UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
________________________________________________
In the Matter of )
)
AUTOMOTIVE BREAKTHROUGH SCIENCES, INC., )
ABS TECH SCIENCES, INC., ) DOCKET NO. 9275
corporations, and )
RICHARD SCHOPS, )
individually and as )
an officer and director of )
said corporations. )
________________________________________________)
In the Matter of )
)
BST ENTERPRISES, INC., )
a corporation, and ) DOCKET NO. 9276
MICHAEL WOODRUFF, )
individually and as an )
officer and director of )
said corporation. )
________________________________________________)
In the Matter of )
)
BRAKE GUARD PRODUCTS, INC., )
a corporation, and ) DOCKET NO. 9277
ED F. JONES, )
individually and as an )
officer and director of )
said corporation. )
________________________________________________)
DEFAULT JUDGMENT AGAINST
RESPONDENTS BST ENTERPRISES, INC.,
AND MICHAEL WOODRUFF
AND ACCOMPANYING
INITIAL DECISION
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
________________________________________________
In the Matter of )
)
AUTOMOTIVE BREAKTHROUGH SCIENCES, INC., )
ABS TECH SCIENCES, INC., ) DOCKET NO. 9275
corporations, and )
RICHARD SCHOPS, )
individually and as )
an officer and director of )
said corporations. )
________________________________________________)
In the Matter of )
)
BST ENTERPRISES, INC., )
a corporation, and ) DOCKET NO. 9276
MICHAEL WOODRUFF, )
individually and as an )
officer and director of )
said corporation. )
________________________________________________)
In the Matter of )
)
BRAKE GUARD PRODUCTS, INC., )
a corporation, and ) DOCKET NO. 9277
ED F. JONES, )
individually and as an )
officer and director of )
said corporation. )
________________________________________________)
DEFAULT JUDGMENT AGAINST
RESPONDENTS BST ENTERPRISES, INC.,
AND MICHAEL WOODRUFF
I. INTRODUCTION
Complaint counsel have moved, pursuant to Sections 3.12(c) and 3.38(b)(5) of the Rules of Practice, for the entry of a default judgment against respondents in Docket 9276, BST Enterprises, Inc. ("BST") and Michael Woodruff.
The motion is based on the failure of respondents BST and Woodruff to answer the complaint in this matter or to respond to various discovery requests served upon them, and the failure of Woodruff to appear at a deposition in response to a subpoena.
II. BACKGROUND
A. Respondents Were Properly Served With
The Complaint and Notice Order
Beginning on approximately October 6, 1995, the U.S. Postal Service made repeated, unsuccessful efforts to get respondents to claim the registered mail package containing the Commission's complaint and notice order in this matter. Thereafter, on November 21, 1995, an investigative assistant in the Commission's Dallas Regional Office hand-delivered to BST's corporate offices, at 3139 National Circle, Garland, Texas, an additional copy of the complaint and notice order, as well as complaint counsel's first set of interrogatories and first subpoena duces tecum to respondents, motion to consolidate, and other pleadings and orders issued prior to that date.(1)
Respondents were located at this address at the time the complaint was issued, and they received the pleadings. The address, 3139 National Circle, was then currently used on BST's stationery and other BST documents. The FTC investigator who delivered the pleadings to this address noted that the building entrance bore the trade name of the BST braking product, BrakeSafe. Moreover, employees present at BST's offices on November 21 confirmed that BST operated out of the location and led FTC personnel to respondent Woodruff's private office. See Spears Declaration; Griggs Declaration. Most importantly, respondents' opposition to the motion to consolidate, and their partial responses to complaint counsel's first subpoena and first set of interrogatories, although incomplete, are irrefutable evidence of the fact that respondents received the complaint and notice order.(2)
B. Respondents Failed to Comply
With Duly Issued Subpoenas
In addition to their failure to answer the complaint, respondents BST and Woodruff have disobeyed my order that they respond to complaint counsel's November 17, 1995 subpoena duces tecum by January 5, 1996. On December 18, 1995, I issued an order requiring respondents to produce all documents responsive to complaint counsel's November 11, 1995 subpoena duces tecum by January 5, 1996. Respondents have yet to turn over such documents.(3) Moreover, it is apparent that respondents' failure to comply with my December 18 order is due to their unwillingness to defend this action and not to an inability to do so. Respondents have neither attempted to discuss the subpoena return with complaint counsel nor filed a motion to quash it.
BST and Woodruff also failed to respond to complaint counsel's February 6, 1996 requests for admissions, or to respond to complaint counsel's motion for partial summary judgment as to the advertising claims made by them. On May 22, 1996, I entered a partial summary decision against respondents BST and Woodruff ruling that respondents made each of the claims alleged in the complaint. My findings of fact were based in part upon the failure of respondents to answer the February 6 request for admissions. See Rule 3.32(b) (matters deemed admitted unless replied to within ten days of service).
