                                                                            FILED
                           NOT FOR PUBLICATION                              MAY 26 2015

                                                                         MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                        U.S. COURT OF APPEALS



                            FOR THE NINTH CIRCUIT


SHIGE TAKIGUCHI; et al.,                         No. 14-17061

              Plaintiffs - Appellees,            D.C. No. 2:13-cv-01183-JAD-
                                                 VCF
 v.

MRI INTERNATIONAL, INC.,                         MEMORANDUM*

              Defendant,

  and

JUNZO SUZUKI and PAUL MUSASHI
SUZUKI,

              Defendants - Appellants.


                    Appeal from the United States District Court
                              for the District of Nevada
                    Jennifer A. Dorsey, District Judge, Presiding

                        Argued and Submitted May 11, 2015
                             San Francisco, California




        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: THOMAS, Chief Judge, and BENAVIDES** and OWENS, Circuit
Judges.

      Junzo Suzuki and Paul Musashi Suzuki appeal from the district court’s

preliminary injunction freezing all of their assets. We have jurisdiction under 28

U.S.C. § 1292, and we review the district court’s preliminary injunction order for

abuse of discretion. Doe v. Harris, 772 F.3d 563, 570 (9th Cir. 2014).

      The Suzukis argue that the preliminary injunction is overbroad because it

imposes a constructive trust for the benefit of a proposed class that has not been

certified. “[I]n the absence of class certification, the preliminary injunction may

properly cover only the named plaintiffs.” Nat’l Ctr. for Immigrants Rights, Inc. v.

INS, 743 F.2d 1365, 1371 (9th Cir. 1984). However, a preliminary injunction may

incidentally benefit putative class members prior to class certification, so long as

the breadth of the injunction is necessary to give the named plaintiffs the relief to

which they would be entitled if they prevail. See Easyriders Freedom F.I.G.H.T. v.

Hannigan, 92 F.3d 1486, 1501-02 (9th Cir. 1996).

      It is unclear whether the district court properly tailored the preliminary

injunction to preserve assets for the benefit of the 25 named plaintiffs. Certain

statements in the district court’s order suggest that the preliminary injunction may

       **
            The Honorable Fortunato P. Benavides, Senior Circuit Judge for the
U.S. Court of Appeals for the Fifth Circuit, sitting by designation.

                                        2                                       14-17061
have been impermissibly issued to afford relief to unnamed class members, while

other statements suggest that the preliminary injunction was properly crafted to

protect a potential recovery by the named plaintiffs. We remand so that the district

court may either clarify that the broad scope of the preliminary injunction is

necessary to benefit the named plaintiffs, or, if not, may modify the preliminary

injunction to protect only the named plaintiffs’ interests. See Nat’l Ctr., 743 F.2d

at 1371-72. If need be, the district court should hold an evidentiary hearing or

permit discovery to determine whether the Suzukis hold assets beyond those

necessary to compensate the named plaintiffs if they prevail. To prevent harm to

the named plaintiffs, the current injunction will remain intact while the district

court reconsiders its scope. See, e.g., Ashcroft v. ACLU, 535 U.S. 564, 586 (2002);

Nat’l Org. for Reform of Marijuana Laws v. Mullen, 796 F.2d 276, 276 (9th Cir.

1986).1

      The Suzukis also argue that the preliminary injunction is overbroad because

it impermissibly freezes assets for the purpose of securing a potential award of

legal damages. The Supreme Court has held that an asset-freezing preliminary

      1
        Although this case is assigned to District Judge Jennifer Dorsey,
preliminary injunction motions have been referred to District Judge Howard
McKibben, who issued the order that is the subject of this appeal. We, of course,
have no objection to Judge McKibben continuing to handle preliminary injunction
proceedings on remand.

                                        3                                        14-17061
injunction is an equitable device that may not issue to prevent the dissipation of

assets pending adjudication of a claim for legal damages. Grupo Mexicano de

Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 333 (1999). However,

this court has held that the Grupo Mexicano rule applies only in cases seeking

exclusively legal damages. Johnson v. Couturier, 572 F.3d 1067, 1083-84 (9th Cir.

2009); In re Focus Media Inc., 387 F.3d 1077, 1084-85 (9th Cir. 2004). Where, as

here, both equitable and legal remedies are sought, this court has never held that a

preliminary injunction may only freeze assets for the potential equitable recovery.

       The Suzukis next argue that the preliminary injunction should be reversed

because plaintiffs have not established a likelihood of success or serious questions

going to the merits of their claims. We disagree. The Suzukis appear to have

played key roles in orchestrating a massive Ponzi scheme that defrauded the

plaintiffs out of millions of dollars. As a result, the district court did not err in

concluding that the plaintiffs have, at a minimum, raised serious questions

regarding whether the Suzukis had actual or constructive knowledge of the fraud.

Furthermore, although communications involving the Suzukis bolster the

conclusion that they had knowledge of the fraud in April 2012, other evidence

raises serious questions with respect to their knowledge prior to April 2012. We




                                          4                                        14-17061
therefore reject the Suzukis’ contention that the preliminary injunction may only

apply to the proceeds of the fraud that they received after April 2012.

      Finally, the Suzukis argue that the district court improperly considered

evidence that the plaintiffs submitted with their preliminary injunction reply brief

and allegations pleaded for the first time in the Third Amended Complaint, which

was filed after all of the preliminary injunction briefing. The Suzukis waived their

challenge to the district court’s consideration of the reply brief evidence by failing

to raise that challenge below. Getz v. Boeing Co., 654 F.3d 852, 868 (9th Cir.

2011). The Suzukis cite no authority for the proposition that a district court is

prohibited from reciting facts alleged in the operative complaint, and even if it

were error to do so, it would be harmless, see United States v. Nutri-cology, Inc.,

982 F.2d 394, 398 (9th Cir. 1992), because the mere allegations of a complaint will

never suffice to establish the prerequisites for obtaining a preliminary injunction,

see Winter v. NRDC, Inc., 555 U.S. 7, 20 (2008).

      We VACATE the judgment and REMAND. The preliminary injunction

shall remain in place for a reasonable time to allow the district court to conduct

further proceedings consistent with this disposition. Each party shall bear its own

costs on appeal.




                                        5                                        14-17061
