194 So. 3d 751
La. Ct. App.2016Background
- Channelside Services, LLC is a judgment creditor of Chrysochoos Group, Inc. (CGI) based on a Florida money judgment; Channelside obtained a Louisiana charging order against CGI’s 50% membership interest in JTMC Enterprises, LLC (JTMC).
- The charging order (April 2014) made Channelside an assignee of CGI’s membership interest in JTMC and expressly limited Channelside to the rights of an assignee.
- Channelside served a records deposition / subpoena duces tecum on non‑party JTMC seeking bank records, tax returns, financial statements, ledgers, leases, and related documents (2008–present).
- JTMC moved to quash the subpoena arguing undue burden and that the Louisiana LLC Act denies assignees the right to inspect LLC records; Channelside moved to compel under discovery and judgment‑debtor examination statutes.
- The trial court ordered JTMC to produce documents evidencing indebtedness to CGI from Jan. 1, 2011 to present for an in camera inspection. JTMC and Channelside both appealed; the appellate court reversed that portion ordering production, granted JTMC’s motion to quash, and denied Channelside’s motion to compel.
Issues
| Issue | Plaintiff's Argument (Channelside) | Defendant's Argument (JTMC) | Held |
|---|---|---|---|
| Whether a judgment creditor‑assignee may compel a non‑party LLC to produce business and financial records in aid of execution | Discovery under La. C.C.P. art. 2451(B) permits examination of any person regarding the judgment debtor’s property; JTMC’s records may show indebtedness to CGI | Louisiana LLC Act grants only the rights of an assignee on a charging order; assignees do not have statutory inspection rights to LLC records (La. R.S. 12:1319, 1330–1332) | Held for JTMC: assignee is not entitled to inspect LLC records; specific LLC statutes control over general discovery statutes |
| Whether in camera review by the court is a permissible, limited alternative to disclosure | In camera review protects third parties while allowing court to identify relevent documents | LLC statutory scheme forecloses disclosure or even in camera review absent admission as member or other statutory basis | Held for JTMC: court erred to order in camera production; documents could not be disclosed to Channelside and in camera review was improper here |
| Temporal scope of any permissible discovery (relevant time period) | Sought records from 2008 to present to find indebtedness due CGI | Charging order/post‑assignment rights arise only as of the charging order date; distributions owed arise as of assignment (April 8, 2014) | Held for JTMC: trial court’s order reaching back to Jan. 1, 2011 was overbroad and not supported by relevance/good cause |
| Whether the trial court’s partial grant/denial abused discretion | Channelside: broad discovery rules and judgment‑debtor provisions justify the order | JTMC: LLC Act is specific and restricts assignee rights; trial court misapplied discovery law | Held for JTMC: trial court abused discretion; appellate court granted quash and denied compel |
Key Cases Cited
- Sercovich v. Sercovich, 96 So.3d 600 (La. App. 4th Cir.) (in camera inspection allowed in divorce discovery where LLC statutes did not restrict access)
- Kinkle v. R.D.C., L.L.C., 889 So.2d 405 (La. App. 3d Cir.) (assignee of membership interest not entitled to inspect LLC records)
- Parish Nat. Bank v. Lane, 397 So.2d 1282 (La. 1981) (purpose of judgment‑debtor examination is to discover assets to aid execution)
- Stolzle v. Safety & Sys. Assur. Consultants, Inc., 819 So.2d 287 (La. 2002) (limits on discovery from third parties; need relevancy and good cause; protect from undue burden)