Finally, Woodruff failed to appear for deposition pursuant to a subpoena issued by me on June 4, 1996. In light of respondents' failure to respond to the outstanding discovery requests, complaint counsel had intended to depose respondent Woodruff, individually and as an officer of BST Enterprises, as to all issues to be adjudicated in this case. Complaint counsel have substantial proof that, despite Woodruff's ongoing efforts to evade service in this proceeding, the subpoena was successfully served upon him.(4) Woodruff not only failed to appear at his deposition; he also neglected to contact complaint counsel either before or after the date of deposition to attempt to comply with the subpoena.
III. DEFAULT JUDGMENT IS APPROPRIATE UNDER RULES 3.12(c)
AND 3.38(b)(5) OF THE COMMISSION'S RULES OF PRACTICE
Default judgment against respondents BST and Woodruff is appropriate under both Rules 3.12(c) and 3.38(b)(5) of the Commission's Rules of Practice.
Rule 3.12(c) provides that the failure of a respondent to file an answer to a complaint:
authorize[s] the Administrative Law Judge, without further notice to the respondent, to find the facts to be as alleged in the complaint and to enter an initial decision containing such findings, appropriate conclusions and order.
Respondents BST and Woodruff failed to answer the complaint in this action, despite the fact they clearly were served with the complaint and notice order almost one year ago. A default order is, therefore, appropriate. See Griffin Systems, Inc., 1993 FTC LEXIS 167 (Order Granting Default Judgment Against Robert W. Boughton), affirmed, Boughton v. FTC, unreported (11th Cir. 1996);(5) American Tractor Trailer Training, Inc., 86 F.T.C. 654, 663-64 (1975); Joseph Richard Horvath t/a Sew Rite, 85 F.T.C. 1081, 1085 (1975); Robertson Investment Co., 83 F.T.C. 1717, 1721-22 (1974).
Commission Rule 3.38(b)(5) provides that if a party fails to comply with a subpoena, or with an order for the production of documents or the answering of interrogatories, the Administrative Law Judge may rule that a "decision of the proceeding be rendered against the party." Respondents BST and Woodruff failed to comply with my order requiring the production of documents and failed to appear for testimony pursuant to subpoena.
In a recent Commission action against RustEvader Corp., the ALJ struck RustEvader's answer, pursuant to Rule 3.38(b)(5), on the grounds that the corporate respondent had failed to comply with the ALJ's order directing it to answer discovery requests. The ALJ then held that the entry of default judgment was appropriate under both Rule 3.12(c) and 3.38(b) where the corporate respondent generally had failed to respond to discovery as to all aspects of the litigation. See RustEvader Corp., Docket No. 9274 (Initial Decision) (May 24, 1996) (Timony, ALJ). A default judgment is also appropriate here since respondents BST and Woodruff have failed to answer the complaint, failed to appear for testimony pursuant to subpoena, and failed to comply with a subpoena or my order for the production of certain documents relevant to the central issues for adjudication in this case.
Commission Rules 3.12(c) and 3.38(b)(5) are modeled closely after Rules 37 and 55(b) of the Federal Rules of Civil Procedure. Under Rule 55(b) default judgment is available "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend [the lawsuit]. . . ." Under Rule 37, a court may issue "an order rendering a judgment by default" if a party disobeys a discovery order, fails to attend its own deposition, fails to serve answers to interrogatories, or fails to respond to a request for inspection. The federal rules provide for default judgment in order to allow the courts to manage their dockets efficiently and effectively. Merrill Lynch Mort. Corp. v. Narayan, 908 F.2d 246, 252 (7th Cir. 1990). As the Supreme Court has stated:
The most severe in the spectrum of sanctions must be available to the district court in appropriate cases, not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterrent.
National Hockey League v. Met. Hockey Club, Inc., 427 U.S. 639, 643 (1976).
The federal courts frequently enter default judgments, pursuant to Rule 55(b), as a result of a party's failure to answer the complaint. For instance, in FTC v. Kitco of Nevada, Inc., 612 F. Supp. 1282 (D.C. Minn. 1985), the court held that Fed. R. Civ. P. 55(b) does not require a hearing before the entry of default where a defendant has failed to answer the complaint:
If the court determines that a defendant is in default, the factual allegations of the complaint will be taken as true. This rule applies to cases seeking equitable as well as legal relief.
FTC v. Kitco of Nevada, Inc., 612 F. Supp. at 1297 (citations omitted).
The federal courts also frequently enter default judgments pursuant to Rule 37 where, as here, the defendant has failed to comply with duly served subpoenas or other discovery requests. In FTC v. Packers Brand Meats, Inc., 562 F.2d 9, 10 (8th Cir. 1977), the defendant, after nearly six months, had failed to respond to the lower court's order to show cause why it should not be required to testify or produce documents pursuant to a subpoena issued by the FTC ALJ. The appellate court held that the district court was "fully justified" in entering a default where the defendant's failure to comply did not constitute either good faith mistake or excusable neglect.
