## Facts

- Investment funds purchased about $75 million in unsecured notes issued by Grupo Mexicano de Desarrollo, S.A. (GMD), with guarantees from four subsidiaries.
- After GMD missed an interest payment and faced financial distress, the noteholders accelerated the debt and sued in federal court for money damages on the contract claim.
- The noteholders alleged GMD was insolvent or near insolvency and intended to favor Mexican creditors by allocating valuable assets to them, potentially defeating any eventual U.S. judgment.
- The noteholders asserted no lien, trust, or other equitable interest in GMD’s assets.
- The district court entered a preliminary injunction barring asset transfers pending adjudication and required the plaintiffs to post a $50,000 bond; after summary judgment on liability, the court converted the injunction into a permanent injunction.

## Issues

1. Whether a federal district court, in an action seeking only money damages and asserting no lien or equitable interest in the defendant’s assets, has authority to issue a prejudgment injunction freezing those assets.
2. Whether the appeal was moot after the preliminary injunction was converted into a permanent injunction following summary judgment, given the existence of an injunction bond.

## Decision

- The Supreme Court held (5–4) that the district court lacked authority to issue a prejudgment asset-freezing injunction in a damages-only contract action where the plaintiff claimed no equitable interest in the assets.
- The Court rejected mootness, reasoning that a live controversy remained because the defendants’ potential recovery on the injunction bond depended on whether the court had power to issue the restraint in the first place.
- The Court reversed the authority for the injunction, grounding the limits of federal equitable power in historical equity practice as of 1789 and declining to recognize a modern Mareva-type remedy absent congressional authorization.
- The Court stated that the merger of law and equity under the Federal Rules did not expand the substantive scope of equitable remedies.

## Legal Principles

- Federal courts’ equitable jurisdiction is limited to the remedies traditionally available in the English Court of Chancery at the time of the Judiciary Act of 1789, absent statutory expansion.
- In general, equity would not restrain a debtor’s use of property before a creditor obtained a judgment fixing the debt.
- A plaintiff seeking only money damages, without a lien or other equitable interest in identified assets, cannot obtain a prejudgment injunction freezing the defendant’s assets merely to secure collection of a potential judgment.
- Expansion of prejudgment creditor remedies that would materially alter debtor–creditor relations is a matter for Congress, not judicial creation.

## Conclusion

The Court ruled that federal courts may not issue prejudgment asset-freezing injunctions to secure potential money judgments when the plaintiff has no equitable interest in the assets, reaffirming historically defined limits on equitable power and leaving any broader remedy to legislative authorization.


Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999)