Nader Modanlo

1 	Final 	Analysis 	Communications 	Systems, 	Inc. 	(FACS), 	also
appeals the bankruptcy court’s Order, and joins in the briefs filed
by Debtor. 	For simplicity, references to Debtor’s legal positions
below 	will 	indicate 	positions 	taken 	by 	Debtor 	and 	FACS 	in 	their
joint brief and reply brief.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IN RE: NADER MODANLO 	:
NADER MODANLO, et al. 	:
Appellants 	:
v. 	: Civil Action No. DKC 2006-1168
:
CHRISTOPHER MEAD, et al.
:
Appellees
:
MEMORANDUM OPINION
This 	case 	is 	before 	the 	court 	on 	appeal 	from 	the 	Order 	of
United 	States 	Bankruptcy 	Judge 	Nancy 	V. 	Alquist 	authorizing 	the
Chapter 	11 	trustee, 	Christopher 	B. 	Mead 	(“Trustee”), 	to 	take
specified 	actions 	on 	behalf 	of, 	and 	with 	respect 	to, 	New 	York
Satellite Industries, LLC (NYSI), in the Chapter 11 case filed by
Nader 	Modanlo 	(“Debtor”), 	Case 	no. 	05-26549-NVA. 1 	(Paper 	16).
Oral 	argument 	is 	deemed 	unnecessary 	because 	the 	facts 	and 	legal
arguments 	are 	adequately 	presented 	in 	the 	briefs 	and 	record, 	and
the 	decisional 	process 	would 	not 	be 	significantly 	aided 	by 	oral
argument. 	See Fed.R.Bankr.P. 8012. 	For the reasons that follow,
the court will affirm the bankruptcy court’s Order.
Case 05-26549 Doc 264 Filed 10/11/06 Page 1 of 25

2
I. 	Background
The 	following 	facts 	are 	undisputed, 	unless 	otherwise 	noted.
Debtor has been involved in litigation over the management of two
companies, 	Final 	Analysis, 	Inc. 	(FAI), 	and 	Final 	Analysis
Communications 	Services, 	Inc. 	(FACS). 	In 	2001, 	FAI 	filed 	an
involuntary 	petition 	under 	Chapter 	11 	of 	the 	Bankruptcy 	Code.
Fourteen 	shareholders 	of 	FACS 	filed 	direct 	and 	derivative 	claims
against FACS, FAI, and Debtor in the Circuit Court for Montgomery
County 	in 	2001, 	alleging 	misappropriation, 	fraud, 	and 	breach 	of
fiduciary duty on the part of Debtor and FAI. 	On October 22, 2004,
a 	jury 	found 	that 	Debtor 	had 	breached 	his 	fiduciary 	duty 	and
awarded a judgment of $103.93 million against Debtor. 	On July 22,
2005, 	Debtor 	filed 	a 	voluntary 	petition 	under 	Chapter 	11 	of 	the
Bankruptcy Code.
Before 	filing 	his 	voluntary 	Chapter 	11 	case, 	Debtor 	was 	the
sole 	member 	of 	NYSI, 	a 	Delaware 	Limited 	Liability 	Company 	(LLC).
NYSI, 	in 	turn, 	owns 	a 	majority 	of 	the 	outstanding 	stock 	of 	FACS.
A 	significant 	asset 	of 	FACS 	is 	a 	verdict 	obtained 	in 	the 	United
States District Court for the District of Maryland against General
Dynamics 	on 	September 	6, 	2005, 	Case 	no. 	PJM 	03-307. 	The 	jury 	in
the 	General 	Dynamics 	litigation 	originally 	awarded 	FACS 	$129
million, 	but 	this 	award 	was 	reduced 	to 	$11.87 	million. 	FACS 	has
filed an appeal of the reduction of this verdict.
Case 05-26549 Doc 264 Filed 10/11/06 Page 2 of 25

2 	Michael 	H. 	Ahan, 	a 	creditor 	of 	Debtor’s 	estate, 	filed 	a
brief in this appeal. 	(Paper 12). 	Debtor objects to this brief on
the ground that Ahan did not participate in the proceeding below.
It 	is 	unnecessary 	to 	resolve 	this 	controversy 	because 	the
bankruptcy 	court’s 	Order 	will 	be 	affirmed 	without 	reaching 	the
preemption issue raised in Ahan’s brief.
3
On 	December 	23, 	2005, 	the 	bankruptcy 	court 	ordered 	the
appointment of a trustee to manage Debtor’s assets. 	Debtor filed
a 	timely 	appeal, 	and 	this 	court 	affirmed 	the 	bankruptcy 	court’s
order. 	Modanlo 	v. 	Ahan 	(In 	re 	Modanlo), 	No. 	DKC 	2006-0268. 2
Christopher B. Mead (“Trustee”) was appointed as Chapter 11 Trustee
of Debtor’s estate on January 10, 2006.
Trustee immediately acted to take control of NYSI. 	The same
day he was appointed, Trustee filed an amendment to NYSI’s Limited
Liability Company Agreement (“LLC Amendment”) providing that:
Notwithstanding 	anything 	else 	to 	the
contrary, (i) the Company may be managed by a
manager, 	as 	such 	term 	is 	defined 	by 	the
[Delaware Limited Liability Company] Act, and
(ii) 	the 	Company’s 	manager 	need 	not 	be 	a
member of the Company.
The 	Trustee 	hereby 	appoints 	Christopher
B. Mead, in his capacity as Chapter 11 Trustee
for Nader Modanlo, in Bankruptcy Case No. 05-
26549-NVA, United States Bankruptcy Court for
the 	District 	of 	Maryland 	(“Manager”), 	as
manager 	of 	the 	Company. 	Management 	of 	the
Company shall be vested solely in the Manager,
and Manager shall have the absolute authority
to 	take 	any 	and 	all 	actions 	on 	behalf 	of 	the
Company, and to sign any and all documents on
the 	Company’s 	behalf, 	including, 	but 	not
limited to, any and all agreements, contracts,
and 	documents 	in 	connection 	with 	any 	court
action. 	Any 	person 	dealing 	with 	the 	Company
may exclusively rely on Manager’s signature as
Case 05-26549 Doc 264 Filed 10/11/06 Page 3 of 25

