Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 1 of 10 PageID #: 457 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION BANK OF AMERICA, N.A., ) ) Plaintiff, ) ) Case No. 4:12-CV-609 vs. ) ) STEPHEN C. ROBERTS, et al., ) ) Defendants. ) DEFENDANTS RESPONSE TO PLAINTIFF BANK OF AMERICA S APPLICATION FOR CHARGING ORDER Defendants Steven C. Roberts, individually and as Trustee of the Steven C. Roberts Revocable Trust and Michael V. Roberts, individually and as Trustee of the Michael V. Roberts Revocable Trust ( Roberts ), by their undersigned counsel submit this Response to Plaintiff Bank of America s Application for Charging Order, and state: I. Introduction On July 22, 2016, Plaintiff Bank of America ( Bank of America ) filed its Application for Charging Order, requesting that this Court issue a charging order with respect to 77 separate entities or partnerships, pursuant to MO. REV. STAT. 347.119 and 359.421. Bank of America asserts that it is entitled to a charging order against the membership interests of the Roberts in the entities. As more fully set forth below, Bank of America is not entitled to a charging order against all of the entities because the list of 77 entities includes companies in which the Roberts have no membership interest and others in which their membership interest is held jointly with their wives and are, therefore, not subject to Bank of America s judgment against the Roberts under Missouri law. 1
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 2 of 10 PageID #: 458 II. Under Missouri Law, Charging Orders May Only be Granted Against the Membership Interest of a Judgment Debtor and May not be Granted Against A Membership Interest Held Jointly with the Judgment Debtor s Spouse. As more fully set forth below, Bank of America is not entitled to entry of the requested charging orders with respect to all of the entities listed in its Application. The Roberts have no membership interest in a number of the entities, and with respect to others, their interest is held jointly with their spouses making it not subject to Bank of America s judgment. a. Charging orders only apply to membership interests of a judgment debtor. A charging order is a post-judgment remedy that allows the judgment creditor of an individual debtor-member of a limited liability company (or a partnership) to enforce a judgment by charging the individual member s distributional interest with the unsatisfied amount of a judgment. Regions Bank v. Alverne Associates, LLC, 456 S.W.3d 52, 56 (Mo. App. E.D. 2014). A charging order entered against a membership interest of an LLC or a partnership interest requires an LLC or partnership to pay the judgment creditor any distribution that would otherwise be paid to the judgment debtor. Disalvo Properties, LLC v. Bluff View Commercial, LLC, 464 S.W.3d 243, 246 (Mo. App. E.D. 2015). A charging order is a form of execution on a judgment. Alverne Associates, 456 S.W.3d at 59 (noting that charging orders are a form of execution on a judgment where attachment of specific partnership property by a judgment creditor of an individual debtor-partner is prohibited. ). Therefore, under Missouri law, a charging order is only authorized against an entity if a judgment debtor has a membership interest in the entity. Moreover, a judgment-creditor s motion to the Court for a charging order is not selfproving. Alverne Associates, LLC, 456 S.W.3d at 56. The judgment-creditor has the burden to 2
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 3 of 10 PageID #: 459 prove the allegations therein. Id. Here, Bank of America has failed to provide any evidence supporting its entitlement to a charging order, specifically whether the Roberts have membership interests in the named entities. Accordingly, Bank of America has not met its burden and is not entitled to a charging order with respect to the entities named in its Application. b. A judgment debtor s membership interests held jointly with a spouse are not subject to judgment and, therefore, cannot be subject to a charging order. Joint ownership of property by spouses raises a presumption of tenancy by the entirety. Hanebrink v. Tower Grove Bank & Trust Co., 321 S.W.2d 524, 527 (Mo. App. 1959). Where property is owned in tenancy by the entireties, each spouse is seized of the whole or