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FILED

FEB 24 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-11-1100-DPaTa

) 

VALLEY HEALTH SYSTEM, ) Bk. No. 07-18293 

)

Debtor. ) Adv. No. 10-01566 

______________________________)

)

PEGGY KIRTON; DIANA AGNELLO, )

)

Appellants, )

)

v. ) M E M O R A N D U M1

)

VALLEY HEALTH SYSTEM; VALLEY )

HEALTH SYSTEM RETIREMENT )

PLAN; JOEL BERGENFELD, )

Trustee of the Valley Health )

System Retirement Plan; )

VINAY M. RAO, Trustee of the )

Valley Health System )

Retirement Plan; MICHELE BIRD,)

Trustee of the Valley Health )

System Retirement Plan, )

)

Appellees. )

______________________________)

Argued and Submitted on January 22, 2015

at Pasadena

Filed - February 24, 2015

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Peter Carroll, Bankruptcy Judge, Presiding

 

1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.
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Appearances: Gregory G. Petersen argued for Appellants Peggy

Kirton and Diana Agnello; Gary E. Klausner of

Levene, Neale, Bender, Yoo & Brill LLP argued for

Appellee Valley Health System; Mark R. Attwood of

Jackson Lewis LLP argued for Appellees Valley

Health System Retirement Plan and its trustees,

Joel Bergenfeld, Vinay M. Rao, and Michele Bird.

 

Before: DUNN, PAPPAS, and TAYLOR, Bankruptcy Judges.

This appeal is before us for a second time. On March 19,

2012 (“Prior Disposition”),2 the Panel determined that the

bankruptcy court lacked subject matter jurisdiction over the

dispute between the parties. On further appeal to the Ninth

Circuit Court of Appeals, that determination was reversed and

remanded to this Panel to determine the remaining substantive

issues posed on appeal from the bankruptcy court. See Valley

Health Sys. v. Kirton (In re Valley Health Sys.), 584 Fed.Appx.

477 (9th Cir. 2014). 

We restate the introduction to the appeal set forth in the

Prior Disposition:

Peggy Kirton and Diana Agnello (“Kirton Parties”) are

former employees of Valley Health System (“VHS”) and

were participants in the Valley Health System

Retirement Plan (“Retirement Plan”). After VHS

confirmed its chapter 93 plan of adjustment, they filed

in state court a petition for writ of mandamus

(“Petition”) against VHS and others seeking to enforce

their alleged rights under the Retirement Plan. VHS

2 The Prior Disposition was a reported opinion: Kirton v.

Valley Health Sys. (In re Valley Health Sys.), 471 B.R. 555 (9th

Cir. BAP 2012). 

3 Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and

all “Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001–9037. All “Civil Rule” references are to

the Federal Rules of Civil Procedure.

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removed the Petition to the bankruptcy court. Along

with other named respondents, VHS then filed a Civil

Rule 12(b)(6) motion to dismiss the Petition, which the

bankruptcy court granted without leave to amend. The

Kirton Parties filed a motion for reconsideration,

which the bankruptcy court denied.

The Kirton Parties appeal from both the dismissal order

and the order denying the motion for reconsideration. 

For the reasons stated below, we AFFIRM the bankruptcy

court’s dismissal of the adversary proceeding.

I. FACTUAL BACKGROUND4

A. VHS Confirms a Chapter 9 Plan

VHS is a local health care district under the California

Local Health Care District Law, Cal. Health & Safety Code § 32000

et seq. VHS filed a chapter 9 bankruptcy petition in December

2007, and the bankruptcy court entered an order for relief in the

case in February 2008. Pursuant to § 943, the bankruptcy court

confirmed VHS’ first amended plan of adjustment (“Chapter 9

Plan”) by order entered April 26, 2010 (“Confirmation Order”). 

On October 14, 2010, VHS issued a notice that October 13, 2010,

was the effective date of the Chapter 9 Plan. Among other

things, the Chapter 9 Plan provided for the discharge of VHS’

prepetition debts and also enjoined claimants from pursuing any

action or proceeding on account of such debts.

The underlying fact that has driven the litigation that is

the subject of this appeal is that VHS, prepetition, allegedly

had failed to fund the Retirement Plan adequately by at least

4 A complete recitation of the facts is set forth in the

Prior Dispostition. The facts in this Memorandum are more

summary in nature, and borrow heavily from the previously stated

facts.

