| STEPHEN CALKINS General Counsel CHARLES A.
HARWOOD ELEANOR DURHAM ATTORNEYS FOR PLAINTIFF UNITED STATES DISTRICT COURT
MEMORANDUM
OF POINTS AND AUTHORITIES IN SUPPORT I. SUMMARY Plaintiff, Federal Trade Commission ("FTC"), brings this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), for preliminary and permanent injunctive relief and other equitable remedies, including an asset freeze, immediate access to defendants' business premises, the appointment of a receiver, expedited discovery, restitution, and disgorgement of ill-gotten gains. Plaintiff seeks to enjoin defendants from continuing to deceive consumers by participating in the deceptive telemarketing of foreign lottery tickets to U.S. consumers through laundering credit card transactions; assisting and facilitating the deceptive telemarketing of tickets, chances, or interests in foreign lotteries by others (primarily Canadian telemarketers); and deceptively selling themselves tickets, chances, or interests in foreign lotteries in violation of Sections 310.3(a)(1)(ii) and (iii); (a)(2)(iii) and (a)(4); 310.3(b); and 310.3(c)(1) of the Telemarketing Sales Rule ("the Rule"), 16 C.F.R. 310.3(a)(1)(ii) and (iii); (a)(2)(iii) and (a)(4); 310.3(b); and 310.3(c)(1). Telemarketers of foreign lottery tickets, operating out of Canada, that use defendants' services make numerous false statements and material omissions to induce the purchase of the tickets, the sale of which is a crime in both Canada and the U.S. For example, defendants' client telemarketers represent to consumers that they are guaranteed to win, or have already won, a large jackpot, or that the odds of winning are one in six or other favorable odds, and that any winnings consumers receive are tax-free. Defendants also directly misrepresent to consumers that the odds of winning are one in six and that those winnings are not taxable in the United States. Defendants and their clients do not tell U.S. consumers that by participating in the defendants' and their clients' lottery promotions, they are participating in a crime. The essential services that defendants provide to many of these telemarketers include purchasing lottery tickets for the Australian lottery on behalf of their client telemarketers and processing the telemarketers' Visa and MasterCard credit card transactions through defendants' Visa and MasterCard merchant accounts. Neither Visa nor MasterCard has authorized the use of their merchant accounts to process the credit transactions of others and is such activity is unlawful under the Rule. Additionally, defendants provide "customer services" for their telemarketing clients, which often include preserving the unlawful lottery ticket sales by refusing to cancel consumer credit card charges or to refund consumers' credit accounts. Finally, the evidence indicates that defendants have become increasingly involved in the telemarketing or sale of the foreign lottery tickets directly to consumers. To halt defendants' unlawful conduct, the FTC seeks an ex parte temporary restraining order pursuant to Fed. R. Civ. P. 65(b) and an order to show cause why a preliminary injunction should not issue. The FTC also seeks an order freezing defendants' assets; appointing a temporary receiver for the corporate defendant, Woofter Investment Corporation ("Woofter"); allowing plaintiff immediate access to Woofter's premises; and expediting discovery. As discussed below in Section V, this kind of order is necessary to prevent continued consumer injury and the dissipation of assets, thereby preserving the Court's ability to provide effective final relief to consumers. II. THE PARTIES A. Woofter Investment Corporation Woofter was incorporated in Nevada in 1986 as a Subchapter S corporation.(1) Woofter's office and principal place of business is 1500 East Tropicana Avenue, Suite 216, Las Vegas, Nevada 89119.(2) Since at least June 1995, Woofter, doing business as A.T.M.S., has provided various services including credit card processing, purchasing lottery tickets, and billing and complaint handling for Canadian boilerrooms that deceptively telemarket tickets, chances, or interests in foreign lotteries to United States residents. The evidence also shows that Woofter sells foreign lottery tickets and makes direct misrepresentations to consumers.(3) B. Patsy M. Barbour Patsy M. Barbour, also known as Patsy Barbour-Woofter ("Barbour"), is president and sole owner of Woofter's capital stock.