Federal Trade Commission v. Sale Slash LLC et al

Filing 171

Stipulated Order for Permanent Injunction and Monetary Judgment filed by Judge Percy Anderson against Defendants Defendants Sale Slash, LLC, Purists Choice LLC, Optim Products LLC, Edgar Babayan, Artur Babayan, and Vahe Haroutounian (collectivel y, "Stipulating Defendants"). Judgment in the amount of Forty-Three Million, Three Hundred Seventy-Nine Thousand, Two Hundred Fifty-Three Dollars and Fifty Cents ($43,379,253.50) is entered in favor of the Commission against Stipulating Individual Defendants and Stipulating Corporate Defendants, jointly and severally, as equitable monetary relief. (See attached document for other requirements.) (lom)

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JONATHAN E. NUECHTERLEIN
GENERAL COUNSEL
MATTHEW H. WERNZ
GUY G. WARD
[e-mail]
[e-mail]
Federal Trade Commission
55 West Monroe Street, Suite 1825
Chicago, Illinois 60603
Tel: [phone]; Fax: [phone]
RAYMOND E. MCKOWN (Cal. Bar No. 150975)
[e-mail]
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
Tel: [phone]; Fax: [phone]
Attorneys for Plaintiff
FEDERAL TRADE COMMISSION

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

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FEDERAL TRADE COMMISSION,
Case No. CV15-03107 PA (AJWx)

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Plaintiff,
v.
SALE SLASH, LLC, a California
limited liability company, et al.,

Stipulated Order for Permanent
Injunction and Monetary
Judgment

Defendants.

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Plaintiff, the Federal Trade Commission (“Commission” or “FTC”), filed its
Amended Complaint For Permanent Injunction and Other Equitable Relief

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(“Complaint”), pursuant to Sections 13(b) and 19 of the Federal Trade

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Commission Act (“FTC Act”), 15 U.S.C. §§ 53(b) and 57(b), and Section 7(a) of

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the Controlling the Assault of Non-Solicited Pornography and Marketing Act of
2003 (the “CAN-SPAM Act”), 15 U.S.C. § 7706(a). The Commission and
Defendants Sale Slash, LLC, Purists Choice LLC, Optim Products LLC, Edgar

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Babayan, Artur Babayan, and Vahe Haroutounian (collectively, “Stipulating

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Defendants”), stipulate to the entry of this Stipulated Order for Permanent

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Injunction and Monetary Judgment (“Order”) to resolve all matters in dispute in
this action between them.
THEREFORE, IT IS ORDERED as follows:

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FINDINGS OF FACT

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1.

This Court has jurisdiction over this matter.

2.

The Complaint charges that Defendants have engaged in deceptive

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and illegal acts or practices that violate Sections 5(a) and 12 of the FTC Act, 15
U.S.C. §§ 45(a) & 52, and Section 5(a) of the CAN-SPAM Act, 15 U.S.C.

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§ 7704(a), in the advertising, marketing, promoting, offering for sale, or selling of

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dietary supplements online, including through commercial electronic mail

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messages.
3.

Stipulating Defendants neither admit nor deny any of the allegations

in the Complaint, except as specifically stated in this Order. Only for purposes of

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this action, Stipulating Defendants admit the facts necessary to establish

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jurisdiction.

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4.

Stipulating Defendants waive any claim that they may have under the

Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this
action through the date of this Order, and agree to bear their own costs and

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attorney fees.
5.

Stipulating Defendants waive all rights to appeal or otherwise

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challenge or contest the validity of this Order.
DEFINITIONS

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For the purposes of this Order, the following definitions shall apply:

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1.

“Affiliate” means any person, including third-party marketers, who

participates in an affiliate program.

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2.

“Affiliate Network” means any person who provides another person

with affiliates for an affiliate program or whom any person contracts with as an
affiliate to promote any product, service, or program.

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3.

“Affiliate Program(s)” means (a) any arrangement under which any

marketer or seller of a product, service, or program pays, offers to pay, or provides

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or offers to provide any form of consideration to any Stipulating Defendant, either
directly or through an affiliate network, to (i) provide the marketer or seller with,
or refer to the marketer or seller, potential or actual customers; or (ii) otherwise

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market, advertise, or offer for sale the product or service on behalf of the marketer

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or seller; or (b) any arrangement under which any Stipulating Defendant pays,

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offers to pay, or provides or offers to provide any form of consideration to any
third party, either directly or through an affiliate network, to (i) provide any
Stipulating Defendant with, or refer to any Stipulating Defendant, potential or

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actual customers; or (ii) otherwise market, advertise, or offer for sale any product,

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service, or program on behalf of any Stipulating Defendant.

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4.

“Clear(ly) and conspicuous(ly)” means that a required disclosure is

difficult to miss (i.e., easily noticeable) and easily understandable by ordinary
consumers, including in all of the following ways:

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a.

In any communication that is solely visual or solely audible, the

disclosure must be made through the same means through which the

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communication is presented. In any communication made through both visual and
audible means, such as a television advertisement, the disclosure must be presented
simultaneously in both the visual and audible portions of the communication, even

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if the representation requiring the disclosure is made in only one means.
b.

A visual disclosure, by its size, contrast, location, the length of

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time it appears, and other characteristics, must stand out from any accompanying
text or other visual elements so that it is easily noticed, read, and understood.

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c.

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An audible disclosure, including by telephone or streaming

video, must be delivered in a volume, speed, and cadence sufficient for ordinary

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consumers to easily hear and understand it.
d.

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In any communication using an interactive electronic medium,

such as the Internet or software, the disclosure must be unavoidable.

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e.

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The disclosure must use diction and syntax understandable to

ordinary consumers and must appear in each language in which the representation

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that requires the disclosure appears.
f.

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The disclosure must comply with these requirements in each

medium through which it is received, including all electronic devices and face-to-

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face communications.

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g.

The disclosure must not be contradicted or mitigated by, or

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inconsistent with, anything else in the communication.
h.

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When the representation or sales practice targets a specific

audience, such as children, the elderly, or the terminally ill, “ordinary consumers”

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includes reasonable members of that group.
5.

“Commercial electronic mail message” (or “commercial email”)

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means any electronic mail message the primary purpose of which is the
commercial advertisement or promotion of a commercial product or service

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(including the content on an Internet website operated for commercial purposes).

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15 U.S.C. § 7702(2).

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6.

“Corporate Defendants” means Sale Slash, LLC, a California

limited liability company, Purists Choice LLC, a California limited liability
company, Optim Products LLC, a California limited liability company, Apex

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Customer Care LLC, a California limited liability company, Penway LLC, a

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California limited liability company, and Renvee LLC, a California limited

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liability company, and their successors and assigns.
7.

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“Cosmetic” means:
a.

articles to be rubbed, poured, sprinkled, or sprayed on,

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introduced into, or otherwise applied to the human body or any part thereof

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intended for cleansing, beautifying, promoting attractiveness, or altering the

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appearance; and
b.

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articles intended for use as a component of any such article;

except that such term shall not include soap. 15 U.S.C. § 55(e).

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8.

“Covered Product” means any dietary supplement, food, drug, or

cosmetic product.

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9.

“Defendants” means all of the Individual Defendants and the

Corporate Defendants, individually, collectively, or in any combination.
10.

“Dietary supplement” means:

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a.

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any product labeled as a dietary supplement or otherwise

represented as a dietary supplement; or

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b.

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any pill, tablet, capsule, powder, softgel, gelcap, liquid, or other

similar form containing one or more ingredients that is a vitamin, mineral, herb or
other botanical, amino acid, probiotic, or other dietary substance to supplement the

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diet by increasing the total dietary intake, or a concentrate, metabolite, constituent,

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extract, or combination of any ingredient described above, that is intended to be

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ingested, and is not represented to be used as a conventional food or as a sole item
of a meal or the diet.
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“Drug” means:

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a.

articles recognized in the official United States Pharmacopoeia,

official Homoeopathic Pharmacopoeia of the United States, or official National

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Formulary, or any supplement to any of them;
b.

articles intended for use in the diagnosis, cure, mitigation,

treatment, or prevention of disease in man or other animals;

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c.

articles (other than food) intended to affect the structure or any

function of the body of man or other animals; and

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d.

articles intended for use as a component of any article specified

in subsection (a), (b), or (c); but does not include devices or their components,
parts, or accessories. 15 U.S.C. § 55(c).

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12.

“Electronic mail message” (or “email”) means a message sent to a

unique electronic mail address. 15 U.S.C. § 7702(6).

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13.

“Electronic mail address” means a destination, commonly expressed

as a string of characters, consisting of a unique user name or mailbox (commonly
referred to as the “local part”) and a reference to an Internet domain (commonly

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referred to as the “domain part”), whether or not displayed, to which an electronic

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mail message can be sent or delivered. 15 U.S.C. § 7702(5).

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14.

“Essentially equivalent product” means a product that contains the

identical ingredients, except for inactive ingredients (e.g., binders, colors, fillers,
excipients), in the same form and dosage, and with the same route of

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administration (e.g., orally, sublingually), as the Covered Product; provided that

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the Covered Product may contain additional ingredients if reliable scientific

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evidence generally accepted by experts in the relevant field indicates that the
amount and combination of additional ingredients is unlikely to impede or inhibit
the effectiveness of the ingredients in the Essentially Equivalent Product.

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15.

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“Food” means
a.

articles used for food or drink for man or other animals;

b.

chewing gum; and

c.

articles used for components of any such article. 15 U.S.C.

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§ 55(b).

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16.

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“Header information” means the source, destination, and routing

information attached to an electronic mail message, including the originating

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domain name and originating electronic mail address, and any other information
that appears in the line identifying, or purporting to identify, a person initiating the
message. 15 U.S.C. § 7702(8).

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“Individual Defendants” or “Stipulating Individual Defendants”

means Edgar Babayan, Artur Babayan, and Vahe Haroutounian, also known as

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Vaheh Haroutounian, also d/b/a Prisma Profits.
18.

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“Initiate,” when used with respect to a commercial electronic mail

message, means to originate or transmit such message or to procure the origination

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or transmission of such message. 15 U.S.C. § 7702(9).

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19.

“Person” means a natural person, an organization or other legal

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entity, including a corporation, partnership, sole proprietorship, limited liability
company, association, cooperative, or any other group or combination acting as an
entity.

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20.

“Plaintiff,” “Commission,” or “FTC” means the Federal Trade

Commission.

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21.

“Preliminary Injunction” means the Preliminary Injunction entered

in this matter on May 12, 2015 (Dkt. No. 33).

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22.

“Procure,” when used with respect to the initiation of a commercial

electronic mail message, means intentionally to pay or provide other consideration

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to, or induce, another person to initiate such a message on one’s behalf. 15 U.S.C.
§ 7702(12).
23.

“Reliably reported,” for a human clinical test or study (“test”),

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means a report of the test has been published in a peer-reviewed journal, and such

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published report provides sufficient information about the test for experts in the

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relevant field to assess the reliability of the results.
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“Receiver” means Robb Evans and Associates, LLC, appointed as

Permanent Equity Receiver over Receivership Defendants pursuant to Section X of

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the Preliminary Injunction.
25.

“Receivership Defendants” means Sale Slash, LLC, a California

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limited liability company and Purists Choice LLC, a California limited liability
company, and their successors and assigns, as well as any subsidiaries, affiliates,
divisions, or business names created or used by these entities, including, but not

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limited to, Apex Customer Care LLC, a California limited liability company, E-

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Level Marketing Inc., a California corporation, Future DNA LLC, a California

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limited liability company, Geneva Shox LLC, a California limited liability
company, Genix Marketing LLC, a California limited liability company, Lead
Kings LLC, a California limited liability company, Optim Products LLC, a

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California limited liability company, Penway LLC, a California limited liability

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company, Renvee LLC, a California limited liability company, and Vita Fuse LLC,

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a California limited liability company.
26.

“Sender” means a person who initiates a commercial electronic mail

message and whose product, service, or Internet website is advertised or promoted

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by the message. 15 U.S.C. § 7702(16).
27.

“Stipulating Corporate Defendants” means Sale Slash, LLC, a

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California limited liability company, Purists Choice LLC, a California limited
liability company, and Optim Products LLC, a California limited liability
company, and their successors and assigns.

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28.

“Stipulating Defendants” means all of the Individual Defendants and

the Stipulating Corporate Defendants, individually, collectively, or in any

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combination.
29.

“TRO” means the Ex Parte Temporary Restraining Order with an

Asset Freeze, Appointment of a Receiver, and Other Equitable Relief, and Order to

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Show Cause Why a Preliminary Injunction Should Not Issue entered in this matter

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on April 27, 2015.

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I.

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PROHIBITED WEIGHT-LOSS CLAIMS

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IT IS ORDERED that Stipulating Defendants, Stipulating Defendants’

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officers, agents, employees, and attorneys, and all other persons in active concert
or participation with any of them, who receive actual notice of this Order, whether

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acting directly or indirectly, in connection with the manufacturing, labeling,

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advertising, promoting, offering for sale, sale, or distribution of any Covered

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Product, are permanently restrained and enjoined from making, or assisting others
in making, expressly or by implication, including through the use of a product
name, endorsement, depiction, or illustration, any representation that:

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A.

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Such Covered Product causes or assists in causing, weight loss, or any

specific amount of weight loss;

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B.

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Such Covered Product causes, or assists in causing, rapid weight loss;

C.

