Charging Orders

The Creditors' Primary Remedy Against A Debtor's

Interest In A Limited Liability Company Or Partnership

Caution state law variances!


The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more


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Arayos, LLC v. Jimmie Ellis, 2016 WL 1642676 (S.D.Ala., 2016).


United States District Court, S.D. Alabama, Southern Division.


ARAYOS, LLC, Plaintiff,




JIMMIE ELLIS, et al., Defendants.




Filed 04/25/2016






*1 This miscellaneous action comes before the Court on plaintiff's Application for Charging Order against John M. Vellianitis (doc. 12).


On December 1, 2015, plaintiff, Arayos, LLC, registered in this judicial district a Judgment (doc. 2) entered by the United States District Court for the District of Maine on October 26, 2015. This Judgment was a default judgment in favor of Arayos, LLC and against John M. Vellianitis and various other defendants, jointly and severally, in the amounts of $590,618.22, plus post-judgment interest, as to Counts II, III, and X; an additional $600,000.00 in statutory damages, plus post-judgment interest as to Count VIII; reasonable attorney's fees of $64,467.50; and $33,125.00 for fees and costs incurred in pre-suit services on non-litigation related tasks. Plaintiff represents that, at present, the Judgment balance remains at $1,288,210.72, exclusive of accrued interest and costs, meaning that to date plaintiff has collected precisely nothing on the Judgment. (Doc. 12, para. 1.)


In furtherance of its ongoing (and thus far unsuccessful) collection efforts, Arayos now seeks issuance of a charging order against Vellianitis's interests in the following limited liability companies: VMJ, LLC; JPV Hospitality Group, LLC; Lodge Entertainment, LLC; and Jonesboro Investments, LLC. The first two of these LLCs were formed in Alabama, while the third and fourth are foreign limited liability companies, formed in Wyoming and Nevada, respectively. Plaintiff submits records from the Alabama Secretary of State purporting to show that Vellianitis is a member of each of these LLCs; however, only the records for VMJ and JPV Hospitality list Vellianitis as a member or manager, as the other two identify him as merely the LLC's registered agent in Alabama. (Doc. 12, Exh. A.) Plaintiff's counsel represents that he mailed a copy of this Application for Charging Order to Vellianitis. To date, Vellianitis has filed neither objection nor opposition to the Application.


The relevant Alabama statute provides, in part, as follows: "On application to a court of competent jurisdiction by any judgment creditor of a member or assignee, the court may charge the interest of the member or assignee with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of financial rights." Ala. Code sec. 10A-5-6.05(a).1 The statutory requirements for issuance of a charging order are satisfied here as to VMJ, LLC and JPV Hospitality Group, LLC, both of which are Alabama limited liability companies clearly within the ambit of the charging order statute on which plaintiff relies.


*2 The same conclusion does not hold true for Lodge Entertainment, LLC and Jonesboro Investments, LLC. As an initial matter, plaintiff has made no showing that Vellianitis is a member of either of these entities. More importantly, as noted supra, plaintiff's filings reflect that Lodge Entertainment is a Wyoming limited liability company, and that Jonesboro Investments is a Nevada limited liability company. Plaintiff has presented no argument explaining why it contends a provision of the Alabama Business and Nonprofit Entities Code would empower this Court to issue a charging order as to a judgment debtor's membership interest in Wyoming and Nevada limited liability companies, as part and parcel of the judgment creditor's efforts to enforce a judgment entered by a federal court in Maine.2 On its face, Alabama Code sec. 10A-5-6.05(a) does not appear to authorize issuance of charging orders relating to foreign limited liability companies.3


*3 For the foregoing reasons, plaintiff's Application for Charging Order against John M. Vellianitis (doc. 12) is granted in part, and denied in part. It is therefore ordered that the individual financial interests of defendant John M. Vellianitis in VMJ, LLC, and JPV Hospitality Group, LLC, be charged with payment of the Judgment rendered by the U.S. District Court for the District of Maine in favor of Arayos, LLC, on October 26, 2015 in the amount of $1,288,210.72, plus accrued interest thereon and costs, less any payments made or credits received. It is further ordered that VMJ, LLC and JPV Hospitality Group, LLC, must report to Arayos, LLC each time a distribution is made with respect to any transferable interest (listing the amount and time of all distributions made in connection with that distribution), and must further distribute to Arayos any amounts that become due or distributable to John M. Vellianitis. The Application for Charging Order is denied as to Lodge Entertainment, LLC, and Jonesboro Investments, LLC. In the absence of a legal showing by plaintiff (which has not been made) that the Alabama charging order statute authorizes orders charging a judgment debtor's membership interest in a foreign LLC, no such order will issue from this Court charging Vellianitis's interests (if any) in those foreign limited liability companies pursuant to Alabama Code sec. 10A-5-6.05(a).


DONE and ORDERED this 25th day of April, 2016.






