Florida Supreme Court Debates Charging Liens For Single Member LLCs

In a blog post earlier this year I reported that the 11^th Circuit Court of Appeals had certified to the Florida Supreme Court the question of whether a charging lien was a judgment creditor’s sole remedy against a debtor’s membership interest in a single member LLC. The Florida Supreme Court held oral argument on this case on January 8, 2009. A decision should be issued soon. The case is Shaun Olmstead v. Federal Trade Commission, SC08-1009.

The Florida Statutes provided that creditor remedies against a membership interest is limited to a charging lien against the member’s economic interest and distribution rights. The Statutes do not distinguish between multi-member LLCs and single member LLCs in this regard. I listened to a recording of the oral argument. Most justices expressed the opinion that the charging lien remedy was designed to protect innocent members/partners in an LLC or partnership, and that the charging lien restriction did not serve its intended purpose when there were no members other than the debtor. The court also recognized that the Statute clearly did not attempt to distinguish between mult-member and single LLCs. The court and the attorneys debated whether the Supreme Court should or could change the charging lien procedure for single member LLCs within the existing statutory framework without judicial modification of the statute.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida