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In USA Beverages, the district court temporarily sealed the court file based on a risk that assets could be concealed or dissipated. 2005 WL 3676636 at *2.
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Case No. 05-61682-CIV-LENARD/KLEIN.
November 4, 2005
ORDER GRANTING EX PARTE TEMPORARY RESTRAINING ORDER WITH ASSET FREEZE, APPOINTMENT OF A RECEIVER AND OTHER EQUITABLE RELIEF
THIS CAUSE is before the Court on the Ex Parte Application for Temporary Restraining Order with Asset Freeze. Appointment of Receiver and Other Equitable Relief, filed on October 19, 2005. Plaintiff also filed on October 19, 2005 (1) a Memorandum of Points and Authorities in Support of Plaintiff'sEx Parte Motion for Temporary Restraining Order and Other Equitable Relief ("Memorandum of Points"), (2) a Certification of Emergency, (3) a Certification of Plaintiff's Counsel in Support of Ex Parte Motion for Temporary Restraining Order Pursuant to Fed.R.Civ.P. 65(b) ("Certification of Counsel"), and (4) six volumes of exhibits in support of its Motion. ("Exhibits.") On October 20, 2005, this Court issued an Order Directing Plaintiff to Supplement its Ex Parte Application for a Temporary Restraining Order. On October 21, 2005, Plaintiff filed a Supplemental Submission Regarding Personal Jurisdiction Over Defendants. ("Supplemental Submission.") Upon review of the Motion, the Memorandum, the Certification of Plaintiff's Counsel, and the Attachments, the Court finds as follows.
I. Factual and Procedural Background
Subject matter jurisdiction in this action is based on a question of federal law, 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. 53(b) and 57(b). The Federal Trade Commission (FTC) has brought this case pursuant to Section 13(b) of the FTC Act, 15 U.S.C. § 53(b). Section 13(b) "authorizes the FTC to seek, and district courts to grant, preliminary and permanent injunctions against practices that violate any of the laws enforced by the Commission." FTC v. Gem Merchandising Corp., 87 F.3d 466, 468 (11th Cir. 1996). Section 13(b) also provides for worldwide service of process, stating "in any suit under this section, process may be served on any person, partnership, or corporation wherever it may be found." 15 U.S.C. § 53(b)(2). Venue in the United States District Court for the Southern District of Florida is proper under 28 U.S.C. §§ 1391(b), (c) and (d), and 15 U.S.C. § 53(b) as Defendant USA Beverages has a business location in the Southern District of Florida and all of the individual defendants transact business through USA Beverages.
As a general rule, courts should address issues relating to personal jurisdiction before reaching the merits of a plaintiff's claims. Republic of Panama v. BCCI Holdings (Luxembourg), 119 F.3d 935, 940 (11th Cir. 1997). The 11th Circuit has held, in conformance with the uniform findings of other circuits, that federal statutes providing for nationwide or worldwide service of process confer federal courts with personal jurisdiction over non-resident entities and individuals as long as such exercise of jurisdiction over non-resident defendants comports with the requirements of the Due Process Clause of the Fifth Amendment, including minimum contacts, fairness and reasonableness. United States Securities and Exchange Commission v. Carrillo, 115 F.3d 1540, 1543-44 (11th Cir. 1997); Republic of Panama, 119 F.3d at 942, 944-45. Further, the relevant forum for purposes of the minimum contacts inquiry is the United States. Carrillo, 115 F.3d at 1543; Republic of Panama, 119 F.3d at 946-47. In SEC v. Carrillo, 115 F.3d 1540, 1542 (11th Cir. 1997), the Court applies a three-pronged test to determine whether the foreign defendant corporation and its officers had sufficient minimum contacts with the United States to justify the exercise of personal jurisdiction. First, contacts must be related to or give rise to the causes of action. Second, the defendant must purposefully avail itself of the privileges and benefits of conducting its activities in the forum. Third, the defendant's contacts must be such that it would reasonably expect to be haled into court in the U.S. Carrillo, 115 F.3d at 1542 (citingVermeulen v. Renault, USA, Inc., 985 F.2d 1534, 1546 (11th Cir. 1993). Finally, if sufficient minimum contacts are found, the Court must determine whether exercising personal jurisdiction would offend traditional principles of fair play and substantial justice Id. at 1544.
In this case, Defendants consist of a corporation and individuals who are officers and employees of the corporation. Though the corporation is incorporated in New Mexico and Florida, its operations are conducted primarily out of Costa Rica and its employees conduct business from an office in Costa Rica. However, the Court is satisfied that sufficient evidence exists to establish that Defendants have minimum contacts with the United States to justify the exercise of personal jurisdiction.