This Alabama statute governs plaintiff's request because "[t]he procedure on execution – and in proceedings supplementary to and in aid of judgment or execution – must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies." Rule 69(a)(1), Fed.R.Civ.P.; see generally Regions Bank v. Stewart, 2011 WL 1827453 (S.D. Ala. May 10, 2011) (discussing and applying Alabama charging order procedure by which judgment creditor may execute on judgment debtor's interest in limited liability company). Also, the Court recognizes that the Alabama legislature enacted a new charging order statute, found at Alabama Code sec. 10A-5A-5.03, as part of the Alabama Limited Liability Company Law of 2014. At present, however, this new statute governs only "a limited liability company formed on or after January 1, 2015." Ala. Code sec. 10A-5A-12.01. The information before the Court shows that the four LLCs at issue were formed prior to January 1, 2015; therefore, the earlier iteration of the charging order statute found at sec. 10A-5-6.05(a) governs here.




To be sure, plaintiff states in conclusory fashion that "[t]his Court has jurisdiction over Vellianitis [sic] interest in his limited liability companies," and cites two cases in which judges of this District Court have entered charging orders pursuant to Alabama law as to foreign limited liability companies. However, the cited cases articulate no reasoning for their expansive application of Alabama Code sec. 10A-5-6.05. Besides, both of those cited cases involved judgments issued by the U.S. District Court for the Southern District of Alabama, such that the charging orders were issued by the court to enforce its own judgment. By contrast, this Court – and this jurisdiction – has nothing to do with the underlying judgment that Arayos, LLC, is trying to enforce. Its only connection to this dispute is, ostensibly, that Vellianitis lives in this district (although plaintiffs submits no proof whatsoever to establish such a jurisdictional fact) and is a member of two LLCs organized and formed in the State of Alabama. The Alabama authorities cited by plaintiff cannot persuasively be read as authorizing this Court, based on such a tenuous connection to the dispute and the absence of supporting language in the applicable charging order statute, to issue charging orders under Alabama law as to limited liability companies formed in Wyoming and Nevada. And plaintiff's citations to a pair of unpublished state trial-court opinions interpreting the Connecticut charging order statute to allow charging orders to be applied to foreign LLCs are unavailing absent a showing (which has not been made) that the Connecticut statute is identical or even substantially similar to Alabama Code sec. 10A-5-6.05(a) in all material respects. Even if the two states' statutes were the same, the Connecticut decisions are unhelpful because of the minimalist reasoning employed (which essentially boils down to the state trial judge's assessment that the Connecticut statute does not expressly forbid issuance of charging orders to foreign LLCs).




The Alabama statute cited by Arayos allows charging orders to issue as to the interest of a "member." Ala. Code sec. 10A-5-6.05. "Member" is statutorily defined as "[a] person reflected in the required records of a limited liability company as the owner of some governance rights of a membership interest in the limited liability company." Ala. Code sec. 10A-5-1.02(7). The term "limited liability company" is likewise defined as "[a]n organization that is formed and existing under this chapter," Ala. Code sec. 10A-5-1.02(6), meaning Chapter 5 of Title 10A of the Alabama Code. Neither Lodge Entertainment, LLC, nor Jonesboro Investments, LLC, is an organization "formed and existing" under that chapter; therefore, the charging order provisions of sec. 10A-5-6.05 do not appear to reach those entities because Vellianitis would not qualify as a "member" of a "limited liability company," as those terms are defined by the statute. Again, plaintiff has made no showing to the contrary. Moreover, although there appears to be precious little case authority on this point, at least one appellate decision from a jurisdiction with an analogous statute supports this result. See, e.g., Fannie Mae v. Heather Apartments Ltd. Partnership, 2013 WL 6223564, *6 (Minn.App. Dec. 2, 2013) (charging order unavailable because Minnesota charging order statute applies only to a limited liability company "organized or governed by this chapter," whereas subject LLC was organized in and governed by laws of the Cook Islands).






C O M M O N      P A G E      F O O T E R



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2019.02.18 ... Florida Order Awarding LLC Interest To Creditor Reversed In Pansky


More Articles On Charging Orders click here




The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more


Available for purchase at



For more on the historical background of Charging Orders and contemporary issues involving the same, see Jay Adkisson's article, Charging Orders: The Peculiar Mechanism, 61 South Dakota Law Review 440 (2016). Available at SSRN:



Appeal - Issues relating to the appeal of a charging order


Bankruptcy - Treatment of the debtor/member's interest in bankruptcy


Compliance - Issues for the LLC and non-debtor members in complying with a charging order


Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute


Creditor Rights Restrictions - Limitations on creditors' management and informational rights


Economic Rights - Limitation of charging order and foreclosure to debtor's economic rights


Exclusivity - The charging order as the sole remedy available to creditors and exceptions


Exemptions - Available state and federal protections that may apply to charging orders


Foreclosure - Liquidation by judicial sale of the debtor's right to distributions


Information Rights - Creditors' ability to access information about the LLC


Intra-Member Disputes - Where one member obtains a charging order against another


Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs


Lien - The lien effect of a charging order and priority issues


Procedure - The procedure for obtaining a charging order and ancillary provisions


Receiver - The role of the receiver in charging order proceedings


Single-Member LLCs - Enforcing the judgment against an LLC with a sole member


Taxes - Tax issues relating to charging orders for all involved parties


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