Federal Trade Commission v. Burnlounge Inc et al

Filing 474

AMENDED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF AGAINST DEFENDANTS BURNLOUNGE, INC., JUAN ALEXANDER ARNOLD, JOHN TAYLOR AND ROB DEBOER by Judge George H Wu, Judgment is hereby entered in favor of the Commission an d againstDefendants BurnLounge and Arnold, jointly and severally, in the amount ofsixteen million two hundred forty-five thousand seven hundred ninety-nine dollarsand seventy cents ($16,245,799.70), Judgment is hereby entered in favor of the Com mission and againstDefendant DeBoer in the amount of one hundred fifty thousand dollars($150,000.00) as disgorgement. Judgment is hereby entered in favor of the Commission and againstDefendant Taylor, in the amount of six hundred twenty thousan d one hundredthirty-nine dollars and sixty-four cents ($620,139.64) as disgorgement. IT IS FURTHER ORDERED that, except as otherwise provided above, each party to this Final Order bear his or its own costs and attorneys fees incurred in connection with this action. (SEE ATTACHED FOR FURTHER DETAILS) (pj)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION 8 9 10 11 12 13 14 ) FEDERAL TRADE COMMISSION, ) ) Plaintiff ) ) v. ) ) BURNLOUNGE, INC., et al., ) ) Defendants. ) ______________________________ ) Case No. CV 07-3654-GW (FMOx) AMENDED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF AGAINST DEFENDANTS BURNLOUNGE, INC., JUAN ALEXANDER ARNOLD, JOHN TAYLOR AND ROB DEBOER 15 16 17 On June 6, 2007, the Plaintiff, Federal Trade Commission (“FTC” or 18 “Commission”) filed a Complaint for Injunctive and Other Equitable Relief against 19 BurnLounge, Inc., Juan Alexander Arnold, John Taylor, Rob DeBoer and Scott 20 Elliot pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC 21 Act”), 15 U.S.C. § 53(b), alleging that they had engaged in deceptive acts or 22 practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). A 23 settlement was agreed upon between the Commission and Defendant Scott Elliot, 24 and the Court entered a stipulated final order for permanent injunction and other 25 equitable relief against him (Docket No. 248) on June 16, 2008. 26 As to the remaining defendants, the matter proceeded to a nine-day bench 27 trial between December 9, 2008 and December 22, 2008. On March 30, 2009, the 28 Court held a hearing to allow the parties to present closing arguments. On July 1, 1 2011, the Court issued a Statement of Decision (Docket No. 431) finding by a 2 preponderance of evidence that BurnLounge, Inc., Juan Alexander Arnold, John 3 Taylor, and Rob DeBoer had violated Section 5 of the FTC Act, and that 4 permanent injunctive and equitable monetary relief was warranted pursuant to 15 5 U.S.C. §§ 45 and 53. The Court directed Plaintiff to resubmit an amended 6 proposed order conforming to the Court’s Statement of Decision. Based on the record established in this matter and for reasons set forth in the 7 8 Court’s Statement of Decision, it is hereby ORDERED, ADJUDGED AND 9 DECREED: DEFINITIONS 10 For purposes of this Final Judgment and Order for Permanent Injunction and 11 12 Other Equitable Relief (hereinafter “Final Order”), the following definitions shall 13 apply: 14 15 1. “Business opportunity” means: (a) A commercial arrangement in which the seller solicits a prospective purchaser to enter into a new business; 16 17 (b) The prospective purchaser makes a required payment; and 18 (c) The seller, expressly or by implication, orally or in writing, 19 represents that the seller or one or more designated persons 20 will: 21 (i) Provide locations for the use or operation of equipment, 22 displays, vending machines, or similar devices, owned, 23 leased, controlled or paid for by the purchaser; 24 (ii) Provide outlets, accounts, or customers, including, but 25 not limited to, Internet outlets, accounts, or customers, 26 for the purchaser’s goods or services; or 27 28 (iii) Buy back any or all of the goods or services that the purchaser makes, produces, fabricates, grows, breeds, Page 2 1 modifies, or provides, including but not limited to 2 providing payment for such services as, for example, 3 stuffing envelopes from the purchaser’s home. 4 2. "Business Venture" means any written or oral business arrangement, 5 however denominated, that is a business opportunity, franchise, or that 6 consists of the payment of any consideration in exchange for: (a) the 7 right or means to offer, sell, or distribute goods or services (regardless 8 of whether identified by a trademark, service mark, trade name, 9 advertising or other commercial symbol); and (b) more than nominal 10 assistance to any person or entity in connection with or incident to the 11 establishment, maintenance, or operation of a new business, or the 12 entry by an existing business into a new line or type of business. 