UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
FEDERAL TRADE COMMISSION and STATE OF NEW JERSEY
Plaintiffs,
v.
NATIONAL SCHOLASTIC SOCIETY, INC. a New Jersey Corporation; also d/b/a
University Society Publishers Periodicals, and DAVID C. BEASLEY, JR., individually and as
an officer of National Scholastic Society, Inc.,
Defendants.
Civil Action No. 97-2423 (WHW)
STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION
Plaintiffs, the Federal Trade Commission and the State of New Jersey, filed their
complaint for a permanent injunction and other relief in this matter, pursuant to Sections
13(b) and 19 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§
53(b) and 57b, the Telemarketing and Consumer Fraud and Abuse Prevention Act,
("Telemarketing Act"),
15 U.S.C. § 6101 et seq., and the Telemarketing Sales Rule, 16 C.F.R. Part 310,
charging defendants National Scholastic Society, Inc., University Society Publishers
Periodicals, a d/b/a of National Scholastic Society, Inc., and David C. Beasley, Jr. with
violations of Section 5 of the FTC Act, 15 U.S.C. § 45(a) and the Telemarketing Sales
Rule, 16 C.F.R. Part 310.
The Commission, the State of New Jersey, and the defendants, by and through counsel,
have agreed to the entry of this Stipulated Final Order for Permanent Injunction
("Order") by this Court to resolve all matters of dispute between and among them
in this action. Each of the defendants, the Commission and the State of New Jersey have
consented to the entry of this Order without trial or final adjudication of any issue of
law or fact herein, and the defendants agree that entry of this Order by the Court and its
filing by the Clerk will constitute notice to them of the terms and conditions of the
Order.
The Commission, the State of New Jersey and the defendants hereby request the Court to
enter this Order. Being advised in the premises, the Court finds:
- This Court has jurisdiction over the subject matter of this case and of the parties
hereto;
- The complaint states a claim upon which relief may be granted against all the defendants
under Sections 5, 13(b), and 19 of the FTC Act, 15 U.S.C. §§ 45, 53(b) and 57b, and the
Telemarketing Act, 15 U.S.C. § 6101 et seq. and the Telemarketing Sales Rule, 16 C.F.R.
Part 310;
- The acts and practices of the defendants alleged in this case are in or affecting
commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44;
- This Order resolves all matters between and among the defendants, the Commission and the
State of New Jersey arising under the FTC Act, the Telemarketing Act, and the
Telemarketing Sales Rule for activities conducted prior to the date of this Order. This
action and the relief awarded herein are in addition to, and not in lieu of, other
remedies as may be provided by law, including both civil and criminal remedies. All relief
set forth in this Order is remedial in nature and is not a fine, penalty, punitive
assessment, or forfeiture;
- The defendants waive all rights to seek judicial review or otherwise challenge or
contest the validity of this Order;
- The defendants waive any claim that they may have 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;
- Entry of this Order is in the public interest;
- Where required by this Order, written notice to the Commission shall be effected by
serving papers, by personal delivery or certified mail, addressed to: Associate Director,
Federal Trade Commission, Division of Marketing Practices, Sixth St. & Pennsylvania
Ave., N.W., Room 238, Washington, DC 20580. Written notice to the State of New Jersey
shall be effected by serving papers, by personal delivery or certified mail, addressed to:
Cindy Miller, Esq., New Jersey Division of law, 124 Halsey Street, P.O. Box 45029, Newark,
NJ 07101; and
- Entry of this Order does not constitute and shall not be interpreted to constitute an
admission or finding by this Court that the defendants violated the FTC Act, the
Telemarketing Act, or the Telemarketing Sales Rule, or committed any act alleged in the
Complaint, all of which allegations are denied by the defendants.
DEFINITIONS
For purposes of this Order, the following definitions apply:
- "Defendants" means National Scholastic Society, Inc., University Society
Publishers Periodicals, a d/b/a of National Scholastic Society, Inc., and David C.
Beasley, Jr., and each of them individually.
- “Telemarketing” shall have the meaning specified in § 310.2(u) of the
Telemarketing Sales Rule, 16 C.F.R. § 3210.2(u).
- “Prize” shall have the meaning specified in § 310.2(p) of the Telemarketing
Sales Rule, 16 C.F.R. § 310.2(p).
- “Prize promotion” shall have the meaning specified in § 310.2(q) of the
Telemarketing Sales Rule, 16 C.F.R. § 310.2(q).
"Material" shall have the meaning specified in § 310.2(k) of
the Telemarketing Sales Rule, 16 C.F.R. § 310.2(k).
ORDER
I.
