In Janvey v. Alguirre, No. 10-10617 (5th Cir. July 22, 2011) the Securities and Exchange Commission (“SEC”) brought suit against the investment company Standford Group Company (“SGC”) and related entities for allegedly perpetrating a massive Ponzi scheme.
The U.S. District Court for the Northern District of Texas granted a motion for a preliminary injunction brought by the court appointed receiver for SGC (“Receiver”) against numerous former financial advisors and employees of the investment company (“Employee Defendants”), freezing the accounts of those individuals pending the outcome of trial.
In the present case, the Employee Defendants filed an interlocutory appeal setting out the following issues:
(1) whether the district court had the power to grant a preliminary injunction before deciding the motion to compel arbitration;
(2) whether the district court abused its discretion when it granted the preliminary injunction;
(3) whether the district court’s preliminary injunction is overbroad;
(4) whether the district court properly granted a preliminary injunction rather than a writ of attachment; and
(5) whether the Receiver’s claims against the Employee Defendants are subject to arbitration.
The Fifth Circuit held as follows:
(1) the district court had the power to decide the motion for preliminary injunction before deciding the motion to compel arbitration;
(2) the district court did not abuse its discretion in granting a preliminary injunction;
(3) the preliminary injunction was not overbroad; and (4) the district courtacted within its power to grant a Texas Uniform Fraudulent Transfer Act (“TUFTA”) injunction rather than an attachment.
We further hold that we do not have jurisdiction to rule on the motion to compel arbitration.