Law School Case Brief
Olmstead v. FTC - 44 So. 3d 76 (Fla. 2010)
The limited liability company (LLC) is a business entity originally created to provide tax benefits akin to a partnership and limited liability akin to the corporate form. In addition to eligibility for tax treatment like that afforded partnerships, LLCs are characterized by restrictions on the transfer of ownership rights that are related to the restrictions applicable in the partnership context. In particular, the transfer of management rights in an LLC generally is restricted. This particular characteristic of LLCs underlies the establishment of the LLC charging order remedy, a remedy derived from the charging order remedy created for the personal creditors of partners. The charging order affords a judgment creditor access to a judgment debtor's rights to profits and distributions from the business entity in which the debtor has an ownership interest.
Defendants Shaun Olmstead, Julie Connell and their corporate affiliates operated an advance-fee credit card scam whereby consumers were enticed to pay a certain sum un exchange for a "platinum" credit card with a high credit line. Consumers, however, received platinum-colored cards usable only for purchasing products from defendants' merchandise catalog or website. Plaintiff Federal Trade Commission ("FTC") filed an action against defendants in federal district court alleging that they committed unfair or deceptive trade practices in violation of § 5(a) of the Federal Trade Commission Act, 15 U.S.C.S. § 45(a). The district court froze defendants' assets—which included several single-member Florida limited liability companies ("LLCs") in which either Olmstead or Connell was the sole member—and placed the assets in receivership. Ultimately, the FTC obtained judgment for injunctive relief and for more than $ 10 million in restitution. To partially satisfy that judgment, the FTC obtained—over the objections of Olmstead and Connell—an order compelling them to endorse and surrender to the receiver all of their right, title, and interest in their LLCs. Olmstead or Connell appealed that order, and the United States Court of Appeals for the Eleventh Circuit certified a question to the Supreme Court of Florida: Whether, pursuant to Fla. Stat. § 608.433(4), a court may order a judgment-debtor to surrender all "right, title, and interest" in the debtor's single-member LLC to satisfy an outstanding judgment.
Did Florida law permit a court to order Olmstead and Connell, as judgment-debtors, to surrender all right, title, and interest in their single-member LLCs to satisfy an outstanding judgment held by the FTC?
The Supreme Court of Florida rephrased the certified question to read: Whether Florida law permitted a court to order a judgment debtor to surrender all right, title, and interest in the debtor's single-member LLC to satisfy an outstanding judgment. The court answered the rephrased question in the affirmative. The court rejected the argument posed by Olmstead and Connell that a charging order was the sole remedy authorized by § 608.433(4), Fla. Stat., the statute cited in the certified question. The court ruled that there was no reasonable basis for inferring that the provision authorizing the use of charging orders established the sole remedy for a judgment creditor against a judgment debtor's interest in a single-member LLC. Recognition of the full scope of a judgment creditor's rights with respect to a judgment debtor's freely alienable membership interest in a single-member LLC did not involve the denial of the plain meaning of the statute. Section 608.433(4) did not displace the FTC's remedy available under § 56.061, Fla. Stat., with respect to a debtor's ownership interest in a single-member LLC.
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