FILED
CLERK, U.S. DISTRICT COURT
JUNE 24 2003
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No. CV-02-9270 JSL (AJWx)
PRELIMINARY INJUNCTION WITH ASSET FREEZE, APPOINTMENT OF A PERMANENT RECEIVER, AND OTHER EQUITABLE RELIEF
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
TREK ALLIANCE, INC., et al.
Defendants.
PROCEDURAL BACKGROUND
On December 6, 2002, Plaintiff Federal Trade Commission filed its Complaint for a permanent injunction and other equitable relief in this matter pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b). Plaintiff also filed an Ex Parte Application for a Temporary Restraining Order with Asset Freeze, Appointment of a Temporary Receiver and Other Equitable Relief, and Order to Show Cause Why a Preliminary Injunction Should Not Issue and a Permanent Receiver Not Be Appointed (“TRO”). On December 9, 2002, the Court granted Plaintiff’s application for a TRO and scheduled a hearing on the OSC for December 23, 2002. The individual Defendants filed opposition papers on December 19, 2002, and Plaintiff filed reply papers on December 20, 2002.
At the hearing on December 23, 2002, the individual Defendants, through their counsel, consented to entry of an extension of the TRO and a new hearing date of January 8, 2003 was
ENTERED ON ICMS
JUN 25 2003
scheduled. A hearing was held on January 8, 2003, at which time counsel for Plaintiff and the individual Defendants advised the Court that they had agreed to stipulate to further extend the TRO and to continue the hearing on the OSC to allow additional time for discovery. The Court approved the parties’ stipulation, establishing a briefing schedule and continuing the hearing until March 24, 2003. At the parties’ request, the Court subsequently modified the briefing schedule and hearing date.
On March 25, 2003, the individual Defendants filed a memorandum of points and authorities in opposition to the entry of a preliminary injunction and the appointment of a permanent receiver, including numerous declarations and exhibits. On April 2, 2003, Plaintiff filed a reply brief, as well as numerous declarations. On June 10, 2003, a hearing was held at which counsel for Plaintiff and the individual Defendants presented oral argument.
DISPOSITION
Having considered all materials and arguments submitted by both Plaintiff and Defendants, Plaintiff’s request for a preliminary injunction and the appointment of a permanent receiver is HEREBY GRANTED.
FINDINGS
1. This Court has jurisdiction of the subject matter of this case and venue in this district is proper.
2. There is good cause to believe that Defendants Trek Alliance, Inc., Trek Education Corporation, VonFlagg Corporation, Jeffrey Kale Flagg, a/k/a Kale Flagg, Richard Von Alvensleben, a/k/a Rich Von, Tiffani Von Alvensleben, a/k/a Tiffani Von, and Harry M. Flagg have engaged in and are likely to engage in acts that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and that the Commission is likely to prevail on the merits of this action.
3. There is good cause to believe that violations of Section 5(a) of the FTC Act are likely to recur unless Defendants are restrained and enjoined by Order of this Court, and that immediate and irreparable harm will result from such violations of the FTC Act.
4. There is good cause to believe that immediate and irreparable damage to the Court’s ability to grant effective final relief for consumers in the form of monetary restitution will occur from the sale, transfer, or other disposition or concealment by Defendants of assets or records unless Defendants are immediately restrained and enjoined by order of this Court.
5. Good cause exists for the appointment of a Receiver over corporate Defendants Trek Alliance, Inc., Trek Education Corporation, and VonFlagg Corporation.
6. Considering Plaintiff’s likelihood of ultimate success and weighing the equities, a preliminary injunction with asset freeze, the appointment of a Receiver, and other equitable relief is in the public interest.
7. No security is required of any agency of the United States for issuance of a restraining order. Fed. R. Civ. P. 65(c).
DEFINITIONS
For purposes of this Order, the following definitions shall apply:
1. “Plaintiff” means the Federal Trade Commission.
2. “Named Defendants” means Trek Alliance, Inc., Trek Education Corporation, VonFlagg Corporation, Jeffrey Kale Flagg, a/k/a Kale Flagg, Richard Von Alvensleben, a/k/a Rich Von, Tiffani Von Alvensleben, a/k/a Tiffani Von, and Harry M. Flagg, and each of them, by whatever names each might be known by.
3. “Defendants” means the Named Defendants, as well as their successors, assigns, officers, agents, directors, servants, employees, salespersons, independent contractors, attorneys, corporations, subsidiaries, all other persons or entities directly or indirectly under their control or under common control with any of them, and all other persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, including, but not limited to, fictitious business names.
4. “Corporate Defendants” refers to Trek Alliance, Inc., Trek Education Corporation, and VonFlagg Corporation.
5. “Individual Defendants” refers to Richard Von Alvensleben, a/k/a Rich Von, Tiffani Von Alvensleben, a/k/a Tiffani Von, and Harry M. Flagg.
6. “Receivership Defendants” means corporate Defendants Trek Alliance, Inc., Trek Education Corporation, and VonFlagg Corporation, their affiliates and subsidiaries, and any other corporations or businesses under the control of any of the corporate Defendants.
7. “Marketing Program” includes, but is not limited to, any multi-level marketing program, business investment opportunity, pyramid marketing scheme, Ponzi scheme, or chain marketing scheme.
8. “Prohibited Marketing Program” means any Marketing Program or plan in which any participants pay money or valuable consideration to the company in return for which they receive the right to receive rewards, in return for recruiting other participants into the program, which are unrelated to the sale of products or services to ultimate users. For purposes of this definition, “sale of products to ultimate users” does not include sales to other participants or recruits in the marketing program or to participants’ own accounts.
9. “Material” means likely to affect a person’s choice of, or conduct regarding, goods or services.
10. “Assets” means any legal or equitable interest in, right to, or claim to, any real or personal property, including, without limitation, chattels, goods, instruments, equipment, fixtures, general intangibles, leaseholds, mail or other deliveries, inventory, checks, notes, accounts, credits, contracts, receivables, shares of stock, and all cash, wherever located.
11. “Document” is equal in scope and synonymous in meaning 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. A draft or non-identical copy is a separate document within the meaning of the term.
12. “Person” means a natural person, organization, or other legal entity, including a corporation, partnership, proprietorship, association, cooperative, government or governmental subdivision or agency, or any other group or combination acting as an entity.
13. The terms “and” and “or” shall be construed conjunctively or disjunctively as necessary, and to make the applicable phrase or sentence inclusive rather than exclusive.
ORDER
I.
PROHIBITED REPRESENTATIONS
A. IT IS HEREBY ORDERED that each of the named Defendants, and the agents, servants, employees, and attorneys of any of them, and all persons or entities directly or indirectly under the control of any of them, and all other persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service or otherwise, and each such person, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the offering or sale of the right to participate in any Marketing Program, are hereby prohibited from:
1. Falsely representing, or assisting others in falsely representing, expressly or by implication, the amount of earnings or income that can be or which is likely to be derived from participation in the program;
2. Falsely representing, or assisting others in falsely representing, expressly or by implication, that persons who participate in such a program are likely to realize substantial financial gain;
3. Falsely representing, or assisting others in falsely representing, expressly or by implication, the benefits that can or are likely to be derived from participation in the program;