DAVID M. NEWMAN (Calif. State Bar No. 54218)
SYLVIA KUNDIG (Calif. Bar No. 172488)
Federal Trade Commission
901 Market Street, Suite 570
San Francisco, CA 94103
(415) 356-5270

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT
DISTRICT OF KANSAS

FEDERAL TRADE COMMISSION, Plaintiff,

v.

PARADE OF TOYS, INC. et al., Defendants.

Case No. 97-2367-GTV

CONSENT JUDGMENT AND ORDER CONTAINING PERMANENT INJUNCTION RE: DEFENDANT
MEGAN N. WALL

WHEREAS Plaintiff, the Federal Trade Commission, has commenced this action by filing the Complaint herein; defendant Megan N. Wall has been served with the Summons and Complaint; the parties have been represented by the attorneys whose names appear hereafter; and the parties have agreed to settlement of this action upon the following terms and conditions, without adjudication of any issue of fact or law and without defendant admitting liability for any of the matters alleged in the Complaint;

THEREFORE, on the joint motion of plaintiff and defendant Megan N. Wall, it is hereby ORDERED, ADJUDGED, and DECREED as follows:

DEFINITIONS

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

"Franchise" is defined in Section 436.2(a) of the Commission's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures," 16 C.F.R. Part 436 (hereinafter the "Franchise Rule"). The term "franchise" in this Consent Judgment and Order shall encompass any successor definition in any later trade regulation rule promulgated by the Commission.

"Business venture" is defined as any written or oral arrangement, however denominated, whether or not covered by the Franchise Rule, which consists of the payment of any consideration for:

a. the right or means to offer, sell or distribute goods or services (whether or not identified by a trademark, service mark, trade name, advertising or other commercial symbol); and

 

b. more than nominal assistance to any person or entity in connection with or incident to the establishment , maintenance, or operation of a new business or the entry of an existing business into a new line or type of business.

FINDINGS

1. This Court has jurisdiction of the subject matter and of the parties, and venue is proper in this District.

2. The Complaint states a claim upon which relief may be granted against the defendants under Sections 5(a)(1), 13(b) and 19 of the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1), 53(b) and 57b.

I.

BAN ON MISREPRESENTATIONS IN THE SALE OF FRANCHISE OR BUSINESS VENTURE

IT IS HEREBY ORDERED that defendant Megan N. Wall, and her agents, servants and attorneys, and those persons in active concert or participation with her who receive actual notice of this Consent Judgment and Order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, in connection with the sale of any franchise or business venture, are hereby permanently enjoined and restrained from making or assisting others in making, directly or by implication, any oral or written statement or representation, including but not limited to a statement or representation that

A. Purchasers of such franchise or business venture can reasonably expect to achieve a specific level of earnings; or

 

B. Any individuals whose names are provided as references to prospective purchasers of such franchise or business venture are existing operators of such franchise or business venture;

when such statement or representation is false or misleading or when, at the time such statement or representation is made, defendant does not possess and rely upon competent and reliable evidence that substantiates such statement or representation; and it is further

ORDERED that defendant Megan N. Wall, and her agents, servants and attorneys, and those persons in active concert or participation with her who receive actual notice of this Consent Judgment and Order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, in connection with the sale of any franchise or business venture, are hereby permanently enjoined and restrained from failing to disclose material information about the costs associated with purchasing such franchise or business venture, including but not limited to any "set up" or "license" fee which are part of initial cost of such franchise or business venture.

II.

BAN ON VIOLATIONS OF THE FRANCHISE RULE

IT IS HEREBY ORDERED that defendant Megan N. Wall, and her agents, servants and attorneys, and those persons in active concert or participation with her who receive actual notice of this Consent Judgment and Order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, are hereby permanently enjoined and restrained from

1. Failing to provide any prospective franchisee with a basic written disclosure document containing the information required under either § 436.1(a)(1)-(24) of the Franchise Rule or under the Uniform Franchise Offering Circular format of disclosure, in the manner and within the time frame stated in the Franchise Rule;
2. Failing to possess a reasonable basis for any oral, written or visual earnings claim or representation of specific levels of sales, income or profits, as is required by 16 C.F.R. § 436.1(b)(2), (c)(2) and (e)(1), at the time any earnings claim is made to a prospective franchisee;
3. Failing to provide any prospective franchisee, in the manner and within the time frame stated in the Franchise Rule, with an earnings claim document as described in § 436.1(b)-(e) of the Franchise Rule or with earnings claims disclosures required by the Uniform Franchise Offering Circular, whenever a written or oral statement is made concerning the actual or potential sales, income, or gross or net profit of any existing or prospective franchise or franchisee; and
4. Failing to comply with any provision of the Franchise Rule, 16 C.F.R. Part 436, as promulgated or as it may hereinafter be amended. A copy of the Franchise Rule is attached hereto as Attachment A and incorporated herein as if fully set forth verbatim.

