Zazzali v. Wavetronix LLC (In re DBSI, Inc.), 2015 WL 12683817 (D.Idaho, 2015).

Opinion 2015 Idaho Bankruptcy Executory_Interest Site.2015IdahoBankruptcyZazzaliExecutoryInterest

AI Synopsis

♦ The U.S. District Court for the District of Idaho addressed Wavetronix’s motion for partial summary judgment seeking a ruling that Stellar Technologies, LLC—an indirect DBSI affiliate whose interest in Wavetronix became part of DBSI’s Chapter 11 bankruptcy estate—had been “dissociated” as a Wavetronix member and therefore held only an economic assignee interest with no management or voting rights. Wavetronix argued dissociation occurred under its operating agreement and Idaho LLC law due to (1) an alleged substantial change in Stellar’s management and control by the Chapter 11 Trustee, (2) an alleged transfer of more than 5% of Stellar’s beneficial interest without the other members’ consent, and (3) a unanimous post-confirmation vote (excluding Stellar) acknowledging and confirming dissociation. The Liquidating Trustee opposed, contending these dissociation triggers were unenforceable under the Bankruptcy Code’s ipso facto doctrine, particularly 11 U.S.C. § 541(c), which invalidates contractual or statutory provisions that forfeit, modify, or terminate a debtor’s property interest based on insolvency, bankruptcy, or a trustee’s taking possession. The court held the confirmation order preserved, rather than waived, the applicability of § 541(c); found the alleged dissociating events fell within § 541(c)’s protections (or lacked adequate factual support); concluded the operating agreement was not an executory contract under § 365; and determined the equities did not favor either side. Because Wavetronix failed to establish dissociation as a matter of law on undisputed material facts, the court denied the motion. ♦

Zazzali v. Wavetronix LLC (In re DBSI, Inc.), 2015 WL 12683817 (D.Idaho, 2015).

United States District Court, D. Idaho.

IN RE: DBSI, INC., et al., Debtors.

James R. Zazzali, as Trustee of the DBSI Estate Litigation Trust created by operation of the Second Amended Joint Chapter 11 Plan of Liquidation, and Conrad Myers, as Trustee of the DBSI Liquidating Trust created by operation of the Second Amended Joint Chapter 11 Plan of Liquidation, Plaintiffs,

Wavetronix LLC, David Arnold, Linda S. Arnold, Michael Jensen, Does 1-50, and ABC Entities 1-50, Defendants.

CASE NO. 1:15-CV-00025-RJB

Signed 07/24/2015

Attorneys and Law Firms

Brett S. Theisen, Jason R. Halpin, Jennifer A. Hradil, Joshua R. Elias, Brian J. McMahon, Gibbons P.C., Newark, NJ, Christopher Viceconte, Natasha M. Songonuga, Gibbons P.C., William Firth, III, Gibbons PC, Wilmington, DE, Keely E. Duke, Kevin Alan Griffiths, Duke Scanlan & Hall, PLLC, Boise, ID, for Plaintiffs.

Eric L. Schnabel, Robert W. Mallard, Dorsey & Whitney (Delaware) LLP, M. Claire McCudden, Cooch and Taylor, Christopher Viceconte, Natasha M. Songonuga, Gibbons P.C., Alessandra Glorioso, William Firth, III, Gibbons PC, Wilmington, DE, Annette W. Jarvis, Dorsey & Whitney LLP, Brent P. Lorimer, Thomas R. Vuksinick, Workman Nydegger, Barton H. Kunz, II, Phillip Lowry, Legrande Rich Humpherys, Karra J. Porter, Ruth A. Shapiro, Christensen & Jensen, P.C., Salt Lake City, UT, Barnard N. Madsen, William L. Fillmore, Fillmore Spencer, LLC, Joseph M. Hepworth, Provo, UT, Blake S. Atkin, Atkin Law Offices, P.C, Bountiful, UT, Brett S. Theisen, Jennifer A. Hradil, Joshua R. Elias, Gibbons, PC, Brian J. McMahon, Gibbons P.C., Newark, NJ, Keely E. Duke, Kevin Alan Griffiths, Duke Scanlan & Hall, PLLC, Boise, ID, for Defendants.

ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT ON DISSOCIATION

ROBERT J. BRYAN, United States District Judge

PAGE_1

This matter comes before the Court on Wavetronix’ Motion for Partial Summary Judgment on Dissociation. Dkt. 70. The Wavetronix Members join Wavetronix’ motion. Dkt. 71, 80. The Court has considered the oral argument of the parties, as well as pleadings filed in support of and in opposition to the motion and the remainder of the file herein.

BACKGROUND

The Court is well-acquainted with the extensive history of this case. See Del. Bank. Case No. 08-12687. Starting on November 6, 2008, DBSI, Inc. (“DBSI”) and some of its affiliated companies filed Chapter 11 bankruptcy petitions in Delaware Bankruptcy Court. Dkt. 70-7, ¶7; Dkt. 73-1, ¶7. The Delaware Bankruptcy Court approved the appointment of a trustee (“Chapter 11 Trustee”) on September 11, 2009. Dkt. 70-7, at ¶18; Dkt. 73-1, at ¶18; Del. Bank. Dkt. 4375. Not all of the DBSI affiliated companies filed for bankruptcy, but all assets of DBSI, including interests in DBSI Investments, Stellar Technologies, LLC (“Stellar”) and Wavetronix, LLC, became part of DBSI’s bankruptcy estate (“Estate”). Del. Bank. Dkt. 5924, at 20, 21. (DBSI has an interest in DBSI Investments, which has an interest in Stellar, which has an interest in Wavetronix.)

Pursuant to his statutory obligations as trustee of the Estate, the Chapter 11 Trustee filed the Amended Chapter 11 Plan of Liquidation (“the Plan”) on August 17, 2010. Del Bank. Dkt. 5699. See 11 U.S.C. § 1106(a). Prior to confirmation of the Plan by the Delaware Bankruptcy Court, on September 24, 2010, Wavetronix, LLC (“Wavetronix”), a corporation partially-owned by Stellar, advised the Chapter 11 Trustee of its objection to the Plan, and Wavetronix and the Chapter 11 Trustee, following negotiation, reached an agreement for stipulated language, which the Delaware Bankruptcy Court adopted by order (“Confirmation Order”). Dkt. 70-7, at ¶18; Dkt. 73-1, at ¶18. Del. Bank. Dkt. 5924. Wavetronix and the Chapter 11 Trustee stipulated to the following, as incorporated by the Confirmation Order:

D. Entity Governance: From and after the Effective Date [of October 29, 2010], the DBSI Liquidating Trustee as to the DBSI Consolidated Debtors, and the DBSI Real Estate Liquidating Trustee as to the Note/Fund Consolidated Debtors, shall have the sole authority: (i) to manage and wind-down the affairs of such Entities; (ii) to exercise all authority of such Entities to manage and wind-down the affairs of Non-Debtor Affiliates [such as Stellar] and all other Entities the ownership interest of which are included within the applicable Trust; (iii) to abandon any asset or interest transferred to the Trust which is determined in such Trustee’s discretion to be burdensome or of inconsequential value; and (iv) to implement the provisions of the Plan, notwithstanding the provisions of any Entity governance document or agreement to the contrary; provided however, that:

(i) Wavetronix LLC. Notwithstanding any provision of the Plan or this Order to the contrary: (a) nothing in the Plan nor in this Order shall (i) affect the rights of .Debtor’s Estates, The Trust, the Trustee the Chapter 11 Trustee, the Credior’s Committee, the Trust Oversight Committee nor Wavetronix LLC (“Wavetronix”) or any successor to any of the foregoing, with respect to dissociation and recharacterization, including any affirmative claims, counterclaims and defenses, and all such rights are expressly reserved, (ii) alter the Wavetronix Operating Agreement or Idaho state law or any other applicable law with respect to the interests in Wavetronix or claims against Wavetronix or claims against Wavetronix, if any, held or to be held by the Chapter 11 Trustee, if prior to the Effective Date, or the Trustee (or his successor(s) in interest) if after the Effective Date, or with respect to the interests in Wavetronix held by any of its members or claims against Stellar or the Chapter 11 Trustee, if any held by such members, (iii) cause the Wavetronix Operating Agreement or any other organizational document to be disregarded or otherwise affect the enforceability thereof under applicable law, including the provisions contained in Sections B.2, C and D of the Article VI of the Plan, and (iv) effectuate any consolidation of Wavetronix into the DBSI Consolidated Debtors and Wavetronix and its members shall retain any offset rights they may possess under applicable law; (b) the [Liquidating Trust], as transferee of Stellar’s claims and/or interest against Wavetronix, shall take such claims and/or interests only to the extent of Stellar’s claims and/or interests prior to confirmation of the Plan and, in the case of claims and interest under the Wavetronix Operating Agreement, subject to the terms and conditions of such Operating Agreement, and subject to all events, to whatever claims, objections or legal arguments Wavetronix, its members, officers, directors, option holders and employees may have; and (c) nothing in the Plan or the Confirmation Order shall or shall be deemed to give the DBSI Liquidating Trust any greater rights, claims, interests, or defenses in Wavetronix by virtue of any transfers from Stellar to the DBSI Liquidating Trustee than those held by Stellar or the Chapter 11 Trustee prior to confirmation of the Plan.

