Peach REO, LLC v. Rice et al

Filing 82

ORDER denying 77 Motion to Reopen; granting in part and denying in part 78 Motion for Charging Order. Signed by Judge Samuel H. Mays, Jr on 07/11/2017. (Mays, Samuel)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

PEACH REO, LLC,
Plaintiff,
v.
RICHARD K. RICE, MALCOLM KYLE
RICE, and THOMAS F. SCHAFFLER,
Defendants.

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No. 2:12-cv-02752-SHM

ORDER

Before the Court are two motions.

First, on September 15,

2016, Plaintiff Peach REO, LLC (“Peach REO”) filed a Motion to
Reopen.

(ECF No. 77 (“Second Mot. to Reopen”).)

Defendants

Richard K. Rice (“RKR”), Malcolm Kyle Rice (“MKR”), and Thomas
F. Schaffler (“TFS”) –– collectively, “Defendants” –– have not
filed a response to the Second Motion to Reopen, and the deadline for doing so has passed.

L.R. 7.2(a)(2).

Second, on September 15, 2016, Peach REO filed a Motion for
Charging Order.

(ECF No. 78 (“Charging-Order Mot.”).)

On Sep-

tember 30, 2016, MKR filed a response to the Charging-Order Motion.

(Resp. and Mem. in Opp’n to Pl.’s Mot. for Charging Or-

der, ECF No. 80 (“Charging-Order Resp.”); see also Aff. of Malcolm Kyle Rice, ECF No. 79 (“MKR Aff.”).)

RKR and TFS have not

responded to the Charging-Order Motion, and the deadline for do-

ing so has passed.

L.R. 7.2(a)(2).

On October 11, 2016, Peach

REO filed a reply in support of the Charging-Order Motion.

(Re-

ply in Supp. of Mot. for Charging Order, ECF No. 81 (“ChargingOrder Reply”).)
For the following reasons, the Motion to Reopen is DENIED
and the Charging-Order Motion is GRANTED in part and DENIED in
part.
I.

BACKGROUND
This history of this case was summarized in the March 2014

order granting Peach REO’s summary-judgment motion and in the
September 2016 order denying Peach REO’s first motion to reopen.
(Order Granting Pl.’s Mot. for Summ. J., ECF No. 72 (“March 2014
Order”); Order on Pl.’s Mot. to Reopen, ECF No. 76 (“September
2016 Order”).)

Since the Court entered the September 2016 Or-

der, Peach REO has filed the Second Motion to Reopen and the
Charging-Order

Motion,

MKR

has

filed

the

Charging-Order

Re-

sponse, and Peach REO has filed the Charging-Order Reply.
II.

ANALYSIS
A.

Second Motion to Reopen

The Second Motion to Reopen seeks the relief Peach REO requested in its June 2016 Motion to Reopen.

(Compare Second Mot.

to Reopen with Mot. to Reopen, ECF No. 74 (“First Mot. to Reopen”).)

Both ask the Court to “reopen” this case “so that

[Peach REO] may engage in post-judgment execution that requires

2

orders from the Court.” 1

(Second Mot. to Reopen 1; see also

First Mot. to Reopen 1 (similar request).)

The First Motion to

Reopen was denied.

The Court construes

(September 2016 Order.)

the Second Motion to Reopen as a motion for reconsideration of
the September 2016 Order.
The standards governing the Second Motion to Reopen are unclear.

Peach REO does not identify the Rule that applies.

generally Second Mot. to Reopen.)
shared this flaw.

(See

The First Motion to Reopen

(See September 2016 Order 2 (“Peach REO does

not cite any rule or statute as grounds for its Motion.

It does

not offer any relevant tests for the Court to apply.”).)

The

Second Motion to Reopen cites Rule 69(a)(1) 2 and section 48-249509 of the Tennessee Code (Second Mot. to Reopen 1).

Neither

provides a standard for assessing the Second Motion to Reopen.
Rule 54(b) governs revision of certain orders “before the
entry of a judgment adjudicating all the claims and all the parties’

rights

and

liabilities.”

A

judgment

adjudicating

all

claims and the parties’ rights and liabilities has been entered
in this matter.

(See note 1 supra.)

Rule 54(b) does not apply.

