Court Opinion

ID: 2757216
Source: CourtListenerOpinion
Date Created: 2014-12-03 19:08:42.580362+00
Date Added: 2024-06-11T15:47:56.594247
License: Public Domain

FILED
 1                       ORDERED PUBLISHED             SEP 19 2011
                                                   SUSAN M SPRAUL, CLERK
 2                                                   U.S. BKCY. APP. PANEL
                                                     O F TH E N IN TH C IR C U IT

 3                UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                          OF THE NINTH CIRCUIT
 5
     In re:                             ) BAP No. CC-10-1275-PaKiSa
 6                                      )
     WILSHIRE COURTYARD,                ) Bk. No. LA 97-10771 PC
 7                                      )
                    Debtor.             )
 8   ___________________________________)
                                        )
 9   CALIFORNIA FRANCHISE TAX BOARD,    )
                                        )
10                  Appellant,          )
     v.                                 ) O P I N I O N
11                                      )
     WILSHIRE COURTYARD; JEROME H.      )
12   SNYDER GROUP I, LTD.; LEWIS P.     )
     GEYSER REVOCABLE TRUST; GEYSER     )
13   CHILDREN’S TRUST, FBO Jennifer     )
     Geyser, Lewis P. Geyser, Trustee; )
14   WENDY K. SNYDER; JEROME H. SNYDER; )
     GEYSER CHILDREN’S TRUST, FBO       )
15   Daniel Geyser, Lewis P. Geyser,    )
     Trustee; RUSSELL & RUTH KUBOVEC,   )
16   DECEASED, KUBOVEC FAMILY TRUST,    )
     Rita Farmer, Trustee; WILLIAM N.   )
17   SNYDER; JOAN SNYDER; GEYSER        )
     CHILDREN’S TRUST, FBO Douglas      )
18   Geiser, Lewis P. Geyser, Trustee; )
     LON J. SNYDER; SNYDER CHILDREN’S   )
19   TRUST, FBO William N. Snyder,      )
     Lewis P. Geyser, Trustee,          )
20                                      )
                    Appellees.          )
21   ___________________________________)
22                  Argued and submitted on May 13, 2011
                           at Pasadena, California
23
                         Filed - September 19, 2011
24
               Appeal from the United States Bankruptcy Court
25                 for the Central District of California
26    Hon. Samuel Bufford, Bankruptcy Judge and Hon. Vincent Zurzolo,
                    Chief Bankruptcy Judge, Presiding.1
27
28
          1
             As explained below, Bankruptcy Judges Bufford and Zurzolo
     each entered orders that are implicated in these appeals.
 1   Appearances:    Todd M. Bailey appeared for Appellant California
                     Franchise Tax Board.
 2
                     Lewis P. Geyser appeared for Appellees Jerome H.
 3                   Snyder Group I, Ltd., Lewis P. Geyser Revocable
                     Trust, Wendy K. Snyder, Jerome H. Snyder, Geyser
 4                   Children's Trust, FBO Jennifer Geyser, Lewis P.
                     Geyser, Trustee, Geyser Children's Trust, FBO
 5                   Daniel Geyser, Lewis P. Geyser, Trustee, Russell &
                     Ruth Kubovec, Deceased, Kubovec Family Trust, Rita
 6                   Farmer, Trustee, William N. Snyder, Joan Snyder,
                     Geyser Children's Trust, FBO Douglas Geyser, Lewis
 7                   P. Geyser, Trustee, Lon J. Snyder and Snyder
                     Children's Trust, FBO William N. Snyder, Lewis P.
 8                   Geyser, Trustee.
 9                   Lewis R. Landau appeared for Appellee Wilshire
                     Courtyard.
10
11   Before:   PAPPAS, KIRSCHER and SARGIS,2 Bankruptcy Judges.
12   PAPPAS, Bankruptcy Judge:
13
14        In this complicated dispute, the Panel is asked to review the
15   opinions and orders of the bankruptcy court entered in a reopened
16   chapter 113 real estate partnership reorganization case, and in
17   particular, the state tax consequences of confirmation of the
18   debtor’s plan for its former partners.   While the substantive
19   issues raised in this appeal involve interesting, complex
20   questions about the interplay of bankruptcy and tax law, we may
21   not comment on those issues.   Instead, the Panel is compelled to
22
23        2
             The Honorable Ronald H. Sargis, Bankruptcy Judge for the
24   Eastern District of California, sitting by designation.
          3
25           Because this bankruptcy case was filed over a decade ago,
     unless otherwise indicated, all chapter, section and rule
26   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and
     to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as
27   enacted and promulgated prior to the effective date of The
     Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
28   Pub. L. 109-8, 119 Stat. 23. The Federal Rules of Civil Procedure
     are referred to as “Civil Rules.”

                                     -2-
 1   reverse the bankruptcy court’s ruling that it had subject matter
 2   jurisdiction to adjudicate the issues in this contest, to vacate
 3   the orders of the bankruptcy court, and to remand this matter to
 4   the bankruptcy court with instructions that it dismiss.
 5                                    FACTS4
 6            Events Before the Reopening of the Bankruptcy Case.
 7        Wilshire Courtyard (“Wilshire”) was a California general
 8   partnership.5   We refer to its general partners, the appellees in
 9   this appeal, collectively as the “Wilshire Partners.”
10        Wilshire began operations in 1984.       By 1987, Wilshire had
11   developed and owned two commercial complexes on Wilshire Boulevard
12   in Los Angeles containing almost a million square feet of rental
13   office space (the “Property”).
14        In 1989, Wilshire entered into several financing agreements
15   concerning the Property.   As a result of these transactions, the
16   secured lender holding the first position lien on the Property was
17   Continental Bank, N.A. (“Continental”); various other entities
18   held subordinated secured debt.    Wilshire’s combined secured debt
19   aggregated almost $350 million.    Wilshire defaulted on the
20   Continental loan in July 1996, and Continental scheduled a
21   foreclosure sale for July 9, 1997.        In response, Wilshire filed a
22   chapter 11 bankruptcy petition on July 8, 1997.
23        Appellant California Franchise Tax Board (“CFTB”) was listed
24   in the creditor’s matrix filed by Wilshire.       CFTB acknowledges
25
          4
26            The material facts in this appeal are undisputed.
          5
27           Through the chapter 11 process, Wilshire was transformed
     from a general partnership to a limited liability company; in this
28   opinion, “Wilshire” refers to both the original partnership as
     well as the reorganized debtor/limited liability company.

                                       -3-
 1   that it received the initial notice of the commencement of the
 2   case sent out by the clerk of the bankruptcy court.    However, for
 3   the reasons discussed below, CFTB did not file a proof of claim,
 4   assert any other claim, nor otherwise participate in Wilshire’s
 5   bankruptcy case.
 6        Early in the bankruptcy case, Continental was acquired by
 7   Bank of America (“BA”).6   BA, Wilshire, and the Wilshire Partners
 8   eventually negotiated a joint, consensual plan of reorganization.
 9   Under the terms of the joint plan, when it became effective,
10   Wilshire would be restructured from a California general
11   partnership to a Delaware limited liability company.   It would
12   continue to own and operate the Property.   Wilshire would arrange
13   for a new, nonrecourse loan for $100 million, secured by a first
14   deed of trust on the Property.
15        For its part in the reorganization, BA agreed to contribute
16   $23 million to the reorganized Wilshire, and to release its
17   secured indebtedness, in exchange for its receipt of the $100
18   million in new loan proceeds.    In consideration of its agreements,
19   BA would receive a 99 percent ownership interest in the
20   reorganized Wilshire; the Wilshire Partners would receive the
21   remaining one percent interest.    For giving up almost all of their
22   former equity in the business, the Wilshire Partners would also
23   receive $3.5 million in cash, and a $450,000 loan.
24        Wilshire’s disclosure statement was approved by the
25
26        6
             According to the plan of reorganization eventually
27   approved by the bankruptcy court, BA was acting as a trustee and
     servicer for several secured creditors. For convenience, and
28   because it is not essential in this appeal, we will refer to all
     of these secured creditors collectively as “BA.”

