                           In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

No. 07-3057
LAKE SHORE ASSET MANAGEMENT LIMITED,
                                                      Petitioner,
                              v.

COMMODITY FUTURES TRADING COMMISSION,
                                                   Respondent.
                        ____________
            Petition for Review of an Order of the
          Commodity Futures Trading Commission.
                        ____________
No. 07-3070
COMMODITY FUTURES TRADING COMMISSION,
                                            Plaintiff-Appellee,
                              v.

LAKE SHORE ASSET MANAGEMENT LIMITED,
                                        Defendant-Appellant.
                        ____________
      Appeal from the United States District Court for the
        Northern District of Illinois, Eastern Division.
        No. 07 C 3598—Blanche M. Manning, Judge.
                        ____________
ARGUED OCTOBER 23, 2007—DECIDED DECEMBER 28, 2007
                    ____________
2                                  Nos. 07-3057 & 07-3070

 Before EASTERBROOK, Chief Judge, and BAUER and
MANION, Circuit Judges.
  EASTERBROOK, Chief Judge. The Commodity Futures
Trading Commission believes that Lake Shore Asset
Management, a commodity-pool operator and adviser in
the derivatives business, has failed to produce the records
required by 7 U.S.C. §6n(3)(A) and the corresponding
regulations, 17 C.F.R. §§ 1.31, 4.23, and 4.33. The dis-
trict judge entered an ex parte order of indefinite duration
not only requiring Lake Shore to produce the records
that the CFTC sought but also freezing all of its assets
(including customers’ funds). We reversed, 496 F.3d 769
(2007), holding that Lake Shore is entitled to a hearing
before any relief may extend past 20 days, and that an
asset freeze is appropriate only if customers otherwise
are at a demonstrable risk of injury. Lake Shore, although
located in the United States, specializes in giving advice
to affiliates and customers elsewhere. Our opinion con-
cluded: “The principal dispute in this case appears to
concern the extent to which transactions by or on behalf
of foreign investors, carried out on exchanges in London,
must be disclosed to the CFTC; there is no apparent
reason why all of these businesses must be shut down
while that dispute is resolved.” 496 F.3d at 773.
  After our opinion issued, the district court suggested
that its ex parte order remained in effect, and the CFTC
contended that it would be entitled to bring a series of
motions, each of which would support a new 20-day asset
freeze without need for a hearing. This led to a petition
for a writ of mandamus, and on August 8, 2007, we issued
this order:
    On August 2, 2007, this court issued an opinion
    vacating the ex parte injunction that the district
    court had issued. We issued the mandate the same
    day, so that our decision took effect immediately.
Nos. 07-3057 & 07-3070                                    3

   According to the “Motion to Enforce Mandate” that
   Lake Shore Asset Management filed on August 7,
   however, the CFTC and the district judge believe
   that the injunction remains in effect. It does not.
   To clarify matters, we add the following to our
   opinion. If necessary, we will enforce these rulings
   by issuing a writ of mandamus, though we trust
   that it will not be necessary.
       1. No injunction is currently in force in
       this litigation, and none has been in force
       since August 2, 2007.
       2. No further ex parte order, or other tem-
       porary restraining order, may be issued in
       this case, because the 20-day limit set by
       Fed. R. Civ. P. 65(b) has been exhausted.
       3. If the CFTC believes that a preliminary
       injunction is warranted, it may move for
       such relief. The district court may not
       issue such an injunction until after an
       opportunity for an evidentiary hearing has
       been afforded to Lake Shore Asset Man-
       agement.
       4. A preliminary injunction may include
       limitations on how Lake Shore Asset Man-
       agement and its customers hold or dispose
       of assets only if the CFTC establishes, by
       a preponderance of the evidence at a hear-
       ing, that customers’ assets otherwise
       would be in jeopardy.
The district court then held a hearing and concluded that
Lake Shore must turn over the records that the Com-
mission wants to see. The court also issued a new injunc-
tion imposing an asset freeze, finding that customers’
funds are in jeopardy. The principal support for this
4                                 Nos. 07-3057 & 07-3070

