Federal Trade Commission v. DR Phone Communication, Inc et al
Filing
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Order by Hon. Samuel Conti granting 15 Motion to Continue and stipulation of preliminary injunction and other equitable relief.(sclc1, COURT STAFF) (Filed on 6/7/2012)
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WILLARD K. TOM
General Counsel
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ROBERT J. SCHROEDER
Regional Director
LAURA M. SOLIS, WA State Bar No. 36005
NADINE S. SAMTER, WA State Bar No. 23881
Federal Trade Commission
915 Second Avenue, Suite 2896
Seattle, WA 98174
Phone: (206) 220-4544 (Solis)
Phone: (206) 220-4479 (Samter)
Facsimile: (206) 220-6366
Email: lsolis@ftc.gov
nsamter@ftc.gov
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KERRY O’BRIEN, CA State Bar No. 149264
Federal Trade Commission
901 Market Street, Suite 570
San Francisco, CA 94103
Phone: (415) 848-5189
Facsimile: (415) 848-5142
Email: kobrien@ftc.gov
Attorneys for Plaintiff
Federal Trade Commission
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
San Francisco Division
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FEDERAL TRADE COMMISSION,
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Plaintiff,
v.
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DR PHONE COMMUNICATIONS, INC.,
also d/b/a DR Phone Communications
Company, Inc., Phone Communications, Inc.,
and DRphonecom.com, and
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DAVID ROSENTHAL, individually and as an
officer of DR Phone Communications, Inc.,
Defendants.
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Stipulated Preliminary Injunction - Page 1
Case No. C-12-2631-SC
Case No. C-12-2631-SC
[PROPOSED] STIPULATED ORDER OF
PRELIMINARY INJUNCTION AND
OTHER EQUITABLE RELIEF
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Plaintiff, the Federal Trade Commission (“FTC” or the “Commission”), pursuant to
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Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b), has filed a
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Complaint for Injunctive and Other Equitable Relief (“Complaint”) and has moved, pursuant to
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Federal Rule of Civil Procedure 65, for a Temporary Restraining Order (“TRO”) and
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Preliminary Injunction With Other Equitable Relief against the defendants, DR Phone
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Communications, Inc., and David Rosenthal (collectively “Defendants”).
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NOW, THEREFORE, the Commission and Defendant David Rosenthal, having
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requested the Court to enter this Stipulated Preliminary Injunction, it is ordered, adjudged, and
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decreed as follows:
FINDINGS
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1.
This is an action by the FTC under Section 13(b) of the FTC Act, 15 U.S.C. §
53(b). Pursuant to this section, the FTC has the authority to seek the relief granted herein.
2.
This Court has jurisdiction over the subject matter of this case and there is good
cause to believe that it will have jurisdiction over all parties hereto.
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3.
Venue in the Northern District of California and service of process are proper.
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4.
The acts and practices of the Defendants are in or affecting commerce, as
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defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
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This Court has the authority to grant a preliminary injunction and other
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appropriate relief pursuant to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), and Rule 65 of
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the Federal Rules of Civil Procedure.
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6.
Plaintiff and Defendant Rosenthal agree that relief set forth herein shall remain
in effect until further order of this Court.
7.
This Order does not constitute, and shall not be interpreted to constitute, either
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an admission by Defendants of any of Plaintiff’s allegations, or a finding by the Court that
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Defendants have engaged in any violation of the FTC Act.
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8.
No security is required of any agency of the United States for issuance of a
restraining order. Fed. R. Civ. P. 65(c).
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Stipulated Preliminary Injunction - Page 2
Case No. C-12-2631-SC
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DEFINITIONS
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For the purpose of this Order, the following definitions shall apply:
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1.
“Stipulating Defendant” means David Rosenthal, individually and as an
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officer, director, manager, member, shareholder, agent, servant, or employee of DR Phone
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Communications, Inc., d/b/a DRphonecom.com, and its divisions, subsidiaries, affiliates,
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predecessors, successors, and assigns. Furthermore, any person or entity in active concert or
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participation with David Rosenthal, including any person acting in the capacity of an officer,
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director, manager, member, shareholder, agent, servant, or employee of DR Phone
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Communications, Inc. and its divisions, subsidiaries, affiliates, predecessors, successors, and
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assigns, who receives actual notice of this Order by personal service or otherwise, is bound to
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comply with this Order, see Fed. R. Civ. P. 65(d), whether these persons or entities are acting
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directly or through a trust, corporation, subsidiary, division, or other device.
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2.