entirety and not of a share or divisible part. See Wehrheim v. Brent, 894 S.W.2d 227, 228 29 (Mo. App. E.D. 1995). Each spouse owns an undivided interest in the whole, not a separate, divisible interest. Id. An execution arising from a judgment against one spouse alone cannot affect property held by a husband and wife as tenants by the entireties. Id. Accordingly, if two spouses jointly hold a membership interest in an LLC or a partnership interest as tenant by the entirety, a charging order against one spouse cannot affect said interests. Feinberg v. Feinberg, 924 S.W.2d 328, 331 (Mo. App. E.D. 1996). III. The Entities at Issue In response to Bank of America s Application, Roberts have divided the 77 entities at issue into separate groups and provide their response to each below. a. The Roberts admit that some of the named entities are subject to the charging order. Of the 77 entities identified by Bank of America in its Application, only three are properly subject to a charging order on behalf of Bank of America. Michael V. Roberts and Steven Roberts, individually, are members of the following entities: 3
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 4 of 10 PageID #: 460 i. Roberts Old School House Lofts, LP ii. Roberts Brothers Development, LLC iii. Roberts Hospitality Services, LLC In that the Roberts have a membership interest in these entities, they do not dispute Bank of America s right to the issuance of a charging order against their membership interests therein. However, the proposed order submitted by Bank of America is not consistent with Missouri law with respect to charging orders and includes entities in which the Roberts have no membership interest. Bank of America s proposed order fails to make it clear that its only interest is in any distributions which may be made to the Roberts on the basis of their membership interest in the entities. Alverne Associates, LLC, 456 S.W.3d at 56. The Roberts hereby provide a proposed order for the Court s review. See Proposed Order attached hereto as Exhibit J. b. The Roberts have no membership interest in some of the named entities and, therefore, the entities cannot be subject to a charging order. The Roberts do not have a membership interest in the following entities: i. Cable Tow Capital, LLC ii. giftcardhotels.com, LLC iii. GiGi by Jeanne, LLC iv. Gradient Eyewear LLC v. Head Rock Recording and Mastering, LLC vi. ibrokerage Firm LLC vii. irealty Firm LLC viii. Lucky Stone Publishing, LLC ix. MBE Environmental Solutions, LLC x. MBE Healthcare Solutions, LLC 4
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 5 of 10 PageID #: 461 xi. MsMogulFinder.com LLC xii. Picture A Miracle, LLC xiii. Raise the Bar STL, LLC xiv. Roberts Broadcasting St. Louis, LLC xv. Roberts Family Enterprises LLC xvi. Roberts Galerie Art & Antiques xvii. Roberts Group Holding, LLC xviii. Roberts Twins & Associates, LLC xix. Roberts Broadcasting Company of Evansville, IN LLC xx. Roberts Broadcasting Company of Jackson, MS LLC xxi. Roberts Hotels Houston, LLC xxii. Roberts Hotels Spartanburg, LLC xxiii. Roberts Hotels Atlanta, LLC xxiv. Roberts Hotels Dallas, LLC xxv. Roberts Hotels Tampa, LLC xxvi. SCD Investments, L.L.C. xxvii. SCD Investments II, L.L.C. xxviii. SCD Investments III, L.L.C. xxix. SCD Investments IV, L.L.C. xxx. SCD Investments V, L.L.C. xxxi. SCD Investments VI, L.L.C. xxxii. SCD Investment Group, LLC xxxiii. Sixty Thirty Realty LLC 5
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 6 of 10 PageID #: 462 xxxiv. Storm Properties, LLC xxxv. The Roberts Family Foundation xxxvi. Valia Group LLC xxxvii. Virtual Minority Media LLC xxxviii. XYZ Properties, LLC xxxix. Roberts Galerie Master Tenant, LLC xl. Roberts-Natcity, LP xli. STL Tower Partners, LLC See Affidavits of Michael V. Roberts, Jr. (Ex. A), Jeanne Roberts Johnson (Ex. B), Christian Roberts (Ex. C), Michael Kirtley (Ex. D), Stephanie Roberts (Ex. E), Eva Frazer (Ex. F), Michael Tiller (Ex. G), and Kay Gabbert (Ex. H), Jeanne Roberts Johnson Regarding Lucky Stone Publishing, LLC (Ex. I), attached hereto. Under Missouri law, Bank of America is not entitled to a charging order against these entities because a charging order is only appropriate against an entity in which a judgment debtor has a membership interest. Alverne Associates, LLC, 456 S.W.3d