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Consumers who use the Covered Product can generally expect to

or

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achieve the weight loss results represented by an endorser of such product;

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unless the representation is non-misleading and, at the time of making such

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representation, Stipulating Defendants possess and rely upon competent and
reliable scientific evidence that substantiates that the representation is true. For
purposes of this Section, competent and reliable scientific evidence shall consist of

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human clinical testing of the Covered Product, or of an Essentially Equivalent

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Product, that is sufficient in quality and quantity based on standards generally

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accepted by experts in the relevant field, when considered in light of the entire
body of relevant and reliable scientific evidence, to substantiate that the
representation is true. Such testing shall be: (1) randomized, double-blind, and

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placebo-controlled; and (2) conducted by researchers qualified by training and

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experience to conduct such testing. In addition, all underlying or supporting data

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and documents generally accepted by experts in the relevant field as relevant to an
assessment of such testing as described in the Section entitled “Preservation of
Records Relating to Competent and Reliable Human Clinical Tests or Studies”

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must be available for inspection and production to Plaintiffs. Stipulating

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Defendants shall have the burden of proving that a product satisfies the definition

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of Essentially Equivalent Product.
II.
PROHIBITED REPRESENTATIONS:
OTHER HEALTH-RELATED CLAIMS
IT IS FURTHER ORDERED that Stipulating Defendants, Stipulating

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Defendants’ officers, agents, employees, and attorneys, and all other persons in

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active concert or participation with any of them, who receive actual notice of this

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Order, whether acting directly or indirectly, in connection with the manufacturing,
labeling, advertising, promotion, offering for sale, sale, or distribution of any
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Covered Product, are permanently restrained and enjoined from making, or

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assisting others in making, directly or by implication, including through the use of

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a product name, endorsement, depiction, or illustration, any representation about
the health benefits, safety, performance, or efficacy of any Covered Product, unless
the representation is non-misleading, and, at the time of making such

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representation, Stipulating Defendants possess and rely upon competent and

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reliable scientific evidence that is sufficient in quality and quantity based on

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standards generally accepted in the relevant scientific fields, when considered in
light of the entire body of relevant and reliable scientific evidence, to substantiate
that the representation is true.

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For purposes of this Section, competent and reliable scientific evidence
means tests, analyses, research, or studies (1) that have been conducted and

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evaluated in an objective manner by qualified persons; (2) that are generally
accepted in the profession to yield accurate and reliable results; and (3) as to
which, when they are human clinical tests or studies, all underlying or supporting

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data and documents generally accepted by experts in the field as relevant to an

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assessment of such testing as set forth in the Section entitled Preservation of

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Records Relating to Competent and Reliable Human Clinical Tests or Studies are
available for inspection and production to Plaintiff.

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III.

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PROHIBITED REPRESENTATIONS
REGARDING TESTS, STUDIES, OR INGREDIENTS

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IT IS FURTHER ORDERED that Stipulating Defendants, Stipulating

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Defendants’ officers, agents, employees, and attorneys, and all other persons in
active concert or participation with any of them, who receive actual notice of this
Order, whether acting directly or indirectly, in connection with the manufacturing,

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labeling, advertising, promotion, offering for sale, sale, or distribution of any

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Covered Product are permanently restrained and enjoined from misrepresenting, in

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any manner, expressly or by implication, including through the use of any product
name, endorsement, depiction, or illustration:
A.

That any Covered Product is clinically proven to cause weight loss;

B.

That the benefits of any Covered Product or service are scientifically

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proven; or

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C.

The existence, contents, validity, results, conclusions, or

interpretations of any test, study, or research.

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IV.

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FDA-APPROVED CLAIMS

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IT IS FURTHER ORDERED that nothing in this Order shall prohibit

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Stipulating Defendants from:
A.

Making any representation for any drug that is permitted in labeling
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for such drug under any tentative or final monograph promulgated by the Food and

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Drug Administration, or under any new drug application approved by the Food and

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Drug Administration; and
B.

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Making any representation for any product that is specifically

permitted in labeling for such product by regulations promulgated by the Food and

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Drug Administration pursuant to the Nutrition Labeling and Education Act of 1990

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or permitted under Sections 303-304 of the Food and Drug Administration

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Modernization Act of 1997.
V.

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PRESERVATION OF RECORDS RELATING TO COMPETENT AND
RELIABLE HUMAN CLINICAL TESTS OR STUDIES

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IT IS FURTHER ORDERED that, with regard to any human clinical test

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or study (“test”) upon which Stipulating Defendants rely to substantiate any claim
covered by this Order, Stipulating Defendants shall secure and preserve all

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underlying or supporting data and documents generally accepted by experts in the

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field as relevant to an assessment of the test, including, but not necessarily limited

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to:
A.

All protocols and protocol amendments, reports, articles, write-ups, or

other accounts of the results of the test, and drafts of such documents reviewed by

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the test sponsor or any other person not employed by the research entity;
B.

All documents referring or relating to recruitment; randomization;
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instructions, including oral instructions, to participants; and participant

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compliance;

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C.

Documents sufficient to identify all test participants, including any

participants who did not complete the test, and all communications with any
participants relating to the test; all raw data collected from participants enrolled in

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the test, including any participants who did not complete the test; source

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documents for such data; any data dictionaries; and any case report forms;

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D.

All documents referring or relating to any statistical analysis of any

test data, including, but not limited to, any pretest analysis, intent-to-treat analysis,
or between-group analysis performed on any test data; and

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E.

All documents referring or relating to the sponsorship of the test,

including all communications and contracts between any sponsor and the test’s

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researchers.
Provided, however, the preceding preservation requirement shall not apply
to a reliably reported test, unless the test was conducted, controlled, or sponsored,

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in whole or in part by: (1) any Stipulating Defendant; (2) any Stipulating

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Defendant’s officers, agents, representatives, or employees; (3) any other person or

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entity in active concert or participation with any Stipulating Defendant; (4) any
person or entity affiliated with or acting on behalf of any Stipulating Defendant;
(5) any supplier of any ingredient contained in the product at issue to any of the

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foregoing or to the product’s manufacturer; or (6) the supplier or manufacturer of

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such product.

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For any test conducted, controlled, or sponsored, in whole or in part, by
Stipulating Defendants, Stipulating Defendants must establish and maintain
reasonable procedures to protect the confidentiality, security, and integrity of any

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personal information collected from or about participants. These procedures shall

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be documented in writing and shall contain administrative, technical, and physical

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safeguards appropriate to Stipulating Defendants’ size and complexity, the nature
and scope of Stipulating Defendants’ activities, and the sensitivity of the personal
information collected from or about the participants.

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VI.

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PROHIBITED BUSINESS ACTIVITIES

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IT IS FURTHER ORDERED that Stipulating Defendants, Stipulating
Defendants’ officers, agents, employees, and attorneys, and all other persons in
active concert or participation with any of them, who receive actual notice of this

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Order, whether acting directly or indirectly, in connection with the advertising,

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marketing, promotion, offering for sale, or sale of any product, service, or

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program, are permanently restrained and enjoined from:
A.

Misrepresenting, or assisting others in misrepresenting, expressly or

by implication, any material fact, including, but not limited to:

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1.

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that any product, service, or program is or has been used,

endorsed, or approved by specifically identified individuals, including celebrities

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such as Oprah Winfrey, Rachel Ray, and any doctor featured on The Doctors
television show;

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2.

that any consumer testimonial reflects typical consumer

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8

experiences with a product, service, or program;

9

3.

that any website or other publication is an objective news

4.

that objective news reporters have performed independent tests

10
11

report;

12
13

of any product, service, or program, including, but not limited to, any Covered

14
15

Product;

16

5.

that independent tests demonstrate the effectiveness of any

17
18
19

product, service, or program featured in any website or other publication,
including, but not limited to, any Covered Product;

20

6.

the total cost to purchase, receive, or use a product, service, or

7.

any material restrictions, limitations, or conditions to purchase,

21
22
23

program;

24
25
26
27

receive, or use a product, service, or program;
8.

any material aspect of the performance, efficacy, nature, or

central characteristics of a product, service, or program; and

28

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9.

1
2

any material aspect of the nature or terms of a refund,

cancellation, exchange, or repurchase policy for a product, service, or program.

3
4
5
6

B.

Failing to, in connection with the advertising, promotion, marketing,

offering for sale, sale, or provision of any product, service, or program through an
Affiliate Program:

7
8
9

1.

Require each Affiliate and/or Affiliate Network to provide to

Stipulating Defendants the following identifying information:

10

a.

11
12
13

In the case of a natural person, the Affiliate’s or Affiliate

Network’s first and last name, physical address, country, telephone number, email
address, and complete bank account information as to where payments are to be

14
15

made to that person;

16

b.

In the case of a business entity, the Affiliate’s or Affiliate

17
18
19
20

Network’s name and any and all names under which it does business, state of
incorporation, registered agent, and the first and last name, physical address,
country, telephone number, and email address for at least one natural person who

21
22

owns, manages, or controls the Affiliate or Affiliate Network, and the complete

23

bank account information as to where payments are to be made to the Affiliate or

24
25
26
27

Affiliate Network;
c.

If Stipulating Defendants have access to certain Affiliates

only through an Affiliate Network, then Stipulating Defendants shall contractually

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1

require each Affiliate Network to obtain and maintain from those Affiliates the

2

identifying information set forth in Subsection B.1.a and B.1.b of this Section prior

3
4
5
6

to the Affiliate’s or Affiliate Network’s participation in any Stipulating
Defendant’s Affiliate Program.
2.

As a condition of doing business with any Affiliate or Affiliate

7
8

Network or such Affiliate or Affiliate Network’s acceptance into any Stipulating

9

Defendant’s Affiliate Program: (a) provide each such Affiliate or Affiliate

10
11
12
13

Network a copy of this Order; (b) obtain from each such Affiliate or Affiliate
Network a signed and dated statement acknowledging receipt of this Order and
expressly agreeing to comply with those provisions of this Order; and (c) clearly

14
15

and conspicuously disclose in writing that engaging in acts or practices prohibited

16

by this Order will result in immediate termination of any Affiliate or Affiliate

17
18
19
20

Network and forfeiture of all monies owed to such Affiliate or Affiliate Network;
provided, however, that if Stipulating Defendants have access to certain Affiliates
only through an Affiliate Network, then Stipulating Defendants shall contractually

21
22

require that the Affiliate Network provide the information required by this

23

Subsection to each of those Affiliates and retain proof of the same prior to any

24
25
26

such Affiliate being used in any Stipulating Defendant’s Affiliate Program; and if
Stipulating Defendants should acquire an entity that has an existing program of

27
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selling through Affiliates, the entity must complete all steps in this Subsection

2

prior to Stipulating Defendants’ acquisition of the entity.

3

3.

4
5
6

Require that each Affiliate or Affiliate Network, prior to the

public use or dissemination to consumers of any marketing materials, including,
but not limited to, websites, emails, and pop-ups used by any Affiliate or Affiliate

7
8

Network to advertise, promote, market, offer for sale, or sell any goods or services,

9

provide Stipulating Defendants with the following information: (a) copies of all

10
11
12
13

materially different marketing materials to be used by the Affiliate or Affiliate
Network, including text, graphics, video, audio, and photographs; (b) each location
the Affiliate or Affiliate Network maintains, or directly or indirectly controls,

14
15

where the marketing materials will appear, including the URL of any website; and

16

(c) for hyperlinks contained within the marketing materials, each location to which

17
18
19
20

a consumer will be transferred by clicking on the hyperlink, including the URL of
any website. Stipulating Defendants shall also require each Affiliate or Affiliate
Network to maintain and provide to Stipulating Defendants upon request records of

21
22

the dates when the marketing materials are publicly used or disseminated to

23

consumers.

Provided, however, that if Stipulating Defendants have access to

24
25
26
27

certain Affiliates only through an Affiliate Network, then Stipulating Defendants
shall contractually require that the Affiliate Network obtain and maintain the same
information set forth above from each of those Affiliates who are part of any

28

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Stipulating Defendant’s Affiliate Program prior to the public use or dissemination

2

to consumers of any such marketing materials, and provide proof to such

3
4
5
6

Stipulating Defendant of having obtained the same.
4.

Promptly review the marketing materials specified in Section

VI.B.3 above as necessary to ensure compliance with this Order. Stipulating

7
8

Defendants shall also promptly take steps as necessary to ensure that the marketing

9

materials provided to Stipulating Defendants under Section VI.B.3 above are the

10
11
12
13

marketing materials publicly used or disseminated to consumers by the Affiliate or
Affiliate Network. If a Stipulating Defendant determines that use of any marketing
materials does not comply with this Order, such Stipulating Defendant shall inform

14
15

the Affiliate or Affiliate Network in writing that approval to use such marketing

16

materials is denied and shall not pay any amounts to the Affiliate or Affiliate

17
18
19
20

Network for such marketing, including any payments for leads, “click-throughs,”
or sales resulting therefrom. Provided, however, that if Stipulating Defendants
have access to certain Affiliates only through an Affiliate Network, then

21
22

Stipulating Defendants shall contractually require that the Affiliate Network

23

comply with the procedures set forth in this Subsection as to those Affiliates.

24
25
26
27

5.

Promptly investigate any complaints that any Stipulating

Defendant receives through any source to determine whether any Affiliate or
Affiliate Network is engaging in acts or practices prohibited by this Order, either

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directly or through any Affiliate that is part of any Stipulating Defendant’s

2

Affiliate Program.

3
4
5
6

6.

Upon determining that any Affiliate or Affiliate Network has

engaged in, or is engaging in, acts or practices prohibited by this Order, either
directly or through any Affiliate that is part of any Stipulating Defendant’s

7
8
9

Affiliate Program, immediately:
a.

Disable

any

connection

between

the

Stipulating

10
11
12
13

Defendant’s Affiliate Program and the marketing materials used by the Affiliate or
Affiliate Network to engage in such acts or practices prohibited by this Order;
b.

Halt all payments to the Affiliate or Affiliate Network

14
15
16

resulting from such acts or practices prohibited by this Order; and
c.

Terminate the Affiliate or Affiliate Network; provided,

17
18
19
20

however, Stipulating Defendants shall not be in violation of this subsection if
Stipulating Defendants fail to terminate an Affiliate Network in a case where
Stipulating Defendants’ only access to an Affiliate who has engaged in acts or

21
22

practices prohibited by this Order is through an Affiliate Network and Stipulating

23

Defendants receive notice that the Affiliate Network immediately terminated the

24
25
26

Affiliate violating this Order from any Affiliate Program maintained by any
Stipulating Defendant.

27
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VII.

2

PROHIBITIONS AGAINST
COMMERCIAL EMAIL MISREPRESENATIONS

3
4

IT IS FURTHER ORDERED that Stipulating Defendants, Stipulating

5
6

Defendants’ officers, agents, employees, and attorneys, and all other persons in

7

active concert or participation with any of them, who receive actual notice of this

8
9
10
11

Order, whether acting directly or indirectly, in connection with the advertising,
marketing, promotion, offering for sale, or sale of any product, service, or
program, are permanently restrained and enjoined from violating Sections 5 and 6

12
13

of the CAN-SPAM Act, 15 U.S.C. §§ 7704 and 7705, of which a copy of the

14

CAN-SPAM Act, 15 U.S.C. §§ 7701-7713, is attached and herein incorporated, by,

15
16
17
18

including but not limited to, initiating, procuring, or transmitting, or assisting
others in initiating, procuring, or transmitting, a commercial electronic mail
message that:

19
20
21

A.