“Document” is synonymous in meaning and equal in scope to the usage of the
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term in Federal Rule of Civil Procedure 34(a), and encompasses both paper documents and
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electronically stored information – including writings, drawings, graphs, charts, photographs,
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sound recordings, images, and other data or data compilations – stored in any medium from
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which information can be obtained either directly or, if necessary, after translation by
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Defendants into a reasonably usable form. A draft or non-identical copy is a separate document
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within the meaning of the term.
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3.
“Clear and prominent” shall mean as follows:
A.
In a print advertisement or other promotional materials, the disclosure
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shall be in a type size and location sufficiently noticeable for an ordinary consumer to read and
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comprehend it, in print that contrasts with the background against which it appears. In multi-
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page documents, the disclosure shall appear on the cover or, alternatively, on the first page
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where any price representation or representation regarding calling time is made.
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B.
In an advertisement communicated through an electronic medium (such
as television, video, radio, and interactive media such as the Internet and online services), the
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Stipulated Preliminary Injunction - Page 3
Case No. C-12-2631-SC
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disclosure shall be presented simultaneously in both the audio and video portions of the
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advertisement. Provided, however, that in any advertisement presented solely through video or
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audio means, the disclosure may be made through the same means in which the advertisement
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is presented. The audio disclosure shall be delivered in a volume and cadence sufficient for an
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ordinary consumer to hear and comprehend it. The video disclosure shall be of a size and
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shade, and shall appear on the screen for a duration sufficient for an ordinary consumer to read
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and comprehend it. In addition to the foregoing, in interactive media, the disclosure shall also
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be unavoidable and shall be presented prior to the consumer incurring any financial obligation.
C.
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On a product label or prepaid calling card, the disclosure shall be in a
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type size and location on the principal display panel sufficiently noticeable for an ordinary
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consumer to read and comprehend it, in print that contrasts with the background against which
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it will appear.
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The disclosure shall be in understandable language and syntax. Nothing
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contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any
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advertisement or calling card label.
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4.
“PIN” means a unique personal identification number assigned to a Prepaid
Calling Card to access the value of the Prepaid Calling Card.
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“Fees and Charges” means any fees or charges assessed in connection with the
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use of a Prepaid Calling Card, including, but not limited to, any maintenance fee, weekly fee,
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monthly fee, connection fee, payphone fee, cell phone fee, access number fee, service fee,
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hang-up fee, or expiration date.
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6.
“Marketing Materials” means any poster, sign, bulletin, Internet website,
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advertisement, in-store display, packaging, prepaid calling card, offer of sale, or other
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promotional material.
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7.
“Prepaid Calling Card” means a card or information providing the right to
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make one or more telephone calls that are paid for in advance. Such right to make prepaid
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telephone calls may be embodied on a card or other physical object or may be purchased by an
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Stipulated Preliminary Injunction - Page 4
Case No. C-12-2631-SC
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electronic means, such as over the Internet, through which the purchaser obtains information,
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such as access and authorization codes, that are not physically located on a card or other object.
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ORDER
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I.
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MISREPRESENTATIONS
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IT IS HEREBY ORDERED that Stipulating Defendant, directly or indirectly through
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any corporation, partnership, subsidiary, distributor, agent, or other device, and those persons in
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active concert or participation with him who receive actual notice of this Order by personal
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service or otherwise, in connection with the marketing, advertising, promotion, distribution,
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offer for sale, or sale of Prepaid Calling Cards, are hereby restrained and enjoined from falsely
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representing, expressly or by implication, the number of calling minutes a consumer will obtain
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by using a Prepaid Calling Card.
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II.
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FAILURE TO DISCLOSE
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IT IS FURTHER ORDERED that Stipulating Defendant, directly or indirectly
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through any corporation, partnership, subsidiary, distributor, agent, or other device, and those
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persons in active concert or participation with him who receive actual notice of this Order by
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personal service or otherwise, in connection with the marketing, advertising, promotion,
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distribution, offer for sale, or sale of Prepaid Calling Cards, are hereby restrained and enjoined
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from making any representations, expressly or by implication, regarding the number of calling
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minutes provided and/or the value of a Prepaid Calling Card, while failing to make a clear and
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prominent disclosure of all material limitations on the use of such Prepaid Calling Card,
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including, but not limited to, the existence and specific amount of any Fees and Charges that
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will be assessed in connection with the use of such Prepaid Calling Card.
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Stipulated Preliminary Injunction - Page 5
Case No. C-12-2631-SC
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III.
