FILED
JUN 26 2017
1 NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-16-1380-KuFTa
)
6 MARDIROS HAIG MIHRANIAN, ) Bk. No. 2:13-bk-39026-BR
)
7 Debtor. ) Adv. No. 2:15-ap-01667-BR
______________________________)
8 )
SAM S. LESLIE, Chapter 7 )
9 Trustee, )
)
10 Appellant, )
)
11 v. ) MEMORANDUM*
)
12 SUSAN CHOBANIAN, )
)
13 Appellee. )
______________________________)
14
Argued and Submitted on May 18, 2017
15 at Pasadena, California
16 Filed – June 26, 2017
17 Appeal from the United States Bankruptcy Court
for the Central District of California
18
Honorable Barry Russell, Bankruptcy Judge, Presiding
19
Appearances: Robert Michael Aronson, on brief, for appellant;
20 David B. Golubchik of Levene, Neale, Bender, Yoo &
Brill LLP argued for appellee.
21
22 Before: KURTZ, FARIS and TAYLOR, Bankruptcy Judges.
23
24
25
26 *
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8024-1.
1 INTRODUCTION
2 Chapter 71 trustee Sam S. Leslie appeals from an order
3 dismissing with prejudice his third amended fraudulent transfer
4 complaint against Susan Chobanian - debtor's former wife and a
5 medical doctor with whom the debtor shared a medical practice.
6 The central issue in this appeal is whether Leslie
7 adequately alleged that the debtor Mardiros Haig Mihranian had an
8 interest in the funds allegedly transferred to Susan. Unless
9 Leslie alleged sufficient facts that, when taken as true,
10 plausibly demonstrated Mihranian’s interest in the transferred
11 funds, Leslie failed to state a claim for relief under either
12 § 544 or § 548.
13 We agree with the bankruptcy court that Leslie did not
14 allege sufficient facts regarding Mihranian’s interest in those
15 funds. The general “story” in Leslie’s complaint informs us that
16 Mihranian (and his now ex-wife Susan) diverted funds from
17 Mihranian’s wholly-owned incorporated medical practice to the
18 defendants. Leslie has never posited – in the bankruptcy court
19 or on appeal – any viable legal theory why funds diverted from
20 Mihranian’s incorporated medical practice plausibly could be
21 identified as belonging to him as opposed to his corporation.
22 We also agree with the bankruptcy court’s decision to
23 dismiss the third amended complaint with prejudice. In total,
24 Leslie availed himself of four attempts – four opportunities – to
25
1
26 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27 all "Rule" references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All "Civil Rule" references are to
28 the Federal Rules of Civil Procedure.
2
1 state adequate fraudulent transfer claims. In addition, Leslie
2 has admitted that he conducted extensive pre-adversary-proceeding
3 discovery under Rule 2004, which discovery included both
4 depositions and document requests, and has not disputed that he
5 hired professionals who (among other things) were assigned the
6 task of identifying the source of transferred funds. Yet, in all
7 of the versions of his complaint, Leslie never stated a coherent
8 set of facts plausibly identifying Mihranian’s pre-transfer
9 interest in the alleged fraudulently transferred funds. Under
10 these circumstances, the bankruptcy court did not err in
11 concluding that Leslie could not or would not plausibly identify
12 Mihranian’s pre-transfer interest in the subject funds, and thus
13 the court did not abuse its discretion in dismissing the third
14 amended complaint without leave to amend.
15 Accordingly, we AFFIRM.
16 FACTS
17 Leslie’s adversary proceeding sought to avoid and recover
18 alleged fraudulent transfers under federal and California law
19 based on §§ 544 and 548 and Cal. Civ. Code §§ 3439.04 and
20 3439.05. This is one of four similarly-pled adversary
21 proceedings. The bankruptcy court dismissed all four with
22 prejudice, and all four are on appeal on identical grounds. Each
23 complaint names a different individual defendant who allegedly
24 received a different series of fraudulently-transferred funds.
25 The history of complaints and responses informs our
26 analysis. Leslie filed his first amended complaint against
27 Susan, without any prompting from the bankruptcy court, within
28 several weeks of the commencement of the adversary proceeding.
3
1 Susan responded to the first amended complaint by filing a Civil
2 Rule 12(b)(6) motion to dismiss. Susan pointed out that Leslie’s
3 fraudulent transfer allegations did little more than state in
4 conclusory fashion the elements for fraudulent transfer claims
5 and did nothing to advise Susan of the specific transactions
6 Leslie claimed constituted fraudulent transfers.
7 The bankruptcy court in large part granted the motion to
8 dismiss. The bankruptcy court dismissed without prejudice
9 Leslie’s fourth claim for relief seeking an accounting and fifth
10 claim for relief seeking disallowance of any proof of claim filed
11 by Susan. The bankruptcy court also dismissed without prejudice
12 Leslie’s first and second claims for relief to the extent they
13 alleged actual fraudulent transfers. To the extent the first and
14 second claims for relief alleged constructive fraudulent
15 transfers, the bankruptcy court’s order on the motion to dismiss
16 merely required more specificity, as follows:
17 On the first and second causes of action in the
Complaint for constructive fraud, the claims shall be
18 amended to be pled with more specificity, including,
without limitation, the source of the alleged
19 transfer(s), the identity of the alleged transferor(s),
the date(s) of the alleged transfer(s), and the amount
20 of the respective transfer(s) . . . .
