In re: Mardiros Haig Mihranian

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: June 26, 2017
• Docket: CC-16-1379-KuFTa
• Status: Unpublished

Opinion

FILED 1 NOT FOR PUBLICATION JUN 26 2017 2 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-16-1379-KuFTa ) 6 MARDIROS HAIG MIHRANIAN, ) Bk. No. 2:13-bk-39026-BR ) 7 Debtor. ) Adv. No. 2:15-ap-01666-BR ______________________________) 8 ) SAM S. LESLIE, Chapter 7 ) 9 Trustee, ) ) 10 Appellant, ) ) 11 v. ) MEMORANDUM* ) 12 MICHAEL MIHRANIAN, ) ) 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 Michael Mihranian – one of the debtor's sons. 5 The central issue in this appeal is whether Leslie 6 adequately alleged that the debtor Mardiros Haig Mihranian had an 7 interest in the funds allegedly transferred to his son Michael. 8 Unless Leslie alleged sufficient facts that, when taken as true, 9 plausibly demonstrated Mihranian’s interest in the transferred 10 funds, Leslie failed to state a claim for relief under either 11 § 544 or § 548. 12 We agree with the bankruptcy court that Leslie did not 13 allege sufficient facts regarding Mihranian’s interest in those 14 funds. The general “story” in Leslie’s complaint informs us that 15 Mihranian (and his now ex-wife Susan) diverted funds from 16 Mihranian’s wholly-owned incorporated medical practice to the 17 defendants. Leslie has never posited – in the bankruptcy court 18 or on appeal – any viable legal theory why funds diverted from 19 Mihranian’s incorporated medical practice plausibly could be 20 identified as belonging to him as opposed to his corporation. 21 We also agree with the bankruptcy court’s decision to 22 dismiss the third amended complaint with prejudice. In total, 23 Leslie availed himself of four attempts – four opportunities – to 24 state adequate fraudulent transfer claims. In addition, Leslie 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 has admitted that he conducted extensive pre-adversary-proceeding 2 discovery under Rule 2004, which discovery included both 3 depositions and document requests, and has not disputed that he 4 hired professionals who (among other things) were assigned the 5 task of identifying the source of transferred funds. Yet, in all 6 of the versions of his complaint, Leslie never stated a coherent 7 set of facts plausibly identifying Mihranian’s pre-transfer 8 interest in the alleged fraudulently transferred funds. Under 9 these circumstances, the bankruptcy court did not err in 10 concluding that Leslie could not or would not plausibly identify 11 Mihranian’s pre-transfer interest in the subject funds, and thus 12 the court did not abuse its discretion in dismissing the third 13 amended complaint without leave to amend. 14 Accordingly, we AFFIRM. 15 FACTS 16 Leslie’s adversary proceeding initially sought to avoid and 17 recover alleged fraudulent transfers under federal and California 18 law based on §§ 544 and 548 and Cal. Civ. Code §§ 3439.04 and 19 3439.05. This is one of four similarly-pled adversary 20 proceedings. The bankruptcy court dismissed all four with 21 prejudice, and all four are on appeal on identical grounds. Each 22 complaint names a different individual defendant who allegedly 23 received a different series of fraudulently-transferred funds. 24 The history of complaints and responses informs our 25 analysis. Leslie filed his first amended complaint against 26 Michael, without any prompting from the bankruptcy court, within 27 several weeks of the commencement of the adversary proceeding. 28 Michael responded to the first amended complaint by filing a

3 1 Civil Rule 12(b)(6) motion to dismiss. Michael pointed out that 2 Leslie’s fraudulent transfer allegations did little more than 3 state in conclusory fashion the elements for fraudulent transfer 4 claims and did nothing to advise Michael of the specific 5 transactions Leslie claimed constituted fraudulent transfers. 6 The bankruptcy court in large part granted the motion to 7 dismiss. The bankruptcy court dismissed without prejudice 8 Leslie’s fourth claim for relief seeking an accounting and fifth 9 claim for relief seeking disallowance of any proof of claim filed 10 by Michael. The bankruptcy court also dismissed without 11 prejudice Leslie’s first and second claims for relief to the 12 extent they alleged actual fraudulent transfers. To the extent 13 the first and second claims for relief alleged constructive 14 fraudulent transfers, the bankruptcy court’s order on the motion 15 to dismiss merely required more specificity, as follows: 16 On the first and second causes of action in the Complaint for constructive fraud, the claims shall be 17 amended to be pled with more specificity, including, without limitation, the source of the alleged 18 transfer(s), the identity of the alleged transferor(s), the date(s) of the alleged transfer(s), and the amount 19 of the respective transfer(s) . . . . 20 Order re Motion to Dismiss (Apr. 14, 2016) at p. 2. We do not 21 know the reasons the bankruptcy court offered for its ruling 22 because neither party provided us with the transcript of the 23 March 29, 2016 hearing on the motion to dismiss.2 24 25 2 Michael’s motion did not address Leslie’s third claim for 26 relief seeking to recover the alleged fraudulent transfers for the benefit of the estate under §§ 550 and 551. Nor did the 27 bankruptcy court’s April 14, 2016 order. On its face, this claim for recovery of avoided transfers has no independent effect in 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 Michael – 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 Instead, the second amended complaint, in conclusory 19 20 2 (...continued) the absence of a viable claim to avoid the transfers. 21 3 Michael asserts that Mihranian and Susan 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 Michael did not cross-appeal this ruling. We further discuss the issue concerning the couple’s 28 marital status near the end of this decision.