(4) Barbour resides at 2720 E. Quail, Las Vegas, Nevada 89120.(5) Barbour has admitted that she controls and participates in the business of Woofter.(6) III. DEFENDANTS' FRAUDULENT BUSINESS PRACTICES A. The Sale of Foreign Lottery Tickets Canadian telemarketing companies targeting U.S. residents, particularly the elderly, solicit consumers by telephone and mail to participate in foreign lotteries (e.g., Australia and Spain) by purchasing chances and interests in lottery tickets. Purchases may be for individual tickets, but are more often for chances and interests in a pooled purchase of lottery tickets. The sale and trafficking in foreign lotteries is a crime in both the United States and Canada,(7) a fact that is not disclosed to consumers.(8) Defendants service or have serviced at least fifteen such telemarketing operations, two of which have been the subject of criminal law enforcement proceedings in the past year.(9) To induce the purchase of lottery tickets, defendants' client telemarketers misrepresent to consumers in telephone sales presentations the chances of winning and the amounts consumers are likely to win. For example, consumers have been told that they cannot lose, or are guaranteed to win, some large amount of money;(10) that the odds of winning are very good;(11) or that the telemarketers' lottery program increases the chance of the consumer winning.(12) Consumers also have been told that winnings are tax free,(13) even though lottery winnings are taxable income in the United States.(14) Direct mail pieces sent to consumers echo the misrepresentations made in the sales calls. For example, confirmation letters defendants sent on behalf of one particular telemarketing client, Winning Edge Systems ("W.E.S."), state:
Neither defendants nor their telemarketers disclose to consumers that they are participating in a crime by purchasing the lottery tickets. Consumers also are not told when they purchase the lottery tickets that the telemarketers' and defendants' policy is to deny requests for cancellations or refunds. Consumers often do not obtain any relief when they discover they have been lied to and attempt to get their money back from defendants' clients. The evidence shows that on many occasions, defendants use the credit charge authorization slips consumers signed after being charged for the lottery tickets as an excuse to uphold transactions, even though they are aware that the telemarketer has engaged in deceptive practices.(16) B. Defendants' Role in the Deceptive Telemarketing of Foreign Lottery Tickets The evidence indicates that defendants act both as assisters and facilitators of the telemarketing by others, as well as telemarketers or sellers under the Rule, of tickets, chances or interests foreign lotteries. 1. Defendants Acting as Assisters and Facilitators of the Deceptive Practices Defendants facilitate their clients' foreign lottery schemes in a number of ways. First, defendants provide credit card processing services for their telemarketing clients.(17) Many of the lottery tickets defendants' client telemarketers sell to consumers are purchased through charges to consumers' credit cards.(18) Defendants have at least three merchant accounts in the name "A.T.M.S."(19) Defendants make these merchant accounts available to their telemarketing clients for processing credit card transactions for a 15 to 20 percent fee.(20) VISA and MasterCard have not authorized defendants' use of these accounts to process credit card transactions for Woofter's client telemarketers.(21) Second, defendants purchase from the Australian lottery authority lottery tickets their telemarketing clients sell to consumers.(22) Defendants pay about $1 per ticket, although their telemarketing clients charge the consumer as much as $100 per ticket or share in a ticket.(23) Defendants charge their client telemarketers a fee for this service.(24) Defendants further provide various "customer services" for their telemarketing clients. Defendants send confirmation packages to consumers that carry the names of both the telemarketer and A.T.M.S., which is described in the confirmation package as "U.S. Customer Service."(25) A toll-free telephone number is provided for the consumer to contact A.T.M.S. with questions concerning credit card billing.