21 Order re Motion to Dismiss (Apr. 14, 2016) at p. 2. We do not
22 know the reasons the bankruptcy court offered for its ruling
23 because neither party provided us with the transcript of the
24 March 29, 2016 hearing on the motion to dismiss.2
25
2
26 Susan’s motion did not address Leslie’s third claim for
relief seeking to recover the alleged fraudulent transfers for
27 the benefit of the estate under §§ 550 and 551. Nor did the
bankruptcy court’s April 14, 2016 order. On its face, this claim
28 (continued...)
4
1 Leslie’s second amended complaint contained more detail. It
2 alleged that Mihranian and his spouse Susan3 engaged in a scheme
3 to divert earnings from their shared medical practice to the
4 various third-party defendants – including Susan – for the
5 purpose of keeping their earnings away from their judgment
6 creditors, two of whom are specifically identified in the
7 complaint.
8 On one hand, the second amended complaint alleged that
9 Mihranian and Susan practiced medicine through a California
10 professional medical corporation known as Medical Clinic &
11 Surgical Specialties of Glendale, Inc. (“MCSSG”). On the other
12 hand, the complaint perhaps suggested that Mihranian and Susan
13 sometimes provided medical services on their own account and not
14 through MCSSG. The second amended complaint did not specify
15 which funds transferred originally were payments for services
16 provided through MCSSG and which (if any) were payments for
17 services provided by the two doctors individually.
18
19
2
(...continued)
20 for recovery of avoided transfers has no independent effect in
the absence of a viable claim to avoid the transfers.
21
3
Susan asserts that she and Mihranian separated in 1998,
22
divorced in 2015, and did not accrue any community property after
23 the 1998 separation date pursuant to Cal. Fam. Code § 771(a).
Leslie alleged that Mihranian and Susan did not really separate
24 in 1998, that the couple continued to work together and live
together after 1998, and that the couple only feigned separation
25 for the purpose of furthering their scheme to keep Mihranian’s
26 assets away from his creditors. The bankruptcy court ultimately
ruled that Leslie had alleged sufficient facts challenging the
27 purported separation, and Susan did not cross-appeal this ruling.
We further discuss the issue concerning the couple’s marital
28 status near the end of this decision.
5
1 The second amended complaint then sets forth several
2 paragraphs of allegations stating that some $2 million in
3 payments for the two doctors’ medical services were shuttled back
4 and forth between Susan and Haig Leo Mihranian – one of her sons.
5 However, none of these allegations clarify who held the medical
6 service payments before Susan began shuttling them back and
7 forth, nor do they clarify who “owned” the right to the payments
8 at the time the medical services were paid for.
9 The second amended complaint then, in conclusory fashion,
10 identifies the $2 million as money “debtor” allegedly transferred
11 to Susan. But it is impossible to tell from the complaint what
12 portion of this amount originally was payment for services
13 provided through MCSSG and what portion of this amount (if any)
14 originally was payment for services provided by the two doctors
15 individually – or who held these funds before they allegedly were
16 transferred to Susan.
17 After she received the second amended complaint, Susan
18 contacted Leslie and urged Leslie to provide more specificity
19 regarding the alleged fraudulent transfers. Susan pointed out
20 that the second amended complaint did not specify “the source of
21 the alleged transfer(s), the identity of the alleged
22 transferor(s), the date(s) of the alleged transfer(s), and the
23 amount of the respective transfer(s)” as directed in the
24 bankruptcy court’s April 14, 2016 order. In response, Leslie
25 filed his third amended complaint.
26 There were only two significant differences between the
27 second amended complaint and the third amended complaint. Most
28 notably, the third amended complaint added two exhibits providing
6
1 some detailed information regarding each of the alleged
2 fraudulent transfers. Exhibit A was entitled “Detail Of 544
3 Transfers” and itemized in two columns the “Date” of each alleged
4 transfer and the “Deposit” amount of each alleged transfer.
5 Exhibit A did not identify the source of each alleged transfer or
6 the identity of the alleged transferor. Nor is there any way to
7 tell who provided the services generating these funds.
8 Furthermore, Leslie’s third amended complaint never explained the
9 relationship or connection (if any) between the $319,981.58 in
10 transfers identified in Exhibit A and the $2 million in funds
11 allegedly shuttled back and forth between Susan and her son Haig.
12 Exhibit B was entitled “Detail Of 548 Transfers” and set
13 forth specific information regarding dates and deposit amounts in
14 the same format as Exhibit A.4
15 The other significant change between the second amended
16 complaint and the third amended complaint concerned the aggregate
17 amount of fraudulent transfers alleged. Whereas the second
18 amended complaint alleged an aggregrate amount of roughly
19 $2 million in alleged fraudulent transfers to Susan, the third
20 amended complaint only alleged an aggregrate amount of
21 $319,981.58 in such transfers.
