UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

UNITED STATES OF AMERICA
Plaintiff

v.

TOYS UNLIMITED INTERNATIONAL, INC.
a Delaware Corporation;
ROBERT G. GARROW,
individually and as an officer of the corporation;
ANDREW B. MOSS, individually; and
BRIAN J. MYLETT, individually,
Defendants.

Case No. 97-08592
CIV-HIGHSMITH
MAGISTRATE JUDGE TURNOFF

STIPULATED JUDGMENT AND
ORDER FOR PERMANENT INJUNCTION
AGAINST ROBERT G. GARROW


Plaintiff, the United States of America, acting upon notification and authorization to the Attorney General by the Federal Trade Commission, ("FTC" or the "Commission"), has commenced this action by filing the Complaint herein. Defendant Robert G. Garrow ("defendant" or "Garrow"), has been served with the summons and the Complaint and Amended Complaint and has filed an Answer. The parties are represented by the attorneys whose names appear hereafter. The parties agree to settlement of this action without adjudication of any issue of fact or law and without defendant admitting liability for any of the violations alleged in the Amended Complaint.

THEREFORE, on the joint motion of the parties it is hereby ORDERED, ADJUDGED AND DECREED as follows:

1. This Court has jurisdiction of the subject matter and of the parties pursuant to 28 USC 1331 and 1345, and 15 U.S.C. 45, 53(b) and 57b.

2. The Amended Complaint states a claim upon which relief may be granted against defendant, under Sections 5(a), 5(m)(1)(A), 9, and 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 45(a), 45(m)(1)(A), 53(b), and 57b.

3. The activities of the defendant as alleged in the Amended Complaint are or were in or affecting commerce, as defined in 15 U.S.C. 44.

4. Entry of this Stipulated Judgment and Order is in the public interest.

5. Defendant enters into this Stipulated Judgment and Order freely and without coercion. Defendant further acknowledges that he has read the provisions of this Stipulated Judgment and Order and is prepared to abide by them.

6. All parties hereby waive all rights to appeal or otherwise challenge or contest the validity of this Stipulated Judgment and Order.

DEFINITIONS

For the purpose of this Stipulated Judgment and Order, the following definitions shall apply:

1. The "Franchise Rule" is the Federal Trade Commission's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions concerning Franchising and Business Opportunity Ventures," 16 C.F.R. Part 436. A copy of the Franchise Rule is attached hereto as Exhibit A and incorporated herein as if fully set forth.

2. "Franchise" and "Franchisor" are defined in Section 436.2(a) of the Franchise Rule, 16 C.F.R.  436.2(a), (c), which is attached as Exhibit A, and includes "business opportunity ventures" as discussed in the FTC's Final Interpretive Guide for the Franchise Rule, 44 Fed. Reg. 49966 (August 24, 1979). The term "franchise" in this Order shall also encompass any successor definition in any later trade regulation rule promulgated by the Commission.

3. "UFOC format" is defined as the Uniform Franchise Offering Circular format which has been adopted by the North American Securities Administrators' Association and accepted by the Commission for use in lieu of the Franchise Rule's disclosure format.

4. "Franchise broker" is defined in Section 436.2(j) of the Franchise Rule, 16 C.F.R. 436.2(j). The term "franchise broker" in this Order shall also encompass any other entity through which the franchisor sells franchises, including, but not limited to, subfranchisors, master franchisees, or regional franchisees.

5. "Business venture" is defined as any written or oral business arrangement, however, denominated, whether or not covered by the Franchise Rule, which consists of the payment of any consideration for:

a. 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

b. 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, including but not limited to recommendations of companies providing location services.

6. "Telemarketing" means the advertising, offering for sale, or sale of any good or service to any person by means of telephone sales presentations, either exclusively or in conjunction with the use of other advertising.

ORDER

I.

