Verizon Litigation

 By Jay Lewis

Part III


After finding that Verizon had met all the four factors, the Court turned to the Defendants’ arguments:

  1. Mootness of Injunctive Relief
  2. Dormant Commerce Clause
  3. Primary Jurisdiction Doctrine
  4. Unclean Hands

The Court found that each of the Defendants’ arguments failed.  The Defendants argued that the injunctive relief was moot because Verizon already shut them out of the network therefore an injunction was irrelevant.  However, the Defendants had been shut out once before but were again on the network violating the MMA Best Practices.  The Court held that if Defendants were not enjoined, they could legally attempt to regain access again and again.

The Dormant Commerce Clause invalidates state regulation if it excessively burdens interstate commerce.  The Court found the Defendants did not make a showing that the ACFA discriminates against out-of-state commerce or that the burdens imposed by the ACFA are excessive in light of the local benefits.

Under the primary jurisdiction doctrine, the Defendants argued that the Court could not decide the standards to apply in this case as the industry is regulated by the Federal Communications Commission and the Federal Trade Commission.  The Court countered by stating the MMA Best Practices applied because the Defendants contractually agreed to those standards.

The defense of unclean hands is an equitable remedy whereby the asserting party must prove inequitable conduct by the opposing party.  Defendants alleged that Verizon misrepresented Defendants’ web pages to the Court, released false press releases, misrepresented business practices to the Texas Attorney General, and alleged that the Defendants’ corporate structure was rife with criminal conspiracy while Verizon maintained a complicated corporate structure.  The Court found Verizon’s conduct did not rise to the level of fraud nor was its conduct false or misleading.

The Court granted Verizon’s request for preliminary injunction effective upon payment of a relatively token $25,000 bond.


Injunctions under the Commodity Exchange Act (part 2)

(Blog written by: Jay Lewis)

In Simmons, a Complaint for Injunctive Relief and a Motion for a Statutory Restraining Order were brought under Section 6c(a) of the Commodity Exchange Act (the “Act”), 7 U.S.C. §6c(a) (2006).  The Act allows U.S. district courts to grant ex parte restraining orders, to freeze assets, and prohibit any person from destroying records. (7 U.S.C. §13a-1 (2006)).  Under the Act, restraining orders may be issued whenever it appears that any person has engaged in a practice constituting a violation of the Act.  (Memorandum p 25, citing CFTC v Clothier, 788 F. Supp. 490, 492-3 (D. Kan. 1992)).  A prima facie case of illegality is sufficient under the Act eliminating the need for proof of irreparable injury or inadequacy of other remedies otherwise required in private actions seeking injunctions. (Memorandum p 27, citing NRLB v Aerovox Corp., 389 F. 2d 475, 477 (4th Cir. 1967). Additionally, a preliminary injunction pursuant to the Act may be granted without bond. (7 U.S.C. §13a-1(b) (2006)).


On February 11, 2011, Chief U.S. District Judge Robert Conrad signed an Order finding that:

·        The Court has jurisdiction over the parties and subject matter pursuant to Section 6c of the Act and venue is proper under 6c(e).

·        The Court found good cause to believe that the named Defendants engaged in acts that violated the Act.

·        The named Relief Defendants received assets as a result of Defendants’ acts and have been unjustly enriched.

·        Immediate and irreparable damage to the Court’s ability to grant effective final relief in the form of monetary redress will occur unless the Defendants and Relief Defendants are immediately restrained and enjoined.

·        The Court found good cause to freeze assets controlled by Defendants and Relief Defendants.

·        The Court found good case to prohibit Defendants from denying Commission representatives access to books and records.

·        The Court found good cause to order repatriation of assets controlled by Defendants and Relief Defendants.

·        The Court found good cause for expedited discovery.

·        The Court also weighed the equities and considered the Commission’s likelihood of success in its claims, and as a result, found that it is in the public’s interest to issue a restraining order.


As a result of the findings above, the Judge ordered the following:

·        The Defendants were ordered not to transfer, dissipate, or dispose of assets.

·        The Judge ordered any financial or brokerage institutions, business entity, or others controlling the Defendants’ assets to prohibit the Defendants from removing any such assets and to deny Defendants access to safe deposit boxes.

·        Judge Conrad also required businesses to provide expedited discovery to the CFTC in the form of account numbers, account balances, account dates, and safe deposit box numbers.

·        The Judge ordered Defendants to provide full accounting for all accounts inside and outside the United States within 10 days of the Order.

·        The Defendants are also ordered to transfer all assets from outside the United States to inside the United States.

·        The Judge ordered that any and all of the Defendants’ business records may not be destroyed.

·        CFTC is allowed to inspect and copy all of Defendants’ books and records.

·        CFTC is allowed to conduct expedited discovery- they may take depositions with only 5 days notice.

·        Pursuant to the Act, CFTC is not required to post a bond.


As of February 23, 2011, discovery in this case has been stayed pending the Keith F. Simmons criminal case.