22 Susan moved to dismiss the third amended complaint. Susan
23 asserted that the third amended complaint did not satisfy the
24 specificity requirement of the bankruptcy court’s April 14, 2016
25
4
26 Susan argued that Exhibits A and B incorrectly identified
the “deposit” dates instead of the transfer dates, but this
27 argument reads the Exhibits in an overly narrow manner. In any
event, the bankruptcy court did not adopt this argument when it
28 dismissed Leslie’s third amended complaint.
7
1 order and also did not satisfy the requirements for pleading
2 claims for relief under Civil Rules 8(a) and 9(b), Ashcroft v.
3 Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly,
4 550 U.S. 544 (2007).
5 At the hearing on the motion to dismiss the third amended
6 complaint, the bankruptcy court primarily focused on one issue.
7 According to the court, it directed Leslie both at the March 29,
8 2016 dismissal motion hearing and in its April 14, 2016 order to
9 specifically identify the transferor of each transfer. The court
10 explained that it made a big difference whether the source of the
11 fraudulently transferred funds was Mihranian, his former wife
12 Susan, MCSSG, or some other person or entity. The following
13 statement is representative of the court’s comments:
14 I was very specific last time we were here. I wanted
you to be specific. Now who actually physically made
15 the transfer at that moment? Was it the Debtor, was it
the ex-wife? And that was -- was that -- did you not
16 understand that that was the whole purpose of my order?
17 Hr’g Tr. (Sept. 27, 2016) 10:24-11:3.
18 Similarly, the court later on made it clear that it was
19 dismissing the third amended complaint because Leslie did not
20 provide the specific information regarding who was the
21 transferor:
22 THE COURT: But the difference is I have ordered you
twice, I think,5 to be more specific as to the Debtor,
23 the ex-wife, now ex-wife, the business. I ordered you,
and you didn't do it. I can't figure out why, but you
24 didn't do it.
25 MR. ARONSON: Your Honor, I thought that I complied with
26
5
27 The record reflects that the court only issued one order
requiring Leslie to provide more specific information regarding
28 the alleged fraudulent transfers – the April 14, 2016 order.
8
1 the Court's order.
2 THE COURT: You're a bright guy. Good lord. I can't
imagine that you actually -- if you did, it's tunnel
3 vision, and you really should have asked somebody else.
4 I am going to grant the motion. This is, you know, you
-- I made it absolutely clear. You didn't do it. And
5 I am going to dismiss it.
6 Hr’g Tr. (Sept. 27, 2016) 30:24-31:11.
7 On October 14, 2016, the bankruptcy court entered its order
8 dismissing with prejudice Leslie’s third amended complaint, and
9 Leslie timely appealed.
10 JURISDICTION
11 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
12 §§ 1334 and 157, and we have jurisdiction under 28 U.S.C. § 158.
13 ISSUE
14 Did the bankruptcy court commit reversible error when it
15 dismissed Leslie’s third amended complaint without leave to
16 amend?
17 STANDARDS OF REVIEW
18 We review de novo orders dismissing complaints for failure
19 to state a claim. See Levitt v. Yelp! Inc., 765 F.3d 1123, 1126
20 (9th Cir. 2014).
21 Denial of leave to amend is reviewed for an abuse of
22 discretion. See Gonzalez v. Planned Parenthood of L.A., 759 F.3d
23 1112, 1114 (9th Cir. 2014).
24 The bankruptcy court abuses its discretion if it applies an
25 incorrect legal standard or its findings of fact are clearly
26 erroneous. Fear v. U.S. Tr. (In re Ruiz), 541 B.R. 892, 896 (9th
27 Cir. BAP 2015).
28
9
1 DISCUSSION
2 Leslie contends that the bankruptcy court erred in several
3 different ways when it dismissed his third amended complaint with
4 prejudice. Leslie asserts that the bankruptcy court erroneously
5 determined that the third amended complaint did not satisfy the
6 requirements of Civil Rules 8(a) and 9(b). Leslie further
7 maintains that the bankruptcy court erroneously required greater
8 specificity regarding each of the alleged fraudulent transfers
9 than either of those Civil Rules require. Leslie also contends
10 that the bankruptcy court erroneously denied him leave to amend.
11 We will address each of these asserted errors in turn.6
12 As a threshold matter, it is important to note Leslie based
13 all of his fraudulent transfer claims on the theory that
14 Mihranian and his then-wife Susan improperly diverted funds from
15 the couple’s shared medical practice. (3rd Am. Compl. at ¶¶ 7,
16 14, 18.) That is what Leslie said in his third amended
17 complaint, and that is what Leslie repeatedly said in his opening
18 appellate brief. (Aplt. Opn. Br. at pp. 10-11, 26-28.) Leslie
19 has not advanced on appeal any alternate theories or arguments
20 underlying his fraudulent transfer claims, and we decline to look
21 beyond what Leslie actually has argued. See Christian Legal
22 Soc'y v. Wu, 626 F.3d 483, 487–88 (9th Cir. 2010) (declining to
23 address matters not specifically and distinctly discussed in the
24
6
In his opening appellate brief, Leslie purported to
25 identify an additional argument challenging the bankruptcy
26 court’s decision: that the bankruptcy erred in determining that
his third amended complaint did not satisfy the bankruptcy
27 court’s heightened specificity requirements. Our discussion of
the first two arguments set forth above addresses and disposes of
28 this additional argument.
