### FI LED U.S. COURT O F APP EALS ELEVENTH CIRCUIT Ma y 5 , 2 005 THO MAS K. KAH N CL ERK [PUBLIS H] IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ ____ _ N os. 01- 1010 7 & 02- 1139 3

____ ____ ____ ____ ____ ____ ____ _ D. C. Docket N o. 00-02532 -CV -JTC -1 SECURITIES AND EXCHANGE COMMIS SION, Plaintiff-Appellee, ve rs us ETS PAYPHONES, INC., D ef en dant, CHA RL ES E. ED WARD S, D ef en dant- Appe llant.

____ ____ ____ ____ _ Appeal f rom the United State s District Court for the N orthern District of Ge orgia

____ ____ ____ ____ __ (M ay 5 , 200 5) ON REMAND FROM THE S UPREME COURT

OF THE U NITE D S TAT ES Be fo re E D MO N D SO N , Ch ie f Judg e, H IL L and L A Y *, Ci rc uit Jud ge s.

____ ____ ____ ___ * Honora ble Donald P. L ay , United States Circuit J udg e for the Eig th Circuit, sit ting by desig nation.2

PE R CU RIA M: In200 2, w e de ci de d C harl es E . E dw ar ds’ s ( E dw ar ds) appe al f ro m the dis tr ic t c ourt’ s gr an t of

the S ec ur iti es and E xc hange Co m m iss ion ’ s ( SE C) m oti on for prelim inary

injunction and asset freez e against Edw ards. The asset fre eze included th e assets of E dwar ds’ s wholly -owned corporation, T winleaf , I nc. (T winleaf ). W e determ ined that the dis trict court lacked subje ct m atter j ur isd ic tio n be ca

use the inv es tm en ts o ff

er ed by E dw ar ds w er e not

“ se curi tie s” unde r fe de ra l se curi tie s law s. S E C v . E T S Pay phon es , I nc . , 300 F . 3d 1 281, 128 5 (1 1thCi r. 200 2) . O n r ev ie w , the S upr em e Co urt c lari fi ed that i nve stm en ts w itha fixed rate of

return could constit ute an “ investm ent contract” under the Se curities Acts of 1 93 3 a nd19 34 . SEC v. Edward s, 1 24 S.Ct . 89 2, 8 98 -9 9 (2 00 4) . E dw ar ds’ s or igi na l a

ppe al , by r em an d f ro m the S upr em e Co urt, is be fo re us ag ai n. I n th e int er im , E dw ar ds m ove d th e dis tr ic t c ourt f or am odi fi catio n of

the asset fre eze to per

m it Tw inleaf to pay

its attorney s fees. T he district court denied Edwar ds ’s m ot io n, an d h e ap pe al ed . W e nowc onsi de r both a

ppe al s. W e m

ust de ci de , spe ci fi ca lly , w he the r (1 ) the tr an sa ct ion s of

fe re d by E dw ar ds w er e se curi tie s un de r the S ec ur iti es A ct s of 1933 and 1934 ; (2) the district court clear ly err ed when it found Edw ards wa s lik el y to vio la te se curi tie s law s inthe f uture ; ( 3) E dw ar ds c anbe pe rs ona lly li ab le3

fo r vio la tio ns o f fe de ra l se curi tie s a ct s; and ( 4) the dis tr ic t c ourt e rr ed by de ny ing Twin le af, In c., us e o f it s fu nd s t o p ay att orne y s fe es forth is act io n. FACTS

W e ad opt the state m en t of

f ac ts f ro m our e ar lie r opi nio n r ep orte d in300 F.3 d 1 28 1.