Similarly, the appellate court in U.S. v. DiMucci, 879 F.2d 1488 (7th Cir. 1989), held that the district court did not abuse its discretion in entering default where:
Defendants' repeated failure to comply with discovery, to obey court orders regarding the same, and to appear for their depositions clearly constitute contumacious conduct which seriously hampered [plaintiff's] trial preparation.
U.S. v. DiMucci, 879 F.2d at 1494.
A default judgment is appropriate and necessary to ensure the functioning of the judicial process when a defendant's actions or inactions amount to willful misconduct. "A defendant cannot be permitted to avoid or delay a plaintiff's right to judicial resolution of a dispute by ignoring the proceeding." Frank Keevan & Son v. Collier Steel Pipe & Tube, 107 F.R.D. 665, 670 (1985). See also Home Port Rentals, Inc. v. Ruben, 957 F.2d 126, 133 (4th Cir.), cert. denied 113 S. Ct. 70 (1992) (The district court was justified in entering default where defendant: failed to cooperate in discovery matters; refused to submit to depositions; and failed to participate in the prosecution and defense of the matter); Crocker National Bank v. M.F. Securities (Bahamas), 104 F.R.D. 123, 127 (1985) ("As a result of defendants' willful failure to comply with the court's order to appear for deposition, this court is authorized in issuing an order rendering judgment by default against defendants."); Minnesota Min. & Mfg. Co. v. ECO Chem., Inc., 757 F.2d 1256, 1261 (Fed. Cir. 1985) (district court did not abuse its discretion in entering default where the defendant repeatedly had engaged in dilatory tactics).
For the reasons given above,
IT IS ORDERED that respondents BST Enterprises, Inc., and Michael Woodruff be, and they hereby are, found in default of this proceeding; and
IT IS FURTHER ORDERED that because of respondents' default, and pursuant to §§3.12(c) and 3.38(b)(5) of the Rules of Practice, the following initial decision be, and it hereby is, entered.
Lewis F. Parker
Administrative Law Judge
Dated: October 16, 1996
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
________________________________________________
In the Matter of )
)
AUTOMOTIVE BREAKTHROUGH SCIENCES, INC., )
ABS TECH SCIENCES, INC., ) DOCKET NO. 9275
corporations, and )
RICHARD SCHOPS, )
individually and as )
an officer and director of )
said corporations. )
________________________________________________)
In the Matter of )
)
BST ENTERPRISES, INC., )
a corporation, and ) DOCKET NO. 9276
MICHAEL WOODRUFF, )
individually and as an )
officer and director of )
said corporation. )
________________________________________________)
In the Matter of )
)
BRAKE GUARD PRODUCTS, INC., )
a corporation, and ) DOCKET NO. 9277
ED F. JONES, )
individually and as an )
officer and director of )
said corporation. )
________________________________________________)
INITIAL DECISION
I. FINDINGS OF FACT
(a) NOW YOU CAN BRAKESAFETM,
NO MATTER WHAT YOU DRIVE.
In just 30 minutes or less, your car, truck, motorhome or motorcycle can be RETROFITTED with the anti-lock benefit braking of BrakeSafe!!
For over forty years, the aerospace and aviation industries have equipped military fighter jets and state-of-the-art airliners with the unmatched, non-skid action of hydraulic anti-locking braking systems. In the late 1980's, electronic variations were offered on expensive European luxury cars and later on select domestic models.
But now you don't have to own a new high-priced car or truck to have the safety of BrakeSafeTM.
And, since some insurance companies support this type of safety product, your BrakeSafeTM installation certificate may entitle you to discounts on your yearly premium; it varies, but reductions as high as 10% are not unusual.
Don't just brake - BrakeSafe.
Unlike electronic ABS systems which react only in emergency or panic situations, BrakeSafeTM is pro-active - it's in continuous operation.
* * * *
While results can vary substantially by road conditions, vehicle weight and other factors, BrakeSafeTM has been found to reduce stopping distances up to 30% when aggressively decelerating from 60 to 0 mph.
[Depiction of two sets of tire tracks, one long and wavy, extending from 0 to 80 on a graph, and the other short and straight, extending from 0 to 60 on the graph.]
* * * *
Shorter stopping distances are also realized, not just during panic stops or on wet roads.
* * * *
Here's How BrakeSafeTM Works
With conventional brakes, vehicles go into a skid when excess brake pressure is applied - usually the driver's response to an unexpected situation.
As brake pressure increases, one tire can begin to slow at a disproportionate rate to the others. The result: wheel lock-up and an immediate reduction in road adhesion. A skid or spin-out.
In contrast, BrakeSafeTM coordinates braking by modulating brake line pressure to all four wheels, controlling the rotational wheel lock-up before it occurs. . . .
* * * *
[Complaint Exhibit A]
(b)
ABS
BRAKESAFETM
Mechanical Safety Braking System With
Anti-lock Benefits
PROTECT YOUR FAMILY, YOURSELF & OTHERS WITH
MORE EFFICIENT STOPPING.
