The Shield Belongs to the Forum.

What they have not been told is that the statute has to be applied before it can protect anything. And whether it gets applied depends not on where the company was formed, but on where the creditor catches the debtor.

On May 8, 2026, the United States District Court for the Southern District of New York decided Shumener, Odson & Oh LLP v. Saadia Square, LLC, 2026 WL 1266002 (S.D.N.Y. May 8, 2026), and confirmed just how permeable New York’s treatment of a membership interest can be. The case is worth studying closely, not because it announces new law, but because it shows how quietly an assumed protection can fail to arrive.

The creditor was a law firm holding a judgment against Saadia Square, LLC of just under $800,000 — the underlying action having been filed in the United States District Court for the Central District of California, No. 2:24-cv-11179, with enforcement proceeding in New York. The asset it wanted was Saadia Square’s minority membership interest in another company, SM Logistics Holdco LLC.

Saadia Square had reasons — good practical ones — for wanting to keep that interest where it was. It had won a jury verdict of roughly $40.5 million against SM Holdco’s managing member, a verdict then on appeal. And SM Holdco was a borrower under a third-party loan in which Saadia Square’s loss of its interest would constitute an event of default. The debtor’s argument was essentially one of equity and timing: wait until the appeal is resolved; do not detonate a loan covenant to collect $800,000 against an interest that may be worth many multiples of it.

The court took none of that into account — because, under the governing procedure, it had no authority to. Enforcement in a federal court sitting in New York runs through Federal Rule of Civil Procedure 69(a), under which post-judgment enforcement follows the law of the state where the court sits, and New York’s turnover statute, N.Y. C.P.L.R. § 5225(a), directs that where the judgment debtor is in possession of property in which it has an interest, the court “shall order” that property paid or delivered over to the creditor. The inquiry is whether the debtor owns assignable property. If it does, the turnover order follows. Hardship, timing, collateral consequences, the pendency of an appeal that might multiply the asset’s value — none of these are inputs the statute invites.

That is the first lesson, and it is a hard one. Clients routinely assume a court will weigh the consequences of stripping an interest away. Where the remedy is mandatory, there is nothing to weigh.

New York has a charging-order statute. Section 607 of the Limited Liability Company Law lets a court “charge the membership interest of the member with payment of the unsatisfied amount of the judgment,” gives the creditor “only the rights of an assignee,” and bars the creditor from reaching the property of the company itself (N.Y. Ltd. Liab. Co. Law § 607; compare N.Y. P’ship Law § 54 and id. § 111). Read alone, it sounds like every other charging-order statute in the country.

The difference is a sentence that is not there. Delaware’s § 18-703(d) says the charging order “is the exclusive remedy by which a judgment creditor of a member or a member’s assignee may satisfy a judgment out of the judgment debtor’s limited liability company interest,” and that “attachment, garnishment, foreclosure or other legal or equitable remedies are not available to the judgment creditor, whether the limited liability company has 1 member or more than 1 member” (6 Del. C. § 18-703(d); see also id. § 18-703(a), (b), (e)). The Uniform Limited Liability Company Act contains a comparable exclusivity provision (Unif. Ltd. Liab. Co. Act § 503(h)). New York has adopted neither. Its § 607 authorizes a charging order; it does not make it the only door.

So the creditor’s other doors stay open. C.P.L.R. § 5201(b) makes a money judgment enforceable against any property “which could be assigned or transferred,” and a membership interest plainly can be. Section 5225 supplies turnover. Section 5228 supplies a receiver. And § 5240 lets a court modify the mechanics of any enforcement procedure — including, as we will see, by routing the interest straight to the creditor rather than through a sheriff. A charging order in New York is one option on a creditor’s menu, and generally the least aggressive one. No creditor is obliged to order it.

Saadia Square did not come from nowhere. Two years earlier, in 245 Park Member LLC v. HNA Group (Int’l) Co., No. 23-842-cv, 2024 WL 1506798 (2d Cir. Apr. 8, 2024) (summary order), the Second Circuit affirmed a turnover order that ought to trouble anyone relying on an out-of-state protective statute.

