Federal Trade Commission v. Speedway Motorsports, Inc.
Stipulated Final Order for Permanent Injunction and Monetary Relief

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IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF NORTH CAROLINA

___________________________________
                                   )
FEDERAL TRADE COMMISSION,          )
                                   )
               Plaintiff,          ) CIVIL ACTION
                                   ) NO. 1:01CV00126
           v.                      )
                                   )
                                   )
SPEEDWAY MOTORSPORTS, INC., and    ) Judge Bullock
OIL-CHEM RESEARCH CORP.,           ) 
                                   ) 
                                   ) 
                                   )
               Defendants.         )
___________________________________)

STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AND MONETARY RELIEF

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), filed a Complaint for permanent injunction and other relief against Speedway Motorsports, Inc., and Oil-Chem Research Corp. pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b). Defendants deny the FTC's allegations.

The Commission and Defendants have agreed to the entry of the following Stipulated Final Order for Permanent Injunction in settlement of the Commission's complaint against Defendants. The Court, being advised in the premises, finds:

FINDINGS

1. This Court has jurisdiction of the subject matter and of the parties.

2. The Complaint states a claim upon which relief may be granted against Speedway Motorsports, Inc. ("Speedway"), and Oil-Chem Research Corp. ("Oil-Chem") under Sections 5(a) and 13(b) of the Federal Trade Commission Act, 15 U.S.C. §§ 45(a) and 53(b).

3. Venue is proper as to all parties in the Middle District of North Carolina.

4. The activities of Speedway and Oil-Chem are in or affecting commerce, as defined in the FTC Act, 15 U.S.C. § 44.

5. Defendants deny the Commission's allegations and nothing herein shall be construed as an admission or finding of liability or misrepresentation by Defendants. With respect to the applicable standard for evaluating Defendants' conduct under the FTC Act, Defendants contend that the applicable standard is the "reasonable basis" standard. Defendants deny that the applicable standard is the "competent and reasonable scientific evidence" standard. Defendants contend that zMAX produces results through a number of unique properties not found in other products.

6. Speedway and Oil-Chem have waived all rights that may arise under the Equal Access to Justice Act, 20 U.S.C. § 2412, amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996).

7. This action and the relief awarded herein are in addition to, and not in lieu of, other remedies as may be provided by law.

8. Each party shall bear its own costs and attorneys' fees.

9. Entry of this Order is in the public interest.

10. Pursuant to Federal Rule of Civil Procedure 65(d), the provisions of this Order are binding upon Defendants, and their officers, agents, servants, and employees, and all other persons or entities in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise.

DEFINITIONS

For the purposes of this Order, the following definitions shall apply:

1. "Competent and reliable scientific evidence" shall mean tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.

2. Unless otherwise specified, "Defendants" shall mean:

  1. Speedway, its divisions, subsidiaries, sucessors and assigns, and their officers, agents,servants, and employees;
  2. Oil-Chem, its divisions, subsidiaries, sucessors and assigns, and their officers, agents,servants, and employees; and
  3. Each of the foregoing, and any combination of the foregoing.

3. "zMAX" shall mean the aftermarket motor vehicle product known as the zMAX Power System, or any product of substantially similar composition marketed for use in motor vehicles.

4. A requirement that any Defendant "notify the Commission" or "file with the Commission" shall mean that the Defendant shall send the necessary information via first class mail, costs prepaid, to the Associate Director for Enforcement, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20508. Attn: FTC v. Speedway Motorsports, Inc., et. al., (M.D. N.C.).

5. The term "including" in this Order shall mean "without limitation."

6. The terms "and" and "or" in this Order shall be constructed conjunctively or disjunctively as necessary, to make the applicable phrase or sentence inclusive rather than exclusive.

CONDUCT PROHIBITIONS

I.

IT IS HEREBY ORDERED that Defendants, directly or through any corporation, partnership, subsidiary, division, or other device, and their officers, agents, servants, and employees, and all other persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale or distribution of zMAX, or any other product for use in any motor vehicle, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, that such product:

  1. increases gas mileage;
  2. increases gas mileage by a minimum of 10%, or by any other percentage, miles-per-gallon, dollar, or other figure;
  3. reduces engine wear;
  4. reduces or eliminates engine wear at startup;
  5. reduces engine corrosion;
  6. extends engine life; or
  7. reduces emissions,

unless at the time the representation is made, Defendants possess and rely upon competent and reliable evidence, which when appropriate must be competent and reliable scientific evidence, that substantiates the representation.

