2013 Opinions

2013 Site.Year2013ChargingOrderOpinions

2013 Charging Order Opinions

In re Strata Title, LLC, 2013 WL 1773619 (Bk.D.Ariz., 2013).

♦ The United States Bankruptcy Court for the District of Arizona adjudicated a conflict concerning the membership interests of the debtor in Santerra Apartments, LLC. The court was tasked with determining whether Santerra's operating agreement qualified as an executory contract, whether a specific purchase option triggered by the debtor's bankruptcy was enforceable, and whether the automatic stay applied to the exercise of that option. Judge Daniel P. Collins concluded that the operating agreement was an executory contract because the members retained material unperformed obligations, such as the power to approve the sale or refinancing of the entity's sole asset and the removal of its manager. The court further ruled that the purchase option functioned as an unenforceable ipso facto clause, as its only trigger was the filing of the bankruptcy petition. While the SAM Parties contended that the provision was valid, the court clarified that Section 363(l) of the Bankruptcy Code protects the estate's use of property and invalidates contractual modifications or forfeitures conditioned on a debtor's financial state. Additionally, the judge found that attempting to force a buyout of the debtor's interest would constitute a violation of the automatic stay under Section 362(a)(3) by attempting to gain control over property of the estate. The SAM Parties' plea for stay relief was denied because they failed to demonstrate cause; the court noted that LLC membership interests do not constitute single asset real estate and a desire to be disentangled from the case is insufficient. As a result, the court denied the motion for declaratory relief and ordered the debtor to submit a disclosure statement and reorganization plan by June 3, 2013, detailing the assumption or rejection of its executory contracts. This ruling effectively protected the debtor's assets while establishing a clear timeline for the progression of the Chapter 11 case. ♦

Safeco Ins. Co. v. Raisch, Case No. C 11-05332 PSG (N.D.Cal., March 20, 2013).

♦ No synopsis ♦

Rockstone Capital, LLC v. Marketing Horizons, Ltd., 2013 WL 4046597 (Conn.Super., Unpublished, July 17, 2013).

♦ The Superior Court of Connecticut resolved a post-judgment conflict regarding a motion for a charging order. The plaintiff, Rockstone Capital, LLC, sought to charge the interests of defendant Ashton Edwards in two limited liability companies, Marketing Ventures Worldwide, LLC and Nonprofit Solutions, LLC, after Edwards defaulted on payments from a 2008 stipulated judgment. Edwards moved to dismiss the application, claiming the court lacked jurisdiction over Nonprofit Solutions, LLC—which he labeled a foreign corporation—and arguing that service of process was insufficient. Judge Robert E. Young denied the motion to dismiss and granted the charging order, finding Edwards' arguments meritless. The court ruled that Edwards lacked standing to contest jurisdiction on behalf of the LLC, which was not a party to the litigation. Crucially, the court held that under General Statutes section 34-171, an LLC does not need to be a party to a charging order proceeding because the order only transfers the member's distributional rights to the creditor as an assignee, without impacting the entity's management. The court also clarified that the charging order statute applies to both domestic and foreign limited liability companies and that Nonprofit Solutions was indeed an LLC, not a corporation. Regarding service, the court determined that serving Edwards’ counsel and sending copies via certified mail was sufficient for a post-judgment remedy in an ongoing case. The final order charged Edwards' interests with the debt, required the companies to pay the plaintiff any distributions otherwise due to Edwards, and mandated the disclosure of the companies' financial records and operating agreements to the plaintiff. This decision underscores the limited scope of charging orders and the court's broad authority to enforce judgments against a member's economic interest in business entities. ♦

Capital Trans Int'l, LLC v. Int'l Petroleum Investment Co., 2013 WL 557236 (M.D.Fl., 2013).

