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FEDERAL TRADE COMMISSION v. WORLD MEDIA BROKERS INC.

March 1, 2004.

FEDERAL TRADE COMMISSION, Plaintiff,
v.
WORLD MEDIA BROKERS INC., a/k/a 913062 ONTARIO INC., et al., Defendants



The opinion of the court was delivered by: AMY J. ST. EVE, District Judge

MEMORANDUM OPINION AND ORDER

The United States Federal Trade Commission ("FTC") filed a six count complaint against World Media Brokers, Inc. ("WMB") and other corporations*fn1 (collectively, the "Corporate Defendants"), and George Yemec and Anita Rapp (collectively, the "Individual Defendants"), alleging violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's Telemarketing Sales Rule, 16 C.F.R. Part 310. Specifically, the FTC alleges that Defendants illegally sold Canadian lottery tickets to consumers throughout the United States and misrepresented to those consumers that such sales were legal.

In Count I, the FTC alleges that Defendants' representations that the consumer is likely to win a large prize in the Canadian lottery constitute a deceptive practice, in violation of Section 5 Page 2 of the FTC Act. In Count II, the FTC alleges that Defendants' failure to disclose to United States' consumers that selling and trafficking in foreign lottery tickets is a violation of federal criminal law constitutes a deceptive practice, in violation of Section 5 of the FTC Act. In Count III, the FTC alleges that Defendants' representations to United States' consumers that Defendants can legally sell foreign lottery tickets to United States' consumers and that the United States' consumers can legally purchase such tickets constitute deceptive acts or practices, in violation of Section 5 of the FTC Act. In Count IV, the FTC alleges that Defendants' representations that the consumer would receive a substantial monetary award or other prize in the Canadian lottery constitute a deceptive practice, in violation of Section 5 of the FTC Act. In Count V, the FTC alleges that Defendants' failure to disclose that the sale and trafficking of foreign lottery tickets is a crime in the United States constitutes a violation of Section 310.3(a)(1)(ii) of the Telemarketing Sales Rule. In Count VI, the FTC alleges that Defendants made certain false and misleading statements to induce United States' consumers to purchase foreign lottery tickets or interests, in violation of Section 310.3(a)(4) of the Telemarketing Sales Rule.

  The FTC moved for partial summary judgment on Counts II, III, V, and VI. For the reasons stated herein, the FTC's motion for summary judgment is granted as to those counts.

  LEGAL STANDARDS

 I. Summary Judgment

  summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of triable fact exists only if "the evidence Page 3 is such that a reasonable jury could return a verdict for the nonmoving party." Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986)). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552 (1986). A party will successfully oppose summary judgment only if it presents "definite, competent evidence to rebut the motion," Equal Employment Opportunity Comm'n v. Roebuck & Co., 233 F.3d 432, 437 (7th Cir. 2000). The Court "considers the evidentiary record in the light most favorable to the nonmoving party, and draws all reasonable inferences in his favor." Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002).

 II. Local Rule 56.1

  The Court first addresses Defendants' failure to comply with the requirements of Local Rule 56.1, which governs summary judgment briefing in the Northern District of Illinois. L.R. 56.1. Local Rule 56.1(a)(3) requires the moving party to provide a "statement of material facts as to which the moving party contends there is no genuine issue and that entitle the moving party to a judgment as a matter of law." L.R. 56.1(a)(3). The opposing party must then file "a concise response to the movant's statement," in which the nonmoving party must "admit or deny each factual statement proffered by the defendant . . ., and designate with specificity and particularity those material facts believed to establish a genuine dispute for trial." Greer v. Board of Educ, of the City of Chicago, 267 F.3d 723, 727 (7th Cir. 2001); L.R. 56.1(b)(3)(A). The nonmoving party Page 4 may also file a statement of additional facts that require the denial of summary judgment. L.R. 56.1(b)(3)(B). The moving party must submit a reply addressing each additional fact. "All material facts set forth in the statement filed pursuant to section (b)(3)(B) will be deemed admitted unless controverted by the [reply] statement of the moving party." Dimmitt & Owens Fin., Inc. v. Superior Sports Prods., Inc., 196 F. Supp.2d 731, 737 (N.D. Ill. 2002).

