United States District Court, D. Arizona
REPORT AND RECOMMENDATION
Honorable Michelle H. Burns United States Magistrate Judge
On
October 18, 2019, Petitioner/Judgment Creditor Custom
Dynamics, LLC (“Custom”), pursuant to
Fed.R.Civ.P. 69 and A.R.S. § 29-655, filed a petition
with the Court seeking a Charging Order against the interest
of Respondent/Judgment Debtor Michael Schutz, d/b/a
Everything L.E.D. - Harley (“Schultz”) in the
Arizona limited liability company registered as Everything
LED Harley Davidson, L.L.C. (“Everything LED”),
of which he is a member. (Doc. 21.) On October 22, 2019, the
Court referred the motion to undersigned United States
Magistrate Judge (hereinafter “this Court”).
(Doc. 26.)
The
Court issued its Order to Show Cause directing that Schultz
and Everything LED appear before the Court on November 13,
2019 at 1:30 PM before Magistrate Judge Michelle H. Burns, to
show cause why the relief requested in the Petition should
not be granted, and on Friday, November 1, 2019 at 2:10 PM,
the Petition and Order to Show Cause were served on Schultz
and Everything LED. (Docs. 28, 30.)
The
Court held the Order to Show Cause Hearing on November 13,
2019 and neither Schultz or any representative of Everything
LED appeared.
BACKGROUND
On
January 23, 2018, the U.S. District Court for the Eastern
District of North Carolina awarded Custom a Judgment against
Defendant/Judgment Debtor Michael Schultz, d/b/a Everything
L.E.D. - Harley, in the amount of $72, 624.00, which was
registered in this District on February 22, 2018. (Doc. 1.)
As of
October 16, 2019, the outstanding balance due on the
underlying Judgment, together with post-judgment interest, is
in the sum of $74, 877.43.[1] Post-judgment interest will continue to
accrue from that date at the rate of $3.62 per day. It is
uncontested that Schultz has an interest in Everything LED.
Pursuant
to Rule 69(a), Fed R. Civ. P., “[t]he procedure on
execution [of a money judgment]-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.” Pursuant to A.R.S. § 29-655(A):
On application to a court of competent jurisdiction by any
judgment creditor of a member, the court may charge the
member's interest in the limited liability company with
payment of the unsatisfied amount of the judgment plus
interest. To the extent so charged, the judgment creditor has
only the rights of an assignee of the member's interest.
A
charging order is “[t]he exclusive remedy by which a
judgment creditor of a member may satisfy a judgment out of
the judgment debtor's interest in the limited liability
company.” A.R.S. 655(C). Custom's proposed charging
order (1) charges the interest of Michael Schutz in
Everything LED with payment of the unsatisfied amount of the
Judgment; (2) orders Everything LED to refrain from paying
any monies or profits due to Michael Schultz until the
judgment is satisfied in full; (3) directs Everything LED to
pay to Custom any monies or profits due or to become due; and
(4) orders Everything LED to respond to or answer all
inquiries from Custom or its counsel with regard to the
limited liability company and to allow Custom or its counsel
complete access to the books and records of the limited
liability company.” (Doc. 21-1.)
This
Court finds that Custom has established its right to the
proposed charging order pursuant to the uncontested facts and
authority cited. Wherefore, IT IS
RECOMMENDED that Movant's Petition for Writ of
Execution in the Form of a Charging Order, (Doc. 21), be
GRANTED, and that the Court enter the
following Charging Order:
1.
Custom is hereby granted an Order charging the interest of
Michael Schutz in Everything LED Harley Davidson, L.L.C. with
payment of the unsatisfied amount of the Judgment.
2.
Everything LED Harley Davidson, L.L.C., and its members and
managers therein, are ordered to refrain from paying any
monies or profits due to Michael Schultz or his assignees
until Custom's Judgment is satisfied in full.
3.
Everything LED Harley Davidson, L.L.C., and its members and
managers therein, are directed to pay to Custom any monies or
profits due or to become due to Michael Schultz or his
assignees. Payments ...