ANN F. WEINTRAUB (AW 3080)
PHYLLIS H. MARCUS
JAMES A. PRUNTY
Attorneys for Plaintiff
Federal Trade Commission
One Bowling Green, Suite 318
New York, NY 10004
(212) 607-2815

UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF NEW YORK

FEDERAL TRADE COMMISSION
Plaintiff,
v.
MEGA FURNITURE, INC.,
and
CANDIDO CRUZ,
Defendants.

STIPULATED ORDER FOR PERMANENT INJUNCTION PRODUCT REFUND, AND OTHER EQUITABLE RELIEF

Civil Action No. _______________

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), has filed its complaint for permanent injunction and other relief pursuant to section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), charging defendants Mega Furniture, Inc. ("Mega Furniture") and Candido Cruz with violating Section 5 of the FTC Act.

The parties have agreed to the entry of this Stipulated Order for Permanent Injunction ("Order") by this Court to resolve all matters of dispute between them in this action.

NOW, THEREFORE, plaintiff Federal Trade Commission and defendants Mega Furniture and Candido Cruz, having requested the Court to enter this Order,

FINDINGS

NOW, THEREFORE, on joint motion of the parties, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED as follows:

1. This Court has jurisdiction of the subject matter of this case and of the parties consenting hereto;

2. Venue is proper as to all parties in the Eastern District of New York;

3. The activities of defendants are in or affecting commerce, as defined in the FTC Act, 15 U.S.C. § 44;

4. The Complaint states a claim upon which relief may be granted against defendants under Section 5 of the FTC Act, 15 U.S.C. § 45(a);

5. Defendants Mega Furniture and Candido Cruz have waived all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412. Defendants waive all rights to seek appellate review or otherwise challenge or contest the validity of this Order, and further waive and release any claim defendants may have against the Commission, its employees, and agents;

6. Entry of this Order is in the public interest;

7. This Order does not constitute and shall not be interpreted to constitute an admission by defendants that they have engaged in violations of the FTC Act.

DEFINITIONS

A. "Consumer" means a purchaser, customer, or natural person.

B. "Document" is synonymous in meaning and equal in scope to the usage of the term in the Federal Rule of Civil Procedure 34(a) and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

C. "Inventory" shall mean the household furniture, including used mattresses, held by defendants for sale to consumers or otherwise, whether located within defendants' showrooms, sales premises, warehouses or elsewhere.

D. A requirement that defendants "notify" or "provide" any information or material to the Commission shall mean that defendants shall send the necessary information or material via first-class mail, costs prepaid, to:

Associate Director, Division of Enforcement
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Room 4302-S
Washington, DC 20580
Re: FTC v. Mega Furniture, Inc. et al.

ORDER

I. PROHIBITED BUSINESS PRACTICES

IT IS THEREFORE ORDERED that defendants, and their officers, directors, agents, servants, employees, salespersons, attorneys, corporations, subsidiaries, affiliates, successors, assigns, and other entities or persons directly or indirectly under their control, and all persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are permanently restrained and enjoined from misrepresenting:

A. That any mattress is all new except for the springs when in fact it is comprised of a used mattresses that has been recovered with new mattress ticking;

B. The extent to which any mattress contains used materials; and,

C. Any other fact material to a consumer's purchasing decision.

II. REQUIRED DISCLOSURES

IT IS FURTHER ORDERED that defendants, and their officers, directors, agents, servants, employees, salespersons, attorneys, corporations, subsidiaries, affiliates, successors, assigns, and other entities or persons directly or indirectly under its control, and all persons or entities in active concert or participation with it who receive actual notice of this Order by personal service or otherwise, in connection with the sale of used mattresses, are:

A. Permanently restrained and enjoined from failing to ensure that a label indicating that the mattress is used is securely attached to each and every used mattress they offer for sale. Such label must be affixed and displayed in such a manner that it may be seen by a consumer prior to purchase; and,

B. Permanently restrained and enjoined from using the term "rebuilt," "renovated," "reconstructed," "remanufactured," or a term of similar import other than the term "used" to describe the used mattresses they sell, unless they also disclose, clearly and conspicuously, at the time the representation is made, the extent to which such mattress is used.

III. REFUND PROGRAM

IT IS FURTHER ORDERED that defendants Mega Furniture and Candido Cruz shall offer a full refund of all used mattresses that they sold to consumers from January 1, 1999 to the present. To effectuate this Paragraph, within ten (10) days after entry of this Order, defendants shall furnish a legible copy of the Notice of Full Refund as set forth in Appendix A [English Version], in English and in Spanish, to consumers (1) who purchased a used mattress from defendants from January 1, 1999 to the present and (2) for whom defendants have sufficient information to be able to obtain a mailing address. In addition to mailing the Notice set forth in Appendix A, defendants Mega Furniture and Candido Cruz shall, within ten (10) days after entry of this Order clearly and prominently post a sign for at least one hundred and eighty days (180) in English and in Spanish in the storefront window facing the street announcing this Full Refund program. Eligible consumers responding to the sign must be given the opportunity to return their old mattress(es) within sixty (60) of the date of their inquiry in order to take advantage of the refund.