♦ Capital Trans International, LLC (CTI) brought suit against three Abu Dhabi-based entities—International Petroleum Investment Company (IPIC), Aabar Investments PJSC, and Tasameem Real Estate Co. LLC—alleging breach of oral contracts for consulting services related to asset acquisitions. The U.S. District Court for the Middle District of Florida examined whether it possessed jurisdiction over these foreign defendants. Regarding IPIC and Aabar, CTI asserted subject matter jurisdiction under the Foreign Sovereign Immunities Act (FSIA). The court determined that IPIC, as a government-owned instrumentality, fell under the FSIA's commercial activity exception because the alleged contracts required payment to be made in Florida, thereby creating a direct effect in the United States. However, the court found that Aabar did not qualify as an "organ" of the Abu Dhabi government because it was created for private commercial profit rather than a national purpose, leading to its dismissal for lack of subject matter jurisdiction. As for Tasameem, the court dismissed the claims due to a lack of personal jurisdiction, noting that the company lacked sufficient business contacts with Florida to satisfy the state's long-arm statute. Finally, the court evaluated IPIC's motion to dismiss based on the doctrine of forum non conveniens. Balancing private and public interest factors, the court concluded that Abu Dhabi was an adequate and available alternative forum. It noted that the overwhelming majority of evidence and witnesses were located in the United Arab Emirates and that UAE law would govern the dispute. Consequently, the court granted the motion to dismiss the action against IPIC on the condition that IPIC stipulates to the domestication and enforcement of any resulting UAE judgment in the United States. This order effectively concluded the proceedings in the Florida district court, directing the parties toward litigation in Abu Dhabi while ensuring a mechanism for the plaintiff to collect on any potential award. ♦

In re Soderstrom (Horizons A Far, LLC v. Webber), 484 B.R. 874 (M.D.Fla., 2013).

♦ The United States District Court for the Middle District of Florida affirmed two pivotal orders from the Bankruptcy Court concerning the sale of a fifty percent membership interest in Plaza N 15 Partners, LLC. The legal dispute was initiated when the appellant, Horizons A Far, LLC, a creditor of the bankruptcy estate, attempted to purchase the debtors' full economic and management interests in the company. Scott Buono, the owner of the remaining fifty percent of the LLC, successfully objected by arguing that the entity's operating agreement restricted the transfer of management rights without his express consent. The Bankruptcy Court sustained this objection, ruling that the operating agreement was an executory contract governed by Section 365 of the Bankruptcy Code. This determination meant the trustee could only sell the debtors' economic interest because Buono refused to accept the appellant as a new managing member. The appellant subsequently argued that it could compel a sale of the entire company under Section 363(h), but the court rejected this contention, finding the statute inapplicable to limited liability companies because membership interests are personal property rather than tenancies in common or joint tenancies. Upon de novo review, District Judge Roy B. Dalton, Jr. affirmed the lower court's decisions. The court held that the appellant was provided sufficient due process and that its late-stage attempt to force a total sale was properly viewed as an untimely motion for reconsideration. Furthermore, the court confirmed that the operating agreement was indeed executory under the functional approach, as its assumption or rejection directly affected the estate's value. The ruling emphasized that Section 363(h) must be strictly interpreted and does not apply to LLC structures. Ultimately, the District Court affirmed the sale of only the economic interest, lifted the stay, and directed the case to be closed. ♦

Eighth & Jackson Investment Group v. Kaw Valley Bank, 2013 WL 183753 (D.Kan., Jan. 17, 2013).

♦ The United States District Court for the District of Kansas considered a motion for discharge and a permanent injunction within an interpleader action. The litigation centered on a 110,000 dollar fund deposited by the plaintiffs, Howard Paul and Eighth and Jackson, representing the purchase price for George Hersh’s membership interest in the company. Kaw Valley Bank asserted a security interest in that membership, while other defendants held competing claims or charging orders. While the bank refused to release its lien, it also contested the plaintiffs’ right to be discharged from the suit. Judge Richard D. Rogers determined that while the court had jurisdiction under statutory interpleader due to the diversity of claimants and the amount in controversy, it lacked jurisdiction over the plaintiffs’ rule interpleader claim because the stakeholders and certain claimants shared Kansas citizenship. Crucially, the court denied the plaintiffs’ request for discharge, finding them to be interested rather than disinterested stakeholders. This determination was based on Paul’s request for a judicial declaration that he owned the membership interest free and clear of the bank’s security interest, a form of relief that went beyond the mere distribution of the interpleaded fund. The court further rejected the plaintiffs’ attempt to make the interpleader conditional upon the severance of the bank’s lien, noting that interpleader is a procedural tool for resolving conflicting claims to a specific res and does not automatically empower the court to adjudicate collateral property rights. Although the plaintiffs remain parties to the suit because of their stake in the outcome, the court granted a permanent injunction restraining the defendants from initiating other proceedings regarding the 110,000 dollar stake. The case was set to proceed to a second stage to determine the ultimate distribution of the funds. ♦

Seven Arts Pictures, Inc. v. Jonesfilm, 2013 WL 599661 (5th Cir., Feb. 18, 2013).