PAGE_2

Del. Bank. Dkt. 5924, at 62, 63.

Wavetronix’ operating agreement (“Operating Agreement”), referred to in the Confirmation Order, provides in relevant part that a Wavetronix member, such as Stellar, will cease to be a member if there is “any transfer ... in excess of 5% of the beneficial interest in a Member or any substantial change in the management or control of the Member without the consent of all of the other Members.” Dkt. 70-1, at 30. The Confirmation Order also refers to Idaho law (“the applicable Idaho law”), which in relevant part provides that an LLC member is dissociated, among other reasons, by an event specified in an operating agreement or if expelled by the unanimous consent of other members. Ida. Code § 30-6-602(2) and (4).

Following a hearing at which the Chapter 11 Trustee and Wavetronix reaffirmed their agreement to stipulated language, the Delaware Bankruptcy Court entered the Confirmation Order on October 26, 2010, with an effective date of October 29, 2010. Dkt. 73-5, at 57. Del. Bank. Dkt. 5924, at 63, 70; Dkt. 5699, at 13; Dkt. 6749. The Confirmation Order also ordered the nunc pro tunc substantive consolidation of Consolidated Non-Debtors, including Stellar, effective November 10, 2008. Del. Bank. Dkt. 5924, at 20, 21, 56, 59.

Prior to the Confirmation Order but after the filing of DBSI’s petition for bankruptcy, on October 14, 2009, the President CEO, and Board Manager of Stellar, Paul Judge, tendered his resignation to Stellar. Dkt. 7-10. Also prior to the Confirmation Order but after DBSI’s filing for bankruptcy, among other actions, the Chapter 11 Trustee: (1) on August 20, 2010, “request[ed] entry of an order authorizing the Trustee to act on behalf of non-debtor Stellar ... [in] a transaction involving the sale” of a technology company; (2) on May 10, 2010, filed Stellar’s Annual Report with the Idaho Secretary of State; and (3) on May 27, 2010, changed Stellar’s registered agent from Douglas Swenson to Debbie Miller. Del. Bank. Dkt. 5715. Dkt. 73-1, at ¶19(d); Dkt. 70-7, at ¶19(d); Dkt. 70-12.

Following the Confirmation Order, effective as of November 24, 2010, all Members of Wavetronix, other than Stellar, voted unanimously to “acknowledge[e] and confir[m] the dissociation of Stellar ... as a Member of the Company (i.e., now an “Assignee” only, with no management or voting rights).” Dkt. 70-6, at 2, 3.

STANDARD OF RELIEF

Summary judgment is proper only if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The moving party is entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient showing on an essential element of a claim on which the nonmoving party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1985). There is no genuine issue of fact for trial where the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (nonmoving party must present specific, significant probative evidence, not simply “some metaphysical doubt.”); see also Fed. R. Civ. P. 56(e).

PAGE_3

Determining the existence of a material fact is often a close question. The court must consider the substantive evidentiary burden that the nonmoving party must meet at trial (e.g., a preponderance of the evidence in most civil cases). Anderson, 477 U.S. at 254, T.W. Elec. Serv. Inc., 809 F.2d at 630. The court must resolve any factual issues of controversy in favor of the nonmoving party only when the facts specifically attested to by that party contradict facts specifically attested to by the moving party. The nonmoving party may not merely state that it will discredit the moving party’s evidence at trial, in the hopes that evidence can be developed at trial to support the claim. T.W. Elec. Serv. Inc., 809 F.2d at 630 (relying on Anderson, 477 U.S. at 254). Conclusory, nonspecific statements in affidavits are not sufficient, and “missing facts” will not be “presumed.” Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888–89 (1990).