10
1 appellant’s opening brief); Brownfield v. City of Yakima,
2 612 F.3d 1140, 1149 n.4 (9th Cir. 2010) (same). With this
3 limitation on our review in mind, we will turn our attention to
4 the so-called errors Leslie has attributed to the bankruptcy
5 court’s decision.
6 A. Civil Rule 8(a) and Civil Rule 9(b) Pleading Requirements
7 Civil Rule 8(a) requires pleadings to set forth “a short and
8 plain statement of the claim showing that the pleader is entitled
9 to relief.” A claim is the “aggregate of operative facts which
10 give rise to a right enforceable in the courts.” Bautista v. Los
11 Angeles Cty., 216 F.3d 837, 840 (9th Cir. 2000) (citing Original
12 Ballet Russe, Ltd. v. Ballet Theatre, Inc., 133 F.2d 187, 189 (2d
13 Cir. 1943)).
14 As the Supreme Court has explained:
15 a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is
16 plausible on its face. . . . A claim has facial
plausibility when the plaintiff pleads factual content
17 that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct
18 alleged. . . . Threadbare recitals of the elements of
a cause of action, supported by mere conclusory
19 statements, do not suffice.
20 Iqbal, 556 U.S. at 678 (citations and internal quotation marks
21 omitted). The Ninth Circuit Court of Appeals has observed that
22 the Supreme Court has not always applied this plausibility
23 standard consistently. Starr v. Baca, 652 F.3d 1202, 1215–16
24 (9th Cir. 2011). In light of this perceived inconsistency, the
25 Ninth Circuit has refined the standard for determining when a
26 complaint meets the minimum requirements of Civil Rule 8(a),
27 stating as follows:
28 First, to be entitled to the presumption of truth,
11
1 allegations in a complaint or counterclaim may not
simply recite the elements of a cause of action, but
2 must contain sufficient allegations of underlying facts
to give fair notice and to enable the opposing party to
3 defend itself effectively. Second, the factual
allegations that are taken as true must plausibly
4 suggest an entitlement to relief, such that it is not
unfair to require the opposing party to be subjected to
5 the expense of discovery and continued litigation.
6 Id. at 1216 (emphasis added). Accord, Merritt v. Countrywide
7 Fin. Corp., 759 F.3d 1023, 1032–33 (9th Cir. 2014). At bottom,
8 the plausibility analysis is context specific and requires the
9 court to draw upon its experience and common sense. Levitt,
10 765 F.3d at 1135.
11 One of the fraudulent transfer elements Leslie needed to
12 allege was that property of the debtor was transferred to the
13 defendants. A transfer of the debtor’s property that otherwise
14 would have been property of the estate is a prerequisite for a
15 fraudulent transfer action under either § 544 or § 548. See
16 Geltzer v. Barish (In re Starr), 502 B.R. 760, 767–68 (Bankr.
17 S.D.N.Y. 2013) (holding that trustee sufficiently alleged
18 debtor’s property interest); Serra v. Salven, 2011 WL 4627576, at
19 *12 (E.D. Cal. Oct. 3, 2011) (holding that trustee failed to
20 prove for summary judgment purposes that debtor had an interest
21 in the property transferred); see also Gaughan v. Edward Dittlof
22 Revocable Tr. (In re Costas), 555 F.3d 790, 792–93 (9th Cir.
23 2009) (generally stating property interest requirement); Wyle v.
24 Rider (In re United Energy Corp.), 944 F.2d 589, 593-94 (9th Cir.
25 1991) (same); Greenspan v. Orrick, Herrington & Sutcliffe LLP (In
26 re Brobeck, Phleger & Harrison LLP), 408 B.R. 318, 337 (Bankr.
27 N.D. Cal. 2009) (“both the ‘property’ and ‘transfer’ elements
28 apply whether the claim is one for actual or constructive
12
1 fraudulent transfer”).
2 Leslie alleged that Mihranian and his then-wife Susan
3 diverted to third parties payments for medical services they
4 provided. If the allegedly diverted medical service fees were
5 owed either to Mihranian or his alleged wife, then Mihranian
6 transferred his interest in those payments by diverting them.
7 See In re Brobeck, Phleger & Harrison LLP, 408 B.R. at 338
8 (holding that debtor law firm’s waiver of potential profits from
9 unfinished legal work constituted a transfer of the law firm’s
10 property within meaning of fraudulent transfer statutes).
11 However, Leslie also alleged that Mihranian and Susan
12 operated through a shared medical practice – an incorporated
13 medical practice – MCSSG. There are no facts alleged in the
14 complaint from which it would be plausible to infer that the fees
15 for services earned by the medical practice would belong to
16 either Mihranian or Susan individually; rather, they would be
17 property of MCSSG. To hold otherwise would ignore the legal
18 separateness of MCSSG. See generally Sonora Diamond Corp. v.
19 Superior Court, 83 Cal. App. 4th 523, 538 (2000) (“a corporation
20 is regarded as a legal entity, separate and distinct from its
21 stockholders, officers and directors, with separate and distinct
22 liabilities and obligations.”).
