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Federal Trade Com'n v. Jordan Ashley, Inc. NESBITT, District Judge:*1 This cause was tried before the Court on March 8 and 14, 1994. The case involves a request by plaintiff the Federal Trade Commission (“FTC”) for a permanent injunction and other relief against Defendants Jordan Ashley, Inc. (“Jordan Ashley”); Gold Coast Developers, Inc. (“Gold Coast”); National Vending Systems, Ltd., Inc. (“National Vending”); Christine Heller (“Heller”); Kelli Blasi (“Blasi”); and Thomas P. Norton (“Norton”), 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).
Upon motion by the FTC, the Court issued an Ex Parte Temporary Restraining Order on December 6, 1993. In the Order, the Court appointed Ms. Linda L. Carroll, Esq. as temporary receiver for Jordan Ashley, Gold Coast, and National Vending (collectively “the Corporate Defendants”), froze the assets of all Defendants, and ordered Defendants to show cause why a preliminary injunction should not issue. In an Order issued January 4, 1994, the Court consolidated the hearing on the preliminary injunction with the trial on the merits pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure. The Court's findings follow.
Findings of FactDefendants have been engaged in the marketing and sale of business opportunities to the public since at least September 1990. These opportunities involve the sale of greeting cards through use of display racks placed in shopping malls and stores engaged in retail selling.
It is undisputed that the individual Defendants are officers and directors in the various Corporate Defendants. Moreover, the evidence reveals that no real distinction existed between the Corporate Defendants. The temporary receiver testified that she seized and secured the business premises of the Corporate Defendants on December 8, 1993 pursuant to her authority as receiver. Her review of the documents she found on the premises indicate that the Corporate Defendants failed to segregate payment of bills. The telephone bills for all of the corporate offices, for example, were held in the name of National Vending. Further, despite the fact that each corporation leased distinct space within the corporate building, rental payments were made exclusively out of Gold Coast's accounts. In addition, the receiver found numerous files containing documents from several, or all, of those Defendants. Documents pertaining to the Corporate Defendants were intermingled throughout these files.
There is nothing to rebut any of this evidence. There is no evidence indicating, for instance, that the Corporate Defendants observed corporate formalities, nor that they performed distinct functions. The Court concludes that all of these Defendants engaged in misrepresentations described below.
The FTC's evidence of these misrepresentations consisted [of] the testimony of four witnesses, whose experiences with Defendants are characteristic of those who purchased Defendants' business opportunities. This testimony established that many prospective investors learned about Defendants' business opportunities through radio and newspaper advertisements. Typically, investors then contacted the 800 number referenced in the advertisements and spoke with one of Defendants' representatives. In both the initial conversation and in subsequent conversations, the representative would typically explain that: (1) an investor could expect to make substantial sums through the purchase of a distributorship, often up to $50,000 per year; (2) an investor could expect to recoup his or her initial investment quickly, usually within six months at the latest; (3) an investor could expect to sell a large number of cards at each location, usually between 200 to 400 cards per month per location; and (4) each investor would operate as Defendants' exclusive distributor within a particular territory, but had to act quickly in order to secure these exclusive rights.FN1
*2 The representatives also assured the investors that a “professional locating company” familiar with each investor's region of the country would find retail outlets suitable for card sales and willing to accept card display racks. In most instances, the representatives insisted that the investors rely initially on the locating company and defer selecting locations without assistance until after acquiring some familiarity with the retail card sale business. The representatives explained, however, that the locating company would find new locations to replace any that proved to be unsatisfactory. The representatives also supplied the investors with the names of other individuals whom they identified as successful distributors. These references confirmed the representatives' statements.
Virtually all of these statements later proved to be false. After agreeing to purchase a distributorship, the investors typically made a non-refundable payment of between $5,000 and $15,000 to one of the Corporate Defendants. The payment generally covered ten card racks, an initial set of cards, and the services of the locating company. The locating company, however, usually failed to secure locations for all of the card racks. Those that the locating company did select were often totally inadequate. The locating company proved to be unwilling, or unable, to find replacement locations. Many investors also discovered other distributors in the area in which the investors had been promised exclusive distribution rights. All investors who testified experienced sales volume and earnings far below the estimates made by the representatives.
