United States v. Regent Office Supply Co.

• Decision Date: 29 January 1970
• Docket Number: No. 169,Docket 33498.,169
• Citation: 421 F.2d 1174
• Parties: UNITED STATES of America, Appellee, v. REGENT OFFICE SUPPLY CO., Inc., and Oxford Office Systems, Inc., Appellants.
• Court: U.S. Court of Appeals — Second Circuit

421 F.2d 1174 (1970)

UNITED STATES of America, Appellee, v. REGENT OFFICE SUPPLY CO., Inc., and Oxford Office Systems, Inc., Appellants.

No. 169, Docket 33498.

United States Court of Appeals, Second Circuit.

Argued October 8, 1969.

Decided January 29, 1970.

Jacob P. Lefkowitz, New York City (Abraham Glasser, New York City, of counsel), for appellants.

Richard A. Givens, Asst. U. S. Atty. (Robert M. Morgenthau, U. S. Atty., for the Southern District of New York, New York City, and John E. Sprizzo, Asst. U. S. Atty., on the brief), for appellee.

Before WATERMAN, MOORE and KAUFMAN, Circuit Judges.

MOORE, Circuit Judge.

Regent Office Supply, Inc. (Regent) and Oxford Office Systems, Inc. (Oxford) were indicted and tried under a somewhat unusual procedure whereby the accused corporations, through their officers and their attorney, in effect agreed to be indicted and expeditiously tried upon certain "admissions and stipulations" of fact constituting the alleged crime. Through the indictment and the one-day trial, both defendants and the government were interested primarily in ascertaining whether or not the admitted conduct fell within the prohibition of 18 U.S.C. § 1341, the federal mail fraud statute.

Having been convicted — much to their chagrin — by the District Court, defendants sought to challenge the jurisdiction of the court by a post-verdict, pre-sentence motion to dismiss the indictment, protesting the irregularity of the pre-indictment procedure in which originally they had cooperated so enthusiastically with the government.

On this appeal from conviction and sentence, appellants renew their challenge to the justiciability of the issue as presented by the (at least cooperative) indictment. They further protest their own stipulation as to the presence of the jurisdictional element of the crime — use of the mails — and they continue to challenge the applicability of the mail fraud statute to their admittedly deceitful operation. Rounding out their attack on the conviction, they register broad assertions of due process violations in the present application of an otherwise constitutional statute and, for the finale, suggest that the statute itself is unconstitutionally vague.

I. JURISDICTION

The appellants are in the business of selling stationery supplies through salesmen (called "agents") who solicit orders for their merchandise by telephone. Worried by the dubious propriety of a "sales pitch," which according to their formal admission included "false pretenses and representations to customers," and probably even more worried by an investigation into their practices by the Post Office Department and the possibility of governmental prosecution, they adopted (obviously with the cooperation of the federal government) a procedure which they hoped would obtain for them (and the "sales pitch") the blessing of the courts. Accordingly they stipulated in writing that their agents "secured sales" by making false representations to potential customers that:

(a) the agent had been referred to the customer by a friend of the customer.

(b) the agent had been referred to customer firms by officers of such firms.

(c) the agent was a doctor, or other professional person, who had stationery to be disposed of.

(d) stationery of friends of the agent had to be disposed of because of a death and that the customer would help to relieve this difficult situation by purchasing it.

So anxious were the accused parties to have judicially approved — or disapproved — their salesmen's customer approach that they sought an immediate trial even to the extent of waiving "trial by jury if indicted for mail fraud in violation of 18 U.S.C. sec. 1341" and agreeing "to stand trial on the basis of these admissions * * * and stipulations, reserving, however, the right to offer testimony to amplify, but not to contradict, the facts contained in these admissions and stipulations." They quite candidly stipulated that they wished "to submit to the court the issue whether a procedure or plan to sell stationery as described above constitutes a scheme to defraud or to obtain money by false or fraudulent representations or promises within the meaning of 18 U.S.C. Sec. 1341." If the court should so find against them they stipulated that "judgment may be entered against the corporations."

