No. 20-55858

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

–––––––––––––––––––––––––––––––––––––––––––––

FEDERAL TRADE COMMISSION,

Plaintiff-Appellee,

v.

JASON CARDIFF and EUNJUNG CARDIFF, et al.,

Defendants-Appellants, 

and

VPL MEDICAL, INC.,

Intervenor-Appellant.

–––––––––––––––––––––––––––––––––––––––––––––

Appeal from the United States District Court

for the Central District of California

No. 5:18-cv-02104-DMG-PLA

The Honorable Dolly M. Gee

–––––––––––––––––––––––––––––––––––––––––––––

ANSWERING BRIEF OF THE 

FEDERAL TRADE COMMISSION

–––––––––––––––––––––––––––––––––––––––––––––

ALDEN F. ABBOTT

General Counsel

JOEL MARCUS

Deputy General Counsel

Of Counsel:

ELIZABETH JONES SANGER 

SHIRA D. MODELL 

JAMES A. PRUNTY 

EDWIN RODRIGUEZ 

Attorneys

FEDERAL TRADE COMMISSION

Washington, D.C. 20580

MARK S. HEGEDUS

Attorney

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-2115

mhegedus@ftc.gov

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ................................................................................... iii

INTRODUCTION .....................................................................................................1

ISSUES PRESENTED FOR REVIEW.....................................................................1

JURISDICTION.........................................................................................................2

STATEMENT OF THE CASE..................................................................................2

A. The FTC’s Complaint, the District Court’s First TRO and 

PI, and Subsequent Contempt Orders.........................................................2

B. VPL Medical, Inc. ......................................................................................7

C. Second TRO and PI....................................................................................9

SUMMARY OF ARGUMENT...............................................................................12

ARGUMENT...........................................................................................................15

I. Standard of Review...........................................................................................15

II. The District Court Correctly Entered a Preliminary Injunction 

Freezing Cardiff’s Assets and Placing VPL Under Receivership....................16

A. The First PI Covers Cardiff’s Assets, Whenever Acquired. ....................16

B. The Supreme Court’s Liu Decision Does Not Require 

Reversal. ...................................................................................................20

1. Liu did not reverse this Court’s precedents interpreting 

he FTC Act. ......................................................................................21

2. The Asset Freeze and Receivership are proper under 

Liu. ....................................................................................................24

a. Liu does not require asset tracing. ...............................................24

b. Cardiff has not proven legitimate expenses ................................25

C. The District Court Correctly Weighed the Equities.................................27

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CONCLUSION........................................................................................................29

STATEMENT OF RELATED CASES

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TABLE OF AUTHORITIES

CASES

AMG Capital Management, LLC v. FTC, 910 F.3d 417 

(9th Cir. 2018), cert. granted, 2020 WL 3865250 (U.S. 

July 9, 2020).........................................................................................................12

Callaghan v. Myers, 128 U.S. 617 (1888)...............................................................26

Does 1-5 v. Chandler, 83 F.3d 1150 (9th Cir. 1996)...............................................15

FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 

1999)........................................................................................................ 15, 21, 27

FTC v. Commerce Planet, 815 F.3d 593 (9th Cir. 2016) ............... 21, 22, 23, 25, 26

FTC v. Credit Bureau Center, 937 F.3d 764 (7th Cir. 

2019), cert. granted, 2020 WL 3865251 (U.S. July 9, 

2020).....................................................................................................................12

FTC v. H.N. Singer, 668 F.2d 1107 (9th Cir. 1982)................................................21

FTC v. World Wide Factors, Ltd., 882 F.2d 344 (9th Cir. 

1989).............................................................................................................. 16, 27

Hart v. Massanari, 266 F.3d 1155 (9th Cir. 2001)..................................................22

Liu v. SEC, 140 S. Ct. 1936 (2020)................................. 1, 13, 20, 23, 24, 25, 26, 27

Natural Resources Defense Council v. Southwest Marine, 

Inc., 242 F.3d 1163 (9th Cir. 2001) .....................................................................19

Porter v. Warner Holding Co., 328 U.S. 395 (1946) ....................................... 22, 23

Portland Feminist Women’s Health Center v. Advocates 

for Life, Inc., 859 F.2d 681 (9th Cir. 1988) .........................................................19

Root v. Ry. Co., 105 U.S. 189 (1882) ......................................................................26

Rubber Co. v. Goodyear, 76 U.S. 788 (1869) .................................................. 25, 26

Schering Corp. v. Illinois Antibiotics Co., 62 F.3d 903 

(7th Cir. 1995)......................................................................................................19

SEC v. Wallenbrock, 313 F.3d 532 (9th Cir. 2002).................................................15

United States v. Odessa Union Warehouse Co-op, 833 

F.2d 172 (9th Cir. 1987).......................................................................................16

United States v. United States Gypsum Co., 333 U.S. 364 

(1948)...................................................................................................................16

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Walczak v. EPL Prolong, Inc., 198 F.3d 725 (9th Cir. 

1999).............................................................................................................. 15, 16

STATUTES

15 U.S.C. § 1693o(c) .............................................................................................2, 3

15 U.S.C. § 45(a) ...................................................................................................2, 3

15 U.S.C. § 52........................................................................................................2, 3

15 U.S.C. § 53(b).................................................................................... 2, 16, 22, 23

15 U.S.C. § 6105....................................................................................................2, 3

15 U.S.C. § 78u(d)(5)...............................................................................................22

15 U.S.C. § 8404....................................................................................................2, 3

15 U.S.C. § 8404(a) ...................................................................................................2

28 U.S.C. § 1292(a) ...................................................................................................2

28 U.S.C. § 1331........................................................................................................2

28 U.S.C. § 1337(a) ...................................................................................................2

28 U.S.C. § 1345........................................................................................................2

RULES

Fed. R. Civ. P. 62(c).................................................................................................19

Fed. R. Civ. P. 65(d) ................................................................................................19

OTHER AUTHORITIES

Restatement (Third) of Restitution, § 51 cmt. b & 

Reporter’s Note b .................................................................................................24

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INTRODUCTION

Appellants Jason Cardiff and a company he owns and/or controls, VPL 

Medical, Inc. (together “Cardiff”), appeal a district court order entering a 

Preliminary Injunction freezing VPL’s assets and appointing a Receiver to manage 

the company. The district court issued this PI after concluding that (1) the assets 

were subject to an earlier preliminary injunction whose terms covered Cardiff’s 

interests in VPL, (2) Cardiff has a record of hiding and dissipating assets, and (3) 

the additional freeze was needed to preserve assets from further dissipation. 

