Petition for Writ of Certiorari — National Taxpayers Union v. Social Security Administration (No. 08-1245)
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| Supreme Court, U.S.
FILED
No.0 081245 APR 7 - 2009
OFFICE OF THE CLERK
IN THE
Supreme Court of the United States
NATIONAL TAXPAYERS UNION,
Petitroner,
v.
UNITED STATES SOCIAL SECURITY
ADMINISTRATION, OFFICE OF THE
INSPECTOR GENERAL,
Respondent.
On PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE TuiRD CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
JAMES E. McCoLuum, JR. MICHAEL E. GELTNER
McCoL_um Anpb Associates, LLC Counsel of Record
7309 Baltimore Avenue GELTNER AND ASSOCIATES, PC
Suite 117 105 North Virginia Avenue
College Park, MD 20741 Suite 305
(301) 864-6070 Falls Church, VA 22046
(703) 536-2334
Attorneys for Petitioner
225208 cr
;
QUESTION PRESENTED
May the Third and Fourth Circuits overrule the
holding of Illinois ex rel. Madigan v. Telemarketing
Associates, 5388 U.S. 600 (2003) (“Telemarketing
Associates”) that the First Amendment allows
punishment of charitable solicitation only for actual
fraud?
TABLE OF CONTENTS
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Table of Contents
Tale Of Appendices .........<seensse ene eeeee
‘Lao of Gited Authorities .........s.+...l
opinions below
StPIBGICTION . ww. cc ce cee check suse
A. Timeliness
B. Jurisdiction ...........
C. Notice
Statement of the Case
A. Basis for Jurisdiction in the Court of
Appeals
l. The Mailings
2 ProceeagingS .....si.isctue eee
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Contents
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b. Appellate Review .............
(i) Petition for Review ........
(i) The Third Circuit’s Decision.
Reasons for Granting the Petition ............
l. The
Third and Fourth Circuits Have
Overruled Telemarketing Associates-Rule
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3. No Circuit Conflict-Rule 10(a). .........
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Conclusion
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TABLE OF APPENDICES
Appendix A — Opinion Of The United States
Court Of Appeals For The Third Circuit Filed
EECORIOE Ti, te nk oc kkk cdc cae bee caweeeie
Appendix B — Recommended Decision Of
The Department Of Health And Human
Services, Departmental Appeals Board,
Appellate Division Dated April 17, 2007 .....
Appendix C — Decision Of The Department Of
Health And Human Services, Departmental
Appeals Board, Civil Remedies Division Dated
RPWCIIT FA ID vo 6 05.5 044 esse ess g so eees
Appendix D — Order Of The United States
Court Of Appeals For The Third Circuit
Denying Petition For Rehearing Dated
PU We BP oc x Gre cee ee ee
Appendix E — Excerpts From Opinion Of HHS
DAB Appellate Division In Social Security
Administration v. National Federation Of
Retired Persons
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Page
58a
TABLE OF CITED AUTHORITIES
Page
City of San Diego v. Roe,
ee Re We CN a Vcc nee vi sce eee e ee wes
Dye v. Hofbauer,
Oe eh oc eek vos eee e ee beeen see es
Elk Grove Unified School District v. Newdow,
Ue We FD os vk a cee cde ccwnsas cues:
Federal Power Comm’n v. Texaco, Inc.,
Ee ee PE ho ne eso cWN Gas Ware enueun
[illinois ex rel. Madigan
v. Telemarketing Associates,
ee Ue, Cn cece eves wees t, 6, 8, 9,
Illinois v. Fisher,
Be is CE mos ko hes ce oy eee ees
Kane v. Garcia Espitia,
Ue RE I oo ho ov bh ed nd ened wekweb ess
Monitor Patriot Co. v. Roy,
Oe ec TED kk ds nv des bea waunns ats
New York Times v. Sullivan,
376 U.S. 254 (1964)
a Te a on ee a ee oe en ie oe ee a a oe ee ie ce
li
13
1]
i}
9
Cited Authorities
Page
Ocala Star Banner Co. v. Damron,
St, RTE co ka ck wb ewes ckesewenwes 1]
Riley v. Nat'l Wildlife Fed’n,
We Bs WE CEOS) ccc ic cctvcesesenes 6, 7, 9, 12
Secretary of State of Maryland
v. Jos. H. Munson Co.,
Me OT TD kad heave cca cv cdevess 6
Social Security Administration v. National
Taxpayers Union, CR No. 1548, 2006
HHSDAB LEXIS 209 (2006) ............... 1
St. Amant v. Thompson,
ee os ae 1]
SSA v. Nat’l Fed’n of Retired Persons,
Department of Health and Human Services
PROT BG BG) ccc ccccenesessesececss 4,5
Social Security Admin. v. United Seniors
Ass'n, Inc., 2003 HHSDAB LEXIS 110 (2003)
‘
cath h e ee ek SE A ee GS 8L8 4.46 6-48 S068 ee oe 8 08 6 08 8 88 a
United Seniors Ass'n., Inc. v. Social Secunty
Administration, 423 F. 3d 397 (4th Cir. 2005),
cert. denied, 547 U.S. 1162 (2006)
Cited Authorities
Page
United States v. Flores-Montano,
ae Wis ee SD oc es ca od heen eees 13
Village of Schaumburg
v. Citizens for a Better Environment,
444 U.S. GEO (1980) .. wc ccccccevecs 6, 7,8, 9, 14
Other Authorities:
J. Cole and E. Bucklo, A Life Well Lived:
An Interview with Justice John Paul Stevens,
Te Rae © CGE 6 ov ch vveeesccacccencas 13
J. D. Varat, Deception and the First Amendment:
A Central, Complex, and Somewhat Curious
Relationship, 53 U.C.L.A. L. Rev. 1107 (2006)
ek Che CEC EE De ees 5
Order of March 13, 2006 by ALJ .............. 8
S. Baker, A Practical Guide to Certiorari, 33
Cath. U. b. Rev. GLE CIGSO) wk. cu cen cctccsc 10
W. Rehnquist, Oral Advocacy: A Disappearing
Art, 35 Mercer L. Rev. 1015 (1984) ......... 10
W. Rehnquist, The Supreme Court (2001) ....... 1]
Cited Authorities
Page
Statutes and Rules:
Internal Revenue Code:
ee se ee wuvenieuut 3
28 U.S.C. §1254
Social Security Act:
OPUS. GEBROR IME) occ cc cv ccucucss i:
PO BGR Rate) OR PS Z
Oe E.G, DEE) cc cicccvecceverdoes 12
2 U.B.U. SIBZUD-IO(C)(]) 2. ccc ccc cccccccces 3
|
OPINIONS BELOW
The decision of the United States Court of Appeals
for the Third Circuit is not yet officially reported. It is
reported so far at 2008 U.S. App. LEXIS 25802, 2008
WL 5175066 (3° Cir. 2008).
The decision of the Department of Health and
Human Services Departmental Appeals Board is
reported at Social Secunty Administration v. National
Taxpayers Union, CR No. 1548, 2006 HHSDAB LEXIS
209 (2006). Petitioner has been unable to find any official
reports for this agency.
JURISDICTION
A. Timeliness
The decision of the Court of Appeals sought to be
reviewed was entered on December 11, 2008.' Petitioner
filed a timely petition for rehearing to the panel of the
Court of Appeals which was denied by order entered
January 9, 2009.-
B. Jurisdiction
This Court has jurisdiction to review the judgment
of the Court of Appeals by writ of certiorari under
28 U.S.C. §1254, which is cross referenced as the
applicable review provision for cases such as this one in
42 U.S.C. §1320a-7a (e).
C.
Notice
The Solicitor General of the United States has been
served in compliance with Rule 29.4(a).
A.
B.
CONSTITUTIONAL PROVISIONS AND
STATUTES INVOLVED
First Amendment to the United States Constitution
(Excerpt)
Congress shall make no law... abridging the
freedom of speech...
42 U.S.C. §1820b-10(a) (1), Social Security Act §1140
(“$1140”), as amended (I:xcerpt)
No person may use, in connection with any
item constituting an advertisement,
solicitation, circular, book, pamphlet or othe
communication... , alone or with other words,
symbols or emblems—(A) the words ‘Social
Security’ ...in amanner which such person
knows or should know would convey, or
in a manner which reasonably could be
interpreted or construed as conveying, the
false impression that such item is approved,
endorsed or authorized by the Social Security
Administration...
STATEMENT OF THE CASE
A. Basis for Jurisdiction in the Court of Appeals
42 U.S.C. §13820b-10(c)(1), part of §1140,
incorporates by reference 42 U.S.C. 1320a-7a(e), which
provides for judicial review by petition for review of final
agency decisions imposing monetary penalties in the
United States Court of Appeals where the agency
respondent resides, which is interpreted for a
corporation as the state of incorporation. See Federal
Power Comm’n v. Texaco, lnec., 377 U.S. 33 (1964). Since
petitioner is a Delaware not for profit corporation, this
provides for review in the United States Court of
Appeals for the Third Circuit. Petitioner filed a timely
petition for review in the United States Court of Appeals
for the Third Circuit after the agency decision, thus
conferring jurisdiction on that court.
B. Facts
1. The Mailings
Petitioner National Taxpayers Union (“NTU”) is a
charitable organization, specifically, a Delaware not for
profit corporation registered as a charity under §501(c)
of the Internal Revenue Code. NTU has functioned,
since its founding in 1973, as ataxpayer advocacy group,
with many successes, such as the Taxpayers Bill of
Rights. In 2001, NTU’s board of directors decided to
take a position in support of private investment accounts
for social security, and, thereafter, NTU mailed copies
of a direct mail solicitation on the subject. The
solicitation contained a survey and advocated for private
livestment accounts and also included a summary of the
background of NTU as an organization. It also contained
the words, “Social Security,” on the envelope and
statement that it was an official survey for the President,
Congress and Social Security Administration.
2. Proceedings
a. Agency
Respondent Social Security Administration (“SSA”)
sent NTU a letter imposing a $274,582 monetary penalty
under §1140. NTU then invoked the agency’s
administrative review procedure by filing a request for
a hearing. NTU’s hearing request included a claim that
$1140 was unconstitutional as applied under the First
Amendment, because it punished charitable solicitation
without a finding of actual fraud.”
The agency conducted a hearing before the
Department of Health and Human Services
Departmental Appeals Board (“HHS DAB”) Civil
Remedies Division. In a prior case, SSA v. Nat'l Fed’n
of Retired Persons, (“Retired Persons”),4 HHS DAB’s
Appellate Division (1) ruled that HHS DAB would
not consider unconstitutional as applied claims and
(2) broadly interpreted §1140 and held that $1140 had
two liability standards—(i) a knowledge standard
(“knows or should know”), which HHS DAB interpreted
3. Request for Hearing in record below.
4. Excerpts from Retired Persons are in Appendix starting
at 60a. The entire opinion is in the record below.
as mere negligence,’ and (ii) a “reasonableness
standard,”® which HHS DAB interpreted as strict
liability not even requiring a false statement.’ The
agency itself has referred to its interpretation of §1140
as setting a “uniquely low threshold of liability.” See
Social Security Admin. v. United Seniors Ass’n, Inc.,
2003 HHSDAB LEXIS 110 at *10 (2003). See also, zd.
at *8 ($1140 “creates avery low threshold for liability.”).
Following Retired Persons, the ALJ in this case
refused to consider NTU’s as applied challenge and
affirmed SSA’s $274,582 monetary penalty based on
findings that NTU’s solicitations violated the
“knowledge” standard® and the “reasonableness”
standard, relying on Retired Persons.” The ALJ made
no finding that NTU had committed actual fraud.''
Thereafter, NTU sought review in the HHSDAB
Appellate Division, which took no action,'' after which
the Commissioner’s inaction resulted in the HHS DAB
decision becoming final.
5. 68a (“Seetion 1140’s knowledge standard is in fact a
negligence standard.”’).
7. 62a (“ section 1140 does not require a factual
misrepresenlation or proof thal some person was actually
(ICCLIVE | oy
6
b. Appellate Review
(i) Petition for Review
NTU filed a timely petition for review in the United
States Court of Appeals for the Third Cireuit. NTU
argued, inter alia, that the imposition of a penalty on it
for a charitable solicitation violated the First
Amendment, as applied, because this Court had
established the rule in the Schaumburg iine of cases,
culminating in Telemarketing Associates, supra,” that
proof of actual fraud was the sine qua non to punish
charitable speech. In 2005, the Fourth Circuit had
rejected this position in denying a First Amendment
claim. See United Senrors Ass'n., Lne. v. Social Security
Administration, 423 F. 3d 397 (4" Cir. 2005), cert. denied,
547 U.S. 1162 (2006) (“United Seniors”). See 423 F 3d
407 (One who “should have known that the message
conveyed the false impression of governmental
endorsement”... “is not entitled to First Amendment
protection.”). NTU argued to the Third Circuit, inter
alia, that United Seniors was wrongly decided and
violated the clear statement that this Court had made
in Telemarketing Associates that the “exacting proof
requirements” of a common law deceit or fraud claim
are required to provide “sufficient breathing room for
protected speech.” 538 U.S. at 620. NTU also relied on
these cases to claim full First Amendment protection
12. See Village of Schaumburg v. Citizens for a Better
Environment, 444 U.S. 620 (1980) (“Schaumburg”); Secretary
of State of Maryland v. Jos. H. Munson Co., 467 U.S. 947 (1984):
Riley v. Nat'l Wildlife Fed'n, 487 U.S. 781 (1988) (“Riley”);
Telemarke fing Associates, s (pra
7
for its mailings; “lLojur prior cases teach that the
solicitation of charitable contributions is protected
speech.” Riley, supra, 487 U.S. at 789.
