Gellman v. FTC
| Decision Date | 26 May 1961 |
| Docket Number | No. 16555.,16555. |
| Citation | 290 F.2d 666 |
| Parties | Nate GELLMAN, Burt Horwitz and Peter Podany, individually and as co-partners doing business as Gellman Brothers, Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Maurice Weinstein, Milwaukee, Wis., for petitioners.
Alvin L. Berman, Atty., Federal Trade Commission, Washington, D. C., for respondent. PGad B. Morehouse, Acting Gen. Counsel, and Alan B. Hobbes, Asst. Gen. Counsel, Federal Trade Commission, Washington, D. C., on the brief for respondent.
Before VOGEL and BLACKMUN, Circuit Judges, and BECK, District Judge.
Petitioners ask this court to review and reverse such order, which was issued at the conclusion of an administrative proceeding based upon a complaint charging the petitioners with having engaged in certain unfair acts and practices in commerce, in violation of the Federal Trade Commission Act. The pertinent provisions thereof are, 15 U.S.C.A. § 45(a) (1) and (6):
made his findings of fact and conclusions and order thereon. The Examiner found, as alleged in the complaint, that the petitioners are now and have been engaged in the sale and distribution of merchandise including devices commonly known as punchboards; that they were sold in "commerce" as defined in the Federal Trade Commission Act; that the "* * * punchboards were so prepared and arranged as to involve games of chance, gift enterprises or lottery schemes when used in making sales of merchandise to the public"; and that the sale of merchandise by means of such punchboards is contrary to established public policy and accordingly constituted unfair acts and practices in violation of the Federal Trade Commission Act. The Examiner issued the proposed order which on appeal was adopted by the Commission.1
In asking this court to review and set aside the order, the petitioners' primary claim of error is that the evidence fails to support the findings of the Examiner.
We note at the outset that it is now well established that the sale or distribution in interstate commerce of punchboards or other devices designed for the purpose of selling merchandise to the public by means of a game of chance or lottery scheme constitutes "unfair or deceptive acts or practices" under § 45(a) of Title 15 U.S.C.A. Zitserman v. Federal Trade Commission, 8 Cir., 1952, 200 F.2d 519, 522; Gay Games, Inc. v. Federal Trade Commission, 10 Cir., 1953, 204 F.2d 197, 199, rehearing denied May 11, 1953; Surf Sales Company v. Federal Trade Commission, 7 Cir., 1958, 259 F.2d 744, 746; Goldberg v. Federal Trade Commission, 7 Cir., 1960, 283 F.2d 299; Feitler v. Federal Trade Commission, 9 Cir., 1953, 201 F.2d 790, 792, rehearing denied February 19, 1953, certiorari denied 346 U.S. 814, 74 S.Ct. 24, 98 L.Ed. 341, rehearing denied 346 U.S. 880, 74 S.Ct. 117, 98 L.Ed. 386. Cf. Loughran v. Federal Trade Commission, 8 Cir., 1944, 143 F.2d 431.
The most recent Court of Appeals case on the subject and one which appears, factually, to be on all fours with the instant situation is Peerless Products, Inc. v. Federal Trade Commission, 7 Cir., 1960, 284 F.2d 825, 826, rehearing denied December 29, 1960. Therein Peerless Products, Inc., shipped punchboards in interstate commerce.
Here the record indicates the following: For approximately forty years petitioners have been engaged in the sale and distribution of various kinds of merchandise, including punchboards. They operate from Minneapolis, Minnesota. Petitioners' sales, including punchboards, for 1957 were in excess of $1,400,000 and approximately the same for 1958. Of this gross amount, approximately 50% represented sales outside the State of Minnesota. The exact volume of petitioners' punchboard business was not ascertainable since petitioners kept no separate record of punchboard sales, a subpoena duces tecum produced no records of punchboard purchases and a search therefor was fruitless. Punchboard items, however, were carried prominently displayed and described on two full pages in the petitioners' catalog. Of 40,000 catalogs published, 75% have been distributed outside of the State of Minnesota. Nate Gellman, one of the petitioners, while claiming that they kept no separate records with reference to the sale of punchboards, admitted that they sold "a lot of punchboards" in the State of Minnesota and that "* * * about 50 per cent of our business on punchboards would be outside the state of Minnesota". An examination of some of the petitioners' sales files by investigators for the Federal Trade Commission disclosed the names of a considerable number of out-of-state purchasers of punchboards. This list was given to Gellman. Gellman testified that he thereafter sent form letters to forty or fifty of such out-of-state purchasers of punchboards. Subsequently it was stipulated by petitioners that four of petitioners' out-of-state customers would have testified, if called as witnesses, (1) that each purchased one board from Gellman Brothers; (2) that each placed upon the board after receiving it a legend to the effect that the person who punched the board and received the lucky number would receive as a prize certain merchandise; (3) that each actually gave to the lucky winner the merchandise referred to as a prize; (4) that the merchandise so given as a prize had a value greater than the amount paid for any individual punch.
As to two of the punchboards received as exhibits and as typical of those admittedly sold by the petitioners, each is described in the petitioners' catalog as a "merchandise board". The legend on the face of each board is:
"Numbers Ending in 0 and 5 Register For Grand Prize Numbers 1 to 15 Are Free Numbers 16 to 35 Pay What You Draw Over 35 Pay Only 35¢"
A third punchboard exhibit of the type sold by the petitioners carried on its face the legend:
"Getzum Smokes Red White Blue Tickets Tickets Tickets XX-XX-XX-XX 20-40-60-80- 22-44-66 115-135...
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