JAMES C. MAHAN, District Judge.
Plaintiff, the Federal Trade Commission ("Commission" or "FTC"), filed its Complaint for Permanent Injunction and Other Equitable Relief, as amended, ("Complaint"), in this matter, pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b. The Commission and Defendants AWS, LLC, FBA Distributors, LLC, FBA Stores, LLC, Info Pros, LLC, Info Solutions, LLC, Online Auction Learning Center, Inc. (Mass. Corp.), Online Auction Learning Center, Inc. (Nev. Corp.), Christopher F. Bowser, Adam S. Bowser, and Jody Marshall ("Settling Defendants") stipulate to the entry of this Stipulated Order for Permanent Injunction and Monetary Judgment ("Order") to resolve all matters in dispute in this action between them.
THEREFORE, IT IS ORDERED as follows:
1. This Court has jurisdiction over this matter.
2. The Complaint charges that Settling Defendants participated in deceptive and unfair acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, and in violation of the Business Opportunity Rule, 16 C.F.R. Part 437, in connection with the advertising, marketing, distribution, promotion and sale of business opportunities to consumers throughout the United States.
3. Settling Defendants neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Order. Only for purposes of this action, Settling Defendants admit the facts necessary to establish jurisdiction.
4. Settling Defendants waive and release any claims that they may have against the Commission and the Receiver, including against any agent of the Commission or the Receiver, that relate to this action.
5. Settling Defendants waive all rights to appeal or otherwise challenge or contest the validity of this Order.
6. Individual Defendant Jody Marshall filed a petition for relief under Chapter 13 of the Bankruptcy Code on January 5, 2016. In re Jody L. Marshall, No. BKS-16-10016-MKN (Bankr. D. Nev.) ("Marshall Bankruptcy Case"). The Commission's prosecution of this action and the Order are actions to enforce the Commission's policy or regulatory power. As a result, if the Marshall Bankruptcy Case is pending as of the date of entry of this Order, then these actions are excepted from the automatic stay pursuant to 11 U.S.C. § 362(b)(4).
For the purpose of this Order, the following definitions apply:
A.
B.
C.
D. "
E. "
F.
G.
H.
I. "
J. "
K.
L.
M. "
N.
IT IS ORDERED that Settling Defendants are permanently restrained and enjoined from advertising, marketing, distributing, promoting, or offering for sale, or assisting in the advertising, marketing, distributing, promoting, or offering for sale of, any Business Opportunity or Business Coaching Program.
IT IS FURTHER ORDERED that Settling Defendants, Settling Defendants' officers, agents, employees, and attorneys, and all other Persons in active concert or participation with them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with promoting or offering for sale any good or service, are permanently restrained and enjoined from:
A. making any Earnings Claim, unless the Earnings Claim is non-misleading, and, at the time such claim is made, Settling Defendants: (1) have a reasonable basis for their claim; (2) have in their possession written materials that substantiate the claim; and (3) make the written substantiation available upon request to the consumer, potential Purchaser or investor, and to the Commission; or
B. misrepresenting or assisting others in misrepresenting, expressly or by implication any other fact material to consumers concerning any product or service, such as the total costs; any material restrictions, limitations, or conditions; or any material aspect of its performance, efficacy, nature, or central characteristics.
IT IS FURTHER ORDERED that:
A. Judgment in the amount of One Hundred Two Million, Four Hundred Eighty-One Thousand, Five Hundred Ninety-Six Dollars ($102,481,596.00) is entered in favor of the Commission against Settling Defendants, jointly and severally, as equitable monetary relief.
B. Settling Individual Defendants are ordered to make the following payments to the Commission, which, as Settling Individual Defendants stipulate, their undersigned counsel holds in escrow for no purpose other than payment to the Commission:
Such payments must be made within 7 days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission.