finding is that Lake Shore has told potential customers
that it manages more than $1 billion, and that customers’
accounts have earned more than 20% annually, but that
no more than $230 million can be located at depositary
institutions and clearing corporations, which hold most
of customers’ money in derivatives transactions. This
means, the district court concluded, that customers have
been losing money (exposing Lake Shore’s statements as
false or deceptive), that someone has made off with cus-
tomers’ money, or both. 2007 U.S. Dist. LEXIS 65559 (N.D.
Ill. Aug. 28, 2007). There are two other possibilities that
the district court did not consider: first, Lake Shore may
have been exaggerating the amount originally invested;
second, the billion-dollar reference may have been to the
notional amount of the derivatives rather than to the
money customers had placed under Lake Shore’s manage-
ment. The notional amount in a futures transaction is
the face value of the contract (say, 100 times the level of
the Standard & Poor’s 500 Index) rather than the amount
of customers’ equity. In derivatives transactions, cus-
tomers rarely hand over more than the margin, which
runs between 2% and 20% of the contract’s notional value.
A court can’t distinguish among these possibilities, how-
ever, without access to Lake Shore’s records.
  Lake Shore asked for a stay of the new injunction; we
denied that motion without opinion. Meanwhile the
National Futures Association concluded that Lake Shore
was out of compliance with its rules. The NFA directed
Lake Shore to freeze all assets belonging to customers.
In re Lake Shore Asset Management Ltd., No. 07-MRA-
007 (Aug. 6, 2007). Lake Shore asked the CFTC to stay
this directive’s enforcement until the agency rules on its
petition for review; Lake Shore argued that the NFA lacks
the legal authority to enter the kind of order that it did.
The CFTC denied the application for a stay. Lake Shore
Asset Management Ltd. v. National Futures Association,
Nos. 07-3057 & 07-3070                                   5

No. CRRA 07-02, 2007 CFTC LEXIS 64 (Aug. 30, 2007).
Lake Shore’s petition for review of the NFA’s order
remains on the CFTC’s docket.
  We consolidated an appeal from the district court’s
injunction (No. 07-3070) with Lake Shore’s petition for
review of the CFTC’s order (No. 07-3057). While the
parties were preparing their briefs, the litigation contin-
ued in the district court. Lake Shore refused to provide
the records, and the district court then appointed a
receiver in order to ensure compliance. 2007 U.S. Dist.
LEXIS 74615 (N.D. Ill. Oct. 4, 2007). Another appeal (No.
07-3408) has been filed from that order. Lake Shore
asked for a stay, and on October 15, 2007, we issued this
decision:
   The district court entered an injunction that froze
   the assets of Lake Shore Asset Management and
   affiliated firms and directed them to make books
   and records available to the CFTC. We declined to
   stay that injunction pending appeal, but Lake
   Shore Asset Management nonetheless failed to
   comply. The district court found that books and
   records have not been made available; indeed,
   Lake Shore refuses to tell the court where they
   are. The status of customers’ assets likewise is
   unclear, as the court and the CFTC need access to
   the books to determine whether customers’ ac-
   counts are in jeopardy. What is more, Lake Shore
   has filed actions in other nations collaterally
   attacking the district court’s judgment and asking
   those nations’ judges to give Lake Shore permis-
   sion to disobey the injunction.
   The district judge concluded that this contuma-
   cious behavior is intolerable and appointed a
   receiver to take over Lake Shore’s operations and
   bring it into compliance with the injunction.
6                                  Nos. 07-3057 & 07-3070

    Injunctions must be obeyed; there is no other
    alternative. Lake Shore is in contempt of court,
    and no district judge is obliged to look the other
    way.
    Fed. R. Civ. P. 65(d) provides that an injunction
    binds “the parties to the action, their officers,
    agents, servants, employees, and attorneys, and
    upon those persons in active concert or participa-
    tion with them who receive actual notice of the
    order by personal service or otherwise.” This
    includes Lake Shore’s offshore affiliates. If, as
    Lake Shore maintains, laws of other nations set
    limits on its disclosures of books and records,
    that would have been a reason to write a different
    injunction (or an argument in support of a stay);
    it is not a reason to disobey an injunction actually
    issued, once this court denied the motion for a
    stay. Moreover, because the injunction is binding
    in personam on foreign affiliates under common
    management, the initiation of litigation in other
    nations’ courts in an effort to evade compliance
    with the injunction is itself a form of contempt,
    and the district judge is entitled to halt the defi-
    ance by empowering the receiver to withdraw
    all litigation initiated by Lake Shore and its
    affiliates in other judicial systems.
    The district court’s order could be read to limit
    Lake Shore’s ability to pursue this appeal (and the
    others already on file, and scheduled for oral
    argument on October 23). The CFTC agrees with
    Lake Shore that a district court cannot prevent
    appeals of its own orders. We therefore treat the
    order as not interfering with Lake Shore’s efforts,
    through current management, to obtain appellate
    review. So understood, the district court’s order
Nos. 07-3057 & 07-3070                                    7