The evidence indicates that Defendants have incorporated USA Beverages in the United States; advertised their business in newspapers throughout the United States; used an office in Florida to send marketing materials to prospective purchasers in the U.S. and receive payments from U.S. purchasers; sent materials to prospective purchasers from a corporation purportedly operating out of New Mexico; sent display racks and coffee to U.S. purchasers; and deposited checks in and accepted wire transfers to bank accounts in Florida from U.S. purchasers. (Supplemental Submission at 4-5.)
David Mead and Silvio Carrano are listed as officers of USA Beverages in corporate filings with the state of Florida and have both played a major role in directing and managing the operations of the company in the United States. (Memorandum of Points and Authorities in Support of Plaintiff's Motion for TRO at 5-6.) Exhibit 5, containing the Declaration of a confidential informant, establishes that Sirtaj Mathauda is an owner of USA Beverages and manages the operations of the company. (Exhibit 5 at 4.) He talks to prospective customers on the telephone, wrote part of the scripts used when employees of USA Beverages speak to prospective customers, and has set up bank accounts used by the company. (Id.) He also pays the sales people in Costa Rica each week in cash. (Id.) Exhibit 5 establishes that Dilraj Mathauda, operating under the alias "Dan Reynolds," holds weekly sales meetings, coordinates the shipping of racks and coffee products to purchasers in the United States, and also closes some deals originally sold by "fronters." (Id.) Moreover, the Declaration of alleged victim Michael Wilson demonstrates that Dilraj Mathauda, operating under the alias "Dan Reynolds," deals directly with purchasers of coffee routes in the United States. (Exhibit 2 at 6-7.) Finally, Exhibit 5 further establishes that Jeff Pearson is the marketing director of USA Beverages. (Exhibit 5 at 3.) Pearson, operating under the alias "Paul Clayton," is the main closer for the company, is in charge of sales, and is running the USA Division of USA Beverages. (Id.) The Declarations of alleged victims David Todd and Michael Wilson further demonstrate that Pearson had frequent contact with purchasers of coffee routes in the United States. (Exhibit 1 at 4-5; Exhibit 2 at 5-6.)
Thus, the Court finds that Defendants have contacts with the United States that directly give rise to the cause of action for false advertising, that Defendants have purposefully availed themselves of the privileges and benefits of conducting activities in the United States, and that Defendants contacts are so extensive that it should reasonably expect to be haled into court in the United States. Moreover, as the court found under very similar factual circumstances in Carrillo, this is not one of those rare cases where the minimum requirements inherent in the concepts of fair play and substantial justice defeat the overwhelming reasonableness of jurisdiction. See Carrillo, 115 F.3d at 1547. The Plaintiff's interest in obtaining relief and the interests of the forum in stamping out this alleged "nefarious economic chicanery" far outweigh any burden the Defendants may face to litigate in the United States.
II. Analysis
Under Section 13(b) of the FTC Act, both a temporary restraining order (TRO) and a preliminary injunction may issue upon a proper showing that 1) weighing the equities and 2) considering the Commission's likelihood of ultimate success, such action would be in the public interest. 15 U.S.C. § 13(b); FTC v. University Health, Inc., 938 F.2d 1206, 1217 (11th Cir. 1991). Further, Federal Rule of Civil Procedure 65(b) permits this Court to enter ex parte orders upon a clear showing that "immediate and irreparable injury, loss, or damage will result" if notice is given.
Here, the Court finds that the six volumes of exhibits in support of Plaintiff's Motion provide specific facts that demonstrate that, after balancing the equities and considering the Commission's likelihood of ultimate success, granting a TRO would be in the public interest The affidavits of two alleged victims, David Todd and Michael Wilson, indicate that USA Beverages made numerous misrepresentations to potential purchasers in the United States in an effort to mislead these consumers. (See Exhibits 1-2.) The affidavits of Douglas and Terri Hart further demonstrate that these two cases were not isolated incidents, but instead were consistent with a pattern of evasive, deceptive behavior by USA Beverages and its officers and employees. (See Exhibit 3.) Exhibit 5 contains the affidavit of a confidential informant who reveals the depth and breadth of this scheme on the part of USA Beverages to mislead consumers and evade responsibility. Therefore, the Court finds that Plaintiff is likely to make out its case for deceptive practices under Section 5 of the FTC Act and that it is therefore also likely to succeed on the merits. This conclusion, combined with a careful weighing of the equities on both sides of this case, leads the Court to conclude that the issuance of a TRO is in the public interest.
