Â鶹´«Ã½

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON

FEDERAL TRADE COMMISSION, Plaintiff,

v.

CYBERSPACE.COM, LLC, FRENCH DREAMS, COTO SETTLEMENT, ELECTRONIC PUBLISHING VENTURES, LLC, OLYMPIC TELECOMMUNICATIONS, INC., IAN EISENBERG, and CHRIS HEBARD, Defendants.

STIPULATED PERMANENT INJUNCTION

Plaintiff, Â鶹´«Ã½ Trade Commission ("FTC" or "Commission"), has filed a Complaint for permanent injunction and other relief in this matter, pursuant to Sections 5 and 13(b) of the Â鶹´«Ã½ Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45 and 53(b). Defendants Ian Eisenberg, French Dreams, and Olympic Telecommunications ("defendants"), and counsel for the Commission hereby STIPULATE and AGREE to the entry of the following Permanent Injunction Order, pending final adjudication as to issues concerning the amount and distributions of consumer redress.

FINDINGS

1. This Court has jurisdiction of the subject matter of this case and of the parties hereto and venue is proper as to all parties in the Western District of Washington.

 

2. The activities of defendants are in or affecting commerce, as defined in the FTC Act, 15 U.S.C. § 44.

 

3. The Complaint states a claim upon which relief may be granted against defendants under Sections 5 and 13(b) of the Â鶹´«Ã½ Trade Commission Act15 U.S.C. § 45(a) and 53(b).

 

4. This Order does not constitute an admission that defendants have engaged in violations of the Â鶹´«Ã½ Trade Commission Act.

 

5. Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of the Order. Defendants waive any claim that they may have held under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each settling party shall bear its own costs and attorneys' fees.

 

6. Entry of this Order is in the public interest.

DEFINITIONS

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

1. "Defendants" means Ian Eisenberg, French Dreams, and Olympic Telecommunications.

 

2. "Solicitation check" means any check that, if deposited or cashed by the consumer, obligates the consumer for any goods or services sold by defendant, including Internet-related services.

 

3. "Internet" means a worldwide system of linked computer networks that use a common protocol (TCP/IP) to deliver and receive information. The "Internet" includes, but is not limited to, the following forms of electronic communication: file transfers, electronic mail, the World Wide Web, newsgroups, Internet Relay Chat, audio, and video.

 

4. "Internet-related Services" means any product or service that assists persons to access, use, browse, advertise on, communicate through, or do business on the Internet, including, but not limited to: design, hosting and maintenance of web pages and web sites, providing Internet access or e-mail accounts, and establishing domain names and virtual domain names.

 

5. "In or affecting commerce" is as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

 

6. "Telephone-billed transaction" means any purchase or purported purchase of a good or service that is charged to a line subscriber's telephone bill, but excluding: (1) purchases solely of common carrier transmission services; (2) purchases of intrastate services regulated by a state public service or public utility commission; (3) purchases of calls to an international telephone number at tarriffed rates; (4) purchases of services accessed by dialing a 900 number or other number that can be blocked by the Line Subscriber pursuant to 47 U.S.C.§ 228(c); (5) purchases of goods or services that are otherwise subject to billing dispute resolution procedures required by Â鶹´«Ã½ statute or regulation; and (6) purchases of goods or services pursuant to a presubscription agreement that meets the requirements of 16 C.F.R. Part 308. For purposes of this Order, any service in which the service provider advertises, promotes, directs, controls, or provides the content of communications provided or exchanged through the service is not a common carrier transmission service. In the event the Pay-Per-Call Rule, 16 C.F.R. Part 308, is amended in a manner that includes within the Rule's coverage any service exempted from the definition of "telephone-billed transaction," pursuant to subparts (1) through (3) above, the subpart exemption shall not apply, and such service shall be deemed a "telephone-billed transaction" pursuant to this Order. Conversely, in the event an amended Pay-Per-Call Rule excludes from the Rule's coverage any service included within the above definition of "telephone-billed transaction," then the above definition shall not apply to such service and such service shall be deemed to be exempt from the definition of "telephone-billed transaction" pursuant to this Order.

PROHIBITED BUSINESS PRACTICES

I.

