2022 Opinions

2022 Site.Year2022ChargingOrderOpinions

2022 Charging Order Opinions

Red Lion Hotels Franchising, Inc. v. First Capital Real Estate Investments LLC, 2022 WL 298118 (E.D.Cal., Feb. 1, 2022).

♦ The United States District Court for the Eastern District of California addressed a motion filed by the plaintiff for an order charging the membership interests of the defendants and for an assignment order to satisfy a significant monetary judgment. The plaintiff, Red Lion Hotels Franchising, Inc., originally obtained a judgment for approximately 1.29 million dollars plus interest against defendants First Capital Real Estate Investments, Suneet Singal, and Majique Ladnier in the Eastern District of Washington following a dispute over franchise license agreements for the operation of three hotels. Having obtained a writ of execution in the California court, the plaintiff sought to reach assets controlled by Singal and Ladnier through two limited liability companies, First Capital Master Advisor, or FCMA, and SRS, LLC, which were held by the Ladnier-Singal Trust. Although Singal attempted to argue that the trust was irrevocable and thus protected from creditors, the court noted that previous court rulings and testimony from Ladnier confirmed the trust was valid and revocable. Applying California law and Federal Rule of Civil Procedure 69, the court found that a charging order was an appropriate remedy to apply the judgment debtors' interests in the limited liability companies toward the satisfaction of the debt. Furthermore, the court granted an assignment order after evaluating factors such as the amount remaining on the judgment and the nature of the assets involved, including a substantial loan payment obligation and corporate shares. The final order charged the membership interests of Singal and Ladnier in both entities, directing them to pay any distributions directly to the plaintiff. Additionally, the court assigned specific interests in a twenty-five million dollar loan payment and corporate shares to the plaintiff until the judgment is fully satisfied. ♦

McLeod v. Bruce, 2022 WL 731517 (M.D.Ga., March 10, 2022).

♦ The United States District Court for the Middle District of Georgia issued a definitive order addressing the aggressive collection efforts of pro se Plaintiff Richard Jerry McLeod following a default judgment of $62,640.00 entered against Robert Bruce and several co-defendants. The central conflict involved McLeod's persistent, though procedurally deficient, attempts to garnish bank accounts held by the non-party entity Robert Bruce Land & Cattle, LLC at Citizens National Bank of Quitman. Despite the bank's assertions that McLeod had failed to comply with Georgia's strict statutory framework for garnishment, the institution deposited significant sums from the LLC's accounts into the registry of the court out of an abundance of caution. The court first granted the LLC's motion to intervene under Federal Rule of Civil Procedure 24(a), finding that the company's financial interests were jeopardized by McLeod's unauthorized efforts. In its substantive analysis, the court determined that McLeod had fundamentally bypassed legal requirements by failing to file a proper garnishment affidavit, neglecting to obtain an official court-issued summons, and failing to achieve valid legal service as mandated by O.C.G.A. sections 18-4-3 and 18-4-8. Furthermore, the court emphasized that McLeod had attempted to seize LLC assets without first obtaining a charging order, the specialized legal mechanism required to reach a member's interest in such an entity. Consequently, the court dismissed the purported garnishment proceedings and directed the Clerk of Court to return all associated funds, including deposits of $1,000.08 and $20,456.14. Although the court issued a stern warning to McLeod against further attempts to circumvent statutory protocols, it ultimately denied the LLC's motion for a temporary restraining order, ruling that the plaintiff remains entitled to collect his judgment through legitimate and lawful procedures. ♦

Jiao v. Xu, 2022 WL 764997 (5th Cir., March 11, 2022).