C. In addition to the payments to the Commission specified in Subsection B above, immediately upon entry of this Order, the Settling Defendants are ordered to surrender to the Commission all control, title, dominion, and interest each has to the following assets:
D. To the extent they are not already in the possession of the Receiver, Settling Defendants shall deliver the assets identified in Subsection C above to the Receiver's possession within 7 days of the entry of this Order.
E. The Receiver shall, as soon as practicable, commence the sale of the unliquidated assets identified in Subsection C above and surrendered pursuant to this Order using a commercially reasonable procedure. The Receiver shall hold the surrendered assets, and the proceeds from the sale of the unliquidated assets, for future transfer in accordance with further instructions from the Court.
F. Upon delivery of the payments specified in Subsection B above to the Commission, and of all the assets specified in Subsection C above to the Receiver, the remainder of the judgment is suspended, subject to Subsections G-O below.
G. The Commission's agreement to the suspension of part of the judgment is expressly premised upon the truthfulness, accuracy, and completeness of Settling Defendants' sworn financial statements and related Documents (collectively, "financial representations") submitted to the Commission, namely:
H. The suspension of the judgment will be lifted as to any Settling Defendant if, upon motion by the Commission, the Court finds that Settling Defendant failed to disclose any material asset, materially misstated the value of any asset, or made any other material misstatement or omission in the financial representations identified above.
I. If the suspension of the judgment is lifted, the judgment becomes immediately due as to that Settling Defendant in the amount specified in Subsection A above (which the parties stipulate only for purposes of this Section represents the consumer injury and unjust enrichment alleged in the Complaint), less any payments previously made pursuant to this Section, plus interest computed from the date of entry of this Order.
J. Settling Defendants relinquish dominion and all legal and equitable right, title, and interest in all assets transferred pursuant to this Order and may not seek the return of any assets.
K. The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the Commission, including in a proceeding to enforce its rights to any payment or monetary judgment pursuant to this Order, such as a nondischargeability complaint in any bankruptcy case.
L. The facts alleged in the Complaint establish all elements necessary to sustain an action by the Commission pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral estoppel effect for such purposes.
M. Settling Defendants acknowledge that their Taxpayer Identification Numbers (Social Security Numbers or Employer Identification Numbers), which Settling Defendants previously submitted to the Commission, may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. §7701.
N. All money paid to the Commission or assets ultimately surrendered to the Commission pursuant to this Order (or any subsequent Court order issued in this matter) and further instructions from the Court may be deposited into a fund administered by the Commission or its designee to be used for equitable relief, including consumer redress and any attendant expenses for the administration of any redress fund. If a representative of the Commission decides that direct redress to consumers is wholly or partially impracticable or money remains after redress is completed, the Commission may apply any remaining money for such other equitable relief (including consumer information remedies) as it determines to be reasonably related to Settling Defendants' practices alleged in the Complaint. Any money not used for such equitable relief is to be deposited to the U.S. Treasury as disgorgement. Settling Defendants have no right to challenge any actions the Commission or its representatives may take pursuant to this Subsection.
O. The asset freeze imposed by the March 14, 2018 Temporary Restraining Order [ECF No. 29], is modified to permit the payment and transfers identified in Subsections B and C above. Upon completion of those payment and transfers, the asset freeze as to Settling Defendants is dissolved. Any existing asset freeze as to the remaining non-settling Defendants shall remain in full force and effect.
IT IS FURTHER ORDERED that Settling Defendants, and their representatives, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, are permanently restrained and enjoined from directly or indirectly:
A. failing to provide sufficient customer information to enable the Commission to efficiently administer consumer redress. Settling Defendants represent that they have provided this redress information to the Commission. If a representative of the Commission requests in writing any information related to redress, Settling Defendants must provide it, in the form prescribed by the Commission, within 14 days.
B. disclosing, using, or benefitting from customer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a customer's account (including a credit card, bank account, or other financial account), that any Settling Defendant obtained prior to entry of this Order in connection with the advertising, marketing, distribution, promotion and sale of business opportunities to consumers throughout the United States; and
C. failing to destroy such customer information in all forms in their possession, custody, or control within 30 days after receipt of written direction to do so from a representative of the Commission.