Rule 59 governs motions to alter or amend a judgment, and Rule

1

Judgment was entered on March 13, 2014, after Peach REO’s summary-judgment motion had been granted.
(See March 2014 Order;
J., ECF No. 73.)
2

Unless otherwise noted, references to “Rules” are to the Federal Rules of Civil Procedure.

3

60(b) governs motions for relief from “a final judgment, order,
or proceeding.”

The relief sought in the Second Motion to Reo-

pen does not correspond to either rule.
The Court need not resolve this question.

Under the Feder-

al Rules and this district’s Local Rules, movants seeking reconsideration or revision must generally show special circumstances
that compel revisiting a prior order or judgment (e.g., new material facts, court mistake, etc.).

See, e.g., Fed. R. Civ. P.

60(b) (setting requirements for motions for relief from judgments);

L.R.

7.3(b)

54(b) motions).

(setting

district

requirements

for

Rule

Determining which rule applies is unnecessary

if the Court considers the motion on its merits.
The Second Motion to Reopen is without merit for the same
reasons that the First Motion to Reopen was without merit.
the September 2016 Order explained:
After entering a judgment, a district
court retains ancillary jurisdiction to ensure the judgment’s execution.
The Federal
Rules
of
Civil
Procedure
provide
for
this . . . . The Sixth Circuit has observed
that “‘[t]he scope of postjudgment discovery
is very broad.’”
After entry of judgment, Peach REO is a
judgment creditor and Defendants are judgment debtors.
Plaintiff may obtain discovery from Defendants to the extent [Rule]
69(a)(2) allows, and the Court need not “reopen” the case for Peach REO to do so.
(September 2016 Order 3 (citations and footnote omitted).)

4

As

Nothing in the Second Motion to Reopen supports a different
analysis.

Peach REO states that it has filed a motion for a

charging order, and that “[a] charging order . . . requires action

by

this

Court,

as

a

(Second Mot. to Reopen ¶ 5.)

court

of

competent

jurisdiction.”

Peach REO also states that it “an-

ticipates filing additional motions for execution that require
orders from the Court and/or writs to be issued by the Clerk.”
(Id. ¶ 6.)

Peach REO cites no authority for the proposition

that this Court must reopen the case to be a “court of competent
jurisdiction” and does not explain why the orders or writs it
contemplates require reopening the case.

This Court has ancil-

lary jurisdiction to ensure that its previously entered judgment
is executed.

It will exercise that jurisdiction as appropriate

based on the parties’ requests.

Reopening the case is unneces-

sary.
The Second Motion to Reopen is DENIED.
B.

Charging-Order Motion
1.

Charging-Order Relief

The Charging-Order Motion prays for relief in four paragraphs.

(Charging-Order Mot. 2–3.)

Paragraph 1 seeks a charg-

ing order “against the interests of [MKR]” in eight limitedliability companies (“LLCs”): (1) Cash Depot of Mississippi, LLC
(“CDM”); (2) Cash Depot of Tennessee, LLC (“CDT”); (3) Cash Depot Title Loans of MS, LLC (“CDTLM”); (4) Palladian Partners IV,

5

LLC

(“PPIV”);

(6) Financial

(5)

Palladian

Management

Partners

Services,

LLC

2001

LLC

(“FMS”);

(“PP2001”);

(7)

Palladian

Partners V, LLC (“PPV”); and (8) M. Kyle Rice Properties, LLC
(“MKRP”).

(Id. at 2.)

Paragraph 2 asks that the charging order

“direct that [Peach REO] has the rights, to the full extent of
the Judgment entered in favor of [Peach REO] against [MKR], as a
transferee of the financial rights of [MKR]” in the eight LLCs.
(Id. at 2–3.)
Peach REO alleges that MKR is a member of PPIV and MKRP.
(Charging-Order

Mot.

2.)

Resp. ¶ 2; MKR Aff. ¶ 9.)
dress MKR’s denial.

MKR

denies

this.

(Charging-Order

The Charging-Order Reply does not ad-

(See generally Charging-Order Reply.)

The

charging-order remedy applies when a judgment debtor is a member
of an LLC.

See, e.g., Larry E. Ribstein & Robert R. Keatinge,

Ribstein

and

Keatinge

on

Limited

Liability

Companies

(2017).

When a judgment debtor is not a member of an LLC, the

charging-order remedy is inappropriate as to that LLC.