23 Leslie argues on appeal that any fees for services owed to
24 MCSSG actually were owed to Mihranian – MCSSG’s sole owner – and
25 that he alleged sufficient facts in his third amended complaint
26 to justify piercing the corporate veil. The bankruptcy court
27 disagreed with Leslie’s alter ego argument, and this alter ego
28 argument is the only ground Leslie has advanced in the bankruptcy
13
1 court or on appeal to explain why MCSSG’s funds should be treated
2 as if they were Mihranian’s property.
3 Generally, to pierce the corporate veil, a plaintiff must
4 allege and prove: (1) “such unity of interest and ownership that
5 the separate personalities of the corporation and the individual
6 no longer exist”; and (2) “if the acts are treated as those of
7 the corporation alone, an inequitable result will follow.”
8 Mesler v. Bragg Mgmt. Co., 39 Cal. 3d 290, 300 (1985). There is
9 no single set of underlying facts that always must be alleged to
10 plausibly demonstrate these two criteria; instead, a variety of
11 case-specific facts must be considered to establish the
12 principal’s domination and control over the corporation and to
13 show that immunizing the principal from the corporation’s
14 liability would work an injustice. Id.; see also Lebastchi v.
15 Superior Court, 33 Cal. App. 4th 1465, 1470 (1995).
16 Alter ego has been described as “an extreme remedy,
17 sparingly used,” Sonora Diamond Corp., 83 Cal. App. 4th at 539,
18 and it is to be imposed “cautiously” and “reluctantly.” Highland
19 Springs Conference & Training Ctr. v. City of Banning, 244 Cal.
20 App. 4th 267, 281 (2016). More importantly, when imposed, the
21 separateness of the corporate entity is not disregarded for all
22 purposes but only for the purpose and under the circumstances of
23 the case in which it is asserted. Lebastchi, 33 Cal. App. 4th at
24 1470; see also Mesler, 39 Cal. 3d at 301 (“under certain
25 circumstances a hole will be drilled in the wall of limited
26 liability erected by the corporate form; for all purposes other
27 than that for which the hole was drilled, the wall still
28 stands”).
14
1 Ordinarily, the alter ego doctrine only is invoked to enable
2 a plaintiff to impose corporate liability upon the corporation’s
3 principal(s). See Sonora Diamond Corp., 83 Cal. App. 4th at 538.
4 In fact, at least one California Court of Appeal has held that
5 California law does not permit “outside reverse piercing of the
6 corporate veil” – piercing in order to make the corporation’s
7 assets liable for the debts of the individual shareholder(s).
8 Postal Instant Press, Inc. v. Kaswa Corp. 162 Cal. App. 4th 1510,
9 1522 (2008). That is precisely what Leslie is attempting to do
10 here: claim the assets of MCSSG as if they belonged to Mihranian
11 individually and his bankruptcy estate.
12 Postal Instant Press is carefully reasoned and persuasive.
13 Moreover, we must follow the law of California’s intermediate
14 appellate courts on this point unless we are convinced that the
15 California Supreme Court would decide the issue differently.
16 Goodrich v. Briones (In re Schwarzkopf), 626 F.3d 1032, 1038 (9th
17 Cir. 2010). We are not persuaded that the California Supreme
18 Court would decide this issue differently. Thus, allegations of
19 alter ego do not aid Leslie; he cannot establish plausibility
20 through such allegations. Consistent with this fact, Leslie did
21 not adequately plead alter ego.
22 As mentioned above, alter ego is the only legal ground
23 Leslie has advanced to explain why fees for medical services
24 belonging to MCSSG should have been considered Mihranian’s
25 property for fraudulent transfer purposes. To the extent Leslie
26 could have advanced other grounds to support this contention,
27 Leslie abandoned them by not raising them in the bankruptcy court
28 or on appeal. See, e.g., United Student Aid Funds, Inc. v.
15
1 Espinosa, 559 U.S. 260, 270 n.9 (2010) (“We need not settle that
2 question, however, because the parties did not raise it in the
3 courts below”); Mayor v. Wolkowitz (In re Cinevision Int'l,
4 Inc.), 2016 WL 638729, *7-8 (Mem. Dec.) (9th Cir. BAP Feb. 16,
5 2016) (declining to consider issue that appellants raised for the
6 first time in their reply brief on appeal).
7 In short, fees for medical services owed to MCSSG did not
8 belong to Mihranian – and were not his property – for fraudulent
9 transfer purposes.
10 Leslie’s third amended complaint arguably suggested that, at
11 least some of the time, Mihranian and Susan accrued earnings on
12 their own account. But no factual allegations in the third
13 amended complaint tie these accrued earnings (if any) to the
14 specific alleged fraudulent transfers identified in the
15 complaint. The bankruptcy court attempted to explain to Leslie
16 that the complaint should have identified the alleged source of
17 all fraudulent transfers. Given the other facts Leslie alleged
18 regarding the corporate status of Mihranian’s and Susan’s medical
19 practice, we agree with the bankruptcy court and hold that Leslie
20 did not state plausible fraudulent transfer claims in the absence
21 of alleged facts plausibly demonstrating that either Mihranian or
22 Susan had a property interest in the specific funds allegedly
23 transferred.
