Mahalo Investments III, LLC v. First Citizens Bank & Trust Company, Inc.
330 Ga. App. 737
| Ga. Ct. App. | 2015Background
- First Citizens Bank & Trust Co. (FCB) obtained a >$3M judgment against Mahalo Investments III, Mark Epstein, and Andrew Kelly in Cobb State Court; the judgment was affirmed on appeal.
- After remittitur, FCB pursued post-judgment discovery and learned Epstein and Kelly held membership interests in several LLCs.
- FCB filed an application under OCGA § 14-11-504(a) seeking charging orders on Epstein’s and Kelly’s LLC distributional interests to satisfy the unsatisfied judgment.
- FCB filed the charging-order application in the same state-court case (same file number) that produced the underlying judgment; appellants objected, arguing a separate proceeding against the LLCs was required and venue/jurisdiction over the LLCs had not been established.
- The trial court issued charging orders against the members’ LLC interests without separately addressing whether the LLCs themselves were necessary parties or whether the application had to be in a separate action.
- On appeal, the Court of Appeals considered whether OCGA § 14-11-504(a) requires a separate action against the LLC (or litigation under a different case number) and whether the court needed jurisdiction/venue over the LLCs to issue a charging order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a charging-order application under OCGA § 14-11-504(a) must be filed in a separate action (different case number or court) rather than in the case that produced the underlying judgment | FCB: The statute permits filing in "a court of competent jurisdiction"; the court that entered the judgment may also enter the charging order if it is a court of competent jurisdiction | Appellants (Mahalo/Epstein/Kelly): The charging order statutes (by comparison to partnership statutes and Prodigy) require a collateral proceeding separate from the judgment action; charging order must be initiated as a distinct action | Held: No separate action requirement; the plain language allows the court of competent jurisdiction (including the court that entered the judgment) to issue the charging order so long as that court has jurisdiction over the judgment debtor |
| Whether the court must have jurisdiction/venue over the LLC itself (not just over the judgment debtor) to issue a charging order on the member’s distributional interest | FCB: Only jurisdiction over the judgment debtor is necessary because the remedy only attaches the debtor’s distributional right, not the LLC’s rights | Appellants: Court needed jurisdiction/venue over the LLCs because the charging order affects interests in those entities | Held: Only jurisdiction over the judgment debtor (member) is necessary; the LLC need not be made a party because the charging order diverts distributions without altering LLC governance |
Key Cases Cited
- Prodigy Centers/Atlanta No. 1 v. T-C Assoc., 269 Ga. 522 (Ga. 1998) (discusses charging-order scheme and collateral proceedings for attaching partnership/LLP interests)
- Couch v. Red Roof Inns, Inc., 291 Ga. 359 (Ga. 2012) (statutory interpretation principles; rely on plain language)
- Corey Outdoor Advertising, Inc. v. Board of Zoning Adjustments of the City of Atlanta, 254 Ga. 221 (Ga. 1985) (statutes in pari materia not used when statute is clear)
- Brown v. King, 266 Ga. 890 (Ga. 1996) (ancillary proceeding doctrine: ancillary enforcement proceedings are independent collateral actions)
- Bank of Am., N.A. v. Freed, 983 N.E.2d 509 (Ill. App. Ct. 2012) (persuasive authority rejecting requirement that court obtain jurisdiction over LLC/partnership to charge a member’s distributional interest)