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Charging Order Opinions New

The use of the black diamond ♦ symbol denotes an artificial intelligence ("AI") synopsis. Since AI is often inaccurate, AI-generated materials such as these synopsis should not be relied upon, and instead proper reference should be made to the underlying real-world materials. Use AI-generated content at your own peril!

NEW OPINIONS

Pearce v. Woodfield (In re Woodfield), 602 B.R. 747 (Bk.D.Ore. May 16, 2019). Bankruptcy, Executory Interest, 365
♦ The U.S. Bankruptcy Court for the District of Oregon considered a motion for summary judgment concerning the debtor's membership interests in three LLCs. The plaintiff, Pearce, sought declarations that the debtor, Woodfield, had dissociated from the LLCs upon filing bankruptcy and that the operating agreements were rejected. The court first addressed the debtor's dissociation. Under Oregon law, a member filing for bankruptcy dissociates, but retains the right to distributions and allocations. The LLC operating agreements modified this by entitling a dissociated member to a set monetary amount instead of ongoing distributions. The court found that the Bankruptcy Code's provision (§ 541(c)(1)) invalidating clauses that modify or forfeit a debtor's property interest due to bankruptcy preempted this dissociation provision. Therefore, Woodfield retained his economic rights. Regarding governance rights, the court determined that Woodfield retained general voting rights, as any provision to the contrary would also be preempted by § 541(c)(1). However, the debtor's right to manage the LLCs was analyzed separately. Since the LLCs were designated as "manager-managed" in their articles of organization, members generally only had the right to vote for managers. The court could not rule on whether Woodfield's management role was affected because the record lacked information on how he became a manager. Finally, the court addressed the plaintiff's request to declare the operating agreements rejected. The court noted that the debtor had not rejected them and that this issue would arise during plan confirmation. The court then determined whether the agreements were "executory contracts" under § 365, finding they were due to various unperformed obligations by both parties. The court also found that the LLC Act's restrictions on accepting performance from an assignee, even if the interest was assignable, meant that the debtor could not assume these agreements without Pearce's consent, as per § 365(c)(1). In summary, the court granted summary judgment for the plaintiff on the issue of non-assignability of the operating agreements but denied it on the debtor's dissociation and rejection of the agreements. ♦

SB PB Victory, L.P., v. Tonnelle North Bergen, LLC, 2025 WL 2394042 (E.D.Pa., Aug. 18, 2025).
♦ the U.S. District Court for the Eastern District of Pennsylvania granted in part and denied in part a motion by SB PB Victory, L.P. (Petitioner) to expand a receivership and for preliminary injunctive relief. Petitioner sought to expand the receivership over Respondent Thomas F. Verrichia's assets to include all assets of both Thomas and Nancy Verrichia, and to obtain a preliminary injunction. The court had previously appointed a receiver over Thomas Verrichia's interest in 29 corporate entities due to Petitioner's inability to collect on over $30 million in judgments. The court granted a limited expansion of the receivership to cover the Verrichias' transferable interests in specific corporate entities identified by Petitioner. However, it denied the request to expand the receivership to "all assets" and "future LLCs" at this time, deeming it overly broad. The court found sufficient grounds for the limited expansion due to insufficient legal remedies, evidence of asset transfers to avoid judgments, commingling of funds, and the Verrichias' non-compliance with court orders and discovery. Regarding the preliminary injunction, the court denied the request for the Verrichias to disclose asset locations, stating this falls under post-judgment discovery rules (Federal Rule of Civil Procedure 69), not preliminary injunctions. However, the court used its equitable powers to order the Verrichias to fully cooperate with the receiver and not obstruct their duties, citing the need to ensure compliance with the receivership order. ♦

Ohio Casualty Ins. Co. v. Beall, 2025 WL 726860 (M.D.Ga., March 6, 2025). Charging Order
♦ The U.S. District Court for the Middle District of Georgia granted Ohio Casualty's motion for a charging order and injunctive relief. Following a $462,657 judgment against Kenneth and Deborah Beall, which remained unsatisfied, Ohio Casualty sought to collect by charging the Bealls' membership interests in several LLCs.

