Jurisdiction And Service Of Charging Order

Topic Jurisdiction TopicsJurisdictionService

The courts have frequently struggled the issue of whether there must be personal jurisdiction over the entity for the charging order to be issued. In my opinion, the correct rule would be that that the court does not need jurisdiction in personam to place the lien on the D/M's entity (any more than a creditor would need jurisdiction over Intel to place a lien on the debtor's Intel stock shares), but that personal jurisdiction would be required to enforce the charging order against the entity, i.e., if the court of judgment does not have personal jurisdiction over the entity, then to enforce the charging order against the entity as to distributions the creditor would need to domesticate the judgment in the jurisdiction where the entity is found. However, even as to distributions, the court of judgment would be able to enforce the charging order against the D/M, i.e., compel the D/M to pay over distributions to the creditor, since personal jurisdiction over the D/M has already been established.

At the very least, this issue needs to be fully addressed in the Comment to § 503, but because jurisdiction is a critically important threshold issue, perhaps it would warrant a statutory change.