UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

v.

UNITEL SYSTEMS, INC., D/B/A UNIVERSE OF TOYS, a Texas corporation;
ROBERT KENNETH FRISCH, JR., individually
and as an officer of the corporate defendant;
DELANEY LEON HINTON, individually
and as an officer of the corporate defendant;
BALJEET S. ANAND, A/K/A BILL SINGH, individually
and as a manager of the corporate defendant; and
HARMIT S. ANAND, A/K/A SONNY SINGH, individually
and as a manager of the corporate defendant, Defendants.

CIVIL ACTION No.

COMPLAINT FOR PERMANENT INJUNCTION
AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("Commission"), for its complaint alleges:

  1. The Commission brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  53(b) and 57b, to secure a permanent injunction, preliminary injunctive relief, rescission of contracts, restitution, disgorgement, and other equitable relief for defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), and the Commission's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures ("the Franchise Rule" or "the Rule"), 16 C.F.R. Part 436.

    JURISDICTION AND VENUE

  2. This Court has jurisdiction over this matter pursuant to 28 U.S.C.  1331, 1337(a) and 1345, and 15 U.S.C.  53(b) and 57b.
  3. Venue in the Northern District of Texas is proper under 28 U.S.C.  1391(b) and (c), and 15 U.S.C.  53(b).

    PLAINTIFF

  4. The Commission is an independent agency of the United States Government created by statute. 15 U.S.C.  41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission is authorized to initiate federal district court proceedings to enjoin violations of the FTC Act in order to secure such equitable relief as may be appropriate in each case. 15 U.S.C.  53(b) and 57b.

    DEFENDANTS

  5. Defendant UNITEL SYSTEMS, INC., doing business as UNIVERSE OF TOYS ("Unitel"), a Texas corporation with its principal place of business at 1865 Summit Ave, Suite 610, Plano, TX 75074, offers and sells carousel display rack business ventures for the sale of Disney stuffed animals and other licensed products to the public. Unitel has transacted business in the Northern District of Texas.
  6. Defendant ROBERT KENNETH FRISCH, JR. is an officer and director of Unitel. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices of the corporate defendant, including the acts and practices set forth in this complaint. In connection with the matters alleged herein, he has transacted business in the Northern District of Texas.
  7. Defendant DELANEY LEON HINTON is an officer of Unitel. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices of the corporate defendant, including the acts and practices set forth in this complaint. In connection with the matters alleged herein, he has transacted business in the Northern District of Texas.
  8. Defendant BALJEET S. ANAND, also known as BILL SINGH, controls, directly or through his wife, his family members or others, approximately 45% of the stock of Unitel; along with Harmit S. Anand and others he originated the idea that forms the basis of Unitel's business; and is a manager of Unitel in charge of product related matters. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices of the corporate defendant, including the acts and practices set forth in this complaint. In connection with the matters alleged herein, he has transacted business in the Northern District of Texas.
  9. Defendant HARMIT S. ANAND, also known as SONNY SINGH, controls, directly or through his family members or others, approximately 45% of the stock of Unitel; along with Baljeet S. Anand and others he originated the idea that forms the basis of Unitel's business; and is an assistant manager of Unitel in charge of product related matters. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices of the corporate defendant, including the acts and practices set forth in this complaint. In connection with the matters alleged herein, he has transacted business in the Northern District of Texas.

    COMMERCE

  10. At all times relevant to this complaint, the defendants have maintained a substantial course of trade or business in the offering and sale of carousel display rack business ventures, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

    DEFENDANTS' BUSINESS ACTIVITIES

  11. Since at least October of 1996, the defendants have been engaged in a deceptive scheme to offer and sell purportedly profitable carousel display rack business ventures to members of the public. In order to induce purchasers to make a minimum investment of $14,990, the defendants have exploited the Disney name and other popular trademarks, representing that carousel racks displaying these products are successful and profitable because of the popularity of these licensed products. The defendants have misrepresented the earnings potential of the business venture, and failed to provide prospective purchasers with the information required by the Commission's Franchise Rule that they need to evaluate these claims and the business venture itself.

    VIOLATIONS OF SECTION 5 OF THE FTC ACT

    COUNT ONE

  12. In the course of offering for sale and selling carousel display rack business ventures, defendants have represented, expressly or by implication, that purchasers can reasonably expect to achieve a specific level of earnings.
  13. In truth and in fact, few, if any, purchasers attain the specific level of earnings represented by the defendants.
  14. Therefore, defendants' representations as set forth in Paragraph 12 are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

    COUNT TWO

  15. In the course of offering for sale and selling carousel display rack business ventures, defendants have represented to consumers that Harmit S. Anand, a/k/a Sonny Singh, is engaged in the retail sale of Disney products and can provide a reference for the corporate defendant.
  16. Harmit S. Anand, a/k/a Sonny Singh, is a manager of the corporate defendant.
  17. In light of defendants' representations as set forth in Paragraph 15, defendants' failure to disclose that Harmit S. Anand, a/k/a Sonny Singh, is a manager of the corporate defendant is deceptive and, therefore, is a violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

