Blix v YMC App # 52 | 12-35986 | Blixeth Emerg Motion w Exhibits

8/20/2019 Blix v YMC App # 52 | 12-35986 | Blixeth Emerg Motion w Exhibits

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IN THE UNITEP STAYES COURT OF APPEALS0R

THE NINTH CIRCUIT

NO. 12-35986

R E c # l v E DIMOTHY L

.

BLIXSETH vouy c.pwysajcjrj

S. COURT OF A

Appellant,

A tJS 1 2 2213

FILED

owsToxs MOUNTAIN CLIJB îUXTED nvE INIzELL

YELLOWSTONE DEVEOPMENT, lLC

BIG SKY RIDGE, LLC

YELLOWSTONE CLUB CONSTRUCTION CO., LLC

Appellees.

EMERGENCMMOTION UNPER CIRCUIT RULE 27'3 TO STAY

PROCEEDINGS

Appeal from the United States District Court for the District of

Montana

Michael J. Flynn

P.O. Box 690

Ranoho Santa Fe, CA 92067

Telephone: (858) 775-7624

[email protected]

Case No. 2:11-73-BU-SEH

Christopher J. Conant

Conant Law LLC

730 17t11 Street

Suite 200

Denver, CO 80202

Telephone: (303) 298-1800

[email protected]

Phillip H, Stillman Michael J. Ferrigno

Stillman & Associates Law Ofice of Michael Ferrigno,

300 South Pointe Drive, PLLC

Suite 4206 1200 N. Main Street, Suite 486

Miami Beach, FL 33 139 Meridian, ID 83680

Telephone: (888) 235-4279 Telephone: (208) 319-3561

[email protected] michael#rrignoWerrîgno-law.com

Attorneys for Appellant Timothy L. Blixseth

T EXHI8IT

=

l

I

Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 1 of 228

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Circult Rule 27-3 Certificate

Identifcation of other Parties:

YELLOWSTONE MOUNTAIN CLUB,

LLC

Appellee,

James A, Patten, Attorney General

Direot: 406-252-8500

Patten, Peterman, Beltkedahl & Green,

PLLC

Suite 300

2817 2nd Avenue Nqrth

Billings, MT 59101

Ronald A. Bender, Attorney

Direct: 406-721-3400

Worden Thane, P.C.

1 11 N. Higgins

P.O, Box 4747

Missoula, MT 59806

Benjamin P. Hursh, Attorney

Direct: 406-523-3600

Crowley Fleck, PLLP

305 South 4th Street East

Suite 100

Missoula, MT 59801

AD HOC GROUP OF CLASS B UNIT

HOLDERS

Appellee,

CIP SUNRISE RIDGE ONVNER LLC

Appellee,

CIP YELLOWSTONE LENDING LLC

Appellee,


Direct; 406-523-3600

(see above)


Direct: 406-523-3600

(see above)

Michael R, Lastowski, Bsquire,

Bankruptcy Counsel

Dired: 302-657-4900

Duane Morris LLP

Suite 1600

222 Delaware Avenue

CROSSHARéOR CAPITAL

PARTNBRS LLC

ppellee,


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Wilmington, DE 19810

Robert R. Bell

MULL ,N HOARD Ar BROWN

50O south Taylor

Amarillo, TX 79120-1656

Shane P. Coleman, Esquire, Attorney

HOLLAND & HART, LLP

401 North 31st Street

P.O. Box 639

Billings, MT 59103-0639

MARC S. KGSCHNER

Appenee,

Charles William Hingle, 1, Esquire,

Attorney

HOLLAND & HART, LLP

401 North 31st Street

P,O. Box 639


Evan R. Levy, Attorney

Direct: 212-735-3889

Skaddeny,Aps, Slate, Meagher & Flom

LLP

Four Times Squaze

New York, NY 10036

CREDIT SUISSE AG, CAYMAN

ISLANDS BRANCH

Appellee,

J. Richard Orizotti, Attorney

Direct: 406-497-1200

POORE ROTI-I & ROBINSON

1341 Hanison Ave.

Butte, MT 59701-4898

George A, Zimmennan, Esquire,

AttorneyDirect: 212-735-2000

Skadden, Arps, Slate, Meagher & Flom

LLP

212-735-3000


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Four Times Square

New York, 'NY 10036

The facts showing the existence of the nature of the claimed

emergency are set forth below in thisMotion but in short, the

emergency requiring definitive action by this Court within 21 days is:

(1) that bankruptcy judge Ralph B. Kirscherof the U.S. Bankruptcy

Court for the District of Montana has set an evidentiary hearing before

himself for September 10, 2013 in which evidence of his own judicial

misconduct/corruption will be preéented foz which he will be the finder

of fact of his own misconduct. This is a

these same faots m'e the subject of a still-pending Complaint of Judicial

patently absurd scenario while

Misconduct that M<. Blixscth submitted three months ago; and (2) Judge Kirscher

entered a $40 million judgment against Mr. Blixseth in favor of the Yellowstone

Club Liquidating Trust (SKYCLT'') which it is seeking to enforce, yet the

beneficiaries of the YCLT are the same parties who have participated

in Judge Kirscher's judicial misconduct to improperly benefit

themselves in their pursuit of Mr. Blixsoth, as demonstrated in the

evidence supporting the judicial misconduct complaint.


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These apparent gross deprivationsof Mr

Blixseth's due process rights

through judicial misconduct based on the documented and authenticated evidence

submitted to this Coul't in connection with Mr

Blixseth's Complaint of Judicial

Misconduct, together with Judge Kirscher's directchallenge to this Court's

appellate jurisdiction in the pending appeal of the Motion to Disqualify is per se

irreparable harm justifying emergency relief at least until such time as the

Complaint of JudicizMisconduct is acted upon by theChief Judge under 28

U.S.C. jj 352 or 353.

Counsel for the other pal-ties havellot been ' notifed of this Emergency

Motion or the grounds for this Emergency Motion because of concerns by Mr

Blixseth's counsel of running afoul of any confidentiality requireluent imposed by

28 U.S.C, # 360 due to the fact that tllis Emergency Motion is based, in part, and

related to the pending Complaint of Judicial Misconduct pendiag as Case No

.

13-

90073.

For the same reasons, the relief sought inthis Motion was unavailable

pending Complaint of Judicialecause the basis, in part, pertains to the still

Misconduct that Mr. Blixseth submitted thrce months ago; thus

,

neither the district

coul't nor the banluuptcy court has any jurisdiction to adjudicate this Motion since


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only this Court has jurisdiction to hear Mr. Blixseth's Complaint of Judicial

Miscondud.

con't on next page


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MOTION

Appellant, Mr. Blixseth, herebysubmits this Elnergency Motion to Stay

Proceedings pursuant to Circuit Rule 27-3) and his request for a hearing before the

Chief Judge pursuant to F.R.A.P. 27(e). This relief is based, in part, on a recently

discovered email account and professional relationship maintained by a Montana

banknlptcy judge, whose conductis at issue in this pending appeal, and Mr.

Blixseth's adversaries.

This recently discovered evidence was submitted to this Court pursuant to 28

U.S.C. j 351 on July 8, 2013, (Exhlbit 1 attached). This evidence, is in addition to

other evidence of judicial misconduct previously submitted to this Court pursuant

to 28 U.S.C. j 35l and which has been under submission since May 3, 2013. See

Case No. 13-90073.It was first stlpplemented on June 3, 2013, again on July 8

,

2013 alld then again on August 1, 2013.

