IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEVADA
FEDERAL TRADE COMMISSION, et al.,
Plaintiffs,
v.
EQUINOX INTERNATIONAL CORPORATION, et al.,
Defendants.
GLENN LOWRANCE, ANNETTE REAGOR, ANNE KEHLER, MARTIN KEHLER, and LISA FUOG,
Intervenors,
v.
BILL GOULDD, et al.,
Defendants.
CV-S-99-0969-JBR-RLH
ORDER PRELIMINARILY APPROVING STIPULATED FINAL JUDGMENT AND CLASS ACTION SETTLEMENT AND SETTING FAIRNESS HEARING
Plaintiffs Federal Trade Commission (“FTC” or “Commission”) and the States of Hawaii, Maryland, Nevada, North Carolina, Pennsylvania and South Carolina commenced this action on August 3, 1999, with the filing of a Complaint for Permanent Injunction and Other Equitable Relief and an Ex Parte Application for a Temporary Restraining Order (“TRO”) and Other Equitable Relief. The Court entered a TRO with asset freeze and receivership provisions on August 5, 1999. On September 14, 1999 following a three-day hearing, the Court entered an order partially granting the Plaintiffs’ Motion for a Preliminary Injunction. South Carolina withdrew from the action in November 1999. On November 19, 1999, the FTC and the remaining , state plaintiffs, joined by the states of Michigan, Tennessee and Virginia (collectively “Government Plaintiffs”), filed their First Amended Complaint for Permanent Injunction and Other Equitable Relief.
The First Amended Complaint charges Defendants Equinox International Corporation (“Equinox”), Advanced Marketing Seminars, Inc. (“AMS”), BG Management, Inc. (“BGM”) and Bill Gouldd (collectively “Defendants”) with violations of Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 45, and violations of State statutes dealing with securities, deceptive trade practices, false advertising, pyramid schemes and licensing requirements. Hawaii Revised Statutes § 485-1 et seq., of the Hawaii Uniform Securities Act; the Maryland Securities Act, Md. Code Ann., Corps. & Ass’ns § § 11-101 et seq. (1993 Repl. Vol. and Supp. 1999), and the Maryland Multilevel Distribution Companies Law, Md. Code Ann., Bus. Reg. § § 14-301, et seq. (1998); the Michigan Consumer Protection Act, Mich. Comp. Laws § 445.901 et seq., and the Michigan Franchise Investment Law, Mich. Comp. Laws § 445.1501 et seq., of which the Pyramid Protection Act, Mich. Comp. Laws § 445.1528, is a part; the Nevada Revised Statutes 598.0915(11), 598.0923(2), 598.110 and 207.171; the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § § 75-1.1 et seq., and the North Carolina Pyramid and Chain Schemes Act, N.C. Gen. Stat. § 14-291.1; the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1 et seq., as amended; the Tennessee Consumer Protection Act of 1977, Tenn. Code Ann. § § 47-18-101 et seq., the Virginia Consumer Protection Act, Va. Code § § 59.1-196 through 59.1-207, as amended, and the Virginia Pyramid Statute, Va. Code § § 18.2-239 through 18.2-240.
On January 7, 1997, Intervenors Glenn Lowrance, Annette Reagor, Anne Kehler, Martin Kehler and Lisa Fuog filed a class action suit against Bill Gouldd, Equinox, AMS, and Marc Accetta in the district court of Lubbock County, Texas (“Texas court”), alleging claims under the Nevada Deceptive Trade Practices Act and the federal Securities Act of 1933. The Texas court granted Intervenors’ motion for class certification, certifying a class consisting of the following:
All persons and entities (excluding Defendants Equinox International Corporation, Bill Gouldd, Marc Accetta, and Advanced Marketing Seminars, Inc., any trusts or other entities that Defendants control; and Defendants’ respective officers, directors, and affiliates and members of their immediate families) who became Equinox International Corporation independent distributors between January 1, 1991 and January 7, 1997.
The class action was subsequently dismissed from the Texas court, pursuant to an Agreed Dismissal Order, so that it could be refiled in Clark County, Nevada. On November 12, 1999, the Court granted Intervenors’ motion to intervene in this action and to pursue on behalf of the class the claims alleged in Intervenors’ second amended petition.