DISCUSSION

Wavetronix argues that, under the Operating Agreement and applicable Idaho law, Idaho Code § 30-6-602(2) and (4), Stellar was dissociated from Wavetronix on at least three grounds as a matter of law: (1) the substantial change of management of Stellar by the Trustee without consent of the other Members; (2) the transfer of more than 5% of the beneficial interest in Stellar without the other Members’ consent; and (3) Stellar’s expulsion by the unanimous vote of all Members except Stellar. Dkt. 70, at 7; see Dkt. 70-1, at 30. Wavetronix points to multiple events leading to Stellar’s dissociation (collectively, “the alleged dissociating events”): Paul Judge’s resignation from Stellar; actions by the Chapter 11 Trustee such as the filing of an Annual Report, changing of Stellar’s registered agent with the State of Idaho, and requesting entry of an order authorizing the trustee to act on behalf of Stellar to effectuate sale of a technology company, showing a substantial change of management; the trustee’s taking ownership of Stellar; and the unanimous vote by Wavetronix’ Members, other than Stellar, to dissociate Stellar. According to Wavetronix, although Stellar—and by extension the Chapter 11 Trustee—retains an economic interest in profits and losses as a dissociated member, Stellar has no managements rights in Wavetronix. Dkt. 70, at 6, 7.

The Liquidating Trustee argues that the Operating Agreement and applicable Idaho law relied upon as the basis for dissociation are invalid under the Bankruptcy Code’s ipso facto doctrine, codified as 11 U.S.C. § 541(c), which renders ineffectual clauses in contracts or state law that would limit a debtors’ rights due to bankruptcy. Dkt. 73, at 9-16. Applying the ipso facto doctrine, the Liquidating Trustee argues, all of the dissociating events alleged by Wavetronix trigger § 541(c) and are thus invalid. Id. The Liquidating Trustee also contends that although trustees are permitted to enter into executory contracts, such as operating agreements, the Operating Agreement in this case is not an executory contract as understood in 11 U.S.C. § 365, because there are not unfulfilled obligations between the parties that would constitute a breach of contract. Id., at 15, 16. The Liquidating Trustee also appeals to principles of equity and argues that, at a minimum, issues of material fact remain as to whether Stellar was dissociated. Id., at 11, 16-21.

In reply, Wavetronix argues that § 541(c) does not apply, because non-bankruptcy events not enumerated under § 541(c) triggered the dissociation; because Stellar is not a debtor in the first place; and because the alleged dissociating events occurred prior to the Effective Date of the Confirmation Order. Dkt. 78, at 11-13. Wavetronix also argues that the language of the Confirmation order indicates an intent to be bound by the applicable Idaho law and the Operating Agreement. Wavetronix’ reply does not expound upon § 365. Id., at 5. (“the Liquidating Trustee concedes that § 365 does not apply ... that leaves ... § 541”.) Concerning the equities, Wavetronix contends that the equities favor Wavetronix, not creditors. Dkt. 78, at 14-16.

(a) 11 U.S.C. § 541

PAGE_4

The Bankruptcy Code generally disapproves of statutory and contractual provisions affecting the bankruptcy estate that are triggered by a bankruptcy. See In re W.R. Grace & Co., 475 B.R. 34, 152 (D. Del. 2012). 11 U.S.C. § 541(c), was promulgated to “invalidate restrictions on the transfer of property of the debtor, in order that all the interests of the debtor in property will become property of the estate.” H.R.Rep. No. 595, 95th Cong. 1st Sess. 368–69 (1977).

Under § 541(a)(1), a bankruptcy estate consists of “all legal or equitable interest of the debtor in property[.]” The bankruptcy estate is created upon “commencement,” which occurs, among other events, upon the filing of a bankruptcy petition. § 541(a)(1); 11 U.S.C. § 301. The part of the statute which applies here is § 541(c)(1), which provides as follows:

An interest of the debtor in property becomes property of the estate under subsection (a)(1)... notwithstanding any provision in an agreement, transfer instrument, or applicable bankruptcy law—

(A)That restricts or conditions transfer of such interest by the debtor; or

(B) That is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement; and that effects or gives an option to effect a forfeiture, modification, or termination of the debtors’ interest in property.

