07 B 03856

Chapter 11 debtor LLCs objected to the claim of one of its former managing member and agent. The claimant still maintains a membership interest in debtor LLC after being removed as managing member and agent in a state court proceeding prior to the bankruptcy case. Two other members were appointed by the state court as managers of the debtor LLCs. The debtor LLCs filed a counterclaim along with their objection for breach of contract, breach of fiduciary duty, and equitable subordination. In response, the claimant filed a third-party complaint for equitable subordination against the current managing members alleging commingling of assets, undercapitalization, and mismanagement. The debtor LLCs and managing partners each filed motions to dismiss arguing that the claimant lacked standing to bring the suit, violated the automatic stay by bringing the suit, violated the Barton doctrine that precludes bringing a suit against a trustee (or DIP) or its current management without leave of the Court, that the issue was barred by res judicata and collateral estoppel since undercapitalization issues were raised during a prior objection to a motion to sell property in a separate proceeding, and that the third-party action was improper and should have been filed as an adversary proceeding. The Court held that the claimant had standing to bring claim for equitable subordination and did not violate the automatic stay in doing so. Also, the Court held the Barton doctrine was not violated since the suit was for alleged acts occurring pre-petition. Further, Res judicata and collateral estoppel were inapplicable because the facts alleged at the sale motion objection differed from those alleged in the current third-party complaint. Finally, the Court dismissed the third-party complaint as improper under rule 7014 and directed the claimant to re-file his suit as an adversary proceeding as required by Fed.R.Bank.P. 7001(8), and Fed.R.Bankr.P. 3007(b), which was amended December 10, 2007 requiring that all actions for relief as provided by Rule 7001(8) must be brought via an adversary proceeding. The debtor LLCs were directed by separate order to re-file their counterclaim as an adversary proceeding as required by Rules 7001(8) and 3007(b).