NOW YOU CAN BRAKESAFETM, NO MATTER WHAT YOU DRIVE.
* * * *
What BrakeSafeTM offers:
* * * *
With this system you will notice a Softer Pedal which minimizes premature lock-up and increases vehicle stability in emergency situations.
Controlled stopping and positive steering control during panic stops and dangerous driving conditions make this BrakeSafeTM system especially attractive for motor homes, trailer pullers and commercial vehicles.
* * * *
In summary, Safer Operation, Greater Control, and Reduced Break Wear more than justify the small investment.
Affordable Aerospace Technology
For years, the aerospace and aviation industries have equipped military fighter jets and state-of-the-art airliners with hydraulic anti-skid, anti-locking braking systems. In the late 1980's, electronic variations were offered on expensive European luxury cars, and later on selected domestic models.
Insurance Discounts
Since insurance companies support this type of safety product, your BrakeSafeTM installation certificate may entitle you to a discount on your yearly premium.
* * * *
While results can vary substantially by road conditions, vehicle weight and other factors, BrakeSafeTM has been found to reduce stopping distances up to 20% when aggressively decelerating from 60 to 0 mph.
[Depiction of two sets of tire tracks, one long and wavy, extending from 0 to 85 on a graph, and the other short and straight, extending from 0 to 55 on the graph.]
* * * *
Does it work?
"We have tested and used it (BrakeSafe)in competition and it greatly enhances our stopping ability. Your product has allowed us to go much deeper into turns while avoiding wheel lockup."
Croydon Kemp
CROCYCO RACING
". . . I had no choice but to apply maximum brakes at approximately 115 MPH. There was no lock up and no skip and the car stopped immediately. Had it not been for this system (BrakeSafeTM), there would have been a mojor [sic] accident. . ."
Bob Beaucond
NORTH COUNTY MUSTANG RACING TEAM
WARRANTY
. . . . BrakeSafeTM is in compliance with the Wheel Slip Brake Control System Road Test Code SAE J46, and National Highway Traffic Safety Administration. (DOT) 49 Code of the Federal Regulations CH. V (10·1·87) Edition 571.105-SA Anti-lock System.
[Complaint Exhibit B]
(c) PROTECT YOUR FAMILY
ABS
BRAKESAFETM
(As used in the airline industry)
Mechanical Safety Braking System
with Anti-lock Benefits
Safer, Skid Resistant Stopping
Controls Premature Lock-up
Shorter, Smoother Braking
Efficiency in Emergencies
* * * *
NOW YOU CAN BRAKESAFETM, NO MATTER WHAT YOU DRIVE.
[Complaint Exhibit C]
(d) THE ABS OF BRAKES
BrakeSafe is an enhanced braking system with ABS benefits. . . . Some of the many enhancements to conventional braking is that you normally stop straighter and shorter. . . . In independent testing, the BrakeSafe devices have proven [sic] to stop at least 20 percent shorter when travelling at 60 mph. . . In some cases, your customers may also be offered decreased insurance premiums.
[Complaint Exhibit D]
(a) ABS BrakeSafe prevents or substantially reduces wheel lock-up, skidding, and loss of steering control in emergency stopping situations;
(b) Installation of ABS BrakeSafe will qualify a vehicle for an automobile insurance discount in a significant proportion of cases;
(c) ABS BrakeSafe complies with a performance standard set forth in Wheel Slip Brake Control System Road Test Code SAE J46;
(d) ABS BrakeSafe complies with a standard pertaining to antilock braking systems set forth by the National Highway Traffic Safety Administration(6);
(e) ABS BrakeSafe provides antilock braking system benefits, including wheel lock-up control benefits, that are at least equivalent to those provided by original equipment manufacturer electronic antilock braking systems; and
(f) Consumer testimonials appearing in their ads and promotional materials reflect the typical or ordinary experience of members of the public who have used the ABS BrakeSafe device.
(g) Tests prove that ABS BrakeSafe will reduce stopping distance when compared with vehicles not furnished with the braking device.
(Partial Summary Decision, at pp. 27-28) (May 22, 1996).
(a) ABS BrakeSafe does not prevent or substantially reduce wheel lock-up, skidding, and loss of steering control in emergency stopping situations;
(b) Installation of ABS BrakeSafe will not qualify a vehicle for an automobile insurance discount in a significant proportion of cases;
(c) ABS BrakeSafe does not comply with a performance standard set forth in Wheel Slip Brake Control System Road Test Code SAE J46 ("SAE J46"). SAE J46 sets forth a test procedure for evaluating the performance of antilock brake systems, but contains no performance standard. Moreover, ABS BrakeSafe has not been subjected to the testing set forth in SAE J46;
(d) ABS BrakeSafe does not comply with a standard pertaining to antilock braking systems set forth by the National Highway Traffic Safety Administration. The provision referred to establishes only a definition pertaining to antilock braking systems, and ABS BrakeSafe does not meet that definition;
(e) ABS BrakeSafe does not provide antilock braking system benefits, including wheel lock-up control benefits, that are at least equivalent to those provided by original equipment manufacturer electronic antilock braking systems;
(f) Testimonials from consumers appearing in the advertisements and promotional materials for ABS BrakeSafe do not reflect the typical or ordinary experience of members of the public who have used the product; and
(g) Tests do not prove that ABS BrakeSafe will reduce stopping distance when compared with vehicles not furnished with the braking device.