Legal ConclusionsThe FTC contends that the conduct outlined above violates both 15 U.S.C. § 45(a) and the “franchise rule”, 16 C.F.R. § 436.1. The Court will examine each of these contentions separately.
(1) 15 U.S.C. § 45(a)(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.
(2) The (Federal Trade) Commission is empowered and directed to prevent persons, partnerships, or corporations.... from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce. (emphasis added).
In order to find the Corporate Defendants liable under this section, the Court must find that those Defendants made material misrepresentations or omissions in connection with the sale of the distributorships and that consumer injury resulted. See F.T.C. v. Amy Travel Service, Inc. [1989–1 Trade Cases ¶ 68,549], 875 F.2d 564, 573 (7th Cir.1989). A representation or omission is material if of the kind usually relied on by a reasonably prudent person. Id.
There is no question that the Corporate Defendants made such misrepresentations. As discussed above, representatives of the Corporate Defendants misrepresented the earnings potential of the distributorships; the sales volume likely to be achieved; the authenticity of references supplied; the exclusivity of, or amount of competition within, the purchaser's geographic territory; the ease with which the locating company could find sales locations; the suitability of those locations; and the terms and conditions governing replacement of unprofitable locations. Each of these misrepresentations is material.
*3 There is no question that these misrepresentations resulted in consumer injury. The FTC's consumer witnesses all testified that several, or all, of these misrepresentations induced them to purchase distributorships and that they failed to recoup their initial investments despite good faith efforts to operate their distributorships. The legion of complaint letters filed with the FTC indicate that numerous other distributorship purchasers experienced similar losses.FN2 See Plaintiff's Exhibit 130.
The evidence concerning misrepresentations and consumer injury is sufficient to render the Corporate Defendants liable. Once corporate liability is established, the FTC must satisfy two additional criteria in order to establish that the individual Defendants are liable. First, the FTC must demonstrate that the individual Defendants participated directly in the wrongful practices or acts or that the individual Defendants had authority to control them. Amy Travel Service, 875 F.2d at 573. Second, the FTC must demonstrate that the individual Defendants had some knowledge of the wrongful acts or practices. Id. The FTC need not demonstrate, however, that the individual Defendants possessed the intent to defraud. Id. at 573–74.
In the present case, it is clear that all three individual Defendants exercised control over the Corporate Defendants. Norton admits that he controlled the Corporate Defendants. Blasi and Heller served as officers in the corporations. Moreover, correspondence prepared by Heller and Blasi indicates that Heller and Blasi were actively involved in the operation of the business of the Corporate Defendants. See Plaintiff's Exhibits 110, 114.
The same correspondence indicates that both Blasi and Heller were aware of the misrepresentations being made in the names of the Corporate Defendants. While there is no such direct evidence indicating that Norton knew about these misrepresentations, it is simply not plausible to suppose that he did not know. He actively participated in the business of the Corporate Defendants and admits that he controlled them. The making of the misrepresentations at issue formed a central part of that business and contributed greatly to its success. Given the importance of the misrepresentations, and the level of Norton's participation, Norton must have been aware that the misrepresentations were being made. The Court concludes that Norton, Heller, and Blasi controlled the Corporate Defendants and that they knew about the misrepresentations being made in the names of the Corporate Defendants.
(2) The Franchise RuleThe FTC also contends that Defendants violated the franchise rule, set out in 16 C.F.R. § 436.1.FN3 The rule requires a franchisor to provide prospective franchisees with a complete and accurate disclosure containing twenty categories of information about the history of the franchisor and the terms and conditions under which the franchise operates. See 16 C.F.R. § 436.1(a)(1)–(a)(20). The rule also requires the franchisor to have a reasonable basis for any oral, written, or visual representations made to a prospective franchisee concerning earnings or profits the franchisee should expect from the franchise; to provide the prospective franchisee with documents substantiating these representations; to disclose the material basis for these representations; and to include a warning that the representations constitute only an estimate, not a guarantee. See id. at §§ 436.1(b)(2), (c)(2), (e)(1), (e)(3)(4). Defendants do not dispute that they failed to comply with the requirements of the franchise rule. They contend that they need not have complied, however, because they were not selling franchises within the meaning of the rule. The term “franchise” is defined extensively in section 436.2(a). In order to demonstrate that Defendants' business ventures were franchises within the meaning of this section, the FTC must demonstrate that the ventures: (1) satisfy the requirements of either section 436.2(a)(1)(i) or section 436.2(a)(1)(ii); (2) satisfy the requirement set out in 436.2(a)(2); and (3) do not fall within any of the exemptions or exclusions set out in sections 436.2(a)(3) or 436.2(a)(4), respectively.
