ULLCA 503(b)(1) Receiver
Receiver Code ULLCASection503b1Receiver
(b) To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subsection (a), the court may:
(1) appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made; and
(2) make all other orders necessary to give effect to the charging order.
Reporter's Comment to Subsection (b).
Paragraph (2) refers to "other orders" rather than "additional orders."
Therefore, given appropriate circumstances, a court may invoke Paragraph (1), Paragraph (2), or both.
Reporter's Comment to Subsection (b)(1).
The receiver contemplated here is emphatically not a receiver for the limited liability company, but rather a receiver for the distributions subject to the charging order.
The principal advantage provided by this paragraph is an expanded right to information.
However, that right goes no further than "the extent necessary to effectuate the collections of distributions pursuant to a charging order."
For a correctly narrow reading of this provision, see Wells Fargo Bank, Nat. Ass'n v. Continuous Control Solutions, Inc., No. 11-1285, 2012 WL 3195759 (Iowa Ct. App. Aug. 8, 2012).
As the comment states, the receiver appointed under ¶ (b) is not, negative, a receiver for the LLC itself, but instead is only a receiver for the distributions, and for the creditor the main tactical advantage to such a receiver is for informational rights.
Example: Creditor holds a judgment against debtor, who has disappeared or is recalcitrant. Normally, the creditor would obtain information about distributions from the debtor, but the court may appoint a receiver to obtain this information in the debtor's place.
Creditors routinely use this provision, quite appropriately, to have a "limited purpose receiver" appointed by the court with these powers only to enforce the charging order, but then work to expand the receiver's portfolio over matters to eventually become a general-purpose receiver for the debtor's estate generally.
For court opinions discussing the role of receivers and charging orders click here.
- 91st Street Joint Venture v. Goldstein, 691 A.2d 272, 114 Md.App. 561 (Md.Sp.App., 1997).
- Deutsch v. Wolff, 7 S.W.3d 460 (Mo.App.W.D.,1999).
- Earthgrains Baking Co., v. Sycamore, 2022 WL 433486 (10th Cir., Feb. 14, 2022).
- Earthgrains Baking Companies, Inc. v. Sycamore Family Bakery, Inc., 2019 WL 6001940 (D.Utah, Nov. 14, 2019).
- Jonas v. Waterman, 2013 WL 6231619 (D.Mont., Dec. 2, 2013).
- Limbright v. Hofmeister, 2012 WL 5605437 (E.D.Ky., 2012).
- Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc., 2021 WL 388660 (Feb. 4, 2021).
- Morgan Stanley Smith Barney LLC v. Johnson, 2018 WL 4654711 (D.Minn., Sept. 27, 2018).
- Morgan Stanley Smith Barney LLC v. Johnson, 2020 WL 1222684 (March 13, 2020).
- Pajooh v. Royal West Investments LLC, Series E, 2017 WL 1173892 (Tex.App., March 30, 2017).
- SEC v. Detroit Memorial Partners, LLC, 2016 WL 6595942 (N.D.Ga., Nov. 8, 2016).
- Single Box, LP v. Del Valle, 2022 WL 1694776 (C.D.Cal., April 6, 2022).
- U.S. v. Zabka, 900 F.Supp.2d 864 (C.D.Ill., 2012).
- Williams v. The Estates LLC, 2022 WL 17490729 (M.D.N.C., Dec. 7, 2022).