13 3. subscriber, or natural person. 14 15 "Consumer" means an actual or potential purchaser, customer, 4. "Defendant BurnLounge" means Defendant BurnLounge, Inc., and its successors and assigns. 16 17 5. “Defendant Arnold” means Defendant Juan Alexander Arnold. 18 6. “Defendant Taylor” means Defendant John Taylor, whose legal name is John Marcus Taylor. 19 20 7. name is Robert Edwards DeBoer. 21 22 8. 9. “Individual Defendants” means Defendants Arnold, Taylor and DeBoer. 25 26 “Defendants” means Defendants BurnLounge, Inc., Juan Alexander Arnold, John Taylor and Rob DeBoer. 23 24 “Defendant DeBoer” means Defendant Rob DeBoer, whose legal 10. The term "document" is synonymous in meaning and equal in scope to 27 the usage of the term in Federal Rule of Civil Procedure 34(a), and 28 includes writings, drawings, graphs, charts, photographs, audio and Page 3 1 video recordings, electronically stored information, computer records, 2 and other data compilations from which information can be obtained 3 and translated, if necessary, through detection devices into reasonably 4 usable form. A draft or non-identical copy is a separate document 5 within the meaning of the term. 6 11. “Franchise” means any continuing commercial relationship or 7 arrangement, whatever it may be called, in which the terms of the 8 offer or contract specify, or the franchise seller promises or represents, 9 orally or in writing, that: (a) the franchisee will obtain the right to 10 operate a business that is identified or associated with the franchisor’s 11 trademark, or to offer, sell, or distribute goods, services, or 12 commodities that are identified or associated with the franchisor’s 13 trademark; (b) the franchisor will exert or has authority to exert a 14 significant degree of control over the franchisee’s method of 15 operation, or provide significant assistance in the franchisee’s method 16 or operation; and (c) as a condition of obtaining or commencing 17 operation of the franchise, the franchisee makes a required payment or 18 commits to make a required payment to the franchisor or its affiliate. 19 12. “Franchisee” means any person who is granted a franchise. 20 13. “Franchise seller” means a person that offers for sale, sells, or arranges for the sale of a franchise. 21 22 14. participates in the franchise relationship. 23 24 15. "Material fact" means any fact likely to affect a person's choice of, or conduct regarding, goods, services, or business ventures. 25 26 “Franchisor” means any person who grants a franchise and 16. "Multi-level Marketing Program" means any marketing program in 27 which participants pay money to the program promoter in return for 28 which the participants obtain the right to: (a) recruit additional Page 4 1 participants, or have additional participants placed by the promoter or 2 any other person into the program participant’s downline, tree, 3 cooperative, income center, or other similar program grouping; (b) sell 4 goods or services; and (c) receive payment or other compensation, in 5 whole or in part, based upon the sales of those in the participants 6 downline, tree, cooperative, income center or similar program 7 grouping. 8 17. is not currently engaged, or a new line or type of business. 9 10 “New business” means a business in which the prospective purchaser 18. “Participating in any prohibited marketing scheme” includes, but is 11 not limited to, promoting, marketing, advertising, offering for sale, or 12 selling, or assisting others in the offering for sale or selling the right to 13 participate in, the prohibited marketing scheme, as well as acting or 14 serving as an officer, director, employee, salesperson, agent, 15 shareholder, advisor, consultant, independent contractor, or 16 distributor, or acting as a speaker or spokesperson on behalf of, any 17 prohibited marketing scheme. 