STATES DISTRICT COURT
Magistrate Judge Seltzer
FEDERAL TRADE COMMISSION, Plaintiff,
DIANE M. JONAS, PAUL A. JONAS,
JAMES W. RAIM,
SECOND EX PARTE TEMPORARY RESTRAINING ORDER
Plaintiff Federal Trade Commission ("Commission"), having filed its amended complaint for a permanent injunction and other relief in this matter under Sections 13(b) and 19(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 53(b) and 57b(a), and having moved without written or oral notice for a temporary restraining order under Rule 65(b) of the Federal Rules of Civil Procedure, and the Court, having considered the pleadings and evidence filed in support, now finds the following:
1. This Court has jurisdiction of the subject matter of this case and there is good cause to believe it will have jurisdiction of all parties.
2. There is good cause to believe that the six defendants added in the amended complaint, Market Systems, Ltd., Natural Health Systems, Inc., Progressive Products, Inc., Tami Brennan McClure, Paul S. Janus, and Richard A. Herbert., M.D., with Defendant James W. Raim, have engaged and are likely to engage in acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. 45(a), and that the Commission is therefore likely to prevail on the merits of this action.
3. There is good cause to believe that immediate and irreparable damage to the Court's ability to grant, and the Commission's ability to obtain, effective final monetary relief in the form of disgorgement, restitution to consumers, or damages will occur from the sale, transfer, or other disposition or concealment by Defendants of their assets or corporate records unless the six Defendants added in the amended complaint are immediately restrained and enjoined by Order of this Court. There is thus good cause for relieving the Commission of the duty to provide Defendants with prior notice of the Commission's motion.
4. Good cause exists for appointing a temporary receiver for Market Systems, Ltd., Natural Health Systems, Inc., and Progressive Products, Inc.
5. Weighing the equities and considering the Commission's likelihood of ultimate success, a temporary restraining order with asset freeze and other equitable relief is in the public interest.
6. No security is required of any agency of the United States for issuance of a restraining order. Fed. R. Civ. P. 65(c).
IT IS THEREFORE ORDERED that, for purposes of this temporary restraining order, the following definitions shall apply:
A. "Business venture" means any written or oral business arrangement, however denominated, whether or not covered by the Franchise Rule, 16 C.F.R. 436.2(a), which consists of the payment of any consideration for:
1. the right or means to offer, sell, or distribute goods or services (whether or not identified by a trademark, service mark, trade name, advertising, or other commercial symbol); and
2. more than nominal assistance to any person or entity in connection with or incident to the establishment, maintenance, or operation of a new business or the entry by an existing business into a new line or type of business.
B. "Defendants," unless otherwise specified in a paragraph of this Order, means Tami Brennan McClure, Paul S. Janus, Richard A. Herbert, M.D., Market Systems, Ltd., Natural Health Systems, Inc. and Progressive Products, Inc., and each of them, and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device.
C. "Franchise" and "Franchisee" shall be defined by Section 436.2(a) of the Franchise Rule, 16 C.F.R. 436.2(a), a copy of which is attached to this Order.
D. "Receivership Defendants" means Market Systems, Ltd., Natural Health Systems, Inc., and Progressive Products, Inc.
IT IS FURTHER ORDERED that Defendants are hereby temporarily restrained and enjoined from --
A. Making or assisting others in making express or implied misrepresentations concerning the Alcohol Neutralizer or any of its ingredients, including but not limited to misrepresentations concerning:
1. the safety or efficacy of the Alcohol Neutralizer or any of its ingredients;
2. government approval of the Alcohol Neutralizer or any of its ingredients; or
3. the results or findings of any tests or studies of the Alcohol Neutralizer or any of its ingredients.
B. Destroying, erasing, mutilating, concealing, altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, any contracts, accounting data, correspondence, advertisements, computer tapes, discs, or other computerized records, books, written or printed records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, personal and business cancelled checks and check registers, bank statements, appointment books, copies of federal, state or local business or personal income or property tax returns, and other documents or records of any kind which relate to their business practices or business or personal finances from January 1, 1988 to the present time.
C. Transferring or disclosing to any person or entity (except to the Commission or to the temporary receiver or by Order of this Court) the names, addresses, telephone numbers, social security numbers, account numbers, or other identifying information of any person who purchased or inquired about a business venture or the Alcohol Neutralizer.