Just nine days aqer the July 8, 2013 sublnission to this Coul-t

on July 17,

2013, in an apparent procedural maneuver to undermine some of the submitted

evidence, the Montaaa bankruptcy judgescheduled an evidentiary hearing fo<

September 10, 2013, before himselfwhere the critical gswc ;b' his own credibility,

and the credibilip of a witness whose sef-serving interests are directlk aligned

with the interests ofthe bankruptcyjudge.The scheduled September 10 hearing is

1


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based on Mr. Blixseth's motion to vacate the AP 14 judgment ûled on December

19, 2012, under Federal Rule of Bankruptcy Procedure 9024

,

(Ru1e 60 (b)(6)),

predicated on the judge'sjudicial misconduct reoited in the May 3, 2013

submission to this Court pursuant to 28 U.S.C. j 351.ln consideration of the

newly discovered evidence both in the June 3, 2013 submission and the July 8

,

2013 submission pursuant to 28 U.S.C. j 351, and based on the facts recited

herein, Mr. Blixseth respectftllly requests emergency Telief.

Mr. Blixseth hereby cel-tifies that the requested l-elief is needed in less than

21 days to avoid irreparable harm asdue process deprivations generally inflict

in'eparable harm per se.Goldie 's Bookstore, Inc

.

v. Superior Court of State of

Cal., 739 F.2d 466, 472 (.th Cir. 1984)

Relief Requested: Mr. Blixseth l'equests that this Com4 stay al1 litigation and

judgment enforcement effortsbeing pursued against him and his assets by the

Yellowstone Club Liquidating Trust; and to stay all proceedings currently pending

before Judge Ralph Kirscher,

scheduled for September 10, 2013.

1.

Montalla banklmptoy judge, including the heating

GROUNDS FOR RELIEF

A. Factual Background

ln November, 2008, Crossllarbor Capital Partners and Edra Blixseth put the

Yellowstone Club into a Chapter 1 1 banlu-uptcy in the Montana banklmptcy oourt


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Crossllarbor and Edra Blixseth, as well as Credit Suisse and Mr. Blixseth's former

lawyer, ultimately proposed a plan of reorganization that had CrossHarbor

purchase the Club for only $1 15 million, free and clear. Ten months earlier,

Crossl-larbor had contracted with Mr.Blixseth to purchase the Club for $455

lnlilli ()z1

This Emergency Motion is made in connection with two pending appeals in

this Court from the orders of theU.S. Bankluptcy Court fo< the District of

Montana (Kirscher, J.) (dcMontana banlcruptcy courf'): (1) the order contil-ming the

Third Amended Plan of Reorganization ((T1an'') of the Yellowstone Mountain

Club, LLC et al (ïdDebtors'') (Ninth Circuit Case No. 13-35190); and (2) order

denying Appellant's Motion fol' Disqualiûcation of Judge Kirscher (.Ni1lth Ckcuit

Case No, 12-35986), as well as the pending Complaint of Judicial Misconduot Gled

by Mr. Blixsetlt, Case No. 13-90073.

B. The Plan

The order of the Montana bankruptcy court contirming the Plan presently on

appeal is dated September 30, 201 1.Ilowever, prior to Judge Kirscher approving

1 These facts and much mol-e are extensively detailed and supported with

documentary evidence in the Offer of Proof that Mr, Blixseth submitted in the

proceedings below and which are part of the record in this appeal. See Mr.

Blixseth's Excerpts of Record, BR 3461-4779, Case No. 13-35190; see also Mr

Blixseth's Opening Brief filed in Ninth Circuit Case No. 12-35986, DktEntry 13-1

,

PP. 9-11.

3


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the Plan on September 30, 201 1, Judge Kirscher had approved the exact same plan

on June 2, 2009. Mr. Blixseth appealed (YMC I appeal) that June 2, 2009 order

because, amongst other reasons, the Plan was approved without appropriate notice

and contained an exculpation clause that releasednumerous parties (including

Credit Suisse, CrossHarbor Capital Partners LLC

,

Mr. Blixseth's former attorney

and 1aw frm, and Mr,Blixsdh's ex-wife) fromal1 liability to any third party

(including Mr. Blixseth). Blixseth v. Yellowstone Mountain Club, LLC, No. CV-

09-47-BU-SHE, 2010 WL 4371368 (D. Mont. Nov. 2, 2010). On November 2

,

2010, the U.S. District Court for the District of Montana granted Mr

Blixsdh's

appeal and reversed and remanded the Plan because the exculpation clause in the

Plan violated Ninth Circuit law. Id.

Upon remand, however, Judge Kirscher re-approved the Plan with the exact

same exculpation clause that the District Court previously threw out for Cçplain

enor.'' Indeed, Judge lcirscher simply disagreed with the appellate mandate from

the District Court that the exculpation clause violated Ninth Circuit law

. In re

Yellowstone Mountain Club, LLC, 46O B

.

R. 254, 277 tBankr. D. Mont. 20 1 1).

Mr. Blixseth appealed again to the District Court (YMC 11 appeal), but this

time the District Com-t dismissed Mr

Blixseth'sappeal for lack of appellate

exculpation clause languagetanding. The District Court said that: <d-f'he Plan's


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neither creates noT imposes liability on him.He is bevond the nmbit of its reach

ynd appliçation.'' Ex.2, p. 4 (emphasis added). Yet just nlne days later the Judge

Kirscher Tuled that Mr. Blixseth had no legal malpractice and bTeach of fiduciary

duty claims against his former attorney, Stephen Brown and his 1aw firm because

the exculpation clause in the re-apmoved Plan released Mr. Brown of liability to

èMi-. Blixseth. Ex. 3, p. 1 1 .

Mr. Blixseth appealed the YMC 11 order to this Cou14.2

When the Plan was initially confirmed in June of 2009, the Plan called for

the creation of the Yellowstone Club Liquidating Trust (tVYCLT'') to pursue Mr.

Blixseth as the sole litigatioa target for Tepayment of over $280 lnillion to the

unsecured creditors,See Ninth Cir. Case No., 12-35986, Dkt Enrty 26-1, p. 20

.

As admitted by Crossl-lalbor's principal at the outset of the bankruptcy, the plan

even befol'e the banluuptcy was ftled was to ttset up'' M<. Blixseth. Ex. 4, p

.

3.

Aocordingly, the YCLTtook over and initiated a host of litigation against M1'.

Blixseth in the U.S. Banlcuptcy Court for the District of Montana as well as the

2 Mr. Blixseth is also currently appealing Judge Kirscher's order that

purportedly applied the exculpation clauses in favor of Mr. Brown.

That appeal is currently before Judge Haddon in the District Court for

the District of Montana. However, a motion for direct certification of

that order is currently pending before Judge Haddon. A hearing on the

certification motion is set for August 9, 2013. See Tlh?othyL. Blixseth

Tz. Stephen .&. Brown, et a1, Mont. D. Case No. CV-13-32-BU-SEH, Docs

5) 6, 14, 19, and 22.

5


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U,S. District Court for the Central District of Califolmia. Judge Kirscher is the sole

active banluuptcy judge in Montana and is the presiding judge over a1l cases in

Montana described herein,

C. Cases in which Mr. Blixseth is Being Sued Pursuant to the

Plan

The cases in which the YCLT is currently suing Mr. Blixseth and his assets

are identiûed as follows:

1. Adv. Case No. 09-14, Montana banknptcy com't (Ex. 5);

2. Adv. Case No. 09-18) Montana bankluptcy court (Ex.6);

Adv, Case No. 10-159 Montana bankruptcy court (Ex. 7),.

