BMA Ventures, LLC v. Prillaman (In re Minton)

BMA Ventures, LLC v. Prillaman (In re Minton)

Opinion

Before the Court is a Motion for Summary Judgment filed by BMA Ventures, LLC, seeking a determination that its Operating Agreement is an executory contract that has been rejected by operation of law or, in the alternative, a ruling that the Chapter 7 Trustee is bound by all provisions of the Operating Agreement. For the reasons set forth below, BMA Ventures' motion will be denied in its entirety.

I. Factual and Procedural Background

Blair Minton ("Debtor") filed a Chapter 7 bankruptcy petition on November 10, 2014. Roger L. Prillaman ("Trustee") was appointed the trustee of the Debtor's bankruptcy estate. On [*2]  his Schedule B - Personal Property, the Debtor listed a variety of investments including a 20% interest in BMA Ventures, LLC ("BMA Ventures"), which he described as having an ownership interest in assisted living communities. BMA Ventures is a multi-member Illinois Limited Liability Company ("LLC") with nine members, including the Debtor. The Debtor was the initial manager of BMA Ventures. Two other members were named as additional managers in 2011, and the Debtor was removed as a manager in 2012.

After it was organized, BMA Ventures adopted its Operating Agreement, which governs the management of the company and the relationship between it and its members. The Operating Agreement outlines how profits and losses are allocated among members and includes limitations on members' disposition of their interests in BMA Ventures. Among those limitations is a right of first refusal; if a member wishes to sell his interest in BMA Ventures to a third party, BMA Ventures has a 60-day option period during which it can choose to purchase the interest on the same terms as the third party. In the event BMA Ventures declines to make the purchase, the initial 60-day option period is followed by a 15-day [*3]  option period for other members to purchase the interest. The Operating Agreement also provides mechanisms to ensure that proposed sales are for fair market value.

In September 2015, BMA Ventures filed a three-count complaint for declaratory judgment against the Trustee. Count I asserts that the Operating Agreement is an executory contract subject to §365 of the Bankruptcy Code. Count II seeks a declaration that the Operating Agreement was rejected pursuant to §365(d)(1) because the Trustee did not affirmatively assume it within 60 days of the filing of the Debtor's bankruptcy petition. In the alternative, Count III asks the Court to find that the sale restrictions in the Operating Agreement are binding on the Trustee. BMA Ventures filed its Motion for Summary Judgment, seeking judgment in its favor on either Counts I and II or on Count III. The motion has been fully briefed and is now ready for decision.

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