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CHARGING ORDERS

The Creditor's Remedy Against A Debtor's Interest In An LLC Or Partnership

 

2014 - Alabama - SE Property

 

SE Property Holdings, LLC v. Unified Recovery Group, LLC, 2014 WL 5846388 (S.D.Ala., 2014).

 

United States District Court, S.D. Alabama, Southern Division.

 

SE PROPERTY HOLDINGS, LLC., Plaintiff,

 

v.

 

UNIFIED RECOVERY GROUP, LLC, et al, Defendants.

 

Misc.Action No. 14–0008–KD–M.

 

Signed Nov. 12, 2014.

 

Attorneys and Law Firms

 

Allen E. Graham Gilbert L. Fontenot, Maples & Fontenot, LLP, Mobile, AL, for Plaintiff.

 

William Lee Webb, Fairhope, AL, for Defendant.

 

 

 

MEMORANDUM OPINION AND ORDER

 

KRISTI K. DuBOSE, District Judge.

 

*1 This action is before the Court on the Application for Charging Order pursuant to Ala.Code sec. 10A–5–6.05, against Jeff S. Green filed by Plaintiff SE Property Holdings, LLC (Seph) (doc. 85). Seph alleges that Defendant Green has not satisfied the final judgment and therefore, it is necessary to obtain a charging order against his interests in certain limited liability companies.

 

On or about September 27, 2013, judgment was rendered by the United States District Court for the Middle District of Louisiana in favor of Seph and against Green and other codefendants. The judgment was registered in this District on March 27, 2014 by filing a certified copy of the judgment (Doc. 1).1 The principal judgment amount was $23,626,922.31, plus interest as of November 5, 2012, in the amount of $2,784,717.10; with post judgment interest at a rate of 8% per annum on $16,666.85 of the judgment, a per diem of $3.65; and with post-judgment interest at a rate of 18% per annum on $23,610,255.46, of the judgment ($23,626,922.31–$16,666.85), and a per diem of $11,643.41. Additional interest continues to accrue on the judgment.

 

Federal Rule of Civil Procedure 69(a)(1) provides that a "money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure on execution-and in proceedings supplementary to and in aid of judgment or execution-must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies."

 

Seph represents that Green has a membership interest in the following Alabama limited liability companies: Placid Drive, LLC; Ashford Park, LLC; Catahoula Trading Company, LLC; Greenwings, LLC; G–Mc Aviation, LLC; Go Development, LLC; Green & Sons, LLC; Green & Sons II, LLC; Hawks Eye, LLC; J–Max, LLC; LBG, LLC; and Unified Recovery Group, LLC. Seph also alleges that Green has a membership interest in the following Louisiana limited liability companies: IED, LLC; Enon, LLC; SGG Properties, LLC; Mill Creek Farm, LLC; and 631 Main, LLC.

 

Under the Alabama Limited Liability Company Law,2 "[o]n application to a court of competent jurisdiction by any judgment creditor of a member or assignee, the court may charge the interest of the member or assignee with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of financial rights." Ala.Code sec. 10A–5–6.05(a) (repealed effective Jan. 1, 2017). Section 10A5–6.05 "shall be the sole and exclusive remedy of a judgment creditor with respect to the judgment debtor's membership interest." Id.

 

Upon consideration, the Court finds that Seph's Application for Charging Order under Ala.Code sec. 10A–5–6.05 against the interests of Jeff S. Green is due to be granted unless the Defendants present valid authority indicating otherwise.3 Accordingly, Seph's Application (doc. 85) is GRANTED, without further action by the Court, unless the Defendants file an objection to Seph's Application (doc. 85) on or before November 21, 2014.

 

*2 A separate Charging Order to effectuate the decision in this memorandum order will be entered contemporaneously herewith; it is further ORDERED that the Charging Order will become effective November 26, 2014, without further action by the Court unless an objection is filed, see infra, and the Court rescinds the Charging Order.

 

DONE and ORDERED.

 

Footnotes

 

1

 

Title 28 U.S.C. sec. 1963 provides for "[r]egistration of judgment for enforcement in other districts" and states that a judgment of district court "may be registered by filing a certified copy of the judgment in any other district[.]" Id. "A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner." Id.

 

2

 

Ala.Code sec. 10A–5–1.01, et seq.

 

3

 

This Court has previously issued charging orders under this statute in other actions. See Parke v. Glover, Civil Action No. 2:11–00639–KD–M, 2014 WL 1577509 (S.D.Ala. Apr. 21, 2014); Scottsdale Ins. Co. v. Mitchell Co., Civil Action No. 11–00578–N, 2013 WL 5745839 (S.D.Ala. Oct. 23, 2013) (Nelson, M.J.); Regions Bank v. Stewart, Civil Action No. 10 –0145–M, 2011 WL 1827453 (S.D.Ala. May 10, 2011) (Milling, M.J.); Vision Bank v. Swindall, Civil Action No. 09–00442–CG–M (S.D. Ala. April 3, 2012 (Doc. 108); November 30, 2010 (Doc. 71); December 4, 2012 (Doc. 111)). Other federal courts have done so as well under the state statutes of their respective jurisdictions. See Scottsdale Ins., 2013 WL 5745839, at n. 2 (citing cases).

 

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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

WEBSITE CONTENTS

 

General Information

 

Analysis of Uniform Limited Liability Company Act Sections re Charging Orders

  • Charging Orders (Section 503) contains the general charging order provisions.
  • Transfers of Transferable Interests (Section 502) includes definitions of "transfer" (102(23)), "transferable interests" (102(24)), and "transferees" (102(25)) defines to what the charging order attaches.
  • Definition of Distribution (Section 102(4)) specifies the economic right obtained through a charging order lien and/or foreclosure.

 

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

 

Charging Order Example Sample Form

 

TOPICAL RESEARCH

 

NATURE OF REMEDY

     Distributions/Economic Rights - Creditors rights to distributional interests/economic rights

PREJUDGMENT

     Prejudgment Relief - Freezing the interest and distributions pending judgment

MOTION MECHANICS

     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

INTERSTATE

     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 RESTRICTIONS

     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

     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

     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

     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

SUNDRY OTHER

     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

 

= = = = =

 

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

by Jay Adkisson

 

  • Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances.

 

  • Creditor-Debtor Law - An overview of judgment enforcement tools and their uses by creditors, and possible defenses by debtors. Related topics include:

 

  • Voidable Transactions - Discussion of the Uniform Voidable Transactions Act (a/k/a 2014 Revision of the Uniform Fraudulent Transfers Act) and fraudulent transfer law in general.

 

  • California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues.

 

  • Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused.

 

  • Protected Series - An examination of the single most complex statutory legal structure yet created, with particular reference to the Uniform Protected Series Act of 2017.

 

  • Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser.

 

 

  • Captive Insurance - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business.

 

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© 2020 Jay D. Adkisson. All Rights Reserved. No claim to government works or the works of the Uniform Law Commission. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction. This site is https://chargingorder.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.