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68 S.M.U. L. Rev. 811 (2015)
The Ties That Bind: LLC Operating Agreements as Binding Commitments

handle is hein.journals/smulr68 and id is 865 raw text is: THE TIES THAT BIND: LLC OPERATING AGREEMENTS AS BINDING COMMITMENTS Joan MacLeod Heminway* OMETIMES, a single sentence, clause, phrase, or word stimulates ideas or action. And so it was with a simple passage from a recent federal bankruptcy court opinion: .... LLC operating agreements are not per se executory contracts governed by § 365 of the Bankruptcy Code because of their unique elements and features under state law that are inconsistent with contract law.1 These few words galvanized two questions that had been circulating in my brain for quite some time. First: is a limited liability company (LLC) operating agreement (now known under Delaware law and in certain other circles as a limited liability com- pany agreement2) a contract? And second: should we care either way? These two questions offer insights into matters of immediate relevance to practitioners as well as legal scholars and law teachers. Specifically, the status of operating agreements as contracts may have implications under both LLC law and other laws involving the adjudication of rights under (or effects of) operating agreements that depend on the existence (or absence) of contractual relations. This essay highlights both issues. LLC law-and especially current Delaware LLC law-has consistently been described by scholars and other commentators as highly contrac- * W.P. Toms Distinguished Professor of Law, The University of Tennessee College of Law. New York University School of Law, J.D. 1985; Brown University, A.B. 1982. Thanks to Steve Bainbridge, Keith Bishop, and Tom Norris for supplying me with food for thought that laid the foundation for this essay, to Carter Bishop, Alex Davie, Josh Fershee, Ben Means, Tom Rutledge, and the audience members at a 2015 Law and Society Associa- tion session (at which the ideas underlying this essay were presented) for offering encour- agement and comments on prior drafts, and to Matthew Sipf for providing valuable research assistance. Work on the essay was supported by a summer research grant from The University of Tennessee College of Law and is inspired by the lengthy and rich aca- demic legacy left to us all by Professor Alan R. Bromberg. I owe Alan a personal debt of gratitude for the scholarship review letter he wrote for my tenure review a number of years ago, in which he helpfully concluded that I had both substantial scholarly ability and sub- stantial promise for further growth and achievement. I can only hope that my work lives up to that kind assessment and, in some small measure, continues in the spirit of his schol- arly endeavors. 1. In re Denman, 513 B.R. 720, 725 (Bankr. W.D. Tenn. 2014). 2. For ease of reference, this essay uses the term operating agreement throughout, except when quoting or referencing the analog under a legal regime that uses a different term.

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