ELECTRONICALLY FILED 4/3/2012 2:24 PM CV-2012-000187.00 CIRCUIT COURT OF MADISON COUNTY, ALABAMA JANE C.

SMITH, CLERK

IN THE CIRCUIT COURT OF MADISON COUNTY, ALABAMA

STATE OF ALABAMA, Plaintiff, V. GRADY HOLT, LESLIE A. HOLT, SAFESTEEL INC., a corporation, and TORNADO MASTERS OF ALABAMA INC., a corporation, Defendants.

) ) ) ) Case No.: ) ) ) ) ) )

CV-2012-000187.00

ORDER GRANTING PERMANENT INJUNCTION AND OTHER RELIEF This matter came to be heard by the Court on March 16, 2012. At that time, the Court considered Plaintiffs Verified Complaint for Injunctive, Declaratory and Other Relief, and the Plaintiffs Motion for a Temporary Restraining Order, Preliminary Injunction, and Appointment of Receiver. All parties to this matter were served with notice of the hearing, providing all parties the opportunity to address the Court concerning the pending Motions. The State of Alabama was represented at the hearing through its Office of the Attorney General, and the Defendants appeared through counsel. Also present was the Receiver appointed by the Court on March 5. The State served all Defendants but SafeSteel, Inc., by personal service on March 5. Nine days later, SafeSteel was served by personal service on Grady Holt. Defendants have not filed an Answer or any other responsive pleading. The Court has considered the testimony and evidence presented at the Preliminary Injunction hearing along with the States Verified Complaint for Injunctive, Declaratory and Other Relief, and the Plaintiffs Motion for a Temporary Restraining Order, Preliminary Injunction and Appointment of Receiver. Based upon the foregoing, and upon a full

consideration of the record in this action, the Court makes the following findings of the procedural history of this action, uncontested facts and findings of fact, conclusions of law, and issues the following Orders in response to the Motions of the State:

A.

PROCEDURAL HISTORY

The State filed a verified complaint with supporting affidavits seeking a Temporary Restraining Order in the Madison County Circuit Court on March 5, 2012, pursuant to Ala. Code 8-19-8 (1975). An emergency ex parte Temporary Restraining Order hearing was held on March 5 with Judge Donna Pate presiding because the undersigned judge who was assigned this case was conducting a jury trial in another case. After considering the States testimony and evidence, Judge Pate granted the Motion for a Temporary Restraining Order and appointed a Receiver, William J. Gibbons, Esq., to oversee Tornado Masters of Alabama, Inc., and SafeSteel, Inc. Judge Pate set the hearing before the undersigned on the States Preliminary Injunction Motion for March 16. Upon the conclusion of the Preliminary Injunction hearing on March 19, the Court renewed the Temporary Restraining Order and Appointment of Receiver pending a decision on the request for preliminary injunction.

B.

FINDINGS OF FACT - DECEPTIVE TRADE PRACTICES

The State has brought allegations of multiple violations of Alabamas Deceptive Trade Practices Act. Having considered all of the evidence and testimony properly before it, this Court makes the following findings of fact: 1. Defendants Leslie and Grady Holt operated two businesses in Alabama, both of

which ostensibly sold tornado shelters to the public. In conducting business, both companies used online and hard-copy advertisements to represent that all of their shelters exceeded specifications

of the Federal Emergency Management Agency (FEMA) standard number 320 and would withstand the destructive force of an EF-5 tornado (as rated on the Enhanced Fujita Scale). 2. Similarly, the Court finds that Tornado Masters, through Leslie and Grady Holt,

advertised that the concrete and anchors in the shelters met FEMA specifications, that Tornado Masters offered only structurally engineered doors, and that Tornado Masters was fully licensed and insured. The vast majority of the States evidence was uncontroverted. No officer of either corporate defendant or any of the individual defendants offered testimony. Because multiple witnesses were both believable and unchallenged, the Court finds that Leslie Holt did state that his shelters had been tested at Texas Tech University where they met approval. 3. The Court finds and there is substantial evidence admitted that none of those

shelters on which the Court received testimony and documentary evidence exceed nor do they meet FEMA 320. On this point, the Court has considered testimony and evidence from Dr. Donald Kinser and Mr. Larry Keith Dunbar, a defense witness. Because Dunbar has neither seen nor inspected any of Defendants shelters including those that Kinser examined, and because Kinser testified that most of the shelters did not match the defendants own designed drawings, this Court finds Dunbars testimony to be of limited value. Kinsers testimony and reports make clear that he is qualified to reach conclusions on the characteristics and quality of the shelters. Kinser conducted a thorough review of the background materials, and his conclusions about the shelters are comprehensive, detailed, and authoritative. The Court finds the testimony of Dr. Kinser to be compelling and the Court finds his research, methodology, and conclusions substantially and inadequately challenged by the Defendants. 4. The Court finds, based on expert testimony, that, as to the shelters on which

