The world of Florida Limited Liability Companies ("LLC") was turned upside down in 2010, with the Florida Supreme Court's ruling, on June 24, 2010, in Olmstead v. Federal Trade Commission (No. SC08-1009), 44 So.3d 76. The court in Olmstead followed the letter of the law and ruled that a creditor was not limited to a charging order as its exclusive remedy to enforce a judgment against the sole member of a Florida single-member LLC. To right the situation, the Florida Senate on April 29, 2011 and the House on May 2, 2011, passed legislation to amend s. 608.433 of the Florida Statutes, to clarify that the ruling in Olmstead did not extend to a member of a Florida multi-member LLC. The legislature further established procedures for application of the Olmstead ruling to a member of a Florida single-member LLC.
The legislation, which awaits signature by Florida Governor Rick Scott, will retroactively amend s. 608.433 to clarify with specificity a judgment creditor options against single and multi-member Florida LLC's. The Florida Supreme Court's ruling in Olmstead had left many LLC creditor issues open to interpretation.
In the case of a single-member LLC, the legislation provides that a creditor will not be limited to a charging order, to enforce a judgment, as its sole and exclusive option if it can establish to the satisfaction of a court "that distributions under a charging order will not satisfy the judgment within a reasonable time." Once the showing has been made, the court may order the sale of the debtor's LLC membership interest through a foreclosure sale. A purchaser of the membership interest will become a member of the LLC, not just an assignee.
In the case of a multi-member LLC, the legislation provides that a "charging order" will be the sole and exclusive remedy by which a creditor may satisfy a judgment against a member or a member's assignee interest. The legislation further provides that foreclosure will not be an available creditor remedy in the case of a multi-member LLC.
View more information from Marc J. Soss at Florida Estate Planning and Florida Wills & Trusts.
Marc Soss' practice focuses on estate and tax planning; probate and trust administration and litigation; guardianship law; and corporate law in Southwest Florida. Marc is a frequent contributor to LISI and has published articles and been quoted in the Florida Bar, Rhode Island Bar, North Carolina Bar, Association of the United States Navy, Lawyers USA, Military.Com, Forbes.Com, and CNN Business. Marc also serves as an officer in the United States Naval Reserve.