24 In sum, under Civil Rule 8(a), Leslie needed to allege facts
25 which, if accepted as true, plausibly could have lead to the
26 following inferences: (1) that the funds transferred to Susan
27 were funds in which Mihranian personally had a property interest
28 before they were transferred to Susan; and (2) that Mihranian
16
1 relinquished to Susan his property interest in those funds by way
2 of those transfers. Leslie did not allege facts that plausibly
3 could support these inferences. Accordingly, the third amended
4 complaint failed to state any viable fraudulent transfer claims.
5 Meanwhile, Civil Rule 9(b) requires fraud to be pled with
6 particularity. Under Civil Rule 9(b), the plaintiff’s
7 allegations must include “‘the who, what, when, where, and how of
8 the misconduct charged.’” United States v. United Healthcare
9 Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016) (quoting Ebeid ex
10 rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir.
11 2010)).
12 A number of bankruptcy courts have acknowledged that Civil
13 Rule 9(b) does not apply to constructive fraudulent transfers.
14 See, e.g., Seror v. Stone (In re Automated Fin. Corp.), 2011 WL
15 10502417, at *4-5 (Bankr. C.D. Cal. Jan. 25, 2011); Angell v. Day
16 (In re Caremerica, Inc.), 415 B.R. 200, 208 (Bankr. E.D.N.C.
17 2009); Official Comm. of Unsecured Creditors. v. Am. Tower Corp.
18 (In re Verestar, Inc.), 343 B.R. 444, 459-60 (Bankr. S.D.N.Y.
19 2006)); see also Sunnyside Dev. Co. LLC v. Cambridge Display
20 Tech. Ltd., 2008 WL 4450328, at *8-9 (N.D. Cal. Sept. 29,
21 2008)(district court ruling holding same). These same decisions
22 hold, however, that Civil Rule 9(b) applies to actual fraudulent
23 transfers because such claims sound in fraud. We question
24 whether all actual fraudulent transfer claims sound in fraud,
25 because the controlling fraudulent transfer statutes state in the
26 disjunctive that an actual fraudulent transfer occurs when the
27 debtor makes a transfer with the actual intent to hinder, delay
28 or defraud. See § 548(a)(1)(A); Cal. Civ. Code § 3439.04; see
17
1 also Wolkowitz v. Beverly (In re Beverly), 374 B.R. 221, 232 (9th
2 Cir. BAP 2007), aff'd in part and adopted, 551 F.3d 1092 (9th
3 Cir. 2008). We do not see why harboring an intent to hinder or
4 delay your creditors would sound in fraud.
5 That being said, it is unnecessary for us to resolve the
6 issue of when, if ever, Civil Rule 9(b) should be applied to
7 actual fraudulent transfer claims. As a practical matter, under
8 the circumstances of this particular case, what Civil Rule 8(a)
9 requires and what Civil Rule 9(b) would require largely overlap.
10 Put another way, in this instance, the Civil Rule 8(a) standard
11 articulated in Merritt, 759 F.3d at 1033, and the Civil Rule 9(b)
12 standard articulated in United Healthcare Insurance Co., 848 F.3d
13 at 1180, lead to similar pleading requirements.
14 In any event, we already have held that none of the
15 fraudulent transfer claims satisfy the Civil Rule 8(a) standard.
16 Thus, it is unnecessary to determine here whether Civil Rule 9(b)
17 also applies and has been satisfied.
18 B. The Bankruptcy Court’s Requirement That Leslie Plead His
19 Fraudulent Transfer Claims With Greater Specificity
20 Leslie’s next contention concerns the bankruptcy court’s
21 April 14, 2016 order and its direction that Leslie must re-plead
22 his constructive fraudulent transfer claims with more
23 specificity, “including, without limitation, the source of the
24 alleged transfer(s), the identity of the alleged transferor(s),
25 the date(s) of the alleged transfer(s), and the amount of the
26 respective transfer(s).”
27 The April 14, 2016 order only stated this requirement as to
28 the constructive fraudulent transfer claims. Even so, when the
18
1 order is read in conjunction with the court’s comments at the
2 final hearing, it becomes reasonably clear that, when the court’s
3 April 14, 2016 order dismissed without prejudice Leslie’s actual
4 fraudulent transfer claims, the court expected any re-pleading of
5 the actual fraudulent transfer claims to include at least the
6 same level of specificity as the constructive fraudulent transfer
7 claims. Neither party has suggested any other interpretation of
8 the court’s April 14, 2016 order, nor has Leslie argued that he
9 did not realize that the bankruptcy court’s specificity
10 requirement applied to both the actual fraudulent transfer claims
11 and the constructive fraudulent transfer claims.
12 As we have already explained, the third amended complaint
13 did not allege sufficient facts to support a plausible inference
14 that Mihranian transferred any of his own property interests to
15 Susan. The bankruptcy court’s required statement of transfers
16 identifying (among other things) the source of each transfer
17 reasonably was aimed at rectifying this deficiency. Typically,
18 identifying the source of the transfer(s) and the identity of the
19 transferor(s) would provide facts from which a court plausibly
20 could infer whether the debtor held a property interest in funds
21 before their transfer. See, e.g., In re Geltzer, 502 B.R. at
22 767–68; In re Caremerica, Inc., 415 B.R. at 208.
