24-2647 (L) Leadenhall Capital Partners LLP v. Advantage Capital Holdings, LLC
In the United States Court of Appeals for the Second Circuit
August Term 2024 Argued: April 1, 2025 Decided: March 23, 2026
Nos. 24-2647 (L), 24-2867 (Con)
LEADENHALL CAPITAL PARTNERS LLP, LEADENHALL LIFE INSURANCE LINKED INVESTMENTS FUND PLC, Plaintiffs-Appellees,
ING CAPITAL LLC, HAYMARKET INSURANCE COMPANY, ACM DELEGATE LLC, NATIONAL FOUNDERS LP, Intervenors, v. ADVANTAGE CAPITAL HOLDINGS LLC, KENNETH KING, 777 PARTNERS LLC, 600 PARTNERS LLC, SPLCSS III LLC, SIGNAL SML 4 LLC, INSURETY AGENCY SERVICES LLC, DORCHESTER RECEIVABLES II LLC, Defendants-Appellants,
JOSH WANDER, STEVEN PASKO, SUTTONPARK CAPITAL LLC, SIGNAL MEDICAL RECEIVABLES LLC, INSURETY CAPITAL LLP, SUTTONPARK SERVICING LLC, SIGNAL SERVICING LLC, INSURETY SERVICING LLC, Defendants.
Appeal from the United States District Court for the Southern District of New York Docket No. 1:24-cv-3453, John G. Koeltl, District Judge. Before: SACK, PÉREZ, and MERRIAM, Circuit Judges.
This appeal is about whether the District Court had the equitable power in this case to freeze the guarantors’ assets upon the borrowers’ default. Defendants- Appellants are guarantors, who assert that the District Court (Hon. John G. Koeltl, J.) abused its discretion in granting a preliminary injunction freezing their assets based on the District Court’s conclusion that Plaintiffs had sufficient contractual and equitable interests in those assets. Plaintiffs are a pair of lenders who sued debtor Defendants for breach of contract to collect on their debt. In the same action, Plaintiffs also sued the entities that guaranteed the debt—the guarantor Defendants-Appellants. Worried that guarantor Defendants would dispose of their assets before Plaintiffs could secure a final judgment, Plaintiffs moved for a preliminary injunction freezing both debtor and guarantor Defendants’ assets. The District Court granted the preliminary injunction, and Defendants appealed.
On appeal, Defendants argue that freezing the guarantor Defendants’ assets was in contravention of the Supreme Court’s decision in Grupo Mexicano De Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), which held that a court cannot issue a preliminary injunction freezing assets in which no lien or equitable interest is claimed. We agree. Plaintiffs have not demonstrated a lien or equitable interest in guarantor Defendants’ assets: they point to no current legal interest in guarantor Defendants’ property, and they do not seek ultimate relief that gives rise to an equitable interest. Accordingly, we VACATE the portion of the District Court’s preliminary injunction order restraining guarantor Defendants’ assets and REMAND for further proceedings consistent with this opinion.
JONATHAN M. WATKINS, (Michael E. Petrella, Matthew M. Karlan, on the brief), Cadwalader, Wickersham & Taft LLP, New York, NY, for Defendants-Appellants Advantage Capital Holdings LLC and Kenneth King
JOHN G. MCCARTHY, Smith, Gambrell & Russell, LLP, New York, NY, for Defendants-Appellants 777 Partners LLC, 600 Partners LLC, SPLCSS III LLC, Signal SML 4 LLC,
2 Insurety Agency Services LLC, and Dorchester Receivables II LLC
LEIGH M. NATHANSON, (Craig Carpenito, King & Spalding LLP, New York, NY, Paul Alessio Mezzina, Zoe M. Beiner, King & Spalding LLP, Washington, DC, on the brief), King & Spalding LLP, New York, NY, for Plaintiffs- Appellees.
MYRNA PÉREZ, Circuit Judge:
This appeal is about whether the District Court had the equitable power in
this case to freeze the guarantors’ assets upon the borrowers’ default. Defendants-
Appellants 1 are guarantors, who assert that the District Court (Hon. John G. Koeltl,
J.) abused its discretion in granting a preliminary injunction freezing their assets
based on the District Court’s conclusion that Plaintiffs had sufficient contractual
and equitable interests in those assets. Plaintiffs are a pair of lenders, Leadenhall
Capital Partners LLP and Leadenhall Life Insurance Linked Investments Fund
PLC, who sued debtor Defendants for breach of contract to collect on their debt.
