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

No. 07-2790
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.
                         ____________
   SUBMITTED AUGUST 1, 2007—DECIDED AUGUST 2, 2007
                    ____________


 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 on demand
the records required by 7 U.S.C. §6n(3)(A) and the corre-
sponding regulations, 17 C.F.R. §§ 1.31, 4.23, and 4.33. On
June 27, 2007, the day after the CFTC filed its complaint,
the district court issued an ex parte order requiring Lake
Shore to comply with the CFTC’s view of its records-
related obligations. The order also freezes all assets of
2                                               No. 07-2790

Lake Shore and other firms under common control. Four
entities fit that description; they do business outside the
United States but are covered by the order. The freeze
affects more than $200 million in customers’ property.
  The judge did not explain her reason for issuing the
order or the thinking behind the asset freeze in particular.
Both Lake Shore and its customers—principally large and
sophisticated businesses, such as the Royal Bank of
Canada—are dissatisfied with the freeze and asked the
district court for relief. Liquidity is valuable to customers
in the derivatives business, and the freeze prevents
customers from trading or cashing out their positions
for an indefinite period. But on July 13 the judge ex-
tended the injunction, with only modest changes in
language, “until further order of Court.” The court set a
briefing schedule that will last until August 23 and
promised a ruling by mail. It did not, however, hold or
schedule an evidentiary hearing.
  A temporary restraining order that remains in force
longer than 20 days must be treated as a preliminary
injunction, which allows an appeal under 28 U.S.C.
§1292(a)(1). See Granny Goose Foods, Inc. v. Teamsters,
415 U.S. 423, 433 (1974); Chicago United Industries, Ltd.
v. Chicago, 445 F.3d 940, 943 (7th Cir. 2006). An immedi-
ate appeal is proper under these decisions. Carson v.
American Brands, Inc., 450 U.S. 79 (1981), which the
CFTC invokes for the proposition that we lack appellate
jurisdiction, addressed the question whether, by refusing
the parties’ request to enter a consent decree, and calling
for further submissions, the district court had “denied”
anyone’s motion for an injunction. There is no doubt here
that the district court has issued an injunction; nothing
more is required under §1292(a)(1).
  Passage of 20 days without an evidentiary hearing
usually means that a TRO must be vacated, for 20 days is
No. 07-2790                                                 3

the limit on ex parte relief set by Fed. R. Civ. P. 65(b). The
CFTC argues, however, and the district judge held, that
Rule 65(b) is inapplicable because this injunction is
authorized by §6c of the Commodity Exchange Act, 7
U.S.C. §13a–1(a). That statute does not set a time limit
for ex parte orders, and as a consequence such orders
may last indefinitely, the district judge concluded.
  That approach would pose serious constitutional prob-
lems. It would allow a business to be destroyed without
giving the affected party any opportunity to present
evidence. Rule 65(b) permits emergency action while
ensuring that district courts use an adversarial, rather
than an inquisitorial and ex parte approach, as soon as
time allows. There is no longer any emergency in this
case; the district court has had ample time to offer Lake
Shore a hearing, and the fact that some statute does not
compel a hearing does not imply that the court may ignore
the defendant’s evidence and arguments.
   Section 13a–1(a) does not say that hearings are unneces-
sary, let alone that they are forbidden. It is silent on the
question. Like hundreds if not thousands of similar
provisions in the United States Code, it authorizes dis-
trict courts to provide equitable relief but does not cover
judicial procedure. Such a statute alters the common
law—for example, it dispenses with the need to show
irreparable injury, see CFTC v. Hunt, 591 F.2d 1211, 1220
(7th Cir. 1979)—but that effect on the substantive rules
of decision does not imply that norms for the conduct of
litigation have been discarded. The absence of a statutory
time limit for ex parte relief no more implies that such
relief may last forever than a statute’s failure to mention
an answer or testimony at a hearing implies that defen-
dants are forbidden to answer the complaint or offer
evidence when a hearing finally is held. Likewise a stat-
ute that authorizes a district court to award damages
but does not mention juries does not forbid jury trials;
4                                               No. 07-2790

