Involuntary Transfer Considerations for Operating Agreements in Bankruptcy

By Peter H. Webb

Transfer restrictions in operating agreements serve an important function in assuring that the members of limited liability companies (“LLCs”) are able to control the admission and withdrawal of their fellow members.  Members view these controls as fundamental to the business relationship, as they do not want to be forced into business with an unknown party without their consent.  Indeed, the right to freely choose with whom to associate is enshrined in the U.S. Constitution.[1]  However, the ability of members to approve or deny membership to others can be challenged in the context of an involuntary assignment by a fellow member’s bankruptcy estate to a creditor under the Bankruptcy Code (the “Code”).

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Pro Se Responsive Pleading By Corporation/LLC Insufficient To Avoid Default

By Matthew D. Lincoln

North Carolina statute N.C.G.S. Section 84-5 prohibits corporations and limited liability companies from practicing law in this state. This prohibition occasionally arises in the litigation context when an entity—usually domiciled in another state—serves a pro se answer (or other response) to a complaint filed in a North Carolina court. Given that a plaintiff’s goal usually is to obtain a judgment as quickly and efficiently as possible, what should the plaintiff do in this situation?

In short, the plaintiff should file a motion asking the court (i) to strike the defendant’s responsive pleading, and (ii) for entry of default and default judgment. Seeking all such relief in one motion may seem aggressive in light of the court’s inclination to have disputes decided on the merits. Fortunately, however, for plaintiffs finding themselves in this scenario, there is authority supporting the award of such relief in a single hearing.

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