In the same action, Plaintiffs also sued the entities that guaranteed the debt—the
guarantor Defendants-Appellants. Worried that guarantor Defendants would
1 Defendants-Appellants are: Advantage Capital Holdings LLC, Kenneth King, 777 Partners LLC, 600 Partners LLC, SPLCSS III LLC, Signal SML 4 LLC, Insurety Agency Services LLC, and Dorchester Receivables II LLC. 3 dispose of their assets before Plaintiffs could secure a final judgment, Plaintiffs
moved for a preliminary injunction freezing both debtor and guarantor
Defendants’ assets. The District Court granted the preliminary injunction, and
Defendants appealed.
On appeal, Defendants argue that freezing the guarantor Defendants’ assets
was in contravention of the Supreme Court’s decision in Grupo Mexicano De
Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), which held that a
court cannot issue a preliminary injunction freezing assets in which no lien or
equitable interest is claimed. We agree. Plaintiffs have not demonstrated a lien or
equitable interest in guarantor Defendants’ assets: they point to no current legal
interest in guarantor Defendants’ property, and they do not seek ultimate relief
that gives rise to an equitable interest. Accordingly, we VACATE the portion of
the District Court’s preliminary injunction order restraining guarantor
Defendants’ assets and REMAND for further proceedings consistent with this
opinion.
4 BACKGROUND
I. Factual Background
In May 2021, Plaintiffs-Appellees Leadenhall Capital Partners LLP and
Leadenhall Life Insurance Linked Investments Fund PLC (together, “Leadenhall”)
entered into a Loan and Security Agreement (“LSA”) with four special purpose
investment entities, Defendants-Appellants SPLCSS III LLC, Dorchester
Receivables II LLC, Insurety Agency Services LLC, and Signal SML 4 LLC (each a
“Borrower,” and together, “Borrowers”). Under the terms of the LSA, Leadenhall
lent capital to Borrowers to finance their purchase of investment instruments. This
debt was secured under the LSA by Borrowers’ grant to Leadenhall of a first-
priority interest in the entirety of Borrowers’ assets and equity as collateral.
Leadenhall also executed agreements with Borrowers’ ultimate parents,
Defendants-Appellants 777 Partners LLC and 600 Partners LLC (“Guarantors”),
who agreed to guarantee those loans. Under that agreement, “[e]ach Guarantor
hereby jointly and severally absolutely, unconditionally and irrevocably
guarantees to [Leadenhall], . . . the full and punctual payment and performance
when due (whether at stated maturity, by acceleration or otherwise) of the
Guaranteed Obligations.” App’x at 254. “Guaranteed Obligations” is defined, in
5 part, as including all obligations under the LSA. App’x at 252. Relevant here,
Guarantors did not pledge any collateral as part of their agreements with
Leadenhall.
In September 2022, Leadenhall received an anonymous tip that the collateral
pledged to secure Leadenhall’s loans to Borrowers was either also pledged to
secure other debts, or not in fact owned by Borrowers at all, either of which would
breach Borrowers’ LSA obligations. App’x at 1110. By November 2023,
Leadenhall believed it had confirmed the tip, and sent formal notice to Borrowers
of their alleged breaches. App’x at 1110–31. Leadenhall believed it was being
defrauded, and in March 2024, Leadenhall exercised its contractual option to
demand immediate payment of the entire outstanding debt of $609,529,966.82 (the
“Accelerated Debt”). App’x at 1131–32.
It soon became clear that neither Borrowers nor Guarantors were able to pay
the Accelerated Debt. App’x at 1132–35. In addition, Leadenhall learned that
Defendant-Appellant Advantage Capital Holdings (“A-CAP”) was a secured
lender to Guarantor 777 Partners LLC and had been in control of 777 Partners’s
operations. 2 App’x at 1131–37. Because 777 Partners was also having trouble
2 Defendant-Appellant Kenneth King is A-CAP’s Chief Executive Officer. 6 servicing A-CAP’s debt, A-CAP was seeking to foreclose on 777 Partners’s assets.
Rather than foreclosing on Borrowers’ assets, Leadenhall instead sought to collect
the Accelerated Debt via a lawsuit alleging claims for breach of contract, fraud,
and RICO violations, against Borrowers, Guarantors, A-CAP, and related entities
and individuals.
II. Procedural History
Leadenhall filed suit on May 3, 2024, in the Southern District of New York.