5 1 fashion, identified an aggregate amount of money – $109,700.00 – 2 that “debtor” allegedly transferred to Michael. It is impossible 3 to tell from the complaint what portion of this amount originally 4 was payment for services provided through MCSSG and what portion 5 of this amount (if any) originally was payment for services 6 provided by the two doctors individually – or who held these 7 funds before they allegedly were transferred to Michael. 8 After he received the second amended complaint, Michael 9 contacted Leslie and urged Leslie to provide more specificity 10 regarding the alleged fraudulent transfers. Michael pointed out 11 that the second amended complaint did not specify “the source of 12 the alleged transfer(s), the identity of the alleged 13 transferor(s), the date(s) of the alleged transfer(s), and the 14 amount of the respective transfer(s)” as directed in the 15 bankruptcy court’s April 14, 2016 order. In response, Leslie 16 filed his third amended complaint. 17 There were only one or two significant differences between 18 the second amended complaint and the third amended complaint. 19 Most notably, the third amended complaint added an exhibit 20 providing some detailed information regarding each of the alleged 21 fraudulent transfers. The exhibit – Exhibit A – was entitled 22 “544 Transfers” and itemized in two columns the “Date” of each 23 alleged transfer and the “Deposit” amount of each alleged 24 transfer. Exhibit A did not identify the source of each alleged 25 transfer or the identity of the alleged transferor. Nor is there 26 any way to tell who provided the services generating these 27 28

6 1 funds.4 2 The only other potentially significant change to the third 3 amended complaint concerned the underlying fraudulent transfer 4 statutes on which Leslie relied. Leslie no longer attempted to 5 state a claim for relief against Michael based on § 548. 6 Michael moved to dismiss the third amended complaint. 7 Michael asserted that the third amended complaint did not satisfy 8 the specificity requirement of the bankruptcy court’s April 14, 9 2016 order and also did not satisfy the requirements for pleading 10 claims for relief under Civil Rules 8(a) and 9(b), Ashcroft v. 11 Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 12 550 U.S. 544 (2007). 13 At the hearing on the motion to dismiss the third amended 14 complaint, the bankruptcy court primarily focused on one issue. 15 According to the court, it directed Leslie both at the March 29, 16 2016 dismissal motion hearing and in its April 14, 2016 order to 17 specifically identify the transferor of each transfer. The court 18 explained that it made a big difference whether the source of the 19 fraudulently transferred funds was Mihranian, his former wife 20 Susan, MCSSG, or some other person or entity. The following 21 statement is representative of the court’s comments: 22 I was very specific last time we were here. I wanted you to be specific. Now who actually physically made 23 the transfer at that moment? Was it the Debtor, was it the ex-wife? And that was -- was that -- did you not 24 understand that that was the whole purpose of my order? 25 4 26 Michael argued that Exhibit A incorrectly identified the “deposit” dates instead of the transfer dates, but this argument 27 reads the Exhibit in an overly narrow manner. In any event, the bankruptcy court did not adopt this argument when it dismissed 28 Leslie’s third amended complaint.