18 19. "Prohibited Marketing Scheme” means an illegal pyramid sales 19 scheme (see e.g., Webster v. Omnitrition Int’l, 79 F.3d 776, 781 (9th 20 Cir. 1996), Ponzi scheme, chain marketing scheme, or other marketing 21 plan or program in which participants pay money or valuable 22 consideration in return for which they obtain the right to receive 23 rewards for recruiting other participants into the program, and those 24 rewards are unrelated to the sale of products or services to ultimate 25 users. For purposes of this definition, “sale of products or services to 26 ultimate users” does not include sales to other participants or recruits 27 or to the participants’ own accounts. 28 20. “Trademark” means trademarks, service marks, names, logos, and Page 5 other commercial symbols. 1 2 ORDER 3 I. Prohibited Marketing Schemes 4 IT IS THEREFORE ORDERED that each Defendant and their officers, 5 agents, servants, and employees, and those persons in active concert or 6 participation with them who receive actual notice of this Final Order by personal 7 service or otherwise, whether acting directly or through any entity, corporation, 8 subsidiary, division, or other device, are permanently restrained and enjoined from 9 engaging, participating, or assisting in any manner or capacity whatsoever, in any 10 Prohibited Marketing Scheme. II. Prohibited Representations 11 12 IT IS FURTHER ORDERED that, in connection with the advertising, 13 promotion, offering for sale, or sale, or assisting others in the advertising, 14 promotion, offering for sale, or sale of any Multi-level Marketing Program or 15 Business Venture, each Defendant and their officers, agents, servants, and 16 employees, and those persons in active concert or participation with them who 17 receive actual notice of this Final Order by personal service or otherwise, whether 18 acting directly or through any entity, corporation, subsidiary, division, or other 19 device, are permanently restrained and enjoined from making, expressly or by 20 implication, orally or in writing, any false or misleading statement or 21 misrepresentation of material fact including, but not limited to, the following: 22 A. Misrepresentations about the amount of sales, income, or profits that a 23 participant in such Multi-level Marketing Program or Business Venture can 24 reasonably expect to achieve; 25 B. Misrepresentations about the amount of sales, income, or profits that a 26 participant or participants in such Multi-level Marketing Program or Business 27 Venture have actually achieved; 28 C. Misrepresentations about the profitability of participating in such Page 6 1 2 Multi-level Marketing Program or Business Venture D. Misrepresentations that a person who participates in such Multi-level 3 Marketing Program or Business Venture can reasonably expect to recoup his or her 4 investment; 5 6 7 8 9 E. Misrepresentations of any reward offered to or earned by participants in such Multi-level Marketing Program or Business Venture; F. Misrepresentations of the legality of such Multi-level Marketing Program or Business Venture; and G. Misrepresentations of any material aspect of the performance, 10 efficacy, nature, or central characteristic of any good or service offered for sale 11 through such Multi-level Marketing Program or Business Venture. III. Prohibition Against Material Omissions 12 13 IT IS FURTHER ORDERED that (in connection with the advertising, 14 promotion, offering for sale, or sale, or assisting others in the advertising, 15 promotion, offering for sale, or sale of any Multi-level Marketing Program or 16 Business Venture) each Defendant and their officers, agents, servants, employees, 17 and attorneys, whether acting directly or through any entity, corporation, 18 subsidiary, division, or other device, are hereby permanently restrained and 19 enjoined from failing to disclose, clearly and conspicuously, to any participant or 20 prospective participant in any Multi-level Marketing Program or Business Venture 21 to whom any earnings, profits or sales volume claims have been made, the 22 following historical information to the extent that such information is reasonably 23 available to the business: 24 A. The number and percentage of participants in the Multi-level 25 Marketing Program or Business Venture who have earned, profited or sold at least 26 the amount represented; and 27 28 B. The number and percentage of participants in the Multi-level Marketing Program or Business Venture who have made a profit through their Page 7 1 participation in the Multi-level Marketing Program or Business Venture. IV. Equitable Monetary Relief 2 3 IT IS FURTHER ORDERED that: 4 A. Judgment is hereby entered in favor of the Commission and against 5 Defendants BurnLounge and Arnold, jointly and severally, in the amount of 6 sixteen million two hundred