IT IS THEREFORE ORDERED that defendants, their agents, servants, employees,
corporations, subsidiaries, successors, assigns, and all other persons or entities in
active concert or participation with them, who receive notice of this Order by personal
service or otherwise, in connection with telemarketing any good or service are hereby
permanently restrained and enjoined from:
A. Violating Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), by making, expressly or
by implication, any misrepresentation of material fact, including but not limited to
representations regarding the purpose for which the defendants seek or obtain a
consumer’s credit card account number.
B. Violating Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), by failing to disclose
any material condition or restriction associated with the receipt of any good, service, or
prize, including but not limited to:
- any requirement that any consumer must complete and mail to a third party any form; and
- that any consumer must pay money for postage or processing.
II.
IT IS FURTHER ORDERED that defendants, their agents, servants, employees,
corporations, subsidiaries, successors, assigns, and all other persons or entities in
active concert or participation with them, who receive notice of this Order by personal
service or otherwise, in connection with the telemarketing of any good or service are
hereby permanently restrained and enjoined from failing to comply with any provision of
the Telemarketing Sales Rule, 16 C.F.R. Part 310, in connection with telemarketing
activity by the defendants, including but not limited to:
A. Violating Section 310.3(a)(1)(I) of the Telemarketing Sales Rule, 16 C.F.R. §
310.3(a)(1)(I), by failing to disclose, in a clear and conspicuous manner, before a
customer pays for goods or services offered, the total costs to purchase, receive, or use,
and the quantity of, any goods or services that are the subject of the sales offer.
B. Violating Section 310.3(a)(1)(iii) of the Telemarketing Sales Rule, 16 C.F.R. §
310.3(a)(1)(iii), by failing to disclose, in a clear and conspicuous manner, before a
customer pays for goods or services offered, if the seller has a policy of not making
refunds, cancellations, exchanges, or repurchases, a statement informing the customer that
this is the seller’s policy.
C. Violating Section 310.3(a)(1)(iv) of the Telemarketing Sales Rule, 16 C.F.R. §
310.3(a)(1)(iv), by failing to disclose, in a clear and conspicuous manner, before a
customer pays for goods or services offered, in any prize promotion, the odds of being
able to receive the prize, and if the odds are not calculable in advance, the factors used
in calculating the odds.
III.
IT IS FURTHER ORDERED that defendants, their agents, servants, employees,
corporations, subsidiaries, successors, assigns, and all other persons or entities in
active concert or participation with them, who receive notice of this Order by personal
service or otherwise are hereby restrained and enjoined from providing to any person,
except agents of Plaintiffs or other law enforcement authorities, the name, address,
telephone number, or credit card or bank account number of any person who provided such
information to the defendants between January 1, 1994, and the date of this Order,
provided however that defendants may provide such information if required to do so by
court order.
IV.
IT IS FURTHER ORDERED that defendants, whether acting directly or through any
business, entity, corporation, subsidiary or other device, shall not hereinafter engage in
any telemarketing unless said defendants, jointly or individually, first obtain a
performance bond in the principal amount of two hundred fifty thousand dollars ($250,000).
A. Each performance bond shall be an insurance agreement providing surety for financial
loss issued by a surety company that is admitted to do business in each of the states in
which the defendants are engaging in telemarketing and that holds a Federal Certificate Of
Authority As Acceptable Surety On Federal Bond and Reinsuring. The performance bond shall
cite this Stipulated Final Judgment and Order for Permanent Injunction as the subject
matter of the bond and shall provide surety thereunder against financial loss due, in
whole or in part, to any violation of Section 5 of the FTC Act, the Telemarketing Sales
Rule, any violation of the provisions of this Order, or to any other cause attributable to
the defendants engaging or participating in telemarketing.
B. The bond shall be deemed continuous and remain in full force and effect as long as
the defendants continue to engage in, participate in, or hold any ownership interest in,
share, or stock in, or serve as officers, directors or trustees of, any business entity
engaged in whole or in part in telemarketing, and for at least three (3) years after the
defendants have ceased engaging in any such activity.
C. The defendants shall provide the executed original of the bond or bonds required by
this Part to the Associate Director, Division of Marketing Practices of the Federal Trade
Commission, and Director, New Jersey Division of Consumer Affairs, 124 Halsey Street, 7th
Floor, P.O. Box 45027, Newark, NJ 07101 at least ten (10) days before commencing the event
precipitating the requirement of obtaining the bond.
D. The bond required by this Part shall be in addition to, and not in lieu of, any
other bond required by law.
E. Proceedings instituted under this section are in addition to, and not in lieu of,
any other civil or criminal remedies as may be provided by law, including any other
proceedings the FTC may initiate to enforce this Order.
V.