Ten days later, Leadenhall moved for a temporary restraining order (“TRO”) on
the basis of its contract claims, 3 alleging that Borrowers and Guarantors were
unable to pay the Accelerated Debt, and that they were in the process of
liquidating and dissipating remaining assets. The requested TRO was therefore to
freeze Borrowers’ and Guarantors’ assets up to the amount of the full Accelerated
3 Leadenhall’s original Complaint and Amended Complaint both asserted claims of fraud, conspiracy to defraud, and unjust enrichment. See App’x at 109–17, 1204–28. While the District Court referenced these claims when denying modification of the preliminary injunction, see App’x at 1346–47, its original grant of a TRO was premised on “Leadenhall focus[ing] its analysis on the contract claims, which provide, on their own, a sufficient basis for the Court to order the relief requested,” see App’x at 816, and it “issue[d] the preliminary injunction for the reasons stated that [it] issued the TRO,” see App’x at 1340. The parties acknowledge that the preliminary injunction at issue is premised on Leadenhall’s contract claims. See A-CAP Br. at 16 (“When Leadenhall applied for a temporary restraining order, it did so based only on its contract claims . . . .”); Appellees’ Br. at 12 (“The TRO application was based on Leadenhall’s breach-of- contract claims against the Borrowers and Guarantors . . . .”); Appellees’ Suppl. Letter Br. at 23 (conceding that “allegations of fraud” were “not the basis for the injunction”). While “the Supreme Court has made clear that the equitable label applied to a claim is not determinative,” see Cent. States, Se. & Sw. Areas Health & Welfare Fund v. Gerber Life Ins. Co., 771 F.3d 150, 155 (2d Cir. 2014), we do, however, limit our review to the basis of the District Court’s injunction, which is Leadenhall’s contract claims, see Gold v. Feinberg, 101 F.3d 796, 800 (2d Cir. 1996).
7 Debt. The District Court held a TRO hearing and issued a TRO the same day. See
App’x at 831–34. It subsequently converted the TRO into a preliminary injunction.
See App’x at 923, 933.
Throughout their opposition to the TRO and the preliminary injunction,
Borrowers, Guarantors, and A-CAP focused primarily on the Supreme Court’s
decision in Grupo Mexicano De Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S.
308 (1999). They argued that the District Court lacked power to freeze Guarantors’
assets because, although Leadenhall has an equitable interest in Borrowers’ assets
which were pledged as collateral, it has no such interest in Guarantors’ assets. The
District Court disagreed, concluding that Grupo Mexicano was distinguishable: “In
Grupo Mexicano, as opposed to this case, the notes issued by the borrower and
guaranteed by the guarantors were explicitly unsecured,” whereas here, “the
guarantors guaranteed performance of all the borrowers’ obligations to
Leadenhall.” App’x at 819.
A-CAP moved to reconsider and modify the preliminary injunction to
unfreeze assets not specifically pledged. The District Court held a hearing on the
motion to reconsider on October 2, 2024, where it denied the motion from the
bench, allowing the injunction against Guarantors to stand.
8 A-CAP appealed the preliminary injunction and subsequent denial to
reconsider and modify the injunction insofar as it freezes Guarantors’ assets. 4 A-
CAP does not appeal the freezing of Borrowers’ assets. See A-CAP Br. at 3
(“Because Leadenhall has no lien or equitable interest in Guarantors’ assets, the
portion of the preliminary injunction restraining those assets should be vacated.”).
Borrowers and Guarantors separately noticed their appeal of the preliminary
injunction, but largely adopt A-CAP’s positions on appeal. See Borrowers’ &
Guarantors’ Br. at 2 (“Pursuant to Federal Rule of Appellate Procedure 28(i), the
777 Appellants adopt by reference the argument set forth in the A-CAP
Appellants’ brief.”).
STANDARD OF REVIEW
We review a district court’s grant, denial, or modification of a preliminary
injunction for abuse of discretion. See JLM Couture, Inc. v. Gutman, 91 F.4th 91, 99
(2d Cir. 2024). Relevant here, we find an abuse of discretion if a district court
“based its ruling on an erroneous view of the law” or “made a clearly erroneous
assessment of the evidence.” Id. (quoting Oneida Nation of N.Y. v. Cuomo, 645 F.3d
154, 164 (2d Cir. 2011)).
