Levy v. Carolinian, LLC

Carolinian, LLC was a closely held, manager-managed South Carolina limited liability company owned and managed various hotel and rental properties in Horry County. In February 2010, Appellants Shaul and Meir Levy obtained a judgment against Bhupendra Patel (a member of Carolinian) in the amount of $2.5 million. Thereafter, the Levys obtained a charging order from the circuit court, which constituted a lien against Patel's distributional interest in Carolinian. Subsequently, the Levys filed a petition to foreclose the charging lien, and the foreclosure sale was held in April 2012. The Levys were the successful bidders, purchasing Patel's distributional interest. Following the foreclosure sale, Carolinian asserted it was entitled to purchase Patel's distributional interest from the Levys pursuant to Article 11 of the Operating Agreement. Carolinian contended that, since the Levys failed to obtain the consent required under Section 11.1 of the Operating Agreement, their distributional interest was deemed to have been offered to Carolinian, and Carolinian was entitled to purchase that interest under Section 11.2. The Levys objected to Carolinian's attempt to force them to sell their interest, arguing they were not subject to the terms of Article 11 of the Operating Agreement and, thus, were not required to seek consent. The Levys subsequently filed suit, seeking a declaratory judgment that they were the lawful owners of Patel's distributional interest and that any right Carolinian had to compel the sale of the distributional interest terminated upon the foreclosure sale under the terms of Section 3.5 of the Operating Agreement. Following a hearing, the trial court found the foreclosure sale, which resulted in the transfer of Patel's distributional interest in Carolinian to the Levys, changed the Levys' status from that of mere judgment creditors to transferees of Patel's distributional interest. The trial court further found that, as transferees, the Levys became subject to the provisions of Article 11 of the Operating Agreement. Specifically, the trial court held that Carolinian could force the Levys to sell Patel's distributional interest pursuant to Sections 11.1 and 11.2 of the Operating Agreement. In their appeal, the Levys argued the circuit court committed an error of law in finding that, pursuant to Article 11 of the Operating Agreement, Carolinian could compel them to sell their interest. The Supreme Court agreed and reversed the trial court. View "Levy v. Carolinian, LLC" on Justia Law