4. Adv. Case No. 09-64; Montanaballlu-uptcy court (Ex. 8);

Case No. CV-11-08283; U.S. District Cotu-t for the Central District of

California (Ex. 9).

On December 5, 2012, Judge Kirscher entered a$40 million judgment

against Mr. Blixseth in favor of the YCLT in Adversry Case No

.

09-14 (CCAP-

14',). fn rc Yellowstone Mountaln Club, LLC, Adv. No. 09-00014, 2012 WL

6043282, at *9 tBanlfT. D, Mont. Dec. 5, 2012).Twenty-two million dollars of that

judgment was for the plaintiffs in adversal'y case No. 09-18,3 thereby depiving

3 In that case, YCLT contends that it is entitled to a percentage of the

very distribution that it contended - and Judge Kirscher ruled -- in AP

09-14 was a fraudulent conveyance

6


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Mr. Blixseth of a trial in that case.The YCLT'S other cases against M1'. Blixseth

remain pending.

The YCLT'S

became enforceable because it was stayed for 14 days pursurt to F.R.B.P

.7062

Deoember 5, 2012 judgment against Mr. Blixseth never

and before that periodlapsed, the Bankruptc,yAppellate Panel reinstated an

involuntary bankruptcypetition filed against Mr. Blixseth by the Montana

Department of Revenue on Deoember 17, 2012 and therefore further stayed

enforcement of the December 5, 2012 judgment in AP-14 as well as all the other

litigation the YCLT was prosecuting against Mr. Blixseth.See In re Blixseth, 484

B.R. 360 (9th Cir. BAP 2012).

On July 10, 2013, the U.S. Banluuptoy Cou14for the Distl-ict of Nevada

dismissed the involuntary petition filed against Mr.

Blixseth. Ex. 10.4

Accordingly, the automatic stay of jroceedings and judgment enforcement efforts

against M1'. Blixseth is now dissolved.

4 The Montana Department of Revenue and the YCLT prosecuted the

involuntary bankruptcy petition. It was unprecedented for the State of

Montana to fkle an involuntary bankzuptcy petition against any

taxpayer. The State of Montana asserted that Mr. Blixseth

ûdundisputedly'' owed the State $219,000 in incomes taxes even though

in on-going litigation the State of Montana was seeking over $56 million

income taxes from M1'. Blixseth. Judge Marltell appropriately saw that

the State of Montana's assertion was merely pretext for the State to try

to collect the $56 million that is presently being litigated in the State of

Montana's tax court.


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Therefore, * . Blixseth fully expects the YCLT to now enforce its

December 5, 2012 judgment and to continùe its prosecution of its litigation against

him, including a11 litigation before Judge Kirscher

6 Judge Kirscher has recently

scheduled an evidentiary hearing on September 10

,

20 13 on a pending motion to

vacate the M7-14 judgment pursuant to Federal Rule of Banlaptcy Procedure

9024 predicated on the evidence of judicial znisconduct recited in the May 3

,

2013

submission to this Court pursuant to 28 U

.

S.C. j 351. Ex. 11 attached. This

evidence was discovered and submitted to Judge Kirscher on December 19

,

2013

after his prior ruling on the Motion toDisqualify now on appeal to this Court

.

Ninth Circuit Case No.12-35986

.

That appeal pending before ihis Court deprives

Judge Kirscher of jurisdiction toconduct the September 10, 2013 evidontiary

hearing which is also predicated on his misconduct and duty to recuse himself

.In

re Combîncd Metals Reduction Co

.,

557 F.2d179, 201 (9th Cir. 1977) (a

5 The YCLT has

Blixseth's

enforcement of the judgment.

Mach. tf' Iron WWzWs, lhc., 803 F

.

2d 794, 797 (4th Cir, 1986) (tïWhere the

prevailing party in the lower court appeals from that court's judgment

,he appeal suspends the execution of the decree

.

'') (citing Bronson g. La

Crosse R.R. Co., 68 U.S. (1 Wall.) 405, 410, 17 L.Ed. 616 (1863)9 Price v

Frankhà Investment Co., 574 F

.

2d 594, 597 (D.C. Cir. 1978); Luther z.

United States, 225 F.2d 495

,497 (10th Cir. 19559; Sealover lc Carey

Canada, 806 F,supp. 59, 62 (M.D. Pa. 1992).

Tennessee ValleyAuihority Tc Atlas

cross-appealed the AP-14 judgment. lt is Mr.

position that the YCLT'Scross-appeal acts to stay

8


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bankrttptcy court lacks jurisdiction to enter an order on an issue that would

elilninate the need to resolve a pending appeal).

D. Disqualification Motion

After several years of being the sole litigatiolz target before Judge Kirscher

and after tearning of numerous cz: parte communications that Judge Kirscher and

his law clerks had with his adversaries,

improprieties recited in the Motion to Disqualify now on appeal

,

coupled with a

coupled with additional judicial

flagrant denial of due process in entering a $22 million award in a judgment in one

adversary case - A.P-14, thereby denying Mr

Blixseth of a trial in at least one

other adversary case, AP 18,6

Kirscher pursuant to 28 U.S.C. j 455.

Mr, Blixseth filed a motion to disqualify Judge

After holding a non-evidentiary hearing, Judge Kirscher assessed his own

credibility and denied the Disqualifcation Motion but in doing so

,

he admitted to

numerous ex parte comnaunications with Mr. Blixseth's adversaries; and

,

he

simply disregarded additional documented and undisputed c

x parte email

communications that unequivocally demanded his recusal

Mr. Blixseth is

presetltly appealing Judge Kirscher's deniat of the Disqualification Motion to this

Court (see Ninth Circuit Case No. 12-35986) and that appeal is fully briefed as of

July 18, 20 13.

6 See infra.


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Amongst the 111Et1))?documented grounds requiring Judge K

-irscher's

disqualifcation of which Mr, Blixseth was aware in 2011 were the following:

1. Judge Kirscher entertained ftconfidential'' çiheads up'' colnmunications

about f'uture cases from lead local counsel for the Yellowstone Club

,

Andy Patten;

2. Judge Kirscher presided over ex parte settlement negotiations in a

hotel with CrossHarbor, Credit Suisse and the Yellowstone Club debtors (with

Andy Patten ag counsel), in which these parties agreed to a plan of reorganization

that made Mr. Blixseth the sole litigation target of the plan

,

while exculpating

themselves, th at called fo'r Judge Kirscher to enter hundreds of millions of dollars

in judgments against Mr, Blixseth for the plan to be successful; i.e., to pay these

same parties from multi-million dollar judgments against Mr. Blixseth entered by

Judge Kirscher. Mr. Blixseth was not made awareof nor invited to these

settlement negotiations presided over by Judge Kirscher in a hotel in which Mr

Blixseth was made the target of the plan; and the judge permitted the other parties

to be exculpated from claims Mr. Blixseth had against them.

3. Judge lfirscher entered a $40 million judgment against Mr, Blixseth

admittedly without affording Mr. Blixseth any oppoTtunity to respond or be heard

,

10


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The list goes on and is set forth in detail with reference to the record in Mr

Blixseth's Opening and Reply briefs in Ninth Circuit Case No

.12-35986, al1 of

which is incorporated herein by reference.

However, silce Judge Kirscher denied the Disqualitkation Motion

,

Mr.

Blixseth has become aware of even more disqualifying facts proving Judge

Kirscher's actual bias and judicial misconduct (discussed infra) that compel the

stay of a11 proceedings involving Mr. Blixseth.

