Wednesday, October 7, 2020

A Pair of Unsuccessful Arguments with Respect to Charging Orders

A Pair of Unsuccessful Arguments with Respect to Charging Orders

      In a July decision out of Florida, the court considered and rejected a pair of novel arguments made with respect to charging orders. Chevron Corp. v. Donziner, Case No. 19-24295-MC-Ungaro/O'Sullivan, 2020 WL 3643043 (S. D. Fla. July 6, 2020).

      Chevron was seeking to collect upon a multimillion-dollar judgment against Donziner. In this particular case, they were seeking an order that certain shares in a corporation be retitled from his name to that of Chevron. In one element of his defense, Donziner asserted that the turnover of title was improper on the basis that the charging order should be the exclusive remedy as the assets of the corporation in question were in turn interests in LLCs. Essentially, he argued that the court should look through the corporation in which he owned shares and look at its assets to determine the appropriate remedy. The court rejected this argument, holding in effect the Donziner was a shareholder, not a member of an LLC, and corporate shares are subject to a turnover order and charging order protection is not available.

      In the second argument, Donziner argued that the sought turn-over order would violate the garnishment limits, asserting in effect that the dividends paid him by the corporation are wages. Whether various state and federal laws imposing limits upon garnishment are applicable with respect to charging orders is a topic that has been often discussed; I wrote a review of the topic in the (now defunct) Journal of Passthrough Entities; here is a link to that article. After considering what would be the applicable law (although curiously looking only at state law and not at the federal statute on the same topic), the court determined that the dividends paid by the corporation are not subject to garnishment limits in that they are not wages or earned income to which those limitations would apply.

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