Issues Involving Partner and Member
Bankruptcies
June 6, 2014
Prepared by:
Joli A. Lofstedt – Connolly, Rosania & Lofstedt, P.C.
and
J. Brian Fletcher – Onsager | Guyerson | Fletcher | Johnson
Presented by:
The Honorable A. Bruce Campbell – United States Bankruptcy Court for the
District of Colorado
Joli. A. Lofstedt – Connolly, Rosania & Lofstedt, P.C.
J. Brian Fletcher – ONSAGER | GUYERSON | FLETCHER | JOHNSON
1
I.
Issues Raised by the Bankruptcy Filing of
Partner/Member
A.
Partner/Member bankruptcy filings raise legal issues, including:

Property of the Estate

Bankruptcy and dissolution of the partnership/LLC

Assignment of Partnership and Membership Interests
 Transfer of Economic Interests
 Right of First Refusal
 Buy-out provisions
 Ability to file Bankruptcy or Seek Dissolution

Section 365 – Executory Contracts
 Section 365(c)(1)
 Section 365(e)(1) - Implication of ipso facto provisions

Jurisdictional and Standing issues
II. Property of the Estate - Section 541 and Colorado
Law





Upon the filing of a petition in bankruptcy, a bankruptcy “estate” is
created pursuant to section 541 of the Bankruptcy Code.
Section 541(c)(1)(B) states in pertinent part that “an interest of the
debtor in property becomes property of the estate. . . notwithstanding
any provision in an agreement . . . that is conditioned . . . on the
commencement of a case . . . .”
The bankruptcy “estate” consists of all equitable and legal interests the
debtor has, including property and contractual rights.
Limited Liability Company – Colo. Rev. Stat. § 7-80-702: The
interest of each member in a limited liability company constitutes the
personal property of the member and may be transferred or assigned.
Partnerships – Colo. Rev. Stat. § 7-64-203: Property acquired by a
partnership is property of the partnership and not of the partners
individually. Colo. Rev. Stat. § 7-60-108: All property originally
brought into the partnership stock or subsequently acquired by purchase
or otherwise on account of the partnership is partnership property.
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III. Dissolution of Partnership/LLC Upon Partner or
Member Bankruptcy Filing



A.
Applicable state law and/or the operating agreement of partnership or
LLC may provide for dissolution of the partnership/LLC or that any
partner or manager who files for bankruptcy withdraws from the
partnership/LLC.
Dissolution and withdrawal provisions often conflict with federal
bankruptcy law principles.
Disagreement among the courts on whether dissolution and withdrawal
provisions are enforceable in bankruptcy.
Colorado Law
1.
Partnerships –
a.
Uniform Partnership Law—Colo. Rev. Stat. § 7-60-131. Causes
of dissolution
(1) Dissolution is caused:
(a) Without violation of the agreement between the partners:
(I) By the termination of the definite term or particular
undertaking stated in the agreement;
(II) By the express will of any partner when no definite term
or particular undertaking is stated;
(III) By the express will of all the partners who have not
assigned their interests or allowed them to be charged for their
separate debts either before or after the termination of any
stated term or particular undertaking;
(IV) By the expulsion of any partner from the business bona
fide in accordance with such a power conferred by the
agreement between the partners;
(b) In contravention of the agreement between the partners, where
the circumstances do not permit a dissolution under any other
provision of this section, by the express will of any partner at
any time;
(c) By any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on
in partnership;
(d) By the death of any partner;
(e) By the bankruptcy of any partner or the partnership;
(f) By decree of court under section 7-60-132.
b.
Colorado Uniform Partnership Act – Colo. Rev. Stat. § 7-64-601.
Events causing partner's dissociation.
(1) A partner is dissociated from a partnership upon the occurrence
of any of the following events:
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...
(f) The partner's:
(I) Becoming a debtor in bankruptcy;
(II) Executing an assignment for the benefit of creditors;
(III) Seeking, consenting to, or acquiescing in the appointment of a
trustee, receiver, or liquidator of that partner or of all or
substantially all of that partner's property; or
(IV) Failing, within ninety days after the appointment, to have
vacated or stayed the appointment of a trustee, receiver, or
liquidator of the partner or of all or substantially all of the partner's
property obtained without the partner's consent or acquiescence, or
failing within ninety days after the expiration of a stay to have the
appointment vacated;
2.
B.
Limited Liability Companies - Dissolution – only upon agreement
by the members, time or events stated in the operating agreement, after
LLC ceases to have members or time set forth in operating agreement
has expired.
Colo. Rev. Stat. § 7-80-801. (1) A limited liability company
formed under this article is dissolved:
(a) Upon the agreement of all members;
(b) At the time or upon the occurrence of the events stated in the
operating agreement; or
(c) After the limited liability company ceases to have members, on
the earlier of:
(I) The ninety-first day after the limited liability company ceases to
have members unless, prior to that date, a person has been
admitted as a member; or
(II) The date on which a statement of dissolution of the limited
liability company becomes effective pursuant to section 7-90-304.
Cases re Bankruptcy and Dissolution of the Partnership or LLC
1.
Connolly v. Nuthatch Hill Assocs. (In re Manning), 831 F.2d 205 (10th
Cir. 1987) (“Under Colorado law, a bankruptcy filing by any partner
effects an automatic dissolution of the partnership.”)