Further, the Court also finds that immediate and irreparable injury, loss or damage would result if notice was provided to Defendants before the issuance of a TRO. Defendants appear to have taken numerous steps to conceal the location of their business operations and even their own identities. (See Memorandum of Points at 2-3, 6-14) There is thus good cause to believe that given notice of these proceedings, Defendants would continue to take steps to conceal their business practices and evade responsibility. Moreover, the Certificate of Counsel demonstrates that there is a very real danger that Defendants will dissipate assets and destroy evidence absent requested relief. (See Certificate of Counsel.) Therefore, the Court finds that Plaintiff has met its burden under Fed.R.Civ.P. 65(b) for issuance of a TRO without notice to the adverse party.
DEFINITIONS
1. "Assets" means any legal or equitable interest in, right to, or claim to, any real and personal property, including, but not limited to, chattel, goods, instruments, equipment, fixtures, general intangibles, inventory, checks, notes, leaseholds, effects, contracts, mail or other deliveries, shares of stock, interest in mutual funds, lists of consumer names, accounts, credits, premises, receivables, funds, and cash, wherever located, whether in the United States or abroad;
2. "Business venture" means any written or oral business arrangement, however denominated, regardless of whether covered by the Franchise Rule, which consists of the payment of any consideration for:
a. the right or means to offer, sell, or distribute goods or services (regardless of whether identified by a trademark, service mark, trade name, advertising, or other commercial symbol); and
b. more than nominal assistance to any person or entity in connection with or incident to the establishment, maintenance, or operation of a new business or the entry by an existing business into a new line or type of business:
3. "Defendants" means USA Beverages, Inc., a Florida corporation. USA Beverages, Inc., a New Mexico corporation, Dilraj Mathauda a/k/a Dan Reynolds. Sirtaj Mathauda. Jeff Pearson a/k/a Paul Clayton, David Mead, and Silvio Carrano, Furthermore, any person insofar as he or she is acting in the capacity of an officer, agent, servant, employee or attorney of any Defendant, and any person or entity in active concert or participation with any of the foregoing who receives actual notice of this Order by personal service or otherwise, is bound to comply with this Order, see Fed.R.Civ.P. 65(d), whether these persons or entities are acting directly or through a trust, corporation, subsidiary, division, or other device;
4. "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 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;
5. "Receiver" shall mean the temporary receiver appointed in Section XI of this Order and any deputy receivers that may be named by the temporary receiver;
6. "Receivership Defendant" shall mean USA Beverages, Inc, a Florida corporation, and USA Beverages, Inc. a New Mexico corporation, and any subsidiary or affiliate thereof;
7. A "Host" or "Hosting Company" is the party that provides the infrastructure for a computer service. With respect to Web pages and Web sites, a Host or Hosting Company maintains "Web servers" — the computers on which Web sites and pages reside. The Host or Hosting Company also maintains the communication lines required to link the server to the Internet. Often, the content on the servers (i.e., the content of the Web pages) is controlled by someone other than the Host or Hosting Company.
It is hereby
ORDERED AND ADJUDGED that
1. Plaintiff's Ex Parte Application for Temporary Restraining Order with Asset Freeze, Appointment of Receiver and Other Equitable Relief, filed on October 19, 2005, is GRANTED.
2. No security is required of Plaintiff, as an agency of the United States, for issuance of a restraining order. Fed.R.Civ.P. 65(c).
3. PROHIBITION AGAINST VIOLATION OF SECTION 5 — In connection with the offering for sale or selling of any business venture, including franchises, Defendants are hereby temporarily restrained and enjoined from making any material misrepresentation or assisting others in making any material misrepresentation, either expressly or by implication, to any prospective purchaser of a business venture, including but not limited to misrepresentations that:
a) Consumers who purchase Defendants' business ventures are likely to earn substantial income;
b) Defendants have secured or will secure locations in prospective purchasers' geographic areas for the placement of display racks or other equipment associated with any business venture offered by Defendants
c) References have purchased Defendants' business venture or will provide reliable descriptions of experiences with the business venture.
