FTC et al. v. Surechek Systems, Inc., et al.

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

FEDERAL TRADE COMMISSION, and
STATE OF ARKANSAS ex rel. WINSTON BRYANT, ATTORNEY GENERAL,
Plaintiffs,

SURECHEK SYSTEMS, INC., d/b/a CONSUMER CREDIT CORP., and CONSUMER CREDIT DEVELOPMENT CORP., a Georgia corporation;

DOUGLAS S. DERICKSON, individually and as an officer of SureCheK Systems, Inc., d/b/a Consumer Credit Corp., and Consumer Credit Development Corp.; and

STEVE LOVERN, individually and as an officer of SureCheK Systems, Inc., d/b/a Consumer Credit Corp., and Consumer Credit Development Corp.,
Defendants. )

CIVIL ACTION NO.

EX PARTE TEMPORARY RESTRAINING ORDER, ASSET
FREEZE, IMMEDIATE ACCESS TO DEFENDANTS' BUSINESS
PREMISES, EXPEDITED DISCOVERY AND ORDER TO
SHOW CAUSE

Plaintiffs, the Federal Trade Commission ("Commission"), the State of Arkansas by and through its Attorney General having filed their complaint for a permanent injunction and other relief in this matter, pursuant to Sections 13(b) and 19(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b(a); and the Telemarketing and Consumer Fraud and Abuse Prevention Act 15 U.S.C. § § 6101 et seq., and having moved ex parte for a Temporary Restraining Order pursuant to Rule 65 of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 65, and the Court having considered the complaint, declarations, exhibits, and memorandum of law filed in support thereof, and now being advised in the premises finds that:

1. This Court has jurisdiction of the subject matter of this case and there is good cause to believe it will have jurisdiction of all parties hereto;

2. There is good cause to believe that the defendants SureCheK Systems, Inc., Douglas S. Derickson, and Steve Lovern have engaged and are likely to engage in acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's Telemarketing Sales Rule 16 C.F.R. Part 310, and that the Commission is therefore likely to prevail on the merits of this action;

3. There is good cause to believe that immediate and irreparable damage to the Court's ability to grant effective final relief for consumers in the form of monetary redress will occur from the sale, transfer, or other disposition or concealment by defendants SureCheK Systems, Inc., Douglas S. Derickson, and Steve Lovern of their assets or corporate records unless said defendants are immediately restrained and enjoined by Order of this Court. There is thus good cause for relieving the plaintiffs of the duty to provide defendants SureCheK Systems, Inc., Douglas S. Derickson, and Steve Lovern with prior notice of the plaintiffs' motion;

4. Weighing the equities and considering the plaintiffs' likelihood of ultimate success, a temporary restraining order with asset freeze and other equitable relief is in the public interest; and

5. No security is required of any agency of the United States for issuance of a restraining order. Fed. R. Civ. P. 65(c).

Definitions

For purposes of this temporary restraining order, the following definitions shall apply:

1. "Telemarketing," "telemarketer," "seller," and "material" are defined in Section 310.2 of the Telemarketing Sales Rule, 16 C.F.R. § 310.2, a copy of which is attached to this Order.

2. "Defendants" means corporate defendant SureCheK Systems, Inc. d/b/a Consumer Credit Corporation and Consumer Credit Development Corporation and individual defendants Douglas S. Derickson and Steve Lovern, and each of them, and their successors, assigns, officers, agents, servants, employees, and those persons 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.

3. "Plaintiffs" means the Federal Trade Commission and the State of Arkansas by and through its Attorney General.

4. "Assets" means all real and personal property of any defendant, or held for the benefit of any defendant, including but not limited to "goods," "instruments," "equipment," "fixtures," "general intangibles," "inventory,", "checks," or "notes," (as these terms are defined in the Uniform Commercial Code), lines of credit and all cash, wherever located.