*4 The record contains evidence sufficient to satisfy both sections 436.2(a)(1)(i) and 436.2(a)(1)(ii). Under section 436.2(a)(1)(i), a franchise is, among other things, a commercial relationship created by an arrangement in which: (1) the alleged franchisee sells goods, commodities, or services; (2) to any person other than the alleged franchisor; (3) where the goods, commodities, or services are identified by the service mark, trade mark, or advertising or other commercial symbol of the alleged franchisor; and (4) where the alleged franchisor gives significant assistance to the alleged franchisee in the latter's method of operation, including, but not limited to, the alleged franchisee's business organization, management, marketing plan, promotional activities, or business affairs. 16 C.F.R. § 436.2(a)(1).
In the present case, all four of the FTC's consumer witnesses testified that they purchased greeting cards and card racks from Defendants and that they sold these cards to members of the general public besides Defendants. Moreover, all four of the witnesses stated that the cards included in the sample pack produced as part of Defendants' exhibit 5 were characteristic of the cards that they received from Defendants and thereafter sold. The cards in the sample pack bear the trademark “American Heart Beats” and indicate that the trademark is held by Jordan Ashley Galleries, Inc. Each card also contain the phrases “By Jordan Ashley Publishing” and “Produced Gold Coast Developers, Inc.”. The cards thus bore the trade marks, service marks, etc. of the Corporate Defendants.
Further, it is clear that Defendants gave purchasers substantial assistance in operating their distributorships. Several of the consumer witnesses testified that Defendants' representatives required them to utilize the services of a professional locating company to select the initial locations for their card racks, explained to them the likely extent of their responsibilities with respect to the actual sale of the cards, offered them tips on how to arrange the cards in order to maximize sales, explained how to deal with the owner/managers of the stores in which the racks were to be placed, and promised them that the locating company would find alternative locations in the event that the locations initially chosen proved to be unsatisfactory. This assistance qualifies as substantial under section 436.2(a)(1)(B)(2).
It is also clear that Defendants' ventures satisfy the requirements of section 436.2(a)(2)(a)(ii). Under that section, a franchise is any continuing commercial relationship in which: (1) the alleged franchisee sells goods, commodities, or services; (2) to any person other than the alleged franchisor; (3) where the goods, services, or commodities sold are supplied by the alleged franchisor; and (4) where the alleged franchisor supplies to the alleged franchisee the services of a person able to provide locations for rack displays. The Court finds that the first two requirements are met for the reasons specified above. Further, the third and fourth requirements are also met. All four of the FTC's consumer witnesses testified that they sold cards purchased from Defendants and that Defendants insisted that they use a professional locating company specified by Defendants in order to select the locations for their rack displays.
*5 The Court also finds that the remaining two elements of the definition of “franchise” in section 436.2(a) are met. Under section 436.2(a)(2), a business arrangement only qualifies as a franchise if the alleged franchisee is required to make a payment to, or a commitment to pay, the alleged franchisor as a condition of obtaining or commencing the franchise operation. Section 436.2(a)(3)(iii), the payment amount must equal or exceed $500.
In the present case, all of the FTC's consumer witnesses testified that Defendants required them to make payments of between $5,000 and $15,000 in order to acquire their initial sets of racks and cards, without which they could not have commenced operation of their card distributorships. This requirement thus served as “a condition of ... commencing the franchise operation” and therefore satisfies section 436.2(a)(2).
Sections 436.2(a)(3) and 436.2(a)(4) set out the exemptions and exclusions to the franchise rule. A review of those exemptions and exclusions reveals that none are applicable to this case.
Based on the foregoing, the Court concludes that the business ventures sold by Defendants are franchises within the meaning of the franchise rule. As Defendants concede that they did not comply with the substantive provisions of the rule, the Court concludes that Defendants have violated the rule.
