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Limited Liability Company Member Disputes

Commercial Litigation Lawyer Miami

Unsigned Operating Agreements are Enforceable in Florida

Did you know in addition to collection work Andre Law Firm P.A. has a thriving civil litigation practice?  While the firm is best known for collections practice, it also handles business litigation disputes and general civil matters.

An issue that recently came up with one of the firm’s valued clients involves a case where there was a dispute between the members of a limited liability company.  Often such partnerships are handled somewhat informally (the dreaded “handshake” or “gentleman’s” agreement).  In this case the client had an operating agreement the parties had negotiated, but they never got around to signing.  The parties did business together for several years, and only years later did a conflict arise.  The agreement as contemplated greatly benefited our client, but a signed copy did not exist.  Does the contemplated operating agreement control when it is not signed?

Operating Agreements are not Subject to Statute of Frauds

An operating agreement in an LLC is contract, a contract that almost always is contemplated to go into perpetuity (fingers crossed right?).  Contracts longer than a year are usually subject to the “Statute of Frauds,” which is codified as Fla. Stat. 725.01.  It basically states that certain contracts to be enforceable must be in writing (contracts for real estate, contracts longer than one year, etc.) Contracts are also in large part, bilateral, meaning the assent of both sides is necessary to make the contract binding.  That assent is usually represented by the signature of the parties to the contract.

The LLC Statute

Operating Agreements, by statute, do not have this signature requirement.  The LLC statute in Florida is governed by Chapter 605 of the Florida Statutes.  Section 605.0106 establishes the enforceability of an operating agreement in the state, clarifying that the operating agreement is not subject to any “statute of frauds” (other than capital contribution obligations), along with a host of other situations where the unsigned operating agreement will be deemed fully enforceable.  An unsigned operating agreement could even allow for the inclusion of new members, if certain conditions in the operating agreement are met.

While the very best practice is to have your (skilled) attorney draft and have the parties sign the operating agreement prior to formation of the LLC, this bit of knowledge about the LLC saved our client a ton of money.

Do you have a business litigation dispute that needs attention? Contact Andre Law Firm today.  

2021 Ends and Thoughts for a Profitable 2022

Commercial Litigation Lawyer Miami

Andre Law Firm P.A. wishes you and yours a healthy and prosperous 2022.  This particular post is directed at my colleagues who may have acquired judgments or verdicts for their clients this year and have not yet been paid on them.

Threshold Question:

Have you perfected your judgment liens?  In a previous post I discussed the importance and practical value of perfecting your client’s judgment lien in order to preserve lien priority as to the judgment debtor’s personal and real property.  As a brief recap, to perfect a judgment lien in real property, one must record a certified copy of the final judgment or verdict in the County where the Debtor has real property.  To perfect a lien in personal property one must file a judgment lien certificate with the Florida Department of State Division of Corporations.

Even if your practice does not have the desire or bandwidth to engage in active collection of a judgment, these steps are crucial in preserving lien priority.  With the current economic times we are in, often judgment debtors have several creditors and preserving lien priority is crucial.  In addition, aggressively pursuing collection on the judgment sets you apart from passive creditors and gets your client paid.

Review Your Files:

I urge my legal colleagues to review their files and make sure that the judgments you have worked so hard at acquiring for your clients are properly perfected.  For 2022, I further urge you to review your files to see what can be done to get these unpaid judgments collected.  My firm would love to help you do this.   If you require a review on the potential collectability or assessment of your unpaid judgments, contact us.

Enforcing International Judgments in Florida

Commercial Litigation Lawyer Miami

Domesticating an International Judgment in Florida

In a prior post I wrote about the process for domesticating a foreign out-of-state judgment in Florida.  What many do not know, is that Florida also provides for the recognition and domestication of international judgments.

South Florida especially, is an international melting pot.  Foreign nationals from all over the world make South Florida their home, at least part of the time.  Furthermore, it is common for wealthy nationals from countries with unstable political or economic conditions to keep valuable assets here in South Florida.  Often these assets are most often in the form of real estate or business interests (often holding real estate).  

