Summary Judgment Granted to YRSS's Client. A NY LLC, and its Manhattan Property, Remain Shielded from Enforcement of a $3 Million Judgment

The Commercial Division of the Nassau County Supreme Court agrees that a judgment creditor cannot acquire a member's interest in a LLC. Rather, the creditor's rights are limited by NY LLC Law to be that of an assignee of the debtor's interest in the profits and losses of the LLC. The ruling requires that the creditor does not have voting rights and, more importantly, partition rights to force the sale of the building. 

YRSS wins summary judgment in a case involving a novel issue of law: whether a judgment creditor of a member of a limited liability company is entitled to that member’s membership interest in the limited liability company.  The plaintiff in this case obtained a judgment against S, an individual who the plaintiff alleged to be a member of the defendant limited liability company, in a separate case and then purchased S’s purported membership interest at a marshal’s auction after the interest had been levied upon.  By bringing this case, the plaintiff sought a judgment declaring that, by purchasing the purported membership interest, it had become the sole owner and member of the limited liability company or owner of a lesser membership interest in the company. YRSS’s client moved for summary judgment arguing that regardless of whether S was a member of the defendant limited liability company, a judgment creditor cannot obtain a judgment debtor’s membership interest in a limited liability company by virtue of paying for such interest at a marshal’s auction.  Accordingly, the plaintiff’s sole cause of action sought relief that, as a matter of law, could not be granted.  YRSS’s client argued that pursuant to Limited Liability Company Law 607, a judgment creditor is, at most, entitled to a charging order against the debtor member’s membership interest, and may not obtain the membership interest itself.  In other words, a judgment creditor may not step into the shoes of the debtor member and acquire voting and management rights in the limited liability company; the judgment creditor may only be entitled to the debtor member’s share of the profits and losses of the limited liability company.  The Court agreed with YRSS’s client’s position and held that the relief sought by plaintiff was “legally unattainable.”  Accordingly, the Court dismissed plaintiff’s case. 
See, Born to Build, L.L.C. v. Ibrahim Saleh et. al., Index No.: 009558/2011.
Peter E. Sverd, Esq. and Jon Stockman, Esq. for the motion.