other laws and rules set out how damages will be ascer-
tained. See Curtis v. Loether, 415 U.S. 189 (1974).
   A statute that does not speak to procedural matters
leaves the Federal Rules of Civil Procedure to govern as
usual. See Fed. R. Civ. P. 1, 81 (rules apply to all civil
actions except to the extent Rule 81 provides otherwise,
and Rule 81 does not create an exception for actions under
the Commodity Exchange Act). Any doubt is removed by
the supersession clause of the Rules Enabling Act, 28
U.S.C. §2072(b), which says that, when the federal rules
and some other law conflict, the rules prevail. See
Henderson v. United States, 517 U.S. 654 (1996). Congress
could of course supersede §2072(b) and the rules in turn,
but §13a–1(a) does not do so. Rule 65(b) applies to this
litigation.
  Because the ex parte order has lasted more than 20 days,
it must be vacated. The district court should hold a
prompt hearing to consider whether a preliminary in-
junction is appropriate—and, if so, what terms the in-
junction should have.
  It is difficult to read §13a–1(a) to authorize an asset
freeze as a “remedy” for a firm’s decision not to hand over
everything the CFTC wants to see. Cf. Grupo Mexicano de
Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308
(1999). The statute authorizes district courts to enjoin acts
or practices that violate the Commodity Futures Act
and the CFTC’s regulations. Injunctions should be tailored
to the violation. Here is §13a–1(a) in full:
    Whenever it shall appear to the Commission that
    any registered entity or other person has engaged,
    is engaging, or is about to engage in any act or
    practice constituting a violation of any provision of
    this Act or any rule, regulation, or order thereun-
    der, or is restraining trading in any commodity for
    future delivery, the Commission may bring an
No. 07-2790                                                 5

    action in the proper district court of the United
    States or the proper United States court of any
    territory or other place subject to the jurisdiction
    of the United States, to enjoin such act or practice,
    or to enforce compliance with this Act, or any rule,
    regulation or order thereunder, and said courts
    shall have jurisdiction to entertain such actions:
    Provided, That no restraining order (other than a
    restraining order which prohibits any person from
    destroying, altering or disposing of, or refusing to
    permit authorized representatives of the Commis-
    sion to inspect, when and as requested, any books
    and records or other documents or which prohibits
    any person from withdrawing, transferring, re-
    moving, dissipating, or disposing of any funds,
    assets, or other property, and other than an order
    appointing a temporary receiver to administer
    such restraining order and to perform such other
    duties as the court may consider appropriate) or
    injunction for violation of the provisions of this
    Act shall be issued ex parte by said court.
The CFTC and the district judge appear to have read the
proviso as a source of authorization to issue ex parte asset
freezes in every situation. That is not what the proviso
says, however. It says that record-keeping and asset-freeze
orders are the only kinds of relief that may be adopted
ex parte, not that district courts should employ these
kinds of relief in every case. The court may “enjoin [the]
act or practice” that violates the Act; on the CFTC’s view,
that “act or practice” is the failure to disclose required
records.
  An asset freeze would be appropriate only if the evidence
suggests that customers’ financial interests otherwise
would be in jeopardy. The district court did not find,
however, that a freeze is required for the customers’
protection, and it appears to harm them by denying them
6                                            No. 07-2790

control over their investments. The Commission’s response
in this court does not suggest that the agency has any
evidence that customers’ assets are endangered. As far as
we can tell, no customer has complained about the way
Lake Shore and affiliated firms have handled their invest-
ments. The principal dispute in this case appears
to concern the extent to which transactions by or on be-
half of foreign investors, carried out on exchanges in
London, must be disclosed to the CFTC; there is no ap-
parent reason why all of these businesses must be
shut down while that dispute is resolved.
  The ex parte order is vacated. The mandate will issue
immediately.

A true Copy:
      Teste:

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




                  USCA-02-C-0072—8-9-07