7 1 Hr’g Tr. (Sept. 27, 2016) 10:24-11:3. 2 Similarly, the court later on made it clear that it was 3 dismissing the third amended complaint because Leslie did not 4 provide the specific information regarding who was the 5 transferor: 6 THE COURT: But the difference is I have ordered you twice, I think,5 to be more specific as to the Debtor, 7 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 8 didn't do it. 9 MR. ARONSON: Your Honor, I thought that I complied with the Court's order. 10 THE COURT: You're a bright guy. Good lord. I can't 11 imagine that you actually -- if you did, it's tunnel vision, and you really should have asked somebody else. 12 I am going to grant the motion. This is, you know, you 13 -- I made it absolutely clear. You didn't do it. And I am going to dismiss it. 14 15 Hr’g Tr. (Sept. 27, 2016) 30:24-31:11. 16 On October 17, 2016, the bankruptcy court entered its order 17 dismissing with prejudice Leslie’s third amended complaint, and 18 Leslie timely appealed. 19 JURISDICTION 20 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 21 §§ 1334 and 157, and we have jurisdiction under 28 U.S.C. § 158. 22 ISSUE 23 Did the bankruptcy court commit reversible error when it 24 dismissed Leslie’s third amended complaint without leave to 25 amend? 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 STANDARDS OF REVIEW 2 We review de novo orders dismissing complaints for failure 3 to state a claim. See Levitt v. Yelp! Inc., 765 F.3d 1123, 1126 4 (9th Cir. 2014). 5 Denial of leave to amend is reviewed for an abuse of 6 discretion. See Gonzalez v. Planned Parenthood of L.A., 759 F.3d 7 1112, 1114 (9th Cir. 2014). 8 The bankruptcy court abuses its discretion if it applies an 9 incorrect legal standard or its findings of fact are clearly 10 erroneous. Fear v. U.S. Tr. (In re Ruiz), 541 B.R. 892, 896 (9th 11 Cir. BAP 2015). 12 DISCUSSION 13 Leslie contends that the bankruptcy court erred in several 14 different ways when it dismissed his third amended complaint with 15 prejudice. Leslie asserts that the bankruptcy court erroneously 16 determined that the third amended complaint did not satisfy the 17 requirements of Civil Rules 8(a) and 9(b). Leslie further 18 maintains that the bankruptcy court erroneously required greater 19 specificity regarding each of the alleged fraudulent transfers 20 than either of those Civil Rules require. Leslie also contends 21 that the bankruptcy court erroneously denied him leave to amend. 22 We will address each of these asserted errors in turn.6 23 As a threshold matter, it is important to note Leslie based 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.

9 1 all of his fraudulent transfer claims on the theory that 2 Mihranian and his then-wife Susan improperly diverted funds from 3 the couple’s shared medical practice. (3rd Am. Compl. at ¶¶ 7, 4 14, 18.) That is what Leslie said in his third amended 5 complaint, and that is what Leslie repeatedly said in his opening 6 appellate brief. (Aplt. Opn. Br. at pp. 10-11, 26-28.) Leslie 7 has not advanced on appeal any alternate theories or arguments 8 underlying his fraudulent transfer claims, and we decline to look 9 beyond what Leslie actually has argued. See Christian Legal 10 Soc'y v. Wu, 626 F.3d 483, 487–88 (9th Cir. 2010) (declining to 11 address matters not specifically and distinctly discussed in the 12 appellant’s opening brief); Brownfield v. City of Yakima, 13 612 F.3d 1140, 1149 n.4 (9th Cir. 2010) (same). With this 14 limitation on our review in mind, we will turn our attention to 15 the so-called errors Leslie has attributed to the bankruptcy 16 court’s decision. 17 A. Civil Rule 8(a) and Civil Rule 9(b) Pleading Requirements 18 Civil Rule 8(a) requires pleadings to set forth “a short and 19 plain statement of the claim showing that the pleader is entitled 20 to relief.” A claim is the “aggregate of operative facts which 21 give rise to a right enforceable in the courts.” Bautista v. Los 22 Angeles Cty., 216 F.3d 837, 840 (9th Cir. 2000) (citing Original 23 Ballet Russe, Ltd. v. Ballet Theatre, Inc., 133 F.2d 187, 189 24 (2d Cir. 1943)). 25 As the Supreme Court has explained: 26 a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is 27 plausible on its face. . . . A claim has facial plausibility when the plaintiff pleads factual content 28 that allows the court to draw the reasonable inference

10 1 that the defendant is liable for the misconduct alleged. . . . Threadbare recitals of the elements of 2 a cause of action, supported by mere conclusory statements, do not suffice. 3 4 Iqbal, 556 U.S. at 678 (citations and internal quotation marks 5 omitted). The Ninth Circuit Court of Appeals has observed that 6 the Supreme Court has not always applied this plausibility 7 standard consistently. Starr v. Baca, 652 F.3d 1202, 1215–16 8 (9th Cir. 2011). In light of this perceived inconsistency, the 9 Ninth Circuit has refined the standard for determining when a 10 complaint meets the minimum requirements of Civil Rule 8(a), 11 stating as follows: 12 First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not 13 simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts 14 to give fair notice and to enable the opposing party to defend itself effectively. Second, the factual 15 allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not 16 unfair to require the opposing party to be subjected to the expense of discovery and continued litigation. 17 18 Id. at 1216 (emphasis added). Accord Merritt v. Countrywide Fin. 19 Corp., 759 F.3d 1023, 1032–33 (9th Cir. 2014). At bottom, the 20 plausibility analysis is context specific and requires the court 21 to draw upon its experience and common sense. Levitt, 765 F.3d 22 at 1135. 23 One of the fraudulent transfer elements Leslie needed to 24 allege was that property of the debtor was transferred to the 25 defendants. A transfer of the debtor’s property that otherwise 26 would have been property of the estate is a prerequisite for a 27 fraudulent transfer action under § 544. See Geltzer v. Barish 28 (In re Starr), 502 B.R. 760, 767–68 (Bankr. S.D.N.Y. 2013)

