FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: VALDEZ FISHERIES 

DEVELOPMENT ASSOCIATION, INC.,

Debtor. No. 04-35319

D.C. No.

SEA HAWK SEAFOODS, INC.,  CV-03-00192-APlaintiff-Appellant, RRB

v. OPINION

STATE OF ALASKA,

Defendant-Appellee. 

Appeal from the United States District Court

for the District of Alaska

Ralph R. Beistline, District Judge, Presiding

Argued and Submitted

December 5, 2005—Seattle, Washington

Filed February 22, 2006

Before: Ronald M. Gould and Marsha S. Berzon, Circuit

Judges, and William W Schwarzer,* Senior District Judge.

Opinion by Judge Schwarzer

*The Honorable William W Schwarzer, Senior United States District

Judge for the Northern District of California, sitting by designation. 

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COUNSEL

Michael T. Schein, Reed Longyear Malnati & Ahrens, PLLC,

Seattle, Washington, for the plaintiff-appellant. 

Mary Ellen Beardsley, Assistant Attorney General, Anchorage, Alaska, for the defendant-appellee. 

OPINION

SCHWARZER, Senior District Judge: 

We must decide whether a bankruptcy court, which had

approved a settlement agreement, had jurisdiction to interpret

that agreement in an adversary proceeding between two creditors brought after the closing and dismissal of the underlying

bankruptcy case. We conclude that, in the circumstances of

this case, the bankruptcy court lacked jurisdiction and we

therefore reverse the district court’s order. 

FACTS

Appellant Sea Hawk Seafoods, Inc., (“Sea Hawk”) owns a

seafood processing plant in Valdez, Alaska. In April 1995,

Sea Hawk brought suit in the Alaska Superior Court against

Valdez Fisheries Development Association (“VFDA”) for

breach of contract arising out of a failed agreement to sell its

processing plant. In August 1997, the Superior Court entered

judgment for Sea Hawk against VFDA for over $2 million.

Alaska’s Division of Investments then called VFDA’s loans

aggregating in excess of $7 million. In response, VFDA deliv1922 IN RE VALDEZ FISHERIES DEVELOPMENT ASSOC.
ered to the State approximately $1.65 million in cash and over

$400,000 in accounts receivable. 

Sea Hawk then filed a petition in the Superior Court naming the State of Alaska as a party and challenging the transactions between VFDA and the State as void under state

fraudulent conveyance law. The court did not rule on the petition. After the Alaska Supreme Court denied VFDA’s request

for a stay of the judgment against it, VFDA filed for Chapter

11 protection and filed a Notice of Automatic Stay. Sea

Hawk’s motion for relief from the automatic stay was denied.

After a period of negotiation, Sea Hawk and VFDA in 1999

entered into a settlement agreement (the subject of this proceeding). The State was not a party to that agreement. The

agreement provided, among other things, that the parties

would “dismiss[ ] all pending litigation between the two parties, with prejudice” and that the bankruptcy court shall have

“continued jurisdiction over . . . the interpretation . . . of . . .

th[e] Settlement Agreement.” The bankruptcy court approved

the settlement agreement and dismissed the Chapter 11 proceeding. On June 24, 1999, the court entered a final decree

closing the VFDA bankruptcy. 

Sea Hawk promptly returned to state court and sought a ruling on its fraudulent conveyance claim against the State. The

State objected on the ground that the settlement agreement

protected it as well as VFDA. The court directed the parties

to seek a determination of the scope of the agreement from

the bankruptcy court. The Alaska Supreme Court affirmed

that ruling. Sea Hawk then moved to reopen the bankruptcy

case to obtain a determination of whether the agreement

released its fraudulent conveyance claim against the State. At

the direction of the court, Sea Hawk filed an adversary proceeding against the State. The court ruled that it had jurisdiction over this proceeding as one related to the bankruptcy.

After further proceedings, the court entered a stipulated final

order finding that the settlement agreement released Sea

IN RE VALDEZ FISHERIES DEVELOPMENT ASSOC. 1923
Hawk’s claim against the State, but preserving Sea Hawk’s

objection to the bankruptcy court’s jurisdiction. Sea Hawk

appealed to the district court, which affirmed, but on the

ground that by approving the settlement agreement, the bankruptcy court retained jurisdiction to interpret it. This timely

appeal followed. 

DISCUSSION

We review a bankruptcy court’s determination of its jurisdiction de novo. In re G.I. Indus., Inc., 204 F.3d 1276, 1279

(9th Cir. 2000). Where bankruptcy jurisdiction can be exercised at the discretion of the court, review is for abuse of discretion. In re Castillo, 297 F.3d 940, 944-45 (9th Cir. 2002).