4. PROHIBITION AGAINST VIOLATION OF THE FRANCHISE RULE — Defendants are hereby temporarily restrained and enjoined from violating or assisting others to violate any provisions of the Franchise Rule, 16 C.F.R. Part 436, by, including but not limited to:
a) Failing to provide each prospective purchaser with a complete and accurate disclosure document as prescribed by the Franchise Rule, 16 C.F.R. § 436.1(a);
b) Failing to disclose, in immediate conjunction with any generally disseminated ("advertised") earnings claim, information required by the Franchise Rule including the number and percentage of prior purchasers known by Defendants to have achieved the same or better results, as required by the Franchise Rule, 16 C.F.R. § 436.1(e)(3)-(4);
c) Failing to have a reasonable basis for any earnings claim at the time such claim is made, as required by the Franchise Rule, 16 C.F.R. § 436.1(b)-(e);
d) Failing to disclose, in immediate conjunction with any earnings claim, and in a clear and conspicuous manner, that material which constitutes a reasonable basis for the earnings claim is available to the prospective purchasers:
e) Failing to provide material which constitutes a reasonable basis for any earnings claim to prospective purchasers, the Commission, or its staff upon reasonable demand.
5. ASSET FREEZE — Defendants are hereby temporarily restrained and enjoined from:
a) Transferring, liquidating, converting, encumbering, pleadging, loaning, selling, concealing, dissipating, disbursing, assigning, spending, withdrawing, granting a lien or security interest or other interest in, or otherwise disposing of any funds, real or personal property, accounts, contracts, consumer lists, shares of stock, or other assets, or any interest therein, wherever located, whether within the United States or within a jurisdiction outside the United States, that are: (1) owned or controlled by any Defendant, in whole or in part, (2) held for the benefit of any Defendant; (3) in the actual or constructive possession of any Defendant; or (4) owned, controlled by, or in the actual or constructive possession of any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by any Defendant, including, but not limited to, any assets held by or for, or subject to access by, any Defendant, at any bank or savings and loan institution, or with any broker-dealer, escrow agent, title company, commodity trading company, precious metals dealer, or other financial institution or depository of any kind:
b) Opening or causing to be opened any safe deposit boxes titled in the name of any Defendant, or subject to access by any Defendant:
c) Incurring charges or cash advances on any credit card issued in the name of the Receivership Defendant.
d) Obtaining a personal or secured loan encumbering the assets of any Defendant; and
e) Incurring liens or other encumbrances on real property, personal property or other assets titled in the name, singly or jointly, of any Defendant.
The assets affected by this Section XI shall include: (1) all assets of each Defendant, as of the time this Order was entered; and (2) assets obtained after the time this Order was entered if the assets are derived from the conduct alleged in the Commission's Complaint.
6. RETENTION OF ASSETS AND RECORDS BY FINANCIAL INSTITUTIONS — Pending determination of the Commission's request for a preliminary injunction, any financial or brokerage institution, business entity, or person served with a copy of this Order that holds, controls or maintains custody of any account or asset held in the name of or for the benefit of any Defendant, or held in an account for which any Defendant is authorized to assert access to or control over, shall:
a) Hold and retain within its control and prohibit the withdrawal, removal, assignment, transfer, pledge, encumbrance, disbursement, dissipation, conversion, sale, or other disposal of any such asset, except by further order of the Court:
b) Deny Defendants access to any safe deposit box that is titled in the name of, individually or jointly or otherwise subject to access by any Defendant:
c) Provide the Commission's counsel, within five (5) business days of receiving a copy of this Order, a sworn statement setting forth:
1. the identification number of each such account or asset titled in the name, individually or jointly, of any Defendant or held on behalf of, or for the benefit of any Defendant:
2. the balance of each such account, or a description of the nature and value of such asset as of the close of business on the day on which this Order is served, and, if the account or other asset has been closed or removed, the date closed or removed, the total funds removed in order to close the account, and the name of the person or entity to whom such account or other asset was remitted; and
3. the identification of any safe deposit box that is titled in the name, individually or jointly, of any Defendant, or is otherwise subject to access by the any Defendant.
d) Upon request by the Commission, promptly provide the Commission with copies of all records or other documentation pertaining to each such account or asset, including but not limited to, originals or copies of account applications, account statements, signature cards, checks, drafts, deposit tickets, transfers to and from the accounts, all other debit and credit instruments or slips, currency transaction reports. 1099 forms, and safe deposit box logs.
7. PRESERVATION OF RECORDS — Defendants are hereby temporarily restrained and enjoined from:
a) Destroying, erasing, mutilating, concealing, altering, transferring or otherwise disposing of, in any manner, directly or indirectly, any documents or electronic records, including web sites and web pages, that relate to the business, business practices, assets, or business or personal finances of any Defendant; and
b) Failing to create and maintain documents that, in reasonable detail, accurately, fairly, and completely reflect Defendants' incomes, disbursements, transactions, and use of money.