    is unlikely to be reversed on appeal, and a stay is
    unwarranted. The motion for a stay is denied.
The district court has since found Lake Shore in contempt
of both the preliminary injunction and the receivership
order. 2007 U.S. Dist. LEXIS 90963 (N.D. Ill. Dec. 10,
2007). We assume that yet another appeal is in the offing.
  Our decision of October 15 says pretty much every-
thing needed to explain why the injunction entered
against Lake Shore must remain in effect. The company’s
briefs in No. 07-3070 scarcely engage the language of
7 U.S.C. §6n(3)(A) and 17 C.F.R. §§ 1.31, 4.23, and 4.33, on
which the order principally rests. Instead Lake Shore
devotes most of its energies to denying that the CFTC may
regulate acts that occur outside the borders of the United
States. That’s true enough—authority for extraterritorial
regulation must be express, see EEOC v. Arabian Ameri-
can Oil Co., 499 U.S. 244 (1991), while 7 U.S.C. §6n does
not mention activities that domestic firms conduct in
other nations—but beside the point.
  Lake Shore transacts its business in the United States.
It voluntarily registered with the CFTC and joined the
NFA. It assures customers that it is subject to U.S. law,
doubtless thinking that submitting to regulation in this
nation would make its promises credible. Some of the
trades occur on exchanges in the United States; some
customers’ assets are held here. Federal law controls
how Lake Shore must conduct itself within the United
States, even though other companies in the same affiliated
group do their business outside, and even though most of
the group’s business is with investors from other nations.
Having registered with domestic agencies—and having
assured the NFA as a condition of membership that no
foreign secrecy law prevents compliance with this nation’s
disclosure requirements—Lake Shore must abide by
federal law, including the record-keeping-and-disclosure
rules.
8                                  Nos. 07-3057 & 07-3070

  Lake Shore maintains that the freeze is invalid, even if
the disclosure order is proper, because the CFTC has
failed to prove that any of its customers relied on a
misrepresentation. But the CFTC need not show reliance
by private investors in order to obtain relief. See Slusser
v. CFTC, 210 F.3d 783 (7th Cir. 2000). Reliance is an
element in a private action for damages; proof of reliance
is not required in a regulatory agency’s suit—or for
that matter a criminal prosecution. See United States v.
Rosby, 454 F.3d 670 (7th Cir. 2006).
  As for the CFTC’s denial of interlocutory relief from
the NFA’s order: That’s not even within our subject-
matter jurisdiction. Courts review final decisions, and an
agency’s resolution of one legal issue—such as whether
the NFA has the authority to freeze a member’s assets—is
not a “final decision” while other aspects of the proceeding
are ongoing before the agency. See, e.g., FTC v. Standard
Oil Co. of California, 449 U.S. 232 (1980). We have not
been able to find any opinion discussing how the finality
rule applies to the relation among the NFA, the CFTC, and
the courts of appeals. But substitute a self-regulatory
organization in the securities business for the NFA, and
the SEC for the CFTC, and the answer is known.
  Allan v. SEC, 577 F.2d 388, 392–93 (7th Cir. 1978), holds
that the SEC’s decision not to stay disciplinary sanc-
tions imposed by a self-regulatory organization is not
final and thus is not reviewable until the agency has
resolved the matter fully. The jurisdictional statute at
issue in that case, 15 U.S.C. §78y(a)(1), is almost identical
to the statute at issue here, 7 U.S.C. §21(i)(4). Cf. Cheng
Fan Kwok v. INS, 392 U.S. 206 (1968) (denial of a stay
of deportation is not a final order of deportation and
therefore is not reviewable). What’s more, the CFTC has
yet to decide whether the NFA enjoys the authority it
claims. A litigant can’t use a motion for a stay (followed
Nos. 07-3057 & 07-3070                                    9

