United States v. Askins & Miller Orthopaedics, P.A. , 924 F.3d 1348 ( 2019 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 18-11434
________________________
D.C. Docket No. 8:17-cv-00092-JDW-MAP
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
ASKINS & MILLER ORTHOPAEDICS, P.A.,
ROLAND V. ASKINS, III,
PHILIP H. ASKINS,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(May 23, 2019)
Before MARCUS, GRANT, and HULL, Circuit Judges.
GRANT, Circuit Judge:
The IRS says it needs a preliminary injunction against Askins & Miller
Orthopaedics—a serial employment-tax delinquent—to ensure that it gets its due
as taxes continue to pile up. It could just wait for nonpayment and later seek a
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money judgment, but if past is prologue, the money will be long gone before the
IRS can collect. Given the alternative of a valid but potentially useless action for
damages, does the IRS necessarily have an “adequate” remedy at law that puts an
injunction out of the question? We conclude that it does not, so we vacate the
district court’s order denying injunctive relief and remand for further proceedings.
I.
The facts in this case tell a cyclical and monotonous story about the IRS’s
years-long battle against two brothers, but the long and short of it is this: Askins &
Miller Orthopaedics habitually fails to pay its federal employment taxes, and the
government seeks injunctive relief to make sure it gets paid going forward.
Askins & Miller is a Sarasota medical practice run by brothers Philip H.
Askins and Roland V. Askins III. As an employer, Askins & Miller is required
under the tax laws to 1) withhold from its employees’ wages and pay over to the
IRS federal income and Federal Insurance Contributions Act (FICA) taxes, and 2)
pay its own FICA taxes. These payments must be deposited in an appropriate
federal depository bank. But since 2010, Askins & Miller has repeatedly failed to
pay these taxes—both its own share of FICA taxes and the income and FICA taxes
it has withheld from its employees—to the IRS. Askins & Miller does not dispute
its tax liability; indeed, it has filed returns documenting it. It just fails, over and
over again, to pay.
The IRS has tried several collection strategies over the years. It started with
an effort to achieve voluntary compliance: IRS representatives have spoken with
the Askins brothers “at least 34 times” since December 2010, including 27 in-
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person meetings. Twice they entered into installment agreements that set up
monthly payments to bring Askins & Miller back into compliance, but the
company defaulted both times. Two other times, they warned Askins & Miller that
continued noncompliance could prompt the government to seek an injunction.
The IRS has employed more aggressive means as well. It served levies on
“approximately two dozen entities,” but most “responded by indicating that there
were no funds available to satisfy the levies.” Three entities paid some money, but
not nearly enough to satisfy Askins & Miller’s debts or to keep pace with its
accrual of new liabilities. Additionally, the IRS’s ability to collect payments
through levies has been hampered by the defendants’ attempts to hide Askins &
Miller’s funds and to keep the balances in Askins & Miller’s accounts low.
Between 2014 and 2016, the Askins brothers transferred money from Askins &
Miller to “RVA Trust,” which operates a private hunting club for the brothers, and
“RVA Investments,” an accounting business associated with their father. The IRS
also discovered additional accounts at BankUnited and Stonegate Bank. It did not
seek to levy RVA Trust, RVA Investments, or the bank accounts because it
discovered them after this case had been referred to the Department of Justice and
because the IRS believed that “there is a substantial risk that any new levy would
result in [the defendants] opening new undisclosed accounts and moving the
money there.”
Next up were the brothers’ personal assets: because the brothers ran Askins
& Miller and were responsible for its failure to pay the taxes, the IRS “assessed
trust fund recovery penalties against Roland V. Askins III for tax periods in 2014–
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2016 and against Philip Askins for tax periods in 2009–2012 and 2014–2016.”
Trust fund recovery penalties allow the IRS to hold a company’s officers
personally liable for the taxes withheld from employees’ wages—which belong to
the government and are merely held in trust by the company—when those officers
willfully fail to remit the employees’ taxes to the IRS. The IRS issued levies to
“approximately 15 entities” associated with Roland, but only one entity made any
payments; that source was enough “to satisfy current trust fund recovery penalties
assessments [sic] against Roland,” but not enough “to keep pace with the rate at
which the company” continued to accrue liabilities. The IRS levied
“approximately six entities” for Philip, but after one paid less than $2,000, Philip
closed the account. The IRS does not believe the brothers have enough assets in
their own names to cover the debts, and even if they did, trust fund recovery
penalties cannot be used to cover Askins & Miller’s share of its own employment
taxes (as distinct from employees’ taxes that were withheld from their paychecks).
The IRS “consistently” filed notices of federal tax liens, but this approach
was a nonstarter: liens “are only valuable insofar as a taxpayer has property against
which the liens can be enforced,” and Askins & Miller “does not own any
substantial property.” For the same reason, the IRS considered but decided not to
pursue asset seizure: the most promising target, a 2004 Cadillac worth $10,000,
was apparently not worth the effort.
