ROSLYN O. SILVER, Chief District Judge.
This Court held a hearing on August 14, 2013 regarding the Federal Trade Commission's ("FTC") request for a preliminary injunction. Attorney Melvin McDonald appeared on behalf of the Himes Defendants. The Court asked Mr. McDonald whether he had any objection to entry of a Preliminary Injunction in this case. Mr. McDonald stated that he did not.
Mr. McDonald has now filed an objection to the FTC's proposed preliminary injunction order (Doc. 49) that focuses solely on a demand for attorneys' fees. As was discussed at the hearing, this is a collateral matter.
The FTC has filed its Complaint for Permanent Injunction and Other Equitable Relief pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and has applied for a temporary restraining order ("TRO"), asset freeze, other equitable relief, and an order to show cause why a preliminary injunction should not issue pursuant to Rule 65 of the Federal Rules of Civil Procedure. The Court held a show cause hearing on August 14, 2013 at which the Corporate Defendants and the following individual Defendants had the opportunity to present evidence and arguments: Lukeroy K. Rose, Solana DePaola, Jennifer Beckman, William D. Claspell, Richard Frost, Dino Mitchell, Lance Himes, Leary Darling, Donna F. Duckett, Della Frost, Alannah M. Harre, Janine Lilly, Michael McIntyre, Benny Montgomery, and Kendrick Thomas.
1. This Court has jurisdiction over the subject matter of this case, jurisdiction over all parties, and venue in this district is proper.
2. There is good cause to believe that Defendants Money Now Funding, LLC, Rose Marketing, LLC, DePaola Marketing, LLC, Affiliate Marketing Group, LLC, Legal Doxs, LLC, US Doc Assist, LLC, Affinity Technologies, LLC, Marketing Expert Solutions, LLC, Lukeroy K. Rose, Cordell Bess, Solana DePaola, Jennifer Beckman, William D. Claspell, Richard Frost, Dino Mitchell, Clinton Rackley, Lance Himes, Leary Darling, Donna F. Duckett, Della Frost, Christopher Grimes, Alannah M. Harre, Ronald W. Hobbs, Janine Lilly, Michael McIntyre, Benny Montgomery, Virginia Rios, and Kendrick Thomas have engaged in and are likely to engage in acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the FTC's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Business Opportunities" ("Business Opportunity Rule" or "Rule"), 16 C.F.R. Part 437, as amended, and the FTC's Trade Regulation Rule entitled "Telemarketing Sales Rule" ("TSR" or "Rule"), 16 C.F.R. Part 310, and that the Commission is likely to prevail on the merits of this action.
3. There is good cause to believe that immediate and irreparable harm will result from Defendants' ongoing violations of the FTC Act, the Business Opportunity Rule, and the TSR unless Defendants are restrained and enjoined by Order of this Court.
4. There is good cause to believe that immediate and irreparable damage to the Court's ability to grant effective final relief for consumers — including the refund of monies paid, restitution, or rescission or reformation of contract — will occur from the sale, transfer, or other disposition or concealment by Defendants of assets or records, and that therefore in accordance with Fed. R. Civ. P. 65(b), the interests of justice require that this Order be granted.
5. Good cause exists for (a) the appointment of a Permanent Receiver over Corporate Defendants Money Now Funding, LLC; Rose Marketing, LLC; DePaola Marketing, LLC; Affiliate Marketing Group, LLC; Legal Doxs, LLC; US Doc Assist, LLC; Affinity Technologies, LLC; and Marketing Expert Solutions, LLC; (b) freezing of Defendants' assets; and (c) the ancillary relief ordered below.
6. Considering Plaintiff's likelihood of ultimate success and weighing the equities, a Preliminary Injunction with asset freeze, the appointment of a Permanent Receiver, and other equitable relief is in the public interest.
7. No security is required of any agency of the United States for issuance of a preliminary injunction. Fed. R. Civ. P. 65(c).
To the extent any of Findings of Fact are more properly characterized as Conclusions of Law, they should be so considered; to the extent any Conclusions of Law are more properly characterized as Findings of Fact, they should be so considered.
