Source: https://www.ftc.gov/sites/default/files/documents/cases/1999/08/smsi.htm
Timestamp: 2018-01-17 06:51:58
Document Index: 595577362

Matched Legal Cases: ['§ 53', '§ 6101', '§ 45', '§ 310', '§ 53', '§ 6102', '§ 45', 'art 310', '§ 44', '§ 2412', '§ 310', '§ 310', '§ 310', '§ 1961', '§ 7701', '§ 49', '§ 45']

FTC v. Southern Maintenance Supplies, Inc., et al.
SOUTHERN MAINTENANCE SUPPLIES, INC.,
an Illinois Corporation, and
DON ASHLEY, individually and as an officer of
Southern Maintenance Supplies, Inc., Defendants.
Civil Action No. 99 C 0975
Judge Norgle
Magistrate Judge Keys
STIPULATED ORDER FOR PERMANENT INJUNCTION
WITH CONSUMER REDRESS AND OTHER EQUITABLE RELIEF
Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), has filed an Complaint for Injunctive and Other Equitable Relief ("Complaint") pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. §§ 6101 et seq., charging defendants Southern Maintenance Supplies, Inc., and Don Ashley (collectively "defendants") with deceptive acts and practices in connection with the sale, offering for sale, or distribution of maintenance supplies. The Commission's Complaint alleges that these acts and practices violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and Sections 310.3(a)(4) and 310.4(d)(2) of the Telemarketing Sales Rule ("Telemarketing Rule"), 16 C.F.R. §§ 310.3(a)(4) and 310.4(d)(2).
The Commission and defendants have consented to the entry of this Stipulated Order for Permanent Injunction with Consumer Redress and Other Equitable Relief ("Stipulated Order") without a trial or adjudication of any issue of law or fact herein.
NOW, THEREFORE, the Commission and defendants, having requested the Court to enter this Stipulated Order, it is ORDERED, ADJUDGED, AND DECREED as follows:
1. This is an action by the Commission instituted under Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and Sections 3 and 6 of the Telemarketing Act, 15 U.S.C. §§ 6102(c) & 6105(b). The Commission has the authority to seek the relief contained herein, and the Amended Complaint states a claim upon which relief may be granted against defendants under Sections 5, 13(b), and 19 of the FTC Act, 15 U.S.C. §§ 45, 53(b), and 57b, and the Telemarketing Rule, 16 C.F.R. Part 310.
2. This Court has jurisdiction over the subject matter of this case and all parties hereto. Venue in the Northern District of Illinois is proper.
3. The alleged activities of defendants are in or affecting commerce, as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
4. Defendants, through this stipulation, do not admit to any violations of the FTC Act or Telemarketing Rule, or to any of the allegations set forth in the Amended Complaint. Defendants consent to this Stipulated Order only to avoid the substantial cost and uncertainty of litigation.
5. The parties shall each bear their own costs and attorney's fees incurred in this action and have waived all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, and all rights to seek judicial review, or otherwise to challenge the validity of this Stipulated Order.
6. Entry of this Stipulated Order is in the public interest.
1. "Defendants" means Southern Maintenance Supplies, Inc., Don Ashley, and their officers, agents, directors, servants, employees, salespersons, independent contractors, attorneys, corporations, subsidiaries, affiliates, successors, assigns, all other persons or entities directly or indirectly under their control or under common control with them, and all other persons or entities in active concert or participation with them, who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any trust, corporation, subsidiary, division, or other device, in connection with the advertising, promoting, offering for sale, sale or distribution of any product or service, or in connection with any telephone solicitation.
2. "Document" is synonymous in meaning and equal in scope to the usage of the term in 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.
3. "Material" means likely to affect a person's choice of, or conduct regarding, goods or services.
4. "Person" means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.
5. "Telemarketing," except for purposes of Section III [Prohibited Business Activities Pursuant to the Telemarketing Rule] of this Stipulated Order, means a plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones and which involves more than one interstate telephone call, provided, however, that a plan, program, or campaign to induce the purchase of goods or services in which the sale of goods or services is not completed, and payment or authorization of payment is not required, until after a face-to-face sales presentation by the seller shall be excluded from this definition.
