Judge Finds Traditional In Contempt of Court

Traditional Industries has lost another round in its dispute with the Federal Trade Commission, a setback that could exacerbate Traditional’s already severe financial problems.

The FTC said last week that a U.S. District Court judge in Seattle, Thomas S. Zilly, found Agoura Hills-based Traditional in contempt of court for violating a settlement that Traditional and the FTC reached in August, 1989, after the agency complained about some of Traditional’s sales practices.

Traditional sells packages of photographic equipment and services--typically costing between $300 and $1,500--directly to consumers, and often provides installment credit to the buyers. The FTC had alleged, among other things, that Traditional made false claims about the quality of its photo enlargements and other services.

As part of the 1989 settlement, Traditional was required to cancel sales contracts of certain customers who had bought Traditional’s products and services before the settlement was reached.

But Zilly, acting on the FTC’s request, ruled that Traditional has failed to offer the cancellation to about 1,100 customers. He also upheld the FTC’s contention that Traditional failed to change its sales practices to comply with the settlement.

In finding Traditional in contempt, Zilly further ordered Traditional to resolve any complaints from about 25,000 additional customers who signed up with Traditional between Aug. 16, 1989, and Oct. 18, 1990. If it can’t, the judge has ordered the company to cancel whatever amounts those customers still owe on their contracts.

It was not immediately clear how much money might be at stake. But Traditional is not required to refund money already paid by those customers, the FTC said.

Nonetheless, Zilly’s ruling could worsen Traditional’s already precarious position. The company lost $5.5 million on revenue of $40.8 million in the nine months that ended March 31.

But its stock price has collapsed to about 12 cents a share after climbing as high as $15 a share three years ago.

Traditional officials could not be reached for comment.