Contains, or is accompanied by, materially false or materially

misleading header information, including but not limited to:

22
23
24
25

1.

an originating electronic mail address, domain name, or Internet

Protocol address when the access to such originating electronic email address,
domain name or Internet Protocol address was obtained by means of false or

26
27

fraudulent pretenses or representations;

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2.

1
2

a “from” line (the line identifying or purporting to identify the

person initiating the message) that does not accurately identify any person who

3
4

initiated the message; or
3.

5
6

fails to identify accurately a protected computer used to initiate

the message;

7
8
9

B.

Contains a subject heading likely to mislead a recipient, acting

reasonably under the circumstances, about a material fact regarding the contents or

10
11
12
13

subject matter of the message;
C.

Does not include a clear and conspicuous notice of the recipient’s

opportunity to decline to receive further commercial electronic mail messages from

14
15

the sender at the recipient’s electronic mail address and describes the means by

16

which the recipient can decline to receive future commercial email messages from

17
18
19
20

the sender;
D.

Does not include a functioning return electronic mail address or other

Internet-based mechanism, clearly and conspicuously displayed, that a recipient

21
22

can use to submit a reply electronic mail message or other form of Internet-based

23

communication requesting not to receive future commercial electronic mail

24
25
26
27

messages from the sender at the electronic mail address where the message was
received, and that remains capable of receiving such messages or communications
for no less than 30 days after the transmission of the original message;

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E.

Does not include the sender’s valid physical postal address; or

2

F.

Is sent to a recipient’s email address, more than 10 business days after

3
4
5
6

the sender receives a request from that email recipient not to receive future
commercial electronic mail messages from the sender at the recipient’s electronic
mail address.

7
8

VIII.

9

MONETARY JUDGMENT

10
11
12
13

IT IS FURTHER ORDERED that:
A.

Judgment in the amount of Forty-Three Million, Three Hundred

Seventy-Nine Thousand, Two Hundred Fifty-Three Dollars and Fifty Cents

14
15

($43,379,253.50) is entered in favor of the Commission against Stipulating

16

Individual Defendants and Stipulating Corporate Defendants, jointly and severally,

17
18
19
20

as equitable monetary relief.
B.

Within seven (7) days of the date of entry of this Order, Stipulating

Corporate Defendant Optim Products LLC is ordered to take all steps that the

21
22

Receiver may require, including executing any documents and providing any

23

necessary information, to cause the transfer to the Receiver, or to his qualified

24
25
26
27

settlement fund, possession and legal and equitable title to the interests in the real
property described in paragraph A of Attachment A to this Order (collectively, the
“Optim Real Property interests”). Following the transfer of title, Defendant Optim

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Products LLC expressly waives, releases, discharges, and disclaims all right, title,

2

and interest in the Optim Real Property interests described in this sub-paragraph.

3
4
5
6

Until Defendant Optim Products LLC transfers title and possession of the Optim
Real Property interests to the Receiver, Defendant Optim Products LLC shall
maintain and take no action to diminish the value of the Optim Real Property

7
8

interests.

9

C.

Within seven (7) days of the date of entry of this Order, Stipulating

10
11
12
13

Individual Defendant Edgar Babayan is ordered to take all steps that the Receiver
may require, including executing any documents and providing any necessary
information, to cause the transfer to the Receiver, or to his qualified settlement

14
15

fund, possession and legal and equitable title to the interests in the real property

16

described in paragraph B of Attachment A to this Order (collectively, the “Edgar

17
18
19
20

Babayan Real Property”). Following transfer of title and possession, the Receiver
shall be responsible for all maintenance, utilities, taxes, homeowner’s association
fees, and all other expenses of any nature related to the Edgar Babayan Real

21
22

Property. Edgar Babayan represents that no encumbrances to the Edgar Babayan

23

Real Property have been added since the execution of his sworn financial statement

24
25
26
27

dated December 4, 2015, and that he will not add any encumbrances or liens to the
Edgar Babayan Real Property after signing this Order. The costs and expenses of
transferring the Edgar Babayan Real Property shall be paid by the Receivership.

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Edgar Babayan expressly agrees that none of the Edgar Babayan Real Property is a

2

homestead property, and further hereby forever waives, releases, discharges, and

3
4
5
6

disclaims all right, title, and interest in the Edgar Babayan Real Property described
in this sub-paragraph. Until Edgar Babayan transfers title and possession of the
Edgar Babayan Real Property, he shall maintain and take no action to diminish the

7
8

value of the Edgar Babayan Real Property, including any structures, fixtures, and

9

appurtenances thereto, in the same condition as on the date Edgar Babayan

10
11
12
13

executed his sworn financial statement dated December 4, 2015. Until Edgar
Babayan transfers title and possession of the Edgar Babayan Real Property to the
Receiver, Edgar Babayan shall remain current on all amounts due and payable on

14
15

the Edgar Babayan Real Property, including but not limited to tax, insurance,

16

homeowner’s assessments, reasonable and necessary maintenance, and similar

17
18
19
20

fees. In order to transfer possession of the Edgar Babayan Real Property, Edgar
Babayan shall vacate the Edgar Babayan Real Property in “broom clean
condition,” and deliver all keys and security codes, if any, to the Receiver along

21
22
23

with written notice that possession is surrendered.
D.

Within seven (7) days of the date of entry of this Order, Stipulating

24
25
26
27

Individual Defendant Artur Babayan is ordered to take all steps that the Receiver
may require, including executing any documents and providing any necessary
information, to cause the transfer to the Receiver, or to his qualified settlement

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fund, possession and legal and equitable title to the interests in the real property

2

described in paragraph C of Attachment A to this Order (the “Artur Babayan Real

3
4
5
6

Property”). Following transfer of title and possession, the Receiver shall be
responsible for all maintenance, utilities, taxes, homeowner’s association fees, and
all other expenses of any nature related to the Artur Babayan Real Property. Artur

7
8

Babayan represents that no encumbrances to the Artur Babayan Real Property have

9

been added since the execution of his sworn financial statement dated May 8,

10
11
12
13

2015, and that that he will not add any encumbrances or liens to the Artur Babayan
Real Property after signing this Order. The costs and expenses of transferring the
Artur Babayan Real Property shall be paid by the Receivership. Artur Babayan

14
15

expressly agrees that none of the Artur Babayan Real Property is a homestead

16

property, and further hereby forever waives, releases, discharges, and disclaims all

17
18
19
20

right, title, and interest in the Artur Babayan Real Property described in this subparagraph. Until Artur Babayan transfers title and possession of the Artur Babayan
Real Property, he shall maintain and take no action to diminish the value of the

21
22

Artur Babayan Real Property, including any structures, fixtures, and appurtenances

23

thereto, in the same condition as on the date Artur Babayan executed his sworn

24
25
26
27

financial statement dated December 4, 2015. Until Artur Babayan transfers title
and possession of the Artur Babayan Real Property to the Receiver, Artur Babayan
shall remain current on all amounts due and payable on the Artur Babayan Real

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Property, including but not limited to tax, insurance, homeowner’s assessments,

2

reasonable and necessary maintenance, and similar fees. In order to transfer

3
4
5
6

possession of the Artur Babayan Real Property, Artur Babayan shall vacate the
Artur Babayan Real Property in “broom clean condition,” and deliver all keys and
security codes, if any, to the Receiver along with written notice that possession is

7
8
9

surrendered.
E.

Within seven (7) days of the date of entry of this Order, Stipulating

10
11
12
13

Individual Defendant Vahe Haroutounian is ordered to take all steps that the
Receiver may require, including executing any documents and providing any
necessary information, to cause the transfer to the Receiver, or to his qualified

14
15

settlement fund, possession and legal and equitable title to the interests in the real

16

property described in paragraph D of Attachment A to this Order (the

17
18
19
20

“Haroutounian Real Property”). Following transfer of title and possession, the
Receiver shall be responsible for all maintenance, utilities, taxes, homeowner’s
association fees, and all other expenses of any nature related to the Haroutounian

21
22

Real Property. Vahe Haroutounian represents that no encumbrances to the Vahe

23

Haroutounian Real Property have been added since the execution of his sworn

24
25
26
27

financial statement dated May 8, 2015, and that he will not add any encumbrances
or liens to the Haroutounian Real Property after signing this Order. The costs and
expenses of transferring the Haroutounian Real Property shall be paid by the

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Receivership. Haroutounian expressly agrees that the Haroutounian Real Property

2

is not a homestead property, and further hereby forever waives, releases,

3
4
5
6

discharges, and disclaims all right, title, and interest in the Haroutounian Real
Property described in this sub-paragraph. Until Vahe Haroutounian transfers title
and possession of the Haroutounian Real Property, he shall maintain and take no

7
8

action to diminish the value of the Haroutounian Real Property, including any

9

structures, fixtures, and appurtenances thereto, in the same condition as on the date

10
11
12
13

Vahe Haroutounian executed his sworn financial statement dated May 8, 2015.
Until Vahe Haroutounian transfers title and possession of the Haroutounian Real
Property to the Receiver, Vahe Haroutounian shall remain current on all amounts

14
15

due and payable on the Haroutounian Real Property, including but not limited to

16

tax, insurance, homeowner’s assessments, reasonable and necessary maintenance,

17
18
19
20

and similar fees. In order to transfer possession of the Haroutounian Real
Property, Vahe Haroutounian shall vacate the Haroutounian Real Property in
“broom clean condition,” and deliver all keys and security codes, if any, to the

21
22
23

Receiver along with written notice that possession is surrendered.
F.

Within seven (7) days of the date of entry of this Order, Defendant

24
25
26
27

Vahe Haroutounian is ordered to transfer any and all ownership interest he has in
the real property described in paragraph E of Attachment A to this Order, to his
parents, Rafik Haroutounian and Ilda Avasapian (the “Haroutounian Family Real

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Property”). Defendant Vahe Haroutounian shall provide written proof of such

2

transfer, in a form acceptable to the Commission, within five (5) days of the

3
4
5
6

transfer. Defendant Vahe Haroutounian shall receive no consideration, cash or
otherwise, for the transfer of title to his parents.
G.

Upon the asset transfers specified in Subsections VIII.B-F and Section

7
8
9

IX, the remainder of the judgment is suspended, subject to the Subsections below.
H.

The Commission’s agreement to the suspension of part of the

10
11
12
13

judgment is expressly premised upon the truthfulness, accuracy, and completeness
of Stipulating Defendants’ sworn financial statements and related documents
(collectively, “financial representations”) submitted to the Commission, namely:

14

1.

15
16

the Financial Statement of Individual Defendant Edgar Babayan

signed on December 4, 2015, including the attachments;

17

2.

18
19

the Financial Statement of Individual Defendant Artur Babayan

signed on May 8, 2015, including the attachments;

20

3.

the Financial Statement of Individual Defendant Vahe

21
22

Haroutounian signed on May 8, 2015, including the attachments;

23

4.

the Financial Statement of Corporate Defendant Sale Slash,

24
25
26

LLC signed by Artur Babayan, President on May 13, 2015, including the
attachments;

27
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5.

1
2

the Financial Statement of Corporate Defendant Purists Choice

LLC, signed by Artur Babayan, President, on May 13, 2015, including the

3
4

attachments; and
6.

5
6

the Financial Statement of Corporate Defendant Optim

Products LLC, signed by Vahe Haroutounian, Owner, on December 2, 2015,

7
8
9

including the attachments.
I.

The suspension of the judgment will be lifted as to any Stipulating

10
11
12
13

Defendant if, upon motion by the Commission, the Court finds that Stipulating
Defendant failed to disclose any material asset, materially misstated the value of
any asset, or made any other material misstatement or omission in the financial

14
15
16

representations identified above.
J.

If the suspension of the judgment is lifted, the judgment becomes

17
18
19
20

immediately due as to that Stipulating Defendant in the amount specified in
Subsection A. above (which the parties stipulate only for purposes of this Section
represents the consumer injury alleged in the Complaint), less any payment

21
22

previously made pursuant to this Section, plus interest computed from the date of

23

entry of this Order.

24
25
26
27

K.

Stipulating Defendants relinquish dominion and all legal and equitable

right, title, and interest in all assets transferred pursuant to this Order and may not
seek the return of any assets.

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1
2

L.

The facts alleged in the Complaint will be taken as true, without

further proof, in any subsequent civil litigation by or on behalf of the Commission,

3
4
5
6

including in a proceeding to enforce its rights to any payment or monetary
judgment pursuant to this Order, such as a nondischargeability complaint in any
bankruptcy case.

7
8
9

M.

The facts alleged in the Complaint establish all elements necessary to

sustain an action by the Commission pursuant to Section 523(a)(2)(A) of the

10
11
12
13

Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral
estoppel effect for such purposes.
N.

Stipulating Defendants acknowledge that their Taxpayer Identification

14
15

Numbers (Social Security Numbers or Employer Identification Numbers), which

16

Stipulating Defendants previously submitted to the Commission, may be used for

17
18
19
20

collecting and reporting on any delinquent amount arising out of this Order, in
accordance with 31 U.S.C. § 7701.
O.

All money paid to the Commission pursuant to this Order may be

21
22

deposited into a fund administered by the Commission or its designee to be used

23

for equitable relief, including consumer redress and any attendant expenses for the

24
25
26
27

administration of any redress fund. If a representative of the Commission decides
that direct redress to consumers is wholly or partially impracticable or money
remains after redress is completed, the Commission may apply any remaining

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money for such other equitable relief (including consumer information remedies)

2

as it determines to be reasonably related to Stipulating Defendants’ practices

3
4
5
6

alleged in the Complaint. Any money not used for such equitable relief is to be
deposited to the U.S. Treasury as disgorgement. Stipulating Defendants have no
right to challenge any actions the Commission or its representatives may take

7
8
9

pursuant to this Subsection.
P.

