The first lienholder, BB&T, began a state court proceeding to “liquidate its obligation.” A hearing on the state court proceeding was scheduled for August 23, 2013. By February, 2013, the loans were in default. Following its acquisition of Harmon House, the LLC became obligated under two bank loans, both of which are secured by the property. The LLC acquired the real property, known as the “Harmon House,” in August, 2005. As is typical, the members of the LLC executed an operating agreement to memorialize their understanding regarding the company’s conduct and affairs. The LLC was formed to acquire, purchase, lease, sell and develop certain waterfront commercial real property located in Solomons, Maryland. Solomons One, LLC was formed in 2005 under the laws of the State of Maryland. The court’s holding in Solomons One was almost entirely based on the operating agreement itself, and so the case reinforces that corporate governance documents should be written such that parties can have reasonable certainty ex ante as to what it takes to get into-or stay out of-bankruptcy court. The takeaway? Draft carefully and thoughtfully. How can we worry about bankruptcy law if an entity is not authorized to file a bankruptcy petition in the first place? In In re Solomons One, LLC, the United States Bankruptcy Court for the District of Maryland interpreted an LLC’s operating agreement to resolve a dispute of whether majority vote or unanimous consent was required to authorize a bankruptcy filing. “How can we be expected to teach children to learn how to read… if they can’t even fit inside the building?”

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