Debtor's Disassociation from LLC Does Not Invalidates Charging Order in Baker's Case
Attorney Lee R. Baker, Jr. of Alaska faced financial repercussions from court cases involving multiple parties, culminating in the order to pay a substantial sum to Kenneth Duffus. The intricate web of litigation involved business deals, past real estate projects, and settling disputes among co-owners.
One of Baker's business deals involved a real estate project called Marion Bowen, which Duffus claimed buried Baker in debt following the 2008 financial downturn. In 2013, Duffus finally secured a $252,585 judgment against Baker, after a failure to sell the Marion Bowen project within a specified timeframe.
Baker co-owned the limited liability company called Aurora Park LLC with his ex-wife, Patricia Baker. They both had separate disputes over the Aurora Park project, whichled to a 2019 settlement agreement. According to the terms, Baker transferred his 50% stake in the Aurora Park LLC to Patricia for a payment of $50,000 and periodic installments of $3,000 monthly until the total of $200,000 was paid in full.
However, Duffus became privy to the settlement and attempted to recover some of the funds to offset his judgment against Baker. In attempting to claim his share, he triggered another legal dispute. The court ordered the depositing of $300,000 from the Baker-Patricia settlement into the court registry while Duffus's claim was litigated.
By this point, Baker owed Duffus approximately $460,000 due to compounded interest on the original judgment. Duffus sought partial payment from the $300,000 deposited in the registry, while Jones Law Group (JLG), which represented Aurora Park LLC, claimed a lien on the funds.
In the following legal proceedings, the court granted Duffus's motion to execute on his judgment against Baker's assets and to issue a charging order against Baker's previous interest in Aurora Park LLC. This charging order mandated Aurora Park LLC to pay Duffus any distributions that would have gone to Baker, including the $300,000 from the Baker-Patricia settlement.
However, a complication arose when JLG, representing Aurora Park LLC, asserted a lien on the settlement funds after the court had issued the charging order. The court ultimately decided that Duffus was entitled to $50,000 of the settlement, leaving the remaining $250,000 in dispute. This amount was divided such that Duffus received $122,000 while JLG's lien covered another $128,000.
In a subsequent appeal, the Alaska Supreme Court ruled that Duffus's charging order could only apply to distributions to Baker, and JLG could only secure lien fees owed at the time of the lien. The case was remanded back to the trial court for resolution of conflicting interests. On remand, the trial court found that the entire $300,000 should go to Duffus, as the funds were deemed interim distributions from Aurora Park LLC to Baker.
Eventually, a final judgment was entered favoring Duffus, who received the $300,000 held in the court registry. Baker submitted an appeal to the Alaska Supreme Court, which further considered Baker's arguments that the term "distributions" should be defined by the Aurora Park LLC's operating agreement and not by the Alaska LLC Act. The court ultimately decided against Baker, ruling that under Alaska LLC law, "distributions" included amounts paid by the company to its members.
- In an attempt to recover some of the funds owed by Attorney Lee R. Baker, Jr., Kenneth Duffus sought a charging order against Baker's interest in Aurora Park LLC, a real-estate investing limited liability company.
- Despite JLG's lien on the funds from the settlement between Baker and his ex-wife, Patricia, the Alaska Supreme Court ruled that Duffus was entitled to the entire $300,000, as it constituted a distribution from Aurora Park LLC to Baker under Alaska LLC law.