179 F.3d 1228 (9th Cir. 1999)
In April 1997, Denyse and Michael Anderson became involved with The Sterling Group, which sold products such as the Aquabell and Talking Pet Tag through late-night television commercials.1 The Andersons formed Financial Growth Consultants, LLC to telemarket media units, investments promising investors a fifty percent return in sixty to ninety days based on sales of Sterling products.2 Financial raised at least thirteen million dollars from investors and retained approximately six million three hundred thousand dollars in commissions, while the scheme operated as a Ponzi scheme using later investments to pay earlier ones.3
On April 23, 1998, the Federal Trade Commission filed a complaint in the United States District Court for the District of Nevada against the Andersons, Financial, and others, alleging violations of the Federal Trade Commission Act and the Telemarketing Sales Rule.4 The district court issued an ex parte temporary restraining order that froze assets and required repatriation of foreign assets.5 After hearings on April 30 and May 8, 1998, the court entered a preliminary injunction incorporating those requirements.6
In July 1995, the Andersons had created an irrevocable trust in the Cook Islands with AsiaCiti Trust Limited as a co-trustee, naming themselves as co-trustees and including provisions to remove them and block repatriation upon an event of duress such as a court order.7 In response to the preliminary injunction, the Andersons faxed instructions to AsiaCiti on May 12, 1998 to provide an accounting and repatriate assets, but AsiaCiti deemed the order an event of duress, removed the Andersons as trustees, and refused to repatriate or provide an accounting.8
On May 7, 1998, the Commission moved to hold the Andersons in civil contempt for failing to provide an accounting and repatriate assets.9 After hearings beginning June 4, 1998 and continuing through June 17, 1998, the district court found the Andersons in civil contempt, rejected their impossibility defense after they attempted to appoint their children as trustees, and ordered them into custody when they did not purge the contempt.10 The Andersons timely appealed the preliminary injunction and the contempt finding to the Ninth Circuit.11
Whether the district court abused its discretion in issuing the preliminary injunction?12
A district court's order regarding preliminary injunctive relief receives only limited review.13 Reversal is warranted solely when the district court abused its discretion by basing its decision on an erroneous legal standard or on clearly erroneous factual findings.14 Section 13(b) of the Federal Trade Commission Act authorizes a preliminary injunction upon a proper showing that weighing the equities and considering the Commission's likelihood of ultimate success would serve the public interest.15 This standard imposes a lighter burden than the traditional equity standard that requires no showing of irreparable harm.16
No. The district court correctly applied the standard under 15 U.S.C. § 53(b) by assessing both the Commission's likelihood of success on the merits and the balance of equities.17 The Commission made a sufficient showing of likely success because the Andersons exercised control over Financial Growth Consultants, LLC, the chief telemarketer of the media units, and were at least recklessly indifferent to the deceptive representations of fifty percent returns in sixty to ninety days on investments in a scheme that in fact operated as a Ponzi scheme using later investors' funds to pay earlier ones.18 The balance of equities favored the public interest in preserving the Andersons' commissions for potential restitution to defrauded investors over the Andersons' private interests, which the district court mitigated by releasing funds for living expenses, operating costs, and attorneys' fees.19 The Andersons' voluntary cessation of sales for The Sterling Group did not moot the need for relief because the mandatory repatriation requirement remained necessary and a possibility of recurrence existed.20
The district court did not abuse its discretion in issuing the preliminary injunction.21
Whether the district court abused its discretion in finding the Andersons in civil contempt for failing to repatriate assets?22
A district court's civil contempt order is reviewed for abuse of discretion.23 Factual findings are reviewed for clear error.24 Findings rejecting an impossibility defense are also reviewed for clear error.25 The moving party must show by clear and convincing evidence that the contemnors violated a specific and definite court order.26 The burden then shifts to the contemnors to demonstrate categorically and in detail why compliance was impossible.27
No. The temporary restraining order and preliminary injunction specifically required the Andersons to repatriate all assets held outside the United States, including those in the Cook Islands trust.28 The Andersons failed to achieve repatriation after AsiaCiti Trust Limited treated the order as an event of duress, removed the Andersons as trustees, and refused to act.29 The Andersons did not carry their burden of proving impossibility.30 The district court found they remained in control of the trust as its protectors.31
This finding was supported by their prior successful withdrawal of more than one million dollars from the trust for taxes.32 It was also supported by their power to appoint trustees and determine whether an event of duress had occurred.33 Their immediate attempt to resign as protectors once the Commission highlighted that role further supported the finding.34 The district court's rejection of the impossibility defense was not clearly erroneous given the Andersons' central involvement in designing the trust to frustrate domestic court orders.35
The district court did not abuse its discretion in finding the Andersons in civil contempt for failing to repatriate assets.36