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ADVERTISING AND MARKETING MATERIALS
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IT IS FURTHER ORDERED that, for Marketing Materials that Defendants
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disseminated to retailers or distributors prior to the date of entry of this Order, Stipulating
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Defendant shall take reasonable actions within his power to ensure that any such materials used
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to market or sell Defendants’ prepaid calling cards that are not in compliance with Sections I
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and II of this Order are removed or replaced. Such actions shall include providing the notice
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required by Section VII of this Order and refusing to sell product to retailers and distributors
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that Stipulating Defendant knows or should know are using Marketing Materials in violation of
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Section I or II of this Order.
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IV.
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PRESERVATION OF RECORDS
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IT IS FURTHER ORDERED that Stipulating Defendant and his successors, assigns,
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agents, servants, employees, and attorneys, and those persons in active concert or participation
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with any of them who receive actual notice of this Order by personal service, facsimile
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transmission, email, or otherwise, whether acting directly or through any corporation,
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subsidiary, division, or other device, are hereby temporarily restrained and enjoined from:
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A.
Destroying, erasing, mutilating, concealing, altering, transferring, falsifying,
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writing over, or otherwise disposing of, in any manner, directly or indirectly, any Documents or
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records of any kind that relate to the business practices or business or personal finances of
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Defendants or other entity directly or indirectly under the control of Defendants, including, but
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not limited to, any and all Marketing Materials, World Wide Web pages, consumer complaints,
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rate decks, call detail records, telephone logs, telephone scripts, contracts, correspondence,
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email, corporate books and records, accounting data, financial statements, receipt books,
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ledgers, personal and business canceled checks and check registers; bank statements, calendars,
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appointment books, and tax returns; and
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Stipulated Preliminary Injunction - Page 6
Case No. C-12-2631-SC
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B.
Failing to create and maintain books, records, and accounts which, in reasonable
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detail, accurately, fairly, and completely reflect the incomes, assets, disbursements,
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transactions, and use of monies by any Defendant or other entity directly or indirectly under the
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control of any Defendant.
V.
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FINANCIAL AND BUSINESS ACCOUNTING
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IT IS FURTHER ORDERED that within twenty (20) calendar days after service of
this Order:
A.
Stipulating Defendant shall complete and deliver to the FTC:
(1) the Financial Statement captioned “Financial Statement of Individual
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Defendant,” a copy of which is attached hereto as Attachment A, and any tax returns, bank
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statements, or other documentation supporting the financial information provided therein; and
(2) the Financial Statement captioned “Financial Statement of Corporate
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Defendant,” a copy of which is attached hereto as Attachment B, and any tax returns, bank
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statements, or other documentation supporting the financial information provided therein; and
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B.
Stipulating Defendant also shall provide the FTC with the following
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information, from January 1, 2010, to the date of Stipulating Defendant’s full and complete
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compliance with this Order, concerning Defendant DR Phone Communications, Inc.: (1) total
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gross sales revenues on a monthly basis derived from the sale of prepaid calling cards; (2) an
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itemization of total gross operating expenses on a monthly basis; (3) gross operating
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expenditures on a monthly basis per category, including but not limited to payroll, advertising,
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marketing, utilities, and property leases; and (4) gross capital expenditures.
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VI.
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NOTIFICATION OF CHANGE IN BUSINESS STRUCTURE
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IT IS FURTHER ORDERED that Stipulating Defendant shall notify the Commission
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of any changes in the structure of Defendant DR Phone Communications, Inc. that may affect
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Stipulating Defendant’s compliance obligations arising under this Order, including but not
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Stipulated Preliminary Injunction - Page 7
Case No. C-12-2631-SC
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limited to: the dissolution, assignment, sale, merger, or other similar action involving
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Defendant DR Phone Communications, Inc.; the creation or dissolution of a subsidiary, parent,
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or affiliate of Defendant DR Phone Communications, Inc. that engages in any acts or practices
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subject to this Order; a change in the business name or address of Defendant DR Phone
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Communications, Inc.,; or a change in Stipulating Defendant’s control over Defendant DR
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Phone Communications, Inc., at least thirty (30) days prior to such change.
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VII.
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DISTRIBUTION OF ORDER BY DEFENDANT
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IT IS FURTHER ORDERED that Stipulating Defendant shall immediately provide a
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copy of this Order to each distributor, sub-distributor, subsidiary, telecommunications service
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provider, division, sales entity, successor, assign, officer, director, member, manager,
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employee, independent contractor, client retailer, client company, agent, and attorney of
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Defendants, and shall, within ten (10) days from the date of entry of this Order, provide the
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FTC with a sworn statement that this provision of the Order has been satisfied, which statement
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shall include the names, physical addresses, phone number, and email addresses, of each such
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person or entity who received a copy of the Order.
