The Florida Supreme Court and the Eleventh Circuit Court of Appeals turned the charging order protection historically granted to limited liability companies ("LLC") on its head in Olmstead v. Federal Trade Commission, 528 F.3d 1310 (11th Cir. 2008). In Olmstead, the Court held that a court may order a judgment debtor to surrender all his rights, title, and interest in a single-member LLC organized under Florida law to satisfy a judgment. Specifically, the Court held that "...there is no reasonable basis for inferring that the provision authorizing the use of charging orders under section 608.433(4) established the sole remedy for a judgment creditor against a judgment debtor's interest in single-member LLC".

A charging order is a remedy that a creditor of a member in an LLC (like a partner in a limited partnership) can receive from a court that instructs the entity to give the creditor any distributions that would be paid to the member of the entity. Generally, when a creditor receives a charging order with respect to the members interest in the entity he does not have any authority to mandate distributions from the entity or to participate in the management of the entity. The charging order was believed to be the only recourse a creditor had against a judgment debtor member in an LLC in a way similar to it being the only recourse against a judgment debtor who is a partner in a limited partnership.

The Court based its rationale on the fact that the Florida limited liability partnership law specifically states that a charging order is the exclusive remedy of a creditor against a judgment debtor limited partner's interest in a limited partnership, but the Florida limited liability company law does not explicitly say that a charging order is the exclusive remedy of a creditor against a judgment debtor member in an LLC.

While the Olmstead case involved a single-member LLC the rationale used by the Court has left many practitioners uncertain about the status of a charging order being the only remedy available to creditors of members in multi-member LLCs established under Florida law. A task-force has been created to rewrite the Florida LLC statute and address many concerns in the area. On May 31, 2011, the Governor of Florida signed into law HB 253 providing that generally the charging order is the sole and exclusive remedy by which a judgment creditor of a member may satisfy a judgment from the judgment debtor's interest in an LLC. However, the revised statute allows foreclosure of a judgment debtor's interest in a LLC that has only one member. Therefore, while HB 253 revised Florida Statute Section 608.433 to provide that a charging order against a member's LLC is the sole and exclusive remedy available to enforce a judgment creditor's unsatisfied judgment against a member, there is a carve out for single member LLC's where foreclosure and other remedies are available against the judgment debtor's interest in the single member LLC, under certain circumstances.

(Updated June 2011)