4
evidencing 	Manager’s 	authority 	to 	act 	on
behalf of the Company.
(Trustee’s 	Ex. 	2 	for 	Feb. 	28, 	2006 	hearing). 	Also 	the 	same 	day,
Trustee 	filed 	a 	voluntary 	bankruptcy 	petition 	on 	behalf 	of 	NYSI,
acting 	under 	the 	authority 	purportedly 	conferred 	upon 	him 	by 	the
LLC Amendment. 	Trustee then filed identical emergency motions in
Debtor’s and NYSI’s bankruptcy cases seeking authorization to cause
NYSI, 	as 	controlling 	shareholder 	of 	FACS, 	to 	call 	a 	shareholder
meeting of FACS. 	It is undisputed that at least one of Trustee’s
goals in calling the shareholder meeting was to remove Debtor as a
director of FACS.
On February 28, 2006, the same day the bankruptcy court held
a hearing on the emergency motion, Trustee filed a “Written Consent
of and Agreement Regarding Admission of Personal Representative of
Last Remaining Member,” (“LLC Consent”), stating that:
Pursuant 	to 	Section 	18-806 	of 	the 	Delaware
Limited Liability Company Act (the “Act”), the
undersigned, 	who 	is 	the 	Personal
Representative 	(as 	defined 	in 	Section 	18-
101(13) 	of 	the 	Act), 	by 	virtue 	of 	being
appointed 	Trustee 	pursuant 	to 	In 	re: 	Nader
Modanlo, 	Case 	No. 	05-2-6549-NVA 	filed 	in 	the
United 	States 	Bankruptcy 	Court 	for 	the
District 	of 	Maryland 	(Greenbelt 	Division) 	of
the 	last 	remaining 	member 	of 	New 	York
Satellite 	Industries, 	LLC 	(the 	“Company”)
hereby 	consents 	to 	the 	continuation 	of 	the
Company, effective as of the occurrence of an
event described in Section 18-801(a)(4) of the
Act 	(that 	is, 	the 	bankruptcy 	of 	the 	last
remaining 	member), 	to 	the 	extent 	that 	such
consent to continue has not already been made;
and 	the 	undersigned, 	as 	such 	Personal
Representative, hereby agrees to the admission
Case 05-26549 Doc 264 Filed 10/11/06 Page 4 of 25

3 	Judge 	Alquist 	entered 	an 	identical 	order 	in 	the 	voluntary
Chapter 11 case filed on NYSI’s behalf by Trustee, No. 06-1-0158-
NVA. 	A 	notice 	of 	appeal 	was 	filed 	in 	that 	case 	as 	well, 	but 	has
not 	been 	pursued 	and 	thus 	is 	not 	at 	issue 	in 	this 	case. 	It 	is
unnecessary 	to 	decide 	whether, 	as 	Trustee 	argues, 	the 	failure 	to
appeal this order precludes reversing the bankruptcy court’s Order
in 	Debtor’s 	Chapter 	11 	case 	because 	the 	bankruptcy 	court’s 	Order
will be affirmed.
5
of 	the 	undersigned, 	as 	a 	member 	of 	the
Company, in such undersigned’s capacity as the
Personal Representative of the last remaining
member, 	effective 	as 	of 	the 	date 	of 	the
occurrence 	of 	the 	event 	described 	in 	Section
18-801(a)(4) of the Act.
(Trustee’s Ex. 14 for Feb. 28, 2006 hearing).
The bankruptcy court granted Trustee’s emergency motion in an
Order 	entered 	on 	April 	7, 	2006. 	Debtor 	and 	FACS 	filed 	a 	timely
notice of appeal on April 12, 2006. 3
II. 	Standard of Review
On appeal from the bankruptcy court, the district court acts
as an appellate court and reviews the bankruptcy court’s findings
of fact for clear error and conclusions of law de novo. 	See In re
Johnson, 	960 	F.2d 	396, 	399 	(4 th 	Cir. 	1992); 	Travelers 	Ins. 	Co. 	v.
Bryson Prop., XVIII (In re Bryson Prop., XVIII), 961 F.2d 496, 499
(4 th Cir.), cert. denied sub nom., Bryson Prop., XVIII v. Travelers
Ins. Co., 506 U.S. 866 (1992).
III. 	Analysis
Debtor 	presents 	the 	following 	issues 	on 	appeal: 	“I. 	Did 	the
Bankruptcy 	Court 	err 	when 	it 	determined 	that 	an 	adversary
proceeding was not required? 	II. Did the Bankruptcy Court err when
Case 05-26549 Doc 264 Filed 10/11/06 Page 5 of 25

6
it permitted the bankruptcy trustee to ask the Secretary of FACS to
call a meeting of the shareholders. . . ?” 	(Paper 6, at 1-2).
A. 	Adversary Proceeding
Debtor argues that the bankruptcy court erred by deciding the
case 	without 	requiring 	a 	formal 	adversary 	proceeding. 	The
bankruptcy court reasoned that “the relief requested by the Trustee
is not the kind that needs to be brought by an adversary proceeding
pursuant to Federal Rule of Bankruptcy Procedure 7001.” 	(Paper 16,
at 2 n.1). 	Debtor argues that an adversary proceeding was required
because 	the 	bankruptcy 	court 	made 	declaratory 	judgments 	as 	an
intermediate 	step 	in 	concluding 	that 	Trustee 	had 	power 	to 	cause
NYSI to call a shareholder meeting of FACS’s shareholders. 	Debtor
also 	argues 	that 	the 	bankruptcy 	court 	reached 	a 	declaratory
judgment as to whether FACS stock was property of the estate.
Fed.R.Bankr.P. 7001, et seq. establish procedural requirements
for adversary proceedings that are similar to the Federal Rules of
Civil 	Procedure 	and 	more 	stringent 	than 	those 	required 	for
contested 	matters. 	These 	rules 	reflect 	a 	determination 	that
certain 	forms 	of 	relief 	are 	“of 	sufficient 	consequence 	to 	the
affected party that the party deserved something more than a copy
of a generic motion which may have been mailed to countless other
creditors and which may include numerous other requests for relief
totally 	unrelated 	to 	the 	specific 	relief 	sought 	against 	that
party.” 	In 	re 	Fuller, 	255 	B.R. 	300, 	305 	(Bankr.W.D.Mich. 	2000).
Case 05-26549 Doc 264 Filed 10/11/06 Page 6 of 25

