Saturday, February 16, 2013

Charging Order Extends to All, and Not Only Cash, Distributions from LLC

Charging Order Extends to All, and Not Only Cash, Distributions from LLC
      In a recent decision of the Superior Court of Connecticut, it was confirmed that the rights of a judgment-creditor holding a charging order apply to all distributions made by the LLC to the judgment-debtor and not only distributions of cash.  Metkoff v. NCT Group, Inc., 2012 WL 6901181 (Conn. Super. Dec. 20, 2012). 
      Michael J. Parella, Sr., the judgment-debtor, was in turn a member in Pardev, LLC.  The plaintiffs sought a charging order against Parella’s interest in Pardev in satisfaction of the judgment.  Parella objected to the scope of the charging order, asserting it should not extend beyond the distribution of money from the LLC.  In response, the judgment-creditor asserted that “a charging lien must lawfully apply to the member’s right to any and all distributions of assets from the LLC to its members, including its rights to contracts and intellectual property.”
      Noting that (i) the holder of a charging order has the rights of an assignee of the member’s LLC interest, (ii) that an assignee is entitled to receive the distributions to which the assignor would be entitled, and (iii) that an LLC interest as defined, in part, as encompassing a member’s right to receive the distribution of “assets” from the LLC, the court was able to easily conclude that the charging order attaches to all distributions of LLC assets, and is not limited to distributions of cash.

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