Floersheim v. FTC

• Decision Date: 26 June 1969
• Docket Number: No. 22733.,22733.
• Citation: 411 F.2d 874
• Parties: Sydney N. FLOERSHEIM, an individual trading and doing business as Floersheim Sales Company and National Research Company, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

411 F.2d 874 (1969)

Sydney N. FLOERSHEIM, an individual trading and doing business as Floersheim Sales Company and National Research Company, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 22733.

United States Court of Appeals Ninth Circuit.

May 28, 1969.

Rehearing Denied June 26, 1969.

Murray M. Chotiner (argued), and James A. Schmiesing, Newport Beach, Cal., for petitioner.

Alvin L. Berman (argued), Atty., James McI. Henderson, Gen. Counsel, J. B. Truly, Asst. Gen. Counsel, Washington, D. C., for respondent.

Before BARNES and ELY, Circuit Judges, and SOLOMON,^* District Judge.

SOLOMON, District Judge:

Sydney N. Floersheim¹ seeks review of a cease and desist order of the Federal Trade Commission. Floersheim sells forms designed to help creditors collect debts. The Commission found the forms deceptive and misleading because they appeared to come from an official source, or from a third party other than the creditor.

Floersheim sells "Payment Demand" and "skip-tracer" forms. Most of the forms are printed on IBM cards. Some of the cards are punched with holes. Many forms are green or beige, others are white. Floersheim lives in and sells his forms from Los Angeles. When a purchaser orders a particular form, it is sent to him and he fills in the name and address of the debtor or other person from whom information is sought. The form is then sent to Floersheim's Washington, D. C., office, and from there mailed to the debtor (or other person) in a brown window envelope. Some of these envelopes state: "The Form Enclosed is Confidential No One Else May Open," and "Postmaster After 5 Days Return to 748 Washington Bldg., Washington, 5, D.C." The envelopes are postmarked Washington, D. C.

The Payment Demand form tells the debtor to pay his debt. One type of Payment Demand form says:

"You have 10 days to pay the amount of $......... on the claim of ............... You are scheduled to appear in the CREDITOR'S OFFICE, located at .............. in the city of.......... State of .......... on or before two o'clock in the afternoon of the ....... day of .........., 19.. to pay the balance requested or give satisfactory reasons in PERSON why the AMOUNT has not been paid. IF MAILING PAYMENT TO CREDITOR REFER TO FILE No .............."

In a box, in bolder print, are the words, "This Demand is made to give you a last opportunity to pay before action is taken on said claim." Arrows point to this statement. At the bottom of the form, in larger letters, is "NOTICE MAILED

FROM WASHINGTON, D. C., BY PAYMENT DEMAND"

Many of the Payment Demand forms also state, in bold type:

"Subject to the Law of the A Creditor may request an Attorney-at-Law to attach after Judgment Property such as Automobile, Jewelry, Boat, Live Stock, Crops, Machinery House, Real Estate, Bank Account, Bank Vault, Stocks, Bonds and Earnings, Commission or Salary."

Other Payment Demand forms tell the debtor to "Take Notice that the above named Creditor claims a just indebtedness from .............." The words "Take Notice" are in an elaborate type. One form is called "Final Demand for the Payment of Debt" and warns the debtor that "This Demand is made to give you a last opportunity to pay and to lay a foundation for action on said claim if the same is not paid within the time aforesaid." Some Payment Demand forms contain a questionnaire with instructions to "Complete questionnaire on reverse side unless full payment enclosed." The questionnaire seeks the husband's and wife's employment status and directs "All answers must be current and must be printed and returned at once." None of the Payment Demand forms, except the one containing the questionnaire, has a disclaimer of government connection.

There are several skip-tracer forms. They all seek information to be sent to Floersheim in a brown, pre-stamped envelope. These envelopes are addressed to "CHANGE OF ADDRESS," "CLAIMANT'S INFORMATION QUESTIONNAIRE," or "CURRENT EMPLOYMENT RECORDS" in Washington, D. C. One variety of skip-tracer form, sent to a person other than the debtor, requests "answers to all questions on the reverse side of this form, pertaining to the subject." The addressee is directed to answer within five days. Another skip-tracer form states in bold letters: "YOU HAVE CHANGED EMPLOYERS. COMPLETE QUESTIONNAIRE AND RETURN TO 748 WASHINGTON BLDG. WASHINGTON, D. C." The addressee is directed to "ANSWER ALL QESTIONS ON REVERSE SIDE OF THIS FORM." Follow-up forms direct the debtor to "Give reasons here why first form was not returned as requested."

Another skip-tracer form is called "CLAIMANT'S INFORMATION QUESTIONNAIRE." It is printed on beige paper which looks and feels like check paper. It seeks the debtor's address, employer, and bank reference among other things. It states: "Caution The Questions Below CANNOT be Answered By Anyone Other Than: Addressee."

The skip-tracer forms contain the following disclaimer, in small type, "The purpose of this card is to obtain information concerning a delinquent debtor, and to further advise that this is not connected in any way with the United States Government."

The Commission concluded that petitioner's forms and envelopes "are misleading, create the impression that they come from the government or some other official source or third party, rather than from the creditor, and that they have the capacity and tendency to deceive those to whom they are sent." The Commission found that the envelopes simulate ones used by the United States Government. In reviewing the skip-tracer forms the Commission said:

"We also find that the skip-tracer forms used by respondent are deceptive. Without purporting to be an exhaustive catalog we find that among other factors their general appearance and similarity to government checks, the use of fictitious names such as `Claimant\'s Information Questionnaire\' or just `Questionnaire\', the prominent use of respondent\'s address, 748 Washington Building, Washington, D. C., on the forms and on the reply envelopes, the peremptory nature of the requests for information, and the statement on the `Claimant\'s Information Questionnaire\' asking the recipient to `Fill in this form for identification to aid collection in full for claimant,\' combine to conceal the true purpose of the request. Footnotes omitted."

The Commission did not believe the disclaimer dispelled this subterfuge.

"The examiner\'s finding that the recipients of such forms are often people of low income having minimal formal education is amply supported by evidence in the record and finds independent corroboration in the Commission\'s extensive experience with this type of form. Such persons would be unlikely to notice respondent\'s inconspicuous disclaimer or to understand its import. Footnote omitted."

The Commission also found the Payment Demand form deceptive.

"Sent, like the skip-tracer forms, in the brown window envelopes, these forms are also frequently directed to debtors who are uneducated or illiterate. While it is by now a commonplace that testimony as to actual deception or capacity to deceive is not essential, the present record contains substantial testimony by debtors,

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