When Mr. Blixseth became aware of and had sufûciently authenticated the

evidence, he immediately filed a motion under Federal éule

Procedure 9024 (Ru1e 9024 Motion) in A.17-14 to vacate the $40 million judgment

of Bankmptcy

that Judge Kirscher had entered against him.A copy of that motion and supporting

Because the evidence submitted ineply brief are attached hereto as Exhibit 1l.

support of the Rule 9024 Motion directly implicated Judge Kirscher in blatant

judicial miscondud, Mr. Blixseth reasonably assumed that Judge lfirscher would

not be the judge tohear and decide the evidence as it deties a1l notions of due

to act as his own jury when presented with evidence of hisrocess for a judge

corruption. However, on July 17, 20l 3, Judge Kirscher set an evidentiary hearing

on the Rule 9024 Motion to be held on September 10, 2013 (Ex. 11); and because

he is the sole active banlu-uptcy judge in Montana, itappears Judge ltirschel'


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intends to preside over the trial of his own conuption

.This appears to conform to

Montana's own brand of nUw judicially recognized corruption by the Montana

Supreme Court. Western Traditîon Partnershè, Inc. v, Attorney General ofstate,

271 P.3d 1, 8-10, 12-13 (Mont. 2011).

E. Grounds for Emergency Relief

Mr. Blixseth seeks emergency relief in this Court to stay implementation of

the Plan insofar as the PINA contemplates and authorizes the YCLT'S prosecution

of litigation and judgment collection against Mr. Blixseth; and in connection with

a11 proceedings cun-ently pending before Judge Kirscher

.

seeks an order from this

Such relief therefore

Court staying a11 litigation in the above-referenced

lawsuits against Mr. Blixseth as well as staying any effort by the YCLT to enforce

the December 5, 2012 judgment against Mr. Blixseth.

As the basis for such relief, Mr. Blixseth has recently discovered additional

evidence indicating that Judge Kirscher has engaged in egregious judicial

impfopriety amounting to constitutional deprivations of due process directed

toward Mr. Blixseth. Capterton v. z4.Z Massey Coal Co

.,

Inc., 556 U.S. 868, 883-

884 (2009) (Due Process Clause requires the appearance of judicial impartiality);

Lileberg v. HeaIth s'crvfcc.î Acquisition Corp., 486 U.S. 847, 864-869 (1998). This

evidence is in addition to the evidence recited in the briefsand record in Ninth

12


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Circuit Case No. 12-359869 and is presently beforethe subject of pending

Complaint of Judicial Misconduct submitted pursuant to 28 U.S.C.j 351.

(1) Internal Documents Retrieved from Edra Blixseth's

Computers

ln December of 2012, Edra Blixseth authenticated a document referring to

Judge ltirscher and the YMC banlmlptcy wherein she stated, ddlkemember we have

added help there from the BK Judge who loves us, and hates Tim (Blixsethl and

Mike Flynn,

help us.'' Exhibit 13.7,

Either way, SB and BS have things in place in that courtroom to

In her testimony, Edra Blixseth identifies <$SB'' as a

reference to Sam Byrne, principal of Crossl-larbor.Mr. Blixseth believes that <%S''

refers to then Montana Governor, Blian Schweitzer. The statement in this

document that C'SB'' and CIBS'' çfhave things in place in that courtroom to help us''

is evidence that Byrne, who ultimately purchased the Club out of the bankmptcy at

a 75% disoount to what he had contracted to purchase the Club a year earlier with

the approval of Judge Kirscher after exparte discussions with him, has improperly

influenced Judge Kirscher.Moreover, Crossl-larbor is a significant beneficiary

within the YCLT and maintains a seat on the 7-member YCLT Advisory Board.

7 Exllibit 13 consists of excerpts of Edra Blixseth's deposition transcript

in which she and her attorney authenticate the quoted from document.

The document itself is Exhibit 11 to Edra's transcript, which is part of

Exhibit 13 hereto. Mr. Blixseth directs this Court's attention to page 7

of Exhibit 11 to the transcript excerpt.

13


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Ex. 14, pp. 6, 18 hereto. Further, Sam Byrne and then Governor Schweitzer have a

political/business relationship. Ex 15. Governor Schweitzer has even visited Mr

Bpne's hedge-fund offices in Boston on prior occasions

f#.

In another document retrieved from Edra Blixseth's hard drives

,

she states in

refel'ence to Judge Kirscher tilwle need thiscase moved back to Montana at a11

costs, SB and BS have spent enormous capital and political favors to ensure they

. get the right outcome from the Montana brkruptcy judge.'' A tlue copy is

attached as Exhibit 16 (emphasis added). As with Exhibit 13, Mr, Blixseth

retained a computer expert to verify if this document was last modifed on a date

when it is believed that Edra Blixseth had possession and oontrol of the computer

from which the document was retrieved. This document is referred to ECDH

Points,pdf ' in the declaration of M1'.Blixseth's computer expert attached as

Exhibit 17. Mr.Blixseth's conputer expel't testifes that this document was

created a'nd last modifiedon July 1 1, 2011, which is when Edra Blixseth is

believed to have had exclusive control of her computer.

(2) Judge Kizscher's Apparent Continued RelationsMp

with the law lrm Worden Thane, P.C.

Mr. Blixseth has discovered through the business information website

data.com, that Ralph B. K-irscher is currently identiûed as a fçvice president'' of the

1aw ûrm Worden Thane P.C. (formerly Worden, Thane & l-laines, P.C,) located in

14


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Missoula, Montana. Enclosed herewith as Exhibit 1 (pp. 3-4) are two screenshots

taken from a recent search on data.com for thecurrent ecaployqes of Svorden

Thane, P.C.

As these screen shots demonstrate, Ralph B. Kirscher is identified as (Gvice

president'' of WordenThaae and dataocom represents that its database of

infol-mation on Ralph B. Kirsoher was last updated on September 12, 2012 (Judge

Kirscher was appointed as banluaptcyjudge in 1999).

Fulher, a search of publicly available email accounts on intelus.com retlects

that the email address [email protected] is currently associated with Ralph B.

Kirscher. See Exhibit 1, p. 5.The domain name wthlaw.net is owned by Worden

Thane.

As this Court's records refleot, before becoming the only adive bankruptcy

judge in the State of Montana in 1999, Judge Kirscher was a partnel- at Worden,

Thane & Haines, P.C.See Ninth Circuit Media Release dated November 15, 1999,

Of paTticular siglnsficance to Mr. Blixseth is the fact that Judge

Kirscher in September of 2010 entered a $40 million judgment against

Mr. Blixseth based on a motion to zeconsider filed by the YCLT in AP-

14 without affording Mr. Blixseth the l4-days to which he was entitled

to file a response. Of that $40million judgment,$22 million was

15


(21 of 3



earmarked to satisfy the claims held by 7 minority ''B'' shareholders

against the Yellowstone Mountain Club LLC and Mr. Bhxseth.

$

'

Moreover, at the time Judge Kirscher includeâ the B Shareholders' $22

million claim within the $40 million judgment in AP-14, the underlying

validity of the B Shareholders' claims were being litigated and yet to be

tried in Adversary Case No. 09-18.8

As it relates to this matter, those (IB'' Shareholders were and are

represented by Worden Thane before Judge Kirscher in connection with their $22

million claim. ln other words, it appears that Judge Kirscher continues to have

some undisclosed relatiohship with the law 51'111 of Wol'den Thane and Worden

Thane currently represents clients in whose favor Judge Kirscher is eatering $22

million judgments without a hearing or trial against Mr. Blixseth on that $22

million.

