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 ANDREW B. MOSS AND
TOYS UNLIMITED INTERNATIONAL, INC.

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 and Amended Complaint herein. Defendants Andrew B. Moss ("Moss") and Toys Unlimited International, Inc. ("Toys Unlimited") have been served with the summons, Complaint and Amended Complaint, and have 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 defendants 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 U.S.C. §§ 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 defendants, under Sections 5(a), 5(m)(1)(A), 13(b) and 19 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 defendants 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. Defendants enter into this Stipulated Judgment and Order freely and without coercion. Defendants further acknowledge that they have read the provisions of this Stipulated Judgment and Order and are 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 disclosure 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 a 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.

ORDER

I.

IT IS ORDERED, ADJUDGED AND DECREED that defendants Moss and Toys Unlimited, whether acting directly or assisting others to act, or acting or assisting others to act through any business entity, corporation, subsidiary, division or other device, are hereby permanently restrained and enjoined from advertising, offering for sale, licensing, contracting, selling or otherwise promoting, in or affecting commerce, any franchise or business venture.

II.

A. IT IS FURTHER ORDERED that defendant Moss shall pay to the plaintiff, pursuant to Section 5(m)(1)(A) of the Federal Trade Commission Act, 15 U.S.C. § 45(m)(1)(A), a civil penalty in the amount of Fifteen Thousand Dollars ($15,000.00), plus 10% interest amortized over three (3) years, at the rate of $484.01 per month for thirty-six (36) months. Defendant shall make the first payment required by this Paragraph within five (5) days of the date of entry of this Stipulated Judgment and Order by certified or cashier's check made payable to the Treasurer of the United States and delivered to the Director, Office of Consumer Litigation, Civil Division, P.O. Box 386, Washington, D.C. 20044. Subsequent payments shall be made no later than the first day of the month. The cover letter accompanying the check shall include the title of this litigation and a reference to DJ# 102-2953. In the event defendant defaults on any payment required to be paid by this Paragraph, the entire unpaid civil penalty and interest due from defendant, together with interest computed under 28 U.S.C. § 1961 -- accrued from the date of default until the date of payment -- shall be immediately payable.

B. IT IS FURTHER ORDERED that the United States' agreement to and the Court's approval of this Stipulated Judgment and Order are expressly premised upon the truthfulness, accuracy, and completeness of the financial statements and information (including, but not limited to U.S. Department of Justice Forms OBD-500 and OBD-500C (as amended by any depositions), depositions, bank records and ledgers, federal and state tax returns) provided by defendants Moss and Toys Unlimited and their counsel 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 misrepresentations 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(s) who made such misrepresenta-tion(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, defendants waive any right to contest any of the allegations set forth in the Amended Complaint filed in this matter.

III.

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Judgment and Order, defendants are 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(s) 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, defendants includes Moss, Toys Unlimited, and any of their officers, agents, servants, employees, successors and assigns, and all persons in active concert or participation with any of 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 Moss 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 Moss, 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 Moss 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 ban on promoting or selling franchises or business ventures (Paragraph I), the provision requiring the payment of civil penalties (Paragraph II), and the record-keeping provisions (Paragraph III);

C. Upon written request by a representative of the Commission, defendants 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, defendants 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 or Moss 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 Moss.

V.

IT IS FURTHER ORDERED that the Commission is authorized to monitor defendants' 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 Moss or Toys Unlimited'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 Moss, 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 defendants 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 Moss is the majority owner of the business or directly or indirectly manages or controls the business.

In providing such access, defendants 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 defendants' 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 defendants are 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 defendants or any of their 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 Moss is the majority owner of the business or directly or indirectly manages or controls the business, defendant Moss 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, and each individual serving in a management capacity, immediately upon employing or retaining any such persons.

IX.

IT IS FURTHER ORDERED that, within five (5) business days after receipt by defendants of the Order as entered by the Court, defendants 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.

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

XII.

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.

SO ORDERED.
DATED: _______________, 1998.

HONORABLE SHELBY HIGHSMITH
United States District Judge