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March 4, 2026 Get Citation Alerts Download PDF Add Note

In re: Shilo Dion Sanders, Big 21, LLC, and Headache Gang, LLC

United States Bankruptcy Court, D. Colorado

• Citations: None known
• Docket Number: 25-01304

• Precedential Status: Unknown Status

• Opinion

• Authorities (18)

• Cited By (0)

• Summaries (0)

• Similar Cases (26.8K)

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Trial Court Document

IN THEF OURN ITTHEED DSITSATTREICST B OAFN KCROULPOTRCAYD OCO URT
The Honorable Michael E. Romero

In re: Case No. 23-14859 MER

Shilo Dion Sanders, Chapter 7

Debtors.

David Wadsworth, Chapter 7 Trustee, Adversary Pr. No. 25-1304 MER

Plaintiff,

v.

Shilo Dion Sanders, Big 21, LLC, and

Headache Gang, LLC

Defendants.

            ORDER DENYING MOTION TO DISMISS                          

THIS MATTER comes before the Court on the Motion to Dismiss Plaintiff’s 

Amended Complaint Pursuant to Fed. R. Bankr. P. 7012(b)(6) (“Motion to Dismiss”)
filed by Shilo Dion Sanders, Debtor/Defendant (“Sanders”), Big 21, LLC, and Headache
Gang, LLC (collectively “Defendants”) and the response filed by the Plaintiff, the
Chapter 7 Trustee (“Trustee”).1 The Motion seeks dismissal of seven of the eight
claims alleged against the Defendants in the Trustee’s Complaint.

APPLICABLE STANDARD

In reviewing a motion to dismiss under Rule 12(b)(6), the Court must accept all
well-pled factual allegations in the complaint as true and construe the complaint in favor
of the plaintiff.2 “The court’s function on a Rule 12(b)(6) motion is not to weigh potential
evidence that the parties might present at trial, but to assess whether the plaintiff's
complaint alone is legally sufficient to state a claim for which relief may be granted.”3

“To survive a motion to dismiss, a complaint must contain sufficient factual matter,

1 ECF Nos. 12, 19.

2 Ash Creek Mining v. Lujan, 969 F.2d 868, 870 (10th Cir. 1992).

3 Duran v. Carris, 238 F.3d 1268, 1270 (10th Cir. 2001) (quotation omitted).

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reasonable inferences therefrom in the light most favorable to the plaintiffs,” whether the
complaint “‘raise[s] a right to relief above the speculative level.’”5

BACKGROUND

According to the well-pled facts in the Complaint, Sanders is a former college
athlete who played football at the University of South Carolina, Jackson State
University, and the University of Colorado. He filed the underlying Chapter 7
bankruptcy case on October 23, 2023. Both before and after the petition date, Sanders
earned revenue as a social media influencer and by marketing his name, image, and
likeness (“NIL”) rights. Sanders formed and is the sole member of Defendants Big 21,
LLC (“Big 21”) and Headache Gang LLC (“Headache Gang”). Sanders entered into
pre-petition NIL contracts primarily through Big 21 and post-petition NIL contracts
primarily through Headache Gang.

Sanders has his own personal savings and checking accounts at Wells Fargo
Bank. Big 21 has a business checking account in its name at Wells Fargo Bank (“Big
21 Account”). Sanders often transferred money between his personal accounts and
the Big 21 Account. The revenue generated from Sanders’ pre-petition NIL contracts
was deposited into the Big 21 Account. On the petition date, the balance of the Big 21
Account was $20,292. From the petition date through the end of 2024, a total of
$535,552.92 was deposited into Big 21’s account, and $527,545.32 was transferred out.

The claims in the Trustee’s Complaint focus on funds deposited in and
transferred out of the Big 21 Account.6 Trustee argues that some portion of these funds
is property of the bankruptcy estate because they are either Sanders’ pre-petition
earnings, proceeds from pre-petition NIL contracts, and/or distributions from Big 21 to
its sole member (i.e., Sanders). The Trustee contends Sanders must account for and
turn over these estate funds under 11 U.S.C. § 542, that the funds must be returned to
the estate as unauthorized post-petition transfers under § 549, or under theories of
unjust enrichment, conversion, civil theft, or money had and received.7 The Trustee
further contends that Sanders’ exercise of control over the funds violates the automatic
stay.

4 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

5 Dias v. City & County of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (quoting Twombly, 550 U.S. at
555).

6 The Complaint also has a claim for Fraudulent Transfer (Claim 8) involving monies transferred out of
Sanders’ personal bank accounts. The Defendants’ Motion to Dismiss does not seek dismissal of Claim
8 and so the Court does not address it.

7 All references to “section” or “§” shall refer to Title 11, United States Code, unless expressly stated
otherwise.

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they are not estate property, Defendants argue the Trustee has no rights to the funds
under any claim. Defendants also argue the monies deposited in the Big 21 Account
after the petition date are Sanders’ post-petition earnings and are thus excluded from
the estate under § 541(a)(6). The Defendants further contend the Complaint contains
insufficient factual allegations to support a claim for turnover.

ANALYSIS

A. Property of the Estate

Property of Sanders’ bankruptcy estate is determined by § 541. That section’s
description of estate property is deliberately broad to include “all legal or equitable
interests of the debtor in property as of the commencement of the case.”8 Determining
the property of the estate can be somewhat complicated when an individual debtor
owns and operates a business through a single member limited liability company
(“LLC”) or another similar closely held business entity. A debtor’s membership interest
in an LLC becomes property of his estate.9 The assets owned by the LLC, however, do
not.10 Instead, the debtor’s right to control management of the LLC and receive
distributions from the LLC does.11 While this distinction is easy to describe, in practice,
the division between the LLC’s profits and the individual owner’s distribution rights is not
always clear.

Property of the estate, as defined by § 541(a), also has a temporal limitation that
can prove tricky. According to § 541(a)(1)’s plain terms, the determination of estate
property is made as of the petition date. This definition, however, does not mean all
property a debtor receives after the petition date is necessarily excluded from the
estate. For example, § 541(a)(7) includes any interest in property the estate acquires
after the petition date. This section is meant to capture “after-acquired” property
interests that are created with or by property already in the estate.12 The estate also
includes contingent property interests that existed on the petition date or are otherwise

8 11 U.S.C. § 541 (a)(1); Woods Construction, LLC v. Graves (In re Graves), 609 F.3d 1153, 1156 (10th
Cir. 2010).

9 In re Albright, 291 B.R. 538, 540 (Bankr. D. Colo. 2003).

10 Gallan v. Bloom Business Jets, LLC, 480 F.Supp.3d 1173 (D. Colo. 2020).
11 In re Albright, 291 B.R. at 541; Gallan, 480 F.Supp.3d at 1182-83 (concluding that assets of individual
debtor’s single-member LLC did not constitute property of the debtor’s bankruptcy estate); Sheehan v.
Warner (In re Warner), 480 B.R. 641, 653 (Bankr. N.D.W.V. 2012) (“[M]embers of a LLC do not have an
ownership interest in the specific property of the company. But members do have a personal property
interest in the distributions of a LLC.”); Meyer v. Haskett, 251 P.3d 1287, 1292 (Colo. App. 2010) (“[A]
member [of an LLC] has no interest in the property owned by the LLC.”).

12 Porrett v. Hillen (In re Porrett), 564 B.R. 57, 68-69 (D. Idaho 2016) (“[S]ome ‘property’ of the bankruptcy
estate within the meaning of § 541(a)(1) must be used to acquire the ‘interest in property’ post-petition for
§ 541(a)(7) to bring that after-acquired ‘interest’ into the bankruptcy estate.”).
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estate.14 This is reinforced by § 541(a)(6), which specifically includes in the bankruptcy
estate all “proceeds, product, offspring, rents or profits of or from property of the estate.
. . .” The term “proceeds” is not defined by it is broadly construed to include “all funds
‘traceable to’ or ‘substituted for’ the original property.”15 For example, where a debtor
musician composes a song pre-petition and earns royalties on that song post-petition,
the post-petition royalties from that song belong to the bankruptcy estate.16 Similarly, if
a debtor’s litigation claim against a third party arises pre-petition, proceeds from that
claim received in post-petition litigation belong to the estate.17

To further complicate matters, § 541(a)(6) excludes from the estate “earnings
from services performed by an individual debtor after the commencement of the case.”

In other words, an individual debtor’s post-petition earnings are not property of the
estate. What constitutes a debtor’s “earnings” is not specifically defined by the
Bankruptcy Code, but courts have recognized that it is not limited to only wages and
salary.18 Earnings could include, for example, post-petition stock distributions made to
the debtor by the debtor’s closely-held businesses as part of a compensation
package.19 The earnings exception has an explicit temporal limitation. Only those
earnings a debtor earns from service performed after the petition date are excluded
from the estate. If all or some portion of the services were performed by the debtor pre-
petition, then those earnings become property of the estate. For example, a
commission a debtor-realtor earns on a sale procured pre-petition can be considered
property of the estate even though the debtor’s right to the commission vests post-
petition at closing because the payment is for the debtor’s pre-petition services.20

All of these concepts will be implicated in determining whether the post-petition
funds in the Big 21 Account are property of the estate. As discussed above, Big 21’s
assets did not become property of Sanders’ bankruptcy estate, but the right to
distributions did. Monies deposited in the Big 21 Account are presumed to be assets of

13 Parks v. Dittmar (In re Dittmar), 618 F.3d 1199, 1208-10 (10th Cir. 2010); see also Segal v. Rochelle, 382 U.S. 375, 380 (1966) (holding that the bankruptcy estate included the debtor’s loss-carryback tax
refund claim because it was “sufficiently rooted in the pre-bankruptcy past.”).
14 In re Dittmar, 618 F.3d at 1208-10 (concluding employee stock appreciation rights, although contingent,
were sufficiently rooted in debtor’s pre-bankruptcy past to be considered property of the estate).
15 In re Porrett, 564 B.R. at 68 (citing In re Magnacom Wireless, LLC, 503 F.3d 984, 992 (9th Cir.2007)).

