                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

GREGORY JOHNSON; WILLIAM                
RODWELL; EDWARD RANGEL; KELLY
MORRELL,
               Plaintiffs-Appellees,
               and
DARLEEN STANTON,
                           Plaintiff,
ROORDA PIQUET & BESSEE, INC.,
Non-party appearing witness,
                           Witness,
                v.
CLAIR R. COUTURIER, JR.,                     No. 08-17369
                         Defendant,
DAVID R. JOHANSON; NOLL                       D.C. No.
                                            2:05-cv-02046-
MANUFACTURING COMPANY                         RRB-GGH
EMPLOYEE STOCK OWNERSHIP
PLAN AND TRUST; PENSCO, INC.;
JOHANSON BERENSON LLP; THE
EMPLOYEE OWNERSHIP HOLDING
CORPORATION, Employee Stock
Ownership Plan; N & NW
MANUFACTURING HOLDING
COMPANY, INC.; NOLL
MANUFACTURING COMPANY,
                        Defendants,
               and
ROBERT E. EDDY,
             Defendant-Appellant.
                                        

                             9695
9696                 JOHNSON v. COUTURIER



GREGORY JOHNSON; WILLIAM                
RODWELL; EDWARD RANGEL; KELLY
MORRELL,
               Plaintiffs-Appellees,
               and
DARLEEN STANTON,
                           Plaintiff,
ROORDA PIQUET & BESSEE, INC.,
Non-party appearing witness,
                           Witness,
                v.
CLAIR R. COUTURIER, JR.,                     No. 08-17373
                         Defendant,
ROBERT E. EDDY; NOLL                          D.C. No.
                                            2:05-cv-02046-
MANUFACTURING COMPANY                         RRB-GGH
EMPLOYEE STOCK OWNERSHIP
PLAN AND TRUST; PENSCO, INC.;
JOHANSON BERENSON LLP; THE
EMPLOYEE OWNERSHIP HOLDING
CORPORATION, Employee Stock
Ownership Plan; N & NW
MANUFACTURING HOLDING
COMPANY, INC.; NOLL
MANUFACTURING COMPANY,
                        Defendants,
               and
DAVID R. JOHANSON,
             Defendant-Appellant.
                                        
                     JOHNSON v. COUTURIER                9697



GREGORY JOHNSON; WILLIAM                 
RODWELL; EDWARD RANGEL; KELLY
MORRELL,
                Plaintiffs-Appellees,
                and
DARLEEN STANTON,
                            Plaintiff,
ROORDA PIQUET & BESSEE, INC.,
Non-party appearing witness,
                            Witness,
                 v.
                                              No. 08-17375
CLAIR R. COUTURIER, JR.,
              Defendant-Appellant,             D.C. No.
                                             2:05-cv-02046-
                and                            RRB-GGH
ROBERT E. EDDY; DAVID R.
JOHANSON; NOLL MANUFACTURING
COMPANY EMPLOYEE STOCK
OWNERSHIP PLAN AND TRUST;
PENSCO, INC.; JOHANSON BERENSON
LLP; THE EMPLOYEE OWNERSHIP
HOLDING CORPORATION, Employee
Stock Ownership Plan; N & NW
MANUFACTURING HOLDING
COMPANY, INC.; NOLL
MANUFACTURING COMPANY,
                         Defendants.
                                         
9698                 JOHNSON v. COUTURIER



GREGORY JOHNSON; WILLIAM                 
RODWELL; EDWARD RANGEL; KELLY
MORRELL,
                Plaintiffs-Appellees,
                and
DARLEEN STANTON,
                            Plaintiff,
ROORDA PIQUET & BESSEE, INC.,
Non-party appearing witness,
                            Witness,
                 v.                           No. 08-17631
CLAIR R. COUTURIER, JR.,                        D.C. No.
              Defendant-Appellant,          2:05-cv-02046-
                and                            RRB-GGH
ROBERT E. EDDY; DAVID R.                        OPINION
JOHANSON; NOLL MANUFACTURING
COMPANY EMPLOYEE STOCK
OWNERSHIP PLAN AND TRUST;
PENSCO, INC.; JOHANSON BERENSON
LLP; THE EMPLOYEE OWNERSHIP
HOLDING CORPORATION, Employee
Stock Ownership Plan; N & NW
MANUFACTURING HOLDING
COMPANY, INC.; NOLL
MANUFACTURING COMPANY,
                         Defendants.
                                         
        Appeal from the United States District Court
           for the Eastern District of California
        Ralph R. Beistline, District Judge, Presiding

                  Argued and Submitted
          May 7, 2009—San Francisco, California
               JOHNSON v. COUTURIER               9699
                Filed July 27, 2009

Before: Procter Hug, Jr., Michael Daly Hawkins, and
        Richard C. Tallman, Circuit Judges.

            Opinion by Judge Tallman
                     JOHNSON v. COUTURIER                 9703




                         COUNSEL

Theodore M. Becker (argued), Thomas M. Peterson, Joseph
E. Floren, and Elizabeth A. Frohlich, Morgan, Lewis & Bock-
ius LLP, for appellant Clair R. Couturier, Jr.

Christopher J. Rillo, Lars C. Golumbic, and Dipal A. Shah,
Groom Law Group Chartered, for appellant David R. Johan-
son.

Gary D. Greenwald (argued), Ron Kilgard, and Gary A.
Gotto, Keller Rohrback, PLC, and Terence J. Devine, Devine,
Markovits & Snyder, LLP, for the appellees.

Carol A. De Deo, Deputy Solicitor of Labor, Timothy D.
Hauser, Associate Solicitor, Plan Benefits Security Division,
Elizabeth Hopkins (argued), Counsel for Appellate and Spe-
cial Litigation, and Robyn M. Swanson, Trial Attorney, U.S.
Department of Labor, for the Secretary of Labor as amicus
curiae supporting appellees.


                         OPINION

TALLMAN, Circuit Judge:

  In his capacity as president of Noll Manufacturing Com-
pany (“Noll”) and its successors, Clair R. Couturier, Jr.,
together with his fellow directors, diverted almost $35 million
9704                 JOHNSON v. COUTURIER
of corporate assets—at least a third of the corporation’s value,
even in Couturier’s own estimation—to his own possession
through the buyout of deferred compensation agreements.
Plaintiffs, all of whom are participants in Noll’s employee
stock ownership plan (“ESOP”), filed suit against Couturier
and two other directors alleging, inter alia, breach of fidu-
ciary duties under the Employee Retirement Income Security
Act of 1974 (“ERISA”). This case requires us to consider
whether the district court abused its discretion when it
enjoined advancement of defense costs and froze Couturier’s
assets. We conclude that the district court did not abuse its
discretion, but remand to allow the district court, in the first
instance, to set the terms and conditions of a surety bond suf-
ficient to secure Couturier and the other defendants against
any harm that might wrongfully befall them as a result of the
issuance of each injunction.