♦ The long-standing legal battle between judgment creditor Jonesfilm and Peter Hoffman, alongside his various Seven Arts corporate entities and Leeway Properties, primarily concerns the enforcement of arbitration awards totaling nearly one million dollars. Following the registration of these California judgments in the Eastern District of Louisiana, Jonesfilm initiated discovery and garnishment proceedings to locate and seize assets linked to Hoffman's Louisiana-based business interests. The litigation is characterized by the repeated failure of Hoffman and his affiliates to comply with judicial mandates, including charging orders that required the production of critical financial statements and tax returns. Instead of following proper legal channels to object to or stay these orders, the judgment debtors chose to ignore them, prompting the district court to issue multiple findings of contempt. A central issue involved the unauthorized transfer of $174,769.56 in garnished funds from a Leeway Properties account to Hoffman and other judgment debtors despite the active seizure order. Hoffman’s defense of an alleged embezzlement scheme and his challenges to the court's personal jurisdiction were consistently rejected as insubstantial and meritless. The district court documented what it described as a profound disregard for the rule of law, ultimately imposing heavy sanctions and over $21,000 in attorney's fees. On appeal, the Fifth Circuit affirmed these decisions in two separate 2013 opinions, underscoring that litigants may not unilaterally decide which court orders to obey. The appellate court noted that the appellants’ ongoing non-compliance constituted a continuing tale of contemptuous conduct that undermined the administrative authority of the judiciary. The final rulings confirmed the broad scope of post-judgment discovery and the court's inherent power to compel submission to its orders, warning Hoffman and his companies that their persistent stone-walling would no longer be tolerated. These decisions emphasize that internal corporate complexities and alleged unavailability of records do not justify the total defiance of valid federal court orders. ♦

Presidential Facility, LLC v. Debbas, Case No. 09-12346 (E.D.Mich., April 12, 2013).

♦ The United States District Court for the Eastern District of Michigan addressed a Motion for Charging Order filed by the plaintiff against Defendant Gregory Campbell. Following a final judgment of $9,500,000 issued in May 2012, the plaintiff sought to encumber Campbell’s present and future interests in limited partnerships and limited liability companies to satisfy the debt. Under Federal Rule of Civil Procedure 69(a), the court applied Michigan law, which identifies charging orders as the exclusive remedy for judgment creditors seeking satisfaction from a debtor's member or partner interests. A charging order serves as a lien on such interests, allowing the creditor to receive distributions that the debtor would otherwise be entitled to. The court denied the plaintiff's request for a broad, prospective charging order for several reasons. First, the court noted that Michigan statutes do not explicitly contemplate issuing charging orders against prospective or unrealized interests. Second, while the court possesses broad discretionary power under Michigan law to subject nonexempt assets to judgment satisfaction, it found the motion unnecessary regarding Campbell's only known interest. Specifically, the parties had already entered a stipulation and order granting a charging order for Campbell’s interest in G.D. Campbell & Associates shortly before the motion's resolution. Consequently, the court found it inappropriate to issue a blanket order for interests Campbell might acquire in the future, suggesting instead that the plaintiff could apply for additional orders if new interests materialize. By denying the motion without prejudice to future applications for specific assets, the court maintained the statutory framework’s focus on identifiable interests rather than speculative future acquisitions. This ruling clarifies that while judgment creditors have robust tools for collection, those tools must be applied to specific, existing assets rather than served as a general encumbrance on potential future holdings. ♦

Fannie Mae v. Heather Apartments LP, 2013 WL 6223564 (Minn.App., Unpublished, 2013).