I. “RELATED TO” JURISDICTION

[1] The bankruptcy court held that it had jurisdiction over

Sea Hawk’s adversary proceeding against the State under 28

U.S.C. § 1334(b) (2000). That section grants district courts

(and bankruptcy courts by reference) “original but not exclusive jurisdiction of all civil proceedings . . . related to cases

under title 11.” § 1334(b) (emphasis added). In In re Fietz,

this Court adopted the Third Circuit’s articulation of the test

for determining whether a civil proceeding is related to bankruptcy, stating that an action is related to bankruptcy if “the

outcome of the proceeding could conceivably have any effect

on the estate being administered in bankruptcy.” 852 F.2d

455, 457 (9th Cir. 1988) (quoting Pacor, Inc. v. Higgins, 743

F.2d 984, 994 (3d Cir. 1984)). In Fietz, the Court held that

there was no “related to” jurisdiction over a claim, though

part of the bankruptcy estate, if it was filed after the Chapter

13 plan had been confirmed and all of the property of the

estate had vested in the debtor. Id. at 458-59. 

[2] Here, when Sea Hawk filed its adversary proceeding,

VFDA’s Chapter 11 case had been dismissed and a final

decree entered. When the bankruptcy court later reopened the

1924 IN RE VALDEZ FISHERIES DEVELOPMENT ASSOC.
bankruptcy case, it did so “for the limited purpose of making

a determination of whether the Settlement Agreement . . .

releases Sea Hawk’s state court claims against the State of

Alaska.” That determination could not conceivably “alter the

debtor’s rights, liabilities, options, or freedom of action . . .

[or] in any way impact[ ] upon the handling and administration of the bankrupt estate.” Fietz, 852 F.2d at 457 (quoting

Pacor, 743 F.2d at 994); see In re Hanks, 182 B.R. 930, 935

(Bankr. N.D. Ga. 1995) (“the enforcement of the settlement

agreement cannot have a conceivable effect on the bankruptcy

case as no case is in existence at that time”). 

The State argues that to preserve the bankruptcy court’s

ability to interpret its prior rulings, a different standard applies

to postconfirmation proceedings. The Third Circuit, after

reviewing the post-confirmation cases, concluded that “the

essential inquiry appears to be whether there is a close nexus

to the bankruptcy plan or proceeding sufficient to uphold

bankruptcy court jurisdiction.” In re Resorts Int’l. Inc., 372

F.3d 154, 166-67 (3d Cir. 2004). The court concluded that

matters affecting the interpretation, implementation, consummation, execution, or administration of the confirmed plan

will typically have the requisite close nexus. We adopted the

close nexus test in In re Pegasus Gold Corp., 394 F.3d 1189,

1194 (9th Cir. 2005). There, we found the requisite close

nexus to exist where the post-confirmation claims asserted

that the defendant breached the Reorganization Plan and

where the outcome of those claims could affect the implementation and execution of the Plan. 

This is not a proceeding falling within the rationale of the

close nexus test. Here, there was no confirmed plan and there

is no claim that the dispute between two creditors, Sea Hawk

and the State, would have any effect on the now-closed bankruptcy estate. The bankruptcy court has no role in the resolution of the creditors’ dispute, and it is involved only

fortuitously because the dispute implicates the terms of a settlement agreement approved by the court as a precondition of

IN RE VALDEZ FISHERIES DEVELOPMENT ASSOC. 1925
the dismissal of VFDA’s bankruptcy. But that agreement has

been fully implemented with respect to VFDA.1

The bankruptcy court did not consider dismissal of

VFDA’s bankruptcy to automatically divest it of jurisdiction

over a related case. It reasoned that after dismissal, the court

has discretion to retain jurisdiction over a related proceeding,

citing In re Carraher, 971 F.2d 327, 328 (9th Cir. 1992). Carraher’s fraud case had originally been filed in state court but

was then removed to bankruptcy court as a related case

because of the pendency of a bankruptcy case. When the

underlying bankruptcy case was dismissed, the bankruptcy

court decided to retain jurisdiction of the fraud case. This

court held that “bankruptcy courts are not automatically

divested of jurisdiction over related cases when the underlying bankruptcy case is dismissed.” Id. Whether to retain jurisdiction of such cases is within the bankruptcy court’s

discretion, guided by considerations of economy, convenience, fairness and comity. Id.

Carraher does not support the bankruptcy court’s decision.

It stands for the proposition that a bankruptcy court may

retain jurisdiction over a related proceeding pending at the

time of the dismissal of the bankruptcy case. It does not support the assertion of bankruptcy jurisdiction over a proceeding

initiated subsequent to the dismissal of the bankruptcy case.

Thus, had the state court fraudulent conveyance action been

removed to the bankruptcy court while the bankruptcy case

was open, that court, in its discretion, could have retained

jurisdiction after the dismissal of the bankruptcy case. But the

fact that it might have been removed does not provide a basis

for bankruptcy jurisdiction over a later filed proceeding. 

1The bankruptcy court itself noted, in an order ending the accrual of the

Trustee’s fees, that this dispute does “not appear to affect the bankruptcy

estate or the debtor.” 