Feeling as if it had reached the end of its rope, the IRS sued Askins & Miller
and both brothers in 2017. It asserted two counts: one for permanent injunctive
relief requiring Askins & Miller and the brothers to take specific steps to ensure
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that future payments would be made before the brothers could divert the money,
and another for damages to account for outstanding liabilities between 2010 and
2015. Relying on a declaration from one of its revenue officers, the IRS asked the
district court to issue a preliminary injunction—largely mirroring the permanent
injunction that it sought in its complaint—designed to prevent Askins & Miller
from incurring further tax liabilities while the litigation was still ongoing. But the
district court denied the motion without prejudice because it found the declaration
conclusory, and because it thought the proposed injunction was “effectively an
‘obey-the-law’ injunction.”
Trying again, the IRS submitted a more detailed declaration and additional
argument as to why the court should issue a preliminary injunction. It contended
that the proposed injunction was not an “obey-the-law” one and that it lacked an
adequate remedy at law because all of its previous collection efforts had proven
unsuccessful. The IRS also argued that because the company appeared to be
judgment-proof, the money judgment it sought for past liabilities was likely
meaningless. But again, the court declined: although the court found that three of
the four factors for granting injunctive relief were “not seriously disputed,” it
denied an injunction because it concluded that the availability of an action for
damages was an adequate remedy at law and that the IRS therefore could not show
irreparable harm. The court also suggested that the injunction, at least as drafted
and proposed by the IRS, 1 was still, effectively, a disfavored “obey-the-law”
1
The proposed injunction included seven terms:
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injunction. The IRS appealed. See 28 U.S.C. § 1292(a)(1) (allowing for
interlocutory appeal of orders denying an injunction). Since then, the district court
has granted summary judgment to the IRS on count two (the damages claim for
taxes between 2010 and 2015), but it deferred ruling on count one (the request for
a permanent injunction) because it concluded that the IRS’s appeal divested it of
jurisdiction over that count. 2
(1) Defendants shall, for liabilities due on each employment tax return required to be
filed after the date of the preliminary injunction, pay over to the IRS all income and
Federal Insurance Contributions Act (“FICA”) taxes withheld from employees and
Askins & Miller’s own share of FICA taxes (collectively, “employment taxes”);
(2) Defendants shall segregate (i.e., hold separate and apart from all other funds) all
employment taxes of employees of Askins & Miller and shall, on a semiweekly
schedule, deposit them in an appropriate federal depository bank;
(3) Defendants shall not transfer any money or property to any other entity—except a
payroll processing company that is shown a copy of the injunction and is approved in
advance by Revenue Officer Richard Paulsen (or another employee designated by the
IRS)—to have that entity pay the salaries or wages of Askins & Miller’s employees.
If Defendants employ an approved payroll processing company, all transfers shall
include sufficient funds for the payroll processing company to make Askins &
Miller’s federal tax deposits, and Defendants shall provide the payroll processing
company with the authority and information necessary to make such deposits;
(4) Except for use of a payroll processing company in accordance with paragraph three
above, Defendants shall not assign any of Askins & Miller’s property or rights to
Askins & Miller’s property or make any disbursements from Askins & Miller’s
accounts before making all required deposits and paying all required outstanding
liabilities due on each employment tax return required to be filed after the date of the
preliminary injunction;
(5) Defendants shall sign and deliver affidavits to the IRS at 5971 Cattleridge Boulevard,
Suite 102-Mail Stop 5410, Sarasota, FL 34232, or to such other specific location as
directed by the IRS, within two banking days after each employment tax deposit is
due, stating that the requisite deposit was timely made;
(6) Defendant Roland V. Askins III shall notify the IRS of any new company or business
he may come to own or manage; and
(7) Defendant Philip H. Askins shall notify the IRS of any new company or business he
may come to own or manage.
2
The brothers did not materially dispute the IRS’s account of the facts before the district court,
nor do they do so on appeal. They did (and do), however, contest the IRS’s characterizations of
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Meanwhile, the defendants’ delinquency continued: Askins & Miller racked
up more liabilities in 2017 even after the IRS sued, and the district court found that
the defendants have “a proclivity for unlawful conduct” and are “likely to continue
ignoring” their tax obligations. In fact, other businesses associated with the
brothers—RVA Trust and Gulfcoast Surgery Center—also fell behind on their
employment taxes. The IRS represented to the district court that Askins & Miller
was “accumulating new employment tax liabilities faster than the IRS’s ability to
collect the outstanding obligations” and that its time spent playing cat-and-mouse
over the years “constituted a substantial drain” on resources. Deeming an action
for damages a Sisyphean task in these circumstances, the IRS contends on appeal
that the district court should have granted a preliminary injunction because the IRS
has no “adequate” remedy at law.