Cardiff fails to show that the district court abused its discretion in entering a 

second PI. This Court should affirm.

ISSUES PRESENTED FOR REVIEW

1. Whether the district court abused its discretion in freezing assets and 

placing them in receivership after concluding that the assets were subject to a 

previously issued preliminary injunction and might otherwise be dissipated.

2. Whether the district court abused its discretion in applying controlling 

Circuit precedent that authorizes a district court to preserve assets pending a final 

judgment that could include equitable monetary relief while concluding that Liu v. 

SEC, 140 S. Ct. 1936 (2020), was not controlling.

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3. Whether the district court abused its discretion in concluding that the 

public interest in asset preservation outweighed Cardiff’s private interest in 

operating his company free from a receivership.

JURISDICTION

The FTC brought the underlying complaint under 15 U.S.C. §§ 45(a), 52; 15 

U.S.C. § 8404; 15 U.S.C. § 1693o(c); and 15 U.S.C. § 6105. ER984. The district 

court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a), and 

1345; 15 U.S.C. §§ 45(a) and 53(b); 15 U.S.C. § 8404(a); and 15 U.S.C. 

§ 1693o(c). On July 7, 2020, the district court entered the preliminary injunction 

on review, ER006, which Cardiff timely appealed on August 19, 2020, ER132.

1

This Court has jurisdiction under 28 U.S.C. § 1292(a).

STATEMENT OF THE CASE

A. The FTC’s Complaint, the District Court’s First TRO and PI, and 

Subsequent Contempt Orders

In October 2018, the FTC sued Jason and Eunjung Cardiff and others for 

making false and unsubstantiated claims that their products would help people quit 

smoking, lose weight, and improve their sexual performance. The Complaint also 

charged a related unlawful auto-ship continuity program that resulted in 

unauthorized shipments and charges, abusive telemarketing through robocalls, and 

 1 Cardiff also filed in this Court a motion for summary reversal (Dkt. 4-1), which 

the FTC opposed (Dkt. 9). That motion is pending.

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unsubstantiated claims regarding a multi-level marketing scheme. Those acts 

violated the FTC Act, 15 U.S.C. §§ 45(a), 52, the Restore Online Shoppers’ 

Confidence Act, 15 U.S.C. § 8404, the Electronic Fund Transfer Act, 15 U.S.C. 

§ 1693o(c), and the Telemarketing and Consumer Fraud and Abuse Prevention 

Act, 15 U.S.C. § 6105.

2 ER985-ER998.

On October 10, 2018, the district court entered a temporary restraining order 

(First TRO) against Defendants, SER182, which it extended two weeks later, 

ER130. On November 8, 2018, the court entered a preliminary injunction (First PI) 

against them. ER060. Section XVI.D of the First TRO and First PI froze 

Defendants’ assets and appointed a Receiver who is directed and authorized to, 

among other things, “[c]onserve, hold, manage, and prevent the loss of all 

Receivership Property, and perform all acts necessary or advisable to preserve the 

value of those Assets.” SER201, ER082-ER083. The First TRO and First PI grant 

the Receiver “full power to sue for, collect, and receive, all Receivership 

Property[.]” Id. As pertinent here, Definition M of the First TRO and First PI 

defines “Receivership Property” as: “any Assets, wherever located, that are: (1) 

 2 The other defendants are Danielle Cadiz, a/k/a Danielle Walker; Redwood 

Scientific Technologies, Inc. (California); Redwood Scientific Technologies, Inc. 

(Nevada); Redwood Scientific Technologies, Inc. (Delaware); Identify, LLC; 

Advanced Men’s Institute Prolongz LLC; Run Away Products, LLC; and Carols 

Place Limited Partnership. ER060-ER062.

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owned, controlled, or held by or for the benefit of ... Jason Cardiff, ... in whole or 

in part; (2) in the actual or constructive possession of ... Jason Cardiff ...; or (3) 

owned, controlled, or held by, or in the actual or constructive possession of, or 

otherwise held for the benefit of, any corporation, partnership, trust, or other entity 

directly or indirectly owned or controlled by ... Jason Cardiff ... .” SER187, 

ER068. 

The Asset Freeze is designed to preserve funds so that they remain available 

for consumer redress if a monetary judgment is entered at the conclusion of the 

case. Paralleling the definition of Receivership Property, the Asset Freeze 

provision, Section VII.A, covers “any Assets that are” (1) owned or controlled, 

directly or indirectly, (2) held, in part or in whole, for the benefit of, or (3) in the 

actual or constructive possession of any Defendant. SER193, ER073-ER074. It 

also covers “any Assets that are” (4) owned or controlled by, in the actual or 

constructive possession of, or otherwise held for the benefit of any corporation, 

partnership, asset protection trust, or other entity that is directly or indirectly 

owned, managed, or controlled by any Defendant. SER193, ER074.

Importantly for this appeal, Section VII, Final Paragraph 3 of the First

TRO’s and First PI’s Asset Freeze provision specified that it “shall include” all

Cardiff assets, personal and business, whenever acquired, not simply assets held 

when the First TRO was entered or those later acquired and derived from 

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prohibited activity. SER193-SER194, ER074. As set forth in Section VII, Final 

Clauses 1 and 2, other defendants did not face such a broad freeze. Id. That 

differential treatment (including placing the Cardiffs’ individual assets under 

receivership) was justified by evidence showing that the Cardiffs used elaborate 

asset-protection vehicles designed to shield their assets from creditors and potential 

creditors. SER219-SER224; see also ER043-ER044. 