Relief OrderedI.It Is Therefore Ordered that Norton is hereby permanently restrained and enjoined from engaging, participating or assisting in any manner or in any capacity whatsoever in the marketing or sale of any franchise or business venture, whether directly or through any intermediary.
It Is Further Ordered that Norton is hereby permanently restrained and enjoined from engaging or participating, whether directly or in concert with others, or through any business entity or device, in the business of telemarketing without first obtaining a performance bond. The principal sum of said bond shall be in the amount of $5,000,000 (five million dollars).
A. The performance bond shall be an insurance agreement pledging surety for financial loss issued by a surety company that is admitted to do business in each state in which any bonded defendant does business and that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring. The performance bond shall cite this Permanent Injunction as the subject matter of the bond and shall provide surety thereunder against financial loss resulting from whole or partial failure of performance due, in whole or in part, to any violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45 or to the provisions of this Permanent Injunction. Such performance bond shall be executed in favor of both (1) the Federal Trade Commission for the benefit of any person injured as a result of any false or misleading representation of material fact made by the defendant while engaged in the business of telemarketing, and (2) any consumer so injured;
*6 B. The bond shall be deemed continuous and remain in full force and effect as long as Norton continues to engage or participate in telemarketing and for at least three years after Norton has ceased to engage or participate in telemarketing;
C. The bond required by this Paragraph is in addition to, and not in lieu of, any other bond required by federal, state, or local law;
D. Norton shall provide a copy of the bond required by this paragraph to the Associate Director for Marketing Practices at the address specified in Paragraph XVII, at least ten days before commencing the business of telemarketing;
E. The FTC may execute against the performance bond if it demonstrates to this Court, by a preponderance of the evidence, that after the effective date of this Order, the bonded Defendant, while engaging or participating in the business of telemarketing, made any false or misleading representation of material fact, directly or by implication, prohibited by Section 5 of the FTC Act or the provisions of this Permanent Injunction.
F. 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 FTC may initiate to enforce this Order.
II.It Is Further Ordered that, in connection with the offering for sale or sale of any franchise or business venture, Heller and Blasi are hereby permanently restrained and enjoined from:
A. Misrepresenting, either orally or in writing, to any potential investor of a franchise or business venture, any material fact, including, but not limited to the following:
B. Violating or assisting others to violate any provision of the Franchise Rule, 16 C.F.R. Part 436, 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, 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 disclose, in immediate conjunction with any mass advertised 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, as required by the Franchise Rule, 16 C.F.R. § 436.1(e)(3)–(4).
III.It Is Further Ordered that judgment is entered in favor of the FTC against the corporate and individual defendants, jointly and severally, in the amount of $9,165,567 (Nine Million, One Hundred Sixty-five Thousand, Five Hundred Sixty-seven Dollars). The receiver appointed by paragraph IV of this Order is also appointed as agent of the FTC for the sole purpose of collecting this judgment and for formulating and implementing a redress plan. Any monies collected by the receiver will be used to create a redress fund. This redress fund shall be used to provide restitution for investors who purchased greeting card business opportunities from the defendants. The redress fund shall also be used to pay administrative costs associated with providing such redress.
IV.*7 It Is Further Ordered that Linda L. Carroll shall continue as permanent receiver with the full power of an equity receiver, for the Corporate Defendants, and their affiliates and subsidiaries (including but not limited to Red Lion Seafood, Inc., d/b/a Red Lion Ostrich Hatchery, Inc. (“Red Lion”)) and of all the funds, properties, premises, accounts and other assets directly or indirectly owned, beneficially or otherwise, by the Corporate Defendants. The receiver shall:
A. Assume full control of the Corporate Defendants by removing Defendants Heller, Blasi, and Norton, and any other officer, independent contractor, employee, or agent of any of the Corporate Defendants, from control and management of the affairs of the Corporate Defendants.