(26) Defendant Barbour has stated that defendants monitor their telemarketing clients and answer consumers' questions regarding purchases, winning numbers, or rules, indicating that defendants also field consumer complaints or billing disputes concerning defendants' telemarketing clients.(27) Indeed, the evidence shows that when consumers have problems, defendants represent to consumers that they will intercede on their behalf with the telemarketer.(28) 2. Defendants as Sellers of Foreign Lottery Tickets Defendants also are sellers of foreign lottery interests within the meaning of the Rule.(29) Confirmation packages defendants sent in November 1996 to W.E.S. customers contain the same misrepresentations the Canadian telemarketers make about the odds of winning a huge jackpot.(30) These letters also identify Woofter, under the name A.T.M.S., as the principal in the transaction.(31) Further, sales representatives of Final Round and NewCastle Inc., two other Canadian telemarketing companies, have identified themselves as employees of A.T.M.S.(32) Indeed, defendants' merchant bank lists five alternate company names coupled with A.T.M.S.'s name -- each the name of a Canadian telemarketer: (1) A.T.M.S./Pools; (2) A.T.M.S./W.E.S.; (3) A.T.M.S./I.T.I.; (4) A.T.M.S./SAT; and (5) A.T.M.S./BIGWIN.(33) IV. ARGUMENT A. This Court Has the Authority to Grant the Relief Requested The FTC seeks a permanent injunction and equitable relief to redress the injury caused by defendants' deceptive practices. To prevent defendants from committing further law violations pending resolution of this action, and to preserve the possibility of effective final relief, the FTC also seeks an ex parte temporary restraining order, an asset freeze against each defendant, appointment of a receiver over Woofter, immediate access to Woofter's business premises, expedited discovery, and a preliminary injunction. This Court has the authority to grant this preliminary and permanent relief pursuant to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), the All Writs Act, 28 U.S.C. § 1651(a), and Rule 65 of the Federal Rules of Civil Procedure. Section 13(b) of the FTC Act (second proviso) provides that "in proper cases the FTC may seek, and after proper proof, the Court may issue, a permanent injunction." (34) A "proper case" includes any matter involving a violation of a law the FTC enforces.(35) In actions brought under Section 13(b), the district court may exercise the full breadth of its equitable authority, including the imposition of additional relief necessary to accomplish complete justice, such as restitution to consumers.(36) Incident to its authority to issue permanent injunctive relief, this Court also has the inherent equitable power to grant all temporary and preliminary relief necessary to effectuate ultimate relief, including an order appointing a receiver and freezing assets for possible later restitution and rescission.(37) B. This Case Meets the Applicable Standard for Entry of a Temporary Restraining Order and Preliminary Injunction To obtain a temporary restraining order and preliminary injunction, the FTC must show a likelihood of success on the merits and that the equities weigh in favor of granting the temporary relief.(38) Harm to the public is presumed.(39) Because irreparable injury is presumed in statutory enforcement cases, a federal agency need only demonstrate "some chance of probable success on the merits" to obtain preliminary relief.(40) Further, in weighing the public and private equities in a statutory enforcement action, public equities should receive greater weight.(41) The FTC easily meets this standard in the present case. 1. The Evidence Demonstrates a
Substantial Likelihood of Ultimate Success on the Merits