    THE FRANCHISE RULE

  18. The Franchise Rule, promulgated by the Commission on October 21, 1979 under Section 18 of the FTC Act, 15 U.S.C.  57a, has since that date remained in full force and effect.
  19. The business ventures sold by the defendants are business opportunity franchises, as "franchise" is defined in Section 436.2(a) of the Franchise Rule, 16 C.F.R.  436.2(a).
  20. The Franchise Rule requires a franchisor to provide prospective franchisees with a complete and accurate basic disclosure statement containing twenty categories of information, including information about the seller of the franchise, the terms and conditions of the proposed business relationship, and the names, addressees and telephone numbers of a cross-section of prior franchise purchasers. 16 C.F.R.  436.1(a)(1) - (a)(20). Disclosure of this information enables a prospective franchisee to check out the franchisor's sales claims and assess the potential risks and benefits involved in the purchase of the franchise.
  21. The Franchise Rule additionally requires: (1) that the franchisor give prospective franchisees a document disclosing the material basis (or the lack of such basis) for any oral, written, or visual earnings or profit representations it makes to a prospective franchisee, 16 C.F.R.   436.2(b)-(e); and (2) that the franchisor, in immediate conjunction with any generally disseminated earnings claim, disclose the number and percentage of prior purchasers known to have earned as much or more than the amount claimed, and include a warning that the earnings claim is only an estimate. 16 C.F.R.  436.1(e)(3)-(4).
  22. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C.  57a(d)(3), and 16 C.F.R.  436.1, violations of the Franchise Rule constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

    VIOLATIONS OF THE FRANCHISE RULE

    COUNT THREE

  23. In numerous instances in connection with the offering of franchises, as "franchise" is defined in the Rule, 16 C.F.R.  436.2(a), defendants have failed to provide prospective franchisees with accurate and complete disclosure documents within the time period required by the Franchise Rule, thereby violating Section 436.1(a) of the Rule, 16 C.F.R.  436.1(a), and Section 5 of the FTC Act, 15 U.S.C. 45.

    COUNT FOUR

  24. In numerous instances in connection with the offering of franchises, as "franchise" is defined in the Rule, 16 C.F.R.  436.2(a), defendants have made earnings claims within the meaning of the Rule, 16 C.F.R.  436.1(b)-(e), but have failed to give prospective franchisees the earnings claim document required by the Rule or have failed to disclose the information required by the Rule in immediate conjunction with the claims, thereby violating Section 436.1(b)-(e) of the Rule, 16 C.F.R.  436.1(b)-(e), and Section 5 of the FTC Act, 15 U.S.C. 45.

    CONSUMER INJURY

  25. Consumers in many areas of the United States have suffered substantial monetary loss as a result of defendants' unlawful acts or practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public interest.

    THIS COURT'S POWER TO GRANT RELIEF

  26. Section 13(b) of the FTC Act, 15 U.S.C.  53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement and restitution, to prevent and remedy any violations of any provision of law enforced by the Commission.
  27. Section 19 of the FTC Act, 15 U.S.C.  57b, authorizes this Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendants' violations of the Franchise Rule, including the rescission and reformation of contracts, and the refund of money.
  28. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by the defendants' law violations.

    PRAYER FOR RELIEF

    WHEREFORE, plaintiff requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C.  53(b) and 57b, and pursuant to its own equitable powers:

  29. Award plaintiff such preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action and to preserve the possibility of effective final relief;
  30. Enter judgment against the defendants and in favor of the plaintiffs for each violation alleged in this complaint;
  31. Permanently enjoin the defendants from violating the Franchise Rule and the FTC Act, as alleged herein;
  32. Award such relief as the Court finds necessary to redress injury to consumers resulting from the defendants' violations of the Franchise Rule and the FTC Act, including but not limited to, rescission of contracts, the refund of monies paid, and the disgorgement of ill-gotten monies; and
  33. Award plaintiff the costs of bringing this action, as well as such other and additional relief as the Court may determine to be just and proper.

    Respectfully submitted,

    DATED:

    _____________________
    STEPHEN CALKINS
    General Counsel

    ______________________________
    JAMES E. ELLIOTT
    TX State Bar No. 06557100

    ______________________________
    SUSAN E. ARTHUR
    TX State Bar No. 01365300
    FEDERAL TRADE COMMISSION
    Dallas Regional Office
    1999 Bryan Street, Ste 2150
    Dallas TX 75201-6808
    214 979-9350

    214 979-9373 (James E. Elliott)
    214 979-9370 (Susan E. Arthur)
    214 953-3079 (Facsimile Machine)

    ATTORNEYS FOR PLAINTIFF
    FEDERAL TRADE COMMISSION