Moreover, the Sacramento Bee has recently reported that it is in actual

possession of emails from the above referenced email account between Worden

8 For a full explanation of the relationship between the 7 B

shareholders' claims and the inclusion thereof in the $40 million

judgment against Mr. Blixseth, we refer this Court to Mr. Blixseth's

Opening Brief and related Excerpts of Record in this Court's Case No.

13-35113.

16


(22 of 3



Thane and Judge Kirscher. Exhlbit 18attached. Mr. Blixseth has brought these

issues to the attention of this Court pursuant to 28 U.S.C. j 351,

This apparent conflict of interest raisesa serious specter of judicial

misooudud direded toward Mr. Blixseth that oompels this Court pursuant to its

supervisory authority under 28 U.S.C.j 2106 to stay a11 litigation and collection

efforts being prosecuted by the YCLT against Mr. Blixseth as just circumstances

arise here,

The collective impact of the extrinsic evidence warranting disqualification

coupled with Judge Kirscher's recent scheduling orders, and his recent scheduling

of an evidentiary hearing on the Rule 9024 Motion before himsef coupled with

what only can be described as bizarrerulings permeated with duePCOCWSS

violations, compels emergency relief (see alsoMr. Blixseth's Disqualiscation

Motion at Case No. 12-35986, ER 232-462, 522-549, 553-594).

Such constitutionaldeprivations of due process will occur on an

on-going basis if nostay is imposed because: (1) Judge Kirscher will

otherwise be the presiding judge over numerous adversary proceedings

against Mr. Blixseth being prosecuted by the YCLT; and (2) the YCLT'S

judgment in AP-14 is constitutionally suspect in light of the fact that

such actions stem from Judge Kirscher'srulings and orders in 7tP-14

17


(23 of 3



and in approving the Plan, al1 of which appear to be the product of

judicial impropriety amounting to deprivations of due process.

Constitutional deprivations of due processare generally presunled to

result in irreparable injury.Goldie% Bookstore, Inc. ir. Superior Court

of State of Cal., 739 F.2d 466, 472 (9th Cir. 1984) (C(An alleged

constitutional inlingement will often alone constitute irreparable

h rm ''). . .

This Court, pursuant to its supervisory authorhy under 28 U.S.C. j 2106 has

the plenary power to grant the requested relief. Matterof Investigation of

Administration of Bankruptcy Court, 607 F.2d 797,798 (8th Cir.1979) (tinding

sufficient authority undeT 28 U.S.C. j 2106 to stay a district court order removing a

disgraced banltruptcy judge until the banlcuptcy judgellad time to appeal his

removal), followed up in 642 F.2d 227 (8th Cir. 1981); US. v. Morales, 465

Fed.Appx. 734, 740 (9th Cir. 2012) (granting emergency motion to stay

proceedings in similar situation due to reuonable expectation of trial judge to

follow appellate mandate); Zank v. Landon, 205 F.2d 615, 616 (9th Cir. 1953)

(citing Patterson v. State of Alabama, 294 U.S. 600, 607 (1935) (çfin determining

what justioe does require, the Court is bound to oonsider any change, either in fact

or in law, which has supervelled since the judgment was entered.').

18


(24 of 3



Accordingly, until such time Its the evidence of Judge Urscher's judicial

impropriety is resolved under 28U.S

.C. 351 cf seq-, itis a deprlvation of Mr

,

Blixseth's due process rights to allow the YCLT to prosecute or enforce any matter

against Mr. Blixseth and for Judge Kirscher to be his own jury in connection with

Mr. Blixseth's pending Rule 9024 Motion, which Judge Kirscher has scheduled to

be heard on September 10, 2013.

A stay is further warranted by the fact that the heating on the Rule 9024

Motion that Judge Kirscher has scheduled to be heard on September 10

)

2013

implicates Judge Kirscher's actual or appardnt bias under 28 U

.

S.C. q 455.

Judge Kirscher grants the Rule 9024 Motion (which litigants cannot assume that he

will do one way or another), then such a graht will necessal-ily mean that Judge

lurscher believes that there exists an actual or apparent lack of impartiality toward

Mr. Blixseth. Such a conclusion will necessarily vacate his prior denial of Mr

Blixseth's Disqualification Motion under 28 U

.

S.C, j 455) and which is presently

otl appeal before this Court in Case No

. 12-35986.However, because of that

appeal pending before this Court in Case No

.12-35986, Judge Kirscher has been

divested of jurisdiction to make any such ruling that effectively vacates his prior

denial of the Disqualifcation Motion or obviate the need for this Court to conclude

that appeal. In re Combined Metals Reduction Co

.,

557 F.2d 179, 201 (9th Cir.

19


(25 of 3



1977) (a bankrnptcy court laoks jmisdioticn to enter an order on an issue that

would eliminate the ne-.d to resolve a pending appeal).

Dated, August 8, 2013:

Mlchael J. Flynn

' J Conant.

*

chael J. Ferrigno

.

r

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Philip H. Stmman

Attorneys for the Appellant

20


(26 of 3



Docket No. 13-90073

Timothy Blixseth

7 1-434 Sahara Rd.

Rancho Mirage, CA 92270

tel: 760 776 6622

Michael J. Flynn, Esq.

PO Box 690

Rancho Sante Fe, CA 92067

tel: 858 775 7624

Cluistopher J. Conant

730 17th Street, Suite 200

Denver, CO 80202

July 7, 20 13

vlA OVERNIGHT DELIVERY

Clerk, United States Court of Appeals, Ninth Circuit

Attn: Cathy Catterson

95 Seventh Street

San Francisco, CA 94103

Re: Supplement to Complaint of Judicial Misconduct Docket No. 13-90073

In May, Mr. Blixseth submitted a Complaint of Jtldicial Misconduct concerning bankruptcy

judge Ralph B. Kirscher of the U.S. Banknzptcy Court for the District of Montana. Upon receipt

of our Complaint, this Court assigned the above-referenced Docket No. to the matter.

Since submitting the Complaint, we have discovered additional facts through publicly available

sources that are probative of the matters raised in the Complaint.

Specitically, we have discovered through the business infonnation website data.com, that Ralph

B. Kirscher is currently identified as a tivice president'' of the 1aw finn Worden Thane P.C.

(formerly Worden, Thane & Haines, P.C.) located in Missoula, Montana. Enclosed herewith as

Exhibit 1 are two screenshots taken from a recent search on data.com for the current employees

of Worden Thane, P.C.

As these screen shots demonstrate, Ralph B. Kirscher is identified as ççvice president'' of Worden

Thane and data.com represents that its database of information on Ralph B. Kirscher was last

updated on September 12, 2012 (Judge Kirscher was appointed as bankmptcyjudge in 1999).

Further, a search of publicly available email accounts on intelus.com reflects that the email

address [email protected] is currently associated with Ralph B. Kirscher. See Exhibit 2

enclosed herewith. The domain name wthlaw.net is owned by Worden Thane. We currently do

not have the technical resources to determine whether this email address is actively being used.