7
The circumstances under which the additional procedures associated
with 	an 	adversary 	proceeding 	are 	required 	are 	provided 	in
Fed.R.Bankr.P. 7001:
(1) a proceeding to recover money or property,
other 	than 	a 	proceeding 	to 	compel 	the 	debtor
to 	deliver 	property 	to 	the 	trustee, 	or 	a
proceeding 	under 	§ 	554(b) 	or 	§ 	725 	of 	the
Code, Rule 2017, or Rule 6002;
(2) 	a 	proceeding 	to 	determine 	the 	validity,
priority, 	or 	extent 	of 	a 	lien 	or 	other
interest in property, other than a proceeding
under Rule 4003(d);
(3) 	a 	proceeding 	to 	obtain 	approval 	under 	§
363(h) 	for 	the 	sale 	of 	both 	the 	interest 	of
the estate and of a co-owner in property;
(4) 	a 	proceeding 	to 	object 	to 	or 	revoke 	a
discharge;
(5) 	a 	proceeding 	to 	revoke 	an 	order 	of
confirmation 	of 	a 	chapter 	11, 	chapter 	12, 	or
chapter 13 plan;
(6) 	a 	proceeding 	to 	determine 	the
dischargeability of a debt;
(7) 	a 	proceeding 	to 	obtain 	an 	injunction 	or
other equitable relief, except when a chapter
9, chapter 11, chapter 12, or chapter 13 plan
provides for the relief;
(8) 	a 	proceeding 	to 	subordinate 	any 	allowed
claim 	or 	interest, 	except 	when 	a 	chapter 	9,
chapter 	11, 	chapter 	12, 	or 	chapter 	13 	plan
provides for subordination;
(9) 	a 	proceeding 	to 	obtain 	a 	declaratory
judgment relating to any of the foregoing; or
(10) 	a 	proceeding 	to 	determine 	a 	claim 	or
cause 	of 	action 	removed 	under 	28 	U.S.C. 	§
1452.
The 	bankruptcy 	court 	concluded 	that 	the 	relief 	requested 	by
Trustee 	did 	not 	fit 	any 	of 	the 	circumstances 	enumerated 	in
Fed.R.Bankr.P. 	7001 	and 	that 	an 	order 	authorizing 	Trustee 	to 	act
was 	appropriate 	relief 	to 	request 	under 	11 	U.S.C. 	§ 	363(b)(1).
(Paper 16, at 2 n.1, 25-26, 29). 	Section 363(b)(1) provides that
Case 05-26549 Doc 264 Filed 10/11/06 Page 7 of 25

8
an appointed “trustee, after notice and a hearing, may use, sell,
or lease, other than in the ordinary course of business, property
of the estate . . . .”
Debtor 	argues 	that 	the 	bankruptcy 	court 	erred 	by 	failing 	to
require 	an 	adversary 	proceeding 	that 	he 	asserts 	was 	necessary
because the bankruptcy court resolved a dispute as to ownership of
property, 	issued 	an 	injunction 	under 	Fed.R.Bankr.P. 	7001(7), 	or
made a declaratory judgment under Fed.R.Bankr.P. 7001(9). 	Debtor
argues 	that 	the 	case 	involved 	the 	disputed 	possession 	of 	FACS’s
stock, which one of NYSI’s creditors may have taken possession of
to secure NYSI’s debt. 	Debtor contends that the bankruptcy court
declared 	that 	NYSI 	“remains 	the 	‘majority 	stockholder 	of 	FACS.’”
(Paper 15, at 5). 	Debtor asserts that such a determination either
was a declaratory judgment that required an adversary proceeding or
that 	more 	stringent 	process 	was 	otherwise 	required 	before 	the
bankruptcy 	court 	could 	determine 	the 	contested 	ownership 	of 	the
FACS stock certificates.
The bankruptcy court did not resolve any dispute as to NYSI’s
interest 	in 	the 	stock 	certificates 	for 	FACS 	stock. 	It 	reserved
“for another day (and possibly another court)” any question as to
NYSI’s authority to call a shareholder meeting. 	(Paper 16, at 29)
The 	bankruptcy 	court’s 	order 	authorizes 	Trustee 	to 	take 	action
through his control of NYSI, but does not make any ruling as to the
ownership 	of 	FACS 	stock. 	(Paper 	1, 	Ex. 	18). 	Because 	it 	did 	not
Case 05-26549 Doc 264 Filed 10/11/06 Page 8 of 25

9
resolve this controversy, the bankruptcy court did not resolve the
validity or extent of a lien or other interest in property, which
would 	require 	an 	adversary 	proceeding 	pursuant 	to 	Fed.R.Bankr.P.
7001(2). 	Debtor 	also 	argues 	that 	it 	is 	necessary 	to 	join 	all
parties 	to 	resolve 	competing 	interests 	of 	“multiple 	parties
claim[ing] 	ownership 	interests 	in 	the 	same 	property.” 	Cross
Timbers 	Oil 	Co. 	v. 	Rosel 	Energy, 	Inc., 	167 	F.R.D. 	457, 	460
(D.Kan.), reconsideration denied, 168 F.R.D. 649 (1996). 	No such
competing claims to the FACS stock were resolved by the bankruptcy
court. 	The 	requirement 	to 	join 	all 	interested 	parties 	is 	not
applicable.
Debtor alternatively argues that an adversary proceeding was
required because the bankruptcy court issued an injunction or made
a 	declaratory 	judgment 	under 	paragraphs 	(7) 	or 	(9) 	of
Fed.R.Bankr.P. 7001. 	Resolution of Trustee’s emergency motion 	was
not 	“a 	proceeding 	to 	obtain 	an 	injunction 	or 	other 	equitable
relief” 	that 	requires 	an 	adversary 	proceeding. 	Fed.R.Bankr.P.
7001(7). 	Equitable 	relief 	under 	Fed.R.Bankr.P. 	7001(7) 	includes
injunctions, 	accountings, 	specific 	performance, 	and 	other 	relief
“traditionally 	granted 	only 	by 	courts 	of 	equity.” 	10 	Collier 	on
Bankruptcy ¶ 7001.08 (15 th ed. rev. 2006). 	Trustee sought a hearing
and authorization to act under 11 U.S.C. § 363(b)(1). 	This action
is not an equitable injunction or relief traditionally reserved for
courts of equity. 	Judge Alquist’s Order does not compel or forbid
Case 05-26549 Doc 264 Filed 10/11/06 Page 9 of 25

