New York: An Overview
Second Circuit Reinforces Limits on Pre-Judgment Asset Freezes: No Mareva Relief For Unsecured Creditors
Plaintiffs in commercial disputes often confront a fundamental risk: even if they prevail in their claims, will the defendant have any assets left at the end of the case to satisfy a judgment? Given the significant expenses that plaintiffs often incur to litigate a case to judgment, this is an important consideration. Thus, when faced with signs of a defendant’s insolvency or asset dissipation, creditors naturally look for tools to preserve the status quo. In many common law jurisdictions outside the United States, that tool exists in the form of a Mareva injunction – a powerful remedy that permits courts to freeze a defendant’s assets pre-judgment to prevent or limit the defendant’s ability to frustrate a future recovery by the plaintiff.
As illustrated in a recent decision by the US Court of Appeals for the Second Circuit, that remedy remains largely unavailable to plaintiffs in federal cases. In Leadenhall Capital Partners LLP v Advantage Capital Holdings LLC, No 24-2647 (2d Cir 23 March 2026), the Second Circuit reaffirmed – and sharpened – the limits on federal courts’ equitable authority to freeze assets before judgment. The Leadenhall court held that, absent a lien or cognizable equitable interest in specific property, a plaintiff asserting a claim for money damages cannot obtain a pre-judgment injunction restraining a defendant’s assets.
The Leadenhall Decision and the Continuing Force of Grupo Mexicano
The Second Circuit’s analysis in Leadenhall rests squarely on the US Supreme Court’s 1999 decision in Grupo Mexicano de Desarrollo v Alliance Bond Fund, 527 US 308 (1999). There, the Court held that federal courts lack the authority to issue injunctions freezing a defendant’s assets in cases seeking only legal relief – namely, money damages – where the plaintiff has no lien or equitable interest in the assets. Grupo Mexicano drew a firm line based on historical equity practice: unsecured creditors cannot use equitable remedies to secure assets in advance of judgment. Unlike those foreign jurisdictions that permit Mareva injunctions, US courts do not permit broad, pre-judgment asset restraints simply because a defendant may be at risk of insolvency or depleting assets that may be used to satisfy a future money judgment.
Leadenhall arose from a not atypical structured lending arrangement in which borrower entities granted a first-priority security interest in their assets, while affiliated guarantors promised payment and performance but pledged no collateral of their own to secure repayment. After discovering alleged deficiencies in collateral and accelerating approximately USD609 million in debt, the lenders sued both the borrowers and guarantors and sought a preliminary injunction freezing their assets on the purported basis that they were in the process of liquidating and dissipating remaining assets. The district court granted the requested injunctive relief, extending the asset freeze to both sets of defendants.
On appeal by another creditor claiming a first-priority security interest in the guarantors’ assets, the Second Circuit unanimously affirmed the injunction solely as to the borrowers, based on the lenders’ perfected security interest in the specific assets of those defendants. With respect to the guarantors, however, the Second Circuit vacated the asset freeze, emphasizing that the lenders were merely unsecured creditors as to those defendants. Because the guarantors had pledged no assets, the court held that the plaintiffs had no lien or equitable interest in any specific property belonging to them, and the requested injunctive relief sought against those defendants was barred by Grupo Mexicano.
In doing so, the court rejected the lenders’ argument that their request for “specific performance,” seeking to compel the guarantors to comply with their contractual obligation to pledge additional collateral of their own sufficient to cover the accelerated debt, supplied the requisite equitable basis for relief. Regardless of the labels applied to the plaintiffs’ claims, the Second Circuit reasoned that, in substance, those claims sought to secure payment of money to satisfy a contractual debt, which it noted is the “quintessential” form of legal relief. To invoke a federal court’s equity jurisdiction to restrain assets pre-judgment, the court held that a plaintiff must seek relief tied to particular, identifiable property – such as restitution, disgorgement or the imposition of a constructive trust – not merely the satisfaction of a general monetary obligation. Because the plaintiffs’ requested injunctive relief aimed to ensure the collectability of a future judgment, their claims fell squarely within Grupo Mexicano’s prohibition.
The Leadenhall decision is in line with New York state law, including the Court of Appeals’ decision in Credit Agricole Indosuez v Rossiyskiy Kredit Bank, 94 NY2d 541 (2000). There, in reliance on Grupo Mexicano, the Court of Appeals likewise held that a plaintiff cannot obtain injunctive relief for the sole purpose of preventing the defendant from dissipating assets necessary to satisfy a future money judgment.
Implications for Lenders and Commercial Parties
The Second Circuit’s decision in Leadenhall underscores a broader point: US federal courts do not recognize the expansive Mareva-style injunctions available in other common law systems. While courts abroad may freeze assets based on a “good arguable case” and a risk of dissipation, US courts are typically constrained by historical limits on equitable jurisdiction. Leadenhall confirms that these constraints remain firmly in place. Pre-judgment injunctive relief that seeks to freeze the defendant’s assets is available only where the plaintiff has a claim over specific, identifiable property of the defendant, including (for example) to enforce a lien, asserts a valid equitable interest in specific assets, or has rights to a discrete fund. These types of injunctions are not, however, available when the plaintiff is merely an unsecured creditor seeking to preserve a pool of assets for eventual collection.
The Second Circuit’s decision in Leadenhall carries several important implications for lenders, creditors and other commercial actors.
First, the contract structure is critical. The availability of pre-judgment remedies is largely determined at the contracting stage: the ability to preserve a defendant’s assets in litigation is often determined not by the strength of a claim after a borrower’s default, but by the structure of rights negotiated and memorialized before it. Security interests, collateral pledges and other contractual mechanisms that create enforceable property rights are essential if asset preservation is a priority.
Second, guarantees alone are insufficient. Even broad guarantees of payment and performance do not create a property interest in a guarantor’s assets. Without collateral, a guarantor’s assets remain beyond the reach of pre-judgment injunctions in federal court seeking to freeze assets.
Third, equity requires a property nexus. Framing a claim as one for “specific performance” will not suffice if the underlying relief is simply payment of money. Courts will look to the substance of the claim and require a connection to identifiable property belonging to the defendant.
Fourth, alternative remedies may be available. Creditors seeking to protect their future judgment using equitable tools may not be without recourse. State-law attachment procedures, fraudulent conveyance claims, and bankruptcy remedies may offer avenues to protect against asset dissipation – but each requires its own evidentiary showing and procedural path unique to the relevant jurisdiction and venue.
Fifth, creditor priority schemes are protected. Leadenhall preserves the integrity of secured lending by preventing unsecured creditors from relying on cleverly framed equitable remedies to effectively leapfrog secured creditors in distressed scenarios.