11 1 (holding that trustee sufficiently alleged debtor’s property 2 interest); Serra v. Salven, 2011 WL 4627576, at *12 (E.D. Cal. 3 Oct. 3, 2011) (holding that trustee failed to prove for summary 4 judgment purposes that debtor had an interest in the property 5 transferred); see also Wyle v. Rider (In re United Energy Corp.), 6 944 F.2d 589, 593-94 (9th Cir. 1991) (generally stating property 7 interest requirement); Greenspan v. Orrick, Herrington & 8 Sutcliffe LLP (In re Brobeck, Phleger & Harrison LLP), 408 B.R. 9 318, 337 (Bankr. N.D. Cal. 2009) (“both the ‘property’ and 10 ‘transfer’ elements apply whether the claim is one for actual or 11 constructive fraudulent transfer”). 12 Leslie alleged that Mihranian and his then-wife Susan 13 diverted to third parties payments for medical services they 14 provided. If the allegedly diverted medical service fees were 15 owed either to Mihranian or his alleged wife, then Mihranian 16 transferred his interest in those payments by diverting them. 17 See In re Brobeck, Phleger & Harrison LLP, 408 B.R. at 338 18 (holding that debtor law firm’s waiver of potential profits from 19 unfinished legal work constituted a transfer of the law firm’s 20 property within meaning of fraudulent transfer statutes). 21 However, Leslie also alleged that Mihranian and Susan 22 operated through a shared medical practice – an incorporated 23 medical practice – MCSSG. There are no facts alleged in the 24 complaint from which it would be plausible to infer that the fees 25 for services earned by the medical practice would belong to 26 either Mihranian or Susan individually; rather, they would be 27 property of MCSSG. To hold otherwise would ignore the legal 28 separateness of MCSSG. See generally Sonora Diamond Corp. v.

12 1 Superior Court, 83 Cal. App. 4th 523, 538 (2000) (“a corporation 2 is regarded as a legal entity, separate and distinct from its 3 stockholders, officers and directors, with separate and distinct 4 liabilities and obligations.”). 5 Leslie argues on appeal that any fees for services owed to 6 MCSSG actually were owed to Mihranian – MCSSG’s sole owner – and 7 that he alleged sufficient facts in his third amended complaint 8 to justify piercing the corporate veil. The bankruptcy court 9 disagreed with Leslie’s alter ego argument, and this alter ego 10 argument is the only ground Leslie has advanced in the bankruptcy 11 court or on appeal to explain why MCSSG’s funds should be treated 12 as if they were Mihranian’s property. 13 Generally, to pierce the corporate veil, a plaintiff must 14 allege and prove: (1) “such unity of interest and ownership that 15 the separate personalities of the corporation and the individual 16 no longer exist”; and (2) “if the acts are treated as those of 17 the corporation alone, an inequitable result will follow.” 18 Mesler v. Bragg Mgmt. Co., 39 Cal. 3d 290, 300 (1985). There is 19 no single set of underlying facts that always must be alleged to 20 plausibly demonstrate these two criteria; instead, a variety of 21 case-specific facts must be considered to establish the 22 principal’s domination and control over the corporation and to 23 show that immunizing the principal from the corporation’s 24 liability would work an injustice. Id.; see also Lebastchi v. 25 Superior Court, 33 Cal. App. 4th 1465, 1470 (1995). 26 Alter ego has been described as “an extreme remedy, 27 sparingly used,” Sonora Diamond Corp., 83 Cal. App. 4th at 539, 28 and it is to be imposed “cautiously” and “reluctantly.” Highland