IT IS THEREFORE ORDERED that defendant Don Ashley, directly or through any corporation, subsidiary, division, or other device, is hereby permanently restrained and enjoined from engaging or participating in the advertising, promoting, marketing, offering for sale, sale or distribution of non-durable office, cleaning, or janitorial supplies by means of telemarketing.
PURSUANT TO THE FTC ACT
IT IS FURTHER ORDERED that defendants are hereby enjoined from:
A. Misrepresenting, directly or by implication, through, inter alia, telephone calls, letters, invoices, packing slips, and/or shipment of maintenance supplies that any person ordered maintenance supplies that were shipped and/or billed to them by defendants;
B. Misrepresenting, directly or by implication, through, inter alia, telephone calls, letters, invoices, packing slips, and/or shipment of maintenance supplies that any person has an obligation to pay a restocking fee before returning the maintenance supplies received from defendants;
C. Misrepresenting, directly or by implication, any fact material to any person's decision to purchase any goods or services from defendants, including, but not limited to:
1. Misrepresenting that defendants are sending such person a free sample of defendants' maintenance supplies; and
2. Misrepresenting the purpose of any telephone call made by defendants to such a person;
D. Shipping any unordered goods to any person or requesting, demanding, or accepting payment for the shipment from any person for any shipment of any unordered goods, including, but not limited to, billing, invoicing, or charging the person; and
E. Shipping goods to any person without the prior express request or consent of the person, unless a clear and conspicuous statement is attached to the merchandise that the person may treat the merchandise as a gift and has the right to retain, use, discard, or dispose of it in any manner the person sees fit without any obligation whatsoever.
PURSUANT TO THE TELEMARKETING RULE
IT IS FURTHER ORDERED that defendants are hereby enjoined from violating any provision of the Telemarketing Rule, 16 C.F.R. § 310.1 et seq., including, but not limited to:
A. Violating Section 310.4(d)(2) of the Telemarketing Rule, 16 C.F.R. § 310.4(d)(2), by failing to disclose promptly and in a clear and conspicuous manner to the person receiving a call from defendants that the purpose of the call is to sell goods;
B. Violating Section 310.3(a)(4) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(4) by making false or misleading statements to induce the purchase of defendants' maintenance supplies including, but not limited to, misrepresentations that:
1. If the person wishes to return a shipment, the person has an obligation to pay a "restocking fee;"
2. The supplies shipped and/or billed by defendants were ordered by the recipient.
A. Defendants Southern Maintenance Supplies, Inc., and Don Ashley shall pay to the Commission the sum of One Hundred Ten Thousand Dollars ($110,000.00) within seven days of the date of entry of this Stipulated Order. All payments required to be made to the Commission under this Section shall be made by certified check or other guaranteed funds payable to and delivered to the Commission, or by wire transfer in accord with directions provided by the Commission.
B. A constructive trust in favor of the consumers who paid for defendants' cleaning and maintenance supplies is imposed on the One Hundred Ten Thousand Dollars ($110,000.00) referred to in Paragraph A. The Court finds that title to these funds never vested with defendants Southern Maintenance Supplies, Inc. and Don Ashley. Title to these funds has remained with Southern Maintenance Supplies, Inc.'s customers for whose benefit, in the form of redress, the constructive trust is imposed.
C. The funds paid by defendants pursuant to this Stipulated Order shall be deposited into a redress fund, administered by the Commission, to be used for equitable relief including, but not limited to, consumer redress and any attendant expenses for the administration of any redress fund. If the Commission determines, in its sole discretion, that redress to purchasers is wholly or partially impracticable, any funds not so used shall be paid to the United States Treasury in lieu of redress. Defendants shall have no right to contest the manner of distribution chosen by the Commission. The Commission in its sole discretion may use a designated agent to administer consumer redress. The Commission and defendants acknowledge and agree that this judgment for equitable monetary relief is solely remedial in nature and is not a fine, penalty, punitive assessment, or forfeiture.
D. In the event of any default on any obligation to make payment under this Section, interest, computed pursuant to 28 U.S.C. § 1961(a), shall accrue from the date of default to the date of payment.
E. Defendants are hereby required, in accordance with 31 U.S.C. § 7701, to furnish to the Commission their respective taxpayer identifying numbers (social security numbers or employer identification numbers), which shall be used for purposes of collecting and reporting on any delinquent amount arising out of such persons' relationship with the government.