STANDARD OF REVIEW

W e re vie watr ia l c ourt’ s de ci sio n to gr an t i nj unc tio n un de r the abuse of dis cr et ionstandard . K lay v. U nit ed H ea lth care G ro up, I nc . , 376 F . 3d 1 092, 109 6 (1 1thCi r. 200 4) . D et er

m inatio ns o f laware r ev ie w ed de novo , w hil e the f ind ing s of f ac t tha t su

ppor t an in j unc tio n are r ev ie w ed

f or c le ar e rr or . S E C v . U nique F in. Co nc ep ts, I nc . , 196 F . 3d 1 195, 119 8 ( 11th C ir . 199 9) . T o r ev er se the inj unc tio n on a que sti on o f j ur isd ic tio n, the pla int if f (h er e, the S E C) m

ust “ onl y e sta bli sh a

‘ reasonable probabilityof ultim ate success upon the qu estion of jurisdiction when the action is tried on th e m erits.’ ” Id. (citations and quo tation om itted). W e re view an asset fre eze f

or an abuse of discretion, though we do not defer to the districtIn Unique F in. Concepts, this Court derived a thre e-e lement test from How ey . 196 F.3d at 1198 1 ((1) an investment of money , (2) a common enter prise, and (3) the expectation of pro fi t s t o be de ri ve d s ole ly

fr om t he e ff or ts o f o the rs ). F or

the purp os e s o f t

his a pp e a l, w e e xam in e se pa

rate ly the tw o a sp e c ts of the thi rd e le me nt: the e xpe c ta tio n o f p ro fi ts and

whether those profits ar e der ived so le ly fr om E dw ard s’ s e ff

or ts. 4 co urt’ s le ga l ana ly sis . L ev i S tr au ss & Co . v. S unr ise I nt’ l T ra din g I nc . , 51 F . 3d 98 2, 9 86 -8 7 (1 1t h C ir. 1 99 5) . JUR ISDICTI ON

T he S ec ur iti es A ct s of

193 3 and 1 934 de fi ne a“ se curi ty ” as inc lud ing

“ investm ent contract. ” 15 U. S. C. §§ 77 b(a)( 1), 78c(a )(10). T he Suprem e Court has set out th e test for dete rm ining whether a transaction qu alifies as an

“ investm ent contract” in SE C v. W .J. How ey Co., 66 S.C t. 1100 (1946 ). U nder H ow ey , ase curi ty

m ust inc lud e fo ur

c om pone nts : ( 1) an in ve stm en t of m one y , ( 2) a co m m on e nte rp ri se , ( 3) the e xpe ct at ionof pr of its , and ( 4) the e xpe ct at ionof pr of its to be de ri ve d so le ly

f ro m the e ff orts o f oth er s. U nique F in. Co nc ep ts, 196 F. 3d at 11 98. 1 Our prior decision in this case concluded that the transactions invol ved an inv es tm en t of

m one y . 300 F . 3d at 12 83. T he S upr em e Co urt sa id the f ixe d r at e of re tur n of fe re d by E dw ar ds c oul d c onst itute an “ expe ct at ionof pr of its . ” E dw ar ds,5

124 S. Ct. at 898-99. W e now exam ine whether the SE C sufficiently dem onstrated th e se co ndan d fo ur th ele m en ts of t he Howey tes t. In our ear lier ruling, w e re affir m ed this Circuit’ s adherence to the “broad vertical com

m onality ” test for dete rm ining whether investors op erate d und er a com m on enterprise. ET S Pay phon es, I nc., 300 F.3d at 1284. T hat test requires the m ovant t o “ showthat the inv es tor s are de pe nde nt u pon the e xpe rt ise or

e ff orts of th e in ve st m en t p ro m ot er fo r th ei r returns .” Id . at 1 28 4. The district court f

oundthat “ ET S had to attract an ever expanding nu m ber of in ve st or s t o m eetit s o bl ig at io n t o e xi st in g i nv es to rs .” ETS Pay ph on es , Inc ., 123 F. S upp. 2d 1 349, 135 2 (N . D . G a. 200 0) . I nve sto rs w er e de pe nde nt u pon E dw ar ds’ s a

bil ity to attr ac t ne wbus ine ss t o r ea liz e pr of its . N ine ty -n ine pe rc en t of inv es tor s le as ed

ba ck the pho ne s th ey

bou ght f ro m one of E dw ar ds’ s c om

panie s to an oth er c om pany of his . T hus, inv es tor s e vid en tly ha d no de sir e “ to p er fo rm the ch or es ne ce ssary

