McClandon v. Dakem & Associates, LLC
2017 Fla. App. LEXIS 7666, 2017 WL 2298443, 219 So. 3d 269 (2017)
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Rule of Law:
A court may appoint a receiver to enforce a charging order against a member's interest in a limited liability company (LLC), but the receiver's authority is limited to collecting distributions and cannot extend to exercising managerial control over the company.
Facts:
- Dakem & Associates, LLC, obtained a judgment against Joeann McClandon in Nevada in 2005.
- Joeann McClandon held a controlling interest in eleven limited liability companies (LLCs).
- To collect its judgment, Dakem & Associates, LLC, sought to intercept the profit distributions that would otherwise be paid from the LLCs to McClandon.
Procedural Posture:
- In 2008, Dakem & Associates, LLC, domesticated a 2005 Nevada judgment against Joeann McClandon in the Circuit Court for Seminole County, Florida, a state trial court.
- Dakem initiated proceedings supplementary in the trial court to collect on the judgment.
- The trial court granted Dakem's request for a charging order against McClandon’s transferable interest in her LLCs.
- To enforce the charging order, the trial court also appointed a receiver and authorized the receiver to take managerial control of the finances of four of the LLCs.
- Joeann McClandon, as Appellant, filed a non-final appeal to the District Court of Appeal of the State of Florida, Fifth District, challenging the portion of the trial court's order that appointed the receiver with managerial powers. Dakem & Associates, LLC, is the Appellee.
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Issue:
Does a trial court exceed its authority under Florida Statutes § 605.0503 by appointing a receiver with managerial control over a judgment debtor's LLCs to enforce a charging order against the debtor's transferable interest?
Opinions:
Majority - Per Curiam
Yes. A trial court exceeds its authority under Florida Statutes § 605.0503 when it grants a receiver managerial control over an LLC to enforce a charging order. The statute specifies that a charging order is the 'sole and exclusive remedy' to satisfy a judgment from a debtor's interest in an LLC. While a court has jurisdiction to enforce its order, including by appointing a receiver, that enforcement must be consistent with the statute's limitations. Citing the commentary to the Revised Uniform Limited Liability Company Act (RULLCA), upon which the Florida statute is based, the court reasoned that a charging order only attaches to the debtor's transferable interest (the right to receive distributions), not their management rights. A creditor is not entitled to 'interfere with the management and activities of the limited liability company.' Therefore, while the appointment of a receiver to collect distributions is permissible, authorizing that receiver to act as a financial officer and exercise managerial control over the LLCs goes beyond the permissible scope of the remedy.
Analysis:
This decision clarifies the scope of a court's enforcement power regarding charging orders against LLC interests in Florida. It establishes a firm line between a member's economic rights, which are subject to creditor claims via a charging order, and their management rights, which are protected from creditor interference. This ruling reinforces the integrity of the LLC as a business structure, ensuring that a member's personal debts do not allow a creditor to usurp control of the business's operations. For future cases, this precedent limits the power of receivers in this context to a passive role of collecting distributions rather than an active role in company management.
