Federal Trade Commission v. Strano
A court can issue a preliminary injunction, to freeze the assets of the spouse of an alleged wrongdoer. The Federal Trade Commission alleged that the defendant, Boris Mizhen, used fake news Web sites, with names that appeared to be legitimate, to promote diet products such as LeanSpa and NutraSlim, in violation of the Federal Trade Commission Act and the Connecticut Unfair Trade Practices Act. Mizhen's spouse, Angelina Strano, was named as a so-called "relief" defendant. The District Court, Hall, J., issued a preliminary injunction to freeze Angelina Strano's assets, which include brokerage accounts and undeveloped property on the Post Road. Strano appealed to the 2nd Circuit. "The plenary powers of a federal court to order an asset freeze are not limited to assets held solely by an alleged wrongdoer, who is sued as a defendant in an enforcement action," pursuant to Smith v. SEC, a 2011 decision of the U.S. Court of Appeals for the 2nd Circuit. They also extend to "nominal" or "relief" defendants. "To obtain a preliminary injunction freezing the assets of such a relief defendant, [plaintiffs] must demonstrate only that they are likely ultimately to succeed in disgorging the frozen funds," pursuant to CFTC v. Walsh, a 2010 decision of the 2nd Circuit. Strano's claim that the District Court lacked jurisdiction to issue the preliminary injunction was not persuasive. The 2nd Circuit also rejected any claim that the government was required to prove Mizhen actively managed the real property, to the exclusion of Strano. It was sufficient for the government to establish Mizhen treated the property as his own. The 2nd Circuit rejected Strano's claim that the District Court should have frozen only one brokerage account, for which Mizhen held a power of attorney. "The district court," wrote the 2nd Circuit, "did not exceed its discretion in freezing the remaining [brokerage] accounts as likely conduits for movement of Mizhen's own funds among other entities in his control." The 2nd Circuit affirmed the issuance of the preliminary injunction. David Wynn represented the defendant, Strano. George Jepsen, Matthew Fitzsimmons, Michael Bergman, David Shonka and John Daly represented the government.