Subsequent events have proven the prescience of such provisions. The FTC 

and Receiver have documented the Cardiffs’ violations of the First TRO, such as

Jason Cardiff’s attempts to transfer more than $200,000 to third parties, including 

parties outside the United States. SER164-SER166. Indeed, since entry of the First

PI, the district court has found the Cardiffs in contempt three times for failing to 

disclose assets, failing to turn assets over to the Receiver, and dissipating and 

wasting assets covered by the PI. SER154, SER132, SER039. The first contempt 

involved an elaborate scheme, aided by their friend Jacques Poujade, to hide the 

Cardiffs’ control of a Canadian company, while maintaining that Jason Cardiff was 

merely an unpaid consultant to the operation. Cardiff used the company to transfer 

$1.56 million (Canadian or CAD) from a company bank account (for which the 

Cardiffs were the only signatories) to subsidiary accounts that, among other things,

funded the Cardiffs’ extravagant lifestyle, in violation of the First TRO and PI. At 

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a contempt hearing, the district court rejected the Cardiffs’ explanation for the 

transfer, stating:

I would say of the 16 years I’ve been on the federal court, I’ve never 

presided over a matter where the fraud committed by the defendants 

was so clear, the deception so extreme. I’m astounded.

SER176 (Tr. 389:3-6). It continued:

I’ve heard carefully from the Cardiffs. Their stories are totally 

unbelievable. It’s pretty clear to the Court that they’ve lied, that they 

worked in concert with each other and with others to avoid, violate the 

conditions of the orders of the Court.

SER177 (Tr. 390:3-7). The district court found the Cardiffs and Poujade in 

contempt of the asset freeze. SER155.

3

The second contempt involved the Cardiffs’ refusal to pay their mortgage, 

thereby dissipating the value of their house (also a frozen asset)—while at the same 

time spending freely on nonessential living expenses, such as multiple luxury car 

leases, using money from an unknown source. SER143-SER146. The Cardiffs also 

failed to truthfully and completely account for their assets. SER150. The district 

court ordered the Cardiffs to reimburse the Receivership Estate for their unpaid 

mortgage and truthfully and completely account for all of their assets, SER136, but 

they have not done so. SER048.

 3 The contempt orders against Poujade are under appeal in this Court in No. 19-

56397. See, infra, Statement of Related Cases.

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The district court found the Cardiffs in contempt a third time for failing to 

comply with the purge conditions set forth in the second contempt order. SER039. 

Specifically, the court found that the Cardiffs failed to disclose accounts containing 

hundreds of thousands of dollars that were “ferreted out” by the FTC, SER046, and 

that they continued to lie about the source of funds from which they paid their 

expenses from May 2019 through July 2020, SER043-SER045. The Cardiffs 

remain in contempt. SER035.

4

B. VPL Medical, Inc.

VPL, the corporate appellant here, appears to be the Cardiffs’ latest attempt 

to conceal their assets and income. On March 2, 2020, the Cardiffs’ counsel 

reported (as required by the First PI) Jason Cardiff’s intent to create a “business 

entity that will manufacture and market disposable sanitary masks to be marketed 

and sold wholly to distributors and wholesalers of the mask. Jason will be the 

owner, principal, and agent for the business.” SER076. On April 27, Cardiff 

submitted to the FTC and the Receiver a disclosure concerning his involvement in 

VPL. The report outlined a byzantine but not fully formed structure for multiple 

entities to carry out this mask business. As in the past, Cardiff downplayed his role, 

referring to himself as merely a “consultant,” although he co-founded the 

 4 The district court held Jason Cardiff in contempt a fourth time for obtaining a 

new Irish passport in violation of an order requiring him to surrender his passports 

to the Receiver. SER168-SER172. 

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company, served as the CEO, and called it “my biggest company to date.” ER866. 

The Cardiffs’ report provided no details about his role at VPL, which later secured

millions of dollars in government contracts. 

Although Cardiff reported that no one associated with defendant Redwood

Scientific was involved in the new company, in fact, Cardiff chose a long-time 

colleague from Redwood, Bobby Bedi, as a front man for VPL. Bedi served on 

Redwood’s Board and as its head of technology, wrote blog posts touting Redwood 

products, provided it search-engine optimization services, helped it launch a multilevel marketing scheme, and helped it apply for merchant accounts. SER079.

Even though Cardiff used Bedi’s name on some VPL documents, third-party 

documents confirm that Cardiff controlled VPL. In mid-April, 2020, the Veterans 

Administration (VA) and the Department of Health and Human Services (HHS) 

awarded VPL contracts for up to $6.4 million and $14.5 million, respectively, to 

supply surgical masks. SER082, SER084-SER097. VPL received another mask

contract from the Federal Emergency Management Agency (FEMA) at the end of 

April. SER082, SER107-SER108. In correspondence with the VA, Stacey Barker, 

the head of VPL’s enterprise sales, copied only Cardiff. SER118. Similarly, an 

email from Barker to FEMA stated that she was copying Cardiff, “my CEO.” Id. 

VPL phone records show approximately 600 calls totaling nearly 2,000 minutes 

between Barker and Cardiff between March 25 and the end of May. Id.

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Cardiff also served as the public face of VPL. A mid-March Twitter post 

directed to the U.S. President listed jc@vplmedical.com as VPL’s contact person. 

SER118-SER119. Investigative reporting by ProPublica referred to Cardiff as a 

VPL representative. SER119.

C. Second TRO and PI

As described above, Cardiff’s control over VPL makes its assets 

Receivership Assets subject to the Asset Freeze. Because of Cardiff’s proven 

history of concealing his assets, on June 24, 2020, the FTC sought a second TRO

on an ex parte basis freezing VPL’s assets and appointing a Receiver over the 

company. SER109. The district court entered the Second TRO the same day.