forty-five thousand seven hundred ninety-nine dollars 7 and seventy cents ($16,245,799.70), to be utilized to directly reimburse 8 consumers who were injured by the BurnLounge pyramid scheme, except as 9 provided for in Section V.A. The judgment shall be paid to the Commission within 10 sixty (60) days of entry of this Final Order. Full payment of this sum shall fully 11 satisfy all monetary claims asserted by the Commission against Defendants 12 BurnLounge and Arnold in this matter. Within fifteen (15) days of entry of this 13 Final Order, in partial satisfaction of the judgment, Defendants Arnold and 14 BurnLounge shall do the following: 15 1. Defendant Arnold shall transfer to the Commission his interest 16 in 1430 N. Cahuega Partners, LP, and all rights and title to that 17 interest; and 18 19 2. Defendant BurnLounge shall: a. Transfer to the Commission its membership interest in 20 Beatport LLC, and all rights and title to that membership 21 interest; and 22 b. Transfer to the Commission all funds owned by 23 BurnLounge or held on its behalf in banks or financial 24 institutions, or otherwise. These funds shall include, but 25 not be limited to, the $50,267.00 and any interest earned 26 thereon, that Defendant BurnLounge was ordered to 27 preserve, pursuant to the Court’s Order of August 4, 2008 28 [Docket No. 268]. Page 8 1 B. Judgment is hereby entered in favor of the Commission and against 2 Defendant DeBoer in the amount of one hundred fifty thousand dollars 3 ($150,000.00) as disgorgement. Defendant DeBoer shall disgorge that amount to 4 the Commission within sixty (60) days of entry of this Final Order. Full payment 5 of this sum shall fully satisfy all monetary claims asserted by the Commission 6 against Defendant DeBoer in this matter. 7 C. Judgment is hereby entered in favor of the Commission and against 8 Defendant Taylor, in the amount of six hundred twenty thousand one hundred 9 thirty-nine dollars and sixty-four cents ($620,139.64) as disgorgement. Defendant 10 Taylor shall disgorge that amount to the Commission within sixty (60) days of 11 entry of this Final Order. Full payment of this sum shall fully satisfy all monetary 12 claims asserted by the Commission against Defendant Taylor in this matter. 13 14 15 D. The judgments entered pursuant to this Section are equitable monetary relief, and are not fines, penalties, punitive assessments or forfeitures. E. Defendants shall relinquish all dominion, control, and title to the 16 funds or assets paid or transferred pursuant to this Final Order to the fullest extent 17 permitted by law. 18 F. Pursuant to Section 604(1) of the Fair Credit Reporting Act, 15 U.S.C. 19 § 1681b(1), any consumer reporting agency may furnish consumer reports 20 concerning the Individual Defendants to the FTC, which shall be used for purposes 21 of collecting and reporting on any delinquent amount arising out of this Order. V. Administration of Funds Collected 22 23 IT IS FURTHER ORDERED THAT: 24 A. Any and all funds collected by the FTC pursuant to this Final 25 Judgment, shall be deposited into a fund administered by the Commission or its 26 agent to be used for consumer redress and any attendant expenses for the 27 administration of any redress fund. Defendants shall have no right to contest the 28 manner of distribution chosen by the Commission. The Commission in its sole Page 9 1 discretion may use a designated agent to administer consumer redress. If the 2 Commission determines in its sole discretion that redress to purchasers is wholly or 3 partially impracticable, or any funds collected from Defendants remain after the 4 redress process is completed, then any funds not used for redress or expenses 5 attendant to the redress fund shall be deposited in the United States Treasury as 6 disgorgement, except as provided in the next paragraph. 7 The funds used to accomplish the consumer redress (and any costs of 8 administering that redress program) will be initially taken from any moneys and/or 9 property obtained by the FTC from Defendant Arnold pursuant to this Judgment 10 (the “Arnold Funds”). On an annual basis beginning one year after the redress 11 program is established (but beginning, in no event, later than two years after the 12 entry of this Judgment), any Arnold Funds which are not actually paid to 13 consumers as consumer redress or expended as expenses attendant to the 14 implementation of the redress program shall be returned to Defendant Arnold; but 15 in no event shall the amount of returned funds exceed the positive difference of (1) 16 the fair market value of any property plus any cash actually paid to the 17 Commission by Defendant Arnold pursuant to the Judgment, minus (2) the sum of 18 $1,664,506.45. See footnote 48 of the Statement of Decision in this action (Docket 19 Item No. 431). 