IT IS ORDERED, ADJUDGED AND DECREED that the defendant, his successors, assigns, officers, agents, employees, attorneys, franchise brokers, and those persons in active concert or participation with him who receive actual notice of this order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, licensing, contracting, sale or other promotion, in or affecting commerce, of a franchise, be and are hereby permanently restrained and enjoined from violating, or assisting others to violate any provision of the Franchise Rule as promulgated or as it may hereinafter be amended, by, including, but not limited to:

a. failing to provide a complete and accurate disclosure document containing all of the information and in the manner required under Sections 436.1(a)(1)-(24) of the Franchise Rule, in the manner and within the time frame stated in the Franchise Rule;

b. failing to provide any prospective franchisee, in the manner and within the time frame stated in the Franchise Rule, with an earnings claim document or other disclosures described in Sections 436.1(b)-(e) of the Franchise Rule;

c. making any earnings claim or projection without having a reasonable basis for all such claims or projections at the time such claims or projections are made, as required by Section 436.1(b) - (e) of the Franchise Rule;

d. engaging in any other act or practice prohibited by the Franchise Rule, 16 C.F.R. Part 436, or failing to fulfill any obligation imposed by the Franchise Rule; provided, however, that defendant may choose to comply with the disclosure requirements of the Franchise Rule by fully and completely complying with the disclosure requirements set forth in the UFOC format. If the defendant chooses to comply with the Franchise Rule by using the UFOC format, defendant is hereby permanently enjoined from failing to comply with any provision of the UFOC. In the event the Franchise Rule is hereafter amended or modified, or the UFOC is amended or modified and such UFOC amendment or modification is accepted by the Commission for use in lieu of the Franchise Rule's disclosure format, defendant's compliance with the Franchise Rule as so amended or modified, or the UFOC as amended or modified and accepted by the Commission, shall not be deemed a violation of this Stipulated Judgment and Order.

II.

IT IS FURTHER ORDERED that defendant, his successors, assigns, officers, agents, employees, attorneys, franchise brokers, and those persons in active concert or participation with him who receive actual notice of this order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, in connection with: a) advertising, offering for sale, licensing, contracting, sale or other promotion, in or affecting commerce, of a franchise, b) telemarketing, or c) offering for sale or the sale of any franchise or business venture, are hereby permanently restrained and enjoined from making any false or misleading statement or representation of material fact, whether directly or by implication, or orally or in writing, concerning any franchise or any product, service, or business venture, including but not limited to any or all of the following:

a. the income, profit, or sales volume that an investor may or is likely to achieve;
b. the income, profit or sales volume allegedly achieved by other investors;
c. the length of time that it may or will take to recoup the purchase price of the business venture;
d. the independence or authenticity of any references;
e. the contention that the names, addresses and telephone numbers of other investors cannot be disclosed based on privacy concerns;
f. the territorial rights to, or amount of competition within, any geographic territory;
g. the availability or existence of profitable locations for investors; or
h. assurances, refunds or guarantees of profitability that may be made by any location service or company that investors may elect to use.

III.

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Judgment and Order, defendant is hereby restrained and enjoined from failing to create and maintain:

A. Records containing the name, address, telephone number and social security number of each person employed by defendant in any capacity, that person's job title or position, the date upon which the employee commenced work, and the date and reason for the employee's termination, if applicable;

B. Records containing the name, address, and telephone number of each customer or client (except that if defendant is in the retail business, defendant need not obtain such information from customers solely to comply with this Order);

C. Records of every written customer complaint or refund request received by any defendant, including 1) the customer's name, address, and telephone number (unless the customer declines to provide such information), 2) the written complaint or refund request, 3) the basis of the complaint or refund request, 4) the results of any investigation of the validity of the complaint or refund request, 5) a record of the response to each complaint or refund request, and 6) a record of the final resolution of the complaint or refund request.

For the purposes of this Paragraph, defendant includes Garrow and any of his officers, agents, servants, employees, successors and assigns, franchise brokers, and all persons in active concert or participation with them who receive actual notice of this Stipulated Judgment and Order by personal service or otherwise.

IV.

IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Stipulated Judgment and Order may be monitored:

A. For a period of five (5) years after the date of entry of this Stipulated Judgment and Order, defendant Garrow shall notify the Federal Trade Commission, in writing, of the following:

1. Any change in his residence, mailing address, or telephone numbers, within ten (10) days of such change;

2. Any change in his employment status (including self-employment) within ten (10) days of such change. Such notice shall include the name and address of each business that defendant is affiliated with or employed by, a statement of the nature of the business, and a statement of defendant's duties and responsibilities in connection with the business or employment;

3. Any proposed change that may affect compliance obligations arising out of this Stipulated Judgment and Order, including but not limited to any change in the structure of defendant Toys Unlimited, or any other business entity owned or controlled by defendant Garrow, such as creation, incorporation, dissolution, assignment, sale, merger, or any change resulting in the emergence of a successor corporation, the proposed filing of a bankruptcy petition, or change in the corporate name or address, thirty (30) days prior to the effective date of any proposed change; provided, however, that, with respect to any proposed change in the corporation about which defendant learns less than thirty (30) days prior to the date such action is to take place, defendant shall notify the Commission as soon as is practicable after learning of such change;

B. One hundred eighty (180) days after the date of entry of this Stipulated Judgment and Order, defendant Garrow shall provide a written report to the Federal Trade Commission, sworn to under penalty of perjury, setting forth in detail the manner and form in which the defendant has complied and is complying with this Stipulated Judgment and Order. This report shall include but not be limited to:

1. Defendant's then current residence address and telephone number;

2. Defendant's then current employment, business addresses and telephone numbers, a description of the business activities of each such employer, or each business managed or controlled by defendant, and defendant's title and responsibilities for each employer or business;

3. A copy of each acknowledgment of receipt of this Stipulated Judgment and Order obtained by defendant pursuant to Paragraph VIII;

4. A statement describing the manner in which defendant has complied and is complying with the terms of this Stipulated Judgment and Order including, but not limited to the provisions against violating the Franchise Rule (Paragraph I) and on false or misleading statements or misrepresentations of material facts (Paragraph II), and the record-keeping provisions (Paragraph III);

C. Upon written request by a representative of the Commission, defendant shall submit additional written reports (under oath, if requested) and produce documents on fifteen (15) days notice with respect to any conduct subject to this Stipulated Judgment and Order;

D. For the purposes of this Stipulated Judgment and Order, defendant shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to:

Associate Director for Marketing Practices
Federal Trade Commission
Room 238H
6th and Pennsylvania Avenue N.W.
Washington, DC 20580

E. For the purposes of this Paragraph, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employer" includes any individual or entity for whom defendant Garrow performs services as an employee, consultant, or independent contractor.

F. For purposes of the compliance reporting required by this Paragraph, the Commission is authorized to communicate directly with defendant Garrow.

V.

IT IS FURTHER ORDERED that the Commission is authorized to monitor defendant's compliance with this Stipulated Judgment and Order by all lawful means, including but not limited to the following means:

A. The Commission is authorized, without further leave of Court, to obtain discovery from any person in the manner provided by Chapter V of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 26-37, including the use of compulsory process pursuant to Fed. R. Civ. P. 45, for the purpose of monitoring and investigating defendant Garrow's compliance with any provision of this Order;

B. The Commission is authorized to use representatives posing as consumers and suppliers to defendant Toys Unlimited, defendant's employees, or any entity managed or controlled in whole or in part by defendant Garrow, without the necessity of identification or prior notice;

C. Nothing in this Order shall limit 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, to investigate whether any defendant has violated any provision of this Stipulated Judgment and Order or Section 5 of the FTC Act, 15 U.S.C.  45. 

VI.

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Judgment and Order, for the purposes of further determining or securing compliance with this Stipulated Judgment and Order, and subject to any legally recognized privilege, the defendant shall permit representatives of the Commission, within three (3) business days of receipt of written notice from the Commission:

A. Access during normal business hours to any offices, or any facility storing documents, of any business where defendant Garrow is the majority owner of the business or directly or indirectly manages or controls the business.

In providing such access, defendant shall permit representatives of the Commission to inspect and copy all documents relevant to any matter contained in this Stipulated Judgment and Order; and shall permit Commission representatives to remove documents relevant to any matter contained in this Stipulated Judgment and Order for a period not to exceed five (5) business days so that the documents may be inspected, inventoried, and copied; and

B. To interview the officers, directors, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, of any business to which Subsection A of this Paragraph applies, concerning matters relating to compliance with the terms of this Stipulated Judgment and Order. The person interviewed may have counsel present.

Provided that, upon application of the Commission and for good cause shown, the Court may enter an ex parte order granting immediate access to defendant's business premises for the purposes of inspecting and copying all documents relevant to any matter contained in this Stipulated Judgment and Order.