4 A-CAP claims “a perfected, first-priority security interest in substantially all of Guarantors’ now- frozen assets.” A-CAP Br. at 12. 9 DISCUSSION
This appeal concerns whether Grupo Mexicano precludes the freezing of
Guarantors’ assets, so we first address Grupo Mexicano and its holding. We then
assess whether Leadenhall properly claims an interest in Guarantors’ assets, which
in turn allows us to determine whether Grupo Mexicano’s holding applies to the
case at bar. Finally, we consider whether the preliminary injunction may be
affirmed on an alternate basis as an attachment under New York law.
We conclude that Leadenhall has neither a lien nor an equitable interest in
Guarantors’ assets. Leadenhall has not shown that it is a secured creditor as to
Guarantors, nor has it shown that it is seeking ultimate equitable relief that would
give rise to an equitable interest in Guarantor’s property. As a result, under Grupo
Mexicano, the District Court did not have the authority to issue a preliminary
injunction freezing those assets, and the District Court’s contrary ruling amounted
to an abuse of discretion. Because Grupo Mexicano precludes freezing Guarantors’
assets in this case, and because we cannot affirm under the alternate basis of
attachment on this record, the portion of the District Court’s preliminary
injunction restraining Guarantors’ assets is therefore vacated. 5
5 The injunction also restrains Borrowers’ assets, which is not challenged here. 10 I. Grupo Mexicano
Grupo Mexicano considered “whether, in an action for money damages, a
United States District Court has the power to issue a preliminary injunction
preventing the defendant from transferring assets in which no lien or equitable
interest is claimed.” 527 U.S. 308, 310 (1999). To answer that question, the
Supreme Court explained that a district court’s equitable authority to issue
preliminary injunctions—pursuant to Rule 65 of the Federal Rules of Civil
Procedure—is circumscribed by “traditional principles of equity jurisdiction.” Id.
at 319 (quoting 11A Wright & Miller’s Federal Practice & Procedure § 2941 (2d ed.
1995)). And those traditional principles, according to Grupo Mexicano, consist of
“the jurisdiction in equity exercised by the High Court of Chancery in England at
the time of the adoption of the Constitution and the enactment of the original
Judiciary Act, 1789.” Id. at 318 (quoting Armistead M. Dobie, Handbook of Federal
Jurisdiction and Procedure 660 (1928)). The Supreme Court ultimately denied the
preliminary injunction that sought the asset freeze: “Because such a remedy was
historically unavailable from a court of equity, we hold that the District Court had
no authority to issue a preliminary injunction preventing petitioners from
11 disposing of their assets pending adjudication of respondents’ contract claim for
money damages.” Id. at 333.
As Grupo Mexicano explained, determining the equitable power of the courts
in this context is to determine “the time and manner in which the property of a
debtor ceases to be subject to his disposition, and becomes subject to the rights of
his creditor.” Id. at 323 n.6 (quoting Adler v. Fenton, 65 U.S. 407, 411 (1861)). And
where a creditor claims no preexisting lien or equitable interest in the assets sought
to be enjoined:
A creditor acquires a lien upon the lands of his debtor by a judgment; and upon the personal goods of the debtor, by the delivery of an execution to the sheriff. It is only by these liens that a creditor has any vested or specific right in the property of his debtor. Before these liens are acquired, the debtor has full dominion over his property; he may convert one species of property into another, and he may alienate to a purchaser.
Id. (quoting Adler, 65 U.S. at 411).
The crux of the dispute in Grupo Mexicano was not the validity of those
baseline principles, but rather if and when a district court’s equitable power may
extend beyond that baseline. The Supreme Court was faced with a situation in
which the plaintiff “had satisfied all conditions precedent to its breach of contract
claim,” the defendant “had no plausible defense on the merits,” and
“unchallenged evidence indicated that [defendant] was so rapidly disbursing its 12 sole remaining asset that, absent provisional action by the District Court, [plaintiff]
would have been unable to collect on the money judgment for which it qualified.”
Id. at 333–34 (Ginsburg, J., dissenting). As such, were it “possible for the District
Judge to set up ‘a pie-powder court . . . on the instant and on the spot,’ the judge
could have moved without pause from evidence taking to entry of final judgment
for [plaintiff], including an order prohibiting [defendant] from transferring assets
necessary to satisfy the judgment.” Id. (Ginsburg, J., dissenting) (quoting Parks v.