(ii) The Third Circuit’s Decision.
The Court of Appeals denied NTU’s petition for
review in an opinion authored by Circuit Judge Fuentes
marked “not precedential.” '’ The opinion’s response to
NTU’s argument that §1140 violated the First
Amendment, as applied, because it “penalizes the
organization’s speech without finding ‘actual intent to
defraud,” was that “[t]his assertion requires little
analysis, because it is based on an incorrect reading of
|[Schaumburg].”'' The Court then read Schaumburg to
allow punishment with no proof of fraud where the
government has a “sufficiently strong subordinating
interest,” '® finding that countervailing governmental
interest in Congress’ desire to be sure recipients open
government mail.'° The Court said that “[m Jail that
appears to be from the Social Security Administration
piques beneficiaries’ interest and induces them to read
and respond accordingly,” '’ which the Court felt violated
Congress’ purpose “to protect seniors and other
beneficiaries from fraud.”'® However, the Court of
Appeals ignored the fact that SSA conceded before the
13. la
3)
Agency that NTU’s survey solicitation did not look like
government mail.!’
Judge Iuentes read Telemarketing Associates’ holding
that fraudulent charitable solicitation is unprotected
speech to mean that “.. . the First Amendment does not
protect a speaker who uses the prohibited language in such
a way that he or she ‘should know’ that the message will
20
mislead or deceive the reader.”*
REASONS FOR GRANTING THE PETITION
1. The Third and Fourth Circuits Have Overruled
Telemarketing Associates-Rule 10(c)
Recently, in the Melville B. Nimmer Memorial Lecture,
UCLA Law School Dean Varat said:
[ijl is essential to emphasize that the First
Amendment usually mandates government
precision to target at most only the deceptive
factual statement that legitimately can ground
legal liability. Take charitable solicitation, for
exai ple. Only actual fraud, not the potential
for misleading speech, may be controlled-'
The authority Dean Varat cited for this statement was
Telemarketing Associates. Telemarketing Associates
14, Order of March 13, 2006 by ALJ, page 2. in record below
but not in Appendices to this petition
2) ). DD. Varat. Dece pt on and the First Amendment
' ’ , ’ = a
4 (i ntral. ( yr ple r, ana Somewhat Curious Relationship, Do
U.C.L.A. L. Rev. 1107. 1127 and n. 74 (2006) (emphasis supplied
f py
ce He al Oo cited tn other 3 ca n the Se? liu? hurg line.
9
and the rest of the Schaumburg line are the New
York Times v. Sullivan*® of charitable solicitation,
demarcating avery clear line beyond which government
may not punish such speech. Indeed, this Court’s
opinion in Telemarketing Associates recognizes the
relationship to New York Times v. Sullivan by
specifically pointing out that both cases draw a line in
exacting proof requirements that “provide sufficient
breathing room for protected speech.”
In both this case and United Seniors, the Courts of
Appeals have overruled Telemarketing Associates and
the Schaumburg line. In this case, the Third Circuit did
so by holding that a countervailing government interest
allows punishment of charitable solicitation for less than
actual fraud, the precise position that Schaumberg had,
in fact, rejected. See 444 U.S. at 639 (“Frauds may be
denounced as offenses and punished by law. Trespasses
may similarly be forbidden. If it is said that these means
are less efficient... the answer is that considerations of
this sort do not empower a municipality to abridge
freedom of speech or press.”).*° The Third Circuit also
23. 376 U.S. 254 (1964)
24. 538 U.S. at 620.
25. See also, Riley, supra, 487 U.S. at 795
[In striking down this portion of the Act, we do not
suggest that States must sit idly by and allow their
citizens to be defrauded. North Carolina has an
antifraud law, and we presume that law enforcement
officers are ready and able to enforce it. Further,
North Carolina may constitutionally require
fundraisers to disclose certain financial information
(Cont'd
10
read Telemarketing Associates to sustain a “should
know” (i.e., negligence) standard,” even though this
Court’s opinion drew a clear line at actual fraud.*’
United Seniors also sanctions a negligence standard.”
NTU believes that this Court should grant the writ
to prevent the lower courts from misreading this Court’s
definitive decisions in the important area of charitable
solicitations and the First Amendment simply to reach
an improper result of overruling these decisions.
Although this Court does not take cases just to reverse
error, a seriously wrong decision on a core subject of
constitutional law is generally treated as sufficient to
warrant a grant of certiorari. See W. Rehnquist, Oral
Advocacy: A Disappearing Art, 35 Mercer L. Rev. 1015,
1027 (1984); S Baker, A Practical Guide to Certiorari,
33 Cath. U. L. Rev. 611, 619 (1984).
(Cont'd)
to the State, as it has since 1981.***If this is not the
most efficient means of preventing fraud, we
reaffirm simply and emphatically that the First
Amendment does not permit the State to sacrifice
speech for efficiency.
(citation omitted at ellipses).
20. Sa
27. 538 U.S. at 620.
2s. 423 F: 3d at 407.
1}
2. Importance
Inthe First Amendment area, it has often been this
Court’s practice to grant certiorari solely because of
the importance of the question presented. See, e.g., Elk
Grove Unified School District v. Newdow, 542 U.S. 1, 5
(2004) (“In light of the obvious importance of that
decision, we granted certiorari to review the First
Amendment issue. . .”). See also, City of San Diego v.
Roe, 543 U.S. 77 (2004) (certiorari granted solely
because of First Amendment question). Moreover, this
Court has also granted certiorari, regardless of the
nature of the decision below, to assure that the lower
courts do not erode important First Amendment
protections. For example, after the decision in New York
Times v. Sullivan, supra, this Court granted certiorari
in several cases solely because the lower courts had
stingily misread the decision to narrow First
Amendment protections. See, e.g., Ocala Star Banner
Co. v. Damron, 401 U.S. 295 (1971); Monitor Patriot Co.
v. Roy, 401 U.S. 265 (1971); St. Amant v. Thompson,
390 U.S. 727 (1968). Former Chief Justice Rehnquist has
noted that the perception that “the lower-court decision
may well be***of general importance beyond its effect
on these particular litigants” is an important factor in
granting certiorari. See W. Rehnquist, The Supreme
Court 234 (2001). NTU believes this case has importance
to all charitable organizations, particularly citizen’s
advocacy groups. The former Chief Justice has also
noted that the “perception that the decision is wrong in
light of Supreme Court precedent,” 7d. at 235, combines
with importance to be the major factor supporting a
certiorari grant.
12
3. No Circuit Conflict-Rule 10(a).
While this Court often looks for a Circuit conflict as
a reason for granting the writ, this is part of the larger
concept that this Court should let the law proceed until
a trend develops before jumping in to make
constitutional law or reaching out to declare a statute
unconstitutional. However, two circuits have now
emphatically taken a narrow view of the First
Amendment in the face of the same very broad agency
interpretation of §1140 that directly impinges on
protected speech. This is an important trend. This trend
makes it unlikely that others will have the courage to
further raise constitutional challenges to §1140, in light
of its draconian monetary penalty threats.” Faced with
a SSA demand, a charitable solicitor would be foolhardy,
in light of the trend of the Third and Fourth Circuits
and §1140’s massive fine authorization, to gamble that,
after exhausting an administrative process, the
charitable solicitor will be lucky enough to find a Circuit
to buck the trend. Certainly, the advice of most counsel
would be to settle or withdraw.
“Chill and uncertainty,” Riley, supra, 487 U.S. at
794, were major factors identified by this Court as
motivating its actions in this area of the law. Because of
the chill of the Third and Fourth Circuit decisions, it is
now unrealistic to believe that a Circuit conflict will
develop in normal course, and there is no longer any
29. §1140 authorizes a penalty of $5000 per piece mailed.
See 42 U.S.C. §1320b-10(b) (emphasis supplied). In the present
case, which involved a very modest test direct mail solicitation
of about 500,000 pieces, NTU was exposed to the risk of a
$2,745,820,000 fine.
13
justification to wait for one before addressing the issue
that these two Circuits have so mishandled. This is
particularly true, because $1140, in authorizing massive
penalties for speech, gives SSA a potent tool with which
to attack its critics. Long-standing, donation-funded
citizen’s advocacy groups like NTU serve an important
function in our democracy, and the Third and Fourth
Circuit’s decisions place their very existence at risk.
4. Not Precedential
While it is not always the announced practice in this
Court to take cases that make no precedent, the Court
has regularly done so where the issue is important and
the decision below is likely wrong in light of precedent.
See, e.g., Kane v. Garcia Espitia, 546 U.S. 9 (2005);
Dye v.Hofbauer, 546 U.S. 1 (2005): Illinois v. Fisher,
540 U.S. 544 (2004); United States v. Flores-Montano,
541 U.S. 149 (2004). The Third Circuit panel’s decision
to mark its opinion not precedential can have no other
purpose than to avoid review here. See J. Cole and
E. Bucklo, A Life Well Lived: An Interview with Justice
John Paul Stevens, 32 Litigation 8, 67 (2006), where the
authors quote Justice Stevens as saying he tends to vote
to grant more on unpublished opinions “on the theory
that occasionally judges will use the unpublished opinion
to reach a decision that might be a little hard to justify.”
14
Certainly, the marking of the Third Circuit’s decision
as “not precedential” is an abuse of any criteria for
unpublished opinions, since the issue of whether §1140
violated the First Amendment as applied to charitable
solicitation had never been addressed in the Third
Circuit and had been considered only once elsewhere,
in United Seniors.*® Moreover, the decision to read
Schaumburg to hold the opposite of its declared
meaning that the fraud requirement cannot be bent by
a countervailing governmental interest cannot be
characterized as a simple fact-based decision of no
general importance. Indeed, when this point is
combined with the certainty that the Third Circuit’s
opinion, whatever its marking, will be found by anybody
Shepardizing either §1140 or United Seniors, and then
read and followed, preventing the damaging fiction that
it is not a precedent is itself sufficient reason to grant
certiorarl.
30. According to the Third Circuit’s own rules, a decision
will be marked non precedential if it “appears to have value
only to the trial court or the parties.” Third Circuit Internal
Operating Procedures, §5.3.
ld
CONCLUSION
The Court is requested to grant the writ of certiorari.
Respectfully submitted,
MICHAEL E. GELTNER
Counsel of Record
GELTNER AND ASSOCIATES, PC
105 North Virginia Avenue
Suite 305
Falls Church, VA 22046
(703) 5386-2334
JAMES FE. McCouuuM, JR.
McCoLt_uM AND ASSOCIATES, LLC
7309 Baltimore Avenue
Suite 117
College Park, MD 2074]
(301) 864-6070
Attorneys for Petitioner
APPENDIX
la
APPENDIX A — OPINION OF THE UNITED
STATES COURT OF APPEALS FOR THE THIRD
CIRCUIT FILED DECEMBER 11, 2008
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-3381
NATIONAL TAXPAYERS UNION,
Petitioner
V.
UNITED STATES SOCIAL SECURITY
ADMINISTRATION; OFFICE OF THE
INSPECTOR GENERAL,
Respondent.
Petition for Review of Final Decision of
Commission of Social Security Administration
(HHS-1:07-43)
Argued November 20, 2008
Before: FUENTES, HARDIMAN, and GARTH,
Circuit Judges
Filed December 11, 2008
*,
|
Appendix A
OPINION OF THE COURT
FUENTES, Circuit Judge:
The National Taxpayers Union (“NTU”) petitions
for review of a decision of the Department of Health
and Human Services Departmental Appeals Board that
upheld a determination by an administrative law judge
(“ALJ”) who found that NTU mailed correspondence
that used “social security” in a manner that violated
Section 1140 of the Social Security Act, 42 U.S.C.
§ 1320b-10. The Appeals Board also affirmed tne ALJ’s
imposition of a civil penalty of $274,582 against NTU.
Because we find that Section 1140(a)(1) is neither
unconstitutional as-applied, nor unconstitutionally
overbroad, and that the ALJ’s decision is supported by
substantial evidence, we deny the petition for review.’