F. The asset freeze imposed by this Court's Temporary Restraining Order with Asset Freeze and Order to Show Cause Why a Preliminary Injunction Should Not Issue ("temporary restraining order") of February 16, 1999, as modified thereafter, shall remain in place and shall be modified to permit such transfers as are necessary to comply with this Section, and such other stipulations agreed between the parties and heretofore or subsequently approved by the court. Upon such compliance, the asset freeze provisions contained in the temporary restraining order shall be deemed dissolved.
IT IS FURTHER ORDERED that within five (5) business days after the date this Stipulated Order is signed by the Court, defendants Southern Maintenance Supplies, Inc., and Don Ashley shall each submit to the Commission a truthful sworn statement (in the form shown on Appendix A to this Stipulated Order) that shall reaffirm and attest to the truthfulness, accuracy, and completeness of their respective financial statements, namely that of Southern Maintenance Supplies, Inc., and that of Don Ashley both dated on February 24, 1999. The Commission's agreement to this Stipulated Order is expressly premised upon the financial condition of each defendant, as represented in their financial statements and amendments thereto, which contain material information upon which the Commission relied in negotiating and agreeing upon this Stipulated Order.
If, upon motion of the Commission, the Court finds that Southern Maintenance Supplies, Inc., or Don Ashley failed to file the sworn statement required by this Section, or that either defendant failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentation in or omission from the financial statement, the Commission may either (1) request that the judgment herein be reopened against such defendants for the purpose of requiring additional monetary consumer redress or obtaining other equitable relief up to the total amount of consumer injury in this matter, or (2) seek to obtain other equitable relief.
Provided, however, that in all other respects this judgment shall remain in full force and effect, unless otherwise ordered by the Court.
IT IS FURTHER ORDERED that defendants are hereby permanently restrained and enjoined from:
A. Selling, renting, leasing, transferring, or otherwise disclosing the name, address, telephone number, social security number, or other identifying information of any person who paid any money to defendants, at any time prior to the date this Stipulated Order is entered, in connection with the sale of the products or services referenced in the Complaint. Provided, however, that Defendants may disclose such identifying information to a law enforcement agency or as required by any law, regulation, or court order; and
B. Collecting or attempting to collect on accounts arising from the shipment of maintenance supplies prior to the date this Stipulated Order is entered.
ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANTS
IT IS FURTHER ORDERED that, within five (5) business days after receipt by defendants of this Stipulated 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 Stipulated Order.
DISTRIBUTION OF ORDER BY DEFENDANTS
IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, defendants shall:
A. Provide a copy of this Stipulated 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, 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 defendant Don Ashley is the majority owner of the business or directly or indirectly manages or controls the business, and where the business is engaged in telemarketing or the sale of non-durable office, cleaning, or janitorial supplies, or assists others engaged in these activities;
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 receipt of copies of this Stipulated Order, as required in Subsection (A).
MONITORING COMPLIANCE OF SALES PERSONNEL
IT IS FURTHER ORDERED that, in connection with any business where defendant Don Ashley is the majority owner of the business or directly or indirectly manages or controls the business, and where the business is engaged in telemarketing or the sale of non-durable office, cleaning, or janitorial supplies, or assists others engaged in these activities, defendants 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 Sections II and III of this Stipulated Order. Such steps shall include adequate monitoring of sales presentations or other calls with customers, and shall also include, at a minimum, the following: (1) listening to the oral representations made by persons engaged in sales or other customer service functions; (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; provided that this Section does not authorize or require the defendant to take any steps that violate any federal, state, or local laws;
B. Failing promptly to investigate fully any consumer complaint received by any business to which this Section applies; and
C. Failing to take corrective action with respect to any sales person whom defendant determines is not complying with this Stipulated Order, which may include training, disciplining, and/or terminating such sales person.
IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, defendants, in connection with any business where defendant Don Ashley is the majority owner of the business or directly or indirectly manages or controls the business, and where the business is engaged in telemarketing or the sale of non-durable office, cleaning, or janitorial supplies, or assists others engaged in these activities, are hereby restrained and enjoined from failing to create, and from failing to 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. The businesses subject to this Section shall retain such records for any terminated employee for a period of two (2) years following the date of termination;
C. Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, for all consumers to whom such business has sold, invoiced or shipped any goods or services;
D. Records that reflect, for every consumer complaint or refund request, whether received directly or indirectly or through any third party:
(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 (3) years after the last date of dissemination of any such materials.