10
any action on the part of any party. 	It only authorizes Trustee to
take 	action 	to 	call 	a 	shareholder 	meeting 	through 	his 	control 	of
NYSI, but it does not require any other entity to heed his request.
(Paper 1, Ex. 18).
Debtor 	argues 	that 	the 	bankruptcy 	court’s 	conclusions 	with
regard to the status of NYSI, and Trustee’s authority over it, are
declaratory judgments which can only be issued after an adversary
proceeding under Fed.R.Bankr.P. 7001(9). 	An adversary proceeding
is 	required 	only 	if 	the 	moving 	party 	requested 	a 	declaratory
judgment as to one of the eight issues enumerated in Fed.R.Bankr.P.
7001(1)-(8); a declaratory judgment as to any other matter does not
require 	an 	adversary 	proceeding. 	Fed.R.Bankr.P. 	7001(9) 	(“a
proceeding to obtain a declaratory judgment relating to any of the
foregoing”) (emphasis added); see also 10 Collier on Bankruptcy ¶
7001.10 	& 	n.2 	(citing 	National 	Gypsum 	Co. 	v. 	Prostok, 	No.
3:98CV0869P, 2000 WL 1499345, at *13 (N.D.Tex. 2000)).
Debtor 	identifies 	five 	conclusions 	of 	the 	bankruptcy 	court
which 	he 	asserts 	are 	declaratory 	judgements 	that 	required 	an
adversary 	proceeding: 	(1) 	that 	NYSI 	was 	dissolved 	when 	Debtor
filed 	for 	bankruptcy, 	(2) 	that 	Trustee 	was 	authorized 	to 	name
himself 	manager 	of 	NYSI, 	(3) 	that 	Trustee 	is 	a 	“personal
representative” 	of 	Debtor 	under 	Delaware 	law, 	(4) 	that 	certain
sections of the Delaware Limited Liability Company Act (“LLC Act”)
do 	not 	apply 	to 	single 	member 	LLCs 	such 	as 	NYSI, 	and 	(5) 	that
Case 05-26549 Doc 264 Filed 10/11/06 Page 10 of 25

4 	Trustee 	argues 	that 	Debtor 	is 	estopped 	from 	arguing 	that
NYSI was dissolved because of his actions in running NYSI after he
filed 	for 	bankruptcy, 	but 	this 	dispute 	need 	not 	be 	resolved
because, 	as 	discussed 	below, 	NYSI 	was 	resuscitated 	by 	Trustee’s
actions.
5 Trustee also argues that provisions of the Delaware LLC Act
relied upon by Debtor are preempted by the Bankruptcy Code. 	It is
not 	necessary 	to 	decide 	this 	issue 	because, 	as 	described 	below,
Trustee has taken control of NYSI pursuant to the Delaware LLC Act.
11
Trustee’s 	actions 	resuscitated 	NYSI 	from 	its 	dissolved 	state.
(Paper 	6, 	at 	4-5). 	None 	of 	these 	conclusions, 	even 	if 	they 	are
declaratory judgments as to NYSI’s legal status under Delaware law,
reaches any of the issues enumerated in Fed.R.Bankr.P. 7001(1)-(8),
and no adversary proceeding was necessary.
B. 	Trustee’s Authority to Control NYSI
NYSI 	was 	dissolved 	pursuant 	to 	the 	Delaware 	LLC 	Act 	when
Debtor filed his voluntary Chapter 11 case. 4 	Del. Code Ann. tit.
6, § 18-801(a)(4). 	Trustee has acted in an attempt to resuscitate
NYSI 	under 	Delaware 	law 	by 	executing 	the 	LLC 	Amendment 	and 	later
the 	LLC 	Consent. 	The 	parties 	disagree 	as 	to 	whether 	that 	action
has 	been 	or 	can 	be 	effective. 5 	The 	bankruptcy 	court 	found 	that
NYSI 	was 	resuscitated 	from 	dissolution 	by 	Trustee’s 	action 	and
Trustee 	acquired 	the 	power 	to 	control 	NYSI 	upon 	the 	execution 	of
either the LLC Amendment or the LLC Consent. 	(Paper 16, at 17).
Under Del. Code Ann. tit. 6, § 18-304(1) “[a] person ceases to
be a member of a limited liability company” if, among other things,
that 	person 	“[f]iles 	a 	voluntary 	petition 	of 	bankruptcy.” 	The
Case 05-26549 Doc 264 Filed 10/11/06 Page 11 of 25

12
Delaware LLC Act also provides that an LLC is dissolved if it has
no 	remaining 	members: 	“A 	limited 	liability 	company 	is 	dissolved
and 	its 	affairs 	shall 	be 	wound 	up 	upon 	the 	first 	to 	occur 	of 	the
following: . . . [a]t any time there are no members . . . .” 	Del.
Code 	Ann. 	tit. 	6, 	§ 	18-801(a). 	This 	provision 	also 	contains 	an
exception to dissolution if:
“within 90 days . . . after the occurrence of
the 	event 	that 	terminated 	the 	continued
membership 	of 	the 	last 	remaining 	member, 	the
personal representative of the last remaining
member 	agrees 	in 	writing 	to 	continue 	the
limited liability company and to the admission
of the personal representative of such member
or 	its 	nominee 	or 	designee 	to 	the 	limited
liability company as a member . . . .”
Del. Code Ann. tit. 6, § 18-801(a)(4)(a).
Once Debtor filed his voluntary bankruptcy petition, NYSI was
“dissolved” 	under 	Delaware 	Law, 	although 	this 	status 	does 	not
automatically 	end 	NYSI’s 	legal 	existence 	nor 	preclude 	its
resuscitation. 	Debtor 	filed 	a 	voluntary 	bankruptcy 	petition 	on
July 22, 2005. 	(Paper 16, at 8). 	Pursuant to Del. Code Ann. tit.
6, § 18-304, he ceased to be a member of NYSI at that time. 	As a
result, NYSI, which had been a single-member LLC, no longer had any
members and became “dissolved” by operation of Del. Code Ann. tit.
6, 	§ 	18-801(a)(4). 	The 	exception 	to 	dissolution 	provided 	in
section 18-801(a)(4)(a) is not available to NYSI. 	Because Trustee
was 	not 	appointed 	until 	January 	10, 	2006, 	(paper 	16, 	at 	3), 	he
could 	not 	take 	any 	action 	with 	respect 	to 	NYSI 	within 	90 	days 	of
Case 05-26549 Doc 264 Filed 10/11/06 Page 12 of 25

