UNITED
STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
UNITEL SYSTEMS, INC., D/B/A
UNIVERSE OF TOYS, a Texas corporation;
ROBERT KENNETH FRISCH, JR., individually
and as an officer of the corporate defendant;
DELANEY LEON HINTON, individually
and as an officer of the corporate defendant;
BALJEET S. ANAND, A/K/A BILL SINGH,
individually
and as a manager of the corporate defendant; and
HARMIT S. ANAND, A/K/A SONNY SINGH,
individually
and as a manager of the corporate defendant, Defendants.
CIVIL ACTION No.
COMPLAINT
FOR PERMANENT INJUNCTION
AND OTHER EQUITABLE RELIEF
Plaintiff, the Federal Trade
Commission ("Commission"), for its complaint
alleges:
- The Commission brings this
action under Sections 13(b) and 19 of the Federal
Trade Commission Act ("FTC Act"), 15
U.S.C. §§ 53(b) and 57b, to secure a
permanent injunction, preliminary injunctive
relief, rescission of contracts, restitution,
disgorgement, and other equitable relief for
defendants' unfair or deceptive acts or practices
in violation of Section 5(a) of the FTC Act, 15
U.S.C. § 45(a), and the Commission's Trade
Regulation Rule entitled "Disclosure
Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures
("the Franchise Rule" or "the
Rule"), 16 C.F.R. Part 436.
JURISDICTION
AND VENUE
- This Court has jurisdiction
over this matter pursuant to 28 U.S.C.
§§ 1331, 1337(a) and 1345, and 15 U.S.C.
§§ 53(b) and 57b.
- Venue in the Northern
District of Texas is proper under 28 U.S.C.
§§ 1391(b) and (c), and 15 U.S.C.
§ 53(b).
PLAINTIFF
- The Commission is an
independent agency of the United States
Government created by statute. 15 U.S.C.
§§ 41 et seq. The Commission is
charged, inter alia, with enforcement of
Section 5(a) of the FTC Act, 15 U.S.C.
§ 45(a), which prohibits unfair or
deceptive acts or practices in or affecting
commerce. The Commission is authorized to
initiate federal district court proceedings to
enjoin violations of the FTC Act in order to
secure such equitable relief as may be
appropriate in each case. 15 U.S.C.
§§ 53(b) and 57b.
DEFENDANTS
- Defendant UNITEL
SYSTEMS, INC., doing business as
UNIVERSE OF TOYS ("Unitel"), a
Texas corporation with its principal place of
business at 1865 Summit Ave, Suite 610, Plano, TX
75074, offers and sells carousel display rack
business ventures for the sale of Disney stuffed
animals and other licensed products to the
public. Unitel has transacted business in the
Northern District of Texas.
- Defendant ROBERT
KENNETH FRISCH, JR. is an officer and
director of Unitel. At all times material to this
complaint, acting alone or in concert with
others, he has formulated, directed, controlled
or participated in the acts and practices of the
corporate defendant, including the acts and
practices set forth in this complaint. In
connection with the matters alleged herein, he
has transacted business in the Northern District
of Texas.
- Defendant DELANEY
LEON HINTON is an officer of Unitel. At
all times material to this complaint, acting
alone or in concert with others, he has
formulated, directed, controlled or participated
in the acts and practices of the corporate
defendant, including the acts and practices set
forth in this complaint. In connection with the
matters alleged herein, he has transacted
business in the Northern District of Texas.
- Defendant BALJEET
S. ANAND, also known as BILL
SINGH, controls, directly or through his
wife, his family members or others, approximately
45% of the stock of Unitel; along with Harmit S.
Anand and others he originated the idea that
forms the basis of Unitel's business; and is a
manager of Unitel in charge of product related
matters. At all times material to this complaint,
acting alone or in concert with others, he has
formulated, directed, controlled or participated
in the acts and practices of the corporate
defendant, including the acts and practices set
forth in this complaint. In connection with the
matters alleged herein, he has transacted
business in the Northern District of Texas.
- Defendant HARMIT S.