City of Boston, 32 Mass. (15 Pick.) 198, 208 (1834) (Shaw, C. J.)). Even so, and while
acknowledging that “equity is flexible,” the majority in Grupo Mexicano held that
“in the federal system, at least, that flexibility is confined within the broad
boundaries of traditional equitable relief.” Id. at 322. While hewing tightly to the
“well-established general rule that a judgment establishing the debt was necessary
before a court of equity would interfere with the debtor’s use of his property,” the
Supreme Court acknowledged that general creditors nevertheless have an
“arsenal” of options available to them, including “bankruptcy, fraudulent
conveyances, and preferences.” Id. at 321, 331.
Grupo Mexicano thus stands for the rather unremarkable observation that in
a claim for contractual money damages, “before judgment (or its equivalent) an
13 unsecured creditor has no rights at law or in equity in the property of his debtor.”
Id. at 330. To be clear, while Grupo Mexicano referred to an “unsecured creditor,”
what mattered at bottom was that the creditor claimed “no lien or equitable
interest” precisely because the creditor in that case presented only a “contract claim
for money damages.” Id. at 310, 333. That is, whether a creditor is secured goes to
whether it has a lien, and does not determine whether it may nevertheless have an
equitable interest, which depends on the nature of the claim.
Indeed, in distinguishing precedent that purportedly held otherwise, Grupo
Mexicano explained that cases where the complaint “state[d] a cause [of action] for
equitable relief” are “not on point here,” and that where “the creditor (the
Government) asserted an equitable lien on the property,” such a situation
“presents a different case from that of the unsecured general creditor.” Id. at 325–
26 (alteration in original).
In that sense, the admittedly imprecise language referencing whether a
creditor is “secured” or “unsecured” under Grupo Mexicano is relevant to—but not
dispositive of—the substantive inquiry, which is whether a creditor has a lien or
equitable interest. See Gucci America, Inc. v. Bank of China, 768 F.3d 122, 130 (2d Cir.
2014) (“The [Supreme] Court’s holding [in Grupo Mexicano] was limited to actions
14 for money damages in which plaintiffs seek a preliminary injunction to prevent
the defendant ‘from transferring assets in which no lien or equitable interest is
claimed.’” (quoting Grupo Mexicano, 527 U.S. at 310)). The point is simply that
where a creditor claims no rights in a debtor’s assets, neither law nor equity shall
operate to grant such rights pre-judgment.
II. Whether a Lien or Equitable Interest Is Claimed
Whether Grupo Mexicano permits a pre-judgment restraint on Guarantors’
assets thus depends on whether Leadenhall properly claims a “lien or equitable
interest” in those assets. 527 U.S. at 310. We conclude that, on this record,
Leadenhall has failed to establish that it possesses either. Therefore, under Grupo
Mexicano, the District Court abused its discretion in restraining Guarantors’ assets
based on a finding that plaintiffs were likely to succeed on the contract claims
against them.
1. No Lien at Issue
Leadenhall has failed to establish that it has a lien on Guarantors’ assets. A
lien is a “legal right or interest that a creditor has in another’s property.” Lien,
15 Black’s Law Dictionary (12th ed. 2024). 6 Leadenhall asserts that Guarantors
“guaranteed all of the Borrowers’ obligations—including not just the obligation to
repay the debt, but also the obligation to secure the debt.” Appellees’ Br. at 33. In
essence, Leadenhall asserts that Guarantors have a contractual “obligation to
provide sufficient collateral to secure the Borrowers’ loans” that provides
Leadenhall with a current legal interest in Guarantors’ property. Appellees’
Suppl. Letter Br. at 21. We thus examine the specific nature of that obligation.
The contracts in question define the parties’ obligations. Guarantors agreed
to “the full and punctual payment and performance when due” of all of
Borrowers’ obligations under the LSA. App’x at 254; see also App’x at 252. And
“‘Obligations’ is defined in the LSA to include ‘the performance of all of the terms,
covenants and agreements on the part of such Borrower (whether as Borrower or
otherwise) to be performed under this Agreement or any document delivered in
connection with this Agreement.’” Appellees’ Br. at 43–44 (quoting App’x at 60).