I. Facts
NTU is a not-for-profit taxpayer advocacy
organization. In 2001, NTU sent thousands of direct mail
pieces to consumers to solicit donations. The brochures
included language in large, red, bold type that stated,
“Official National Survey on Social Security.” The
brochures also included the statement that it was
“commissioned by the NTU for the Social Security
Administration, White House, and Congress of the
United States.” The Social Security Administration
(“SSA”) received a complaint, and the Inspector General
1. We have jurisdiction pursuant to 42 U.S.C. § 1820a-7a(e)
~
Ja
Appendix A
of the SSA determined that the mailing violated Section
1140 of the Social Security Act. Section 1140 prohibits
the use of nineteen phrases, including “social security,”
in a manner that either (1) the writer knows or should
know, or (2) the reader could reasonably perceive as
conveying the false impression of official endorsement
of the material by the SSA or the government. The
Inspector General sent a cease-and-desist letter to
NTU, and NTU responded with an apology. SSA
subsequently received an additional complaint, and
determined that the basis of the new complaint was a
slightly altered version of the same brochure which NTU
mailed after the cease-and-desist letter. The SSA
Inspector General sent another letter to NTU,
demanding that NTU provide written confirmation of
its intent to comply with Section 1140 within ten days.
Instead of complying, NTU filed a lawsuit in United
States District Court, claiming that Section 1140 was
unconstitutional.” While the action was pending, NTU
mailed a third version of the brochure, which SSA also
considered misleading and in violation of Section 1140.
The SSA Inspector General wrote NTU, stating that
it planned to impose a penalty in the amount of $274,582,
or $.50 per offending direct mail piece* NTU requested
a hearing in front of an ALJ, who found that NTU
2. The District Court ultimately dismissed NTU's
complaint, and the Fourth Circuit affirmed.
3. The statute provides for a “civil money penalty not to
exceed . . . $5,000" for each piece of mail that contains the
prohibited language. 42 U.S.C. § 1320b-10(b)(1).
4
4a
Appendix A
violated both prongs of Section 1140. Specifically, the
ALJ found that NTU knew that the language used in
the brochures would induce recipients to read it because
the language conveyed the false impression that the
SSA authorized the mailing. Similarly, the ALJ found
that recipients could reasonably interpret the language
on the brochure as conveying the false impression that
the SSA authorized the mailing. Finally, the ALJ found
that the proposed penalty was reasonable. NTU
appealed the ALJ’s decision to the Appeals Board of
the Department of Health and Human Services, which
refused to review the decision, thereby adopting the
ALJ’s decision as final. NTU petitions this Court for
review of the agency’s final decision.
In its petition for review, NTU asserts several
arguments. First, NTU challenges the constitutionality
of Section 1140, arguing that it violates NTU’s First
Amendment rights as-applied, and that it is facially
overbroad. Second, NTU argues that the monetary
penalty imposed is “criminal in nature” and that it is
“excessive” and prohibited by the Eighth Amendment.
Finally, NTU urges this Court to apply Daubert
principles to administrative proceedings and to strike
the expert testimony from the ALJ proceeding.
Sa
Appendix A
II. Discussion
A. First Amendment!
1. As-Applied Challenge
NTU first argues that Section 1140 violates the First
Amendment as-applied because*%uch application
penalizes the organization’s speech without finding
“actual intent to defraud.” In other words, according to
NTU, government may not limit speech unless that
speech intends to defraud or deceive the reader or
listener. This assertion requires little analysis, because
it is based on an incorrect reading of Vill. of
Schaumburg v. Citizens for a Better Env't, 444 U.S. 620,
100 S.Ct. 826, 63 L.Ed.2d 73 (1980). Contrary to NTU’s
assertions, Village of Schaumburg acknowledged that
a “direct and substantial limitation on protected activity”
is constitutional if “it serves a sufficiently strong,
subordinating interest.” /d. at 636. Here, the government
has a substantial interest in protecting Social Security
recipients from deceptive mailings. For millions of
Americans, Social Security is a vital, if not their only,
source of income. Mail that appears to be from the SSA
piques beneficiaries’ interest and induces them to read
and respond accordingly. Congress enacted Section 1140
to protect seniors and other beneficiaries from fraud,
and to ensure that when the SSA sends legitimate mail
to beneficiaries, the recipients will open it and not
4, We review NTU’s constitutional claims de novo. See, e.g.,
CBS Corp. v. FCC, 535 F.3d 167, 174 (3d Cir.2008).
6a
Appendix A
perceive it as “junk mail.” House Comm. on Ways and
Means, 102D Cong., Report on Deceptive Solicitations
5 (Comm. Print 1992). Section 1140 requires only that
charities refrain from using deceptive language when
soliciting. Therefore, Section 1140 is constitutional as-
applied because it serves a “strong, subordinating
interest.”
2. Facially Overbroad
Section 1140 regulates two types of conduct. The
first type of conduct relates to the intentions of the
speaker. This prong states that a speaker cannot use
nineteen phrases, including “social security,” “in a
manner which such person knows or should know would
convey ... the false impression that such item is
approved, endorsed or authorized by” SSA. 42 U.S.C.
§ 13820b-10(a). The second type of conduct is objective
with regard to the reader, and prohibits the use of the
proscribed phrases “in a manner which reasonably could
be interpreted or construed as conveying the false
impression that such item is approved, endorsed or
authorized” by SSA. /d. Both prongs also cover
communications that convey the false impression that
the author has “some connection with the SSA.” /d.
This Court has held that it will strike down a
regulation of speech on its face “if its prohibitions are
sufficiently overbroad-that is, if it reaches too much
expression that is protected by the Constitution.”
DeJohn v. Temple Univ., 587 F.3d 301, 314 (3d Cir.2008).
In other words, this Court must find that the very
Ta
Appendix A
existence of the regulation at issue “will inhibit free
expression to a substantial extent.” /d. (quotation marks
omitted) (emphasis added); see also Ashcroft v. Free
Speech Coalition, 585 U.S. 284, 246-44, 122 S.Ct. 1389,
152 L.Ed.2d 403 (2002) (invalidating the Child
Pornography Prevention Act as facially overbroad
because the statute reached a “substantial” amount of
protected speech, such as speech that neither appealed
to the prurient interest nor was patently offensive,
including speech that had serious “literary, artistic,
political, and scientific value”); Broadrick v. Oklahoma,
413 U.S. 601, 615, 98 S.Ct. 2908, 37 L.Ed.2d 830 (1973)
(“[T]he overbreadth of a statute must not only be real,
but substantial as well, judged in relation to the statute’s
plainly legitimate sweep.”); 181 South Inc. v. Fischer,
454 F.3d 228, 235 (3d Cir.2006) (“The overbreadth
claimant bears the burden of demonstrating, from the
text of the law and from actual fact, that substantial
overbreadth exists.”).
In United States v. Williams, U.S. _, 128 S.Ct.
1830, 170 L.Ed.2d 650 (2008), the Supreme C«urt implied
that it disfavors facial challenges, preferring to review
circumstances under which the challenged statute
actually infringes protected speech. The Court noted
that the overbreadth doctrine tends “to summon forth
an endless stream of fanciful hypotheticals” that may
potentially implicate the infringement of protected
speech. /d. at 1848. The Court further stated that the “
‘mere fact that one can conceive of some impermissible
applications of a statute is not sufficient to render it
susceptible to an overbreadth challenge.’ ” /d. at 1844
8a
Appendix A
(quoting Members of City Council of Los Angeles v.
Taxpayers for Vincent, 466 U.S. 789, 800, 104 S.Ct. 2118,
80 L.Ed.2d 772 (1984)). The Court described
hypothetical scenarios discussed at oral argument, and
noted that if those situations came to pass, the affected
parties could bring an as-applied challenge. /d.; see also
Washington State Grange v. Washington State
Republican Party, U.S. _,__, 1288.Ct. 1184, 1191,
170 L.Ed.2d 151 (“Facial challenges are disfavored for
several reasons. Claims of facial invalidity often rest on
speculation. ... Facial challenges also run contrary to
the fundamental principle of judicial restraint that
courts should not... formulate a rule of constitutional
law broader than is required by the precise facts to which
it is to be applied.”).
As previously discussed, the first prong of Section
1140 prohibits the use of words such as “social security”
in a manner that the speaker “knows or should know
would convey” the false impression of government
approval or endorsement. Like other forms of public
deception, fraudulent charitable solicitation is
unprotected speech. Jllinois v. Telemarketing Assocs.,
Inc., 538 U.S. 600, 611-12, 123 S.Ct. 1829, 155 L.Ed.2d
793 (2003). Therefore, the prong of Section 1140 that
contains the “knowing” standard is not
unconstitutionally overbroad. Likewise, the First
Amendment does not protect a speaker who uses the
prohibited language in such a way that he or she “should
know” that the message will mislead or deceive the
reader.
9a
Appendix A
The second part of Section 1140 requires closer
analysis because it does not require that the speaker
“know” or “should know” that the language could
mislead the reader. Rather, the second prong of the
statute prohibits the use of the language in such a way
that the reader could reasonably interpret as conveying
governmental endorsement. Because this prong does
not have a scienter requirement for the speaker, it could
possibly reach some protected speech. However, it is
wholly unclear that such non-deceptive speech reaches
a “substantial” amount of protected speech. NTU has
failed to provide any significant examples of protected
speech falling under the statute and its counsel
essentially disavowed the overbreadth claim at oral
argument. Given the lack of evidence of the second
prong’s “substantial” burden on protected speech, we
find that the objective prong of Section 1140 is not
overbroad.
We note that the Fourth Circuit has also examined
a similar facial challenge to Section 1140 in United
Seniors Ass’n, Ine. v. Soc. Sec. Admin., 423 F.3d 397,
406-07 (4th Cir.2005). As in this case, the Fourth Circuit
held that, while the objective prong of Section 1140 could
reach some protected speech, any such speech
constituted, “at most, a minuscule portion of the speech
reached by the statute.” Jd. at 407.
For these reasons, we reject NT U’s facial challenge.
10a
Appendix A
B. Monetary Fine’
NTU next challenges the penalty imposed by the
ALJ, arguing that it is criminal in nature and
“excessive” in violation of the Eighth Amendment.
In Myrie v. Comm’y, N.J. Dept. of Corr, this Court
examined the issue of whether a surcharge at a prison
commissary was civil or criminal in nature, and whether
the surcharge was excessive. This Court explained that
the first step in such an inquiry is to determine whether
the legislature, “‘in establishing the penalizing
mechanism, indicated either expressly or impliedly a
preference for one label or the other.’ ” 267 F.3d 251,
256 (3d Cir.2001) (quoting Hudson v. United States, 522
U.S. 98, 99, 118 S.Ct. 488, 189 L.Ed.2d 450 (1997)). This
inquiry is clear, because Section 1040 expressly permits
a “ civil money penalty” for violation of the statute.
42 U.S.C. § 1820b-10(b) (emphasis added).
Under Myrie, the Court next examines whether the
“statutory scheme [i]s so punitive either in purpose or
effect ...as to ‘transfor[m] what was clearly intended
as a civil remedy into a criminal penalty.’ ” Myrie, 267
F.3d at 256 (quoting Hudson, 522 U.S. at 99-100)
(internal citations omitted). This inquiry requires the
Court to apply the seven criteria identified in Kennedy
5. An appellate court reviews the question of whether a
fine is constitutionally excessive under a de novo standard.
United States v. Bajakajian, 524 U.S. 321, 337 n. 10, 118 S.Ct.
2028, 141 L..Fd.2d 314 (1998).
lla
Appendix A
v. Mendoza-Martinez, 372 U.S. 144, 168-69, 83 S.Ct. 554,
9 L.Ed.2d 644 (1963). These criteria include
Whether the sanction involves an affirmative
disability or restraint, whether it has
historically been regarded as a punishment,
whether it comes into play only on a finding
of scienter, whether its operation will promote
the traditional aims of punishment-retribution
and deterrence, whether the behavior to
which it applies is already a crime, whether
an alternative purpose to which it may
rationally be connected is assignable for it, and
whether it appears excessive in relation to the
alternative purpose assigned....
Id.
Applying these criteria to NTU’s penalty of $.50 per
unit that violated Section 1140, we conclude that the
criteria do not support NTU’s contention that the
penalty is criminal in nature. First, NTU concedes that
the penalty does not involve an “affirmative disability
or restraint.” (App. Br. at 32.) Second, the Supreme
Court has stated that monetary penalties have not
“historically been viewed as punishment.” Hudson, 522
U.S. at 104. Next, as discussed in Section II.A.2., supra,
a violation of Section 1140 does not necessarily require
a finding of scienter. Although Section 1140’s monetary
penalty likely promotes the traditional ends of
punishment, retribution and deterrence, to some
degree, that alone is not enough to characterize the
I2a
Appendix A
penalty as penal in nature, rather than civil. See zd. at
105 (“[T]he mere presence of [deterrence] is insufficient
to render a sanction criminal, as deterrence may serve
civil as well as criminal goals.”) (internal citation and
quotation marks omitted). In fact, one of the alternative
purposes of the sanction is to reimburse the Social
Security Trust Fund for the cost of policing deceptive
practices. STAFF OF H.R. ComM. on Ways AND MEANS, 102pD
ConG., REPORT ON DECEPTIVE SOLICITATIONS, at 7 (Comm.