8. FINANCIAL DISCLOSURES — Each Defendant, within forty-eight (48) hours of service of this Order, shall prepare and deliver to counsel for the Commission and to the Receiver completed financial statements on the forms attached to this Order as Attachment A (Financial Statement of Any Individual Defendant) for themselves individually, and Attachment B (Financial Statement of Corporate Defendant), for each business entity under which they conduct business or of which they are an officer, and for each trust for which any Defendant, is a trustee. The financial statements shall be accurate as of the date of entry of this Order. Defendants shall include in the financial statements a full accounting of all funds and assets, whether located inside or outside of the United States, that are: (a) titled in the name of such any Defendant, jointly, severally or individually; (b) held by any person or entity for the benefit of any Defendant; or (c) under the direct or indirect control of any Defendant.
9. CONSUMER REPORT — Pursuant to Section 604(1) of the Fair Credit Reporting Act, 15 U.S.C. § 1681b(1), any consumer reporting agency may furnish a consumer report concerning any Defendant to the Commission.
10. FOREIGN ASSET REPATRIATION — Within five (5) business days following the service of this Order, each Defendant shall:
a) Provide the Commission and the Receiver with a full accounting of all funds, documents, and assets outside of the United States which are: (1) titled in the name, individually or jointly, of any Defendant; or (2) held by any person or entity for the benefit of any Defendant; or (3) under the direct or indirect control, whether jointly or singly, of any Defendant;
b) Transfer to the territory of the United States and deliver to the Receiver all funds, documents, and assets located in foreign countries which are: (1) titled in the name individually or jointly of any Defendant; or (2) held by any person or entity, for the benefit of any Defendant; or (3) under the direct or indirect control, whether jointly or singly of any Defendant;
c) Provide the Commission access to all records of accounts or assets of any Defendant held by financial institutions located outside the territorial United States by signing the Consent to Release of Financial Records attached to this Order as Attachment C.
11. INTERFERENCE WITH REPATRIATION — Defendants are hereby temporarily restrained and enjoined from taking any action, directly or indirectly, which may result in the encumbrance or dissipation of foreign assets, or in the hindrance of the repatriation required by Section IX of this Order, including but not limited to:
a) Sending any statement, letter, fax, e-mail or wire transmission, telephoning or engaging in any other act, directly or indirectly, that results in a determination by a foreign trustee on other entity that a "duress" event has occurred under the terms of a foreign trust agreement until such time that all assets have been fully repatriated pursuant to Section IX of this Order;
b) Notifying any trustee, protector or other agent of any foreign trust or other related entities of either the existence of this Order, or of the fact that repatriation is required pursuant to a Court Order, until such time that all assets have been fully repatriated pursuant to Section IX of this Order.
12. APPOINTMENT OF TEMPORARY RECEIVER — David R. Chase is appointed temporary receiver for USA Beverages, Inc., a Florida Corporation, and USA Beverages, Inc., a New Mexico corporation and any subsidiaries or affiliates thereof (together the "Receivership Defendant"). The Receiver shall be the agent of this Court, and solely the agent of this Court, in acting as Receiver under this Order. The Receiver shall be accountable directly to this Court.
13. RECEIVER'S DUTIES — The Receiver is authorized and directed to accomplish the following:
a) Assume full control of the Receivership Defendant by removing, as the Receiver deems necessary or advisable, any director, officer, independent contractor, employee, or agent of any of the Receivership Defendant, including any Defendant, from control of, management of, or participation in, the affairs of the Receivership Defendant;
b) Take exclusive custody, control, and possession of all assets and documents of, or in the possession, custody, or under the control of, the Receivership Defendant, wherever situated, including, but not limited to: 1000 S. Dixie Highway W. Suite 1, Pompano Beach, Florida, and 3003 B Hillrise Drive, Suite 13, Las Cruces, New Mexico. The Receiver shall have full power to divert mail, control the phone numbers, and to sue for, collect, receive, take in possession, hold, and manage all assets and documents of the Receivership Defendant and other persons or entities whose interests are now under the direction, possession, custody, or control of, the Receivership Defendant. The Receiver shall assume control over the income and profits therefrom and all sums of money now or hereafter due or owing to the Receivership Defendant. Provided, however, that the Receiver shall not attempt to collect any amount from a consumer if the Receiver believes the consumer was a victim of the unfair or deceptive acts or practices or other violations of law alleged in the Complaint in this matter, without prior Court approval:
c) Take all steps necessary to secure each location from which the Receivership Defendant operates its business, including, but not limited to: 1000 S. Dixie Highway W. Suite 1, Pompano Beach, Florida, and 3003 B Hillrise Drive, Suite 13, Las Cruces, New Mexico. Such steps may include, but are not limited to, any of the following, as the Receiver deems necessary or advisable: (1) serving this Order; (2) completing a written inventory of all receivership assets; (3) obtaining pertinent information from all employees and other agents of the Receivership Defendant, including, but not limited to, the name, home address, social security number, job description, passwords or access codes, method of compensation, and all accrued and unpaid commissions and compensation of each such employee or agent; (4) photographing and video taping any or all portions of the location; (5) securing the location by changing the locks and disconnecting any computer modems or other means of access to the computer or other records maintained at the location; and (6) requiring any persons present on the premises at the time this Order is served to leave the premises, to provide the Receiver with proof of identification, or to demonstrate to the satisfaction of the Receiver that such persons are not removing from the premises documents or assets of the Receivership Defendant. Law enforcement personnel, including, but not limited to, police or sheriffs, may assist the Receiver in implementing these provisions in order to keep the peace and maintain security.