                               I

                               A

   Noll, a closely held corporation founded in 1942, manufac-
tured and sold galvanized sheet metal products. Through
restructuring, Noll was succeeded first by N&NW Holding
Company (“N&NW”) in 2001, and then by The Employee
Ownership Holding Company (“TEOHC”) in 2004.

  Noll’s founder, who died in 1980, established the ESOP in
1977 to give the company’s employees an opportunity to
share in its success. His will reflects an intent that the ESOP
own the entire company. However, for reasons we cannot dis-
cern from the record, the ESOP did not acquire full ownership
of Noll until 2001.

   Clair R. Couturier, Jr., became President of Noll in 1999.
Noll’s Board of Directors designated Couturier the sole
trustee for the ESOP as of April 24, 2001. Attorney David R.
Johanson, who had previously represented the ESOP in con-
                         JOHNSON v. COUTURIER                        9705
nection with its leveraged purchase of all remaining Noll
stock, was appointed a Noll director on June 20, 2001, joining
Couturier and Noll’s general counsel on the Board. However,
after the transfer of ownership to N&NW later that year, Cou-
turier and Johanson remained as the sole directors.

   This litigation traces its genesis to the sizeable deferred
compensation awarded to Couturier during his tenure as presi-
dent of Noll and its successors. Prior to 2001, retired Noll
executives were entitled to continue receiving 75 percent of
their base salary, with an adjustment made every three years,
under a Compensation Continuation Agreement (“CCA”). In
2001, however, Johanson drafted three documents that tied
deferred executive compensation to company value: (1) an
Equity Incentive Plan (“EIP”) establishing an incentive stock
option plan for key management personnel; (2) an Incentive
Stock Option Agreement (“ISO”) granting Couturier 80,000
shares at a strike price of $34;1 and (3) a Value Enhancement
Incentive Plan (“VEIP”) creating additional synthetic equity.
At the time these plans were enacted, one director reportedly
opined that this “is not too good” for the ESOP; they were
nonetheless approved by the Board on June 13, 2001.2

   After the reorganization of Noll under N&NW, Johanson
and Couturier, remaining as the sole directors, orchestrated
additional incentive agreements in February 2002. The 2002
EIP allowed for issuance of up to 110,000 shares, with no
more than 93,500 shares being awarded to a single grantee.
The 2002 ISO again granted to Couturier 80,000 shares at a
strike price of $34 per share. The 2002 VEIP created addi-
tional synthetic equity for Couturier. Couturier and Johanson
  1
     The effect of the 2001 ISO is unclear; the governing EIP allowed for
issuance of only 50,000 shares, with a grant to any single employee not
exceeding 25,000 shares.
   2
     Although the board minutes reflect that all three directors, including
Couturier, voted to approve these compensation programs, one director
later claimed that he had abstained from the vote.
9706                    JOHNSON v. COUTURIER
also increased Couturier’s monthly CCA stipend by about 33
percent and enacted a Supplemental Executive Retirement
Plan providing additional deferred compensation.3

   The advent of 2003 heralded further expansion of Couturi-
er’s compensation. That year, Couturier and Johanson
approved a retroactive annual cash bonus to Couturier equal-
ing ten percent of the dollar amount of external debt repaid on
certain loans. Some of these loans were refinanced later that
same year. N&NW then purchased a $5.5 million home (“the
Palm Desert home”) and a $325,000 private golf club mem-
bership in Palm Desert, California, for Couturier’s personal
use.

   After unsuccessful negotiations with Alliance Holdings,
Inc. for the acquisition of N&NW—during which the value of
Couturier’s interest in the company became a point of
contention—Couturier and Johanson appointed Couturier’s
financial advisor, Robert E. Eddy, as Special Trustee to the
ESOP. Eddy’s role was to evaluate proposed transactions
involving N&NW and the ESOP, including monetization of
Couturier’s financial interest in N&NW. Couturier and Johan-
son ultimately opted to merge N&NW into TEOHC, which
Johanson had incorporated in Delaware on December 15,
2003. As the incorporator, Johanson appointed himself, Cou-
turier, Eddy, and accountant James Roorda as directors. Pur-
suant to a new plan, the ESOP was now to be administered
by Trustees appointed by the TEOHC Board of Directors; the
Board members appointed themselves as Trustees.
  3
    Benefits Consultants, Inc. provided a contemporaneous opinion finding
that the CCA, ISO, and VEIP did not constitute an unreasonable level of
compensation, but specifically did not render an opinion as to whether
adopting these agreements was consistent with ERISA fiduciary duties.
Moss Adams Advisory Services (“Moss Adams”) provided a contempora-
neous opinion concluding that the 2002 ISO was fair to the ESOP from
a financial point of view.
                         JOHNSON v. COUTURIER                        9707
   On July 20, 2004, pursuant to the merger transaction, Cou-
turier received over $26 million in cash, title to the Palm
Desert home, a Bentley automobile valued at $200,000, and
various other benefits in exchange for his deferred compensa-
tion interests. The parties value this buyout package at $34.8
million.4 Accordingly, Couturier’s overall compensation
package equals about 65 percent of TEOHC’s assets as of
June 2004, and about 80 percent of N&NW’s assets as of each
of the prior two years. The package also exceeded by more
than two-fold N&NW’s 2002 stock market value.

                                    B

   On October 11, 2005, several former and current Noll
employees (collectively, “Plaintiffs”), all of whom are ESOP
participants, filed suit against Couturier, Johanson, and Eddy
(collectively, “Defendants”) in the United States District
Court for the Eastern District of California. Claiming that
Couturier was vastly overcompensated, Plaintiffs’ amended
complaint seeks relief from Defendants’ alleged breach of
fiduciary duties in their capacities as ERISA fiduciaries and
corporate directors. Under ERISA, Plaintiffs seek: (1) to hold
Defendants jointly and severally liable for all ESOP losses
related to their misconduct; (2) creation of a constructive trust
for disgorgement of Defendants’ wrongful profit; and (3)
removal of Eddy as ESOP Trustee. Plaintiffs also seek to hold
Couturier and Johanson jointly and severally liable for losses
suffered by Noll and N&NW because of directorial miscon-
duct, and all three Defendants jointly and severally liable for
losses suffered by TEOHC because of directorial misconduct.
Finally, Plaintiffs also accuse Johanson and his law firm of
  4
    Moss Adams issued a qualified opinion that the merger transaction was
fair to the ESOP from a financial and economic perspective. It specifically
excluded any consideration of the fairness of Couturier’s compensation
package. The latter issue was separately analyzed by The California
Appraisal Institute, which concluded that Couturier’s buyout package did
not exceed “adequate consideration” under ERISA.
9708                    JOHNSON v. COUTURIER
professional negligence, and on this basis seek to hold them
jointly and severally liable for losses suffered by Noll,
N&NW, and TEOHC.