Provided, however, that, in the event the Franchise Rule is hereafter amended or modified, defendants' compliance with that Rule as so amended or modified shall not be deemed a violation of this injunction.

III.

PROVISIONS RELATED TO CONSUMER REDRESS

IT IS FURTHER ORDERED that within three (3) business days after the date of entry of this Consent Judgment and Order, defendant Megan N. Wall shall submit to the Federal Trade Commission, by mailing a copy thereof to the Regional Director, San Francisco Regional Office, Federal Trade Commission, 901 Market Street, Suite 570, San Francisco, CA 94103, a truthful sworn statement, in the form shown on Attachment B to this Consent Judgment and Order, that shall reaffirm and attest to the truthfulness, accuracy and completeness of defendant Megan N. Wall's financial statement executed on September 17, 1997, and related documents submitted to the Federal Trade Commission (collectively "the Financial Statement"). The plaintiff's agreement to this Consent Judgment and Order is expressly premised on the truthfulness, accuracy and completeness of the Financial Statement, which contains material information concerning defendant Megan N. Wall's financial condition upon which plaintiff relied in negotiating and agreeing to a Consent Judgment and Order without provisions for consumer redress. If, upon motion by the plaintiff, this Court finds that defendant Megan N. Wall failed to file the sworn statement required by this Paragraph, or failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentation in or omission from the Financial Statement, the Judgment herein shall be reopened for the purpose of determining the amount of consumer redress for which defendant Megan N. Wall may be liable; provided, however, that in all other respects the Consent Judgment and Order shall remain in full force and effect; and provided further that proceedings instituted under this Paragraph are in addition to and not in lieu of any other proceedings the plaintiff may initiate to enforce this Consent Judgment and Order. Solely for the purposes of this Paragraph, defendant Megan N. Wall waives any right to contest the allegations in the plaintiff's complaint.

IV.

PERSONS AFFECTED; CONTINUING JURISDICTION

IT IS FURTHER ORDERED that defendant Megan N. Wall shall within thirty (30) days of the entry of this Consent Judgment and Order, provide a copy of this Consent Judgment and Order to the officers, agents, servants, employees and attorneys of any firm of which she is an officer, director, owner or shareholder or for which she exercises any management or supervisory responsibility, and secure from each such person a signed statement acknowledging receipt of a copy of this Consent Judgment and Order, and shall, within ten (10) days of complying with this paragraph, file an affidavit with the Court and serve the Federal Trade Commission, by mailing a copy thereof to the Regional Director, San Francisco Regional Office, Federal Trade Commission, 901 Market Street, Suite 570, San Francisco, CA 94103, setting forth the fact and manner of such compliance, including the name and title of each person to whom a copy of this Consent Judgment and Order has been provided; and it is further

ORDERED that, for a period of five (5) years from the date of entry of this Consent Judgment and Order, defendant Megan N. Wall shall maintain and make available to the Federal Trade Commission, within seven (7) days of the date receipt of a written request, business records demonstrating compliance with the terms and provisions of this Consent Judgment and Order, including but limited to all promotional materials (including written materials and scripts, recording or transcriptions of oral presentations) and any materials upon which defendant relies as the basis for any claims made in any promotional material; and it is further

ORDERED that for seven (7) years after the date of entry of this Consent Judgment and Order, defendant Megan N. Wall shall notify the Federal Trade Commission within thirty (30) days whenever she changes or discontinues her then-current business or employment; and it is further

ORDERED that this action, and the relief awarded herein, is in addition to and not in lieu of other remedies as may be provided by law, including other proceedings the plaintiff may initiate to enforce this Consent Judgment and Order, or other civil or criminal remedies; and it is further

ORDERED that this Court shall retain jurisdiction of this matter for the purposes of enabling any of the parties to this Consent Judgment and 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 Consent Judgment and Order, for the enforcement of compliance therewith, or for the punishment of violations thereof.

THERE BEING NO JUST REASON FOR DELAY, the Clerk of the Court is directed to enter this Consent Judgment and Order forthwith.

Dated this _____________ day of _____________, 19____.

G. Thomas Van Bebber, Chief
United States District Court Judge

* * * * *

The Federal Trade Commission, by its counsel, and defendant and her counsel, hereby consent to the terms and conditions of the Consent Judgment and 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.