A general partner files for bankruptcy. State partnership law says that filing strips the general partner of its right to manage the partnership the moment the petition hits the docket. The limited partners read the statute, hold a meeting, and vote the debtor out. Did they exercise control over property of the estate, or did the estate never hold that property to begin with?

That question had not been answered in the Ninth Circuit, and the California Supreme Court has not answered it either. On June 29, 2026, the Bankruptcy Appellate Panel answered it in a published opinion, In re LeFever Mattson, with Judge Brand writing for the panel. The answer matters to anyone who structures, finances, or litigates around partnerships and limited liability companies in which an entity manager might one day file for Chapter 11.

The Panel held that California Corporations Code sections 15906.03 and 15906.05, which dissociate a general partner and terminate its management rights the instant it becomes a debtor in bankruptcy, are impermissible ipso facto clauses inconsistent with section 541(c)(1)(B) of the Bankruptcy Code. Because those statutes are preempted, the debtor's management rights did not evaporate on the petition date. They became property of the estate. And because they became estate property, the limited partners' vote to remove the debtor as general partner was an act to exercise control over property of the estate, a violation of the automatic stay under section 362(a)(3), and therefore void.

LeFever Mattson Inc. is a California corporation that invested across the real estate spectrum: single family homes, multi-unit residential property, commercial property, and raw land. By the time it filed, it directly or indirectly controlled or held interests in roughly 60 limited partnerships and limited liability companies. Live Oak Investments, LP was one of them.

Live Oak traces back to an apartment complex called Southwood. LeFever Mattson and a group of investors had bought Southwood years before the partnership existed. In 2015, refinancing the property required a formal vehicle, so LeFever Mattson and its founder formed Live Oak and drafted the limited partnership agreement that governs it. The investors contributed their individual Southwood interests in exchange for percentage interests in the new partnership. The agreement named LeFever Mattson as general partner. The founder became president. Everyone else, including the appellant, held limited partner interests.

The structure is a common one: a corporate general partner holding the management rights, with the investors as limited partners. That ordinariness carries through to the analysis, because the Panel resolved the case on generally applicable statutes rather than anything peculiar to these facts.

The dispute that set this appeal in motion began with a sale. In August 2024, Southwood sold for $10.8 million, netting Live Oak nearly $4 million. About $2.3 million of that went to LeFever Mattson, which characterized the payment as its 21.24% partnership interest plus a 3% sale commission. The limited partners received nothing. They say that withholding breached both the partnership agreement and the general partner's fiduciary duties.

What happened next is what the appeal is actually about. Shortly after the sale, LeFever Mattson filed Chapter 11 for itself and its affiliates, Live Oak among them, and the cases proceeded as jointly administered debtors in possession with an official committee of unsecured creditors in place. A year into the cases, the limited partners noticed a partnership meeting with three items on the agenda: remove LeFever Mattson as general partner, install the appellant as the new general partner and president, and authorize Live Oak to retain its own bankruptcy counsel. They held the meeting, with the debtor present, and cast the votes to do all three.

The committee, having secured standing to pursue estate claims, moved for an order declaring the removal a violation of the automatic stay and void. The bankruptcy court agreed on every point, and this appeal followed.

The appeal presented three questions, and the Panel reviewed each one de novo, giving no deference to the bankruptcy court. The questions build on one another. The stay analysis depends on whether the management rights were estate property, and that in turn depends on whether the state statutes stripping those rights survive preemption. Resolve the preemption question, and the rest resolves with it.

Section 541(a)(1) sweeps every legal and equitable interest of the debtor into the estate, and the Supreme Court has instructed courts to read that scope broadly. What counts as an interest, and how far it extends, is a question of state law under Butner. So the Panel went to California law and found the management right in two places.

The statute supplies the first. Each general partner has equal rights in the management and conduct of the partnership's activities. The partnership agreement supplies the second, and it goes further than the statute. Article 5.1 vests the general partner alone with all decision-making authority over the partnership, including any action in connection with financing or refinancing the property. A partnership agreement is an enforceable contract under California law, and a contract right is property. The debtor's right to run Live Oak was therefore a property interest, and prepetition contract rights are property of the estate.

The limited partners tried to shrink that interest to nothing. A partner's property, they argued, is only its transferable interest, the right to distributions, because that is the only piece of a partnership interest the statute allows a partner to transfer. The Panel rejected the premise. The fact that a management right cannot be sold does not mean it is not owned. Non-transferability is a limit on what a partner may do with an interest. It is not proof that the interest does not exist. Reading a partner's property down to the distribution right alone reads the interest too narrowly.

Having established that the management right is property, the Panel turned to the statutes the limited partners relied on to make it disappear. Section 15906.03(f)(1) dissociates a person as a general partner upon that person becoming a debtor in bankruptcy. Section 15906.05(a)(1) then provides that on dissociation, the person's right to participate in management terminates. Read together, they perform a single function: the bankruptcy filing itself, and nothing else, extinguishes the management right.