                                       -4-
 1   bankruptcy court on February 19, 1998.      The disclosure statement
 2   did not address the state tax consequences for the Wilshire
 3   Partners as a result of the transactions proposed in the
 4   reorganization plan.
 5        Notice of the confirmation hearing concerning the joint plan
 6   was sent by Wilshire to interested parties in the bankruptcy case
 7   on February 12, 1998.      However, CFTB was not served with a copy of
 8   the proposed plan nor given notice of the confirmation hearing.7
 9        After the confirmation hearing, the bankruptcy court entered
10   an Order Confirming the Joint Plan of Reorganization on April 14,
11   1998.       CFTB acknowledges that it received the “Notice of Order
12   Confirming [Wilshire’s] Chapter 11 Plan” from the clerk of the
13   bankruptcy court, which stated in relevant part that, “Notice is
14   hereby given of the entry of an order of this Court confirming a
15   Plan of Reorganization.      A copy of the order and the plan itself
16   are contained in the Court file located at the address listed
17   herein.”
18        A plan having been confirmed, the Wilshire case was closed by
19   the bankruptcy court in an order entered on October 22, 1998.
20   Wilshire contends, and CFTB has not effectively disputed, that the
21   confirmed plan was implemented and consummated, in that the
22   restructure of the reorganized Wilshire, and the various transfers
23   and transactions contemplated by the confirmed plan, were all
24
             7
25           While Wilshire and the Wilshire Partners argue that CFTB
     received effective notice or had knowledge of the bankruptcy
26   proceedings by other means, Wilshire apparently did not serve
     notice of the plan and confirmation hearing on CFTB because it had
27   not filed proofs of claim in the bankruptcy case. Of course, for
     its part, CFTB did not consider itself to be a “creditor” in the
28   bankruptcy case, since the general partnership Wilshire was not a
     taxable entity.

                                         -5-
 1   completed.
 2        After the plan was confirmed, the various Wilshire Partners
 3   reported approximately $208 million in aggregate cancellation of
 4   debt income (“CODI”) on their individual 1998 California state tax
 5   returns.      Then, on November 15, 2002, CFTB sent Wilshire and the
 6   Wilshire Partners an “Audit Issue Presentation Sheet” (“AIPS”).
 7   The AIPS informed them that CFTB challenged the Wilshire Partners’
 8   characterization of the tax consequences of the transactions
 9   effected by the confirmed chapter 11 plan as CODI.       Rather than
10   $208 million in CODI, CFTB argued that the Wilshire Partners
11   should have reported approximately $231 million in capital gain
12   income arising from the plan transactions, because the treatment
13   of their interests under the plan constituted a disguised sale of
14   the Property.      Based on the AIPS, CFTB issued notices of proposed
15   assessments to the Wilshire Partners on June 15, 2004, totaling
16   approximately $13 million in unpaid income taxes.
17        The Wilshire Partners disputed CFTB’s position.      Over the
18   next five years, CFTB and The Wilshire Partners engaged in several
19   rounds of administrative hearings relating to this dispute.8
20                        Reopening of the Bankruptcy Case.
21        On May 27, 2009, the contest shifted back to the bankruptcy
22   court.      Wilshire filed an ex parte motion to reopen the bankruptcy
23   case.       As cause for reopening, Wilshire argued that, through the
24   AIPS and the continuing administrative hearings, CFTB was
25
26           8
             CFTB states in its brief that, upon reopening of the
27   bankruptcy case, and receipt of the Order to Show Cause discussed
     below, the CFTB hearing officer suspended work on the
28   administrative hearings. There is no other information in the
     record concerning the status of those administrative hearings.

                                         -6-
 1   attempting to collaterally attack the confirmed chapter 11 plan by
 2   characterizing its terms as effecting a disguised sale of the
 3   Property while, according to the plan, Wilshire had retained
 4   ownership of the Property.   The bankruptcy court granted the
 5   motion and entered an order reopening the bankruptcy case on June
 6   4, 2009.
 7        Wilshire then filed a motion for an Order to Show Cause Re
 8   Contempt (“OSC”) on June 23, 2009.    The bankruptcy court entered
 9   the OSC on August 12, 2009, directing CFTB to appear before the
10   bankruptcy court to show why it should not be held in contempt for
11   collaterally attacking, and by refusing to act in accordance with,
12   the plan and confirmation order.
13        CFTB responded to the OSC on August 27, 2009, arguing that
14   Wilshire had not given CFTB adequate notice of the terms of the
15   proposed plan, the time for objecting to the plan, or of the
16   confirmation hearing, so CFTB was not bound by the plan and
17   confirmation order; Wilshire lacked standing to prosecute the OSC
18   motion; issuance of a contempt order by the bankruptcy court
19   against CFTB would be fundamentally unfair, because the state tax
20   consequences of the plan terms were never considered, and would
21   have been beyond the authority of the bankruptcy court to
22   determine; and Wilshire was guilty of laches because it had
23   delayed raising these issues in the bankruptcy case for six years.
24        Wilshire replied on September 9, 2009, arguing that CFTB
25   received adequate notice of the filing of the bankruptcy case and
26   proceedings and entry of the confirmation order; Wilshire had both
27   prudential and constitutional standing to seek enforcement of the
28   confirmation order.   CFTB could not prove its affirmative defense

                                     -7-
 1   of laches.
 2        The bankruptcy court held an initial hearing on the OSC on
 3   September 15, 2009.   Wilshire and CFTB appeared by counsel; the
 4   Wilshire Partners, however, were not represented.   After hearing
 5   arguments of counsel, the bankruptcy court directed the parties to
 6   submit further briefing whether a contempt motion was proper under
 7   the circumstances of this case, and suggested that the individual
 8   Wilshire Partners should be joined as parties to the proceedings.
 9        After a continued status conference, on March 12, 2010,
10   acting under authority of Rule 7019, made applicable in contested
11   matters by Rule 9014(c), the bankruptcy court ordered the joinder
12   of the Wilshire Partners in the proceedings.   None of the Wilshire
13   Partners objected to the joinder order.
14        Wilshire and the Wilshire Partners filed a joint Motion for
15   Summary Judgment or Summary Adjudication of Issues on May 3, 2010.
16   In the motion, they repeated Wilshire’s earlier allegations
17   concerning CFTB’s receipt of adequate notice in the chapter 11
18   case, that CFTB’s characterization of the plan transactions as a
19   disguised sale amounted to a collateral attack on the plan, and
20   that the confirmation order should be enforced under applicable
21   provisions of the Bankruptcy Code.
22        CFTB filed an opposition to the summary judgment motion on
23   June 9, 2010, generally countering these allegations.   In addition
24   to its earlier arguments, CFTB also argued that the bankruptcy
25   court lacked subject matter jurisdiction to decide the motion, and
26   that even if it had jurisdiction, the bankruptcy court should
27   abstain from considering the tax issues.   If the bankruptcy court
28   was inclined to resolve the tax issues, and to decide whether the