Provided, however, that customer information need not be disposed of, and may be disclosed, to the extent requested by a government agency or required by law, regulation, or court order.
IT IS FURTHER ORDERED that Settling Defendants must fully cooperate with representatives of the Commission in this case and in any investigation related to or associated with the transactions or the occurrences that are the subject of the Complaint. Settling Defendants must provide truthful and complete information, evidence, and testimony. Settling Individual Defendants must appear and Settling Corporate Defendants must cause Settling Corporate Defendants' officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that a Commission representative may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as a Commission representative may designate, without the service of a subpoena.
IT IS FURTHER ORDERED that Robb Evans & Associates LLC is hereby appointed equity Receiver for the Settling Corporate Defendants for the purpose of taking the necessary steps to wind down the businesses of the Settling Corporate Defendants, liquidate assets, and pay any net proceeds to the Commission to satisfy the monetary judgment in this Order. In carrying out these duties, the Receiver shall be the agent of this Court, shall be accountable directly to this Court, and is authorized and directed to:
A. Take any and all steps that the Receiver concludes are appropriate to wind down the affairs of the Settling Corporate Defendants.
B. Continue to exercise full control over the Settling Corporate Defendants and continue to collect, marshal, and take custody, control, and possession of all the funds, property, premises, accounts, documents, mail, and other assets of, or in the possession or under the control of the Settling Corporate Defendants, wherever situated, the income and profits therefrom, and all sums of money now or hereafter due or owing to the Settling Corporate Defendants.
C. Continue to have full control over the management and personnel of the Settling Corporate Defendants.
D. Take all steps necessary or advisable, including issuing subpoenas, to locate and liquidate all other assets of the Settling Corporate Defendants, cancel the Settling Corporate Defendants' contracts, collect on amounts owed to the Settling Corporate Defendants, and take such other steps as may be necessary to wind-down the Settling Corporate Defendants efficiently.
E. To the extent not already completed, the Receiver shall as soon as practicable after the entry of this Order, take exclusive custody, control, and possession of all assets identified in Section III.C of this Order.
F. The Receiver shall give reasonable notice to the Commission of any settlements or compromises by the Receiver concerning the Receivership Estate, before the settlement or compromise is consummated. Within 20 days of this notice, the Commission shall have the opportunity to object to any such settlement, by filing a motion with the Court.
G. 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 Settling Corporate Defendants prior to the date of entry of the temporary restraining order in this action, except payments that the Receiver deems necessary or advisable to ensure assets of the Settling Corporate Defendants are not lost, stolen, or dissipated.
H. Institute actions or proceedings in state, federal, or foreign courts as the Receiver deems necessary and advisable to preserve or recover the assets of the Settling Corporate Defendants, or that the Receiver deems necessary and advisable to carry out the Receiver's mandate under this Order, including actions challenging fraudulent or voidable transfers.
I. Defend any or all actions or proceedings instituted against the Settling Corporate Defendants, as the Receiver deems necessary and advisable to preserve the assets of the Settling Corporate Defendants.
J. Continue to maintain accurate records of all receipts and expenditures incurred as the Receiver.
K. Perform all acts necessary or advisable to complete an accurate accounting of assets of the Receivership Estate, and prevent unauthorized transfer, withdrawal, or misapplication of said assets.
L. Continue to be entitled to reasonable compensation for the performance of the Receiver's duties pursuant to this Order, including duties performed by the Receiver's agents, including accountants and lawyers, and for the cost of actual out-of-pocket expenses incurred by them, from the assets of the Receivership Estate, at the hourly rate previously agreed to by the Receiver and used as the bases for prior fee applications approved by the Court.