IT IS FURTHER ORDERED that if the defendants, whether acting directly or through
any business, entity, corporation, subsidiary or other device, engage in the sale of goods
or services through telemarketing and tape-record any conversation with a consumer to
verify or confirm that a consumer is agreeing to purchase goods or services, the
defendants are hereby restrained and enjoined from accepting and processing such purchase
unless the tape-recording meets the following criteria:
A. The tape recording must clearly include a statement which seeks to obtain permission
from the consumer to tape-record the conversation and shall reflect the entirety of the
conversation;
B. The tape recording must clearly reflect the consumer’s agreement to tape-record
the call;
C. The tape recording must include clear, complete, and understandable disclosures of
all material terms of the purchase, and that the consumer has expressly agreed to the
material terms. The material terms disclosed in the tape-recorded conversation shall be
consistent with any material terms previously disclosed to the consumer. Material terms
include, but are not limited to:
- whether any consumer will receive or is entitled to receive any prize, cash, coupon, or
other good or service;
- any handling, shipping, processing, or similar charge, or whether any consumer can
receive magazines by paying only a handling, shipping, processing, or similar charge;
- the consumer’s ability to cancel any transaction;
- the cost of any magazine subscription;
- the enforceability, or validity of any contract;
- the amount of each monthly payment;
- the number of payments;
- the amount of any late charges that a consumer may incur, and under what conditions and
when such late charge may accrue; and
- the cost, if any, of changing or substituting any magazine subscription for another.
This Part of this Order shall not affect any obligation to comply with any federal,
state, or local law regarding the tape-recording of telephone conversations.
VI.
IT IS FURTHER ORDERED that, for a period of five (5) years from the date of
entry of this Order, defendants, their agents, employees, corporations, subsidiaries,
successors, assigns, and all other persons or entities in active concert or participation
with them, who receive notice of this Order by personal service or otherwise and who
together with any defendant engage in the telemarketing of goods or services after the
date of entry are hereby restrained and enjoined from failing to create, and from failing
to retain for a period of 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 (when
available) of each person that any of the above-referenced businesses employ in any
capacity, 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;
C. Records containing the name, address, telephone number (when available), dollar
amounts paid for all consumers to whom any of the above-referenced businesses have sold,
invoiced or shipped any goods or services, or from whom any of the above-referenced
businesses accepted money or other items of value;
D. Representative copies of all solicitations, training packets, scripts, audiotext
messages, advertisements, or other marketing materials actually utilized.
E. Records that reflect, for every consumer complaint or refund request received from
any consumer to whom any of the above-referenced business(es) have sold, invoiced or
shipped any prizes, goods or services, or from whom any of the above-referenced businesses
accepted money or other items of value, whether received directly or indirectly or through
any third party:
- the consumer's name, address, telephone number and the dollar amount paid by the
consumer;
- the written complaint or refund request, if any, and the date of the complaint or refund
request;
- the basis of the complaint, including the name of any salesperson complained against (if
available), and the nature and result of any investigation conducted concerning the
validity of any complaint;
- each response and the date of the response;
- any final resolution and the date of the resolution; and
- in the event of a denial of a refund request, the reason for such denial.
VII.
IT IS FURTHER ORDERED that, in order that compliance with the provisions of this
Order may be monitored:
A. Within five (7) days after receiving notice of the entry of this Order, defendants
shall submit to the Commission a truthful sworn statement that shall acknowledge receipt
of this Order;
B. Within seven (7) days after receiving notice of the entry of this Order, defendant
David C. Beasley, Jr., shall provide written notice to the Commission and the State of New
Jersey of his current residential address(es), mailing address(es), business and home
telephone number(s), and employment status, including the name(s), telephone number(s),
and business address(es) of any current employer(s);
C. For a period of five (5) years from the date of entry of this Order, defendant David
C. Beasley, Jr. shall notify the Commission in writing within thirty (30) days of any
changes in his employment status or his residential or business mailing address(es) or
telephone number(s);
D. For a period of five (5) years from the date of entry of this Order, defendant
National Scholastic Society, Inc., shall notify the Commission in writing within thirty
(30) days of any changes in its corporate status or address(es), or any trade names or
d/b/a’s used by National Scholastic Society, Inc.
For the purposes of this section, "employment" includes the performance of
services as an employee, consultant, or independent contractor; and "employers"
includes any individual or entity for whom defendant David C. Beasley, Jr. performs
services as an employee, consultant, or independent contractor.
VIII.
IT IS FURTHER ORDERED that, for a period of five (5) years from the date of
entry of this Order, the defendants shall:
A. Within ten (10) business days of the date of entry of this Order, provide a copy of
this Order to, and obtain a signed and dated acknowledgment of receipt of same from, all
current and future officers, directors, managers, shareholders, and employees of any
defendants and any independent contractor that at the time the Order is entered rendered
or previously rendered telemarketing services or in the future will provide telemarketing
services for any defendant; and
B. Maintain for a period of three (3) years after creation, and upon ten (10) business
days notice make available to representatives of the Commission or the State of New
Jersey, the original signed and dated acknowledgments of receipt of this Order.