ER039. The court found that the FTC would likely succeed in showing that Cardiff 

controls VPL and its assets, which therefore are Receivership Property. ER043. 

The court also found that, given Cardiff’s past contemptuous conduct, he was 

likely to conceal or dissipate the VPL assets and destroy evidence of his ownership 

of VPL absent the Second TRO. ER044. That would irreparably harm the FTC’s 

ability to obtain monetary relief for the victims of Cardiff’s illegal conduct. Id. The 

Second TRO also authorized expedited discovery regarding Cardiff’s involvement

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in and relationship with VPL, the nature and disposition of VPL assets, and 

Cardiff’s compliance with the Second TRO. ER056.5

Two days later, Cardiff and VPL sought to dissolve the Second TRO, largely

on the ground that the First PI did not apply to Cardiff’s businesses started after the 

entry of the First TRO and PI that have no relationship to his prior misconduct. 

ER900, ER901-ER902. The district court readily denied the motion to dissolve. 

ER032, ER036. It concluded that the First PI’s definition of Receivership Property 

contains no “temporal limitation and does not preclude the Receiver from taking 

possession of Jason Cardiff’s later-acquired assets, including VPL’s assets.” 

ER034. The court explained that it specifically relied on the First PI’s Asset Freeze 

provision which covered “any Assets that are ... owned or controlled ... by any 

Defendant” and which specified that the freeze “‘shall include ... all Assets owned 

or controlled, directly or indirectly, by Defendant Jason Cardiff ... .’” Id. (quoting 

ER074). The court cited evidence submitted by the FTC and the Receiver that 

“only underscores the likelihood that VPL is in fact co-owned and controlled by 

Jason Cardiff and Bobby Bedi ... .” ER034-ER035.

When it issued the Second TRO, the district court also issued an order to 

show cause why it should not enter a new PI. ER058. In response, Cardiff and Bedi 

 5 As noted above, the district court previously held Cardiff in contempt for 

failing to disclose his assets.

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maintained that Cardiff was only a consultant to VPL, not its CEO. ER026. Yet 

documents found by the Receiver in VPL’s office referred to Cardiff variously as a 

director (along with Bedi), founder, CEO, COO, and president of VPL. Id. The 

Receiver found emails in which Cardiff described VPL as “my biggest company to 

date” and expressed his desire to own “super-majority shares” and to have the 

ability to call all of Bedi’s stock at any time and at minimal cost. Id.

Following a hearing, the district court entered the Second PI on July 7. It 

again noted that the First PI’s Receivership Property and Asset Freeze provisions 

had no temporal limitation and applied to any “[a]ssets owned or controlled, 

directly or indirectly,” by Cardiff. ER025, ER027. It rejected Cardiff’s claim that 

he was merely a consultant. “Given inconsistencies in how Bedi described 

Cardiff’s position; [others’] belief that Cardiff acted as the CEO; Cardiff’s history 

of dishonesty before this Court; and the undisputed facts that Cardiff helped to 

found VPL and wields final authority over many crucial business decisions,” the 

Court concluded that “the preponderance of the evidence supports the FTC’s 

argument that Cardiff owns or controls VPL, whether directly or indirectly, even if 

he is not technically VPL’s CEO.” ER027. It thus held that VPL belonged in the 

receivership and its assets frozen under the First PI. Id.

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* * * * * * * *

On October 9, 2020, the district court granted, in part, the FTC’s motion for 

summary judgment, finding Cardiff and the other Defendants liable on all sixteen 

counts in the FTC’s Complaint. SER001, SER022-027. The court denied, in part, 

Defendants’ motion for summary judgment. SER021, SER027. It deferred a ruling

on the appropriate remedies pending a decision by the Supreme Court in FTC v. 

Credit Bureau Center, 937 F.3d 764 (7th Cir. 2019), cert. granted, 2020 WL 

3865251 (U.S. July 9, 2020), and AMG Capital Management, LLC v. FTC, 910 

F.3d 417 (9th Cir. 2018), cert. granted, 2020 WL 3865250 (U.S. July 9, 2020). 

SER015, SER028. In the meantime, the First and Second PIs remain in effect.

SER028.

SUMMARY OF ARGUMENT

Preliminary injunction orders are subject to only limited review for abuse of 

discretion, and Cardiff has failed to show that the district court abused its 

discretion when it froze Cardiff’s VPL assets. 

1. The court properly concluded that the FTC had shown both that any assets 

owned or controlled by Cardiff, whenever acquired, are subject to the First PI’s 

asset freeze and that the equities favored preserving those assets for possible 

consumer redress.

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The district court was correct to conclude that the First PI is “crystal clear” 

that “Assets that are ... owned or controlled” by Cardiff are frozen as Receivership 

Property and include Cardiff’s current assets with no temporal limitation. Cardiff’s 

attempt to sow ambiguity rests on the linguistic error that “owned” and 

“controlled” function as past tense verbs referring to Cardiff’s prior ownership or 

control of assets. In fact, “owned” and “controlled” function as adjectives 

modifying assets that Cardiff currently owns or controls. That is all the more clear 

given that “Receivership Property” explicitly refers to “Assets ... that are ... owned 

or controlled” ... by any Defendant, while the Asset Freeze covers “any Assets that 

are ... owned or controlled ... by any Defendant” and specifies that it “shall 

include” Cardiff’s assets with no limitation. It would have made no sense for the 

Second PI to freeze assets that Cardiff no longer owned or control. Instead, the

district court correctly concluded that the only logical meaning is that the First PI 

freezes assets that are owned or controlled by Cardiff whenever acquired. And 

even if there were any ambiguity, a district court’s interpretation of its prior order 

is entitled to heavy weight. 