f or ar et ur n” on the ir

inv es tm en t. E be rh ar dt v . W at er s, 901 F . 2d 1578 , 158 0- 81 ( 11th C ir . 199 0) ( de fi nin g th e “ thr ust of the c om m on e nte rp ri se te st” ). G ive n th e fa ct

ua l f ind ing s of

the dis tr ic t c ourt and o ur r ev ie wof

the r ec or d, w e co nc lud e the S E C m ad e, a t this pr el im inary sta ge , asuf

fi ci en t sh ow ing on the second elem ent: a com

m on enterprise.In Bonne r v. City of Prichar d, 661 F.2d 1206 ( 11th Cir. 1981) ( en banc ), this Court adopted as 2 prec edent all decisions of the forme r F ifth Circuit Court of Appeals de cided pr ior to October 1, 1981. In makingthis determination, we of ten look to the actua l relationship betwee n the par ties. See 3 Al ba ne se , 8 23 F .2 d at 41 2 ( re a so nin gthat any c ontr ol r e ta ine d b y

inv e sto rs wa s “ ill us or

y” de sp ite contra ctual ter

ms). 6 T he f ourth e le m en t of

the H ow ey

te st a sks the “ am ount

of c ontro l tha t the inv es tor s r et ai n[ ed ] und er the ir w ri tte n a gr ee m en ts. ” A lbane se v. F la . N at ’ l B an k of O rl an do, 823 F . 2d 4 08, 410 ( 11th C ir . 198 7) . T he m or e co ntr ol i nve sto rs r et ai n, the less likely

it becom es that the contract qualifies as a sec urity . ET S investors re ta ine d m ini m al c ontro l ov er the te le phon es . O nc e aninv es tor le as ed the pho ne ba ck to E T S (whic h ni ne ty -n ine pe rc en t di d) , that i nve sto r re lie d onE T S (and E dw ar ds) f

or pr of its . S ee E be rh ar dt, 901 F . 2d at 15 81 ( co nsi de ri ng tha t the av er ag e inv es tor

r el ie d onde fe ndants f

or suc ce ss) . I n a ddi tio n, thr oughhis co m panie s, E dw ar ds p ro vid ed the “ es se nti al m an ag er ia l e ff orts” of pho ne pla ce m en t, c oll ec tio n and m ai nte nanc e. S E C v . K osc ot I nte rp lane tary , I nc . , 497 F. 2d 47 3, 483 (5th Cir. 1974). A nd, this fact is im portant: these m anagerial 2 ef fo rt s in cl ude d th e sol e dis cr et ionove r w he re to pla ce te le phon es . S ee S E C v . U nique F in. Co nc ep ts, I nc . , 196 F . 3d 1 195, 120 1 ( 11th C ir . 199 9) ( co nsi de ri ng de fe ndant’ s so le dis cr et ionove r inv es tm en t f unds ). W e se e no a

buse of dis cr et ion 3 in the dis tr ic t c ourt’ s c onc lus ionthat the S E C m et it s burd enof

sho w ing a re as ona ble pr oba bil ity of suc ce ss o n th e j ur isd ic tio na l qu es tio n.7

REASONABLE LIKELIHOO D OF CONTINUING VIOLA TIONS

T o gr an t a

pr el im inary

inj unc tio n inase curi tie s c as e, apla int if f m ust pr ovi de , a m ong oth er

e le m en ts, “posi tiv e pr oof ” that the de fe ndant w ill li ke ly vio la te se curi tie s law s inthe f uture . S E C v . Cate ri nic ch ia , 613 F . 2d 1 02, 105 ( 5th Ci r. 19 80 ) (ci ti ng SEC v . Bla tt , 58 3 F .2d13 25 , 13 34 (5t h C ir. 1 97 8) ). T he dis tr ic t c ourt c onc lud ed that the S E C m et

thi s burd en . E T S Pay

phon es , In c. , 123 F . S upp. 2d at 13 55. W e re vie wthat de te rm inatio n f or an a buse of discretion. U niqu e Fin. Concepts, Inc. , 196 F. 3d at 119 8. T hat Edw ards has co m pl ie d wi th th e SEC s in ce t he in cep ti on of t he SEC su itis un di sp ut ed . Yet, we m ust w ei gh this c om

pli an ce a ga ins t the m ag nit ude of the a lle ge d f

ra ud and ex am ple s of pot en tia l m al fe as an ce , inc lud ing af ind ing of sc ie nte r, and a lle ga tio ns of state lawvio la tio ns b y

