• Charging Order May Be Obtained Against Foreign LLC Interest
  • October 4, 2017 | Authors: Edward J. Levin; Lawrence D. Coppel; Marjorie A. Corwin; Christopher R. Rahl
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • In a recent decision addressing an unsettled issue in Maryland of importance to judgment creditors, the United States District Court for the District of Maryland held that a charging order may be issued under the Maryland Limited Liability Company Act (Title 4A of the Corporations & Associations Article) even though the debtor’s membership interest was held in a limited liability company (LLC) formed under Georgia law. Under Sec. 4A-607(b) of the Maryland Act, a judgment creditor of a member may obtain a charging order that serves as a lien on the member’s economic interest in a LLC. In the recent case, the debtor argued that Georgia law governed whether a charging order could be issued. The court initially noted that a “limited liability company” is defined by Sec. 4A-101(k) of the Maryland Act to be one that is organized in Maryland. However, notwithstanding the definition of a LLC, the court ruled that a charging order could be issued under the Maryland Act because Sec. 4A-101(m) defines a “member” as a member of a Maryland or foreign LLC, and Sec. 101(i) defines an “economic interest” as the right of a “member”. The court also noted that the Maryland Act does not prohibit a court from entering a charging order against a foreign LLC. In addition, the court stated in a footnote to its opinion that it could issue a charging order because it had personal jurisdiction over the judgment debtor. Although the court’s decision is only binding in the decided case, it is important authority for a creditor seeking to impose a lien through a charging order under the Maryland Limited Liability Company Act where the membership interest of the debtor is held in a foreign LLC.