2. The district court correctly followed controlling Circuit precedent 

governing preliminary equitable relief under the FTC Act. The Supreme Court’s 

decision in Liu v. SEC, 140 S. Ct. 1936 (2020), did not overturn this precedent. Liu

did not even involve asset freezes; it concerned only the calculation of a final 

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monetary judgment. Liu also involved equitable relief under the securities laws, not 

the FTC Act. This Court has recognized that relief under the FTC Act is broader 

than that authorized by statutes like the Securities Exchange Act provision at issue 

in Liu and includes restitution and the return of unjust gains. Indeed, Liu reaffirmed 

the very Supreme Court holdings on which this Court relied to support the scope of 

equitable relief under the FTC Act.

Even if Liu were pertinent here, it does not follow from that decision that the 

district court abused its discretion. Nothing in Liu requires that frozen assets be 

tethered to the deceptive scheme alleged in the complaint or tied to any specific 

assets. Rather, Liu simply requires that the amount ordered to be disgorged not 

exceed the defendant’s net profits. At this preliminary stage, that requirement is

met because the amount of potential disgorgement far exceeds the amount of assets 

frozen.

Liu also held that the calculation of net profits should reflect legitimate 

expenses. The burden to show such expenses rests with Cardiff, but he has made

no effort to satisfy that burden. In fact, the record thus far shows that Redwood and 

Cardiff incurred expenses to market worthless, deceptive products and to support a 

lavish lifestyle. These are classic illegitimate expenses.

3. The district court properly weighed the equities. The public interest in 

preserving funds for restitution strongly outweighs Cardiff’s private interests. 

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Cardiff asserts that the Second PI hampered VPL’s ability to operate and deprived 

the public of protective masks, but the facts show that the company was and is not 

capable of producing those masks. 

ARGUMENT

I. STANDARD OF REVIEW.

“This court only subjects a district court’s order regarding preliminary 

injunctive relief to ‘limited review.’” FTC v. Affordable Media, LLC, 179 F.3d 

1228, 1233 (9th Cir. 1999) (quoting Does 1-5 v. Chandler, 83 F.3d 1150, 1152 (9th 

Cir. 1996)). This standard also applies to decisions to impose asset freezes, id. at 

1236-37, or to subject assets to a receivership, SEC v. Wallenbrock, 313 F.3d 532, 

536 (9th Cir. 2002). The Court “will reverse a district court’s issuance of a 

preliminary injunction only if the district court abused its discretion by basing its 

decision on an erroneous legal standard or on clearly erroneous factual findings.” 

Affordable Media, 179 F.3d at 1233. “A district court’s decision is based on an 

erroneous legal standard if: (1) the court did not employ the appropriate legal 

standards that govern the issuance of a preliminary injunction; or (2) in applying 

the appropriate standards, the court misapprehended the law with respect to the 

underlying issues in the litigation.” Walczak v. EPL Prolong, Inc., 198 F.3d 725, 

730 (9th Cir. 1999) (cleaned up). “A district court’s decision is based on clearly 

erroneous factual findings if ‘the reviewing court on the entire evidence is left with 

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the definite and firm conviction that a mistake has been committed.’” Id. (quoting 

United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)).

II. THE DISTRICT COURT CORRECTLY ENTERED A PRELIMINARY 

INJUNCTION FREEZING CARDIFF’S ASSETS AND PLACING VPL

UNDER RECEIVERSHIP.

In cases under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), “the district 

court is required (i) to weigh equities; and (ii) to consider the FTC’s likelihood of 

ultimate success before entering a preliminary injunction.” FTC v. World Wide 

Factors, Ltd., 882 F.2d 344, 346 (9th Cir. 1989). “Harm to the public interest is 

presumed.” Id. (citing United States v. Odessa Union Warehouse Co-op, 833 F.2d 

172, 175-76 (9th Cir. 1987)). In addition, “[w]here an injunction is authorized by 

statute, and the statutory conditions are satisfied ..., the agency to whom the 

enforcement of the right has been entrusted is not required to show irreparable 

injury.” Odessa Union Warehouse, 833 F.2d at 175.

Cardiff challenges the district court’s rulings on both the merits and the 

balance of equities, but his attacks are groundless. 

A. The First PI Covers Cardiff’s Assets, Whenever Acquired.

In ruling that VPL assets should be under receivership and subject to the 

Asset Freeze, the district court relied on two provisions of the First PI. The first, 

Definition M, defined “Receivership Property” to include “any Assets ... that are 

... owned, controlled, or held by ... Jason Cardiff.” ER025 (quoting ER068). The 

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second, Section VII, Final Paragraph Clause 3, specified that the Asset Freeze 

“shall include ... all Assets owned or controlled, directly or indirectly, by 

[Cardiffs].” ER025 (quoting ER074). Stating that the “crux of the matter is 

whether the FTC has shown a likelihood of success on the merits that Cardiff owns 

or controls VPL,” ER025, the district court held that “significant evidence” 

supported the conclusion that “Cardiff owns or controls VPL” and that “VPL 

belongs under receivership, with its assets frozen, pursuant to the [First PI].” 

ER026-ER027. 

Cardiff does not challenge the district court’s conclusion that Cardiff owns 

or controls VPL. Instead, he asserts that the phrase “Assets owned or controlled, 

directly or indirectly by Cardiffs,” as used in Definition M and Clause 3, is 

ambiguous and should be construed in Cardiff’s favor, and that a provision of the 

First PI in which the phrase appears, Section VII, should be interpreted “as a 

whole,” like a contract, in order to determine the district court’s intent. Br. 18-21.

Neither of these assertions is valid.

First, the district court itself declared that the terms “owned” or “controlled”

are “crystal clear,” ER025, and “not ambiguous,” ER035. Nevertheless, attempting 

to sow ambiguity, Cardiff states that the “plain meaning of the terms ‘owned’ or 

‘controlled’” refers to the “past tense,” that is, assets previously owned by the 

Cardiffs. Br. 21. Setting aside the inconsistency of asserting that the meaning is

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simultaneously ambiguous and plain, Cardiff makes a linguistic error. The terms 

do not function as past tense verbs describing Cardiff’s prior actions. Rather, 

“owned” or “controlled” function as adjectives that modify the word “Assets” and 

appear after the present tense verbs “are” and “include.” In other words, the terms 

cover Cardiff’s current assets.