II.
Section 7402(a) of the Internal Revenue Code grants federal district courts
an array of powers to aid in enforcing the tax laws:
their motivations and intent: in the brothers’ telling, it was bad business, not bad faith, that
caused them to fall behind. Specifically, Philip Askins submitted a declaration to the district
court stating that Askins & Miller did not make “any decision never to pay withholding taxes,”
that Askins & Miller has “consistently reported all of its tax liabilities,” and that “extreme
financial reversals and financial hardships” caused the business to fall behind on all of its debts.
Philip also claimed that Askins & Miller never “sought to hide or avoid it’s [sic] liabilities either
to the IRS or to any of its other creditors” and that he had been truthful and open with the IRS.
Finally, Philip claimed that a potential sale of another entity, Gulfcoast Surgery Center, was
supposed to provide the funds to bring Askins & Miller into compliance with all of its tax
obligations, but the sale “unexpectedly” fell through. The district court did not explicitly resolve
these disputes in its order denying the government’s motion for a preliminary injunction, but it
did find that “the record demonstrates that Defendants have diverted and misappropriated” the
employment taxes withheld from their employees’ wages.
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The district courts of the United States at the instance of the United States
shall have such jurisdiction to make and issue in civil actions, writs and
orders of injunction, and of ne exeat republica, orders appointing receivers,
and such other orders and processes, and to render such judgments and
decrees as may be necessary or appropriate for the enforcement of the
internal revenue laws. The remedies hereby provided are in addition to and
not exclusive of any and all other remedies of the United States in such
courts or otherwise to enforce such laws.
26 U.S.C. § 7402(a). In analyzing this grant of injunctive power, we have said that
the “decision to issue an injunction under § 7402(a) is governed by the traditional
factors shaping the district court’s use of the equitable remedy.” United States v.
Ernst & Whinney, 735 F.2d 1296, 1301 (11th Cir. 1984).3 To obtain a preliminary
injunction under “the traditional factors,” the IRS must demonstrate 1) a
substantial likelihood of success on the merits, 2) that it will suffer irreparable
injury unless the injunction is issued, 3) that the threatened injury to the IRS
outweighs whatever harm the proposed injunction might cause the defendants, and
3
We note that there is some question over whether applying “the traditional factors” in § 7402(a)
cases is the right approach. The statute’s “in addition to and not exclusive of” language could be
read to suggest that the government need not show the lack of an adequate remedy at law, as
would normally be required under the traditional factors. See, e.g., United States v. Benson, 561
F.3d 718, 727 n.4 (7th Cir. 2009); cf. United States v. First Nat’l City Bank, 379 U.S. 378, 383
(1965) (“[O]ur review of the injunction as an exercise of the equity power granted by 26 U.S.C.
§ 7402(a) must be in light of the public interest involved: ‘Courts of equity may, and frequently
do, go much farther both to give and withhold relief in furtherance of the public interest than
they are accustomed to go when only private interests are involved.’” (citation omitted)). But the
IRS does not ask us to hold categorically that the adequate-remedy-at-law requirement is
inapplicable in § 7402(a) cases, and at any rate we are bound by our precedent. See Ernst &
Whinney, 735 F.2d at 1301; see also United States v. Cruz, 611 F.3d 880, 887 (11th Cir. 2010)
(rejecting argument that courts should disregard equitable factors when issuing injunctions under
§ 7407 and citing Ernst & Whinney); Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1098–99
(11th Cir. 2004) (recognizing some “statutory injunction” contexts where the traditional
requirements are relaxed, but citing Ernst & Whinney for the proposition that “several of our
cases also suggest that, when Congress authorizes injunctive relief, it implicitly requires that the
traditional requirements for an injunction be met in addition to any elements explicitly specified
in the statute”).
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4) that the injunction would not be adverse to the public interest. See Keeton v.
Anderson-Wiley, 664 F.3d 865, 868 (11th Cir. 2011). We review for abuse of
discretion a district court’s “ultimate decision of whether to grant a preliminary
injunction,” but we review de novo “determinations of law made by the district
court en route” to that decision. Owner-Operator Indep. Drivers Ass’n, Inc. v.
Landstar Sys., Inc., 622 F.3d 1307, 1323 (11th Cir. 2010) (internal quotation marks
and citation omitted).
III.
Before reaching the merits, we face a preliminary question: whether
subsequent events have rendered this case (or at least portions of this case) moot.
During the briefing, counsel for defendants filed a motion to withdraw because he
was not getting paid. In that motion, counsel asserted that Askins & Miller “is no
longer in business, has no employees, and has insufficient assets to ever resume
business in the future.” The first five of the seven items in the proposed
preliminary injunction are premised on Askins & Miller’s continued viability.