20 B. Defendants shall cooperate fully to assist the Commission in 21 identifying consumers who may be entitled to redress pursuant to this Final Order. 22 The cooperation shall include, but not be limited to, providing Plaintiff a list of 23 each consumer who purchased a VIP, Exclusive or Basic package, and at any time 24 was a BurnLounge Mogul. As to each such consumer, Defendants shall provide 25 consumer contact information including the consumer’s name, member and retailer 26 identification numbers, address, telephone numbers and e-mail addresses. This 27 consumer contact information shall be provided to Plaintiff within twenty (20) 28 days of entry of this Final Order in the form of a searchable electronic document Page 10 1 formatted in Microsoft Excel [.xls or .xlsx] or Microsoft Access [.mdb or .mdbx], 2 and supplied on CD-R CD ROM optical disks formatted to ISO 9660 3 specifications, DVD-ROM optical disks for Windows-compatible personal 4 computers, or USB 2.0 flash drives, or in such other electronic form as may be 5 agreed to in writing by Plaintiff. VI. Compliance Monitoring 6 7 IT IS FURTHER ORDERED that, for the purpose of monitoring and 8 investigating compliance with any provision of this Final Order, and for a period of 9 five (5) years: 10 A. Within fifteen (15) days of receipt of written notice from a 11 representative of the Commission, Defendants each shall submit additional written 12 reports, which are true and accurate and sworn to under penalty of perjury; produce 13 documents for inspection and copying; appear for deposition; and provide entry 14 during normal business hours to any business location in each Defendant’s 15 possession or direct or indirect control to inspect the business operation; 16 17 B. In addition, the Commission is authorized to use all other lawful means, including but not limited to: 1. 18 Obtaining discovery from any person, without further leave of 19 court, using the procedures prescribed by Fed. R. Civ. P. 30, 31, 20 33, 34, 36, 45 and 69; 2. 21 Posing as consumers and suppliers to Defendants, their 22 employees, or any other entity managed or controlled in whole 23 or in part by any Defendant, without the necessity of 24 identification or prior notice; and 25 C. Defendants shall permit representatives of the Commission to 26 interview any employer, consultant, independent contractor, representative, agent, 27 or employee who has agreed to such an interview, relating in any way to any 28 conduct subject to this Final Order. The person interviewed may have counsel Page 11 1 2 present. Provided however, that nothing in this Final Order shall limit the 3 Commission’s lawful use of compulsory process, pursuant to Sections 9 and 20 of 4 the FTC Act, 15 U.S.C. §§ 49, 57b-1, to obtain any documentary material, tangible 5 things, testimony, or information relevant to unfair or deceptive acts or practices in 6 or affecting commerce (within the meaning of 15 U.S.C. § 45(a)(1)). VII. Compliance Reporting 7 8 9 10 11 12 IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Final Order may be monitored: A. For a period of five (5) years from the date of entry of this Final Order, 1. Each Individual Defendant shall notify the Commission of the 13 following: 14 a. Any changes in such Defendant’s residence, mailing 15 addresses, and telephone numbers, within ten (10) days 16 of the date of such change; 17 b. Any changes in such Defendant’s employment status 18 (including self-employment), and any change in such 19 Defendant’s ownership in any business entity, within ten 20 (10) days of the date of such change. Such notice shall 21 include the name and address of each business that such 22 Defendant is affiliated with, employed by, creates or 23 forms, or performs services for; a detailed description of 24 the nature of the business; and a detailed description of 25 such Defendant’s duties and responsibilities in 26 connection with the business or employment; and 27 28 c. Any changes in such Defendant’s name or use of any aliases or fictitious names; Page 12 2. 