Court Dismisses Chicago Hotel Bankruptcy Case for Lack of Authority to File

In re Chicago South Loop Hotel Owner, LLC, No. 23-02595 (Bankr. N.D.Ill. May 24, 2023)

On May 24, 2023, the U.S. Bankruptcy Court for the Northern District of Illinois filed a memorandum opinion dismissing the chapter 11 case of Chicago South Loop Hotel Owner, LLC, for lack of proper authority to have filed the case.

U.S. Bank had moved to dismiss the case, arguing that the debtor lacked the appropriate authority because the debtor’s parent company, Chicago South Loop Hotel, LLC, did not adhere to its own operating agreement. This noncompliance was evident in the parent company’s unilateral decision to make several amendments and resolutions without obtaining the unanimous consent of all members—a requirement specified in the operating agreement.

This transgression led to an invalid acquisition of a significant membership interest by the manager of the parent company, Vickie White. Since this interest was unlawfully obtained, she did not have the authority to transfer it to Chicago South Loop Hotel Holdings, LLC. For the same reasons, Todd Hansen, who was elected as a manager by Vickie White, did not possess the necessary authority to sign the chapter 11 petition on behalf of the Debtor. Accordingly, the court granted U.S. Bank’s motion to dismiss.

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