IV. RECORD KEEPING PROVISIONS

IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, defendants, in connection with any business where (1) individually or jointly, defendants are officers, directors, managers or majority owners or directly or indirectly control or manage the business, and (2) the business engages in the sale of mattresses, are hereby restrained and enjoined from failing to have such business create, and from failing to have such business retain for a period of three (3) years following the date of such creation, unless otherwise specified:

A. Books, records and accounts that, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues;

B. Records accurately reflecting: the name, address, and telephone number of each person employed in any capacity by such business, including as an independent contractor; that person's job title or position; the date upon which the person commenced work; and the date and reason for the person's termination, if applicable; provided that the business subject to this subsection shall retain such records for a period of two (2) years following the date of each such person's termination;

C. Records containing the names, addresses, phone numbers, dollar amounts paid, services purchased, for all consumers to whom such business has sold any goods or services, or from whom any of the above-referenced businesses accepted money or other items of value;

D. Records that reflect, for every consumer complaint or refund request, whether received directly or indirectly: (1) the consumer's name, address, telephone number and the dollar amount paid by the consumer; (2) the written complaint or refund request, if any, and the date of the complaint or refund request; (3) the basis of the complaint, including the name of any salesperson complained against, and the nature and result of any investigation conducted concerning any complaint; (4) each response and the date of the response; (5) any final resolution and the date of the resolution; and (6) in the event of a denial of a refund request, the reason for the denial; and,

E. Copies of all sales scripts, training materials, advertisements, or other marketing materials utilized; provided that copies of all sales scripts, training materials, advertisements, or other marketing materials utilized shall be retained for three (3) years after the last date of dissemination of any such materials.

V. COMPLIANCE REPORTING BY DEFENDANTS

IT IS FURTHER ORDERED that:

A. For a period of three (3) years from the date of entry of this Order, defendants shall notify the Commission of:

1. Any changes in defendants' business addresses, mailing addresses and telephone numbers, within ten (10) days of such change;

2. For a period of three (3) years from the date of entry of this Order, corporate defendant shall notify the Commission of any proposed change in the structure of the corporate defendant or any proposed change in the structure of any business entity owned or controlled by the individual defendant, such as creation, incorporation, dissolution, assignment, sale, merger, dissolution of subsidiaries, proposed filing of a bankruptcy petition, or change in the corporate name or address, or any other change that may affect compliance obligations arising out of this Order, 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 a defendant learns less than thirty (30) days prior to the date such action is to take place, such defendant shall notify the Commission as soon as is practicable after learning of such proposed change;

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

1. Defendant's then current employment, business addresses, and telephone numbers;

2. A copy of each acknowledgment of receipt of this Order obtained by defendants pursuant to Paragraph VIII of this Order; and,

3. A statement describing the manner in which each defendant has complied and is complying with the provisions of Paragraphs I-III of this Order. This statement shall include, but shall not be limited to (a) copies of all invoices showing sales of used mattresses by defendants to consumers from January 1, 1999 to the present; (b) a list of the names and addresses of all consumers to whom a Notice of Full Refund was sent; (c) a list of names of all consumers who responded to defendants' notifications (either the Notice of Full Refund or the storefront window sign) and indicated that they desired a refund; (d) the total number, in units and in dollar amounts, of the refunds given by defendants.

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

D. For the purposes of this Paragraph, "employment" includes the performance of services as an employee, consultant, independent contractor, or officer or director;

E. For purposes of the compliance reporting required by this Paragraph, the Commission is authorized to communicate directly with defendants Mega Furniture, Inc. and Candido Cruz.

VI. ACCESS TO BUSINESS PREMISES

IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, for the purpose of further determining compliance with this Order, defendants shall permit representatives of the Commission, within three (3) business days of receipt of written notice to defendants from the Commission:

A. Access during normal business hours to any office, or facility storing documents or inventory, of any business where (1) individually or jointly, defendants are officers, directors or majority owners or directly or indirectly control or manage the business, and (2) the business engages in the sale of mattresses. In providing such access, defendants shall permit representatives of the Commission to inspect and copy all documents and to inspect and photograph all inventories relevant to any matter contained in this Order; and shall permit Commission representatives to remove documents or inventories relevant to any matter contained in this Order for a period not to exceed five (5) business days so that the documents or inventories may be inspected and copied, where applicable; 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 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 and inventories relevant to any matter contained in this Order.

VII. AUTHORITY TO MONITOR COMPLIANCE

IT IS FURTHER ORDERED that the Commission is authorized to monitor defendants' compliance with this 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 defendants' compliance with any provision of this Order;

B. The Commission is authorized to use representatives posing as consumers and suppliers in contacts with defendants, their employees, or any other entity managed or controlled in whole or in part by defendants, without the necessity of identification or prior notice where the Commission has reason to believe defendants are engaged in the sale of mattresses; and,

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 defendants have violated any provision of this Order or Section 5 of the FTC Act, 15 U.S.C. § 45.

