Court Opinion

ID: 2716510
Source: CourtListenerOpinion
Date Created: 2014-08-08 18:02:04.55215+00
Date Added: 2024-06-11T08:03:51.677607
License: Public Domain

FILED
                             NOT FOR PUBLICATION                              AUG 07 2014

                                                                          MOLLY C. DWYER, CLERK
                     UNITED STATES COURT OF APPEALS                         U.S. COURT OF APPEALS

                             FOR THE NINTH CIRCUIT

In re: VALLEY HEALTH SYSTEM, a                   No. 12-60019
California Local Health Care District,
                                                 BAP No. 11-1100
               Debtor,

                                                 MEMORANDUM*
VALLEY HEALTH SYSTEM
RETIREMENT PLAN; VALLEY
HEALTH SYSTEM; VINAY M. RAO,
Trustee of the Valley Health System
Retirement Plan; MICHELE BIRD,
Trustee of the Valley Health System
Retirement Plan; JOEL BERGENFELD,
Trustee of the Valley Health System
Retirement Plan,

               Appellants,

  v.

PEGGY KIRTON; DIANA AGNELLO,

               Appellees.

                           Appeal from the Ninth Circuit
                            Bankruptcy Appellate Panel
            Hollowell, Pappas, and Markell, Bankruptcy Judges, Presiding

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                      Argued and Submitted February 5, 2014
                               Pasadena, California

Before: PREGERSON and WARDLAW, Circuit Judges, and BURRELL, Senior
District Judge.**

      Appellants—Valley Health System, Valley Health Retirement Plan, and

trustees of the Retirement Plan—appeal a Bankruptcy Appellate Panel (BAP)

decision that reversed the bankruptcy court’s dismissal of a mandamus petition

filed against Appellants. As the facts and procedural history are familiar to the

parties, we do not recite them here except as necessary to explain our disposition.

We have jurisdiction under 28 U.S.C. § 158(d)(1), and we reverse.

      Appellees—former Valley Health System employees and retirement plan

participants—filed a mandamus petition in state court seeking to enforce their

alleged rights under the Valley Health Retirement Plan. The mandamus petition

was filed after the bankruptcy court had confirmed Valley Health System’s

Chapter 9 bankruptcy plan. Appellants removed the case from state court to

bankruptcy court, and the bankruptcy court dismissed the mandamus petition for

failure to state a claim. The bankruptcy court subsequently denied Appellees’

motion for reconsideration. Appellees appealed the bankruptcy court’s decisions

       **
             The Honorable Garland E. Burrell, Jr., Senior District Judge for the
U.S. District Court for the Eastern District of California, sitting by designation.

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to the BAP. The BAP ruled that the bankruptcy court lacked subject matter

jurisdiction over the mandamus petition, and thus vacated the bankruptcy court’s

dismissal of the mandamus petition. The BAP remanded the matter to the

bankruptcy court with instructions to remand the mandamus petition to the state

court. In re Valley Health System, 471 B.R. 555, 569 (B.A.P. 9th Cir. 2012).

      “Bankruptcy courts have subject matter jurisdiction over proceedings

‘arising under title 11, or arising in or related to cases under title 11.’” In re

Wilshire Courtyard, 729 F.3d 1279, 1285 (9th Cir. 2013) (quoting 28 U.S.C.

§ 1334(b)). We conclude that the BAP erred in holding that the bankruptcy court

did not have “related to” jurisdiction. See Valley Health System, 471 B.R. at 567-

68.

      After a bankruptcy plan has been confirmed, a bankruptcy court has “related

to” jurisdiction over proceedings that have “a close nexus to the bankruptcy plan or

proceeding.” In re Pegasus Gold Corp., 394 F.3d 1189, 1194 (9th Cir. 2005)

(quoting In re Resorts Int’l, Inc., 372 F.3d 154, 166 (3d Cir. 2004)). A close nexus

exists where a “matter[] affect[s] the interpretation, implementation,

consummation, execution, or administration of the confirmed plan.” In re Wilshire

Courtyard, 729 F.3d 1279, 1287 (9th Cir. 2013) (internal quotation marks

omitted).

