The world of Florida Limited Liability Companies (“LLC”) was turned upside down on June 24, 2010, with the Florida Supreme Court’s ruling 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, on Tuesday, May 31, 2011, Governor Scott approved legislation that amends s. 608.433 of the Florida Statutes, to clarify that the ruling in Olmstead does not extend to a member of a Florida multi-member LLC. The legislation further establishes procedures for application of the Olmstead ruling to a member of a Florida single-member LLC.
The legislation retroactively amends s. 608.433 to clarify with specificity a judgment creditor options against single and multi-member Florida LLC. 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.