Therefore, respondents' representations as set forth in finding 9 were, and are, false and misleading.
(a) In emergency stopping situations, a vehicle equipped with ABS BrakeSafe will stop in a shorter distance than a vehicle that is not equipped with the device; and
(b) Installation of ABS BrakeSafe will make operation of a vehicle safer than a vehicle that is not equipped with the device.
(Partial Summary Decision, at p. 28) (May 22, 1996).
II. CONCLUSIONS OF LAW
1. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents.
2. The acts and practices of respondents as described in findings 1 through 13 above constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.
3. The following order is necessary and appropriate under applicable legal precedent and the facts of this case.
III. ORDER
DEFINITIONS
For the purposes of this Order:
1. "Competent and reliable scientific evidence" shall mean tests, analyses, research, studies, or other evidence based upon the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results; and
2. "Purchasers for resale" shall mean all purchasers of ABS BrakeSafe for resale to the public, including but not limited to franchisees, wholesalers, distributors, retailers, installers, and jobbers.
I.
IT IS ORDERED that respondents, BST Enterprises, Inc., a corporation, its successors and assigns, and its officers, and Michael Woodruff, individually and as an officer and director of said corporation, and respondents' agents, representatives, and employees, directly or through any partnership, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of ABS BrakeSafe or any substantially similar product in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from employing the initials or term ABS in conjunction with or as part of the name for such product or the product logo.
II.
IT IS FURTHER ORDERED that respondents, BST Enterprises, Inc., a corporation, its successors and assigns, and its officers, and Michael Woodruff, individually and as an officer and director of said corporation, and respondents' agents, representatives, and employees, directly or through any partnership, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of ABS BrakeSafe or any substantially similar product in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing, in any manner, directly or by implication, that such product:
A. Is an antilock braking system;
B. Prevents or substantially reduces wheel lock-up, skidding, or loss of steering control in emergency stopping situations;
C. Will qualify a vehicle for an automobile insurance discount in a significant proportion of cases;
D. Complies with a performance standard set forth in Wheel Slip Brake Control System Road Test Code SAE J46;
E. Complies with a standard pertaining to antilock braking systems set forth by the National Highway Traffic Safety Administration;
F. Has been proven in tests to reduce stopping distances by at least 20% when the vehicle's brakes are applied at a speed of 60 mph; or
G. Provides antilock braking system benefits, including wheel lock-up control benefits, that are at least equivalent to those provided by original equipment manufacturer electronic antilock braking systems.
III.
IT IS FURTHER ORDERED that respondents BST Enterprises, Inc., a corporation, its successors and assigns, and its officers, and Michael Woodruff, individually and as an officer and director of said corporation, and respondents' agents, representatives, and employees, directly or through any partnership, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any braking system, accessory, or device, in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing, in any manner, directly or by implication, that:
A. In emergency stopping situations, a vehicle equipped with the system, accessory, or device will stop in a shorter distance than a vehicle that is not equipped with the system, accessory, or device; or
B. Installation of the system, accessory, or device will make operation of a vehicle safer than a vehicle that is not equipped with the system, accessory, or device;
unless, at the time of making such representation, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.
IV.
IT IS FURTHER ORDERED that respondents BST Enterprises, Inc., a corporation, its successors and assigns, and its officers, and Michael Woodruff, individually and as an officer and director of said corporation, and respondents' agents, representatives, and employees, directly or through any partnership, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from misrepresenting, in any manner, directly or by implication:
A. The contents, validity, results, conclusions, or interpretations of any test or study;
B. The compliance of any such product with any standard, definition, regulation, or any other provision of any governmental entity or unit, or of any other organization;
C. The availability of insurance benefits or discounts arising from the use of such product; or
D. That any endorsement (as "endorsement" is defined in 16 C.F.R. § 255.0(b)) of the product represents the typical or ordinary experience of members of the public who use the product, unless:
(1) such representation is true, or
(2) respondentS disclose clearly, prominently, and in close proximity to the endorsement or testimonial either:
(a) what the generally expected results would be for users of such product, or
(b) the limited applicability of the endorser's experience to what consumers may generally expect to achieve, that is, that consumers should not expect to experience similar results.
V.
