F.T.C. v. Transnet Wireless Corp., 05-61559-CIV.

• Decision Date: 20 March 2007
• Docket Number: No. 05-61559-CIV.,05-61559-CIV.
• Parties: FEDERAL TRADE COMMISSION, Plaintiff, v. TRANSNET WIRELESS CORPORATION, a Florida corporation, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

506 F.Supp.2d 1247

FEDERAL TRADE COMMISSION, Plaintiff, v. TRANSNET WIRELESS CORPORATION, a Florida corporation, et al., Defendants.

No. 05-61559-CIV.

United States District Court, S.D. Florida.

March 20, 2007.

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Harold E. Kirtz, Gerald S. Sachs, Federal Trade Commission, Atlanta, GA, for Plaintiff.

Carl Francis Schoeppl, Jr., Schoeppl & Burke, P.A., Boca Raton, FL, for Defendant, Transnet Wireless Corporation.

Paul Pemberton, Plantation, FL, pro se.

Farris Pemberton, Ashland, TN, pro se.

Bradley Cartwright, Weston, FL, pro se.

Margaret Pemberton, Bay Harbor, FL, pro se.

ORDER AND OPINION GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

KENNETH A. MARRA, District Judge.

THIS CAUSE is before the Court upon Plaintiff Federal Trade Commission's Motion for Summary Judgment, (DE 89), filed on June, 2, 2006. On August 9, 2006, the Court granted (DE 113) Defendant Bradley Cartwright's Motion for Extension of Time to File an Opposition to Plaintiff's Motion for Summary Judgment (DE 109). In that order, the Court advised the pro se Defendants that the Court would being considering Plaintiff's Motion on September 8, 2006. The Court also instructed Defendants on how to respond to a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. The Court cautioned Defendants that failure to file a response would result in the Court accepting all material facts set forth in the Motion as true, provided there is record support. A review of the record reveals that Defendants have not filed a response to Plaintiff's Motion for Summary Judgment.¹ Accordingly, the matter is now ripe for review. The Court has carefully considered the motion, the pertinent parts of the record and is otherwise fully advised in the premises.

I. Background

On September 26, 2005, the Federal Trade commission ("FTC") filed a two-count Complaint against Transnet Wireless Corporation ("Transnet"), Nationwide Cyber Systems, Inc. ("Nationwide"), Paul Pemberton, Farris Pemberton, Bradley Cartwright and Margaret. Pemberton, asserting claims for unfair or deceptive acts and practices in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a), and failure to disclose in violation of the FTC's Franchise Rule, 16 C.F.R. Part 436. (Compl. ¶ 1.) The FTC simultaneously moved ex parte for a temporary restraining order, which this Court granted. (DE 21.) After the conclusion of discovery, Plaintiffs instant motion for Summary Judgment followed.

The facts, as culled from the complaint, affidavits², depositions, exhibits, consumer complaints³, and adverse inferences⁴, and reasonably inferred therefrom in a light most favorable to the Defendants, for the purposes of this Summary Judgment Motion, are as follows.

PARTIES

Plaintiff, the Federal Trade Commission, is an independent agency of the United States government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce, as well as enforcement of the Franchise Rule, 16 C.F.R. § 436. The Commission is authorized to initiate federal district court proceedings, to enjoin violations of the FTC Act in order to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C. §§ 53(b) and 57(b).

Defendant Nationwide Cyber Systems, Inc., ("Nationwide") is a Florida corporation with its principal place of business located at 6030 Hollywood Boulevard, Suite 140, Hollywood, Florida 33024. Nationwide promoted and sold business ventures involving public access Internet kiosks. Nationwide transacted business in the Southern District of Florida. (Pl.Ex.1, pp. 114, 118, 178.) Nationwide was incorporated in the state of Florida in January, 2001. (Pl.Ex. 9, pp. 31; Pl.Ex. 20, p. 16.)

