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COMMONWEALTH PENNSYLVANIA v. JAMES TOLLESON AND RODNEY TOLLESON (06/19/74)

decided: June 19, 1974.

COMMONWEALTH OF PENNSYLVANIA, ACTING BY ATTORNEY GENERAL ISRAEL PACKEL, PLAINTIFF,
v.
JAMES TOLLESON AND RODNEY TOLLESON, DEFENDANTS. (SECOND OPINION)



Original jurisdiction in case of Commonwealth of Pennsylvania, Acting by Attorney General Israel Packel, v. James Tolleson and Rodney Tolleson.

COUNSEL

George S. Test, Deputy Attorney General, for plaintiff.

James H. Joseph, with him Donald S. Hershman and Baskin, Boreman, Wilner, Sachs, Gondelman & Craig, for defendants.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Kramer.

Author: Kramer

[ 14 Pa. Commw. Page 142]

This matter comes within the original jurisdiction of this Court. The Commonwealth of Pennsylvania (Commonwealth), acting through its Attorney General, filed a complaint in equity against James E. Tolleson and Rodney W. Tolleson (referred to collectively as Tollesons and individually by their given and surnames) seeking an injunction to restrain certain activities alleged to be in violation of the Unfair Trade Practices and Consumer Protection Law (hereinafter Act), Act of December 17, 1968, P.L. 1224, 73 P.S. ยง 201-1 et seq. Filed simultaneously herewith is an opinion and order of this Court granting the permanent injunction prayed for by the Commonwealth. Also filed simultaneously herewith is an opinion of this Court arising out of an appeal by the Tollesons and an organization known as American Be Independent from the levying of civil penalties by the Court of Common Pleas of Erie County. We have dealt with these matters in separate opinions in the interest of clarity. This opinion will deal with four separate petitions filed by the Commonwealth praying for the imposition of civil penalties on the Tollesons for alleged violations of a consent order issued by this Court.

When the complaint was filed on February 23, 1973, this Court, after hearing argument from counsel for the Commonwealth and counsel for the Tollesons, issued a Special Injunction prohibiting the Tollesons "from conducting any solicitations, promotional activities, sales of services, or any of the activities alleged to be carried on in the allegations of the Complaint filed herein in the Commonwealth of Pennsylvania." That same order directed that a hearing be held on February 26, 1973 for the purposes of determining whether a preliminary injunction should be issued. The hearing date was continued at the request of both parties until March 14, 1973, when the parties jointly presented to

[ 14 Pa. Commw. Page 143]

    the Court for its approval a stipulation agreeing to the terms of a consent order. On March 15, 1973, after review of the record, this Court approved the proffered Consent Decree which contained the following provisions:

"And Now, this 15th day of March 1973, based upon the executed stipulation of the parties and upon joint motion of counsel, it is hereby ordered that the Special Injunction heretofore issued by this Court on February 23, 1973, as thereafter extended, be and the same hereby is continued in full force and effect in all respects as a Preliminary Injunction until the hearing and determination of the above entitled civil action, except as is herein below set forth:

"1. Executive members of Exciting Life, Inc. who had paid for such membership prior to February 23, 1973 and Executive member [sic] of Century 2000, Inc. who were members thereof prior to February 23, 1973, may (if such Century 2000, Inc. executive members agree and consent), be continued as or offered and made executive members of Exciting Life, Inc. as the case may be. Except as such executive members of Century 2000, Inc. agree and consent thereto, and except for Exciting Life, Inc. executive members who were such prior to February 23, 1973 James Tolleson, Rodney Tolleson, the above named defendants, their agents, servants, employees, representatives and organizations which they control or direct, shall not sell, solicit, promote or offer, create, confer or appoint any executive members in Exciting Life, Inc. or any other entity.

"2. Defendants, their agents and representatives, through any corporate or other device, shall not engage in any of the following acts or practices in any business enterprises presently in existence or which shall come into existence affecting residents of the Commonwealth,

[ 14 Pa. Commw. Page 144]

    whether or not such acts or practices take place in Pennsylvania or elsewhere:

"a. Paying, or promising to pay, any fee, compensation, reward or other remuneration, either directly or indirectly, to any person for the procurement of a contract of purchase of something of value, whether intrinsic or extrinsic, with others or for the procurement of names of potential customers, such as would violate subsection (xii) of Section 2(4) of the Unfair Trade Practices and Consumer Protection Law, Act of December 17, 1968, P.L. , No. 387;

"b. Making any representations directly or through their agents, employees or representatives, through distributors, state developers, Executive Members of any other subsequently created franchises or investors relating to earnings or earnings potential which are not based upon the experience of a substantial number of people engaged in the same or similar enterprise and working for Defendants or any one of them;