§

7:8

On this

record, the Court cannot determine whether MKR is a member of
PPIV or MKRP.

The request for a charging order as to PPIV and

MKRP is DENIED.

In what follows, the remaining six LLCs –– CDT,

FMS, CDM, CDTLM, PP2001, and PPV –– will be referred to as the
“Relevant LLCs.”
The Charging-Order Motion invokes Rule 69(a)(1).
ing-Order Mot. ¶ 3.)

Under Rule 69(a)(1),

6

(Charg-

A money judgment is enforced by a writ of
execution, unless the court directs otherwise.
The procedure on execution -- and in
proceedings supplementary to and in aid of
judgment or execution -- must accord with
the procedure of the state where the court
is located, but a federal statute governs to
the extent it applies.
Peach REO has a money judgment that this Court may enforce, and
this Court is located in Tennessee.

The Court’s execution pro-

cedure must accord with Tennessee law unless a federal statute
governs.
No relevant federal statute governs the Court’s execution
procedure.

Therefore, Tennessee law controls.

Because Tennes-

see courts apply Tennessee choice-of-law rules, see, e.g., State
ex rel. Smith v. Early, 934 S.W.2d 655, 657 (Tenn. Ct. App.
1996) (quoting Restatement (Second) of Conflict of Laws § 6(1)
(1971); citing Hataway v. McKinley, 830 S.W.2d 53, 59 & nn. 2–3
(Tenn. 1992)), this Court applies those rules.
Each Relevant LLC has its own operating agreement; each
contains

a

choice-of-law

provision. 3

Tennessee

choice-of-law

rules generally honor contractual choice-of-law provisions:

3

The operating agreements of CDT and FMS provide that those
agreements “shall be interpreted and construed in accordance”
with Tennessee law. (Operating Agreement of Cash Depot of Tennessee, L.L.C. § 16.3, ECF No. 79-1 (“CDT Agreement”); Operating
Agreement of Financial Management Services, L.L.C. § 16.3, ECF
No. 79-4 (“FMS Agreement”).)
The operating agreements of CDM
and CDTLM provide that those agreements “shall be interpreted
and construed in accordance” with Mississippi law.
(Operating
Agreement of Cash Depot of Mississippi, L.L.C. § 16.3, ECF No.
7

Tennessee follows the rule of lex
contractus.
This rule provides that a
[4]
tract
is presumed to be governed by
law of the jurisdiction in which it was
cuted absent a contrary intent.

loci
conthe
exe-

If the parties manifest an intent to
instead apply the laws of another jurisdiction, then that intent will be honored provided certain requirements are met.
The
choice of law provision must be executed in
good faith.
The jurisdiction whose law is
chosen must bear a material connection to
the transaction.
The basis for the choice
of another jurisdiction’s law must be reasonable and not merely a sham or subterfuge.
Finally, the parties’ choice of another jurisdiction’s law must not be “contrary to ‘a
fundamental policy’ of a state having [a]
‘materially greater interest’ and whose law
would otherwise govern.”
Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 650 (Tenn. Ct. App.
1999) (citations omitted).
The Vantage Technology requirements are met here.

There

has been no showing that the members of the Relevant LLCs exe-

79-2 (“CDM Agreement”); Operating Agreement of Cash Depot Title
Loans of Mississippi, L.L.C. § 16.3, ECF No. 79-3 (“CDTLM Agreement”).)
The operating agreements of PP2001 and PPV provide
that “[a]ll questions with respect to the construction of this
Agreement and the rights and liabilities of the parties shall be
determined in accordance with” Delaware law. (Limited Liability
Company Agreement of Palladian Partners 2001, LLC § 15.3, ECF
No. 79-5 (“PP2001 Agreement”); Limited Liability Company Agreement of Palladian Partners V, LLC § 15.3 (“PPV Agreement”), ECF
No. 79-7.)
4

Under Tennessee law, an LLC’s operating agreement is a contract.
VRF Eye Specialty Grp., PLC v. Yoser, 765 F. Supp. 2d
1023, 1032 (W.D. Tenn. 2011) (citing River Links at Deer Creek,
LLC v. Melz, 108 S.W.3d 855, 857 (Tenn. Ct. App. 2002)).

8

cuted the various choice-of-law provisions in bad faith.

