People of State of Ill. ex rel. Hartigan v. Peters, 88-1555

• Decision Date: 05 April 1989
• Docket Number: No. 88-1555,88-1555
• Citation: 871 F.2d 1336
• Parties: PEOPLE OF the STATE OF ILLINOIS, ex rel. Neil F. HARTIGAN, Attorney General of Illinois, Plaintiff-Appellee, v. George PETERS, doing business as MGM Motors and George Peters, individually, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1336

871 F.2d 1336

PEOPLE OF the STATE OF ILLINOIS, ex rel. Neil F. HARTIGAN Attorney General of Illinois, Plaintiff-Appellee, v. George PETERS, doing business as MGM Motors and George Peters, individually, Defendant-Appellant.

No. 88-1555.

United States Court of Appeals Seventh Circuit.

Argued Dec. 1, 1988.

Decided April 5, 1989.

Paul E. Peldyak, Joseph N. Rathnau, Chicago, Ill., for defendant-appellant.

Margaret M. Drewko, Asst. Atty. Gen., Chicago, Ill., for plaintiff-appellee.

Before WOOD, Jr., RIPPLE, and MANION, Circuit Judges.

Harlington WOOD, Jr., Circuit Judge.

In this case we examine the limitations on a district judge's authority to enjoin a defendant and place his assets in receivership prior to a full hearing on the merits. The district judge enjoined Appellant George Peters from activities related to the alleged offense of selling cars with understated mileage readings and placed all Peters' known assets in receivership pursuant to the Illinois Consumer Fraud and Deceptive Business Practices Act (Illinois Consumer Fraud Act or the Act). Peters complains that notice and other aspects of the hearing were defective. He also argues that the injunction and receivership were overbroad. We agree with the district judge that the notice and hearing were not defective but reverse and remand the district judge's denial of the motion to dissolve the injunction and vacate the receivership because we find that the terms of the injunction and receivership exceed the parameters established by the Illinois Consumer Fraud Act.

I. FACTS

On February 11, 1987 the Illinois Attorney General filed a complaint for injunctive and other relief and a motion for a temporary restraining order and order freezing assets (TRO) naming Peters as defendant. The Attorney General alleged that Peters violated the Federal Motor Vehicle Information and Cost Savings Act, 15 U.S.C. Secs. 1981-1991 (1982), and the Illinois Consumer Fraud Act, Ill.Ann.Stat. ch. 121 1/2, paragraphs 261-272 (Smith-Hurd Supp.1988). According to the complaint, Peters purchased cars, set back the mileage reading on the odometers, and then under a variety of assumed names resold the cars to unsuspecting purchasers. Pursuant to Rule 65(b) of the Federal Rules of Civil Procedure, the district judge granted the Attorney General's motion for a TRO without notice to Peters and set a hearing date for February 21, 1987.

On February 20, 1987, one day before the TRO expired, the Attorney General asked the district judge to extend the TRO because the process server could not locate Peters. The district judge extended the TRO to March 3, 1987 and rescheduled the hearing for that morning.

On March 2, 1987 (one day before the hearing) John O'Brien, an investigator for the Attorney General, served Peters with papers. O'Brien testified that he walked up to Peters, identified himself as an investigator for the Attorney General, and handed Peters the papers. Peters touched the papers but then began to back away. Before Peters could retreat completely, however, O'Brien put the papers into Peters' coat pocket. Peters then took the papers out of his coat pocket, flung them to the ground, got in his car and drove away.

Not surprisingly, Peters did not appear the next day at the scheduled hearing. Based on the testimony of O'Brien and affidavits attached to the motion for the TRO, the district judge granted the Attorney General's motion for a preliminary injunction and also granted the Attorney General's motion to place all of Peters' known assets in receivership.

Approximately four and a half months later--on July 20, 1987--Peters' counsel filed an appearance. On October 2, 1987 Peters' counsel answered the complaint and a set of interrogatories. On October 9, 1987 Peters' counsel moved to quash service and on November 7 and December 7 the district judge heard testimony on the motion. Peters asserted that he was never served but the district judge, after taking extensive testimony, ruled otherwise.

Peters then moved to dissolve the preliminary injunction and to vacate the appointment of the receiver. The district judge again heard arguments on the adequacy of notice as well as challenges to the scope of the receivership. The district judge then denied the motions, reiterating many of the reasons and findings he gave in support of the injunction and appointment of the receiver. Peters appealed.

