On May 17, the Colorado Court of Appeals held that an attorney fees award imposed under the Colorado Consumer Protection Act (CCPA) is a civil penalty and is not dischargeable under the Bankruptcy Code.

The Colorado LLC Act prohibits an insolvent LLC from making a distribution to a member. Insolvency is defined as the LLC’s liabilities exceeding its assets, with minor exceptions. Colo. Rev. Stat. § 7-80-606. The Act also mandates that a member who receives a distribution and who knows at the time that the LLC is insolvent is personally liable to the LLC for the amount of the distribution. Id.

The Colorado Court of Appeals held last month that creditors as a group have standing to sue members of an LLC who receive distributions knowing that the distributions were made when the LLC was insolvent. Colborne Corp. v. Weinstein, No. 09CA0724, 2010 Colo. App. LEXIS 58 (Colo. App. Jan. 21, 2010).