ANAND, also known as SONNY SINGH,
controls, directly or through his family members
or others, approximately 45% of the stock of
Unitel; along with Baljeet S. Anand and others he
originated the idea that forms the basis of
Unitel's business; and is an assistant manager of
Unitel in charge of product related matters. At
all times material to this complaint, acting
alone or in concert with others, he has
formulated, directed, controlled or participated
in the acts and practices of the corporate
defendant, including the acts and practices set
forth in this complaint. In connection with the
matters alleged herein, he has transacted
business in the Northern District of Texas.
COMMERCE
- At all times relevant to
this complaint, the defendants have maintained a
substantial course of trade or business in the
offering and sale of carousel display rack
business ventures, in or affecting commerce, as
"commerce" is defined in Section 4 of
the FTC Act, 15 U.S.C. § 44.
DEFENDANTS'
BUSINESS ACTIVITIES
- Since at least October of
1996, the defendants have been engaged in a
deceptive scheme to offer and sell purportedly
profitable carousel display rack business
ventures to members of the public. In order to
induce purchasers to make a minimum investment of
$14,990, the defendants have exploited the Disney
name and other popular trademarks, representing
that carousel racks displaying these products are
successful and profitable because of the
popularity of these licensed products. The
defendants have misrepresented the earnings
potential of the business venture, and failed to
provide prospective purchasers with the
information required by the Commission's
Franchise Rule that they need to evaluate these
claims and the business venture itself.
VIOLATIONS
OF SECTION 5 OF THE FTC ACT
COUNT
ONE
- In the course of offering
for sale and selling carousel display rack
business ventures, defendants have represented,
expressly or by implication, that purchasers can
reasonably expect to achieve a specific level of
earnings.
- In truth and in fact, few,
if any, purchasers attain the specific level of
earnings represented by the defendants.
- Therefore, defendants'
representations as set forth in Paragraph 12 are
false and misleading and constitute deceptive
acts or practices in violation of Section 5(a) of
the FTC Act, 15 U.S.C. § 45(a).
COUNT
TWO
- In the course of offering
for sale and selling carousel display rack
business ventures, defendants have represented to
consumers that Harmit S. Anand, a/k/a Sonny
Singh, is engaged in the retail sale of Disney
products and can provide a reference for the
corporate defendant.
- Harmit S. Anand, a/k/a
Sonny Singh, is a manager of the corporate
defendant.
- In light of defendants'
representations as set forth in Paragraph 15,
defendants' failure to disclose that Harmit S.
Anand, a/k/a Sonny Singh, is a manager of the
corporate defendant is deceptive and, therefore,
is a violation of Section 5(a) of the FTC Act, 15
U.S.C. § 45(a).
THE FRANCHISE RULE
- The Franchise Rule,
promulgated by the Commission on October 21, 1979
under Section 18 of the FTC Act, 15 U.S.C.
§ 57a, has since that date remained in full
force and effect.
- The business ventures sold
by the defendants are business opportunity
franchises, as "franchise" is defined
in Section 436.2(a) of the Franchise Rule, 16
C.F.R. § 436.2(a).
- The Franchise Rule requires
a franchisor to provide prospective franchisees
with a complete and accurate basic disclosure
statement containing twenty categories of
information, including information about the
seller of the franchise, the terms and conditions
of the proposed business relationship, and the
names, addressees and telephone numbers of a
cross-section of prior franchise purchasers. 16
C.F.R. § 436.1(a)(1) - (a)(20). Disclosure
of this information enables a prospective
franchisee to check out the franchisor's sales
claims and assess the potential risks and
benefits involved in the purchase of the
franchise.
- The Franchise Rule
additionally requires: (1) that the franchisor
give prospective franchisees a document
disclosing the material basis (or the lack of
such basis) for any oral, written, or visual
earnings or profit representations it makes to a
prospective franchisee, 16 C.F.R.
§ 436.2(b)-(e); and (2) that the
franchisor, in immediate conjunction with any
generally disseminated earnings claim, disclose
the number and percentage of prior purchasers
known to have earned as much or more than the
amount claimed, and include a warning that the
earnings claim is only an estimate. 16 C.F.R.
§ 436.1(e)(3)-(4).