Defendant Transnet Wireless Corporation, ("Transnet") is a Florida corporation with its principal place of business located at 100 South Pine Island Road, Suite 200, Plantation, Florida 33324. Transnet promoted and sold business ventures involving public access Internet kiosks or terminals and transacted business in the Southern District of Florida. (Pl.Ex.1, pp. 85, 208.) Transnet was incorporated in the state of Florida in December 2002. (Pl.Ex.1, p. 85.)

Defendant Paul Pemberton was an officer, director, manager, and/or an owner of both Nationwide and Transnet. He formulated directed, controlled, or participated in the acts and practices of Nationwide and Transnet. He transacted business in the Southern District of Florida. (Pl.Ex. 1, p. 120; Pl.Ex. 12, ¶ 3; Pl.Ex. 15, ¶ 4; Pl.Ex. 28, ¶ 3; Pl.Ex. 31, ¶ 4.) Defendant Farris Pemberton was an officer, director, manager, and/or owner of corporate defendant Nationwide. He formulated, directed, controlled, or participated in the acts and practices of Nationwide and transacted business in the Southern District of Florida. (Pl.Ex.1, pp. 113-120, Pl.Ex.2, pp. 7, 12.) Defendant Bradley Cartwright was an officer, director, manager, and/or owner of corporate defendant Transnet. He formulated, directed, controlled, or participated in the acts and practices of Nationwide. He transacted business in the Southern District of Florida. (Pl.Ex. 1, pp. 207-208, 221, 225, 293-300; Pl.Ex. 9, p. 32; Pl.Ex. 15, ¶ 23, p. 18; Pl.Ex. 16, pp. 6, 24.)

Relief Defendant Margaret Pemberton is an individual who received funds that can be traced to the corporate defendants' deceptive acts and practices. She transacted business in the Southern District of Florida. (Pl.Ex. 1, pp. 131-138, 147-156, 169-177; Pl.Ex. 36; Pl.Ex. 52.)

BUSINESS ACTIVITIES

Since early 2001, Defendants have engaged in a course of conduct to advertise, market, promote, offer to sell, and sell to consumers business ventures involving public access Internet kiosks, also known as kiosks or Internet terminals. (Pl.Ex.1-32.) These free-standing Internet kiosks house a computer hard-drive, monitor, wireless router, and vending slot. (Id.) The units provide direct Internet access, for a fee, to numerous users from public locations, such as hotels, airports, coffee houses, malls, hospitals, and bookstores. (Id.)

Defendants promoted their business ventures to prospective purchasers through a variety of media, including radio and television advertisements, an Internet web page, written marketing materials, and telephonic and in-person sales pitches. (E.g., Pl.Ex. 1, pp. 220-247; Pl.Ex. 8, ¶ 1; Pl.Ex. 9, ¶ 2; Pl.Ex. 13, ¶ 2; Pl.Ex. 31, ¶ 1.) Through one or more of these means, Defendants made various representations designed to lure prospective purchasers into buying a business venture by misrepresenting (1) the amount of money the potential purchaser can reasonably expect to earn with the business venture and (2) the availability and profitability of locations for kiosks. For example, a radio advertisement aired during programs, such as the Rush Limbaugh program, stated:

Would you like to own your own business and enjoy financial independence? ... There is no technical knowledge required. You get everything you need to own and operate your own business .... You simply receive a monthly check for all the wireless revenue generated at your location.... There is unlimited income potential.... Prime locations are available now.

(Pl.Ex. 1, p. 1; see also, Pl.Ex. 13, ¶¶ 2-3; Pl.Ex. 15, ¶ 1; Pl.Ex. 16, ¶ 2; Pl.Ex. 24, ¶ 2; Pl.Ex. 29, ¶¶ 1-2; Pl.Ex. 31, ¶ 1.)

