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10 / 12 / 2018

Saadi v. Maroun, 2018 WL 1282325 (M.D. Fla. 2018)

In this case out of the Middle District of Florida, the Federal Court took a look at what judgment creditors will face when looking to "prove" that a single-member LLC is, in fact, a single-member LLC for purposes of F.S. Section 605.0503 (to allow for judicial sale). 

The facts of the case are as follows. 

In October 1, 2009, a jury awarded Plaintiff Edward T. Saadi $90,000 in compensatory and punitive damages for his claims against Defendant Pierre A. Maroun.  But Plaintiff was unable to collect on his judgment.  Plaintiff then filed various motions to aid in collection, and when that was to no avail, he sought an Olmstead remedy, and in particular, looked to 605.0403, to claim that it would be proper for the court to order that a judicial sale occur of Defendant's interest in Maroun's International, LLC or alternatively, a charging order against Defendant's interest in the LLC.

The court noted that a judicial sale can't be ordered under Florida's LLC Act if there is more than one member, and in that situation, Plaintiff can only seek a charging order. Fla. Stat. § 605.0503(1) & (6).

The Magistrate Judge then held an evidentiary hearing to determine whether Defendant was the sole member of MILLC.

Thereafter, the Magistrate Judge allowed Defendant to supplement the record with the following: (1) an affidavit and a corrected affidavit of Omar Al-Qawasmi, who allegedly holds a 49% interest in MILLC; (2) an application for use of the fictitious name, “MI7USA,” by MILLC dated October 31, 2011; (3) eight letters between various dignitaries in the Jordanian government and MI7USA that purportedly show that MILLC is a viable business entity; (4) a copy of the original mortgage that Omar Al-Qawasmi took out on his house in Jordan dated August 29, 2012; (5) a copy of the wire transfer evidencing that Omar Al-Qawasmi deposited money into MILLC's Regions Bank account on September 6, 2012; (6) a copy of a promissory note from MILLC to Omar Al-Qawasmi that was presented at the hearing but has now been filed with the Pinellas County Clerk of Court; (7) the deed to the condominium owned by MILLC; and (8) sworn affidavits from the other alleged members of MILLC (Ahmad Kameh who allegedly owns 15% and Jean Maroun who allegedly owns 15%). 

In the Report and Recommendation, the Magistrate Judge found that neither Plaintiff's nor Defendant's evidence was persuasive. As a result, the Magistrate Judge concluded that Plaintiff failed to show that Defendant was the sole member of MILLC. Therefore, the Magistrate Judge found that the only remedy available to Plaintiff was a charging order against Defendant's interest in MILLC, and the Magistrate Judge recommended such relief.

Plaintiff then objected to these recommendations.

Defendant sought to supplement the records, but Plaintiff objected, arguing that the affidavits submitted consist of hearsay because they are out of court statements and Plaintiff cannot cross-examine the affiants. Plaintiff also argues that the remaining documents are unauthenticated and should not have been considered.

The Federal Court found it significant that Plaintiff could not cite to any case law discussing the proper materials to be considered in an evidentiary hearing conducted pursuant to Florida Statute § 605.0503.

Thus, the Federal Court ruled that Plaintiff had failed to show that Defendant was the sole member of MILLC. Accordingly, the Court overruled Plaintiff's objections to the Magistrate Judge's ruling allowing Defendant to supplement the record.

At that point, Plaintiff further argued in opposition to the Magistrate Judge's recommendations that a proper evidentiary showing had been made in support of single-member LLC status.  However, the Federal court viewed things differently, noting that Plaintiff's evidence for proving that Defendant was the sole member of MILLC was that Defendant never listed any other members of MILLC in any of its filings, that Defendant used MILLC's bank account for personal expenses and titled it similar to his personal account, that the MILLC failed to file tax returns, and that Defendant lived rent-free in the condominium owned by MILLC. The Federal Court then ruled that the Magistrate Judge properly concluded that this evidence was not sufficient. Specifically, the Magistrate Judge stated the following:

Saadi says the LLC is just Maroun, relying primarily upon Florida Department of State records and Maroun’s and the LLC’s responses to Saadi’s interrogatories. For example, the Electronic Articles of Organization for Maroun’s International, LLC filed with the Secretary of State on May 6, 2006, and the annual reports for Maroun’s International, LLC for the years 2007-2017 mention only Maroun and no one else. See doc. 335, Ex. 3, 4, and 5. From this, he posits the LLC is a single entity structure—and Maroun is the only stakeholder. 


But that conclusion assumes that Florida’s LLC scheme requires an LLC to list all its members in such filings. And that is not the case. In fact, the process for setting up an LLC in Florida can be unsophisticated.... Nothing in the Act required the LLC to identify in its articles of organization all its members of the LLC. Similarly, the LLC’s annual reports show Maroun as the “Managing Member/Manager” for the years 2009-2012 and the “Authorized Person” for the years 2013-2017. But as with the articles of organization, the legislative scheme did not require the LLC to list in the annual report all its members. Fla. Stat § 6-5.0212. 


That makes Saadi’s conclusion that these filings evince a single-member LLC unconvincing.

Considering only Plaintiff's evidence and disregarding all of Defendant's evidence, the Middle District concluded that Plaintiff had not shown that there are no other members of MILLC.

Plaintiff's evidence simply showed that Defendant may have been improperly using MILLC's assets as his own, but that alone is not the same as showing that there are no other members of MILLC.

Therefore, the Court overruled Plaintiff's objection to the Magistrate Judge's conclusion that Plaintiff has not shown that there are no other members of MILLC.  The Court ruled that a judicial sale is not an available remedy in this type of situation.