testimony was elicited, many would not withstand an EF-5 tornado. Given that the Defendants

represent that every shelter will withstand an EF-5 tornado, it is implicit from the evidence that many will not. Further, the Court finds that the evidence is uncontroverted that Tornado Masters is not fully licensed, and that Defendants shelters were not tested at Texas Tech University. Given both the stipulations by the parties and the lack of rebuttal testimony by the defense, the Court finds that Defendants knew Tornado Masters was unlicensed, knew their shelters were not tested at Texas Tech University, and knew or reasonably should have known that many of the shelters did not meet FEMA 320 and would not withstand an EF-5 tornado. The Court finds the representations in advertisements and by oral statements attributable to the Defendants are false and otherwise deceptive. 5. The Court finds that multiple consumers were deceived by Defendants

representations including that the shelters had been tested at Texas Tech University, met FEMA standards, and would withstand an EF-5 tornado. 6. The Court finds that the Defendants represented that grants bearing the

unauthorized seal of the United States Department of Agriculture (USDA) had or would be awarded to customers. These grants were not issued by the USDA, which awarded no grant money to Defendants customers, approved no shelters, and never had a business relationship with Tornado Masters or SafeSteel. The Defendants distributed these fraudulently created grants to consumers both by hand delivery and through the mail. The Court finds that Defendants deceived customers into believing that the federal government had awarded them money and approved their shelters. In making this determination, the Court is not persuaded by the unsubstantiated suggestion in questions by defendants counsel that a supposed USDA employee named Charlie Rutledge purportedly approved the grant program. There is absolutely no evidence before the Court that such approval was even possible, or ever sought.

7.

The Court finds that Defendants failed to deliver a shelter to Mr. Richard Storie in

a reasonable time despite collecting a down payment of $3,642. As with many other State witnesses, Stories testimony went unchallenged. The Court further finds that Defendants were aware that Storie never received a refund or a shelter. Similarly, the Court finds that other consumers did not receive a shelter in the time promised after making down payments. 8. The Court finds that Tornado Masters and SafeSteel are de facto one and the same

enterprise in all but their legal form. The few shelter designs that Defendants produced to the State often carry both corporate names, and at least one customer was given a SafeSteel receipt and a Tornado Masters USDA grant. The root of these supposedly distinct companies can be traced to Leslie Holt who operated and controlled both entities. C. I. CONCLUSIONS OF LAW - DECEPTIVE TRADE PRACTICES The State of Alabama, by and through its Attorney General, is authorized under

the Deceptive Trade Practices Act to bring an action against any person who is engaging in, has engaged in or is about to engage in any act or practice declared to be unlawful under the Act. ( 8-19-8 Code of Alabama 1975, as amended). The Attorney General may bring an action against such person to restrain by temporary restraining order and temporary or permanent injunction such acts or practices. 8-19-8(a) Code of Alabama 1975, as amended. II. Defendants conduct constitutes violations of the Deceptive Trade Practices Act in

at least the following respects: a. Defendants wrongfully, knowingly and intentionally deceived consumers

by advertising that all of their shelters were certified as compliant with standards referred to as FEMA 320; b. Defendants wrongfully, knowingly and intentionally deceived customers

by representing that all of their shelters exceeded said FEMA 320 specifications; c. Defendants wrongfully, knowingly and intentionally created the

misunderstanding that their shelters designs were affiliated with or certified by Texas Tech University; d. Defendants wrongfully, knowingly and intentionally misrepresented that

all of their shelters would withstand an EF-5 tornado; e. than they truly are; f. Defendants wrongfully, knowingly and intentionally sold shelters that did Defendants illegally represented that their shelters were a higher quality

not meet FEMA 320 despite advertising otherwise; g. Defendants wrongfully, knowingly and intentionally made false and

misleading statements about the reason for price deductions by creating and distributing fraudulent and misleading supposed USDA grants to consumers; h. Defendants failed to deliver shelters in a reasonable time and in at least

one case, failed to deliver at all; and i. Together each of these acts constitutes an unconscionable, false,

misleading, or deceptive act or practice in trade pursuant to Alabama law. III. Defendants did not meet their burden of proof in establishing any defenses

provided in 8-19-13 Code of Alabama 1975, as amended. The testimony of the defendants one witness, Mr. Larry Dunbar, did not provide sufficient proof refuting or excusing the culpability of the defendants in this case. IV. The Court concludes that the Attorney General has shown with substantial,

competent evidence that Defendants have engaged in continuous and willful violations of the