Print 1992). In addition, Section 1140 is not consistent
with criminal behavior, because a civil penalty reaches
negligent conduct, whereas actual fraud is required for
a crime. With regard to “whether an alternative purpose
to which it may rationally be connected is assignable for
it,” this Court has interpreted this inquiry to ask
“whether an asserted ‘sanction’ may be reasonably
regarded as having a purpose other than punishment.”
Myrie, 267 I.3d at 261. As previously noted, the
legislative history demonstrates that aside from
punishment, there are the additional goals of
deterrence, as well as funding the cost of enforcement
of Section 1140. Staff of H.R. Comm. on Ways And
Means, 102d Cong., Report on Deceptive Solicitations,
at 9(Comm. Print 1992). Finally, the fine at issue is not
“excessive in relation to the alternative purpose
assigned.” When compared to the cost to the
government to enforce Section 1140, the $.50 per unit
fine is not excessive. Moreover, it is far less than the
maximum fine of $5,000 per violation that the statute
permits.
l3a
Appendix A
Likewise, we find NTU’s contention that the fine
violates the Excessive Fines Clause of the Eighth
Amendment meritless. To violate the Excessive Fines
Clause, the fine must be both “excessive” and a “fine.”
Tillman v. Lebanon County Corr. Facility, 221 F.3d 410,
420 (8d Cir.2000). For the reasons noted above, the
penalty at issue is neither “excessive” nor a “fine,” which
more commonly refers to a penalty for a criminal offense.
Id. (citing Browning Ferris Indus. of Vt., Inc. v. Kelco
Disposal, Inc., 492 U.S. 257, 265, 109 S.Ct. 2909, 106
L.Ed.2d 219 (1989)).
C. Expert Testimony®
NTU asks this Court to endorse the application of
Daubert to administrative proceedings and to strike the
testimony of Professor William Arnold, the expert who
testified for the government before the ALJ. Daubert
sets forth rules for determining whether expert
witnesses who testify in federal trials are reliable and
relevant as required by the Federal Rules of Evidence.
Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579,
113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). Here, NTU
argues that Professor Arnold’s testimony was “sloppy
and unscientific” and should have been excluded
from the administrative hearing under Daubert.
However, neither the Federal Rules of Evidence nor
Daubert apply to administrative hearings. See, e.g.,
6. This Court will defer to fact determinations by the
agency “if supported by substantial evidence on the record
considered as a whole.” 42 U.S.C, § 1320a-7a(e) (incorporated
by reference in 42 U.S.C. § 1320b-10(¢)(1)).
l4a
Appendix A
20 C.F .R. § 498.217(b) (“[T]he ALJ will not be bound by
the Iederal Rules of Evidence, but may be guided by
them in ruling on the admissibility of evidence.”
(emphasis added)); Bayliss v. Barnhart, 427 F.3d 1211,
1218 n. 4 (9th Cir.2005) (explaining that Daubert does
not govern the admissibility of evidence before an ALJ).
But see Niam »v. Ashcroft, 354 F.3d 652, 660 (7th Cir.2004)
(applying the “spirit of Daubert” to administrative
proceedings).
We find NTU’s arguments without merit. Not only
did the ALJ explain the Professor’s extensive
credentials in her opinion, but she conceded that she
did not rely on his testimony in reaching her decision.
Specifically, the ALJ noted that “much of Professor
Arnold’s testimony simply states the obvious.
Interpreting the plain meaning of the language on such
blatantly deceptive mailers does not require great
expertise.” (App. at 17 n. 9.) Even without considering
the testimony of Professor Arnold, we find that there is
substantial evidence in the record to support the ALJ’s
determination.
For the foregoing reasons, we will deny NTU’s
petition.
lSa
APPENDIX B — RECOMMENDED DECISION OF
THE DEPARTMENT OF HEALTH AND HUMAN
SERVICES, DEPARTMENTAL APPEALS BOARD,
APPELLATE DIVISION DATED APRIL 17, 2007
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
In the Case of:
Social Security Administration
Office of the Inspector General,
Petitioner,
« Vv, -
National Taxpayers Union,
Respondent.
RECOMMENDED DECISION DECLINING
REVIEW OF ADMINISTRATIVE LAW
JUDGE DECISION
The National Taxpayers Union (NTU) appealed a
December 14, 2006 decision by Administrative Law
Judge (ALJ) Carolyn Cozad Hughes, Social Security
Administration v. National Taxpayers Union, DAB
CR1543 (2006). In that decision, the ALJ: (1) found that
NTU had mailed correspondence that used the words
“social security” in a manner that violated section 1140
of the Social Security Act (Act); and (2) affirmed the
l6a
Appendix B
$274,584 civil money penalty proposed by the Social
Security Administration’s Office of Inspector General
for NTU’s violations of section 1140.
The regulations governing appeals to the Board in
administrative proceedings to enforce section 1140
provide that the Board “will limit its review to whether
the ALJ’s initial decision is supported by substantial
evidence on the whole record or contained an error of
law.” 20 C.F.R. § 498.221(i). The Board may remand a
case to the ALJ for further proceedings or may issue to
the Commissioner of Social Security a recommended
decision to decline review or affirm, increase, reduce,
or reverse the penalty determined by the ALJ. 20 C.ER.
§ 498.221(h).
The Board has considered each of the contentions made
by NTU in the brief accompanying its January 11, 2007
notice of appeal and examined the record. Applying the
appropriate standard of review, the Board finds no basis
to disturb the ALJ’s factual findings or legal conclusions
on any issue. Consequently, the Board issues this
recommended decision to decline review of the AT.J’s
December 14, 2006 decision.
This recommended decision becomes the final decision
of the Commissioner 60 days after the date on which
it is served on the parties and the Commissioner,
unless the Commissioner reverses or modifies the
recommended decision within that 60-day period.
20 C.F.R. § 498.222(a). If the Commissioner does not
reverse or modify the recommended decision, the Board
17a
Appendix B
will serve a copy of the Commissioner’s final decision
on the parties. If the Commissioner reverses or modifies
the recommended decision, the Commissioner shall
serve NTU with a copy of his final decision.
Appeal Rights
NTU may appeal the final decision of the Commissioner
by filing a petition for judicial review in the appropriate
United States Court of Appeals. See Act §§ 1140(¢)(1),
1128A(e). The petition for judicial review must be filed
within 60 days after NTU is served with a copy of the
Commissioner's final decision. 20 C.F.R. § 498.222(c¢)(1).
If a petition for judicial review is filed, a copy of the filed
petition must be sent by certified mail, return receipt
requested, to the Social Security Administration’s
General Counsel at the following address:
Social Security Administration Office
of General Counsel
Altmeyer Building
6401 Security Boulevard, Room 635
Baltimore, MD 21235.
See 20 C.ER. § 498.222(c)(2).
s/ Judith A. Ballard
Judith A. Ballard
s/ Leslie A. Sussan
Leslie A. Sussan
s/ Donald F. Garrett
Donald EF. Garrett
Presiding Board Member
I Sa
APPENDIX C — DECISION OF THE DEPARTMENT
OF HEALTH AND HUMAN SERVICES, DEPART-
MENTAL APPEALS BOARD, CIVIL REMEDIES
DIVISION DATED DECEMBER 14, 2006
Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Social Security Administration,
Petitioner,
~ VY. Pas
National Taxpayers Union,
Respondent.
DECISION
The Respondent, National Taxpayers Union (NTU), is an
advocacy group with headquarters in Alexandria, Virginia.
In order to increase membership and raise money, NTU
regularly sends out solicitations and other mailers. Here,
because it persisted in sending mailers asserting (among
other claims deemed misleading): “OFFICIAL
NATIONAL SURVEY ON SOCIAL SECURITY,” the
Inspector General (1.G.) of the Social Security
Administration (SSA) proposes imposing against it a
$274,582 civil money penalty (CMP) under section 1140 of
the Social Security Act (Act). For the reasons set forth
below, | agree with SSA and impose against NTU a CMP
of $274,582.
19a
Appendix ©
I. Background
In February 2002, a United States Senator forwarded
to SSA a constituent complaint about a letter and survey
that NTU sent him.’ P Ex. 3. The matter was referred
to the I.G. who, in a letter dated April 3, 2002, advised
NTU of the complaint and of the I.G.’s determination
that the mailing violated section 1140 of the Act because
its language could reasonably be construed as conveying
the impression that NTU was conducting a survey
authorized by SSA. In fact, SSA had not endorsed,
approved, or authorized NTU to conduct such a survey
on its behalf. The I.G.’s letter asked that, in all its direct
mailings and other communications, NTU immediately
cease and desist from using the words “Social Security”
or “Social Security Administration in a manner that
could reasonably be construed as conveying the false
impression that the communication was authorized,
approved, or endorsed by SSA. P Ex. 5.
NTU’s president, John Berthoud, responded in a letter
dated April 12, 2002, apologizing for any unintended
appearance of impropriety. The letter explained that
NTU intended to use the survey results “in lobbying
the government, Congress, and the Social Security
Administration for much-needed changes (which was our
purpose for commissioning it),” and promised to change
the package design “so that there is no impression that
1. We refer to this mailing as “Version 1.” An original example
of Version 1 1s in the reeord as R. Ex, 1, See also P: Ex, 17,
20a
Appendix C
the SSA has provided any formal authorization for our
project.”* P Ex. 6; Stipulation; Tr. 2-3.
On September 4, 2002, however, SSA received another
complaint about an NTU mailing similar to the one that
generated the first complaint. P Exs. 9, 11. After
verifying that this new version of NTU’s mailing was
developed and mailed after NTU promised to change
its package design (P Ex. 10), the I.G. determined that
the revised mailing also misled the public into believing
that the survey was authorized, endorsed, or approved
by SSA.° In a letter dated November 7, 2002, the I.G.
demanded that, within 10 days of its receipt of the letter,
NTU provide written confirmation of its plan to comply
2. President Berthoud’s statement could be construed as
misleading. NTU neither solicited the survey nor used its results
for any purpose. NTU’s Membership Director, Douglas Frank,
hired a copywriter, D. Richard Geske, to design a mailing for
the purpose of increasing membership and raising money. The
copywriter decided that the survey would be an effective
response device or “involvement technique.” Tr. 11; 252. The
survey itself was not a valid survey, by any objective standard.
Tr. 131-32. The survey “results” have never been used. They
were not tabulated until March 2003, and were not shared with
the NTU Board. Tr. 10, 17, 43, 48 (“Actually, no particular plan of
operation for [tabulating survey results].”). When tabulated,
the results were not particularly supportive of NTU’s position
a fact NTU seems to have ignored. R. Ex. 10. NTU’s then Director
of Government Affairs, Alfred W. Cors, Jr., was not even aware
of the survey, and opined that it was designed more to raise
money for NTU than to lobby Congress. Tr. 109-11.
3. This revised mailing is referred to as Version 2, and an
original example is in the record as R. Ex. 2. See also P Ex. 18.
2la
Appendix C
with section 1140. The letter warned that, if NTU failed
to act, the I.G. would take administrative action under
section 1140 and its implementing regulations.
FE Bx. il.
NTU declined to submit the requested plan. Instead,
characterizing section 1140 as unconstitutional, on
December 6, 2002, NTU filed a law suit against SSA in
U.S. District Court for the District of Maryland. P. Ex.
12; see SSA's post-hearing brief (SSA Br.), Appendix A.
In January and February 2003, while the court action
was pending, NTU mailed out a third version of its
solicitation/survey, which SSA also considers misleading
and violative of section 1140. P Exs. 14, 16, 19.
The District Court subsequently dismissed NTU’s
complaint. Natronal Taxpayers Union v. SSA, Civil
Action No. WMN-02-3949 (September 3, 2003) (SSA Br.,
Appendix A). NTU appealed, and, in a decision dated
July 15, 2004, the U.S. Court of Appeals for the Fourth
Circuit affirmed tne dismissal. Nutional Taxpayers
Union v. SSA, 376 F.3d 239 (4% Cir. 2004), cert. den. 125
S.Ct. 1300 (2005).
Shortly thereafter, in a letter dated May 10, 2005, the
I.G. proposed imposing against NTU a CMP in the
amount of $274,582 (or 50¢ per violation), based on its
determination that, between December 2001 and
February 2003, NTU mailed 549,164 solicitation surveys
4. Referred to as Version 3, an original example of the
mailing is in the record as R. Ex. 3. See also P. Ex. 19.
Pe.
22a
Appendix C
that violated section 1140. The letter advised NTU of
its appeal rights and NTU timely requested a hearing.
I held a hearing in Washington, D.C. on July 12 and 13,
2006. I have admitted into evidence SSA Exhibits
(P. Exs.) 1-37, and NTU Exhibits (R. Exs.) 1-19, and 24-
51. Tr. 2, 247. Following the hearing, the parties
submitted post-hearing briefs (SSA Br. and NTU Br.)
and reply briefs (SSA Reply and NTU Reply).
II. Statutory and Regulatory Background
Section 1140 of the Act prohibits misuse of symbols,
emblems, or names in reference to Social Security or
Medicare.