"c. Failing to clearly and conspicuously disclose to all present and future buyers or investors in any of the Defendants' business enterprises the proposed and actual application of all fees or their monies which are required as an initial or subsequent payment or investment;

"d. Misrepresenting any or all of Defendants' actual possessions, past, present or future, and the true nature of Defendants' interest in any or all of said possessions or misrepresent any of Defendants' earnings, past, present or future;

"e. Engaging in any high pressure salesmanship, either directly or through agents, employees or representatives;

"f. Distributing by any means, including but not limited to, mailing, hand deliveries, advertisements in any known or to be developed media, any of the letters or brochures attached hereto and marked Exhibits 'D',

[ 14 Pa. Commw. Page 145]

'F', 'H', and 'I', or otherwise publish in any form or manner the same or similar information contained in the said exhibits, which aforesaid materials do not disclose the general nature, kind or type of business or goods or services to be sold;

"g. Distributing or displaying excessive currency or expensive possessions, whether owned or not, to others or in the presence of others while engaged in any promotional activities in the Commonwealth or outside the Commonwealth but in the presence of residents of the Commonwealth;

"h. Recommending or encouraging any person to make a false statement to any financial institution or any person for the purpose of inducing said financial institution or any person to loan money;

"i. Recommending, encouraging or in any way condoning the misrepresentation of the financial status or success or achievement of another when such person is engaged in any promotional activities of Defendants or one of Defendants' agents;

"j. Engaging, promoting, planning, designing or in any way perpetuating sales presentations to individuals or groups of individuals which contain and emphasize the use of excessive enthusiasm or any sales tactics which are designed to break down an individual's sales resistance by implementing emotional and psychological pressures made solely for the purpose of inducing people into paying or investing property in the purchase of goods, services or any other thing of value, whether intrinsic or extrinsic;

"k. Misrepresenting the true purpose, nature or content of any legal documents utilized by the Defendants in the promotion and sale of any goods, services or any other thing of value, whether intrinsic or extrinsic;

"l. Conducting, directly, promoting, designing or condoning any sales presentation either to an individual

[ 14 Pa. Commw. Page 146]

    or to a group of individuals which includes the use of speakers who recount their swift financial, emotional or spiritual success as a result of becoming involved in any of Defendants' enterprises, past, present or future, unless the statements made are true and relevant to the situation of the persons to whom the conversation is directed, or otherwise such differences in situations as exist are clearly explained;

"m. Misrepresenting, directly or by implication, the fair market value of any goods, services or any other thing of value promoted by Defendants;

"n. Misrepresenting, directly or by implication, the extent or nature of ownership Defendants or either one of them possess or control in any business enterprises or misrepresent the quality, quantity, characteristics, ingredients, sponsorship or approval of any goods, services, business enterprises or any other thing of value;

"o. Failing to disclose any and all costs which will be incurred by buyers or investors in furtherance of their investments or franchises;

"p. Misrepresenting the amount of effort an investor in one of Defendants' enterprises will have to expend in order to achieve financial success.

"q. Failing to disclose to any and all prospective purchasers who may inquire about Defendants' history and background that Defendants have been agents of Koscot Interplanetary, Inc., Glenn W. Turner, Century 2000, Exciting Life and the existing financial status of all such enterprises and persons to the extent of Defendants' knowledge;

"r. Representing that Defendants or any of the Defendants' enterprises intend to provide their investors or buyers with any form or forms of advertising unless and until Defendants or their agents have obtained firm commitments from all media involved for the placement and publication of such advertising;

[ 14 Pa. Commw. Page 147]

"s. Misrepresenting the cost of any merchandise, services or any other thing of value which Defendants promote for sale or sell, either directly or through franchises or other third parties;

"t. Representing that Defendants own or are negotiating for the ownership of any goods, services or any other things of value unless such is, in fact, the case;

"u. (1) Make any claim in any advertising, promotional material, or disclosure statement, or in any oral sales presentation, solicitation or discussion between a Seller's representatives and prospective purchasers, for which the Seller does not have substantiation in its possession, which substantiation shall be made available to prospective purchasers or the Bureau of Consumer Protection or its staff upon demand. This provision applies, but is not limited, to statements concerning the experience or qualifications, needed for success as a purchaser;

"(2) Make any claim in any advertising or promotional material, or in any oral sales presentation, solicitation or discussion between a Seller's representations and prospective purchasers, which (directly or by implication) contradicts any of the statements required to be disclosed pursuant to this Preliminary Injunction.

