OCTOBER TERM, 1998
certiorari to the united states court of appeals for the second circuit
No. 98-231. Argued March 31, 1999—Decided June 17, 1999
Respondent investment funds purchased unsecured notes (Notes) from petitioner Grupo Mexicano de Desarrollo, S. A. (GMD), a Mexican holding company. Four GMD subsidiaries (also petitioners) guaranteed the Notes. After GMD fell into financial trouble and missed an interest payment on the Notes, respondents accelerated the Notes' principal amount and filed suit for the amount due in Federal District Court. Alleging that GMD was at risk of insolvency, or already insolvent, that it was preferring its Mexican creditors by its planned allocation to them of its most valuable assets, and that these actions would frustrate any judgment respondents could obtain, respondents requested a preliminary injunction restraining petitioners from transferring the assets. The court issued the preliminary injunction and ordered respondents to post a $50,000 bond. The Second Circuit affirmed.
1. This case has not been rendered moot by the District Court's granting summary judgment to respondents on their contract claim and converting the preliminary injunction into a permanent injunction. Generally, the appeal of a preliminary injunction becomes moot when the trial court enters a permanent injunction because the former merges into the latter. Here, however, petitioners' potential cause of action against the injunction bond for wrongful injunction suffices to preserve the Court's jurisdiction, since petitioners' argument that the District Court lacked the power to restrain their use of assets pending a money judgment is independent of their defense against the money judgment on the merits. For the same reason, petitioners' failure to appeal the conversion of the preliminary injunction into a permanent injunction does not forfeit their claim on the bond. Pp. 313-318.
2. The District Court lacked the authority to issue a preliminary injunction preventing petitioners from disposing of their assets pending adjudication of respondents' contract claim for money damages because such a remedy was historically unavailable from a court of equity. Pp. 318-333.Page: Index 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: October 4, 2007