As this Court's records reflect, before becoming the only active bankruptcy judge in the State of

Montana in 1999, Judge Kirscher was a partner at Worden, Thane & Haines, P.C. See Ninth

Circuit Media Release dated November 15, 1999

Of particular sigpificance to Mr. Blixseth is the fact that Judge Kirscher in September of 2010

entered a $40 mlllion judgment against Mr. Blixseth based on a motion to reconsider filed by the

plaintiff in Adversary Case No. 09-14 (çWP-14'') without affording Mr. Blixseth the l4-days to


(27 of 3



which he was entitled to file a response. Of that $40 million judgment, $22 million was

earmarked to satisfy the claims held by 7 minority CEB'' shareholders against the Yellowstone

Motmtain Club LLC and Mr. Blixseth. Moreover, at the time Judge Kirscher included the B

Shareholders' $22 million claim within the $40 million judgment in AP-14, the underlying

validity of the B Shareholders' claims were being litigated and yet to be tried in Adversary Case

1o

.

09-18.

As it relates to this matter, those 7 CCB'' Shareholders were and are represented by Worden Thane

before Judge Kirscher in connection with their $22 million claim. In other words, it appears that

Judge Kirscher continues to have some relationship with the 1aw firm of Worden Thane and

Worden Thane currently represents clients in whose favor Judge Kirscher is entering $22 million

judgments without a hearing or trial against Mr. Blixseth on that $22 million.

We believe these recently discovered facts are probative of the matters addressed in the

Complaint of Judicial Misconduct previously stlbmitted by Mr. Blixseth and submit for the Chief

Judge's further consideration and investigation.

/s/Michael J Flvnn /s/ Timothv L . Blixseth

Michael J. Flynn Timothy L. Blixseth

attorney for

Timothy L. Blixseth

cc: Christopher J. Conant, attorney for Timothy L. Blixseth

Enclosures: Exhibit 1 and 2

1 For a full explanation with of the relationship between the 7 B shareholders' claims and the

inclusion thereof in the $40 million judgment against Mr. Blixseth, we refer this Court to Mr.

Blixseth's Opening Brief and related Excerpts of Record in this Court's Case No. 13-351 13.


(28 of 3



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(31 of 3



Case 2211-cv-0O065-SEH Document 121 Filed 03/06/13 Page 1 of 5

FILED

MA2 2 6 2113

G U 8 . M*- ' Cx d

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT 01 MONTU A

BUTTE DIWSION

TIMOTHY L. BLIXSETH, No. CV-I 1-65-BU-SEH

Appellant,

VSs

Ysl-l-owsTo= MOIJNTAIN

cl-uB, LL , vsl-l-owsToxE

DEVELOPMENT, Ltc, BlG sKY

RIDG , LLc, YELnowsrroc

cta coxsrRucTlox co., LLc,

MEMORANDUM

AND ORDER

On appeal from Bankruptcy

Case No. 08-61570-11

Appellees,

OTRODUW D N

Appellant, Timothy L. Blixseth tBlixsethl, has appealed from the

September 30, 201 1, Order of the United Sotes Bankruptcy Coud for the District

of Montana, adopting and ratifying its Memorandum of Decision and Order of

June 2, 2009, which confrmed Debtors' Third Amended Plan of Reorganization.

This Court has jurisdiction under 28 U.S.C. 9 l 5S(a).


(32 of 3



Case 2:11-cv-00065-SEH Document 121 Filed 03/06/13 Page 2 Of 5

BACKGROUND

Blixseth was one of the principal founders of Yellowstone Mountain Club,

LLC. ln November 2008, Yellowstone Mountain Club, LLC, Yellowstone

Development, LLC, Big Sky Ridge, LLC, and Yellowstone Club Constmction

Company, LLC (collectively Debtors) fled for Chapter 1 1 bankruptcy protection.l

Debtors' submitted a Third Amended Plan of Reorganization on May 22, 2009. lt

was confrmed by the Bankruptcy Court on June 2, 2009.

An unsecured claim in favor of Blixseth for $26,000 was listed in

Amended Schedule F to the Amended Voluntary Petition of Debtor Yellowstone

Mountain Club, LLC .2 This scheduled claim was superseded by Blixseth's filing

of Proof of Claim No. 714 in the amount of $250,000 for a lifetime club

membership.3 On September 14, 2010, Blixseth and others filed an tçAgreed

Motion to Allow Withdrawal of Proofs of Claim.''4 rfhe Banknzptcy Court granted

1 Bankruptcy Case 08-61570-1 1.

2 See Bnnknlptcy Case 08-61570-1 1) Document 407-6 at 32. The basis for this olaim was

described by the Trustee ms 4tunknown'' as the Trustee lacked suocient information to evaluate

whether the scheduled claim represented a legitimate claim agalnst Debtor's bnnkmlptcy estate.

See Brmknlptcy Case 0:-61570-1 1, Docllment 1432 at 2.

3 ne Blnknlptcy Court's Claims Register in Banknlptcy Case 08-61570-11 reiects t%t

Blixsdh filed Proof of Claim No. 714 on March I8. 2009.

4 Sec Bqnkruptcy Case 08-61570-1 1, Document 1952.

2


(33 of 3



Case 2:11-cv-00065-SEH Document 121 Filed 03/06/13 Page 3 of 5

the motion on September 15, 2010,5 ending Blixseth's stxnding as a creditor in the

proceedlngs-

DISCUSSION

This appeal asserts numerous challenges to the actions and decisions of the

Banknlptcy Court in re-approvlg Debtors' Third Amended Plan of

Reorganization on September 30, 201 1, following remand.6 Extensive briefs and

record excerpts have been submitted by the parties. On October 18, 20 12, the

Court conducted ajoint hearing in this appeal and the appeal in Cause 1 1-66-BU-

SEH. The Court heard approximately 3% hours of oral argument. However, none

of the issues presented are appropriate for resolution as Blixseth lacks standing to

assert them on appeal.

Sspnding to appeal a decision of a Bankruptcy Court is to be distinguished

5 See Banknlptcy Case 08-61570-1 1, Document 1956.

S ne apptal issues as stated by Blixseth are:

Was it reversible error for the bankruptcy court to confrm the Plan

containhzg identical exculpatory clauses that this Court previously held

violated Ninth Circuit law?

Was it reversible error for the bankruptcy court to approve the Settlement

Term Sheet without a proNr Rule 9019 Motion before it and without

applying thç A IC Properdes factors to tb.e present circnmstances?

Did the bankmptcy court err in denying Blixseth's Rule 60(b) Motion?

2,

3.


(34 of 3



Case 2:11-cv-00065-SEH Document 121 Filed 03/06/13 Page 4 of 5

from standing to appear and participate in proceedings before the Banknlptcy

Court. See Motor VeMcle Ca

smlty Co. v. Thope Insulation Co. (1n re norpe

Insulation Co.J, 677 F.3d 869, 883-84 (9* Cir. 2012). A party has standing to

contest a Bankruptcy Court order on appeal only if he can show that the order

being appealed hms a present, direct and adverse affect on his peclmiary interests.

M.; Duckor Spradling & Metzgqr v. Baum Tmst (ln re P.R.T.C.. lnc.)., 177 F.3d

774, 777 (9Z Cir. 1999)) Fondiller v. Robertson, 707 F.2d 441, 443 (9th Cir. 1983)4

In re Combustion Eneineering. Inc., 39 1 F.3dl90 214-17 (3'd Cir 2005). Future, *

contingens or potential adverse pecuniary develqpments do not suffice.

Fondmiller, 707 F.2d at 443; In re Combustion Enpine-tring. lnca, 39 I F.3d at 215-

Blixseth, having withdrawn his claims, is no longer a creditor. He has no

standing as such to challenge the Banknlptcy Court's re-confirmation of the Third

Amended Plan of Reorganization as the Plan has no direct and immediate hnpact

on his property or his rights.The Plan's exculpation clause Ianguage neither

creates nor imposes any liability on him- He is beyond the ambit of its reach and

application. Similarly, Bliueth can claim no immediate adverse effect upon his

property or his pecuniary interests by reason of any compliance or non-compliance

with Banknlptcy Rule 90 19 in the approval of the Settlement Tenn Sheet as he is

not a creditor.


(35 of 3



Case 2:11-cv-O0065-SEH Document 121 Filed 03/06/13 Page 5 of 5

Consideration of any issue related to the motion denominated StMotion for

Relief from Order Consnuing Third Amended Plan of Reorganization'' sled

November 30, 2010, and characterized in Blixseth's brief as a Rule 601) motion

is, by defnition, dtpendent upon standing to claim capacity to rsert the issue in

the Iirst instance. That standing is absent.Neither how the Bankruptcy Court

addressed the matters asserted in the motion, nor how it resolved them, resulted in

a present adverse affect on Blixseth's pecuniary interests.

CONCLUSION

Blixseth lacks standing to challenge the Bankruptcy Court's Memorandum

of Decision and Order of September 30, 2011.

ORDER

This appeal is DISMISSED.

DATED this f day of March, 2013.

AM E. HADDON

United States District Judge


(36 of 3



O8-61570-RBK Doc#: 2522 Filed: 03/15/13 Entered: 03/15/13 13234:27 Page 1 of 12

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF MONTANA

In re

YELLOWSTONE MOUNTAIN CLUB,

LLC,

Debtor.

ln re

YELLOWSTONE DEVELOPMENT,

LLC,

Debtor.

In re

YELLOWSTONE CLUB

CONSTRUCTION COMPANY, LLC,

Debtor.

In re

BIG SKY RIDGE, LLC,

Debtor.

Case No. 08-61570-11

Casc No. 08-61571-11

Case No. 08-61573-11

Case No. 08-61572-11

MEMORANDUM of DECISION

At But'te in said District this 15tb day of March, 2013.

In this Chapter l l bankruptcy, after due notice, a hearing was held October 9, 2012, in

Butte on the Amended Motion for Leave to Sue Stephen R. Brown and the Law Finu of

1


(37 of 3



O8-61570-RBK Doc#: 2522 Filed: 03/15/13 Entered: 03/15/13 13:34:27 Page 2 of 12

Garlington Lohn & Robinson, PLLP in the U.S. District Court for the District of Montana filed

by Timothy Blixseth on March 28, 2012, at docket entry no. 2445. Mdrew E. Hawes and

Michael J. Ferrigno of Boise, Idaho, and Christopher J. Conant of Denver, Colorado appeared

at the hearing on behalf of Timothy Blixseth (ç&Blixseth'); Mikel L. Moore and Dale R.

Cockrell of Kalispell, Montana appeared at the hearing on behalf of Stephen R. Brown

(i1Brown'') and Garlington, Lohn & Robinson, PLLP (çtGLR'')' Robert F. James of Great Falls,

Montana and Robert C. Weaver of Portland, Oregon, appeared at the healing on behalf of

Thomas Hutchinson and Bullivant, Houser, Bailey, P.C.; Trent Gardner of Bozeman, Montana

appeared at the hearing on behalf of J. Thomas Beckett and Parsons Behle & Latimer; and

Michael F. McMahon of Helena, Montana appeared at the hearing on behalf of James A. Patten

and Patten Peterman Bekkedahl & Green, PLLC. The Court heard argument from counsel for

Blixseth, Brown and GLR.

BACKGROUND

In the late 1990s, Blixseth and his former spouse, Edra Blixseth, began developing the

ççYellowstone Club,'' which was, and still is, a members only master-planned unit development,

situated on 13,500 acres of private land in Madison County near Big Slty, Montana. Until

August of 2008, the Yellowstone Club was owned and operated by Blixseth through four

companies, namely, Yellowstone Mountain Club, LLC, Yellowstone Development, LLC, Big

Sky Ridge, LLC, and Yellowstone Club Constnzction Company, LLC. From their inception to

Augtzst 12, 2008, Yellowstone Mountain Club, LLC and Yellowstone Development, LLC were

controlled by Blixseth through his holding company, Blixseth Group, lnc. (t1BGl''). Between

August of 2001 and August of 2008, BGl owned 82.6532 percent of the Class A stock in


(38 of 3




Yellowstone Mountain Club, LLC and Yellowstone Development, LLC.

ln late 2004 or early 2005, Blixseth and Credit Suisse began discussing the possibility of

the Yellowstone Club bon-owing money from Credit Suisse. The loan amount, which initially

started out around $ 125 to $150 million, eventually increased to $375 million and in September

of 2005, Credit Suisse loaned Yellowstone Mountain Club, LLC, Yellowstone Development,

LLC, and Big Sky Ridge, LLC $375 million.

On the day the loan funded, Blixseth transferred $209 million of the loan proceeds from

the Yellowstone Club entities to their parent company, BGI. The following day, Blixseth

transferred $209 million from BGI to accounts in Blixseth's name.

Blixseth contends he transferred the $209 million to himself based upon the advice of

counsel, namely Brown. The advice upon which Blixseth relies is set forth in a letter dated

September 30, 2005. The September 30, 2005, letter was written by Brown of the Garlington,

Lohn & Robinson, PLLP 1aw firm, and was addressed to Credit Suisse. ln the letter, Brown

states that çûas of (September 30, 20051 . . . gelach Loan Par'ty has the requisite power and

authority to execute, deliver and perform its obligations under the Loan Documentsg,j . . . gandq

gelxecution and delively by the Loan Parties, and performance of their respective obligations

under, the Loan Documents does not: violate any of their organizational documents; violate any

laws; to the best of our knowledge violate any orders, judgments, or decrees; to the best of our

knowledge, breach any material contract or create liens or encumbrances; or require filing or

registration with any governmental agency.'' The letter provides that tçltlhe foregoing opinion is

being delivered solely to the addressees (i.e., the Administrative Agent and the Lenders) names

in this letter . . . and may not be relied upon by any other person or entity and may not be


(39 of 3



O8-61570-RBK Doc#: 2522 Filed: 03/1 5/13 Entered: 03/15/13 13:34:27 Page 4 Of 12

disclosed, quoted, filed with a governmental agency or othemise refen-ed to without our written

t 11onsell .

Blixseth and Edra separated on or about December 1, 2006, and a Petition for

dissolution was filed on or about December 15, 2006, in the Superior Court of California.

Following a contentious divorce, Blixseth and Edra finally reached an agreement as to the

division of marital propery As part of their agreement, Edra was, in August of 2008, awarded

BGl and the Yellowstone Club entities. Edra caused the four Yellowstone Club entities to file

voluntary Chapter 1 1 bankruptcy petitions on November l0, 2008. The Debtors were

represented by Thomas Hutchinson and other attorneys from the Bullivant, Houser, Bailey, P.C.

law firm, and by James A. Patten and other attorneys from the Patten Peterman Bekkedahl &

Green, PLLC law firm.

Brown represented Yellowstone Mountain Club, LLC, Yellowstone Development, LLC,

and Big Sky Ridge, LLC in various matters between the late 1990s through 2008, including a

state court matter filed by Greg LeMond against Yellowstone Mountain Club, LLC and

Yellowstone Development, LLC. Brown also represented Blixseth personally from June of

2008 to sometime in thc fall of 2008 in connection with Blixseth's divorce, but only as it

pertained to the division of Montana assets.