Trustee brought an action against a debtor’s partnership and the
non-bankrupt partners, seeking authority to sell partnership real
estate. In the alternative, trustee sought windup of the partnership
and a partnership accounting.

Under the partnership agreement, partners entitled to buy-out the
debtor partner’s interest in the partnership for a “discount” – i.e.,
75% of the value of the debtors “capital account” – which was
less than debtors’ share of the value of partnership. The Tenth
Circuit remanded to the bankruptcy court to examine, among
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
2.
other things, whether there were any ipso facto provisions in the
agreement related to the buy-out. According to the Tenth
Circuit, if “the partners, in fact, did intend to allow a severe
penalty upon dissolution by bankruptcy,” ipso facto provisions
would likely be implicated. Given the “discount,” the court
found that the buy-out provision may also be prohibited under
sections 363(1) and 541(c) as a “modification” of estate property.
The Tenth Circuit noted that “valuing the bankrupt’s interest, not
at appreciated fair market value, as is typically done upon the
death or incompetency of a partner, but instead at book value
produces not only a modification but has the added effect of
requiring [the debtor] to virtually forfeit his interest . . . .”
Holding: trustee lacked authority under 11 U.S.C.S. § 363(f) to sell
the partnership property free and clear of other interests. However,
the court remanded for the bankruptcy court to take extrinsic
evidence as to the intent of the parties with regard to the
applicability of ambiguous terms of the partnership agreement
regarding dissolution by bankruptcy and for extrinsic evidence as
to the intended meaning of ambiguous term “capital account.”
Other Jurisdictions:
A.
In re Prebul, 2011 WL 2947045 (Bankr. E.D. Tenn. July 19,
2011) aff’d 2012 WL 5997927 (E.D. Tenn. Nov. 30, 2012): finding that
to permit dissolution under state law “would defeat the evident purpose
of §541(c)” and holding that “the statute [providing for dissolution] is
rendered ineffective by §541(c)(1).”
B.
In re Warner, 480 B.R. 641 ((Bankr. N.D. W. Va. 2012): holding
that the bankruptcy filing of the member did not result in dissolution of
the LLC.
C.
In re Modanlo, 412 B.R. 715 (Bankr. D. Md. 2006): finding that
the filing of bankruptcy by the sole member of the LLC dissolved the
LLC by operation of law, but chapter 7 trustee “resuscitated the LLC by
filing an amendment to the operating agreement.”
D.
In re Clinton Court, 160 B.R. 57 (Bankr. E.D. Pa. 1993): general
partner’s prior filing of a bankruptcy petition did not dissolve general
partnership and, therefore, did not bar non-debtor general partner from
filing subsequent bankruptcy petition on behalf of the partnership.
E.
In re Sawyer, 130 B.R. 384 (Bankr. E.D.N.Y. 1991): finding that
under New York law, the filing of a chapter 7 case by the general
partner resulted in dissolution of the partnership.
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II. Assignment of Partnership and Membership
Interests
A.
Factors Considered:

Partners and members have voluntarily associated in the business.

Partnership/LLC often formed by personal relationships.

Partnership/LLC often a closely held entity.

In re Harms, 10 B.R. 817 (Bankr. D. Colo. 1981): “A general partner is
in a fiduciary relationship with the limited partners. It is important that
he have no conflict of interest. Moreover, an agreement among partners
is unique in the law. It is not only a legal relationship, but it is also a
personal relation or status, somewhat as marriage is a relation or status.”
B.
Colorado law.

Colo. Rev. Stat. § 7-80-702(1). Interest in limited liability company transferability of interest
(1) The interest of each member in a limited liability company constitutes
the personal property of the member and may be assigned or transferred.
Unless the assignee or transferee is admitted as a member, the assignee or
transferee shall only be entitled to receive the share of profits or other
compensation by way of income and the return of contributions to which
that member would otherwise be entitled and shall have no right to
participate in the management of the business and activities of the limited
liability company or to become a member.
C.
Economic rights/benefits v. management rights: Upon Chapter 7 bankruptcy
filing, what rights does Chapter 7 Trustee have?

D.
In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003): Court held that
where there are no other members in the LLC, the entire membership
interest transferred to the bankruptcy estate and Chapter 7 trustee
becomes a substituted member. However absent consent by the other
members, trustee may only have economic rights to participate in profits
and other compensation or return of contributions.
Other Jurisdictions:

In re Garrison–Ashburn, L.C., 253 B.R. 700 (Bankr. E.D. Va. 2000):
“[t]here is no question that the economic rights, that is the membership
interest, becomes property of the estate.”
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
E.
Transferability of debtor’s management rights depends on a variety of factors,
including:





F.
In re Warner, 480 B.R. 641 (Bankr. N.D. W. Va. 2012): non-economic
rights and economic rights (ability to receive distributions from LLC)
were included in “property of the estate.”
Nature of the operating agreement
Whether the agreement is an executory contract
Whether partners and members can be compelled to accept performance
from a third party and whether there are any unique aspects of
partnership/LLC and/or partner/manager
Case law precedent/jurisdiction
Whether any party objects
Cases Regarding Transfer of Management Rights

In re Jundanian, 2012 WL 1098544 (Bankr. D. Md. Mar. 30, 2012):
finding that the provisions in the Maryland Act providing that a person
ceases to be a member of a LLC when they file bankruptcy were invalid
and concluding that the management rights were estate property.

In re Pickel, 487 B.R. 289 (Bankr. D.N.M. 2013): finding that debtor’s
bankruptcy filing did not diminish debtor’s membership or management
rights or interests in wholly owned LLC.

In re First Protection, Inc., 440 B.R. 821 (9th Cir. BAP 2010):
concluding debtor’s contractual rights and interests in LLC became
property of the estate.

In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003): finding that
because there were no other members in the LLC, the trustee obtained
all of the debtor’s rights, including the right to manage the LLC.

In re Milford Power Company v. PDC Milford Power, 866 A.2d 738
(Del. Ch. 2004): finding clause that deprived debtor minority member of
its ability to participate as a member in the governance of the LLC
enforceable and discussing the policy justifications for such clauses.

In re Modanlo, 412 B.R. 715 (Bankr. D. Md. 2006): finding trustee
could continue to participate in management, but noting the result may
have been different if there were other members.
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III. Transfer of Economic Interests
A.
B.
General rules
1.
The interest of a general partner/manager in the partnership/LLC (i.e.,
profits and surplus) is property of the estate under section 541 of the
Bankruptcy Code.
2.
The trustee generally will be authorized to transfer partner/member
economic interests – e.g., interests in profits – although the transfer
generally remains subject to the terms and conditions of the agreement
and/or applicable non-bankruptcy law.
Cases
1.
In re Soderstrom, 484 B.R. 874 (M.D. Fla. 2013): finding bankruptcy
trustee could sell debtor’s economic interest in LLC.
2.
In re A.F. Evans Co., Inc., 2009 WL 2821499 (Bankr. N.D. Cal. June
23, 2009): concluding that “there is legal authority to support the
proposition that a prohibition on assignment is not enforceable in the
context of a bankruptcy filing where the identity of the contracting party
is not material to the contract, i.e., where only an economic interest is
being assigned” (internal citations omitted).
3.
Baldwin v. Wolff, 690 N.E. 2d 632 (Ill. App. 1998): finding bankruptcy
trustee could assign limited partner’s right to distributions.
4.
In re Dean, 174 B.R. 787 (Bankr. E.D. Ark. 1994): finding that the
restrictions contained in agreement related to the transfer of interests
were not invalidated by any provision of Bankruptcy Code.
IV. Right of First Refusal
A.
General rules. Rights of first refusal are generally enforceable unless triggered
by the bankruptcy.
B.
Cases.
1.
In re The IT Group, Inc., Co., 302 B.R. 483 (D. Del. 2003): Applicable
law did not excuse members from rendering economic performance to
an assignee, therefore, the court concluded that section 365(e)(2)(A) did
not apply and the default provision in the agreement was an
unenforceable ipso facto provision. The court concluded, however, that
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the right of first refusal was not an ipso facto clause; instead, the right of
first refusal was triggered by any transfer of interest and not by the
member filing for bankruptcy. Accordingly, assumption and assignment
of the debtor’s economic interest was subject to the other members’
right of first refusal.
V.
2.
In re Capital Acquisitions & Management Corp., 341 B.R. 632 (Bankr.
N.D. Ill. 2006): finding the agreement was not an executory contract and
concluding that the non-debtor LLC members’ right of first refusal was
not an invalid ipso facto provision.
3.
In re Strata Title, LLC, 2013 WL 1773619 (Bankr. D. Ariz. Apr. 25,
2013): finding that the bankruptcy filing was the “purchase option”
trigger and the purchase option was an unenforceable ipso facto clause;
exercising the purchase option would be a violation of the automatic
stay.
Buy-Out Provisions
A.
B.
General.

There is disagreement among the courts whether agreed buy-out
provisions may be non-enforceable ipso facto clauses.

Courts generally have concluded buy-out provisions cannot be
abrogated in bankruptcy, unless agreement would operate to effect “a
forfeiture, modification, or termination.”
Cases
1.
In re Catron, 158 B.R. 629 (E.D. Va. 1993), aff’d. mem. 25 F.3d 1038
(4th Cir. 1994): holding that section 365(e)(1) did not invalidate the
provision in the partnership agreement permitting the non-bankrupt
partners to buy out the debtor’s interest upon the debtor’s filing for
bankruptcy.
2.
Connolly v. Nuthatch Hill Assocs. (In re Manning), 831 F. 2d 205 (10th
Cir. 1987): The Tenth Circuit remanded to the bankruptcy court to
examine, among other things, whether there were any ipso facto
provisions in the agreement related to the buy-out. According to the
Tenth Circuit, if “the partners, in fact, did intend to allow a severe
penalty upon dissolution by bankruptcy,” ipso facto provisions would
likely be implicated. Given the “discount,” the court found that the buyout provision may also be prohibited under sections 363(1) and 541(c)
as a “modification” of estate property. The Tenth Circuit noted that
“valuing the bankrupt’s interest, not at appreciated fair market value, as
9
is typically done upon the death or incompetency of a partner, but
instead at book value produces not only a modification but has the
added effect of requiring [the debtor] to virtually forfeit his interest….”
C.
VI.
A.
The Buy-Out Price
1.
Buy-out price may be subject to higher and better offers.
2.
In re Cutler, 165 B.R. 275 (Bankr. D. Ariz. 1994): buyout restriction at
predetermined price was unenforceable; trustee could sell the estates’
interest to the highest bidder.
3.
In re Grablowsky, 180 B.R. 134 (Bankr. E.D. Va. 1995): “While the
partnership agreements in the case sub judice are not punitive in that
they provide for the purchase of the debtor’s interest at the fair market
value, they are limiting in derogation of the Bankruptcy Code by
purporting to preclude the sale of the interests by the Trustee to third
parties who may be willing to pay the estate more than the fair market
value for the interests. The estate is entitled to any bonus that may arise
from the freedom to sell such interests to any willing purchaser; only in
that way can the Trustee realize the greatest value of the assets for the
estate.”
Ability to File Bankruptcy Petition or Seek
Dissolution
Cases.
1.
In re H & W Food Mart, LLC, 461 B.R. 904 (Bankr. N.D. Ga. 2011): a
bankruptcy petition filed on behalf of a Georgia LLC by its member (the
debtor) was not authorized, as the trustee – not the debtor – had
authority to file the petition.
2.
In re A-Z Electronics, LLC, 350 B.R. 886 (Bankr. D. Idaho 2006):
debtor’s managing member, who had filed for chapter 7 relief, lacked
authority to file chapter 11 petition for the LLC – but the chapter 7
trustee had standing.
3.
In re Klingerman, 388 B.R. 677 (Bankr. E.D. N.C. 2008): Chapter 11
debtor brought adversary proceeding to compel dissolution of LLC and
non-debtor member moved to dismiss based on debtor’s alleged lack of
standing pursuant to provision in the LLC’s operating agreement; court
held the debtor’s rights and interest in the LLC were property of the
estate and thus the estate has standing to ask for dissolution.
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VII. Section 365 - Executory Contracts
A.
B.
C.
General rules.
1.
Section 365 of the Bankruptcy Code permits the debtorin-possession/trustee to assume or reject executory contracts.
2.
Executory contracts are often defined as a contract where material
performance by both sides remains.
3.
The term “executory contract” in the Bankruptcy Code refers to a
contract on which performance remains due to some extent on both
sides. In re Mirant Corp., 440 F.3d 238 (5th Cir. 2006).
4.
Countryman test: an executory contract is “a contract under which the
obligation of both the bankrupt and the other party are so far
unperformed that the failure of either to complete performance would
constitute a material breach excusing the performance of the other.”
5.
Executory contracts may include management agreements, leases,
operating agreements, etc.
Executory Nature of Partnership Agreements & LLC Agreements
1.
Courts have differing views of whether partnership agreements and LLC
agreements are executory contracts:
2.
A number of courts have held that partnership agreements and LLC
