O'Neal v. CDB American Franchise System, Inc., 2021 WL 3709716 (M.D.Fla., Aug. 20, 2021).
Opinion 2021 Florida Jurisdiction 2021FloridaONealJurisdiction
Related Article: None.
AI Synopsis
♦ The United States District Court for the Middle District of Florida addressed a motion by Plaintiff Thomas O’Neal seeking a charging lien against Defendant Brandon Carnes’s membership interests in nine Missouri-based limited liability companies. Following a prior judgment in his favor for $608,400.00, O’Neal attempted to collect these funds using Florida’s debt execution procedures as permitted under Federal Rule of Civil Procedure 69(a), which requires federal courts to follow the execution practices of the state in which they are located. The primary legal hurdle involved the court's jurisdiction over foreign property and assets. Florida Statute 605.0503 allows courts of competent jurisdiction to issue charging orders to intercept distributions from a debtor's interest in an LLC, essentially redirecting payments that would otherwise go to the member. While membership interests are legally classified as intangible personal property that generally accompanies the owner wherever they reside, Florida case law dictates that state courts lack the necessary in rem or quasi in rem jurisdiction over property that is not domestic to the state. The court found that O’Neal failed to satisfy this essential jurisdictional requirement because the evidence established that Carnes was a resident of Kansas and the LLCs in question were organized and domestic to Missouri rather than Florida. Without a sufficient and legally recognized connection to the state of Florida, the court determined it could not exercise the necessary judicial authority over the intangible personal property interests held by a non-resident in foreign companies. Consequently, United States Magistrate Judge Amanda Arnold Sansone concluded that the court lacked the power to impose the requested lien on these specific external assets. As a result of these jurisdictional findings, the Plaintiff’s motion for a charging order against the defendant’s Missouri limited liability company interests was denied. ♦
O'Neal v. CDB American Franchise System, Inc., 2021 WL 3709716 (M.D.Fla., Aug. 20, 2021).
United States District Court, M.D. Florida, Tampa Division.
Thomas O’NEAL, Plaintiff,
v.
CDB AMERICAN FRANCHISE SYSTEM, INC.; CDB American Shaman, LLC; Shaman Botanicals, Inc.; Florida Shaman Properties, LLC; Brandon Carnes; and Katelyn Sigman, Defendants.
Case No. 8:20-cv-936-KKM-AAS
Signed 08/20/2021
Attorneys and Law Firms
Wolfgang M. Florin, Scott L. Terry, Florin Gray Bouzas Owens, LLC, Lutz, FL, for Plaintiff.
ORDER
AMANDA ARNOLD SANSONE, United States Magistrate Judge
PAGE_1 Plaintiff Thomas O’Neal moves for the entry of a charging lien on Defendant Brandon Carnes’s membership interest in these nine Missouri limited liability companies: (1) F&B, LLC; (2) BC Convenience, LLC; (3) Dynamic Distribution, LLC; (4) Missouri A.S. Properties, LLC; (5) AS Mission Wellness, LLC; (6) Arizona AS Properties, LLC; (7) Colorado Shaman Properties, LLC; (8) Eighty8 Investments, LLC; and (9) Vast Distribution, LLC (collectively, the Missouri LLCs). (Doc. 82, p.1).
Mr. O’Neal obtained judgment against Mr. Carnes and others for $608,400.00. (Doc. 78). Under Federal Rule of Civil Procedure 69(a), the procedure for executing judgment “must accord with the procedure of the state where the court is located.” Fed. R. Civ. P. 69(a)(1). Thus, Florida procedure for executing judgments applies here.
Florida Statute 605.0503(1) provides:
On application to a court of competent jurisdiction by a judgment creditor of a member or a transferee, the court may enter a charging order against the transferable interest of the member or transferee for payment of the unsatisfied amount of the judgment with interest. Except as provided in subsection (5), a charging order constitutes a lien upon a judgment debtor’s transferable interest and requires the limited liability company to pay over to the judgment creditor a distribution that would otherwise be paid to the judgment debtor.
This court must therefore determine whether it has competent jurisdiction to issue a charging order against Mr. Carnes’s membership interests in the Missouri LLCs.
Florida Statute § 605.0501 states that transferable interests in limited liability companies, like membership interests, are personal property. Florida courts have established that membership and other transferable interests in limited liability companies are intangible personal property that “accompan[y] the person of the owner.” Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308, 1315–16 (M.D. Fla. 2015) (citing Beverly Beach Props. v. Nelson, 68 So.2d 604, 611 (Fla. 1953)). As such, membership interests in foreign LLCs (like the Missouri LLCs here) may be subject to a charging order issued by a Florida court if the other jurisdictional requirements are satisfied.
“Florida courts do not have in rem or quasi in rem jurisdiction over foreign property.” Sargeant v. Al–Saleh, 137 So.3d 432, 434 (Fla. Dist. Ct. App. 2014) (citations omitted). The cases favorably cited by Mr. O’Neal in his motion confirm this requirement. See Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308, 1315 (M.D. Fla. 2015) (“Therefore, because Barber resides in Florida, Barber’s membership interest in Blaker is located with her in Florida and is properly subject to in rem jurisdiction in this state”); In re McCuan, 2018 WL 11206025, PAGE_5 (Bankr. M.D. Fla. Feb. 13, 2018) (“Here, there is no dispute that this Court has personal jurisdiction over Jill McCuan because her primary residence is in Florida”).
Mr. O’Neal failed to establish Mr. Carnes’s membership interests in the Missouri LLCs are sufficiently domestic to Florida to establish in rem or quasi in rem jurisdiction. Instead, Mr. Carnes is a Kansas resident with membership interests in limited liability companies solely domestic to Missouri. (See Doc. 6, Doc. 82–1). As such, this court cannot exercise jurisdiction over Mr. Carnes’s membership interests in the Missouri LLCs.
PAGE_2 Accordingly, Mr. O’Neal’s motion for a charging lien on Mr. Carnes’s limited liability company interests in the Missouri LLCs is DENIED.
ORDERED in Tampa, Florida on August 20, 2021.