d) Conserve, hold, and manage all assets of the Receivership Defendant, and perform all acts necessary or advisable to preserve the value of those assets in order to prevent any irreparable loss, damages, or injury to consumers or creditors of the Receivership Defendant, including, but not limited to, obtaining an accounting of the assets and preventing the unauthorized transfer, withdrawal, or misapplication of assets;
e) Enter into contracts and purchase insurance as advisable or necessary;
f) Manage and administer the business of the Receivership Defendant until further order of this Court by performing all incidental acts that the Receiver deems to be advisable or necessary, which includes but is not limited to; retaining, hiring, or dismissing any employees, independent contractors, or agents;
g) Choose, engage, and employ attorneys, accountants, appraisers, and other independent contractors and technical specialists, as the Receiver deems advisable or necessary in the performance of duties and responsibilities under the authority granted by this Order;
h) Make payments and disbursements from the receivership estate that are necessary or advisable for carrying out the directions of, or exercising the authority granted by, this Order. The Receiver shall apply to the Court for prior approval of any payment of any debt or obligation incurred by the Receivership Defendant prior to the date of entry of this Order, except payments that the Receiver deems necessary or advisable to secure assets of the Receivership Defendant, such as rental payments;
i) Suspend business operations of the Receivership Defendant if in the judgment of the Receiver such operations cannot be continued legally and profitably;
j) Institute, compromise, adjust, appear in, intervene in, or become party to such actions or proceedings in state, federal or foreign courts or arbitration proceedings as the Receiver deems necessary and advisable to preserve or recover the assets of the Receivership Defendant, or that the Receiver deems necessary and advisable to carry out the Receiver's mandate under this Order, including but not limited to, actions challenging fraudulent or voidable transfers;
k) Defend, compromise, adjust, or otherwise dispose of any or all actions or proceedings instituted in the past or in the future against the Receiver in his role as Receiver, or against the Receivership Defendant, as the Receiver deems necessary and advisable to preserve the assets of the Receivership Defendant, or as the Receiver deems necessary and advisable to carry out the Receiver's mandate under this Order;
l) Issue subpoenas to obtain documents and records pertaining to the Receivership, and conduct discovery in this action on behalf of the receivership estate;
m) Open one or more bank accounts as designated depositories for funds of the Receivership Defendant. The Receiver shall deposit all funds of the Receivership Defendant in such a designated account and shall make all payments and disbursements from the receivership estate from such an account. The Receiver shall serve copies of monthly account statements on all parties;
n) Maintain accurate records of all receipts and expenditures that he makes as Receiver; and
o) Cooperate with reasonable requests for information or assistance from any state or federal law enforcement agency.
14. TRANSFER OF RECEIVERSHIP PROPERTY TO RECEIVER — Defendants and any other person or entity with possession, custody or control of property of or records relating to the Receivership Defendant shall upon notice of this Order by personal service or otherwise immediately notify the Receiver of, and, upon receiving a request from the Receiver, immediately transfer or deliver to the Receiver possession, custody, and control of, the following:
a) All assets of the Receivership Defendant;
b) All documents of the Receivership Defendant, including, but not limited to, books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records of wire transfers, and check registers), client lists, title documents and other papers;
c) All computers and data in whatever form used to conduct the business of the Receivership Defendant;
e) All assets belonging to other persons or entities whose interests are now under the direction, possession, custody, or control of, the Receivership Defendant, and
f) All keys, codes, and passwords necessary to gain to secure access to any assets or documents of the Receivership Defendant, including, but not limited to, access to their business premises, means of communication, accounts, computer systems, or other property.