HNA International, a Hong Kong company, had guaranteed an investment and lost the underlying dispute; the resulting judgment ran to roughly $185.4 million. The asset the creditor pursued was HNA International’s 100% membership interest in HNA North America, LLC — a Delaware limited liability company. The district court ordered that interest turned over under C.P.L.R. § 5225(a), and directed it be conveyed directly to the creditor rather than to a sheriff, invoking C.P.L.R. § 5240 in the face of the debtor’s obstruction.

HNA International raised precisely the defense a planner would expect: Delaware law makes the charging order the exclusive remedy against a Delaware LLC interest, so turnover was unavailable. The Second Circuit did not accept it. Its answer was a conflicts-of-law answer rather than an interpretation of the Delaware statute: New York law, not Delaware law, controls the question. HNA International had consented, in the guaranty it signed, to the jurisdiction of the New York courts for enforcement — so what counts as reachable “property” fell to be decided under New York’s own enforcement law. Under § 5201(b) the judgment reaches assignable property, out-of-state LLC interests are assignable, and New York’s LLC Law contains nothing purporting to abolish turnover. The panel drew on the New York Court of Appeals’ decision in Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303 (2010), which had already established that membership interests in out-of-state limited liability companies are intangible personal property that travels with the debtor and can be attached in New York where the court has personal jurisdiction over him.

We would note, in fairness, that 245 Park issued as a non-precedential summary order rather than a published opinion. But its reasoning has proven durable in the district courts, and Saadia Square is the evidence.

Here is the question the commentary usually leaves unasked, and it is the one that matters most to a client: so what? A New York court has ordered the interest turned over. What, exactly, does the creditor now hold?

Not, it turns out, quite what the order seems to say. A turnover under C.P.L.R. § 5225 is an in personam command to the debtor — pay over, deliver, convey. New York decides, under its own enforcement law, what “property” of the debtor is reachable; that is the holding of 245 Park. But New York does not thereby get to decide the internal affairs of a Delaware, Wyoming, or Nevada company. Who may be admitted as a member of a limited liability company — who may vote the interest, inspect the books, sit in management, and compel or block a distribution — is a question of that company’s governance, and under the internal affairs doctrine it is answered by the law of the state of formation and by the operating agreement, not by the forum that happened to render the judgment (see Restatement (Second) of Conflict of Laws § 302; cf. VantagePoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005)).

The two do not deliver the same thing. What is assignable about a membership interest — and therefore what a turnover order can actually reach — is the economic, or “transferable,” interest: the right to distributions and allocations. Management and membership are not freely assignable. So the creditor who compels a turnover of a Delaware LLC interest takes, at most, what Delaware gives an assignee: the right to receive distributions if and when they are made, and no right to participate in management, to vote, to inspect records, or to be admitted as a member except as the operating agreement allows or upon the vote or consent of all members (6 Del. C. § 18-702(a)–(b); Wyoming, Nevada, and other LLC-friendly jurisdictions contain materially similar provisions). The New York court can order the debtor to hand over the certificate. It cannot order the Delaware company to seat the creditor at the table, and it cannot rewrite Delaware’s rule on who becomes a member.

Follow that to its end and the creditor’s victory grows strangely familiar. Having won turnover, the creditor stands as a bare assignee. If the manager — often the debtor, or someone aligned with the debtor — simply declines to declare a distribution, the assignee waits, holding an economic right that yields nothing. That is, almost exactly, the position a charging order would have left it in. And should the creditor press further — try to vote the interest, force its way into management, or be recognized as a member — it must litigate that where the company’s internal affairs are decided, under the home state’s law, and there it meets § 18-702 and its equivalents head-on. This is the collision clients should understand: a New York order purporting to transfer “the membership interest” can hand the creditor more than the chartering state will recognize, and at the far end of the pipeline the aggressive remedy may deliver no more than the modest one it bypassed. The orders of the enforcing court and the law of the chartering state do not sit in the same place, and the seam between them is where a creditor’s paper win can quietly lose its value.