II.

IT IS FURTHER ORDERED that Defendants, directly or through any corporation, partnership, subsidiary, division, or other device, and their officers, agents, servants, and employees, and all other persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product, service or program, in or affecting commerce, shall not misrepresent, in any manner, expressly or by implication, the existence, contents, validity, results, conclusions or interpretations of any test, study, or research.

III.

IT IS FURTHER ORDERED that Defendants, directly or through any corporation, partnership, subsidiary, division, or other device, and their officers, agents, servants, employees, and attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product, service or program, in or affecting commerce, shall not misrepresent, in any manner, expressly or by implication, that endorsements or testimonials reflect:

  1. the actual and current opinions, findings, beliefs, and/or experiences of consumers providing endorsements or testimonials; or
  2. the typical or ordinary experience of members of the public who use the product.

For purposes of this Part, "endorsement" shall mean as defined in 16 C.F.R. §§ 255.0(b).

MONETARY RELIEF

IV.

IT IS FURTHER ORDERED that Defendants shall pay refunds to purchasers of zMax in the amount of $1,000,000.00, in accordance with the provisions of this Part. Administrative expenses will be borne by Defendants in addition to this amount.

  1. Within fifteen (15) days from the date of service of this order, Defendants shall compile a mailing list containing the name and last known address of all purchasers who purchased zMax prior to January 31, 2001, via the Defendants' internet site or via in an inbound telemarketing call. Within sixty (60) days from the date of service of this order, the Defendants shall provide Commission staff with a computer printout copy of the mailing list, as well as provide the list in computer readable form.
  2. Within sixty (60) days from the date of service of this order, Defendants shall send via first-class mail, postage prepaid, a Notice of Refund Offer in a form mutually agreeable to the Parties, to all purchasers listed on the mailing list required by subpart A of this Part. The Court agrees to retain jurisdiction over this matter to resolve any disputes between the Parties regarding the form or content of the Notice of Refund Offer.
  3. Defendants shall also send via first-class mail, postage prepaid, a separate Notice of Refund Offer in a form mutually agreeable to the Parties, to all purchasers who contact Defendants or the Commission to request a refund within one hundred twenty (120) days from the date of service of this order. Each mailing shall be made within fifteen (15) business days after the period for purchasers to respond to the Notice of Refund Offer has expired.
  4. No information other than that form mutually agreed upon by the Parties, shall be included in or added to the Notice of Refund Offer, nor shall any other material be transmitted therewith. The envelope containing the Notice of Refund Offer shall be in the form set forth in Attachment B to this order.
  5. For each mailing returned by the U.S. Postal Service as undeliverable for which Defendants thereafter obtain a corrected address, Defendants shall, within fifteen (15) business days after receiving the corrected address, send a Notice of Refund Offer to the corrected address.
  6. Defendants shall send a refund check or credit card refund to (i) each direct purchaser who returns the completed application form appended to the Notice of Refund Offer to Defendants and (ii) to each purchaser contemplated under subpart "C" who returns the completed application form appended to the Notice of Refund Offer to Defendants. Defendants shall send refund checks by first-class mail, postage prepaid, or apply credit card refunds, within fifteen (15) business days after the period for purchasers to respond to the Notice of Refund Offer has expired. If a credit card refund cannot be processed, Defendants shall send a refund check in the manner specified above. The envelope containing the refund check shall be in the form set forth in Attachment C to this order.
  7. Refunds will be distributed to purchasers in one or more rounds, on a pro rata basis. For the first round, the pro rata share will be calculated by dividing $1,000,000.00 by the total number of consumers requesting a refund pursuant to this Part.
  8. A second round of pro rata check or credit card refunds will be sent to pay out any money remaining if purchasers in the first round fail to cash their checks. Consumers eligible for the second round would include all consumers who cashed their checks or successfully had a credit applied to their credit card in the first round. The pro rata share would be determined by dividing the remaining available refund monies by the total number of consumers who cashed checks or received credit card refunds in the first round (subtracting the total amount of their first round refund checks). In no case, however, would any second round consumer receive more than 100 percent of the monies, including shipping and handling charges, paid by such consumer to Defendants. A consumer shall have the right to participate in the refund distribution only upon signing a waiver of rights and release of all claims against Defendants. Defendants shall conduct additional rounds of po rata refunds if necessary to apply the full $1,000,000.00 amount to consumer refunds. Such additional rounds may be accomplished by applying additional credits to the credit cards of eligible consumers.
  9. Defendants shall notify any purchaser who applies for a refund but fails to apply properly, of any error in the purchaser's refund application, and shall provide a reasonable opportunity for the purchaser to rectify any such error.
  10. Within two hundred forty (240) days from the date of service of this order, Defendants shall furnish to Commission staff the following:
    1. In computer readable form and in computer print-out form, a list of the names and addresses of all consumers who were sent refund checks or received credit card refunds pursuant to Part IV of this order, and for each name included on the list, the amount, check or transaction number and mailing or transaction date of every refund sent or applied;
    2. A list of all Notices of Refund Offer returned to Defendants as undeliverable or rejected, all credit card refunds that could not be applied to consumer's credit cards; and
    3. All other documents and records evidencing efforts made and actions taken by Defendants to identify, locate, contact and provide refunds to consumers requesting a refund.

