Second Circuit – Asset freeze: Leadenhall Capital Partners LLP v. Advantage Capital Holdings LLC

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United States Court of Appeals for the Second Circuit

 Asset freeze — Guarantor’s assets — Legal interest in property

Leadenhall Capital Partners LLP v. Advantage Capital Holdings LLC

24-2647(L)

Judges Sack, Perez, and Merriam

Background: At issue is whether the district court had the equitable power to freeze the guarantors’ assets upon the borrowers’ default. The plaintiffs are a pair of lenders who sued the debtor for breach of contract to collect on their debt. The plaintiffs also sued the entities that guaranteed the debt. Worried that the guarantor defendants would dispose of their assets before plaintiffs could secure a final judgment, the plaintiffs moved for a preliminary injunction freezing both the debtor and guarantor defendants’ assets.

Ruling: The Second Circuit vacated and remanded. The court held that the plaintiffs did not demonstrate a lien or equitable interest in guarantor defendants’ assets. They pointed to no current legal interest in that property, and they do not seek ultimate relief that gives rise to an equitable interest.

Jonathan M. Watkins, of Cadwalader, Wickersham & Taft, and John G. McCarthy, of Smith, Gabrell & Russell, for the defendants-appellants; Leigh M. Nathanson, of King & Spalding, for the plaintiffs-appellees.

Oral argument audio