527 U.S. 308 (1999)
Petitioner Grupo Mexicano de Desarrollo, S.A., a Mexican holding company, issued $250 million of 8.25% unsecured notes due in 2001 in February 1994, with those notes ranking pari passu with all other unsecured debt and guaranteed by four subsidiaries while respondents purchased approximately $75 million of the notes.
Between 1990 and 1994 GMD participated in a Mexican government toll-road construction program as both investor and contractor, yet when the Mexican economy deteriorated the concessionaires could not pay contractors like GMD, prompting the government in 1997 to announce a Toll Road Rescue Program under which it would issue guaranteed notes to pay outstanding receivables held by GMD.
By mid-1997 GMD was insolvent or nearly so because its current liabilities exceeded current assets, and it filed a Form 20-F stating substantial doubt about its ability to continue as a going concern; GMD therefore missed the August 1997 interest payment on the notes while attempting to restructure its $450 million in other debts.
GMD publicly announced plans to place $17 million of Toll Road Notes in trust for employees and to transfer $100 million to the Mexican government, but negotiations with note holders through December 1997 proved unsuccessful.1
On December 11, 1997, respondents accelerated the notes and filed suit in the Southern District of New York seeking $80.9 million in contract damages together with a preliminary injunction restraining transfer of the Toll Road Notes and Receivables; the district court issued a temporary restraining order the same day and on December 23 found GMD at risk of insolvency, noted that the Toll Road Notes were its only substantial asset, and entered a preliminary injunction barring dissipation or transfer after respondents posted a $50,000 bond.
The Second Circuit affirmed the preliminary injunction, but while that appeal was pending the district court granted respondents summary judgment on April 17, 1998, for $82,444,259 and converted the preliminary injunction into a permanent injunction; petitioners appealed only the preliminary-injunction portion and respondents moved to dismiss the appeal as moot because the permanent injunction had been entered.2
Whether the appeal from the grant of a preliminary injunction becomes moot when the district court later enters a permanent injunction and the case proceeds to final judgment?3
An appeal from the grant of a preliminary injunction is not rendered moot by the subsequent entry of a permanent injunction if the appellant possesses a potential claim against the injunction bond under Federal Rule of Civil Procedure 65(c).4 The validity of the preliminary injunction is independent of the merits of the underlying contract claim.5
Yes. The district court granted summary judgment to respondents on April 17, 1998, for $82,444,259 and converted the preliminary injunction into a permanent injunction.6 Petitioners retained a live claim on the $50,000 bond posted by respondents because the preliminary injunction had already interfered with GMD's debt restructuring efforts and ordinary business operations.7
The harm caused by freezing assets before any judgment was rendered remains distinct from the final adjudication of the note default.8 This preserves jurisdiction over the interlocutory appeal even after the permanent injunction took effect.9
The appeal is not moot.10
Related opinions on this issue
Joined by Stevens, Souter, And Breyer, Jj.
Justice Ginsburg joined Part II of the opinion and agreed that the case is not moot.11 She recognized that petitioners' potential claim on the injunction bond kept the controversy alive despite the entry of final judgment.12 The resolution of the merits is immaterial to the validity of petitioners' potential claim on the bond because the preliminary injunction rested on an asserted equitable power separate from the contract claim.13
Whether a United States District Court has the power in an action for money damages to issue a preliminary injunction preventing the defendant from transferring assets in which no lien or equitable interest is claimed?14
Federal equity jurisdiction under the Judiciary Act of 1789 is limited to the principles administered by the English Court of Chancery at the time of the separation of the two countries.15 A general unsecured creditor without a judgment possesses no cognizable interest in the debtor's property and therefore cannot obtain an injunction restraining the debtor's use of unencumbered assets before judgment.16
No. Respondents were unsecured note holders who accelerated their $80.9 million claim after GMD missed the August 1997 interest payment.17 They sought to freeze the Toll Road Notes and Receivables, GMD's only substantial asset, without any lien or equitable interest.18 The district court found GMD at risk of insolvency and issued the preliminary injunction on December 23, 1997, after a $50,000 bond was posted.19
No historical equitable remedy permitted such pre-judgment asset freezes for general contract creditors.20 The requested relief finds no analogue in traditional creditor's bills, which required a prior judgment, and the merger of law and equity did not alter this substantive limitation on equitable power.21
The district court lacked authority to issue the preliminary injunction.22
Related opinions on this issue
Joined by Stevens, Souter, And Breyer, Jj.
Justice Ginsburg noted that the three prior cases considering asset-freeze injunctions involved factual and legal circumstances markedly different from those presented here and thus do not rule out or in the provisional remedy at issue.23 She pointed out that courts have drawn on equitable jurisdiction in a series of cases implementing the desegregation mandate of Brown v. Board of Education to supervise various aspects of local school administration.24 Similarly, courts enforcing the antitrust laws have superintended intricate programs of corporate dissolution or divestiture.25
Justice Ginsburg observed that the decision to award provisional relief always rests with the judge regardless of the underlying jury-trial right on the merits, and findings made at the preliminary stage do not bind the jury.26