♦ The United States Court of Appeals for the Fifth Circuit affirmed a district court's decision granting injunctive, declaratory, and turnover relief against Ningbo Xu and LCL Company, LLC. The litigation originated from the formation of Dongtai Investment Group, LLC, created by Xu and several investors to purchase a Crowne Plaza Hotel in Houston. The plaintiffs, including both original investors and their assignees, alleged that Xu failed to pay his full capital contribution and committed various fraudulent acts, including unauthorized bank withdrawals. The Fifth Circuit maintained jurisdiction over the appeal, concluding that the various orders were either final or inextricably linked to the preliminary injunction. Addressing Xu's challenges, the court held that the plaintiffs maintained standing to bring derivative claims under Texas law, regardless of whether the assignment to their children was fully perfected. The court also found that the plaintiffs' securities fraud claims met the necessary heightened pleading standards and involved domestic transactions. In affirming the preliminary injunction, the appellate court agreed that the potential loss of the hotel's franchise and the property itself constituted a substantial threat of irreparable injury. Regarding the declaratory relief, the court upheld the invalidation of Xu's original ownership certificates, noting that issuing new certificates based on his actual capital contribution of roughly eight hundred sixty-eight thousand dollars was not an unlawful expulsion from the company. Finally, the court approved the turnover order requiring Xu to surrender his remaining interests to partially satisfy a 1.3-million-dollar judgment for unauthorized withdrawals. It reasoned that because the company itself was the creditor, the general requirement for a charging order did not apply under Texas law. Ultimately, the Fifth Circuit found no abuse of discretion or legal error in the district court's actions, affirming the judgment in its entirety. ♦

Thomas v. Hughes, 2022 WL 620240 (5th Cir., March 3, 2022).

♦ The United States Court of Appeals for the Fifth Circuit addressed a post-judgment charging order issued against Lou Ann Hughes following a multimillion-dollar judgment for fraudulent transfers, misappropriation of trade secrets, and breach of fiduciary duty. The primary appeal had already affirmed a lower court judgment of approximately $3.9 million against Hughes and her entities. In the subsequent proceeding, the district court granted a charging order against Hughes's membership interest in M. G. & Sons, a single-member LLC whose sole asset was a piece of real property that Hughes had previously transferred to the entity. This order specifically required Hughes and M. G. & Sons to obtain leave of court before transferring the property, funds outside the ordinary course of business, or her membership interest to any third party. Hughes challenged the order on appeal, contending that under the Texas Business Organizations Code, a charging order is the exclusive remedy for a judgment creditor and that the additional transfer restrictions constituted improper equitable remedies against LLC property. The Fifth Circuit rejected this narrow interpretation, affirming that both federal and state courts possess inherent authority to enforce their judgments through combined methods such as charging orders and injunctive relief. Citing Texas precedent, the court determined that the statute did not preclude supplementary injunctions intended to prevent the dissipation of assets. The circuit court further found the district court's restrictions justified by Hughes's documented history of using fraudulent transfers to evade prior judgments. However, the appellate court did identify a technical error in the direct enjoinment of M. G. & Sons, as the LLC was not a judgment debtor. Consequently, the court modified the order to strike M. G. & Sons as a named party under the injunction while clarifying that Hughes, as the sole member and judgment debtor, remained prohibited from causing the entity to bypass the court-ordered restrictions. Ultimately, the Fifth Circuit affirmed the district court's order as modified. ♦

AVT - New York, L.P. v. Olivet University, 2022 WL 951754 (D.Utah., March 30, 2022).

♦ The United States District Court for the District of Utah addressed a dispute concerning the issuance of a charging order against a judgment debtor's interests in various foreign entities. The plaintiff and judgment creditor, AVT - New York, L.P., moved the court to charge the interests of the defendant, Olivet University, in four limited liability companies—two formed under New York law and two under Delaware law. Pursuant to Rule 69 of the Federal Rules of Civil Procedure and Utah Code section 48-3a-503, such an order requires these companies to pay any distributions to the creditor rather than the debtor. Olivet opposed this application, contending that the court lacked personal jurisdiction over the four out-of-state entities. Following an initial review, Magistrate Judge Daphne A. Oberg issued a Report and Recommendation suggesting that the motion be granted. District Judge Jill N. Parrish subsequently reviewed Olivet's objections to this recommendation. The court first found that several of Olivet's new legal arguments regarding the scope of state law were waived because they had not been raised before the magistrate judge. Furthermore, the court overruled objections regarding personal jurisdiction, determining that Olivet lacked standing to assert jurisdictional defenses on behalf of non-party entities. The court reasoned that personal jurisdiction over the foreign companies was unnecessary because the order specifically targeted Olivet's own personal property interest in those companies rather than the companies themselves. Citing established Utah precedent, the court affirmed its authority to adjudicate a party's interest in property located in another state if the court maintains jurisdiction over the parties. Ultimately, the court adopted the Report and Recommendation in full, granting the motion and entering a charging order for the outstanding judgment amount of 3,496,413.34 US dollars. ♦

Earthgrains Baking Co., v. Sycamore, 2022 WL 433486 (10th Cir., Feb. 14, 2022).

