Opinion 2019 Florida Pansky Charging Order

 

2019 - Florida - Pansky

 

 

Pansky v. Barry S. Franklin & Assoc., 2019 WL 581620 (Fla.App., Feb. 13, 2019).

 

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, Fourth District.

 

Daniel PANSKY, Appellant,

 

v.

 

BARRY S. FRANKLIN & ASSOCIATES, P.A., Appellee.

 

No. 4D16-1353

 

[February 13, 2019]

 

Appeal of non-final order from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Timothy L. Bailey, Judge; L.T. Case No. FMCE 12-013820 (41/97).

 

Attorneys and Law Firms

 

Scott Edwards of Scott J. Edwards, P.A., Boca Raton, for appellant.

 

Barry S. Franklin of Barry S. Franklin & Associates, P.A., Aventura, for appellee.

 

Opinion

 

Per Curiam.

 

*1 Daniel Pansky appeals from a trial court's nonfinal order authorizing a charging order and transfer of his interest in Daniel Pansky, LLC in favor of his judgment creditor, the law firm of Barry S. Franklin & Associates, P.A. ("law firm"). Because we find the trial court exceeded its statutory authority pursuant to section 605.0503, Florida Statutes (2016), when it transferred Pansky's "right, title, and interest" in the limited liability company, we reverse.

 

The underlying facts show that the law firm had previously represented Pansky in a divorce proceeding. The law firm withdrew as counsel, claiming it was owed attorney's fees that Pansky had not paid. The law firm obtained monetary judgments for the claimed fees and attempted to collect on the judgments by filing a motion for charging order against Daniel Pansky, LLC, in which Pansky has an ownership interest. The law firm also sought transfer of Pansky's ownership interest in the LLC to the law firm.

 

Pansky conceded that the law firm was entitled to entry of a charging order, but objected to any transfer of his ownership interest in the LLC.

 

The trial court held a hearing on the law firm's motion and orally ruled that based on Pansky's concession, an agreed order granting a charging order would be entered. The court stated that it would reserve ruling on any additional relief beyond a charging order that the law firm requested.

 

The trial court entered a written order granting the charging order, but also transferring Pansky's "right, title, and interest" in the LLC. It is from this order that Pansky appeals.

 

Section 605.0503(3), Florida Statutes, provides that "a charging order is the sole and exclusive remedy by which a judgment creditor of a member or member's transferee may satisfy a judgment from the judgment debtor's interest in a limited liability company or rights to distributions from the limited liability company." Id. (emphasis added).

 

"[A] charging order constitutes a lien upon a debtor's transferable interest and requires the [LLC] to pay over to the judgment creditor a distribution that would otherwise be paid to the judgment debtor." § 605.0503(1), Fla. Stat. (alterations added).

 

For single-member LLCs, a charging order is "not the sole and exclusive remedy by which the judgment creditor may satisfy the judgment. ..." § 605.0503(4), Fla. Stat. (emphasis added). In the case of a single-member LLC:

 

[I]f a judgment creditor of a member or member's transferee establishes to the satisfaction of a court of competent jurisdiction that distributions under a charging order will not satisfy the judgment within a reasonable time ... upon such showing, the court may order the sale of that interest in the limited liability company pursuant to a foreclosure sale.

 

Id.

 

Here, a factual dispute exists as to whether Daniel Pansky is the sole member of the LLC. Pansky maintains that it is a two-member LLC, such that only a charging order is authorized, and the law firm contends that Pansky is the sole member.

 

At the hearing on the law firm's motion, the court stated "I don't have enough in front of me to show it's a one-member LLC that I can give you-all [sic] that other relief. But since there's no opposition to the entry of the charging order, that's granted."

 

*2 As such, the court stated it would "reserve jurisdiction on the other prayers for relief, such as [a freeze order] and transferring Mr. Pansky's ownership interest" until the factual disputes were determined at a later proceeding. (emphasis added).

 

In Abukasis v. MTM Finest, Ltd., the Third District reversed a trial court's order which transferred the appellant's "membership interest" in an LLC toward the satisfaction of a debt. Abukasis v. MTM Finest, Ltd., 199 So.3d 421, 422 (Fla. 3d DCA 2016). The Third District explained that it found "no authority for an order directly transferring an interest in property to a judgment creditor in partial or full satisfaction of a money judgment." Id.

