FTC v. Olmstead - Eleventh Circuit Speaks: Charging Order Is NOT Sole Remedy.
Though the result was preordained, the United States Court of Appeals for the Eleventh Circuit issued its decision in FTC v. Olmstead. At issue in Olmstead was whether Florida law allowed a court to order a judgment-debtor to surrender all "right, title, and interest" in the judgment-debtor's single-member LLC to satisfy the claims of a judgment-creditor. The Florida Supreme Court, in a 4-2 decision with a harshly worded dissent, ruled that a court does indeed have such power.
In a previous post, I discussed the Florida Supreme Court's decision in Olmstead v. FTC. Briefly, in Olmstead the defendant argued that because Florida's LLC Act made no distinction between single-member and multi-member LLCs, a charging order was the sole remedy of a judgment-creditor. Drawing an analogy to stock in corporations, which the dissent in Olmstead argued was incorrect, the Florida Supreme Court held that F.S.A. Section 608.433(4) does not establish the exclusive remedy for judgment-creditors of single-member LLCs. Instead the Florida Supreme Court held that judgment-creditors of single-member LLCs also have the right to levy upon and sell through an execution sale, a member's interest in a single-member LLC pursuant to F.S.A. Section 56.061-even though that statute deals with stock in corporations, not membership interests in LLCs.
The Eleventh Circuit noted:
Where an LLC has only one member, no need exists to protect the interests of other members by restricting judgment-creditors to a charging-order remedy.
As flawed as the statutory interpretation behind the Florida Supreme Court's decision in Olmstead v. FTC may be, because that decision has now been adopted in a published decision of the Eleventh Circuit Court of Appeals, courts in other states with similar LLC acts, such as North Carolina, will likely look to FTC v. Olmstead for guidance. As a result, where limiting a judgment-creditor's remedy solely to a charging order is an important planning consideration, caution would dictate steering clear of single-member LLCs.