1926 IN RE VALDEZ FISHERIES DEVELOPMENT ASSOC.
II. RETAINED JURISDICTION OVER THE 

SETTLEMENT AGREEMENT

The district court affirmed the bankruptcy court’s order on

a different theory, holding that when that court approved the

settlement agreement between VFDA and Sea Hawk, it was

thereby adopting the terms of the settlement agreement as part

of its order. This, it held, was sufficient for it to have implicitly retained jurisdiction over that agreement. 

[3] Bankruptcy courts are courts of limited jurisdiction.

Having concluded that there was no “related to” jurisdiction

over this proceeding, we next consider whether the bankruptcy court had ancillary jurisdiction. Ancillary jurisdiction

may rest on one of two bases: (1) to permit disposition by a

single court of factually interdependent claims, and (2) to

enable a court to vindicate its authority and effectuate its

decrees. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.

375, 379-80 (1994). Only the second basis is relevant in this

case. Thus, the question here is whether the bankruptcy

court’s jurisdiction over this proceeding is necessary in order

to vindicate its authority or effectuate its decree. Where a settlement agreement led to the dismissal of a case, a court has

jurisdiction to vindicate its authority or effectuate its decree

if the court’s dismissal order explicitly retained jurisdiction or

incorporated the terms of the settlement agreement. Id. at 381.

Otherwise, enforcement of the settlement agreement is for

state courts. Id. at 382. 

[4] Here, the bankruptcy court entered an order approving

the settlement agreement and a second order dismissing the

case, reciting the prior approval and stating that “[t]he conditions of the settlement hav[e] been fulfilled.” The orders neither “retain[ed] jurisdiction” over the settlement agreement

nor incorporated “the parties’ obligation to comply with [its]

terms.” Id. at 381. 

The State seeks to distinguish Kokkonen on two grounds.

First, it argues that Kokkonen does not apply because the setIN RE VALDEZ FISHERIES DEVELOPMENT ASSOC. 1927
tlement agreement here required and received the bankruptcy

court’s approval. But Kokkonen specifically states that “[t]he

judge’s mere awareness and approval of the terms of the settlement agreement do not suffice to make them part of his

order.” Id. It noted that even in a dismissal under Federal Rule

of Civil Procedure 41(a)(2), which requires a court order,

enforcement of the settlement agreement is for state courts in

the absence of a specific retention of jurisdiction or a condition requiring the parties’ compliance with the terms of the

settlement agreement. Id. at 381-82; see also O’Connor v.

Colvin, 70 F.3d 530, 532 (9th Cir. 1995) (stating that “even

a district court’s expressed intention to retain jurisdiction is

insufficient to confer jurisdiction if that intention is not

expressed in the order of dismissal”); Hagestad v. Tragesser,

49 F.3d 1430, 1433 (9th Cir. 1995) (holding that even though

the district court had announced that it would oversee the

drafting of settlement papers and the construction and execution of the settlement, it had not retained jurisdiction). 

Next, the State argues that Kokkonen involved enforcement

of a settlement agreement, while this proceeding is brought to

interpret an agreement. It relies on dicta in two Ninth Circuit

cases stating that a bankruptcy court “retains subject matter

jurisdiction to interpret orders entered prior to dismissal of

the underlying bankruptcy case.” In re Taylor, 884 F.2d 478,

481 (9th Cir. 1989) (citing In re Franklin, 802 F.2d 324, 326-

27 (9th Cir. 1986)). We need not decide the efficacy of these

statements in light of the subsequent decision in Kokkonen.

Suffice it to say that neither Franklin nor Taylor supports

bankruptcy court jurisdiction over this proceeding. In Franklin, the court found that the bankruptcy court had “arising

under” jurisdiction under 28 U.S.C.§ 1334(b) of a declaratory

judgment action to determine the validity of a prior stay order

issued by another bankruptcy judge. 802 F.2d at 326. In Taylor, the court held that the bankruptcy court lacked jurisdiction to grant relief from a stay order entered in a prior

bankruptcy case that had been dismissed. 884 F.3d at 481. We

find these cases not remotely apposite to the matter before us.

1928 IN RE VALDEZ FISHERIES DEVELOPMENT ASSOC.
So far as the application of the Kokkonen principle is concerned, we find no relevant difference between a proceeding

to enforce a settlement agreement and one to interpret it. 

[5] We have considered the other arguments advanced by

the State and find them without merit. We conclude that

because this proceeding between Sea Hawk and the State is

not one to “vindicate the [court’s] authority” or to “effectuate

its decree,” Kokkonen, 511 U.S. at 380, the bankruptcy court

lacked jurisdiction. 

CONCLUSION

For the reasons stated, the order of the district court is

REVERSED. 

IN RE VALDEZ FISHERIES DEVELOPMENT ASSOC. 1929