In California, it may not be fair, however the sole remedy for a judgment creditor to take possession of a judgment debtor’s interest and rights (and liabilities) to LLC ownership or distributions (or a general or limited partnership) is a charging order (CCP 699.720(a)).
One of many judgment articles: I am a Judgment Broker, not a lawyer, and this article is my opinion based on my experience, please consult with a lawyer if you need legal advice.
Some judgment enforcers have told me “If a lot of money is involved, I’ll spend for personal service. If not, then I serve it by mail”. Other judgment enforcers have asked me if one could save money by serving charging order proposals on LLCs by mail or certified mail, and I remind everyone personal service is best and that I am not a lawyer.
In California and probably all states, you should have all court orders personally served on the named party(s). After serving any court orders, you file your proofs of service and the original documents and pleadings with the court.
In a never ending quest to attempt to cut costs, some enforcers are looking at little loopholes in California laws. They have their proposed charging order. They look through some codes related to charging orders (CCPs (California Codes of Civil Procedure) 684.010-080 and CCP 708.310-320), and find no place where it says personal service is required.
Service of court papers is also covered by California CCPs 1005 and 1010, however even these CCPs do not discuss using personal service. Reading the codes may lead someone to believe that a court order is a nonspecific paper that can be served by mail, unless a law says you cannot.
When you sue an LLC, service of the “Notice of Motion for Charging Order” is very important. Once the charging order is issued, the question is, how strong do you want your proof of service to be, that the entity and/or other members/partners received the order; so that they are bound by the service and one day be persuaded or forced to settle the judgment?
Whether or not the partnership or LLC opposed or responded to your served proposed motion is irrelevant. If they were properly served, they become “parties in interest”. After an entity is personally served and is a party to a court case, they can be served under California CCPs 1010 and 1011, so after first personal services, they can be served by mail; if they were first served personally.
To serve a general partnership, try to serve the designated agent for service of process (California Corporation codes 16310(b) and 17601), and CCP 416.40(a). If one cannot find the agent or they evade service, one can serve them by mail (CCP 415.30 and Corporation Code 16310(d)). If they fail to respond in 20 days, you can ask the court for an order to serve the documents on the Secretary of State.
When serving papers on a LLC or partnership, there are limits on who you can serve. Usually, one can serve only the person named as the agent for service (CCP 416.10), if that person can be found. One can use the address listed with the Secretary of State for that person, and then sub-serve the papers on the person apparently in charge of the business (CCP 415.20(a)).
If the agent for service of process cannot be located or refuses to allow service, then one must serve all members of the LLC. How does one serve all the LLC members? The list of members is usually not kept anywhere that you can easily find. You can find the members, it is just not easy or quick to do so. Here is one way to find who the LLC members are:
1) Write to the California Secretary of State. Ask for the organizational papers of the LLC and send them a blank check with “not to exceed XXX” on it. Best to put a not to exceed, of twice what you or they estimate the document charges to be. The secretary of state will not play any shenanigans, so this is a good way to go. When you get the documents, you will discover who the secretary and the managing member of the LLC is. etc.
2) Have the appropriate members served personally with a debtor examination, and the managing member served personally with a 3rd-party examination (an OEX/ORAP) with your good faith belief that the LLC is holding more than $250 of your debtor’s property.
Also, if possible, have the LLC’s secretary served in person, with another subpoena duces tecum (which commands people to bring in documents). In your subpoena duces tecum, make sure to demand that they bring the LLC’s minute book and the membership register, that shows the names and the ownership percentages of the non-managing members.
3) Assuming both the managing member and the secretary shows up (this is not guaranteed, and in some courts failure to show brings no real penalties to for non-complience) you will soon have the names of all the members. In your motion for a charging order against the interests of the debtor in the LLC; you need to document a declaration that says that you performed an examination on the managing member, and subpoenaed the secretary of the LLC, who produced the requested documents showing all members of the LLC (see exhibit XXX).
Then, you can serve all the LLC members, and file the proofs of service for them with the court. Later, you can ask the judge something like “May I please have my charging order?”
If the LLC has a physical office, you can have your registered process server, serve your motion on their managing member. There are no directors in LLCs, so you can either have the managing member served by personal service or, if they are not available, you must serve all the LLC members. If the managing member or the secretary was personally served, you can then serve all the LLC members by first class mail.