IT IS FURTHER ORDERED that respondents BST Enterprises, Inc., a corporation, its successors and assigns, and its officers, and Michael Woodruff, individually and as an officer and director of said corporation, and respondents' agents, representatives, and employees, directly or through any partnership, corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any braking system, accessory, or device, or any other system, accessory, or device designed to be used in, on, or in conjunction with any motor vehicle, in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from making any representation, directly or by implication, regarding the absolute or comparative attributes, efficacy, performance, safety, or benefits of such system, accessory, or device, unless such representation is true and, at the time of making such representation, respondents possess and rely upon competent and reliable evidence, which when appropriate must be competent and reliable scientific evidence, that substantiates the representation.
VI.
IT IS FURTHER ORDERED that respondents BST Enterprises, Inc., a corporation, its successors and assigns, and Michael Woodruff shall:
A. Within forty-five (45) days after the date of service of this Order, compile a current mailing list containing the names and last known addresses of all purchasers of ABS BrakeSafe since January 1, 1990. Respondents shall compile the list by:
1. Searching their own files for the names and addresses of such purchasers; and
2. Using their best efforts to identify any other such purchasers, including but not limited to sending by first class certified mail, return receipt requested, within five (5) days after the date of service of this Order, to all of the purchasers for resale with which respondents have done business since January 1, 1990, an exact copy of the notice attached hereto as Appendix A. The mailing shall not include any other documents. In the event that any such purchaser for resale fails to provide any names or addresses of purchasers in its possession, respondents shall provide the names and addresses of all such purchasers for resale to the Federal Trade Commission within forty-five (45) days after the date of service of this Order.
3. In addition, respondents shall retain a National Change of Address System ("NCOA") licensee to update this list by processing the list through the NCOA database.
B. Within sixty (60) days after the date of service of this Order, send by first class mail, postage prepaid, to the last address known to respondents of each purchaser of ABS BrakeSafe identified on the mailing list compiled pursuant to subparagraph A of this Part, an exact copy of the notice attached hereto as Appendix B. The mailing shall not include any other documents. The envelope enclosing the notice shall have printed thereon in a prominent fashion the phrases "FORWARDING AND RETURN POSTAGE GUARANTEED" and "IMPORTANT NOTICE--U.S. GOVERNMENT ORDER ABOUT ABS BRAKESAFE BRAKING DEVICE."
C. Send the mailing described in subparagraph B of this Part to any person or organization not on the mailing list prescribed in subparagraph A of this Part about whom respondents later receive information indicating that the person or organization is likely to have been a purchaser of ABS BrakeSafe, and to any purchaser whose notification letter is returned by the U.S. Postal Service as undeliverable and for whom respondents thereafter obtain a corrected address. The mailing required by this subpart shall be made within ten (10) days of respondents' receipt of a corrected address or information identifying each such purchaser.
D. In the event respondents receive any information that, subsequent to its receipt of Appendix A, any purchaser for resale is using or disseminating any advertisement or promotional material that contains any representation prohibited by this Order, immediately notify the purchaser for resale that respondents will terminate the use of said purchaser for resale if it continues to use such advertisement or promotional material.
E. Terminate within ten (10) days the use of any purchaser for resale about whom respondents receive any information that such purchaser for resale has continued to use any advertisement or promotional material that contains any representation prohibited by this Order after receipt of the notice required by subparagraph A of this Part.
VII.
IT IS FURTHER ORDERED that respondents BST Enterprises, Inc., a corporation, its successors and assigns, and Michael Woodruff shall for five (5) years after the last correspondence to which they pertain, maintain and upon request make available to the Federal Trade Commission or its staff for inspection and copying:
A. The list compiled pursuant to subparagraph A of Part VI of this Order;
B. Copies of all notification letters sent to purchasers pursuant to subparagraphs B and C of Part VI of this Order;
C. Copies of notification letters sent to purchasers for resale pursuant to subparagraphs A and D of Part VI of this Order, and all other communications with purchasers for resale relating to the notices required by Part VI of this Order.
VIII.
IT IS FURTHER ORDERED that for five (5) years after the last date of dissemination of any representation covered by this Order, respondents, or their successors or assigns, shall maintain and upon request make available to the Federal Trade Commission or its staff for inspection and copying:
A. All materials that were relied upon in disseminating such representation; and
B. All tests, reports, studies, surveys, demonstrations, or other evidence in their possession or control that contradict, qualify, or call into question such representation, or the basis relied upon for such representation, including complaints from consumers, and complaints or inquiries from governmental organizations.
IX.
IT IS FURTHER ORDERED that respondent BST Enterprises, Inc., its successors and assigns, shall:
A. Within thirty (30) days after the date of service of this Order, provide a copy of this Order to each of respondent's current principals, officers, directors, and managers, and to all personnel, agents, and representatives having sales, advertising, or policy responsibility with respect to the subject matter of this Order; and
B. For a period of ten (10) years from the date of service of this Order, provide a copy of this Order to each of respondent's future principals, officers, directors, and managers, and to all personnel, agents, and representatives having sales, advertising, or policy responsibility with respect to the subject matter of this Order, within three (3) days after the person assumes his or her position.
X.