The court found that the Bealls held interests in Beall & Company, LLC, Lake Welbrook Properties, LLC, and Springwood Investment Property, LLC (Kenneth), and KDAWG Investments, LLC and Lake Welbrook Properties, LLC (Deborah). As the Bealls did not oppose the motion, the court ordered the LLCs to pay any distributions owed to the Bealls directly to Ohio Casualty until the judgment is satisfied. Additionally, the court enjoined the Bealls from transferring their LLC interests to prevent collection. ♦

HDDA, LLC v. Vasani, 2025 Ohio 2000, 2025 WL 1587261 (Ohio App., June 5, 2025), charging order discovery opinion
♦ The Ohio Tenth District Court of Appeals affirmed a trial court's decision compelling discovery in aid of execution of a judgment. Creditor HDDA, LLC sought to enforce Georgia judgments against debtors Abhijit and Bhavna Vasani. To aid execution, HDDA subpoenaed nine non-party limited liability companies (LLCs), where the Vasanis were members, for financial information. The Vasanis and the LLCs moved to quash the subpoenas and for a protective order, arguing discovery was improper because they were "only members," it imposed an undue burden, and a charging order was the sole remedy against LLC interests. The trial court denied their motions and compelled compliance. Reviewing for abuse of discretion, the appellate court rejected the Vasanis' arguments. It affirmed that Ohio Civil Rules 69 and 45 permit non-party subpoenas for relevant information in aid of execution. The court clarified the subpoenas sought to uncover commingled personal and business assets, not to execute directly on membership interests, thus the charging order rule was inapplicable. Regarding undue burden, the court found the Vasanis' claim lacked specific factual support. Moreover, HDDA demonstrated a substantial need for the discovery, citing evidence of commingling personal and business funds, which could reveal hidden assets. Finding no abuse of discretion, the court affirmed the trial court's order compelling compliance. ♦

Baker v. Duffus, 2025 WL 1416805 (Alaska, May 16, 2025) charging order lien and distribution
♦ The Alaska Supreme Court addressed a dispute over $300,000 in settlement funds. The claimants were Kenneth Duffus, a creditor with a charging order against distributions from Aurora Park, LLC to Lee Baker, and Jones Law Group (JLG), Baker's law firm, asserting an attorney's lien. Previously, the Supreme Court validated JLG's lien but remanded for the superior court to determine if the funds were LLC distributions subject to Duffus's charging order, and the lien's value based on fees owed for the specific case (the "Aurora Park litigation"). On remand, the superior court found: 1. The $300,000 (from Baker selling his LLC interest) were LLC distributions to Baker (and JLG as his designee), subject to Duffus's charging order. It ruled that LLCs cannot use operating agreements to redefine "distribution" under statute to evade creditors. 2. JLG's attorney's lien had no value because Baker and JLG failed to provide credible evidence (like fee agreements or billing records) proving Baker owed JLG for services specifically in the Aurora Park litigation. The $250,000 claimed seemed to be a settlement figure, not a proven debt. 3. The superior court also erroneously entered a second final judgment and improperly awarded attorney's fees against Duffus after a mistaken release and subsequent return of the funds. In the current appeal, the Supreme Court: 1. Affirmed that the funds were LLC distributions. The statutory definition of "distribution" controls, and the evidence supported that the funds were from the LLC for Baker's interest. 2. Affirmed that JLG's attorney's lien had no proven value due to the lack of credible evidence of the debt owed for the specific legal work. 3. Vacated the second final judgment, as a final judgment from 2013 already existed, and these were post-judgment enforcement proceedings. 4. Vacated the attorney's fee award against Duffus, finding it an abuse of discretion as there was no basis for sanctioning Duffus, who had complied with court orders. Ultimately, the Supreme Court upheld the superior court's substantive decisions, meaning Duffus is entitled to the settlement funds. The procedural errors by the superior court were corrected. ♦

WC 4th and Colorado, 2025 WL 1225841 (Tex.App., 14th Distr., April 29, 2025).
♦ The Texas Court of Appeals affirmed a trial court's dismissal of WC 4th's claims against Third Street. A receiver, appointed over WC 4th's parent company (WCCG) in a separate suit, appeared on behalf of WC 4th and moved to dismiss its lawsuit. WC 4th challenged the receiver's authority. The appellate court first determined that WC 4th's challenge was not an impermissible collateral attack on the receivership order. It then addressed the receiver's authority, finding that the trial court could have reasonably concluded WCCG owned or managed WC 4th, bringing it under the receiver's purview. Critically, the court held that while a 'charging order' is typically the exclusive remedy for a creditor against a partner's interest, an exception (from Heckert) applies when the entity is not an operating business and no other party's interests would be disrupted. Because WC 4th was not operating and failed to show disruption to other partners' interests, the receiver had authority to dismiss the suit. The court distinguished this from La Zona Rio, where the entity was operational and other partners' interests were at stake. ♦