at 56. Therefore, the Court should deny Bank of America s Application with respect to the entities set forth above. c. The Roberts own some of the named entities jointly with their spouses and, therefore, the entities are not subject to a charging order. The following entities are either: 1) owned by Michael V. Roberts and Jeanne G. Roberts as tenants by the entirety; 2) owned by Steve Roberts and Eva Frazer as tenants by the entirety; or 3) owned by entities that are owned by Michael Roberts and Jeanne Roberts as tenants by the entirety and Steve Roberts and Eva Frazer as tenants by the entirety: i. Bella Laguna Investments II, LLC ii. Bella Laguna Investments III, LLC 6
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 7 of 10 PageID #: 463 iii. Bella Laguna Investments, LLC iv. Blackstar Holdings II, LLC v. Blackstar Holdings III, LLC vi. Blackstar Holdings, LLC vii. Roberts Brothers Broadcasting, L.L.C. viii. Roberts Brothers Financing LLC ix. Roberts Brothers Properties II, L.L.C. x. Roberts Brothers Properties III, L.L.C. xi. Roberts Brothers Properties IV, L.L.C. xii. Roberts Brothers Properties IX, LLC xiii. Roberts Brothers Properties X LLC xiv. Roberts Brothers Properties XIV, LLC xv. Roberts Brothers Properties, L.L.C. xvi. Roberts Communications Properties, LLC xvii. Roberts Community Development Venture Fund, LLC xviii. Roberts Development II, LLC xix. Roberts Development, L.L.C. xx. Roberts Downtown Development Company, LLC xxi. Roberts Hotels Detroit, LLC xxii. Roberts Plaza II, L.L.C. xxiii. Roberts Plaza, L.L.C. xxiv. Roberts Publishing Company, LLC xxv. Roberts Radio Broadcasting, LLC 7
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 8 of 10 PageID #: 464 xxvi. Roberts Tower Company II, LLC xxvii. Roberts Tower Company III, LLC xxviii. Roberts Tower Company, LLC xxix. Roberts Tower Management, LLC xxx. Royal Motorsport, LLC xxxi. SMR Tower Investments, LLC xxxii. Talley Properties II, LLC xxxiii. Talley Properties, LLC See Affidavits of Michael Kirtley (Ex. D) and Kay Gabbert (Ex. H), attached hereto. Under Missouri law, Bank of America is not entitled to a charging order against these entities because the membership interests of the Roberts are held jointly with their spouses as tenants by the entireties. Under Missouri law, Bank of America is not entitled to a charging order against a judgment debtor s membership held as tenants by the entireties with his or her spouse. Wehrheim, 894 S.W.2d at 228-29; Feinberg, 924 S.W.2d at 331. Therefore, the Court should deny Bank of America s Application with respect to the entities set forth above. IV. Conclusion As set forth above, only the three entities listed in Section III.a. above are properly subject to a charging order in favor of Bank of America. Defendants Steven C. Roberts, individually and as Trustee of the Steven C. Roberts Revocable Trust and Michael V. Roberts, individually and as Trustee of the Michael V. Roberts Revocable Trust respectfully request the Court deny Bank of America s Application for Charging Order with respect to all other entities listed therein and enter an order consistent with the proposed order provided by the Roberts herewith and grant all other relief deemed appropriate. 8
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 9 of 10 PageID #: 465 Respectfully submitted, BLITZ, BARDGETT & DEUTSCH, L.C. By: /s/ R. Thomas Avery Robert D. Blitz, #24387MO R. Thomas Avery, #45340MO Ellen W. Dunne, #41442MO 120 S. Central Ave., Ste. 1500 St. Louis, MO 63105 (314) 863-1500 (314) 863-1877 (facsimile) rblitz@bbdlc.com rtavery@bbdlc.com edunne@bbdlc.com Attorneys for Defendants 9
Case: 4:12-cv-00609-AGF Doc. #: 74 Filed: 08/18/16 Page: 10 of 10 PageID #: 466 CERTIFICATE OF SERVICE I hereby certify that on the 18th day of August, 2016, a true and accurate copy of the foregoing document was sent via electronic filing to the following parties of record: Joseph J. Trad Jacqueline K. Graves Lewis Rice LLC 600 Washington Ave., Suite 2500 St. Louis, MO 63101 Mike W. Bartolacci David A. Warfield Thompson Coburn LLP One US Bank Plaza St. Louis, MO 63101 Matthew D. Montaigne Alston & Bird LLP 4721 Emperor Blvd., Suite 400 Durham, NC 27703 Christopher A. Riley John C. Weitnauer Alston & Bird LLP 1201 W. Peachtree Street One Atlantic Center Atlanta, GA 30309 /s/ R. Thomas Avery 10