                                   C

   The Defendant directors, officers, and trustees entered into
multiple and largely identical indemnification agreements
with Noll and its successors between 2001 and 2005. These
agreements generally indemnify Defendants for any liabilities
incurred in their service as directors—and, in the case of Cou-
turier and Eddy, in their service as ESOP trustees—so long as
any such liability did not involve “deliberate wrongful acts”
or “gross negligence.”5 The agreements are governed by Cali-
fornia law “to the extent not preempted by federal law”; Cou-
turier’s trustee indemnification further specifies that it is
“[s]ubject to the relevant provisions of [ERISA].”

  At issue here are provisions within the indemnification
agreements requiring TEOHC to advance defense costs. Seek-
ing advancement as promised in the indemnification agree-
ments, each Defendant has executed an undertaking to repay
TEOHC for “any expenses paid by it on my behalf in advance
of the final disposition of the [instant] suit[ ], if it shall ulti-
mately be determined that I am not entitled to be indemnified
by the Company” under Delaware law.
  5
   Seven of the ten indemnification agreements covering Couturier,
Johanson, and Eddy condition indemnification on an absence of “deliber-
ate wrongful acts” and “gross negligence” on the part of the indemnitee.
However, the agreement indemnifying Couturier as a trustee excepts from
coverage losses resulting from his “grossly negligent and/or intentional
misconduct.” One of the two agreements indemnifying Eddy as a trustee
also excepts from coverage losses resulting from his “grossly reckless
and/or intentional misconduct,” while the other excepts from coverage
losses resulting from his “negligent, grossly reckless and/or intentional
misconduct.” Because our ensuing analysis is identical regardless of which
subset of these five exceptions applies, we refer to the ten agreements as
indemnifying Defendants so long as any such liability did not involve
deliberate wrongful acts or gross negligence.
                      JOHNSON v. COUTURIER                     9709
   After learning that Johanson and Eddy had asserted a claim
for advancement of defense costs against TEOHC in a related
commercial arbitration proceeding conducted before the
American Arbitration Association (“AAA”), Plaintiffs and the
Department of Labor (“DOL”) sought to intervene. The arbi-
trator declined to allow intervention, finding that “determina-
tion of the contract interpretation questions presented here
would not be aided by input from these third parties,” and
ordered TEOHC to advance Johanson’s and Eddy’s defense
costs. After Plaintiffs obtained an Order To Show Cause why
the advancement should not be enjoined, the district court on
September 26, 2008, found that Plaintiffs were not bound by
the AAA decision and had met their burden justifying issu-
ance of a preliminary injunction prohibiting the advancement
of defense costs. Couturier, Johanson, and Eddy all timely
appealed this injunction.6

   On October 24, 2008, the district court also granted a sec-
ond preliminary injunction: (1) preventing Couturier from
“transferring, secreting, assigning, pledging, mortgaging, or
hypothecating” the assets he received as part of the 2004 buy-
out package without prior court approval; and (2) ordering an
accounting of these assets within 20 days. However, the court
limited this injunction to allow Couturier “to cover normal
living expenses and legal fees.” Couturier timely appealed
this second preliminary injunction.

                                 D

   A subsidiary of Gibraltar Industries, Inc. purchased
TEOHC’s assets on April 10, 2007, for almost $61 million.
Approximately $15.8 million of the sale proceeds remained
for distribution to the ESOP after payment of bank debt, exec-
utive compensation, closing costs, and escrow. Consulting
Fiduciaries, Inc., the current ESOP trustee, distributed $5 mil-
  6
   On January 20, 2009, we denied Defendants’ emergency motion for a
stay.
9710                 JOHNSON v. COUTURIER
lion to the participants in January 2008. The balance of funds
has been withheld, at least partly in escrow, to allow TEOHC
to pay for its own legal expenses once directors’ and officers’
liability (“D&O”) insurance coverage is exhausted and to sat-
isfy the indemnification agreements with Defendants.

                               II

   Defendants collectively make three separate arguments to
avoid invalidation of these agreements under ERISA: (1) that
they are not ERISA fiduciaries; (2) that the setting of execu-
tive compensation is a business decision not subject to
ERISA; and (3) that whether TEOHC is obligated to advance
their defense costs is purely a matter of state contract law. We
consider and reject each argument in turn.

                               A

   [1] Congress enacted ERISA to establish “minimum stan-
dards . . . assuring the equitable character of [benefit] plans
and their financial soundness.” 29 U.S.C. § 1001(a). To
accomplish this goal, ERISA requires that plan assets be held
in trust for the exclusive benefit of plan participants and their
beneficiaries. Id. § 1103. Moreover, “authority to control and
manage the operation and administration of the plan” must be
vested in one or more named fiduciaries. Id. § 1102(a). In
order “to protect . . . the interests of participants in employee
benefit plans and their beneficiaries,” ERISA also imposes
“standards of conduct, responsibility, and obligation for fidu-
ciaries of employee benefit plans.” Id. § 1001(b). These stan-
dards include duties of loyalty and care, id. § 1104(a)(1), as
well as a prohibition on self-dealing, id. § 1106(b)(1).

   [2] An ESOP is a type of ERISA plan “designed to invest
primarily in” the stock of the employer who created it. Id.
§ 1107(d)(6)(A). “Congress expressly intended that the ESOP
would be both an employee retirement benefit plan and a
technique of corporate finance that would encourage
                          JOHNSON v. COUTURIER                         9711
employee ownership.” Edgar v. Avaya, Inc., 503 F.3d 340,
346 (3d Cir. 2007) (quotation omitted). Although the creation
of ESOPs necessitated their exemption from certain ERISA
requirements, such as asset diversification, the core fiduciary
duties of loyalty and care as well as the prohibition against
self-dealing7 remain in effect. Id.

   [3] We construe ERISA fiduciary status “liberally, consis-
tent with ERISA’s policies and objectives.” Ariz. State Car-
penters Pension Trust Fund v. Citibank, (Ariz.), 125 F.3d 715,
720 (9th Cir. 1997). ERISA “defines ‘fiduciary’ not in terms
of formal trusteeship, but in functional terms of control and
authority over the plan.” Mertens v. Hewitt Assocs., 508 U.S.
248, 262 (1993). Thus, ERISA—and ESOP—fiduciaries
include not only those specifically named in the employee
benefit plan, 29 U.S.C. § 1102(a), but also any individual who
“exercises any discretionary authority or discretionary control
respecting management of such plan or exercises any author-
ity or control respecting management or disposition of its
assets,” 29 U.S.C. § 1002(21)(A)(i). We have accordingly
recognized that where members of an employer’s board of
directors have responsibility for the appointment and removal
of ERISA trustees, those directors are themselves subject to
ERISA fiduciary duties, albeit only with respect to trustee
selection and retention.8 Batchelor v. Oak Hill Med. Group,
870 F.2d 1446, 1448- 49 (9th Cir. 1989).
  7
     The prohibition against self-dealing is, however, curtailed in order to
allow plan acquisition of employer stock. 29 U.S.C. § 1108(e).
   8
     In reaching this conclusion, we have relied on an interpretive bulletin
issued by the DOL in 1975, which provides:
      Q: In the case of a plan established and maintained by an
      employer, are members of the board of directors of the employer
      fiduciaries with respect to the plan?
      A: Members of the board of directors of an employer which
      maintains an employee benefit plan will be fiduciaries only to the
      extent that they have responsibility for the functions described in
      [29 U.S.C. § 1002(21)(A)]. For example, the board of directors
9712                    JOHNSON v. COUTURIER
   [4] Because all three Defendants served as ESOP trustees,
each was an ERISA fiduciary subject to the duties of loyalty
and care and to the prohibition against self-dealing. Couturier
served as the sole Trustee of the Noll ESOP beginning on
April 24, 2001. Eddy was appointed Special Trustee to the
ESOP in 2003. After Noll merged into TEOHC in 2004, all
three Defendants were appointed to the ESOP Board of Trust-
ees.