For purpose of this Order, the following definitions shall apply:
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5. The term
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A. That any Defendant or other person offers, sells, or provides loans or cash advances;
B. The amount of income, earnings, or profits that a person may or is likely to earn, or that other persons have earned;
C. That any Defendants or other person will provide, locate, or obtain leads containing the names or contact information of persons potentially interested in Defendants products or services;
D. That any Defendant or other person will contact, sell, or provide services to businesses consumers refer;
E. The total cost to purchase, receive, or use any products or services; or
F. Any material aspect of the performance, efficacy, nature, or central characteristics any product or service.
A. Failing to disclose, or disclose adequately, in writing material information pertaining to the any opportunity at least seven (7) days before the consumer signs a contract or makes a payment in connection with that opportunity including:
B. Making any earnings claims unless there is (1) a reasonable basis for the claim at the time the claim is made; and (2) written substantiation for the earnings claim in the possession of Defendants' at the time the claim is made;
C. Violating the Business Opportunity Rule, 16 C.F.R. Part 437, as amended, a copy of which is attached.
A. Initiating, or causing others to initiate, an outbound telephone call (1) to a person's telephone number on the National Do Not Call Registry or (2) to a person who previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are being offered;
B. Causing the telephone to ring or engaging persons in telephone conversation repeatedly or continuously, with intent to annoy, abuse, or harass the person at the called number;
C. Threating, intimidating, or the using of profane or obscene language; or
D. Initiating outbound telephone calls to a telephone number within a given area code on behalf of a seller who has not, either directly or through another person, paid the required annual fee for access to the telephone numbers within that area code that are included in the National Do Not Call Registry.
A. Transferring, liquidating, converting, encumbering, pledging, loaning, selling, concealing, dissipating, disbursing, assigning, spending, conveying, gifting, withdrawing, granting a lien or security interest or other interest in, or otherwise disposing of any funds, real or personal property, accounts, contracts, consumer lists, shares of stock, or other assets, or any interest therein, wherever located, whether within the United States or within a jurisdiction outside the United States, that are: (1) owned or controlled by any of the Defendants, in whole or in part; (2) held for the benefit of any of the Defendants; (3) in the actual or constructive possession of any of the Defendants; or (4) owned, controlled by, or in the actual or constructive possession of, or otherwise held for the benefit of any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by any of the Defendants including, but not limited to, any assets held by or for, or subject to access by any of the Defendants at any bank or savings and loan institution, or with any broker-dealer, escrow agent, title company, commodity trading company, precious metals dealer, or other financial institution or depository institution of any kind;
B. Opening or causing to be opened any safe deposit boxes titled in the name of, or subject to access by, any of the Defendants;
C. Incurring charges or cash advances on any credit card issued in the name, singly or jointly, of any of the Corporate Defendants;
D. Obtaining a personal or secured loan encumbering the assets of any of the Defendants, or any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by any of the Defendants; or
E. Incurring liens or other encumbrances on real property, personal property or other assets titled in the name, singly or jointly, of any of the Defendants or any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by any of the Defendants.
Provided, that the assets affected by this Section IV shall include: (1) all assets of any of the Defendants as of the time of issuance of this Order; and (2) assets obtained after the time of issuance of this Order if the assets are derived from the conduct alleged in the Commission's Complaint.
Provided further, that this Section IV shall not prevent the Individual Defendants from paying bills or making purchases of necessaries with funds obtained by them subsequent to imposition of the asset freeze from any legitimate source, such as funds borrowed from family, friends, or others; income from lawful employment; or charges made to those individual defendants' credit cards.
