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After Olmstead v. FTC, a Florida Case with Potential National Implications.

The Florida Supreme Court’s opinion in Olmstead v. FTC created much uncertainty concerning charging order protection for multi-member LLCs in Florida[1] and seems to have been the catalyst for legislative action in Florida and Delaware, among others.

In 2011, the Florida legislature amended the Florida Revised Limited Liability Company Act to provide 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 an LLC or rights to distributions from the LLC.… Read the rest

Real Life Stories (Cases) on the Issue: Olmstead v. FTC (Florida).

Olmstead v. FTC, a non-bankruptcy case, dealt with the question as to whether a court may order judgment debtor to surrender all right, title, and interest in the debtor’s single-member LLC to satisfy an outstanding judgment (not unlike the question of whether a debtor-member in bankruptcy transfers all of his or her interests in the LLC to the bankruptcy trustee).[1] In that case, the Federal Trade Commission (“FTC”) sued the defendants for unfair or deceptive trade practices involving an advance-fee credit card scam and obtained judgment for more than $10 million in restitution.… Read the rest

Real Life Stories (Cases) on the Issue: In re Modanlo (Delaware).

In Modanlo, Modanlo was the debtor and held a 100% ownership interest in NYSI, a Delaware single-member LLC.[1] Subsequently, the trustee filed a bankruptcy petition for NYSI and sought the court’s authorization to permit him to act as the manager of NYSI, among other things.[2] Modanlo objected, arguing that neither he nor the trustee as his successor had any authority to cause NYSI to do anything, including placing the LLC into a bankruptcy, once he filed his bankruptcy petition (causing him to cease being a member of NYSI and causing dissolution of NYSI).… Read the rest

Real Life Stories (Cases) on the Issue: In re A-Z Electronics, LLC (Idaho).

A-Z Electronics, another bankruptcy case involving a single-member LLC, follows the reasoning in Albright to reach the conclusion that a debtor-member’s bankruptcy filing assigns his or her entire membership interest, economic and non-economic, to the bankruptcy trustee where there are no other members. In that case, Ryan, along with his wife, filed bankruptcy and listed A-Z Electronics, LLC (the “LLC”) as an asset with a value of “$0.00.”[1] Subsequently, the LLC also filed bankruptcy, signed by Ryan as the sole and managing member of the entity.… Read the rest

Real Life Stories (Cases) on the Issue: In re Albright (Colorado).

In Albright, Albright was the debtor in bankruptcy and the sole member of a Colorado LLC, which owned certain real property.[1]  The bankruptcy trustee contended that, because the debtor was the sole member and manager of the LLC at the time she filed bankruptcy, the trustee now controlled the LLC and could cause the LLC to sell the real property and distribute the net sales proceeds to the bankruptcy estate.… Read the rest