IT IS THEREFORE ORDERED that defendants, and their successors, assigns, officers, agents, directors, servants, employees, salespersons, corporations, subsidiaries, affiliates, all other persons or entities directly or indirectly under their control, and all other persons or entities in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, are hereby permanently restrained and enjoined from sending a bill, or causing a bill to be sent, to any consumer for any product or service sold by any defendant without first obtaining express, verifiable authorization that the consumer being charged has agreed to be charged for the product or service in the amount and in the manner set forth in the bill which defendants have sent or caused to be sent to that consumer; provided, however, that defendants Eisenberg and/or Olympic Telecommunications, when acting as a third-party billing aggregator for independent vendors, shall be enjoined from:

A. Collecting or attempting to collect, directly or indirectly, charges for any telephone-billed transaction not blockable pursuant to 47 U.S.C. § 228(c) where defendants know or should have known that the charge was not expressly authorized by the person from whom payment is being sought; and

 

B. Collecting or attempting to collect, on behalf of any vendor or other entity, directly or indirectly, charges for any telephone-billed transaction not blockable pursuant to 47 U.S.C. § 228, unless defendants perform monthly a scientifically designed random telephone survey of at least 50 or 5 percent (which ever is greater) of the purchasers, up to a maximum of 250 purchasers, submitted by the vendor or other entity to verify that the purchases been authorized by the person from whom payment is being sought; and

 

C. Billing or causing to be billed, or collecting or attempting to collect payment, directly or indirectly, on behalf of any Vendor that is a party to any telephone-billed transaction where the defendant knows or should know that the Vendor does not obtain express authorization for such telephone-billed transaction from the Line Subscriber; and

 

D. Failing to maintain, for a period of three years, records sufficient to demonstrate compliance with Sections B and C of this paragraph.

II.

IT IS FURTHER ORDERED that defendants, and their successors, assigns, officers, agents, directors, servants, employees, salespersons, corporations, subsidiaries, affiliates, all other persons or entities directly or indirectly under their control, and all other persons or entities in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, promotion, marketing, offering for sale, sale, or provision of any goods or services, are hereby permanently restrained and enjoined from making any false or misleading representations, expressly or by implication, orally or in writing, that:

A. A solicitation check is a refund, rebate, receivable, or other payment for services based on a prior or ongoing business relationship;

 

B. Consumers are legally obligated to pay charges for goods or services that were not authorized by the consumers; and

 

C. Consumers have or had a business relationship with any defendant.

III.

IT IS FURTHER ORDERED that defendants, and their successors, assigns, officers, agents, directors, servants, employees, salespersons, corporations, subsidiaries, affiliates, all other persons or entities directly or indirectly under the control of defendants, and all other persons or entities in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, promotion, marketing, offering for sale, sale, or provision of any goods or services, are hereby permanently restrained and enjoined from failing to disclose, clearly and conspicuously:

A. On the face of any solicitation check, a statement that notifies the payee that signing and cashing or depositing the check obligates the payee to pay a monthly charge;

 

B. On the back of the check, and above the endorsement line, a statement that notifies the payee of the amount and frequency of the charge that defendants will impose if the payee deposits or endorses the check. No other information above the endorsement line may be included by defendant on the back of the check; and

 

C. In a notice attached to the solicitation check, a statement that contains all the material terms associated with depositing or endorsing the solicitation check, including a statement that informs the payee that by endorsing or cashing the check, the payee is purchasing or signing up for defendants' goods or services; notifies the payee that defendants will impose a charge if the payee deposits or endorses the check; discloses the amount and frequency of the charge; explains how defendants will bill the payee; describes the goods or services provided for the charge; explains how to cancel and obtain a full refund for any purchase made by the consumer; and provides a customer service telephone number for consumers to call with questions. The notice shall not resemble an invoice or other form suggesting a prior or ongoing business relationship between the consumer and defendants.

COOPERATION WITH THE COMMISSION

IV.

IT IS FURTHER ORDERED that defendants hereby agree to cooperate fully, truthfully, and completely with the plaintiff, Â鶹´«Ã½ Trade Commission, in the continuing litigation of this matter. This cooperation includes, but is not limited to, meeting with Commission investigators and attorneys, assisting in the preparation for testimony, producing defendants' business and financial records, and testifying fully, truthfully, and completely at any deposition, hearing or trial in this matter, if called upon to do so, without the necessity of service of process upon them. Nothing contained in this paragraph shall be deemed to: 1) waive any defendant's privilege against self-incrimination; 2) waive any defendant's right to seek a protective order or assert objections under the Â鶹´«Ã½ Rules of Civil Procedure; or 3) to compel disclosure of a trade secret or confidential commercial information.