1 Defendant BurnLounge shall notify the Commission of any 2 changes in structure of Defendant BurnLounge or any business 3 entity that Defendant BurnLounge directly or indirectly 4 controls, or has an ownership interest in, that may affect 5 compliance obligations arising under this Final Order, including 6 but not limited to: incorporation or other organization; a 7 dissolution, assignment, sale, merger, or other action; the 8 creation or dissolution of a subsidiary, parent, or affiliate that 9 engages in any acts or practices subject to this Final Order; or a 10 change in the business name or address, at least thirty (30) days 11 prior to such change, provided that, with respect to any 12 proposed change in the business entity about which Defendant 13 BurnLounge learns less than thirty (30) days prior to the date 14 such action is to take place, Defendant BurnLounge shall notify 15 the Commission as soon as is practicable after obtaining such 16 knowledge. 17 B. One hundred eighty (180) days after the date of entry of this Final 18 Order and annually thereafter for a period of five (5) years, Defendants each shall 19 provide a written report to the FTC, which is true and accurate and sworn to under 20 penalty of perjury, setting forth in detail the manner and form in which they have 21 complied and are complying with this Final Order. This report shall include, but 22 not be limited to: 23 24 1. For each Individual Defendant: a. addresses, and telephone numbers; 25 26 Such Defendant’s then-current residence address, mailing b. Such Defendant’s then-current employment status 27 (including self-employment), including the name, 28 addresses, and telephone numbers of each business that Page 13 1 such Defendant is affiliated with, employed by, or 2 performs services for; a detailed description of the nature 3 of the business; and a detailed description of such 4 Defendant’s duties and responsibilities in connection 5 with the business or employment; and c. 6 Any other changes required to be reported under Subsection A of this Section. 7 2. 8 For all Defendants: a. 9 A copy of each acknowledgment of receipt of this Final 10 Order, obtained pursuant to the Section titled 11 “Distribution of Order”; b. 12 Subsection A of this Section. 13 14 15 16 Any other changes required to be reported under C. Each Defendant shall notify the Commission of the filing of a bankruptcy petition by such Defendant within fifteen (15) days of filing. D. For the purposes of this Final Order, Defendants shall, unless 17 otherwise directed by the Commission’s authorized representatives, send by 18 overnight courier all reports and notifications required by this Final Order to the 19 Commission, to the following address: Associate Director for Enforcement Federal Trade Commission 600 Pennsylvania Avenue, N.W., Room NJ-2122 Washington, D.C. 20580 RE: FTC v. BurnLounge, Inc. 20 21 22 23 Provided that, in lieu of overnight courier, Defendants may send such reports 24 or notifications by first-class mail, but only if Defendants contemporaneously send 25 an electronic version of such report or notification to the Commission at: 26 DEBrief@ftc.gov. 27 28 E. For purposes of the compliance reporting and monitoring required by this Final Order, the Commission is authorized to communicate directly with each Page 14 1 Defendant. VIII. Record Keeping Provisions 2 3 IT IS FURTHER ORDERED that, for a period of seven (7) years from the 4 date of entry of this Final Order, Defendants, in connection with advertising, 5 offering, marketing, promotion or sale of any multi-level marketing program or 6 business venture and their agents, employees, officers, or corporations, are hereby 7 restrained and enjoined from failing to create and retain the following records: 8 9 10 A. Accounting records that reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues; B. Personnel records accurately reflecting: the name, address, and 11 telephone number of each person employed in any capacity by such business, 12 including as an independent contractor; that person's job title or position; the date 13 upon which the person commenced work; and the date and reason for the person's 14 termination, if applicable; 15 C. Customer files containing the names, addresses, phone numbers, 16 dollar amounts paid, quantity of items or services purchased, and description of 17 items or services purchased, to the extent such information is obtained and kept in 18 the ordinary course of business; 19 20 21 22 23 D. Complaints and refund requests (whether received directly, indirectly, or through any third party) and any responses to those complaints or requests; E. Copies of all sales scripts, training materials, advertisements, or other marketing materials; and F. All records and documents necessary to demonstrate full compliance 24 with each provision of this Final Order, including but not limited to, copies of 25 acknowledgments of receipt of this Final Order required by the Sections titled 26 “Distribution of Order” and “Acknowledgment of Receipt of Order” and all reports 27 submitted to the FTC pursuant to the Section titled “Compliance Reporting.” 