Wells Fargo v. Barber Case Analysis

In Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308 (M.D. Fla. 2015), the Middle District of Florida held that an LLC membership interest is intangible personal property located with its owner. Florida creditor remedies therefore applied to Sabrina Barber’s Nevis LLC interest.

The holding turns on the LLC member’s Florida residency. Because intangible property follows its owner, the same court held that a Kansas resident’s Missouri LLC interests lay beyond its reach, and the Colorado Supreme Court locates a membership interest, for charging-order purposes, in the state where the LLC was formed. A non-Florida owner, or a Florida resident sued outside Florida, faces a different analysis.

The Facts

Wells Fargo and Regions Bank held a deficiency judgment against Sabrina Barber for $62,491,162.98, entered by a Florida state court on October 8, 2013. Before the judgment, Barber had made a series of transfers.

Barber received approximately $1 million from the sale of her marital home and deposited the funds into a bank account. She later transferred $870,000 to a TD Ameritrade account under Blaker Enterprises, LLC, a single-member Nevis LLC she had formed in January 2011. Additional transfers moved funds back and forth between Barber’s AIG accounts and Blaker’s TD Ameritrade accounts.

The banks sued to foreclose Barber’s membership interest or, in the alternative, for a charging order against it. The complaint also sought to avoid the transfers as fraudulent under FUFTA. Barber moved to dismiss, arguing that the court lacked jurisdiction over an interest in a Nevis-organized LLC.

LLC Membership Interests Are Intangible Personal Property

The Barber court rejected the jurisdictional argument by distinguishing LLC membership interests from corporate stock. Barber relied on Sargeant v. Al-Saleh, 137 So. 3d 432 (Fla. 4th DCA 2014). There the Fourth District held that a Florida court could not order turnover of stock in a foreign corporation because the court lacked in rem jurisdiction over property located abroad.

The court found Sargeant inapplicable. Corporate stock certificates are tangible personal property located wherever the physical certificates are held. An LLC membership interest is different. It is intangible personal property that has no physical form and no fixed location. Under established conflict-of-law principles, intangible personal property follows the person of the owner.

Because Barber resided in Florida, her membership interest in Blaker Enterprises was located in Florida. The court had in rem jurisdiction over the interest regardless of where the LLC was organized. The Nevis formation was irrelevant to the jurisdictional analysis.

Florida Law Applies to a Nevis LLC’s Membership Interest

Having established jurisdiction, the court addressed which law governed the creditor’s remedies. Florida’s LLC Act provided two avenues: a charging order under § 608.433(4) and, for single-member LLCs, foreclosure under § 608.433(6). The same two remedies now sit in § 605.0503, and Florida’s appellate courts have held creditors of multi-member LLCs to the charging order alone. Nevis law allowed only a charging order and made it the creditor’s sole remedy.

The court found the two sets of statutory remedies were not substantially similar. Florida allowed foreclosure; Nevis did not. Nevis allowed a non-charged member to redeem a charged member’s interest; Florida did not. Because the remedies differed, the court conducted a traditional conflict-of-laws analysis.

The analysis turned on the nature of the property. Membership interests are personal property. Florida’s choice-of-law rule provides that the law of the situs governs personal property. Since the membership interest was located with Barber in Florida, Florida law controlled. The court applied § 608.433(6) and held that the creditors had stated a claim to foreclose the interest, because Barber was the sole member of Blaker Enterprises.

The court cited only two provisions of the Nevis LLC Ordinance: section 38, which classifies a membership interest as personal property, and section 43, which makes the charging order the sole remedy and lets the other members redeem a charged interest. Neither helped Barber, because Florida law governed the interest; the rest of Nevis LLC law never entered the analysis.

Six Badges of Fraud

The court denied Barber’s motion to dismiss the fraudulent transfer claims. Under FUFTA, the banks alleged actual fraud—a transfer made with intent to hinder, delay, or defraud creditors—and constructive fraud. The statute lists badges of fraud that courts consider in determining actual intent.

The court identified six badges of fraud in the complaint’s allegations. The transfers went to an insider, since Barber was the sole member of Blaker Enterprises. Barber retained control of the transferred funds. The transfers came shortly after the state court entered summary judgment against her. The transfers appeared to constitute substantially all of her assets. Barber received no consideration from Blaker Enterprises. And Barber was insolvent when she made the transfers, as the summary judgment against her exceeded $66 million.