VIII. ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANTS

IT IS FURTHER ORDERED that, within five (5) business days after receipt by defendants of this Order as entered by the Court, defendants shall submit to the Commission a truthful sworn statement, in the form shown on Appendix B, that shall acknowledge receipt of this Final Order.

IX. DISTRIBUTION OF ORDER BY DEFENDANTS

IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, defendants shall:

A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of review of same from, each officer or director, each individual serving in a management capacity, 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, for any business where (1) individually or jointly, defendants are officers, directors or majority owners or directly or indirectly control or manage the business, and (2) the business engages in the sale of mattresses; and,

B. Maintain for a period of three (3) years after creation, and upon reasonable notice, make available to representatives of the Commission, the original signed and dated acknowledgments of the review of copies of this Order, as required in the subsection A of this Paragraph.

X. MONITORING OF SALES PERSONNEL

IT IS FURTHER ORDERED that defendants, in connection with any business where (1) individually or jointly, defendants are officers, directors, managers or majority owners or directly or indirectly control or manage the business, and (2) the business engages in the sale of mattresses are hereby permanently restrained and enjoined from:

A. Failing to take reasonable steps sufficient to monitor and ensure that all employees and independent contractors engaged in sales or other customer service functions comply with Paragraphs I and II of this Order. Such steps shall include adequate monitoring of sales presentations or other contacts with customers, and shall include, at a minimum, the following: (1) training sales personnel as to what representations are prohibited and what disclosures are required by this Order; (2) establishing a procedure for receiving and responding to consumer complaints; and, (3) ascertaining the number and nature of consumer complaints regarding transactions in which each employee or independent contractor is involved;

B. Failing promptly to investigate fully any consumer complaint received by any business to which this Paragraph applies; and,

C. Failing to take corrective action with respect to any sales person whom defendants determines is not complying with this Order, which may include training, disciplining, and/or terminating such sales person and keeping records of each such action for a period of two (2) years.

XI. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction over this matter for purposes of the construction, modification and enforcement of this Order.

SO STIPULATED:

APPENDIX A
[English Version]
NOTICE OF FULL REFUND

Dear Consumer:

Mega Furniture, Inc., has been charged by the Federal Trade Commission with deceptive sales practices regarding the used mattresses that they have sold. In settlement of the FTC's claims, Mega Furniture has agreed to offer full refunds to all consumers who purchased a used mattress from our store between January 1, 1999 and December 31, 1999.

Our records reflect that you purchased a used mattress(es) from Mega Furniture between January 1, 1999 and December 31, 1999.

You can get a refund for the full amount of the purchase price of the used mattress(es) that you bought from us. In order to get your refund, please bring the old mattress(es) to our store no later than 60 days after you receive this letter.

Thank you.

Sincerely,
Candido Cruz
President
Mega Furniture, Inc.

APPENDIX B

DEBRA A. VALENTINE
General Counsel

ANN F. WEINTRAUB (AW 3080)
PHYLLIS H. MARCUS
JAMES A. PRUNTY
Attorneys for Plaintiff
Federal Trade Commission
One Bowling Green, Suite 318
New York, NY 10004
(212) 607-2815

UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF NEW YORK

FEDERAL TRADE COMMISSION
Plaintiff,
v.
MEGA FURNITURE, INC.,
and
CANDIDO CRUZ,
Defendants.

Civil No. 99-737 A

AFFIDAVIT OF ______________

[Defendant's Name], being duly sworn, hereby states and affirms as follows:

1. My name is [name of defendant]. I am the president of Mega Furniture, Inc. I am a citizen of the United States and am over the age of eighteen. I have personal knowledge of the facts set forth in this Affidavit.

2. I am a defendant in FTC v. Mega Furniture Inc. et al. (United States District Court for the Eastern District of New York).

3. My current business address is ________________________. My current business telephone number is ________________. My current residential address is ________________. My current residential telephone number is _____________.

4. On [date], in my individual capacity and as president of Mega Furniture, Inc., I received a copy of the Final Consent Order, which was signed by the Honorable ________________ and entered by the Court on ________________ [date of entry of Order]. A true and correct copy of the Order that I received is appended to this Affidavit.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed on [date], at [city and state].

______________________________
[name of defendant]
Individually and as president of defendant Mega Furniture, Inc.

State of ____________________, City of ____________________
Subscribed and sworn to before me this _____ day of _________, 2000.

_____________________________
Notary Public

My Commission Expires:
_____________________________

APPENDIX C

CERTIFICATE OF CORPORATE RESOLUTION

I, , the undersigned Secretary of Mega Furniture, Inc., a New York corporation, do hereby certify that a meeting of the Board of Directors of said corporation was duly held on the day of , 2000, a quorum being present, and that the following resolution was adopted, and is now in full force and effect, to wit:

RESOLVED, that the Consent Decree proposed to be entered in FTC v. Mega Furniture, Inc. et al. in the District Court for the Eastern District of New York, in the form and upon the terms and conditions consented to on behalf of this corporation by , hereby is, in all respects, ratified, confirmed and approved.

IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the corporation on this day of , 2000.

Secretary
Mega Furniture, Inc.