Although counsel withdrew the motion after the Askins brothers “made
satisfactory financial arrangements,” we asked the parties to address whether
Askins & Miller is “still incurring tax liabilities that the proposed preliminary
injunction would address” and how the answer to that question should affect our
disposition of the case.
“Whether a case is moot is a question of law that we review de novo.”
Sheely v. MRI Radiology Network, P.A., 505 F.3d 1173, 1182 (11th Cir. 2007). A
“case is moot when it no longer presents a live controversy with respect to which
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the court can give meaningful relief.” Id. at 1183 (quoting Troiano v. Supervisor
of Elections, 382 F.3d 1276, 1282 (11th Cir. 2004)). But an “important exception”
to this “general rule” exists in cases of “voluntary cessation”—that is, where a
defendant voluntarily puts an end to his offensive conduct. Id. In such cases, it is
“well settled” that the defendant’s voluntary cessation does not automatically moot
the case; rather, a case “might become moot if subsequent events made it
absolutely clear that the allegedly wrongful behavior could not reasonably be
expected to recur.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,
528 U.S. 167, 189 (2000) (internal quotation marks and citation omitted). This
“stringent” standard imposes a “heavy” and “formidable” burden on the party
asserting mootness—here, the Askins brothers. Id. at 189–90. To carry this
“heavy” burden, we require more than a private party’s assertion that its challenged
conduct will not recur. See Sheely, 505 F.3d at 1184.
Based on the undisputed factual record, Askins & Miller’s possible closure
did not moot the IRS’s claim for injunctive relief. The Supreme Court has made
clear that the voluntary cessation standard applies where a business entity’s closure
is alleged to have mooted the case. See Laidlaw, 528 U.S. at 193. In conducting
the voluntary cessation analysis, we have previously identified “at least” three
relevant factors: “(1) whether the challenged conduct was isolated or unintentional,
as opposed to a continuing and deliberate practice; (2) whether the defendant’s
cessation of the offending conduct was motivated by a genuine change of heart or
timed to anticipate suit; and (3) whether, in ceasing the conduct, the defendant has
acknowledged liability.” Sheely, 505 F.3d at 1184. Applying those factors here—
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in light of the history of the case and the undisputed conduct of the defendants—
we find it far from “absolutely clear that the allegedly wrongful behavior could not
reasonably be expected to recur.” Laidlaw, 528 U.S. at 189 (internal quotation
marks and citation omitted).
First, we consider “whether the challenged conduct was isolated or
unintentional, as opposed to a continuing and deliberate practice.” Sheely, 505
F.3d at 1184. The defendants’ failure to pay their federal employment taxes has
been “a continuing and deliberate practice” for the better part of a decade. Far
from “isolated or unintentional,” the defendants’ routine failure to pay their
employment taxes since 2010—despite withholding the money from their
employees, and despite repeated interventions from the IRS—appears to have been
their method of doing business. And although the defendants attribute that routine
failure to bad business rather than bad faith, their professed intentions wane in the
shadow of their undisputed history. Similarly, considering the record, we put little
weight on Askins & Miller’s (unsupported) eleventh-hour assurances that the
business is gone for good. Indeed, we have repeatedly said that a “defendant’s
assertion that it has no intention of reinstating the challenged practice ‘does not
suffice to make a case moot’ and is but ‘one of the factors to be considered in
determining the appropriateness of granting an injunction against the now-
discontinued acts.’” Id. (quoting United States v. W.T. Grant Co., 345 U.S. 629,
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633 (1953)). And, again, we require more than a private party’s unsupported
assertions—especially here, given the history of this case.
Second, we ask “whether the defendant’s cessation of the offending conduct
was motivated by a genuine change of heart or timed to anticipate suit.” Id. Here,
the timing of Askins & Miller’s possible closure is more indicative of a changed
tax-avoidance strategy than a changed heart. We have previously expressed
skepticism where changed circumstances come on the eve of a significant decision
point in litigation. See id. at 1187 n.13 (defendant applied “new policy” shortly
before summary judgment motion); see also id. at 1186 (collecting cases). Here,
Askins & Miller claims to have closed down while this case was on appeal.
Significantly, the undisputed facts in the record demonstrate that it would be
simple to reopen at a moment’s notice: back in November 2015, while the IRS was
still experimenting with different collection strategies, “the company submitted a
financial statement” reflecting “no investments, no accounts or notes receivable, no
real estate, and no business equipment.” Despite that lack of assets, the company
continued in business until at least mid-2018. The record further demonstrates the
defendants’ history of moving money around from entity to entity. Even taking the
defendants at their word, one of the brothers “has continued his practice
incorporated as Roland V. Askins, III, M.D., P.A.,” and their attorney represented
at oral argument that although Askins & Miller is out of business “as a practical
matter” (whatever that may mean), the corporation “continues to exist” and “hasn’t
been formally dissolved.” Those admissions only underscore the ease with which
the brothers could revive Askins & Miller. In light of the record evidence, the
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defendants’ claim that they have “insufficient assets to ever resume business in the
future” rings hollow.
