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CHARGING ORDERS

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

 

2015 - Florida - Kearney

 

Kearney Construction Co., LLC v. Bank of America, N.A, 2015 WL 1499155 (M.D. Fla., 2015).

 

United States District Court, M.D. Florida, Tampa Division.

 

KEARNEY CONSTRUCTION COMPANY, LLC, et al., Plaintiffs,

 

v.

 

BANK OF AMERICA, N.A., Defendant.

 

No. 8:09–cv–1912–T–33TBM. | Signed April 1, 2015.

 

ORDER

 

VIRGINIA M. HERNANDEZ COVINGTON, District Judge.

 

*1 This cause comes before the Court in consideration of Defendant Bank of America, N.A.’s Motion for Reconsideration of March 20, 2015, Order Denying Motion to Reopen Case (Doc. # 69), filed on March 26, 2015. For the reasons stated below, the Court grants the Motion in part.

 

Discussion

 

It is within the Court’s discretion to grant a motion for reconsideration. Lussier v. Dugger, 904 F.2d 661, 667 (11th Cir.1990). Arguments in favor of granting reconsideration must be balanced against the desire to achieve finality in litigation. Id . As stated in Florida College of Osteopathic Medicine, Inc. v. Dean Witter Reynolds, Inc., 12 F.Supp.2d 1306, 1308 (M.D.Fla.1998), “[a] motion for reconsideration must demonstrate why the court should reconsider its past decision and set forth facts or law of a strongly convincing nature to induce the court to reverse its prior decision.” Further, “in the interests of finality and conservation of scarce judicial resources, reconsideration is an extraordinary remedy to be employed sparingly.” Lamar Adver. of Mobile, Inc. v. City of Lakeland, 189 F.R.D. 480, 489 (M.D.Fla.1999).

 

This Court recognizes three grounds to justify reconsideration of a prior order under Federal Rule of Civil Procedure 59(e): “(1) an intervening change in controlling law; (2) the availability of new evidence, and (3) the need to correct clear error or manifest injustice.” Fla. College of Osteopathic Med., Inc., 12 F.Supp.2d at 1308. In deciding a motion for reconsideration, “[t]his Court will not reconsider its judgment when the motion for reconsideration fails to raise new issues but, instead, relitigates that which the Court previously found lacking.” Ludwig v. Liberty Mut. Fire Ins. Co., No. 8:03–cv–2378–T–17MAP, 2005 U.S. Dist. LEXIS 37718, at *8 (M.D.Fla. Mar. 30, 2005). In addition, “a motion for reconsideration is not the proper forum for the party to vent dissatisfaction with the Court’s reasoning.” Id. at *11 (internal citation and quotation omitted).

 

On August 26, 2009, Plaintiffs—Kearney Construction Company, LLC; Bing Charles W. Kearney, Jr.; Brian W. Seeger; and Alan G. Payne-filed suit against Bank of America in state court. (Doc. # 2). Bank of America removed this action to this Court on the basis of diversity of citizenship on September 18, 2009. (Doc. # 1).

 

On February 21, 2011, the parties filed an Agreed Joint Motion and Stipulation to Entry of Final Judgment in Favor of Bank of America, N.A. and the Dismissal of All Claims by Kearney, Seeger, and Payne Agaisnt the Bank. (Doc. # 62). The Court granted the Motion on February 22, 2011. (Doc. # 63). Accordingly, the Clerk was directed to enter Judgment in favor of Defendant as follows:

 

(A) Bank of America, N.A. shall recover from Bing Charles W. Kearney, Jr., a/k/a Bing Kearney, Brian W. Seeger, and Alan G. Payne, jointly and severally, the sum of $7,603,581.35, which shall continue to accrue interest at .30% in accordance with 28 U.S.C. § 1961.

 

*2 (B) Bing Charles W. Kearney, Jr., a/k/a Bing Kearney, Brian W. Seeger, and Alan G. Payne stipulate and agree that they shall take nothing by this action and that the final judgment shall dismiss, with prejudice, all claims by Bing Charles W. Kearney, Jr., a/k/a Bing Kearney, Brian W. Seeger, and Alan G. Payne against Bank of America, N.A.

 

(C) The parties stipulate that each side shall bear their own fees and costs in this action. FOR ALL OF WHICH LET EXECUTION ISSUE.