As discussed in Section III above, defendants' telemarketing clients violate the Telemarketing Sales Rule by misrepresenting and failing to disclose material facts to consumers purchasing foreign lottery tickets. Defendants violate the Rule by providing various services to their telemarketing clients, such as purchasing lottery tickets on behalf of the telemarketers, laundering the telemarketer clients' credit card transactions through defendants' merchant accounts with VISA and MasterCard, and handling consumer complaints and billing disputes for their telemarketing clients. The evidence also suggests that defendants violate the Rule by making misrepresentations directly to consumers and failing to disclose material information to consumers. Violations of the Rule are deceptive practices that violate Section 5 of the FTC Act.(42) a. Defendants' and Their Client Telemarketers' Rule Violations Defendants and their telemarketing clients fail to disclose to consumers in the U.S. that purchasing foreign lottery tickets violates U.S. criminal statutes.(43) These deceptive practices violate § 310.3(a)(1)(ii) of the Rule, which prohibits telemarketers and sellers from failing to disclose to consumers "all material restrictions, limitations, or conditions to purchase, receive, or use the goods or services that are the subject of the sales offer."(44) Defendants and their telemarketing clients also induce consumers to purchase foreign lottery tickets by misrepresenting one or more of the following: (1) consumers cannot lose playing the lotteries; (2) consumers are guaranteed to win large jackpots if they play the lotteries; (3) the odds of winning the lotteries are good; (4) the telemarketers' lottery program increases the chances of the consumer winning; and (5) the lottery winnings are tax-free in the U.S.(45) In fact, the odds of winning in a foreign lottery are extremely low, and if consumers by chance win, they are likely to win only very small amounts of money -- often less than the cost of the ticket itself.(46) Further, contrary to the misrepresentations, there are no special programs that increase consumers' chances of winning, and the winnings are taxable in the United States.(47) Therefore, these representations are false and violate §§ 310.3(a)(2) (iii) and (a)(4) of the Rule. Finally, defendants and their Canadian telemarketing clients violate § 310.3(a)(1)(iii) of the Rule, which requires them to disclose to consumers, if they have a policy of not making refunds, cancellations, exchanges, or repurchases; or, if the seller or telemarketer makes a representation about a refund, cancellation, exchange, or repurchase policy, a statement of all material terms and conditions of such policy. As discussed in Section III.A above, defendants and their clients do not disclose to U.S. consumers that they do not allow refunds or cancellations on sales of foreign lottery tickets. b. Defendants' Assisting and Facilitating the Rule Violations of Others Defendants play a substantial role in assisting and facilitating their Canadian telemarketer clients' deceptive sales of foreign lottery tickets to consumers in the United States. Section 310.3(b) of the Rule provides that: It is a deceptive telemarketing act or practice and a violation of this Rule for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates §§ 310.3(a) or (c), or § 310.4 of this Rule. As discussed in Section III.B.1 above, defendants assist and facilitate the Canadian telemarketers in their illegal and deceptive telemarketing sales by providing credit card processing services, purchasing lottery tickets on behalf of their clients, and providing "customer services." This substantial assistance and support makes it possible for defendants' clients to illegally and deceptively sell foreign lottery tickets to U.S. consumers. Defendants know or, at the very least, consciously avoid knowing, that their clients are engaged in these illegal and deceptive practices. Indeed, defendants actually purchase from the Australian lottery authority the tickets its clients sell to U.S. consumers, handle questions, complaints and billing disputes regarding these transactions, and even make the same misrepresentations as their clients make directly to consumers.(48) Moreover, the high chargeback rates on the proposed defendants' VISA merchant accounts are another strong indication alerting them to the fact that their Canadian telemarketing clients are engaged in fraudulent activities.(49) c. Credit Card Laundering Violations Section 310.3(c) of the Rule, which prohibits credit card laundering or factoring, provides that:
The defendants use their merchant accounts with VISA and MasterCard to process credit card transactions for their Canadian clients' telemarketing sales to consumers for a 15 percent fee.(50) This practice, also known as credit card laundering or factoring, violates VISA and MasterCard's merchant contracts and rules.(51) Therefore, defendants are not authorized to process their clients' credit card transactions through their merchant accounts and are in violation of this provision of the Rule. d. Individual Liability Patsy Barbour is individually liable for the Rule violations discussed above. Defendant Barbour may be held individually liable under the FTC Act for Woofter's deceptive acts or practices if: (1) Woofter violated Section 5 of the FTC Act; and (2) defendant Barbour participated directly in Woofter's unlawful acts or practices or had authority to control them.(52) As discussed above in Sections IV.B.1.a through c, Woofter is violating the Rule. As the president of Woofter and its sole shareholder, defendant Barbour has the authority to control these practices and has admitted her role in the company.(53) Defendant Barbour may also be held individually liable for restitution for Woofter's Rule violations because she had knowledge of them. Knowledge in this context is defined as actual knowledge of material misrepresentations, reckless indifference to the truth or falsity of a misrepresentation, or an awareness of a high probability of fraud along with an intentional avoidance of the truth.(54) Woofter provides extensive customer services for its Canadian clients that involves not only handling billing disputes, but also fielding consumer complaints regarding the registration of the foreign lottery tickets and issues related to winnings.(55) Woofter also purchases foreign lottery tickets from Australian lotteries for its clients and on its own behalf.(56) In some instances, Woofter sells foreign lottery chances and interests directly to consumers and makes some of the same misrepresentations its Canadian clients make to consumers in its confirmation letters.(57) Defendant Barbour most likely has actual knowledge of these misrepresentations because the evidence shows that she involved herself closely in Woofter's daily operations and its handling of its clients consumer complaints -- even when hospitalized for surgery.(58) As the sole shareholder and president of Woofter, if defendant Barbour does not have actual knowledge of Woofter's activities, she certainly is either recklessly indifferent to the misrepresentations Woofter and its clients are making, or she is intentionally avoiding the truth despite clear indications that there is a high probability that Woofter and its clients are engaged in fraudulent activities. As such, she is individually liable for restitution for the consumer injury Woofter's deceptive practices caused. V. BASIS FOR RELIEF A. The Balance of the Equities Requires Preliminary Relief As discussed above, preliminary relief is appropriate if, once the FTC establishes the likelihood of its ultimate success and the Court weighs the equities, the relief sought is in the public interest. The equities in this case weigh heavily in favor of preliminary injunctive relief. Defendants' conduct evidences a pattern of law violations central to the success of their business. Given the pervasive nature of the unlawful activity, there is a strong likelihood that, absent injunctive relief, future law violations will occur.(59) These violations, if continued, will result in continued substantial consumer loss.(60) The private equities in this case are not compelling. Compliance with the law is hardly an unreasonable burden.(61) Even though an order may curtail defendants' activities, "that is a necessary and . . . unavoidable consequence of the violation."(62) The evidence demonstrates that the public equities -- protection of innocent consumers, effective enforcement of the law, and the preservation of defendants' assets for consumer redress -- weigh heavily in favor of granting the preliminary relief requested in this case. B. An Asset Freeze and Appointment of a Receiver are Necessary to Preserve Assets for Ultimate Consumer Redress As part of the permanent relief in this case, the FTC seeks restitution for consumers defrauded by defendants' deceptive practices. To preserve the possibility of such relief, the FTC seeks an immediate freeze of defendants' assets and appointment of a receiver over Woofter to prevent any concealment or dissipation of assets pending final resolution of this litigation. An asset freeze should be granted when the FTC has shown a likelihood of success on the merits and a possibility of dissipation of assets.