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United States v. Zaken Corp.

United States District Court, C.D. California

September 18, 2014

THE ZAKEN CORP., a California corporation also d/b/a the Zaken Corproation, QuickSell and QuickSell and TIRAN ZAKEN, individually and as an officer of the Zaken Corp., Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For United States of America, Plaintiff: Lisa K Hsiao, LEAD ATTORNEY, Ann Entwistle, John W Burke, U.S. Department of Justice, Washington, DC; Anoiel Khorshid, AUSA - Office of U.S. Attorney, Civil Division - Federal Building, Los Angeles, CA.

For The Zaken Corp, a California corporation, also dba The Zaken Corporation, QuickSell, and QuikSell, Defendant: William I Rothbard, LEAD ATTORNEY, Law Office of William I Rothbard, Santa Monica, CA; Bryan C Altman, The Altman Law Group, Los Angeles, CA.

For Tiran Zaken, individually and as an officer of The Zaken Corp, Defendant: Bryan C Altman, The Altman Law Group, Los Angeles, CA; William I Rothbard, Law Office of William I Rothbard, Santa Monica, CA.

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DEAN D. PREGERSON, United States District Judge.

Presently before the court is Plaintiff's Motion for Summary Judgment. Having considered the submissions of the parties, the court is inclined to grant the motion and adopt the following order.

I. Background

Defendants (collectively, " Zaken" ) offer a " Wealth Building Home Business Plan" to consumers.[1] (Declaration of Dani Stagg, Ex. D at 44.) For $148.00, plus shipping, purchasers become Associates of QuikSell Liquidations and receive a " kit" including instructions on how to locate excess inventories, " '[i]nsider' secret techniques," " powerful and proven strategies," " a simple seven-word phrase that instantly pays [purchasers] cash profits," and other information. (Id. at 57-58, 97.) Zaken also offers purchasers additional " tools" for an additional charge. (Stagg Dec., Ex. E. at 85-86.)

Under Zaken's plan, consumers identify businesses seeking to liquidate excess inventory. Consumers then notify Zaken, which may proceed to negotiate an acquisition of the excess merchandise. If Zaken is successful in 1) buying the products identified by the consumer and 2) reselling the products at a profit, then Zaken pays purchasers fifty percent of the net proceeds. (Id. at 52-53.) Zaken advertises a " realistic ballpark figure" estimate that " 2 to 4 hours a week working this business will earn [participants] an average of $3,000 to $6,0000." (Stagg Dec. Ex. D. at 61.)

Effective March 1, 2012, the Federal Trade Commission broadened the scope of its " Business Opportunity Rule," 16 CFR § 437.1 et seq., the earliest form of which was first promulgated in 1978. 76 FR 76816. Prior versions of the rule regulated and imposed certain disclosure requirements upon the sale of business opportunities, but only those costing over $500. 76 FR 76818. The 2012 revision eliminated this monetary threshold. 76 FR 76821. The 2012 changes also seek " to address the sale of deceptive work-at home schemes, where unfair and deceptive practices have been both prevalent and persistent." 76 FR 76826. The FTC elaborated that " [s]ellers of fraudulent work-at-home opportunities deceive their victims with promises of an ongoing relationship in which the seller will buy the output that business opportunity purchasers produce, often misrepresenting to purchasers that there is a market for the purchasers' goods and services," and that these schemes " frequently dupe consumers with false earnings claims." Id.

On November 9, 2012, Plaintiff filed a complaint against Defendants for violations of the FTC's Business Opportunity

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Rule and Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a).

II. Legal Standard

Summary judgment is appropriate where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show " that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). All reasonable inferences from the evidence must be drawn in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the moving party does not bear the burden of proof at trial, it is entitled to summary judgment if it can demonstrate that " there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 323.

Once the moving party meets its burden, the burden shifts to the nonmoving party opposing the motion, who must " set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256. Summary judgment is warranted if a party " fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. A genuine issue exists if " the evidence is such that a reasonable jury could return a verdict for the nonmoving party," and material facts are those " that might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248. There is no genuine issue of fact " [w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

It is not the court's task " to scour the record in search of a genuine issue of triable fact." Keenan v. Allan, 91 F.3d 1275, 1278 (9th Cir. 1996). Counsel has an obligation to lay out their support clearly. Carmen v. San Francisco Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001). The court " need not examine the entire file for evidence establishing a genuine issue of fact, where the evidence is not set forth in the ...

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