♦ The legal saga of EarthGrains Baking Companies versus Sycamore Family Bakery, Inc. centers on the protracted enforcement of a 2012 judgment totaling over six million dollars for trademark infringement and breach of contract. Following several years of nonpayment, a federal district court in Utah issued a charging order in 2014 against Leland Sycamore’s forty-eight percent membership interest in the Sycamore Family LLC. However, the LLC failed to remit any funds to EarthGrains, leading to findings of willful contempt. The court determined that the Sycamore family had orchestrated their finances to make Leland appear judgment-proof by shielding assets within the LLC and making improper de facto distributions to family members, such as providing rent-free housing and unsubstantiated loans. To remedy this obstruction, the court appointed R. Wayne Klein as a receiver with the power to manage LLC assets and conduct a forensic accounting of distributions. A major issue involved the Sheffield Property, a multimillion-dollar mansion used by Leland as collateral for personal debt. When Leland defaulted, the receiver imputed the home’s value as a distribution to him. Although the Tenth Circuit Court of Appeals eventually mandated that this distribution be valued based on actual foreclosure results rather than older tax assessments, it explicitly affirmed the district court’s authority to liquidate LLC real estate to satisfy the charging order. In 2024, the district court finalized the accounting, concluding that the LLC owed approximately one point six million dollars for past omitted distributions. The court ordered the further sale of LLC assets to cover this amount and ruled that the receivership would persist until the entirety of the original multi-million dollar judgment is satisfied through Leland’s forty-eight percent share of all future distributions. This case highlights the broad equitable powers of courts to pierce through obstructive corporate maneuvers to ensure the satisfaction of valid legal judgments. ♦

In re Kleynerman, 2022 WL 243215 (E.D.Wis., Jan. 26, 2022).

♦ In the bankruptcy proceedings of Gregory Kleynerman, the central dispute involved a 499,000 dollar state court judgment and a charging order held by Scott Smith against Kleynerman’s interest in Red Flag Cargo Security Systems, LLC. After Kleynerman filed for Chapter 7 bankruptcy, he listed his interest in Red Flag as an exempt asset with a zero dollar value. Initially, Smith focused on unsuccessfully challenging the dischargeability of the debt based on fraud and did not object to the exemption or valuation. Following Kleynerman’s discharge, a Wisconsin state court ruled that the bankruptcy did not satisfy the lien on the debtor’s personal property. Consequently, Kleynerman moved to reopen his bankruptcy case to avoid the judicial lien under 11 U.S.C. Section 522(f), arguing it impaired his exemption. The bankruptcy court granted the motion to reopen and the request for lien avoidance, finding that the lien met the statutory criteria for impairment. However, the court conditioned this relief on Kleynerman reimbursing Smith 19,861 dollars for legal fees incurred due to the debtor’s delay in seeking avoidance. Smith appealed, but both the district court and the Seventh Circuit affirmed the decision. The appellate court held that the bankruptcy judge acted within her discretion in reopening the case for cause. Furthermore, the court emphasized that Smith had failed to timely object to the exemption or valuation during the initial bankruptcy proceedings, opting instead to remain quiescent until after the discharge. Because the lien was a judicial lien that impaired a valid exemption and did not fall under specific non-avoidable categories like domestic support obligations, federal law permitted its avoidance. These rulings underscore the distinction between the discharge of personal liability and the avoidance of liens, confirming that bankruptcy courts retain broad discretion to afford further relief to debtors even after case closure. ♦

Fremont Bank v. Signorelli, 2020 WL 13093882 (April 8, 2020).

♦ United States Magistrate Judge Donna M. Ryu issued a Report and Recommendation regarding the plaintiff's motion for an order charging the interest of Signorelli Family, L.P. in third-party STARJ Partners, LLC. The underlying litigation originally commenced in August 2018 when Fremont Bank initiated an action against Robert J. Signorelli, Kathryn R. Signorelli, and the Signorelli Family Partnership for breach of contract and breach of written guaranties after the defendants defaulted on a business loan agreement for one million dollars. In April 2019, Judge Haywood S. Gilliam, Jr. granted summary judgment in favor of Fremont Bank for nearly nine hundred sixty thousand dollars, yet the defendants failed to satisfy this legal obligation. To recover the debt, the bank moved for a charging order under Federal Rule of Civil Procedure 69(a) and California Code of Civil Procedure section 708.310. The court explained that while federal rules govern the execution of judgments, the procedural law of the forum state, California, dictates the specific process. Under California law, a charging order functions as a lien on a judgment debtor’s transferable interest in a partnership or limited liability company, requiring the entity to redirect distributions to the judgment creditor. Crucially, such an order does not permit the creditor to participate in management or exercise membership rights. Although Fremont Bank did not serve the motion on the third-party limited liability company, the magistrate judge determined that such service was not required for the issuance of the order itself under the provided statutory framework. The court ultimately found that Fremont Bank provided substantial evidence of the Partnership’s sixty-seven point five percent membership interest in STARJ Partners. Given this evidence and the defendants' lack of opposition, the court recommended granting the motion to assist in the satisfaction of the outstanding judgment. ♦