13 1 Springs Conference & Training Ctr. v. City of Banning, 244 Cal. 2 App. 4th 267, 281 (2016). More importantly, when imposed, the 3 separateness of the corporate entity is not disregarded for all 4 purposes but only for the purpose and under the circumstances of 5 the case in which it is asserted. Lebastchi, 33 Cal. App. 4th at 6 1470; see also Mesler, 39 Cal. 3d at 301 (“under certain 7 circumstances a hole will be drilled in the wall of limited 8 liability erected by the corporate form; for all purposes other 9 than that for which the hole was drilled, the wall still 10 stands”). 11 Ordinarily, the alter ego doctrine only is invoked to enable 12 a plaintiff to impose corporate liability upon the corporation’s 13 principal(s). See Sonora Diamond Corp., 83 Cal. App. 4th at 538. 14 In fact, at least one California Court of Appeal has held that 15 California law does not permit “outside reverse piercing of the 16 corporate veil” – piercing in order to make the corporation’s 17 assets liable for the debts of the individual shareholder(s). 18 Postal Instant Press, Inc. v. Kaswa Corp. 162 Cal. App. 4th 1510, 19 1522 (2008). That is precisely what Leslie is attempting to do 20 here: claim the assets of MCSSG as if they belonged to Mihranian 21 individually and his bankruptcy estate. 22 Postal Instant Press is carefully reasoned and persuasive. 23 Moreover, we must follow the law of California’s intermediate 24 appellate courts on this point unless we are convinced that the 25 California Supreme Court would decide the issue differently. 26 Goodrich v. Briones (In re Schwarzkopf), 626 F.3d 1032, 1038 (9th 27 Cir. 2010). We are not persuaded that the California Supreme 28 Court would decide this issue differently. Thus, allegations of

14 1 alter ego do not aid Leslie; he cannot establish plausibility 2 through such allegations. Consistent with this fact, Leslie did 3 not adequately plead alter ego. 4 As mentioned above, alter ego is the only legal ground 5 Leslie has advanced to explain why fees for medical services 6 belonging to MCSSG should have been considered Mihranian’s 7 property for fraudulent transfer purposes. To the extent Leslie 8 could have advanced other grounds to support this contention, 9 Leslie abandoned them by not raising them in the bankruptcy court 10 or on appeal. See, e.g., United Student Aid Funds, Inc. v. 11 Espinosa, 559 U.S. 260, 270 n.9 (2010) (“We need not settle that 12 question, however, because the parties did not raise it in the 13 courts below”); Mayor v. Wolkowitz (In re Cinevision Int'l, 14 Inc.), 2016 WL 638729, *7-8 (Mem. Dec.) (9th Cir. BAP Feb. 16, 15 2016) (declining to consider issue that appellants raised for the 16 first time in their reply brief on appeal). 17 In short, fees for medical services owed to MCSSG did not 18 belong to Mihranian – and were not his property – for fraudulent 19 transfer purposes. 20 Leslie’s third amended complaint arguably suggested that, at 21 least some of the time, Mihranian and Susan accrued earnings on 22 their own account. But no factual allegations in the third 23 amended complaint tie these accrued earnings (if any) to the 24 specific alleged fraudulent transfers identified in the 25 complaint. The bankruptcy court attempted to explain to Leslie 26 that the complaint should have identified the alleged source of 27 all fraudulent transfers. Given the other facts Leslie alleged 28 regarding the corporate status of Mihranian’s and Susan’s medical

15 1 practice, we agree with the bankruptcy court and hold that Leslie 2 did not state plausible fraudulent transfer claims in the absence 3 of alleged facts plausibly demonstrating that either Mihranian or 4 Susan had a property interest in the specific funds allegedly 5 transferred. 6 In sum, under Civil Rule 8(a), Leslie needed to allege facts 7 which, if accepted as true, plausibly could have lead to the 8 following inferences: (1) that the funds transferred to Michael 9 were funds in which Mihranian personally had a property interest 10 before they were transferred to Michael; and (2) that Mihranian 11 relinquished to Michael his property interest in those funds by 12 way of those transfers. Leslie did not allege facts that 13 plausibly could support these inferences. Accordingly, the third 14 amended complaint failed to state any viable fraudulent transfer 15 claims. 16 Meanwhile, Civil Rule 9(b) requires fraud to be pled with 17 particularity. Under Civil Rule 9(b), the plaintiff’s 18 allegations must include “‘the who, what, when, where, and how of 19 the misconduct charged.’” United States v. United Healthcare 20 Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016) (quoting Ebeid ex 21 rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 22 2010)). 23 A number of bankruptcy courts have acknowledged that Civil 24 Rule 9(b) does not apply to constructive fraudulent transfers. 25 See, e.g., Seror v. Stone (In re Automated Fin. Corp.), 2011 WL 26 10502417, at *4-5 (Bankr. C.D. Cal. Jan. 25, 2011); Angell v. Day 27 (In re Caremerica, Inc.), 415 B.R. 200, 208 (Bankr. E.D.N.C. 28 2009); Official Comm. of Unsecured Creditors. v. Am. Tower Corp.

