US v. Barnes
| Decision Date | 25 January 1996 |
| Docket Number | No. C 95-4132-MWB.,C 95-4132-MWB. |
| Citation | 912 F. Supp. 1187 |
| Parties | UNITED STATES of America, Plaintiff, v. Thomas J. BARNES, 10 North Central Avenue, Hartley, Iowa 51346; American Savings Express, 185 South Central Avenue, Hartley, Iowa XXXXX-XXXX; American Savings Express, 200 South Central Avenue, Hartley, Iowa XXXXX-XXXX; Images International, 61 North 1st Avenue East, Hartley, Iowa XXXXX-XXXX; Images International Diamond Fulfillment and American Savings Express, P.O. Box 28, Hartley, Iowa XXXXX-XXXX; American Savings Express and Coupon Express, P.O. Box 3247, Sioux City, Iowa 51101, Defendants. |
| Court | U.S. District Court — Northern District of West Virginia |
Willis A. Buell, Assistant U.S. Attorney, Sioux City, Iowa, and John A. Ruberti, Postal Inspector Attorney, Inspection Service Operations Support Group — Chicago, Chicago, Illinois, for the U.S.
Stanley E. Munger of Munger & Reinschmidt, Sioux City, Iowa, for Defendants.
ORDER NUNC PRO TUNC
The attached Order Adopting Consent Preliminary Injunction is substituted nunc pro tunc for the Order Adopting Consent Preliminary Injunction previously filed on December 28, 1995, and shall be effective from the date on which the original order was filed.
IT IS SO ORDERED.
Following this court's issuance of a temporary restraining order ex parte, the court held a hearing on plaintiff's request for a preliminary injunction pursuant to 18 U.S.C. § 1345 to enjoin activities of defendants who were allegedly engaged in mail fraud in violation of 18 U.S.C. § 1341. The fraud alleged consisted of soliciting and obtaining fees by mail from applicants for unsecured credit cards, but providing instead of the expected credit cards a merchandise catalogue and further credit card applications requiring payment of additional fees. Before completion of the hearing on the preliminary injunction, at the court's urging, the parties entered into negotiations that produced a consent preliminary injunction, which was read into the record. The court enters this written order confirming its adoption of the consent preliminary injunction and further commenting on the appropriate standards and burdens of proof for issuance of a preliminary injunction pursuant to 18 U.S.C. § 1345. Such comments are particularly appropriate here, because the court strongly disagrees with the burden of proof urged by the government. The court has instead applied the burden of proof articulated in a decision, which the government did not even cite in its brief or argument, from the only federal court of appeals to consider the question.
On December 12, 1995, plaintiff United States filed its complaint in this civil action for injunctive and equitable relief pursuant to 18 U.S.C. § 1345 against defendants Thomas J. Barnes and various companies in whose name Mr. Barnes was allegedly doing business. The complaint alleged the defendants to be currently engaged and to have been engaged for some time in a fraudulent scheme to obtain money or property through the mail. The scheme purportedly involves sending through the U.S. Mail direct solicitations and placing advertisements in newspapers which contain materially false and misleading representations and omissions of material fact. The complaint sought a temporary restraining order ex parte and a preliminary injunction as well as permanent injunctive and other equitable relief. Also on December 12, 1995, the United States submitted a brief in support of its application for a temporary restraining order and a preliminary injunction with accompanying exhibits and affidavits.1
Upon consideration of the complaint and exhibits annexed thereto, on December 12, 1995, the court granted the plaintiff's temporary restraining order ex parte, but in a form much more limited in scope than the United States had requested. On December 14, 1995, the United States, on behalf of one of the banks mentioned in the restraining order as holding funds of defendants, sought a modification of the temporary restraining order. The modification sought was to allow Best Bank of Boulder, Colorado, to debit defendants' accounts for payment of return items received by the bank, either by direct collection or through the Federal Reserve system as stop payments or authorization revoked notices, so that consumers could receive reimbursement for charges to their accounts. The court granted the modification by order dated December 16, 1995.
On December 20, 1995, the United States filed a separate motion for a preliminary injunction. In the temporary restraining order issued on December 12, 1995, defendants were also directed to serve any documents or papers in response to the temporary restraining order and motion for preliminary injunction on or before December 20, 1995. On December 20, 1995, defendants filed an appearance of counsel and a motion to vacate the temporary restraining order on the grounds that the United States had no standing to seek the ex parte temporary restraining order and has none to seek a preliminary injunction, the court is without jurisdiction to grant the relief set forth in the temporary restraining order or sought in the application for a preliminary injunction, and that plaintiff did not present sufficient good cause for the court to grant an ex parte temporary restraining order and cannot present sufficient evidence to show that defendants have committed a violation of 18 U.S.C. § 1345,2 or to meet the requirements of Fed.R.Civ.P. 65, for the issuance of any preliminary injunctive relief.
Finally, in its order of December 12, 1995, the court also set a hearing on plaintiff's application for a preliminary injunction for December 22, 1995. However, by order dated December 19, 1995, the hearing was rescheduled for 9:00 a.m. on December 21, 1995, at the request of defendants' counsel. That hearing was held in due course. The United States was represented by Willis A. Buell, Assistant U.S. Attorney, of Sioux City, Iowa, and John A. Ruberti, Postal Inspector Attorney, Inspection Service Operations Support Group — Chicago, of Chicago, Illinois. Defendants were represented by counsel Stanley E. Munger of Munger & Reinschmidt, of Sioux City, Iowa. The hearing was recessed so that the parties, at the court's urging, could attempt to negotiate a consent preliminary injunction. The parties eventually agreed to the language of such a consent preliminary injunction and read it into the record. That consent preliminary injunction stated, inter alia, that this court has found that a consent preliminary injunction should issue. Therefore, the court enters this written order to confirm its adoption of the parties' consent preliminary injunction, to identify the standards, and to comment on the burdens of proof for, issuance of a preliminary injunction pursuant to 18 U.S.C. § 1345, and to state the grounds upon which issuance of a consent preliminary injunction is proper in this case.
The complaint, attached exhibits and affidavits, and testimony offered thus far at the hearing provide the following factual background for consideration of whether the consent preliminary injunction is appropriate in this case. However, the evidentiary hearing on the government's motion for a preliminary injunction was terminated, at the court's urging, before defendants presented any evidence, so that the parties could attempt to negotiate a consent preliminary injunction. Therefore, the court here only summarizes the evidence thus far presented. Any findings of fact here or in the subsequent legal analysis, as well as any conclusions of law forming part of the court's determination of whether the issuance of a preliminary injunction is proper in this case, are intended to be subject to the "general rule" that "`the findings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits.'" Henderson v. Bodine Aluminum, Inc., 70 F.3d 958, 962 (8th Cir. 1995) (quoting University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981)). Application of this "general rule" is particularly appropriate here in light of the admittedly truncated proceedings and incomplete record upon which any findings of fact and conclusions of law in this order are based.
The government presented evidence that the defendant, Thomas J. Barnes, through his companies, American Savings Express, Images International, American Savings Express and Coupon Express, and Images International Diamond Fulfillment And American Savings Express, is operating a scheme or artifice to obtain money and property through the U.S. Mail by fraudulent means in violation of 18 U.S.C. § 1341. The government and postal inspectors began investigating the scheme in response to many consumer complaints.
The scheme, which, according to the evidence thus far presented, had certainly begun by August of 1995, and possibly earlier, appears to work as follows: Mr. Barnes places advertisements or notices in direct mail solicitations...
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