   Johanson argues, without any citation to the record, that he
served on the TEOHC ESOP Board of Trustees for only one
day, and thus never had the opportunity to take any actions
that would subject him to ERISA fiduciary duties. Be that as
it may, Johanson, together with Couturier and Eddy, also
served on the TEOHC Board of Directors. The TEOHC ESOP
Plan specified that it was to “be administered by a Board of
Trustees composed of individuals who will be appointed by
the unanimous action of the Board [of] Directors” of
TEOHC. (Emphasis added.) The Plan further vested the
power of trustee removal in the TEOHC Board of Directors.
Thus, as the de facto decision makers of closely held and
related entities, all three defendants—including Johanson—
also served as ERISA fiduciaries with respect to appointment
and removal of ESOP trustees. See Batchelor, 870 F.2d at
1448- 49; 29 C.F.R. § 2509.75-8(D-4).

                                    B

   ERISA confers upon federal district courts exclusive juris-
diction over any civil action brought by a plan participant or

    may be responsible for the selection and retention of plan fidu-
    ciaries. In such a case, members of the board of directors exercise
    “discretionary authority or discretionary control respecting man-
    agement of such plan” and are, therefore, fiduciaries with respect
    to the plan. However, their responsibility, and, consequently,
    their liability, is limited to the selection and retention of fidu-
    ciaries . . . .
29 C.F.R. § 2509.75-8(D-4).
                     JOHNSON v. COUTURIER                   9713
beneficiary for equitable relief from a trustee’s breach of fidu-
ciary duty. 29 U.S.C. § 1132(a), (e). Johanson argues, how-
ever, that the district court lacked subject matter jurisdiction
over the instant case because the actions challenged by
Plaintiffs—actions that resulted in the allegedly excessive
compensation of Couturier—are business decisions not sub-
ject to ERISA.

   [5] Decisions relating to corporate salaries generally do not
fall within ERISA’s purview. But where plan assets include
the employer’s stock, the value of those assets depends on the
employer’s equity. Employee compensation levels are, of
course, one of the many business expenditures reducing the
value of the overall equity of any company. On the other
hand, “[v]irtually all of an employer’s significant business
decisions affect the value of its stock, and therefore the bene-
fits that ESOP plan participants will ultimately receive.” Mar-
tin v. Feilen, 965 F.2d 660, 666 (8th Cir. 1992). Taken to its
logical conclusion, therefore, this line of thinking would, in
the case of an ESOP, extend the application of ERISA to a
corporation’s annual expenditures on office supplies—clearly
an absurd result. The Eighth Circuit has on this basis limited
an ERISA fiduciary’s duties “to transactions that involve
investing the ESOP’s assets or administering the plan.” Id.
Setting executive compensation levels does not obviously fall
into either category. See Eckelkamp v. Beste, 201 F. Supp. 2d
1012, 1023 (E.D. Mo. 2002) (holding that a corporate director
is not acting as an ESOP fiduciary in setting compensation
levels).

   [6] Nonetheless, we conclude that applying ERISA to the
instant case does not risk encompassing within its confines
any and all day-to-day corporate decisions shielded by the
business judgment rule. Where, as here, an ESOP fiduciary
also serves as a corporate director or officer, imposing ERISA
duties on business decisions from which that individual could
directly profit does not to us seem an unworkable rule. To the
contrary, our holding merely comports with congressional
9714                   JOHNSON v. COUTURIER
intent in establishing ERISA fiduciary duties as “the highest
known to the law.” Howard v. Shay, 100 F.3d 1484, 1488 (9th
Cir. 1996) (quotation omitted). To hold otherwise would pro-
tect from ERISA liability obvious self-dealing, as Plaintiffs
allege occurred here, to the detriment of the plan beneficia-
ries.

                                 C

   Defendants argue that whether TEOHC is obligated to
advance their defense costs is purely a matter of state contract
law, and that ERISA simply does not apply. ERISA preemp-
tion is a question of law that we review de novo. Elliot v. For-
tis Benefits Ins. Co., 337 F.3d 1138, 1141 (9th Cir. 2003).

   [7] ERISA contains a broad preemption clause, such that
with only limited exceptions it “supersede[s] any and all State
laws insofar as they may now or hereafter relate to any
employee benefit plan.” 29 U.S.C. § 1144(a). As in Boggs v.
Boggs, we “can begin, and in this case end, the analysis by
simply asking if state law conflicts with the provisions of
ERISA or operates to frustrate its objects.” 520 U.S. 833, 841
(1997); see also Branco v. UFCW-N. Cal. Employers Joint
Pension Plan, 279 F.3d 1154, 1157, 1160 (9th Cir. 2002)
(holding that ERISA’s surviving spouse annuity preempts a
testamentary transfer).

   [8] Defendants’ indemnification agreements specify that
they are governed by California law. California allows
advancement of defense costs “upon receipt of an undertaking
by or on behalf of the agent to repay that amount if it shall
be determined ultimately that the agent is not entitled to be
indemnified as authorized in this section.”9 Cal. Corp. Code
§ 317(f). Couturier, Johanson, and Eddy all submitted the req-
  9
   Defendants’ undertakings specify that they are governed by Delaware
law, which similarly establishes that advancement is permissible upon
receipt of an undertaking. Del. Code Ann. tit. 8, § 145(e).
                      JOHNSON v. COUTURIER                   9715
uisite undertakings, thus apparently rendering advancement of
their defense costs enforceable under state law.

   [9] However, Defendants’ indemnification agreements pro-
vide complete indemnity so long as the challenged acts or
omissions do not involve deliberate wrongful acts or gross
negligence. ERISA, by contrast, requires that a fiduciary act
“with the care, skill, prudence, and diligence under the cir-
cumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the con-
duct of an enterprise of a like character and with like aims.”
29 U.S.C. § 1104(a)(1)(B). The indemnification agreements
thus effectively limit Defendants’ liability under ERISA
because, so long as they do not engage in deliberate wrongful
acts or gross negligence, Defendants will be indemnified—
even if they violated the ERISA “prudent man” standard of
care. Accordingly, application of state law in the instant case
conflicts with ERISA and is preempted. See Boggs, 520 U.S.
at 844 (“In the face of [a] direct clash between state law and
the provisions and objectives of ERISA, the state law cannot
stand.”).

