Case Type:
Case Status:
BAP No. CC-21-1027-SGF (9th Circuit, Aug 26,2021) Not Published
BAP for 9th Circuit reversed ruling of bankruptcy court (CD Cal.) dismissing chapter 11 case. BAP ruled that limited liability operating agreement provided manager with “full, complete, and exclusive” control over all of LLC affairs without limitation, which encompassed all matters for which authority can be granted under California law, unless expressly excluded in operating agreement. Because operating agreement did not exclude manager's authority to file bankruptcy, manager had authority to do so. Consent of 50% member was not required for authority.
Procedural context:
Bankruptcy court (CD Cal.) granted LLC member's motion to dismiss chapter 11 bankruptcy of LLC based on lack of authority of manager to file bankruptcy. LLC, through manager, appealed to BAP for 9th Cir.
Member (Zirkle) executed agreement with other member-manager (Welch) to rescind Zirkle's membership interest for payment of $25,000. Welch defaulted on payment. On January 15, 2021, Welch filed bankruptcy petition on behalf of LLC under subchapter V of chapter 11. Creditor was in midst of foreclosing on LLC assets. Within a week of the bankruptcy filing, Zirkle filed motion to dismiss the case, alleging Welch's default on membership interest sale rescinded Zirkle's sale, and Zirkle remained 50% member. Zirkle aruged Welch lacked authority to unilaterally file bankruptcy absent its approval as 50% member.
Spraker, Gan, Faris

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