Being that there are a high number of foreign individuals, it stands to reason that often time these individuals are also judgment debtors.  Throughout the years, Andre Law Firm has been retained to domesticate and enforce international judgments against such individuals.  

Uniform Out-of-country Foreign Money-Judgment Recognition Act

Fla. Stat. § 55.601 is the Uniform Out of Country Foreign Money Judgment Recognition Act.  This statute governs, recognition of international judgments.  As is the case with out-of-state foreign judgments, out-of-country foreign judgments must first be recognized, or domesticated, before being enforced. The burden is first on the judgment creditor to prove that the foreign judgment is valid, final, and conclusive where rendered, and that it grants or denies the recovery of a sum of money.

Similar to the process of domesticating out-of-state judgments, The Judgment Creditor must record a certified/exemplified copy of the judgment (along with certified translations if necessary) along with an affidavit from the judgment creditor attesting to the finality of the judgment and giving the contact information of the judgment debtor.  The judgment is recorded simultaneously with the filing of the affidavit, and the clerk mails to the judgment debtor a Notice of Recording of out-of-country foreign judgment and shall make note of the mailing on the record. After service of the Notice of Recording of out-of-country foreign judgment, the judgment debtor shall have thirty days to respond in opposition to the domestication of the foreign judgment, and shall file a Notice of Objection specifying all grounds for nonrecognition or non-enforceability of the same.

The statute enumerates mandatory and discretionary grounds for non-recognition of the foreign judgment, which the debtor can raise during this 30-day objection period.  To keep the post short, we will just direct you to  Fla. Stat. § 55.605. If the judgment debtor fails to object in the 30 days the judgment will be recognized and subject to enforcement.  If they do not object, enforcement is stayed until a hearing (usually evidentiary) is held on the objection.  

Use an Experienced Law Firm

These matters can be hotly contested because often these types of judgment debtors have the means to employ attorneys, and often have already employed sophisticated asset-protection measures to protect their local assets.  Hiring an experienced firm like Andre Law Firm P.A. is absolutely vital to enforcing such a judgment.  Contact us today to discuss the domestication of international judgments, or any other creditor’s rights matter you have questions about.

How do I Know my Judgment is Collectable?

Commercial Litigation Lawyer Miami

I would like to pose this premise to you.  You have worked hard and spent money to obtain a final judgment, but the judgment debtor will not voluntarily pay.   How do you collect?  Perhaps this is the wrong question to ask.  The fundamental question should be “Can you collect?”

Obviously, if you are the meritorious party in a lawsuit against a company like AT&T or Suntrust, you can rest assured, you will likely be paid.  The issue of non-payment most often comes against lawsuits against closely-held companies, individuals, or family-owned operations.

Often to even obtain a modest judgment (let’s say $50k), it can take five figures worth of money spent on attorneys’ fees (and court costs) to obtain that modest result.  Combine that with the fact judgment creditors  can get so emotionally invested in the outcome of a litigation they often get irrational regarding their own case’s potential for collection.  

Research the Debtor

In order to determine whether a judgment can be collected, it takes a global view of the judgment debtor and its finances.  While no mathematic formula exists in determining whether a judgment is collectable you should start with some threshold questions:

  • Has the law firm that obtained the judgment perfected your judgment lien?
  • Did your judgment require the judgment debtor to serve a fact information sheet?
  • If the Judgment Debtor is a business entity, is that entity still operating?
  • What type of assets does the Judgment Debtor own (e.g. real property, vehicles, assets of the variety that would show up on an asset search (like certain equipment)).
  • Has the judgment debtor made any transfers of assets lately?

These considerations may seem obvious, but I can’t even tell you how often people come to me to collect judgments that are obviously uncollectable.  Often people do not want to hear that the judgment is not collectable (even when you provide evidence on why it is not collectable). Perhaps they do not care the judgment is uncollectable and they just want someone working on it for a contingent fee hoping for a miracle.