For purposes of this Part, "purchaser" shall mean any person who has purchased zMax and who has not previously received a full refund of the purchase price.

RECORD KEEPING

V.

IT IS FURTHER ORDERED that Defendants, for a period of five (5) years after the last date of dissemination of any representation covered by this Order, shall maintain and upon request make available to the Commission for inspection and copying:

  1. All advertisements and promotional materials containing the representation;
  2. All materials that were relied upon in disseminating the representation; and
  3. All tests, reports, studies, surveys, demonstrations, or other evidence in their possession, custody, or control, that contradict, qualify, or call into question the representation, or the basis relied upon for the representation, including complaints and other communications with consumers or with governmental entities or consumer protection organizations. Nothing in this subparagraph C requires Defendants to waive their rights to assert the attorney client privilege or work product doctrine, provided however, that if Defendants withhold materials otherwise called for under this Subparagraph (C) then Defendants shall create a privilege log identifying any materials withheld and specifying the bases for assertions of the attorney client privilege or work product doctrine. The FTC reserves the right to challenge Defendants' assertions of privilege.

MONITORING

VI.

IT IS FURTHER ORDERED that Defendants, for a period of five (5) years after the date of service of this Order, shall deliver a copy of this Order to all current and future officers and directors, and to all managers, employees, agents, and representatives having responsibilities with respect to the subject matter of this Order, and shall secure from each such person a signed and dated statement acknowledging receipt of the Order. Defendants shall deliver this Order to current personnel within thirty (30) calendar days after the date of service of this Order, and to future personnel within thirty (30) calendar days after the person assumes such position or responsibilities. Defendants shall maintain and upon request make available to the Commission for inspection and copying each such signed and dated statement for a period of five (5) years after such statement is signed.

VII.

IT IS FURTHER ORDERED that Defendants shall, for a period of five (5) years, notify the Commission at least thirty (30) calendar days prior to any change in either corporation that may affect compliance obligations arising under this Order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in either corporation about which Defendants learn less than thirty (30) calendar days prior to the date such action is to take place, they shall notify the Commission as soon as is practicable after obtaining such knowledge.

VIII.

IT IS FURTHER ORDERED that Defendants shall, within sixty (60) calendar days after the service of this Order, file with the Commission a report, in addition to any initial report, in writing, setting forth in detail the manner and form in which they have complied with this Order. Defendants have submitted an initial compliance report dated December 23, 2002 describing the means by which they will comply with Parts I-III of this Order. The staff has sent a letter dated December 26, 2002 responding to Defendants' initial compliance report.

IX.

IT IS FURTHER ORDERED that the Commission is authorized to monitor the compliance of Defendants with this Order by all lawful means, including but not limited to the following means:

  1. The Commission is authorized, without further leave of court, to obtain discovery from any person in the manner provided by Chapter V of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 26-37, including but not limited to the use of compulsory process pursuant to Fed. R. Civ. P. 45, for the purpose of monitoring and investigating the compliance of defendants with this Order.
  2. Nothing in this Order shall limit the Commission's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15. U.S.C. §§ 49, 57b-1, to investigate whether defendants have violated any provision of this Order or Sections 5 or 12 of the FTC Act, 15 U.S.C. §§ 45, 55.