(a)(1) No person may use, in connection with
any item constituting an advertisement,
solicitation, circular, book, pamphlet, or other
communication ... alone or with other words,
letters, symbols or emblems—
(A) the words “Social Security”,
“Social Security Account”, “Social
Security System”, “Social Security
Administration”, “Medicare”, “Health
Care Financing Administration”,
“Department of Health and Human
Services”, “Health and Human
5. Citation to the Health Care Financing Administration
(HCFA) at section 1140 has been changed to the Centers for
Medicare & Medicaid Services (CMS). PL. 108-173, § 900(e).
23a
Appendix C
Services”, “Supplemental Security
Income Program”, or “Medicaid”, the
letters “SSA”, “HCFA”, “DHHS”, “HHS”,
or “SSI”, or any other combination or
variation of such words or letters, or
(B) a symbol or emblem of the
Social Security Administration, Health
Care Financing Administration, or
Department of Health and Human
Services (including the design of, or a
reasonable facsimile of the design of . . .
envelopes or other stationery used by
the Social Security Administration,
Health Care Financing Administration,
or Department of Health and Human
Services) or any other combination or
variation of such symbols or emblems,
in a manner which such person knows or
should know would convey, or in a manner
which reasonably could be interpreted or
construed as conveying, the false impression
that such item is approved, endorsed,
or authorized by the Social Security
Administration, the Health Care Financing
Administration, or the Department of Health
and Human Services or that such person has
some connection with, or authorization from,
the Social Security Administration, the Health
Care Financing Administration, or the
Department of Health and Human Services.
* * * +
24a
Appendix C
(3) Any determination of whether the use
of one or more words, letters, symbols, or
emblems (or any combination or variation
thereof) in connection with an item described
in paragraph (1)... is a violation of this
subsection shall be made without regard to
any inclusion in such item (or any so
reproduced, reprinted, or distributed copy
thereof) of a disclaimer of affiliation with the
United States Government or any particular
agency or instrumentality thereof.
The Act provides for CMPs of up to $5,000 per violation.
Act, § 1140(b). Each piece of mail containing “one or
more words, letters, symbols, or emblems in violation of
subsection (a)” constitutes a separate violation.
Implementing regulations are found at 20 C.F.R. Part
498. Echoing the broad statutory language, they
authorize the I.G. to impose a penalty against any person
who, he determines,
has made use of certain Social Security
program words, letters, symbols, or emblems
in such a manner that they knew or should
have known would convey, or in a manner
which reasonably could be interpreted or
construed as conveying, the false impression
that an advertisement or other item was
authorized, approved, or endorsed by the
Social Security Administration, or that such
person has some connection with, or
25a
Appendix C
authorization from, the Social Security
Administration.
20 C.ER. § 498.102(b). CMPs maybe imposed for misuse
of the statutorily protected words, letters, symbols, or
emblems, “or any other combination or variation” of those
words, letters, symbols or emblems. 20 C.E.R.
§ 498.102(b)(1). Again, the use of a disclaimer is not
considered a defense in determining a section 1140
violation. 20 C.E-R. § 498.102(c).
With respect to the amount of the penalty, the regulations
authorize the I.G. to impose a penalty of not more than
$5,000 for each violation. In the case of a direct mailing
solicitation, each separate piece of mail containing one or
more program words, letters, symbols, or emblems
constitutes a separate violation. 20 C.F.R. § 498.103. In
determining the amount of the CMP the I.G. takes into
account: (1) the nature and objective of the advertisement,
solicitation, or other communication, and the circumstances
under which they were presented; (2) the frequency and
scope of the violation and whether a specific segment of
the population was targeted; (3) the prior history of the
individual, organization, or entity in their willingness or
refusal to comply with informal requests to correct
violations; (4) the history of prior offenses of the individual,
organization, or entity in their misuse of program words,
letters, symbols, and emblems; (5) the financial condition
of the individual or entity; and (6) such other matters as
justice may require. The use of a disclaimer of affiliation
with the U.S. government, SSA, or its programs is not a
mitigating factor in determining the amount of penalty.
20 C.ER. § 498.106.
26a
Appendix C
If the I.G. seeks to impose a penalty, it serves the party
with written notice of its intent. 20 C.F-R. § 498.109. The
party is entitled to a hearing before an administrative
law judge (ALJ). 20 C.ER. § 498.202. The hearing is not
limited to specific items and information set forth in the
notice letter; additional items or information may be
introduced by either party, subject to the 15-day
exchange requirements of 20 C.F.R. § 498.208. 20 C.ER.
§ 498.215(e).
NTU has the burden of going forward and the burden
of persuasion with respect to affirmative defenses and
any mitigating circumstances. The I.G. has the burden
of going forward and the burden of persuasion with
respect to all other issues. The burden of persuasion
“will be judged by a preponderance of the evidence.”
20 C.ER. § 498.215(b) and (c).
The regulations require me to issue an initial decision
based on the record, and specifically grants me the
authority to affirm, deny, increase, or reduce the
penalties proposed by the I.G. 20 C.FR. § 498.220.
Ill. Issues
I must determine whether the three solicitations sent
by NTU violate section 1140 of the Act. Specifically,
(1) Did NTU know, or should it have known, that its
solicitations conveyed the false impression that its
mailings were approved, endorsed, or authorized by SSA
or that NTU had some connection with or authorization
from the agency?
2/a
Appendix C
In the alternative, (2) Could the solicitations reasonably
be interpreted or construed as conveying the false
impression that they were approved, endorsed, or
authorized by SSA or that NTU had some connection
with or authorization from the agency? If I find in the
affirmative on either of these questions, NTU has
violated the statute and is subject to the imposition of a
CMP.
(3) If I conelude that NTU has violated section 1140,
what, if any, CMP should be imposed?
IV. Discussion
NTU relies on direct mail solicitations “to help” build
and maintain grass roots support. R. Ex. 9, at 5.
According to NTU’s then Membership Director, Douglas
Frank, in June 2001, NTU decided to use the issue of
private investment accounts for Social Security in its
effort to increase membership and raise funds. R. Ex.
17, at 1 (Frank Decl. 191, 2), Tr. 6. He directed D. Richard
Geske, an independent copywriter, to put together a
solicitation package that addressed the issue. He pave
no specific directions, leaving the choice of “response
device” up to the copywriter. R. Ex. 17, at 1 (Frank Decl.
3); Tr. 7. He did not ask Copywriter Geske to design a
survey. Tr. 7-8, 11; R. Ex. 15, at 1-2 (Geske Decl. 1 13).
On his own initiative, Copywriter Geske decided to
include a survey in the package. R. Ex. 15, at 3 (Geske
Decl. {1 16).
28a
Appendix C
All of the mailers are “self-mailers;” the entire package
is one piece of paper that “comes open in the reader’s
hands, but the parts stay together until used.”
R. Ex. 15, at 2 (Geske Decl. 11 4); R. Ex. 17, at 1-2 (Frank
Decl. 1 3).
A, In all three versions of its “Social Security”
solicitation, NTU violated section 1140 of the
Act.’
I. NTU used the words “Social Security” on
its solicitations in a manner that could
reasonably be interpreted as conveying
the false impression that its mailings
were approved, endorsed, or authorized
by the Social Security Administration,
or that NTU had some connection with
or authorization from SSA.
NTU argues that a “reasonable person” could see that
its mailers originated from NTU, and not from SSA or
any other government agency. But this is not the
statutory standard. The baseline inquiry under section
1140(a)(1) is whether NTU’s mailers reasonably could
be interpreted or construed to have conveyed the false
impression that SSA approved, endorsed, or authorized
their contents. Further, the statute does not require any
evidence of actual confusion by those who received the
mailers. As the Court of Appeals for the Fourth Circuit
6. I make findings of fact and conclusions of law to support
my decision in this case. | set forth each finding below, in italics
and bold, as a separate lettered or numbered heading.
29a
Appendix C
has acknowledged, this test creates a “relatively low
threshold to support a finding of liability.” United
Seniors Association v. SSA, 423 3d 397, 405 (4" Cir.
2005).
Here, although NTU’s mailers do not purport to be from
SSA itself, they are simply chock-full of language that
conveys the impression that SSA approved, authorized,
or endorsed their contents. I consider bclow some of
the more egregious examples:
Version 1.
* Written on the outside of the Version 1 mailer, in
underlined bright red capital letters, is the
following: OFFICIAL NATIONAL SURVEY ON
SOCTAL SECURITY. Immediately beneath that,
in smaller capital letters, the following appears:
COMMISSIONED BY THE NATIONAL
TAXPAYERS UNION FOR THE SOCIAL
SECURITY ADMINISTRATION, WHITE
HOUSE AND CONGRESS OF THE UNITED
STATES
7. In United Seniors, the Court observed that mass mailers
purposely use bold red ink for the “Social Security message”
and black ink for the sender block “to detract attention from
the sender block and focus attention on the Social Security
message.” United Seniors Association, 423 F.3d 401. Copywriter
Geske conceded that he wanted “to bring attention to this
particular piece.”
30a
Appendix C
(Emphasis in original).* P Ex. 17, at 1; R. Ex. 1. I find
this language, by itself, sufficient to establish a section
1140 violation since it creates the impression that NTU’s
survey has official sanction. Even though it shows that
NTU sent the mailer, the recipient would still reasonably
think that SSA approved, endorsed, or authorized its
contents. See United Seniors Association, 423 F.3d at
405. The reader is led to believe that NTU is acting with
“official” sanction from three governmental entities.
See also P. Ex. 37, at 2 (Arnold Decl.); Tr. 147-48.
In enacting section 1140, Congress was particularly
concerned that direct mailers put “Social Security”
words and symbols on the face of their mailers to entice
recipients into opening them. As the Court of Appeals
noted, once a recipient of a misleading envelope opens
the envelope and begins reading its contents, the
deceptive “communication” has served its purpose.
United Seniors Association, 423 F.3d at 404. NTU has
made much of what I consider an inconsequential
distinction between the outside of a self-mailer and an
envelope. For all practical purposes, the information
printed on the outside of these self-mailers has the same
impact as information printed on the outside of an
envelope, and, as with an envelope, once the recipient
opens the self-mailer, the deceptive communication has
achieved its purpose.
8. To the extent possible, quotations from the mailers are
presented in their original format, including capitalization,
italics, underlining, and bold text.
3la
Appendix C
* The outside of the mailer is filled with additional
language designed to create the impression of some
official sanction:
POSTMASTER: IMMEDIATE DELIVERY
REQUESTED DELIVERIN ACCORDANCE
WITH POSTAL REGULATIONS:
DMM300.1.0
CERTIFIED SURVEY ENCLOSED:
P020041B 08204 16282
PLEASE OQPEN IMMEDIATELY AND
KINDLY RESPOND AS SOON AS POSSIBLE
(Emphasis in original), P Ex. 17, at 1. Director rank
acknowledged that the mailer was simply sent at the
third class, non-profit rate, and that nobody “certified”
the survey. Tr. 62. Even Copywriter Ceske eventually
conceded that this language is there to “increase the
importance of a piece.” Tr. 283, 284.
William E. arnold, Ph.D, is a Professor Emeritus in
Communications at Arizona State University, and a
Professor of Gerontology at the University of Arizona.
He has conducted research on the use of information to
change attitudes and behavior. P Ex. 37, at 16 et seg.
(Arnold Deecl.); ‘ly. 121-22. He has extensive experience
in conducting surveys, and testified credibly during
these proceedings. Tr. 130. Professor Arnold points out
that, taken together, the language on the outside of the
mailer conveys a sense of urgency that a Social Security
ote >
J2a
Appendix C
beneficiary wou!d be reluctant to ignore. Even non-
beneficiaries could reasonably infer that the mailing
contains official documents that could affect personal
earnings records maintained by SSA. P. Ex. 37, at 3
(Arnold Decl.).°
¢ When the flyer is opened, it leads to a page with the
“National Taxpayers Union letterhead, below which
the violative language is repeated, in bold,
underlined capital letters:
9. N'TU attacks Professor Arnold’s expertise, pointing out
that the professor admitted that he is not an expert on direct
mail tactics. NTU Br. at 8; Tr. 146. I see no reason why he would
need such expertise in order to opine knowledgeably in this
ease. Professor Arnold’s expertise in communications is
undeniable; he has spent forty years researching, publishing
and teaching in that field. He understands the significance of
language and is fully qualified to comment on how people might
reasonably construe particular words and phrases. Moreover,
much of his testimony simply states the obvious. Interpreting
the plain meaning of the language on such blatantly deceptive
mailers does not require great expertise. Even NTU, although
denying the section 1140 violation, concedes that its use of
language “might abuse the recipient.” NTU Br. at 4n.6
33a
Appendix C
OFFICIAL NATIONAL SURVEY ON
SOCIAL SECURITY
CONDUCTED BY
THE NATIONAL TAXPAYERS UNION
108 NORTH ALFRED STREET
ALEXANDRIA, VIRGINIA 22314
AND COMMISSIONED FOR
THE SOCIAL SECURITY ADMINISTRATION
THE WHITE HOUSE
UNITED STATES HOUSE OF
REPRESENTATIVES
UNITED STATES SENATE
(Emphasis in original), P Ex. 17, at 3. The page then
addresses the recipient by name (ISSUED TO: [name
deleted]), followed by what appears to be very specific
identifying information (QUALIFYING ZONE &
RATING; CERTIFICATION NUMBER, and RETURN
DATE). But this identifying information is, in fact, of
absolutely no consequence except to create the
impression of consequence.