Ohio Casualty Ins. Co. v. Beall, 2025 WL 726860 (M.D.Ga., March 6, 2025).
♦ None ♦

Business Aircraft Leasing, Inc. v. Ultra Energy Resources, LLC (In re Addington), 2025 WL 936686 (Bk.E.D.Ky., March 26, 2025).
♦ In the case of Business Aircraft Leasing, Inc. v. Ultra Energy Resources, LLC (In re Addington), the Bankruptcy Court denied Ultra Energy Resources' motion to dismiss for lack of jurisdiction but granted Ultra's motion for summary judgment, denying Business Aircraft Leasing, Inc.'s (BAL) cross-motion. The court ruled that BAL only purchased the economic rights (the right to distributions) associated with the Debtor's 36% membership interest in Ultra Energy Resources during the bankruptcy proceeding, not the governance rights. The court based its decision on the Sale Motion, Sale Order, Purchase Agreement, and the Operating Agreement for Ultra, finding that the documents clearly indicated an intent to sell and purchase only the distribution rights, which were subject to a charging lien. The court also noted that the Chapter 7 Trustee did not obtain the necessary approval from Ultra's Manager to transfer the entire membership interest, including governance rights, as required by the Operating Agreement. ♦

PB Brands LLC v. Patel Sister LLC, 2025 WL 655086, (M.D.Ga., Feb. 28, 2025).
♦ None ♦

Arrowhead Capital Finance, Ltd. v. Seven Arts Entertainment, Inc., 2025 WL 551357 (S.D.N.Y., Feb. 18, 2025).
♦ The United States District Court for the Southern District of New York ruled in favor of Plaintiff Arrowhead, ordering Defendant Seven Arts Entertainment, Inc. (SAE) to turn over its membership interests in Picture Pro, LLC (PPL) to Arrowhead. The court found that SAE had a discernable property interest in PPL and that Arrowhead was entitled to it due to a previous judgment. PPL's arguments against the turnover, including improper service, the need to domesticate the judgment in Colorado (where PPL is incorporated), and that Colorado law only allows for the turnover of distribution rights, were rejected. The court emphasized that New York law governs the turnover proceeding and permits the turnover of membership interests in foreign LLCs, even if those LLCs are governed by other states' laws regarding internal operations. SAE was ordered to transfer all membership interests and related documentation to Arrowhead within five business days. ♦

Mora v. Venegas, 2025 WL 51217 (S.D.Fla., Jan. 8, 2025).
♦ In the case of Mora v. Venegas, the U.S. District Court for the Southern District of Florida granted Plaintiff Juana Timotea Salazar Mora's motion for a charging order against Defendant Monica A. Venegas. Ms. Mora had previously won a $291,000 judgment against Ms. Venegas for employment-related violations, of which only $6,000 had been paid. To collect the remaining $285,000, Ms. Mora sought a charging order against Ms. Venegas's membership interest in Venegas International Group, LLC. The court, citing Florida law, found that a charging order is the appropriate remedy for a judgment creditor seeking to collect from a debtor's interest in an LLC. Since Ms. Venegas did not respond to the motion and public records confirmed her membership in the LLC, the court granted the motion. The order directs Venegas International Group, LLC to pay any distributions, transfers, or amounts owed to Ms. Venegas directly to Ms. Mora's counsel until the judgment is satisfied. Ms. Mora was also ordered to serve a copy of the order on Venegas International Group, LLC within three days. ♦

Youngblood-McDaniel v. Diagnostic Bioscience Labs., M.D.Fla. Case No. 24-cv-700 (Jan. 17, 2025).
♦ In the case of Youngblood-McDaniel v. Diagnostic Bioscience Labs., the U.S. District Court for the Middle District of Florida issued a charging order in favor of plaintiffs Tracy Youngblood-McDaniel and Endpoint Capital, LLC against defendant Diagnostic Bioscience Laboratories, LLC. This order stems from a previous default judgment against the defendant for $118,938.00 plus $470.00 in costs, which remains unpaid. The charging order places a lien on the defendant's interest in Reliant Scientific, LLC, a Florida limited liability company where the defendant is a member and/or manager. The order requires the defendant to report all amounts distributable from Reliant Scientific, LLC, and prohibits Reliant Scientific from distributing any funds to the defendant, instead directing those funds to the plaintiffs until the judgment is satisfied. The court retains jurisdiction to issue further orders, including potentially appointing a receiver or foreclosing on the lien. ♦