As for the collateral pledged by Borrowers, those specific assets were pledged
when the LSA became effective: “Section 2.15 Security Interest. (a) To secure the
6 Indeed, the entry for “lien” in Black’s Law Dictionary cross-references the entry for “pledge,” the relevant part of which says: “A bailment or other deposit of personal property to a creditor as security for a debt or obligation.” Pledge, Black’s Law Dictionary (12th ed. 2024). As this section explains, a lien in this context most directly means any extent to which assets are pledged as collateral. 16 performance by the Borrowers of all of the Obligations, each Borrower hereby
grants to the Collateral Agent for the benefit of the Secured Parties in the Related
Lender Group with respect to such Borrower, a first-priority security interest in
the Collateral.” App’x at 214 (emphasis added). It is undisputed that Guarantors
do not hold any of the pledged collateral that Leadenhall could foreclose on, and
also that Guarantors did not pledge any assets themselves.
So, the obligated performance in question has nothing to do with existing
collateral, but rather the obligation to provide and perfect additional collateral,
precisely because it turned out that the existing collateral was insufficient. 7 See
Appellees’ Br. at 37 (“Leadenhall is seeking injunctive relief to compel the
Borrowers and Guarantors to fulfill their contractual obligation to acquire and pledge
sufficient collateral to secure Leadenhall’s debt.” (emphasis added)). Even with
this characterization of the relevant obligations, Leadenhall does not—because it
7 The parties dispute the actual contractual obligations at issue. For example, Leadenhall asserts that “the Borrowers were contractually required to ensure they owned the appropriate amount of collateral on an ongoing basis” under the LSA. Appellees’ Suppl. Letter Br. at 5–8. Guarantors (via A-CAP) in contrast assert that the LSA contains no affirmative obligation to extend collateral at all, but rather triggers protections for Leadenhall in the event of a collateral deficiency, such as relieving lending obligations and accelerating debt repayment obligations. See A-CAP Suppl. Letter Br. at 30–36. Determining the actual obligations under the LSA goes to the ultimate merits of the contractual claims; for purposes of resolving this preliminary injunction on appeal, we take Leadenhall’s allegations of those rights to determine whether a lien or an equitable interest is sufficiently asserted in the first instance. See Deckert v. Indep. Shares Corp., 311 U.S. 282, 289 (1940) (“It is enough at this time to determine that the bill contains allegations which, if proved, entitle petitioners to some equitable relief. Whether or not they sufficiently allege or prove their right to all of the relief prayed in the bill we do not decide because the question is not before us.”). 17 cannot—assert that it has a current legal right to, or interest in, Guarantors’ assets.
Leadenhall does not point to any contractual language pledging Guarantors’
assets as additional collateral, nor any contractual specifications at all for what any
additional collateral would be. To wit, Leadenhall only asserts that “[t]he
Guarantors’ assets must be preserved (up to the amount of the Accelerated Debt)
so they can ultimately fulfill their own obligation to protect Leadenhall’s rights as
a secured creditor.” Appellees’ Br. at 33. And because it asserts no legal right to
foreclose upon or otherwise control Guarantors’ assets, Leadenhall is not a secured
creditor as to Guarantors. See Secured, Black’s Law Dictionary (12th ed. 2024) (“(Of
a creditor) protected by a pledge, mortgage, or other encumbrance of property that
helps ensure financial soundness and confidence.”). Leadenhall cannot claim a
lien on Guarantors’ assets, and thus, under Grupo Mexicano, Leadenhall cannot
obtain a pre-judgment restraint on Guarantors’ assets on that basis.
2. No Equitable Interest at Issue
On its contract claims at issue, Leadenhall has failed to show that the
ultimate relief it seeks gives rise to an equitable interest. As a general principle, a
“claim for money due and owing under a contract is ‘quintessentially an action at
law,’” Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210 (2002)
18 (quoting Wal-Mart Stores, Inc. Assocs.’ Health & Welfare Plan v. Wells, 213 F.3d 398,
401 (7th Cir. 2000)), because “[m]oney damages are, of course, the classic form of
legal relief,” id. (alteration in original) (quoting Mertens v. Hewitt Assocs., 508 U.S.
248, 255 (1993)). Nevertheless, claims for money can still implicate equitable
interests: “a plaintiff could seek restitution in equity, ordinarily in the form of a
constructive trust or an equitable lien, where money or property identified as
belonging in good conscience to the plaintiff could clearly be traced to particular
funds or property in the defendant’s possession.” Id. at 213. Such money claims
are distinguishable from the general principle because an equitable interest in
property is an interest in particular property, as opposed to a general interest in
receiving compensation. See Coan v. Kaufman, 457 F.3d 250, 262–64 (2d Cir. 2006)
(drawing the same distinction between equitable and legal “restitutionary
monetary relief” in the ERISA context, and holding that the remedy sought was
not equitable because plaintiff “seeks monetary relief; she does not attempt to
recover a specifically identified fund from the defendants”).