♦ The Minnesota Court of Appeals affirmed a district court order holding appellant Andrew C. Grossman in constructive civil contempt for failing to satisfy judgments exceeding $10 million. The legal dispute arose from Grossman's personal guarantee of a commercial mortgage loan, leading to judgments docketed by Fannie Mae. Following his father's death, Grossman received a trust distribution of approximately $11 million, which he transferred to a Swiss bank account at Coutts Bank. Although the Minnesota Supreme Court had previously reversed a temporary injunction regarding these funds before they were in Grossman's possession, the district court issued a new order for the delivery of funds once Grossman admitted the distribution had occurred. When Grossman subsequently claimed the account lacked sufficient funds, it was revealed that the money had been invested in LSPG Shoreline 2012, LLC, a Cook Islands entity for which Grossman was the sole member. On appeal, Grossman challenged the delivery order, the contempt finding, and an award of attorney fees. The appellate court concluded that evidence of Grossman's control over the funds was clear and convincing, satisfying the statutory requirements for applying a debtor's property to a judgment. The court further determined that the contempt finding was not an unlawful imprisonment for debt but a measure to compel compliance with a judicial order. The court deferred to the district court's credibility findings, noting that Grossman failed to prove an inability to comply in good faith and that the LLC appeared to be a vehicle for shielding assets. Finally, the court upheld the award of attorney fees, citing Grossman's bad faith and the district court's inherent authority to sanction such conduct. The ruling underscores the broad discretion of district courts in supplemental proceedings to enforce judgments and manage non-compliant debtors. ♦

In re Myers, 2013 WL 587311 (S.D.Miss., Feb. 14, 2013).

♦ The United States Bankruptcy Court for the Southern District of Mississippi addressed whether Rick and Tina Myers converted their Chapter 13 bankruptcy case to Chapter 7 in bad faith and whether their subsequent business entity, Infinity Services of Mississippi, LLC, constituted property of the bankruptcy estate. Under 11 U.S.C. section 348(f)(2), if a debtor converts a case in bad faith, the property of the estate includes all property held as of the date of conversion rather than the original petition date. The court found that the Debtors engaged in an unfair manipulation of the bankruptcy system by failing to disclose significant financial information, including monthly payments from a business sale, the purchase of vehicles, a secret credit union account, and twenty thousand dollars received from selling an Express Personnel franchise shortly after conversion. Furthermore, the court determined that the Debtors were not candid with the Chapter 7 Trustee and used estate assets to launch Infinity LLC. Although Infinity was formally organized after the conversion date, evidence showed it was a continuation of the Debtors previous business, P and L Properties, utilizing the same employees and funded by estate proceeds. Applying the broad definitions of estate property under section 541, the court concluded that Infinity and its related causes of action against Liberty Mutual in a pending District Court Action were generated from estate assets and thus belonged to the bankruptcy estate. Consequently, because the conversion was motivated by a sinister motive and a lack of disclosure, the court ruled that all property held by the Debtors at the time of conversion, including Infinity LLC and its legal claims, must be administered for the benefit of creditors. This decision confirms that the bad faith conversion exception prevents debtors from shielding after-acquired property or business interests that were seeded with undisclosed bankruptcy estate assets. ♦

Jonas v. Waterman, 2013 WL 6231619 (D.Mont., Dec. 2, 2013).

♦ Edwin R. Jonas III, a former attorney, has engaged in a multi-decade legal campaign across several states to contest alimony and child support obligations arising from his 1990 New Jersey divorce from Linda B. Jonas. The provided legal documents detail his repeated, unsuccessful attempts to use federal district and bankruptcy courts in Montana and New Jersey to circumvent state court judgments. In Jonas v. Waterman, the Montana District Court granted summary judgment to Jonass former counsel, Ronald Waterman, ruling that any alleged procedural negligence during the domestication of New Jersey judgments did not cause Jonas injury; the court found the Montana Supreme Court would have applied res judicata to bar his satisfaction-of-judgment defenses regardless of his counsels actions. Concurrently, the United States Bankruptcy Court for the District of Montana dismissed Jonas's Chapter 11 and Chapter 7 filings, emphasizing that its jurisdiction does not extend to relitigating domestic relations matters or interfering with final New Jersey divorce decisions through the Rooker-Feldman doctrine. In the New Jersey action of Jonas v. Gold, the court dismissed Jonass claims of fraud, malpractice, and civil rights violations against his ex-wifes attorneys. The court held that Jonass suit was an improper collateral attack on state court orders, noting that his challenges to a 1996 constructive trust were time-barred by nearly a decade and lacked the necessary documentation required by New Jerseys Affidavit of Merit statute. Throughout these diverse proceedings, judges have consistently characterized Jonas as a vexatious litigant who utilized the fugitive disentitlement doctrine to avoid appearing in court while filing meritless suits. Ultimately, the judiciary affirmed that the 2006 New Jersey judgments remain binding under the principles of res judicata, and Jonas is legally precluded from repeating previously adjudicated challenges in new forums. ♦