                                     -8-
 1   plan transactions did indeed result in CODI rather than capital
 2   gain, CFTB requested a six-month continuance to undertake
 3   discovery on that issue.
 4        Wilshire and the Wilshire Partners responded to CFTB’s
 5   opposition on June 16, 2010, generally repeating and supporting
 6   their earlier arguments.
 7        The bankruptcy court conducted a hearing on both the OSC and
 8   summary judgment motion on June 22, 2010, at which all the parties
 9   were represented by counsel.   The bankruptcy court rejected CFTB’s
10   request to submit additional briefing, and denied its request for
11   additional time for discovery.   After hearing from the parties,
12   the bankruptcy court addressed the issues, and in particular,
13   focused on one particular finding it had made in the Confirmation
14   Order, providing that:
15        V. The Joint Plan and all agreements, settlements,
          transactions and transfer contemplated thereby do not
16        provide for, and when consummated will not constitute,
          the liquidation of all or substantially all of the
17        property of the Debtor’s Estate under Bankruptcy Code
          section 1141(d)(3)(A)[.]
18
19   Order Confirming the Debtor’s Joint Plan of Reorganization Dated
20   December 12, 1997 at ¶ V (entered April 14, 1998) (“Finding V”).
21   Interpreting the meaning of this provision of the order, the
22   bankruptcy judge stated:   “I’m determining that the finding in the
23   confirmation order is that the transaction provided for in the
24   plan was not a sale for any purpose. . . .    [B]ecause it’s not a
25   sale there’s no tax imposed on the partnership.    There’s no gain
26   to be taxed [to] the partnership.”     Hr’g Tr. 40:7-15 (June 22,
27   2010).   However, the bankruptcy court was uncertain as to the tax
28   consequences to the Wilshire Partners, and requested further

                                      -9-
 1   briefing from the parties.
 2        Both parties filed supplemental briefs.   On July 15, 2010,
 3   the bankruptcy court entered an Order for Summary Adjudication,
 4   memorializing its oral ruling at the June 22 hearing that,
 5   according to Finding V, “the transaction under the plan is not a
 6   sale or exchange for any purpose.”
 7        The bankruptcy court held a second hearing on the summary
 8   judgment motion on July 20, 2010.    Early in the hearing, the court
 9   noted that its July 15, 2010 order interpreting Finding V was
10   effective only as to Wilshire, and only tentative as to the
11   individual Wilshire Partners.   After hearing the arguments of the
12   parties, the bankruptcy court announced it would grant summary
13   judgment to Wilshire and the Wilshire Partners.   Among the rulings
14   made by the bankruptcy court were that: (a) § 1141 provides that
15   all creditors are bound by the plan, and this includes the CFTB;
16   (b) the terms of the confirmed plan also apply to the Wilshire
17   Partners; (c) and the CFTB’s actions constitute contempt of the
18   confirmation order, and CFTB would be ordered to cease and desist.
19   Hr’g Tr. 30:1-3; 8-9; 18-19 (July 20, 2010).
20        On July 26, 2010, CFTB filed a timely appeal of the
21   bankruptcy court’s July 15, 2010 order, its July 20 oral rulings,
22   together with “any judgment, order or decree related to the July
23   20, 2010 decision.”
24        On August 31, 2010, the bankruptcy court entered a published
25   “Opinion on Summary Judgment Motion” (the “Opinion”).   In re
26   Wilshire Courtyard, 437 B.R. 380 (Bankr. C.D. Cal. 2010).    In it,
27   the court defended its subject matter jurisdiction on three
28   grounds.   First, it held, the bankruptcy court had continuing,

                                     -10-
 1   post-confirmation jurisdiction over matters with a “close nexus”
 2   to the bankruptcy case.   Second, it opined that CFTB’s alleged
 3   violation of the confirmation order required interpretation of
 4   that order, and the court had jurisdiction to interpret and
 5   enforce its own orders.   And third, the bankruptcy court decided
 6   that, since this case required it to make income tax
 7   determinations regarding the non-debtor partners, which in turn
 8   required the court to make a determination of the nature of the
 9   income at the partnership/debtor level, these determinations also
10   involved interpretation and enforcement of its confirmation order.
11   In re Wilshire Courtyard, 437 B.R. at 384.
12        Moving to the merits of the contest, the essential holding of
13   the Opinion can be summarized in an excerpt:
14        The court holds that the interests of the [Wilshire
          Partners] are wholly derivative from the status of the
15        property in the partnership. In consequence, [C]FTB
          cannot recharacterize the plan transactions at the
16        partner level without recharacterizing them at the
          partnership level as well. Because [C]FTB has not
17        brought any such recharacterization application before
          this court (and cannot because the statute of
18        limitations has run), [C]FTB is prohibited by the plan
          from claiming that the partners can be taxed on the plan
19        transactions as a sale generating taxable income.
20   Id. at 383.
21        On October 4, 2010, the bankruptcy court entered a final
22   “Order Granting Summary Judgment.”     With some minor discrepancies,
23   this final order was consistent with the Opinion.9
24
          9
             Up to this point, the proceedings in the bankruptcy court
25   were conducted, and the decisions and orders entered, by presiding
     Bankruptcy Judge Bufford. Because of his retirement, this final
26   order was entered by then-Chief Bankruptcy Judge Zurzolo without
     further hearings. While it is not critical to our analysis, we
27   presume Judge Zurzolo also entered the order without conducting an
     independent review and analysis of the issues of law previously
28                                                        (continued...)

                                     -11-
 1        On September 13, 2010, CFTB filed an amended notice of
 2   appeal, now seeking review of the July 15 order, the July 20 oral
 3   decision, the August 31 Opinion, and the October 4, 2010 Order
 4   Granting Summary Judgment.
 5                                JURISDICTION
 6        CFTB challenges the bankruptcy court’s decision that it had
 7   subject matter jurisdiction to resolve the issues in this case.
 8   This contention is addressed in detail below.   There is no
 9   challenge to the Panel’s jurisdiction over this appeal, however,
10   which is clear under 28 U.S.C. § 158.
11                                   ISSUE
12        Whether the bankruptcy court had subject matter jurisdiction
13   to adjudicate the issues in this appeal.
14                             STANDARD OF REVIEW
15        The existence of subject matter jurisdiction is a question of
16   law reviewed de novo.   Atwood v. Fort Peck Tribal Court
17   Assiniboine, 513 F.3d 943, 946 (9th Cir. 2008); Carpenter v. FDIC
18   (In re Carpenter), 205 B.R. 600, 604 (9th Cir. BAP 1997).     De novo
19   review is independent, with no deference given to the trial
20   court's conclusions.    See First Ave. W. Bldg., LLC v. James (In re
21   Onecast Media, Inc.), 439 F.3d 558, 561 (9th Cir. 2006).
22                                 DISCUSSION
23       The bankruptcy court lacked subject matter jurisdiction to
           adjudicate the Wilshire Partners’state tax obligations.
24
          CFTB asserts numerous arguments challenging the merits of the
25
26        9
           (...continued)
27   decided by Judge Bufford. And because we determine, infra, that
     the bankruptcy court lacked subject matter jurisdiction to enter
28   its various orders, we need not examine any of the possible
     inconsistencies between the Opinion and the final order.

                                      -12-
 1   bankruptcy court’s rulings that CFTB may not pursue recovery from
 2   the Wilshire Partners for capital gains taxes allegedly due under
 3   state law.   Wilshire and the Wilshire Partners dispute CFTB on
 4   each substantive point, urging the Panel to affirm the decisions
 5   of the bankruptcy court.   However, before we may review the
 6   parties’ arguments concerning the substance of this dispute, the
 7   Panel must conclude that the bankruptcy court had subject matter
 8   jurisdiction to make its decisions.    Because we decide that the
 9   bankruptcy court lacked jurisdiction to adjudicate the individual
10   Wilshire Partners’ state tax obligations, the Panel will not
11   address the other issues or arguments of the parties in this
12   appeal.
13        The decisions of the Ninth Circuit guide us to our
14   conclusion.10   In determining the scope of a bankruptcy court’s
15   jurisdiction, we begin with the statutory scheme, because the
16   “jurisdiction of the bankruptcy courts, like that of other federal
17   courts, is grounded in, and limited by, statute.”   Battle Ground
18   Plaza, LLC v. Ray (In re Ray), 624 F.3d 1124, 1130 (9th Cir. 2010)
19   (quoting Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995)).      A
20   bankruptcy court’s jurisdiction is, generally, prescribed by 28
21   U.S.C. § 1334(b).   In addition to granting jurisdiction to
22   bankruptcy courts over bankruptcy cases, the statute provides that
23
          10
24           The Panel is cognizant of the Supreme Court’s recent
     decision in Stern v. Marshall, 131 S. Ct. 2594 (2011), wherein the
25   court holds that a bankruptcy court lacks “constitutional
     authority to enter a final judgment on a state law counterclaim
26   that is not resolved in the process of ruling on a creditor's
     proof of claim.” Id. at 2620. However, we conclude that the
27   Supreme Court’s decision is inapposite to the issues raised in
     this case involving a post-confirmation challenge to the
28   bankruptcy court’s jurisdiction to decide the tax dispute between
     the Wilshire Partners and CFTB.