The freeze on the assets of Stipulating Defendants Sale Slash, LLC,

10
11
12
13

Purists Choice LLC, Artur Babayan, and Vahe Haroutounian pursuant to Section V
of the Preliminary Injunction entered in this action on May 12, 2015 (the “First
Preliminary Injunction”) and the freeze of the assets of Stipulating Defendants

14
15

Optim Products LLC and Edgar Babayan pursuant to Section V of the Preliminary

16

Injunction as to Defendants Apex Customer Care LLC, Penway LLC, Renvee

17
18
19
20

LLC, Optim Products LLC, and Edgar Babayan entered in this action on
November 25, 2015 (the “Second Preliminary Injunction”) are modified to permit
the payments and other transfers of assets identified in this Section. Upon

21
22

completion of all payment and other obligations identified in this Section and in

23

Sections IX, the asset freezes are dissolved as to Stipulating Defendants. A

24
25
26

financial institution shall be entitled to rely upon a letter from the Commission
stating that the freeze on the Stipulating Defendants’ assets has been lifted.

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IX.

2

TURNOVER OF ASSETS HELD BY THIRD PARTIES

3
4
5
6

IT IS FURTHER ORDERED that, in order to partially satisfy the
monetary judgment set forth in Section VIII above:
A.

Any financial institution, business entity, or person that holds,

7
8

controls, or maintains custody of any account or asset of any Individual Defendant,

9

or any account or asset held on behalf of, or for the benefit of, any Individual

10
11
12
13

Defendant, or any account or asset of any Individual Defendant frozen pursuant to
(a) the TRO, (b) the First Preliminary Injunction; or (c) the Second Preliminary
Injunction, shall turn over such account or asset to Plaintiff, by wire transfer

14
15

pursuant to directions provided by counsel for the Commission, or as otherwise

16

agreed to in writing by counsel for the Commission, within ten (10) days of

17
18
19
20

receiving notice of this Order by any means, including, but not limited to, via
facsimile.
B.

Any financial institution, business entity or person that holds,

21
22

controls, or maintains custody of (1) any account or asset of any Receivership

23

Defendant other than Defendants Apex Customer Care LLC, Penway LLC, and

24
25
26
27

Renvee LLC, or (2) any account or asset held on behalf of, or for the benefit of,
any Receivership Defendant other than Defendants Apex Customer Care LLC,
Penway LLC, and Renvee LLC, or (3) any account or asset of any Receivership

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Defendant other than Defendants Apex Customer Care LLC, Penway LLC, and

2

Renvee LLC frozen pursuant to (a) the TRO, (b) the First Preliminary Injunction;

3
4
5
6

or (c) the Second Preliminary Injunction, shall turn over such account or asset to
the Receiver or her designated agent, by wire transfer pursuant to directions
provided by the Receiver or her designated agent, or as otherwise agreed to in

7
8

writing by the Receiver or her designated agent, within ten (10) days of receiving

9

notice of this Order by any means, including, but not limited to, via facsimile.

10
11
12

Upon such transfer, such account or asset shall be an account or asset of the
receivership estate.

13

X.

14
15

CUSTOMER INFORMATION

16

IT IS FURTHER ORDERED that Stipulating Defendants, Stipulating

17
18
19
20

Defendants’ officers, agents, employees, and attorneys, and all other persons in
active concert or participation with any of them who receive actual notice of this
Order, whether acting directly or indirectly, are permanently restrained and

21
22
23

enjoined from directly or indirectly:
A.

failing to provide sufficient customer information to enable the

24
25
26

Commission to efficiently administer consumer redress. If a representative of the
Commission requests in writing any information related to redress, Stipulating

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Defendants must provide it, in the form prescribed by the Commission, within 14

2

days.

3
4
5
6

B.

disclosing, using, or benefitting from customer information, including

the name, address, telephone number, email address, social security number, other
identifying information, or any data that enables access to a customer’s account

7
8

(including a credit card, bank account, or other financial account), that any

9

Defendant obtained prior to entry of this Order in connection with the sale or

10
11
12
13

marketing of weight-loss products; and
C.

failing to destroy such customer information in all forms in their

possession, custody, or control within 30 days after receipt of written direction to

14
15
16

do so from a representative of the Commission.
Provided, however, that customer information need not be disposed of, and

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18
19
20

may be disclosed, to the extent requested by a government agency or required by
law, regulation, or court order.
XI.

21
22
23

COOPERATION
IT IS FURTHER ORDERED that Stipulating Defendants must fully

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25
26
27

cooperate with representatives of the Commission in this case and in any
investigation related to or associated with the transactions or the occurrences that
are the subject of the Complaint. Stipulating Defendants must provide truthful and

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complete information, evidence, and testimony. Stipulating Individual Defendants

2

must appear and Stipulating Corporate Defendants must cause Stipulating

3
4
5
6

Defendants’ officers, employees, representatives, or agents to appear for
interviews, discovery, hearings, trials, and any other proceedings that a
Commission representative may reasonably request upon 5 days written notice, or

7
8

other reasonable notice, at such places and times as a Commission representative

9

may designate, without the service of a subpoena.

10

XII.

11

RECEIVERSHIP TERMINATION

12
13

IT IS FURTHER ORDERED that the appointment of the Receiver over

14
15

Receivership Defendants pursuant to Section X of the Preliminary Injunction is

16

hereby continued as modified by this Section.

17
18
19
20

A.

Within seven (7) days aft er entry of this Order, the Receiver shall

transfer the sum of Five Million Dollars ($5,000,000.00) to the Plaintiff from the
funds previously transferred in this matter pursuant to (1) the TRO, (2) the First

21
22

Preliminary Injunction, and (3) the Second Preliminary Injunction, by wire transfer

23

pursuant to directions provided by counsel for the Commission, or as otherwise

24
25

agreed to in writing by counsel for the Commission.

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2

B.

The Receiver is directed and authorized to accomplish the following

within ninety (90) days after entry of this Order, but any party or the Receiver may

3
4

request that the Court extend the Receiver’s term for good cause:
1.

5
6

Complete the process of taking custody, control, and possession

of all assets of Receivership Defendants, pursuant to Section X.B. of the

7
8

Preliminary Injunction;

9

2.

Negotiate and make payment necessary to resolve amounts

10
11
12

owed to American Express Bank, FSB related to the following credit card
accounts:

13

a.

accounts in the names of Optim Products LLC and Vaheh

14
15

Haroutounian, with number ending -1004;

16

b.

accounts in the names of Optim Products LLC and Vaheh

17
18

Haroutounian, with number ending -2002;
c.

19
20

accounts in the names of Sale Slash LLC and Artur

Babayan, with number ending -91005; and

21

d.

22
23

accounts in the names of e-Level Marketing Inc. and

Edgar Babayan, with number ending -51003.

24
25
26
27

3.

Complete the liquidation of (a) all assets of Receivership

Defendants, except for the assets of Receivership Defendants Apex Customer Care
LLC, Penway LLC, and Renvee LLC, and (b) all assets described in Section

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VIII.B-F and Section IX.B, above, without further order of the Court . For

2

purposes of liquidation of the assets described in Section VIII.B-F and Section

3
4
5

IX.B, the Receiver shall obtain the appraisal of one disinterested person of the
value of the asset before liquidating it;

6

4.

Prepare and submit a report describing the Receiver’s activities

7
8

pursuant to this Order, and a final application for compensation and expenses; and

9

5.

Distribute to Plaintiff any remaining liquid assets at the

10
11

conclusion of the Receiver’s duties.
C.

12
13

Upon completion of the above tasks, the duties of the receivership as

to the Receivership Defendants shall terminate, except as to the assets of

14
15

Receivership Defendants Apex Customer Care LLC, Penway LLC, and Renvee

16

LLC.

17
18
19
20

XIII.
COOPERATION WITH THE RECEIVER
IT IS FURTHER ORDERED that Stipulating Defendants, Stipulating

21
22

Defendants’ officers, agents, servants, employees, and attorneys, and all other

23

persons in active concert or participation with any of them, who receive actual

24
25
26
27

notice of this Order, whether acting directly or indirectly, shall fully cooperate with
and assist the Receiver. This cooperation and assistance shall include, but not be
limited to providing any information to the Receiver that is reasonably necessary to

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enable the Receiver to exercise its authority and discharge its responsibilities under

2

this Order.

3

XIV.

4

ORDER ACKNOWLEDGMENTS

5
6

IT IS FURTHER ORDERED that Stipulating Defendants obtain

7
8
9

acknowledgments of receipt of this Order:
A.

Each Stipulating Defendant , within 7 days of entry of this Order,

10
11
12
13

must submit to the Commission an acknowledgment of receipt of this Order sworn
under penalty of perjury.
B.

For 5 years after entry of this Order, each Stipulating Individual

14
15

Defendant for any business that such Defendant, individually or collectively with

16

any other Defendant, is the majority owner or controls directly or indirectly, and

17
18
19
20

each Stipulating Corporate Defendant, must deliver a copy of this Order to: (1) all
principals, officers, directors, and LLC managers and members; (2) all employees,
agents, and representatives who participate in conduct related to the subject matter

21
22

of the Order; and (3) any business entity resulting from any change in structure as

23

set forth in the Section titled Compliance Reporting. Delivery must occur within 7

24
25
26

days of entry of this Order for current personnel. For all others, delivery must
occur before they assume their responsibilities.

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2

C.

From each individual or entity to which a Stipulating Defendant

delivered a copy of this Order, that Stipulating Defendant must obtain, within 30

3
4

days, a signed and dated acknowledgment of receipt of this Order.
XV.

5
6

COMPLIANCE REPORTING

7
8
9

IT IS FURTHER ORDERED that Stipulating Defendants make timely
submissions to the Commission:

10
11
12
13

A.

One year after entry of this Order, each Stipulating Defendant must

submit a compliance report, sworn under penalty of perjury:
1.

Each Stipulating Defendant must: (a) identify the primary

14
15

physical, postal, and email address and telephone number, as designated points of

16

contact, which representatives of the Commission may use to communicate with

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18
19
20

Stipulating Defendant; (b) identify all of that Stipulating Defendant’s businesses
by all of their names, telephone numbers, and physical, postal, email, and Internet
addresses; (c) describe the activities of each business, including the goods and

21
22

services offered, the means of advertising, marketing, and sales, and the

23

involvement of any other Defendant (which Stipulating Individual Defendants

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25
26
27

must describe if they know or should know due to their own involvement); (d)
describe in detail whether and how that Stipulating Defendant is in compliance
with each Section of this Order; and (e) provide a copy of each Order

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Acknowledgment obtained pursuant to this Order, unless previously submitted to

2

the Commission.

3

2.

4
5
6

Additionally, each Stipulating Individual Defendant must: (a)

identify all telephone numbers and all physical, postal, email and Internet
addresses, including all residences; (b) identify all business activities, including

7
8

any business for which such Defendant performs services whether as an employee

9

or otherwise and any entity in which such Defendant has any ownership interest;

10
11
12
13

and (c) describe in detail such Defendant’s involvement in each such business,
including title, role, responsibilities, participation, authority, control, and any
ownership.

14
15
16

B.

For 20 years after entry of this Order, each Stipulating Defendant

must submit a compliance notice, sworn under penalty of perjury, within 14 days

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18

of any change in the following:
1.

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20

Each Stipulating Defendant must report any change in: (a) any

designated point of contact; or (b) the structure of any Stipulating Corporate

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22

Defendant or any entity that Stipulating Defendant has any ownership interest in or

23

controls directly or indirectly that may affect compliance obligations arising under

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25
26
27

this Order, including: creation, merger, sale, or dissolution of the entity or any
subsidiary, parent, or affiliate that engages in any acts or practices subject to this
Order.

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2.

1
2

Additionally, each Stipulating Individual Defendant must report

any change in: (a) name, including aliases or fictitious name, or residence address;

3
4
5
6

or (b) title or role in any business activity, including any business for which such
Defendant performs services whether as an employee or otherwise and any entity
in which such Defendant has any ownership interest, and identify the name,

7
8
9

physical address, and any Internet address of the business or entity.
C.

Each Stipulating Defendant must submit to the Commission notice of

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11
12
13

the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding
by or against such Stipulating Defendant within 14 days of its filing.
D.

Any submission to the Commission required by this Order to be

14
15

sworn under penalty of perjury must be true and accurate and comply with 28

16

U.S.C. § 1746, such as by concluding: “I declare under penalty of perjury under

17
18
19
20

the laws of the United States of America that the foregoing is true and correct.
Executed on: _____” and supplying the date, signatory’s full name, title (if
applicable), and signature.

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22
23

E.

Unless otherwise directed by a Commission representative in writing,

all submissions to the Commission pursuant to this Order must be emailed to

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26

[e-mail] or sent by overnight courier (not the U.S. Postal Service) to:
Associate Director for Enforcement, Bureau of Consumer Protection, Federal

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Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. The

2

subject line must begin: FTC v. Sale Slash, LLC, X150034.

3

XVI.

4

RECORDKEEPING

5
6

IT IS FURTHER ORDERED that Stipulating Defendants must create

7
8

certain records for 20 years after entry of the Order, and retain each such record for

9

5 years. Specifically, Stipulating Corporate Defendants and each Stipulating

10
11
12
13

Individual Defendant for any business that such Defendant, individually or
collectively with any other Defendant, is a majority owner or controls directly or
indirectly, must create and retain the following records:

14

A.

16

accounting records showing the revenues from all goods or services

B.

15

personnel records showing, for each person providing services,

sold;

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18
19
20

whether as an employee or otherwise, that person’s: name; addresses; telephone
numbers; job title or position; dates of service; and (if applicable) the reason for

21
22
23

termination;
C.

records relating to Affiliates or Affiliate Networks, including all

24
25
26

names, addresses, and telephone numbers; dollar amounts paid or received; and
information used in calculating such payments;

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2

D.

records of all consumer complaints and refund requests, whether

received directly or indirectly, such as through a third party, and any response;

3
4
5
6

E.

all records necessary to demonstrate full compliance with each

provision of this Order, including all submissions to the Commission;
F.

Copies of all marketing materials, documents, and information

7
8

received pursuant to Subsection VI.B.3 of this Order; and all written approvals or

9

denials of marketing materials made pursuant to Subsection VI.B.4 of this Order.

10
11

G.

a copy of each unique advertisement or other marketing material.
XVII.

12
13

COMPLIANCE MONITORING

14
15
16

IT IS FURTHER ORDERED that, for the purpose of monitoring
Stipulating Defendants’ compliance with this Order, including the financial

17
18
19
20

representations upon which part of the judgment was suspended and any failure to
transfer any assets as required by this Order:
A.