B. Take custody, control and possession of all the funds, property, premises, mail and other assets of, or in the possession or under the control of, the Corporate Defendants, wherever situated. The receiver has full power to sue for, collect, receive and take in possession all goods, chattels, rights, credits, moneys, effects, lands, leases, books and records, work papers, and records of accounts, including computer-maintained information, and other papers and documents of the Corporate Defendants and business venture purchasers whose interests are now held by or under the direction, possession, custody or control of the Corporate Defendants. The receiver has discretion to determine that certain personal property or other assets of the individual Defendants shall be under the receiver's control, but shall remain in the possession or custody of an individual Defendant;
C. Conserve, hold and manage all receivership assets, and perform all acts necessary to preserve the value of those assets in order to prevent any irreparable loss, damage and injury to business venture purchasers;
D. Prevent the withdrawal or misapplication of funds belonging or entrusted to the Corporate Defendants and to obtain an accounting thereof;
F. Manage and administer the business of the Corporate Defendants until further order of this Court, by performing all acts necessary or incidental thereto. This includes hiring or dismissing all personnel the receiver deems appropriate;
G. Disburse funds that the receiver deems necessary and advisable to preserve the properties of the Corporate Defendants or that the receiver deems necessary and advisable to carry out the receiver's mandate under this Order;
I. Institute, 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 or augment the properties of the Corporate Defendants or that the receiver deems necessary and advisable to carry out the receiver's mandate under this Order. The receiver has the authority to bring suit for recovery of assets of the receivership estate against all parties to whom assets may have been fraudulently transferred;
*8 J. Institute, compromise, adjust, intervene in or become party to such actions or proceedings in state, federal or foreign courts, as the receiver deems necessary, against any and all individuals or entities who may be liable for or who assisted the Corporate Defendants in the activities set forth in the FTC's complaint and for which the Corporate Defendants are now found to be liable for or who assisted the Corporate Defendants in the activities set forth in the FTC's Complaint and for which the Corporate Defendants are now found to be liable in the sum of $9,165,567 (Nine Million Five Hundred Thousand Dollars);
K. Defend, compromise or adjust or otherwise dispose of any or all actions or proceedings instituted against the Corporate Defendants that the receiver deems necessary and advisable to preserve the properties of the Corporate Defendants or that the receiver deems necessary and advisable to carry out the receiver's mandate under this Order;
L. Liquidate all assets of the Corporate Defendants, and all assets transferred to the receiver in accordance with the terms of this Order;
M. Formulate a plan for distribution of the assets of the Corporate Defendants, pursuant to Paragraph III of this Order, to purchasers of the defendants' franchises or business ventures and to administer the distribution of such assets pursuant to further order of this Court; and
N. Execute all bills of sale and deeds to personal and real property belonging to or coming into possession of the Corporate Defendants.
V.It Is Further Ordered that, in light of the appointment of a receiver herein, the Corporate Defendants are hereby prohibited from filing a petition for relief under the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., without prior permission from this Court.
VI.It Is Further Ordered that the receiver and all personnel hired by the receiver as herein authorized, shall be compensated for the services they render to the receivership estate during the pendency of the case. Prior to paying any compensation, the receiver shall file a request with the Court, outlining the services rendered and the related fees and expenses. The receiver shall not pay any compensation except upon order of the Court.
VII.It Is Further Ordered that Norton will immediately cause to be transferred to the receiver all control, right, title and interest to all real and personal property and causes of action now in the custody or control of the receiver, (including property in the custody of the receiver pursuant to this Court's previous Order on December 20, 1993, a copy of which is attached to this Order as Exhibit B). This provision applies to, but is not limited to (1) the following: condominium unit number 2503, One Island Place Condominium II, 3801 N.E. 207th Street, North Miami Beach, Florida 33180; (2) all interest held by Norton or his wife, Patricia Riley Norton (“Riley”), in Red Lion; (3) all stock or ownership interest in the Corporate Defendants.
VIII.*9 It Is Further Ordered that Defendants are hereby permanently restrained and enjoined from providing to any person, except agents of the FTC, the receiver or other law enforcement authorities, the name, address, telephone number, or credit card or bank account number, of any person who purchased a franchise or business venture from any of Defendants.
IX.It Is Further Ordered during the pendency of the receivership ordered herein, Defendants and all customers, principals, investors, creditors, stockholders, lessors, and other persons, seeking to establish or enforce any claim, right or interest against or on behalf of any of the Corporate Defendants, or any of their subsidiaries or affiliates, and all others acting for or on behalf of such persons, including attorneys, trustees, agents, sheriffs, constables, marshals, and other officers and their deputies, and their respective attorneys, servants, agents and employees be and are hereby stayed from:
A. Commencing, prosecuting, continuing or enforcing any suit or proceeding against any of the Corporate 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 of or on behalf of any of the Corporate 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 Corporate 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 Corporate Defendants' interests in property, 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 Corporate Defendants, or any of their subsidiaries or affiliates, or the receiver appointed pursuant to this Permanent Injunction or any agent appointed by said 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 Corporate Defendants, or their subsidiaries or affiliates.