For

each LLC, the choice-of-law provision selects the law of the
state of its formation; 5 that state has an obvious material connection to the LLC.
of-law

provisions

There has been no showing that the choicewere

unreasonable,

shams,

or

subterfuges.

There has also been no showing that the choice-of-law preferences of the members of the Relevant LLCs were contrary to a
fundamental policy of another state’s law.
Because the Vantage Technology requirements have been met,
the Court will apply the choice-of-law provisions in the Relevant LLC operating agreements.

Tennessee law applies to CDT and

FMS, Mississippi law applies to CDM and CDTLM, and Delaware law
applies to PP2001 and PPV.
In the Charging-Order Response, MKR argues that a charging
order is inappropriate because Peach REO “has failed to comply
with the requirements for transfer of financial rights as provided by the statutes of Delaware, Tennessee and Mississippi
and/or the pertinent articles of the respective Operating Agreements . . . .”

(Charging-Order Resp. ¶ 15.)

That argument re-

lies on antiassignment provisions in the Relevant LLC operating
agreements.

(Id. ¶¶ 5, 10.)

The operating agreements for CDT,

5

Cf. CDT Agreement 1 (noting that CDT is a Tennessee LLC); FMS
Agreement 1 (same for FMS); CDM Agreement 1 (noting that CDM is
a Mississippi LLC); CDTLM Agreement 1 (same for CDTLM); PP2001
Agreement 1 (noting that PP2001 is a Delaware LLC); PPV Agreement 1 (same for PPV).

9

CDM, CDTLM, and FMS provide that, “[e]xcept as otherwise specifically provided herein, no Member may Transfer all or any part
of his Membership Interest without the prior unanimous Approval
of the other Members, which approval may be given or withheld in
the sole and absolute discretion of each Member.”

(CDT Agree-

ment § 13.1; CDM Agreement § 13.1; CDTLM Agreement § 13.1; FMS
Agreement § 13.1.)

The operating agreements for PP2001 and PPV

provide that, “[s]ubject to any restrictions on transferability
by operation of law or contained elsewhere in this Agreement, a
Member may assign, sell, pledge, hypothecate or otherwise encumber . . . all or a portion of his Company Interest only upon the
prior written consent of the Manager, which consent may be withheld in its sole discretion.”
Agreement § 10.2(a).)

(PP2001 Agreement § 10.2; PPV

MKR argues that these provisions bar this

Court from entering a charging order governing MKR’s financial
rights in the Relevant LLCs.
Peach

REO

replies

Charging-Order Reply.)

with

two

arguments.

(See

generally

First, Peach REO argues that the antias-

signment provisions in the operating agreements are not controlling “because a charging order is not an assignment of the financial rights in the company.”
id. ¶ 4.)

(Peach REO Reply ¶ 2; see also

Second, even if a charging order would effect an as-

signment, the state statutes governing antiassignment provisions
only allow LLCs to restrict assignments by LLC members.

10

The

statutes do not restrict the ability of courts to effect assignments.

(Id. ¶¶ 2, 5.)

Peach REO’s first argument is dispositive.

Under the rele-

vant law of Tennessee, Mississippi, and Delaware, charging orders are liens, not assignments.
a.

Tennessee LLCs

The parties suggest that the applicable provisions of the
Tennessee Code are sections 48-249-507 and 48-249-509.

(See,

e.g.,

3–4.)

Charging-Order

Mot.

2;

Charging-Order

Resp.

¶¶

Those sections are part of the Tennessee Revised Limited Liability Company Act, Tenn. Code Ann. §§ 48-249-101 to 48-249-1133
(“Tennessee Revised LLC Act”).

The Tennessee Revised LLC Act

applies to Tennessee LLCs “formed on or after January 1, 2006.”
Tenn. Code Ann. § 48-249-1002(a).
1997.

CDT and FMS were formed in

(See, e.g., CDT Agreement 1; FMS Agreement 1.)

The Ten-

nessee Revised LLC Act does not apply to CDT or FMS. 6

Both are

governed by Tennessee’s earlier Limited Liability Company Act,
Tenn.

Code

Ann.

§§ 48-201-101

to

48-248-606

(“Tennessee

LLC

Act”).

