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Are Single-Member LLCs A Ticking Time Bomb for Asset Protection? - MP3 |
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ARE SINGLE-MEMBER LLCS OF ANY UTILITY FOR ASSET PROTECTION AFTER THE FLORIDA SUPREME COURT'S DECISION IN OLMSTEAD?
WHAT WILL STATE LEGISLATURES AND THE COURTS DO NOW?
The Florida Supreme Court's decision in Olmstead v. FTC holds that the charging order is not the exclusive remedy of a creditor of a member of a single-member Florida LLC.
On June 24, 2010, the Florida Supreme Court issued its decision in Olmstead v. Federal Trade Commission. In a bit of a surprise, the Court, in a 5-2 decision, held that Florida law permits a court to order a judgment debtor to surrender all right, title, and interest in the debtor's single member limited liability company to satisfy an outstanding judgment. The case dealt with an effort by the FTC to shut down an advance-fee credit card scam, in which the defendant's single-member Florida LLC interests were made subject to a receivership. After obtaining a judgment for more than $10 million in restitution, the FTC sought to compel the defendants to surrender the LLC interests to the receiver.
The Court found it significant that the Florida LLC Act did not make it specifically clear that a charging order was the "exclusive remedy" available to a creditor of an LLC member with respect to the ownership interest in an LLC, as is the case with Florida limited partnerships and limited liability limited partnerships. The Court suggests that Florida law governing the levy and sale under execution on corporate stock "clearly does authorize" the transfer to a judgment creditor of all an LLC member's right, title and interest in an LLC, and the operation of this statute has not been limited by the Florida LLC Act as currently drafted. A strongly worded dissent would have decided the case the other way, and expressed concern for the impact that this might have on even multi-member LLCs in Florida.
During this program, our panel will discuss:- The Olmstead majority and dissenting opinions, including a strongly worded dissent raising concerns that even multi-member LLCs might be subject to attack, absent any legislative fix
- Whether single-member LLCs are of any utility for asset protection, in light of Olmstead and prior decisions involving single-member LLCs, like Albright, A-Z Electronics, Modanlo, VData, Desmond, and Schwab
- What will these single-member LLC cases mean for companies that have utilized single-member LLCs rather than subsidiary corporations
- What State Legislatures might be expected to do
- The impact of the Olmstead decision on remedies pursued by creditors.
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