STATES DISTRICT COURT
FEDERAL TRADE COMMISSION, Plaintiff,
CAROUSEL OF TOYS USA, INC., a
Florida Corporation, and
Case No. 97-8587
Magistrate Judge Brown
STIPULATED FINAL JUDGMENT AND
Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), commenced this action by filing a Complaint pursuant to Sections 13(b) and 19(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b(a), charging the defendants with engaging in unfair or deceptive acts or practices in violation of Section 5 of the FTC Act,
15 U.S.C. § 45, and the FTC's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" (the "Franchise Rule"), 16 C.F.R. Part 436.
Now the Commission and defendants, Carousel of Toys USA, Inc. and Kelie Brodzinski, agree to a settlement of this action without trial or adjudication of any issue of law or fact herein and without the defendants admitting liability for any of the violations alleged in the complaint or of any wrongdoing whatsoever .
Upon the consent of the parties hereto, 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. The Complaint states a claim upon which relief may be granted against defendants under Sections 5, 13(b), and 19(a) of the FTC Act, 15 U.S.C. §§ 45, 53(b), and 57b(a).
3. Entry of this Final Order is in the public interest.
4. Defendants have waived all rights to seek appellate review or otherwise challenge or contest the validity of this Final Order or the temporary or preliminary orders entered in this proceeding.
5. This Final Order does not constitute, and shall not be interpreted to constitute, either an admission by defendants or a finding by the Court that defendants have engaged in violations of the FTC Act or the Franchise Rule.
6. This action and the relief awarded herein are in addition to, and not in lieu of, other remedies as may be provided by law, including both civil and criminal remedies.
For purposes of this Final Order, the following definitions shall apply:
1. "Franchise Rule" is defined as the Commission's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures," 16 C.F.R. Part 436, as currently promulgated or as it may hereafter be amended.
2. "Franchise" is defined as in Section 436.2(a) of the Franchise Rule.
3. "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.
4. "Defendants" means Carousel of Toys USA, Inc. and Kelie Brodzinski, and each of them and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Final Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device.
IT IS THEREFORE ORDERED that, in connection with the offering for sale or sale of any franchise or business venture, defendants are hereby permanently restrained and enjoined from:
A. Misrepresenting, either orally or in writing, expressly or by implication, to any potential investor in a franchise or business venture, any statement of material fact including, but not limited to, misrepresentations regarding the following:
1. the income, profits, or sales volume likely to be achieved; or
2. the income, profits, or sales volume achieved by other franchise or business venture purchasers.
B. Failing to disclose to any potential investor in a franchise or business venture, prior to any payment by the potential investor, the price and a description of each separate item for which an investor will pay, including but not limited to any items included as "set-up," "administrative fees," or other fees. For goods sold as a part of the initial inventory, defendants shall not fail to provide an itemized list of each separate item, the price of each such item, and any suggested retail price for such item.
C. Violating or assisting others to violate any provision of the Franchise Rule, 16 C.F.R. Part 436, a copy of which is attached hereto as Exhibit A, as presently promulgated by the Commission or as hereafter amended, including but not limited to:
1. failing to provide potential franchisees with a complete and accurate disclosure document within the times stated in the Franchise Rule;
2. failing to provide potential franchisees with an earnings claim document when any earnings claim is made; and
3. failing to disclose, in immediate conjunction with any generally disseminated earnings claim, the material basis for the claim (or the lack of such basis) and a warning that the earnings claim is only an estimate.
IT IS FURTHER ORDERED that, in connection with the marketing, offering for sale, or sale of any franchise or business venture, defendants are hereby permanently restrained and enjoined from assisting or facilitating any person who defendants know or should know makes false or misleading representations or engages in any violations of the Franchise Rule, such as those set forth in Paragraph I of this Final Order. "Assisting" includes but is not limited to: (1) acting as a franchise or business venture broker; or (2) supplying or arranging to supply any goods, such as product display racks, or any service, such as a locating service for those racks.
IT IS FURTHER ORDERED that defendants are hereby permanently enjoined from assisting any person, as described in Paragraph II of this Final Order, without taking reasonable steps sufficient to determine, at the beginning of any business relationship, and continuing thereafter on a regular basis throughout the relationship, whether such person is conducting business in any manner that would be prohibited by Paragraph I of this Final Order. Such steps shall include, but are not limited to, evaluating:
A. The nature of such person's business practices;
B. The nature of any goods or service such person advertises, offers for sale, or sells;
C. The representations made to consumers by such person, or any of his or her agents or employees, concerning any good or service, and the truthfulness, accuracy, and completeness of these representations, including, but not limited to, reviewing such person's advertisements, solicitations, and training manuals, for truthfulness, accuracy, and completeness;
D. The information provided to prospective purchasers prior to the sale of any franchise or business venture by such person, including reviewing the Franchise Rule disclosure document provided by such person, or his or her agents or employees, to prospective purchasers, or the reason such a disclosure document is not provided to prospective purchasers; and
E. The number and nature of consumer complaints concerning such person and the manner in which such complaints are handled.
IT IS FURTHER ORDERED that the Commission's agreement to this Final Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements executed and provided to counsel for the Commission by defendants on August 12, 1997. If, upon motion by the Commission, this Court finds that either defendant's financial statement failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentations or omissions of assets, the Commission may request that this Final Order be reopened for the purpose of requiring restitution as to that defendant; provided, however, that in all other respects this Final 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 as may be provided by law, including any other proceedings the Commission may initiate to enforce this Final Order. Solely for the purpose of reopening or enforcing this Paragraph of the Final Order, defendants waive any right to contest any of the allegations in the Complaint filed in this matter.
IT IS FURTHER ORDERED the Commission's agreement to this Final Order is expressly premised upon defendant Brodzinski's agreement to cooperate fully, truthfully and completely with the Commission's employees and other law enforcement agents or personnel in investigations, proceedings or litigation concerning any person with whom she worked at Carousel of Toys USA, Inc. This cooperation includes, but is not limited to, meeting with the Commission's employees and other law enforcement agents or personnel whenever requested. Defendant Brodzinski has agreed not to protect anyone who was truly involved and not to implicate falsely anyone who was not truly involved. Defendant Brodzinski further has agreed to testify truthfully before a federal grand jury or at any hearing or trial if called upon to do so.
If the Commission has reason to believe that defendant Brodzinski has failed to cooperate fully as specified above, the Commission may request that the Court reopen this Order for the purpose of modifying any provision of this agreement. In any such proceeding, defendant Brodzinski waives any right to contest any of the allegations of the Complaint filed in this matter. If the Court finds that defendant Brodzinski has failed to cooperate fully as specified above, the Court may modify any provision of this Final Order, provided, however, that in all other respects this Final Order shall remain in full force and effect unless otherwise ordered by this Court; and provided further, that proceedings instituted under this Section are in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission may initiate to enforce this Final Order.
IT IS FURTHER ORDERED that, for a period of five (5) years commencing with the date of entry of this Final Order, defendant Brodzinski shall:
A. Notify the Commission in writing of any change in her residential address within ten (10) days of such change;
B. Notify the Commission in writing of any change in her employment status within ten (10) days of such change. Such notice shall include the name and address of each business that defendant Brodzinski is affiliated with or employed by, a statement of the nature of the business, and a statement of her duties and responsibilities in connection with the business; and
C. Notify the Commission in writing at least thirty (30) days prior to the effective date of any proposed change in the structure of any business entity owned or controlled by defendant Brodzinski, such as creation, incorporation, dissolution, assignment, sale, creation or dissolution of subsidiaries, or any other changes that may affect compliance obligations arising out of this Final Order.
IT IS FURTHER ORDERED that, for purposes of determining or securing compliance with this Final Order, defendant Brodzinski shall permit, subject to defendant Brodzinski's reasonable convenience but without restraint or interference from her, representatives of the Federal Trade Commission:
A. Access during normal business hours to the offices of any business owned or controlled in whole or in part by defendant Brodzinski to inspect and copy all documents relating in any way to any conduct subject to this Final Order; and
B. To interview the officers, directors, or employees of any such business with regard to compliance with the terms of this Final Order. Such officers, directors, or employees may have counsel present.
IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Final Order, in connection with any business owned or controlled in whole or in part by defendant Brodzinski that is engaged in the operation or sale of any franchise or business venture, defendant Brodzinski 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 in the business 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 person to whom the business sells, invoices, or ships any property, goods, or services;
C. Records of the cost of goods or property sold by the business and the income and expenses incurred in the sale of any property, goods, or services; and
D. Records of every written or oral consumer complaint or refund request received by the business, which records include:
1. The customer's name, address, telephone number and the dollar amount paid by the customer;
2. The written complaint, if any, and the date of the complaint or refund request;
3. The basis of the complaint or refund request and the nature and result of any investigation conducted as to the validity of any complaint or refund request;
4. Each response to the complaint or refund request 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, or if cured, the basis for determining that the complaint has been cured.
IT IS FURTHER ORDERED that, within sixty (60) days after the date of entry of this Final Order, defendant Brodzinski shall file a report with the Commission setting forth in detail the manner and form in which she has complied with this Final Order. Such report shall include defendant Brodzinski's current residential address and employment status, including the name and address of each business that she is affiliated with or employed by, a statement of the nature of the business, and a statement of her duties and responsibilities in connection with that business.
IT IS FURTHER ORDERED that, within five (5) business days after receipt by defendant Brodzinski of this Order as entered by the Court, she shall submit to the Commission a truthful sworn statement that shall 1) acknowledge receipt of this Final Order and 2) reaffirm and attest to the truth, accuracy and completeness of the financial statements executed by defendants Carousel of Toys USA, Inc., and Kelie Brodzinski, on August 12, 1997.
IT IS FURTHER ORDERED that all notices required of defendants by this Final Order shall be made to the following address:
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for the purpose of enabling the Commission and defendants to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Final Order, for the enforcement of compliance therewith, or the punishment of violations therefor.
SO ORDERED, this _____day of _________, 1997.
The parties, hereby consent to the terms and conditions of the Stipulated Final Order as set forth above and consent to entry thereof. Each party shall bear its own costs and attorney's fees. Defendants waive any rights that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412.
Agreed to by:
Federal Trade Commission
Carousel of Toys USA, Inc.
Kelie Brodzinski, individually