COMPLIANCE REPORTING BY DEFENDANT
IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Stipulated Order may be monitored:
A. For a period of five (5) years from the date of entry of this Stipulated Order, defendants shall notify the Commission of the following:
(1) Any changes in defendants' residence, mailing addresses, and telephone numbers, within ten (10) days of the date of such change;
(2) Any changes in defendants' employment status (including self-employment) within ten (10) days of such change. Such notice shall include the name and address of each business that such defendant is affiliated with or employed by, a statement of the nature of the business, and a statement of defendants' duties and responsibilities in connection with the business or employment; and
(3) Any proposed change in the structure of defendant Southern Maintenance Supplies Inc., or of any business entity owned or controlled by defendant Don Ashley, such as creation, incorporation, dissolution, assignment, sale, merger, creation, 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 Stipulated 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 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 proposed change;
B. One hundred eighty (180) days after the date of entry of this Stipulated Order, defendants shall provide a written report to the Commission, sworn to under penalty of perjury, setting forth in detail the manner and form in which the defendants have complied and are complying with this Stipulated Order. This report shall include but not be limited to:
(1) Defendant Don Ashley's current residence address and telephone number;
(2) Defendant Don Ashley's current employment, business addresses and telephone numbers, a description of the business activities of each such employer, and defendant's titles and responsibilities for each employer;
(3) A copy of each acknowledgment of receipt of this Stipulated Order obtained by defendant pursuant to Section VII; and
(4) A statement describing the manner in which defendants have complied and is complying with Sections II and III of this Stipulated Order;
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 Order;
D. For the purposes of this Stipulated Order, defendants shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to:
55 E. Monroe St., Suite 1860
Re: FTC v. Southern Maintenance Supplies, Inc.;
E. For the purposes of this Section, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employers" include any individual or entity for whom defendant Don Ashley performs services as an employee, consultant, or independent contractor; and
F. For purposes of the compliance reporting required by this Section, the Commission is authorized to communicate directly with defendant Don Ashley.
COMMISSION'S AUTHORITY TO MONITOR COMPLIANCE
IT IS FURTHER ORDERED that the Commission is authorized to monitor defendants compliance with this Stipulated 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 Stipulated Order;
B. The Commission is authorized to use representatives posing as consumers and suppliers to defendants, defendants' employees, or any other entity managed or controlled in whole or in part by defendant Don Ashley, without the necessity of identification or prior notice; and
C. Nothing in this Stipulated 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 Stipulated Order or Section 5 of the FTC Act, 15 U.S.C. § 45.
IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, for the purpose of further determining compliance with this Stipulated Order, 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 office, or facility storing documents, of any business where defendant Don Ashley is the majority owner of the business or directly or indirectly manages or controls the business, and where the business is engaged in telemarketing or the sale of non-durable office, cleaning, or janitorial supplies, or assists others engaged in these activities. 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 Order; and shall permit Commission representatives to remove documents relevant to any matter contained in this Stipulated 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) applies, concerning matters relating to compliance with the terms of this Stipulated 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 Order.
IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for all purposes.
The parties agree and stipulate to entry of the foregoing Stipulated Order as a Final Judgment in this action.
RUSSELL W. DAMTOFT
SARA LORBER
SOUTHERN MAINTENANCE SUPPLIES, INC.
by: DON ASHLEY, President
DON ASHLEY, individually
Urban, Burt & Cossidente, Ltd.
Attorney for Defendants Southern Maintenance Supplies, Inc. and Don Ashley
HON. CHARLES J. NORGLE
SOUTHERN MAINTENANCE SUPPLIES, INC., and DON ASHLEY, Defendants.
[Name of defendant], being duly sworn, hereby states and affirms as follows:
1. My name is_______________________. My current residence address is _____________________________________________________. 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. Southern Maintenance Supplies, Inc., et al. (United States District Court for the Northern District of Illinois).
3. On [date], I received a copy of the Stipulated Order for Permanent Injunction with Consumer Redress and Other Equitable Relief which was signed by the Honorable Charles J. Norgle and entered by the Court on [date of entry of Order]. A true and correct copy of the Order I received is appended to this Affidavit.
Executed on [date], at [city and state].
[Full name of Defendant]
Subscribed and sworn to before me this _____ day of _________, 199___.