Defendants' television advertisements appeared on such channels as Fox News Network, MSNBC, the Animal Planet, and ESPN. (Pl.Ex. 6, 7, 15, 29; Pl.Ex. 40, p. 2.) These television advertisements, for example, represent to consumers that the business is a turnkey business, that there is a potential to make significant sums of money, that prime locations are available, that a consumer will be running his/her own business, and that there will be a 100% return in the first year. (Pl.Ex. 2, ¶ 2; Pl.Ex. 3, ¶ 2; Pl.Ex. 4, ¶ 2; Pl.Ex. 5, ¶ 2; Pl.Ex. 6, ¶ 2; Pl.Ex. 7, ¶ 2; Pl.Ex. 9, ¶ 2; Pl.Ex. 10, ¶ 2; Pl.Ex. ¶ 2; Pl.Ex. 12, ¶ 1; Pl.Ex. 14, ¶ 2; Pl.Ex. 30, ¶ 2; Pl.Ex. 32, ¶ 2; Adv. Inf. 8, 42, 67, 129, 164.) In their advertisements, Defendants made representations about the earnings potential of its business venture, and urged consumers to contact them through a toll-free number. (Id.) Prospective purchasers called and talked with one of the Defendants or the Defendants' salespeople. (E.g., Pl.Ex. 1, ¶ 7; Pl.Ex. 4, ¶ 2; Pl.Ex. 7, ¶ 2; Pl.Ex. 8, ¶ 1; Pl.Ex. 15, ¶ 2; Pl.Ex. 30, ¶ 4; Pl.Ex. 31, ¶ 2.)

During these sales calls, Defendants and their salespeople represented to prospective business venture purchasers that, in exchange for payment often ranging from $9,000 to $100,000, purchasers would receive public access Internet kiosk(s) and profitable locations, through which they were likely to derive substantial income. (Pl.Ex. 5, ¶¶ 3-7; Pl.Ex. 6, ¶¶ 3-8; Pl.Ex. 8, ¶¶ 2-3; Pl.Ex. 10, ¶¶ 3-7; Pl.Ex. 13, ¶¶ 4-6; Pl.Ex. 14, ¶¶ 3-6; Pl.Ex. 15, ¶¶ 4-8; Pl.Ex. 16, ¶¶ 6-9; Pl.Ex. 26, ¶¶ 3-6; Pl.Ex. 29, ¶¶ 3-8; Pl.Ex. 30, ¶¶ 4-8; Pl.Ex. 31, ¶¶ 4-7; Pl.Ex. 39, pp. 5-7, 10-11, 14-20, 22-27.) Generally, Defendants' salespeople told potential consumers that the average income generated from the business venture ranged from $1,000 to $2,000 per month per kiosk. (Pl.Ex. 2, ¶ 7; Pl. Ex. 3, ¶ 4; Pl.Ex. 4, ¶ 3; Pl.Ex. 5, ¶ 3; Pl.Ex. 6, ¶¶ 3-6; Pl.Ex. 7, ¶ 3; Pl.Ex. 8, ¶ 2; Pl.Ex. 10, ¶ 3; Pl.Ex. 12, ¶ 3; Pl.Ex. 13, ¶ 4; Pl.Ex. 14, ¶ 3; Pl.Ex. 15, ¶ 4; Pl.Ex. 16, ¶ 6; Pl.Ex. 17, ¶ 4; Pl.Ex. 18, ¶ 5; Pl.Ex., 19, ¶ 4; Pl.Ex. 20, ¶ 6; Pl.Ex. 21, ¶ 2; Pl.Ex. 22, ¶ 3; Pl.Ex. 23, ¶ 4; Pl.Ex. 24, ¶ 3; Pl.Ex. 25, ¶ 3; Pl.Ex. 29, ¶ 3; Pl.Ex. 31, ¶ 4; Pl.Ex. 32, ¶ 3; Pl.Ex. 39, pp. 19-21, 24-25, 35, 49-50.)

One scenario typically described by Defendants was that purchasers of just a 2-location plan, which...