Leadenhall identifies no particular property of Guarantors’ that it is entitled
to; the nature of the alleged obligation at issue is simply that Guarantors owe funds
to meet Borrowers’ collateral deficiency. And that additional collateral is
19 fungible—there is no claim that any specific assets of Guarantors must be provided
as collateral or applied to service outstanding debts, nor that Guarantors must
obtain any specific assets to do so. In other words, the contractual obligation in
question is for Guarantors to pay money. “Typically, however, specific
performance of a contract to pay money was not available in equity.” Knudson,
534 U.S. at 211. So too here. That the District Court found “Leadenhall has
demonstrated that the borrowers and guarantors would be unable to satisfy a
substantial damage award and intend to frustrate any judgment on the merits by
making an award uncollectible” does not alter the nature of the obligation sought
to be enforced here, which is a legal interest in money due and owing under a
contractual obligation. App’x at 820. The obligation sought to be enforced thus
does not give rise to an equitable interest.
To be sure, a preliminary injunction may restrain fungible assets like money
without identifying particular property, but only “where the plaintiff is pursuing
a claim for final equitable relief, and the preliminary injunction is ancillary to the
final relief.” Gucci America, Inc. v. Bank of China, 768 F.3d 122, 131 (2d Cir. 2014)
(citation omitted). But Leadenhall identifies no final equitable relief to which the
asset freeze could be “ancillary,” and thus fails to claim an equitable interest.
20 Gucci America for example involved an asset freeze that Leadenhall claims
is “directly analogous.” Appellees’ Suppl. Letter Br. at 34. But Gucci America made
clear that plaintiffs there were “seeking an accounting of the defendants’ profits, in
addition to injunctive relief and monetary damages, under the Lanham Act,” and
that “the common law action of ‘account’ is one of the earliest examples of a
restitutionary action in equity, imposing on a defendant the obligation to disclose
and return profits from the use of the plaintiff’s property.” 768 F.3d at 131–33; see
Knudson, 534 U.S. at 214 n.2 (describing the general rule that equitable restitution
requires particular funds or property, and that “[t]here is a limited exception for
an accounting for profits”). It was thus not improper to freeze assets without
identifying particular funds because doing so was ancillary to the equitable final
relief pursuant to statutory authority, see Gucci America, 768 F.3d at 131–33, and
“[a] preliminary injunction is always appropriate to grant intermediate relief of
the same character as that which may be granted finally.” De Beers Consol. Mines,
Ltd. v. United States, 325 U.S. 212, 220 (1945). This aligns with our reading of Grupo
Mexicano: The propriety of a preliminary injunction in relation to a court’s
equitable powers is determined by the nature of the final relief sought.
21 Granted, when it comes to monetary relief, construing the character of that
final relief as either legal or equitable can sometimes require a “fine distinction.”
Cf. Knudson, 534 U.S. at 214–15; see also De Beers Consol. Mines, Ltd., 325 U.S. at 219
(“Preliminary to a discussion of the course of decision in chancery it will be well
to note exactly what is the substance of the injunction, since the name given to the
process is not determinative.”); Gucci America, 768 F.3d at 131 (observing “that
recovery of profits ‘is not easily characterized as legal or equitable’” (quoting
Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 668 n.1 (2014))); cf. SEC v.
Commonwealth Chem. Secs., Inc., 574 F.2d 90, 95 (2d Cir. 1978) (determining the right
to a jury trial by “analyz[ing] the nature of the claim for a money judgment”
because “[t]he name which the complaint affixes to the money claim is not
controlling”). Take, for example, “the well-settled principle that restitution is ‘not
an exclusively equitable remedy,’” such that “whether it is legal or equitable in a
particular case . . . remains dependent on the nature of the relief sought.” Knudson,
534 U.S. at 215 (quoting Reich v. Cont’l Cas. Co., 33 F.3d 754, 756 (7th Cir. 1994)).
Knudson distinguished between “cases in which the plaintiff ‘could not assert title
or right to possession of particular property, but in which nevertheless he might
be able to show just grounds for recovering money to pay for some benefit the
22 defendant had received from him,’” and cases “where money or property
identified as belonging in good conscience to the plaintiff could clearly be traced
to particular funds or property in the defendant’s possession,” as actions for
restitution in law and in equity, respectively. Id. at 212–14 (quoting 1 Dan B.