Following that language, in underlined, red capital
letters is the “JMPORT INFORMATION’ section. The
recipient is again mentioned by name (in fact, the
recipient’s name is repeated throughout the mailer) and
told:
34a
Appendix C
YOUR NAME WAS SPECIFICALLY CHOSEN
to receive this OFFICIAL SURVEY ON
SOCIAL SECURITY...
... Because you have a VALID SOCIAL
SECURITY NUMBER and live in one of the
QUALIFYING ZONES from which we are
required to seleci at least ONE participant.
(The ellipses are in the original; emphasis is also in the
original). Then the mailing tells the recipient (again by
name) that the recipient's participation in the survey is
crucial.
And because you or your spouse has paid into
the Social Security system and are receiving
or expect to receive benefits in the future. ...
P Ex. 17, at 3: R. Ex. 1.
In reviewing this language, Professor Arnold observed
that “the recipient’s logical conclusion is that SSA has
shared official information with NTU, information that
only SSA would be privy to, in order for NTU to conduct
an official survey on SSA’s behalf.” P Ex. 37, at 3-5
(Arnold Decl.). I agree. The references to the recipient’s
social security number and eligibility create the
impression that NTU has specific information that it
could only have obtained from SSA. As one recipient of
35a
Appendix C
an NTU mailer (and of Social Security)'® explained to
NTU’s private investigator,
Ms. Fischer: Because in there someplace it
says something about people collecting, if I
remember correctly.
Mr. Roche: Collecting Social Security?
Ms. Fischer: Yes. I didn’t know how they
would have possibly found that out.
* * *
Ms. Fischer: It seemed to mc that they knew
that I was collecting — somehow they got my
Social Security number, which is supposed to
be private. Nobody is supposed to know that.
Mr. Roche: Right.
Ms. Fischer: Otherwise they wouldn’t have
known my birthday or my — the fact that I
was collecting —
Further, I agree with the I.G. that the assertion that
NTU is required to select at least one participant from
each “qualifying zone” tells the recipient that NTU is
not conducting the survey for itself, but is acting at the
10. As discussed 7ufru, Laura Fischer received Version 2
of the mailer, which contains this same language.
36a
Appendix C
direction of others who have imposed this requirement.
Inasmuch as no other entities are mentioned, logic dictates
that SSA, the White House, and/or Congress imposed that
requirement.
¢ On page 4 of the mailing, under the bold red caption
“WHAT ARE THE OPTIONS? CAN SOCIAL
SECURITY BE SAVED?”, the mailer describes NTU
“{a]s the authorized sponsor of this survey and
a credible voice in Washington, D.C. that has
exclusively represented the interests of the American
taxpayer....”
(Emphasis in original); P Ex. 17, at 6; R. Ex. 1. Director
Frank defended this language by asserting that NTU was
the “authorized sponsor” because it authorized itself to
conduct the survey. Tr. 61. And Copywriter Geske insisted
that if the recipient “read the entire package” he/she would
“understand very clearly that it was the National
Taxpayers Union.” Tr. 287. But no one would reasonably
infer that NTU required authorization from itself to
sponsor a survey. “Authorization” suggests approval by
an outside entity with some authority, and, again, according
to the mailer, SSA, the White House, and Congress are
the authorizing entities.
The mailer then includes the inevitable, and repeated,
requests for donations, along with the ersatz survey. P
Ex. 17, at 8, 10; R. Ex. 1 (“[Name deleted] thank you for
your valued participation in this important survey on Social
Security. Please return your survey today in the envelope
provided and won’t you please do your part to help the
National Taxpayers Union save Social Security by enclosing
your donation of $25 or more. .. .”’). Tr. 14-16.
37a
Appendix C
Version 2.
Director Frank responded to the I.G.’s cease-and-desist
letter by removing from the mailer the most conspicuous
references to the “Social Security Administration.”
Tr. 19-20. The revised mailer still purports to contain an
“OFFICIAL NATIONAL SURVEY ON SOCIAL
SECURITY” that was “COMMISSIONED BY THE
NATIONAL TAXPAYERS UNION FOR THE WHITE
HOUSE AND CONGRESS OF THE UNITED STATES.”
(Emphasis in original). P Ex. 18, at 1; R. Ex. 2. The mailer
contains the same specific, faux-consequential identifying
information. The recipient is addressed by name and
advised that her name was “SPECIFICALLY CHOSEN”
to receive this OFFICIAL NATIONAL SURVEY ON
SOCIAL SECURITY because she lives in a“QUALIFYING
ZONE” from which NTU is “required” to select a
participant and she is the “ONLY individual from a total
of 89” in the above “QUALIFYING ZONE” whose name
matches the other “important demographic and economic
data that’s central to the purpose of this survey.” P Ex.
18, at 3; R. Ex. 2."' It still refers to the recipient’s Social
Security eligibility, and refers to NTU as the “authorized
sponsor” of the survey. P Ex. 18, at 6; R. Ex. 2.
I do not find that eliminating “Social Security
Administration” from the listed “survey sponsors”
11. Copywriter Geske would not admit that this “one of
89” number was a fabrication, but he could not explain why the
remaining 88 names would not have qualified, nor why
recipients from various zones were all “one of 89.” Tr. 270-77.
38a
Appendix C
brought the mailer into compliance with section 1140.
The mailer continued to use the term “Social Security”
as “part of an overall design” that conveys the
impression that the mailer contains an important Social
Security document (the survey) sent on behalf of official
government sources. This violates section 1140.
See United Seniors Association, 423 F.3d 408.
Laura Fischer is a retiree receiving Social Security
benefits. P Ex. 34, at 1 (Fischer Decl. 11). She has had
no association with NTU, but a copy of Version 2 was
mailed to her in about June 2002. /d. at 2 (Fischer Decl.
11 4, 5). She testified, credibly, that she does not
generally open such solicitations, but she opened this
one because of the bold red reference to Social Security
and because it indicated that a “certified survey” was
enclosed. /d. at 2 (Fischer Decl. IT 4). Tr. 80, 227-28,
235. At first she thought that SSA was involved with
NTU’s request, but, having worked for SSA in the
distant past, she considered it unlikely that SSA would
sponsor a private solicitation for funds. So she called
SSA to inqui®e. /d. Thus, the 1.G. has not only shown
that NTU’s mailing “could be interpreted” as conveying
a false impression (satisfying the “low threshold” set by
the statute), but has also shown that the mailing in fact
confused its recipient, enticing her to open it, read its
contents, and call SSA. Had the envelope not referred
to SSA, she would have discarded it, unopened.”
12. Ms. Fischer's inclination to diseard such mail illustrates
Congress’ additional concern about the effect of deceptive
(Cont'd)
38a
Appendix C
brought the mailer into compliance with section 1140.
The mailer continued to use the term “Social Security”
as “part of an overall design” that conveys the
impression that the mailer contains an important Social
Security document (the survey) sent on behalf of official
government sources. This violates section 1140.
See United Seniors Association, 423 F.3d 405.
Laura Fischer is a retiree receiving Social Security
benefits. P Ex. 34, at 1 (Fischer Decl. 11). She has had
no association with NTU, but a copy of Version 2 was
mailed to her in about June 2002. /d. at 2 (Fischer Decl.
1{ 4, 5). She testified, credibly, that she does not
generally open such solicitations, but she opened this
one because of the bold red reference to Social Security
and because it indicated that a “certified survey” was
enclosed. 7d. at 2 (Fischer Decl. IT 4). Tr. 80, 227-28,
235. At first she thought that SSA was involved with
NTU’s request, but, having worked for SSA in the
distant past, she considered it unlikely that SSA would
sponsor a private solicitation for funds. So she called
SSA to inquire. /d. Thus, the I.G. has not only shown
that NTU’s mailing “could be interpreted” as conveying
a false impression (satisfying the “low threshold” set by
the statute), but has also shown that the mailing in fact
confused its recipient, enticing her to open it, read its
contents, and call SSA. Had the envelope not referred
to SSA, she would have discarded it, unopened."
12. Ms. Fischer’s inclination to discard such mail illustrates
Congress’ additional concern about the effect of deceptive
(Cont'd)
39a
Appendix C
Version 8.
After receiving the LG.’s November 7, 2002 cease-and-
desist letter, NTU mailed out a third version of the
solicitation/survey. P Ex. 19, at 1; R. Ex. 3.
* Written on the outside of Version 3, in even larger
underlined bright red capital letters is: “OFFICIAL
NATIONAL SURVEY ON SOCIAL SECURITY.” As
in Version 2, immediately beneath that, in smaller
capital letters, is “CoMMISSIONED By THE NATIONAL
TAXPAYERS UNION For WHITE House AND CONGRESS
Or Tue UNITED STATES.”
(Emphasis in original).
¢ Again, when the flyer is opened, it leads to a page
with the NTU logo and NATIONAL TAXPAYERS
UNION in bold letters.
Immediately below that, in red, capitalized italics, is:
REQUIRED NOTIFICATION AND DISCLAIMER:
(Cont'd)
mailers. People are so inundated with “official” mail that they
are not able to distinguish genuine correspondence from SSA,
and are more likely to discard it, seriously hampering SSA’s
ability to communicate with its constituents. United Seniors
Association, 423 F.3d at 399. See also SSA v. United Seniors
Association, DAB CR1075, at 4-5 (2003); House Comm. on Ways
and Means, 102d Cong., 2d Sess., Report on Deceptive
Solicitations 5 (Comm. Print 1992).
40a
Appendix ©
Then, in capital letters: THE NATIONAL
TAXPAYERS UNION IS LEGALLY RECOGNIZED
AND REGISTERED AS A NOT FOR PROFIT
ORGANIZATION BY THE UNITED STATES
GOVERNMENT. THIS ORGANIZATION IS
INDEPENDENT FROM SAID GOVERNMENT
AND RECEIVES NO FUNDING OR SUPPORT OF
ANY KIND BY THE U.S. GOVERNMENT, ITS
AGENCIES OR ANY OF THE BRANCHES
THEREOF MOREOVER, THE ENCLOSED
OFFICIAL NATIONWIDE OPINION POLL ON
SOCIAL SECURITY /JS SPONSORED BY SAID
ORGANIZATION TO INSURE THAT CERTAIN
VIEWPOINTS HELD BY THE GENERAL
PUBLIC ARE FAIRLY AND ACCURATELY
REPRESENTED.
(Emphasis in original). P Ex, 19, at 3; R. Ex. 3. Even if
this were a credible disclaimer, the statute explicitly
precludes me from considering a disclaimer in
determining a violation under section 1140.
Determination of a violation “shall be made without
regard to any inclusion in such item ... of a disclaimer
of affiliation with the United States Government or any
particular agency or instrumentality thereof.” Act,
§ 1140(a)(3).
Moreover, the disclaimer paragraph is more an exercise
in obfuscation than a legitimate disclaimer. First, NTU
claims legal] recognition and registration by the U.S.
government, which suggests some official government
sanction beyond that afforded a typical non-profit
4la
Appendix C
organization. The next sentence, though, disavows any
financial connection with the government. Then comes
the reference, in bold, to the OFFICIAL NATIONWIDE
OPINION POLL ON SOCIAL SECURITY, sponsored,
not by NTU, but by “said organization.” The antecedent.
for “said organization” is ambiguous. Careful parsing
of the passage suggests that it refers to NTU, but the
more casual reader could easily conclude that it refers
to SSA, or some other government agency or branch.
See P. Ex. 37, at 10-11 (Arnold Decl.)
The next paragraph confuses the reader even more,
suggesting that NTU’s poll has been sponsored or
endorsed by both the legislative and executive
branches of government, or, as SSA argues, that
NTU is working with the President and Congress
to conduct the _— survey. It reads:
ACKNOWLEDGMENT: IT IS FURTHERMORE
HEREIN ACKNOWLEDGED THAT SAID
OFFICIAL NATIONWIDE POLL ON SOCIAL
SECURITY HEREIN CONTAINED WAS
COMMISSIONED FOR THE PRESIDENT OF
THE UNITED STATES, THE HONORABLE
GEORGE WALKER BUSH, AND MEMBERS OF
THE UNITED STATES CONGRESS.
The next section repeatedly addresses the recipient
by name, advises her that the branches of
government are formulating new policies for the
“SOCIAL SECURITY PROGRAM,” that will have
a “profound effect” on her retirement benefits,
eligibility requirements, and the manner in which
42a
Appendix C
the program is administered. The mailer tells her
that her views “will influence those policies and
changes” but that she “MUST PARTICIPATE by
filling-out and returning the Official Nationwide
Opinion Poll on Social Security.” The letter then
repeats that she was selected because of her
“eligibility status.”
Again the reference to the recipient’s eligibility status
suggests that NTU obtained confidential infatuation
from SSA about this particular recipient. The
admonition that she “must participate” suggests that
her failure to do so could adversely affect her receipt of
benefits. See P Ex. 37, at 12 (Arnold Decl.).