E T S co m m itt ed be fo re the S E C’ s in vol ve m en t. S E C v . Carr iba A ir , I nc . , 681 F . 2d 1 318, 132 2 ( 11th C ir . 198 2) ( co nsi de ri ng “ the eg re gio usne ss o f the de fe ndant’ s a ct ion s, the iso la te d or r ec ur re nt n at ur e of the i n fr ac t i o n , t h e d eg re e o f s ci en t eri n v o l v ed , t h e s i n ce ri ty o f t h e d ef en d an t ’s as sur an ce s a ga ins t f

uture vio la tio ns, the de fe ndant’ s r ec ogni tio n of the w ro ngf

ul na tur e of his c ondu ct , and the li ke lih ood that the de fe ndant’ s oc cu pa tio n w ill pr es en t o pp or tu ni ti es forfut ur e v io la ti on s” ).8

Whe n w ei ghi ng the se iss ue s, w e m ust a lso r ec ogni ze “ that f

or the m atte r in que sti on the re is a range of c hoi ce f or the dis tr ic t c ourt and s o lo ng a s it s de ci sio n doe s no t am ount

to a cl ear er

ro r of j udgm en t w e w ill not

r ev er se e ve n if

w e w oul d have gon e the oth er

w ay ha d th e ch oic e be enour s to m ak e. ” Mc Mahan v. T oto , 256 F. 3d 1 120, 112 8 ( 11th C ir . 200 1) . A s su ch , w e se e no a buse of dis cr et ionin th e d is tri ctco ur t’s d eci si on to gra ntth e p rel im in ary in jun ct io n. INDIVIDUAL LIABILITY

E dw ar ds arg ue s th at , if

the inv es tm ents w er e se curi tie s, the y w er e iss ue d by E T S, not by him . T his arg um en t i s w ith out m er it. U nit ed

S ta te s v. Ra ch al , 473 F. 2d 1 338, 134 1- 42 ( 5thCi r. 197 3) ( ex em pti ng i ndi vid

ua ls f ro m the r ea chof

the Securities A ct w ould“ eviscerate” it). E dw ar ds a lso c ha lle nge s th e co urt’ s f ind ing of sc ie nte r, ane ce ssary

e le m en t of f ra ud unde r the se curi tie s law s. T he dis tr ic t c ourt f ound that E T S “ al w ay s lo st m one y on i ts p ay

phon e ope ratio ns. ” S E C v . E T S Pay phon es , I nc . , 123 F . S upp. 2nd 1 349, 1352 (N .D . G a. 2000 ). T he district court also specifically found that E dw ar ds w as aw ar e of

E T S’ s f inanc ia l c ondi tio n. I d. a t 13 55. E dw ar ds c ont en dsE dw ar d s a dmi tt e d ly d id n o t e mp lo y

th e G e n e r a ll y

A c c e p te d

A c c o un ti n gPrin c ip le s ( G A A P) . 4 The SEC demonstrated that when GAA P metho d s ar e em ploy ed, ETS’s fina ncial losses ar e undeniable. T he Gove rnment expert conce ded, howeve r, that under the methods used by ETS, no l o s s was a

ppare nt. The trial cour

t considere d this testim ony when r uling a nd reje cted Edw ards’ s purported r eliance on the non-standa rd methods.

