Asset Freezing in Business Disputes: When Courts Will (and Won’t) Step In

A recent Florida appellate decision underscores the limits of injunctive relief in financial disputes and the legal hurdles buyers face in seeking asset protection before a final judgment. The case of Hamad v. Sarsour provides valuable insights for business buyers and sellers alike, particularly regarding the scope of injunctive remedies when financial damages are at stake.

Case Background

Ghina Hamad, the seller of a Mediterranean restaurant, Pita Grill & Market, Inc., entered into a purchase and sale agreement with Hanan Sarsour. As part of the agreement, Hamad warranted that the business’s financial records were accurate and that there were no undisclosed liabilities.

Months after the sale, Sarsour discovered that the business had unpaid sales and use tax liabilities of $112,621.43—a debt accumulated over three years before the sale. Feeling misled, Sarsour filed a lawsuit alleging breach of contract and fraudulent inducement and sought damages to cover the unexpected tax burden.

Injunction to Prevent Asset Dissipation

After learning from third parties that Hamad intended to sell her property and relocate to Venezuela, Sarsour moved for a preliminary injunction to prevent Hamad from transferring or dissipating her assets before a judgment was reached. The trial court granted the injunction, effectively freezing Hamad’s real property and other financial holdings.

Hamad appealed, arguing that the injunction was improperly granted because monetary damages were an adequate legal remedy, making injunctive relief unnecessary.

Key Legal Analysis and Court Ruling

The appellate court ruled in Hamad’s favor, reversing the trial court’s injunction order. The decision rested on a fundamental principle of Florida law: an injunction is not appropriate when a party has an adequate remedy at law, such as monetary damages.

1. Adequate Legal Remedy Standard

Florida courts require that a party seeking an injunction must prove:

• Irreparable harm if the injunction is not granted.
• No adequate legal remedy (i.e., money damages would not be sufficient compensation).
• A clear legal right to relief.

While Sarsour argued that Hamad’s potential flight from the country would render her judgment uncollectible, the appellate court clarified that the risk of non-collection does not justify an injunction. Courts distinguish between:

• The inability to obtain a judgment (which may warrant injunctive relief), and
• The inability to collect a judgment (which does not justify an injunction).

As long as a judgment could be issued, the legal system assumes the possibility of collection through standard enforcement mechanisms, such as garnishments and liens.

2. Prior Florida Case Law Reinforced This Decision

The appellate court cited several cases reinforcing that a plaintiff cannot obtain an injunction solely because a defendant might dissipate assets:

• Weinstein v. Aisenberg, 758 So. 2d 705 (Fla. 4th DCA 2000): Courts will not freeze a defendant’s assets simply because a plaintiff fears the judgment will be uncollectible.
• Supreme Serv. Station Corp. v. Telecredit Serv. Ctr., Inc., 424 So. 2d 844 (Fla. 3d DCA 1982): Financial disputes must be resolved through judgments, not injunctions.
• Mary Dee’s, Inc. v. Tartamella, 492 So. 2d 815 (Fla. 4th DCA 1986): Affirmed that injunctions are not a collection tool for potential monetary awards.

Implications for Litigants in Business Disputes

1. Freezing Assets Requires More Than Fear of Nonpayment

• Courts will not preemptively freeze assets unless there is a specific legal basis beyond financial concerns.
• Plaintiffs must show more than a risk of nonpayment—they must prove that the defendant’s actions threaten the court’s ability to grant a judgment.

2. Judgment Enforcement Requires Legal Strategy

• If a seller moves assets overseas, a plaintiff can pursue fraudulent transfer claims after securing a judgment.
• International collections may require domesticating the judgment in another jurisdiction.

Conclusion

The appellate court’s decision in Hamad v. Sarsour reinforces the importance of contractual diligence over reliance on injunctions to secure financial claims. Buyers should focus on pre-sale investigations and contract protections rather than expecting courts to freeze assets as a remedy for potential non-payment. This case serves as a crucial reminder: legal safeguards in transactions are more effective than post-sale litigation risks.

Rosenthal Law Group is experienced handling complex business litigation disputes including injunctions and post-judgment collections.