IT IS THEREFORE ORDERED that, in connection with telemarketing, the defendants are hereby temporarily restrained and enjoined from:

A. Misrepresenting, either orally or in writing, any material fact, including but not limited to the following:

1. That consumers will receive a credit card, such as a Visa or MasterCard, in return for the payment of a one-time fee;

2. The total costs to purchase, receive, or use any goods or services that are offered, offered for sale, or sold by the defendants; and

3. The purpose for which the defendants will use a consumer's bank account information;

B. Requesting or receiving payment of any fee or consideration in advance of obtaining or arranging an extension of credit when they have guaranteed or represented a high likelihood of success in obtaining or arranging an extension of credit;

C. Failing to disclose, in a clear and conspicuous manner, before the consumer sends any funds to defendants or divulges to defendants credit card or bank account information, the total costs to purchase, receive, or use, any goods or services that are offered, offered for sale, or sold by defendants, and all material restrictions, limitations or conditions to receive an extension of credit, including but not limited to the following, that:

1. additional applications for a credit card will be required;

2. credit cards will be issued only if the applications of the consumers are approved by the card issuing bank; and

3. the consumers must pay additional fees to the card issuing bank if the consumers are approved for the major credit cards;

D. Obtaining, submitting for payment, or assisting others to obtain or submit for payment a check, draft, or other form of negotiable paper drawn on a person's checking, savings, share, or similar account without obtaining that person's express written authorization, in the form of that person's signature on the negotiable instrument; and

E. Providing substantial assistance or support to any seller or telemarketer when the defendants know or consciously avoid knowing that the seller or telemarketer is engaged in any act or practice in violation of the Telemarketing Sales Rule 16 C.F.R. Part 310.

II.

IT IS FURTHER ORDERED that the defendants are hereby temporarily restrained and enjoined from:

A. Transferring, converting, encumbering, selling, concealing, dissipating, disbursing, assigning, spending, withdrawing, or otherwise disposing of any funds, property, accounts, contracts, shares of stock, or other assets, wherever located, that are (1) owned or controlled by any defendant, in whole or in part; or (2) in the actual or constructive possession of any defendant; or (3) owned, controlled by, or in the actual constructive possession of any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by, or under common control with, any defendant, including, but not limited to, any assets held by or for any defendant at any bank or savings and loan institution, or with any broker-dealer, escrow agent, title company, commodity trading company, precious metal dealer, or other financial institution or depository of any kind;

B. Opening or causing to be opened any safe deposit boxes titled in the name of any defendant, or subject to access by any defendant; and

C. Incurring charges on any credit card issued in the name, singly or jointly, of any defendant.

III.

IT IS FURTHER ORDERED that, pending determination of the plaintiffs' request for a preliminary injunction, any financial or brokerage institution, business entity, or person that holds, controls, or maintains custody of any account or asset of any of the defendants, or has held, controlled, or maintained custody of any account or asset of any of the defendants at any time since January 1, 1996, shall:

A. Prohibit the defendants from withdrawing, removing, assigning, transferring, pledging, encumbering, disbursing, dissipating, converting, selling, or otherwise disposing of any such asset except as directed by further order of the Court;

B. Deny defendants access to any safe deposit box that is:

1. Titled in the name of any defendant, either individually or jointly; or

2. Otherwise subject to access by any defendant;

C. Provide counsel for the plaintiffs, within five (5) business days of receiving a copy of this Order, a sworn statement setting forth:

1. The identification number of each such account or asset titled in the name, individually or jointly, of any of the defendants, or held on behalf of, or for the benefit of, any of the defendants;

2. The balance of each such account, or a description of the nature and value of such asset as of the close of business on the day on which this Order is served, and, if the account or other asset has been closed or removed, the date closed or removed, the total funds removed in order to close the account, and the name of the person or entity to whom such account or other asset was remitted; and

3. The identification of any safe deposit box that is either titled in the name, individually or jointly, of any defendant, or is otherwise subject to access by any defendant; and

D. Upon the request by the plaintiffs, promptly provide the plaintiffs with copies of all records or other documentation pertaining to such account or asset, including but not limited to originals or copies of account applications, account statements, signature cards, checks, drafts, deposit tickets, transfers to and from the accounts, all other debit and credit instruments or slips, currency transaction reports, 1099 forms, and safe deposit box logs. Any such financial institution, account custodian, or other aforementioned entity may arrange for the plaintiffs to obtain copies of any such records which the plaintiffs seek, provided that such institution or custodian may charge a reasonable fee not to exceed fifteen cents per page copied.

IV.