9 that be ca use E T S use d no n- standard a cc ount ing m ethods , he la ck ed an in te nt t o de fr au d in ve sto rs . 4 W e re vie wf

ind ing s of

sc ie nte r fo r cl ear er

ro r. L uc as v. F la . P ow er

& L igh t Co., 765 F.2d 1039 , 1040 (11th Cir. 1985). T he SE C provided evidence that neither ET S nor its represe ntatives, includin g Edw ards, disclos ed to investo rs that E T S w oul d be una

ble to buy

ba ck pho ne s if asub stanti al num

be r of inv es tor s so req ue st ed . Edward s ad m it s t ha t ETS rel ie d o n n ew in ve st or s t o s us ta in op erat io ns . T his r el ianc e w as a lso not c onve y ed

to inv es tor s. I nst ea d, E dw ar ds s en t a le tte r to

“ le as eh old er s” on 1 Jun e 2000 statin g th at E T S re m ai ne d pr of

ita ble , e ve n th ough E T S de cl ar ed

bankr upt cy on 1 1 S ep te m

be r 2000 . G ive n th e oth er f ac ts, w e se e no cl ear e rro r in th e d is tri ctco ur t’s ad di ti on al fin di ng of s ci en te r. Acco rd in gl y , we se e no e rr or

in the dis tr ic t c ourt’ s de ci sio n to gr an t the pr el im inary inj unc tio n ag ai ns t Ed ward s p ers on al ly.

EDWARDS’S ASSET FREEZEThe SEC argues that Edwa rds did not preser

ve his appea l on the s cope of the asset fre eze. See 5 Fed er al Trade Comm’n v. Alantex Assoc’s, 872 F.2d 966, 970 (11th Cir. 1989) ( concluding appellant wa ived rig ht t o ch al l en ge asse t free ze beca use it did not request the re lease of funds for specific purpose) . We disag ree . E dwar ds challeng ed the r eac h of the a sset fre eze, includingthe aff ect on Tw inleaf. 10 T he dis tr ic t c ourt or de re d th at E dw ar ds’ s a sse ts b e fr oz ento pr es er ve sufficient funds for potential di sgorgm ent. E TS Pay phon es Inc. , 123 F. Supp.2d at 1356 . On the initial appeal, E dwar ds challenged th is free ze, arguing it was fa ci al l y i n v al i dan dth ati tfa i l edt o s h o w a s s et s we re ac qu i re db y fr au d . We 5 conclude that the dis trict court did not abu se its discretion when ordering a fre eze of E dw ar ds’ s a sse ts. We r e j e c tE dw ar d s ’s f

a c i a l c h a l l e n g e s . E dw ar d s ar g u e s th a tth e S up r e me Co urt de ci sio n of

G ru po M ex ic an o de D es ar

ro llo , S . A . v. A lli an ce Bo nd F und, Inc. , 119 S. Ct. 1961 (1999) (“ Gr upo Mexicano”) prevents a pre-j udgm ent free ze of his a sse ts. G ru

po M ex ic an o a ddr es se d th e iss ue of w he the r “ in an a ct ionf

or money damages , a

United State s District Court has the power to issu e a pr el im inary

inj unc tio n” a m ount ing to a fr ee ze of a sse ts. 119 S . Ct . a t 19 64 (em phasis add ed). T he Court answer ed the questio n “ no,” but it disti ngui shed tho se c as es w he re the ult im at e re lie f soug ht i s e qui ta ble . I d. a t 19 71 ( dis cu ssi ng D ec ke rt v. I nde pe nde nc e Sh ar es Co rp . , 61 S . Ct . 229 ( 1940 ) an d U nit ed S ta te s v. Fi rs t Nat . Cit y

Ban k, 8 5 S . Ct. 5 28 (19 65 )).Contrary to Edwards’ s assertions, disg org ment is an equitable reme dy . See, e.g., SEC v. Yun, 6 32 7 F .3 d 1 26 3, 12 68 n. 10 (1 1th Cir . 2 00 3) (d ist inguis hin gbe tw e e n le g a l da ma g es and

e qu ita ble dis g or g e me nt) ; SEC v. B latt, 58 3 F .2 d 1 32 5, 13 35 (5 th C ir . 1 97 8) . Se e a lso Tu ll v . Unit e d St ate s, 107 S. Ct . 1831, 1839 (1987). 11 The F ourth Circuit recently addressed this iss ue and said that in cases invo lving equitable relief, even wher e m oney dam ages are also claim ed, D eckert controls. U nited States v. O ncolog y Assoc’ s, P .C. , 198 F. 3d 48 9, 498 (4th Cir. 1999 ). U nde r D ec ke rt , e qui ta ble r em ed ie s e m