None of which is a plan. It is a fault line, not a fortress, and a client should hear it as one. The comfort is thin and expensive: it means fighting on two fronts, in two states’ courts, with an uncertain result — and it is weakest precisely where clients so often sit, in a single-member LLC, where there are no other members to withhold consent and where courts have repeatedly found the assignee limitation too flimsy to respect, reasoning that its animating purpose — protecting the other members from an unwanted co-owner — is absent (see, e.g., In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003)). The lesson is not that the entity saves you after all. It is that even the creditor’s win is muddier than the headline suggests — and that the clean answer lies elsewhere.

This is the point we want clients to carry away, and it is worth stating without ornament.

The protective statute belongs to the state of formation. The remedy belongs to the forum where the creditor sues. A Delaware exclusivity clause is a rule for Delaware courts and for courts that choose to apply Delaware law. It is not a property of the membership certificate. It does not follow the interest into a courthouse in Manhattan.

Which reframes the planning question entirely. The variable that decided 245 Park was not the charter of HNA North America. It was that HNA International — a Hong Kong entity — could be sued in New York, because a guaranty it had signed years earlier put the dispute there. The exposure was created not by the choice of LLC jurisdiction but by an unrelated commercial document that handed a creditor a New York forum. By the time anyone thought about charging orders, the outcome was already fixed.

So the honest questions are the unglamorous ones. Where does the client actually live, hold assets, and do business? Which forum-selection, arbitration, and consent-to-jurisdiction clauses has the client signed, in guaranties and credit agreements and joint-venture documents that no one filed under “asset protection”? Where would a plaintiff most plausibly bring suit? Those answers, not the state on the certificate of formation, describe the law that will govern the remedy.

There is a structural answer to this problem, and it is the one the Lighthouse approach has always turned on.

Every case discussed above begins from the same premise: the judgment debtor owns assignable property. Turnover under C.P.L.R. § 5225(a) asks whether the debtor possesses an interest that can be transferred. If the answer is yes, the analysis proceeds. If the answer is no, it never begins.

An LLC, standing alone, does not change that answer. It is a remedy-limiting device, and it limits remedies only where a statute says so and a court agrees to apply that statute. It leaves the interest in the client’s own hands, wagering everything on a conflicts analysis that a creditor may well win.

A seasoned, irrevocable, discretionary trust changes the answer itself. Where the membership interest is genuinely owned by the trust — settled years earlier, when no claim existed or was foreseeable; irrevocable, so no switch remains to be flipped; discretionary, so no beneficiary holds a fixed entitlement a creditor could attach; and administered by a genuinely independent trustee rather than the settlor in a different hat — there is no assignable interest in the debtor’s hands for a turnover order to reach. The creditor’s difficulty is not that a statute forbids the remedy. It is that the property is not there.

The same discipline governs, as it always does. A transfer made after a claim has accrued does not solve this problem; it creates a second one, handing the creditor a voidable-transfer claim layered on top of the judgment, with the familiar badges — insider transferee, suspicious timing, retained control, concealment — supplying the intent. Structure built under the shadow of a dispute is not protection. It is evidence.

Saadia Square will be read by most practitioners as a narrow procedural decision about C.P.L.R. § 5225(a), and as a matter of doctrine that is what it is. We read it as something more useful: a demonstration that the protection most clients believe they purchased when they formed an LLC is contingent on a question they have never been asked — in whose courthouse will this be decided?

Charging-order protection is real, and in jurisdictions that have written exclusivity into statute with care, it is formidable. Nevis, for instance, makes the charging order the sole and exclusive remedy, provides that it is not a lien on the member’s interest, confines the creditor to distributions as and when actually made, and sunsets the order after three years without renewal (Nevis Limited Liability Company Ordinance, Cap. 7.04(N), § 60(2), (10), (15)). But every one of those provisions is a rule addressed to a court. The client’s task — and the planner’s — is to make it as likely as possible that the court deciding the matter is one that must listen.

An entity chosen well is worth having. An entity chosen well, owned by a trust settled long before anyone was looking, and administered by someone the settlor cannot direct, is worth considerably more. The difference between the two is not cleverness. It is timing and architecture, which is to say, it is work that can only be done on a clear day. Creditor remedies against membership interests turn heavily on the specific facts, the governing documents, the debtor’s contacts with a given forum, and the law of the jurisdictions involved; this note is offered for general planning discussion, not as legal advice for any particular matter.