Nothing contained in this Order shall limit the Commission from seeking modification of this Order should counsel for the Commission determine that defendant has not complied with any provision of this Order.

FINANCIAL DISCLOSURE

V.

IT IS FURTHER ORDERED that within ten (10) days of the signing of this Order by defendants, defendants shall provide the Commission with a complete statement of all billings, collections, disbursements, income, and expenses of Cyberspace.com, to the extent the information is within their possession, custody, control, or knowledge.

CONSUMER REDRESS

VI.

IT IS FURTHER ORDERED that:

A. Consumer redress, including defendants' respective contributions are to be determined in the following manner through referral to a Special Master ("Master"):

 

1. The Master shall be selected by mutual consent of the parties within five (5) days of the signing of this order. If the defendants fail to select a Master within the allotted time period, the FTC shall select a Master within three (3) days;

 

2. Defendants agree to cooperate fully and to participate in good faith in the process that shall be determined in the sole discretion of the Master after consultation with the parties;

 

3. The Master shall be compensated at a reasonable rate by the defendants, each of whom shall bear an equal portion of such costs;

 

4. The Master shall endeavor to obtain an agreement among the parties determining the amount of consumer redress, the method of distribution, and the means of guaranteeing payment of consumer redress by defendants named in the caption;

 

5. If the Master is not able to obtain such an agreement on the matters set forth in Paragraph 4 within 30 days of the entry of this Order, then this matter shall proceed to Court immediately under normal Court procedures.

 

B. The parties agree that the provisions of Rule 53, Fed. R. Civ. P., do not apply to this Section.

 

C. Failure to fulfill all or any portion of this Section shall not affect any other Section of this Order.

GENERAL REQUIREMENTS

VII.

Acknowledgment of Receipt of Order by Defendants

IT IS FURTHER ORDERED that, within five (5) business days after receipt by defendants of this Order as entered by the Court, defendants shall submit to the Commission truthful sworn statements, in the form shown on Attachment A to this Order, that shall acknowledge receipt of this Final Order.

VIII.

Distribution of Order by Defendants

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, defendants shall:

A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of same from, each owner, officer and director, each individual serving in either a management or supervisory capacity immediately upon employing or retaining any such persons, for any business where:

 

(1) any defendant is the majority owner of the business or directly or indirectly manages or controls the business, and where

 

(2) the business uses solicitation checks to sign consumers up for any goods or services marketed or sold by defendants; and

 

B. Maintain for a period of three (3) years after creation, and upon reasonable notice, make available to representatives of the Commission, the original signed and dated acknowledgments of the receipt of copies of this Order, as required in Subsection (A) of this Paragraph.

IX.

Record Keeping Provisions

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, defendants, and defendants' successors, assigns, officers, agents, directors, servants, employees, salespersons, corporations, subsidiaries, affiliates, all other persons or entities directly or indirectly under the control of defendants, and all other persons or entities in active concert or participation with defendants who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with any business where

(1) any defendant is the majority owner of the business or directly or indirectly manages or controls the business, and where

 

(2) the business uses solicitation checks to sign consumers up for any goods or services marketed or sold by any defendant are hereby restrained and enjoined from failing to create, and from failing to retain for a period five (5) years following the date of such creation, unless otherwise specified:

A. Books, records, and accounts that, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues;

 

B. Records accurately reflecting: the name, address, and telephone number of each person employed by such business, including as an independent contractor; that person's job title or position; the date upon which the person commenced work; and the date and reason for the person's termination, if applicable. The businesses subject to this Paragraph shall retain such records for any terminated employee for a period of two (2) years following the date of termination;

 

C. Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items and services purchased, and description of the items and services purchased, for all consumers to whom such business sold, invoiced, or shipped any goods and services;

 

D. Records that reflect, for every consumer complaint or refund request, whether received directly, indirectly, or through any third party:

 

1. the consumer's name, street address, telephone number, and dollar amount paid by the consumer;

 

2. the complaint or refund request, if any, and the date of the complaint or refund request;

 

3. the basis of the complaint, including the name of any salesperson complained against, and the nature and result of any investigation conducted concerning the complaint;

 

4. each response by defendants and the date of the response;

 

5. any final resolution and the date of the resolution; and

 

6. in the event of a denial of a refund request, the reason for the denial; and

 

E. Copies of all sales scripts, training materials, advertisements, or other marketing materials created or used by defendants; provided that copies of all sales scripts, training materials, advertisements, or other marketing materials utilized shall be retained for three (3) years after the last date of dissemination of any such materials.