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$100 million. The Chapter 9 Plan specifically addressed VHS’

obligations under its Retirement Plan:

Defined Benefit Plan Participants will be entitled to

the same rights and benefits to which such participants

are currently entitled under the VHS Retirement Plan

and the MetLife Group Annuity Contract, and such

participants shall have no recourse to the District or

to any assets of the District, and shall not be

entitled to receive any distributions under this Plan. 

Instead, all unallocated amounts held by MetLife Group,

pursuant to the VHS Retirement Plan and the MetLife

Group Annuity Contract, will continue to be made

available to provide retirement benefits for

participants in the manner indicated under the

provisions of the VHS Retirement Plan and the MetLife

Group Annuity Contract. Accordingly, the treatment of

Allowed Class 2C claim holders set forth herein shall

not affect any legal, equitable or contractual rights

to which the VHS Retirement Plan participants are

entitled.

Chapter 9 Plan (Dec. 17, 2009) at 16:13-22. Based on this

treatment, Retirement Plan participants (Class 2C claimants) were

characterized as unimpaired, with no entitlement to vote on the

Chapter 9 Plan.

The Kirton Parties were served with notice of the claims bar

date, bankruptcy court approval of the first amended disclosure

statement, and the confirmation hearing on the Chapter 9 Plan. 

They also received copies of the Chapter 9 Plan and the first

amended disclosure statement. The Kirton Parties filed no proofs

of claim, did not object to confirmation of the Chapter 9 Plan,

and otherwise did not participate in VHS’ Chapter 9 case. They

further did not appeal the Confirmation Order.

B. The Kirton Parties Seek Relief in State Court

In August 2010, after the Chapter 9 Plan had been confirmed,

the Kirton Parties filed the state court Petition, naming as

respondents VHS, the Retirement Plan, three individual trustees

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for the Retirement Plan, and MetLife, Inc. (“MetLife”), the

administrator of the Retirement Plan. The Petition sought

damages in excess of $100 million under various theories for the

alleged underfunding of the Retirement Plan since 1999. The

Petition’s prayer for relief sought a writ of mandate directing

the respondents to fund the Retirement Plan as required by law,

to disclose VHS’ underfunding and violations of the Retirement

Plan and the California Constitution, to cease any concealment of

underfunding/violations, and to prosecute any actions allowed or

required to conserve the Retirement Plan’s assets. The Petition

alleged that all of the respondents had breached their respective

duties to prevent, to disclose, or both, VHS’ underfunding of the

Retirement Plan, which were alleged to have arisen under the

Retirement Plan itself and California Constitution Art. XVI,

Sec. 17. However, ultimately, as noted in the Prior Disposition,

“[t]he gravamen of the Petition was that VHS allegedly

underfunded the Retirement Plan to the tune of $100 million.” 

471 B.R. at 560.

C. VHS Removes the State Court Petition to Bankruptcy Court

On September 22, 2010, VHS filed a notice of removal

pursuant to 28 U.S.C. § 1452(a) and Rule 9027, which removed the

Petition from state court to the bankruptcy court. VHS, the

Retirement Plan, and its Trustees (“VHS Defendants”) then filed

the motion (“Dismissal Motion”) to dismiss the Petition under

Civil Rule 12(b)(6), applicable in the adversary proceeding

pursuant to Rule 7012, on October 22, 2010.

The primary argument in the Dismissal Motion was that the

Chapter 9 Plan and the Confirmation Order discharged VHS’

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obligation to fund the Retirement Plan. In addition, the VHS

Defendants argued that the Trustees had no contractual or

fiduciary obligations to the Kirton Parties under the Retirement

Plan; that the Retirement Plan did not have legal capacity to sue

or be sued; that the Kirton Parties did not comply with the prefiling requirements of the California Government Claims Act; that

both VHS and the Trustees were immune from liability; and that

the Kirton Parties failed to plead the requisite elements for

mandamus relief or for relief under the causes of action alleged.

The notice which accompanied the Dismissal Motion warned the

Kirton Parties that if they failed to file a timely opposition,

the Local Rules authorized the bankruptcy court to treat that

failure as consent to the relief requested in the Dismissal

Motion. Notwithstanding that warning, the Kirton Parties never

filed a response to the Dismissal Motion. On the eve of the

January 4, 2011, hearing (“Hearing”) on the Dismissal Motion, the

Kirton Parties instead filed what they intended to be an amended

complaint. 