plo y ed to “pr es er

ve the status quo ” ar e pr ope r in a ct ion s ari sin g un de r the S ec ur iti es A ct . 61 S. Ct . a t 23 4. W e ac ce pt the r ea soni ng o f the F ourth C ir cu it an d c onc lud e that G ru po M ex ic an o do es not control the ou tcom e of this case, because the SE C seeks equitable relief (d isg or gm en t) , not

j ust m one y dam ag es . 6 W e ack no wled ge th atth e SEC al so see ks th e le ga l re m ed y of c iv il da m ag es . Bu t, the a sse t f

re ez e is j ust if

ie d a s am eans o f pr es er

vin g f unds f or the e qui ta

ble re m edy of dis gor gm en t. W e do n ot b el ie ve that the inc lus ionof ac la im f or c ivi l penalty dam ages m akes the rem edies soug ht wholly legal and not equit able. E dw ar ds’ s se co nd f

ac ia l c ha lle nge is ba se d onthe S E C’ s de ci sio n no t t o fo llo wthe pr oc ed

ur es se t f orth i n th e Fe de ra l D eb t C oll ec tio n A ct ( “ FD CA ”) . 28 U . S. C. § 30 01 et . se q. T he F D CAappl ie s to sit ua tio ns whe re the gov er

nm en tEdwar ds also argues that Rule 64 of the F eder al Rules of Civil P roce dure should have controlled 7 the low e r c ourt ’s dis po sit ion of his a sse ts. We d isag re e . Ru le 64 a pp lie s in c a se s o f “ arr e st, attachme nt, ga

rnishment, reple vin, se questration, and other c orre sponding or equivalent r emedies.” Fe d. R. Civ. P . 64. Disg org ement is unlike these remedies. See g ener ally , Blatt, 583 F.2d at 1335. 12 se ek s “ to r ec ove r a j udgm en t onade bt; or to obt ai n, be fo re j udgm en t onac la im fo r a d eb t, a re m ed y

in co nn ect io n wi th su ch cla im .” 28 U.S.C. § 3 00 1( a). T he F D CAis ina

ppl ic ab le to thi s c as e fo r tw o r ea sons . F ir st, the S E C i s no t nowse ek ing to re co ve r fo r a j udgm en t or “ obt ai n” any

a sse ts. A t this poi nt, the SE C i s atte m

pti ng t o f re ez e as se ts t o pr ev en t the ir dis bur se m en t; no m one y is be ing tr an sf

er re d to the f

ed er al tr ea sur

y or r eg istry of the c ourt. S ec ond, the statut or y de fi nit ionof

“pr ej udgm en t r em edy ” doe s no t i nc lud e dis gor ge m en t. 28 U . S. C. § 30 02( 11) . A cc or din gly , e ve n if w e as sum e, w ith out

de ci din g, that a cl ai m f or dis gor ge m en t se ek s c oll ec tio n of a“ de bt” a s de fi ne d by

the F D CA , the m eans the S E C e m

plo y ed to se cure that de bt i n th is c as e (d isg or ge m en t) is not one of the prej udgm ent rem edies covered by the FD CA. T he asset fre eze, as it applies

7 to f unds pot en tia lly

sub j ec t t o di sgor ge m en t, is fa ci al ly sound. W e re se rv e j udgm en t onthe appl ic ab ili ty of the F D CAto the S E C’ s c la im f or c ivi l pe na lti es . Edw ards also challenges the scope of the asset fre eze. T he SE C’ s burden fo r show ing the a m ount

of a sse ts s ubj ec t t o di sgor ge m en t ( an d, the re fo re a va ila ble fo r fr ee ze ) is l igh t: “ a re as ona ble appr oxi m at ionof

ade fe ndant’ s il l- gotte n ga insThe SEC st resse s that Edwar ds’s own testimony at the pre liminary