Alabama Deceptive Trade Practices Act 8-19-8(c) Code of Alabama 1975, as amended. The Defendants displayed a pattern of misconduct that can neither be ignored nor allowed to persist, given the alarming scope and magnitude of the violations wrought on consumers. The States expert examined seventeen shelters and concluded that not a single one met what had been promised by the Defendants, i.e., the near-absolute protection achieved by FEMA 320 status. In fact, the evidence shows that some of these shelters could result in harm to occupants on a sunny day. V. The Court finds and concludes that the Defendants in this cause, as specified

herein above, have been engaging in practices and acts which are unlawful pursuant to the Alabama Deceptive Trade Practices Act, 8-19-1, et seq., Code of Alabama 1975, as amended. The Court finds and determines that the customers and potential customers of these Defendants are facing irreparable harm without adequate remedy at law. The Court finds

injunctive relief is necessary to provide the protection of Alabama consumers contemplated by the Act. It is this Courts determination that a permanent injunction preventing all of the

Defendants from continued operation of a tornado-shelter business under any name, entity or organization is necessary and appropriate.

D. 1.

CONSOLIDATION WITH A TRIAL ON THE MERITS

Pursuant to discussions this Court conducted in the presence of all representatives of each

party in this matter, and on its own motion and under the authority of ARCP 65(a)(2), this Court hereby consolidates the Preliminary Injunction hearing with the Final Trial on the merits. The comprehensive presentation by the State, especially the persuasive and authoritative testimony of

its expert, Dr. Kinser, establishes that there is little, if any, evidence left to be heard at a further trial. Accordingly, this Court exercises its power to consolidate the action.

E.

REASONS FOR THE ISSUANCE OF THE PERMANENT INJUNCTION AND THE PERMANENT APPOINTMENT OF THE RECEIVER Based upon the foregoing facts and conclusions of law, and in accordance with Rule 65

(d) Alabama Rules of Civil Procedure, the Court sets forth the following reasons for the Issuance of the Permanent Injunction: 1. The State has established the right of the consuming public to be protected from

deceptive and unlawful trade practices as provided in 8-19-1, et seq., Code of Alabama 1975, as amended. This Court has the authority to grant an injunction enjoining the illegal business activities of Defendants in order to protect consumers from unlawful trade practices pursuant to 8-19-8 Code of Alabama 1975, as amended. 2. The Defendants have failed to obtain numerous licenses and have knowingly

advertised otherwise. Further, the evidence shows that Defendants made numerous other false representations including that their shelters met FEMA 320, were tested at Texas Tech University, and would withstand an EF-5 tornado. 3. A permanent injunction must be issued and a Receiver appointed permanently in

order to prevent the Defendants from diverting money that will be necessary to repair or replace dangerous shelters, upgrade inadequate shelters, reimburse those who never received shelters, and, if available, after those obligations are met, to pay the appropriate and necessary fines and costs to the State. 4. The State has no adequate remedy at law to protect the consuming public against

these continuing unlawful trade practices. Because the evidence establishes an unreasonable risk of irreparable harm to the public and a potential increase in the number of aggrieved consumers, the Court enters this order as a permanent injunction. The State has shown that the harm to consumers has been and will continue to be imminent and irreparable. Therefore, the Court determines that a permanent injunction and the appointment of a receiver should issue. 5. The Court therefore finds that immediate and irreparable injury will occur in the

absence of permanent injunctive relief, that there is no adequate remedy at law, that the Plaintiff has presented substantial evidence in support of its allegations on the merits of the case, and that the hardship imposed upon the Defendants does not and will not unreasonably outweigh the benefit to the State and its citizens, and that granting the injunction serves the public interests and, in fact, is required to protect said public interest. The State on behalf of its consumer citizens is entitled to permanent injunctive relief.

F.