16 1 (In re Verestar, Inc.), 343 B.R. 444, 459-60 (Bankr. S.D.N.Y. 2 2006)); see also Sunnyside Dev. Co. LLC v. Cambridge Display 3 Tech. Ltd., 2008 WL 4450328, at *8-9 (N.D. Cal. Sept. 29, 4 2008)(district court ruling holding same). These same decisions 5 hold, however, that Civil Rule 9(b) applies to actual fraudulent 6 transfers because such claims sound in fraud. We question 7 whether all actual fraudulent transfer claims sound in fraud, 8 because the controlling fraudulent transfer statutes state in the 9 disjunctive that an actual fraudulent transfer occurs when the 10 debtor makes a transfer with the actual intent to hinder, delay 11 or defraud. See § 548(a)(1)(A); Cal. Civ. Code § 3439.04; see 12 also Wolkowitz v. Beverly (In re Beverly), 374 B.R. 221, 232 (9th 13 Cir. BAP 2007), aff'd in part and adopted, 551 F.3d 1092 (9th 14 Cir. 2008). We do not see why harboring an intent to hinder or 15 delay your creditors would sound in fraud. 16 That being said, it is unnecessary for us to resolve the 17 issue of when, if ever, Civil Rule 9(b) should be applied to 18 actual fraudulent transfer claims. As a practical matter, under 19 the circumstances of this particular case, what Civil Rule 8(a) 20 requires and what Civil Rule 9(b) would require largely overlap. 21 Put another way, in this instance, the Civil Rule 8(a) standard 22 articulated in Merritt, 759 F.3d at 1033, and the Civil Rule 9(b) 23 standard articulated in United Healthcare Insurance Co., 848 F.3d 24 at 1180, lead to similar pleading requirements. 25 In any event, we already have held that none of the 26 fraudulent transfer claims satisfy the Civil Rule 8(a) standard. 27 Thus, it is unnecessary to determine here whether Civil Rule 9(b) 28 also applies and has been satisfied.

17 1 B. The Bankruptcy Court’s Requirement That Leslie Plead His 2 Fraudulent Transfer Claims With Greater Specificity 3 Leslie’s next contention concerns the bankruptcy court’s 4 April 14, 2016 order and its direction that Leslie must re-plead 5 his constructive fraudulent transfer claims with more 6 specificity, “including, without limitation, the source of the 7 alleged transfer(s), the identity of the alleged transferor(s), 8 the date(s) of the alleged transfer(s), and the amount of the 9 respective transfer(s).” 10 The April 14, 2016 order only stated this requirement as to 11 the constructive fraudulent transfer claims. Even so, when the 12 order is read in conjunction with the court’s comments at the 13 final hearing, it becomes reasonably clear that, when the court’s 14 April 14, 2016 order dismissed without prejudice Leslie’s actual 15 fraudulent transfer claims, the court expected any re-pleading of 16 the actual fraudulent transfer claims to include at least the 17 same level of specificity as the constructive fraudulent transfer 18 claims. Neither party has suggested any other interpretation of 19 the court’s April 14, 2016 order, nor has Leslie argued that he 20 did not realize that the bankruptcy court’s specificity 21 requirement applied to both the actual fraudulent transfer claims 22 and the constructive fraudulent transfer claims. 23 As we have already explained, the third amended complaint 24 did not allege sufficient facts to support a plausible inference 25 that Mihranian transferred any of his own property interests to 26 Michael. The bankruptcy court’s required statement of transfers 27 identifying (among other things) the source of each transfer 28 reasonably was aimed at rectifying this deficiency. Typically,