NTU argues that I should require “a properly designed
survey to establish whether the recipient class
(the reasonable person) would understand the NTU
solicitations to be government-sponsored.” NTU Br. at
7. Of course, at approximately $ 100,000 per survey, such
a requirement would render section 1140 virtually
unenforceable. See ‘Ir. 155. While such a survey might
be admissible as evidence, and NTU was certainly free
to conduct and submit the results of such a survey,
nothing in the statutory language, regulations, nor case
law suggests that SSA must do so in order to halt the
blatant misuse of protected words and symbols. Indeed,
the reviewing courts have unanimously affirmed the
ALB’s authority to determine violations without such
evidence. United Seniors, 423 F.3d 397; SSA uv. National
Federation of Retired Persons, DAB No. 1885 (2003),
aff'd, 115 Fed.Appx. 763, 2004 WL 2980874 (C.A.5),
43a
Appendix C
Moreover, this argument — that a survey would show
that no one could reasonably interpret the mailer as
conveying a false impression of government involvement
— would be in the nature of an affirmative defense, for
which respondent bears the burden of going forward
and the burden of persuasion. 20 C.E.R. § 498.215(b)(1).
I note also that NTU has exclusive control over the
recipient information necessary to conduct such a
survey, information it did not share with the I.G., even
in response to subpoenas (see SSA Reply at 11; Tr. 39-
41), and was thus the only party in a position to
undertake such a survey.
All three versions of NTU’s Social Security mailer were
designed to entice the recipient to open it, to send in a
response, and to send money. Tr. 141. To achieve these
purposes, the mailers are fraught with deliberately
ambiguous and deceptive language that repeatedly
includes the protected ‘Social Security” words. By any
objective standard, NTU’s use of those protected words
conveyed the false impression that the mailers’ contents
were approved, endorsed, or authorized by SSA. The
language used in the mailers also suggested that NTU
had some connection with or authorization from SSA.
The I.G. has thus established that NTU violated section
1140, without regard to what NTU knew or should have
known about how its mailing would be interpreted. I
next consider what NTU knew or should have known.
44a
Appendix C
2. NTU knew or should have known that its
solicitations conveyed or could reasonably
have been interpreted as conveying the
false impression that its mailings were
approved, endorsed, or authorized by SSA,
or that NTU had some connection with or
authorization from that agency.
In SSA v. United Seniors, Judge Kessel wrote:
Respondent is a sophisticated mass marketer
of ideas. its life blood is its appeals to senior
citizens on a range of social and policy issues.
It has vast experience in making mass
mailings. That sophistication makes it obvious
that Respondent knew what it was doing
when it designed the envelopes that are at
issue in this case.
United Seniors, DAB CR!075, at 18 (2003), aff’d 423
F.3d 397 (4" Cir. 2005); see also National Federation of
Retired Persons, DAB No. 1885, at 238, 28, aff’d, 115
ed.Appx. 763, 2004 WL 2980374 (where Respondent
deliberately and prominently displayed protected
language on the outside of its mailings to induce
recipients to open them, and where it used protected
language on the inside to induce recipients to respond,
it not only knew or should have known that its mailing
created a false impression, it specifically designed those
mailers to create that impression).
45a
Appendix C
Judge Kessel’s words also apply to NTU; it is an
experienced mass marketer of ideas that knew exactly
what it was doing when it designed the mailers in this
case. Richard Geske is an experienced copywriter, well-
versed in direct mail techniques." He carefully and
13. Copywriter Geske was not a particularly credible witness.
He attempted to circumvent even simple questions, and, at times,
his spirited defense of NTU’s actions bordered on the absurd. For
example, notwithstanding the names of three governmental bodies
on the outside of the mailer, Copywriter Geske refused to
acknowledge that the envelope contained any reference to the
government:
Q. Do you see how it says, “Commissioned by the
National Taxpayers Union for the Social Security
Administration, White House and Congress of the
United States”?
A. Yes.
Q. Okay, why did you make that reference to the
government?
A, Well, it’s not a reference to the government, in my
opinion...
JUDGE HUGHES: Do you understand that the
Social Security Administration is a government
agency?
THE WITNESS: Yes, I do.
JUDGE HUGHES: And the White House is a
government entity?
THE WITNESS: Right.
JUDGE HUGHES: As is the Congress of the United
States?
THE WITNESS: Yes. oe
(Cont'd)
46a
Appendix C
deliberately chose the mailer language. He put on the
outside of the mailer “OFFICIAL NATIONAL SURVEY
ON SOCIAL SECURITY.” He acknowledges that he
chose this language “to get attention.”
The object of the text on the exterior of the
mailer is to get attention. In writing a mailer
like this, there is a risk that recipients will see
it as “junk mail” and throw it away, and the
use of bold lettering and messages on the
exterior is designed to encapsulate the entire
message so the recipient may decide quickly
that it is worthwhile to read further."
(Cont'd)
JUDGE HUGHES: Okay, so it is a reference. I think
we can all agree that this is a reference to the
government.
THE WITNESS: Well, actually, I think it’s abundantly
clear. It means that — exactly what it says. Here is a
survey. The National Taxpayers Union is conducting
this survey. And they had the authority to do this task
~~ hence the word “commissioned” — for the Social
Security Administration, blab, blab, blah.
Tr. 260-62.
14. NTU has argued that its mailers so resembled “junk
mail” that no reasonabie person would have considered it
anything else. Copywriter Geske’s testimony here — that he
designed the outside of the mailer to distinguish it from “junk
mail” so that the recipient would take it more seriously —
undercuts that argument. Moreover, there is simply no “junk
(Cont'd)
47a
Appendix C
R. Ex. 15, at 4-5 (Geske Decl. 110). When asked why the
lettering “Official National Survey on Social Security,”
was even larger on Version 3 than the earlier versions,
he said that he actually wanted the larger font size on
all versions in order to “to bring attention to this
particular piece.” Tr. 289-90.
Copywriter Geske admitted that the survey was his idea;
he came up with it as an “involvement technique,” which
he described as a technique, commonly used in direct
mail, that is “proven” to increase responses. Tr. 252-53."
He included the personalized references and the
language, “you or your spouse has paid into the Social
Security system and are receiving or expect. to receive
(Cont'd)
mail” exception to section 1140. Congress enacted section 1140 to
address problems created by “direct mailers,” i.e. purveyors of
junk mail. See Deceptive Mailings and Solicitations to Senior
Citizens and Other Consumers: Hearing before the Subcomm. on
Social Security, and the Subcomm. on Oversight of the House
Committee on Ways and Means, 102d Cong., 2d Sess. 124 (Comm.
Print 1992) (1992 House Hearing); Deceptive Solicitations,
Including Findings and Recommendations of the Subcommittees,
H. R. Rep. No. 9, 102d Cong. 2d Sess. 45 (1992) (1992 House Report).
A “junk mail” exception would devour the rule, leaving nothing.
15. On the other hand, he also claimed that NTU planned to
use the survey as the “centerpiece” for its lobbying campaign.
“The results of the survey were going to ke collected, tabulated,
ond then used literally, again, as a centerpiece for their lobbying
can.naign.” Tr. 254. But when reminded that NTU was not even
aware of the survey, that he had concocted it to increase responses,
he said “Tl can’t answer for them.” Ty. 254.
48a
Appendix C
benefits in the future.” He admitted that he did not
actually know whether any particular recipient fell into
this category; he assumed that most people did, and
included the language because a higher degree of
personalization is shown to increase response rates.
Tr. 263.
Next, I find unconvincing NTU’s assertion that it would
deliberately have avoided any suggestion of an
association with the government because its target
audience is so hostile. The above discussion establishes,
however, that Copywriter Geske deliberately included
references to “Social Security, and, as Director Frank
acknowledged, the Social Security program does not
engender a negative response, even from those most
hostile to government. Tr. 35-36. Moreover, NTU’s
mailers and some of its mailing lists suggest no animosity
to the administration in power at the time. See P. Ex.
19, at 3; R. Ex. 3 (“COMMISSIONED FOR THE
PRESIDENT OF THE UNITED STAPLES, THE
HONORABLE GEORGE WALKER BUSH, AND
MEMBERS OF THE UNITED STATES
CONGRESS”); P Ex. 19, at 8 (“The President of the
United States, the Honorable George Walker Bush, the
Honorable Members of the United States Congress...
owe you a debt of gratitude and appreciation.”)
I note finally that NTU knew or should have known that
its mailers conveyed a false impression because the 1.G.’s
April 3, 2002 warning letter told them so when the I.G.
attempted to elicit voluntary compliance. But NTU not
did comply. Instead, it made minimal, cosmetic changes,
and sent out Versions 2 and 3.
49a
Appendix C
B. SSA proposes a reasonable penalty of 50¢ per
violation ($274,582 total).
Having found that NTU violated section 1140, I must
now determine an appropriate penalty. The statute and
regulations authorize penalties of up to $5,000 for each
piece of mail containing the violative language. Act,
§ 1140(b); 20 C.ER. § 498.103.
Responding to a subpoena, NTU advised SSA that it
sent out 549,164 of the mailers. PR Ex. 14.'° The I.G.
proposes imposing a penalty of 500 per mailer, for a total
of $274,582. I am authorized to affirm, deny, increase, of
reduce this amount. 20 C.F-R. § 498.220. In reaching my
decision, I must consider the following factors: (1) the
nature and objective of the advertisement, solicitation,
or other communication, and the circumstances under
which they were presented; (2) the frequency and scope
of the violation and whether a specific segment of the
population was targeted; (3) the prior history of the
individual, organization, or entity in their willingness
or refusal to comply with informal requests to correct
violations; (4) the history of prior offenses of the
individual, organization, or entity in their misuse of
program words, letters, symbols, and emblems; (5) the
financial condition of the individual or entity; and
16. NTU has provided numbers that do not exactly add
up. Compare P. Ex. 14 with P. Ex. 16 (suggesting a total of 549,045
mailers sent — 205,663 Version 1 mailers + 291,968 Version 2
mailers + 51,414 Version 3 mailers). NTU has exclusive contro]
of the figures, and can hardly complain that the I.G. has taken
it at its word. So I accept the 549,164 figure.
50a
Appendix C
(6) such other matters as justice may require. The use
of a disclaimer of affiliation with the U.S. government,
SSA, or its programs is not a mitigating factor in
determining the amount of the penalty. 20 C.F.R.
§ 498.106.
I note, initially, that 50¢ per violation is a low penalty.
Compare United Seniors, DAB CR1075, at 18 ($1.00 per
envelope) and National Federation of Retired Persons,
DAB CR968, at 3 ($1.00 per mailer).
!. Nature and objective of the solicitations
and the circumstances under which they
were presented.
As discussed above, NTU’s solicitations were designed
to increase its “membership”” and to raise money.
Employing well-established marketing techniques, NTU
deliberately employed protected language to induce
recipients to open its mailers and to respond.
2. Frequency, scope of the violation, and
whether a specific segment of the
population was targeted.
NTU mailed 549,164 solicitations from January 2002
through February 2003. P. Exs. 14, 16. I consider this a
substantial number of solicitations.
17. Recipients were not told that sending money made
them members of NTU. Tr. 14. They were told that their
contribution would “help ... save Social Security” See, e.g.,
P Ex. 17, at 10. In fact, their contributions were simply added to
NTU’s general revenues. Tr. 44.
Sla
Appendix C
The elderly are among the most vulnerable in our
population, and the group about whom Congress
expressed the most concern when it enacted section
1140. SSA asserts that the elderly were targets of
NTU’s solicitations, which would justify an increased
penalty. NTU denies that charge, claiming that it
targeted a somewhat younger group, and selected
names from mailing lists of those likely to share its views.
While NTU sent mailers to all of its “members”
(see Footnote 17),"* the objective data shows that it also
specifically targeted the elderly. That data is found at
P Ex. 16 (see also R. Exs. 12, 18, and 14). The document
is initially confusing because it includes figures for at
least two additional mailers, which have nothing to do
with this case (a “Fair Tax Insert Package” and an
“Abolish the IRS” mailer). Pages 1-3, 7-9, and 12-14 of P
Ex. 16(R. Ex. 12, at 1-3; R. Ex. 13, at 1-3; and R. Ex. 14,
at 1-3) contain the data for those irrelevant mailers. The
relevant data is at P Ex. 16, pages 4-6 (containing
Version 1 mailing information), pages 10-11 (containing
Version 2 mailing information); and page 15 (containing
Version 3 mailing information). See also, R. Ex. 12, at 4-
6; R. Ex. 18, at 4-5; and R Ex. 14, at 4. Tr. 159 et seq.
Version 1: NTU sent solicitations to individuals selected
from mailing lists provided by specific groups with which
it had arrangements to share such lists. NTU mailed
Version | to 148,238 individuals from selected mailing
18. NTU’s former lobbyist, Alfred W. Cors, Jr., noted that
the “average direct mail recipient and respondent” is a 70-year-
old widow. Tr. 113.
