## Facts

- DB Capital Holdings, LLC was a manager-managed Colorado LLC formed to develop and sell a luxury condominium project in Aspen, Colorado.
- The LLC had two members: Aspen HH Ventures, LLC (Class A) and Dancing Bear Development, LP (Class B); the designated manager was Dancing Bear Management, LLC.
- The LLC operating agreement was amended to bar commencement of any bankruptcy or similar debtor-relief proceeding unless all members consented.
- After the LLC defaulted on its loan, the secured lender initiated a Colorado state-court receivership action; Aspen intervened and sought dissolution of the LLC.
- Shortly after Aspen sought dissolution, the manager filed a voluntary Chapter 11 petition for DB Capital without Aspen’s consent.
- Aspen moved to dismiss the bankruptcy case as unauthorized under the operating agreement; the manager argued the anti-bankruptcy provision was void as contrary to federal public policy.
- The bankruptcy court dismissed the Chapter 11 case under 11 U.S.C. § 1112(b), and the debtor (through the manager) appealed.

## Issues

1. Whether authority to file a Chapter 11 petition for a manager-managed Colorado LLC is determined by state law and the LLC operating agreement.
2. Whether an operating-agreement provision requiring unanimous member consent to file bankruptcy is enforceable, or void as against public policy.
3. Whether a Chapter 11 petition filed by an LLC’s manager in violation of such a consent requirement is unauthorized and subject to dismissal.

## Decision

- The Bankruptcy Appellate Panel affirmed the dismissal of the Chapter 11 case.
- The panel held that state law and the operating agreement controlled who had authority to file the petition on the LLC’s behalf.
- The unanimous-consent restriction was valid and enforceable under Colorado LLC law as an internal governance allocation of authority.
- Because the manager lacked authority to file without unanimous member consent, the petition was unauthorized and properly dismissed.
- The panel distinguished internal member agreements from creditor-imposed waivers of bankruptcy access, which courts often treat as unenforceable.

## Legal Principles

- Authority to commence a bankruptcy case for an entity depends on applicable state law and the entity’s governance documents; a bankruptcy court may dismiss a petition filed without proper authority.
- Under Colorado law, an LLC operating agreement may define and restrict management powers, including conditioning or withholding authority to initiate bankruptcy, so long as the provision is consistent with law.
- An internal governance provision allocating decision-making power over a bankruptcy filing is not treated the same as a contractual waiver of bankruptcy protection demanded by a creditor.
- Filing bankruptcy is generally outside the “ordinary course” management authority when the governing agreement limits a manager’s powers to ordinary-course operations.

## Conclusion

The panel held that a Colorado LLC’s operating agreement could validly require unanimous member consent to file bankruptcy, and a Chapter 11 petition filed by the manager without that consent was unauthorized and had to be dismissed.


In re DB Cap. Holdings, LLC, 2010 WL 4925811 (10th Cir. B.A.P. 2010)