IT IS FURTHER ORDERED that Defendants are hereby temporarily restrained and enjoined from:
A. Transferring, converting, encumbering, selling, concealing, dissipating, disbursing, assigning, spending, withdrawing, granting a lien or other interest in, or otherwise disposing of any funds, property, accounts, contracts, shares of stock or other assets, wherever located, that are (a) owned or controlled by any Defendant, in whole or in part; or (b) in the actual or constructive possession of any Defendant; or (c) owned, controlled by, or in the actual or constructive possession of any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by, or under common control with, any Defendant, including, but not limited to, any assets held by or for any Defendant at any bank or savings and loan institution, or with any broker-dealer, escrow agent, title company, commodity trading company, precious metal dealer, or other financial institution or depository of any kind.
B. Opening or causing to be opened any safe deposit boxes titled in the name of any Defendant, or subject to access by any Defendant.
C. Failing to create and maintain books, records, accounts, and data which, in reasonable detail, accurately, fairly, and completely reflect their incomes, disbursements, transactions, and use of money.
IT IS FURTHER ORDERED that _________________________ is appointed temporary receiver, with the full power of an equity receiver, for the Receivership Defendants and of all the funds, properties, premises, accounts, other assets, and documents directly or indirectly owned, beneficially or otherwise, by the Receivership Defendants, with directions and authority to accomplish the following:
A. Assume full control of the Receivership Defendants by removing the Defendants Tami Brennan McClure, Paul S. Janus, Richard A. Herbert, or any other officer, independent contractor, employee, or agent of any of the Receivership Defendants, including Defendant James W. Raim, from control and management of the affairs and from possession or occupancy of the business premises of the Receivership Defendants.
B. Collect, marshal, and take custody, control and possession of all the funds, property, premises, accounts, mail and other assets of, or in the possession or under the control of, the Receivership Defendants, wherever situated, the income and profits therefrom, and all sums of money now or hereafter due or owing to the Receivership Defendants, with full power to: collect, receive and take possession of all goods, chattels, rights, credits, moneys, effects, lands, leases, books and records, work papers, and records of accounts, including computer-maintained information, contracts, financial records, monies on hand in banks and other financial institutions, and other papers and documents of the Receivership Defendants and business venture purchasers whose interests are now held by or under the direction, possession, custody or control of the Receivership Defendants.
C. Perform all acts necessary to conserve, hold, manage, and preserve the value of those assets, in order to prevent any irreparable loss, damage, and injury to consumers, and all acts incidental thereto, including the suspension of operations, and the notification of purchasers of the Alcohol Neutralizer or Alcohol Neutralizer distributorships, franchises, or business ventures of the pendency of this action and of the possibility that the sale or distribution of the Alcohol Neutralizer may violate federal law.
D. Enter into such agreements in connection with administration of the receivership, including, but not limited to: (1) the retention and employment of investigators, attorneys or accountants of the receiver's choice, including without limitation members and employees of the temporary receiver's firm, to assist, advise, and represent the receiver, and (2) the movement and storage of any equipment, furniture, records, files or other physical property of the Receivership Defendants;
E. Institute, prosecute, compromise, adjust, intervene in or become party to such actions or proceedings in state, federal or foreign courts that the temporary receiver deems necessary and advisable to preserve the value of the assets of the Receivership Defendants or that the temporary receiver deems necessary and advisable to carry out the receiver's mandate under this Order, and likewise to defend, compromise or adjust or otherwise dispose of any or all actions or proceedings instituted against the temporary receiver or the Receivership Defendants that the temporary receiver deems necessary and advisable to preserve the properties of the Receivership Defendants or that the temporary receiver deems necessary and advisable to carry out the receiver's mandate under this Order.
IT IS FURTHER ORDERED that, immediately upon service of this Order upon them, Defendants McClure, Janus, Herbert, and James W. Raim shall deliver to the temporary receiver: (A) possession and custody of all funds, assets, property owned beneficially or otherwise, and all other assets, wherever situated, of the Receivership Defendants; (B) possession and custody of all books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, cancelled checks, records of wire transfers, and check registers), client lists, title documents, and other papers of the Receivership Defendants; (C) possession and custody of all legal files, records, or documents of or concerning the Receivership Defendants (including documents that may be privileged, confidential, or immune from discovery); (D) possession and custody of all funds and other assets belonging to members of the public now held by the Receivership Defendants; (E) all keys, computer passwords, entry codes, combinations to locks required to open or gain access to any of the property or effects, and all monies in any bank deposited to the credit, of the Receivership Defendants, wherever situated; (F) all information identifying the accounts, employees, properties, or other assets or obligations of the Receivership Defendants; (G) a statement providing the total number of distributorships, franchises, or business ventures sold by each of the Defendants; and (H) a statement providing the names, addresses and phone numbers of each person who purchased a distributorship, franchise, a business venture, or the Alcohol Neutralizer, whether directly from one or more of the Defendants or through a broker or other entity, and the total dollar amount of money received from each purchaser. By written permission of the temporary receiver and without motion to the Court, the time for providing any of the above may be extended, but for no more than five (5) business days.
