Articles Posted in Limited Liability Company

Can a Florida Court Obtain Jurisdiction Over a Non-Florida Limited Liability Company to Enforce a Charging Lien Against a Florida Resident’s Membership Interest? South Florida Commercial Litigation and Collection Attorney?

If you are reading this article, you are likely a judgment creditor attempting to recover, on your judgment, against an individual or entity that is resident in Florida or that has moved to Florida in order to attempt to avoid paying you..  The Florida LLC Act provides a mechanism to have the court enter a charging order against the judgment debtor’s membership interest in a limited liability company or, under limited circumstances, to order that the member’s interest be foreclosed to satisfy the judgment.  One argument that is generally raised by the judgment debtor, concerning non-Florida limited liability companies, is that a Florida court may only exercise jurisdiction over property of a judgment debtor located within the court’s jurisdictional territory.  As a result, the judgment debtor argues that because a foreign limited liability is located outside the State of Florida, Florida courts do not have jurisdiction to enforce the judgment against those entities.  However, a membership interest in a limited liability company, including foreign limited liability companies, is intangible personal property which accompanies the person of the owner.  Therefore, because the member’s interest resides with the Judgment debtor in Florida, the membership interests are located in Florida and are properly subject to in rem jurisdiction in the State of Florida.

Please keep in mind that this article is for informational purposes only.  It is not designed to be complete in all material respects.  Moreover, there may be facts specific to your situation that would have to be considered to determine whether or not Florida courts would have jurisdiction to enforce your judgment against a foreign limited liability company.  Thus, if you have any questions relative to this post, please feel free to contact us.

The Florida Limited Liability Company Act, which is located in Florida Statutes 608.401 – 705, provides that a judgment creditor to any member of a limited liability company may obtain a charging order against the member’s interest in the company or foreclose that interest in the company under certain circumstances.  As to the charging order, the Florida LLC Act provides “On application to a court of competent jurisdiction by any judgment creditor of a member or a member’s assignee, the court may enter a charging order against the limited liability company interest of the judgment debtor or assignee rights for the unsatisfied amount of the judgment plus interest.”

A charging order issued under this provision acts as a lien on the member’s interest in the limited liability company and grants the judgment creditor the right to receive distributions from the company which the member would have otherwise been entitled to receive.  Generally, a charging order is the sole and exclusive remedy by which a judgment creditor may satisfy a judgment from a member’s interest in a limited liability company or distributions therefrom.  However, where the limited liability company has only one member, the Florida LLC Act allows a judgment creditor to foreclose the member’s interest in the company as follows:

If a judgment creditor of a member 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, a charging order is not the sole and exclusive remedy by which the judgment creditor may satisfy the judgment against a judgment debtor who is the sole member of a limited liability company and upon such showing, the court may order the sale of that interest in the limited liability company pursuant to a foreclosure sale.  A judgment creditor may make a showing to the court that distributions under a charging order will not satisfy the judgment within a reasonable time at any time after the entry of the judgment and may do so at the same time that the judgment creditor applies for the entry of a charging order.  The purchaser of the member’s interest at a foreclosure sale steps into the shoes of the member for all purposes and the member loses all interest and rights in the company.

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