In the event that any person or entity fails to deliver or transfer asset or otherwise fails to comply with any provision of this Section, the Receiver may file ex parte a Motion for Writ of Possession or Sequestration or other equitable writ accompanied by an Affidavit of Non-Compliance regarding the failure. Upon filing of the motion and affidavit, the Court may authorize, by written order, the issuance of Writs of Possession or Sequestration or other equitable writs. The writs shall authorize and direct the United States Marshal or any sheriff or deputy sheriff of any county, or any other federal or state law enforcement officer, to seize the asset, document, or other item covered by this Section and to deliver it to the Receiver.
15. COOPERATION WITH THE RECEIVER — Defendants and all other persons or entities served with a copy of this Order shall fully cooperate with and assist the Receiver in taking and maintaining possession, custody, or control of the assets of the Receivership Defendant. This cooperation and assistance shall include, but not be limited to; providing information to the Receiver that the Receiver deems necessary in order to exercise the authority and discharge the responsibilities of the Receiver under this Order, providing any password required to access any computer, electronic file, or telephonic data in any medium; and advising all persons who owe money to the Receivership Defendant that all debts should be paid directly to the Receiver; transferring funds at the Receiver's direction and producing records related to the assets and sales of the Receivership Defendant. The entities obligated to cooperate with the Receiver under this provision include, but are not limited to, banks, broker-dealers, savings and loans, escrow agents, title companies, commodity trading companies, precious metals dealers and other financial institutions and depositories of any kind, and all third-party billing agents, and telecommunications companies that have transacted business with the Receivership Defendant.
16. INTERFERENCE WITH THE RECEIVER — Defendants are hereby restrained and enjoined from directly or indirectly:
a) Interfering with the Receiver managing, or taking custody, control, or possession of, the assets or documents subject to this receivership;
b) Transacting any of the business of the Receivership Defendant;
c) Transferring, receiving, altering, selling, encumbering, pledging, assigning, liquidating, or otherwise disposing of any assets owned, controlled, or in the possession or custody of, or in which an interest is held or claimed by the Receivership Defendant or the Receiver; and
d) Refusing to cooperate with the Receiver or the Receiver's duly authorized agents in the exercise of their duties or authority under any order of this Court.
17. STAY OF ACTIONS AGAINST RECEIVERSHIP DEFENDANT — Except by leave of this Court, during pendency of the receivership ordered herein. Defendants, and all investors, creditors, stockholders, lessors, customers and other persons seeking to establish or enforce any claim, right, or interest against or on behalf of Defendants, and all others acting for or on behalf of such persons, are hereby enjoined from taking action that would interfere with the exclusive jurisdiction of this Court over the assets or documents of the Receivership Defendant, including, but not limited to:
a) Petitioning, or assisting in the filing of a petition, that would cause the Receivership Defendant to be placed in bankruptcy;
b) Commencing, prosecuting, or continuing a judicial, administrative, or other action or proceeding against the Receivership Defendant, including the issuance or employment of process against the Receivership Defendant, except that such actions may be commenced if necessary to toll any applicable statute of limitations;
c) Filing or enforcing any lien on any asset of the Receivership Defendant, taking or attempting to take possession, custody, or control of any asset of the Receivership Defendant; or attempting to foreclose, forfeit, alter, or terminate any interest in any asset of the Receivership Defendant, whether such acts are part of a judicial proceeding, are acts of self-help, or otherwise;
d) Initiating any other process or proceeding that would interfere with the Receiver managing or taking custody, control, or possession of, the assets or documents subject to this receivership. Provided that, this Order does not stay; (i) the commencement or continuation of a criminal action or proceeding; (ii) the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power; or (iii) the enforcement of a judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power.
18. COMPENSATION OF RECEIVER — The Receiver and all personnel hired by the Receiver as herein authorized, including counsel to the Receiver and accountants, are entitled to reasonable compensation for the performance of duties pursuant to this Order and for the cost of actual out-of-pocket expenses incurred by them from the assets now held by, in the possession or control of, or which may be received by, the Receivership Defendant. The Receiver shall file with the Court and serve on the parties periodic requests for the payment of such reasonable compensation, with the first such request filed no more than sixty (60) days after the date of entry of this Order. The Receiver shall not increase the hourly rates used as the bases for such fee applications without prior approval of the Court.
19. RECEIVER'S BOND — The Receiver shall file with the Clerk of this Court a bond in the sum of $25,000.00 with sureties to be approved by the Court, conditioned that the Receiver will well and truly perform the duties of the office and abide by and perform all acts the Court directs.