13
July 	22, 	2005, 	as 	required 	to 	take 	advantage 	of 	the 	exception
provided by section 18-801(a)(4)(a).
1. 	Resuscitation of NYSI
The bankruptcy court concluded that, although dissolved, NYSI
was resuscitated under Del. Code Ann. tit 6, § 18-806 either when
Trustee 	executed 	the 	LLC 	Amendment 	or 	when 	he 	executed 	the 	LLC
Consent. 	(Paper 16, at 13-14). 	Debtor contends that this finding
was in error. 	He argues that Trustee’s actions were insufficient
to 	resuscitate 	NYSI, 	that 	Trustee 	was 	not 	authorized 	as 	his
“personal 	representative” 	to 	resuscitate 	NYSI, 	and 	that 	Trustee
cannot 	acquire 	management 	rights 	in 	NYSI 	because 	LLC 	management
rights are not assignable under Delaware law.
Under 	the 	Delaware 	LLC 	Act, 	although 	dissolved, 	an 	LLC 	does
not cease to exist legally until a certificate of cancellation is
filed 	with 	the 	office 	of 	Delaware’s 	Secretary 	of 	State, 	which
cannot 	occur 	until 	the 	LLC’s 	affairs 	are 	wound 	up 	and 	its 	assets
distributed. 	See Del. Code Ann. tit. 6, §§ 18-201(b), 18-203. 	A
recently 	enacted 	provision 	of 	the 	Delaware 	LLC 	Act 	also
specifically 	authorizes 	a 	“personal 	representative” 	of 	an 	LLC’s
last member to resuscitate an LLC dissolved for lack of any members
at any time until the certificate of cancellation is issued. 	Del.
Code Ann. tit 6, § 18-806.
Notwithstanding the occurrence of an event set
forth 	in 	§ 	18-801(a)(1), 	(2), 	(3) 	or 	(4) 	of
this 	title, 	the 	limited 	liability 	company
shall 	not 	be 	dissolved 	and 	its 	affairs 	shall
Case 05-26549 Doc 264 Filed 10/11/06 Page 13 of 25

14
not 	be 	wound 	up 	if, 	prior 	to 	the 	filing 	of 	a
certificate 	of 	cancellation 	in 	the 	office 	of
the Secretary of State, the limited liability
company 	is 	continued, 	effective 	as 	of 	the
occurrence 	of 	such 	event, 	pursuant 	to 	the
affirmative 	vote 	or 	written 	consent 	of 	all
remaining 	members 	of 	the 	limited 	liability
company or the personal representative of the
last remaining member of the limited liability
company if there is no remaining member . . .
. 	If 	there 	is 	no 	remaining 	member 	of 	the
limited 	liability 	company 	and 	the 	personal
representative 	of 	the 	last 	remaining 	member
votes 	in 	favor 	of 	or 	consents 	to 	the
continuation of the limited liability company,
such personal representative shall be required
to 	agree 	in 	writing 	to 	the 	admission 	of 	the
personal representative of such member or its
nominee 	or 	designee 	to 	the 	limited 	liability
company 	as 	a 	member, 	effective 	as 	of 	the
occurrence 	of 	the 	event 	that 	terminated 	the
continued 	membership 	of 	the 	last 	remaining
member.
Id. 	In 	interpreting 	this 	statute, 	a 	court 	must 	“‘ascertain 	and
give effect to the intent of the legislature.’ 	Because a statute
passed by the [Delaware] General Assembly is to be considered as a
whole, rather than in parts, each section should be read in light
of all others in the enactment.” 	Del. Bay Surgical Servs., P.C. v.
Swier, 900 A.2d 646, 652 (Del. 2006) (quoting Coastal Barge Corp.
v. Coastal Zone Ind. Control Bd., 492 A.2d 1242, 1246 (Del. 1985)).
Section 	18-806 	imposes 	three 	requirements 	for 	the
resuscitation 	of 	a 	dissolved 	LLC 	that 	no 	longer 	has 	any 	members:
(1) the last member must have a personal representative, (2) that
representative 	must 	affirmatively 	vote 	or 	consent 	in 	writing 	to
continuing the LLC, and (3) the personal representative must also
Case 05-26549 Doc 264 Filed 10/11/06 Page 14 of 25

15
either 	become 	or 	appoint 	someone 	to 	become 	a 	member 	of 	the 	LLC.
Id. 	Trustee argues and the bankruptcy court concluded that the LLC
Amendment 	and 	LLC 	Consent 	that 	Trustee 	executed 	fulfill 	these
requirements, while Debtor argues that none of these requirements
have been met.
Debtor 	argues 	that 	the 	LLC 	Amendment 	filed 	by 	Trustee 	is
insufficient to serve as a written consent to the continuation of
NYSI 	or 	as 	a 	written 	consent 	for 	Trustee 	to 	serve 	as 	a 	member 	of
NYSI as required by Del. Code Ann. tit. 6, § 18-806. 	In order to
resuscitate 	NYSI, 	the 	personal 	representative 	of 	the 	last 	member
must 	consent 	in 	writing 	both 	to 	continuation 	of 	NYSI 	and 	“to 	the
admission 	of 	the 	personal 	representative 	of 	such 	member 	or 	its
nominee or designee to the limited liability company as a member,
effective 	as 	of 	the 	occurrence 	of 	the 	event 	that 	terminated 	the
continued membership of the last remaining member.” 	Del. Code Ann.
tit. 6, § 18-806.
In 	the 	LLC 	Consent, 	Trustee 	explicitly 	“consents 	to 	the
continuation 	of 	the 	Company 	[NYSI]. 	. 	. 	to 	the 	extent 	that 	such
consent to continue has not already been made.” 	(Trustee’s Ex. 14
for 	Feb. 	28, 	2006 	hearing). 	He 	also 	explicitly 	“agrees 	to 	the
admission of the undersigned, [Trustee] as a member of the Company,
in . . . [his] capacity as the Personal Representative of the last
remaining member, effective as of the date of the occurrence of the
event described in Section 18-801(a)(4) of the Act.” 	(Id.) 	These
Case 05-26549 Doc 264 Filed 10/11/06 Page 15 of 25