IX.
IT IS FURTHER ORDERED that the Commission or the State of New Jersey may monitor
the defendants' compliance with this Order by all lawful means available, including the
taking of depositions, subpoenas or other discovery requests, and by using investigators
posing as consumers or suppliers, and that for a period of seven (7) years from the date
of entry of this Order, for the purpose of further determining or securing compliance with
this Order, the defendants, their successors, and their assigns shall permit
representatives of the Commission or the State of New Jersey, within ten (10) business
days of receipt of written notice from the staff of the Commission or from representatives
of the State of New Jersey:
A. Access during normal business hours to any office, or facility storing documents of
any defendant or any business that together with any defendant engages in, or assists
others who are engaged in, telemarketing. In providing such access, the defendants, their
successors, and their assigns shall permit representatives of the Commission or of the
State of New Jersey to inspect and copy all documents relevant to any matter contained in
this Order, provided that the Commission or the State of New Jersey pay their own copying
costs; and
B. To interview or depose the officers, directors, and employees, including all
personnel involved in responding to consumer complaints or inquiries, and all sales
personnel, whether designated as employees, consultants, independent contractors or
otherwise, of any business to which Part VI, above, applies concerning matters relating to
compliance with the terms of this Order. The persons so interviewed or deposed and the
defendants may have counsel present.
X.
IT IS FURTHER ORDERED that the defendants shall, within sixty (60) days after
service of this Order, and at such other times as the Commission or the State of New
Jersey may request, provide a written report setting forth in detail the manner and form
in which they have complied with this Order.
XI.
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter
for purposes of construction, modification and enforcement of this Order.
XII.
IT IS FURTHER ORDERED that the Court's approval of this Order is expressly
premised upon the truthfulness, accuracy, and completeness of the financial statements for
defendants provided to counsel for Plaintiffs by defendant David C. Beasley, Jr. on May
29, 1997, and supplemented on June 23, 1997, June 25, 1997, and June 26, 1997. If, at any
time following entry of this Order, the Commission or the State of New Jersey obtains
information indicating that the representations of any defendant on any of the financial
statements concerning any defendant’s assets, income, liabilities, or net worth are
fraudulent, misleading, inaccurate, or incomplete, the Commission or the State of New
Jersey may, upon motion to the Court, request that the Order herein be reopened for the
purpose of requiring consumer redress; provided, however, that in all other
respects this Order shall remain in full force and effect unless otherwise ordered by this
Court; and provided further, that proceedings instituted under this Part are in
addition to, and not in lieu of, any other civil or criminal remedies as may be provided
by law, including any other proceedings Plaintiffs may initiate to enforce this Order.
Solely for the purposes of reopening or enforcing this Part, the defendants waive any
right to contest any of the allegations of the Complaint filed in this matter.
XIII.
IT IS FURTHER ORDERED that the freeze on the assets of the defendants pursuant
to earlier orders of this Court shall be lifted upon the entry of this Stipulated Final
Judgment. Financial institutions holding the assets of the defendants including safe
deposit boxes, shall release these assets immediately upon receiving a copy of this
Stipulated Final Judgment.
By signing below, the Commission, the State of New Jersey and the defendants hereby
stipulate and agree to entry of the foregoing Order, which shall satisfy all claims of the
Commission and the State of New Jersey in this action against the defendants.
SO ORDERED, this day of ___________, 1998.
________________________________
The Honorable William H. Walls
The parties hereby consent to the terms and conditions set forth above and hereby
consent to the entry of this Stipulated Final Order For Permanent Injunction at the
Court’s convenience and without further notice to the parties.
FOR PLAINTIFF FEDERAL TRADE COMMISSION:
BETSY BRODER
Federal Trade Commission
Division of Marketing Practices
Sixth Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
202-326-2968
BB-9912
FOR PLAINTIFF STATE OF NEW JERSEY:
________________________
CINDY K. MILLER
Senior Deputy Attorney General
P.O. Box 45029
Newark, New Jersey 07101
(973) 648-7579
CKM-3650
FOR THE DEFENDANTS:
DAVID C. BEASLEY, JR.,
individually and on behalf of
Defendants National Scholastic
Society, Inc. and University
Society Publishers Periodicals,
a d/b/a of National Scholastic
Society, Inc.
BEN H. BECKER
Attorney for the Defendants
Schwartz, Tobia, Stanziale,
Becker, Rosensweig & Sedita
22 Crestmont Road
Montclair, NJ 07042
(973) 746-6000
BHB-6377 |