CFPB v. Integrity Advance, LLC, 2024 WL 5262916 (D.Kan.Dec. 31, 2024).
♦ In CFPB v. Integrity Advance, LLC, the U.S. District Court for the District of Kansas ruled that the Federal Debt Collection Procedures Act (FDCPA) preempts a Kansas state law allowing for charging orders to seize a debtor's interest in a Limited Liability Company (LLC). The Consumer Financial Protection Bureau (CFPB) was attempting to collect a $43 million judgment against James R. Carnes. The CFPB had previously obtained a charging order under Kansas law to attach Carnes's interests in several LLCs. However, the court, upon its own review, determined that the FDCPA, which governs federal debt collection, provides the exclusive means for the CFPB to collect debts. The court found that the FDCPA's garnishment provision, which allows for the seizure of a debtor's property held by a third party, applies to LLC interests. Therefore, the court vacated the existing charging order and denied all pending motions related to it, including a new application for a charging order, concluding that the FDCPA's garnishment procedures are the proper method for the CFPB to pursue Carnes's LLC interests. The court sided with the weight of recent authority that interprets the FDCPA to preempt state laws that provide alternative collection mechanisms. ♦

Big Sandy Co. v. American Carbon Corp., 2024 WL 5250401 (E.D.Ky., Dec. 30, 2024).
♦ In Big Sandy Co. v. American Carbon Corp., the U.S. District Court for the Eastern District of Kentucky granted Big Sandy Company's motion for a charging order against American Carbon Corporation (ACC). This order allows Big Sandy to collect on a prior judgment against ACC by placing a lien on ACC's interests in four subsidiary LLCs (McCoy Elkhorn Coal, Knott County Coal, Deane Mining, and Perry County Resources). The court rejected ACC's arguments that the court lacked jurisdiction because the subsidiaries were not registered in Kentucky, and that the charging order would improperly give Big Sandy priority over other creditors. The court held that it had jurisdiction over ACC, and therefore could issue a charging order against its interests in the LLCs, regardless of where they were formed. The court also clarified that the charging order acts as a lien, not an assignment, and does not inherently grant priority over other creditors. The order requires the subsidiaries to notify Big Sandy of any distributions to ACC and to pay those distributions directly to Big Sandy until the judgment is satisfied. The order also prevents the subsidiaries from diverting funds and requires ACC to inform Big Sandy of any new or reinstated LLCs. ♦

Bartch v. Bartch, 2024 WL 3560748 (10th Cir., July 29, 2024).

Stich v. Mattingly, 2024 WL 2788210 (Ky.App., May 31, 2024).
♦ Stich v. Mattingly, 2024 WL 2788210 (Ky.App., May 31, 2024), involves a dispute between Kevin Stich, a member of a limited liability company (LLC) called Haunt Brothers, LLC, and Kevin Mattingly, a judgment creditor. Mattingly obtained a judgment against Stich for unpaid rent and sought to collect on the judgment by foreclosing on Stich's interest in Haunt Brothers. (1) Key Points: (a) Charging Order: Mattingly obtained a charging order against Stich's interest in Haunt Brothers, which gave him the right to receive distributions from the LLC up to the amount of the judgment. (b) Foreclosure: Mattingly sought to foreclose on Stich's interest in Haunt Brothers, arguing that he was entitled to the entire interest, not just the right to receive distributions. (c) Stich's Argument: Stich argued that the foreclosure should be limited to his right to receive distributions up to the amount of the judgment. (d) Court's Decision: The court affirmed the foreclosure order, finding that the statute (KRS 275.260) allows for the foreclosure of the entire interest in the LLC, not just the right to receive distributions. (2) Reasoning: (a) The court interpreted the statute to mean that the "limited liability company interest subject to the charging order" in KRS 275.260(4) refers to the judgment debtor's entire transferable interest in the company. (b) The court found that limiting the foreclosure to the right to receive distributions would render the foreclosure provision meaningless. (c) The court reasoned that the foreclosure process is intended to provide a more drastic remedy for creditors, allowing them to recoup their debts through a forced sale of the member's entire interest. (3) Outcome: The court upheld the foreclosure order, allowing Mattingly to foreclose on Stich's entire interest in Haunt Brothers, LLC. This means that Stich will lose his membership in the LLC, and the purchaser at the foreclosure sale will acquire his rights as an assignee. (4) Implications: This case highlights the importance of understanding the specific provisions of the Kentucky Limited Liability Company Act (KRS 275.001 et seq.) when dealing with charging orders and foreclosures. It also demonstrates that creditors can use foreclosure as a powerful tool to collect on judgments against LLC members. ♦