IT IS FURTHER ORDERED that respondent BST Enterprises, Inc., its successors and assigns, shall notify the Commission at least thirty (30) days prior to any proposed change in the corporation such as a dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation which may affect compliance obligations under this Order.
XI.
IT IS FURTHER ORDERED that respondent Michael Woodruff shall, for a period of ten (10) years from the date of entry of this Order, notify the Commission within thirty (30) days of the discontinuance of his present business or employment and of his affiliation with any new business or employment. Each notice of affiliation with any new business or employment shall include respondent's new business address and telephone number, current home address, and a statement describing the nature of the business or employment and his duties and responsibilities.
XII.
IT IS FURTHER ORDERED that this Order will terminate twenty years from the date of its issuance, or twenty years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of:
A. Any paragraph in this Order that terminates in less than twenty years;
B. This Order's application to any respondent that is not named as a defendant in such complaint; and
C. This Order if such complaint is filed after the Order has terminated pursuant to this paragraph.
Provided further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the Order, and the dismissal or ruling is either not appealed or upheld on appeal, then the Order will terminate according to this paragraph as though the complaint was never filed, except that the Order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal.
XIII.
IT IS FURTHER ORDERED that respondents shall, within sixty (60) days after service of this Order upon them, and at such other times as the Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this Order.
Lewis F. Parker
Administrative Law Judge
Dated: October 16, 1996
APPENDIX A
[BST Enterprises, Inc. letterhead]
Dear ABS BrakeSafe Reseller:
Our records indicate that you are or have been a distributor or retailer of the ABS BrakeSafe, a brake product. This letter is to advise you that the Federal Trade Commission recently obtained an Order against BST Enterprises, Inc. regarding certain claims made for the ABS BrakeSafe device. Under that Order, we are required to notify our distributors, wholesalers and others who have sold ABS BrakeSafe to stop using or distributing advertisements or promotional materials containing these claims. We are also asking for your assistance in compiling a list of ABS BrakeSafe purchasers, so that we may contact them directly. Please read this letter in its entirety and comply with all parts.
The FTC's Decision and Order
The Federal Trade Commission has determined that the following claims made for the ABS BrakeSafe device in BST Enterprises' advertisements, logos and promotional material are FALSE and MISLEADING:
(a) ABS BrakeSafe is an antilock braking system.
(b) ABS BrakeSafe prevents or substantially reduces wheel lock-up, skidding, and loss of steering control in emergency stopping situations;
(c) Installation of ABS BrakeSafe will qualify a vehicle for an automobile insurance discount in a significant proportion of cases;
(d) ABS BrakeSafe complies with a performance standard set forth in Wheel Slip Brake Control System Road Test Code SAE J46;
(e) ABS BrakeSafe complies with a standard pertaining to antilock braking systems set forth by the National Highway Traffic Safety Administration;
(f) ABS BrakeSafe provides antilock braking system benefits, including wheel lock-up control benefits, that are at least equivalent to those provided by original equipment manufacturer electronic antilock braking systems; and
(g) Tests prove that ABS BrakeSafe will reduce stopping distances by at least 20% when the vehicle's brakes are applied at 60 mph.
The FTC Order requires BST Enterprises, Inc. to cease and desist from making these false claims for the ABS BrakeSafe device.
In addition, the FTC Order requires BST Enterprises, Inc. to cease and desist from making claims that ABS BrakeSafe will shorten stopping distances in emergency stopping situations or make a vehicle safer, unless at the time of making such representation it possesses competent and reliable scientific evidence substantiating the representation.
We need your assistance in complying with this Order.
Please immediately send us the names and last known addresses of all persons or businesses, including other resellers, to whom you have sold an ABS BrakeSafe since January 1, 1990. We need this list in order to provide the notification required by the FTC Order. If you do not provide this information, we are required to provide your name and address to the FTC.
Please stop using the ABS BrakeSafe promotional materials currently in your possession. These materials may contain claims that the FTC has determined to be false or unsubstantiated. You also should avoid making any of the representations as described in this letter. Under the FTC Order, we must stop doing business with you if you continue to use the prohibited materials or make the prohibited representations.
If you have any questions, you may call Sydney Knight of the Federal Trade Commission at (202) 326-2162. Thank you for your cooperation.
Very truly yours,
Michael Woodruff
President
BST Enterprises, Inc.
APPENDIX B
[BST Enterprises, Inc. letterhead]
Dear ABS BrakeSafe Customer:
Our records indicate that you previously purchased an ABS BrakeSafe for your vehicle. This letter is to advise you that the Federal Trade Commission ("FTC") recently obtained an Order against BST Enterprises, Inc. regarding certain claims made for ABS BrakeSafe. Please read this letter in its entirety.
The FTC's Decision and Order
The Federal Trade Commission has determined that the following claims made for the ABS BrakeSafe device in BST Enterprises, Inc.'s advertisements, logos and promotional material are FALSE and MISLEADING:
(a) ABS BrakeSafe is an antilock braking system.