(63) As discussed above, the FTC has amply demonstrated a likelihood of success on the merits. Moreover, where business operations are permeated by fraud, there is a strong possibility assets may be dissipated during the pendency of the legal proceedings.(64) As in similar cases where courts have ordered asset freezes solely on the basis of pervasive fraudulent activity, an asset freeze in this case is warranted.(65) Freezing the defendant Barbour's assets is also warranted because she owns and controls the corporate defendant that participated in the fraudulent scheme, and thus is individually liable for consumer redress.(66) C. Appointing a Receiver Will Halt Ongoing Fraud and Prevent Additional Injury The Commission seeks appointment of a temporary receiver to take over Woofter's operations. The temporary receiver will locate and preserve business assets and records to obviate the risk of destruction, dissipation, or secretion of assets and records. During the pendency of the temporary restraining order, the receiver will also investigate and determine the extent of defendants' contractual relationships with telemarketers and others, determine the size and extent of defendants' practices, and identify consumers potentially injured by defendants' practices. The receiver will also ensure that adequate notice of this proceeding is given to employees, agents, clients, and others who promote or participate in defendants' business so that additional consumer injury may be avoided. This Court has the inherent power to appoint a receiver "as an incident to its express statutory authority to issue a permanent injunction under Section 13 of the Federal Trade Commission Act."(67) The public also faces the risk that the business may continue to operate in a deceptive manner without a receiver's oversight.(68) D. An Order Requiring Expedited Discovery and Immediate Access is Appropriate District courts are authorized to depart from normal discovery procedures and fashion discovery by order to meet discovery needs in particular cases.(69) The FTC seeks immediate access to defendants' books and records, permission to conduct depositions upon three days' notice, and permission to make requests for production of documents and admissions on five days' notice. This kind of discovery order reflects the Court's broad and flexible authority in equity to grant preliminary emergency relief in cases involving the public interest.(70) Also, to locate assets wrongfully obtained from defrauded consumers and to ensure that no records or accounting books are tampered with, the FTC seeks to obtain immediate access to defendants' premises. This relief has regularly been granted in similar FTC actions.(71) E. The Temporary Restraining Order and Asset Freeze Should Be Issued Ex Parte The defendants' pattern of fraudulent conduct demonstrates the need for ex parte relief. An ex parte temporary restraining order is warranted where the facts show that irreparable injury, loss, or damage will result before the defendants can be heard in opposition.(72) Courts have routinely granted ex parte relief in appropriate FTC actions.(73) Here, the pervasive nature of defendants' fraudulent conduct indicates a high risk that defendants will dissipate or conceal assets or destroy documents if provided notice of this action, frustrating this Court's ability to grant effective final relief. Thus, an ex parte order is particularly appropriate.(74) VI. CONCLUSION The defendants have caused and are likely to continue to cause great injury to consumers through their unlawful practices in violation of Sections 310.3(a)(1)(ii) and (iii); (a)(2)(iii) and (a)(4); 310.3(b); and 310.3(c)(1) of the Telemarketing Sales Rule. To prevent ongoing consumer harm, this Court should issue the requested ex parte Temporary Restraining Order, appoint a receiver over the corporate defendant and permit immediate access to Woofter's premises. Further, this Court should order an asset freeze over both defendants and permit the parties to engage in expedited discovery. Finally, this Court should enter the requested preliminary injunction to halt the deceptive practices detailed in the Complaint and this memorandum to ensure the possibility of effective final relief in the form of monetary redress to consumers. DATED: May 7, 1997. Eleanor Durham 1. Declaration of Maxine Stansell, filed in support of and concurrently with this Memorandum (hereinafter "Stansell Dec."), Exhs.1 and 2. 