agreements are executory contracts. Other courts have found that
partnership agreements and LLC agreements are not executory
contracts.
Cases
1.
In re Warner, 480 B.R. 641 (Bankr. N.D. W. Va. 2012: ) “There is a
lack of consensus among the courts regarding the executory nature of
operating agreements of limited liability companies because “[t]here are
no per se rules regarding the classification of limited liability company
operating agreements . . . Factors relevant in evaluating a LLC operating
agreement include whether the operating agreement imposes remote or
hypothetical duties, requires ongoing capital contributions, and the level
of managerial responsibility imposed on the debtor (internal citations
omitted. )
2.
In re Prebul, 2011 WL 2947045 (Bank. E.D. Tenn. July 19, 2011):
commenting that “[w]here the operating agreement imposes no duties or
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only remote and hypothetical duties, it is not an executory contract” and
“where the operating agreement both requires ongoing capital
contributions and imposes management duties, it has often been deemed
executory.”
D.
3.
In re Allentown Ambassadors, Inc., 361 B.R. 422 (Bankr .E.D. Pa.
2007): providing that “[i]n this inquiry, the four corners of the parties’
agreement are examined to determine whether both parties have
material, unperformed obligations as of the commencement of the
bankruptcy case” and finding that the operating agreement was an
executory agreement because members had continuing duties to manage
the LLC and to make additional cash contributions.
4.
In re Tsiaoushis, 383 B.R. 616 (Bankr. E.D. Va. 2007) aff’d 2007 WL
2156162 (E.D. Va. July 19, 2007): “[t]he analysis used to determine
whether a particular limited liability company operating agreement is an
executory contract under Bankruptcy Code §365(e)(1) is clear . . .
[t]here is no per se rule . . . [e]ach operating agreement is separately
analyzed.”
5.
In re Ehmann, 319 B.R. 200 (Bankr. D. Ariz. 2005): noting that courts
consider, in deciding whether the agreement is executory, whether there
is “some material obligation owing to the company by the member;”
finding that the agreement was not executory and thus the LLC was not
subject to contractual limitations in the operating agreement.
Section 365(c)(1)
1.
E.
Generally.
a.
Section 365(c)(1) provides that a trustee is unable to assume or
assign an agreement if applicable nonbankruptcy law excuses the
nondebtor party from accepting performance from an “entity
other than the debtor or debtor in possession.”
b.
The classic example is “personal services” contracts, which
contracts courts generally agree cannot be assigned.
c.
State law – i.e., applicable nonbankrupcty law – often prohibits
the assignment of a partner’s/member’s management agreement.
Differing Tests Under Section 365(c)(1)
1.
“Hypothetical Test”: non-consensual assumption of an executory
contract or unexpired lease barred where applicable nonbankrutpcy law
would prevent assignment to a hypothetical third party.
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2.
F.
G.
“Actual test”: nonconsensual assumption of an executory contract or
unexpired lease prohibited only where applicable nonbankruptcy law
precludes the assignment of such agreement and the debtor actually
intends to assign it.
Applying Section 365(c)(1)
1.
Courts examine the “facts and circumstances,” with a focus on the type
of partner/manager and partnership/LLC at issue.
2.
In re Antonelli, 148 B.R. 443 (D. Md. 1992): “[a]pplication of the rule,
however, calls for a particularized, practical approach . . . the question of
whether or not management power in a partnership is assignable turns
not upon the status which ‘applicable law’ generally accords to
partnership agreements but upon the materiality of the identity of the
partners to the performance of the obligations remaining to be
performed under the partnership in question” (emphasis added).
3.
JD Factors, LLC v. Freightco, LLC, 2009 WL 3401965 (N.D. Ind. Oct.
16, 2009): finding that a members service as a vice-president pursuant to
the operating agreement was non-assignable due to the personal service
contract provisions and “considering that Indiana law governing limited
liability companies provides that, unless otherwise provided in the
company’s operating agreement, no person can become a member
without the consent of all the members.”
4.
In re Soderstrom, 484 B.R. 874 (M.D. Fla. 2013): finding where