(b) ABS BrakeSafe prevents or substantially reduces wheel lock-up, skidding, and loss of steering control in emergency stopping situations;
(c) Installation of ABS BrakeSafe will qualify a vehicle for an automobile insurance discount in a significant proportion of cases;
(d) ABS BrakeSafe complies with a performance standard set forth in Wheel Slip Brake Control System Road Test Code SAE J46;
(e) ABS BrakeSafe complies with a standard pertaining to antilock braking systems set forth by the National Highway Traffic Safety Administration;
(f) ABS BrakeSafe provides antilock braking system benefits, including wheel lock-up control benefits, that are at least equivalent to those provided by original equipment manufacturer electronic antilock braking systems; and
(g) Tests prove that ABS BrakeSafe will reduce stopping distances by at least 20% when the vehicle's brakes are applied at the speed of 60 mph.
The FTC Order requires BST Enterprises, Inc. to cease and desist from making these false claims for the ABS BrakeSafe device.
In addition, the FTC Order requires BST Enterprises, Inc. to cease and desist from making claims that ABS BrakeSafe will shorten stopping distances in emergency situations or make a vehicle safer, unless at the time of making such representation it possesses competent and reliable scientific evidence substantiating the representation.
If you have any questions, you may call Sydney Knight of the Federal Trade Commission at (202) 326-2162. Thank you for your cooperation.
Very truly yours,
Michael Woodruff
President
BST Enterprises, Inc.
ENDNOTES
1. See Spears Declaration and Griggs Declaration, dated November 22, 1995, and filed with the Secretary's Office on November 28, 1995 (Attachments 1 and 2 to complaint counsel's motion); Complaint Counsel's Response to Respondent BST's Motion for Thirty Day Extension to Submit Documents, at footnote 1, filed December 15, 1995 (Attachment 3 to complaint counsel's motion). Accompanying the complaint was the standard Secretary's letter informing respondents of the need to file an answer within the time set by the Commission's Rules. (Attachment 1, ¶2 to complaint counsel's motion).
2. See BST's Answer to Motion to Consolidate (stamped Dec. 15, 1995) (Attachment 4 to complaint counsel's motion); November 17, 1995 Subpoena duces tecum to BST and BST's December 22, 1995 Partial Response thereto (Attachment 5 to complaint counsel's motion); November 17, 1995 Interrogatories to BST and BST's December 26, 1995 Partial Responses thereto (Attachment 6 to complaint counsel's motion). See also, BST's request for a thirty day extension on the subpoena return (stamped Dec. 15, 1995) (Attachment 7 to complaint counsel's motion). These are all of the pleadings respondents have submitted in this proceeding. None of these pleadings dispute respondents' receipt of the complaint or other documents.
3. See Order Granting Extension of Time to BST, D. 9276 (Dec. 18, 1995) (Attachment 8 to complaint counsel's motion); Hoppock Declaration (Attachment 9 to complaint counsel's motion) (complaint counsel never received the documents ordered to be turned over by January 5, 1996).
4. Since the complaint was issued, respondents BST and Woodruff have changed addresses several times without notifying complaint counsel, me, or the Secretary's Office. Despite this fact, complaint counsel have attempted to serve all pleadings to respondents' most current known address.
In May 1996, complaint counsel learned from the U.S. Postal Service that respondents had changed their address to a post office box in Dallas, Texas at zip code 75355. Hoping to effect personal service of a subpoena ad testificandum upon Woodruff, complaint counsel obtained the street address given by him in registering for the post office box. When it was determined that Woodruff did not reside at this address, an employee of the Commission's Dallas Regional Office hand-delivered a subpoena ad testificandum to the station manager for zip code 75355 for placement in respondent Woodruff's post office box. (See Elliott Declaration) (Attachment 10 to complaint counsel's motion). The station manager's sworn declaration states that the subpoena was picked up from the post office box the following day. (See Brown Declaration) (Attachment 11 to complaint counsel's motion). Accordingly, Woodruff was properly served with the subpoena ad testificandum.
Moreover, Woodruff and BST Enterprises continue to accept mail at this address. (See Teague Declaration) (Attachment 12 to complaint counsel's motion). On June 7, 1996, the same date that the subpoena was picked up, respondents renewed the post office box. At that time Woodruff changed his street address to 3131 National Circle, Garland, Texas -- evidently just doors down from BST's former corporate address of 3139 National Circle. (See Teague Declaration).
5. The circuit court's unpublished opinion is included as Attachment 14 to complaint counsel's motion. Both the ALJ and the circuit court found that the entry of a default judgment against the respondent for failure to answer the complaint was appropriate under Rule 3.12(c) where the complaint was properly served upon a post office box, respondent's only known address. In this instance, service was made at respondents' place of business, which unquestionably is appropriate under Rule 3.12(c)
6. This finding was articulated in my May 28,1996 order clarifying the May 22, 1996 Partial Summary Decision.