STATES DISTRICT COURT
Magistrate Judge Seltzer
FEDERAL TRADE COMMISSION, Plaintiff,
DIANE M. JONAS, PAUL A. JONAS,
JAMES W. RAIM, ROBERT BRIAN ROEMER,
STIPULATED PRELIMINARY INJUNCTION
Plaintiff Federal Trade Commission ("Commission"), pursuant to Sections 13(b) and 19(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 53(b), 57b(a), filed a complaint for permanent injunction and other relief, including consumer redress, and applied ex parte for a temporary restraining order, for an order to show cause why a preliminary injunction should not be granted pursuant to Rule 65 of the Federal Rules of Civil Procedure and why a permanent receiver should not be appointed. The Court granted the Commission's application and entered a temporary restraining order on July 10, 1995. The Commission and Defendants Diane M. Jonas, Paul A. Jonas, James W. Raim, and The Business Opportunity Center, Inc. have stipulated to entry of this preliminary injunction, and the Court makes the following findings of fact and conclusions of law:
1. This Court has jurisdiction of the subject matter of this case. Defendants Diane M. Jonas, Paul A. Jonas, James W. Raim, and The Business Opportunity Center, Inc. have been served copies of the summons and complaint and the temporary restraining order, and all are subject to the jurisdiction of this Court.
2. Entry of this Order is in the public interest.
3. This Order does not represent a determination by the Court or an admission by the defendants that Diane M. Jonas, Paul A. Jonas, James W. Raim, or The Business Opportunity Center, Inc. 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 the Federal Trade Commission Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" (the "Franchise Rule"), 16 C.F.R. Part 436.
4. Defendants Diane M. Jonas, Paul A. Jonas, James W. Raim, and The Business Opportunity Center, Inc. have waived any right to appeal this Order or the temporary restraining order entered in this case.
5. Defendants Paul Jonas and Diane Jonas are the sole shareholders of The Business Opportunity Center, Inc.
6. Defendant James W. Raim has done business as "Market Systems, Ltd.," an unincorporated business entity.
7. No security is required of any agency of the United States for issuance of an injunction. Fed. R. Civ. P. 65(c).
IT IS THEREFORE ORDERED that, for purposes of this preliminary injunction, the following definitions shall apply:
A. "Defendants" means Diane M. Jonas, Paul A. Jonas, James W. Raim, and The Business Opportunity Center, Inc.
B. "Receivership Defendants" means The Business Opportunity Center, Inc. and Market Systems, Ltd.
C. "Alcohol reducing agent" means any product or substance for which an express or implied representation is made that the product or substance will or may reduce or minimize inebriation, blood alcohol levels, or alcohol toxicity, including but not limited to the products or substances known as the "Alcohol Neutralizer," "pueraria," or "Neutrahol."
D. "Business venture" means 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:
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.
E. "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.
Scope of Order
IT IS FURTHER ORDERED that any provision of this Order that is binding upon the Defendants or upon the Receivership Defendants is binding upon each of them and upon their successors, assigns, officers, agents, servants, employees, attorneys, 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, partnership, or other entity or device. Within three (3) business days of entry of this Order, Defendants shall provide a copy of this Order to each of their successors, assigns, officers, agents, servants, employees, and attorneys, and to all persons or entities who have participated with them in the offering or selling of any alcohol reducing agent or any business venture involving an alcohol reducing agent, and to all persons or entities who have purchased from them any alcohol reducing agent or any business venture involving an alcohol reducing agent. Within five (5) business days of entry of this Order, Defendants shall provide an affidavit to the Commission stating whether they have complied with this disclosure requirement and setting forth the name and address of each person or entity to whom a copy of the Order was provided, the date on which the person or entity was provided the copy, the name and address of the person who provided the copy, and the manner of service.
IT IS FURTHER ORDERED that Defendants are hereby enjoined from --
A. Making or assisting others in making express or implied misrepresentations concerning any alcohol reducing agent, including but not limited to misrepresentations concerning:
1. the safety or efficacy of the agent;
2. government review or approval of the agent; or
3. the results or findings of any tests or studies of the agent.
B. Violating or assisting others in violating any provisions of the Franchise Rule, 16 C.F.R. Part 436, including but not limited to the following:
1. failing to provide potential franchisees with a complete and accurate disclosure document within the times stated in the Franchise Rule, 16 C.F.R. 436.1(a);
2. failing to have a reasonable basis for any earnings claim at the time such claim is made, as required by the Franchise Rule, 16 C.F.R. 436.1(b)-(e); and
3. failing to provide potential franchisees with an earnings claim document when any earnings claim is made, as required by the Franchise Rule, 16 C.F.R. 436.1(b)-(e).
C. 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, receipts, receipt books, ledgers, personal and business cancelled checks and check registers, bank statements, appointment books, copies of business, personal, or property tax returns for any federal, state, or local government, 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.
D. Transferring or disclosing to any person or entity (except to the Commission or to the 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 involving the Alcohol Neutralizer or an Alcohol Neutralizer business venture.
IT IS FURTHER ORDERED that Defendants are hereby 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 Gerald B. Wald is appointed 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 Diane M. Jonas, Paul A. Jonas, James W. Raim, Robert Brian Roemer, or any other officer, independent contractor, employee, or agent of any of the Receivership Defendants, 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 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 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 receiver deems necessary and advisable to preserve the value of the assets of the Receivership Defendants or that the 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 receiver or the Receivership Defendants that the receiver deems necessary and advisable to preserve the properties of the Receivership Defendants or that the 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 shall deliver to the 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 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 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 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 receiver appointed pursuant to this order or any agent appointed by the receiver; and
E. Doing any act or thing whatsoever to interfere with the 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 receiver and all personnel hired by the receiver, including counsel to the 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 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 be filed no later than September 30, 1995. The 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 receiver shall file with the Clerk of this Court a bond in the sum of $25,000 with sureties to be approved by the Court, conditioned that the 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 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 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 receiver or the Commission, promptly provide the 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 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 receiver shall, subject to the 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.
IT IS FURTHER ORDERED that any Defendant's failure to provide the Commission and the receiver, on or before July 21, 1995, with a completed financial statement, responses to requests for admissions, or other information as required by the temporary restraining order may be treated as contempt of this Order.
IT IS FURTHER ORDERED that the Commission and the receiver may notice depositions upon oral examination beginning upon entry of this Order and may depose any party upon five (5) business days' notice.
IT IS FURTHER ORDERED that the Commission and the receiver may serve copies of this Order by facsimile 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 receiver with a consumer report concerning Diane M. Jonas, Paul A. Jonas, James W. Raim, Robert Brian Roemer, The Business Opportunity Center, Inc., or their successors or assigns.
IT IS FURTHER ORDERED that the parties may execute the stipulation to this Order in multiple counterparts.
IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for all purposes.
SO ORDERED, at Fort Lauderdale, Broward County, Florida, this _____day of _________, 1995, at ________.m.
The undersigned consent to entry of this Stipulated Preliminary Injunction: