North Carolina Charging Order Against Delaware LLC Affirmed In Universal Life Insurance Company Case

Universal Life Insurance Company (“ULICO”) held a North Carolina judgment in excess of $524 million against Lindberg, resulting from the latter’s breach of a guarantee in 2020. Lindberg held 100% of the shares in a Delaware corporation called Global Growth Holdings, Inc., which in 2023 he converted into a Delaware limited liability company now called Global Growth Holdings, LLC (“Global”). Lindberg was apparently the sole member of Global.

In 2024, ULICO filed a motion in the Durham County Superior Court in North Carolina for the imposition of a charging order against Linberg’s interest in Global. Attempting to fend off the charging order, Lindberg argued that the North Carolina court did not have jurisdiction to enter a charging order against a Delaware LLC. The Superior Court disagreed, and entered a charging order in favor of ULICO against Lindberg’s interest in Global. This set up the appellate opinion that we will next examine in Universal Life Ins. Co. v. Lindberg, 2026 WL 1407705 (2026), which you can read for yourself here.

The first question the North Carolina Court of Appeals took up was whether the charging order was even appealable at this stage. To be appealable, the charging order had to be considered a final order. An order is final if there is nothing left to be done by the trial court. In a previous opinion in this same case, the Court of Appeals ruled that the charging order was not final, something known as an interlocutory order, because at that time the charging order was subject to possible modification by the trial court. Here, in contrast, there was nothing further for the trial court to do in regard to the charging order, and thus it was to be considered a final order.

The next issue was whether the charging order provision of the North Carolina LLC Act should apply to a Delaware LLC. Lindberg argued that it should not. The contention was that the section of the North Carolina LLC which related to charging order only applied to companies that were formed under North Carolina law. Instead, Lindberg’s North Carolina LLC was a foreign LLC under that LLC Act and thus was not subject to the charging order provision at all.

As an aside, this argument is known as the Heather Apartments argument after the unpublished opinion of the Minnesota Court of Appeals where the issue first arose. A number of courts have struggled with this issue, with seemingly most deciding that the charging order provisions of most states’ LLC Acts do indeed apply to out-of-state LLCs, such as in the Vision Marketing decision.

The Court of Appeals had not such difficulties and disagreed with Lindberg’s argument. Under the LLC Act, a North Carolina court could impose a charging order against a debtor’s interest in an LLC whether it was formed in North Carolina or elsewhere.

The remaining issue was whether a North Carolina court had personal jurisdiction over Lindberg’s out-of-state assets. In other words, Lindberg argued that because Global was a Delaware LLC, the North Carolina court was without jurisdiction to impose a charging order against Lindberg’s interest in that entity.

The Court of Appeals rejected this argument. Lindberg had made a general appearance in the North Carolina Superior Court and thus was subject to its jurisdiction. Because a charging order only places a lien on the debtor’s interest ― but not on the LLC itself ― it doesn’t matter where the LLC is located so long as the debtor was within the personal jurisdiction of North Carolina. Thus, so long as the debtor was before the Superior Court, the Superior Court had jurisdiction to issue the charging order without having to relying upon in rem jurisdiction (i.e., jurisdiction based on property being located within the jurisdiction. Thus, the Court of Appeals stated:

“In our view, so long as personal jurisdiction exists over the interest owner, a trial court may issue a charging order.”

Since Lindberg was within the personal jurisdiction of the North Carolina courts, that by itself was sufficient for the charging order to be issued against his interest in Global, even if Global was domiciled in Delaware. Thus, the charging order of the Superior Court was affirmed.

ANALYSIS

An interest in a limited liability company is typically defined by statute as personal property. Unlike physical assets ― say, a car or coin collection ― an LLC interest is an intangible, and thus is known as intangible personal property. Typically, intangible personal property is considered to exist in the jurisdiction of the debtor’s residence. Presumably, without knowing, Limberg lived in North Carolina since ULICO sued him there, and thus Limberg’s interest in Global existed in North Carolina. There is also an argument to be made that intangible personal property follows the debtor around wherever he goes, but that is beyond the scope of this article. The important thing is that the jurisdiction of formation of the LLC plays no role in this analysis.

Where it might matter is forcing the LLC to comply. A North Carolina court may enter a charging order which is places a lien upon the debtor’s interest in an out-of-state LLC, and certainly the debtor is bound by the order. However, whether the out-of-state LLC is bound by that order is a different thing entirely. Assume, for instance, that Global had no assets in North Carolina or any connections to that state; in such circumstances, the North Carolina order will have no effect on Global itself until at least ULICO registers the order in Delaware under the Full Faith & Credit clause of the U.S. Constitution. Global could, in theory, continue to make distributions to Limberg in violation of the North Carolina charging order …. for a while.

This is why creditors who discover that the debtor has an interest in an LLC with valuable assets will usually register the judgment in the state where the LLC is formed. Then, when the charging order is issued, the charging order will also be filed in the state of the LLC’s formation. The state of the LLC’s formation has no choice but to register the charging order and then the LLC itself will be bound by it.

But note that even if the charging order is not registered in the state of the LLC’s formation, the charging order is still binding upon the debtor. Thus, if Global were to ignore the charging order and make a distribution to Limberg, he would be required to turn over the distribution to ULICO or else face contempt of court for violating the charging order.

The upshot of all this is that forming an LLC out-of-state doesn’t create any advantages in relation to a charging order. The laws of the LLC’s state of formation as they relate to the charging order are irrelevant. Thus, you may hear that an LLC should be formed in Delaware as here, or Wyoming, or even my adoptive state of Nevada, because those states “have better charging order protection.” That’s nice, but also irrelevant if the debtor is not resident in one of those states (and maybe not even then). It is simply a baseless myth that a debtor can somehow import “better” charging order law to protect his interest by forming the LLC in one of these debtor-friendly states.

Thus, my typical response to the question, “Where is the best state to file an LLC for charging order protection?”, is usually, “The state you are in, or where you will be actually conducting business.” That’s the charging order law that will almost always apply anyway.