Within 14 days of receipt of a written request from a representative of

21
22

the Commission, each Stipulating Defendant must: submit additional compliance

23

reports or other requested information, which must be sworn under penalty of

24
25
26
27

perjury; appear for depositions; and produce documents for inspection and
copying. The Commission is also authorized to obtain discovery, without further
leave of court, using any of the procedures prescribed by Federal Rules of Civil

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Procedure 29, 30 (including telephonic depositions), 31, 33, 34, 36, 45, and 69.
B.

For matters concerning this Order, the Commission is authorized to

3
4
5
6

communicate directly with each Stipulating Defendant. Stipulating Defendants
must permit representatives of the Commission to interview any employee or other
person affiliated with any Stipulating Defendant who has agreed to such an

7
8
9

interview. The person interviewed may have counsel present.
C.

The Commission may use all other lawful means, including posing,

10
11
12
13

through its representatives as consumers, suppliers, or other individuals or entities,
to Stipulating Defendants or any individual or entity affiliated with Stipulating
Defendants, without the necessity of identification or prior notice. Nothing in this

14
15

Order limits the Commission’s lawful use of compulsory process, pursuant to

16

Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.

17
18
19
20

D.

Upon written request from a representative of the Commission, any

consumer reporting agency must furnish consumer reports concerning Individual
Defendants, pursuant to Section 604(1) of the Fair Credit Reporting Act, 15 U.S.C.

21
22

§1681b(a)(1).

23
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25
26
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XVIII.

2

RETENTION OF JURISDICTION

3
4
5

IT IS FURTHER ORDERED that this Court retains jurisdiction of this
matter for purposes of construction, modification, and enforcement of this Order.

6
7
8
9
10
11

_________ y ______,
_
,
.
IT IS SO ORDERED, this __________ day of ______, 2016.
________________________________
________________________________
_
_ _ _
Hon. Percy Anderson
Hon. Percy
United States District Judge
States

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JONATHAN E. NUECHTERLEIN
GENERAL COUNSEL
MATTHEW H. WERNZ
GUY G. WARD
[e-mail]
[e-mail]
Federal Trade Commission
55 West Monroe Street, Suite 1825
Chicago, Illinois 60603
Tel: [phone]; Fax: [phone]
RAYMOND E. MCKOWN (Cal. Bar No. 150975)
[e-mail]
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
Tel: [phone]; Fax: [phone]
Attorneys for Plaintiff
FEDERAL TRADE COMMISSION

16

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

17
18

FEDERAL TRADE COMMISSION,
Case No. CV15-03107 PA (AJWx)

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20
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24

Plaintiff,
v.

Schedule A to Stipulated Permanent
Injunction and Monetary Judgment

SALE SLASH, LLC, a California
limited liability company, et al.,
Defendants.

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2

The following are the property descriptions referred to in Section VIII
(Monetary Judgment) of the Stipulated Permanent Injunction and Monetary

3
4
5
6

Judgment:
A.

The Optim Real Property Interests referred to in Section VIII.B

includes the following interests:

7
8
9

1.

any interest in the property located at 5850 East Grove Avenue,

Fresno, California, 93612, including a Promissory Note and Deed of Trust with

10
11
12
13

Absolute Assignment of Leases and Rents, Security Agreement, and Fixture Filing
(First Priority), both dated July 10, 2014;
2.

any interest in the property located at 222 Monterey Road

14
15

#1405, Glendale, California 91206, including a Promissory Note, dated July 7,

16

2014, and Deed of Trust with Absolute Assignment of Leases and Rents, Security

17
18
19
20

Agreement, and Fixture Filing (First Priority), dated July 10, 2014;
3.

any interest in the property located at 3352 Brandon Street,

Pasadena, California 91107, including a Promissory Note and Deed of Trust with

21
22

Absolute Assignment of Leases and Rents, Security Agreement, and Fixture Filing

23

(First Priority), both dated September 25, 2014; and

24
25
26

4.

any interest in the property located at 915 North Santa Anita

Avenue, Arcadia, California 91006, including a Promissory Note and Deed of

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Trust with Absolute Assignment of Leases and Rents, Security Agreement, and

2

Fixture Filing (First Priority), both dated February 24, 2015.

3
4
5
6

B.

The Edgar Babayan Real Property referred to in Section VIII.C

includes any interests in the real property, together with the structures,
improvements, appurtenances, hereditaments, and other rights appertaining or

7
8

belonging thereto, situated at:

9

1.

13909 Yellowstone Drive, Frazier Park California 93225;

2.

180 Aspen Oak, Glendale, California 91202;

3.

4440 Sandy River, #43, Las Vegas, Nevada 89103;

4.

4579 Don Ricardo Drive, Los Angeles, California 90008; and

5.

14839 Sherman Way, Unit 3, Van Nuys, California 91405.

10
11
12
13
14
15
16

C.

The Artur Babayan Real Property referred to in Section VIII.D

17
18
19
20

includes any interests in the real property, together with the structures,
improvements, appurtenances, hereditaments, and other rights appertaining or
belonging thereto, situated at he real property commonly known as 4440 Sandy

21
22
23

River, #43, Las Vegas, Nevada 89103.
D.

The Vahe Haroutounian Real Property referred to in Section VIII.E

24
25
26
27

includes the real property, together with the structures, improvements,
appurtenances, hereditaments, and other rights appertaining or belonging thereto,
situated at 343 Pioneer Drive, Unit PH3, Glendale, California 91203.

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2

E.

The Haroutounian Family Real Property referred to in Section VIII.F

includes the real property, together with the structures, improvements,

3
4
5

appurtenances, hereditaments, and other rights appertaining or belonging thereto,
situated at 6614 Valmont Street, Valmont, California 91042.

6
7
8
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PUBLIC LAW 108–187—DEC. 16, 2003

117 STAT. 2699

Public Law 108–187
108th Congress
An Act
To regulate interstate commerce by imposing limitations and penalties on the transmission of unsolicited commercial electronic mail via the Internet.

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

Dec. 16, 2003
[S. 877]

This Act may be cited as the ‘‘Controlling the Assault of NonSolicited Pornography and Marketing Act of 2003’’, or the ‘‘CANSPAM Act of 2003’’.

Controlling the
Assault of NonSolicited
Pornography and
Marketing Act of
2003.
15 USC 7701
note.

SEC. 2. CONGRESSIONAL FINDINGS AND POLICY.

15 USC 7701.

SECTION 1. SHORT TITLE.

(a) FINDINGS.—The Congress finds the following:
(1) Electronic mail has become an extremely important
and popular means of communication, relied on by millions
of Americans on a daily basis for personal and commercial
purposes. Its low cost and global reach make it extremely
convenient and efficient, and offer unique opportunities for
the development and growth of frictionless commerce.
(2) The convenience and efficiency of electronic mail are
threatened by the extremely rapid growth in the volume of
unsolicited commercial electronic mail. Unsolicited commercial
electronic mail is currently estimated to account for over half
of all electronic mail traffic, up from an estimated 7 percent
in 2001, and the volume continues to rise. Most of these messages are fraudulent or deceptive in one or more respects.
(3) The receipt of unsolicited commercial electronic mail
may result in costs to recipients who cannot refuse to accept
such mail and who incur costs for the storage of such mail,
or for the time spent accessing, reviewing, and discarding such
mail, or for both.
(4) The receipt of a large number of unwanted messages
also decreases the convenience of electronic mail and creates
a risk that wanted electronic mail messages, both commercial
and noncommercial, will be lost, overlooked, or discarded amidst
the larger volume of unwanted messages, thus reducing the
reliability and usefulness of electronic mail to the recipient.
(5) Some commercial electronic mail contains material that
many recipients may consider vulgar or pornographic in nature.
(6) The growth in unsolicited commercial electronic mail
imposes significant monetary costs on providers of Internet
access services, businesses, and educational and nonprofit
institutions that carry and receive such mail, as there is a
finite volume of mail that such providers, businesses, and

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institutions can handle without further investment in infrastructure.
(7) Many senders of unsolicited commercial electronic mail
purposefully disguise the source of such mail.
(8) Many senders of unsolicited commercial electronic mail
purposefully include misleading information in the messages’
subject lines in order to induce the recipients to view the
messages.
(9) While some senders of commercial electronic mail messages provide simple and reliable ways for recipients to reject
(or ‘‘opt-out’’ of) receipt of commercial electronic mail from
such senders in the future, other senders provide no such
‘‘opt-out’’ mechanism, or refuse to honor the requests of recipients not to receive electronic mail from such senders in the
future, or both.
(10) Many senders of bulk unsolicited commercial electronic
mail use computer programs to gather large numbers of electronic mail addresses on an automated basis from Internet
websites or online services where users must post their
addresses in order to make full use of the website or service.
(11) Many States have enacted legislation intended to regulate or reduce unsolicited commercial electronic mail, but these
statutes impose different standards and requirements. As a
result, they do not appear to have been successful in addressing
the problems associated with unsolicited commercial electronic
mail, in part because, since an electronic mail address does
not specify a geographic location, it can be extremely difficult
for law-abiding businesses to know with which of these disparate statutes they are required to comply.
(12) The problems associated with the rapid growth and
abuse of unsolicited commercial electronic mail cannot be solved
by Federal legislation alone. The development and adoption
of technological approaches and the pursuit of cooperative
efforts with other countries will be necessary as well.
(b) CONGRESSIONAL DETERMINATION OF PUBLIC POLICY.—On
the basis of the findings in subsection (a), the Congress determines
that—
(1) there is a substantial government interest in regulation
of commercial electronic mail on a nationwide basis;
(2) senders of commercial electronic mail should not mislead recipients as to the source or content of such mail; and
(3) recipients of commercial electronic mail have a right
to decline to receive additional commercial electronic mail from
the same source.
15 USC 7702.

SEC. 3. DEFINITIONS.

In this Act:
(1) AFFIRMATIVE CONSENT.—The term ‘‘affirmative consent’’, when used with respect to a commercial electronic mail
message, means that—
(A) the recipient expressly consented to receive the
message, either in response to a clear and conspicuous
request for such consent or at the recipient’s own initiative;
and
(B) if the message is from a party other than the
party to which the recipient communicated such consent,
the recipient was given clear and conspicuous notice at

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117 STAT. 2701

the time the consent was communicated that the recipient’s
electronic mail address could be transferred to such other
party for the purpose of initiating commercial electronic
mail messages.
(2) COMMERCIAL ELECTRONIC MAIL MESSAGE.—
(A) IN GENERAL.—The term ‘‘commercial electronic mail
message’’ means any electronic mail message the primary
purpose of which is the commercial advertisement or promotion of a commercial product or service (including content on an Internet website operated for a commercial
purpose).
(B) TRANSACTIONAL OR RELATIONSHIP MESSAGES.—The
term ‘‘commercial electronic mail message’’ does not include
a transactional or relationship message.
(C) REGULATIONS REGARDING PRIMARY PURPOSE.—Not
later than 12 months after the date of the enactment
of this Act, the Commission shall issue regulations pursuant to section 13 defining the relevant criteria to facilitate
the determination of the primary purpose of an electronic
mail message.
(D) REFERENCE TO COMPANY OR WEBSITE.—The inclusion of a reference to a commercial entity or a link to
the website of a commercial entity in an electronic mail
message does not, by itself, cause such message to be
treated as a commercial electronic mail message for purposes of this Act if the contents or circumstances of the
message indicate a primary purpose other than commercial
advertisement or promotion of a commercial product or
service.
(3) COMMISSION.—The term ‘‘Commission’’ means the Federal Trade Commission.
(4) DOMAIN NAME.—The term ‘‘domain name’’ means any
alphanumeric designation which is registered with or assigned
by any domain name registrar, domain name registry, or other
domain name registration authority as part of an electronic
address on the Internet.
(5) ELECTRONIC MAIL ADDRESS.—The term ‘‘electronic mail
address’’ means a destination, commonly expressed as a string
of characters, consisting of a unique user name or mailbox
(commonly referred to as the ‘‘local part’’) and a reference
to an Internet domain (commonly referred to as the ‘‘domain
part’’), whether or not displayed, to which an electronic mail
message can be sent or delivered.
(6) ELECTRONIC MAIL MESSAGE.—The term ‘‘electronic mail
message’’ means a message sent to a unique electronic mail
address.
(7) FTC ACT.—The term ‘‘FTC Act’’ means the Federal
Trade Commission Act (15 U.S.C. 41 et seq.).
(8) HEADER INFORMATION.—The term ‘‘header information’’
means the source, destination, and routing information
attached to an electronic mail message, including the originating domain name and originating electronic mail address,
and any other information that appears in the line identifying,
or purporting to identify, a person initiating the message.
(9) INITIATE.—The term ‘‘initiate’’, when used with respect
to a commercial electronic mail message, means to originate
or transmit such message or to procure the origination or

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PUBLIC LAW 108–187—DEC. 16, 2003
transmission of such message, but shall not include actions
that constitute routine conveyance of such message. For purposes of this paragraph, more than one person may be considered to have initiated a message.
(10) INTERNET.—The term ‘‘Internet’’ has the meaning given
that term in the Internet Tax Freedom Act (47 U.S.C. 151
nt).
(11) INTERNET ACCESS SERVICE.—The term ‘‘Internet access
service’’ has the meaning given that term in section 231(e)(4)
of the Communications Act of 1934 (47 U.S.C. 231(e)(4)).
(12) PROCURE.—The term ‘‘procure’’, when used with
respect to the initiation of a commercial electronic mail message, means intentionally to pay or provide other consideration
to, or induce, another person to initiate such a message on
one’s behalf.
(13) PROTECTED COMPUTER.—The term ‘‘protected computer’’ has the meaning given that term in section 1030(e)(2)(B)
of title 18, United States Code.
(14) RECIPIENT.—The term ‘‘recipient’’, when used with
respect to a commercial electronic mail message, means an
authorized user of the electronic mail address to which the
message was sent or delivered. If a recipient of a commercial
electronic mail message has one or more electronic mail
addresses in addition to the address to which the message
was sent or delivered, the recipient shall be treated as a separate recipient with respect to each such address. If an electronic
mail address is reassigned to a new user, the new user shall
not be treated as a recipient of any commercial electronic
mail message sent or delivered to that address before it was
reassigned.
(15) ROUTINE CONVEYANCE.—The term ‘‘routine conveyance’’ means the transmission, routing, relaying, handling, or
storing, through an automatic technical process, of an electronic
mail message for which another person has identified the recipients or provided the recipient addresses.
(16) SENDER.—
(A) IN GENERAL.—Except as provided in subparagraph
(B), the term ‘‘sender’’, when used with respect to a
commercial electronic mail message, means a person who
initiates such a message and whose product, service, or
Internet web site is advertised or promoted by the message.
(B) SEPARATE LINES OF BUSINESS OR DIVISIONS.—If an
entity operates through separate lines of business or divisions and holds itself out to the recipient throughout the
message as that particular line of business or division
rather than as the entity of which such line of business
or division is a part, then the line of business or the
division shall be treated as the sender of such message
for purposes of this Act.
(17) TRANSACTIONAL OR RELATIONSHIP MESSAGE.—
(A) IN GENERAL.—The term ‘‘transactional or relationship message’’ means an electronic mail message the primary purpose of which is—
(i) to facilitate, complete, or confirm a commercial
transaction that the recipient has previously agreed
to enter into with the sender;