Single Box, LP v. Del Valle, 2022 WL 1694776 (C.D.Cal., April 6, 2022).

♦ The United States District Court for the Central District of California denied a motion by judgment creditors to appoint a receiver to seize income from two companies, PR Property Services LLC and PRP Commercial Real Estate Services Inc. The judgment creditors, who held a judgment exceeding four million dollars against Brett Del Valle and others, argued that a receiver was necessary because Del Valle was allegedly avoiding payment under existing charging orders by transferring company profits to other entities for his personal use. Despite various collection efforts that yielded only minimal recovery, the court characterized the appointment of a receiver as an extraordinary remedy to be used with extreme caution under California law. The court found that the creditors failed to demonstrate the clear necessity required for such a drastic measure, noting that their claims of obfuscation and bad faith were based primarily on unsupported speculation rather than concrete evidence. Specifically, the creditors offered no proof to rebut Del Valle's testimony that company profits were used for business expenses rather than personal bills. Additionally, the court observed that the creditors had not fully explored less severe legal remedies, such as enforcing the charging order already in place against PR Property LLC or initiating collection actions specifically against PRP Commercial Inc. The court also criticized the broad and ill-defined scope of the requested receivership, which would have empowered a receiver to oversee Del Valle's business activities regardless of the entity involved. Ultimately, because the judgment creditors did not prove that the debtor had frustrated collection through contumacious conduct or that other enforcement mechanisms were inadequate, District Judge Philip S. Gutierrez denied the motion, emphasizing that receiverships are rarely appropriate for the enforcement of simple money judgments without evidence of systemic subversion. ♦

Textron Financial Corp. v. Spanish Springs II, LLC, 2022 WL 1296098 (C.D.Cal., April 6, 2022).

♦ United States Magistrate Judge Karen L. Stevenson issued an amended report and recommendation advising the District Court to grant an unopposed motion for a charging order. The motion, filed by assignee judgment creditor AKRO Real Estate Partners LLC, seeks to satisfy an outstanding judgment of $1,151,413.90 against judgment debtors John E. King and Carole King by charging their interests in seven specific limited liability companies. The underlying judgment, originally entered in 2010 for over $4.6 million and renewed in 2020, stems from a 2009 lawsuit involving the judicial foreclosure of a deed of trust and a breach of guaranty following a loan default by Spanish Springs II, LLC. Although an initial report and recommendation expressed concern over the sufficiency of evidence regarding the debtors' ownership interests, the assignee judgment creditor successfully augmented the record with supplemental evidence. This included proofs of service on authorized agents for six of the seven LLCs and documentation establishing John E. King as a manager and designated agent for the seventh entity, Oak Shores Group LLC. Under Federal Rule of Civil Procedure 69 and relevant California statutes, a charging order serves as a lien on a debtor's transferable interest, requiring the LLC to redirect distributions to the judgment creditor. Because the debtors and the affected LLCs failed to oppose the motion, and the creditor provided substantial evidence of the debtors' membership interests, the court concluded that the legal requirements for the order were met. Consequently, the magistrate judge recommends that the district judge charge the Kings' interests in Higuera Brew LLC, Nipomo Properties LLC, Oak Shores Group LLC, Shaffer Lane LLC, Hunter Ranch Golf Course LLC, SLO South Higuera LLC, and Spanish Vineyards LLC to satisfy the remaining debt. ♦

Duffus v. Baker, 513 P.3d 264 (Alaska, July 15, 2022).

