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Federal Trade Commission v. John Beck Amazing Profits

November 17, 2009

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
JOHN BECK AMAZING PROFITS, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Florence-Marie Cooper United States District Court Judge

PRELIMINARY INJUNCTION

APPOINTMENT OF MONITOR AND OTHER EQUITABLE RELIEF

Plaintiff Federal Trade Commission ("FTC"or "Commission") filed a Complaint for Permanent Injunction and Other Equitable Relief and applied for a Preliminary Injunction against Defendants 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 ("Telemarketing Act"), 15 U.S.C. §§ 6101 et seq. In conjunction with the Order of this same date, granting in part Plaintiff's request for a Preliminary Injunction, Plaintiff's request is HEREBY GRANTED IN PART as follows.

FINDINGS OF FACT

The Court has considered the pleadings, declarations, exhibits, and memoranda filed in support of the Commission's motion and finds that:

1. This Court has jurisdiction of the subject matter of this case, there is good cause to believe it will have jurisdiction over all parties, pursuant to 15 U.S.C. §§ 45(a) and 53(b) and 28 U.S.C. §§1331, 1337(a) and 1345, and there is good reason to believe that venue is proper to all parties in the Central District of California. The Complaint states a claim upon which relief may be granted under Sections 5 and 13(b) of the FTC Act, 15 U.S.C. §§ 45 and 53(b).

2. There is good cause to believe that Defendants have engaged in 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 Telemarketing Sales Rule ("TSR"), 16 C.F.R. Part 310, and that the Commission is likely to prevail on the merits of this action.

3. There is good cause to believe that immediate and irreparable harm to consumers will result from Defendants' ongoing violations of the FTC Act and Telemarketing Sales Rule unless Defendants are immediately restrained and enjoined by Order of this Court.

4. Weighing the equities and considering the Commission's likelihood of ultimate success, this Preliminary Injunction with equitable relief is in the public interest.

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

DEFINITIONS

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

1. "Billing information" means any data, including but not limited to, name, address, telephone number, email address, account number, routing number, date of birth, or social security number, that enables any person to access a consumer's or donor's account, including but not limited to credit card, debit card, prepaid card, checking, savings, mortgage loan, share draft, or similar accounts.

2. "Coaching Services" shall mean coaching services, mentoring services, instructional services, teaching services, consulting services, or any other services or products marketed or sold by Defendants (as hereinafter defined), which relate in any way to the John Beck or Jeff Paul systems that Defendants sell in the Beck Infomercials (as hereinafter defined) or in the Paul Infomercials (as hereinafter defined), whether these services or products consist in whole or in part of additional written and/or electronic materials, or of one-on-one telephonic sessions, or of other types of telephonic sessions, or of a seminar or seminars.

3. "Clearly and conspicuously," or "clear and conspicuous," means:

a. In textual communications (e.g., printed publications or words displayed on the screen of an electronic device), the required disclosures are of a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend them, in print that contrasts with the background against which they appear;

b. In communications disseminated orally or through audible means (e.g., radio or streaming audio), the required disclosures are delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend them;

c. In communications disseminated through an electronic medium (such as television, video, and interactive media such as the Internet, online services and software), the required disclosures shall be presented simultaneously in both the audio and the visual portions of the communication. In any communication presented solely through visual or audio means, the required disclosures may be made through the same means in which the communication is presented. Any audio disclosures shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend them. Any visual disclosures shall be of a size and shade, with a degree of contrast to the background against which they appear and shall appear on the screen for a duration and in a location sufficiently noticeable for an ordinary consumer to read and comprehend them;

d. In all instances, the required disclosures shall be presented prior to the consumer incurring any financial obligation, in an understandable language and syntax, and with nothing contrary to, inconsistent with, or in mitigation of the disclosures used in any communication with them.

4. "Commerce" means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation, as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

5. "Corporate Defendants" means John Beck Amazing Profits, LLC; Jeff Paul, LLC d/b/a Shortcuts to Millions, LLC; Mentoring of America, LLC; and Family Products, LLC, as well as their affiliates, subsidiaries, successors and assigns, and any other corporations or businesses under the control of any of them.

6. "Defendants" means the Individual Defendants and the Corporate Defendants, individually, collectively, or in any combination.

7. "Document" is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and any other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

8. "Endorsement" is synonymous in meaning and equal in scope to the usage of the term in the FTC's "Guides Concerning Use of Endorsements and Testimonials in Advertising," 16 C.F.R. § 255.0(b), and includes any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) which message consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group or institution.

9. "FTC" or "Commission" means the Federal Trade Commission.

10. "Individual Defendants" means John Beck, Douglas Gravink, Gary Hewitt, and Jeff Paul, and each of them, by whatever names they may be known.

11. "Infomercial" means any written or verbal statement, illustration, or depiction that is 120 seconds or longer in duration that is designed to effect a sale or create interest in the purchasing of any product or service, which appears in any media, including but not limited to radio, television, and the Internet.

12. "Material" means likely to affect a person's choice of, or conduct regarding, products or services or a charitable contribution.

13. "Monitored Defendants" means all Defendants over which a Monitor has been appointed pursuant to this Order. as well as their affiliates, subsidiaries, successors and assigns, and any other corporations or businesses under the control of any of them.