The general fiscal health of the judgment debtor (and if an entity, the principals comprising the management of the judgment debtor) helps paint a picture of collectability.  There are many tools you can utilize to help paint that picture, such as asset searches, public records searches (like UCC Lien searches, or searches of the official public records), and simple internet searches.  Sometimes it is even advisable to hire a private investigator to research your debtor’s finances.

Lien Perfection and Passive Collection

Keep in mind that a judgment that is not collectable now might not always be uncollectable.  That’s why judgment lien perfection is so important.  “Has the lawyer that obtained the judgment perfected your judgment lien?”  In a previous journal entry, we discuss the process and importance of perfecting your judgment lien as soon as possible.  Preserving the priority of your lien may allow you to collect passively (e.g. judgment debtor trying to sell or refinance real property has to address your judgment lien). 

Moreover, you might even find 2 or 3 years down the road, the judgment debtor has gotten back on their feet and you can now actively collect your judgment. If the judgment is currently uncollectable, it is advisable to keep an eye on the judgment debtor from time to time. Often judgment debtors (particularly individuals) are very entrepreneurial and will move on to the next hopefully profitable venture.

Not having a realistic assessment or expectation of the collectability of a judgment is often a recipe for disaster.  Contact Andre Law today to figure out if your money judgment is one which you can collect against.

Florida Statute 56.29: A Judgment Creditor’s Not-so-Secret Weapon

If winning a lawsuit guaranteed recovery to the prevailing party, there would not be law firms such as Andre Law specializing in post-judgment collection.  Often the entry of a judgment or a verdict is just the first step in complete recovery.  Take the following and all too common example: Plaintiff seeks to recover, after a lengthy lawsuit and trial, from a Defendant who borrowed a large sum of money from Plaintiff and never paid it back.  A judgment is awarded in favor of Plaintiff for $500,000.00.  Defendant, in order to protect his assets from garnishment and levy, creates shell limited liability companies in order to hold bank accounts which are solely for personal use and to otherwise hide non-exempt assets subject to execution.  How does Plaintiff recover?  A simple of writ of garnishment in the name of Defendant would not freeze the assets held in the name of the shell companies, nor would a sheriff levy on tangible property titled in the name of a shell company.

Fla. Stat. 56.29 Proceedings Supplementary

The answer is found in Fla. stat. 56.29 which governs supplemental proceedings to execution in Florida.  This statute is a powerful tool which grants the Court equitable powers to make the judgment creditor whole.  The Court has the power to examine the judgment debtor and third parties regarding any possible property which may be subject to execution by the judgment creditor.

Supplemental proceedings provide a “useful, efficacious, and salutary remedy at law enabling the judgment creditor not only to discover assets which may be subject to his judgment, but to subject them thereto by a speedy and direct proceeding in the same court in which the judgment was recovered.” Regent Bank v. Woodcox, 636 So. 2d 885, 886 (Fla. 4th DCA 1994) (citation omitted).  

Threshold Requirements

The requirements in opening a supplemental proceeding are minimal.  There should be an unsatisfied Florida judgment and/or lien for this tool to be available.  Also, upon filing of the motion for supplemental proceedings, the Judgment Creditor should have a valid and outstanding writ of execution issued, and an affidavit from the judgment creditor accompanying the motion for relief.  To initiate the supplemental proceedings, the judgment creditor must file a motion and an affidavit in the court that the original action arose.  The motion must (1) describe the judgment debtor’s nonexempt property or obligation to be used to satisfy the judgment; and (2) identify the third party in possession of the nonexempt property or who owes the obligation.  Additionally, the affidavit must provide general information about the case, the parties, and the outstanding judgment, such as a statement that the execution on the judgment is “valid and outstanding.”  After the motion and affidavit have been filed, the judgment creditor is entitled to proceedings supplementary as a matter of law.

