Court Opinion

ID: 54838
Source: CourtListenerOpinion
Date Created: 2010-04-26 01:36:19+00
Date Added: 2024-06-11T17:19:26.547750
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT United States Court of Appeals
                                                   Fifth Circuit

                                                                            FILED
                                                                         December 5, 2007

                                       No. 07-40200                   Charles R. Fulbruge III
                                                                              Clerk

ANIMALE GROUP INC; ANIMALE GROUP SA

                                                  Plaintiffs - Appellees
v.

SUNNY’S PERFUME INC; SUNIL KUMAR TYAGI

                                                  Defendants - Appellants

                   Appeal from the United States District Court
                    for the Southern District of Texas, Laredo
                                 No. 5:07-CV-13

Before KING, BARKSDALE and DENNIS, Circuit Judges.
PER CURIAM:*
       Sunny’s Perfume, Inc. (“Sunny’s Perfume”) and Sunil Kumar Tyagi
(collectively “Defendants”) appeal the district court’s February 8, 2007,
preliminary injunction restraining them from transferring certain assets.
Defendants’ sole argument on appeal is that the district court lacked the
authority to enter a pre-judgment asset freeze under any circumstance. We
AFFIRM.

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
                                  No. 07-40200

           I. FACTUAL AND PROCEDURAL BACKGROUND
      Animale Group, Inc. and Animale Group, S.A. (“Plaintiffs”) are the owners
of the federally-registered trademark “Animale.” Plaintiffs design, distribute
and market perfume under the Animale trade name. Sunny’s Perfume runs a
storefront and wholesale warehouse in Laredo, Texas. Tyagi is the owner and
operator of Sunny’s Perfume.
      On January 25, 2007, Plaintiffs filed a six count complaint against
Defendants for violations of the Lanham Act and various state torts. Plaintiffs
alleged that Defendants were selling counterfeit perfume labeled with the
Animale trademark.        On the same day, Plaintiffs moved for a temporary
restraining order freezing Defendants’ assets. The district court granted the
application, pending a February 6, 2007, hearing on Plaintiffs’ motion for
preliminary injunction. During the hearing, the district court granted the
motion for a preliminary injunction, and enjoined Defendants from transferring
approximately $600,000 in real property and cash. The district court stated that
it had authority to enter the injunction because Plaintiffs’ suit sought equitable
relief, and a freeze was necessary to prevent Defendants from dissipating their
assets.
      On March 6, 2007, Defendants filed this interlocutory appeal pursuant to
28 U.S.C. § 1292(a)(1).
                               II. DISCUSSION
A. Standard of Review
      “A district court’s grant of preliminary injunction is reviewed for abuse of
discretion.” Women’s Med. Ctr. of Nw. Houston v. Bell, 248 F.3d 411, 418-19 (5th
Cir. 2001) (citations omitted). Findings of fact are reviewed for clear error, and
legal determinations are reviewed de novo. Hoover v. Morales, 164 F.3d 221, 224
(5th Cir. 1998). Because Defendants challenge only the district court’s power to

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                                  No. 07-40200