                                     -13-
 1   “the district courts [and by reference pursuant to 28 U.S.C.
 2   § 157, the bankruptcy courts] shall have original but not
 3   exclusive jurisdiction of all civil proceedings arising under
 4   title 11, or arising in or related to cases under title 11.”
 5        Because in many respects the bankruptcy courts’ statutory
 6   jurisdiction is narrow in focus, we individually examine each
 7   potential basis for the bankruptcy court’s assertion of subject
 8   matter jurisdiction, below.
 9   1.   “Arising under” and “arising in” jurisdiction.
10        Only when a right to relief is created by title 11 does an
11   action to enforce that right “arise under title 11.”   Harris v.
12   Wittman (In re Harris), 590 F.3d 730, 737 (9th Cir. 2009); see
13   H.R. Rep. No. 595, 95th Cong., 1st Sess. 445 (1977).   Similarly,
14   proceedings “arising in” bankruptcy cases, for purposes of the
15   jurisdictional statute, are also usually easy to identify as those
16   that, although not based on any right granted in title 11, would
17   not exist outside a bankruptcy case, such as matters related to
18   the administration of the bankruptcy estate.   Maitland v. Mitchell
19   (In re Harris Pine Mills), 44 F.3d 1431, 1435-37 (9th Cir. 1995).
20   Neither of these statutory bases for jurisdiction can be invoked
21   in this case.
22        In our view, adjudication of the dispute between the Wilshire
23   Partners and CFTB does not implicate either the bankruptcy court’s
24   arising under or arising in jurisdiction.   No provision of the
25   bankruptcy code dealing with state tax consequences is at issue,
26   nor were other chapter 11 provisions used by Wilshire in an
27   attempt to restructure the tax consequences of plan confirmation.
28   Instead, reduced to its essence, the contest in the bankruptcy

                                    -14-
 1   court in this case concerned whether, because of the terms of the
 2   order confirming Wilshire’s reorganization plan,11 the Wilshire
 3   Partners owe the State of California $13 million in taxes on what
 4   CFTB characterizes as their income from capital gains.   The
 5   parties acknowledge that this dispute did not arise until long
 6   after confirmation of the Wilshire plan, when CFTB issued the AIPS
 7   in 2002, and then in 2004 assessed the Wilshire Partners for this
 8   tax liability.   While originally casting their motion as one for a
 9   finding that CFTB was guilty of “contempt,” the real relief sought
10   from the bankruptcy court in the motion filed by Wilshire, and
11   later joined by the Wilshire Partners, was a declaration from the
12   bankruptcy court that, as a result of confirmation of the plan,
13   the individual Wilshire Partners received cancellation of debt
14   income, not capital gains, and an order prohibiting CFTB from
15   collecting the taxes and vacating the assessments.   Viewed in this
16   fashion, this contest is at bottom a tax dispute between the
17   Wilshire Partners and CFTB arising under California state tax law,
18
          11
19           In making its decision, the bankruptcy court relied not on
     any express provision of Wilshire’s plan characterizing the
20   transactions as something other than a sale of Wilshire’s assets,
     but instead, on a “finding” made in its order confirming the plan.
21   We do not say here that, in a case where a chapter 11 debtor
     clearly invokes the substantive provisions of title 11 to
22   restructure debtor-creditor relations, to modify rights of third
     parties, or to transfer bankruptcy estate property, the bankruptcy
23   court lacks jurisdiction to interpret and enforce those plan
     provisions on those who are bound by its terms, and to prevent a
24   collateral attack or serial litigation concerning the confirmation
     order. But this is not such a case, as it is undisputed that the
25   disclosure statement and chapter 11 plan filed by Wilshire, served
     on its creditors, and eventually confirmed by the bankruptcy court
26   simply makes no mention of the “sale/no-sale” attributes of the
     property transfers, or of the state tax consequences to the
27   Wilshire Partners of confirmation of that plan. Such an “after
     the fact” declaration by the bankruptcy court giving CFTB no
28   inkling of what was intended is not an adequate basis for the
     bankruptcy court’s decision to assume jurisdiction.

                                     -15-
 1   not the bankruptcy code.   In other words, the Wilshire Partners’
 2   right to relief, if any, does not “arise under” any provision of
 3   the bankruptcy code.
 4        It is equally clear that this dispute does not “arise in” a
 5   case under the bankruptcy code.    Under the case law, this language
 6   in the jurisdictional statute refers to an “administrative matter
 7   unique to the bankruptcy process that has no independent existence
 8   outside of bankruptcy and could not be brought in another forum,
 9   but whose cause of action is not expressly rooted in the
10   bankruptcy code.”   In re Ray, 624 F.3d at 1131.   Wilshire and the
11   Wilshire Partners do not argue that the critical issues raised by
12   the contempt motion in these proceedings could not have been
13   prosecuted in state court.   Indeed, the parties were actively
14   litigating the Wilshire Partners’ alleged tax liability in the
15   state administrative proceedings that were on-going at the time
16   Wilshire sought to reopen the bankruptcy case.     The Wilshire
17   Partners certainly could have sought relief from CFTB’s tax
18   assessment in those proceedings, and if necessary, in state court.
19        The Wilshire Partners disagree, and instead suggest that this
20   contest could not “feasibly be adjudicated in any alternate forum
21   due to the procedures applicable to the adjudication of tax
22   disputes.”   Wilshire Partner’s Reply Br. at 7 (emphasis added).
23   They explain that, under California law, a taxpayer has no
24   recourse to the state courts until after a disputed tax is paid,
25   at which point the taxpayer may sue for a refund.    Nast v. St. Bd.
26   of Equalization, 46 Cal. App. 4th 343, 346-47 (Cal. Ct. App.
27   1996).   According to the Wilshire Partners, they lack an
28   “accessible alternate venue” for the adjudication of the tax

                                       -16-
 1   dispute, because it could not “feasibly be adjudicated” in the
 2   state court, apparently because of the extent of the taxes CFTB
 3   seeks to collect from them.
 4        The Wilshire Partners’ argument that the state proceedings
 5   were not “feasible” lacks merit in the context of determining the
 6   subject matter jurisdiction of the bankruptcy court.   First, by
 7   reopening the bankruptcy case, the pending state administrative
 8   proceedings in which the parties’ positions on the assessments and
 9   issues were being considered were interrupted.   Presumably, absent
10   the bankruptcy proceedings initiated by Wilshire, the state
11   administrative proceedings would have progressed toward
12   determining the Wilshire Partners’ tax liabilities.
13        Second, there is nothing in the bankruptcy code or case law
14   that provides that the “arising in” jurisdiction of a bankruptcy
15   court requires that the proceedings available in the alternative
16   forum be prompt or feasible.   The requirement for bankruptcy court
17   jurisdiction is that an action have “no independent existence
18   outside of bankruptcy and could not be brought in another forum.”
19   In re Ray, 624 F.3d at 1131 (emphasis added).    Moreover, the
20   suggestion by Wilshire and the Wilshire Partners that the delay
21   caused by the state tax procedures renders those proceedings
22   unfair is at odds with the Supreme Court’s conclusion in another
23   case that the CFTB’s procedures for settling tax disputes
24   constitute “a plain, speedy and efficient remedy.”    Cal. Franchise
25   Tax Bd. v. Alcan Aluminium Ltd., 493 U.S. 331, 338 (1990).
26        Simply put, the issues raised by Wilshire and the Wilshire
27   Partners in this case did not “arise under” the bankruptcy code,
28   nor “arise in” a bankruptcy case.