II. ANALYSIS

This court previously examined whether we have jurisdiction to review the district judge's denial of defendant's motion to vacate the appointment of the receiver. See Illinois ex rel. Hartigan v. Peters, 861 F.2d 164 (7th Cir.1988). In our earlier opinion, we stated that 28 U.S.C. Sec. 1292(a)(1) explicitly gave us jurisdiction to review the denial of the motion to dissolve the injunction. See 861 F.2d at 165. We also held that we had pendent jurisdiction over the denial of the motion to vacate the receivership because it was "inextricably intertwined" with the injunction order and compelling reasons existed for our review of both motions at the same time. See 861 F.2d at 166.

We did not address, however, in our earlier decision the issue of the scope of review. In reviewing a denial of motions to dissolve an injunction and vacate a receivership, we are not called upon to examine the district judge's original decision to impose an injunction and place assets in receivership. To obtain review of a district judge's decision to grant an injunction, the defendant must seek review through a direct appeal within thirty days of the district judge's decision or give extraordinary reasons for not having done so. Fed.R.App.Proc. 4(a). See Buckhanon v. Percy, 708 F.2d 1209, 1214 (7th Cir.), cert. denied, 465 U.S. 1025, 104 S.Ct. 1281, 79 L.Ed.2d 684 (1983). Peters did not bring a direct appeal within thirty days, nor are his reasons for not bringing a direct appeal extraordinary.

The scope of our review is therefore limited to the findings and conclusions underlying the district judge's denial of the motions to dissolve the injunction and vacate the receivership. See Buckhanon, 708 F.2d at 1213. See also Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1418 n. 4 (9th Cir.1984). Fortunately for Peters, the district judge based his order denying the motions to dissolve the injunction and vacate the receivership on findings that he had also relied upon in granting the injunction and receivership. In effect, the district judge gave Peters in the hearing on the motions to dissolve the injunction and vacate the receivership an opportunity to challenge the judge's previous findings and provide new arguments on the matter. Because the district judge based his denial of the motion to dissolve the injunction and vacate the receivership on findings identical to those previously made, as well as on new findings, and 28 U.S.C. Sec. 1292 permits us to pragmatically review the denial of a motion to dissolve an injunction, we will review issues that were both part of the district judge's initial decision to grant an injunction and appoint a receiver and his denial of the motion to dissolve the injunction and vacate the receivership. See 9 J. Moore, W. Taggart & J. Wicker, Moore's Federal Practice p 110.02 (2d ed. 1985). Cf. Fern v. Thorp Public School, 532 F.2d 1120, 1126-30 (7th Cir.1976). We realize that our review, because it calls into question findings underlying both the injunction and the denial of the motion to dissolve the injunction, may undermine the terms of the injunction and receivership. Those findings, nevertheless, addressed in the order refusing the motion to dissolve the injunction and vacate the receivership, are part of the record before us on appeal. See Godinez v. Lane, 733 F.2d 1250, 1255-57 (7th Cir.1984). In taking this pragmatic approach, however, we are not condoning attempts to circumvent the thirty-day filing requirement for a direct appeal through a motion to dissolve an injunction.

Peters first challenges aspects of the hearing at which the court imposed the injunction and receivership: the sufficiency of notice, the oral nature of the motion made by the Attorney General, the adequacy of the evidence, and the constitutionality of the Illinois statute under which the Attorney General brought the action. He then challenges the specificity and scope of the injunction and receivership. We affirm the district court's decision with respect to the issues raised concerning the hearing. We agree with Peters, however, that the injunction and receivership are too broad because they extend to assets that have not been connected to the alleged illegal activity. We therefore reverse and remand in part to allow the district court to reconsider the denial of the motion to dissolve the injunction and vacate the receivership and to modify the scope of the injunction and receivership accordingly.

A. The Hearing

1. Notice

Peters argues that notice of the hearing for the preliminary injunction and receivership violated the due process clause of the fourteenth amendment and Rule 65(a)(1) of the Federal Rules of Civil Procedure. ¹ According to Rule 65(a)(1), the adverse party must be given notice before a court issues a preliminary injunction. Rule 65 does not specify what constitutes sufficient notice. One court, however, has stated that notice should apprise a defendant of a hearing and provide adequate time to prepare a defense. See SEC v. Capital Growth Co., S.A. (Costa Rica), 391 F.Supp. 593, 600 (S.D.N.Y.1974). We leave the question of what constitutes sufficient notice primarily to the district court's discretion and apply a deferential standard of review. See, e.g., United States v. Alabama, 791 F.2d 1450, 1458 (11th Cir.1986), cert. denied, 479 U.S. 1085, 107 S.Ct. 1287, 94 L.Ed.2d 144 (1987) (abuse of discretion standard); SEC v. G. Weeks Sec., Inc., 678 F.2d 649, 651 (6th Cir.1982) (abuse of discretion review); SEC v. Capital Growth Co.,...