 

(Id.) (emphasis in original). After entry of the Judgment, the Clerk was directed to close this case. (Id.). The Clerk entered a Judgment in favor of Bank of America on February 22, 2011, and thereafter, this case was closed. (See Doc. # 64).

 

On March 20, 2015, Bank of America filed a Motion to Reopen Case (Doc. # 65), Motion for Charging Order on Limited Liability Company Interests (Doc. # 66), and Motion for Charging Order on Partnership Interests (Doc. # 67). That same day, the Court entered an Order denying the Motion to Reopen Case and, as a result, denied the remaining Motions as moot. (Doc. # 68). In the present Motion, Bank of America requests that this Court reconsider its March 20, 2015, Order, and for this Court to reopen the case and reinstate the Motions for Charging Orders, nunc pro tunc, to the March 20, 2015, filing date. (See Doc. # 69).

 

In its Motion to Reopen Case, Bank of America sought to reopen this action to “enforce and execute on its judgment pursuant to the Federal Rules of Civil Procedure, including, but not limited to, Rule 69, Execution.” (Doc. # 65 at 1). To the extent Bank of America requests that this Court continue to retain jurisdiction over this action for the limited purpose of enforcing the February 22, 2011, judgment, this Court grants Bank of America’s Motion for Reconsideration. See Riggs v. Johnson Cnty., 6 Wall. 166, 73 U.S. 166, 187, 18 L.Ed. 768 (1867) (“[T]he jurisdiction of a court is not exhausted by the rendition of the judgment, but continues until that judgment shall be satisfied.”). However, the Court stands behind its March 20, 2015, Order (Doc. # 68), to the extent that this Court declines to reopen this action. See Aronowitz v. Home Diagnostics, Inc., No. 93–06999–CIV, 2010 WL 2351468, at *5 (S.D.Fla. June 11, 2010) aff’d, 419 F. App’x 988 (Fed.Cir.2011) (“Courts possess discretion in determining whether to reopen a case.”).

 

The Court notes that Bank of America filed a Motion for Charging Order on Limited Liability Company Interests (Doc. # 66) and a Motion for Charging Order on Partnership Interests (Doc. # 67) on March 20, 2015. In light of this Court denying Bank of America’s Motion to Reopen Case, the Court simultaneously denied these Motions as moot. (See Doc. # 68). To the extent Bank of America requests that this Court reconsider its prior Order, and reinstate these Motions, nunc pro tunc, the Court declines to do so.

 

In filing both the Motion for Charging Order on Limited Liability Company Interests (Doc. # 66) and Motion for Charging Order on Partnership Interests (Doc. # 67), Bank of America failed to comply with the Local Rules; specifically Local Rule 3.01(g). Local Rule 3 .01(g) states in relevant part:

 

*3 Before filing any motion in a civil case, except a motion for injunctive relief, for judgment on the pleadings, for summary judgment, to dismiss or to permit maintenance of a class action, to dismiss for failure to state a claim upon which relief can be granted, or to involuntarily dismiss an action, the moving party shall confer with counsel for the opposing party in a good faith effort to resolve the issues raised by the motion, and shall file with the motion a statement (1) certifying that the moving counsel has conferred with opposing counsel and (2) stating whether counsel agree on the resolution of the motion. A certification to the effect that opposing counsel was unavailable for a conference before filing a motion is insufficient to satisfy the parties’ obligation to confer.

 

Bank of America’s representation in both Motions that “[p]ursuant to Local Rule 3.01(g), M.D. Fla., opposing counsel has not responded to Bank of America” is insufficient to satisfy Local Rule 3.01(g). Therefore, although this Court continues to retain jurisdiction to enforce the judgment in this closed action, the Court declines to reinstate Bank of America’s Motion for Charging Order on Limited Liability Company Interests (Doc. # 66) and a Motion for Charging Order on Partnership Interests (Doc. # 67) nunc pro tunc. These Motions—originally denied as moot—are denied without prejudice for Bank of America’s failure to comply with Local Rule 3.01(g). Bank of America may re-file these Motions once counsel has complied with Local Rule 3.01(g).

 

Accordingly, it is hereby

 

ORDERED, ADJUDGED, and DECREED:

 

Defendant Bank of America, N.A.’s Motion for Reconsideration of March 20, 2015, Order Denying Motion to Reopen Case (Doc. # 69) is GRANTED in PART as set forth herein.

 

DONE and ORDERED.

 

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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.

 

Contact Jay Adkisson:

 

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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.