                                     -17-
 1   2.   “Related to” jurisdiction.
 2        In response to CFTB’s challenge, the bankruptcy court
 3   addressed the question of its subject matter jurisdiction in its
 4   Opinion.   Although the court did not employ the precise terms, we
 5   construe its holding to be that it had “related to” jurisdiction
 6   under 28 U.S.C. § 1334(b), ancillary jurisdiction to interpret the
 7   plan and confirmation order, and supplemental jurisdiction over
 8   the claims of the nondebtor Wilshire Partners.   Under the
 9   applicable case law, we respectfully disagree that jurisdiction
10   existed under any of those grounds.
11        Whether the bankruptcy court had related to jurisdiction is a
12   harder question than arising in or arising under, because this
13   jurisdictional component covers a much broader set of disputes,
14   actions and issues.   Indeed, related to jurisdiction arguably
15   includes almost every matter or action that directly or indirectly
16   relates to a bankruptcy case.   Sasson v. Sokoloff (In re Sasson),
17   424 F.3d 864, 868-69 (9th Cir. 2005).    Here, Wilshire and the
18   Wilshire Partners contend that not only are terms of the Wilshire
19   confirmed plan called into question by CFTB’s position, but its
20   actions constitute, in substance, a collateral attack on the
21   bankruptcy court’s confirmation order.   At first blush, these
22   arguments would seem to be “related to” Wilshire’s bankruptcy
23   case.
24        The bankruptcy court explained its view of its related to
25   jurisdiction in this case as follows:
26        [T]hough a bankruptcy court has more limited subject
          matter jurisdiction post-confirmation than
27        pre-confirmation, it retains post-confirmation subject
          matter jurisdiction over matters with a “close nexus” to
28        the bankruptcy case [citing In re Pegasus Gold Corp.,

                                       -18-
 1        394 F.3d at 1193-94]. Matters involving “the
          interpretation, implementation, consummation, execution
 2        or administration of the confirmed plan will typically
          have the requisite close nexus.” Id. at 1194. In this
 3        case, the determination whether [C]FTB's actions violate
          the confirmation order involves an interpretation of the
 4        confirmed plan, and confers continuing subject matter
          jurisdiction on the court after plan confirmation.
 5
 6   In re Wilshire Courtyard, 437 B.R. at 384.   The bankruptcy court’s
 7   reasoning that the parties’ request that it “interpret” the plan
 8   and confirmation order establishes the “close nexus” to the
 9   bankruptcy case so as to confer related to subject matter
10   jurisdiction is, in our view, flawed.    More precisely, as the case
11   law discussed below shows, in order to find the requisite close
12   bankruptcy nexus and establish post-confirmation jurisdiction in a
13   chapter 11 case, the outcome of the issues before the bankruptcy
14   court must potentially impact the debtor, the estate, or the
15   implementation of the plan of reorganization.   Here, the outcome
16   of the Wilshire Partners’ tax dispute with CFTB will have no
17   impact whatsoever on the debtor, the estate, or the implementation
18   of the Wilshire plan of reorganization.
19        As the bankruptcy court acknowledged, in recent years various
20   courts of appeal have articulated the limits on bankruptcy court
21   related to jurisdiction over matters arising after confirmation of
22   a debtor’s reorganization plan.    See, e.g., Binder v. Price
23   Waterhouse & Co. (In re Resorts Int’l, Inc.), 372 F.3d 154, 166-67
24   (3d Cir. 2004) (“the essential inquiry appears to be whether there
25   is a close nexus to the bankruptcy plan or proceeding sufficient
26   to uphold bankruptcy court jurisdiction over the matter”); Bank of
27   La. v. Craig’s Stores of Tex., Inc. (In re Craig’s Stores of Tex.,
28   Inc.), 266 F.3d 388, 390-91 (5th Cir. 2001) (post-confirmation

                                       -19-
 1   bankruptcy jurisdiction limited to matters pertaining to
 2   implementation or execution of the plan).
 3        The Ninth Circuit has adopted the “close nexus” test of
 4   Resorts Int’l for measuring post-confirmation related to
 5   bankruptcy court jurisdiction.   State of Montana v. Goldin (In re
 6   Pegasus Gold Corp.), 394 F.3d 1189, 1194 (9th Cir. 2005)
 7   (reasoning that while this test “recognizes the limited nature of
 8   post-confirmation jurisdiction, [it] retains a certain
 9   flexibility”).   In Resorts Int’l, the Third Circuit considered
10   what it perceived to be problems in its existing precedent, Pacor,
11   Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984).12   In Pacor, the
12   court had held that “the test for determining whether a civil
13   proceeding is related to bankruptcy is whether the outcome of that
14   proceeding could conceivably have any effect on the estate being
15   administered in bankruptcy.”   Id. at 994.   The Pacor test,
16   however, proved less than useful in determining related to
17   jurisdiction after confirmation of a plan because the bankruptcy
18   estate no longer exists.   In Resorts Int’l, the court shifted the
19   emphasis to whether “there is a close nexus to the bankruptcy plan
20   or proceeding sufficient to uphold bankruptcy court jurisdiction
21   over the matter.”   372 F.3d at 166-67.   Although the Third Circuit
22
          12
23           Pacor is among the most influential decisions in
     bankruptcy law, and forms the analytical framework for related to
24   jurisdiction in the Third, Fourth, Fifth, Eighth, Ninth and
     Eleventh Circuits. See, e.g., Fietz v. Great W. Sav. (In re
25   Fietz), 852 F.2d 455, 457 (9th Cir. 1988) (“We . . . adopt the
     Pacor definition [of related to jurisdiction]. . . . We reject
26   any limitation on this definition[.]”). Although Pacor is
     somewhat dated, it is still the “grandfather” of related to
27   analysis, and its caution that related to jurisdiction requires an
     effect on the bankruptcy estate [or, as its progeny interpreted
28   Pacor for postconfirmation purposes, the debtor or the plan] is
     instructive for our purposes.

                                      -20-
 1   never precisely defined what it meant by “close nexus,” it cited
 2   numerous case examples of a nexus that would   support
 3   jurisdiction.   In re Resorts Int’l, Inc., 372 F.3d at 167, citing
 4   Donaldson v. Bernstein, 104 F.3d 547, 552 (3d Cir. 1997) (post-
 5   confirmation proceeding concerning the reorganized debtor’s
 6   failure to pay unsecured creditors according to terms in the
 7   plan); U.S. Tr. v. Gryphon at the Stone Mansion, 216 B.R. 764
 8   (W.D. Pa. 1997), aff’d 166 F.3d 552 (3d Cir. 1999) (dispute
 9   regarding post-confirmation U.S. Trustee quarterly fees);
10   Bergstrom v. Dalkon Shield Claimants Trust (In re A.H. Robins
11   Co.), 86 F.3d 364, 372-73 (4th Cir. 1996) (dispute over
12   calculation of attorney fees that could affect treatment of
13   remaining claims under the plan).   However, the import of the
14   Resorts Int’l analysis is even more revealing by its citation of
15   example cases where the facts did not establish a sufficiently
16   close nexus to support bankruptcy jurisdiction.   In re Resorts
17   Int’l, Inc., 372 F.3d at 168 (giving example of dispute between a
18   plan liquidating trust and tobacco manufacturers that would have
19   “no impact on any integral aspect of the bankruptcy plan or
20   proceeding,” citing Falise v. Am. Tobacco Co., 241 B.R. 48, 52
21   (E.D.N.Y. 1999)); Grimes v. Graue (In re Haws), 158 B.R. 965, 971
22   (Bankr. S.D. Tex. 1993) (in an action by trustee against partner
23   of the debtor, trustee failed to prove how any damages received
24   from the defendant were “necessary to effectuate the terms of [the
25   plan]”).   In short, under Resorts Int’l, as a condition for
26   bankruptcy court post-confirmation jurisdiction, the outcome of a
27   dispute must produce some effect on the reorganized debtor or a
28   confirmed plan.   Indeed, immediately following its review of this