S2a
Appendix C
lists (including some NTU internal lists) and 57,425 to
individuals whose names were in NTU’s “house file,”
for a total of 205,663 mailers sent. Tr. 166; P. Ex. 16, at
5, 6; R. Ex. 12, at 5, 6.'° Of these 37,976 mailers were
sent to individuals whose names were drawn from five
group lists targeting senior citizens: Direct Mail
Seniors” (providing two lists of 5,945 names and 19,253
names); American Seniors for Government Reform
(providing two lists of 4,097 names and 5,290 names);
and United Seniors Association PAC Donors (3,391
names). SSA Ex. 16, at 4; Tr. 163-65.
Version 2: NTU sent out 291,968 of the Version 2
mailers. Of those, more than half, 149,631 mailers, were
19. In his declaration, Director Frank agrees with the total,
but divides it differently, stating that Version 1 was sent to 119,207
narnes selected from mailing lists and 86,456 names from NTU’s
own house file. R. Ex. 17, at 4 (Frank Deci. 4 9). (The house file
consists of those who have previously responded to NTU
solicications. Tr. 37-38). NTU has not exptained these figures, but
it appears that in May 2002, NTU sent 57,425 mailers to individuals
whose names were drawn. from its house file. P Ex. 16, at 6. To that
Director Frank adds earlier mailings sent to names drawn from
NTU’s internal lists: NTU Petition Signers/Nondonors (7,531
mailers); NTU Email Names from 1/02 (7,886 mailers); NTU Email
Names from 2/02 (6,691 mailers); NTU Email Names Non-donors
(835 mailers); and NTU Expires (6,088 mailers) for a total of 86,456.
P Ex. 16, at 4. The remaining 119,207 mailers were sent to names
drawn from other lists.
20. According to its list manager, Direct Mail Seniors are
“older Americans” who are “are genuinely concerned about the
rights of senior citizens, and have donated to a campaign
addressing Social Security and Medicare issues.” R. Ex. 6, at 34.
53a
Appendix C
sent to individuals whose names were drawn from
groups targeting seniors: American Seniors for
Government Reform (5,414 names); Seniors Against
Benefit Cuts (18,814 names); Seniors Coalition (62,125
names); Seniors for Equitable Retirement (4,941
names); and Direct Mail Seniors (58,337 names).
P Ex. 16, at 10, 11; Tr. 167-69.
Version 3: NTU sent out 51,414 of the Version 3 mailers.
These went exclusively to names drawn from either the
house file or seniors organizations. 28,705 of the names
were drawn from lists targeting seniors: Seniors for
Equitable Retirement (4,047 names); Seniors Against
Benefit Cuts (two lists of 3,620 names and 9,471 names);
and American Seniors for Government Reform (11,567
names). P Ex. 16, at 15; Tr. 170-71.
Thus 40% of the mailers were sent to individuals whose
names were selected from senior citizen mailing lists
(216,312 of 549,045).
Ryder T. Ulon is a “list broker.” For the last six vears,
he has been NTU’s exclusive account representative.
His job includes identifying the best lists for NTU’s
mailings. R. Ex. 16. He testified that he selects the lists
that he deems appropriate and he considers the content
of the mailing in selecting the lists. Tr. 176, 184. He also
claimed, unconvincingly, that he made “absolutely no
effort to select retired persons, senior citizens, social
security recipients or the like,” and to bolster this claim,
suggests that “Biker Magazine” provided one of the lists
he used for the Social Security mailers. R. Ex. 16, at 1-
54a
Appendix C
2 (Ulon Decl. 11 1-2, 6); R. Ex. 6; Tr. 179. But the data
shows that, in fact, none of the Social Security mailers
went to “Biker” listees. P Ex. 16.
Broker Ulon’s testimony is misleading because he did
not limit himself to the lists he drew from for the Social
Security mailers. He provides a long “list of lists” from
which he purportedly selected names for the “3 NTU
mailings (including the Social Security package).” R. Ex.
16, at 3 (Ulon Decl. 1 8). But in referring to the “8 NTU
mailings” he does not mean the three versions of the
Social Security mailing, which are the subject of this
appeal. He means the Social Security mailer in all three
forms plus the “Fair Tax” mailer and the “Abolish the
IRS” mailer. So his “list of lists” tells us virtually nothing
about where the violative mailings were sent. It only
suggests that the recipient names were drawn from some
of the listed organizations. And in fact, R. Ex. 5 and
P. Ex. 16 show that the Social Security mailing was
not sent to anyone from the Biker Magazine list. The
“Fair Tax” mailer went to Biker Magazine list names.
P Ex. 16, at 2.
Broker Ulon also omitted from his “list of lists” an
organization called Seniors Coalition, even though
62,125 Social Security mailer recipients were selected
from that list. R. Ex. 16, at 3; Tr. 169; P Ex. 16, at 11.
The “Seniors Coalition” is described as “the premier
direct mail seniors list in the industry!” That list is made
up of individuals concerned about senior citizen issues.
The “donors” are “age 60+,” and the list is
recommended for any mailer trying to reach “the mature
55a
Appendix C
audience with disposable income.” R. Ex. 6, at 19. Broker
Ulon characterized his omission of the group as an
“oversight.” Tr. 169. But I find it strange that he would
include Biker Magazine and multiple other
organizations, to which NTU sent zero of the Social
Security mailers, and omit an organization to which it
mailed tens of thousands.
The evidence thus establishes that NTU targeted senior
citizens for receipt of these mailers.
3. The prior history of the individual,
organization, or entity in their willingness
or refusal to comply with informal requests
to correct violations.
While NTU was in the process of sending out Version 1,
the 1.G. notified NTU of its concerns, and sought
voluntary compliance. P. Ex. 5. In a response that I
consider less than straight-forward, NTU agreed to
cooperate, and to change the package design so that it
would not create the impression of SSA authorization.
P Ex. 6; see footnote 2, supra. But NTU’s changes were
superficial, and its subsequent mailers were violative,
and it continued to send them out for aimost a full year
after receiving the I.G.’s letter.
56a
Appendix C
4, The history of prior offenses of the
individual, organization, or entity in
their misuse of program words, letters,
symbols, and emblems.
SSA concedes that NTU has no prior section 1140
offenses.
5. The financial condition of the individual
or entity.
I am satisfied that the I.G. has carefully reviewed NTU’s
financial records, and correctly determined that NTU
is capable of paying this penalty. For its part, NTU has
not argued otherwise.
6. Such other matters as justice may
require.
[am concerned about NTU’s investigative tactics in this
case. It was certainly within the organization’s rights to
interview the I.G.’s potential witnesses. However, NTU’s
private investigator, John Roche, went to Laura
Fischer’s home where he misrepresented himself,
claiming that he represented the attorney for “Agora
Publishing.” R. Ex. 19; Tr. 226 et seg. I found wholly
unconvincing his assertion that this was simply my
error.” Tr. 240-41. Frankly, this action alone might have
justified my increasing the penalty in this case, and, had
the I.G. asked that I consider it, | would seriously have
entertained the prospect.
S7a
Appendix C
V. Conclusion
For all of these reasons, I find that NTU has violated
section 1140, and, under the authority granted me in
20 C.ER. § 498.220, I affirm the $274,582 CMP proposed
by the 1.G.
s/ Carolyn Cozad Hughes
Carolyn Cozad Hughes
Administrative Law Judge
S8a
APPENDIX D — ORDER OF THE UNITED STATES
COURT OF APPEALS FOR THE THIRD CIRCUIT
DENYING PETITION FOR REHEARING
DATED JANUARY 9, 2009
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 07-3381
NATIONAL TAXPAYERS UNION
Petitioner,
v.
UNITED STATES SOCIAL SECURITY
ADMINISTRATION; OF FICE OF THE
INSPECTOR GENERAL
Respondent.
SUR PETITION FOR PANEL REHEARING
Present: FUENTES, HARDIMAN and GARTH,
Circuit Judges
The Petition for Rehearing filed by the Appeilant in
the above-entitled matter, having been submitted to the
judges who participated in the decision of this court,
and no judge who concurred in the decision having asked
for rehearing by this panel, the Petition for Rehearing
is hereby DENIED.
Ya
Appendix D
BY THE COURT,
/s/ Julio M. Fuentes
Circuit Judge
DATED: January 9, 2009
60a
APPENDIX E — EXCERPTS FROM OPINION OF
HHS DAB APPELLATE DIVISION IN SOCIAL
SECURITY ADMINISTRATION v. NATIONAL
FEDERATION OF RETIRED PERSONS
Department of Ilealth and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
DATE: June 20, 2003
Civil Remedies CR968
App. Div. Docket No. A-03-16
Decision No. 1885
In the Case of:
Social Security Administration,
Petitioner,
V.
National Federation of Retired Persons,
Respondent.
RECOMMENDED DECISION ON REVIEW OF
ADMINISTRATION LAW JUDGE DECISION
6la
Appendix E
Discussion
NFRP makes numerous contentions to this appeal. We
address them in the four sections below. Section A
addresses the contentions regarding the ALJ’s section
1140 liability findings. Section B addresses NF RP’s
contention that the ALJ abused her discretion by
doubling the CMP proposed by SSA. Section C
addresses NFRP’s constitutional arguments. Finally,
Section D addresses NFRP’s contentions regarding the
ALJ’s evidentiary and other rulings.
A. Section 1140 liability
Section 1140 establishes two liability standards, which
we refer to as the “knowledge standard” and the
“reasonableness standard.” A person violates section
1140 under the knowledge standard if he uses Social
Security program words in a solicitation or other
communication “in a manner which [he] knows or should
know would convey ... the false impression that such
item is approved, endorsed, or authorized by the Social
Security Administration|.]” Under the reasonableness
standard, a person violates section 1140 if the
communication “reasonably could be interpreted or
construed as conveying” the false impression that it was
approved, endorsed, or authorized by SSA. For
narrative purposes, we first consider the ALJ’s findings
under the “reasonableness” standard.
62a
Appendix E
1. Substantial evidence supports the ALJ’s
finding that the contested mailers
“reasonably could be interpreted or
construed as conveying the false impressiu:i”
of SSA approval, endorsement, or
authorization.
On its face, the reasonableness standard does not
require SSA to establish that some person actually had
a false impression that the communication was endorsed,
approved, or authorized by SSA. Section 1140 requires
only that a person of average intelligence “could” get
such a false impression from inspecting the
communication. In addition, section 1140 does not
require a factual misrepresentation or proof that some
person was actually deceived by the communication. It
requires only that the communication leave or create a
“false impression.” An impression is “a notion, feeling,
or recollection, esp[ecially] a vague one.” Webster’s New
World Dictionary (2d College ed.).* A false impression,
then, is a suspicion or vague notion based on an
incomplete or erroneous understanding of the facts.
2. In the America Heritage Dictionary (4th ed. 2000), the
primary definition of “impression” is “[a]n effect, feeling, or
image retained as a consequence of experience.” A secondary
definition is “a vague notion, remembrance, or belief.”
63a
Appendix E
2. Substantial eridence supports the ALJ’s
finding that the NFRP knew or should have
known that its mailers would convey the false
impression proscribed by section 1140.
Section 1140’s knowledge standard is in fact a
negligence standard. See Huntzinger v. Hastings
Mutual Ins. Co., 148 F.3d 302, 312 (7th Cir. 1998) (“knew
or should have known” are words connoting a liability
standard sounding in negligence); Levine v. CMP
Publishers, Inc., 738 F.2d 660, 672 (Sth Cir. 1984). Thus,
NFRP has violated section 1140 if it knew or, in the
exercise of reasonable care, should have known that the
mailers would create the false impression of official
endorsement, approval, or...
* * *
C. Constitutional claims
During the proceedings before the ALJ, NFRP
contended that SSA’s enforcement action amounted to
an unlawful infringement of its First Amendment rights.
See NF RP Motion for Summary Judgment. The ALJ
declined to address this constitutional challenge, finding
that she was bound to apply section 1140 and the
accompanying regulations. See Rulings and Summary
of Telephone Conference, dated April 16, 2002.
It is well-settled that administrative tribunals do not
have the power to declare a statute or regulation
unconstitutional. Sentinel Medical Laboratories, DAB
64a
Appendix E
No. 1762 (2001). Section 498.204 of SSA’s regulations
reflects this principle, stating that an ALJ lacks the
authority to “[flind invalid or refuse to follow Federal
statutes or regulations.” 20 C.FR. § 498.204.
NFRP contends that section 498.204 does not apply
because it is alleging only an “unconstitutional
application” of federal law, not that the law is invalid.
NFRP Brief at 97-98. However, the terminology used
by NFRP in its argument calls to mind a claim that the
statute and regulations are unconstitutional as applied.
We interpret section 498.204 as precluding the ALJ from
considering both facial and “as applied” challenges to
the statute and regulations. Thus, to the extent that
NFRP’s contention is that section 1140 and its
regulations are unconstitutional as applied, the ALJ
committed no error in refusing to address it. In any
event, as we now explain, the constitutional arguments
made by NF RP are substantively meritless or constitute
facial challenges to the statute that are beyond our
authority to address.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.