Clarification of Creditor Rights Concerning LLC Members

The Florida Legislature recently passed CS/HB 253 (the “Bill”) to address the uncertainty that the Florida Supreme Court created with its’ decision in Olmstead v. Federal Trade Commission, 44 So. 3d 76 (Fla. 2010). In Olmstead, the Court held that a charging order is not the exclusive remedy of a judgment creditor when attempting to satisfy the judgment against a judgment debtor’s membership interest in a Florida single-member limited liability company (LLC). Consequently, the Court ordered the judgment debtor to surrender all of his rights, title, and interest in the single-member LLC to the creditor in satisfaction of the judgment.

The Bill specifically addresses the Olmstead decision’s ambiguities and amends Florida Statutes Section 608.433. The amendment now makes clear distinctions between single and multiple-member LLCs. It provides that a charging order is the sole and exclusive remedy by which a judgment creditor of an LLC member (in a single or multiple-member LLC) may satisfy a judgment using the member’s membership interest. However, in the case of a single-member LLC, a court may order a foreclosure sale of the membership interest only where a creditor shows that distributions under the charging order will not satisfy the judgment within a reasonable time. The membership interest foreclosure remedy is not available in the case of a multiple-member LLC.