16
written consents are sufficient to meet the requirements of section
18-806 with respect to both continuation of NYSI and admission of
Trustee as a member, regardless of whether the LLC Amendment also
meets these requirements.
Debtor 	argues 	that 	Trustee 	did 	not 	become 	a 	member 	of 	NYSI,
and 	hence 	had 	no 	authority 	to 	control 	it 	or 	to 	execute 	the 	LLC
Amendment. 	Admission 	to 	an 	ongoing 	LLC 	is 	generally 	governed 	by
Del. Code Ann. tit. 6, § 18-301, which allows admission “upon the
consent of all members and when the person’s admission is reflected
in 	the 	records 	of 	the 	limited 	liability 	company.” 	Debtor 	argues
that 	there 	were 	no 	members 	of 	NYSI 	who 	could 	consent 	to 	make
Trustee 	a 	member. 	This 	argument 	would 	render 	the 	personal
representative 	clauses 	of 	section 	18-806 	a 	nullity 	because 	a
personal 	representative 	is 	only 	authorized 	to 	resuscitate 	a
dissolved 	LLC 	when 	there 	are 	no 	other 	members. 	Section 	18-806
admits 	a 	personal 	representative 	(or 	his 	or 	her 	designee) 	as 	a
member of an LLC dissolved for lack of any members when and if the
personal 	representative 	executes 	a 	written 	consent 	to 	become 	a
member 	and 	to 	the 	continuance 	of 	the 	LLC. 	Trustee 	followed 	this
procedure when he executed the LLC Consent.
Debtor 	also 	argues 	that 	Trustee 	is 	not 	a 	“personal
representative” and as such is not authorized to resuscitate NYSI
under section 18-806. 	When an LLC has been dissolved for lack of
remaining 	members 	under 	section 	18-801(a)(4), 	section 	18-806
Case 05-26549 Doc 264 Filed 10/11/06 Page 16 of 25

17
authorizes 	the 	“personal 	representative 	of 	the 	last 	remaining
member” 	to 	act 	to 	resuscitate 	the 	LLC. 	The 	term 	“personal
representative” is defined broadly: 	“as to a natural person, the
executor, 	administrator, 	guardian, 	conservator 	or 	other 	legal
representative 	thereof 	. 	. 	. 	.” 	Del. 	Code 	Ann. 	tit. 	6, 	§ 	18-
101(13). 	Delaware courts are bound to apply unambiguous statutory
language, but will apply techniques of statutory interpretation to
ascertain the meaning of ambiguous statutory language.
If 	the 	statute 	as 	a 	whole 	is 	unambiguous,
there is no reasonable doubt as to the meaning
of the words used and the Court's role is then
limited 	to 	an 	application 	of 	the 	literal
meaning 	of 	the 	words. 	However, 	it 	is
undisputed 	that 	when 	a 	statute 	is 	ambiguous
and 	its 	meaning 	may 	not 	be 	clearly
ascertained, 	the 	Court 	must 	rely 	upon 	its
methods 	of 	statutory 	interpretation 	and
construction to arrive at what the legislature
meant.
Bateman 	v. 	317 	Rehoboth 	Ave., 	LLC, 	878 	A.2d 	1176, 	1182 	n.15
(Del.Ch. 	2005) 	(quoting 	Coastal 	Barge 	Corp., 	492 	A.2d 	at 	1246).
The 	scope 	of 	the 	term 	“other 	legal 	representative” 	in 	the
definition of “personal representative,” Del. Code Ann. tit. 6, §
18-101(13), 	is 	not 	clear 	on 	its 	face. 	Because 	no 	Delaware 	Court
has 	considered 	whether 	a 	bankruptcy 	trustee 	is 	a 	personal
representative, 	it 	is 	appropriate 	to 	look 	to 	the 	persuasive
authority of decisions interpreting the same language elsewhere.
Debtor argues that Trustee is the legal representative of his
estate and its creditors, and, because he may take action adverse
Case 05-26549 Doc 264 Filed 10/11/06 Page 17 of 25

18
to 	Debtor’s 	personal 	interests, 	is 	not 	Debtor’s 	personal
representative. 	This 	argument 	is 	unpersuasive 	in 	light 	of 	the
purpose of the relevant sections of the Delaware LLC Act and a long
history 	of 	decisions 	interpreting 	the 	scope 	of 	statutory
authorizations 	for 	action 	by 	a 	personal 	representative 	or 	legal
representative.
A 	bankruptcy 	trustee 	is 	authorized 	under 	federal 	bankruptcy
law 	to 	administer 	a 	debtor’s 	estate. 	Trustee 	is 	authorized 	to
operate 	Debtor’s 	business 	in 	its 	ordinary 	course, 	11 	U.S.C. 	§§
1106(a)(1), 	704(5), 	and, 	upon 	a 	hearing, 	outside 	the 	ordinary
course 	of 	business, 	11 	U.S.C. 	§ 	363(b)(1). 	Once 	appointed, 	a
bankruptcy 	trustee 	acquires 	the 	authority 	to 	exercise 	certain
rights that would otherwise belong to the debtor, such as filing a
motion on behalf of the debtor in ongoing litigation in an attempt
to secure a judgment that would be property of the estate. 	Heyman
v. M.L. Marketing Co., 116 F.3d 91, 94-95 (4 th Cir. 1997). 	Courts
usually 	interpret 	a 	bankruptcy 	trustee 	as 	being 	a 	“personal
representative” 	or 	“legal 	representative” 	of 	the 	debtor 	when
statutes 	authorize 	action 	by 	a 	personal 	or 	legal 	representative.
See 	Heyman, 	116 	F.3d 	at 	94-95 	(trustee 	authorized 	as 	legal
representative 	of 	Debtor 	to 	file 	Fed.R.Civ.P. 	60(b) 	motion);
McClaskey v. Harbison-Walker Refractories Co., 138 F.2d 493, 495,
499 	(3 d 	Cir. 	1943) 	(sheriff 	acting 	with 	authority 	similar 	to
bankruptcy trustee authorized to assign patent rights as personal
Case 05-26549 Doc 264 Filed 10/11/06 Page 18 of 25

