My sister ran across this problem after the 10.9.1 update was applied to her MacBook Pro. The original error manifested as a problem with the “login” keychain. It wasn’t until clearing the login keychain (after making a back up of course) that the “Local items” error was visable.
Removing the keychain directory resolved the issue right away, and restoring the backup of the login keychain allowed her to continue like nothing happened.
I’ve also run into this same problem with my mother’s MacBook Pro, and my work MacBook Pro.