- Pursuant to Section
18(d)(3) of the FTC Act, 15 U.S.C.
§ 57a(d)(3), and 16 C.F.R. § 436.1,
violations of the Franchise Rule constitute
unfair or deceptive acts or practices in or
affecting commerce, in violation of Section 5(a)
of the FTC Act, 15 U.S.C. § 45(a).
VIOLATIONS
OF THE FRANCHISE RULE
COUNT
THREE
- In numerous instances in
connection with the offering of franchises, as
"franchise" is defined in the Rule, 16
C.F.R. § 436.2(a), defendants have failed
to provide prospective franchisees with accurate
and complete disclosure documents within the time
period required by the Franchise Rule, thereby
violating Section 436.1(a) of the Rule, 16 C.F.R.
§ 436.1(a), and Section 5 of the FTC Act,
15 U.S.C. § 45.
COUNT FOUR
- In numerous instances in
connection with the offering of franchises, as
"franchise" is defined in the Rule, 16
C.F.R. § 436.2(a), defendants have made
earnings claims within the meaning of the Rule,
16 C.F.R. § 436.1(b)-(e), but have failed
to give prospective franchisees the earnings
claim document required by the Rule or have
failed to disclose the information required by
the Rule in immediate conjunction with the
claims, thereby violating Section 436.1(b)-(e) of
the Rule, 16 C.F.R. § 436.1(b)-(e), and
Section 5 of the FTC Act, 15 U.S.C. § 45.
CONSUMER
INJURY
- Consumers in many areas of
the United States have suffered substantial
monetary loss as a result of defendants' unlawful
acts or practices. Absent injunctive relief by
this Court, defendants are likely to continue to
injure consumers and harm the public interest.
THIS
COURT'S POWER TO GRANT RELIEF
- Section 13(b) of the FTC
Act, 15 U.S.C. § 53(b), empowers this Court
to grant injunctive and other ancillary relief,
including consumer redress, disgorgement and
restitution, to prevent and remedy any violations
of any provision of law enforced by the
Commission.
- Section 19 of the FTC Act,
15 U.S.C. § 57b, authorizes this Court to
grant such relief as the Court finds necessary to
redress injury to consumers or other persons
resulting from defendants' violations of the
Franchise Rule, including the rescission and
reformation of contracts, and the refund of
money.
- This Court, in the exercise
of its equitable jurisdiction, may award other
ancillary relief to remedy injury caused by the
defendants' law violations.
PRAYER
FOR RELIEF
WHEREFORE, plaintiff
requests that this Court, as authorized by
Sections 13(b) and 19 of the FTC Act, 15 U.S.C.
§§ 53(b) and 57b, and pursuant to its own
equitable powers:
- Award plaintiff such
preliminary injunctive and ancillary relief as
may be necessary to avert the likelihood of
consumer injury during the pendency of this
action and to preserve the possibility of
effective final relief;
- Enter judgment against the
defendants and in favor of the plaintiffs for
each violation alleged in this complaint;
- Permanently enjoin the
defendants from violating the Franchise Rule and
the FTC Act, as alleged herein;
- Award such relief as the
Court finds necessary to redress injury to
consumers resulting from the defendants'
violations of the Franchise Rule and the FTC Act,
including but not limited to, rescission of
contracts, the refund of monies paid, and the
disgorgement of ill-gotten monies; and
- Award plaintiff the costs
of bringing this action, as well as such other
and additional relief as the Court may determine
to be just and proper.
Respectfully submitted,
DATED:
_____________________
STEPHEN CALKINS
General Counsel
______________________________
JAMES E. ELLIOTT
TX State Bar No. 06557100
______________________________
SUSAN E. ARTHUR
TX State Bar No. 01365300
FEDERAL TRADE COMMISSION
Dallas Regional Office
1999 Bryan Street, Ste 2150
Dallas TX 75201-6808
214 979-9350
214 979-9373 (James E.
Elliott)
214 979-9370 (Susan E. Arthur)
214 953-3079 (Facsimile Machine)
ATTORNEYS FOR
PLAINTIFF
FEDERAL TRADE COMMISSION
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