Tuesday, October 6, 2020

Orders in Furtherance of a Charging Order

Orders in Furtherance of a Charging Order

           A continuing tension is the degree to which the judgment-creditor, holding a charging order, is entitled to information as to the internal activities of the LLC in order to determine whether the charging order is being satisfied. For example, what have been the actual distributions made to the judgment-debtor, and have the LLC and the judgment-debtor, in cooperation with the other members, made payments to or on behalf of the judgment-debtor that should properly be characterized as distributions paid to the account of the judgment-creditor. In a recent decision from Alabama, the court enforced the ability to subpoena LLC records to make those determinations. SC Property Holdings, LLC v. United Recovery Group, LLC, Misc. No. 14-0008-KD-MU, 2020 WL 3579210 (S.D. Ala. May 29, 2020).

         Holding the LLC and its managing member in contempt for failure to produce certain records, the court wrote that “And without access to the subpoenaed documents, neither SCPH nor this Court, for instance, it can determine whether Green & Sons, LLC is in violation of the charging orders, a definitive harm to both SCPH and this Court’s authority.”

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