United States District Court, D. Colorado
In re ROCKY ASPEN, LLC, Debtor.
ROCKY ASPEN, LLC, ROCKY ASPEN MANAGEMENT 204, LLC, and AH DB KITCHEN ASPEN INVESTORS, LLC, Appellees. HANFORD HOLDINGS LLC, Appellant,
A. BRIMMER United States District Judge
matter is before the Court on appellant Hanford Holdings
LLC's Motion for Leave to Appeal. Docket No. 1. Hanford
seeks leave for an interlocutory appeal under 28 U.S.C.
§ 158(a)(3) from the Bankruptcy Court's Order
Denying Motion to Dismiss. In re Rocky Aspen, LLC,
No. 16-12194, Docket No. 267 (Bankr. D. Colo. June 22, 2016)
(Docket No. 1-1).
dispute arises from a restaurant venture. Debtor Rocky Aspen
LLC was formed to build and operate a restaurant by its two
members, appellees Rocky Aspen Management 204, LLC
(“RAM 204”) and AH DB Kitchen Aspen Investors,
LLC (“AH”). Docket No. 1-1 at 1. Pursuant to the
debtor's operating agreement, each member appointed one
of the debtor's two managers. Id. at 1. After
the debtor fell behind schedule and went over budget on its
restaurant project, appellant Hanford Holdings LLC
(“Hanford”) loaned debtor money under a pledge
agreement signed by the debtor and its two members.
Id. at 2. A dispute subsequently arose between the
two members. RAM 204 purported to exercise its rights under
the debtor's operating agreement to replace the manager
appointed by AH with a manager of its choosing. Id.
at 2-3. On February 29, 2016, Hanford sent RAM 204 and AH
notice that a default had occurred under the loan based on
debtor's written admission that it was unable to pay its
debts as they became due. Id. at 11; Docket No. 1 at
6. Hanford alleges that a default on the loan entitled
Hanford to exercise all of the voting rights of RAM 204 and
AH pursuant to the pledge agreement. Docket No. 1-1 at 3. On
March 11, 2016, the two managers of debtor, both appointed by
RAM 204, adopted a resolution to file for bankruptcy.
Id. at 3. The same day, debtor filed a voluntary
Chapter 11 petition. Docket No. 1 at 7.
filed a motion to dismiss the bankruptcy case, challenging
the authority of the debtor's managers to file for
bankruptcy. Docket No. 1-1 at 3. Hanford also argued that,
due to the default, it had the right to control the debtor
through the voting rights granted to Hanford by the pledge
two-day trial, the Bankruptcy Court denied Hanford's
motion to dismiss. Docket No. 1-1 at 1. The Bankruptcy Court
found that the debtor's operating agreement vested all
management voting rights in its managers, not its members,
and that the managers had the authority to file the
bankruptcy petition without a vote by the debtor's
members. Id. at 6. The Bankruptcy Court also found
that the pledge agreement did not amend the debtor's
operating agreement and that, in any event, Hanford lacked
any voting rights because the fifteen-day cure period for a
continuing default under the pledge agreement had not yet
passed by the time the bankruptcy petition was filed.
Id. at 10-11.
Court can grant leave to pursue an interlocutory appeal in
its discretion. 28 U.S.C. § 158(a)(3). District courts
have looked to the standards found in 28 U.S.C. §
1292(b) to determine if leave is warranted, i.e., whether
“the order involves a controlling question of law over
which there is a substantial basis for disagreement and for
which immediate appeal will advance the ultimate termination
of the litigation.” In re M & L Bus. Mach. Co.,
Inc., No. 94-K-936, 1994 WL 263457, at *2 (D. Colo. June
6, 1994) (citing In re Blinder, Robinson & Co.,
Inc., 135 B.R. 899, 901 (D. Colo. 1992)). Hanford has
the burden to show this standard is met. In re Fox,
241 B.R. 224, 232 (B.A.P. 10th Cir. 1999) (citing In re
Nucor, Inc., 116 B.R. 246, 247 (D. Colo.1990)).
proposes three issues for appeal:
1. Did the Bankruptcy Court improperly apply legal principles
of contract construction to the pledge agreement?
2. Did the Bankruptcy Court incorrectly determine that the
pledge agreement did not amend the operating agreement?
3. Did the Bankruptcy Court apply the wrong burden of proof
for who has authority to file the petition? Docket No. 1 at
the first issue, Hanford argues that the Bankruptcy Court
incorrectly applied Colorado law instead of New York law to
the pledge agreement, failed to give meaning to the pledge
agreement's terms granting Hanford voting control, and
interpreted the pledge agreement inconsistently with various
cases. Id. at 11-13. But Hanford fails to articulate
how applying New York law would change the outcome, how the
noted terms present a controlling question, or how the cited
cases are inconsistent with the Bankruptcy Court's order.
See Scotiabank de Puerto Rico v. Figueroa Martinez,
2016 WL 5678266, at *2 (D.P.R. Sept. 29, 2016) (rejecting an
argument that the bankruptcy court applied the wrong law
where the appellant failed to address how the alternative law
would lead to a different outcome). As the Bankruptcy Court
recognized, even if Hanford is correct that it had voting
control of the debtor at the time of the petition, this does
not present a controlling issue because Hanford does not
claim it attempted to do anything with those voting rights.
Docket No. 1-1 at 11 (“To the extent Hanford had such
member voting rights, an issue this Court need not determine,
Hanford did not vote those units to remove [the debtor's
co-managers] prior to the petition date. Accordingly, those
co-managers remained authorized to file the petition on the
the second issue, Hanford argues that the Bankruptcy Court
misapplied the law by failing to properly consider that the
pledge agreement satisfied both the statutory requirements to
amend the debtor's operating agreement and those in the
operating agreement itself. Docket No. 1 at 14-15. The
Bankruptcy Court, however, also relied on other evidence not
contested by Hanford, e.g., that the pledge agreement does
not express the parties' intent to modify the operating
agreement, but rather expresses the parties' intent to
create a security agreement. Docket No. 1-1 at ...