"v. Fail to include immediately above and on the same page as the purchaser's signature line of any contract establishing or confirming a purchase agreement, the following statement which clearly stands out from any other print in the body of such contract, the following:

"NOTICE: YOU ARE ENTITLED TO CERTAIN IMPORTANT INFORMATION CONCERNING THIS TRANSACTION: IT IS IN YOUR BEST INTEREST TO STUDY SUCH INFORMATION. YOU MAY CANCEL THIS CONTRACT FOR ANY REASON WITHIN

[ 14 Pa. Commw. Page 148]

SEVEN (7) BUSINESS DAYS AFTER EITHER SIGNING THIS CONTRACT OR RECEIVING THE REQUIRED INFORMATION, WHICHEVER OCCURS LATER. If you choose to cancel, you will be entitled to receive a full refund within seven (7) business days after Seller receives notice of your cancellation. Cancellation must be in writing and mailed to the address given below. For your own protection you may wish to use certified mail with return receipt requested, or a telegram, either of which should be sent to the address below. (Seller will insert here the address and telephone number to which such notices should be sent).

"w. Fail to cancel any contract for which a notice of cancellation was sent as provided above within seven (7) business days after either the contract's execution, or the purchaser's receipt of all required information, whichever occurs later, or to fail to refund any money paid by purchaser within seven (7) business days after the date of receipt of such notice of cancellation;

"y. Fail to furnish the prospective purchaser, upon request at any time and, in the absence of any request, before consummation of any agreement, with a copy of the purchase agreement proposed to be used;

"z. Take, accept or negotiate any promissory note or other instrument of indebtedness which contains:

"(1) Any waiver of rights or remedies which the purchaser may have against the Seller or other person acting in his behalf; or

"(2) Any provision by which the purchaser agrees not to assert against Seller a claim or defense arising out of the transaction or agrees not to assert against an assignee such a claim or defense.

"This provision (z) shall apply to any transaction in which the Seller or any of its agents or representatives took any part whatsoever, including, but not by way of limitation, the actual negotiation of such instrument,

[ 14 Pa. Commw. Page 149]

    or any referral to or arrangement with any other person with whom a purchaser negotiates such instrument, but does not apply to any transaction entered into between a purchaser and another person wholly free of any involvement by the Seller or its agents or representatives;

"aa. Make a misstatement of a material fact or omit any material fact which, if stated, would have made statements that were made untrue or misleading under the circumstances in the disclosure of information required by this Consent Petition.

"3. In the sale of any and all of Defendants' services or products, Defendants shall make available to purchasers a brief description of the following information in a written form which shall be provided to all prospective purchasers of Defendants' services or products:

"a. A statement of the history of the company or other enterprise through which Defendants are offering the said services or products;

"b. A statement of the entire purchase price for the services or products, including any foresceable [sic] expenses which will be incurred by purchaser;

"c. An explicit statement of all services and products which will be made available to purchasers for the stated price;

"d. If any price comparisons are utilized by Defendants, their agents or representatives, comparing the value of Defendants' services or products to the same or similar services or products, Defendants shall include such comparisons in such information provided to purchasers, including identification of specific services or products which are used in Defendants' price comparisons;

"e. If any services which are to be provided depend upon the ability of Defendants to produce certain training or other services, including, but not limited to, air

[ 14 Pa. Commw. Page 150]

    travel or any other means or mode of transportation, Defendants shall provide prospective purchasers with information concerning the extent of ownership or control Defendants have over the actual performance of the services to be provided by Defendants.

"Provided however, that any price comparisons utilized by Defendants as provided in subparagraph (d) hereof shall be supported by proof of the truth and accuracy of such price comparisons which shall be supplied to the Bureau of Consumer Protection if requested.

"4. Subjected to the provisions of this preliminary injunction Defendants, James and Rodney Tolleson, their agents, servants, employees, representatives, and organizations which they control or direct (including executive members thereof) shall be entitled to offer, sell, solicit and promote the sale of family memberships in Exciting Life, Inc. and shall be permitted to cause to be offered, sold, or solicited family memberships in Exciting Life, Inc.

"5. The parties hereto agree that subject to the Court's further orders upon its own motion, no hearing in this case shall be held before March 28, 1973 and until either or both parties, by praecipe to the President Judge of this court, indicate that the matter is ready for hearing.

"6. All persons subject to this preliminary injunction have agreed and represented to the Court by their attorneys that this Order shall be construed to permit the activities mentioned in paragraphs 1 and 4 hereof and none other, and the activities set forth and permitted in paragraph 4 hereof shall be subject to the express requirements of all the other paragraphs of the Order and the applicable laws of the Commonwealth. Further, the disclosure statement ...


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