                                     -21-
 1   case law, the Third Circuit concluded “where there is a close
 2   nexus to the bankruptcy plan or proceeding, as when a matter
 3   affects the interpretation, implementation, consummation,
 4   execution, or administration of a confirmed plan or incorporated
 5   litigation trust agreement, retention of post-confirmation
 6   bankruptcy court jurisdiction is normally appropriate.”      Id. at
 7   168-69.      This statement is quoted by the bankruptcy court in this
 8   case to justify that interpretation of a plan provision, standing
 9   alone, provides a basis for subject matter jurisdiction over this
10   dispute.13      But fairly read, it is clear that the Resorts Int’l
11   court did not intend that a need for plan interpretation support
12   post-confirmation jurisdiction in all cases, but only in those
13   where the results of plan interpretation would have a demonstrable
14   impact on the debtor or confirmed plan of reorganization.
15        As noted, the Ninth Circuit adopted the close nexus test in
16   In re Pegasus Gold, a seminal decision exploring the limits of
17   post-confirmation bankruptcy jurisdiction.      Pegasus Gold involved
18   a dispute between the debtor and the State of Montana over
19   financial responsibility for reclamation and water treatment
20   costs.       The parties had reached a settlement agreement approved by
21   the bankruptcy court under which the debtor agreed to establish a
22   new entity, RSC, which would perform the reclamation work.      The
23   debtor funded RSC, and a share of RSC became an asset of the
24   debtor’s liquidating trust established in the debtor’s chapter 11
25   plan.
26        After confirmation of the plan, disagreements arose between
27
             13
28           The bankruptcy court cited to Pegasus Gold for this
     statement. Pegasus Gold in turn cited to Resorts Int’l.

                                         -22-
 1   the State and trust almost immediately, and the State terminated
 2   RSC.   The Liquidating Trustee then filed a complaint for breach of
 3   contract against the State in the bankruptcy court.      Although the
 4   State objected, the bankruptcy court held it had jurisdiction, and
 5   the State appealed.
 6          When the appeal eventually reached the Ninth Circuit, it
 7   affirmed the bankruptcy court’s decision in favor of its
 8   jurisdiction.   In re Pegasus Gold, 394 F.3d 1189.     Applying the
 9   Resorts Int’l close nexus test, the court noted that although the
10   trustee’s complaint alleged numerous state law contract and tort
11   claims against the State, at least three of those claims, and the
12   remedies sought by the trustee, could conceivably affect the
13   implementation and execution of the confirmed reorganization plan,
14   especially the funding of RSC, and the cash flow into the
15   liquidation trust from RSC income.      Id. at 1194.   As a result, the
16   court held that the bankruptcy court had related to jurisdiction
17   over those claims.    Id.
18          Because the bankruptcy court had subject matter jurisdiction
19   over some of the trustee’s claims, the Ninth Circuit held that the
20   bankruptcy court could also properly adjudicate the remaining
21   trustee claims against the State by exercising supplemental
22   jurisdiction under 28 U.S.C. § 1367, because those additional
23   claims arose from a “‘common nucleus of operative facts’ and would
24   ordinarily be expected to be resolved in one judicial proceeding.”
25   Id. at 1195, citing United Mine Workers v. Gibbs, 383 U.S. 725,
26   725 (1966) and Sec. Farms v. Int’l Bhd. Of Teamsters, 124 F.3d
27   999, 1008 (9th Cir. 1997).
28          The Ninth Circuit further explained the meaning of the close

                                      -23-
 1   nexus test it first articulated in Pegasus Gold in Sea Hawk
 2   Seafoods, Inc. v. State of Alaska (In re Valdez Fisheries Dev.
 3   Ass’n, Inc.), 439 F.3d 545 (9th Cir. 2006).   In Valdez Fisheries,
 4   a creditor of a former chapter 11 debtor commenced an adversary
 5   proceeding in the bankruptcy court in connection with a closed
 6   bankruptcy case to determine the effect of its settlement
 7   agreement with the debtor on its fraudulent conveyance claim
 8   against another creditor.    On appeal, the court held that, on the
 9   facts of that case, the claims asserted in the adversary
10   proceeding failed the close nexus test, and therefore, the
11   bankruptcy court lacked subject matter jurisdiction to entertain
12   the creditor’s suit.   The court noted there was no confirmed plan,
13   and there was no assertion that the outcome of the dispute between
14   two creditors, Sea Hawk and the State of Alaska, would have any
15   effect on the estate in the closed bankruptcy case.   In the
16   court’s view, to show a close nexus, the outcome of a dispute must
17   “alter the debtor’s rights, liabilities, options, or freedom of
18   action or in any way impact upon the handling and administration
19   of the bankrupt estate.”    Id. at 548 (quoting In re Fietz, 852
20   F.2d at 427).    In Valdez Fisheries, the court distinguished its
21   holding from that in Pegasus Gold, observing that the post-
22   confirmation claims asserted by debtor that the State of Montana
23   had breached the terms of a confirmed reorganization plan and “the
24   outcome of those claims could affect the implementation and
25   execution of the plan.”    Id. at 548.
26        The Ninth Circuit most recently visited related to
27   jurisdiction after confirmation in a chapter 11 case in In re Ray,
28   624 F.3d 1124.   In Ray, the bankruptcy court had approved the sale

                                      -24-
 1   of a parcel of property owned by the debtor and his nondebtor co-
 2   owner, free and clear of the first refusal rights previously
 3   granted by them to Battle Ground Plaza, LLC (“BG Plaza”).    After
 4   the debtor’s plan was confirmed and the bankruptcy case was
 5   closed, BG Plaza sued the reorganized debtor, the nondebtor co-
 6   owner, the purchaser, and the purchaser’s successor in state court
 7   for breach of its contractual right of first refusal.   Because the
 8   sale was originally authorized under a bankruptcy court order, the
 9   state court, in its words, “remanded” the action to the bankruptcy
10   court, and stayed proceedings in state court pending the
11   bankruptcy court’s determination whether it retained jurisdiction
12   over the transaction and dispute.   In re Ray, 624 F.3d at 1129.
13   The bankruptcy court assumed jurisdiction and proceeded to
14   construe the sale order and resolve the parties’ claims.
15        When the dispute finally reached the Ninth Circuit, the court
16   decided that the bankruptcy court lacked jurisdiction to decide a
17   dispute between two nondebtors over the meaning of the bankruptcy
18   court’s sale order entered in a since-closed chapter 11 bankruptcy
19   case.   Applying Valdez Fisheries, the court concluded that,
20   because the claims were all based upon Washington law, could exist
21   entirely apart from the bankruptcy proceeding, and could not
22   impact the closed bankruptcy case, the state court, not the
23   bankruptcy court, should construe the sale order and adjudicate
24   the parties’ rights.   Id. at 1134-35.
25        We distill several lessons from these decisions for
26   application of the close nexus test as developed in Resorts Int’l,
27   and as adopted and refined by the Ninth Circuit.   Stated briefly,
28   to support jurisdiction, there must be a close nexus connecting a

                                     -25-
 1   proposed post-confirmation proceeding in the bankruptcy court with
 2   some demonstrable effect on the debtor or the plan of
 3   reorganization.
 4        Applying the Ninth Circuit case law to the facts of this
 5   appeal, while it is true Wilshire and the Wilshire Parties were
 6   asking the bankruptcy court to interpret its own confirmation
 7   order, it seems clear that the bankruptcy court lacked related to
 8   jurisdiction to adjudicate the tax issues between the Wilshire
 9   Partners and CFTB.   All of the acts and transactions required to
10   consummate and implement the confirmed plan in this case had been
11   completed, and the bankruptcy case had long since been closed, by
12   the time the tax dispute between the Wilshire Partners and CFTB
13   arose.   More importantly, the outcome of that tax dispute can have
14   no conceivable effect on the implementation of the confirmed plan
15   of reorganization, or on the reorganized debtor, Wilshire.
16   Instead, any consequences from CFTB’s actions will impact only the
17   Wilshire Partners.
18        Moreover, as in Ray, the central issues in the Wilshire
19   Partners-CFTB dispute concern application of California’s tax
20   laws, not bankruptcy law, to the transactions effected by the
21   confirmed plan.   As was the case in Ray, even if the terms of
22   Wilshire’s confirmed plan and the confirmation order are
23   implicated in the resolution of this contest, the California
24   administrative agencies and courts can construe their meaning.
25        Under Ninth Circuit case law, a close nexus between this tax
26   dispute and the Wilshire bankruptcy case is missing.    As a result,
27   the bankruptcy court erred in assuming related to jurisdiction
28   over this dispute.