Third, we look to “whether, in ceasing the conduct, the defendant has
acknowledged liability.” Id. at 1184. Although the defendants here have not
disputed their past tax debt—the district court entered a money damages judgment
for past-due employment taxes, and Askins & Miller filed tax returns admitting its
liabilities—that is cold comfort given the history of this case, in which Askins &
Miller has demonstrated a pattern of admitting liability but refusing to pay. The
IRS’s proposed relief is designed to prevent Askins & Miller from dodging its
admitted tax liabilities going forward. Because the record amply demonstrates a
pattern of Askins & Miller pairing its admitted liability with a refusal to pay, the
fact that it still admits its liability does not convince us that it is “absolutely clear
that the allegedly wrongful behavior could not reasonably be expected to recur.”
Laidlaw, 528 U.S. at 189 (internal quotation marks and citation omitted).
Given the undisputed facts before us, we do not believe that the defendants
can satisfy their “heavy” and “formidable” burden of making it “absolutely clear”
that their behavior will not recur. And “we are unpersuaded that a remand would
further the expeditious resolution of the matter.” Sheely, 505 F.3d at 1188 n.15
(conducting mootness analysis without remanding for further fact finding). The
district court already concluded that the defendants have “a proclivity for unlawful
conduct” and are “likely to continue ignoring” their tax obligations. The record
demonstrates a near-decade-long saga in which the IRS has pursued Askins &
Miller time and again. Over that time span, the defendants have funneled money
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to new accounts and entities as the IRS closed in on the old ones. For at least the
time between November 2015 and mid-2018, Askins & Miller continued as a
going concern despite reporting “no investments, no accounts or notes receivable,
no real estate, and no business equipment.” Against that backdrop—and in light of
the defendants’ admissions that Askins & Miller “continues to exist” and that one
of the brothers continues to practice medicine—“we can discern no reason for
sending the question of mootness back to the district court for further review or
fact finding.” Id.
We emphasize that our decision that the case is not moot does not resolve
whether Askins & Miller’s possible closure makes injunctive relief inappropriate
on the merits. That is due to the differences between the standard for mootness
due to voluntary cessation and the standard for granting injunctive relief. For a
case to be moot under the voluntary cessation doctrine, the party asserting
mootness—here, the defendants—bears the burden to convince a court that
“subsequent events made it absolutely clear that the allegedly wrongful behavior
could not reasonably be expected to recur.” Laidlaw, 528 U.S. at 189 (internal
quotation marks and citation omitted). By contrast, to obtain an injunction, the
plaintiff must “establish by a preponderance of the evidence that this form of
equitable relief is necessary.” Sheely, 505 F.3d at 1182 n.10. Because “the two
inquiries are strikingly different”—both as to who bears the burden and as to what
that burden is—it follows that “[e]ven though a case is not moot, that does not
mean that injunctive relief follows automatically.” Id. The analyses may
“overlap[]” because “both are concerned with the likelihood of future unlawful
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conduct,” but as we have explained, the answers may well turn out to be different.
Id. Our analysis here answers the mootness question, but we leave it to the district
court on remand to answer the merits question.
IV.
Assured of our jurisdiction, we turn to the merits. We conclude that neither
the adequate-remedy-at-law requirement nor Rule 65(d) should have precluded
injunctive relief on the facts here.
A. Adequate Remedy at Law
The district court determined that three out of the four “traditional factors”
governing the propriety of injunctive relief—likelihood of success on the merits,
the balance of harms, and the public interest—were “not seriously disputed by
Defendants.” But it denied injunctive relief because it concluded that the IRS had
an adequate remedy at law: a suit for money damages after Askins & Miller failed
to pay its taxes. We disagree. On these facts, the IRS’s ability to sit on its hands
until the defendants fail to pay their taxes (again) and only then bring an action for
money damages does not qualify as an “adequate” legal remedy.
Our prior cases do not answer the question presented here. We have said
before that § 7402(a)’s language “encompasses a broad range of powers necessary
to compel compliance with the tax laws.” Ernst & Whinney, 735 F.2d at 1300.