16 Cusano v. Klein, 264 F.3d 936, 945 (9th Cir. 2001).

17 In re Villescas, 632 B.R. 223, 231-32 (Bankr. D. Utah 2021).

18 In re Evans, 464 B.R. 429, 435 (Bankr. Colo. 2011).

19 Id. at 438.

20 Prochnow v. Apex Properties, Inc. (In re Prochnow), 467 B.R. 656, 664 (C.D. Ill. 2012).
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either Sanders’ pre-petition earnings, “proceeds” from his pre-petition NIL contracts, or
member distributions from Big 21 to Sanders. The Defendants dispute these
contentions, instead arguing that monies in the Big 21 Account are Sanders’ post-
petition earnings.

Identifying the true nature of the funds will require presenting evidence and
resolving numerous factual issues. For example, whether the funds are Sanders’ pre-
or post-petition earnings will depend on the type of services Sanders performed, when
he performed them, and the terms of the contract(s) (if any) requiring those services.

Whether the funds are instead contract proceeds or LLC distributions will depend on the
same evidence as well as other issues like the terms of Big 21’s and Headache Gang’s
operating agreements, the terms of any license of Sanders’ NIL rights, how the
payments were designated by the Sanders/Big 21 and whether the payments were tied
to the “enterprise value” of Big 21 or Headache Gang.23 The decision will also have to
consider the unique nature of NIL interests, a relatively new property interest, the
parameters of which have not been considered by many courts, let alone bankruptcy
courts.

The Court cannot make these determinations in the context of deciding the
Motion to Dismiss. The Court’s role in deciding the Motion to Dismiss is not to resolve
factual disputes or weigh potential evidence outside the four corners of the Complaint.24

The Trustee has otherwise sufficiently pled the necessary elements of his claims. He
has also supported his claims with sufficient factual allegations regarding Sanders’ bank
accounts, his NIL proceeds deposits into the Big 21 Account, and Sanders’ control over

21 Amdura Nat’l Distribution Co. v. Amdura Corp., Inc. (In re Amdura Corp., Inc.), 75 F.3d 1447, 1451 (10th Cir. 1996).

22 Id. 23 See In re Evans, 464 B.R. at 438 (holding trustee failed to meet burden to show any portion of stock
distributions were something other than earnings); Hopkings v. Quilling (In re Quilling), 2014 WL
6863112, at *4-5 (Bankr. D. Idaho Dec. 3, 2014) (concluding shareholder distributions to debtors were
proceeds included in the estate and not earning for personal services); Litzler v. Sholdra (In re Sholdra), 270 B.R. 64, 71-72 (Bankr. N.D. Tex. 2001) (concluding payments debtor received from professional
corporation medical practice were earnings); Scott v. Decker (In re Decker), 623 B.R. 417, 429-30 (Bankr.
W.D. Va. 2020) (“Either the earnings were from services performed after the commencement of the case
or they were not. Merely because the debtor is a shareholder of an S Corporation does not change the
timing of services rendered.”); Holber v. Segal (In re Segal), 579 B.R. 734, 743-45 (E.D. Pa. 2016)
(payments debtor received on pre-petition consulting agreement were not earnings); In re Ruetz, 317
B.R. 549, 553 (Bankr. Colo. 2004) (determining debtor’s right to real estate commission arose pre-petition
despite being subject to various contingencies).

24 Brokers’ Choice of Am., Inc. v. NBC Universal, Inc., 757 F.3d 1125, 1135 (10th Cir. 2014) (“The court’s
function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial,
but to assess whether the plaintiff’s amended complaint alone is legally sufficient to state a claim for
which relief may be granted.”).

Big 21 and Headache Gang. Whether the evidence will ultimately substantiate the
Trustee’s claims is a matter to be decided at trial.
CONCLUSION
For the reasons stated above, the Court hereby ORDERS the Motion to Dismiss
is DENIED.
Dated: March 4, 2026. BY THE COURT:

                                                <a 
                                  AKLE    Go 
                                   Michael E. Romero, 
                                   United State     nkruptcy Court