                                     -26-
 1   3.   Supplemental or ancillary jurisdiction.
 2        By this conclusion, we also dispose of the Wilshire Partners’
 3   argument that the bankruptcy court could properly exercise
 4   supplemental jurisdiction under 28 U.S.C. § 1367(a)14 because “the
 5   common nucleus of operative facts was the interpretation of the
 6   Plan, Confirmation Order and section 346 [of the bankruptcy code]
 7   to determine whether the [C]FTB's issuances of Notices of Income
 8   Tax Due collaterally attack the Confirmed Plan and violate section
 9   346(a) and (j)(1).”   Reply Br. at 10, citing In re Pegasus.
10        To support the exercise of supplemental jurisdiction, the
11   statute requires that there be another claim as to which the
12   bankruptcy court has original jurisdiction.    Sasson v. Sokoloff
13   (In re Sasson), 424 F.3d 864, 869 (9th Cir. 2005) (holding that
14   the bankruptcy court may exercise supplemental jurisdiction under
15   28 U.S.C. § 1367(a) “over all other claims that are so related to
16   claims in the action within [the bankruptcy court’s] original
17   jurisdiction that they form part of the same case or
18   controversy”).   However, as we explained above, the bankruptcy
19   court lacked jurisdiction over any of the claims under these
20
21        14
               28 U.S.C. § 1367 provides:
22
          Supplemental jurisdiction.
23
          (a) Except as provided in subsections (b) and (c) or as
24        expressly provided otherwise by Federal statute, in any
          civil action of which the district courts have original
25        jurisdiction, the district courts shall have
          supplemental jurisdiction over all other claims that are
26        so related to claims in the action within such original
          jurisdiction that they form part of the same case or
27        controversy under Article III of the United States
          Constitution. Such supplemental jurisdiction shall
28        include claims that involve the joinder or intervention
          of additional parties.

                                       -27-
 1   facts.   Because of this, it also lacked supplemental jurisdiction
 2   over any other claims.
 3        The bankruptcy court also concluded it possessed ancillary
 4   jurisdiction to interpret and enforce its orders:
 5        Further, a bankruptcy court retains subject matter
          jurisdiction to interpret and enforce its own orders.
 6        See Haw. Airlines, Inc. v. Mesa Air Group, Inc., 355
          B.R. 214, 218 (D. Haw. 2006)(“The law is clear that ‘[a]
 7        bankruptcy court retains post-confirmation jurisdiction
          to interpret and enforce its own orders, particularly
 8        when disputes arise over a bankruptcy plan of
          reorganization’” (citing Luan Investment S.E. v.
 9        Franklin 145 Corp. (In re Petrie Retail, Inc.), 304 F.3d
          223, 230 (2d Cir. 2002))). Accordingly, this court
10        retains subject matter jurisdiction to interpret and
          enforce the chapter 11 plan and the confirmation order.
11
12   In re Wilshire Courtyard, 437 B.R. at 384.    We also disagree with
13   the bankruptcy court on this point.
14         “Ancillary jurisdiction may rest on one of two bases: (1) to
15   permit disposition by a single court of factually interdependent
16   claims, and (2) to enable a court to vindicate its authority and
17   effectuate its decrees.”   In re Valdez Fisheries, 439 F.3d at 549,
18   citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,
19   379-80 (1994); In re Ray, 624 F.3d at 1135.   The bankruptcy court
20   here relied on the second prong of ancillary jurisdiction — to
21   vindicate its authority and effectuate its decrees.
22        Significantly, the two cases cited by the bankruptcy court to
23   support its ancillary jurisdiction deal with interpretation and
24   enforcement of court orders that have an effect on the reorganized
25   debtor and the administration of a bankruptcy estate.   In Hawaiian
26   Airlines, the debtor commenced a post-confirmation adversary
27   proceeding against an investor for return of property of the
28   bankruptcy estate.   The adversary proceeding asked the bankruptcy

                                     -28-
 1   court to interpret and enforce its Plan Procedures Order, which
 2   governed the relationships between the reorganized debtor and
 3   potential investors.   Specifically, the orders to be interpreted
 4   related to contracts between the trustee and parties directly
 5   affecting the administration and assets of the estate itself.
 6   Haw. Airlines, 355 B.R. at 217.    Likewise, in Petrie Retail, the
 7   bankruptcy court was called upon to interpret and enforce orders
 8   enjoining a creditor from commencing or continuing an action
 9   contingent upon the interpretation of lease provisions that were
10   at issue in the administration of the debtors' estate.   In re
11   Petrie Retail, 304 F.3d at 225.
12        In short, the two cases relied on by the bankruptcy court to
13   support ancillary jurisdiction both involve actions, the outcome
14   of which would directly affect the debtor and the operation or
15   implementation of its plan of reorganization.   In the present
16   appeal, on the other hand, the results of the tax dispute between
17   the Wilshire Partners and CFTB will have no effect on either the
18   debtor (i.e., Wilshire), any estate, or the confirmed plan of
19   reorganization.
20        The Ninth Circuit’s most recent review of ancillary
21   jurisdiction is also found in In re Ray, 624 F.3d at 1135-36.    The
22   Ray bankruptcy court had held that it had jurisdiction and this
23   Panel affirmed under both related to and ancillary jurisdiction.
24   Id. at 1129.   As to the bankruptcy court’s purported need to
25   vindicate and effectuate its sale order, the court of appeals
26   observed that ancillary jurisdiction should only be used “when
27   necessary to resolve bankruptcy issues, not to adjudicate state
28   law claims that can be adjudicated in state court.”   Id. at 1136.

                                       -29-
 1   Applying In re Ray to the present appeal, the claims in dispute
 2   here are tax claims asserted solely by CFTB against the Wilshire
 3   Partners, and thus most comparable to the state contract claim
 4   rejected as a basis for ancillary jurisdiction in In re Ray.
 5        The Wilshire Partners attempt to counter these holdings by
 6   citing the Supreme Court’s recent holding in Travelers Indem. Co.
 7   v. Bailey, 129 S. Ct. 2195 (2009) (“Travelers”).   Travelers
 8   involved an appeal of the bankruptcy court’s “Clarifying Order”
 9   entered in 2004 that interpreted the scope of an injunction
10   contained in a prior order confirming a chapter 11 plan entered in
11   1986.   Because of its distinctly different facts, we do not
12   believe Travelers controls here.
13        Travelers was the principal insurance company for Johns-
14   Manville (“Manville”), a supplier of raw asbestos.   When studies
15   began to mount showing a link between asbestos exposure and
16   respiratory diseases, the prospect of overwhelming liability led
17   Manville to file for bankruptcy protection under chapter 11.
18   Travelers, 129 S. Ct. at 2199.   The parties and the bankruptcy
19   court ultimately concluded that the solution to Manville’s
20   predicament was “a plan of reorganization for [Manville] which
21   would provide for payment to holders of present or known asbestos
22   health related claims . . . and [to] those persons who had not yet
23   manifested an injury but who would manifest symptoms of
24   asbestos-related illnesses at some future time.”   In re
25   Johns-Manville Corp., 97 B.R. 174, 176 (Bankr. S.D.N.Y. 1989).
26        The bankruptcy court confirmed a plan of reorganization that
27   created the Manville Personal Injury Settlement Trust (the
28   “Trust”).   Manville’s insurers agreed to provide most of the