♦ The Supreme Court of Alaska addressed a conflict between a judgment creditor's charging order and an attorney's lien regarding settlement funds from a limited liability company interest sale. Kenneth Duffus, a creditor with multiple unsatisfied judgments against Lee Baker, sought a charging order against funds Baker was to receive from settling a lawsuit involving Aurora Park, LLC. Simultaneously, Baker's counsel, Jones Law Group, filed an attorney's lien against those same funds. The superior court initially granted the charging order and enforced the lien, resulting in a split of the funds. Both parties appealed the priority and validity of these instruments. The Supreme Court first examined whether the settlement payments constituted a distribution under Alaska limited liability company law. It noted that a charging order only reaches distributions to which a member is entitled. The lower court had incorrectly applied the Alaska Corporations Code's definition of distribution. The Supreme Court clarified that under LLC law, interim distributions must involve the distribution of company assets. Because the settlement funds were paid by third parties rather than the LLC itself, and the lower court failed to trace these funds to the LLC's assets, the Supreme Court could not determine if they qualified as distributions. While the court found the attorney's lien valid because it was intended to compensate for services that created the settlement property, it found insufficient evidence, such as billing records, to establish the value of services rendered specifically for the Aurora Park litigation. Ultimately, the Supreme Court vacated the superior court's judgment and remanded for evidentiary hearings to determine if the settlement funds originated from the LLC and to establish the precise amount secured by the lien. The court declined to rule on priority until these factual issues were resolved. ♦

In re Greenpoint Asset Management II, LLC (Greenpoint Asset Management II, LLC v. Hallick), 2022 WL 4647692 (Bk.E.D.Wis., Sept. 30, 2022).

♦ The United States Bankruptcy Court for the Eastern District of Wisconsin addressed whether liens obtained by judgment creditor Erick Hallick could be avoided as preferential transfers under 11 U.S.C. Section 547(b). The debtor-plaintiffs, Greenpoint Asset Management II LLC and Michael Hull, filed for Chapter 11 bankruptcy on November 11, 2021. Hallick had previously obtained a 13.6 million dollar judgment and secured a levy order and various charging orders in August and September 2021, which were within the ninety-day preference window. Hallick argued that his liens were initiated outside the preference period, asserting they related back to May and June 2021 when he served the debtors with orders for supplemental examinations. He primarily relied on the Wisconsin Supreme Court's earlier ruling in Badger Lines. However, Chief Judge G. Michael Halfenger determined that the newer Wisconsin Supreme Court precedent in Associated Bank N.A. v. Collier requires a creditor to levy upon specific property to create a superior interest. The court further held that under Section 547(e) of the Bankruptcy Code, a transfer is considered made only when it is perfected against subsequent judicial liens, and relation-back principles under state law cannot override this federal timing requirement. Consequently, the court found that the transfers were made during the preference period. While the court denied Hallick's cross-motion for summary judgment, it granted him limited discovery under Federal Rule of Civil Procedure 56(d) regarding the debtors' insolvency, which remains a disputed material fact. The court established that while other elements of the preference claims were satisfied, the final determination of avoidance depends on the outcome of the discovery into the debtors' financial status at the time the liens were perfected. ♦

Bocangel v. Warm Heart Family Assistance Living, Inc. 2022 WL 1120058 (D.Md., April 14, 2022).

♦ In Bocangel v. Warm Heart Family Assistance Living, Inc., the U.S. District Court for the District of Maryland addressed the enforcement of judgments resulting from violations of the Fair Labor Standards Act (FLSA). In 2021, the court entered two judgments against the defendants, Warm Heart Family Assistance Living, Inc. and Constance Robinson: an initial judgment of $685,726.50 for FLSA violations and a subsequent judgment of $224,879.55 for attorney’s fees and costs. To satisfy these amounts, the plaintiffs sought a charging order against Constance Robinson’s corporate interests in Warm Heart. The court evaluated the request under Federal Rule of Civil Procedure 69(a)(1), which provides that the procedure for enforcing a money judgment must align with the laws of the state where the court sits, unless a federal statute specifically applies. Because the FLSA contains no specific provisions for the execution of judgments, the court looked to Maryland law. Under Maryland Rule 2-649, a court may issue an order charging the economic interest of a judgment debtor in a partnership or limited liability company to ensure payment of a debt. The court granted the plaintiffs' request for a charging order against Robinson’s interest in the corporation. The order requires Warm Heart to pay the plaintiffs any distributions or profits that would otherwise be payable to Robinson until the total judgment—including principal, fees, and costs—is satisfied in full. Regarding the plaintiffs' request for post-judgment interest at a rate of 10% per annum, the court denied the specific rate requested. Instead, it ruled that post-judgment interest is governed by 28 U.S.C. § 1961. This federal statute mandates that interest be calculated at a rate equal to the weekly average 1-year constant maturity Treasury yield. Consequently, the court ordered that interest be applied to the judgments according to this federal statutory formula rather than state-level interest rates. ♦

JPMorgan Chase Bank, N.A. v. Winget, 2022 WL 2389287 (6th Cir., July 1, 2022).