IT IS FURTHER ORDERED that, except by leave of this Court, during the pendency of the receivership established by this Order, all persons or entities shall be stayed from:
A. Commencing, prosecuting, continuing or enforcing any suit or proceeding against any of the Receivership Defendants, or any of their subsidiaries or affiliates, except that such actions may be filed to toll any applicable statute of limitations;
B. Commencing, prosecuting, continuing or entering any suit or proceeding in the name or on behalf of any of the Receivership Defendants, or any of their subsidiaries or affiliates;
C. Accelerating the due date of any obligation or claimed obligation, enforcing any lien upon, or taking or attempting to take possession of, or retaining possession of, a property of any of the Receivership Defendants, or any of their subsidiaries or affiliates or any property claimed by any of them or attempting to foreclose, forfeit, alter or terminate any of the Receivership Defendants' interests in property, including without limitation, the establishment, granting, or perfection of any security interest, whether such acts are part of a judicial proceeding or otherwise;
D. Using self-help or executing or issuing, or causing the execution or issuance of any court attachment, subpoena, replevin, execution or other process for the purpose of impounding or taking possession of or interfering with, or creating or enforcing a lien upon any property, wheresoever located, owned by or in the possession of any of the Receivership Defendants, or any of their subsidiaries or affiliates, or the temporary receiver appointed pursuant to this order or any agent appointed by the temporary receiver; and
E. Doing any act or thing whatsoever to interfere with the temporary receiver taking control, possession or management of the property subject to this receivership, or to in any way interfere with the receiver, or to harass or interfere with the duties of the receiver; or to interfere in any manner with the exclusive jurisdiction of this Court over the property and assets of the Receivership Defendants, or their subsidiaries or affiliates, including the filing of a petition for relief under the United States Bankruptcy Code, 11 U.S.C. 101 et seq., against the Receivership Defendants, without prior permission from this Court;
Provided, however, that nothing in this paragraph shall be construed to stay the types of acts, actions, or proceedings that would be excepted under 11 U.S.C. 362(b) from the automatic stay in a bankruptcy action.
IT IS FURTHER ORDERED that the temporary receiver and all personnel hired by the temporary receiver, including counsel to the temporary receiver and accountants, are entitled to reasonable compensation for the performance of duties under to this Order and to reimbursement of actual out-of-pocket costs incurred by them and shall be paid from the current or future assets of the receivership estate. The temporary receiver shall file with the Court and serve on the parties periodic requests for the payment of such reasonable compensation, describing the services rendered and the related fees and costs in sufficient detail and with sufficient clarity for the Court to determine whether they are reasonable and necessary to the fulfillment of the Receiver's duties under this Order. The first such request shall filed no more than 45 (forty-five) days after entry of this Order. The temporary receiver shall not increase the hourly rates used as the bases for such fee applications without prior approval of the Court.
IT IS FURTHER ORDERED that the temporary receiver shall have on file with the Clerk of this Court a bond in the sum of $25,000.00 with sureties to be approved by the Court, conditioned that the temporary receiver will well and truly perform the duties of the office and abide by and perform all acts the Court directs.
IT IS FURTHER ORDERED that, pending determination of the plaintiff's request for a preliminary injunction, any financial or brokerage institution, business entity, or person that holds, controls or maintains custody of any account, asset, or property of any Defendant, or has held, controlled or maintained custody of any account, asset, or property of any Defendant at any time since January 1, 1993, shall:
A. Prohibit any person or entity from withdrawing, removing, assigning, transferring, pledging, encumbering, disbursing, dissipating, converting, selling, or otherwise disposing of any such asset except:
1. as directed by further order of the Court; or
2. for assets held in the name or for the benefit of any Receivership Defendant, as directed by the temporary receiver;
B. Deny any person or entity access to any safe deposit box that is:
1. titled in the name of any Defendant, either individually or jointly; or
2. otherwise subject to access by any Defendant;
C. Provide counsel for the Commission and the temporary receiver appointed herein, within five (5) business days of receiving a copy of this Order, a sworn statement setting forth:
1. the identification number of each such account or asset titled in the name, individually or jointly, of any Defendant, or held on behalf of, or for the benefit of, any such persons;
2. the balance of each such account, or a description of the nature and value of such asset as of the time this Order is served, and, if the account or other asset has been closed or removed, the date closed or removed, the total funds removed in order to close the account, and the name of the person or entity to whom such account or other asset was remitted; and
3. the identification of any safe deposit box that is either titled in the name, individually or jointly, of any Defendant, or is otherwise subject to access by any Defendant;
D. Upon the request by the temporary receiver or the Commission, promptly provide the temporary receiver and the Commission with copies of all records or other documentation pertaining to 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. Any such financial institution, account custodian, or other aforementioned entity may arrange for the Commission to obtain copies of any such records which the Commission seeks, provided that such institution or custodian may charge a reasonable fee not to exceed fifteen cents per page copied; and
E. Cooperate with all reasonable requests of the temporary receiver relating to implementation of this Order, including transferring funds at the receiver's direction, producing records related to the Defendants' accounts, and gaining entry to the business premises of the Receivership Defendants.