23 We acknowledge that Leslie might have employed other methods
24 besides the bankruptcy court’s specificity requirement to satisfy
25 the pleading requirements of Civil Rule 8(a) for purposes of
26 alleging Mihranian’s interest in the alleged fraudulently
27 transferred funds. Even so, Leslie did not in fact plausibly
28 allege Mihranian’s interest in the transferred funds in any way,
19
1 and the bankruptcy court’s specificity requirement reasonably was
2 aimed at rectifying this deficiency in Leslie’s pleading.
3 Therefore, we conclude that the bankruptcy court did not commit
4 reversible err when it imposed the specificity requirement on
5 Leslie in the April 14, 2016 order.
6 C. Dismissal Without Leave To Amend
7 Leslie also contends on appeal that the bankruptcy court
8 should have granted him leave to amend his complaint. Generally
9 speaking, courts should not deny leave to amend unless the court
10 determines that amendment would be futile. See Ebner v. Fresh,
11 Inc., 838 F.3d 958, 963 (9th Cir. 2016); Lacey v. Maricopa Cty.,
12 693 F.3d 896, 926 (9th Cir. 2012) (en banc).7
13 That being said, the trial court has broad discretion in
14 deciding whether to grant leave to amend, especially when (as
15 here) the plaintiff already has been given multiple opportunities
16 to amend its complaint. See Gonzalez, 759 F.3d at 1116 (citing
17 Miller v. Yokohama Tire Corp., 358 F.3d 616, 622 (9th Cir.
18 2004)). Gonzalez is instructive. There, the Ninth Circuit Court
19 of Appeals affirmed the district court’s dismissal of Gonzalez’s
20 third amended complaint without leave to amend. Id. In the
21 process of holding that the district court did not abuse its
22
23
7
To be clear, different standards (other than futility)
24 apply when the bankruptcy court dismisses with prejudice an
adversary proceeding as a sanction based on plaintiff’s
25 noncompliant or dilatory conduct. See generally Lee v.
26 Roessler–Lobert (In re Roessler-Lobert), 567 B.R. 560, 568-73
(9th Cir. BAP 2017) (describing other standards). Here, however,
27 Susan did not request dismissal of Leslie’s complaint as a
sanction, nor did the bankruptcy court consider sanctions as a
28 ground for dismissal without leave to amend.
20
1 discretion in denying leave to amend, the Court of Appeals relied
2 on two things: (1) Gonzalez’s failed multiple attempts to state
3 viable claims for relief; and (2) the fact that certain
4 attachments to Gonzalez’s complaint “defeated the plausibility of
5 his allegations.” Id.
6 Similarly, here, Leslie’s focus in his complaint on the
7 alleged diversion of funds from an incorporated medical practice
8 undermined the plausibility of his allegations that Mihranian had
9 a property interest in the alleged fraudulently transferred
10 funds.
11 Furthermore, Leslie, like Gonzalez, had a history of
12 multiple failed attempts to state viable claims for relief.
13 Leslie’s third amended complaint was his fourth attempt to state
14 his fraudulent transfer claims. Leslie has not disputed that he
15 filed his first amended complaint and his third amended complaint
16 after discussions with the defendants regarding the insufficiency
17 of his fraudulent transfer allegations. Additionally, the
18 bankruptcy court reviewed two of Leslie’s four complaints, and
19 the court correctly determined that neither stated plausible
20 fraudulent transfer claims. After the first of the bankruptcy
21 court’s two reviews, the court ordered Leslie to allege more
22 specific facts regarding the subject transfers, which order
23 reasonably was aimed at identifying whether Mihranian plausibly
24 had an interest in the alleged fraudulently transferred funds.
25 Nonetheless, Leslie did not comply with the court’s order, nor
26 did Leslie otherwise adequately address the court’s concern
27 regarding identification of Mihranian’s interest in the
28 transferred funds.
21
1 Leslie’s failure to do so is particularly inexplicable here
2 because he admitted to conducting extensive pre-litigation
3 discovery in the form of Rule 2004 examinations – consisting of
4 both depositions and voluminous document production requests –
5 focusing on the transfers in question. Nor has Leslie disputed
6 Susan’s assertion that Leslie hired professionals who (among
7 other things) were assigned the task of identifying the source of
8 the transferred funds. Simply put, this is not a situation where
9 the plaintiff lacked an opportunity to obtain sufficient
10 information to plead his claims with more specificity.
11 Under these circumstances, the bankruptcy court did not err
12 when it determined that Leslie either could not or would not
13 plausibly allege Mihranian’s interest in the transferred funds.
14 Accordingly, dismissal without leave to amend was not an abuse of
15 discretion.
16 D. Other Issues: Community Property, Statute of Limitations
17 and Request to Supplement The Record
18 There are a few additional issues we should address. First,
19 Susan claims that Leslie did not sufficiently allege
20 Mihranian’s community interest in any funds Susan received on
21 account of medical services Susan provided on her own account.
22 To the extent Mihranian had a community interest in funds in
23 which Susan held a right to payment, the transfer of those funds
24 could have constituted a transfer of the debtor’s interest in
25 property for fraudulent transfer purposes. See In re Beverly,
26 374 B.R. at 233.
