## Facts

- Judgment creditors obtained a money judgment against three individual judgment debtors.
- To collect, the creditors sought charging orders under Iowa Code § 489.503 against the debtors’ transferable (economic) interests in three limited liability companies (LLCs).
- The district court entered charging orders redirecting distributions otherwise payable to the debtors to the creditors.
- The district court also required the LLCs to provide periodic cash-flow statements (or similar documentation) to the creditors’ counsel or the court to verify compliance and confirm that distributions were not being diverted.
- The LLCs filed a limited resistance challenging only the compelled periodic financial disclosures, not the charging orders themselves.
- The district court stayed the cash-flow disclosure requirement pending appeal.
- On appeal, the appellants challenged solely the disclosure provisions, arguing the statute did not authorize imposing ongoing reporting duties on the LLCs.

## Issues

1. Whether Iowa Code § 489.503 authorizes a court, as part of a charging order, to require an LLC to produce periodic cash-flow statements or similar ongoing financial disclosures to a judgment creditor or the court.

## Decision

- The court affirmed the charging orders to the extent they operated as liens on the debtors’ transferable interests and redirected distributions to the judgment creditors.
- The court vacated the portions of the orders requiring the LLCs to provide periodic cash-flow statements or similar financial disclosures.
- The court held that Iowa Code § 489.503 did not provide statutory authority to compel ongoing, generalized financial reporting by the LLCs as an adjunct to a charging order.

## Legal Principles

- A charging order under Iowa Code § 489.503 is a limited creditor remedy that attaches as a lien to a debtor-member’s transferable interest and entitles the creditor to receive distributions otherwise payable to the debtor.
- The remedy targets economic rights and does not transfer membership or management rights to the creditor.
- Iowa Code § 489.503(2) permits (a) appointment of a receiver for distributions, with power to make inquiries the judgment debtor could have made, and (b) other orders necessary to give effect to the charging order.
- The “necessary to give effect” language does not authorize imposing broad, ongoing financial disclosure duties on the LLC itself; information-gathering, when needed, is addressed through the statute’s receiver mechanism and collection-focused orders.

## Conclusion

The court maintained the charging orders as the proper means to intercept distributions from the judgment debtors’ LLC interests but rejected periodic cash-flow reporting requirements because the LLC charging-order statute did not authorize courts to compel ongoing financial disclosures from the companies.


Wells Fargo Bank, N.A. v. Continuous Control Sols., Inc., 2012 WL 3195759 (Iowa Ct. App. 2012)