18 1 identifying the source of the transfer(s) and the identity of the 2 transferor(s) would provide facts from which a court plausibly 3 could infer whether the debtor held a property interest in funds 4 before their transfer. See, e.g., In re Geltzer, 502 B.R. at 5 767–68; In re Caremerica, Inc., 415 B.R. at 208. 6 We acknowledge that Leslie might have employed other methods 7 besides the bankruptcy court’s specificity requirement to satisfy 8 the pleading requirements of Civil Rule 8(a) for purposes of 9 alleging Mihranian’s interest in the alleged fraudulently 10 transferred funds. Even so, Leslie did not in fact plausibly 11 allege Mihranian’s interest in the transferred funds in any way, 12 and the bankruptcy court’s specificity requirement reasonably was 13 aimed at rectifying this deficiency in Leslie’s pleading. 14 Therefore, we conclude that the bankruptcy court did not commit 15 reversible err when it imposed the specificity requirement on 16 Leslie in the April 14, 2016 order. 17 C. Dismissal Without Leave To Amend 18 Leslie also contends on appeal that the bankruptcy court 19 should have granted him leave to amend his complaint. Generally 20 speaking, courts should not deny leave to amend unless the court 21 determines that amendment would be futile. See Ebner v. Fresh, 22 Inc., 838 F.3d 958, 963 (9th Cir. 2016); Lacey v. Maricopa Cty., 23 693 F.3d 896, 926 (9th Cir. 2012) (en banc).7 24 25 7 To be clear, different standards (other than futility) 26 apply when the bankruptcy court dismisses with prejudice an adversary proceeding as a sanction based on plaintiff’s 27 noncompliant or dilatory conduct. See generally Lee v. Roessler–Lobert (In re Roessler-Lobert), 567 B.R. 560, 568-73 28 (continued...)

19 1 That being said, the trial court has broad discretion in 2 deciding whether to grant leave to amend, especially when (as 3 here) the plaintiff already has been given multiple opportunities 4 to amend its complaint. See Gonzalez, 759 F.3d at 1116 (citing 5 Miller v. Yokohama Tire Corp., 358 F.3d 616, 622 (9th Cir. 6 2004)). 7 Gonzalez is instructive. There, the Ninth Circuit Court of 8 Appeals affirmed the district court’s dismissal of Gonzalez’s 9 third amended complaint without leave to amend. Id. In the 10 process of holding that the district court did not abuse its 11 discretion in denying leave to amend, the Court of Appeals relied 12 on two things: (1) Gonzalez’s failed multiple attempts to state 13 viable claims for relief; and (2) the fact that certain 14 attachments to Gonzalez’s complaint “defeated the plausibility of 15 his allegations.” Id. 16 Similarly, here, Leslie’s focus in his complaint on the 17 alleged diversion of funds from an incorporated medical practice 18 undermined the plausibility of his allegations that Mihranian had 19 a property interest in the alleged fraudulently transferred 20 funds. 21 Furthermore, Leslie, like Gonzalez, had a history of 22 multiple failed attempts to state viable claims for relief. 23 Leslie’s third amended complaint was his fourth attempt to state 24 his fraudulent transfer claims. Leslie has not disputed that he 25 7 26 (...continued) (9th Cir. BAP 2017) (describing other standards). Here, however, 27 Michael 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 filed his first amended complaint and his third amended complaint 2 after discussions with the defendants regarding the insufficiency 3 of his fraudulent transfer allegations. Additionally, the 4 bankruptcy court reviewed two of Leslie’s four complaints, and 5 the court correctly determined that neither stated plausible 6 fraudulent transfer claims. After the first of the bankruptcy 7 court’s two reviews, the court ordered Leslie to allege more 8 specific facts regarding the subject transfers, which order 9 reasonably was aimed at identifying whether Mihranian plausibly 10 had an interest in the alleged fraudulently transferred funds. 11 Nonetheless, Leslie did not comply with the court’s order, nor 12 did Leslie otherwise adequately address the court’s concern 13 regarding identification of Mihranian’s interest in the 14 transferred funds. 15 Leslie’s failure to do so is particularly inexplicable here 16 because he admitted to conducting extensive pre-litigation 17 discovery in the form of Rule 2004 examinations – consisting of 18 both depositions and voluminous document production requests – 19 focusing on the transfers in question. Nor has Leslie disputed 20 Michael’s assertion that Leslie hired professionals who (among 21 other things) were assigned the task of identifying the source of 22 the transferred funds. Simply put, this is not a situation where 23 the plaintiff lacked an opportunity to obtain sufficient 24 information to plead his claims with more specificity. 25 Under these circumstances, the bankruptcy court did not err 26 when it determined that Leslie either could not or would not 27 plausibly allege Mihranian’s interest in the transferred funds. 28 Accordingly, dismissal without leave to amend was not an abuse of