27 Ultimately, the bankruptcy court seemed to decide this issue
28 in favor of Leslie, and Susan did not cross-appeal from this
22
1 ruling. Regardless, under California law, whether Mihranian and
2 Susan actually were separated in and after 1998 as Susan claims
3 was a question of fact necessary to determine whether and when
4 they ceased to accrue community property under Cal. Fam. Code
5 § 771(a). See In re Marriage of Manfer, 144 Cal. App. 4th 925,
6 930 (2006). Leslie effectively alleged that Mihranian and Susan
7 continued to work together, that they continued to live together
8 in the same residence, and that neither intended a permanent and
9 final cessation of their marriage; rather, according to Leslie,
10 the couple feigned separation in 1998 as part of a scheme to keep
11 Mihranian’s assets away from his creditors. These facts were
12 sufficient to allege that Mihranian and Susan were not, in fact,
13 separated and continued to accrue community property in and after
14 1998. See generally id.
15 Even so, under the circumstances of this appeal, the issue
16 of whether the fees for services were Susan’s property or
17 Mihranian’s property largely is a red herring. The more
18 important questions – questions that Leslie never answered –
19 were: (1) why funds allegedly diverted from the couple’s shared
20 medical practice were property of the debtor as opposed to
21 property of MCSSG; and (2) how the so-called sham separation
22 advanced Mihranian’s and Susan’s diversion scheme when Leslie’s
23 complaint indicated that both Mihranian and Susan were judgment
24 debtors to one or more of the judgment creditors named in
25 Leslie’s complaint.
26 Another issue we should address concerns the statute of
27 limitations applicable to actual fraudulent transfers under
28 California law. The applicable statute provides in relevant
23
1 part:
2 (a) Under paragraph (1) of subdivision (a) of
Section 3439.04, not later than four years after the
3 transfer was made or the obligation was incurred or, if
later, not later than one year after the transfer or
4 obligation was or could reasonably have been discovered
by the claimant.
5
6 Cal. Civ. Code § 3439.09(a) (emphasis added).
7 The bankruptcy court opined that, to the extent Leslie
8 sought to avail himself of § 3439.09(a)’s “discovery rule,”
9 Leslie should have alleged that the fraudulent nature of the
10 transfers reasonably could not have been discovered earlier.
11 Leslie’s opening appeal brief does not mention let alone
12 address the statute of limitations issue. On this basis alone,
13 we could decline to address this issue. Christian Legal Soc'y,
14 626 F.3d at 487–88; Brownfield, 612 F.3d at 1149 n.4.
15 In any event, for purposes of this appeal, suffice it to say
16 that Leslie could not have properly invoked this discovery rule
17 unless he alleged facts plausibly tending to demonstrate that the
18 fraudulent nature of the transfers was not discovered earlier and
19 reasonably could not have been discovered earlier. See Denholm
20 v. Houghton Mifflin Co., 912 F.2d 357, 362 (9th Cir. 1990); Sun
21 'n Sand, Inc. v. United Cal. Bank, 21 Cal. 3d 671, 701-02 (1978);
22 see also Ezra v. Seror (In re Ezra), 537 B.R. 924, 933 (9th Cir.
23 BAP 2015) (“the one-year period under Cal. Civ. Code
24 § 3439.09(a)’s discovery rule does not commence until the
25 plaintiff has reason to discover the fraudulent nature of the
26 transfer.”)
27 The final issue we should address concerns Susan’s request
28 to supplement the record on appeal. In this request, Susan asked
24
1 us to consider on appeal documents that were not part of this
2 adversary proceeding but rather were part of Leslie’s
3 contemporaneous motion to substantively consolidate Mihranian’s
4 bankruptcy estate with MCSSG and the four fraudulent transfer
5 defendants. Even if we were to assume that these materials were
6 sufficiently “before” the bankruptcy court to be considered part
7 of the adversary proceeding record (which they were not),
8 consideration of their contents as evidence for purposes of
9 resolving Susan’s Civil Rule 12(b)(6) dismissal motion likely
10 would have converted the defendants’ dismissal motion into a
11 summary judgment motion. See Civil Rule 12(d). We decline on
12 appeal to consider materials that would have converted this
13 matter into a summary judgment proceeding when the bankruptcy
14 court did not do so.
15 Therefore, Susan’s motion seeking to supplement the record
16 with the materials from the substantive consolidation proceeding
17 is hereby ORDERED DENIED.8
18 CONCLUSION
19 For the reasons set forth above, the bankruptcy court’s
20 order dismissing with prejudice Leslie’s third amended complaint
21
8
On the day of oral argument, this Panel delayed the start
22
of oral argument in this appeal by roughly 30 minutes because, at
23 the time this appeal first was called for hearing, counsel for
Leslie was not present. After the 30-minute delay, the Panel
24 proceeded with oral argument. Only counsel for Susan appeared;
no one appeared for Leslie. The Panel effectively submitted
25 Leslie’s position on his appellate briefs and on the record on
26 appeal. Shortly after the completion of oral argument, the Panel
received from Leslie’s counsel an informal telephonic request to
27 continue oral argument. That request is hereby ORDERED DENIED.
The request was untimely and was not presented in a procedurally
28 proper format. See Rule 8013(a).
25
1 is AFFIRMED.
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