As previously stated, DBSI has an ownership interest in Wavetronix, because DBSI, the debtor, has an interest in DBSI Investments, which has an interest in Stellar, which has an interest in Wavetronix. By extension, DBSI’s interest in Wavetronix became property of the Estate as of the bankruptcy petition filing date, November 8, 2009. See § 541(a). That interest in Wavetronix was taken by the Liquidating Trustee as it was held by Stellar – that is, subject to applicable Idaho law and the Operating Agreement. The question here —and the focus of the parties at oral argument—is the application of § 541(c) to Stellar’s interest in Wavetronix. But for § 541(c), Stellar would have been dissociated by the change in management, the change in ownership and the vote of the other members.

Since Stellar became property of the Estate at the time DBSI filed for bankruptcy, nothing shown on the record provided has occurred that may have dissociated Stellar that does not also fall under § 541(c)(1).

The Confirmation Order. The parties argue extensively about the applicability of the Operating Agreement and applicable Idaho law under the terms of the stipulated language in the Confirmation Order. Dkt. 5924, at 62, 63. Wavetronix argues that the Confirmation Order should be interpreted to fully implement the Operating Agreement and applicable Idaho law. However, nothing in the Confirmation Order indicates an intent by the Court or the parties to waive the applicability of § 541(c)(1). The Confirmation Order simply preserved the issue of the effect of the Operating Agreement and applicable Idaho law for later resolution. The Confirmation Order referred to the application of “other applicable law.” “Applicable law” in this case is § 541(c)(1), and none of the alleged dissociating events fall outside of its applicability.

Change in Management and Transfer of Ownership. Wavetronix’ argument that Stellar’s dissociation was triggered by acts of the Chapter 11 Trustee, demonstrating changes in management and ownership, is unavailing. All of the acts alleged fit squarely under § 541(c) – as acts involving the “taking of possession by the trustee” that, if the Idaho law and operating agreement were to apply, would “effect a ... modification ... of the debtor’s interest in property” of the estate.

PAGE_5

Similarly, the resignation of Mr. Judge cannot be considered to be a substantial change in management. If the resignation occurred because of the “financial condition of the debtor,” it would trigger § 541(c)(1)(B). In any event, the record is silent on the reason for that resignation, and the record is silent as to whether the resignation was a “substantial change” in the management of Stellar.

Membership Vote. After the bankruptcy was filed, and the Plan was confirmed, Wavetronix Members – except Stellar – unanimously elected to dissociate Stellar – in a matter consistent with applicable Idaho Law (Idaho Code § 30-6-602(4)) and the Operating Agreement (Dkt. 70-1, at 30). The reasons for that election are unclear. That act did not result in dissociation. Section 541(c) again trumps the applicable Idaho law and Operating Agreement for two reasons: First, the act of dissociating by the other members would “restrict or condition the transfer” of the debtor’s interest in Wavetronix under § 541(c)(1)(A). If the election were valid, the Liquidating Trustee could not transfer Stellar’s full interest – including management participation – to a third party. (Pursuant to the Operating Agreement, any such transfers, including management rights, would require the consent of the other members of Wavetronix, but the possibility of transfer of full rights in Wavetronix, with such consent, was not restricted when the Chapter 11 Trustee took ownership of Stellar’s interest.) Second, the act of dissociating Stellar would “effect a modification ... of the debtor’s interest in property,” and there is no showing that the act of the other Members was not triggered by one or more of the forbidden reasons listed in § 541(c)(1)(B).

Furthermore, under such circumstances, were the Court to find that § 541(c)(1) did not apply, that would be an end-run around the entire purpose of the provision, which is to invalidate restrictions on the debtor’s property that could inhibit the Chapter 11 Trustee’s ability to collect assets on behalf creditors. See H.R.Rep. No. 595, 95th Cong. 1st Sess. 368-69.

Collateral Estoppel. Another argument made by the parties concerns collateral estoppel. According to the Liquidating Trustee, the Court previously rejected Wavetronix’ argument that the stipulated language in the Confirmation Order overrides application of the Bankruptcy Code, so Wavetronix should be estopped from making an identical argument again. Dkt. 73, at 18. See Case No. 1:14-CV-00417, Dkt. 9. However, the Court’s prior holding addressed only a narrow discovery issue, and the Court’s analysis did not rely on deciding between applying either bankruptcy law or the Confirmation Order to the detriment of other. Id., at 3.

