The Creditor's Remedy Against A Debtor's Interest In An LLC Or Partnership
2013 - California - Safeco Insurance
Safeco Ins. Co. v. Raisch, Case No. C 11-05332 PSG (N.D.Cal., March 20, 2013).
SAFECO INSURANCE COMPANY OF AMERICA, Plaintiff,
RAISCH COMPANY, a California CORPORATION, and DOUGLAS RAISCH, an individual, Defendants.
Case No. C 11-05332 PSG.
United States District Court, N.D. California, San Jose Division.
March 20, 2013.
ORDER CHARGING DEFENDANT'S PARTNERSHIP INTEREST
PAUL S. GREWAL, Magistrate Judge.
On November 27, 2012, the court granted the parties' stipulation for entry of judgment against Defendants Raisch Company and Douglas Raisch (collectively, "Defendants") in the amount of $298,329.81. On January 16, 2013, Plaintiff Safeco Insurance Company of America ("Safeco") moved for entry of a charging order against non-party partnership AG Raisch, B A Raisch, D E Raisch, D KL dba R&R Farms ("R&R Farms") located at 15581 Toyon Dr., Los Gatos, CA 95030. Third-party Raisch Investment Group, Ltd. ("RIG") filed a non-opposition but noted that it holds a senior judgment against Defendants and a charging order against R&R Farms. On March 5, 2013, Safeco and RIG appeared for hearing, but Defendants did not appear. Having considered the papers and arguments of counsel, the motion is GRANTED.
Taken together, California Code of Civil Procedure sec. 708.310-708.320 and Corporations Code sec. 16504 allow the court to impose a charging order against the judgment debtor's transferable partnership interest to satisfy any outstanding judgment against the debtor partner. Safeco has submitted declarations from a Santa Clara Superior Court proceeding of both Defendant Douglas Raisch and Bryan Raisch, partner in the general partnership of R&R Farms. While these declarations establish that at least as of August 20, 2012, Douglas Raisch had a 25% partnership interest in R&R Farms, it is unclear as to whether said partnership interest was transferable and whether Douglas Raisch still holds the interest. Without deciding this issue, the court finds it appropriate to impose a charging order on any partnership interest that remains.
Any partnership interest Defendant and judgment debtor Douglas Raisch holds in R&R Farms is hereby charged with the unpaid balance of the judgment entered against Douglas Raisch in favor of Safeco on November 27, 2012, in the sum of $298,329.81 plus interest at the rate of 0.17% per annum calculated from the date of the judgment.
Within 90 days of this order, R&R Farms shall provide to Safeco a written accounting of its assets and liabilities, along with sufficient backup documentation, to allow Safeco a meaningful opportunity to evaluate the financial strength of the partnership.
IT IS SO ORDERED.
 See U.S. Fid. & Guar. Co. v. The Scott Companies, Inc., Case No. 03-5376SBAEMC, 2008 WL 728874, at *1 (N.D. Cal. Mar. 17, 2008).
 See Docket No. 35.
 See id.
 It is well-established that even in diversity cases, post-judgment interest is determined according to federal law. See Northrop Corp. v. Triad Int'l Mktg., S.A., 842 F.2d 1154, 1155 (9th Cir. 1988). The postjudgment interest rate therefore is calculated in compliance with 28 U.S.C. sec. 1961 and the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve system for the week of November 23, 2012, which is the week preceding the judgment.
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More Articles On Charging Orders click here
LAW REVIEW ARTICLES
by Jay Adkisson
For more on the historical background of Charging Orders and contemporary issues involving the same, see Jay Adkisson's article, Charging Orders: The Peculiar Mechanism, 61 South Dakota Law Review 440 (2016). Available at SSRN: https://ssrn.com/abstract=2928487
Analysis of Uniform Limited Liability Company Act Sections re Charging Orders
The Uniform Acts re Charging Orders and Transferable Interests (without Jay's comments):
Effect of Bankruptcy On The Debtor-Member's LLC Interest here
Collected Court Opinions On Charging Orders here and below
NATURE OF REMEDY
Distributions/Economic Rights - Creditors rights to distributional interests/economic rights
Prejudgment Relief - Freezing the interest and distributions pending judgment
Entities - The types of legal entities amenable to charging orders, or not
Procedure - The procedure for obtaining a charging order and ancillary provisions
Unknown Interest - Where the debtor's interest, if any, has not been ascertained
Order Form Generally - Most issues to the form of the charging order
Order Form Future Interests - How the charging order affects subsequently-acquired interests
Exemptions - Available state and federal protections that may apply to charging orders
Abstention - Collateral attacks on charging orders in federal court
Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute
Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs
Foreign Entities - Charging orders against out-of-state entities
Creditor Rights Restrictions - Limitations on creditors' management and informational rights
Information Rights - Creditors' ability to access information about the LLC
Management & Voting Rights - Rights of creditor after charging order issued
LIEN EFFECT AND PRIORITY
Lien - The lien effect of a charging order and priority issues
Compliance - Issues for the LLC and non-debtor members in complying with a charging order
Receiver - The role of the receiver in charging order proceedings
SINGLE MEMBER LLC
Single-Member LLCs - Enforcing the judgment against an LLC with a sole member
Foreclosure - Liquidation by judicial sale of the debtor's right to distributions
REPURCHASE AND REDEMPTION RIGHTS
Repurchase/Redemption Rights - Third-parties' ability to purchase the charged interest
Appeal - Issues relating to the appeal of a charging order
RELATION TO OTHER REMEDIES
Exclusivity - The charging order as the sole remedy available to creditors and exceptions
Voidable Transactions/Fraudulent Transfers - Issues relating to avoidable transfers of interests
Abstention - Attempts to collaterally attack the charging order in federal court
Bankruptcy - Treatment of the debtor/member's interest in bankruptcy
Intra-Member Disputes - Where one member obtains a charging order against another
Taxes - Tax issues relating to charging orders for all involved parties
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Additional Court Opinions About charging orders (unsorted)
THE CHARGING ORDERS PRACTICE GUIDE
The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more
Available for purchase directly from the ABA at https://goo.gl/faZzY6
Also available from Amazon at https://www.amazon.com/Charging-Orders-Practice-Guide-Understanding/dp/1641052643
OTHER INFORMATIONAL WEBSITES
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