Losing Streak Continues for Option Bs : Bankruptcy: Dissident cities and agencies dealt more setbacks as judge first refuses to extend deadline for claim, then rules county is party that can sue broker.

In the latest of a string of legal setbacks they suffered this week, dissidents in Orange County’s ill-fated investment pool failed to persuade a judge to extend Friday’s deadline for filing a critical claim against the bankrupt county.

The coalition of 14 California cities and public agencies, known as the Option Bs, was unable to persuade U.S. Bankruptcy Judge John E. Ryan to delay Friday’s 4 p.m. deadline.

The Option Bs are among thousands of agencies and individuals who must file a proof of claim in Bankruptcy Court, detailing how much money the county owes them.

But the Option B agencies contended through their lawyers that, unlike the thousands of others who have filed claims, they did not have enough information to fully prepare their complaint.

On Thursday, Ryan rejected the argument, saying he was “in doubt as to the real problem facing the Option B participants.”

“It certainly seems to me that there is sufficient information at this point to all Option B participants to file their claim,” Ryan said, adding that the Option B agencies would be able to amend their complaints at a later date.

Bruce Bennett, the county’s bankruptcy attorney, said he was pleased with the judge’s decision. It would ensure the county’s bankruptcy plan will proceed on schedule, Bennett said.

The 14 dissident investors are a small minority of the California cities and public agencies that are parties to the settlement plan. The plan gave pool investors who selected Option B 77% of their pre-bankruptcy deposits and the right to sue for the unpaid 23%.

The vast majority of pool investors surrendered that right when they selected Option A and chose to receive 77% of their deposits plus a series of IOUs for the balance of their money.

The Option B group was dealt a further setback Friday when Ryan, ruling on a case between Merrill Lynch and the county, undermined arguments the dissidents plan to make. Ryan ruled the county was the appropriate party to bring the lawsuit--not individual investors.

“There are a number of problems for some of their theories,” Bennett said after Friday’s hearing.

Three lawyers for the Option B coalition declined to comment on the judge’s ruling, saying they were studying the decision.

Earlier this week, Ryan also rejected the Option B agencies’ request for a “super-status conference,” where the 14 agencies would have discussed their grievances with the county and the judge.

And last week, U.S. District Judge Gary L. Taylor rejected a request by the Option Bs to have their lawsuits against the county transferred from Bankruptcy Court. Taylor said the agencies’ request was premature.

David Brown, an Irvine attorney representing the Option B group, said the agency filed claims Friday totaling about $50 million.

The Option B agencies are: the city of Atascadero; the city of Mountain View; the city of Santa Barbara; the Santa Barbara Redevelopment Agency; the city of Montebello; the Montebello Redevelopment Agency; the Santiago Water District; the city of Milpitas; the city of Claremont; the city of Buena Park; the Buena Park Redevelopment Agency; the city of Yorba Linda; the Yorba Linda Redevelopment Agency, and the Yorba Linda Water District.

Among the estimated 5,000 individuals and agencies that beat Friday’s deadline to file was Orange County’s former chief executive officer, William J. Popejoy.

Popejoy wants reimbursement for $40,000 he paid out of his own pocket to help settle a lawsuit over work done at John Wayne Airport.

The suit had to be resolved before the county was legally allowed to issue recovery notes to cities and schools that lost money in the bankruptcy. Popejoy, a retired millionaire who at the time was working as an unpaid volunteer, wrote the check from his own personal account to unravel the legal tangle.

“I’m sure I’ll be paid, but I’m not going to lose any sleep over it,” Popejoy said. “I’m pleased I was able to do it for the county.”

Even if his claim is paid, however, Popejoy is expected to lose money on the deal. When the legal hitch was discovered, it was unclear exactly how much the construction company was owed, but the $40,000 check covered it.

“It was somewhere in the neighborhood of $39,000. We were in a rush, so I made it for $40,000,” Popejoy said. “I guess the contractor made out on it.”

Times staff writer Rene M. Lynch contributed to this report.