20. ACCESS TO BUSINESS OFFICES AND RECORDS — In order to allow the Commission and the Receiver to preserve assets and evidence relevant to this action. Plaintiff and Receiver, and their representatives, agents, and assistants, shall have immediate access to the business premises of the Receivership Defendant. The Commission and the Receiver, and their representatives, agents, and assistants, are authorized to employ the assistance of law enforcement officers as they deem necessary to effect service and to implement peacefully the provisions of this Order. The Commission and the Receiver, and their representatives, agents, and assistants, are authorized to remove documents from the Receivership Defendant's premises in order that they may be inspected, inventoried, and copied for the purpose of preserving discoverable material in connection with this action.
Furthermore, the Receiver shall allow Defendants reasonable access to the premises and business records of the Receivership Defendant within his possession for the purpose of inspecting and copying materials relevant to this action. The Receiver shall have the discretion to determine the time, manner, and reasonable conditions of such access.
21. AUTHORITY TO SERVE DEFENDANTS IN A FOREIGN COUNTRY BY INTERNATIONAL COURIER — Pursuant to Fed.R.Civ.P. 4(f)(3). Plaintiff may serve this Order and all related documents on Defendants Dilraj Mathauda. Sirtaj Mathauda, Jeff Pearson, and Silvio Carrano by private international courier.
22. SERVICE BY FACSIMILE AUTHORIZED — Copies of this Order may be served by any means, including facsimile transmission, upon any financial institution or other entity or person that may have possession, custody, or control of any documents or assets of any Defendant, or that may otherwise be subject to any provision of this Order. Service upon any branch or office of any financial institution shall effect service upon the entire financial institution.
23. SERVICE UPON PLAINTIFF — Defendants shall serve all pleadings, memoranda, correspondence, affidavits, declarations, or other documents related to this Order or Plaintiff's motion for a preliminary injunction by facsimile transmission to (202) 326-3395, by hand delivery, or by overnight shipment through a third-party commercial carrier to the offices of the Federal Trade Commission, at 600 Pennsylvania Avenue, NW, Room H-238, Washington, DC 20580, and addressed to the attention of Elizabeth Hone.
24. DURATION OF TEMPORARY RESTRAINING ORDER — The Temporary Restraining Order granted herein shall expire ten (10) days from the date of entry noted below unless, within such time, the Order is extended for an additional period not to exceed ten (10) days for good cause shown, or unless. Defendants consent to an extension for a longer period.
25. REFERRAL — Pursuant to 28 U.S.C. § 636, the Ex Parte Motion for Temporary Restraining Order, filed on October 19, 2005, is REFERRED to United States Magistrate Judge Theodore Klein to take all necessary and proper action as required by law. It is the responsibility of the parties in this case to indicate the name of the Magistrate Judge assigned to the case on all motions and related papers referred by this order.
26. ORDER TO SHOW CAUSE REGARDING PRELIMINARY INJUNCTION — Pursuant to Federal Rule of Civil Procedure 65(b), each of the Defendants shall appear before Magistrate Judge Theodore Klein on the 10th day of November, 2005, at 10 o'clock a.m., to show cause, if there is any, why this Court should not enter a Preliminary Injunction, in the form provided by the Federal Trade Commission, enjoining the violations of law alleged in the Commission's Complaint, continuing the freeze of their assets, continuing the Receivership and imposing such additional relief as may be appropriate.
27. BRIEFS AND AFFIDAVITS CONCERNING PRELIMINARY INJUNCTION — Defendants must file with the Clerk's Office and deliver to the counsel for the Commission any brief responding to the order to show cause why a preliminary injunction should not be entered no later than 72 hours before the time scheduled for the hearing. The parties must file with the Clerk's Office and deliver to counsel that have entered an appearance any affidavits and other evidence upon which they intend to rely in connection with the Commission's request for a preliminary injunction no later than 24 hours before the time scheduled for the preliminary injunction hearing. If any party intends to present the testimony of any witness at the hearing on a preliminary injunction, that party shall file with the Court and deliver to counsel that have entered an appearance a statement disclosing the name, address and telephone number of any such witness, and either a summary of the witness's expected testimony, or the witness's affidavit or declaration revealing the substance of the witness's testimony, no later than 24 hours before the time scheduled for the preliminary injunction hearing.
28. RETENTION OF JURISDICTION — This Court shall retain jurisdiction of this matter for all purposes.
DONE AND ORDERED in Chambers at Miami, Florida this 4 day of November, 2005, at 2:35 p.m.