hear ing r evea led the $2.24 8 mil lio n f igur e . E dw ard s’ s a c c ounti ng , h ow e ve r, sh ow s h im r e c e ivi ngov e r $ 2. 7 mi llionin compensation from ETS and Twinlea f for the same pe riod. 13 [i s r equir ed ] . . . E xa ct itu de is not ar equir em en t. ” S E C v . Ca lvo , 378 F . 3d 1 211, 1217 ( 11th C ir . 200 4) . B ut, the “pow er to or de r dis gor ge m en t e xte nds onl y to the am ount w ithint er es t by

w hic h th e de fe ndant p ro fi te d f ro m his w ro ngdo ing . A ny furthe r sum

w oul d c onst itute ape na lty a sse ssm en t. ” S E C v . Bl att, 583 F . 2d 1 325, 13 35 (5t h C ir. 1 97 8) . Given our other conclusion s, w e can pre sum e gains from ET S w ere acquired thr oughf ra ud. A cc or din gly , any

m one y dis tr ibu te d f

ro m E T S to T w inl ea f or E dw ar ds w oul d be sub

j ec t t o adis gor ge m en t or de r. “ T he pur pose of dis gor ge m en t is . . . to de pr iv e th e wro ng do er o f hi s i ll -g ot te n g ai n.” Bla tt , 58 3 F .2dat 1 33 5. The S EC continu ally

cites $300 m illion as the total am ountof ill-gotten gains byET S, but neith er the r ecord before us nor a finding of the district court s u ff i ci en t l y es t ab l i s h es th atamou n t . Th e r ec o rdi s co n s i s t en twi th th e S EC ’s appellate brief: the S EC suggest s, w ithou t a specific r ebuttal from Edw ards, that fr om 199 6 th ro ugh 2000 , E dw ar ds p er sona lly r ec ei ve d a t l ea st $ 3. 04 m ill ionin co m pe nsatio n f

ro m E T S an d T w inl ea f. T w inl ea f obt ai ne d a t l ea st $ 18. 4 m ill ion 8 in p ay m en ts and i nte re st f

re e loans f

ro m E T S. A cc or din gly , appr oxi m at el y $21 m il li on sh ou ldbe subjec t t o d is go rg em en t.Th is n umb e r, c ite d b y

the SEC in i ts b ri e f, is e xclu siv e of pr e jud g me nt i nte re st. 9 14 Against this po tential equitable liabil ity of $21 m illion , the district court found th at E dwar ds pos sesses $7 m illion in personal real estate assets. 123 F. Sup p .2 dat1 3 5 6 . In 2 0 0 0 , Ed wa rd s es t i m at edi nh i s d ep o s i t i o nth at Twi n l ea f’s ac tua l va lue a t $1 3 to $15 m ill ion . I n 20 01, he r ev ise d th at num be r to $ 2. 09 mi l l i o ni nc a s h . B u t , w e u s e th e 2 0 0 0 c a l c u l a t i o nt o e x a mi n e w h e th e r , a tth e t i me the dis tr ic t c ourt m ad e the de ci sio n to f re ez e al l a sse ts, the c ourt a buse d it s di sc ret io n. Cf

. Dall as Co wbo y s C he erl ead ers , Inc . v. Sco reb oa rdPo st ers , Inc ., 600 F.2d 118 4, 1887 (5th Cir. 1979) (acknowledging that appellate review m ay co ns id er t he “po st ur e o f th e p ro ceed in gs at t he ti m e o f en try”). When totalin g Tw inleaf’ s value with E dwar ds’ s personal assets, it appears that the m ost Edwards poss essed in 200 0 was $22 m illion ; the least he controlled w as $20 m ill ion . A cc or din gly , E dw ar ds f ai le d to m ee t hi s burd enof sho w ing the SE C’ s f al lba ck num be r of $19 m ill ionf

or pot en tia l l ia

bil ity is anunr ea sona

ble ap p ro x i m at i o n . S EC v . C al v o , 3 7 8 F. 3 d1 2 1 1 , 1 2 1 7 (1 1 th Ci r. 2 0 0 4 ). Edwa rd s ’s 9 arg um en ts ab ou t t he ass etfree ze ar e n otba se d o n Twi nl eaf’s ac tu al va lu e in 20 00 . T hus, if T w inl ea f’ s va lue in 2000 w as a s lo wa s th e $13 m ill ione sti m at ed by E dw ar ds, af

ull a sse t f re ez e w oul d be ne ce ssary to pr es er ve suc h f unds f or15

pot en tia l di sgor gm en t. G ive n th es e fa ct s, the dis tr ic t c ourt di d no t a buse it s di sc ret io n wh en itfro ze al l o f Edwar ds ’s ass et s. MODIFI CATION OF ASSET FREEZE FOR ATTO RNEYS FEES