2. Id. 3. Stansell Dec., Exhs. 14-17. 4. Stansell Dec., Exhs. 2 at 11-12; 39 at 503. 5. Stansell Dec., Exh. 2 at 11-12. 6. Stansell Dec., Exh. 3 at 14-16; 35 at 366, 384. 7. These include laws that prohibit importing and transmitting lottery materials by mail and otherwise, 18 U.S.C. §§ 1301 and 1302, as well as anti-racketeering laws relating to gambling, 18 U.S.C. §§ 1952, 1953, and 1084. Stansell Dec., Exhs. 24-29; and 30 at 248. 8. Stansell Dec., Exhs. 14 at 114; 17 at 133; 21 at 228; and 22 at 229. 9. Stansell Dec., Exhs. 31 at 251-52; and 33 at 327. 10. Stansell Dec., Exhs. 6-9; 11-13;15-19; and 21-23. 11. Stansell Dec., Exhs. 6-14; 17-18; and 31. 12. Stansell Dec., Exhs. 8-9; 11-16; and 21. 13. Stansell Dec., Exhs. 7 at 39; 14 at 111; 19 at 199; and 35 at 359. 14. Stansell Dec., Exh. 35 at 359. 15. Stansell Dec., Exhs. 17 at 184; and 39 at 529. 16. Stansell Dec., Exhs. 14-19; and 39. 17. Stansell Dec., Exhs. 14-20; 30 at 248-49; 31 at 326; 39 at 502; and 40 at 568-80. 18. Id. 19. Stansell Dec., Exhs. 17 at 191-92; and 33 at 326. 20. Stansell Dec., Exhs. 30 at 249; and 34 at 342. 21. Stansell Dec., Exh. 38. 22. Stansell Dec., Exhs. 17 at 185; 23 at 240; 30 at 248-49; 33 at 327; 35 at 365; and 39 at 502. 23. Stansell Dec., Exhs. 18 at 193-194; and 30 at 248. 24. Stansell Dec., Exhs. 30 at 249; 33 at 326; 34 at 339; and 35 at 377. 25. Stansell Dec., Exhs. 17 at 185; 18 at 197; 23 at 240; and 39 at 503, 513-60. 26. Id. 27. Stansell Dec., Exh. 3 at 14-16. 28. Stansell Dec., Exhs. 3 at 14-16; 18 at 248-49; and 39 at 543-47. 29. A "seller" is defined under Section 310.2(r) of the Rule as "any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the customer in exchange for consideration." 30. Stansell Dec., Exh. 39 at 513-42. 31. For example, the W.E.S. confirmation letters sent to Evelyn Green, dated November 25, 1996, show Woofter's (under the name A.T.M.S.) Las Vegas P.O. Box as the company address rather than W.E.S.'s Vancouver, B.C., address. Stansell Dec., Exh. 39 at 513-42. 32. Stansell Dec., Exhs. 14-16. 33. Stansell Dec., Exh. 37 at 397. 34. The FTC proceeds here, as in FTC v. H.N. Singer, 668 F.2d 1107, 1113 (9th Cir. 1982) , under the second proviso of Section 13(b). Cases brought under this proviso are not subject to the conditions set forth in the first proviso of Section 13(b) for the issuance of preliminary injunction in aid of administrative proceedings. Singer, 668 F.2d at 1111 (routine fraud case may be brought under second proviso, without being conditioned on first proviso requirement that the FTC institute an administrative proceeding); FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431, 1434 (11th Cir. 1984) ("Congress did not limit the court's powers under the [second and] final proviso of Section 13(b)"). 35. Singer, 668 F.2d at 1113; FTC v. Pacific Medical Clinics Management, Inc., 1992-2 Trade Cas. (CCH) ¶ 69,777 at 67,587 (S.D. Cal. 1992). 36. FTC v. Pantron I Corp., 33 F.3d 1088, 1102 (9th Cir.), cert denied, 115 S.Ct 1794 (1995); FTC v. Amy Travel Service, 875 F.2d 564, 572 (7th Cir.), cert. denied, 493 U.S. 954 (1989); Singer, 668 F.2d at 1113. 37. FTC v. World Wide Factors, Ltd., 882 F.2d 344, 346-47 (9th Cir. 1989) (affirming district court's power to freeze assets and appoint receiver); Singer, 668 F.2d at 1113 (affirming preliminary injunction and personal and corporate asset freeze). 38. World Wide Factors, 882 F.2d at 346. 39. Id. See also United States v. Odessa Union Warehouse Co-op, 833 F.2d 172, 175 (9th Cir. 1987) (where injunction authorized by statute, enforcing agency need not show irreparable injury). 40. U.S. v. Odessa Union, 833 F.2d at 176. 41. World Wide Factors, 882 F.2d at 347. 42. 15 U.S.C. § 6106(b). 43. See, supra note 7. 44. Defendants are "sellers" within the meaning of the Rule. See, supra note 29. 45. See, supra Section III.A. 46. Id. 47. Id. 48. See, supra Section III.B.1. 49. Stansell Dec., Exh 37 at 391-97. 50. See, supra Section III.B.1. 51. Id. 52. FTC v. Publishing Clearing House, Inc., 104 F.3d 1168, 1170 (9th Cir. 1997). Under the Telemarketing and Consumer Fraud and Abuse Prevention Act, which directed the FTC to promulgate the Rule, a violation of the Rule is a violation of § 5 of the FTC Act. 15 U.S.C. §6106(b). 53. Stansell Dec., Exh. 3 at 14-16. 