In Levi Strauss & Co. v. Sunrise International Trading Inc. the Court of Appeals for the Eleventh Circuit held that a federal district court has, ancillary to its power to order preliminary relief, the inherent power to freeze a defendant's assets in order to preserve assets which may be used to satisfy an equitable award of profits.

Plaintiff Levi Strauss manufactures blue jeans which are sold in the United States and abroad under the valid U.S. trademark, LEVI'S 501's. In 1993, Levi Strauss commenced an action seeking injunctive relief against the defendant Sunrise International for allegedly offering for sale tens of thousands of pairs of counterfeit LEVI'S 501 jeans, claiming that Sunrise was engaged in the manufacture of counterfeit LEVI'S 501 jeans in the People's Republic of China and elsewhere for shipment primarily to European customers.

The district court issued a temporary restraining order and granted the plaintiff Levi Strauss's request for an inspection of Sunrise's business premises. This inspection resulted in the seizure of voluminous documents demonstrating Sunrise's participation in the alleged activities and two pairs of counterfeit LEVI'S 501 jeans. Subsequently, an evidentiary hearing was held wherein the district court issued a preliminary injunction enjoining Sunrise from engaging in further counterfeiting activities and imposed an asset freeze, pending a permanent resolution of the case, limiting Sunrise's expenditures to certain business expenses and a $2000 per month living allowance.

Sunrise appealed, citing two cases which recently reversed asset freezes, and asserted that the district court abused its discretion by freezing its assets. The Eleventh Circuit distinguished those cases on the ground that they had involved the preservation of assets to satisfy money judgments in a securities case and in a suit alleging fraudulent inducement. In contrast, Levi Strauss's request for equitable relief invokes the district court's inherent power to grant preliminary relief, including a freeze of those assets which may be used to satisfy a final equitable award of profits. Sunrise further argued that the district court also abused its discretion by freezing assets unrelated to the illegal activity, but the Court left this issue unresolved, since Sunrise had failed to request from the district court exemption of specific assets on the ground that they were not linked to illegal activity. The Court noted that the district court had granted Sunrise's only request for modification of the freeze by ruling that Sunrise could pay their attorneys' fees.

Sunrise also challenged the district court's decision on other grounds, including lack of subject matter jurisdiction, because the counterfeit jeans were not manufactured or intended for final sale in the United States. The Eleventh Circuit flatly rejected this argument, noting that the Lanham Act applies to extraterritorial activities not wholly confined within the territorial limits of a foreign country. Given, among other things, that both Levi Strauss and Sunrise were U.S. corporations, that the individual defendants were U.S. residents, that counterfeit product and fraudulent documents relating to the illegal activity were discovered at Sunrise's U.S. offices and that some of the illegal activity took place in the United States, the Court held that subject matter jurisdiction was proper.