At the Hearing, the bankruptcy court found that no valid

amended complaint had in fact been filed; the Kirton Parties had

failed to comply with Civil Rule 15, which required either

written consent from the VHS Defendants or an order from the

bankruptcy court in advance of filing an amended complaint,

neither of which the Kirton Parties had obtained. In light of

the Kirton Parties’ failure to respond to the Dismissal Motion,

the bankruptcy court granted the Dismissal Motion without leave

to amend.

The Kirton Parties objected to the proposed dismissal order

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prepared by the VHS Defendants on the basis that it attempted to

grant relief beyond that sought in the Dismissal Motion and to

resolve matters not properly before the bankruptcy court. In

particular, the Kirton Parties asserted that granting the

Dismissal Motion in favor of parties not expressly named as

movants in the Dismissal Motion would violate the Kirton Parties’

due process rights. In large part this argument seems to be

directed to the Kirton Parties’ assertions that VHS had more than

one retirement plan and that the retirement plan named in their

Petition was not the Retirement Plan on behalf of which the

Dismissal Motion was filed. The Kirton Parties also asserted

that the California Constitution deprived the bankruptcy court of

jurisdiction over any retirement plan of VHS. The bankruptcy

court overruled the Kirton Parties’ objections and entered the

form of order (“Dismissal Order”) the VHS Defendants had lodged.

In response, the Kirton Parties filed a motion for

reconsideration of the Dismissal Order, reiterating their

arguments made against the form of order. The bankruptcy court

entered a Memorandum of Decision (“Opinion”) without a hearing

with respect to reconsideration on February 24, 2011. In the

Opinion, the bankruptcy court explicitly found that “VHS had only

one retirement plan – the VHS Retirement Plan identified in VHS’s

disclosure Statement.” The bankruptcy court also rejected the

Kirton Parties’ theory that the VHS Retirement Plan was a sui

juris entity capable of being sued in its own right. Rather, the

bankruptcy court ruled that the VHS Retirement Plan was

“tantamount to a pre-petition contract between VHS and the plan

participants,” citing Westley v. Cal. Pub. Employees Ret. Sys.

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Bd. of Admin., 105 Cal. App. 4th 1095, 1116 (3d Dist. 2003). The

bankruptcy court ruled that VHS’ only funding obligation arose

from this contractual relationship, implicitly rejecting any

theory that the underfunding implicated the California

Constitution. Finally, the bankruptcy court ruled that the

Trustees had no contractual obligations under the Retirement Plan

in their individual capacities. Noting that the Kirton Parties

had been on notice throughout VHS’ bankruptcy case of relevant

deadlines but had failed to take any action to protect any claim

they might have had against VHS for underfunding the Retirement

Plan, the bankruptcy court concluded that the claims asserted in

the Petition were barred by the confirmed Chapter 9 Plan.

Based upon the foregoing, the bankruptcy court ruled that

granting the Dismissal Motion was appropriate, as was granting it

without leave to amend where the claims stated by the Petition

could not possibly be cured by the allegation of other facts. 

Further, extending the Dismissal Order to cover claims asserted

against MetLife, notwithstanding MetLife’s failure to make an

appearance in response to the Petition, was warranted because

MetLife’s position was aligned with that of the VHS Defendants.

The order (“Reconsideration Order”) denying the

Reconsideration Motion was entered February 24, 2011. The Kirton

Parties thereafter timely appealed both the Dismissal Order and

the Reconsideration Order.

II. JURISDICTION

The bankruptcy court had “related to” jurisdiction under

28 U.S.C. §§ 1334 and 157. See Valley Health Sys. v. Kirton

(In re Valley Health Sys.), 584 Fed.Appx. 477 (9th Cir. 2014). 

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We have jurisdiction under 28 U.S.C. § 158.

III. ISSUES

Whether the bankruptcy court clearly erred and/or abused its

discretion when it dismissed the adversary proceeding.

IV. STANDARDS OF REVIEW

We review de novo the bankruptcy court’s interpretation of

the Civil Rules. Am. Sports Radio Network, Inc. v. Krause

(In re Krause), 526 F.3d 1070, 1073 n.5 (9th Cir. 2008). Thus,

the bankruptcy court’s dismissal of an adversary proceeding for

failure to state a claim under Civil Rule 12(b)(6) is reviewed de

novo. N.M. State Inv. Council v. Ernst & Young LLP, 641 F.3d

1089, 1094 (9th Cir. 2011); Barnes v. Belice (In re Belice),

461 B.R. 564, 572 (9th Cir. 2011).

“Dismissal without leave to amend is improper unless it is

clear, upon de novo review, that the complaint could not be saved

by any amendment.” Thinket Ink Info. Res., Inc. v. Sun

Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004)(citation

omitted). Where amendment would be futile, it is not error for a

trial court to deny leave to amend. Id., citing Saul v. United

States, 928 F.2d 829, 843 (9th Cir. 1991).