245 Park Member LLC v. HNA Group (Int'l) Co., 2024 WL 1506798 (2nd Cir., April 8, 2024).

Campbell v. 1 Spring, LLC, 2024-Ohio-308, 2024 WL 342686 (Ct.App., Slip Op., Jan. 30, 2024).

Universal Life Ins. Co. v. Lindberg, 2023 WL 8379394 (N.C.App., Dec. 5, 2023).
♦ Universal Life Ins. Co. v. Lindberg, 2023 WL 8379394 (N.C.App., Dec. 5, 2023), is a legal opinion from the Court of Appeals of North Carolina in the case of Universal Life Insurance Company v. Greg E. Lindberg. The opinion addresses the validity of an injunction and a charging order issued by a lower court in an attempt to enforce a federal court judgment against Lindberg. Here's a breakdown of the key points: (1) The Injunction: (a) The court found that the trial court lacked jurisdiction to issue the injunction. This is because the plaintiff, Universal Life Insurance Company, did not attempt to execute the judgment through a writ of execution before seeking the injunction. North Carolina law requires a returned, unsatisfied writ of execution before supplemental proceedings, like the injunction, can be pursued. (b) The court vacated the injunction. (2) The Charging Order: (a) The court found that the charging order was too broad. It included LLCs in which Lindberg did not have an "economic interest" as defined by the North Carolina Limited Liability Company Act. (b) The court reversed the charging order in part. The trial court must reduce the number of LLCs included in the charging order to only those where Lindberg is a member or has a legally assigned economic interest. (c) The court also reversed the charging order's requirements for Lindberg to produce documents and freeze distributions. These requirements were deemed beyond the scope of the "exclusive remedy" provided by the NC LLC Act. (3) Overall: The Court of Appeals found that the lower court's attempts to enforce the judgment against Lindberg were flawed. The injunction was vacated, and the charging order was significantly narrowed. The case was remanded back to the trial court for further proceedings consistent with the appellate court's opinion. (4) Key Takeaways: (a) Jurisdiction is crucial. The court emphasized the importance of following proper procedures, such as attempting to execute a judgment before seeking supplemental relief. (b) Statutory interpretation is key. The court carefully analyzed the language of the NC LLC Act to determine the scope of the charging order. (c) The "exclusive remedy" principle matters. The court recognized that the NC LLC Act provides a specific remedy for judgment creditors, and any additional requirements must be justified by other legal authority. ♦

In re Canada, Bk.N.D.Tex. Case No. 23-30568 (Dec. 5, 2023).

Saregama India, Ltd. v. Subramanian Aiyer, N.D.Cal. Case No. 23-MC-80172 (Nov. 29, 2023).

Prime Victor Int'l Ltd. v. Simulacra Corp., D.Nev. Case No. 23-MS-00014 (Nov. 29, 2023).

Crabar/GBF, Inc. v. Wright, 2023 WL 8110737 (D.Neb., Nov. 22, 2023).

Pettine v. Direct Biologics, LLC (In re Pettine), 2023 WL 7648619 (BAP 10th Cir., Nov. 15, 2023).

Brockley v. Ellis, 2023 WL 6303748 (S.D., Sept. 27, 2023).

Mexico Foods Holdings, LLC v. Nafal, 2023 WL 6284705 (Tex.App. Dallas, Sept. 27, 2023).

Bran v. Spectrum MH, LLC, 2023 WL 5487421 (Tex.App., 14th Distr., August 24, 2023).

Klinek v. Luxeyard, Inc., 2023 WL 4497063 (Tex.App. 14th Distr., July 13, 2023).

In re McCuan, 2023 WL 4030468 (M.D.Fla. 2:19-CV-317, June 15, 2023).

Wright v. Shenandoah Investors, LLC, 2023 NY Slip Op. 31392(U)

Fremont Bank v. Signorelli, 2023 WL 2505021 (N.D.Cal., Feb. 24, 2023).