A. Hold and retain within its control and prohibit the withdrawal, removal, assignment, transfer, pledge, encumbrance, disbursement, dissipation, conversion, sale, or other disposal of any such asset, except by further order of the Court;
B. Deny any person, except the Receiver acting pursuant to Section XIV of this Order, access to any safe deposit box that is titled in the name of, individually or jointly, or otherwise subject to access by, any of the Defendants;
C. Provide the Commission's counsel and to the Receiver, within five (5) business days of receiving a copy of this Order, a sworn statement setting forth:
D. Upon request by the Commission, promptly provide the Commission with copies of all records or other documentation pertaining to each such account or asset, including, but not limited to, originals or copies of account applications, account statements, signature cards, checks, drafts, deposit tickets, transfers to and from the accounts, all other debit and credit instruments or slips, currency transaction reports, 1099 forms, and safe deposit box logs.
A. Completed financial statements on the forms attached to this Order as Attachment A (Financial Statement of Individual Defendant) for themselves individually and Attachment B (Financial Statement of Corporate Defendant) for each business entity under which they conduct business or of which they are an officer, and for each trust for which any Defendant is a trustee. The financial statements shall be accurate as of the date of entry of this Order. Each Defendant shall include in the financial statements a full accounting of all funds and assets, whether located inside or outside of the United States, that are: (1) titled in the name of such Defendant, jointly, severally, or individually; (2) held by any person or entity for the benefit of such Defendant; or (3) under the direct or indirect control of such Defendant. Defendants shall attach to these completed financial statements copies of all local, state, provincial, and federal income and property tax returns, with attachments and schedules, as called for by the instructions to the financial statements; and
B. Attachment C (Consent to Release and Request for Copy of Tax Return).
A. Provide the Commission and the Receiver with a full accounting of all funds, documents, and assets outside of the United States which are: (1) titled in the name, individually or jointly, of any of the Defendants; or (2) held by any person or entity for the benefit of any of the Defendants; or (3) under the direct or indirect control, whether jointly or singly, of any of the Defendants;
B. Transfer to the territory of the United States and deliver to the Receiver all funds, documents, and assets located in foreign countries which are: (1) titled in the name individually or jointly of any of the Defendants; or (2) held by any person or entity, for the benefit of any of the Defendants; or (3) under the direct or indirect control of any of the Defendants, whether jointly or singly;
C. Provide the Commission access to all records of accounts or assets of any of the Defendants held by financial institutions located outside the territorial United States by signing the Consent to Release of Financial Records appended to this Order as Attachment C.
A. Sending any statement, letter, fax, e-mail or wire transmission, telephoning or engaging in any other act, directly or indirectly, that results in a determination by a foreign trustee or other entity that a "duress" event has occurred under the terms of a foreign trust agreement until such time that all assets have been fully repatriated pursuant to Section VII of this Order;
B. Notifying any trustee, protector or other agent of any foreign trust or other related entities of either the existence of this Order, or of the fact that repatriation is required pursuant to a court order, until such time that all assets have been fully repatriated pursuant to Section VII of this Order.
A. Destroying, erasing, falsifying, writing over, mutilating, concealing, altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, Documents that relate to: (1) the business, business practices, Assets, or business or personal finances of any of the Defendants, (2) the business practices or finances of entities directly or indirectly under the control of any of the Defendants, or (3) the business practices or finances of entities directly or indirectly under common control with any other Defendant, including: any and all marketing materials, World Wide Web pages, consumer complaints, rate decks, call detail records, telephone logs, telephone scripts, contracts, correspondence, email, corporate books and records, accounting data, financial statements, receipt books, ledgers, personal and business canceled checks and check registers, bank statements, calendars, appointment books, and tax returns; and
B. Failing to create and maintain Documents that, in reasonable detail, accurately, fairly, and completely reflect Defendants' incomes, disbursements, transactions, and use of Defendants' Assets.