                               III

   With these principles in mind, we turn to an evaluation of
the district court’s decision to enjoin advancement of defense
costs. “A plaintiff seeking a preliminary injunction must
establish [1] that he is likely to succeed on the merits, [2] that
he is likely to suffer irreparable harm in the absence of pre-
liminary relief, [3] that the balance of equities tips in his
favor, and [4] that an injunction is in the public interest.” Win-
ter v. Natural Res. Defense Council, Inc., 129 S. Ct. 365, 374
(2008). “We review the grant or denial of a preliminary
injunction for abuse of discretion.” Am. Trucking Ass’ns v.
City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009).
This review is “limited and deferential,” and it does not
extend to the underlying merits of the case. Id. (quoting Lands
Council v. Martin, 479 F.3d 636, 639 (9th Cir. 2007)). A dis-
9716                 JOHNSON v. COUTURIER
trict court “necessarily abuses its discretion when it bases its
decision on an erroneous legal standard or on clearly errone-
ous findings of fact.” Id. (quoting Lands Council, 479 F.3d at
639). But “[a]s long as the district court got the law right, it
will not be reversed simply because the appellate court would
have arrived at a different result if it had applied the law to
the facts of the case.” Id. (quoting Wildwest Inst. v. Bull, 472
F.3d 587, 590 (9th Cir. 2006)) (alteration in original).

                              IV

   We conclude that the district court did not abuse its discre-
tion in preliminarily enjoining TEOHC from advancing
Defendants’ defense costs. Plaintiffs established all four ele-
ments of the governing standard, and Defendants have failed
to demonstrate that the district court based its decision either
on an erroneous legal standard or on clearly erroneous find-
ings of fact.

                               A

                               1

   [10] Plaintiffs have established that they are likely to suc-
ceed in proving that Defendants breached their fiduciary
duties under ERISA. Plaintiffs allege that Defendants
breached these obligations by engaging in a series of transac-
tions that improperly diverted much of the equity in TEOHC
(and thus in the ESOP) to Couturier. Plaintiffs claim that by
engaging in these transactions, Defendants impermissibly
placed Couturier’s financial interests ahead of the ESOP. The
district court correctly compared the size of Couturier’s $34.8
million buyout package with the company’s overall value, and
properly noted its concern that this comparison by itself con-
stitutes strong evidence that Defendants breached their fidu-
ciary duties under ERISA. Couturier’s buyout package of
$34.8 million equaled nearly 65 percent of the company’s
                      JOHNSON v. COUTURIER                   9717
total assets as of June 2004, and exceeded by more than two-
fold N&NW’s 2002 value.

   [11] In 2003, Moss Adams Advisory Services (“Moss
Adams”) recommended that Couturier be given no more than
between $6 million and $9 million, the value of the deferred
compensation agreements which N&NW carried on its books
at that time. The record reveals that the Moss Adams fair-
ness/valuation team was clearly uncomfortable with the pack-
age proposed by Couturier and Johanson, and refused to opine
on the fairness of what ultimately became a $34.8 million
package. On January 21, 2004, Moss Adams qualified its
opinion to specifically exclude the “issues of whether the
executive compensation for various executives and related
packages represent ‘reasonable’ compensation,” deferring to
others the resolution of these matters. At least at this stage in
the proceedings, it is difficult to understand how an ERISA
fiduciary exercising the requisite care, and acting exclusively
in the ESOP’s interest, could have acquiesced to a buyout
package for Couturier that apparently exceeded the fair mar-
ket value by some $25 million. As trustees, Defendants
should have opposed the buyout package. And as directors
with authority over the selection and retention of trustees,
Defendants should have recognized that Couturier was hope-
lessly mired in a clear conflict of interest involving such bla-
tant self-dealing and sought his removal as an ESOP trustee.

   [12] Because Plaintiffs are likely to succeed in proving that
Defendants breached their ERISA duties, they are also likely
to succeed in proving that Defendants are not entitled to
indemnification, nor to advancement of defense costs,
because section 410(a) of ERISA renders the governing
agreements void. Section 410(a) specifies that “any provision
in an agreement or instrument which purports to relieve a
fiduciary from responsibility or liability for any responsibility,
obligation, or duty under this part shall be void as against
public policy.” 29 U.S.C. § 1110(a). Thus, “[i]f an ERISA
fiduciary writes words in an instrument exonerating itself of
9718                 JOHNSON v. COUTURIER
fiduciary responsibility, the words, even if agreed upon, are
generally without effect.” IT Corp. v. Gen. Am. Life Ins. Co.,
107 F.3d 1415, 1418 (9th Cir. 1997).

   Admittedly, ERISA does not bar the purchase of liability
insurance by a plan, fiduciary, or employer. 29 U.S.C.
§ 1110(b). The DOL has therefore interpreted section 410 to
permit indemnification of fiduciaries so long as the agreement
“do[es] not relieve a fiduciary of responsibility or liability”
under ERISA. 29 C.F.R. § 2509.75-4. In other words, an
indemnification provision is valid if it “merely permit[s]
another party to satisfy any liability incurred by the fiduciary
in the same manner as insurance.” Id. This DOL exemption
does not, however, extend to indemnification of a fiduciary by
the ERISA plan itself. Id. (“The Department of Labor inter-
prets section 410(a) as rendering void any arrangement for
indemnification of a fiduciary of an employee benefit plan by
the plan.”). The DOL has explained that “[s]uch an arrange-
ment would have the same result as an exculpatory clause, in
that it would, in effect, relieve the fiduciary of responsibility
and liability to the plan by abrogating the plan’s right to
recovery from the fiduciary for breaches of fiduciary obliga-
tions.” Id.

   The indemnification agreements and associated advance-
ment provisions at issue here clearly “purport[ ] to relieve”
Defendants from their fiduciary responsibilities under ERISA.
ERISA requires that a fiduciary discharge its duties “with the
care, skill, prudence, and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.” 29 U.S.C.
§ 1104(a)(1)(B). The indemnification agreements, by contrast,
indemnify Defendants so long as the liability for which cover-
age is sought did not involve any deliberate wrongful acts or
gross negligence. Nor do the signed undertakings provide the
ESOP with any recourse should Defendants be found to have
violated only their fiduciary duties under ERISA. Conse-
                     JOHNSON v. COUTURIER                  9719
quently, because Plaintiffs have shown probable success on
the merits of their ERISA claims, they have also shown that
section 410(a) likely renders void the indemnification agree-
ments and advancement provisions therein.

