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Creditors’ Rights Trump Ownership Restrictions in LLC Operating Agreements

A recent South Carolina Supreme Court decision affirms the supremacy of creditors’ foreclosure rights, and sounds a cautionary note for LLCs. The state’s high court said that LLCs can’t use an operating agreement to force a creditor to sell a distributional interest it obtained via judicial foreclosure. 

The ruling came in Levy v. Carolinian, LLC, a case involving an LLC that owns an oceanfront hotel. One of the members, who owned about a quarter of the LLC, found himself on the wrong end of a judgment for $2.5 million. Creditors obtained a charging order – essentially a lien – against their debtor’s distributional interest in the LLC. The creditors then foreclosed on its charging lien and purchased the member’s distributional interest at public auction. 

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Tis the Season for Retailers to Know their Premises Liability Risks

Nothing says Happy Holidays like the hustle and bustle of Christmastime commerce. Crowded stores, congested parking lots and package-laden shoppers are a welcomed tradition to retail outfits that realize roughly twenty percent of annual sales during the holiday season. But with all the hustle and bustle also comes the increased risk of incidents: the combination of lots of shoppers and lots of merchandise means a greater chance of spills and tumbles (of products and people). The last thing stores want to do is curb retail activity, but how do they keep tabs on potential dangers that could lead to customer injury and legal liability? 

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