This meaning is the only logical one. Definition M, “Receivership Property,” 

explicitly refers to “Assets ... that are ... owned or controlled” ... by any 

Defendant, SER187, ER068, while the Asset Freeze covers “any Assets that are ... 

owned or controlled ... by any Defendant,” SER193, ER074. It would have made 

no sense for the First PI to have frozen assets that a Defendant no longer owned.

The Cardiff-specific provision of the Asset Freeze reinforces this 

understanding. Section VII, Final Paragraph Clause 3, singles out Cardiff’s assets 

without temporal or causal limitation. ER025. Final Paragraph Clause 1 freezes 

“Assets of Defendants as of the time [First] TRO was entered.” SER193, ER074. 

Final Paragraph Clause 2 freezes “Assets obtained by Defendants after the TRO 

was entered if those Assets are derived from any activity that is the subject of the 

Complaint ... or prohibited by this Order.” SER193-SER194, ER074. By contrast, 

Final Paragraph Clause 3 states that the freeze “shall include ... all Assets owned 

or controlled ... by Jason Cardiff,” and does so without limitation. SER194, 

ER074. As explained above at pages 4-5, Clause 3 was purposefully broad given 

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Cardiff’s record of concealing and dissipating assets. Cardiff’s reading would 

defeat that purpose.

Second, even if Cardiff had shown ambiguity, he is wrong that the 

injunction should be construed in his favor. Br. 18. The cases on which he relies, 

Portland Feminist Women’s Health Center v. Advocates for Life, Inc., 859 F.2d 

681 (9th Cir. 1988), and Natural Resources Defense Council v. Southwest Marine, 

Inc., 242 F.3d 1163 (9th Cir. 2001), do not stand for that proposition. Advocates 

for Life concerned whether an injunction satisfied Fed. R. Civ. P. 65(d)’s 

requirements for “specificity” and “reasonable detail.” 859 F.2d at 685. Southwest 

Marine concerned modification of an injunction under Fed. R. Civ. P. 62(c). 242 

F.3d at 1169 n.2. Neither case held that all ambiguities in an injunction must be 

resolved in favor of the enjoined party. To the contrary, the district court’s 

interpretation of its own injunction is entitled to “particularly heavy weight,” 

Schering Corp. v. Illinois Antibiotics Co., 62 F.3d 903, 908 (7th Cir. 1995), a 

standard that would make no sense if the rule were simply that the restrained party 

automatically got the benefit of any doubt.

Third, there is no need to resort to contract interpretation principles to 

determine the district court’s intent behind the First PI. Br. 18, 21. The court’s task 

was not to determine what the parties before it meant by their words. The PI is not 

a contract, like a consent decree, but is the district court’s own order. As such, the 

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court knew exactly what it meant when it entered the First PI and could state with 

utter surety that it intended to cover assets such as VPL.

But even if it were appropriate to apply contract interpretation principles, the 

district court did not abuse its discretion in rejecting Cardiff’s interpretation. He 

argues that Final Paragraph Clause 1 (Defendants’ assets at the time of the First 

TRO) and Clause 2 (Defendants’ later acquired assets tied to conduct alleged in the 

Complaint or prohibited by the PI) limit the meaning of Final Paragraph Clause 3

(Cardiff’s current assets), and that Clause 3 serves as a “catch all” for assets that 

are already covered by Clauses 1 and 2. Br. 18, 20-21. But as explained above, 

Clause 3 distinguishes and specifically applies to Cardiff’s current assets and 

would be meaningless if it merely tracked the assets already covered by Clauses 1 

and 2. The district court thus properly rejected Cardiff’s interpretation as 

“illogical[]” and concluded it would make Clause 3 “redundant.” ER035. That 

determination fell well within the court’s discretion.

B. The Supreme Court’s Liu Decision Does Not Require 

Reversal.

In Liu v. SEC, 140 S. Ct. 1936, the Supreme Court held that the term 

“equitable relief” in the Securities Exchange Act allows the SEC to recover a 

monetary remedy for violations of the law, but limits the remedy to unlawfully 

derived net profits as opposed to revenue. Cardiff contends that Liu mandates 

reversal of the Second PI because the district court applied an incorrect standard of 

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relief based on Circuit precedent that has now allegedly been overturned. His

contentions fail.

1. Liu did not reverse this Court’s precedents 

interpreting the FTC Act.

Cardiff first claims the district court improperly “failed to apply the correct 

standard enunciated in Liu to determine whether a court may freeze assets of a 

non-party where, as in this case, the assets are not derived from ‘ill-gotten gains’ or 

‘net unlawful profits’ from the alleged unlawful activities.” Br. 8. That argument 

fails right off the bat because Liu had nothing to do with an asset freeze. The case 

concerned only the calculation of a final monetary judgment. At this preliminary 

stage of the case, the freeze serves to preserve assets so they are not dissipated 

before final judgment. See Affordable Media, 179 F.3d at 1236. Liu did not address 

that situation. And because the potential final judgment in this case could exceed

$18 million, while the frozen assets total at most $5 million, the freeze is 

appropriate even if Liu were read to restrict any final award (an issue that is not 

presented at this point, and that is inconsistent with Circuit law, as described 

below).

More fundamentally, Cardiff argues that Liu “implicitly overruled FTC v. 

H.N. Singer, 668 F.2d 1107 (9th Cir. 1982), and FTC v. Commerce Planet, 815 

F.3d 593 (9th Cir. 2016), to the extent these decisions allowed equitable restitution 

or disgorgement based on consumer loss.” Br. 9. Circuit law says otherwise. “Once 

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a panel resolves an issue in a precedential opinion, the matter is deemed resolved, 

unless overruled by the court itself sitting en banc, or by the Supreme Court,” or 

unless Congress changes the law. Hart v. Massanari, 266 F.3d 1155, 1171 & n.28

(9th Cir. 2001). 