VII.

IT IS FURTHER ORDERED that, except to comply with a request or order of a governmental agency or court, or a requirement of any applicable law or regulation, the defendant is hereby permanently enjoined and restrained from providing or transferring to any person the name, address or telephone number of any person who purchased a business venture from defendant or any of his agents, representatives, brokers or employees.

VIII.

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of its entry, for any business where defendant Garrow is the majority owner of the business or directly or indirectly manages or controls the business, defendant Garrow shall provide a copy of this Stipulated Judgment and Order to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director, each individual serving in a management capacity, immediately upon employing or retaining any such persons. In addition, where Garrow is the majority owner of a business venture or directly or indirectly manages or controls a business venture, he shall provide a copy of this Stipulated Judgment and Order to, and obtain a signed and dated acknowledgment of receipt of same from, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, immediately upon employing or retaining any such persons.

IX.

IT IS FURTHER ORDERED that, within five (5) business days after receipt by defendant of the Order as entered by the Court, defendant shall submit to the Commission a truthful sworn statement that shall acknowledge receipt of this Order. The notice required by this Paragraph shall be addressed as required by Paragraph IV.D.

X.

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for the purpose of enabling the parties to apply to the Court at any time for such further orders and directions as may be necessary or appropriate for the interpretation, modification or enforcement of this order, or for the punishment of violations thereof.

XI.

IT IS FURTHER ORDERED that the United States' agreement to and the Court's approval of this Stipulated Judgment and Order with no monetary relief is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements and information provided by defendant to the United States. If, upon motion by the United States, this Court finds that any of such financial statements failed to disclose any asset the value of which exceeds $1,000, or materially misrepresented the value of any asset, or made any other material representations in or omissions of assets, the United States may request that this Stipulated Judgment and Order be reopened for the purpose of requiring restitution or additional civil penalties from the defendant who made such misrepresentation(s); provided however, that in all other respects this Stipulated Judgment and Order shall remain in full force and effect unless otherwise ordered by this Court; and provided further, that proceedings instituted under this Paragraph are in addition to, and not in lieu of, any other civil or criminal remedies available by law. Solely for the purposes of reopening or enforcing this Paragraph, defendant waives any right to contest any of the allegations set forth in the Amended Complaint filed in this matter.

XII.

Defendant agrees that this Stipulated Judgment and Order does not entitle defendant to seek or to obtain attorneys' fees as a prevailing party under the Equal Access to Justice Act, 28 U.S.C.  2412, and defendant further waives any rights to attorneys' fees that may arise under said provision of law.

XIII.

The parties hereby consent to entry of the foregoing Stipulated Judgment and Order which shall constitute a final judgment and order in this matter. The parties further stipulate and agree that the entry of the foregoing Stipulated Judgment and Order shall constitute a full, complete and final settlement of this action. The parties further stipulate that this Stipulated Judgment and Order embodies all of the agreements among the parties and that the parties have not relied upon any representations or statements not included herein.

FOR THE PLAINTIFF: FOR THE DEFENDANT:
FRANK W. HUNGER
Assistant Attorney General
ROBERT G. GARROW
individually and as a former officer
of Toys Unlimited International, Inc.
THOMAS E. SCOTT
United States Attorney
PETER A. SACHS
Jones, Foster, Johnston & Stubbs, P.A.
505 S. Flagler Drive
Suite 1100
P.O. Box 3475
West Palm Beach, FL 33402-3475
(561) 659 -3000
ATTORNEY FOR ROBERT G. GARROW
JEFFREY LEVENSON
Assistant U.S. Attorney
500 E. Broward Blvd., 7th Floor
Fort Lauderdale, FL 33394
Florida Bar # 383570
(954) 356-7314
DOUGLAS ROSS
Office of Consumer Litigation
P.O. Box 386
Washington, DC 20044
(202) 514-1874
Of Counsel:
EILEEN HARRINGTON
Associate Director for
Marketing Practices
Federal Trade Commission
JOANNA P. CRANE
PATRICIA S. HOWARD
Attorneys
Federal Trade Commission
Washington, DC 20580
(202) 326-3258

SO ORDERED.
DATED: _______________, 1998.

HONORABLE SHELBY HIGHSMITH
United States District Judge