 

The Third District further stated that the trial court "failed to conform with even the most rudimentary requirements of section 605.0503[.]" Id. at 423; see also McClandon v. Dakem & Assocs., LLC, 219 So.3d 269, 271 (Fla. 5th DCA 2017) (explaining that a charging order should only divest a debtor of his or her "economic opportunity to obtain profits and distributions from the LLC," and it should charge only the debtor's membership interest and not managerial rights); Capstone Bank v. Perry-Clifton Enter., LLC, 230 So.3d 970, 971 (Fla. 1st DCA 2017) (explaining that a charging order instructs the entity to give the creditor any distributions that would otherwise be paid to the member of the entity).

 

On appeal, the law firm contends that the trial court's order does not make a transfer or conveyance of property or assets. The firm asserts that the order merely adjudicates the law firm's entitlement to a charging order. We find this argument unconvincing.

 

The trial court's order plainly contains language transferring Pansky's "right, title, and interest" in the LLC to the law firm. Because we find that the order goes beyond granting a charging order—as was agreed to by the parties and authorized by statute—we reverse and remand for further proceedings consistent with this opinion.

 

Reversed and remanded.

 

 

 

 

 

 

2020.04.30 ... Charging Order Denied For Lack Of Proof Of The Debtor's Interest In Dhillon

2020.02.29 ... Florida Charging Order Requires Distributions To Be Re-Directed To The Creditor In Kostoglou

2019.06.24 ... Charging Order Protection Backfires At Judicial Sale In Preservation Holdings

2019.04.27 ... Iowa Supreme Court Serves Up A Shoddy Charging Order Opinion In Retterath

2019.03.19 ... Million Dollar Quartet Leads To Lien Priority Dispute Involving Charging Order

2019.02.18 ... Florida Order Awarding LLC Interest To Creditor Reversed In Pansky

 

More Articles On Charging Orders click here

 

 

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

 

General Information

• About Jay Adkisson and this website
• Articles About Charging Orders

 

Analysis of Uniform Limited Liability Company Act Sections re Charging Orders

• Charging Orders (Section 503) contains the general charging order provisions.

• Foreclosure of Charging Order Liens (503(c-e)) deals with foreclosure generally of an interest subject to a charging order lien.
• Foreclosure re Single-Member LLC (503(f)) is the special case of foreclosure of an LLC with only one member.

• 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):

• Uniform Limited Liability Company Act, Article V ("ULLCA" and "RULLCA").

• Uniform Partnership Act, Article V - ("UPA" and "RUPA")
• Uniform Limited Partnership Act, Article VII - ("ULPA" and "RULPA")

 

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

 

 

 

Appeal - Issues relating to the appeal of a charging order

 

Bankruptcy - Treatment of the debtor/member's interest in bankruptcy

 

Compliance - Issues for the LLC and non-debtor members in complying with a charging order

 

Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute

 

Creditor Rights Restrictions - Limitations on creditors' management and informational rights

 

Distributions - Creditors rights to distributive payments

 

Economic Rights - Limitation of charging order and foreclosure to debtor's economic rights

 

Exclusivity - The charging order as the sole remedy available to creditors and exceptions

 

Exemptions - Available state and federal protections that may apply to charging orders

 

Foreclosure - Liquidation by judicial sale of the debtor's right to distributions

 

Foreign Entities - Charging orders against out-of-state entities

 

Information Rights - Creditors' ability to access information about the LLC

 

Intra-Member Disputes - Where one member obtains a charging order against another

 

Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs

 

Lien - The lien effect of a charging order and priority issues

 

Management & Voting Rights - Rights of creditor after charging order issued

 

Order Form Generally - Most issues to the form of the charging order

 

Order Form Future Interests - How the charging order affects subsequently-acquired interests

 

Prejudgment Relief - Freezing the interest and distributions pending judgment

 

Procedure - The procedure for obtaining a charging order and ancillary provisions

 

Receiver - The role of the receiver in charging order proceedings

 

Repurchase/Redemption Rights - Third-parties' ability to purchase the charged interest

 

Single-Member LLCs - Enforcing the judgment against an LLC with a sole member

 

Taxes - Tax issues relating to charging orders for all involved parties

 

Unknown Interest - Where the debtor's interest, if any, has not been ascertained

 

Voidable Transactions/Fraudulent Transfers - Issues relating to avoidable transfers of interests

 

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Additional Court Opinions About charging orders (unsorted)

 

 

• 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.

 

• Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States, and special focus on the California Anti-SLAPP law.

 

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

 

© 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.