by a petition for judicial review) to force an agency to
make an instant decision on a complex issue. The CFTC
may address the subject after full deliberation, and judi-
cial review must await the agency’s final disposition of the
entire dispute presented by Lake Shore’s petition to re-
view the NFA’s order.
  Having said all this, however, we must confess that in
one important respect our decision of October 15 was
imprecise. We observed that under Fed. R. Civ. P. 65(d) an
injunction against Lake Shore Asset Management, Ltd.,
binds all those acting in concert with it—which means
other members of the corporate group. But it does not
follow that a litigant’s affiliates may be named in an
injunction. The only defendant in the CFTC’s suit is Lake
Shore Asset Management, which must be the sole ad-
dressee of the injunction. See Zenith Radio Corp. v.
Hazeltine Research, Inc., 395 U.S. 100, 110–11 (1969). The
injunction may direct Lake Shore to do things within
its power—such as turning over its books and records—
but may not impose obligations directly on other mem-
bers of the corporate group.
  Any of Lake Shore’s affiliates is bound, to be sure, by
an injunction against Lake Shore, but a district court
must not direct Lake Shore to do things that only some
other member of the group, not named as a defendant,
could perform. And whether a particular person or firm is
among the “parties’ officers, agents, servants, employees,
and attorneys; [or] other persons in active concert or
participation with” them (see Fed. R. Civ. P. 65(d)(2)(B),
(C)) is a decision that may be made only after the person
in question is given notice and an opportunity to be
heard. (This language comes from the version of Rule 65
that became effective on December 1, 2007; the language
quoted in our order of October 15 is from the version of
Rule 65(d) that was then current. There is no substan-
tive difference.)
10                                Nos. 07-3057 & 07-3070

  The district judge evidently was confident that other
members of the Lake Shore Group of Companies are “in
active concert or participation with” Lake Shore Asset
Management, and that may well be true. But so far none
of these other entities has been served with process and
given an opportunity to present evidence. That is essen-
tial before any enforcement action may be taken against a
non-litigant. Zenith Radio held that even a defendant’s
concession that some additional entity is the defendant’s
alter ego does not warrant an injunction against that
entity, until it has been served with process and offered
the opportunity to say whether it agrees with the original
defendant’s concession. See also, e.g., Chase National
Bank v. Norwalk, 291 U.S. 431, 436–37 (1934); Scott v.
Donald, 165 U.S. 107, 117 (1897).
  The injunction that the district court entered imposes
obligations on “Lake Shore [Asset Management] Limited,
individually and as part of the Lake Shore common enter-
prise”. The phrase “individually and as part of the Lake
Shore common enterprise” must be deleted wherever it
occurs in the injunction, so that the order’s only ad-
dressee is Lake Shore Asset Management, the sole defen-
dant. Rule 65(d)(2) specifies who other than Lake Shore
must comply, and before any person or entity is deemed to
be “in active concert or participation with” Lake Shore,
notice and an opportunity for a hearing must be provided.
Of course, other members of the Lake Shore Group of
Companies act at their peril if they disregard the com-
mands of the injunction, for, if the district court ulti-
mately determines that they are in concert with Lake
Shore, then they will be in contempt of court. But that is
an issue for another day, if any additional member of the
group (or any of the entities’ officers) should be named as
a party. See In re Teknek, LLC, No. 07-1498 (7th Cir.
Dec. 28, 2007).
Nos. 07-3057 & 07-3070                                 11

  The petition to review the CFTC’s order is dismissed for
want of jurisdiction. The judgment of the district court
is affirmed to the extent it concerns Lake Shore Asset
Management (and is within its power to perform) but is
vacated to the extent the injunction imposes duties on
other entities, and the case is remanded for proceedings
consistent with this opinion.

A true Copy:
      Teste:

                      ________________________________
                      Clerk of the United States Court of
                        Appeals for the Seventh Circuit




                  USCA-02-C-0072—1-9-08