A. Assume full control of the Receivership Defendants by removing, as the Receiver deems necessary or advisable, any director, officer, independent contractor, employee, or agent of any of the Receivership Defendants, including any Defendant, from control of, management of, or participation in, the affairs of the Receivership Defendants;
B. Take exclusive custody, control, and possession of all assets and documents of, or in the possession, custody, or under the control of, the Receivership Defendants, wherever situated. The Receiver shall have full power to divert mail and to sue for, collect, receive, take in possession, hold, and manage all assets and documents of the Receivership Defendants and other persons or entities whose interests are now under the direction, possession, custody, or control of, the Receivership Defendants. The Receiver shall assume control over the income and profits therefrom and all sums of money now or hereafter due or owing to the Receivership Defendants. Provided, however, that the Receiver shall not attempt to collect any amount from a consumer if the Receiver believes the consumer was a victim of the unfair or deceptive acts or practices or other violations of law alleged in the Complaint in this matter, without prior Court approval;
C. Take all steps necessary to secure each location from which the Receivership Defendants operate or have operated their businesses. Such steps may include, but are not limited to, any of the following, as the Receiver deems necessary or advisable: (1) serving this Order; (2) completing a written inventory of all Receivership assets; (3) obtaining pertinent information from all employees and other agents of the Receivership Defendants, including, but not limited to, the name, home address, Social Security Number, job description, passwords or access codes, method of compensation, and all accrued and unpaid commissions and compensation of each such employee or agent; (4) photographing and videotaping any or all portions of the location; (5) securing the location by changing the locks and disconnecting any computer modems or other means of access to the computer or other records maintained at that location; and
(6) requiring any persons present on the premises at the time this Order is served to leave the premises, to provide the Receiver with proof of identification, or to demonstrate to the satisfaction of the Receiver that such persons are not removing from the premises documents or assets of the Receivership Defendants. Law enforcement personnel, including, but not limited to, police or sheriffs, may assist the Receiver in implementing these provisions in order to keep the peace and maintain security. If requested by the Receiver, the United States Marshals Service will provide appropriate and necessary assistance to the Receiver to implement this Order and is authorized to use any necessary and reasonable force to do so;
D. Suspend business operations of the Receivership Defendants if in the judgment of the Receiver such operations cannot be continued legally and profitably;
E. Conserve, hold, and manage all assets of the Receivership Defendants, and perform all acts necessary or advisable to preserve the value of those assets in order to prevent any irreparable loss, damage, or injury to consumers or creditors of the Receivership Defendants, including, but not limited to, obtaining an accounting of the assets and preventing the unauthorized transfer, withdrawal, or misapplication of assets;
F. Enter into contracts and purchase insurance as advisable or necessary;
G. Prevent the inequitable distribution of assets and determine, adjust, and protect the interests of consumers and creditors who have transacted business with the Receivership Defendants;
H. Manage and administer the business of the Receivership Defendants until further order of this Court by performing all incidental acts that the Receiver deems to be advisable or necessary, which includes but is not limited to retaining, hiring, or dismissing any employees, independent contractors, or agents;
I. Choose, engage, and employ attorneys, accountants, appraisers, and other independent contractors and technical specialists, as the Receiver deems advisable or necessary in the performance of duties and responsibilities under the authority granted by this Order;
J. Make payments and disbursements from the receivership estate that are necessary or advisable for carrying out the directions of, or exercising the authority granted by, this Order. The Receiver shall apply to the Court for prior approval of any payment of any debt or obligation incurred by the Receivership Defendants prior to the date of entry of this Order, except payments that the Receiver deems necessary or advisable to secure assets of the Receivership Defendants, such as rental payments;
K. Institute, compromise, adjust, appear in, intervene in, or become party to such actions or proceedings in state, federal or foreign courts or arbitration proceedings as the Receiver deems necessary and advisable to preserve or recover the assets of the Receivership Defendants, or that the Receiver deems necessary and advisable to carry out the Receiver's mandate under this Order, including, but not limited to, actions challenging fraudulent or voidable transfers;
L. Defend, compromise, adjust, or otherwise dispose of any or all actions or proceedings instituted in the past or in the future against the Receiver in his role as Receiver, or against the Receivership Defendants, as the Receiver deems necessary and advisable to preserve the assets of the Receivership Defendants, or as the Receiver deems necessary and advisable to carry out the Receiver's mandate under this Order;
M. Issue subpoenas to obtain documents and records pertaining to the Receivership, and conduct discovery in this action on behalf of the Receivership estate;
N. Open one or more bank accounts as designated depositories for funds of the Receivership Defendants. The Receiver shall deposit all funds of the Receivership Defendants in such a designated account and shall make all payments and disbursements from the Receivership estate from such an account. The Receiver shall serve copies of monthly account statements on all parties;