   Defendants nonetheless argue that section 410(a) does not
apply because advancement would be made from corporate,
not plan, assets. See 29 C.F.R. § 2510.3-101(h)(3) (establish-
ing that corporate assets are not plan assets where the plan is
an ESOP). But given that TEOHC’s plan of liquidation pro-
vides for payment of all remaining equity to ESOP partici-
pants as shareholders, this is not a case where, in accordance
with 29 C.F.R. § 2509.75-4, the indemnification agreement
“merely permit[s] another party [other than the plan] to satisfy
any liability incurred by the fiduciary.” To the contrary, any
proceeds taken from TEOHC’s remaining funds to pay Defen-
dants’ defense costs will, dollar for dollar, reduce the funds
available for distribution to ESOP participants. In other
words, advancement is here tantamount to asking ESOP par-
ticipants to pay for Defendants’ defense costs, with no recov-
ery possible or at least highly unlikely— even if Defendants
breached their fiduciary duties to the ESOP—so long as
Defendants did not engage in deliberate wrongful acts or
gross negligence. Such a result is impermissible under section
410(a).

   Finally, because the agreement indemnifying Couturier as
a trustee specifies that it is “[s]ubject to the relevant provi-
sions of [ERISA],” Couturier argues that his right to advance-
ment is not void under section 410(a). This assertion
overlooks two key points. First, the remaining three agree-
ments indemnifying Couturier as a director contain no such
limitation, even though in his capacity as director Couturier
was subject to ERISA fiduciary duties with respect to
appointment and retention of ESOP trustees. Second, as we
explain above, Plaintiffs are likely to succeed in proving that
Couturier did in fact breach his ERISA obligations, thus also
9720                  JOHNSON v. COUTURIER
rendering this particular indemnification agreement unen-
forceable.

                                2

   [13] The Supreme Court recently clarified that preliminary
injunctive relief is available only if plaintiffs “demonstrate
that irreparable injury is likely in the absence of an injunc-
tion.” Winter, 129 S. Ct. at 375. In so doing, the Court
rejected the Ninth Circuit’s “possibility of irreparable harm”
test, noting that “[i]ssuing a preliminary injunction based only
on a possibility of irreparable harm is inconsistent with our
characterization of injunctive relief as an extraordinary rem-
edy that may only be awarded upon a clear showing that the
plaintiff is entitled to such relief.” Id. at 375- 76. Defendants
allege that the district court failed to apply the requisite “like-
lihood of harm” standard and relied instead on a possibility of
harm. We disagree.

   [14] The district court correctly found that Plaintiffs will
likely succeed in proving that Defendants breached their fidu-
ciary duties under ERISA. The district court therefore also
correctly found that Plaintiffs will likely succeed in proving
that the indemnification agreements are void under section
410(a) of ERISA because they exculpate Defendants from
their fiduciary obligations. Consequently, there is more than
a possibility that Defendants will be required to reimburse
TEOHC for any advanced defense costs—there is at least a
likelihood.

   [15] Similarly, there is a likelihood that Defendants will not
have the resources to reimburse TEOHC if defense costs are
advanced. Plaintiffs are not required to submit detailed finan-
cial statements in support of this assertion. Rather, it is
enough that Couturier himself alleged that Defendants even
now would not be able to pay their legal bills without
advancement of funds. Moreover, Defendants have already
expended the $5 million in D&O insurance coverage previ-
                      JOHNSON v. COUTURIER                   9721
ously available to defend this suit, are represented by multiple
attorneys raising a vigorous defense, and are facing a potential
judgment in the tens of millions of dollars if found to have
breached their fiduciary duties. Nor have Defendants submit-
ted any financial data demonstrating that they will be able to
reimburse TEOHC if a judgment is rendered against them.
Thus, the district court did not abuse its discretion in finding
that Plaintiffs established a likelihood of irreparable harm if
injunctive relief were denied.

                                3

   [16] The balance of equities tips in Plaintiffs’ favor. Admit-
tedly, if the preliminary injunction is upheld, Defendants will
be forced either: (1) to find a way to pay for their own defense
and seek recovery after trial; (2) to find attorneys willing to
accept the risk of payment after trial; (3) to continue litigation
without representation; or (4) to settle. We recognize that
these options are accompanied by real and difficult conse-
quences for each Defendant. Nonetheless, any such conse-
quences are outweighed by the potential hardship to Plaintiffs
if advanced defense costs are not reimbursed.

   [17] If, as is likely, Defendants are found to have violated
their fiduciary obligations under ERISA, section 410(a) ren-
ders their indemnification agreements void and they are not
entitled to advancement of defense costs. Even if that were
not the case, Plaintiffs are willing to place the potential
defense costs in escrow; if they do so, Defendants will ulti-
mately be able to recover their costs if so entitled. By con-
trast, as explained above, recovery by Plaintiffs of any
advanced defense costs seems remote, a result that would
leave ESOP participants without the benefits whose security
ERISA strives above all else to protect.

                                4

  [18] “In exercising their sound discretion, courts of equity
should pay particular regard for the public consequences in
9722                JOHNSON v. COUTURIER
employing the extraordinary remedy of injunction.” Winter,
129 S. Ct. at 376- 77 (quoting Weinberger v. Romero-
Barcelo, 456 U.S. 305, 312 (1982)). Defendants invoke the
public interest in ensuring that talented individuals remain
willing to serve as corporate directors and officers. But this
concern, while significant, is far outweighed by the interests
that ERISA protects. In enacting ERISA, Congress noted:

    that the continued well-being and security of mil-
    lions of employees and their dependents are directly
    affected by these plans; that they are affected with a
    national public interest; that they have become an
    important factor affecting the stability of employ-
    ment and the successful development of industrial
    relations; . . . that despite the enormous growth in
    such plans many employees with long years of
    employment are losing anticipated retirement bene-
    fits owing to the lack of vesting provisions in such
    plans; that owing to the inadequacy of current mini-
    mum standards, the soundness and stability of plans
    with respect to adequate funds to pay promised bene-
    fits may be endangered; that owing to the termina-
    tion of plans before requisite funds have been
    accumulated, employees and their beneficiaries have
    been deprived of anticipated benefits; and that it is
    therefore desirable in the interests of employees and
    their beneficiaries, for the protection of the revenue
    of the United States, and to provide for the free flow
    of commerce, that minimum standards be provided
    assuring the equitable character of such plans and
    their financial soundness.

29 U.S.C. § 1001(a). In order for ERISA “to promote the
interests of employees and their beneficiaries in employee
benefit plans,” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90
(1983), Congress chose to hold plan fiduciaries to a high
standard—in fact, “the highest known to the law.” Howard,
100 F.3d at 1488 (quotation omitted). Congress also chose to
                     JOHNSON v. COUTURIER                   9723
render void any agreement that would exculpate a fiduciary
from responsibility for a breach of that standard. 29 U.S.C.
§ 1110(a). Accordingly, the public interest here favors
upholding the preliminary injunction barring advancement of
defense costs by TEOHC.

                               B

   We also reject the numerous additional arguments through
which Defendants attempt to invalidate this preliminary
injunction. Defendants attack the preliminary injunction as
based on insufficient evidence, as failing to give due defer-
ence to the arbitration order, as improper under Supreme
Court precedent, as impermissibly granting relief of a differ-
ent character than any judgment that might finally issue, and
as improperly imposing a constructive trust. None of these
arguments has merit.