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VIII.
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CONSUMER REPORTS
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IT IS FURTHER ORDERED that pursuant to Section 604(1) of the Fair Credit
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Reporting Act, 15 U.S.C. § 1681b(1), any consumer reporting agency may furnish a consumer
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report concerning Stipulating Defendant to the FTC.
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IX.
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SERVICE OF THIS ORDER BY PLAINTIFF
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IT IS FURTHER ORDERED that copies of this Order may be served by electronic
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mail, facsimile transmission, personal or overnight delivery, or U.S. Mail, by agents and
employees of the Commission or any state or federal law enforcement agency, on (1)
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Stipulated Preliminary Injunction - Page 8
Case No. C-12-2631-SC
7th
June
FEDERAL TRADE COMMISSION
FINANCIAL STATEMENT OF INDIVIDUAL DEFENDANT
Instructions:
1.
Complete all items. Enter “None” or “N/A” (“Not Applicable”) where appropriate. If you cannot fully answer a
question, explain why.
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The font size within each field will adjust automatically as you type to accommodate longer responses.
3.
“Dependents” include your live-in companion, dependent children, or any other person, whom you or your spouse
(or your children’s other parent) claimed or could have claimed as a dependent for tax purposes at any time during
the past five years.
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“Assets” and “Liabilities” include ALL assets and liabilities, located within the United States or elsewhere,
whether held individually or jointly.
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Attach continuation pages as needed. On the financial statement, state next to the Item number that the Item is
being continued. On the continuation page(s), identify the Item number(s) being continued.
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Type or print legibly.
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Initial each page in the space provided in the lower right corner.
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Sign and date the completed financial statement on the last page.
Penalty for False Information:
Federal law provides that any person may be imprisoned for not more than five years, fined, or both, if such person:
(1) “in any matter within the jurisdiction of any department or agency of the United States knowingly and
willfully falsifies, conceals or covers up by any trick, scheme, or device a material fact, or makes any false,
fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the
same to contain any false, fictitious or fraudulent statement or entry” (18 U.S.C. § 1001);
(2) “in any . . . statement under penalty of perjury as permitted under section 1746 of title 28, United States Code,
willfully subscribes as true any material matter which he does not believe to be true” (18 U.S.C. § 1621); or
(3) “in any (. . . statement under penalty of perjury as permitted under section 1746 of title 28, United States
Code) in any proceeding before or ancillary to any court or grand jury of the United States knowingly makes any
false material declaration or makes or uses any other information . . . knowing the same to contain any false
material declaration” (18 U.S.C. § 1623).
For a felony conviction under the provisions cited above, federal law provides that the fine may be not more than the
greater of (i) $250,000 for an individual or $500,000 for a corporation, or (ii) if the felony results in pecuniary gain to any
person or pecuniary loss to any person other than the defendant, the greater of twice the gross gain or twice the gross loss.
18 U.S.C. § 3571.
ATTACHMENT A
BACKGROUND INFORMATION
Item 1.
Information About You
Your Full Name ______________________________________________ Social Security No. ___________________
Place of Birth _________________________ Date of Birth _______________ Drivers License No. _______________
Current Address ______________________________________________________ From (Date) _________________
Rent or Own? _________ Telephone No. _________________________ Facsimile No. _________________________
E-Mail Address _____________________________________ Internet Home Page ____________________________
Previous Addresses for past five years:
Address___________________________________________ Rent or Own?________ From/Until_________________
Address___________________________________________ Rent or Own?________ From/Until_________________
Identify any other name(s) and/or social security number(s) you have used, and the time period(s) during which they
were used________________________________________________________________________________________
Item 2.
Information About Your Spouse or Live-In Companion
Spouse/Companion's Name _____________________________________ Social Security No. ___________________
Place of Birth _________________________________________ Date of Birth _______________________________
Identify any other name(s) and/or social security number(s) your spouse/companion has used, and the time period(s)
during which they were used ________________________________________________________________________
Address (if different from yours) _____________________________________________________________________
From (Date) _________________________ Rent or Own?___________ Telephone No._________________________
Employer’s Name and Address ______________________________________________________________________
Job Title _______________________ Years in Present Job _________ Annual Gross Salary/Wages $______________
Item 3.
Information About Your Previous Spouse
Previous Spouse’s Name & Address __________________________________________________________________
___________________________________ Social Security No. _________________ Date of Birth _______________
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Initials __________
Item 4.
Contact Information
Name & Address of Nearest Living Relative or Friend ___________________________________________________
____________________________________________________________ Telephone No. ______________________
Item 5.
Information About Dependents Who Live With You
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