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117 STAT. 2703

(ii) to provide warranty information, product recall
information, or safety or security information with
respect to a commercial product or service used or
purchased by the recipient;
(iii) to provide—
(I) notification concerning a change in the
terms or features of;
(II) notification of a change in the recipient’s
standing or status with respect to; or
(III) at regular periodic intervals, account balance information or other type of account statement with respect to,
a subscription, membership, account, loan, or comparable ongoing commercial relationship involving the
ongoing purchase or use by the recipient of products
or services offered by the sender;
(iv) to provide information directly related to an
employment relationship or related benefit plan in
which the recipient is currently involved, participating,
or enrolled; or
(v) to deliver goods or services, including product
updates or upgrades, that the recipient is entitled to
receive under the terms of a transaction that the
recipient has previously agreed to enter into with the
sender.
(B) MODIFICATION OF DEFINITION.—The Commission by
regulation pursuant to section 13 may modify the definition
in subparagraph (A) to expand or contract the categories
of messages that are treated as transactional or relationship messages for purposes of this Act to the extent that
such modification is necessary to accommodate changes
in electronic mail technology or practices and accomplish
the purposes of this Act.
SEC. 4. PROHIBITION AGAINST PREDATORY AND ABUSIVE COMMERCIAL E-MAIL.

15 USC 7703.

(a) OFFENSE.—
(1) IN GENERAL.—Chapter 47 of title 18, United States
Code, is amended by adding at the end the following new
section:
‘‘§ 1037. Fraud and related activity in connection with electronic mail
‘‘(a) IN GENERAL.—Whoever, in or affecting interstate or foreign
commerce, knowingly—
‘‘(1) accesses a protected computer without authorization,
and intentionally initiates the transmission of multiple commercial electronic mail messages from or through such computer,
‘‘(2) uses a protected computer to relay or retransmit multiple commercial electronic mail messages, with the intent to
deceive or mislead recipients, or any Internet access service,
as to the origin of such messages,
‘‘(3) materially falsifies header information in multiple
commercial electronic mail messages and intentionally initiates
the transmission of such messages,
‘‘(4) registers, using information that materially falsifies
the identity of the actual registrant, for five or more electronic

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Courts.

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mail accounts or online user accounts or two or more domain
names, and intentionally initiates the transmission of multiple
commercial electronic mail messages from any combination of
such accounts or domain names, or
‘‘(5) falsely represents oneself to be the registrant or the
legitimate successor in interest to the registrant of 5 or more
Internet Protocol addresses, and intentionally initiates the
transmission of multiple commercial electronic mail messages
from such addresses,
or conspires to do so, shall be punished as provided in subsection
(b).
‘‘(b) PENALTIES.—The punishment for an offense under subsection (a) is—
‘‘(1) a fine under this title, imprisonment for not more
than 5 years, or both, if—
‘‘(A) the offense is committed in furtherance of any
felony under the laws of the United States or of any State;
or
‘‘(B) the defendant has previously been convicted under
this section or section 1030, or under the law of any State
for conduct involving the transmission of multiple commercial electronic mail messages or unauthorized access to
a computer system;
‘‘(2) a fine under this title, imprisonment for not more
than 3 years, or both, if—
‘‘(A) the offense is an offense under subsection (a)(1);
‘‘(B) the offense is an offense under subsection (a)(4)
and involved 20 or more falsified electronic mail or online
user account registrations, or 10 or more falsified domain
name registrations;
‘‘(C) the volume of electronic mail messages transmitted in furtherance of the offense exceeded 2,500 during
any 24-hour period, 25,000 during any 30-day period, or
250,000 during any 1-year period;
‘‘(D) the offense caused loss to one or more persons
aggregating $5,000 or more in value during any 1-year
period;
‘‘(E) as a result of the offense any individual committing the offense obtained anything of value aggregating
$5,000 or more during any 1-year period; or
‘‘(F) the offense was undertaken by the defendant in
concert with three or more other persons with respect
to whom the defendant occupied a position of organizer
or leader; and
‘‘(3) a fine under this title or imprisonment for not more
than 1 year, or both, in any other case.
‘‘(c) FORFEITURE.—
‘‘(1) IN GENERAL.—The court, in imposing sentence on a
person who is convicted of an offense under this section, shall
order that the defendant forfeit to the United States—
‘‘(A) any property, real or personal, constituting or
traceable to gross proceeds obtained from such offense;
and
‘‘(B) any equipment, software, or other technology used
or intended to be used to commit or to facilitate the commission of such offense.

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117 STAT. 2705

‘‘(2) PROCEDURES.—The procedures set forth in section 413
of the Controlled Substances Act (21 U.S.C. 853), other than
subsection (d) of that section, and in Rule 32.2 of the Federal
Rules of Criminal Procedure, shall apply to all stages of a
criminal forfeiture proceeding under this section.
‘‘(d) DEFINITIONS.—In this section:
‘‘(1) LOSS.—The term ‘loss’ has the meaning given that
term in section 1030(e) of this title.
‘‘(2) MATERIALLY.—For purposes of paragraphs (3) and (4)
of subsection (a), header information or registration information
is materially falsified if it is altered or concealed in a manner
that would impair the ability of a recipient of the message,
an Internet access service processing the message on behalf
of a recipient, a person alleging a violation of this section,
or a law enforcement agency to identify, locate, or respond
to a person who initiated the electronic mail message or to
investigate the alleged violation.
‘‘(3) MULTIPLE.—The term ‘multiple’ means more than 100
electronic mail messages during a 24-hour period, more than
1,000 electronic mail messages during a 30-day period, or more
than 10,000 electronic mail messages during a 1-year period.
‘‘(4) OTHER TERMS.—Any other term has the meaning given
that term by section 3 of the CAN-SPAM Act of 2003.’’.
(2) CONFORMING AMENDMENT.—The chapter analysis for
chapter 47 of title 18, United States Code, is amended by
adding at the end the following:

Applicability.

‘‘Sec.
‘‘1037. Fraud and related activity in connection with electronic mail.’’.

(b) UNITED STATES SENTENCING COMMISSION.—
(1) DIRECTIVE.—Pursuant to its authority under section
994(p) of title 28, United States Code, and in accordance with
this section, the United States Sentencing Commission shall
review and, as appropriate, amend the sentencing guidelines
and policy statements to provide appropriate penalties for violations of section 1037 of title 18, United States Code, as added
by this section, and other offenses that may be facilitated
by the sending of large quantities of unsolicited electronic mail.
(2) REQUIREMENTS.—In carrying out this subsection, the
Sentencing Commission shall consider providing sentencing
enhancements for—
(A) those convicted under section 1037 of title 18,
United States Code, who—
(i) obtained electronic mail addresses through
improper means, including—
(I) harvesting electronic mail addresses of the
users of a website, proprietary service, or other
online public forum operated by another person,
without the authorization of such person; and
(II) randomly generating electronic mail
addresses by computer; or
(ii) knew that the commercial electronic mail messages involved in the offense contained or advertised
an Internet domain for which the registrant of the
domain had provided false registration information;
and

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(B) those convicted of other offenses, including offenses
involving fraud, identity theft, obscenity, child pornography, and the sexual exploitation of children, if such
offenses involved the sending of large quantities of electronic mail.
(c) SENSE OF CONGRESS.—It is the sense of Congress that—
(1) Spam has become the method of choice for those who
distribute pornography, perpetrate fraudulent schemes, and
introduce viruses, worms, and Trojan horses into personal and
business computer systems; and
(2) the Department of Justice should use all existing law
enforcement tools to investigate and prosecute those who send
bulk commercial e-mail to facilitate the commission of Federal
crimes, including the tools contained in chapters 47 and 63
of title 18, United States Code (relating to fraud and false
statements); chapter 71 of title 18, United States Code (relating
to obscenity); chapter 110 of title 18, United States Code
(relating to the sexual exploitation of children); and chapter
95 of title 18, United States Code (relating to racketeering),
as appropriate.

15 USC 7704.

SEC. 5. OTHER PROTECTIONS FOR USERS OF COMMERCIAL ELECTRONIC MAIL.

(a) REQUIREMENTS FOR TRANSMISSION OF MESSAGES.—
(1) PROHIBITION OF FALSE OR MISLEADING TRANSMISSION
INFORMATION.—It is unlawful for any person to initiate the
transmission, to a protected computer, of a commercial electronic mail message, or a transactional or relationship message,
that contains, or is accompanied by, header information that
is materially false or materially misleading. For purposes of
this paragraph—
(A) header information that is technically accurate but
includes an originating electronic mail address, domain
name, or Internet Protocol address the access to which
for purposes of initiating the message was obtained by
means of false or fraudulent pretenses or representations
shall be considered materially misleading;
(B) a ‘‘from’’ line (the line identifying or purporting
to identify a person initiating the message) that accurately
identifies any person who initiated the message shall not
be considered materially false or materially misleading;
and
(C) header information shall be considered materially
misleading if it fails to identify accurately a protected
computer used to initiate the message because the person
initiating the message knowingly uses another protected
computer to relay or retransmit the message for purposes
of disguising its origin.
(2) PROHIBITION OF DECEPTIVE SUBJECT HEADINGS.—It is
unlawful for any person to initiate the transmission to a protected computer of a commercial electronic mail message if
such person has actual knowledge, or knowledge fairly implied
on the basis of objective circumstances, that a subject heading
of the message would be likely to mislead a recipient, acting
reasonably under the circumstances, about a material fact

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117 STAT. 2707

regarding the contents or subject matter of the message (consistent with the criteria used in enforcement of section 5 of
the Federal Trade Commission Act (15 U.S.C. 45)).
(3) INCLUSION OF RETURN ADDRESS OR COMPARABLE MECHANISM IN COMMERCIAL ELECTRONIC MAIL.—
(A) IN GENERAL.—It is unlawful for any person to initiate the transmission to a protected computer of a commercial electronic mail message that does not contain a
functioning return electronic mail address or other Internet-based mechanism, clearly and conspicuously displayed,
that—
(i) a recipient may use to submit, in a manner
specified in the message, a reply electronic mail message or other form of Internet-based communication
requesting not to receive future commercial electronic
mail messages from that sender at the electronic mail
address where the message was received; and
(ii) remains capable of receiving such messages
or communications for no less than 30 days after the
transmission of the original message.
(B) MORE DETAILED OPTIONS POSSIBLE.—The person
initiating a commercial electronic mail message may
comply with subparagraph (A)(i) by providing the recipient
a list or menu from which the recipient may choose the
specific types of commercial electronic mail messages the
recipient wants to receive or does not want to receive
from the sender, if the list or menu includes an option
under which the recipient may choose not to receive any
commercial electronic mail messages from the sender.
(C) TEMPORARY INABILITY TO RECEIVE MESSAGES OR
PROCESS REQUESTS.—A return electronic mail address or
other mechanism does not fail to satisfy the requirements
of subparagraph (A) if it is unexpectedly and temporarily
unable to receive messages or process requests due to a
technical problem beyond the control of the sender if the
problem is corrected within a reasonable time period.
(4) PROHIBITION OF TRANSMISSION OF COMMERCIAL ELECTRONIC MAIL AFTER OBJECTION.—
(A) IN GENERAL.—If a recipient makes a request using
a mechanism provided pursuant to paragraph (3) not to
receive some or any commercial electronic mail messages
from such sender, then it is unlawful—
(i) for the sender to initiate the transmission to
the recipient, more than 10 business days after the
receipt of such request, of a commercial electronic mail
message that falls within the scope of the request;
(ii) for any person acting on behalf of the sender
to initiate the transmission to the recipient, more than
10 business days after the receipt of such request,
of a commercial electronic mail message with actual
knowledge, or knowledge fairly implied on the basis
of objective circumstances, that such message falls
within the scope of the request;
(iii) for any person acting on behalf of the sender
to assist in initiating the transmission to the recipient,
through the provision or selection of addresses to which
the message will be sent, of a commercial electronic

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mail message with actual knowledge, or knowledge
fairly implied on the basis of objective circumstances,
that such message would violate clause (i) or (ii); or
(iv) for the sender, or any other person who knows
that the recipient has made such a request, to sell,
lease, exchange, or otherwise transfer or release the
electronic mail address of the recipient (including
through any transaction or other transfer involving
mailing lists bearing the electronic mail address of
the recipient) for any purpose other than compliance
with this Act or other provision of law.
(B) SUBSEQUENT AFFIRMATIVE CONSENT.—A prohibition
in subparagraph (A) does not apply if there is affirmative
consent by the recipient subsequent to the request under
subparagraph (A).
(5) INCLUSION OF IDENTIFIER, OPT-OUT, AND PHYSICAL
ADDRESS IN COMMERCIAL ELECTRONIC MAIL.—(A) It is unlawful
for any person to initiate the transmission of any commercial
electronic mail message to a protected computer unless the
message provides—
(i) clear and conspicuous identification that the message is an advertisement or solicitation;
(ii) clear and conspicuous notice of the opportunity
under paragraph (3) to decline to receive further commercial electronic mail messages from the sender; and
(iii) a valid physical postal address of the sender.
(B) Subparagraph (A)(i) does not apply to the transmission
of a commercial electronic mail message if the recipient has
given prior affirmative consent to receipt of the message.
(6) MATERIALLY.—For purposes of paragraph (1), the term
‘‘materially’’, when used with respect to false or misleading
header information, includes the alteration or concealment of
header information in a manner that would impair the ability
of an Internet access service processing the message on behalf
of a recipient, a person alleging a violation of this section,
or a law enforcement agency to identify, locate, or respond
to a person who initiated the electronic mail message or to
investigate the alleged violation, or the ability of a recipient
of the message to respond to a person who initiated the electronic message.
(b) AGGRAVATED VIOLATIONS RELATING TO COMMERCIAL ELECTRONIC MAIL.—
(1) ADDRESS HARVESTING AND DICTIONARY ATTACKS.—
(A) IN GENERAL.—It is unlawful for any person to initiate the transmission, to a protected computer, of a
commercial electronic mail message that is unlawful under
subsection (a), or to assist in the origination of such message through the provision or selection of addresses to
which the message will be transmitted, if such person
had actual knowledge, or knowledge fairly implied on the
basis of objective circumstances, that—
(i) the electronic mail address of the recipient was
obtained using an automated means from an Internet
website or proprietary online service operated by
another person, and such website or online service
included, at the time the address was obtained, a notice
stating that the operator of such website or online