And we have also emphasized that in any given case under § 7402(a) a court must
look to “the traditional factors shaping the district court’s use of the equitable
remedy,” and that “[f]oremost among the principles governing the use of the
injunctive remedy is the traditional requirement ‘that courts of equity should not
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act . . . when the moving party has an adequate remedy at law and will not suffer
irreparable injury if denied equitable relief.’” Id. at 1301 & n.11 (quoting Younger
v. Harris, 401 U.S. 37, 43–44 (1971)). We left it to the district court in that case to
“examine the extent to which [the IRS’s] interests are protected by available legal
remedies.” Id. And our past precedents on adequate legal remedies do not
squarely resolve the issue in this case: whether the collectability of a future money
judgment to cure an expected future injury matters. See, e.g., Ne. Fla. Chapter of
the Ass’n of Gen. Contractors of Am. v. City of Jacksonville, 896 F.2d 1283, 1285
(11th Cir. 1990) (stating broadly that an injury is irreparable “only if it cannot be
undone through monetary remedies”). But see, e.g., Scott v. Roberts, 612 F.3d
1279, 1294–95 (11th Cir. 2010) (discussing situations where an injury is
irreparable even though “a later money judgment might undo” it); Levi Strauss &
Co. v. Sunrise Int’l Trading Inc., 51 F.3d 982, 986 (11th Cir. 1995) (stating that
trademark infringement causes irreparable harm, even though the trademark holder
was also seeking monetary damages); Fla. Businessmen for Free Enter. v. City of
Hollywood, 648 F.2d 956, 958 n.2 (5th Cir. Unit B June 1981) (stating that lost
profits may amount to irreparable injury if they are “difficult or impossible to
calculate”).
Addressing that issue now, we can see that the collectability of a future
money judgment to redress future harms is relevant in determining whether legal
remedies are “adequate” such that they preclude injunctive relief under § 7402(a).
The very nature of equitable power—the thing that distinguishes it from law—is its
flexible and discretionary nature, its ability to respond to real-world practicalities,
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and its general aversion to rules that let bad actors capitalize on legal technicalities.
See, e.g., Roscoe Pound, The Decadence of Equity, 5 Colum. L. Rev. 20 (1905).
Equity courts have long recognized “extraordinary circumstances,”
including the likelihood that a defendant will never pay, as one way to “give rise to
the irreparable harm necessary for a preliminary injunction.” 11A Charles Alan
Wright & Arthur Miller, Federal Practice and Procedure § 2948.1 (3d ed. 2013);
see also Ernst & Whinney, 735 F.2d at 1301 (citing Wright & Miller for its
“general discussion of equitable principles governing [the] injunctive remedy”).
More specifically, “most courts sensibly conclude that a damage judgment against
an insolvent defendant is an inadequate remedy.” Douglas Laycock, The Death of
the Irreparable Injury Rule, 103 Harv. L. Rev. 687, 716 (1990); see also, e.g.,
Lakeview Tech., Inc. v. Robinson, 446 F.3d 655, 657 (7th Cir. 2006) (noting that
the “[a]bility to calculate damages” does not make a remedy adequate “if the
plaintiff cannot collect the award”).4
Indeed, the Supreme Court long ago stressed the practical nature of the
equitable inquiry, stating that it “is not enough that there is a remedy at law; it must
be plain and adequate, or in other words, as practical and as efficient to the ends of
justice and its prompt administration, as the remedy in equity.” Boyce’s Ex’rs v.
Grundy, 28 U.S. (3 Pet.) 210, 215 (1830). The district court’s categorical rule that
4
The IRS also points to district court cases purportedly granting injunctions in circumstances
similar to this case, but we place little weight on them. First, the IRS concedes that many of
these cases were the result of default or consent orders, so their propriety may not have been
subject to the sort of vigorous litigation that would give them persuasive value. Second, the
relevance of out-of-circuit cases is further watered down by the fact that some courts—unlike
this Court—have not held injunctions under § 7402(a) to the traditional equitable requirements.
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a case involving calculable money damages can never warrant injunctive relief,
regardless of a plaintiff’s ability to collect on a future judgment, is discordant with
the history and purposes of equity jurisprudence.
The fact that the IRS is attempting to avoid future losses is key. As the IRS
notes, it “is an involuntary creditor; it does not make a decision to extend credit.”
In re Haas, 31 F.3d 1081, 1088 (11th Cir. 1994). As long as the brothers continue
to accrue employment taxes, the IRS continues to lose money. This sets the IRS
apart from the position of other creditors (who can cut their losses by refusing to
extend additional credit), and—crucially—means that the injunction sought is not
simply an attempt to provide security for past debts. Rather, the proposed
injunction here would staunch the flow of ongoing future losses as the brothers
continue to accumulate tax liabilities—unlike in cases where the loss has already
been inflicted or would be attributable to a single event, where we have stated that
injuries are irreparable only when they “cannot be undone through monetary
remedies.” E.g., Scott, 612 F.3d at 1295 (quoting Cunningham v. Adams, 808 F.2d
815, 821 (11th Cir. 1987)).