14. "Negative option feature" means, in an offer or agreement to sell or provide any product or service, a provision under which the consumer's silence or failure to take an affirmative action to reject products or services or to cancel the agreement is interpreted by the seller or provider as acceptance or continuing acceptance of the offer. Offers or agreements with negative option features include, but are not limited to:

a. Free or introductory price trial offers in which the consumer receives a product or service for free or at a nominal or introductory price for an initial period and will incur an obligation to pay or pay a greater amount for the product or service if he or she does not take affirmative action to cancel, reject, or return the product or service before the end of that period;

b. Continuity plans in which, subsequent to the consumer's agreement to the plan, the seller or provider automatically ships products or provides services to a consumer unless the consumer contacts the seller or provider within a certain time and requests that the seller or provider not to ship the products or provide the services; and

c. Automatic renewal plans in which the seller or provider automatically renews the agreement and charges the consumer unless the consumer cancels before renewal.

15. "Person" means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

16. "Plaintiff" means the Federal Trade Commission.

17. "Seller" means any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide, products or services to a consumer in exchange for consideration.

18. "Telemarketer" means any person who, in connection with telemarketing, initiates or receives telephone calls to or from a consumer or donor.

19. "Telemarketing" means a plan, program, or campaign which is conducted to induce the purchase of products or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call.

Order

I. Conduct Prohibitions (John Beck Infomercials)

IT IS HEREBY ORDERED that Defendants, as well as their officers, agents, servants, employees, and attorneys, and all other persons or entities in active concert or participation with any of them who receive actual notice of this Order, whether acting directly or through any corporation or other entity, subsidiary, division, or other device, including but not limited to, fictitious business names, and each such person:

A. Are hereby restrained and enjoined, following the expiration of fifteen (15) business days after the date of this Order, from airing the "earlier"John Beck infomercial, which for the purposes of this Order is the version of the John Beck infomercial referenced in this litigation by the First Declaration of FTC Investigator Ann Stahl" ("First Stahl Decl."), ¶ 5 (hereinafter the "Earlier Beck Infomercial"), or the "later" John Beck infomercial, which for the purposes of this Order is the version of the John Beck infomercial referenced in this litigation by the First Stahl Decl., ¶ 6 (hereinafter, the "Later Beck Infomercial") (collectively, the "Beck Infomercials"), on television or on any other medium, without first adding the following disclaimers to these infomercials. These following disclaimers, which must be added to either or both of the Beck Infomercials that air, may not be modified by Defendants, and the disclaimers are listed immediately below, as items (1) through (11). These disclaimers, with the exception of (11), must be added in a font size identical to, or greater in size than, the font size of the scrolling text that appears at the bottom of the Later Beck Infomercial at approximately minute 6:20 -- 6:35 of the Later Beck Infomercial, which states, "Stay tuned to Receive FREE Lists of All the Tax Foreclosure Properties Available in Your Area!" Subject to any agreement Defendants may already have made or subsequently enter into not to air either of the Beck Infomercials, so long as the revised Beck Infomercials contain all of the following disclaimers, the Beck Infomercials may air for a period of up to 150 days from the date either one first airs in this revised form:

(1) Whenever there is an image or video featured of a house that was renovated more than a nominal amount after the purchase of the relevant tax lien or tax deed or other instrument, but before the photograph or video image was taken (or if Defendants have any doubt about whether any house shown has been thus renovated), the disclaimer, appearing during the entire time the image or video is shown: "This house is pictured as it appears after being renovated.";

(2) Whenever there is a group of images showing houses, some of which have been, or may have been, renovated more than a nominal amount after the purchase of the relevant tax liens or tax deeds or other instruments, but before the photographs were taken (or if Defendants have any doubt about whether any house in the group shown has been thus renovated), the disclaimer, shown for at least three seconds: "Some houses pictured after being renovated.";

(3) Whenever John Beck's "Property Vault," or "Free 30 Day Membership!" or "FREE 30 Day Membership" or "John Beck's amazing property vault" or "FREE Advisory Service!" or "FREE Property Vault Membership!" or any equivalent or similar phrase, is mentioned or referenced, the disclaimer, appearing for at least three seconds: "After the initial 30-days of free membership, or until you cancel, a monthly fee of $39.95 will automatically be charged.";

(4) Appearing approximately every five-to-seven minutes throughout the Beck Infomercials, and showing on screen for at least fifteen seconds at a time, and appearing at least five distinct times, the disclaimer: "Tax sale, foreclosure and lien programs vary widely from state-to-state. Significant restrictions and legal obstacles OFTEN EXIST. Other secured parties likely have a strong interest in protecting their legal interests. Vacant land is often easier to obtain than homes.";

(5) Appearing approximately every five-to-seven minutes throughout the Beck Infomercials, and showing on screen for at least fifteen seconds at a time, and appearing at least five distinct times: "It is the very exceptional situation when a valuable property is obtained, since owners do not normally give away their property for just back taxes.";

(6) Whenever there is an Endorsement and/or a testimonial, or a reference to an Endorsement and/or a testimonial, the disclaimer, appearing during the entire time any such endorser is speaking: "Endorser's results unique. Results not typical. Actual results vary widely.";

(7) Whenever there is an explicit or implicit reference to a "guarantee", or equivalent word or phrase, the disclaimer, which must also be complied with by Defendants: "Return your package within 30 days of receipt for ...


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