Equitable Remedies

As previously mentioned, Fla. Stat. 56.29 is equitable, which means courts have the discretion to come up with an equitable remedy that affords a judgment creditor complete relief. See Donan v. Dolce Vita Sa, Inc., 992 So. 2d 859, 861 (Fla. 4th DCA 2008). A court can even enter a money judgment against any third parties who may hold the property subject to execution. Fla. Stat. §§ 56.29(6), 56.19 (2016); and if a third-party transferee retains the property solely for purposes of delaying satisfaction of the judgment, the court may award an additional 20 percent of the value of the property in damages. Fla. Stat. § 56.18 (2016). 

Going back to our hypothetical posed above:  A supplemental proceeding in this instance, assuming that the debtor had no plausible defenses (they hardly ever do), a money judgment could be entered against the shell companies, the Court could order the turnover of the property held by companies, and order any other such proper relief.  Obviously, the Court would have to fashion a remedy powerful and flexible enough to deter the debtor from further devising assets to defraud creditors.  The beauty of Fla. Stat. 56.29 is that it does allow for this creativity, by the court and the creditor.

Conclusion

Andre Law Firm has used this tool time and again to help its clients recover assets and coerce payment of judgments by judgment debtors.  While Florida is generally a debtor friendly state, Fla. Stat. 56.29 is one the most powerful tools available at the creditor’s disposal.  If you have any questions regarding this tool, contact us today.

Miami Collections Attorney- Perfecting Judgment Liens

Commercial Litigation Lawyer Miami

Preserving Lien Priority

You have been involved in a long and contentious litigation and your lawyers obtained a money judgment in your favor. What happens next? The Debtor has to pay right? If it were only that easy! Collecting on a judgment is often a cat and mouse game.

The honest truth is that many judgments are not paid voluntarily. You have to enforce your creditor’s rights. Many firms are not equipped to handle cases once it gets to post judgment, and often neglect the first step in enforcing a judgment. Perfecting a judgment lien is the first step toward collecting on the judgment.

We get many cases that involve judgments obtained by other law firms that did not bother to perfect the client’s judgment lien interest. If you have a judgment entered in your favor and you need to collect, contact Andre Law to determine how you can get your rights enforced, and to make sure your judgment lien is perfected.

What is “perfecting” a judgment lien? Essentially this is the process you take to make sure your judgment acts as a lien on the debtor’s assets. Perfecting the lien preserves your priority in regard to competing creditors. It requires a few easy steps, but often firms do not even bother to do this for their clients. Collecting on a judgment is a complicated process and not observing technical rules could be disastrous.

Judgment Liens on Real Property

In Florida, you essentially have two different forms of judgment liens. One is for real property and one is for personal property. First we will address the real property judgment lien. When your judgment is entered, you must obtain a certified copy of that judgment. You then record judgment in whatever county your judgment debtor owns real property. (An experienced collection firm like Andre Law can locate real property assets). Only a recorded certified judgment will act as a lien on all of the debtor’s property in that county. Further, the lien is perfected as of the date of recording. This means it will take priority over most liens recorded after (there are a few exceptions). You must perfect your judgment lien in this fashion if you seek to levy specific non-exempt real property belonging to the debtor.

Judgment Liens on Personal Property

When it comes to personal property (which is non real estate property), perfecting your judgment lien requires applying for a judgment lien certificate with the Florida Department of State Division of Corporations. For a small fee, a judgment creditor can register for a judgment lien certificate which lasts for five years (which can be extended prior to expiration). This registration acts as a lien on the debtor’s personal property in the state. When your personal property lien is perfected you are able to levy personal property under the Florida Statutes with a county sheriff or federal marshal. This can be especially useful in instances where the debtor has valuable property like vehicles or vessels you seek to levy.

Do Not Delay!

It is crucial that your lien is perfected by your attorney when the judgment is entered. Even if your attorney will not do the post-judgment collection work for you, this is essential. Protect your rights or a competing creditor can step ahead in lien priority despite obtaining his judgment later.

Do you need a Debt Collection Attorney in Miami or the rest of Florida? Contact Tony Andre of Andre Law Firm P.A. today.