enter an asset restraint altogether, and not its factual findings, our review is de
novo.
B. Analysis
        Defendants argue that the district court lacked the authority to freeze
their assets based on Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund,
Inc., 527 U.S. 308 (1999). In Grupo Mexicano, the Supreme Court held that
federal courts do not have equitable authority to preliminarily freeze assets in
legal actions. Id. at 324-33. It reasoned that a federal court’s equitable power
is limited to the jurisdiction exercised by the High Court of Chancery in England
at the time of the enactment of the Judiciary Act of 1789. Id. at 318-19 (citations
omitted). Traditionally, remedies of law had to be exhausted before equitable
remedies could be pursued.       Id. at 319-20.    A general creditor without a
judgment “had no cognizable interest, either at law or in equity, in the property
of his debtor, and therefore could not interfere with the debtor’s use of that
property.” Id. at 320-21.
        As Plaintiffs note, however, Defendants fail to address prior Supreme
Court precedent authorizing pre-judgment asset restraints. In particular, in
Deckert v. Independence Shares Corp., 311 U.S. 282, 289-91 (1940), the Court
held that a district court had sufficient equitable powers to preliminarily freeze
a defendant’s assets in suits sounding in equity. The Court concluded that
where a legal action is inadequate and an asset freeze is narrowly drawn to
sequester only those funds necessary to satisfy the potential judgment, “‘[i]t is
well settled that the granting of a temporary injunction . . . is within the sound
discretion of the trial court . . . .’” Id. at 290 (quoting Prendergast v. N.Y. Tel.
Co., 262 U.S. 43, 50 (1923)); see also United States v. First Nat’l City Bank, 379
U.S. 378, 385 (1965) (stating that defendants might dissipate their assets if the
district court could not freeze their bank accounts).

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                                  No. 07-40200

      The issue before us, then, is whether Grupo Mexicano governs equitable
as well as legal actions. Other circuits have determined that the case is limited
to actions at law. See, e.g., United States ex rel Rahman v. Oncology Assocs.,
P.C., 198 F.3d 489, 496-97 (4th Cir. 1999) (holding that Deckert still authorizes
a district court to preliminarily freeze assets in a case involving equitable
claims); CSC Holdings, Inc. v. Redisi, 309 F.3d 988, 996 (7th Cir. 2002) (“[T]he
[C]ourt specifically noted that a restraint on assets was still proper if a suit
sought equitable relief.”); Kennedy Bldg. Assocs. v. CBS Corp., 476 F.3d 530, 535
(8th Cir. 2007) (“Here, the underlying relief sought is equitable, rather than
legal, so our case involves the use of equity in support of equity, rather than
equity in support of a legal remedy.”); In re Focus Media Inc., 387 F.3d 1077,
1085 (9th Cir. 2004) (“Grupo Mexicano . . . exempts from its proscription . . .
cases in which equitable relief is sought.”); SEC v. ETS Payphones, Inc., 408
F.3d 727, 734 (11th Cir. 2005) (“Grupo Mexicano does not control the outcome of
this case, because the SEC seeks equitable relief (disgorgement), not just money
damages.”).
      We agree. In Grupo Mexicano, the Supreme Court explicitly distinguished
Deckert. See 527 U.S. at 324-25 (stating that Deckert was not on point because
the underlying cause of action there was for equitable relief). It also noted that
“[t]he preliminary relief available in a suit seeking equitable relief has nothing
to do with the preliminary relief available in a creditor’s bill seeking equitable
assistance in the collection of a legal debt.” Id. at 325. Until the Court instructs
us otherwise, we must continue to follow Deckert. See Medellin v. Dretke, 371
F.3d 270, 280 (5th Cir. 2004).
      Defendants do not contest that Plaintiffs seek equitable relief, nor could
they. Plaintiffs seek an accounting of lost profits under the Lanham Act, which
is “subject to the principles of equity.” See 15 U.S.C. § 1117(a). This court

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                                  No. 07-40200

previously recognized that such an accounting is an equitable remedy. Maltina
Corp. v. Cawy Bottling Co., 613 F.2d 582, 584-85 (5th Cir. 1980) (holding that an
accounting remedies unjust enrichment). As have other circuits. See, e.g., Levi
Strauss & Co. v. Sunrise Int’l Trading Inc., 51 F.3d 982, 986-87 (11th Cir. 1995);
Reebok Int’l, Ltd. v. Marnatech Enters., Inc., 970 F.2d 552, 559 (9th Cir. 1992).
Because Defendants seek equitable relief, the district court was authorized to
preserve the status quo by entering a limited asset freeze.
                             III. CONCLUSION
      For the reasons stated above, we AFFIRM the district court’s
preliminary injunction.

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