Dobbs, Law of Remedies § 4.2(1), at 571 (2d ed. 1993)). Both are actions for a
payment of a sum of money, but the underlying basis of that relief is different.
In sum, “for restitution to lie in equity, the action generally must seek not to
impose personal liability on the defendant, but to restore to the plaintiff particular
funds or property in the defendant’s possession.” Id. at 214. Or, put another way,
“[t]he preliminary relief available in a suit seeking equitable relief has nothing to
do with the preliminary relief available in a creditor’s bill seeking equitable
assistance in the collection of a legal debt.” Grupo Mexicano, 527 U.S. at 325
(distinguishing Deckert v. Independence Shares Corporation, 311 U.S. 282 (1940),
which permitted a pre-judgment asset freeze because the creditor’s bill “stated a
cause of action for the equitable remedies of rescission of the contracts and
restitution of the consideration paid”); see also Gucci America, 768 F.3d at 130–31.
The contract claims at issue seek no other final relief beyond monetary
damages in the form of the Accelerated Debt plus interest—that is, full and due
23 payment of the “secured debt obligation.” App’x at 1190–228; see also App’x at
1017. The “specific performance” being sought is therefore “equitable assistance
in the collection of a legal debt,” a recourse precisely foreclosed by Grupo Mexicano.
527 U.S. at 325. While Leadenhall recognizes that “contracts—and particularly
breaches of contracts—often give rise to equitable rights, including but not limited
to rights of specific performance, rescission, restitution, disgorgement, and the
like,” Leadenhall does not assert such a claim. Appellees’ Br. at 41. Indeed, as
Leadenhall itself states, the allegations of fraud are “not the basis for the
injunction” in question. Appellees’ Suppl. Letter Br. at 23–24. Leadenhall asserts
that it seeks specific performance “in forcing the Borrowers—and Guarantors—to
perform their obligations to hold sufficient collateral to satisfy the secured debt
obligation.” Appellees’ Br. at 36. But that is nothing more than saying the specific
performance desired is ensuring the legal debt can be paid.
Inescapably, “[h]ere, petitioners seek, in essence, to impose personal liability
on respondents for a contractual obligation to pay money—relief that was not
typically available in equity.” Knudson, 534 U.S. at 210; cf. De Beers Consol. Mines,
Ltd., 325 U.S. at 222–23 (rejecting monetary injunction under Sherman Act as
unauthorized by statute or equity, because otherwise “it is difficult to see why a
24 plaintiff in any action for a personal judgment in tort or contract may not, also,
apply to the chancellor for a so-called injunction sequestrating his opponent’s
assets pending recovery and satisfaction of a judgment in such a law action,” and
“[n]o relief of this character has been thought justified in the long history of equity
jurisprudence“). Without a cognizable equitable interest at issue, Grupo Mexicano
controls, and the District Court lacked authority to freeze Guarantors’ assets. 527
U.S. at 322 (explaining that “there is absolutely nothing new about debtors’ trying
to avoid paying their debts, or seeking to favor some creditors over others,” and
that “[t]he law of fraudulent conveyances and bankruptcy was developed to
prevent such conduct; an equitable power to restrict a debtor’s use of his
unencumbered property before judgment was not”).
III. State-Law Attachment
Finally, Leadenhall offers an alternative basis by which it asserts this Court
could affirm the injunction against Guarantors’ assets: “a prejudgment attachment
under state law pursuant to [Federal Rule of Civil Procedure] 64.” Appellee’s Br.
at 21. But an attachment is a distinct order applying state law, not an alternative
basis for a preliminary injunction under federal law. An attachment order also
requires factual findings—including with respect to whether Guarantors have
25 acted with intent to frustrate enforcement of a future judgment against them. See
Cap. Ventures Int’l v. Republic of Argentina, 443 F.3d 214, 218–19 (2d Cir. 2006)
(quoting N.Y. C.P.L.R. § 6201(3) (Consol. 2025)).
Those factual findings were not made by the District Court and are not
evident from the record. See App’x at 823 (“If Leadenhall seeks an attachment, it
should move separately for an attachment, and the Court would afford the other
parties an opportunity to respond, and Leadenhall an opportunity to reply.”). The
District Court can decide on remand whether to issue such an order.
CONCLUSION
For the foregoing reasons, we VACATE the portion of the District Court’s
preliminary injunction order restraining Guarantors’ assets and REMAND for
further proceedings consistent with this opinion.