On February 11, 2000, the Court entered an order provisionally certifying a non-mandatory class under Fed. R. Civ. P. 23(b)(3). The Court noted therein that such class certification was provisional and that it may be altered or amended at any time before a decision on the merits. The Court also approved the dissemination of class notice. The deadline for opting out of the class was March 31, 2000.
Government Plaintiffs and Intervenors (collectively “Plaintiffs”), and Defendants have agreed to the entry of a Stipulated Final Judgment and Class Action Settlement, the terms of which are set forth below, to resolve all matters of dispute between them in this action. Based on the extensive record in this case and the Court’s familiarity with the dispute between the parties, the Court hereby enters this Order preliminarily to approve the terms of the Stipulated Final Judgment and Class Action Settlement, to schedule a fairness hearing on the Stipulated Final Judgment and Class Action Settlement, and to provide guidance to the parties as to their rights and responsibilities pending the fairness hearing and final approval of the Stipulated Final Judgment and Class Action Settlement.
THEREFORE, it is hereby ORDERED, ADJUDGED and DECREED as follows:
PRELIMINARY APPROVAL OF STIPULATED FINAL JUDGMENT
Pursuant to Fed. R. Civ. P. 23(e), the Court finds the terms and conditions of this Stipulated Final Judgment and Class Action Settlement (“Order”) to be fundamentally fair, adequate, reasonable and free from collusion. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026-27 (9th Cir. 1998) (affirming final approval of class settlement); Marshall v. Holiday Magic, Inc. 550 F. 2nd 1173, 1178 (9th Cir. 1977) (affirming final approval of class settlement in pyramid scheme case). The Court therefore preliminarily approves the following terms and conditions of this Order, as to which all parties have agreed.
I. General Terms
A. This Court has jurisdiction over the subject matter and the parties.
B. Venue is proper as to all parties in the United States DIstrict Court for the DIstrict of Nevada.
C. The First Amended Complaint and the Complaint in Intervention filed with leave of the Court on April 19, 2000, state a claim upon which relief may be granted against the Defendants under the acts and statutes set forth above.
D. Defendants have entered into this Order freely and without coercion. Defendants further acknowledge that they have read the provisions of this Order and are prepared to abide by them.
E. Plaintiffs and Defendants, by and through their counsel, have agreed that the entry of this Order resolves all matters of dispute between them arising from the First Amended Complaint and Intervenors’ Complaint in Intervention in this action, up to the date of entry of this Order.
F. Plaintiffs and Defendants waive all rights to seek appellate review or otherwise challenge or contest the validity of this Order. Parties agree that nothing herein shall preclude any party from seeking appellate review of any proceeding to enforce this Order, but agree not to challenge or contest, in any manner, the validity of this Order in such a proceeding. Defendants further waive and release any claim they may have against the Plaintiffs, their employees, representatives or agents and the Receiver as of the date of entry of this Order.
G. The Plaintiffs, all members of the class the Intervenors represent, the Receiver and their affiliates, affiliated companies, subsidiaries, employees, servants, officers, directors, agents, attorneys, heirs, personal representatives, predecessors, successors, and assigns, past and present (hereafter collectively referred to as “Plaintiff Releasors”), for an in consideration of the agreements set forth in this Order, the sufficiency of which is hereby acknowledged, do hereby release, acquit, and forever discharge the Defendants and their affiliates, affiliated companies, subsidiaries, employees, servants, officers, directors, agents, attorneys, heirs, personal representatives, predecessors, successors, and assigns, past and present (hereafter collectively referred to as “Equinox Releasees”), from any and all civil claims, including but not limited to contingent claims, counterclaims, cross-claims, third-party claims, liabilities, demands, losses, judgments, actions, suits, causes of action, accountings, rights, damages, punitive damages, and interests, direct or derivative, nominally or beneficially, possessed or claimed, known or unknown, suspected or unsuspected, choate or inchoate, and whether or not Equinox Releasees or any of them are at fault, that Plaintiff Releasors had, now have, may have at any time in the future, or claim to have or have had and that relate to the causes of action set forth in Federal Trade Commission, et al. v. Equinox International Corporation, et al., Case No. CV-S-99-0969-JBR-RLH (United States District Court for the District of Nevada), or that could have been set forth in this action, for or by reason of any cause, matter, or thing whatsoever from the beginning of the world through and including the date of this Order.