IT IS FURTHER ORDERED that the temporary receiver shall, subject to the temporary receiver's discretion and direction, allow Plaintiff's representatives and Defendants or their representatives reasonable access to the premises of the Receivership Defendants to inspect and copy any and all books, records, accounts, and other property owned by or in the possession of the Receivership Defendants. The receiver shall monitor inspection and copying by the Defendants or their representatives to ensure that no books, records, accounts, or other property are destroyed, damaged, altered, concealed, or removed. For purposes of this paragraph, "Defendants" means Tami Brennan McClure, Paul S. Janus, Richard A. Herbert, James W. Raim, Market Systems, Ltd., Natural Health Systems, Inc., and Progressive Products, Inc., and each of them.
IT IS FURTHER ORDERED that, at least (3) three days prior to the preliminary injunction hearing in this matter, and in no event later than two weeks after entry of this Order, each Defendant shall provide the Commission and the temporary receiver with a completed financial statement, on the forms attached to this Order, accurate as of the date of service of this Order upon such Defendant. For purposes of this paragraph, "Defendants" means Tami Brennan McClure, Paul S. Janus, Richard A. Herbert, James W. Raim, Market Systems, Ltd., Natural Health Systems, Inc., and Progressive Products, Inc., and each of them.
IT IS FURTHER ORDERED that in anticipation of the preliminary injunction hearing in this matter, the parties and the temporary receiver are granted leave to conduct expedited discovery in this matter. The parties and the temporary receiver may depose witnesses at any time after the date of this Order upon three (3) business days notice. The parties shall respond to any requests for admissions within five (5) business days after service of the requests for admissions.
IT IS FURTHER ORDERED that, at least two (2) business days prior to the preliminary injunction hearing in this matter, each party shall:
A. File with this Court and serve on all opposing parties a witness list that shall include the name, address, and telephone number of any such witness, and either a summary of the witness' expected testimony, or the witness' affidavit revealing the substance of such witness' expected testimony.
B. Serve on all other parties any affidavits, memoranda, and other evidence on which they intend to rely.
Defendants shall serve copies of all such materials on counsel for the Commission by delivery to 6th Street & Pennsylvania Avenue, N.W. (Room H-238), Washington, DC 20580, prior to 10:00 a.m. of the specified day.
IT IS FURTHER ORDERED that agents of the Commission and the temporary receiver may serve copies of this Order upon any financial institution or person or entity that may be in possession of any assets, property, or property rights of Defendants or that may be subject to any provision of this Order.
IT IS FURTHER ORDERED that, pursuant to Section 604 of the Fair Credit Reporting Act, 15 U.S.C. 1681b, any consumer reporting agency may furnish the Commission or the temporary receiver with a consumer report concerning Diane M. Jonas, Paul A. Jonas, James W. Raim, Robert Brian Roemer, or The Business Opportunity Center, Inc.
IT IS FURTHER ORDERED that each of the Defendants shall appear before this Court on the ___________ day of _________, 1995, at _____________o'clock________.m. at the United States Courthouse, Ft. Lauderdale, Florida, Room ___________, to show cause, if any there be, why this Court should not enter a preliminary injunction, pending final ruling on the Complaint, against Defendants, enjoining them from further violations of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. 45(a), and continuing the freeze of their assets, appointing a permanent receiver, and imposing such additional relief as may be appropriate. For purposes of this paragraph, "Defendants" means Tami Brennan McClure, Paul S. Janus, Richard A. Herbert, Market Systems, Ltd., Natural Health Systems, Inc., and Progressive Products, Inc., and each of them.
IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for all purposes.
SO ORDERED, this _____day of _________, 1995, at ________.m.