Renteria v. Canepa, Case No. 3:11-cv-00534-RCJ-CWH (D.Nev., 2013).

♦ The United States District Court for the District of Nevada presided over a breach of contract action concerning five promissory notes executed by Defendant Eugene Cleveland Canepa in favor of the Renteria Family Trust. These notes, which totaled 845,000 dollars in principal, were signed by Canepa both in his individual capacity and as the President of French Quarter, Inc. Following a default in 2007 and the subsequent Chapter 11 bankruptcy filing of French Quarter, Inc., the parties entered into a court-approved settlement agreement. This agreement established that Canepa remained a co-maker of the notes and that the plaintiffs reserved their right to sue for the outstanding debt. After a partial distribution from the bankruptcy estate covered accrued interest and a portion of late fees, the principal remained largely unsatisfied. In prior proceedings, the court granted judgment on the pleadings, establishing Canepa's liability for roughly 1 million dollars including interest and late fees. In the current order, District Judge Robert C. Jones addressed three pending motions. First, the court granted a Motion for Charging Order, allowing the plaintiffs to charge Canepa's stock in FQ Men's Club, Inc. and Monkey Bars, Inc., along with his membership interest in Western Properties of Nevada. Judge Jones rejected the defense's claim that existing federal tax liens barred this execution, noting that state law permitting the charging order applies regardless of potential priority disputes with the Internal Revenue Service. Second, the court imposed Rule 11 sanctions against Canepa's counsel for filing a frivolous motion to set aside the judgment based on irrelevant testimony from an unrelated case. Finally, the court awarded 12,677.50 dollars in attorney fees to the Renteria Family Trust, finding the requested amount reasonable and consistent with the terms of the original promissory notes. ♦

Rock Bay, LLC v. Eighth Judicial District Court, 129 Nev. Adv. Op. 21, 2013 WL 1349284 (Nev., April 4, 2013).

♦ The Supreme Court of Nevada clarified the scope of post-judgment discovery against nonparties under Nevada Rule of Civil Procedure (NRCP) 69(a). The dispute arose after judgment creditors Redwood Recovery Services, LLC and Elevenhome Limited sought to execute multi-million dollar Florida judgments against Jeffrey Kirsch and several related debtor entities. After domesticating these judgments in Nevada, the creditors issued subpoenas for the financial records of two nonparty companies, Rock Bay, LLC and Maybourne, Inc., directed at an accounting firm and a bank. The petitioners moved to quash the subpoenas, contending that as nonparties to the underlying litigation, their own private assets and financial information were not subject to discovery. The district court denied these motions, finding that the close relationship between the entities created a reasonable suspicion regarding the good faith of asset transfers. On review, the Supreme Court held that while post-judgment discovery is typically restricted to a judgment debtor's assets, NRCP 69(a) allows inquiry into a nonparty's assets under specific circumstances. These include situations where the relationship between the debtor and the nonparty raises a reasonable suspicion of bad faith asset transfers or where evidence suggests the nonparty is an alter ego of the debtor. Applying this framework, the Court denied the petition regarding Rock Bay, citing Kirsch's control, the suspicious timing of the company's dissolution, and evidence of monetary transfers between entities. Conversely, the Court granted the petition as to Maybourne, Inc., finding no evidence that it had directly exchanged assets with the debtors or functioned as an alter ego. This decision establishes a necessary balance between the rights of creditors to uncover concealed assets and the privacy rights of nonparties, preventing discovery from becoming a tool for harassment. ♦

FirstMerit Bank NA v. Xyran, Ltd., 2013 Ohio 1039, 2013 WL 1183340 (Ohio.App., 2013).