That is exactly the operation section 541(c)(1)(B) forbids. An interest of the debtor becomes property of the estate notwithstanding any applicable nonbankruptcy law that is conditioned on the commencement of a case and that effects a forfeiture, modification, or termination of the debtor's interest in property. A state statute that terminates a management right the moment its holder files is a textbook ipso facto clause. It is conditioned on the filing, and it terminates the interest. The Bankruptcy Code overrides it.

The Panel was not writing on a blank slate so much as extending a settled line to a setting that had not yet reached this circuit's published law. Court after court has treated state statutes and operating-agreement provisions that strip an entity manager's rights on a bankruptcy filing as ineffective ipso facto clauses. Almost all of that authority involves limited liability companies rather than partnerships, but on this question the Panel found the difference to be no difference at all.

The limited partners had case law of their own, three California decisions they said compelled the opposite result. The Panel read them and found the reliance misplaced. None of the three analyzed whether the partnership statutes are impermissible ipso facto clauses. Each simply stated, on what was an unopposed point in the record, that a partner is dissociated on filing. Two of them involved the same debtor, so the second was repeating an undisputed fact from the first. A blanket statement about dissociation that no one contested is not a holding on preemption, and the Panel treated those cases as distinguishable and of little use.

That left the limited partners' fallback that partnership cases and LLC cases occupy separate doctrinal boxes. The Panel closed it in one line of reasoning. Virtually every court to confront a state law or contractual provision that terminates an entity manager's interest solely because of a bankruptcy filing has found it preempted, and there is no logical reason the result should change when the entity is a limited partnership rather than a limited liability company.

The limited partners had one argument left. Suppose the partnership agreement is an executory contract that the estate can neither assume nor assign. Then, they reasoned, sections 365(c)(1) and 365(e)(2) let the ipso facto clauses stand, and the management rights never reached the estate after all. The bankruptcy court had not decided whether the agreement was executory, but the Panel took up the legal question anyway, because whether a non-assumable executory contract becomes estate property is a pure question of law. It called the argument wrong as a matter of law, and it did not have to reach far to say so.

The rule has a structural logic that the Panel drew out. If the parties could decide for themselves whether a contract was executory, and whether its rights entered the estate, then the parties, rather than the bankruptcy court, would be drawing the boundaries of estate property. The Code does not permit that. Prepetition contract rights are property of the estate regardless of whether the contract is executory or not. Labeling the partnership agreement executory, even if the label fit, would not carry the management rights out of the estate.

Once the management rights are estate property, the rest follows quickly. Section 362(a)(3) stays any act to obtain possession of, or to exercise control over, property of the estate. Voting a debtor general partner out of the partnership and installing a replacement is an exercise of control over that property. The acts violated the stay, and acts that violate the stay are void as a matter of law, not merely voidable. The Panel had company here too: a bankruptcy court reached the same result where partners held a postpetition meeting to dissociate a debtor and elect a new managing partner.

One boundary is worth marking. The Panel did not decide whether the limited partners had cause to remove the debtor for its alleged prepetition breach of the partnership agreement. The bankruptcy court expressly declined to decide that question, and the Panel followed suit. The holding is about who may act, and when, not about whether the underlying grievance has merit. The limited partners' claims about the withheld sale proceeds remain undecided. What the opinion resolves is that the way to pursue removal during the case runs through relief from the automatic stay and a determination by the bankruptcy court, not through a partnership vote.

Strip away the partnership specifics and the opinion states a general rule with wide reach. When an entity's manager files for bankruptcy, the manager's governance rights are presumptively property of the estate, and neither a state statute nor a private agreement can switch them off at the petition date. Section 541(c)(1)(B) neutralizes the trigger, and the Panel drew no line between limited partnerships and limited liability companies in getting there.

That has consequences on several fronts. For anyone holding a minority position behind a manager who might file, self-help through the entity's own governance machinery is off the table once the case begins; the path runs through a motion for relief from the stay, decided by the bankruptcy court, not through a partnership or membership vote. For anyone drafting operating and partnership agreements, a bankruptcy-triggered removal clause is worth little against a debtor manager, and diligence on a counterparty should treat that manager's governance rights as an asset that will follow it into bankruptcy. And for anyone who still files the partnership cases and the LLC cases in separate mental folders, the Panel was direct that, for this question, the difference between them is a distinction without a difference.

A quieter lesson sits in a footnote. The parties, and to a degree the bankruptcy court, briefed the wrong chapter of the California Corporations Code, citing the general partnership provisions rather than the limited partnership provisions that actually governed. The Panel called the error harmless because the two regimes track each other and the result held. It is a useful reminder that in an area this reticulated, citing the statute that governs the entity in front of you is not a formality.

Opinions like this one are where the operative rules of restructuring actually live. A first-impression holding on ipso facto preemption will not surface in a treatise for years, and it sits in a single published decision inside a docket carrying thousands of entries. Finding it, along with the majority line of LLC authority the Panel built on, before your adversary does is the difference between arguing from the current state of the law and arguing from where the law stood the last time you happened to look.