Semiconductor Global Solutions v. Capital Asset Exchange and Trading

Background

Semiconductor Global Solutions (SGS) sued Capital Asset Exchange & Trading LLC (CAET) after SGS paid $2 million for semiconductor-manufacturing equipment in 2022. The opinion states that CAET does not appear to dispute receiving the money or failing to deliver the equipment. CAET contended that it could not lawfully deliver the equipment or return the payment without authorization from the Treasury Department’s Office of Foreign Assets Control (OFAC), based on SGS’s alleged ownership by a Semiconductor Manufacturing International Corporation subsidiary. CAET submitted a request to OFAC for a license to refund the payment in May 2025, and that request remained pending.

SGS filed the case in August 2024. It later moved for a preliminary injunction requiring CAET to preserve and deposit $2,000,000 into the court’s registry. SGS argued that the injunction was needed to preserve the status quo because the funds might be transferred, dissipated, used for other business operations, used to resolve other disputes, or otherwise become unavailable before the court or OFAC determined the parties’ rights.

Legal standard

A preliminary injunction is an extraordinary remedy. The court explained that the party seeking one generally must show a likelihood of success on the merits, a likelihood of irreparable harm without the injunction, that the balance of equities favors relief, and that an injunction serves the public interest. Under the Ninth Circuit’s alternative sliding-scale approach, serious questions on the merits may suffice if the hardship balance sharply favors the moving party, but the party must still show likely irreparable injury and that the injunction is in the public interest.

The court also explained that a mandatory injunction, which requires a party to take action rather than merely prohibiting conduct, carries a more demanding standard. The court did not decide that the distinction was dispositive because it found the motion insufficient even assuming SGS sought a prohibitory injunction.

Court’s analysis and ruling

The court found that SGS had not meaningfully addressed CAET’s asserted regulatory defense that current regulations prevented CAET from delivering the equipment or returning the payment because of ties to SMIC. Independently, the court held that SGS had not shown likely irreparable harm. SGS relied on the risk that CAET might dissipate, conceal, or otherwise make the $2 million difficult to recover, pointing to CAET’s non-delivery, non-refund, failure to segregate the money, exclusive control over it, asserted regulatory barrier to repayment, and refusal to assure SGS that the funds would remain available.

The court concluded that these circumstances were not enough to establish the required risk of irreparable injury. It also noted that SGS waited nearly two years after filing the case before seeking a preliminary injunction and did not identify changed circumstances explaining the delay. The court rejected SGS’s assertion that CAET’s litigation strategy, motion to stay, and OFAC application prevented SGS from seeking an injunction earlier.

The court therefore DENIED the motion for a preliminary injunction. The order’s title also refers to a motion to deposit funds, but the body and conclusion expressly analyze and deny the motion identified as Docket No. 68.