                                           -3-
      Here, the confirmed bankruptcy plan provides that:

             [Retirement plan participants] shall have no recourse to
             [Valley Health System] or to any assets of [Valley Health
             System], and shall not be entitled to receive any
             distributions under this [bankruptcy] Plan. Instead, all
             unallocated amounts held . . . pursuant to the VHS
             Retirement Plan . . . will continue to be made available to
             provide retirement benefits for participants in the manner
             indicated under the provisions of the VHS Retirement
             Plan . . . . Accordingly, the treatment of [retirement plan
             participants] set forth herein shall not affect any legal,
             equitable or contractual rights to which [they] are
             entitled.”

      The resolution of Appellees’ mandamus petition would “affect[] the

interpretation [and] implementation . . . of the confirmed plan.” Wilshire, 729 F.3d

at 1289 (quoting Pegasus Gold Corp., 394 F.3d at 1194). Resolution of the

mandamus petition would require a court to determine whether the confirmed

bankruptcy plan discharged Appellees’ claims—whether Appellees have any

“recourse to [Valley Health System] or to any of [its] assets.” Thus, there is a

close nexus between the bankruptcy plan and the mandamus petition.

      Furthermore, a close nexus also exists where a proceeding requires

interpretation of an order confirming a bankruptcy plan. Wilshire, 729 F.3d at

1289. Here, the confirmation order provides that:

                                         -4-
             All entities that have, hold or may hold claims arising
             prior to the Effective Date . . . are permanently enjoined,
             from and after the Effective Date, from (a) commencing
             or continuing, in any manner, any action or other
             proceeding of any kind with respect to any such pre-
             Effective Date claim or cause of action against [Valley
             Health System] . . . that would . . . delay or impede the
             full implementation of the Plan, [and] (b) enforcing,
             attaching, collecting, or recovering by any manner or
             means any judgment, award, decree or order against
             [Valley Health System] with respect to such pre-
             Effective Date claims or causes of action . . . .

      The resolution of Appellees’ mandamus petition requires interpretation of

the confirmation order. A court would need to determine whether the bankruptcy

court’s confirmation order enjoins Appellees from continuing their mandamus

action. Thus, there is a close nexus between the bankruptcy plan and the

mandamus petition.

      Appellees’ reliance on In re Ray, 624 F.3d 1124 (9th Cir. 2010), is

misplaced. In Ray, we held that the bankruptcy court lacked “related to”

jurisdiction where, after a bankruptcy case closed, a plaintiff challenged a debtor’s

sale of real property that had been approved by the bankruptcy court. Id. at 1129.

The plaintiff alleged breach of first refusal rights. Id. We reasoned that the

bankruptcy court did not have “related to” jurisdiction over the dispute because the

“breach of contract action . . . could have existed entirely apart from the

                                          -5-
bankruptcy proceeding.” Id. at 1135. In other words, “[t]he dispute in Ray . . . did

not involve ‘implementation and execution of [the bankruptcy plan].’” Wilshire,
729 F.3d at 1288 (quoting Ray, 624 F.3d at 1134). Unlike in Ray, here, a court

must interpret the bankruptcy plan and confirmation order to determine whether

Appellees’ claims were discharged or Appellees are enjoined from bringing suit.

Thus, the bankruptcy court retained “related to” jurisdiction over Appellees’

mandamus petition.1

      Because the BAP addressed only jurisdiction and did not address any of the

substantive issues that Appellees raised on appeal from the bankruptcy court, we

REVERSE and REMAND with instructions that the BAP determine all of the

remaining substantive issues raised on appeal from the bankruptcy court.

      REVERSED AND REMANDED.

      1
        Because we conclude that the bankruptcy court retained “related to”
jurisdiction over Appellees’ mandamus petition, we need not reach the parties’
arguments concerning other bases of jurisdiction. Cf. Wilshire, 729 F.3d at 1285
n.5.

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