                               1

   [19] Defendants first allege that the district court failed to
rely on “credible and admissible” evidence in granting the
preliminary injunction. See, e.g., Am. Passage Media Corp. v.
Cass Commc’ns, Inc., 750 F.2d 1470, 1473 (9th Cir. 1985)
(finding an insufficient showing of irreparable harm in part
because submitted “affidavits [from plaintiff ’s own execu-
tives] are conclusory and without sufficient support in facts”).
They object in particular to the district court’s reliance on the
interested declaration of Plaintiffs’ counsel and unverified cli-
ent complaints.

   A district court may, however, consider hearsay in deciding
whether to issue a preliminary injunction. Republic of the
Philippines v. Marcos, 862 F.2d 1355, 1363 (9th Cir. 1988)
(en banc); see also Flynt Distrib. Co. v. Harvey, 734 F.2d
1389, 1394 (9th Cir. 1984) (“The trial court may give even
inadmissible evidence some weight, when to do so serves the
purpose of preventing irreparable harm before trial.”). More-
9724                     JOHNSON v. COUTURIER
over, the district court in the instant case relied not only on
the challenged evidence but also on “the many exhibits, affi-
davits, declarations and factual allegations which have been
submitted . . . by all parties . . . throughout the course of this
litigation.”10 The district court thus did not abuse its discretion
on this basis.

                                     2

   [20] Defendants argue that the preliminary injunction can-
not be reconciled with the arbitrator’s finding that TEOHC is
contractually obligated to advance defense costs. In particular,
they cite the strong federal policy in favor of arbitration, as
well as the statutory provision that limits the venue where a
party may seek to enforce or vacate an arbitral award to the
district court where the arbitration occurred (here, the North-
ern District of California). However, the district court cor-
rectly found that Plaintiffs are not bound by the
indemnification agreements or the arbitral decision, being a
party to neither. As we noted in IT Corp. v. General American
Life Insurance Co., “a fiduciary’s contract with an employer
cannot get it off the hook with the employees who participate
in the ERISA plan. They did not sign a contract exonerating
the fiduciary.” 107 F.3d at 1418. Similarly, the Federal Arbi-
tration Act “does not require parties to arbitrate when they
have not agreed to do so.” EEOC v. Waffle House, Inc., 534
U.S. 279, 293 (2002) (quotation omitted). Moreover, Defen-
dants have not asserted any alternative contract or agency
principles which may bind a nonsignatory to an arbitration
agreement. See Comer v. Micor, Inc., 436 F.3d 1098, 1101
(9th Cir. 2006).
  10
     Notably, this evidence includes an admission by Couturier that
between 2001 and 2004, he became “entitled . . . to receive between 33%
to 40% of the value of N&NW.” It seems untenable that ERISA fidu-
ciaries acting in an ESOP’s best interests would, first, determine their own
compensation and, second, award such a large percentage of the company,
and indirectly of the ESOP’s assets, to one individual.
                     JOHNSON v. COUTURIER                   9725
                               3

   [21] Defendants next argue that the preliminary injunction
is improper under Grupo Mexicano de Desarrollo, S.A. v.
Alliance Bond Fund, Inc., in which the Supreme Court held
that the district court lacked authority “to issue a preliminary
injunction preventing the defendant from transferring assets in
which no lien or equitable interest is claimed.” 527 U.S. 308,
310, 333 (1999). However, by its very terms, the holding of
Grupo Mexicano is limited to cases in which only monetary
damages are sought. The Supreme Court expressly stated that
a preliminary injunction barring asset transfer is available
where the suit seeks equitable relief. Id. at 324- 25 (distin-
guishing Deckert v. Independence Shares Corp., 311 U.S. 282
(1940)); see also Rubin v. Pringle (In re Focus Media Inc.),
387 F.3d 1077, 1085 (9th Cir. 2004) (“Grupo Mexicano thus
exempts from its proscription against preliminary injunctions
freezing assets[,] cases involving bankruptcy and fraudulent
conveyances, and cases in which equitable relief is sought.”).
Plaintiffs here seek equitable relief pursuant to section 409(a),
29 U.S.C. § 1109(a), and section 502(a)(3), 29 U.S.C.
§ 1132(a)(3), of ERISA. Accordingly, the preliminary injunc-
tion barring advancement of defense costs by TEOHC is not
improper under Grupo Mexicano.

                               4

   [22] Relying on De Beers Consolidated Mines, Ltd. v.
United States, 325 U.S. 212 (1945), Defendants also assert
that a preliminary injunction may only grant relief of the same
character as the judgment that may finally issue. Because the
injunction here prevents advancement of TEOHC assets but
Plaintiffs ultimately seek to recover funds held by Couturier,
Defendants argue that the preliminary injunction is impermis-
sible due to its difference in character from the final relief
sought. But in De Beers, the district court’s only power under
antitrust law was to restrain future anticompetitive action—it
was without jurisdiction to enter a monetary judgment at any
9726                 JOHNSON v. COUTURIER
stage of the proceedings. 325 U.S. at 219- 20; see also Hilao
v. Estate of Marcos (In re Estate of Marcos, Human Rights
Litig.), 25 F.3d 1467, 1478 (9th Cir. 1994) (“The preliminary
injunction was inappropriate [in De Beers] not because the
plaintiff was seeking money damages . . . the injunction was
inappropriate precisely because the plaintiff could not recover
any money damages.” (quotation omitted) (alteration in origi-
nal)).

   Here, by contrast, the district court has jurisdiction under
ERISA to impose a constructive trust over any assets in
Defendants’ possession it concludes rightfully belong to the
ESOP. 29 U.S.C. § 1109(a); see also Amalgamated Clothing
& Textile Workers Union, AFL-CIO v. Murdock, 861 F.2d
1406, 1412 & n.10 (9th Cir. 1988). Furthermore, if TEOHC
is allowed to advance funds to Couturier, Plaintiffs will
undoubtedly seek their recovery also as part of the final judg-
ment. As this is not a case where the preliminary injunction
“deals with a matter lying wholly outside the issues in the
suit,” De Beers, 325 U.S. at 220, Defendants’ argument fails.

                               5

   [23] Finally, Johanson argues that Plaintiffs cannot estab-
lish his liability under ERISA because they cannot identify
specific funds or property in his possession over which they
seek to impose a constructive trust. Be that as it may, in addi-
tion to imposing a constructive trust, Plaintiffs seek also to
hold Johanson jointly and severally liable for all ESOP losses
related to Defendants’ misconduct. Accordingly, this argu-
ment, too, lacks merit.

                               V

   In granting the second preliminary injunction freezing Cou-
turier’s assets and requiring an accounting, the district court
applied an alternative analytical framework and found “that
there are serious questions on the merits and the balance of
                          JOHNSON v. COUTURIER                           9727
hardship tips sharply in favor of plaintiff.” In this respect,
Couturier challenges only the district court’s failure to con-
sider the element of irreparable harm. Although the validity
of the district court’s approach is questionable post-Winters,
we conclude that the district court did not abuse its discretion.
The court’s analysis implicitly supports a likelihood of irrepa-
rable harm to Plaintiffs in the absence of injunctive relief.