 We review the bankruptcy court’s denial of a motion for

reconsideration for an abuse of discretion. Tracht Gut, LLC v.

Cnty. of L.A. Treasurer & Tax Collector (In re Tracht Gut, LLC),

503 B.R. 804, 809 (9th Cir. BAP 2014).

Review of an abuse of discretion determination involves a

two-prong test; first, we determine de novo whether the

bankruptcy court identified the correct legal rule for

application. See United States v. Hinkson, 585 F.3d 1247, 1261-

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62 (9th Cir. 2009)(en banc). If not, then the bankruptcy court

necessarily abused its discretion. See id. at 1262. Otherwise,

we next review whether the bankruptcy court’s application of the

correct legal rule was clearly erroneous. We will affirm unless

its fact findings were illogical, implausible, or without support

in inferences that may be drawn from the facts in the record. 

See id. 

We may affirm the decision of the bankruptcy court on any

basis supported by the record. See ASARCO, LLC v. Union Pac. R.

Co., 765 F.3d 999, 1004 (9th Cir. 2014); Shanks v. Dressel,

540 F.3d 1082, 1086 (9th Cir. 2008).

V. DISCUSSION

1. The Bankruptcy Court Dismissed the Adversary

Proceeding Because the Kirton Parties Failed to

Comply With National and Local Rules.

It is well- and long-established that a court’s local rules

have the force of law. See Weil v. Neary, 278 U.S. 160, 169

(1929). This principle includes the bankruptcy court’s Local

Rules. See Price v. Lehtinen (In re Lehtinen), 332 B.R. 404,

412-14 (9th Cir. BAP 2005), aff’d, 564 F.3d 1052 (9th Cir. 2009).

In the Bankruptcy Court for the Central District of

California, Local Rule 9013–1(f) provides, with exceptions not

relevant to this appeal, that “each interested party opposing or

responding to the motion must file and serve the response

(Response) on the moving party and the United States trustee not

later than 14 days before the date designated for hearing.” 

Further, Local Rule 9013-1(h) cautions “if a party does not

timely file and serve documents, the court may deem this to be

consent to the granting or denial of the motion, as the case may

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be.”

The VHS Defendants filed the Dismissal Motion on October 22,

2010. The notice of motion, with which the Kirton Parties were

served, warned that a failure to file a timely opposition to the

Dismissal Motion could be treated by the bankruptcy court as

consent to the relief requested in the Dismissal Motion. 

Notwithstanding the notice that serious consequences might result

if a timely response to the Dismissal Motion was not filed, the

Kinton Parties never filed any response, even with several

opportunities to do so. 

The original scheduled hearing date on the Dismissal Motion

was November 30, 2010, making the Kirton Parties’ response due no

later than November 16, 2010. The record establishes that on

November 24, 2010, the parties filed a stipulation to continue

the hearing to a proposed date of December 30, 2010; that the

continuance was a professional courtesy being extended to counsel

for the Kirton Parties based upon his poor health; and that the

parties expressly stipulated “[t]o allow [the Kirton Parties’]

Opposition and [the VHS Defendants’] Reply to the Opposition to

[the Dismissal Motion] to be filed in accordance with the new

date [sic] hearing.” The bankruptcy court ultimately reset the

hearing on the Dismissal Motion for January 4, 2011, resetting

the deadline for the Kirton Parties to file an opposition to the

Dismissal Motion to December 21, 2010. A joint status report

also was due on December 21, 2010 under the Local Rules; however,

counsel for the VHS Defendants was unable to obtain the

cooperation of counsel for the Kirton Parties. The VHS

Defendants filed a unilateral status report instead. On

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December 30, 2010, the VHS Defendants filed a notice that no

opposition had been filed to the Dismissal Motion. Ultimately,

at 9:23 p.m. on January 3, 2011, the day before the Hearing, the

Kirton Parties filed their own unilateral status report.

The Kirton Parties belatedly attempted to file an amended

complaint, taking the position that the amended complaint would

render the Dismissal Motion moot, thereby relieving the Kirton

Parties of the responsibility for responding to the Dismissal

Motion, timely or otherwise.