6

A Tennessee LLC formed before January 1, 2006, can elect to be
governed by the Tennessee Revised LLC Act by amending its articles of incorporation. Tenn. Code Ann. § 48-249-1002(b). Neither party suggests that CDT or FMS has made such an election.
(See generally Charging-Order Mot.; Charging-Order Resp.; Charging-Order Reply.)

11

Under the Tennessee LLC Act, section 48-218-105 governs a
judgment creditor’s rights to a judgment debtor’s interests in
an LLC:
On application to a court of competent jurisdiction by any judgment creditor of a
member, the court may charge such person’s
financial rights with payment of the unsatisfied amount of the judgment with interest.
To the extent so charged, the judgment creditor has only the rights of an assignee of
such person’s financial rights under § 48218-101.
This section does not deprive any
member or assignee of financial rights of
the benefit of any exemption laws applicable
to the membership interest. This section is
the sole and exclusive remedy of a judgment
creditor with respect to the judgment debtor’s membership interest.
The text of the statute establishes that a charging order
creates a lien, not an assignment.
of

rights

or

property.”

An assignment is a “transfer

Assignment,

(10th ed. 2014) (first definition).

Black’s

Law

Dictionary

A lien is “[a] legal right

or interest that a creditor has in another’s property.”
Black’s Law Dictionary (emphasis added).

Lien,

Unlike an assignment,

a lien on property leaves the property in the original owner’s
hands.

Section 48-218-105 empowers a court to “charge [a judg-

ment debtor’s] financial rights with payment of the unsatisfied
amount of the judgment with interest.”

This does not contem-

plate a transfer of a judgment debtor’s financial rights; it
leaves them with the judgment debtor.
lien.

12

A charging order is a

The Tennessee Court of Appeals has confirmed this point,
opining that

“‘[a]

charging

order

constitutes

a

lien

on

judgment debtor’s distributional interest’” in an LLC.
Grp.,

Inc.

v.

Gilbert,

No.

M2015-01044-COA-R3-CV,

the

Rogers
2016

WL

2605651, at *1 (Tenn. Ct. App. May 3, 2016) (quoting 51 Am. Jur.
2d Limited Liability Companies § 23).

Rogers Group construed

section 48-249-509, the provision of the Tennessee Revised LLC
Act parallel to section 48-218-105 of the Tennessee LLC Act.
See id. at *2.

The decision is nevertheless instructive because

section 48-249-509 is similar to section 48-218-105.

Compare

Tenn. Code Ann. § 48-218-105 with id. § 48-249-509.
Because a charging order is a lien under Tennessee law, not
an assignment, MKR’s argument based on the antiassignment provisions in the CDT Agreement and the FMS Agreement fails.

As to

CDT and FMS, the relief sought in Paragraph 1 of the prayer for
relief in the Charging-Order Motion is GRANTED.
In Paragraph 2 of the Charging-Order Motion’s prayer for
relief, Peach REO asks the Court to direct that Peach REO “has
the rights . . . to the full extent of the Judgment entered in
favor of [Peach REO] against [MKR], of a transferee of the financial rights of [MKR]” in, inter alia, CDT and FMS.

The more

appropriate language is set out in section 48-218-105.

MKR’s

financial rights in CDT and FMS are charged with MKR’s payment
of the unsatisfied amount of the March 2014 judgment.

13

Peach REO

has the rights of an assignee of MKR’s financial rights under
section 48-218-101. 7
b.

Mississippi LLCs

The parties contend that the applicable Mississippi statutes are sections 79-29-703 and 79-29-705 of the Mississippi
Code.
4.)

(Charging-Order Resp. ¶¶ 8–9; Charging-Order Reply ¶¶ 3–
Sections 79-29-703 and 79-29-705 are part of the Revised

Mississippi

Limited

Liability

Company

Act,

Miss.

Code

§§ 79-29-101 to 79-29-1317 (“Mississippi Revised LLC Act”).

Ann.
The

Mississippi Revised LLC Act applies, in relevant part, to Mississippi LLCs formed on or after January 1, 2011.
Ann. § 79-29-1301(a).

Miss. Code

CDTLM was formed in 2004 (CDTLM Agreement

1), and CDM was formed in 1997 (CDM Agreement 1).