Liu did not overturn Commerce Planet and H.N. Singer. Liu interpreted a 

provision in the securities laws that allows a court to order “equitable relief.” 15 

U.S.C. § 78u(d)(5). The FTC Act, by contrast, authorizes a “permanent 

injunction.” 15 U.S.C. § 53(b). The Court has recognized that “equitable relief”

serves as “a limitation on the relief available” from a court of equity, whereas 

“permanent injunction” conveys a broader power “to award complete relief,” 

including legal remedies. Commerce Planet, 815 F.3d at 602. Liu did not address 

that matter, so the interpretation of the FTC Act set forth in Commerce Planet 

remains binding. In keeping with Commerce Planet, the district court concluded 

that Liu involved the narrower understanding of equitable relief, not the broader 

one implicated by the phrase “permanent injunction.” ER029-ER030. Cardiff is

therefore wrong that the district court erred in declining to apply Liu.

If anything, Liu supports existing precedent. In upholding the SEC’s ability 

to obtain disgorgement of profits as “equitable relief” under 15 U.S.C. § 78u(d)(5), 

Liu reaffirmed the holding of Porter v. Warner Holding Co., 328 U.S. 395 (1946), 

that “[o]nce a District Court’s equity jurisdiction has been invoked ... a decree 

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compelling one to disgorge profits ... may properly be entered.” Liu, 140 S. Ct. at 

1943 (quoting Porter, 328 U.S. at 398-99). The securities laws say nothing about 

disgorgement, but following Porter, Liu concluded that “[u]nless otherwise 

provided by statute, all ... inherent equitable powers ... are available for the proper 

and complete exercise of [equitable] jurisdiction.” Id. at 1947 (quoting Porter, 328 

U.S. at 398). This Court relied on these very principles from Porter when ruling 

that Section 13(b) of the FTC Act permits “restitution” and the return of “unjust 

gain from past violations.” Commerce Planet, 815 F.3d at 599. Liu’s unqualified 

endorsement of Porter thus reinforces this Court’s precedent interpreting Section 

13(b).

Moreover, like the FTC Act, the statute in Porter authorized a “permanent 

... injunction,” and the Court held that monetary remedies “may be considered as 

an equitable adjunct to an injunction decree.” Porter, 328 U.S. at 399. The Court 

explained that “[n]othing is more clearly a part of the subject matter of a suit for an 

injunction than the recovery of that which has been illegally acquired and which 

has given rise to the necessity for injunctive relief.” Id. “[W]here, as here, the 

equitable jurisdiction of the court has properly been invoked for injunctive 

purposes, the court has the power to ... award complete relief.” Id.

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2. The Asset Freeze and Receivership are proper under 

Liu.

Even if Liu applied here, it does not follow that the district court abused its 

discretion in freezing Cardiff’s VPL assets and subjecting VPL to the 

Receivership.

a. Liu does not require asset tracing.

Cardiff maintains that, under Liu, the district court could not freeze Cardiff’s 

VPL assets because the assets are not “tethered” to the Redwood deceptive 

scheme. Br. 15-16, 17. The district court, however, correctly rejected such a 

requirement. ER026 (n.4). Liu did not address asset tracing or hold that only the 

actual property obtained by unlawful means is subject to disgorgement. Rather, the 

Court ruled that the securities laws permit the imposition of a money judgment 

reflecting ill-gotten gains untethered to specific assets. Furthermore, Liu held that 

in some cases defendants may face collective liability for profits that accrued to a 

partner, 140 S. Ct. at 1945, 1949, which necessarily would require disgorgement of

assets that are not tethered to the defendant’s individual wrongdoing. Liu also 

relied on the Restatement, which explains that disgorgement “involves no claim to 

particular assets and no requirement of tracing.” Restatement (Third) of

Restitution, § 51 cmt. b & Reporter’s Note b. Indeed, Justice Thomas dissented in 

part on the ground that “[d]isgorgement ... has no tracing requirement.” Liu, 140 

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S. Ct. at 1953-54 (Thomas, J., dissenting). Consistent with Liu, this Court does not 

require tracing under the FTC Act. Commerce Planet, 815 F.3d at 601.

The core holding of Liu is that (under the securities laws) the amount of a 

final disgorgement judgment should not exceed the defendant’s profits from its 

wrongdoing. 140 S. Ct. at 1949-50. Measured against this requirement, the freeze 

on Cardiff’s VPL assets is proper. The Cardiffs’ unjust gains from the Redwood 

scheme amounted to at least $18.2 million from January 1, 2015, through October 

12, 2018, SER181, SER053,

6 while the frozen assets total less than $5 million.7

Even if Liu directly controlled this case, the district court did not abuse its 

discretion in freezing the VPL assets. ER030.

b. Cardiff has not proven legitimate expenses

Liu held that the measure of disgorgement is “net profits from wrongdoing 

after deducting legitimate expenses.” 140 S. Ct. at 1946 (emphasis added). The 

calculation thus “requires ascertaining whether expenses are legitimate.” Id. at 

1950. As the cases relied on by Liu explain, a legitimate expense is one “untainted 

by dishonesty.” Rubber Co. v. Goodyear, 76 U.S. 788, 803 (1869). A defendant 

has no right to deduct expenses incurred “while ... violating the [victims’] rights,” 

 6 Cardiff has not refuted this calculation. ER036. 

7 Prior to the freeze of VPL assets, the FTC had frozen approximately $560,000 

USD and $1.56 million CAD (equivalent to about $1.2 million USD). ER030. VPL 

assets may total nearly $3 million. ER863. 

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for that would “compel[]” victims “to pay the defendant for [the] time and 

expenses” necessary to defraud them. Callaghan v. Myers, 128 U.S. 617, 664 

(1888). Liu thus held that crediting a defendant’s expenses would be “inequitable” 

where “the ‘entire profit of a business or undertaking’ results from the wrongful 

activity.” 140 S. Ct. at 1945 (quoting Root v. Ry. Co., 105 U.S. 189, 203 (1882)). 