ACKNOWLEDGMENT OF RECEIPT OF ORDER AND RIGHT TO REOPEN

X.

IT IS FURTHER STIPULATED AND ORDERED that, within fifteen days after service of this Order, Defendants shall submit to the Commission a truthful sworn statement, in the form shown on Attachment D, that shall acknowledge receipt of this Order.

RETENTION OF JURISDICTION

XI.

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.

FEDERAL TRADE COMMISSION

JONATHAN COWEN
LAUREEN KAPIN
MELVIN ORLANS
EDWIN RODRIGUEZ
Counsel for Plaintiff
Federal Trade Commission
Washington, DC 20580
202-326-2533

SPEEDWAY MOTORSPORTS, INC.

OIL-CHEM RESEARCH CORP.

WILLIAM R. BROOKS, Vice-President
on behalf of Defendants
Speedway Motorsports, Inc.
Oil-Chem Research Corp.

Fred T. Lowrance
Melanie Dubis
PARKER POE
ADAMS & BERNSTEIN LLP
401 South Tryon Street
Suite 3000
Charlotte, NC 28202
(704) 372-9012
(704) 334-4706 (fax)

Kenneth A. Gallo
Leiv H. Blad Jr.
Aimée D. Latimer
Allyson Baker
CLIFFORD CHANCE
ROGERS & WELLS LLP
2001 K Street NW
Washington, D.C. 20009
(202) 912-5000
(202) 912-6000 (fax)

Counsel for Defendants

IT IS SO ORDERED, this _____ day of _____________, 2002 in Greensboro, North Carolina.

UNITED STATES DISTRICT JUDGE

ATTACHMENT A - LETTER

ATTACHMENT B - REFUND NOTICE LETTER ENVELOPE

Forwarding and Return Postage Guaranteed: [address of consumer refund administrator]

Window Envelope

[The following statement is to appear in a box, on the left hand side of the envelope in red, in extra large, bold type face]

ATTENTION: IMPORTANT REFUND INFORMATION INSIDE

ATTACHMENT C - REFUND CHECK ENVELOPE

Forwarding and Return Postage Guaranteed: [address of consumer refund administrator]

Window Envelope

(indicates a check is enclosed)

ATTACHMENT D - AFFIDAVIT

IN THE UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF NORTH CAROLINA

___________________________________
                                   )
FEDERAL TRADE COMMISSION,          )
                                   )
               Plaintiff,          ) CIVIL ACTION
                                   ) NO. 1:01CV00126
           v.                      )
                                   )
                                   )
SPEEDWAY MOTORSPORTS, INC., and    ) Judge Bullock
OIL-CHEM RESEARCH CORP.,           ) 
                                   ) 
                                   ) 
                                   )
               Defendants.         )
___________________________________)

AFFIDAVIT OF WILLIAM R. BROOKS

William R. Brooks, being duly sworn, hereby states and affirms:

1. My name is William R. Brooks. I am a citizen of the United States and am over the age of eighteen. I have personal knowledge of the matters discussed in this declaration, and if called as a witness, I could and would competently testify as to the matters stated herein. I am Vice-President and Chief Financial Officer of defendant Speedway Motorsports, Inc., and Director and Vice-President of defendant Oil-Chem Research Corp.

2. My business address is ____________________________________ My current business telephone number is ________________________.

3. On (date) _________________, I received a copy of the Stipulated Final Order and Settlement of Claims for Monetary Relief as to Defendants Speedway Motorsports, Inc., and Oil-Chem Research Corp., which was signed by the Honorable Frank Bullock, United States District Court Judge for the Middle District of North Carolina. A true and correct copy of the Order that I received is appended to this Affidavit.

I hereby declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date) ________________, at (city, state) _______________, ______.

William R. Brooks

STATE OF NORTH CAROLINA

COUNTY OF ______________

BEFORE ME this day personally appeared William R. Brooks, who being first duly sworn, deposes and says that he has read and understands the foregoing statement and that he has executed the same for the purposes contained therein.

SUBSCRIBED AND SWORN TO before me this _____ day of _____________, 2002, by William R. Brooks. He is personally known to me or has presented (state identification) ______________________ as identification.

Print Name

NOTARY PUBLIC
STATE OF CALIFORNIA

Commission Number
Affix Seal