IT IS FURTHER ORDERED that Settling Defendants obtain acknowledgments of receipt of this Order:
A. Each Settling Defendant, within 7 days of entry of this Order, must submit to the Commission an acknowledgment of receipt of this Order sworn under penalty of perjury.
B. For 10 years after entry of this Order, each Settling Individual Defendant for any business that such Settling Defendant, individually or collectively with any other Settling Defendants, is the majority owner or controls directly or indirectly, and each Settling Corporate Defendant, must deliver a copy of this Order to: (1) all principals, partners, officers, directors, and LLC managers and members; (2) all employees, agents, and representatives who participate in conduct related to the subject matter of the Order; and (3) any business entity resulting from any change in structure as set forth in the Section titled Compliance Reporting. Delivery must occur within 7 days of entry of this Order for current personnel. For all others, delivery must occur before they assume their responsibilities.
C. From each individual or entity to which a Settling Defendant delivered a copy of this Order, that Settling Defendant must obtain, within 30 days, a signed and dated acknowledgment of receipt of this Order.
IT IS FURTHER ORDERED that Settling Defendants make timely submissions to the Commission:
A. One year after entry of this Order, each Settling Defendant must submit a compliance report, sworn under penalty of perjury:
B. For 20 years after entry of this Order, each Settling Defendant must submit a compliance notice, sworn under penalty of perjury, within 14 days of any change in the following:
C. Each Settling Defendant must submit to the Commission notice of the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding by or against such Settling Defendant within 14 days of its filing.
D. Any submission to the Commission required by this Order to be sworn under penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by concluding: "I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on: _____" and supplying the date, signatory's full name, title (if applicable), and signature.
E. Unless otherwise directed by a Commission representative in writing, all submissions to the Commission pursuant to this Order must be emailed to DEbrief@ftc.gov or sent by overnight courier (not the U.S. Postal Service) to: Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. The subject line must begin: FTC v. AWS, LLC et al., X180026.
IT IS FURTHER ORDERED that Settling Defendants must create certain records for 20 years after entry of the Order, and retain each such record for 5 years. Specifically, Settling Corporate Defendants and each Settling Individual Defendant for any business that such Settling Defendant, individually or collectively with any other Settling Defendants, is a majority owner or controls directly or indirectly, must create and retain the following records:
A. accounting records showing the revenues from all goods or services sold;
B. personnel records showing, for each person providing services, whether as an employee or otherwise, that person's: name; addresses; telephone numbers; job title or position; dates of service; and (if applicable) the reason for termination;
C. records of all consumer complaints and refund requests, whether received directly or indirectly, such as through a third party, and any response;
D. all records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Commission; and
E. a copy of each unique advertisement or other marketing material.
IT IS FURTHER ORDERED that, for the purpose of monitoring Settling Defendants' compliance with this Order, including the financial representations upon which part of the judgment was suspended and any failure to transfer any assets as required by this Order:
A. Within 14 days of receipt of a written request from a representative of the Commission, each Settling Defendant must: submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; appear for depositions; and produce Documents for inspection and copying. The Commission is also authorized to obtain discovery, without further leave of court, using any of the procedures prescribed by Federal Rules of Civil Procedure 29, 30 (including telephonic depositions), 31, 33, 34, 36, 45, and 69.
B. For matters concerning this Order, the Commission is authorized to communicate directly with each Settling Defendant. Settling Defendant must permit representatives of the Commission to interview any employee or other person affiliated with any Settling Defendant who has agreed to such an interview. The person interviewed may have counsel present.
C. The Commission may use all other lawful means, including posing, through its representatives, as consumers, suppliers, or other individuals or entities, to Settling Defendants or any individual or entity affiliated with Settling Defendants, without the necessity of identification or prior notice. Nothing in this Order limits the Commission's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.
D. Upon written request from a representative of the Commission, any consumer reporting agency must furnish consumer reports concerning Settling Individual Defendants, pursuant to Section 604(1) of the Fair Credit Reporting Act, 15 U.S.C. §1681b(a)(1).
IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.