19
representative); 	Scott 	v. 	Hollingsworth, 	2 	P.2d 	571, 	574
(Cal.Ct.App. 1931) (receiver authorized as personal representative
to sue to collect statutory penalties), overruled on other grounds
by 9 P.2d 836 (Cal. 1932); In re Wilcox & Howe Co., 39 A. 163, 165-
67 	(Conn. 	1898) 	(recognizing 	a 	general 	rule 	that 	a 	trustee 	is 	a
debtor’s 	personal 	representative, 	but 	finding 	an 	exception 	under
Connecticut 	conditional 	sales 	statute); 	Monongahela 	Bank 	v.
Overhold, 	96 	Pa. 	327, 	1880 	WL 	5096 	at 	*3 	(Pa. 	1880) 	(bankruptcy
assignee 	authorized 	as 	legal 	representative 	to 	sue 	for 	statutory
penalties); see also Goldberg v. Nathan Littauer Hosp. Ass’n, 160
Misc.2d 571, 575 (N.Y.Sup.Ct. 1994) (bankruptcy trustee treated as
the 	administrator 	of 	a 	decedent’s 	estate 	for 	tolling 	statute 	of
limitations).
Exceptions to this rule have been recognized with respect to
rights that are highly personal to the debtor or not appropriately
exercised 	by 	a 	bankruptcy 	trustee. 	A 	bankruptcy 	trustee 	is 	not
authorized to administer a debtor’s constitutional privacy rights
in 	his 	or 	her 	mail. 	In 	re 	Benny, 	29 	B.R. 	754 	(N.D.Cal. 	1983)
(indicating 	a 	trustee 	represents 	the 	estate 	rather 	than 	the
personal 	interest 	of 	the 	debtor); 	In 	re 	Crabtree, 	37 	B.R. 	426
(Bankr.E.D.Tenn. 	1984). 	A 	trustee 	also 	is 	not 	a 	“personal
representative” 	of 	the 	debtor 	under 	a 	Connecticut 	statute 	making
unrecorded 	conditional 	sales 	effective 	only 	against 	the 	buyer 	or
its 	personal 	representative, 	because 	the 	statute 	authorized 	the
Case 05-26549 Doc 264 Filed 10/11/06 Page 19 of 25

20
liquidation 	of 	conditionally 	held 	goods 	upon 	insolvency 	and 	this
purpose 	would 	be 	frustrated 	by 	making 	conditions 	on 	the 	sale
effective against a trustee as the buyer’s personal representative.
In 	re 	Wilcox 	& 	Howe 	Co., 	39 	A. 	at 	165-67. 	Although 	not
interpreting 	the 	meaning 	of 	“personal 	representative” 	or 	“legal
representative,” 	courts 	have 	also 	held 	that 	some 	actions 	of 	a
bankruptcy 	trustee 	are 	not 	actions 	of 	the 	debtor. 	In 	re 	Buckeye
Countrymark, Inc., 251 B.R. 835, 840 (Bankr.S.D.Ohio 2000) (claim
brought 	by 	trustee 	not 	barred 	by 	insurance 	contract 	language
because 	it 	was 	not 	a 	claim 	brought 	by 	debtor); 	In 	re 	Obie 	Elie
Wrecking Co., 35 B.R. 114, 115 (Bankr.N.D.Ohio 1983) (payments to
IRS made by trustee from the estate are not voluntary payments made
by debtor); Ragsdale v. New England Land & Dev. Corp., 297 S.E.2d
31, 33 (Ga. 1982) (remedy of shareholder derivative action is not
available to a bankruptcy trustee of debtor-shareholder).
The policy rationale behind other sections of the Delaware LLC
Act 	is 	to 	protect 	the 	interests 	of 	other 	members 	of 	an 	LLC 	from
forced 	co-management 	with 	a 	bankruptcy 	trustee, 	but 	this
justification does not apply to the powers conferred on a “personal
representative” under section 18-806. 	Del. Code Ann. tit 6, § 18-
304 	severs 	the 	personal 	interest 	in 	control 	and 	management 	of 	an
LLC 	of 	any 	member 	who 	files 	for 	bankruptcy 	to 	“recognize[] 	the
unique relationships that exist among members of LLCs and protect[]
solvent members from being forced into relationships they did not
Case 05-26549 Doc 264 Filed 10/11/06 Page 20 of 25

21
choose that result from the bankruptcy of one of their chosen co-
investors.” 	Milford Power Co. v. PDC Milford Power, LLC, 866 A.2d
738, 754 (Del.Ch. 2004).
Cooperative 	management 	of 	an 	LLC 	by 	co-investors 	is 	a 	right
with respect to which a trustee is not a personal representative,
but the policy rationale of protecting co-investors from unwanted
relationships is not operative when an LLC is dissolved under Del.
Code Ann. tit. 6, § 18-801(a)(4) for want of any remaining members.
Under 	these 	circumstances, 	there 	are 	no 	other 	members 	whose
interests could be protected by restrictions on management rights.
Section 18-806 allows a “personal representative” to act only when
there are no remaining members of the LLC, and thus no co-investors
to 	protect. 	The 	Delaware 	Supreme 	Court 	would 	likely 	hold 	that 	a
bankruptcy 	trustee 	meets 	the 	statutory 	definition 	of 	a 	“personal
representative” because the statute’s policy rationale suggests no
reason 	to 	depart 	from 	the 	general 	interpretation 	of 	the 	terms
“legal representative” and “personal representative.” 	See, e.g.,
Heyman, 116 F.3d at 94-95; In re Wilcox & Howe Co., 39 A. at 166.
2. 	Assignment of the Right to Manage NYSI
Debtor argues that his own bankruptcy estate included only an
economic interest in NYSI, and Trustee cannot be a member of NYSI
or have any right to participate in the management of NYSI. 	This
argument is not persuasive because it ignores the effect of section
18-806 of the Delaware LLC Act.
Case 05-26549 Doc 264 Filed 10/11/06 Page 21 of 25

