United States District Court, D. Nevada
M. Navarro, Chief Judge United States District Judge.
before the Court is the Motion to Dissolve the Emergency
Restraining Order, (ECF No. 1038), filed by Interested
Parties El Dorado Trailer Sales, LLC, and E.T.S. Ventures,
LLC (collectively “El Dorado”). The Federal Trade
Commission (“FTC”) filed a Response, (ECF No.
1046), and El Dorado filed a Reply, (ECF No. 1053). For the
reasons discussed below, the Court DENIES the Motion.
action was originally brought by the FTC asserting that
certain payday lending entities violated portions of the
Federal Trade Commission Act, the Truth in Lending Act, and
the Electronic Fund Transfer Act. (Am. Compl. 15:1-20:6, ECF
No. 386). On March 31, 2016, the Court entered an Order, (ECF
No. 960), granting the FTC's Motion for Preliminary
Injunction against the payday lending defendants and their
associated entities, including Level 5 Motorsports LLC
(“Level 5”), in the form of an asset freeze and
accounting (the “Asset Freeze Order”). The
instant Motion concerns the disputed ownership of an asset
purchased by Level 5 and subject to the Asset Freeze Order.
the pendency of this action, Level 5 entered into a contract
(“Purchase Contract”) dated August 13, 2014, with
Bruce High Performance Transporters, LLC (“Bruce
Transporters”) to purchase a custom vehicle transport
trailer. (Ex. D to Am. Becker Aff. at 9- 15, ECF No. 1052-1).
The Purchase Contract required Level 5 to pay Bruce
Transporters $578, 046.00, payable in a down payment and two
installments, with a delivery date of December 15, 2014.
(Id.). Although Level 5 made each of these payments,
Bruce Transporters never completed construction of the
trailer and Level 5 made no attempts to take possession of
the trailer. (See Ex. 3 to Resp. at 4, ECF No.
December 2015, Bruce Transporters had ceased all operations.
(See Mot. to Dissolve 4:3-4). Ultimately, Bruce
Transporters executed an asset purchase agreement
(“Asset Purchase Agreement”) with El Dorado on
December 31, 2015. (Ex. E to Am. Becker Aff. at 17-21).
Pursuant to the Asset Purchase Agreement, El Dorado paid
$400, 001.00 in exchange for Bruce Transporters'
“accounts receivable, accounts payable as of December
31, 2015, inventory, work in progress, equipment and other
tangible personal property.” (Id.). Schedule A
of the Asset Purchase Agreement lists the assets acquired by
El Dorado but does not include the trailer purchased by Level
5. (Id. at 27-40). After executing the Asset
Purchase Agreement, El Dorado took possession of the
unfinished trailer and spent $281, 164.37 to complete it.
(Mot. to Dissolve 5:3-10); (Ex. F to Am. Becker Aff. at
learned of El Dorado's possession of and intent to sell
the trailer in August 2016. (Resp. 2:4-6, ECF No. 1046).
Shortly thereafter, the FTC filed an Emergency Motion to
Enforce the Asset Freeze Order, (ECF No. 1031), asking the
Court to restrain El Dorado against any attempts to sell or
otherwise dispose of the trailer and permitting the FTC to
designate an agent to take custody of it, which the Court
granted, (ECF No. 1036). On November 30, 2016, the Court
issued a new Asset Freeze Order, (ECF No. 1099), to appoint a
monitor and preserve the value of monitorship assets. In the
instant Motion, El Dorado asks the Court to dissolve the
Asset Freeze Order with regard to the trailer. (See
generally Mot. to Dissolve, ECF No. 1038).
Dorado argues that the Court lacks jurisdiction to enforce
the Asset Freeze Order against it. (Mot. to Dissolve
8:1-11:7, ECF No. 1038). In support of its position, El
Dorado emphasizes that it is neither a party to the
underlying action nor was it named in the Court's
Preliminary Injunction Order. (Id. 8:15-17).
However, federal courts possess broad authority “to
issue a variety of ‘ancillary relief' measures in
[enforcement] actions brought by [federal agencies].”
SEC v. Wencke, 622 F.2d 1363, 1369 (9th Cir. 1980);
see also SEC v. Universal Financial, 760 F.2d 1034,
1038 (9th Cir. 1985) (noting a district court's power to
enter a blanket receivership stay “is broader than the
court's authority to grant or deny injunctive relief
under Fed.R.Civ.P. 65”). “The Supreme Court has
repeatedly emphasized the broad equitable powers of the
federal courts to shape equitable remedies to the necessities
of particular cases, especially where a federal agency seeks
enforcement in the public interest.” Wencke,
622 F.2d at 1371.
expression of the Court's inherent authority to fashion
equitable relief is the in rem injunction. Because
“in rem orders [are] particularly vulnerable to
disruption by an undefinable class of persons who are neither
parties nor acting at the instigation of parties . . . courts
must have the power to issue orders . . . tailored to the
exigencies of the situation and directed to protecting the
court's judgment.” United States v. Hall,
472 F.2d 261, 266 (5th Cir. 1972); accord United States
v. Paccione, 964 F.2d 1269, 1275 (2d Cir. 1992) (noting
that orders issued “to preserve property for forfeiture
following a RICO conviction . . . closely resemble remedies
such as garnishment or attachment, which may be directed
routinely at third-parties, who have no interest in the
merits of the underlying litigation”).
order issued to preserve the assets of a receivership estate
is a classic example of an in rem injunction.
See SEC v. Hardy, 803 F.2d 1034, 1037 (9th Cir.
1986) (“The basis for broad deference to the district
court's supervisory role in equity receiverships arises
out of the fact that most receiverships involve multiple
parties and complex transactions.”); cf. SEC v.
Wencke, 622 F.2d 1363, 1369 (9th Cir. 1980) (“The
power of the district court to issue a stay, effective
against all persons, of all proceedings against the
receivership entities rests as much on its control over the
property placed in receivership as on its jurisdiction over
the parties to the securities fraud action.”). In
Wencke, an SEC enforcement action, the Ninth Circuit
upheld a blanket stay of actions against an equitable
receivership and its assets, declaring that “rule 65(d)
does not limit the power of a federal court to enter such
orders.” Id. at 1371. The court noted,
however, that such orders would be upheld only “upon an
appropriate showing of necessity.” Id. The
Wencke court found that a blanket stay was
“necessary to achieve the purposes of the
receivership.” Id. at 1369.
the receivership was instituted to preserve the assets of the
lending defendants named in the underlying action in order to
provide redress for defrauded consumers. (See Order
Appointing Monitor and Freezing Assets 6:6-8, ECF No. 1099).
Permitting El Dorado to retain assets that are properly part
of the Monitorship Estate would thus thwart the purpose of
the receivership. Moreover, requiring the FTC to institute a
separate action against any third party holding assets of the
receivership estate “would result in a multiplicity of
actions in different forums, and would increase litigation
costs for all parties while diminishing the size of the
receivership estate.” SEC v. Universal
Financial, 760 F.2d 1034, 1038 (9th Cir. 1985); (see
also Order Appointing Monitor and Freezing Assets
11:7-8) (“This Court shall have exclusive jurisdiction
regarding any dispute regarding whether any Asset is included
in the Monitorship Estate.”). Accordingly, the
Court's Asset Freeze Order is necessary to achieve the
purposes of the receivership, and the Court denies El
Dorado's request to dissolve any aspect of
HEREBY ORDERED that El Dorado's Motion to Dissolve the
Court's Asset ...