Indeed, the record and the district court’s own findings demonstrate that the
government’s proposed injunctive relief is “appropriate for the enforcement of the
internal revenue laws,” 26 U.S.C. § 7402(a), and that the government will likely
suffer irreparable injury absent an injunction. Among other things, the district
court noted that Askins & Miller had “a proclivity for unlawful conduct,” had
“diverted and misappropriated” the employment taxes it had withheld from its
employees’ wages, and was “likely to continue ignoring” its employment tax
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obligations. The IRS’s declaration demonstrates that, over a period of several
years, it expended considerable resources making numerous—and unsuccessful—
attempts to collect Askins & Miller’s unpaid taxes. And in the face of all that, as
the declaration explained, Askins & Miller is effectively judgment-proof. In short,
the record amply demonstrates that, absent the requested injunction, the
government will continue to suffer harm from Askins & Miller’s willful and
continuing failure to comply with its employment tax obligations—including lost
tax revenue and the expenditure of a disproportionate amount of its resources
monitoring Askins & Miller and attempting to bring it into compliance—and that,
in all likelihood, the government will never recoup these losses.
The district court relied primarily on our decision in Rosen v. Cascade
International, Inc., 21 F.3d 1520 (11th Cir. 1994), but Rosen is an uncomfortable
fit here. As background, shareholders in that case brought a suit for money
damages against a company and its officers because of alleged securities fraud. Id.
at 1522. To ensure that the defendants would be able to satisfy any money
judgment ultimately obtained in the litigation, the district court entered a
preliminary injunction freezing the assets of one of the defendants. Id. On appeal,
we held that the district court lacked authority to enter that injunction because
“cases in which the remedy sought is the recovery of money damages do not fall
within the jurisdiction of equity,” and as a general rule of federal equity, “a court
may not reach a defendant’s assets unrelated to the underlying litigation and freeze
them so that they may be preserved to satisfy a potential money judgment.” Id. at
1527 (internal quotation marks and citation omitted). We also noted that a request
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for prejudgment attachment under Federal Rule of Civil Procedure 64, rather than a
motion for a preliminary injunction under Rule 65, provided the appropriate means
to seek an asset freeze. Id. at 1530–31. Looking to state law (as the Rule
requires), we concluded that the plaintiffs had not shown that they were entitled to
Rule 64 relief. Id.
The differences between that case and this one announce themselves rather
clearly. Rosen asked “whether a district court has the power to enter a preliminary
injunction freezing the assets of a defendant before trial in a case where the
plaintiffs ultimately seek only money damages.” Id. at 1526 (emphasis added).
That damages-only fact was front and center: we explained that a preliminary
injunction is appropriate only where it seeks relief of the “same character” as the
final relief sought, and that the asset freeze in that case was not of the same
character as the ultimate relief because the plaintiffs there “sought only the award
of monetary damages—and not equitable relief.” Id. at 1527, 1529 (internal
quotation marks and citation omitted); accord Grupo Mexicano de Desarrollo, S.A.
v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999); Mitsubishi Int’l Corp. v.
Cardinal Textile Sales, Inc., 14 F.3d 1507 (11th Cir. 1994).
Here, in contrast, the IRS’s complaint asked for a permanent injunction
providing prospective equitable relief for anticipated future violations—the same
relief sought by the preliminary injunction at issue. Indeed, we have already held
that Rosen does not apply where the complaint itself seeks a permanent injunction.
Levi Strauss & Co., 51 F.3d at 987; see also SEC v. ETS Payphones, Inc., 408 F.3d
727, 734 (11th Cir. 2005) (per curiam) (holding that Grupo Mexicano does not
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apply where the complaint seeks equitable relief). As Rosen itself was careful to
note, a preliminary injunction “is always appropriate to grant intermediate relief of
the same character as that which may be granted finally.” Rosen, 21 F.3d at 1527
(quoting De Beers Consol. Mines v. United States, 325 U.S. 212, 220 (1945)). 5
What’s more—and contrary to the district court’s reading—nothing in Rosen
suggests that the IRS has not shown an irreparable injury for purposes of a
preliminary injunction. The Rosen court’s statement that the “test of the
inadequacy of a remedy at law is whether a judgment could be obtained, not
whether, once obtained it will be collectible,” 21 F.3d at 1531 (quoting St.
Lawrence Co., N.V. v. Alkow Realty, Inc., 453 So. 2d 514, 514–15 (Fla. Dist. Ct.
App. 1984)), was made in the context of a Rule 64 analysis relating to prejudgment
attachment. As we have said, Rule 64 looks to the law of the state in which the
court sits. See Fed. R. Civ. P. 64(a). So this statement in Rosen merely described
Florida law governing prejudgment attachment; it did not determine (or even
describe) federal equitable power.