X.It Is Further Ordered that, immediately upon service of this Order upon them, if they have not done so already, Defendants shall transfer control of the following to the receiver; (1) all funds, assets, property owned beneficially or otherwise, and all other assets, wherever situated, of the Corporate Defendants; (2) all books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records of wire transfers, and check registers), client lists, title document and other papers or records, in any form or however maintained, of the Corporate Defendants; and (3) all funds and other assets belonging to members of the public now held by the Corporate Defendants.
XI.*10 It Is Further Ordered that Defendants shall fully cooperate with and assist the receiver appointed in this action. Defendants are hereby permanently restrained and enjoined from, directly or indirectly, hindering or obstructing the receiver in any manner.
XII.It Is Further Ordered that all banks, brokers, savings and loans, escrow agents, title companies, other financial institutions or any other persons or entities which are served with a copy of this Order, shall cooperate with all reasonable requests of the permanent receiver relating to implementation of this Order, including transferring funds at the receiver's direction, allowing the receiver access to safe deposit boxes, and producing records related to Defendants' accounts.
XIII.It Is Further Ordered that the receiver shall maintain the bond previously filed with the Clerk of this Court in the sum of $3,500 with sureties to be approved by the Court, conditioned that the receiver will well and truly perform the duties of her office and duly account for all monies and properties which may come into her hands and abide by and perform all things which she shall be directed to do.
XIV.It Is Further Ordered that, in order to facilitate the Commission's monitoring of compliance with the provisions of this Permanent Injunction, the individual defendants shall each, for five years after the date of entry of this Order:
A. Notify the FTC in writing, within thirty days after service of this Order, of his or her current residence address and employment status, including the name and business address of his or her current employer(s), if any;
B. Notify the FTC in writing within thirty days of any change in his or her residential address. Such notification shall include the Defendant's new address and telephone number;
C. Notify the FTC in writing within thirty days of any change in his or her employment status; such notice shall include the name, address and telephone number of the Defendant's new employer, a statement of the nature of his business, and a statement of the Defendant's duties and responsibilities in connection with the business;
D. Notify the FTC in writing at least thirty days prior to the effective date of any proposed change in the structure of any business entity owned or controlled by any Defendant, 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 Order;
E. After receiving reasonable notice from the FTC, permit duly authorized representative of the FTC access during normal business hours to the offices of any company or any person under any Defendants' control, to inspect and copy all documents belonging to any individual Defendant and all documents of any company owned or controlled by either of them, in whole or in part, relating in any way to any conduct subject to this Order;
F. Refrain from interfering with duly authorized representatives of the FTC who wish to interview and Defendants' employers, agents, and employees (who may have counsel present) relating in any way to any conduct subject to this Order;
*11 G. Upon written request by any duly authorized representative of the FTC, submit written reports (under oath, if requested) and produce documents on thirty days notice with respect to any conduct subject to this Order; and
XV.It Is Further Ordered that Defendants shall, within sixty days after date of entry of this Order, file with the FTC a preliminary report and on the one hundred-fiftieth day following entry of this Order file a supplemental report, in writing, setting forth in detail the manner and form in which they have complied with this Order.
XVI.It Is Further Ordered that all notices required of Defendants by this Order shall be made to the following address:
XVII.FN1. Several witnesses testified that they received a brochure from Gold Coast outlining the distributorship. The brochure includes at least one graphic containing estimated sales and earnings figures for new distributorships. These figures are consistent with the figures which Defendants' representatives orally communicated to the witnesses. FN2. In an Order dated March 7, 1994, the Court granted by default the FTC's Motion In Limine For Admission Of Declarations And Consumer Letters. The motion sought admission of the consumer declarations and letters pursuant to the residual exception to the hearsay set out in Rule 803(24) and 804(b)(5) of the Federal Rules of Evidence.
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