ORDER FOR PERMANENT INJUNCTION

Based upon the foregoing, and for good cause shown, Plaintiffs Motion for Permanent Injunction is GRANTED. Accordingly, it is hereby ordered, adjudged and decreed as follows, effective this date: 1. That the Defendants individually and through any name, entity or organization are

permanently enjoined from engaging in the business of or participating or being involved in the design, construction, manufacturing, advertising, sale, delivery, installation, inspection, repair, of or in consultation about tornado shelters, safe rooms, or similar products whether or not for profit within or from Alabama or with Alabama customers; 2. That the Defendants are permanently enjoined from soliciting, acquiring or entering

into contracts with new customers from the date of this Order; 3. That a Permanent Receiver is duly appointed by separate order of this Court on

this date and the Defendants are hereby directed to disclose immediately to the Permanent Receiver the existence and location of any and all financial accounts in any banks, brokerage firms, credit unions, or any other financial or depository institutions; 4. That all banks, brokerage firms, credit unions, or any other financial or depository

institutions in which funds are deposited by Defendants, their agents, servants or employees, or upon which Defendants have signatory authority, in whatever names the accounts are held, shall freeze all activity on these accounts, subject to the Permanent Receivers direction. Further, all activity on any account of Defendants in which money is deposited or in which Defendants have signatory authority and later discovered by Plaintiff shall be frozen, subject to the Permanent Receivers direction; 5. All banks, brokerage firms, credit unions, and other financial and depository

institutions, wherever they may be located, are ordered to provide immediately to the Receiver, and to the State, all financial records involving any account in which the Defendants have signatory authority; 6. Further, all activity on any account in which Defendants have signatory authority

which is later discovered by the State or by any financial institution is hereby and shall be frozen, subject to the Permanent Receivers direction; 7. That the Defendants are ordered to disclose to the Receiver and to the State the

identities of all persons who act as agents, representatives, employees, consultants or independent contractors or who have provided the names of potential customers for Defendants; 8. That the Defendants are ordered to provide to the Permanent Receiver a list of all

websites and Internet addresses used by Defendants to discuss, promote, describe or advertise their services, to solicit business, or to offer services and to provide the means by which to access those websites, including all passwords; 9. That the Defendants provide to the Permanent Receiver an accounting of all funds

received by or paid to Defendants at any time that Defendants were doing business; 10. That Defendants disgorge to the Permanent Receiver all fees, funds, and monies

received by Defendants; 11. Defendants, individually and through any name, entity or organization are

enjoined from promoting, advertising, or conducting any business on any and all Internet sites that relate to the design, construction, manufacturing, advertising, sale, delivery, installation, inspection, repair, or consultation of tornado shelters, safe rooms, or similar products, whether or not for profit, within or from Alabama or with Alabama customers; 12. Defendants and all persons associated with them through any name, entity or

organization are enjoined from disposing of, transferring or otherwise moving cash, checks or other financial instruments on the premises or otherwise in their possession; 13. Defendants and their agents shall provide a list of all customers, reflecting the

amounts that customers paid as a down payment any other amounts received by Defendants from each of Defendants customers. 14. Any violation of this Order shall result in a fine of $25,000 per violation and,

upon proper petition and proof, the party in violation shall be judged in contempt. This Court shall retain jurisdiction over this action. 15. As a conservative estimate, the evidence shows that Defendants sold

approximately 220 shelters last year-each of which was sold on the promise that the company

was licensed, that the shelter exceeded FEMA 320 and would withstand an EF-5 tornado, and that each would be delivered on time. In every instance, the promise that Tornado Masters was licensed was false. And in a number of instances, the representations about timeliness, quality, and safety were also false. The Deceptive Trade Practices Act authorizes civil penalties in the amount of $2,000 per violation per 8-19-11 Code of Alabama 1975, as amended. Regarding the 17 shelters on which this court heard testimony all but two were sold to consumers. Those two were sold for re-sale to a Jackson County, Alabama business. Accordingly, this Court awards the Attorney General civil penalties of $30,000 against the Defendants, jointly and severally. The Court also reserves the right to award additional civil penalties pursuant to said section. The Attorney General may petition for recovery of these violations. Because the Office of Attorney General has reserved its right to collect these penalties until each consumer is made whole, the Receiver shall be made aware that these penalties stand junior to the interests of consumers. 16. Because of the mandatory requirements of 8-19-11(e), Code of Alabama 1975,

as amended, the court reserves for separate hearing the issue of attorneys fees and costs, and the Attorney Generals office shall submit in writing its proposed submission for order regarding attorneys fees and costs within ten (10) days of the herein order, which shall become the order of the court, unless objected to by the defendants within 5 days after its submission. Like the penalties awarded above in Paragraph F.-15, these fees shall only be paid after consumers are first made whole.

H.

FINAL JUDGMENT

The Court expressly determines that there is no just reason for delay and directs the entry

of final judgment as to all claims presented by the State. DONE this 3rd day of April, 2012. /s/ DENNIS E ODELL CIRCUIT JUDGE