The Missis-

sippi Revised LLC Act does not apply to CDTLM or CDM.
perseded Mississippi LLC statutes govern those LLCs.
Kinwood

Capital

Grp.,

LLC

v.

BankPlus

(In

re

The su-

See, e.g.,

Northlake

Dev.

L.L.C.), 60 So. 3d 792, 795 n.4 (Miss. 2011).)

7

Cf. Tenn. Code Ann. § 48-218-101(b) (“An assignment of a member’s financial rights entitles the assignee to receive, to the
extent assigned, only the share of profits and losses and the
distributions to which the assignor would otherwise be entitled.
An assignment of a member’s financial rights does not dissolve
the LLC and does not entitle or empower the assignee to become a
member, to cause a dissolution, to exercise any governance
rights, or, except as specifically provided by chapters 201-248
of this title, to receive any notices from the LLC, or to cause
dissolution. The assignment may not allow the assignee to control the member’s exercise of governance rights, and any attempt
to do so shall be null and void.”).

14

Under the Mississippi Revised LLC Act, section 79-29-705
governs creditors’ rights.

Miss. Code Ann. § 79-29-705.

The

parallel provision of earlier Mississippi law reads as follows:
On application to a court of competent jurisdiction by a judgment creditor of a member, the court may charge the limited liability company interest of the member with
payment of the unsatisfied amount of the
judgment, with interest.
To the extent so
charged, the judgment creditor has only the
rights of an assignee of the limited liability company interest. This article does not
deprive any member of the benefit of any exemption laws applicable to his limited liability company interest.
Id. § 79-29-703 (Lexis through 1994 legislation; repealed 2010).
Peach REO’s first argument is again dispositive: under Mississippi law, a charging order creates a lien and does not effect an assignment.

The statutory text is instructive.

Like

the Tennessee LLC Act, the earlier Mississippi law provides that
a charging order “charge[s] the limited liability company interest of the member with payment of the unsatisfied amount of the
judgment.”

That describes a lien, not an assignment.

The cur-

rent Mississippi Revised LLC Act provides that charging orders
are liens after discussing those orders in terms much like the
terms used in earlier Mississippi law.

Id. § 79-29-705(2) (“A

charging order constitutes a lien on the judgment debtor’s financial interest.”); compare id. § 79-29-705(1) (present stat-

15

ute) with id. § 79-29-703 (Lexis through 1994 legislation; repealed 2010).
Because a charging order, under Mississippi law, is a lien,
not an assignment, MKR’s antiassignment-provision argument fails
as to CDM and CDTLM.

As to CDM and CDTLM, the relief sought in

Paragraph 1 of the prayer for relief in the Charging-Order Motion is GRANTED.
In Paragraph 2 of the Charging-Order Motion’s prayer for
relief, Peach REO asks the Court to direct that Peach REO “has
the rights . . . to the full extent of the Judgment entered in
favor of [Peach REO] against [MKR], of a transferee of the financial rights of [MKR]” in, inter alia, CDM and CDTLM.

The

more appropriate language is set out in the relevant statutory
provision, former section 79-29-703.
and

CDTLM

are

charged

with

MKR’s

amount of the March 2014 judgment.

MKR’s LLC interests in CDM
payment

of

the

unsatisfied

Peach REO has the rights of

an assignee of MKR’s LLC interest under former section 79-29702. 8

8

Cf. Miss. Code Ann. § 79-29-702 (“An assignment of a limited
liability company interest does not dissolve a limited liability
company or entitle the assignee to become or to exercise any
rights of a member. An assignment entitles the assignee, to the
extent assigned, to share in such profits and losses, to receive
such distribution or distributions, and to receive such allocations of income, gain, loss, deduction, credit or similar items
to which the assignor would have been entitled.”) (Lexis through
1994 legislation; repealed 2010).

16

c.

Delaware LLCs.

The applicable provisions of Delaware law are sections 18702 and 18-703 of title 6 of the Delaware Code.

(Charging-Order

Resp. ¶¶ 12–13; Charging-Order Reply ¶ 3; cf. Del. Code Ann.
tit. 6, §§ 18-702, 18-703.)
Peach REO’s first argument is again dispositive.

Section

18-703 is titled “Member’s limited liability company interest
subject to charging order.”

Del. Code Ann. tit. 6, § 18-703.

