In re DB Capital Holdings, LLC

DB Capital Holdings, LLC (DB Capital) (debtor) developed and sold luxury condominiums in Aspen, Colorado. DB Capital was structured as a manager-operated limited-liability company (LLC) with Aspen HH Ventures, LLC (Aspen) as its only class A member and Dancing Bear Development, LP (DB Development) as its only class B member. The general partner of DB Capital was Dancing Bear Management, LLC (DB Management). The management of DB Capital by DB Management was conducted pursuant to an operating agreement. The operating agreement established that the operation of the company would be governed by Colorado law. The lender for DB Capital’s condominium project was West LB AG (West LB) (creditor). An amendment to the operating agreement in May 2006 added a provision stating that DB Capital would not commence proceedings to be adjudicated bankrupt or consent to proceedings filed on its behalf absent the consent of all members of the LLC. In January 2009, DB Capital breached its loan agreement with West LB, and it became apparent to West LB that DB Capital had insufficient funds to continue its condominium project. In March 2010, West LB filed a receivership action. In May, Aspen intervened in the receivership action and moved for the dissolution of DB Capital. Shortly thereafter, DB Management filed a Chapter 11 bankruptcy petition on behalf of DB Capital. In response, Aspen filed a motion to dismiss the bankruptcy action, asserting that DB Management did not have legal authorization to file for bankruptcy on DB Capital’s behalf. DB Management argued that the provision in the operating agreement prohibiting it from filing for bankruptcy was against public policy and therefore void. The bankruptcy court granted Aspen’s motion to dismiss, and DB Capital appealed.