Grupo Mexicano de Desarrollo, S.A. (GMD), a Mexican holding company, issued unsecured notes to investors, including Alliance Bond Fund and others. After GMD encountered serious financial distress and defaulted, the noteholders sued in the Southern District of New York for breach of contract seeking money damages. Concerned that GMD was insolvent or nearing insolvency and allegedly preferring some creditors over others and transferring assets that would frustrate collection, the noteholders sought a preliminary injunction under Federal Rule of Civil Procedure 65 to restrain GMD from dissipating or transferring its assets pending judgment. The district court granted a preliminary injunction freezing GMD's assets up to the amount claimed, reasoning that equitable powers permitted preservation of the status quo to ensure an eventual damages judgment would not be rendered hollow. The Second Circuit affirmed. The Supreme Court granted certiorari to decide whether a federal court sitting in a diversity action for money damages may issue such a prejudgment asset-freeze injunction when the plaintiffs have no lien, security interest, or other equitable interest in the defendant's property and asserted no independent equitable claim at the time the injunction issued.
May a federal court, in a case seeking solely money damages where the plaintiff has no lien or equitable interest in the defendant's property, issue a preliminary injunction restraining the defendant from transferring assets in order to secure a potential judgment?
Absent statutory authorization or an asserted equitable interest in specific property, a federal court's equitable powers under Rule 65 do not include issuing a preliminary injunction to freeze a defendant's assets to secure satisfaction of a potential money judgment. The scope of federal equitable jurisdiction is defined by the traditional principles of equity exercised by the English Court of Chancery in 1789; because Mareva-type asset-freeze injunctions were not historically available in actions at law for money damages, such relief is beyond the court's equitable authority in those circumstances. Plaintiffs seeking prejudgment security for legal claims must proceed via state-law prejudgment remedies incorporated by Rule 64 or assert an equitable claim or interest that supports in rem or specific relief.
No. The Supreme Court reversed, holding that in an action for money damages, where the plaintiff has no lien or equitable interest in the defendant's assets, a federal court lacks authority to issue a preliminary injunction freezing those assets pending adjudication.
1) Historical limits of equity: The Court grounded federal equity jurisdiction in the traditional remedies available in the English High Court of Chancery in 1789, the benchmark for the Judiciary Act's grant of equitable power. Asset-freeze injunctions to secure a prospective damages award (often called Mareva injunctions) are a modern innovation of English courts and were not available at the founding. Because such relief was not part of traditional equity, it is not encompassed within federal courts' inherent equitable powers. 2) Distinguishing Deckert and De Beers: The Court distinguished Deckert v. Independence Shares Corp., which permitted a preliminary injunction to preserve a specific fund where the plaintiffs sought equitable rescission and restitution—relief directly tied to particular assets. By contrast, the noteholders in Grupo Mexicano sought only legal damages and had no equitable claim to any specific res. The decision also drew on De Beers Consolidated Mines v. United States, which cautioned against using preliminary injunctions to restrain assets unrelated to the merits or the ultimate equitable relief. 3) Rule 65 versus Rule 64: Rule 65 does not itself enlarge substantive equitable authority; it regulates procedure for injunctions that equity otherwise permits. When unsecured creditors desire prejudgment security, the appropriate route is Rule 64, which adopts state-law provisional remedies such as attachment or garnishment, subject to their standards and safeguards. Allowing a free-standing federal asset freeze under Rule 65 would circumvent Rule 64 and displace state choices about creditor priorities and protections. 4) Separation of powers and creditor priorities: The majority emphasized that creating a broad federal remedy enabling unsecured creditors to leapfrog others by freezing assets would alter the delicate balance of debtor-creditor law and bankruptcy priorities—subjects traditionally left to legislatures. Any such reallocation of rights and remedies, the Court reasoned, should come from Congress, not judicial expansion of equitable powers. 5) Scope and limits: The Court acknowledged that different results may obtain when a plaintiff asserts an equitable interest in specific property (e.g., a constructive trust, equitable lien, or rescission claim tied to an identifiable fund) or when Congress has expressly authorized asset freezes (as in certain securities, RICO, or FTC matters). But where, as here, the claim is purely legal and unsecured, a preliminary asset restraint is impermissible. 6) Dissent's view: The dissent, led by Justice Ginsburg, argued for a more flexible, evolving equity responsive to modern commercial realities, emphasizing that preserving assets to prevent judgment frustration is consistent with equitable principles and that federal courts historically adapted remedies. The majority, however, rejected this elasticity in favor of the historically anchored limit.
Grupo Mexicano is a touchstone for the modern law of equitable remedies and civil procedure. It sharpens the legal/equitable divide, confining Rule 65 injunctions to traditional equitable contexts and steering unsecured creditors toward Rule 64 state-law prejudgment remedies. After Grupo, courts routinely deny requests to freeze assets in pure damages suits unless the plaintiff shows a lien, security interest, or an equitable claim to specific property, or invokes a statute that expressly authorizes an asset freeze. The decision also has broader implications for separation of powers and federalism: it prevents federal courts from creating new prejudgment creditor remedies that could upend state law and bankruptcy priorities, leaving such policy choices to legislatures.
Grupo Mexicano draws a bright doctrinal line: federal courts cannot deploy preliminary injunctions to freeze a defendant's assets in a suit for money damages when the plaintiff has no lien or equitable interest in those assets. By tethering equity to its historical boundaries and directing unsecured creditors to Rule 64's state-law remedies, the Court preserves the traditional architecture of debtor-creditor law and avoids judicially reshaping creditor priorities.