O. Maintain accurate records of all receipts and expenditures incurred as Receiver;
P. Cooperate with reasonable requests for information or assistance from any state or federal law enforcement agency;
Q. File reports with the Court on a timely basis and at regular intervals or as otherwise directed by the Court.
A. Immediately upon service of this Order upon them, or within a period permitted by the Receiver, Defendants, their Representatives, and any other person or entity with possession, custody or control of assets or documents relating to the Receivership Defendants shall transfer or deliver possession, custody, and control of the following to the Receiver:
B. In the event any person or entity fails to deliver or transfer any asset or otherwise fails to comply with any provision of this Section, the Receiver may file ex parte an Affidavit of Non-Compliance regarding the failure. Upon filing of the affidavit, the Court may authorize, without additional process or demand, Writs of Possession or Sequestration or other equitable writs requested by the Receiver. The writs shall authorize and direct the United States Marshals Service or any sheriff or deputy sheriff of any county to seize the asset, document, or other item and to deliver it to the Receiver.
A. A list of all assets and property, including accounts, of the Receivership Defendants that are held in any name other than the name of a Receivership Defendant, or by any person or entity other than a Receivership Defendant; and
B. A list of all agents, employees, officers, servants or those persons in active concert and participation with the Individual Defendants and Receivership Defendants who have been associated with or done business with the Receivership Defendants.
A. Interfering with the Receiver managing, or taking custody, control, or possession of the assets or documents subject to this Receivership;
B. Transacting any of the business of the Receivership Defendants or any substantially similar name;
C. Transferring, receiving, altering, selling, encumbering, pledging, assigning, liquidating, or otherwise disposing of any assets owned, controlled, or in the possession or custody of, or in which an interest is held or claimed by, the Receivership Defendants, or the Receiver;
D. Destroying, secreting, defacing, transferring, or otherwise altering or disposing of any documents of the Receivership Defendants, including, but not limited to, books, records, accounts, or any other papers;
E. Excusing debts owed to the Receivership Defendants;
F. Refusing to cooperate with the Receiver or the Receiver's duly authorized agents in the exercise of their duties or authority under any order of this Court; and
G. Harassing or interfering with the Receiver in any way.
A. Except by leave of this Court, during pendency of the Receivership ordered herein, Defendants, their Representatives, and all investors, creditors, stockholders, lessors, customers and other persons seeking to establish or enforce any claim, right, or interest against or on behalf of Defendants, and all others acting for or on behalf of such persons, are hereby enjoined from taking action that would interfere with the exclusive jurisdiction of this Court over the assets or documents of the Receivership Defendants, including, but not limited to:
A. The Commission and the Receiver may take the depositions of parties and non-parties. Ninety-six hours (96) notice shall be sufficient notice for such depositions. Deposition transcripts that have not been signed by the witness may be used the preliminary injunction hearing in this matter. The limitations set forth in Federal Rule of Civil Procedure 30(a)(2) and 31(a)(2) regarding subsequent depositions of an individual shall not apply to depositions taken pursuant to this Section, and those depositions shall not count toward the deposition limit set forth in said rules;
B. The Commission and the Receiver may serve upon parties requests for production of documents or inspection that require production or inspection within five (5) business days of service, and may serve subpoenas upon non-parties that direct production or inspection within five (5) business days of service;
C. The Commission and the Receiver may serve deposition notices and other discovery requests upon the parties to this action by facsimile, overnight courier, or email, and depositions may be taken by telephone or other remote electronic means; and
D. Any discovery taken pursuant to this Order is in addition to, and is not subject to, the presumptive limits on discovery set forth in the Federal Rules of Civil Procedure and Local Rules of this Court.
