2026 Opinions
20XX Site.Year2026ChargingOrderOpinions
2026 Charging Order Opinions
Matter of Canada, 2026 WL 376475 (5th Cir., Feb. 11, 2026).
♦ The United States Court of Appeals for the Fifth Circuit is considering whether an ownership interest in a Texas limited liability company (LLC) is exempt property in a federal bankruptcy proceeding, focusing on the interpretation of Texas law. William R. Canada Jr., who declared bankruptcy, claimed his 70% interest in DAD Drilling, LLC was exempt, but both the bankruptcy and district courts denied the exemption, citing the absence of explicit protection in Texas statutes and prior Texas court decisions. The appellate court notes that while Texas intermediate courts have generally held LLC interests are non-exempt, the language of Texas Business Organizations Code § 101.112 could be interpreted as providing an exclusive remedy for creditors, potentially suggesting a stronger exemption. Because the Texas Supreme Court has not directly addressed this issue and the question is both close and recurring, the Fifth Circuit has certified the question to the Texas Supreme Court, asking whether LLC membership interests are exempt property in bankruptcy under § 101.112. The court emphasizes the importance of resolving this ambiguity due to the prevalence of LLCs in Texas and the interplay between state and federal exemption laws. ♦
Radiance Capital Receivables Twelve LLC v. Campbell (In re Campbell), 2026 WL 84544 (Bk.S.D.N.Y., Jan. 12, 2026).
♦ The United States Bankruptcy Court for the Southern District of New York addressed cross-motions for summary judgment in an adversary proceeding concerning the dischargeability of debts. Radiance Capital, holding a judgment against Debtor John Campbell, had previously obtained Charging Orders in Alabama requiring Campbell’s limited liability companies (LLCs) to pay distributions directly to Radiance. Instead, Campbell diverted funds from his LLCs, specifically Whigham Place, to himself and other controlled entities for personal use. Radiance sought to have the debt declared nondischargeable. The Court granted summary judgment in favor of the Debtor on Count I, dismissing the claim for "actual fraud" under 11 U.S.C. § 523(a)(2)(A). Relying on Eleventh Circuit precedent, the Court held that the underlying debt was a standard loan breach not obtained by fraud, and the subsequent fraudulent transfers did not create a new, separate fraud debt. However, the Court ruled in favor of Radiance on Count II under § 523(a)(6). It found that Campbell’s knowing violations of the Charging Orders constituted "willful and malicious injury." Therefore, any monetary sanctions arising from these violations are nondischargeable. The Court sua sponte modified the automatic stay to permit the Alabama District Court to adjudicate the pending contempt motion and determine the specific sanction amount. Finally, regarding Count III, the Court issued a declaratory judgment that the liens created by the Charging Orders remain valid and survive the bankruptcy discharge. The Court rejected Campbell’s defenses regarding superior IRS liens and waiver, noting his failure to appeal the original orders or report transfers. ♦
TBG Funding LLC v. Kenwood Commons, LLC, 2026 WL 504166 (Feb. 12, 2026).
♦ The New York Supreme Court (Albany County) addressed whether a judgment creditor may obtain turnover of a judgment debtor’s LLC membership interests despite “pick your partner” transfer restrictions in operating agreements. Following a foreclosure deficiency judgment of approximately $17.9 million, the plaintiff sought turnover of the defendants’ interests in two LLCs—Winter Investors, LLC and Tunnel Associates, LLC—or, alternatively, charging orders. The court held that LLC membership interests are personal property subject to enforcement under CPLR article 52 and that charging orders under LLC Law § 607 are discretionary, not exclusive remedies. It concluded that judgment debtors have standing to invoke operating agreement provisions but that those provisions do not bar turnover where CPLR § 5225 authorizes it. Turnover was deemed appropriate for Winter because the judgment debtors owned 100% of that entity, eliminating concerns about non-debtor members. As to Tunnel, which had an unaffiliated co-owner, the court found no requirement that non-debtor members affirmatively consent to turnover, particularly where they did not intervene after notice. Accordingly, the court ordered turnover of the specified LLC membership interests to the plaintiff’s designee to satisfy the judgment in whole or in part. ♦