Nor may a wrongdoer subtract the cost of “materials ... bought for the purposes 

of” violating the victims’ rights. Id. at 1945-46 (discussing Rubber Co., 76 U.S. at 

803). If the record is unclear about whether an expense is legitimate, “every doubt 

and difficulty should be resolved against” the wrongdoer. Rubber Co., 76 U.S. at 

803-04.

As noted above, Liu concerns the proper calculation of disgorgement at the 

conclusion of a proceeding once a court renders factual findings and holds a 

defendant liable. At this preliminary point in the case, it is not possible to 

determine which of Cardiff’s claimed expenses would be deemed “legitimate” and 

which would not. But to the extent there is a record, it does not show legitimate 

expenses to offset the $18.2 million disgorgement amount.

The burden to prove legitimate expenses rests on Cardiff. See Commerce 

Planet, 815 F.3d at 604. In an apparent attempt to suggest no net profits from 

wrongdoing, Cardiff states that Redwood and the Cardiffs lost money. Br. 2. He 

makes no effort to show that such losses reflect legitimate expenses. To the 

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contrary, Redwood’s own records reveal millions of dollars spent on media and 

advertising to promote and broadcast false and unsubstantiated claims. SER071. 

The Cardiffs also spent hundreds of thousands of dollars on luxury vehicles, 

cruises, resorts, and private air charter travel. SER072. Expenditures incurred to 

market worthless, deceptive products and lavish personal expenses are classic 

“inequitable deductions.” Liu, 140 S. Ct. at 1945. Cardiff’s failure to show 

legitimate expenses underscores that the district court did not abuse its discretion.

C. The District Court Correctly Weighed the Equities.

“When a district court balances the hardships of the public interest against a 

private interest, the public interest should receive greater weight.” FTC v. World

Wide Factors, Ltd., 882 F.2d 344, 347 (9th Cir.1989). Further, the public interest in 

preserving funds for restitution is great. Affordable Media, 179 F.3d at 1236. The 

district court did not abuse its discretion when it concluded that the “public’s

interest in redress would be harmed without a preliminary injunction ensuring that 

VPL’s assets remain under receivership, particularly given the likelihood of 

dissipation.” ER030. 

Cardiff suggests that the public interest in a U.S.-based supply of surgical 

masks during the Covid-19 pandemic outweighs the FTC’s interest in freezing 

funds that might be needed to provide equitable monetary relief at the conclusion 

of the case. Br. 9-11. Notably, he makes no showing or claim that VPL was 

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uniquely situated to supply such masks. Rather, at its core his claim is that the

Second PI harmed his private interest in operating VPL, but he has failed to show 

that it even had that effect. 

He asserts that the Second PI prevented VPL from fulfilling an HHS order 

for 20,000,000 facemasks, but the Receiver concluded that VPL could not timely 

fulfill the HHS contract; he characterized it as “doomed to fail.” ER003. Rejecting 

Cardiff’s motion to remove the Receiver, SER050, the district court declined to 

second-guess that determination. ER004. Instead, the court found that removing 

the Receiver “would cause the estate irreparable harm” due to the real risk of asset 

dissipation. ER004.

In any event, on August 29 the district approved a plan for ongoing VPL 

operations in the hopes that profitable operation of VPL would grow the

Receivership Estate, making more money available for any future monetary relief. 

SER036. On October 1, the Receiver filed a court-required status report on VPL’s 

operations. SER029. Although the Receiver has released hundreds of thousands of 

dollars for VPL’s operations, VPL has still not managed to begin production of 

masks. The Receiver reported that “[c]ontrary to previous representations by VPL 

that it could have been operational within days of the Receiver’s appointment on 

June 24, 2020, it is still not operational despite Cardiff and Bedi having access to 

all necessary resources and a month of work on operational issues.” SER032. In 

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other words, the difficulties the Receiver previously identified remain and cannot 

be attributed to the Second PI. Even having resumed operations with funding, VPL 

still is not in a position to produce masks. The district court thus correctly weighed 

the equities. ER031.

CONCLUSION

For the foregoing reasons, this Court should affirm the Second PI.

October 13, 2020 Respectfully submitted,

Alden F. Abbott

General Counsel

Joel Marcus

Deputy General Counsel

/s/ Mark S. Hegedus

MARK S. HEGEDUS

Attorney

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

Of Counsel:

ELIZABETH JONES SANGER 

SHIRA D. MODELL 

JAMES A. PRUNTY 

EDWIN RODRIGUEZ

Attorneys

FEDERAL TRADE COMMISSION

Washington, D.C. 20580

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STATEMENT OF RELATED CASES

Federal Trade Commission v. Poujade, et al., Nos. 19-56397 & 20-55066, 

involves third parties, Jacques Poujade and True Pharmastrip, Inc., whose conduct 

and assets are subject to the First PI but are not subject to the Second PI challenged 

in No. 20-5585. Oral argument in Nos. 19-56397 & 20-55066 is scheduled for 

November 20, 2020.

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CERTIFICATE OF COMPLIANCE

I certify that the foregoing brief complies with Fed. R. App. P. 32(a)(7) and 

Circuit Rule 32-1, in that it contains 6,559 words, excluding the items exempted by 

Fed. R. App. P. 32(f). The brief’s type size and typeface comply with Fed. R. App. 

P. 32(a)(5) and (6).

October 13, 2020 /s/ Mark S. Hegedus

Mark S. Hegedus

Attorney 

Federal Trade Commission

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

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CERTIFICATE OF SERVICE

I certify that on the 13th day of October, 2020, an electronic copy of the 

foregoing Answering Brief of the Federal Trade Commission was filed with the 

Clerk of the Court for the United States Court of Appeals for the Ninth Circuit 

using the appellate CM/ECF system and that service will be accomplished via that 

system.

/s/ Mark S. Hegedus

Mark S. Hegedus

Attorney 

Federal Trade Commission

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

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