Governor signs Olmstead "patch bill"

I previously wrote about the Florida Supreme Court’s decision in Olmstead v. Federal Trade Commission, in which the Court set forth detailed reasoning as to why a judgment debtor’s interest in a single-member LLC should be subject to levy in addition to the imposition of a charging order.   The dissenting opinion in Olmstead expressed concern over whether that reasoning could then be applied in the context of a multi-member LLC, causing a result contrary to the traditional view on creditor’s rights with respect to LLC membership interests.  On May 31, the Governor signed into law CS/HB 253, which amends Section 608.433 of the Florida Limited Liability Company Act to address that concern.  Laws of Florida Ch. 2011-77 details the revisions, which apply retroactively.

The statute now clearly provides that a charging order is the “sole and exclusive” remedy for a judgment creditor with respect to the membership interest owned by a judgment debtor in a multi-member LLC.  On the other hand, and consistent with Olmstead, the statute now expressly states that a charging order is not the sole remedy in the context of a single-member LLC, provided the creditor can establish that the “charging order will not satisfy the judgment within a reasonable time.”  What will be required to support that showing will be subject to development, however the practical lesson is clear:  assets held in a single-member LLC are not beyond the reach of a judgment creditor of the sole member.

Contact a Florida business law attorney if you have questions about the impact of this statutory revision on your LLC.

Posted in Business Law
Tags: , , , , , ,