X.

Compliance Reporting by Defendants

IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Order may be monitored:

A. For a period of five (5) years from the date of entry of this Order, defendants shall notify the Commission of the following:

 

1. Any changes in defendants' business address, mailing addresses, and telephone numbers, within ten (10) days of the date of such change;

 

2. Any proposed change in the structure of any defendant and of any business entity owned or controlled by any defendant involved in solicitation checks or the billing for any business that uses solicitation checks, such as creation, incorporation, dissolution, assignment, sale, merger, dissolution of subsidiaries, proposed filing of a bankruptcy petition, or change in the corporate name or address, or any other change that may affect compliance obligations arising out of this Order, thirty (30) days prior to the effective date of any proposed change;

B. Ninety (90) and one hundred eighty (180) days after the date of entry of this Order, each defendant shall provide a written report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which it has complied and is complying with this Order. This report shall include, but not be limited to:

 

1. Each defendant's then current business address, mailing addresses, and telephone numbers, and a list of the names of all current officers and managers;

 

2. A description of each defendant's current business involved in solicitation checks or the billing for any business that uses solicitation checks, including a description of all marketing methods and goods and services sold;

 

3. A copy of each acknowledgment of receipt of this Order obtained by each defendant pursuant to Paragraph VII of this Order;

 

4. A statement describing the manner in which each defendant has complied and is complying with: (a) the injunctive provisions of this Order, and (b) the consumer redress provisions of this Order;

 

C. Upon written request by a representative of the Commission, each defendant shall submit additional written reports (under oath, if requested) and produce documents on fifteen (15) days notice with respect to any conduct subject to this Order;

 

D. For the purposes of this Order, each defendant shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to:

Associate Director
Division of Marketing Practices
Â鶹´«Ã½ Trade Commission, Room 238
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580

Re: FTC v. Cyberspace.com LLC and

E. For purposes of the compliance reporting required by this Paragraph, the Commission is authorized to communicate directly with any defendant.

XI.

Commission's Authority to Monitor Compliance

IT IS FURTHER ORDERED that the Commission is authorized to monitor and investigate defendants' compliance with this Order by all lawful means, including, but not limited to, the following:

A. The Commission is authorized, without further leave of court, to obtain discovery from any person in the manner provided by Chapter V of the Â鶹´«Ã½ Rules of Civil Procedure, Fed. R. Civ. P. 26-37, and the Local Rules of this Court, including the use of compulsory process pursuant to Fed. R. Civ. P. 45, for the purpose of monitoring and investigating defendants' compliance with any provision of this Order;

 

B. Nothing in this Order shall limit the Commission's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49 and 57b-1, to investigate whether any defendant has violated any provision of this Order or Section 5 of the FTC Act, 15 U.S.C. § 45.

XII.

Retention of Jurisdiction by This Court

IT IS FURTHER ORDERED that this Court will retain jurisdiction of this matter for the purpose of enabling any of the parties to this Order to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Order, for the enforcement of compliance therewith or the punishment of violations thereof.

SO ORDERED, this ___ day of ___________________________, 2000

___________________________
United States District Judge

The parties, by their respective counsel, hereby consent to the terms and conditions of the Order as set forth above and consent to the entry thereof. Defendants waive any rights that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412.

ATTACHMENT A

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON

FEDERAL TRADE COMMISSION, Plaintiff,

v.

CYBERSPACE.COM, LLC, FRENCH DREAMS, COTO SETTLEMENT, ELECTRONIC PUBLISHING VENTURES, LLC, OLYMPIC TELECOMMUNICATIONS, INC., IAN EISENBERG, and CHRIS HEBARD, Defendants.

AFFIDAVIT OF DEFENDANT

___________________________, being duly sworn, hereby states and affirms as follows:

1. My name is ___________________________. I am the President and Chief Executive Officer of ___________________________ . I am authorized to execute this affidavit.

2. ___________________________ is a defendant in FTC v. Cyberspace.com et al., which has been filed in the Western District of Washington.

3. On ___________________________, I received, on behalf of a copy of the Order, which was signed by the Honorable and entered by the Court on 2000.

A true and correct copy of the Order I received is appended to this Affidavit.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.

___________________________

State of ___________________________, City of ___________________________

Subscribed and sworn to before me this _____ day of ___________________________, 2000

___________________________
Notary Public

My Commission Expires: ___________________________