UBS Fin. servs., Inc. v. Lacava
2018 Ohio 3165
Ohio Ct. App.2018Background
- In 2008 UBS terminated Albert LaCava and in 2010 a FINRA panel awarded UBS $196,963.89 on its counterclaim; LaCava unsuccessfully challenged the award and the judgment was confirmed in Cuyahoga Common Pleas Court.
- In January 2010 LaCava reduced his AIM LLC ownership from 100% to 5.2% by transferring most interest to his wife Mary; later amendments apportioned small interests to Amanda and Lauren Lacava. UBS alleged the transfers were fraudulent conveyances intended to frustrate its judgment.
- UBS sued (Cuyahoga C.P. No. CV-16-868794) seeking (1) a charging order under R.C. 1705.19 against LaCava’s AIM membership interest, (2) a receiver, and (3) to set aside the transfer as fraudulent under R.C. Chapter 1336. AIM was named as a defendant.
- The trial court granted summary judgment to UBS: it voided the transfer, entered relief under Ohio’s fraudulent-transfer statutes against transferees, issued a charging order, enjoined disposition of assets, and ordered AIM to freeze accounts and only disburse to satisfy the judgment. The court denied appointment of a receiver.
- AIM appealed, arguing (inter alia) that the R.C. 1336.09 statute of limitations barred relief, that UBS’s charging-order remedy could not reach AIM or its assets, that AIM’s operating agreement barred charging orders/assignee remedies, and that UBS should pay AIM’s attorneys’ fees. The Eighth District affirmed.
Issues
| Issue | Plaintiff's Argument (UBS) | Defendant's Argument (AIM) | Held |
|---|---|---|---|
| Whether R.C. 1336.09 statute of limitations barred UBS’s remedies | Relying on fraudulent-transfer statutes to set aside transfers and recover assets or entry of judgment against transferees | AIM argued any fraudulent-transfer claims against AIM were time‑barred under R.C. 1336.09 and that the statute precluded relief against AIM | Ruling: R.C. 1336.09 did not bar UBS’s charging-order request because UBS’s fraudulent-transfer claim was against LaCava (not AIM), and a charging-order application under R.C. 1705.19 is not governed by R.C. 1336.09; trial court’s freeze consistent with transferee liability under Chapter 1336 affirmed. |
| Whether a charging order (R.C. 1705.19) may be enforced by ordering AIM to freeze/disburse assets to satisfy the judgment | Charging order on LaCava’s membership interest is UBS’s exclusive remedy against that membership interest; court may enforce it against entities that are transferees/conduits | AIM argued R.C. 1705.19 prohibits a creditor from obtaining possession of or exercising remedies against LLC property and that the court lacked authority to choke AIM’s operations | Ruling: Trial court may order AIM (controlled by transferor/transferee) to comply with the charging order and enjoin dispositions to protect satisfaction of the judgment; R.C. 1705.19 does not render R.C. Chapter 1336 relief meaningless in these circumstances. |
| Whether AIM’s operating agreement can nullify statutory charging-order rights or bind UBS as assignee to pay AIM’s fees | UBS: statutory remedy under R.C. 1705.19 controls; operating agreement cannot override statute | AIM argued its operating agreement forbids charging-order remedies and requires a creditor/assignee to be bound by contract provisions including fee-shifting in AIM’s favor | Held: Operating agreement cannot nullify or contradict applicable statute; AIM cannot rely on contract terms that conflict with R.C. 1705.19. UBS not required to pay AIM’s fees; AIM was not prevailing party. |
| Whether AIM (or its other members) had standing or were improperly joined / venue issues | UBS named AIM as necessary party because assets were routed through AIM and the Lacavas controlled AIM; venue in Cuyahoga County was proper and defendants had previously litigated there | AIM argued lack of standing, improper joinder, improper venue (should be Summit County), and that third-party members’ rights were affected | Ruling: AIM was a necessary interested party given the conduit allegations; AIM waived venue objection by prior filings; AIM lacked standing to raise other members’ rights; trial court did not abuse discretion. |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (summary judgment standard) (Ohio Supreme Court) (standard for granting summary judgment under Civ.R. 56)
- Dresher v. Burt, 75 Ohio St.3d 280 (moving party burden in summary judgment) (Ohio Supreme Court) (allocation of burdens under Civ.R. 56)
- Holdeman v. Epperson, 111 Ohio St.3d 551 (operating agreements cannot conflict with statute) (Ohio Supreme Court) (statute controls over inconsistent contract provisions)
- Wilborn v. Bank One Corp., 121 Ohio St.3d 546 (attorney-fee recovery rule) (Ohio Supreme Court) (American rule and exceptions for contract/statute-based fee shifting)
- Bell v. N. Ohio Tel. Co., 149 Ohio St. 157 (contracts contrary to statute are invalid) (Ohio Supreme Court) (elementary contract/statute principle)