IT IS FURTHER ORDERED that defendants are hereby temporarily restrained and enjoined from:

A. Failing to create and maintain books, records, accounts, and data that, in reasonable detail, accurately, fairly, and completely reflect their incomes, disbursements, transactions, and use of monies; and

B. Destroying, erasing, mutilating, concealing, altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, any contracts, accounting data, correspondence, advertisements, computer tapes, discs, or other computerized records, books, written or printed records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, personal and business canceled checks and check registers, bank statements, appointment books, copies of federal, state or local business or personal income or property tax returns, and other documents or records of any kind which relate to their business practices or business or personal finances from January 1, 1996, to the present time.

IT IS FURTHER ORDERED that the defendants shall allow the plaintiffs' representatives, agents, and assistants, immediate access to the defendants' business premises, including but not limited to 5430 Jimmy Carter Blvd., Suites 111, 112, and 229 Norcross, GA 30093. The purpose of this access shall be to inspect and copy any materials relevant to this action and to inventory defendants' assets. The plaintiffs' may remove materials from defendants' business premises so they may be inspected, inventoried, and copied. The plaintiffs shall return materials so removed within five (5) business days of completing said inventory and copying. In no event shall the plaintiffs retain the materials longer than ten (10) business days.

VI.

IT IS FURTHER ORDERED that, at least three (3) days prior to the preliminary injunction hearing in this matter, and in no event later than ten (10) business days after entry of this Order, each defendant shall provide the plaintiffs with a completed financial statement, on the forms attached to this Order, accurate as of the date of service of this Order upon such defendant.

VII.

IT IS FURTHER ORDERED that each defendant shall immediately provide a copy of this Order to each of its parent companies, holding companies, divisions, subsidiaries, corporations, affiliates, successors, assigns, directors, officers, managing agents, employees, representatives, and independent contractors, and shall, within three (3) business days from the date of service of this Order, provide plaintiffs with a sworn statement that defendants have complied with this provision of the Order and provide plaintiffs with a list of all business entities and individuals that were provided a copy of this Order.

VIII.

IT IS FURTHER ORDERED that in anticipation of the preliminary injunction hearing in this matter, the parties are granted leave to conduct expedited discovery in this matter. The parties may depose witnesses at any time after the date of this Order upon two (2) business days notice. The parties shall respond to any requests for admissions within five (5) business days after service of the requests for admissions.

IX.

IT IS FURTHER ORDERED that, at least two (2) business days prior to the preliminary injunction hearing in this matter, all parties shall file with this Court and serve on all opposing parties, a witness list which shall include the name, address, and telephone number of any such witness, and either a summary of the witness' expected testimony, or the witness' affidavit revealing the substance of such witness' expected testimony.

IT IS FURTHER ORDERED that parties shall serve affidavits, memoranda, and other evidence on which they intend to rely not less than two (2) business days before the preliminary injunction hearing in this matter. Defendants shall serve copies of all such materials on counsel for the Plaintiffs, prior to 4:45 p.m. of that day, by delivery to the following: Cindy A. Liebes, Federal Trade Commission, Atlanta Regional Office, 60 Forsyth Street, Suite 5M35, Atlanta, GA 30303 and James DePriest, Arkansas Office of the Attorney General, 323 Center Street, Suite 200, Little Rock, AR 72201.

XI.

IT IS FURTHER ORDERED that agents of the plaintiffs may serve copies of this Order upon any financial institution or person or entity that may be in possession of any assets, property, or property rights of defendants or that may be subject to any provision of this Order.

XII.

IT IS FURTHER ORDERED that, pursuant to Section 604 of the Fair Credit Reporting Act, 15 U.S.C. § 1681b, any consumer reporting agency may furnish the plaintiffs with a consumer report concerning any defendant.

XIII.

IT IS FURTHER ORDERED that each of the defendants shall appear before this Court on the ___________ day of _________, 1997, at ________o'clock ____.m. at the United States Courthouse, Room ___________, to show cause, if any there be, why this Court should not enter a preliminary injunction, pending final ruling on the Complaint, against said defendants enjoining them from further violations of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a), and the Telemarketing Sales Rule, 16 C.F.R. Part 310, continuing the freeze of their assets and imposing such additional relief as may be appropriate.

XIV.

IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for all purposes.

SO ORDERED, this _____day of July, 1997, at __________.

__________________________________
United States District Judge