22
Pursuant 	to 	Del. 	Code 	Ann. 	tit. 	6, 	§ 	18-702, 	unless 	an 	LLC
agreement provides otherwise, “[t]he assignee of a member’s limited
liability 	company 	interest 	shall 	have 	no 	right 	to 	participate 	in
the management of the business and affairs of a limited liability
company.” 	The 	Delaware 	LLC 	Act 	defines 	a 	“limited 	liability
company interest” as “a member’s share of the profits and losses of
a 	limited 	liability 	company 	and 	a 	member’s 	right 	to 	receive
distributions 	of 	the 	limited 	liability 	company’s 	assets”. 	Del.
Code Ann. tit. 6, § 18-101(8). 	The Delaware Court of Chancery has
held 	that 	when 	a 	member 	of 	a 	multi-member 	Delaware 	LLC 	files 	for
bankruptcy, 	his 	membership 	interest 	in 	the 	governance 	of 	the 	LLC
terminates under Del. Code Ann., tit. 6, § 18-304, but his limited
liability interest, consisting only of economic rights to payment,
becomes part of his bankruptcy estate. 	Milford Power Co., LLC v.
PDS Milford Power, LLC, 866 A.2d 738, 760-62 (Del.Ch. 2004); accord
Eureka VIII, LLC v. Niagara Falls Holdings, LLC, 899 A.2d 95, 115-
16, 	(Del.Ch. 	2006) 	(interpreting 	LLC 	operating 	agreement 	and
Delaware 	LLC 	Act 	to 	craft 	remedy 	for 	breach 	of 	LLC 	operating
agreement). 	“The policy that underlies § 18-702(b)(3) is that ‘it
is far more tolerable to have to suffer a new passive co-investor
one 	did 	not 	choose 	than 	to 	endure 	a 	new 	co-manager 	without
consent.’” 	Eureka 	VIII, 	866 	A.2d 	at 	115 	(quoting 	Milford 	Power,
866 	A.2d 	at 	760). 	Debtor 	argues 	that 	the 	application 	of 	these
Case 05-26549 Doc 264 Filed 10/11/06 Page 22 of 25

23
statutory provisions and Delaware decisions precludes Trustee from
taking any management interest in NYSI.
Both 	Milford 	Power 	and 	Eureka 	VIII 	involved 	circumstances
where disassociation of one or more members did not leave the LLC
with 	no 	remaining 	members. 	While 	the 	Delaware 	LLC 	Act 	does 	not
generally distinguish between multi-member and single-member LLCs,
the 	application 	of 	sections 	18-801(a)(4) 	and 	18-806 	are
significantly 	different 	depending 	on 	whether 	any 	members 	remain
after 	one 	or 	more 	members 	are 	dissociated 	by 	bankruptcy. 	The
bankruptcy of fewer than all members of an LLC does not cause the
dissolution 	of 	the 	LLC 	and 	the 	remaining 	members 	continue 	to 	run
the LLC. 	They do so without the input of the bankruptcy trustee in
order to protect them from the rigors of an undesired co-management
relationship. 	See 	Milford 	Power, 	866 	A.2d 	at 	760. 	In 	such 	a
scenario, section 18-806 does not authorize a bankruptcy trustee,
as personal representative of the former member, to take any action
with 	respect 	to 	the 	LLC’s 	governance. 	In 	the 	case 	of 	NYSI, 	a
single-member LLC, Debtor’s bankruptcy filing not only terminated
his 	membership 	under 	section 	18-304 	but 	dissolved 	NYSI 	under
section 18-801(a)(4) because NYSI had no remaining members. 	When
an LLC is dissolved for lack of remaining members, section 18-806
empowers the bankruptcy trustee, as personal representative of the
last 	remaining 	member, 	to 	consent 	to 	the 	continuation 	of 	the 	LLC
and to become the sole member of the LLC. 	Del. Code Ann. tit. 6,
Case 05-26549 Doc 264 Filed 10/11/06 Page 23 of 25

24
§ 	18-806. 	The 	meaning 	of 	this 	language 	is 	plain. 	Trustee
consented to these conditions in writing in the LLC Consent, if not
earlier, 	and 	became 	the 	sole 	member 	of 	NYSI 	effective 	as 	of 	the
time 	Debtor 	filed 	his 	voluntary 	Chapter 	11 	petition. 	As 	the 	new
sole 	member 	of 	NYSI, 	Trustee 	is 	entitled 	to 	management 	rights
regardless of whether the LLC Amendment was effective in naming him
as 	manager. 	“Unless 	otherwise 	provided 	in 	a 	limited 	liability
company 	agreement, 	the 	management 	of 	a 	limited 	liability 	company
shall be vested in its members.” 	Del. Code Ann. tit. 6, § 18-402.
Debtor 	argues 	that 	such 	a 	construction 	of 	section 	18-806
deprives 	section 	18-304(2) 	of 	the 	Delaware 	LLC 	Act 	of 	meaning.
Del. Code Ann. tit. 6, § 18-304(2) terminates the membership of an
LLC member if:
Unless 	otherwise 	provided 	in 	a 	limited
liability 	company 	agreement, 	or 	with 	the
written consent of all members, 120 days after
the commencement of any proceeding against the
member 	seeking 	reorganization, 	arrangement,
composition, 	readjustment, 	liquidation,
dissolution 	or 	similar 	relief 	under 	any
statute, law or regulation, if the proceeding
has 	not 	been 	dismissed, 	or 	if 	within 	90 	days
after 	the 	appointment 	without 	the 	member's
consent or acquiescence of a trustee, receiver
or 	liquidator 	of 	the 	member 	or 	of 	all 	or 	any
substantial 	part 	of 	the 	member's 	properties,
the 	appointment 	is 	not 	vacated 	or 	stayed, 	or
within 	90 	days 	after 	the 	expiration 	of 	any
such stay, the appointment is not vacated.
Del. Code Ann. tit. 6 § 304(2). 	This provision, like section 18-
702, continues to apply in spite of the construction of section 18-
806 described above, if members remain in an LLC. 	This result is
Case 05-26549 Doc 264 Filed 10/11/06 Page 24 of 25

consistent 	with 	the 	text 	of 	section 	18-806, 	which 	authorizes 	a
personal representative to act only when there are no remaining LLC
members. 	It 	is 	also 	consistent 	with 	the 	policy 	rationale,
protecting 	remaining 	LLC 	members 	from 	an 	unwanted 	co-management
relationship with a bankruptcy trustee, that underlies sections 18-
304 and 18-702. 	Eureka VIII, 866 A.2d at 115; Milford Power, 866
A.2d at 760.
IV. 	Conclusion
For 	the 	reasons 	stated 	above, 	because 	there 	were 	no 	clearly
erroneous 	findings 	of 	fact 	nor 	any 	erroneous 	conclusions 	of 	law,
the 	court 	will 	affirm 	the 	ruling 	of 	the 	bankruptcy 	court. 	A
separate Order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
Case 05-26549 Doc 264 Filed 10/11/06 Page 25 of 25