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service will not give, sell, or otherwise transfer
addresses maintained by such website or online service
to any other party for the purposes of initiating, or
enabling others to initiate, electronic mail messages;
or
(ii) the electronic mail address of the recipient
was obtained using an automated means that generates possible electronic mail addresses by combining
names, letters, or numbers into numerous permutations.
(B) DISCLAIMER.—Nothing in this paragraph creates
an ownership or proprietary interest in such electronic
mail addresses.
(2) AUTOMATED CREATION OF MULTIPLE ELECTRONIC MAIL
ACCOUNTS.—It is unlawful for any person to use scripts or
other automated means to register for multiple electronic mail
accounts or online user accounts from which to transmit to
a protected computer, or enable another person to transmit
to a protected computer, a commercial electronic mail message
that is unlawful under subsection (a).
(3) RELAY OR RETRANSMISSION THROUGH UNAUTHORIZED
ACCESS.—It is unlawful for any person knowingly to relay or
retransmit a commercial electronic mail message that is unlawful under subsection (a) from a protected computer or computer
network that such person has accessed without authorization.
(c) SUPPLEMENTARY RULEMAKING AUTHORITY.—The Commission shall by regulation, pursuant to section 13—
(1) modify the 10-business-day period under subsection
(a)(4)(A) or subsection (a)(4)(B), or both, if the Commission
determines that a different period would be more reasonable
after taking into account—
(A) the purposes of subsection (a);
(B) the interests of recipients of commercial electronic
mail; and
(C) the burdens imposed on senders of lawful commercial electronic mail; and
(2) specify additional activities or practices to which subsection (b) applies if the Commission determines that those
activities or practices are contributing substantially to the proliferation of commercial electronic mail messages that are
unlawful under subsection (a).
(d) REQUIREMENT TO PLACE WARNING LABELS ON COMMERCIAL
ELECTRONIC MAIL CONTAINING SEXUALLY ORIENTED MATERIAL.—
(1) IN GENERAL.—No person may initiate in or affecting
interstate commerce the transmission, to a protected computer,
of any commercial electronic mail message that includes sexually oriented material and—
(A) fail to include in subject heading for the electronic
mail message the marks or notices prescribed by the
Commission under this subsection; or
(B) fail to provide that the matter in the message
that is initially viewable to the recipient, when the message
is opened by any recipient and absent any further actions
by the recipient, includes only—
(i) to the extent required or authorized pursuant
to paragraph (2), any such marks or notices;

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117 STAT. 2710

(ii) the information required to be included in the
message pursuant to subsection (a)(5); and
(iii) instructions on how to access, or a mechanism
to access, the sexually oriented material.
(2) PRIOR AFFIRMATIVE CONSENT.—Paragraph (1) does not
apply to the transmission of an electronic mail message if
the recipient has given prior affirmative consent to receipt
of the message.
(3) PRESCRIPTION OF MARKS AND NOTICES.—Not later than
120 days after the date of the enactment of this Act, the
Commission in consultation with the Attorney General shall
prescribe clearly identifiable marks or notices to be included
in or associated with commercial electronic mail that contains
sexually oriented material, in order to inform the recipient
of that fact and to facilitate filtering of such electronic mail.
The Commission shall publish in the Federal Register and
provide notice to the public of the marks or notices prescribed
under this paragraph.
(4) DEFINITION.—In this subsection, the term ‘‘sexually oriented material’’ means any material that depicts sexually
explicit conduct (as that term is defined in section 2256 of
title 18, United States Code), unless the depiction constitutes
a small and insignificant part of the whole, the remainder
of which is not primarily devoted to sexual matters.
(5) PENALTY.—Whoever knowingly violates paragraph (1)
shall be fined under title 18, United States Code, or imprisoned
not more than 5 years, or both.

Deadline.

Federal Register,
publication.

15 USC 7705.

PUBLIC LAW 108–187—DEC. 16, 2003

SEC. 6. BUSINESSES KNOWINGLY PROMOTED BY ELECTRONIC MAIL
WITH FALSE OR MISLEADING TRANSMISSION INFORMATION.

(a) IN GENERAL.—It is unlawful for a person to promote, or
allow the promotion of, that person’s trade or business, or goods,
products, property, or services sold, offered for sale, leased or offered
for lease, or otherwise made available through that trade or business, in a commercial electronic mail message the transmission
of which is in violation of section 5(a)(1) if that person—
(1) knows, or should have known in the ordinary course
of that person’s trade or business, that the goods, products,
property, or services sold, offered for sale, leased or offered
for lease, or otherwise made available through that trade or
business were being promoted in such a message;
(2) received or expected to receive an economic benefit
from such promotion; and
(3) took no reasonable action—
(A) to prevent the transmission; or
(B) to detect the transmission and report it to the
Commission.
(b) LIMITED ENFORCEMENT AGAINST THIRD PARTIES.—
(1) IN GENERAL.—Except as provided in paragraph (2), a
person (hereinafter referred to as the ‘‘third party’’) that provides goods, products, property, or services to another person
that violates subsection (a) shall not be held liable for such
violation.
(2) EXCEPTION.—Liability for a violation of subsection (a)
shall be imputed to a third party that provides goods, products,
property, or services to another person that violates subsection
(a) if that third party—

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117 STAT. 2711

(A) owns, or has a greater than 50 percent ownership
or economic interest in, the trade or business of the person
that violated subsection (a); or
(B)(i) has actual knowledge that goods, products, property, or services are promoted in a commercial electronic
mail message the transmission of which is in violation
of section 5(a)(1); and
(ii) receives, or expects to receive, an economic benefit
from such promotion.
(c) EXCLUSIVE ENFORCEMENT BY FTC.—Subsections (f) and (g)
of section 7 do not apply to violations of this section.
(d) SAVINGS PROVISION.—Except as provided in section 7(f)(8),
nothing in this section may be construed to limit or prevent any
action that may be taken under this Act with respect to any violation of any other section of this Act.
SEC. 7. ENFORCEMENT GENERALLY.

15 USC 7706.

(a) VIOLATION IS UNFAIR OR DECEPTIVE ACT OR PRACTICE.—
Except as provided in subsection (b), this Act shall be enforced
by the Commission as if the violation of this Act were an unfair
or deceptive act or practice proscribed under section 18(a)(1)(B)
of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).
(b) ENFORCEMENT BY CERTAIN OTHER AGENCIES.—Compliance
with this Act shall be enforced—
(1) under section 8 of the Federal Deposit Insurance Act
(12 U.S.C. 1818), in the case of—
(A) national banks, and Federal branches and Federal
agencies of foreign banks, by the Office of the Comptroller
of the Currency;
(B) member banks of the Federal Reserve System
(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies,
and insured State branches of foreign banks), commercial
lending companies owned or controlled by foreign banks,
organizations operating under section 25 or 25A of the
Federal Reserve Act (12 U.S.C. 601 and 611), and bank
holding companies, by the Board;
(C) banks insured by the Federal Deposit Insurance
Corporation (other than members of the Federal Reserve
System) and insured State branches of foreign banks, by
the Board of Directors of the Federal Deposit Insurance
Corporation; and
(D) savings associations the deposits of which are
insured by the Federal Deposit Insurance Corporation, by
the Director of the Office of Thrift Supervision;
(2) under the Federal Credit Union Act (12 U.S.C. 1751
et seq.) by the Board of the National Credit Union Administration with respect to any Federally insured credit union;
(3) under the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.) by the Securities and Exchange Commission with
respect to any broker or dealer;
(4) under the Investment Company Act of 1940 (15 U.S.C.
80a–1 et seq.) by the Securities and Exchange Commission
with respect to investment companies;
(5) under the Investment Advisers Act of 1940 (15 U.S.C.
80b–1 et seq.) by the Securities and Exchange Commission
with respect to investment advisers registered under that Act;

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PUBLIC LAW 108–187—DEC. 16, 2003

(6) under State insurance law in the case of any person
engaged in providing insurance, by the applicable State insurance authority of the State in which the person is domiciled,
subject to section 104 of the Gramm-Bliley-Leach Act (15 U.S.C.
6701), except that in any State in which the State insurance
authority elects not to exercise this power, the enforcement
authority pursuant to this Act shall be exercised by the
Commission in accordance with subsection (a);
(7) under part A of subtitle VII of title 49, United States
Code, by the Secretary of Transportation with respect to any
air carrier or foreign air carrier subject to that part;
(8) under the Packers and Stockyards Act, 1921 (7 U.S.C.
181 et seq.) (except as provided in section 406 of that Act
(7 U.S.C. 226, 227)), by the Secretary of Agriculture with respect
to any activities subject to that Act;
(9) under the Farm Credit Act of 1971 (12 U.S.C. 2001
et seq.) by the Farm Credit Administration with respect to
any Federal land bank, Federal land bank association, Federal
intermediate credit bank, or production credit association; and
(10) under the Communications Act of 1934 (47 U.S.C.
151 et seq.) by the Federal Communications Commission with
respect to any person subject to the provisions of that Act.
(c) EXERCISE OF CERTAIN POWERS.—For the purpose of the
exercise by any agency referred to in subsection (b) of its powers
under any Act referred to in that subsection, a violation of this
Act is deemed to be a violation of a Federal Trade Commission
trade regulation rule. In addition to its powers under any provision
of law specifically referred to in subsection (b), each of the agencies
referred to in that subsection may exercise, for the purpose of
enforcing compliance with any requirement imposed under this
Act, any other authority conferred on it by law.
(d) ACTIONS BY THE COMMISSION.—The Commission shall prevent any person from violating this Act in the same manner, by
the same means, and with the same jurisdiction, powers, and duties
as though all applicable terms and provisions of the Federal Trade
Commission Act (15 U.S.C. 41 et seq.) were incorporated into and
made a part of this Act. Any entity that violates any provision
of that subtitle is subject to the penalties and entitled to the
privileges and immunities provided in the Federal Trade Commission Act in the same manner, by the same means, and with the
same jurisdiction, power, and duties as though all applicable terms
and provisions of the Federal Trade Commission Act were incorporated into and made a part of that subtitle.
(e) AVAILABILITY OF CEASE-AND-DESIST ORDERS AND INJUNCTIVE
RELIEF WITHOUT SHOWING OF KNOWLEDGE.—Notwithstanding any
other provision of this Act, in any proceeding or action pursuant
to subsection (a), (b), (c), or (d) of this section to enforce compliance,
through an order to cease and desist or an injunction, with section
5(a)(1)(C), section 5(a)(2), clause (ii), (iii), or (iv) of section 5(a)(4)(A),
section 5(b)(1)(A), or section 5(b)(3), neither the Commission nor
the Federal Communications Commission shall be required to allege
or prove the state of mind required by such section or subparagraph.
(f) ENFORCEMENT BY STATES.—
(1) CIVIL ACTION.—In any case in which the attorney general of a State, or an official or agency of a State, has reason
to believe that an interest of the residents of that State has
been or is threatened or adversely affected by any person who

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117 STAT. 2713

violates paragraph (1) or (2) of section 5(a), who violates section
5(d), or who engages in a pattern or practice that violates
paragraph (3), (4), or (5) of section 5(a), of this Act, the attorney
general, official, or agency of the State, as parens patriae,
may bring a civil action on behalf of the residents of the
State in a district court of the United States of appropriate
jurisdiction—
(A) to enjoin further violation of section 5 of this Act
by the defendant; or
(B) to obtain damages on behalf of residents of the
State, in an amount equal to the greater of—
(i) the actual monetary loss suffered by such residents; or
(ii) the amount determined under paragraph (3).
(2) AVAILABILITY OF INJUNCTIVE RELIEF WITHOUT SHOWING
OF KNOWLEDGE.—Notwithstanding any other provision of this
Act, in a civil action under paragraph (1)(A) of this subsection,
the attorney general, official, or agency of the State shall not
be required to allege or prove the state of mind required by
section 5(a)(1)(C), section 5(a)(2), clause (ii), (iii), or (iv) of
section 5(a)(4)(A), section 5(b)(1)(A), or section 5(b)(3).
(3) STATUTORY DAMAGES.—
(A) IN GENERAL.—For purposes of paragraph (1)(B)(ii),
the amount determined under this paragraph is the amount
calculated by multiplying the number of violations (with
each separately addressed unlawful message received by
or addressed to such residents treated as a separate violation) by up to $250.
(B) LIMITATION.—For any violation of section 5 (other
than section 5(a)(1)), the amount determined under
subparagraph (A) may not exceed $2,000,000.
(C) AGGRAVATED DAMAGES.—The court may increase
a damage award to an amount equal to not more than
three times the amount otherwise available under this
paragraph if—
(i) the court determines that the defendant committed the violation willfully and knowingly; or
(ii) the defendant’s unlawful activity included one
or more of the aggravating violations set forth in section 5(b).
(D) REDUCTION OF DAMAGES.—In assessing damages
under subparagraph (A), the court may consider whether—
(i) the defendant has established and implemented,
with due care, commercially reasonable practices and
procedures designed to effectively prevent such violations; or
(ii) the violation occurred despite commercially
reasonable efforts to maintain compliance the practices
and procedures to which reference is made in clause
(i).
(4) ATTORNEY FEES.—In the case of any successful action
under paragraph (1), the court, in its discretion, may award
the costs of the action and reasonable attorney fees to the
State.
(5) RIGHTS OF FEDERAL REGULATORS.—The State shall serve
prior written notice of any action under paragraph (1) upon

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Records.