21 1 discretion. 2 D. Other Issues: Community Property, Statute of Limitations 3 and Request to Supplement The Record 4 There are a few additional issues we should address. First, 5 Michael claims that Leslie did not sufficiently allege 6 Mihranian’s community interest in any funds Susan received on 7 account of medical services Susan provided on her own account. 8 To the extent Mihranian had a community interest in funds in 9 which Susan held a right to payment, the receipt of those funds 10 by Michael could have constituted a transfer of the debtor’s 11 interest in property for fraudulent transfer purposes. See 12 In re Beverly, 374 B.R. at 233. 13 Ultimately, the bankruptcy court seemed to decide this issue 14 in favor of Leslie, and Michael did not cross-appeal from this 15 ruling. Regardless, under California law, whether Mihranian and 16 Susan actually were separated in and after 1998 as Michael claims 17 was a question of fact necessary to determine whether and when 18 they ceased to accrue community property under Cal. Fam. Code 19 § 771(a). See In re Marriage of Manfer, 144 Cal. App. 4th 925, 20 930 (2006). Leslie effectively alleged that Mihranian and Susan 21 continued to work together, that they continued to live together 22 in the same residence, and that neither intended a permanent and 23 final cessation of their marriage; rather, according to Leslie, 24 the couple feigned separation in 1998 as part of a scheme to keep 25 Mihranian’s assets away from his creditors. These facts were 26 sufficient to allege that Mihranian and Susan were not, in fact, 27 separated and continued to accrue community property in and after 28 1998. See generally id.

22 1 Even so, under the circumstances of this appeal, the issue 2 of whether the fees for services were Susan’s property or 3 Mihranian’s property largely is a red herring. The more 4 important questions – questions that Leslie never answered – 5 were: (1) why funds allegedly diverted from the couple’s shared 6 medical practice were property of the debtor as opposed to 7 property of MCSSG; and (2) how the so-called sham separation 8 advanced Mihranian’s and Susan’s diversion scheme when Leslie’s 9 complaint indicated that both Mihranian and Susan were judgment 10 debtors to one or more of the judgment creditors named in 11 Leslie’s complaint. 12 Another issue we should address concerns the statute of 13 limitations applicable to actual fraudulent transfers under 14 California law. The applicable statute provides in relevant 15 part: 16 (a) Under paragraph (1) of subdivision (a) of Section 3439.04, not later than four years after the 17 transfer was made or the obligation was incurred or, if later, not later than one year after the transfer or 18 obligation was or could reasonably have been discovered by the claimant. 19 20 Cal. Civ. Code § 3439.09(a) (emphasis added). 21 The bankruptcy court opined that, to the extent Leslie 22 sought to avail himself of § 3439.09(a)’s “discovery rule,” 23 Leslie should have alleged that the fraudulent nature of the 24 transfers reasonably could not have been discovered earlier. 25 Leslie’s opening appeal brief does not mention let alone 26 address the statute of limitations issue. On this basis alone, 27 we could decline to address this issue. Christian Legal Soc'y, 28 626 F.3d at 487–88; Brownfield, 612 F.3d at 1149 n.4.

23 1 In any event, for purposes of this appeal, suffice it to say 2 that Leslie could not have properly invoked this discovery rule 3 unless he alleged facts plausibly tending to demonstrate that the 4 fraudulent nature of the transfers was not discovered earlier and 5 reasonably could not have been discovered earlier. See Denholm 6 v. Houghton Mifflin Co., 912 F.2d 357, 362 (9th Cir. 1990); Sun 7 'n Sand, Inc. v. United Cal. Bank, 21 Cal. 3d 671, 701-02 (1978); 8 see also Ezra v. Seror (In re Ezra), 537 B.R. 924, 933 (9th Cir. 9 BAP 2015) (“the one-year period under Cal. Civ. Code 10 § 3439.09(a)’s discovery rule does not commence until the 11 plaintiff has reason to discover the fraudulent nature of the 12 transfer.”) 13 The final issue we should address concerns Michael’s request 14 to supplement the record on appeal. In this request, Michael 15 asked us to consider on appeal documents that were not part of 16 this adversary proceeding but rather were part of Leslie’s 17 contemporaneous motion to substantively consolidate Mihranian’s 18 bankruptcy estate with MCSSG and the four fraudulent transfer 19 defendants. Even if we were to assume that these materials were 20 sufficiently “before” the bankruptcy court to be considered part 21 of the adversary proceeding record (which they were not), 22 consideration of their contents as evidence for purposes of 23 resolving Michael’s Civil Rule 12(b)(6) dismissal motion likely 24 would have converted the defendants’ dismissal motion into a 25 summary judgment motion. See Civil Rule 12(d). We decline on 26 appeal to consider materials that would have converted this 27 matter into a summary judgment proceeding when the bankruptcy 28 court did not do so.

24 1 Therefore, Michael’s motion seeking to supplement the record 2 with the materials from the substantive consolidation proceeding 3 is hereby ORDERED DENIED.8 4 CONCLUSION 5 For the reasons set forth above, the bankruptcy court’s 6 order dismissing with prejudice Leslie’s third amended complaint 7 is AFFIRMED. 8 9 10 11 12 13 14 15 16 17 18 19 20 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 Michael 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).