♦ The Eighth District Court of Appeals of Ohio affirmed a trial court's decision granting a charging order in favor of FirstMerit Bank against Bhupinder Sawhny's interest in a private medical practice, The Center for Neurosurgery, L.L.C. The legal dispute originated from a 2004 promissory note in the amount of $480,000 executed by Xyran, Ltd. and guaranteed by Bhupinder and Jaspreet Sawhny. After obtaining a cognovit judgment and unsuccessfully attempting to satisfy the debt through foreclosure and wage garnishment, FirstMerit discovered Bhupinder’s ownership interest in the medical practice and sought a charging order. The appellants raised two primary assignments of error. First, they argued that the charging order effectively assigned Bhupinder’s ownership interest to the bank, which they claimed would violate Ohio law prohibiting the unauthorized practice of medicine and violate the practice’s own operating agreement, both of which require interests to be held by licensed physicians. The appellate court rejected this argument, clarifying that under R.C. 1705.19, a charging order only applies to a membership interest, defined as the right to receive distributions and a share of profits and losses. The court emphasized that such an order does not transfer governance rights or allow the judgment creditor to participate in the management or medical practice of the entity. Consequently, the court found the bank was not practicing medicine or violating the operating agreement. Second, the appellants contended that the trial court violated their due process rights by granting the order without conducting an evidentiary hearing. The court dismissed this claim, ruling that an evidentiary hearing is unnecessary when the opposing party’s filings fail to establish a legitimate legal basis for relief. Since the appellants' arguments relied on a legal misunderstanding regarding the narrow scope of charging orders, no hearing was warranted. The appellate court ultimately concluded the appeal lacked merit and affirmed the lower court's judgment. ♦

Southlake Equipment Co., Inc. v. Henson Gravel & Sand, LLC, 213 Okla.Civ.App. 87 ( 2013).

♦ Involves an appeal by Melvin D. Henson, Jr. and his company against an Oklahoma trial court's order requiring the assignment of Henson's entire membership interest in Econtuchka Erosion Control, LLC to Southlake Equipment Company in satisfaction of a multi-thousand dollar judgment. Southlake had originally sought a writ of special execution to seize both the economic and voting interests of Henson's twenty-four percent stake in the entity. While the trial court initially granted this request, the Oklahoma Court of Civil Appeals reversed the decision based on a strict interpretation of statutory law, specifically eighteen O.S. section twenty-thirty-four. The appellate court determined that state law provides the sole and exclusive remedy for judgment creditors against a member's interest in a limited liability company, which is a charging order. Under this legal framework, a charging order only entitles the judgment creditor to the rights of an assignee. This means the creditor can receive the member's share of profits, losses, and distributions but is explicitly barred from exercising voting or management rights. The court further clarified that a charging order cannot be converted into a full membership interest through foreclosure. Additionally, the court reviewed the LLC's operating agreement, which stipulated that the written consent of all other members was required to transfer a full interest to a third party. Since one member had not consented, the trial court's order to transfer voting rights violated both the statutory protections and the private governance agreement. Consequently, the appellate court held that the trial court erred by ordering a complete transfer of the membership interest and remanded the case with instructions to issue a new charging order limited only to economic distributions until the debt is satisfied. ♦

In re Holt, Bk.D.S.C. No. 13-02506-dd (Sept. 12, 2013).