28 IX. Distribution of Order Page 15 1 IT IS FURTHER ORDERED that, for a period of five (5) years from the 2 date of entry of this Final Order, Defendants shall deliver copies of the Final Order 3 as directed below: 4 A. Defendant BurnLounge must deliver a copy of this Final Order to 5 (1) all of its principals, officers, directors, and managers; (2) all of its employees, 6 agents, and representatives who engage in conduct related to the subject matter of 7 the Final Order; and (3) any business entity resulting from any change in structure 8 set forth in Subsection A of the Section titled “Compliance Reporting.” For 9 current personnel, delivery shall be within five (5) days of service of this Final 10 Order upon Defendant BurnLounge. For new personnel, delivery shall occur prior 11 to them assuming their responsibilities. For any business entity resulting from any 12 change in structure set forth in Subsection A of the Section titled “Compliance 13 Reporting,” delivery shall be at least ten (10) days prior to the change in structure. 14 B. Individual Defendant as Control Person: For any business that an 15 Individual Defendant controls, directly or indirectly, or in which such Defendant 16 has a majority ownership interest, such Defendant must deliver a copy of this Final 17 Order to (1) all principals, officers, directors, and managers of that business; (2) all 18 employees, agents, and representatives of that business who engage in conduct 19 related to the subject matter of the Final Order; and (3) any business entity 20 resulting from any change in structure set forth in Subsection A.2 of the Section 21 titled “Compliance Reporting.” For current personnel, delivery shall be within five 22 (5) days of service of this Final Order upon such Defendant. For new personnel, 23 delivery shall occur prior to them assuming their responsibilities. For any business 24 entity resulting from any change in structure set forth in Subsection A.2 of the 25 Section titled “Compliance Reporting,” delivery shall be at least ten (10) days prior 26 to the change in structure. 27 28 C. Individual Defendant as employee or non-control person: For any business where an Individual Defendant is not a controlling person of the business Page 16 1 but otherwise engages in conduct which is related to or involves multi-level 2 marketing, such Defendant must deliver a copy of this Final Order to all principals 3 and managers of such business before engaging in such conduct. D. 4 Defendants must secure a signed and dated statement acknowledging 5 receipt of the Final Order, within thirty (30) days of delivery, from all persons 6 receiving a copy of the Final Order pursuant to this Section. X. Acknowledgment of Receipt of Order 7 IT IS FURTHER ORDERED that each Defendant, within five (5) 8 9 business days of receipt of this Final Order as entered by the Court, must submit to 10 the Commission a truthful sworn statement acknowledging receipt of this Final 11 Order. XI. Independence of Obligations 12 IT IS FURTHER ORDERED that each of the obligations imposed by 13 14 this Final Order is independent of all other obligations under the Final Order, and 15 that the expiration of any requirements imposed by this Final Order shall not affect 16 any other obligation arising under this Final Order. XII. Costs and Attorneys Fees 17 IT IS FURTHER ORDERED that, except as otherwise provided 18 19 above, each party to this Final Order bear his or its own costs and attorneys fees 20 incurred in connection with this action. XIII. Continued Jurisdiction 21 IT IS FURTHER ORDERED that this Court shall retain jurisdiction 22 23 /// 24 /// 25 of this matter for purposes of construction, modification, and enforcement of this 26 Final Order. 27 28 Dated: 29th of February, 2012 Page 17 1 2 3 ______________________________ Hon. George H. Wu United States District Judge 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page 18

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