                                      -30-
 1   initial corpus of the Trust, with $80 million contributed by
 2   Travelers.   Travelers, 129 S. Ct. at 2199.    However, the insurance
 3   companies refused to contribute the funds without the protection
 4   of an injunction from the bankruptcy court limiting their exposure
 5   to direct claims (i.e., claims not through the Trust).     On
 6   December 18, 1986, the bankruptcy court entered an Insurance
 7   Settlement Order, providing that upon the insurers' payment of the
 8   settlement funds to the Trust, “all Persons are permanently
 9   restrained and enjoined from commencing and/or continuing any
10   suit, arbitration or other proceeding of any type or nature for
11   Policy Claims against any or all members of the Settling Insurer
12   Group [including Travelers].”    Travelers, 129 S. Ct. at 2199
13   (quoting the December 18, 1986, bankruptcy court’s Settlement
14   Order).    The Settlement Order was incorporated by reference in the
15   bankruptcy court’s December 22, 1986, order confirming Manville’s
16   chapter 11 plan.    Id.   The settlement order and plan confirmation
17   order were affirmed by the district court, and then by the Second
18   Circuit.   Id. at 2200.
19        Over a decade later, claimants began filing direct actions
20   against Travelers, not based upon Manville’s wrongdoing, but
21   alleging that its insurers had violated state consumer protection
22   statutes or their common law duties.     Travelers asked the
23   bankruptcy court to enjoin several of those direct actions.      The
24   bankruptcy court entered its Clarifying Order, which provided that
25   the 1986 settlement order and reorganization plan barred the
26   direct actions.    129 S. Ct. at 2201.   On appeal of the Clarifying
27   Order, the district court affirmed, but the Second Circuit
28   reversed, holding that the bankruptcy court had exceeded its

                                       -31-
 1   jurisdiction in entering the original 1986 settlement order and
 2   injunction barring direct action against insurers, including
 3   Travelers.    The Supreme Court granted certiorari.
 4        The Supreme Court’s Travelers decision principally concerns
 5   whether the bankruptcy court correctly interpreted its 1986
 6   orders.   However, there were two jurisdictional issues resolved by
 7   the Court.
 8        First, the Court ruled that the Second Circuit had erred in
 9   concluding that the bankruptcy court did not have jurisdiction to
10   enter the Settlement Order in 1986.     Second, the Court ruled,
11   agreeing with the Second Circuit, that the “Bankruptcy Court
12   plainly had [subject-matter] jurisdiction to interpret and enforce
13   its own prior orders.”    129 S. Ct. at 2205.   As authority for this
14   proposition, the Court cited Local Loan Co. v. Hunt, 292 U.S. 234
15   (1934), where the following statement appears:
16        The pleading by which respondent invoked the
          jurisdiction of the bankruptcy court in the present case
17        is in substance and effect a supplemental and ancillary
          bill in equity, in aid of and to effectuate the
18        adjudication and order made by the same court. That a
          federal court of equity has jurisdiction of a bill
19        ancillary to an original case or proceeding in the same
          court, whether at law or in equity, to secure or
20        preserve the fruits and advantages of a judgment or
          decree rendered therein, is well settled.
21
22   Id. at 239.
23        Viewing the Travelers decision in context, we observe the
24   following: (1) The underlying order that the bankruptcy court
25   interpreted and enforced was an injunction that was negotiated by
26   the parties to the original settlement agreement, and incorporated
27   in the plan of reorganization, and the record clearly indicates
28   that the essential parties (the debtor and the insurance

                                      -32-
 1   companies) would not have agreed to plan confirmation without the
 2   settlement agreement and injunction; (2) the Court’s ruling that a
 3   bankruptcy court “plainly” had subject matter jurisdiction to
 4   interpret and enforce its own prior orders should be viewed in
 5   this context, that the Clarifying Order related to an injunction
 6   that had been negotiated and considered an essential part of the
 7   plan of reorganization.   The citation the Court provided as
 8   authority for its general proposition reinforces the principle
 9   that exercise of ancillary subject matter jurisdiction must in
10   some way relate to an order that “preserves the fruits and
11   advantages” of the previous order.
12        The Travelers decision was made in the context of a complex
13   history, where the order being interpreted related to an
14   injunction that was a sine qua non for the acceptance of the plan
15   of reorganization.   After ruling that the bankruptcy court had
16   jurisdiction to approve the original settlement agreement and
17   enter the injunction, the Supreme Court considered the ancillary
18   subject matter question and ruled in light of its previous
19   decision in Hunt that the bankruptcy court had jurisdiction.    The
20   presence of the Hunt citation shows that the Court had in mind
21   that, based on the facts of Travelers, ancillary subject matter
22   jurisdiction in that context related back to preserving a benefit
23   (a fruit or advantage) granted in the original order.   In short,
24   we believe Travelers is not directly relevant to the current
25   appeal, because the bankruptcy court’s orders interpreting the
26   plan did not act to preserve a benefit negotiated in the plan of
27   reorganization or, indeed, have any effect on the plan of
28   reorganization.

                                     -33-
 1        The Wilshire Partners attempt to distinguish In re Ray by
 2   noting that Ray dealt solely with a request that the bankruptcy
 3   court enforce, not interpret, its earlier orders:   “This act of
 4   interpreting, not merely enforcing, an earlier order distinguishes
 5   [Travelers and this case] from Ray because the Ray case merely
 6   involves the act of enforcing the effect of the earlier sale
 7   order.   While enforcement can occur in any court, only the
 8   Bankruptcy Court could interpret its own order.”    The Wilshire
 9   Partners’ Opening Br. at 7.
10        Of course, the Wilshire Partners’ argument is incorrect on
11   its face.   It is a gross overstatement to say that the bankruptcy
12   court is the only court that could interpret its orders.    Courts
13   daily interpret the decisions and orders made by other courts –
14   indeed, one basic task of any court is the interpretation of case
15   law, a process of understanding and applying the orders and
16   rulings of “other” courts.
17        We also disagree with the Wilshire Partners’ analysis of the
18   Ninth Circuit's holding in In re Ray.   In that case, the state
19   court was called upon to interpret the meaning of the bankruptcy
20   court’s sale order in order to determine if a breach of contract
21   occurred.   Though asked to do so by the state court, the Ninth
22   Circuit held that the bankruptcy court should not have interceded
23   in the breach contest, and that it lacked jurisdiction to
24   interpret the sale order where the plan had been implemented and
25   the bankruptcy case had long-since been closed.    In re Ray, 624
26   F.3d at 1136.   As we read the Ninth Circuit’s decision, both
27   interpretation and enforcement of the sale order were matters
28   properly submitted to the state court, not the bankruptcy court.

                                     -34-
 1        In sum, we conclude that the bankruptcy court in this case
 2   lacked related to jurisdiction, or ancillary or supplemental
 3   jurisdiction, to adjudicate the tax dispute between the Wilshire
 4   Partners and CFTB.
 5                               CONCLUSION
 6        As the Ninth Circuit observed in In re Ray, “[r]eopening of
 7   the bankruptcy case is rare, and only used when necessary to
 8   resolve bankruptcy issues, not to adjudicate state law claims that
 9   can be adjudicated in state court.”   624 F.3d at 1136.   Because
10   the bankruptcy court lacked subject matter jurisdiction to enter
11   the various orders in this contest, we VACATE those orders and
12   REMAND with instructions that the bankruptcy court dismiss this
13   matter.
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

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