Local Rule 7015-1(a)(3) provides, “Unless otherwise ordered,

a pleading will not be deemed amended absent compliance with this

rule and [Rule] 7015.” Rule 7015 expressly incorporates Civil

Rule 15. Because the Kirton Parties did not amend the Petition

within 21 days after the Dismissal Motion was filed, they were

required to comply with Civil Rule 15(a)(2), which states: “In

all other cases, a party may amend its pleading only with the

opposing party's written consent or the court's leave. The court

should freely give leave when justice so requires.” The Kirton

Parties having obtained neither the written consent of the VHS

Defendants nor leave of the bankruptcy court to file their

amended complaint, the bankruptcy court properly determined that

the Petition was not deemed amended. The Kirton Parties were

therefore left with a live Dismissal Motion to which they had not

responded.

The bankruptcy court neither erred nor abused its discretion

in entering the Dismissal Order in these circumstances. That

determination was in accordance with Local Rules 9013-1(f) and

(h), of which the Kirton Parties were fully informed.

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2. Dismissal Without Leave to Amend Was Not Improper

Rule 15(a)(2) requires the bankruptcy court to freely give

leave to amend a pleading “when justice so requires.” If,

however, upon de novo review, it is clear that the Petition could

not be saved by any amendment, dismissal without leave to amend

is not improper. See Polich v. Burlington N., Inc., 942 F.2d

1467, 1472 (9th Cir. 1991). To dismiss a pleading without leave

to amend, the bankruptcy court was required to determine that the

Petition could not possibly be cured by the allegation of other

facts. United States v. SmithKline Beecham, Inc., 245 F.3d 1048,

1052 (9th Cir. 2001).

Any underfunding of the Retirement Plan could only be

collected from VHS. As noted by the bankruptcy court, the

Petition through its various claims for relief sought damages in

excess of $100 million for the alleged underfunding of the

Retirement Plan since 1999. Yet, in light of the terms of the

confirmed Chapter 9 Plan, no action could be taken to require VHS

to pay additional funds into the Retirement Plan. In these

circumstances, the bankruptcy court concluded that the Petition

failed to state a plausible claim for relief against any of the

VHS Defendants or MetLife, a fatal defect that could not be cured

by amendment. We agree with the bankruptcy court’s conclusion. 

It is clear that the allegation of additional facts would not

cure the defects in the Petition. Accordingly, the bankruptcy

court did not err in dismissing the Petition without leave to

amend.

3. The Scope of the Dismissal Was Not Improper

The Kirton Parties contend that the bankruptcy court erred

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in dismissing the Petition as to all of the named respondents

when not all had requested dismissal. Aside from Does 1-200, the

only “Respondent” named in the Petition that did not join in the

Dismissal Motion was MetLife. 

The Ninth Circuit has held as a matter of law that dismissal

with prejudice in favor of a party which has not appeared can be

based upon the presentations of other defendants which have

appeared. See Abagninin v. AMVAC Chemical Corp., 545 F.3d 733,

743 (9th Cir. 2008). MetLife was the administrator of the

Retirement Plan; its interest was absolutely aligned with that of

the VHS Defendants. The bankruptcy court determined that MetLife

was in an identical position to the VHS Defendants such that the

claims in the Petition against MetLife also should be dismissed

without leave to amend. Not only was it within the authority of

the bankruptcy court to do so (see Silverton v. Dep’t. of

Treasury, 644 F.2d 1341, 1345 (9th Cir.), cert. denied, 454 U.S.

895 (1981)), it was not error in the circumstances before us.

VI. CONCLUSION

In light of the failure of the Kirton Parties to comply with

the Local Rules in relation to the Dismissal Motion, the

bankruptcy court did not err when it dismissed the Petition. Nor

was dismissal without leave to amend the Petition error where the

confirmed Chapter 9 Plan precluded any effort by the Kirton

Parties to compel VHS to provide additional funding to the

Retirement Plan. Extending the scope of the Dismissal Order to

MetLife was appropriate where MetLife was merely the

administrator of the Retirement Plan and was aligned with all of

the other VHS Defendants. Accordingly, we AFFIRM both the

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Dismissal Order and the Reconsideration Order.5

5 Appellants filed two requests for judicial notice in this

appeal. The first requested that we take judicial notice of

(1) the list of creditors in the chapter 9 case and (2) the

docket of the chapter 9 case. The second, filed days before oral

argument, requested that we take judicial notice of a June 2,

2003, opinion of the Attorney General for the State of

California. We deny the requests on the basis that the documents

which Appellants request that we take judicial notice of are not

relevant to the disposition of this appeal or are merely

redundant to facts and/or authorities already in the record

before us.

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