Avant Capital Partners, LLC v. Strathmore Development Co Michigan, LLC

Case Type:
Case Status:
Affirmed in part and Reversed in part
Sixth Circuit Case Nos. 16-2378/16-2418; File Name: 17a0400n.06 (6th Circuit, Jul 10,2017) Not Published
Sixth Circuit reversed District Court's addition of a related non-party to a judgment on account of alleged transfers to the non-party by a judgment debtor and determined that, under Michigan Proceedings Supplementary to Judgement Act, an additional claim needs to be asserted against a non-party, such as piercing the corporate veil, before it can be added as a liable party to a judgment against the related judgment debtor. Sixth Circuit affirmed other relief granted to creditor to intercept and/or restrain payments by judgment debtor to related party.
Procedural context:
Creditor obtained judgment in the District Court in Connecticut against an entity based on the failure of the judgment debtor to pay the creditor a loan fee. Creditor began post-judgment collection proceedings in District Court in Michigan. Creditor sought to recover from the sole member of the judgment debtor limited liability company for transfers made by the judgment debtor to the member. Creditor did not assert a claim against the non-party member nor include the member in the post-judgment proceedings. District Court entered order making non-party member jointly and severally liable for the judgment against the limited liability company and granted other relief in favor of creditor.
A development limited liability company in Michigan was run by an individual who also ran the member limited liability company. The individual had two other related development companies. The development company failed to pay a loan fee and the creditor obtained a judgment in Connecticut and transferred it to Michigan for collection. The creditor sought o garnish amounts paid by the judgment debtor to its member. The individual put the two related companies in Chapter 11. Debtors sought authority to make certain payments to the development company. Instead the Debtors paid funds to the member. Creditor received order from District Court to make member jointly and severally liable for the judgment and sought other relief to recover the payments. Under Michigan law creditor had to assert a claim against member and could not, through post-judgment proceedings alone, make member directly liable. Instead, creditor needed to assert claim against member. such as by piercing corporate veil. District Court's order granting creditor other relief was proper even though member was not a party as it knew of the proceedings and participated in a hearing.
Boggs, Clay and Sutton, Circuit Judges

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