♦ The litigation between Larry J. Winget and creditors led by Alter Domus involves a fifteen-year effort to collect a debt exceeding $750 million arising from a defaulted loan to Winget’s company, Venture. Although Winget satisfied his personal $50 million guaranty, the Larry J. Winget Living Trust remains liable for the balance. In a move to shield assets, Winget revoked the Trust in 2014, but the Sixth Circuit declared this a fraudulent transfer under the Michigan Uniform Fraudulent Transfer Act, ruling that a settlor’s right to revoke is limited if the trust has outstanding contractual obligations. Despite reinstating the Trust, Winget retained distributions and promissory notes issued by his LLCs during the revocation period. The courts subsequently imposed a constructive trust over these assets, finding that Winget was unjustly enriched and that the notes legally belonged to the Trust. Conflict intensified when Winget and JVIS-USA, LLC amended these promissory notes in 2020 to extend maturity and remove demand clauses, leading to new claims under the Michigan Uniform Voidable Transactions Act. Winget also attempted to nullify nineteen years of Trust contributions through state probate court, resulting in a federal civil contempt finding for violating a status quo order against asset dissipation. Recent rulings in 2024 have upheld the creditor's right to pursue claims for unjust enrichment and voidable transactions regarding these amended notes. The judiciary has repeatedly affirmed that because the Trust entered a binding guaranty, its assets must remain available to creditors regardless of Winget’s attempts to manipulate trust structures or ownership status. This extensive litigation, resulting in dozens of opinions, establishes that while a revocable trust is an estate planning tool, it cannot be used to hide property once a right to payment has matured, ensuring that contractual guarantees are enforceable against trust assets. ♦

79 Madison LLC v. _DEBTOR_, 2022 WL 867901 (N.Y. Super.App.Div., Dept. 1, March 24, 2022).

♦ The Supreme Court, Appellate Division, First Department of New York, addressed the enforcement of a money judgment against a debtor's membership interest in an LLC. The court upheld an order requiring the defendant to turn over his membership interest in an LLC to the plaintiff to satisfy the judgment. The court rejected the defendant's argument that the internal affairs doctrine necessitated the application of Wyoming or Delaware law, which might limit a creditor's remedy to a charging order. It clarified that the internal affairs doctrine governs relationships between a company and its directors or shareholders and does not apply when the rights of external third parties are at issue. Under New York law, specifically CPLR 5201(b) and 5225(a), an interest in an LLC is assignable and transferable property subject to enforcement. Although CPLR 5225(a) generally directs property to a sheriff for sale, the court invoked its broad discretion under CPLR 5240 to order a direct turnover to the plaintiff. This exercise of discretion was deemed appropriate due to the uncertain value of the membership interest and the recorded history of the defendant obstructing the plaintiff's enforcement efforts. The court also dismissed claims of a potential windfall, noting the defendant could avoid the turnover by satisfying the judgment. Additionally, the court affirmed the use of an antisuit injunction to prevent the defendant from collaterally attacking the enforcement in other jurisdictions, though it narrowed the injunction's scope to a specific proceeding in Kings County. Ultimately, the ruling confirms that New York courts can compel the direct transfer of LLC interests to judgment creditors, providing a robust mechanism for enforcement against uncooperative debtors. ♦

Williams v. The Estates LLC, 2022 WL 3226659 (M.D.N.C., Aug. 10, 2022).