   [24] A party seeking an asset freeze must show a likelihood
of dissipation of the claimed assets, or other inability to
recover monetary damages, if relief is not granted.11 See, e.g.,
Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 321
F.3d 878, 881 (9th Cir. 2003). As already explained, Plaintiffs
have established that they are likely to succeed in proving that
Couturier impermissibly awarded himself tens of millions of
dollars in compensation—in Couturier’s own words, “33% to
40% of the value” of the company’s stock—in contravention
of the highest fiduciary duties known to the law.12 Thus, in the
mere five years that he served as CEO, Couturier somehow
convinced his fellow directors and trustees to consent to
  11
      This standard was previously rejected by the Ninth Circuit in FSLIC
v. Sahni, 868 F.2d 1096, 1097 (9th Cir. 1989) (“The district court held that
‘[b]ecause an asset freeze is such a drastic provisional remedy, this court
is of the opinion that likelihood of dissipation of assets is a prerequisite.’
We believe it was error to require this more stringent standard. So long as
the district court continued to believe that FSLIC was likely to succeed on
the merits, the court should only have required FSLIC to show a possibil-
ity of dissipation of assets.” (citation omitted) (alteration in original)).
However, because Winters requires a likelihood of irreparable harm, this
aspect of the Sahni decision is overruled.
   12
      Couturier claims that comparison of the first and second preliminary
injunction orders reveals that the district court altered its assessment of the
strength of Plaintiffs’ ERISA claims. Specifically, the district court spoke
of a “likelihood” of success on the merits when it issued the first injunc-
tion, but only of a “fair chance” of success when it issued the second
injunction. In freezing Couturier’s assets, however, the district court spe-
cifically relied on its first order in finding that Plaintiffs have “at least a
‘fair chance of success on the merits.’ ” Thus, the court did not change its
assessment, but merely tailored its language to the standard it employed.
9728                 JOHNSON v. COUTURIER
diverting nearly $35 million from the ESOP into his personal
bank account. Such an individual is presumably more than
capable of placing assets in his personal possession beyond
the reach of a judgment. Accordingly, Couturier’s own prior
conduct establishes a likelihood that in the absence of an asset
freeze and accounting, Plaintiffs will not be able to recover
the improperly diverted funds and will thus be irreparably
harmed. See, e.g., In re Focus Media Inc., 387 F.3d at 1086
(finding “the specter of irreparable harm” in part because of
“evidence in the record that in the past [the defendant] made
away with [the bankrupt company’s] funds”); Conn. Gen.,
321 F.3d at 881 (concluding that the district court did not
clearly err in finding a likelihood of dissipation given the
defendants’ “history of fraudulent intra-family transfers, their
refusal to disclose asset information in defiance of court order
and their convenient divorce settlement”); FTC v. Affordable
Media, LLC, 179 F.3d 1228, 1236- 37 (9th Cir. 1999) (con-
cluding that the district court did not clearly err in finding a
likelihood of dissipation “[g]iven the [defendants’] history of
spiriting their commissions away to a Cook Islands trust”).

   [25] Couturier argues also that the district court erroneously
found that he would not be harmed by an asset freeze. The
district court in fact concluded that a narrowly tailored asset
freeze would prejudice Couturier less than a denial of relief
would prejudice Plaintiffs. In that context, the court found
that any prejudice to Couturier would be substantially miti-
gated by limiting the injunction to permit Couturier “to cover
normal living expenses and legal fees” and by allowing Cou-
turier to petition the court at any time for consent to an asset
transfer or disposal. Given that the freeze on Couturier’s
assets is limited to those in which Plaintiffs have an equitable
interest and does not extend to normal living expenses and
legal fees, the district court correctly balanced the relative
hardships. See Marcos, 862 F.2d at 1362 (finding no hardship
where an asset freeze does not extend to normal living
expenses and legal fees).
                     JOHNSON v. COUTURIER                 9729
   Nor does Couturier’s “the-sky-is-falling” resort to De Beers
have any merit. Couturier would have us believe that “[n]o
relief of this character has been thought justified in the long
history of equity jurisprudence.” De Beers, 325 U.S. at 223.
But as discussed above, the district court in De Beers lacked
authority to enter a monetary judgment, thus rendering an
asset freeze to ensure compliance with any final injunctive
relief impermissible. Id. at 219- 20. In fact, the Supreme
Court expressly differentiated the situation where an injunc-
tion freezes “a fund or property which would have been the
subject of the provisions of any final decree.” Id. at 220. De
Beers is thus inapposite here. See generally Hilao, 25 F.3d at
1477- 78.

                              VI

   Federal Rule of Civil Procedure 65(c) permits a court to
grant preliminary injunctive relief “only if the movant gives
security in an amount that the court considers proper to pay
the costs and damages sustained by any party found to have
been wrongfully enjoined or restrained.” Despite the seem-
ingly mandatory language, “Rule 65(c) invests the district
court ‘with discretion as to the amount of security required,
if any.’ ” Jorgensen v. Cassiday, 320 F.3d 906, 919 (9th Cir.
2003) (quoting Barahona-Gomez v. Reno, 167 F.3d 1228,
1237 (9th Cir. 1999)). In particular, “[t]he district court may
dispense with the filing of a bond when it concludes there is
no realistic likelihood of harm to the defendant from enjoin-
ing his or her conduct.” Id. We review for abuse of discretion
a district court’s determination as to the amount and appropri-
ateness of the security required by Rule 65(c). Barahona-
Gomez, 167 F.3d at 1237.

  [26] The district court ordered Plaintiffs to post $5000 as
security for each temporary restraining order preceding the
corresponding preliminary injunction. Although Plaintiffs
have since stated that these cash bonds remain with the Clerk
of Court as security for the preliminary injunctions, the dis-
9730                 JOHNSON v. COUTURIER
trict court did not itself address the sufficiency of the bond
amounts except in the context of issuing the temporary
restraining orders. We remand the question of bond suffi-
ciency to the district court, which should set the terms and
conditions of a surety bond for each preliminary injunction.
The court may wish to take into account Plaintiffs’ offer to
place in escrow potential defense costs, an offer which if
accepted would itself ensure that Defendants’ expenses will
be reimbursed if either preliminary injunction is ultimately
found to have been granted in error.

                              VII

   We conclude that ERISA establishes federal subject matter
jurisdiction over this case and that state law governing
advancement of defense costs is here preempted as its appli-
cation would conflict with ERISA. We further conclude that
the district court did not abuse its discretion in preliminarily
enjoining TEOHC from advancing defense costs, nor in freez-
ing Couturier’s assets and requiring an accounting. Finally,
because it did not consider the question in the first instance,
we remand the question of bond sufficiency to the district
court.

  Costs on appeal are awarded to Plaintiffs-Appellees.

  AFFIRMED but REMANDED with instructions.