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PUBLIC LAW 108–187—DEC. 16, 2003
the Federal Trade Commission or the appropriate Federal regulator determined under subsection (b) and provide the Commission or appropriate Federal regulator with a copy of its complaint, except in any case in which such prior notice is not
feasible, in which case the State shall serve such notice immediately upon instituting such action. The Federal Trade
Commission or appropriate Federal regulator shall have the
right—
(A) to intervene in the action;
(B) upon so intervening, to be heard on all matters
arising therein;
(C) to remove the action to the appropriate United
States district court; and
(D) to file petitions for appeal.
(6) CONSTRUCTION.—For purposes of bringing any civil
action under paragraph (1), nothing in this Act shall be construed to prevent an attorney general of a State from exercising
the powers conferred on the attorney general by the laws of
that State to—
(A) conduct investigations;
(B) administer oaths or affirmations; or
(C) compel the attendance of witnesses or the production of documentary and other evidence.
(7) VENUE; SERVICE OF PROCESS.—
(A) VENUE.—Any action brought under paragraph (1)
may be brought in the district court of the United States
that meets applicable requirements relating to venue under
section 1391 of title 28, United States Code.
(B) SERVICE OF PROCESS.—In an action brought under
paragraph (1), process may be served in any district in
which the defendant—
(i) is an inhabitant; or
(ii) maintains a physical place of business.
(8) LIMITATION ON STATE ACTION WHILE FEDERAL ACTION
IS PENDING.—If the Commission, or other appropriate Federal
agency under subsection (b), has instituted a civil action or
an administrative action for violation of this Act, no State
attorney general, or official or agency of a State, may bring
an action under this subsection during the pendency of that
action against any defendant named in the complaint of the
Commission or the other agency for any violation of this Act
alleged in the complaint.
(9) REQUISITE SCIENTER FOR CERTAIN CIVIL ACTIONS.—
Except as provided in section 5(a)(1)(C), section 5(a)(2), clause
(ii), (iii), or (iv) of section 5(a)(4)(A), section 5(b)(1)(A), or section
5(b)(3), in a civil action brought by a State attorney general,
or an official or agency of a State, to recover monetary damages
for a violation of this Act, the court shall not grant the relief
sought unless the attorney general, official, or agency establishes that the defendant acted with actual knowledge, or
knowledge fairly implied on the basis of objective circumstances,
of the act or omission that constitutes the violation.
(g) ACTION BY PROVIDER OF INTERNET ACCESS SERVICE.—
(1) ACTION AUTHORIZED.—A provider of Internet access
service adversely affected by a violation of section 5(a)(1), 5(b),
or 5(d), or a pattern or practice that violates paragraph (2),
(3), (4), or (5) of section 5(a), may bring a civil action in

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PUBLIC LAW 108–187—DEC. 16, 2003

117 STAT. 2715

any district court of the United States with jurisdiction over
the defendant—
(A) to enjoin further violation by the defendant; or
(B) to recover damages in an amount equal to the
greater of—
(i) actual monetary loss incurred by the provider
of Internet access service as a result of such violation;
or
(ii) the amount determined under paragraph (3).
(2) SPECIAL DEFINITION OF ‘‘PROCURE’’.—In any action
brought under paragraph (1), this Act shall be applied as if
the definition of the term ‘‘procure’’ in section 3(12) contained,
after ‘‘behalf’’ the words ‘‘with actual knowledge, or by consciously avoiding knowing, whether such person is engaging,
or will engage, in a pattern or practice that violates this Act’’.
(3) STATUTORY DAMAGES.—
(A) IN GENERAL.—For purposes of paragraph (1)(B)(ii),
the amount determined under this paragraph is the amount
calculated by multiplying the number of violations (with
each separately addressed unlawful message that is transmitted or attempted to be transmitted over the facilities
of the provider of Internet access service, or that is transmitted or attempted to be transmitted to an electronic
mail address obtained from the provider of Internet access
service in violation of section 5(b)(1)(A)(i), treated as a
separate violation) by—
(i) up to $100, in the case of a violation of section
5(a)(1); or
(ii) up to $25, in the case of any other violation
of section 5.
(B) LIMITATION.—For any violation of section 5 (other
than section 5(a)(1)), the amount determined under
subparagraph (A) may not exceed $1,000,000.
(C) AGGRAVATED DAMAGES.—The court may increase
a damage award to an amount equal to not more than
three times the amount otherwise available under this
paragraph if—
(i) the court determines that the defendant committed the violation willfully and knowingly; or
(ii) the defendant’s unlawful activity included one
or more of the aggravated violations set forth in section
5(b).
(D) REDUCTION OF DAMAGES.—In assessing damages
under subparagraph (A), the court may consider whether—
(i) the defendant has established and implemented,
with due care, commercially reasonable practices and
procedures designed to effectively prevent such violations; or
(ii) the violation occurred despite commercially
reasonable efforts to maintain compliance with the
practices and procedures to which reference is made
in clause (i).
(4) ATTORNEY FEES.—In any action brought pursuant to
paragraph (1), the court may, in its discretion, require an
undertaking for the payment of the costs of such action, and
assess reasonable costs, including reasonable attorneys’ fees,
against any party.

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117 STAT. 2716
15 USC 7707.

PUBLIC LAW 108–187—DEC. 16, 2003

SEC. 8. EFFECT ON OTHER LAWS.

(a) FEDERAL LAW.—(1) Nothing in this Act shall be construed
to impair the enforcement of section 223 or 231 of the Communications Act of 1934 (47 U.S.C. 223 or 231, respectively), chapter
71 (relating to obscenity) or 110 (relating to sexual exploitation
of children) of title 18, United States Code, or any other Federal
criminal statute.
(2) Nothing in this Act shall be construed to affect in any
way the Commission’s authority to bring enforcement actions under
FTC Act for materially false or deceptive representations or unfair
practices in commercial electronic mail messages.
(b) STATE LAW.—
(1) IN GENERAL.—This Act supersedes any statute, regulation, or rule of a State or political subdivision of a State that
expressly regulates the use of electronic mail to send commercial messages, except to the extent that any such statute,
regulation, or rule prohibits falsity or deception in any portion
of a commercial electronic mail message or information attached
thereto.
(2) STATE LAW NOT SPECIFIC TO ELECTRONIC MAIL.—This
Act shall not be construed to preempt the applicability of—
(A) State laws that are not specific to electronic mail,
including State trespass, contract, or tort law; or
(B) other State laws to the extent that those laws
relate to acts of fraud or computer crime.
(c) NO EFFECT ON POLICIES OF PROVIDERS OF INTERNET ACCESS
SERVICE.—Nothing in this Act shall be construed to have any effect
on the lawfulness or unlawfulness, under any other provision of
law, of the adoption, implementation, or enforcement by a provider
of Internet access service of a policy of declining to transmit, route,
relay, handle, or store certain types of electronic mail messages.
15 USC 7708.
Deadline.
Reports.

(a) IN GENERAL.—Not later than 6 months after the date of
enactment of this Act, the Commission shall transmit to the Senate
Committee on Commerce, Science, and Transportation and the
House of Representatives Committee on Energy and Commerce
a report that—
(1) sets forth a plan and timetable for establishing a nationwide marketing Do-Not-E-Mail registry;
(2) includes an explanation of any practical, technical, security, privacy, enforceability, or other concerns that the Commission has regarding such a registry; and
(3) includes an explanation of how the registry would be
applied with respect to children with e-mail accounts.
(b) AUTHORIZATION TO IMPLEMENT.—The Commission may
establish and implement the plan, but not earlier than 9 months
after the date of enactment of this Act.

15 USC 7709.

SEC. 10. STUDY OF EFFECTS OF COMMERCIAL ELECTRONIC MAIL.

Deadline.
Reports.

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SEC. 9. DO-NOT-E-MAIL REGISTRY.

(a) IN GENERAL.—Not later than 24 months after the date
of the enactment of this Act, the Commission, in consultation with
the Department of Justice and other appropriate agencies, shall
submit a report to the Congress that provides a detailed analysis
of the effectiveness and enforcement of the provisions of this Act
and the need (if any) for the Congress to modify such provisions.

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PUBLIC LAW 108–187—DEC. 16, 2003

117 STAT. 2717

(b) REQUIRED ANALYSIS.—The Commission shall include in the
report required by subsection (a)—
(1) an analysis of the extent to which technological and
marketplace developments, including changes in the nature
of the devices through which consumers access their electronic
mail messages, may affect the practicality and effectiveness
of the provisions of this Act;
(2) analysis and recommendations concerning how to
address commercial electronic mail that originates in or is
transmitted through or to facilities or computers in other
nations, including initiatives or policy positions that the Federal
Government could pursue through international negotiations,
fora, organizations, or institutions; and
(3) analysis and recommendations concerning options for
protecting consumers, including children, from the receipt and
viewing of commercial electronic mail that is obscene or pornographic.
SEC. 11. IMPROVING ENFORCEMENT BY PROVIDING REWARDS FOR
INFORMATION ABOUT VIOLATIONS; LABELING.

The Commission shall transmit to the Senate Committee on
Commerce, Science, and Transportation and the House of Representatives Committee on Energy and Commerce—
(1) a report, within 9 months after the date of enactment
of this Act, that sets forth a system for rewarding those who
supply information about violations of this Act, including—
(A) procedures for the Commission to grant a reward
of not less than 20 percent of the total civil penalty collected
for a violation of this Act to the first person that—
(i) identifies the person in violation of this Act;
and
(ii) supplies information that leads to the successful collection of a civil penalty by the Commission;
and
(B) procedures to minimize the burden of submitting
a complaint to the Commission concerning violations of
this Act, including procedures to allow the electronic
submission of complaints to the Commission; and
(2) a report, within 18 months after the date of enactment
of this Act, that sets forth a plan for requiring commercial
electronic mail to be identifiable from its subject line, by means
of compliance with Internet Engineering Task Force Standards,
the use of the characters ‘‘ADV’’ in the subject line, or other
comparable identifier, or an explanation of any concerns the
Commission has that cause the Commission to recommend
against the plan.

Reports.
Deadlines.
Procedures.
15 USC 7710.

SEC. 12. RESTRICTIONS ON OTHER TRANSMISSIONS.

Section 227(b)(1) of the Communications Act of 1934 (47 U.S.C.
227(b)(1)) is amended, in the matter preceding subparagraph (A),
by inserting ‘‘, or any person outside the United States if the
recipient is within the United States’’ after ‘‘United States’’.
SEC. 13. REGULATIONS.

15 USC 7711.

(a) IN GENERAL.—The Commission may issue regulations to
implement the provisions of this Act (not including the amendments
made by sections 4 and 12). Any such regulations shall be issued
in accordance with section 553 of title 5, United States Code.

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117 STAT. 2718

PUBLIC LAW 108–187—DEC. 16, 2003

(b) LIMITATION.—Subsection (a) may not be construed to
authorize the Commission to establish a requirement pursuant
to section 5(a)(5)(A) to include any specific words, characters, marks,
or labels in a commercial electronic mail message, or to include
the identification required by section 5(a)(5)(A) in any particular
part of such a mail message (such as the subject line or body).
15 USC 7712.

Deadline.

15 USC 7713.

SEC. 14. APPLICATION TO WIRELESS.

(a) EFFECT ON OTHER LAW.—Nothing in this Act shall be interpreted to preclude or override the applicability of section 227 of
the Communications Act of 1934 (47 U.S.C. 227) or the rules prescribed under section 3 of the Telemarketing and Consumer Fraud
and Abuse Prevention Act (15 U.S.C. 6102).
(b) FCC RULEMAKING.—The Federal Communications Commission, in consultation with the Federal Trade Commission, shall
promulgate rules within 270 days to protect consumers from
unwanted mobile service commercial messages. The Federal
Communications Commission, in promulgating the rules, shall, to
the extent consistent with subsection (c)—
(1) provide subscribers to commercial mobile services the
ability to avoid receiving mobile service commercial messages
unless the subscriber has provided express prior authorization
to the sender, except as provided in paragraph (3);
(2) allow recipients of mobile service commercial messages
to indicate electronically a desire not to receive future mobile
service commercial messages from the sender;
(3) take into consideration, in determining whether to subject providers of commercial mobile services to paragraph (1),
the relationship that exists between providers of such services
and their subscribers, but if the Commission determines that
such providers should not be subject to paragraph (1), the
rules shall require such providers, in addition to complying
with the other provisions of this Act, to allow subscribers to
indicate a desire not to receive future mobile service commercial
messages from the provider—
(A) at the time of subscribing to such service; and
(B) in any billing mechanism; and
(4) determine how a sender of mobile service commercial
messages may comply with the provisions of this Act, considering the unique technical aspects, including the functional
and character limitations, of devices that receive such messages.
(c) OTHER FACTORS CONSIDERED.—The Federal Communications Commission shall consider the ability of a sender of a commercial electronic mail message to reasonably determine that the message is a mobile service commercial message.
(d) MOBILE SERVICE COMMERCIAL MESSAGE DEFINED.—In this
section, the term ‘‘mobile service commercial message’’ means a
commercial electronic mail message that is transmitted directly
to a wireless device that is utilized by a subscriber of commercial
mobile service (as such term is defined in section 332(d) of the
Communications Act of 1934 (47 U.S.C. 332(d))) in connection with
such service.
SEC. 15. SEPARABILITY.

If any provision of this Act or the application thereof to any
person or circumstance is held invalid, the remainder of this Act
and the application of such provision to other persons or circumstances shall not be affected.

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Case 2:15-cv-03107-PA-AJW Document 169-1 Filed 02/01/16 Page 77 of 77 Page ID
#:3149

PUBLIC LAW 108–187—DEC. 16, 2003

117 STAT. 2719

SEC. 16. EFFECTIVE DATE.

The provisions of this Act, other than section 9, shall take
effect on January 1, 2004.

15 USC 7701
note.

Approved December 16, 2003.

LEGISLATIVE HISTORY—S. 877:
SENATE REPORTS: No. 108–102 (Comm. on Commerce, Science, and Transportation).
CONGRESSIONAL RECORD, Vol. 149 (2003):
Oct. 22, considered and passed Senate.
Nov. 21, considered and passed House, amended.
Nov. 25, Senate concurred in House amendment with an amendment.
Dec. 8, House conccurred in Senate amendment.

Æ

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