The court held that the complaint plausibly alleged a prima facie case of actual fraud. Because the same allegations showed no consideration and insolvency, the complaint also stated a prima facie claim for constructive fraud, and both fraudulent transfer claims survived dismissal.

The Certificated-Interest Workaround and Its Failure

The Barber reasoning left an opening for debtors holding certificated interests. The opinion emphasized that LLC membership interests are intangible personal property, unlike stock certificates in a corporation, which the court treated as tangible property with a fixed physical location. The conflict-of-laws authority the court cited treats shares not embodied by a document as intangible property.

The theory was that if a debtor issued physical membership certificates and kept them in a foreign jurisdiction, the interest might be reclassified as tangible property located outside the court’s reach, similar to the corporate stock in Sargeant. Practitioners built a workaround on that distinction in the years after Barber.

The workaround failed in Schanck v. Gayhart, 245 So. 3d 970 (Fla. 1st DCA 2018), where certificates for a debtor’s corporate stock and LLC membership interests had been moved to Canada. The First District held that § 678.1121(5) authorizes an order canceling and reissuing the certificates, even when the paper cannot be seized because it sits abroad or its location is unknown.

The Florida Supreme Court reached the same conclusion for assets generally in Shim v. Buechel, 339 So. 3d 315 (Fla. 2022). Section 56.29(6), the Court held, lets a court with personal jurisdiction over a judgment debtor order that debtor to act on property outside Florida. The Court disapproved Sargeant to the extent it held otherwise. The order can reach only property that is not exempt from execution.

Together, the three decisions removed location as a defense to collection. Barber placed a Florida resident’s LLC interest in Florida, Schanck reached certificates kept abroad through cancellation and reissuance, and Shim confirmed that a court’s power runs against the debtor rather than the asset. Florida courts can order judgment debtors to act on any nonexempt asset they control, wherever it sits.

The Holding Depends on Florida Residency

The holding in Barber hinges on one factual requirement: the LLC member must reside in Florida. The court’s entire jurisdictional analysis rested on the principle that intangible personal property follows the person of the owner. Because Barber lived in Florida, her membership interest was Florida property subject to Florida law.

When the member resides elsewhere, the jurisdictional foundation collapses. In O’Neal v. CDB American Franchise System, Inc., No. 8:20-cv-936, 2021 WL 3709716 (M.D. Fla. Aug. 20, 2021), the same court applied Barber‘s rule and denied a charging order against a Kansas resident’s membership interests in nine Missouri LLCs. Because a membership interest accompanies its owner, the Kansas resident’s interests were not sufficiently domestic to Florida to support in rem jurisdiction.

Other courts disagree about where a membership interest sits. In JPMorgan Chase Bank, N.A. v. McClure, 393 P.3d 955 (Colo. 2017), the Colorado Supreme Court held that, for charging-order purposes, a membership interest is located in the state where the LLC was formed, not where the member resides. Under Colorado’s rule, a Colorado LLC’s membership interest stays Colorado property no matter where the member lives.

The disagreement means Barber‘s holding is strongest in its home forum. Under Barber, a Florida court treats a Florida resident’s membership interest as Florida property wherever the LLC was formed. A non-Florida resident who forms a Florida LLC, or a Florida resident sued outside Florida, faces a different analysis.

What Barber Means for Foreign LLC Planning

The rule in Barber applies to every foreign-organized LLC, because the situs rule the court applied turns on where the member lives. A Florida resident who forms a single-member LLC in Wyoming, Nevada, Delaware, or any other state receives that jurisdiction’s charging order protections only if the litigation occurs there. When a Florida creditor sues a Florida resident in Florida, the court applies Florida law to the membership interest because the interest is located with the owner.

Wyoming’s exclusive-remedy statute does not help. Nevada’s charging order protections do not apply. Nevis law’s exclusive-remedy and member-redemption provisions are irrelevant. The debtor’s membership interest is Florida personal property, and Florida’s creditor remedies govern.

The only structure that moves assets beyond a Florida court’s effective enforcement power is an offshore trust with an independent foreign trustee who is not subject to U.S. jurisdiction. The trustee, not the debtor, holds legal title. A Florida court can order the debtor to repatriate assets, but if the trustee is independent and the debtor lacks the power to compel compliance, the court’s order has no practical effect on the trust’s assets.

That structural distinction—between assets the debtor controls and assets an independent trustee controls—is what Barber, Schanck, and Shim collectively confirm as the dividing line in Florida asset protection case law.