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Carney Direct, Client Will Clash in Court

Carney Direct Marketing has won a temporary restraining order and is seeking an injunction against former client First National Credit involving the alleged misuse of mailing list names.

According to Carney, FNC reused almost 600,000 names provided for a previous mailing without approval or payment. Carney was granted the order June 7 in Orange County, CA, Superior Court. Both parties are due back in court June 21.

Carney began its relationship with First National Credit, a sub-prime credit card solicitor operated by Nevada-based FNC Investments Inc., in October 2000. It acted as list broker for the mailer until last month, when FNC stopped paying Carney's invoices.

Until May, FNC had been ordering 400,000 records from lists managed by Carney every 10 days and paying its invoices promptly, said Diana Arroyo, vice president of operations at Carney Direct Marketing, Irvine, CA.

“In the beginning of May, they stopped paying us, and we set up a meeting to see what we could work out,” she said.

The details of the meeting were outlined in documents regarding the temporary restraining order submitted to the court by Carney and its attorney, Donald P. Brigham, on June 7.

During the May 7 meeting with FNC officers Mahmoud Karkehabadi, aka Mike Kay, and Steve Golgolab, FNC claimed it was unable to pay the $281,900.35 owed for unpaid list rental invoices. At the time, Carney suggested that FNC consider authorized reuses of previously rented names at a reduced rate to help them keep their business afloat and possibly help Carney recoup some of the money FNC owes.

Another meeting took place May 20 at which possible reuse of data was again discussed but not authorized, Carney said.

However, according to the documents, Carney learned May 28 that FNC's service bureau, Insync Computer, had pulled about 300,000 names from about 10 CDM lists for a remail. An employee at Insync confirmed this to Carney Direct. Carney then verified through FNC's mail house, Town AllPoint, that 285,379 names had been remailed May 13 with 49,449 more remailed May 24 and an additional 247,153 remailed May 31.

Court documents also outlined the terms of the order and prohibit FNC from “using, selling, assigning, transferring, accessing and/or manipulating through computer processes or otherwise, any lists of names and addresses provided by CDM, except in connection with the return of lists to the Plaintiff.”

Meanwhile, also on June 7, FNC filed its opposition to the temporary restraining order, claiming it suffered $900,000 in lost revenue because of defective mailing lists provided by Carney.

The filing said in part, “Until approximately December 2001, FNC was fairly satisfied with the service of Carney Direct. Beginning at that time, however, FNC found that the percentage of mail returned as undeliverable jumped sixfold, from approximately 3 percent to 18 percent. This extraordinary jump made the mailings unprofitable and imperiled our company.”

In response to the allegation, Arroyo said, “I don't think there's any evidence to back that up.”

Wild Chang, FNC's attorney, said it will file a cross complaint against Carney alleging breach of contract, breach of fiduciary duty and unfair competition. He said the duplicate names on lists provided by Carney exceeded the industry standard of 3 percent. Furthermore, Chang claimed that the defendants did not reuse the lists supplied by Carney.

Last year, FNC came under investigation by attorneys general in Oregon and California because of “deceptive solicitations” and “misleading promotions.” Oregon investigators charged that FNC had mailed thousands of “gold card” promotions, implying that the credit card was a general purpose, major credit card. However, investigators said the card could be used only to purchase a limited number of items from the company's catalog. Customers paid $37-$42 for membership.

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