54. FTC v. Publishing Clearing House, Inc., 104 F.3d at 1171, citing FTC v. American Standard Credit Systems, Inc., 874 F. Supp. 1080, 1089 (C.D. Cal. 1994) and Amy Travel Service, Inc., 875 F.2d at 574. 55. See, supra Section III.B.1. 56. See, supra Section III.B.1 and 2. 57. See, supra Section III.B.1 and 2. 58. Stansell Dec., Exhs. 35 at 366; 39 at 558-61, and 565-67. 59. FTC v. Southwest Sunsites, 665 F.2d 711, 723 (5th Cir.) (large-scale systematic scheme tainted by fraudulent and deceptive practices gives rise to reasonable expectation of continued violations absent restraint), cert. denied, 456 U.S. 973 (1984). 60. Indeed, the evidence uncovered during the FTC investigation of Woofter's activities indicates that defendants collected about $5 million in fees each year for their credit card processing services provided for its British Columbia telemarketers alone. See Stansell Dec., Exh. 35 at 368. 61. See World Wide Factors, 882 F.2d at 347 ("there is no oppressive hardship to defendants in requiring them to comply with the FTC Act, refrain from fraudulent representation, or preserve their assets from dissipation or concealment."). 62. National Soc'y of Professional Eng'rs v. U.S., 435 U.S. 679, 697 (1978). 63. See FSLIC v. Sahni, 868 F.2d 1096, 1097 (9th Cir. 1989). 64. See, e.g., World Wide Factors, 882 F.2d at 347; SEC v. Manor Nursing Centers, 458 F.2d 1082, 1106 (2d Cir. 1972). 65. See, e.g., Singer, 668 F.2d at 1113; FTC v. U.S. Oil & Gas Corp., 748 F.2d at 1434. The following is a sampling of recent FTC actions in which a TRO, asset freeze, and appointment of receiver were all entered ex parte and without notice to the defendants: FTC v. American Exchange Group, Inc., CV-S-96-669-PMP (D. Nev. July 22, 1996)(Telemarketing Sales Rule case); FTC v. Oasis Southwest, Inc., CV-S-96-654-PMP (D. Nev. July 15, 1996)(Telemarketing Sales Rule case); FTC v. Silver State Western Publishing, Inc., CV-S-95-417-LDG (D. Nev. May 15, 1996)(Telemarketing Sales Rule case); FTC v. FANS, Inc., CV-S-96-191-LDG (D. Nev. March 7, 1996)(Telemarketing Sales Rule case); FTC v. International Charity Consultants, Inc., et al., CV-S- 94-195-DWH (D. Nev. Mar. 1, 1994); FTC v. NCH, Inc., et al., CV-S-94-138-LDG (D. Nev. Feb. 14, 1994); FTC v. Sierra Pacific Marketing, Inc., et al., CV-S-93-134-PMP (D. Nev. Feb. 22, 1993); FTC v. Denny Mason, et al., CV-S-93-135-PMP (D. Nev. Feb. 22, 1993); FTC v. Pioneer Enterprises, Inc., CV-S-92-615-LDG (D. Nev. July 20, 1992); FTC v. Go For It, CV-S-90-1991-LDG (D. Nev. Feb. 9, 1991). See also, e.g., FTC v. Fortuna Alliance L.L.C., et al., C96-799M (W.D. Wash. May 24, 1996); FTC v. Ellis, et al., SA CV 96-114 LHM (Eex) (C.D. Cal. 1996); FTC v. Genesis One Corp., et al., Civ. No. 96-1516 MRP (MCx)(C.D. Cal. 1996); FTC v. North American Supply, Civ. No. 95-4264 LGB (AJWx) (C.D. Cal. 1995); FTC v. Satellite Broadcasting Corp., Civ. No. SA-95-336 LHM (Eex) (C.D. Cal. 1995); FTC v. Showcase Distributing, Inc., et al., CV-95-1368-PHX-SMM (D. Ariz. 1995); FTC v. National Art Publishers and Distributors, Inc., et al., CV 94-0518 R (CM)(S.D. Cal. 1994); FTC v. Steven Toth, et al., Civ. No. 94-4467 SVW (Shx) (C.D. Cal. 1994). 66. Amy Travel Service, 875 F.2d at 574-76; FTC v. World Travel Vacation Brokers, 861 F.2d 1020, 1031 (7th Cir. 1988). 67. U.S. Oil & Gas, 748 F.2d at 1432. 68. See SEC v. Keller Corp., 323 F.2d 397, 403 (7th Cir. 1963) ("[I]t is hardly conceivable that the trial court should have permitted those who were enjoined from fraudulent misconduct to continue in control of [the defendant's] affairs . . . "). 69. Fed. R. Civ. P. 1, 26(b) and 34(b). 70. See Porter v. Warner Holding Co., 328 U.S. 395, 398 (1945); FSLIC v. Dixon, 835 F.2d 554, 562 (5th Cir. 1987). 71. See, e.g., FTC v. NCH, Inc., et al. CV-S-94-138-LDG (D. Nev. Feb. 14, 1994) (ex parte TRO granted and expedited discovery and immediate access ordered); see also the cases cited at supra note 65. 72. Fed. R. Civ. P. 65(b); see also In the Matter of Vuitton et Fils S.A., 606 F.2d 1, 3-4 (2d Cir. 1979) (discussion of when ex parte order should enter). 73. See, supra note 65. 74. Cenergy Corp. v. Bryson Oil & Gas P.L.C., 657 F. Supp. 867, 870 (D. Nev. 1987) (proper to enter TRO without notice where notice would defeat very purpose of TRO); see Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 439 (1974) (underlying purpose of ex parte temporary restraining order is to preserve status quo and prevent irreparable harm). |