5
We also note that, for at least a portion of the employment taxes at issue, the assets that the
injunction would reach are not “unrelated”—indeed, they do not even wholly belong to the
defendants—because when an employer withholds employees’ taxes, the withheld money is held
in trust for the United States. See Thibodeau v. United States, 828 F.2d 1499, 1506 (11th Cir.
1987) (per curiam). So at least for this portion of the taxes, the IRS has an equitable interest that
might qualify it for relief analogous to the “creditor’s bill” recognized in English courts of
equity. See Grupo Mexicano, 527 U.S. at 319–20 & n.5 (“Some cases suggested that there was
an exception [to the requirement that a judgment be obtained before bringing a creditor’s bill]
where the debt was admitted or confessed, at least if the creditor possessed an interest in the
debtor’s property.”).
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In sum, the district court erred in applying a categorical rule that because tax
liability may be calculated and sought in an action for damages, it necessarily
precludes injunctive relief under § 7402(a).
B. Rule 65(d)
The district court also suggested that “the United States’ proposed injunction
would be unenforceable” as an overbroad “obey-the-law” injunction. It is true that
we have “questioned the enforceability of obey-the-law injunctions” because “they
lack specificity and deprive defendants of the procedural protections that would
ordinarily accompany a future charge of a violation.” SEC v. Goble, 682 F.3d 934,
949 (11th Cir. 2012). Such injunctions are disfavored because they often run afoul
of Rule 65(d)’s requirement that injunctions state their terms specifically and
“describe in reasonable detail” the “act or acts restrained or required.” Fed. R. Civ.
P. 65(d). But here, the “obey-the-law” problem does not doom the IRS’s proposed
injunction—the injunction plainly requires more of the Askins brothers than the
law requires of others, and where it does direct action consistent with the law, it
does so for specific provisions that the Askins brothers claim they already
understand.
Backing up, the specificity requirements in Rule 65(d) are “designed to
prevent uncertainty and confusion on the part of those faced with injunctive orders,
and to avoid the possible founding of a contempt citation on a decree too vague to
be understood.” Goble, 682 F.3d at 950 (quoting Schmidt v. Lessard, 414 U.S.
473, 476 (1974) (per curiam)). An injunction “should clearly let [the] defendant
know what he is ordered to do or not to do” and “should be phrased in terms of
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objective actions, not legal conclusions.” Id. (quoting Planetary Motion, Inc. v.
Techsplosion, Inc., 261 F.3d 1188, 1203 (11th Cir. 2001)). A defendant “should
only be required to look within the four corners of the injunction to determine what
he must do or refrain from doing.” Id. at 952 (internal quotation marks and citation
omitted). But the “degree of particularity required depends on the nature of the
subject matter,” and “at times an injunction that orders a defendant to comply with
a statute may be appropriate.” Id. at 950 (internal quotation marks and citation
omitted). That is the case where the statutory terms are specific and the defendant
clearly knows what conduct is prohibited or required. Id. at 950–51 (citing
McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949)).
The IRS’s proposed injunction passes muster here based on the district
court’s own findings. The district court found that the “statutes with which
Defendants must comply are specific, and the record demonstrates that they are
well aware of the conduct the proposed injunction addresses, their failure to remit
to the IRS taxes withheld from their employees.” Askins & Miller does not contest
its tax liabilities and has engaged with the IRS for the better part of a decade in the
IRS’s repeated efforts to ensure compliance. The district court also found that the
IRS demonstrated the defendants’ “proclivity for unlawful conduct,” which cuts in
favor of a broad injunction. Cf. McComb, 336 U.S. at 192 (noting that broad
injunctions “are often necessary to prevent further violations where a proclivity for
unlawful conduct has been shown”). Finally, the proposed injunction goes well
beyond merely requiring compliance with the employment tax laws. In fact, it lists
numerous concrete actions for the defendants to take—to name only a few,
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segregating their funds, informing the IRS of any new business ventures, and filing
various periodic affidavits—well beyond what a simple “obey-the-law” injunction
would look like. In short, this case does not raise the sort of fair notice concerns
that Rule 65(d) is designed to address.
V.
Because the district court erroneously imposed a categorical rule that
prevented a proper exercise of its broad equitable discretion, we vacate its order
denying the IRS’s request for a preliminary injunction against the Defendants-
Appellees. On remand, the district court should consider the collectability of a
future money judgment in determining whether that remedy is “adequate.” It
should also consider any relevant factual developments that may affect the
propriety of the injunctive relief sought, including the defendants’ assertion that
Askins & Miller is no longer in business and the IRS’s contention that it may need
to seek additional injunctive relief in light of those developments. As we have
already explained, this analysis is distinct from the mootness issue that we have
addressed. Apart from what we have already said, we express no opinion on
whether an injunction is ultimately appropriate. Rather, we leave it for the district
court on remand to exercise its equitable discretion consistent with the principles in
this opinion.
VACATED AND REMANDED.
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