(b) In re Farmer’s Market

Wavetronix urges the court to consider the applicability of In re Farmer’s Market, 792 F.2d 1400, 1402 (9th Cir. 1986). In that case, the Ninth Circuit interpreted the effect of § 541 on a California statute that allows the State to refuse transferring ownership of a liquor license to an owner delinquent in her state taxes. The liquor license, the Ninth Circuit found, was “property” and thus part of the bankruptcy estate as defined under § 541(a), but the bankruptcy estate’s property interest was still subject to a California statute, that legislated the state’s right to collect delinquent taxes. Id., at 1402. The bankruptcy estate “takes the license subject to the restriction [of state taxes] imposed on the debtor by its transferor.” Id., at 1403. In re Farmer’s Market also considered § 541(c)(1)(A), which prevents limitations that “restrict[ ] or condition[ ] transfer of such interest by the debtor” to the bankruptcy estate. Interpreting that subsection, the court found that it should not be read to invalidate all transfer restrictions on property in which the debtor holds an interest; instead, the provision should be read to “avoid[ ] only those restrictions which prevent transfer of the debtor’s property to the estate.” Id., at 1402 (emphasis added).

PAGE_6

With respect to § 541(c)(1)(a), In re Farmer’s Market is directly applicable to this case. Just as the liquor license was “property” of the bankruptcy estate subject to an applicable statute, Stellar’s interest in Wavetronix is property of the Estate that the Estate possesses subject to the Operating Agreement and applicable Idaho law. However, In re Farmer’s Market is limited in its application in one important respect: it analyzed § 541(c)(1)(A), not § 541(c)(1)(B). See id, at 1402. Even if the Court applies a narrow reading to § 541(c)(1)(A), as In re Farmer’s Market could suggest, the gravamen of Wavetronix’ issue with the Chapter 11 Trustee appears to be the Chapter 11 Trustee’s “possession” of Stellar’s interest in Wavetronix, which implicates § 541(c)(1)(B). In re Farmer’s Market does not require that the Court grant Wavetronix’s motion.

(c) 11 U.S.C. § 365

If the Operating Agreement is an executory contract under 11 U.S.C. § 365 and was adopted by the Chapter 11 Trustee, the Operating Agreement would be binding on the Liquidating Trustee, and § 541 would, in effect, be waived. To determine whether a contract is executory, the Ninth Circuit has adopted the “Countryman Test,” under which a contract is executory if the obligations of both parties are so far unperformed that the failure of either party to complete performance would constitute a material breach and thus excuse the performance of the other. Unsecured Creditors’ Comm. v. Southmark Corp., 139 F.3d 702, 705 (9th Cir. 1998); Griffel v. Murphy, 839 F.2d 533, 536 (9th Cir. 1988); Vern Countryman, Executory Contracts in Bankruptcy: Part 1, 57 Minn. L.Rev. 439, 460 (1973). More simply stated, if there are no material obligations that must be performed by the members of a limited liability company, then the contract is not executory and is not governed by § 365. In Re Ehmann, 319 B.R. 200, 205 (Bkrtcy. D. Ariz. 2005).

Neither party argues that the Operating Agreement is an executory contract. The Court agrees. Section 365 does not apply. The Operating Agreement was not an executory contract binding on the Liquidating Trustee.

(d) The equities

Finally, the parties argue that the equities of the case favor their respective positions. There are obvious equities on both sides. On the one hand, the ‘pick your partner’ bedrock principle of LLCs would favor Wavetronix; on the other hand, the Liquidating Trustee is a statute-created person whose explicit task is to collect funds on behalf of creditors. On balance, the equities neither weigh in favor nor against the parties.

CONCLUSION

Wavetronix’ motion for partial summary judgment should be denied, because Wavetronix has not proved dissociation as a matter of law based on material facts not in issue.

ORDER

Therefore, it is HEREBY ORDERED that Wavetronix Partial Motion for Summary Judgment on Dissociation (Dkt. 70) is denied.

Dated this 24th day of July, 2015.

Zazzali v. Wavetronix LLC (In re DBSI, Inc.), 2015 WL 12683817 (D.Idaho, 2015).

Related Article: None.

AI Synopsis