Opinion 2014 Florida Lefkowitz Lien Charging Order

 

Adkisson's

CHARGING ORDERS

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

 

2014 - Florida - Lefkowitz

 

Lefkowitz v. Quality Labor Mgt., LLC, 2014 WL 5877850 (Fla.App., Distr. 5, 2014).

 

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

 

District Court of Appeal of Florida, Fifth District.

 

Ivan M. LEFKOWITZ, Appellant,

 

v.

 

QUALITY LABOR MANAGEMENT, LLC, et. al., Appellees.

 

No. 5D13–4481.

 

Nov. 14, 2014.

 

Appeal from the Circuit Court for Orange County, Robert J. Egan, Judge.

 

Attorneys and Law Firms

 

Usher Larry Brown, Erin J. O'Leary, Gregg Johnson, and Cherish Benedict, of Brown, Garganese, Weiss & D'Agresta, P.A., Orlando, for Appellant.

 

Samuel M. Nelson, of Burr & Forman LLP, Orlando, for Appellee Quality Labor Management, LLC.

 

No Appearance for other Appellees.

 

Opinion

 

 

 

EVANDER, J.

 

*1 Ivan Lefkowitz appeals an order denying his motion to intervene post-judgment in a lawsuit brought by Quality Labor Management, LLC ("Quality") against Truckare I of Jacksonville, LLC, Michelle Newton, and Brian Newton. In his motion to intervene, Lefkowitz asserted that he had a perfected security interest in certain property of the Newtons that was also the subject of charging orders obtained by Quality. We conclude that the trial court abused its discretion in denying the motion to intervene and, accordingly, reverse.

 

Quality filed its complaint against Truckare I and the Newtons on December 3, 2013. Six days later, the trial court entered a stipulated final judgment of $450,000, in favor of Quality against the three defendants. Additionally, on that same day, the trial court entered four separate charging orders directed to the Newtons' ownership interests in three limited partnerships and a limited liability company.1

 

On December 12, 2013, Lefkowitz filed his motion to intervene. In his motion, Lefkowitz asserted that he had a significant interest in the proceedings because, in 2010, the Newtons pledged to Lefkowitz their ownership interests in the same collateral that was subject to the charging orders, as security for a $250,000 business loan from Lefkowitz. Lefkowitz further alleged that the Newtons executed assignments of their ownership interests in the collateral in favor of Lefkowitz pursuant to the terms of the pledge agreement, that the assignments were executed in blank to permit the automatic assignment of the collateral to Lefkowitz upon default, and that Lefkowitz had perfected his security in the collateral on September 9, 2010, by filing a UCC–1 financing statement.

 

Following an alleged default in payment, Lefkowitz filed a complaint against the Newtons in 2011 seeking to exercise his right to take ownership of the collateral, consistent with the terms of the pledge agreement. That lawsuit was still pending at the time Lefkowitz filed his motion to intervene in the underlying action brought by Quality against the Newtons and Truckare I. Upon Lefkowitz' appeal from the denial of his motion to intervene, this court granted his motion for an emergency stay, thereby precluding enforcement of the charging orders pending resolution of the instant appeal.

 

Regarding interventions, Florida Rule of Civil Procedure 1.230 provides:

 

Anyone claiming an interest in pending litigation may at any time be permitted to assert a right by intervention, but the intervention shall be in subordination to, and in recognition of, the propriety of the main proceeding, unless otherwise ordered by the court in its discretion.

 

The right to intervene is limited after a final judgment has been entered. Technical Chems. & Prods., Inc. v. Porchester Holdings, Inc., 748 So.2d 1090, 1091 (Fla. 4th DCA 2000). Post-judgment intervention is, however, permitted when the ends of justice so require. Wags Transp. Sys., Inc. v. City of Miami Beach, 88 So.2d 751, 752 (Fla.1956) (holding that homeowners who purchased their property in reliance on zoning ordinance and upon fact that all property in zoning district would be maintained as residential property would be permitted, in the interest of justice, to intervene in order to appeal from final decree enjoining city from enforcing zoning restrictions and to present their defenses); Technical Chems., 748 So.2d at 1091–92 (holding that trial court erred in denying post-judgment motion to intervene where party that sought to intervene could not have asserted an interest in subject matter of litigation prior to entry of judgment); Humana Health Plans v. Lawton, 675 So.2d 1382, 1384–85 (Fla. 5th DCA 1996) (holding that health care provider had right to intervene in subscriber's action against negligent tortfeasor to assert its statutory right to reimbursement for medical expenses and to be heard before distribution of judgment settlement proceeds).

 

*2 In the instant case, the general rule against post-judgment intervention is inapplicable because Lefkowitz is not attacking the merits of Quality's judgment, but rather is seeking to defend its interests in certain collateral. See Technical Chems., 748 So.2d at 1091–92. Additionally, as conceded by Quality, Lefkowitz did not have grounds to intervene prior to the entry of judgment. It was only when Quality sought the issuance of the charging orders, directed to the collateral Lefkowitz claimed to have a perfected security interest in, did Lefkowitz have a basis for intervention. Finally, if Lefkowitz can prove the allegations set forth in his motion to intervene, his interest in the collateral would take priority over Quality's claim. See, e.g., Blosam Contractors, Inc. v. Luycx, 535 So.2d 352, 354 (Fla. 1st DCA 1988) (holding that prior perfected security interest in judgment debtor's limited partnership interest had priority over charging lien obtained by judgment creditor).

 

Because the "ends of justice" require that Lefkowitz be afforded the opportunity to defend his interests in that property which is the subject of Quality's charging orders, we reverse the trial court's denial of Lefkowitz' motion to intervene and remand for further proceedings.2

 

REVERSED and REMANDED.

 

ORFINGER and COHEN, JJ., concur.

 

Footnotes

 

1

 

A charging order affords a judgment creditor access to a judgment debtor's rights to profits and distributions from a business entity in which the debtor has an interest. See Young v. Levy, 140 So.3d 1109 (Fla. 4th DCA 2014). Sections 608.433(5) and 620.1703(3), Florida Statutes (2013) provide, as a general rule, that a charging order is the exclusive remedy by which a creditor may satisfy a judgment from the debtor's interest in a limited liability company or in a limited partnership, respectively.

 

2

 

In doing so, we reject Quality's argument that Lefkowitz' failure to file a notice of lis pendens in his lawsuit against the Newtons would somehow cause him to lose his asserted status as the holder of a perfected security interest.

 

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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

 

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