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Rights of Creditors to a Member’s Interest in a N.Y. LLC; an Assignee

On Behalf of | Apr 1, 2022 | Uncategorized

Attorney Peter Sverd obtains dismissal of a lawsuit against a NY Limited Liability Company (LLC), keeping a $3 million judgment creditor of a purported member of the LLC, at bay, and its Manhattan Building safe from liquidation: The Commercial Division of the New York State Supreme Court agreed that a judgment creditor cannot acquire a member’s interest in a LLC at a Marshal’s Auction. 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 required that the creditor did not have voting rights, or partition rights to force the sale of the building. By bringing its case, the plaintiff sought a judgment declaring that by purchasing the purported membership interest, it had become a member of the limited liability company. Pursuant to Liability Company Law Section 607, the judgment creditor was entitled to a charging order against the debtor member’s membership interest. The Court dismissed plaintiff’s case.See, Born to Build, L.L.C. v. Ibrahim Saleh et. al., Index No.: 009558/2011.