♦ The legal battle in Williams v. The Estates LLC centers on a multi-million dollar judgment following a jury verdict that found Craig Brooksby and several associated entities liable for a fraudulent bid-rigging conspiracy and extortion involving real estate foreclosures. Despite the judgment and a permanent injunction, Brooksby and his co-defendants, including King Family Enterprises and the GG Irrevocable Trust, engaged in a systemic pattern of defiance. To enforce the judgment, the court issued various charging orders against the defendants' interests in numerous limited liability companies. However, consistent efforts to conceal assets and records led to the appointment of James Lanik as a receiver to oversee the defendants financial interests. The litigation is marked by repeated findings of civil contempt against Brooksby for violating the permanent injunction by participating in prohibited property transactions through entities like Soren LLC. By early 2025, the court escalated its enforcement measures due to the defendants flagrant non-compliance with receivership orders and the concealment of assets. Consequently, the court ordered Brooksby into federal custody to compel cooperation and issued similar orders against Rex King while imposing daily fines on Sonja Brooksby. Additionally, the court expanded the permanent injunction to strictly limit Brooksby's business activities and imposed rigorous financial reporting requirements. The proceedings also extended to Carolyn Souther, whose interests in specific LLCs were subjected to charging orders. Throughout the years of litigation, Chief District Judge Catherine C. Eagles characterized the defendants' conduct as a tangled web of deception, highlighting a persistent disregard for judicial authority. The court's evolving responses, from initial money judgments to incarceration and expanded injunctive relief, underscore the complexity of dismantling a sophisticated real estate fraud operation and the necessity of extraordinary measures to ensure the integrity of the judicial process. ♦

Farmer v. Farmer, 2022 WL 3270714 (S.D., Aug. 10, 2022).

♦ The Supreme Court of South Dakota reviewed orders from both a divorce court and a collection court regarding the distribution of excess proceeds from an execution sale of property owned by Lakota Lake Camp, LLC. The underlying conflict stemmed from a 2014 divorce between James and Lori Farmer, where James, as managing member of the LLC, was repeatedly found in contempt for failing to comply with property settlement terms. To satisfy James's debts to Lori, a divorce court originally awarded James the value of a property called Granite Perch while awarding other assets to Lori. Later, Lori purchased a bank's judgment against James and the LLC, leading to an execution sale of Granite Perch that generated approximately thirty-eight thousand dollars in surplus funds. Lori applied to the collection court for a charging order against James's distributional interest in the LLC and requested the release of the surplus. The collection court granted the charging order but left the decision on the funds to the divorce court, which ordered them released to Lori. James and the LLC appealed, challenging the collection court's jurisdiction and the divorce court's authority to release company assets for personal debts. The Supreme Court affirmed the collection court's jurisdiction to issue the charging order, ruling that James's status as a member and the court's control over the proceeds were sufficient. Crucially, however, the Court reversed the divorce court's order releasing the funds. It held that under South Dakota law, a charging order is the exclusive remedy for a member's judgment creditor and does not grant the right to seize specific LLC property. Because the funds belonged to the LLC and James had not distributed them to himself, they could not be used to satisfy his personal liabilities. The Court remanded the case for the collection court to determine the rightful disposition of the funds. ♦

Unruh Turner Burke and Frees, PC v. Tattersall Development Co., 2022 WL 4588209 (Pa. Super., Sept. 30, 2022).

♦ The Superior Court of Pennsylvania affirmed a trial court order denying a motion to dissolve a preliminary injunction. The litigation began in 2012, resulting in a 2015 judgment favoring the appellee, Unruh Turner Burke and Frees, PC (UTBF), against appellants Kenneth and Joyce Hellings. After years of the appellants allegedly avoiding enforcement through shell entities and refusing to disclose assets, UTBF obtained a charging order in 2018 against several controlled entities. In 2021, UTBF sought an emergency special injunction under Pennsylvania Rule of Civil Procedure 3118 upon discovering a purported scheme to shield 22.5 million dollars in real estate proceeds through various shell entities, collectively known as the Embreeville Entities. The trial court granted the injunction, requiring these entities to pay sums due to the appellants into the court. On appeal, the appellants challenged the trial court's jurisdiction, citing improper service on the entities and a failure to join them as indispensable parties. They also argued that the relief exceeded the scope of Rule 3118 and involved improper reverse piercing of the corporate veil against non-debtor third parties. The Superior Court rejected these arguments, determining that the appellants failed to show prejudice from any alleged service defects and that the trial court reasonably concluded the entities were effectively one and the same as the judgment debtors for the purpose of the injunction. The court held that the injunction merely maintained the status quo established by the 2018 charging order. Finally, the court found the challenge to reverse piercing of the corporate veil was premature, as the injunction only preserved assets pending a final hearing to determine if the corporate form was used to fraudulently shield personal assets from the judgment. ♦