♦ The United States Bankruptcy Court for the District of South Carolina addressed a motion for relief from stay and an objection to exemptions involving debtors John and Carole Ann Holt and First Citizens Bank and Trust Company. First Citizens held three significant judgments against the Holts resulting from their guarantees of commercial loans to Low Country Land, LLC, and Pamplico Highway Development, LLC. Following the confirmation of Low Country Land’s Chapter 11 reorganization plan, the Holts sought to claim exemptions under South Carolina law in a promissory note, referred to as the CJ Note, which was payable to the LLC after a sale of assets rather than to the Holts personally. First Citizens objected to these exemptions, arguing the Holts lacked a direct legal interest in the note itself and that the bank's charging lien on the Holts' membership interests entitled the creditor to any distributions. Central to the dispute was the Holts' dissociation as members of the LLCs, which was triggered both by the appointment of a receiver and their bankruptcy filing. Under South Carolina’s limited liability company statutes, dissociated members are treated as transferees who possess distributional interests rather than direct ownership of the entity's specific assets. The judge concluded that while the Holts could not claim exemptions in the note itself because it belonged to the entity, they were entitled to claim their allowed exemptions in their underlying distributional interests in Low Country Land. The court sustained the objection regarding the note but allowed the exemptions for the distributional interests. Furthermore, the court denied the motion for relief from stay without prejudice, observing that the previously confirmed disclosure statement already outlined the dissolution of the LLC and limited post-confirmation management. The parties were ultimately directed to consult and attempt a consensual resolution regarding the final liquidation of assets and the collection of note payments. ♦

Kriti Ripley, LLC v. Emerald Investments, LLC, 2013 WL 3200596 (S.C., June 26, 2013).

♦ The Supreme Court of South Carolina addressed the novel issue of foreclosing on a member’s interest under the South Carolina Uniform Limited Liability Company Act. The dispute originated from the formation of Ashley River Properties II, LLC by Kriti Ripley, LLC and Emerald Investments, LLC for property development. After Emerald and its member Stuart Longman misappropriated Kriti’s $1.25 million capital contribution, Kriti obtained a legal judgment and a charging order against Emerald’s distributional interest. Despite the order, Emerald refused to pay, leading Kriti to move for foreclosure on the interest. The circuit court denied the motion, erroneously characterizing foreclosure as a drastic remedy and a disfavored forfeiture, while suggesting that alternative remedies like judicial dissolution were more appropriate. On appeal, the Supreme Court reversed the decision, identifying significant errors of law. The Court clarified that according to Section 33-44-504, a charging order and subsequent foreclosure represent the exclusive remedy for a judgment creditor; therefore, the availability of other remedies under the LLC Act was irrelevant to Kriti’s status as a creditor. Furthermore, the Court held that foreclosure is not a penalty or forfeiture but a standard equitable tool for debt collection. The justices emphasized that the primary factor for granting foreclosure is the likelihood of the judgment being satisfied through distributions within a reasonable period. The record showed that Ashley River II was operating at a loss with shrinking equity and no prospect of making distributions in the foreseeable future. Additionally, the Court found that Emerald’s pattern of abusive litigation and original misconduct weighed in favor of Kriti’s equitable position. Ultimately, the Supreme Court remanded the case for the foreclosure and sale of Emerald’s interest, affirming that creditors are entitled to an expedient recovery when distributions are unavailable. ♦

RES GA English Colony v. English Colony LLC, 2013 WL 12247806 (N.D.Ga., 2013).

♦ The court addressed three motions: (1) defendants’ renewed request under Federal Rule of Civil Procedure 56(d) for more time to oppose the plaintiff’s summary-judgment motion, (2) the plaintiff’s motion for summary judgment on a fraudulent transfer claim, and (3) the plaintiff’s motion for a charging order to aid collection of an earlier money judgment. The court denied the Rule 56(d) motion because the defendants’ affidavit did not meet Rule 56(d)’s specific requirements (the mere incarceration/unavailability of defendant Peretz was not enough), and the record showed defendants had already effectively admitted key facts by failing to timely respond to requests for admission and by not properly contesting the plaintiff’s statement of undisputed facts. On the merits, the court granted summary judgment to the plaintiff on Count III, finding that Peretz’s transfers of multiple real properties to various LLC “transferees” constituted fraudulent transfers under O.C.G.A. §§ 18‑2‑74 and 18‑2‑75, and ordered relief including avoidance/cancellation of the deeds, attachment and injunctive relief, and directed the plaintiff to submit a proposed final judgment consistent with the order. Finally, the court deferred ruling on the charging-order motion because the plaintiff had not provided current evidence of Peretz’s present ownership interests in the targeted entities; it allowed 60 days of discovery under Rule 69(a)(2) and permitted later supplementation and renewed consideration. ♦