Section 18-703(b) provides that “[a] charging order constitutes
a lien on the judgment debtor’s limited liability company interest.”

Id. § 18–703(b).

Under Delaware law, charging orders are

liens, not assignments.
Because Delaware law treats charging orders as liens, not
assignments, MKR’s antiassignment-provision argument fails as to
PP2001 and PPV.

As to those LLCs, the relief sought in Para-

graph 1 of the Charging-Order Motion is GRANTED.
In Paragraph 2 of the Charging-Order Motion’s prayer for
relief, Peach REO asks the Court to direct that Peach REO “has
the rights . . . to the full extent of the Judgment entered in
favor of [Peach REO] against [MKR], of a transferee of the financial rights of [MKR]” in, inter alia, PP2001 and PPV.

The

better language is the language of the relevant statutory provision, section 18-703(a).

MKR’s LLC interests in PP2001 and PPV

are charged to satisfy the March 2014 judgment, and Peach REO

17

has the right to receive any distribution or distributions to
which MKR would otherwise have been entitled as to those LLC interests.
2.

Discovery Relief

Paragraph 3 of the Charging-Order Motion’s prayer for relief asks the Court to “direct [MKR] to report to [Peach REO]
any amount that is now due or may become due or distributable to
[MKR] by reason of any [interests] in” CDM, CDT, CDTLM, PPIV,
PP2001, FMS, PPV, and MKRP.

(Charging-Order Mot. 3.)

Paragraph

4 of the prayer for relief asks the Court to “direct [MKR] to
report to [Peach REO] the assets of” those LLCs.

(Id.)

Under Rule 69(a)(2), “[i]n aid of [a] judgment or execution, the judgment creditor . . . may obtain discovery from any
person –– including the judgment debtor –– as provided in these
rules or by the procedure of the state where the court is located.”

Of the traditional discovery devices in the Federal Rules

of Civil Procedure, Peach REO’s requests are most like interrogatories.

MKR does not contest these requests.

Peach REO is en-

titled to request this information through discovery.

Fed. R.

Civ. P. 69(a)(2).
The

Charging-Order

Motion

sought in Paragraphs 3 and 4. 9

is

GRANTED

as

to

the

relief

MKR is ORDERED to provide the re-

9

Peach REO should initially seek execution-related discovery
from the judgment debtors or other persons pursuant to Rule
18

quested information within 30 days of the entry of this Order. 10
Cf. Fed. R. Civ. P. 33(b)(2) (deadline for interrogatories).
The provisions of Rule 33 governing answers to interrogatories
shall apply to MKR’s responses.
III. CONCLUSION
For the foregoing reasons, the Second Motion to Reopen is
DENIED.
The Charging-Order Motion is GRANTED in part and DENIED in
part.

The relief sought against Palladian Partners IV, LLC, and

M. Kyle Rice Properties, LLC, in Paragraphs 1 and 2 of the
Charging-Order Motion’s prayer for relief is DENIED.
The relief sought against Cash Depot of Mississippi, LLC;
Cash Depot of Tennessee, LLC; Cash Depot Title Loans of MS, LLC;
Palladian Partners 2001 LLC; Financial Management Services, LLC;
and Palladian Partners V, LLC, in Paragraph 1 of the ChargingOrder Motion’s prayer for relief is GRANTED.
The relief sought against those six LLCs in Paragraph 2 of
the

Charging-Order

Motion’s

prayer

for

relief

is

GRANTED

as

69(a)(2) before asking for the Court to compel production of information.
10

Because MKR denies being a member of PPIV or MKRP, the Court
has denied Peach REO’s request for a charging order as to them.
The Charging-Order Motion’s request for information from MKR
about PPIV and MKRP does not depend on MKR’s being a member of
those LLCs. MKR must respond to Peach REO’s interrogatories as
to PPIV and MKRP to the extent he has knowledge.

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stated in this order.

The six LLCs are charged to recognize and

honor the March 2014 judgment against MKR in favor of Peach REO
until that judgment has been fully satisfied.
The relief sought in Paragraphs 3 and 4 of the ChargingOrder Motion’s prayer for relief is GRANTED.

MKR is ORDERED to

provide the requested information within 30 days of the entry of
this Order.
IT IS SO ORDERED this 11th day of July, 2017.

/s/ Samuel H. Mays, Jr.
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

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