applicable law allows members of an LLC not to consent to a new
managing member, bankruptcy trustee could not assume the
management interest and only the economic interest was available for
sale.
Section 365(e)(1): Ipso Facto Provisions
5.
General Rules.
a.
Provisions of agreements that modify rights and duties solely on
account of a bankruptcy proceeding are generally unenforceable
as ipso facto provisions under section 365(e)(1) of the
Bankruptcy Code.
b.
Provisions of agreements that cause a partnership/LLC to
dissolve or that trigger buy-out options solely on account of a
bankruptcy proceeding of the partner/member are often held to
be unenforceable ipso facto clauses.
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c.
6.
VIII.
A.
Exceptions exist to section 365(e)(1) in the Bankruptcy Code:
365(e)(2)(A)(i): “applicable law excuses a party, other than the
debtor, to such contract or lease from accepting performance
from or rendering performance to the trustee or to an assignee of
such contract or lease, whether or not such contract or lease
prohibits or restricts assignment of rights or delegation of
duties.”
Cases
a.
LaHood v. Covey, 437 B.R. 330 (Bankr. C.D. Ill. 2010):
concluding that the provisions of the operating agreement
purporting to place limitations or restrictions on the member’s
interest as a result of his bankruptcy filing were unenforceable.
b.
In re Dixie Management & Inv., Ltd. Partners, 2011 WL
1753971 (Bankr. W.D. Ark. May 9, 2011): finding provision of
LLC statute and operating agreement specifying that dissociation
results from the bankruptcy filing of a member conflicted with
federal bankruptcy law and was ineffective and therefore such
provision did not prevent debtor’s 62% membership interest in
investment group from being included in property of the estate.
c.
In re Tsiaoushis, 383 B.R. 616 (Bankr. E.D. Va. 2007) aff’d,
2007 WL 2156162 (E.D. Va. July 19, 2007): Chapter 11 trustee
filed adversary complaint against LLC of which debtor was a
member and sought to enforce the provisions of LLC's operating
agreement that provided that the LLC would be dissolved upon
the bankruptcy of a member and that, upon dissolution, members
could proceed to sell or liquidate LLC's property. LLC’s
manager opposed the trustee’s request, asserting that the
operating agreement was an executory contract and that the
provision for automatic dissolution was an unenforceable ipso
facto clause. The court concluded that the operating agreement
was not an executory contract and that therefore section
365(e)(1) of the Bankruptcy Code was not applicable. The
operating agreement was valid and enforceable.
Jurisdictional and Standing Issues
In re Mordini, 2013 WL 1855751 (Bankr. D. Colo. May 1, 2013): finding that
the court lacked jurisdiction over claims asserted against debtor’s wholly
owned LLC and noting that “the economic effect of litigation on the value of a
separate non-debtor entity in which a debtor owns an equity interest is
insufficient to create such jurisdiction.”
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B.
In re Thadikamalla, 488 B.R. 791 (Bankr. N.D. Ga. 2013): finding that the
court had “related to jurisdiction” over issues regarding the wind up of the
partnership as such issues “undeniably impact the estate and the administration
of the estate” and “[a]n action is related to bankruptcy if the outcome could
alter the debtor’s rights, liabilities, options, or freedom of action (either
positively or negatively) and which in any way impacts upon the handling and
administration of the bankrupt estate.” (internal citations omitted.)
C.
Weinstein v. Colborne Foodbotics, LLC, 302 P.3d 263 (Colo. 2013).
“Under section 7-80-606 members are liable to the LLC but not the LLC's
creditors. We also conclude that the manager of an insolvent LLC does not owe
the LLC’s creditors the same fiduciary duty that an insolvent corporation’s
directors owe a corporation's creditors. Here, the plaintiff, as a creditor of the
LLC, may not assert a claim for either unlawful distribution against the defendant
members or a common law breach of fiduciary duty against the defendant
managers absent express statutory authority. Because the LLC Act does not
provide such authority, we reverse the court of appeals and remand this case with
directions to return it to the trial court to reinstate the trial court’s grant of the
defendants’ motion to dismiss.”
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