The indictment (undated) was filed on October 3, 1968. Since the grand jury minutes were not transcribed (delivery and transcription were waived by the defendants), this Court is not aware of what, if anything, was presented to the grand jury.¹ The only description of any false and fraudulent pretenses is the enumeration, in substance, of the (a), (b), (c) and (d) of the stipulation.

With lightning speed Regent and Oxford pleaded not guilty and waived jury trial. The trial commenced and concluded on October 16, 1968. The government's case consisted entirely of the defendants' stipulation. The reaction, if any, of any customers to the representations or the effect, if any, of such reaction on the commercial transactions was not revealed. On the stipulation the government rested its case. Decision of the motion for acquittal was reserved.

For its defense, the accused corporations called the president of Regent, Harold Hartwig, who testified that the firms sell well-known, nationally advertised brands of stationery, such as Swingline staples, Faber pencils, Perma-Write pens, etc., and some paper to large users among which are corporations such as Goodyear, General Electric and Rexall; that many of these customers provide a large volume of reorder business; that the Regent-Oxford enterprise has over 20,000 customers; that sales are made exclusively through their customers' purchasing agents; that the false representations listed in the stipulation were made as a preliminary part of the salesmen's solicitation; that price and quality of the merchandise are always discussed honestly; that the price offered has been lower than the purchasing agent is or was paying at the time of the solicitation; that the goods could be returned if found to be unsatisfactory; and that when a complaint is made an additional discount is offered to induce the customer to keep the goods.

Cross-examination elicited that visits to the Regent-Oxford offices had been made by the Better Business Bureau and by a Post Office Inspector; that the "lies" were to "get by" secretaries on the telephone and to get "the purchasing agent to listen to our agent"; and that for business reasons various fictitious names were used both for their companies in different localities and for individuals. A Postal Inspector then testified for the government as to an interview with Hartwig in which the description of the sales method used was merely reiterated.

The trial transcript reveals that following the presentation of this minimal evidence, some sixty pages of argument between court and counsel ensued, during which many hypothetical fact situations were posed, none of which are found in any testimony by salesmen or customers. The government advanced several theories. "The primary harm is in the circumstance of the person who is selling stationery in a legitimate way." (What might be the "legitimate way" was never disclosed.) Another "primary theory" was that "the person who is purchasing the item is also defrauded in another way, that he is entitled to give his patronage based on honest information, and if he wants to do somebody a favor and use his buying power for a charitable purpose or to reward his friends, he is entitled to do that, and not to be misled." (Again there was no proof of any such situation.) The government immediately backed away from "fraud" by relying on the disjunctive "false pretenses" language of the statute and when questioned by the trial court as to whether this would not be "the first time that there would be any judicial decision on obtaining property by false pretenses where there was no pecuniary harm done to the person from whom the property was obtained" replied, "On the precise facts this would be a case of first impression," and straightway turned to a case involving "charitable contributions." (United States v. Roth, 285 F.Supp. 364 S.D.N. Y.1968).

The government throughout insisted that what these purchasing agents "were after was to give business to a friend and/or to someone whose relatives had died." (No proof of this assumption appears in the record.) Little wonder that the trial court, with no factual background available, said, "It is pretty hard for me to pass on the question of whether the scheme was illegal or not, if I don't know what it was."

The Opinion Below

The trial court found that the defendants' conduct constituted a "scheme to defraud" but that there was "no evidence that defendants intended to get `something for nothing,' United States v. Harrison, Harrison v. United States 200 F. 662 (6th Cir. 1912) from the customer or that any of their customers failed to receive merchandise of the quality promised." However, after thoroughly analyzing the many mail fraud cases, the court found the defendants guilty as charged. They received minimal fines for their violations, but they press this appeal because they are obliged to, in their words, "as a matter of their sheer business survival."

The Post-Verdict Motion

Faced with disapproval of their business practices in such annoyingly concrete form as an actual criminal conviction, it suddenly dawned on the Regent-Oxford strategists that "this case possesses an apparently unique feature whose import defense counsel did not perceive until re-study of the case," namely, that it was not a "case or controversy" after all and they were "not aware that the federal criminal prosecutive jurisdiction may be set in operation in this manner," the "manner" being the "stipulation-indictment" procedure, an "ill-conceived purpose to obtain a constitutionally impermissible `advisory opinion' from this Federal...