E dw ar ds a lso appe al s th e dis tr ic t c ourt’ s de nia l of his r eque st t o pe rm it T w inl ea f to u se it s a sse ts t o pay it s atto rn ey s f

ee s. T he se f

ee s a cc ru ed

dur ing atte m pte d se ttl em en t ne got ia tio ns w iththe S E C and a s ar es ult of sub m itt ing acco un ti ng s an d wee kl y

fin an ci al rep or ts . In addition to the challenges discus sed above, E dwar ds argues that the asset fr ee ze vio la te s T w inl ea f’ s r igh ts unde r the D ue P ro ce ss C la use of the F if th Am endm ent to the United States Constituti on. E dwar ds also argues that, under Geo rg ialaw o f co rp or at io ns , he c an no t b e res po ns ib le forTwin le af’s l eg al fees . The standing and m ootn ess doctrines bar us from deciding whether Tw inleaf shouldbe perm itted to pay its own legal expenses. E dwar ds concedes that T w inl ea f is a

nonparty to thi s li tig at ion . T he re fo re , to ac hie ve standi ng, E dw ar d s mu s ts h o wth a th e an dT w i n l e a f h a v e ac l o s e r e l a t i o n s h i p , an dth a t“s o me obst ac le ” pr ev en ts T w inl ea f fr om a sse rt ing it s r igh ts. S ee P lanne d P ar en tho od Ass ’n of At la nt a Area, In c. v. M il le r, 93 4 F .2d14 62 , 14 65 n.2 (11 th Cir . 19 91 ).E dw ar d s a l s o ar gu e s th at th e d i s tr i c t c o urt e r r o n e o u s l y r e l i e d o n tw o c a s e s f r o mthe Se ve nth 10 Circuit. SEC v. Quinn, 997 F.2d 287 ( 7th Cir. 1993); SEC v. Cherif, 933 F .2d 403 (7th Cir. 1991). We reviewdistrict court judg ments; we do not gr ade the opinions. W e agree with Edwards that the decisions ar e not on point. Quinn involved the asset f ree ze of one pe rson, and that pe rson violated the pre liminary

inju n ct i o n . 9 9 7 F.2d at 289. Cherif involved per sons who did not submi t to an a c c ounti ng . 9 33 F .2 d at 40 3. Ed wa rd s ha s be e n fa

r mor e c oo pe rativ e tha

n the de fe nd ants in t

ho se case s. Sti ll, we may

aff irm the district court’s judgment, even i f we do not ag ree its reasoning . See Rosen v. Cascade Int’l, Inc., 21 F .3d 1520, 1527 n.13 (11th Cir. 1994). 16 E dw ar ds m ad e no s uc h sh ow ing . I n a ddi tio n, the arg um en t i s m oot . E dw ar ds ac know le dge s th at

T w inl ea f is n o lo nge r subj ec t t o an a sse t f re ez e, but he f ears it m ay be sub j ec t t o on e la te r. E dw ar ds h as not c onvi nc ing ly

de m onstrate d why

his fearis li ke ly to b e rea li zed . W e al so r ej ec t E dw ar ds’ s arg um en t tha t T w inl ea f shou ld p ay f or the w ee kly re ports o f re ve nue s e ar

ne d by it . E dw ar ds pe rso nal lya gr ee d, by c onse nt o rd er , to pr ovi de suc h r ep orts. T he c onse nt o rd er is int er pr et ed a s ac ontra ct , and h e is boun d by it. S ee Robinson v . C ollert, 602 F. 2d 87 , 92 (5th Cir. 1979 ). 10 T hus, in al l m atte rs , the dis tr ic t c ourt’ s or de rs are a ff irm ed .

AFFIR MED.