The Ninth Circuit B.A.P. has affirmed in In re Alameda Investments, LLC that transfer restrictions in a limited liability company operating agreement to which the debtor was a party do not prohibit transfer of the debtor’s entire membership interest (including voting rights) to a liquidating trust established pursuant to the debtor’s chapter 11 plan.
In this case, the debtor was a member of a two-member limited liability company, West Lakeside, LLC (the “Joint Venture”). Absent consent from a majority of other members, the Joint Venture’s operating agreement prohibited transfers of all components of a member’s interest, including voting rights. The debtor’s plan established a liquidating trust to liquidate the debtor’s remaining assets, including its interest in the Joint Venture. For well over a year, the Joint Venture permitted the liquidating trustee to participate in the management of the Joint Venture. However, the non-debtor member of the Joint Venture eventually questioned whether the liquidating trust had full membership rights (including voting rights) to the Joint Venture or whether it had only an economic interest in the Joint Venture.