McClandon v. Dakem & Assoc., LLC, 219 So.3d 269 (Fla.App., 2017).
Opinion 2017 Florida Receiver Site.Opinion2017FloridaMcClandonChargingOrderReceiver
Related Article: None.
AI Synopsis
♦ Dakem sought to collect a twelve-year-old Nevada judgment (domesticated in Florida) from judgment debtor Joeann McClandon through proceedings supplementary targeting distributions from eleven LLCs in which she held a controlling interest. The trial court entered a charging order under section 605.0503, Florida Statutes, against McClandon’s transferable interests and, to enforce the order, appointed a receiver over four LLCs with broad authority that effectively made the receiver the companies’ financial officer and allowed managerial decision-making. On appeal, McClandon argued that a charging order is the “sole and exclusive remedy” for reaching a debtor’s interest in a multi-member LLC and does not authorize a receiver; Dakem responded that a receiver was permitted to give the charging order practical effect under the court’s continuing jurisdiction and equitable powers recognized in subsections 605.0503(7)(c)–(d). The Fifth District agreed in part: it held the trial court did not abuse its discretion by appointing a receiver to collect distributions subject to the charging order, but it exceeded the permissible scope by granting the receiver managerial control over the LLCs. Relying on RULLCA commentary, the court emphasized that a charging order divests only the debtor’s economic rights (profits/distributions) and does not permit interference with LLC management or acceleration of distributions. The order was therefore affirmed as to the charging order and receiver appointment, and reversed as to the provisions giving the receiver managerial/financial-officer control, leaving management with the LLCs. ♦
McClandon v. Dakem & Assoc., LLC, 219 So.3d 269 (Fla.App., 2017).
District Court of Appeal of Florida, Fifth District.
Joeann MCCLANDON, Appellant,
v.
DAKEM & ASSOCIATES, LLC, Appellee.
Case No. 5D16–3300
Opinion filed May 26, 2017
Attorneys and Law Firms
Stephanie L. Cook and Robert Clayton Roesch, of Shuffield, Lowman & Wilson, P.A., Orlando, for Appellant.
Jon Marshall Oden, of Ball Janik, LLP, Orlando, for Appellee.
Opinion
PER CURIAM.
This appeal arises out of proceedings supplementary below where Appellee/judgment creditor Dakem & Associates, LLC is attempting to collect on a twelve-year-old judgment from Appellant/judgment debtor, Joeann McClandon. Appellant has a controlling interest in eleven limited liability companies (“LLCs”). Appellee filed the proceedings supplementary to reach the distributions from these LLCs to satisfy *270 its judgment. The trial court granted a charging order in Appellee's favor against Appellant's transferable interest in the LLCs. To enforce the charging order, the court appointed a receiver to take control of four of the LLCs' finances, acting as the de facto Chief Financial Officer, and authorized the receiver to make financial management decisions.
Appellant takes issue with the portion of the trial court's order appointing a receiver. She argues that section 605.0503, Florida Statutes (2015), permits a charging order as the sole exclusive remedy to attach a judgment debtor's interest in a multi-member LLC and that there is no authority under that statute for the appointment of a receiver. On the other hand, Appellee counters that the receiver is necessary to give the charging order “teeth” and that the court was well within its jurisdiction to appoint a receiver pursuant to subsections 605.0503(7)(c) and (d). We agree with the trial court in part and reverse in part.
Appellee obtained a judgment against Appellant in Nevada in 2005. In 2008, Appellee domesticated the Nevada judgment in Florida and began proceedings to collect the amounts owed, which culminated in the order at issue. Section 605.0503 permits the court to enter a charging order against a judgment debtor's transferrable interest and requires the LLC to pay over to the judgment creditor any distribution that would otherwise be paid to the judgment debtor. Subsection (3) dictates that “a charging order is the sole and exclusive remedy by which a judgment creditor ... or member's transferee may satisfy a judgment from the judgment debtor's interest in a limited liability company or rights to distributions from the limited liability company.” § 605.0503(3), Fla. Stat. (2015). That being said, subsection (7) provides that “[t]his section does not limit any of the following”:
§§ 605.0503(7)(c)-(d). It is clear to this Court that the trial court did not abuse its discretion when it appointed a receiver to enforce its charging order.1 However, it did abuse its discretion in determining the scope of the receiver's power—specifically, by authorizing the receiver to have managerial control over the LLCs. The commentary under RULLCA provides that:
RULLCA § 503 cmt. Under RULLCA and section 605.0503, the charging order entered by the court should have only directed the LLCs to divert Appellant's rights to the LLCs' profits and distributions to Appellee. Stated differently, the charging order should have only divested Appellant of her economic opportunity to obtain profits and distributions from the LLC, charging only her membership interest, not her managerial rights. To the extent that the order appointing the receiver authorized the receiver to exercise managerial control over the LLCs, it exceeded the permissible scope and is reversed. In sum, the order granting the charging order and appointing the receiver is affirmed; however, the portions of the order permitting the receiver to be the financial officer of the LLC and exercise managerial control is reversed. The management control remains with the LLCs.
fn1. Florida's Revised Limited Liability Act is based on the Revised Uniform Limited Liability Company Act of 2006, as amended in 2011 (“RULLCA”). Section 503 of RULLCA provides in part:
AFFIRMED in part and REVERSED in part.
PALMER and WALLIS, JJ., and JACOBUS, B.W., Senior Judge, concur.