  Defendants' Rule 56.1 response is inadequate. Many statements in Defendants' response include impermissible argument, conclusory statements, and duplicative responses to separate paragraphs. Instead of simply admitting or denying the FTC's asserted facts, Defendants improperly assert legal arguments regarding whether the FTC should have relied on George Yemec's affidavit and whether certain alleged activity was in fact legal. Moreover, Defendants repeatedly limit their responses to the Individual Defendants without referring to the Corporate Defendants, thereby implicitly admitting that the Corporate Defendants engaged in the alleged activity. Local Rule 56.1 statements that are full of argument, evasion, and improper denials defeat the point of Local Rule 56.1, which is to identify precisely which facts are actually in dispute. Bordelon v. Chicago Sch. Reform Bd. of Trs., 233 F.3d 524, 528 (7th Cir. 2000). Defendants' failure to adequately dispute the FTC's material facts, however, does not result in an automatic grant of summary judgment in the FTC's favor. The Court still must evaluate all facts in the light most favorable to Defendants, the nonmoving party. O'Donnell v. City of Chicago, No. 02 C 1847, 2003 WL 22339285, at *1 (N.D. Ill. Oct. 14, 2003).*fn2 Page 5

  BACKGROUND

 I. Defendants' Attack On The FTC's Evidence

  Defendants, in their responses to the FTC's statement of material facts, assert numerous legal arguments attacking the authenticity and admissibility of the evidence on which the FTC bases its statement of material facts. The Court will address those arguments-none of which have merit-before reciting the undisputed facts.

  First, Defendants argue that the FTC improperly obtained the sworn affidavit of Individual Defendant George Yemec and that the Court, therefore, should not consider Yemec's affidavit. Yemec submitted his sworn affidavit in a Canadian proceeding wherein the FTC obtained an injunction against Defendants that was later dissolved by the Ontario Superior Court of Justice. Defendants do not argue that the Yemec affidavit is irrelevant or untrustworthy. Instead, Defendants argue that they never consented to the FTC's use of the affidavit in this proceeding, and that Justice Gans of the Ontario Superior Court "essentially" required the FTC "to return all documents and equipment immediately and to release Defendants' assets." (R. 43-1, Def.s.' Mot. to Strike Pl.'s Exs. at 2.) These arguments are misguided because Defendants' consent is not necessary,*fn3 and because Defendants mischaracterize Justice Gans's ruling. Justice Page 6 Gans never prohibited the FTC from using the documents from the Canadian proceeding in this proceeding. In fact, Justice Gans specifically contemplated a ruling from this Court that Defendants cannot restrict the FTC's use of Defendants' documents from the Canadian proceeding. (R. 39-1, FTC's Reply Mem. for Partial Summ. J. ("FTC's Reply Mem.") at 8) ("This Court orders that all the properties, assets, evidence, and documents of the Defendants . . . shall be returned to the Defendants forthwith and any copies . . . shall be returned subject to any order of the United States District Court, Northern District of Illinois or this Honourable Court." FTC v. Yemec, et al., Docket No. 02-CV-237070CM3, at 3 (Ontario Sup.Ct. of Justice Oct. 21, 2003).) The FTC properly relied upon Yemec's sworn affidavit.

  Second, Defendants attack the reliability and authenticity of the FTC's evidence contained in the declaration of the FTC's investigator, Alan Krause. (R. 38-1, Def.s.' Mem. in Opp. to the FTC's Mot. for Partial Summ. J. ("Def.s.' Opp. Mem.") at 10.) This attack has no merit. Defendants filed a motion pursuant to Federal Rule of Civil Procedure 56(f) for an extension of time to allow for needed discovery concerning the quality and authenticity of the FTC's investigation, which was conducted by Mr. Krause. (R. 33-1, Def.s.' Rule 56(f) Mot. for Extension of Time.) The Court granted the motion and gave Defendants an additional three weeks to file their response brief, expressly to allow them to depose Mr. Krause. (See Minute Order, Sept, 17, 2003.) Defendants, however, made no attempt to schedule Mr. Krause's deposition. (See R. 39-1, FTC's Reply Mem. at 8.) Mr. Krause swore to the truth of his declaration and the authenticity ...


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