Opinion 2021 Ohio Kerr Charging Order Absention

 

Adkisson's

CHARGING ORDERS

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

2021 - Ohio - Kerr

 

Kerr v. Collier, 2021 WL 972529 (N.D.Ohio, March 16, 2021).

 

United States District Court, N.D. Ohio, Western Division.

 

Jeremy Kerr, Plaintiff

 

v.

 

Judge John Collier, Defendant

 

Case No. 3:20-cv-01110

 

03/16/2021

 

Jeffrey J. Helmick, United States District Judge

 

MEMORANDUM OPINION AND ORDER

 

BACKGROUND AND HISTORY

 

*1 Before me is Plaintiff’s pro se Motion to Alter or Amend Judgment under Federal Civil Procedure Rule 59(e). Plaintiff Jeremy Kerr filed this action under 42 U.S.C. § 1983 against Henry County Common Pleas Court Judge John Collier, claiming that in 2013, the judge improperly granted the opposing party’s Charging Order allowing that party to collect their judgment from Plaintiff’s interest in limited liability companies. He asked me to declare that the Charging Order violated his right to due process and is void, along with all other proceedings and Orders that happened or were issued after that date. I dismissed the Complaint on two grounds. First, I concluded that the Rooker-Feldman Doctrine prohibits me from overturning a state court judgment or Order. I cannot void the state court’s Charging Order and nullify all other proceedings and Orders that occurred after that date.1 Second, I concluded the action was filed well beyond the two-year statute of limitations period for § 1983 actions. Plaintiff seeks to reinstate his case to my active docket claiming the Rooker-Feldman Doctrine does not apply to due process claims and contending that the statute of limitations does not apply because the judgment should be declared to be void.

 

FN1 The state court proceedings continued until 2018, and included appeals, the appointment of a receiver, and other collections actions.

 

“A district court may grant a Rule 59(e) Motion to Alter or Amend Judgment only if there is: ‘(1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice.’ ” Henderson v. Walled Lake Consol. Schs., 469 F.3d 479, 496 (6th Cir. 2006) (quoting Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005)). Rule 59 motions “are not intended as a vehicle to relitigate previously considered issues...and are not the proper vehicle to attempt to obtain a reversal of a judgment by offering the same arguments previously presented.” Kenneth Henes Special Projects Procurement v. Cont’l Biomass Indus., Inc., 86 F. Supp. 2d 721, 726 (E.D. Mich. 2000) (emphasis and citation omitted); see also Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir. 1998) (noting that a Rule 59(e) motion “is not an opportunity to re-argue a case” nor an avenue to raise arguments that “could have, but [were] not” raised before); Beltowski v. Bradshaw, No. 1:08 CV 2651, 2009 WL 5205368, at *4 (N.D. Ohio Dec. 23, 2009) (“The motion for reconsideration should not provide the parties with an opportunity for a second bite at the apple.”).

 

Plaintiff asserts that my Opinion contained two clear errors of law. First, citing Catz v. Chalker, 142 F.3d 279 (6th Cir. 1998), he argues that because he asserted a claim for denial of due process, the Rooker-Feldman Doctrine does not apply. Second, he contends that because the judgment in question should be considered void, the two-year statute of limitations does not apply to his challenge.

 

*2 As an initial matter, Catz v. Chalker, 142 F.3d 279 (6th Cir. 1998) was overruled by Coles v. Granville, 448 F.3d 853, 857-59 (6th Cir. 2006). The focus is no longer on whether the federal claim is “inextricably intertwined” with the state court judgment. Catz, 142 F.3d at 293. Instead, the inquiry is on whether the source of Plaintiff’s injury is the state court judgment itself and whether Plaintiff is asking me to review that judgment and overturn or void it. McCormick v. Braverman, 451 F.3d 382, 393 (6th Cir. 2006); Kovacic v. Cuyahoga County Dep’t of Children and Family Services, 606 F.3d 301, 308-311 (6th Cir. 2010); Berry v. Schmitt, 688 F.3d 290, 298-99 (6th Cir. 2012). In this case, that is exactly what Plaintiff is asking me to do. He is challenging a Charging Order issued in 2013 by a state court judge to allow the opposing party to collect on a judgment that previously had been issued. Plaintiff asks me to void not only the Charging Order but asks me to void all subsequent Orders issued in that case and nullify all subsequent proceedings. It is impossible for me to take those actions without exercising what is in substance appellate review of the state court proceedings. I cannot void or vacate judgments issued by the state court in a state civil case. Hall v. Callahan, 727 F.3d 450, 453-55 (6th Cir. 2013). Moreover, his argument that he is challenging the Order on procedural grounds is unavailing. If I construe Rooker-Feldman to allow attacks on a state court’s alleged procedural errors, then federal courts could extensively review state court trial proceedings, a task belonging to state appellate courts. Id.

 

Furthermore, Plaintiff could and should have raised his concerns to the Ohio Appellate Courts in 2013. Instead, he tried to attack that Order seven years later through a civil rights action under 42 U.S.C. § 1983. The statute of limitations for filing any claim under § 1983 is two years.

 

Plaintiff cites a staff note in the Ohio Rule of Civil Procedure to say that a void judgment is not subject to statute of limitations issues. A broader reading of that reference provides context for that statement. The commentators noted that unlike Federal Civil Procedure Rule 60(b), the Ohio Rule does not provide a basis for relief from judgment for a void (as opposed to voidable) judgment. The rationale for this exclusion was that such a provision was unnecessary because a truly void judgment, one entered without subject matter jurisdiction or personal jurisdiction of the Defendant, can be declared to be void by any Ohio court without regard to the statute of limitations in question in that action. There are several problems with Plaintiff’s application of that staff note here. First, the Charging Order was entered in a case in which neither the state court’s subject matter jurisdiction over the case nor the personal jurisdiction over the parties was an issue. Under Ohio law, that would not make the Charging Order void, but rather voidable at best. No Ohio court declared the Charging Order to be void and as stated above, I am barred by the Rooker-Feldman Doctrine from doing so. The claim brought to this federal court under 42 U.S.C. § 1983 is one involving an active and still valid state court Order. Second, Ohio Civil Procedure Rule 60(b) has no effect on the two-year statute of limitations for bringing claims in federal court under 42 U.S.C. § 1983. The Charging Order in question was issued in 2013. Even if Plaintiff could get past the bar of Rooker-Feldman, the statute of limitation for bringing an action under 42 U.S.C. § 1983 expired in 2015.

 

CONCLUSION

 

Therefore, Plaintiff’s Motion to Alter or Amend Judgment under Rule 59(e) (Doc. No. 7) is denied. His Request for an Order (Doc. No. 8) is denied as moot. I certify, pursuant to 28 U.S.C. § 1915(a)(3), that an appeal from this decision could not be taken in good faith.

 

So Ordered.

 

s/ Jeffrey J. Helmick

 

United States District Judge

 

 

 

 

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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

     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

INTERSTATE

     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 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

     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

 

= = = = =

 

List Of Court Opinion Sections

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.

 

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