As of November 10, 2008, the date the Yellowstone Club entities sought protection

under the Banknzptcy Code, Brown and his law firm, GLR, were owed a substantial sum for

unpaid legal fees. As a result of their prepetition claim, GLR filed in Yellowstone Moulztailz

Club, LLC'S bankruptcy case, on Febrtlaly 25, 2009, Proof of Claim No. 372 asserting an

tmsecured claim of $16,569.66 and filed Amended Proof of Claim No. 738 on July 23, 2009,

4


(40 of 3



08-6157O-RBK Doc#: 2522 Filed: 03/15/13 Entered: 03/15/13 13:34:27 Page 5 of 12

asserting a claim of $345,590.00 for unpaid legal fees. In the Yellowstone Development, LLC

banknlptcy case, GLR filed Proof of Claim No. 101 on Febrtzary 25, 2009, asserting an

unsecured claim of $386,582.29 and amended said claim on July 23, 3009, to assert an

unsecured claim of $65,291.00 for unpaid legal fees. ln all, GLR claimed that as of November

10, 2008, it was owed in excess of $410,000.00 from Yellowstone Mountain Club, LLC and

Yellowstone Development, LLC for unpaid Iegal fees.

Because of GLR and Brown's substantial unsecured claim, Brown agreed to serve as

Chairman of the Unsecured Creditors Committee. In connection with Brown agreeing to sel've

on the Unsecured Creditors Committee, the Yellowstone Club entities explicitly waived the

attorney-client privilege and Brown withdrew as the Debtors' counsel in tlze fall of 2008. Also,

because Brown had also represented Blixseth in certain matters, Brown did not, while serving

as Chair of the Unsecured Creditors Committee, participate in matters involving Blixseth.

Brown was one member on an eleven member committee and served as a layperson on

the Committee, performing no legal work for the Unsecured Creditors Committee. The

Unsecured Creditors Committee was represented by J. Thomas Beckett and other attorneys

from Parsons, Behle & Latimer of Salt Lake City, Utah and by attorney James H. Cossitt of

Kalispell, Montana.

The Unsecured Creditors Committee eventually filed a lawsuit against Credit Suisse.

Blixseth intervened in that action and this Court has since entered a Judgment against Blixseth

in the amount of $40,992,210.8 1on grounds Blixseth fraudulently misappropriated the

proceeds fwm the Credit Suisse loan.

ln response, Blixseth filed on June 8, 2011, a complaint in the United States District

5


(41 of 3



O8-61570-RBK Doc#: 2522 Filed: 03/1 5/13 Entered: 03/15/13 13:34:27 Page 6 Of 12

Coul't for the District of Montana. The aforementioned complaint for: (1) legal malpractice; (2)

breach of fiduciary duty; (3) fraud; (4) breach of contract; (5) equitable indemnification; (6)

comparative indemnity; (7) contribution; (8) malpractice for failing to disclose conflict of

interest; (9) conspiracy; (10) aiding and abetting commission of torts; and (1 1) aiding and

abetting commission of torts named Brown, GLR, James A. Patten, Patten Peterman Bekkedahl

& Grcen, PLLC, J. Thomas Beckett, Parsons Behle & Latimer, Thomas L. Htltchinson,

Bullivant, Houser, Bailey, P.C., Samuel T. Byrne, Crossllarbor Capital Partners, LLC, and John

Does 1 - l00 as defendants.

On March 5, 20 12, United States District Coul't Judge Donald W. Molloy concluded

that al1 Blixseth's claims were subject to the Barton Doctrine, and that no exceptions applied.

Judge Molloy thus entercd an Ordcr dismissing Blixscth's complaint for lack of subject matter

jtlrisdiction. Judge Molloy explained in the Order entered March 5, 2012,

The Barton Doctrine is derived from the United States Supreme Court's

decision in Barton v. Barbour, 104 U.S. l26 (1 881). lt requires a party to itfirst

obtain leave of the banknzptcy court before it initiates an action in another forum

against a banknlptcy tnzstee or other officer appointed by the bankrtzptcy court for

acts done in the officer's official capacity.'' Crown Vantage, Inc. v.Fort James

Corp., 421 F.3d 963, 970 (9th Cir. 2005) (discussing Bartonj. lf the Banknzptcy

Court has not granted leave, then other courts do not have subject matter

jurisdiction. 1d. at 97 1 ; see also McDaniel v. Blust, F.3d , 2012 WL

401591 at * 1-*3 (4th Cir. Feb. 9, 2012).

The purpose of the Barton Doctrine is to centralize bankrtzptcy litigation,

which helps avoid inconsistent rulings from different courts and ensures that the

forum most familiar with the case-the bankruptcy court-presides over related

claims. See generally Crown Vantage, 42l F.3d 963. That concenl is particularly

relevant here, since the Banknlptcy Court has addressed or is addressing issues

that are similar (if not the same) to those presented in Blixseth's complaint. If this

Court were to now intercede and decide the merits of Blixseth's claims, it would

nm the risk of fnlstrating the banknlptcy proceedings throtlgh a collateral attack.

6


(42 of 3




The Barton Doctrine also enables the bankruptcy court to keep a watchful

eye on court-appointed or -approved officers. As Judge Posner described:

Just like an equity receiver, a trtlstee in bankruptcy is working in effect

for the court that appointed or approved him, administering property thathas come under the court's control by virtue of the Bankruptcy Code. lf

he is burdened with having to defend against suits by litigants

disappointed by his actions on the court's behalf, his work for the coul't

will be impeded.

This concern is most acutc when suit is brought against the tnzstee while

the banknlptcy proceeding is still going on. The threat of his being

distracted or intimidated is then very great . . . . Without the LBarton

Doctrinel, tnzsteeship will become a more irksome duty, and so it will

be harder for courts to find competent people to appoint as trustees.

Trustees will have to pay higher malpractice premiums, and this will

make the administration of the bankruptcy laws more expensive (and the

expense of banknzptcy is already a source of considerable concenz).

Furthermore, requiring that leave to sue be sought enables banknlptcy

judges to monitor the work of the tnlstees more effectively. lt does this

by compelling suits growing out of that work to be as it were prefiled

before the bankruptcyjudge that made the appointment; this helps the

judge decide whether to approve this trustee in a subsequent case.

Matter ofLinton, 136 F.3d 544, 545 (7th Cir. 1998)4 see also Crown Vantage, 421

F.3d at 970-71 ; McDaniel, F.3d ? 2012 WL 401591 at *3-*4; Carter v.

h Cir. 2000).odgers, 220 F.3d 1249, 1252-53 (V

The Barton Doctrine generally applies if three conditions are met: (1) the

plaintiff must be attempting to ltinitiateg q an action in another forum'' (2) ççagainst

a bankrtzptcy tnlstee or other officer appointed by the bankruptcy court'' (3) GEfor

acts done in the officer's official capacity.'' Crown Vantage, 421 F.3d at 970.

Each of these conditions is met here.

In dismissing Blixseth's complaint, Judge Molloy ccmcluded that this Court was a different

forum than the District Court; that Brown, who selwed as the Chair of the Unsecured Creditors

Committee, was a çtcourt-approved'' officer; and that al1 of Blixseth's claims were either ççbased

on Brown's alleged misconduct as Chair of the Unsecured Creditors Committee'' or did not

accl'ue until Brown became Chair of the Unsecured Creditors Committee.


(43 of 3



08-61570-88K Doc#: 2522 Filed: 03/15/13 Entered: 03/15/13 13:34:27 Page 8 of 12

Blixseth appealed Judge Molloy's decision to the United States Court of Appeals for the

Ninth Circuit (GtNinth Circuif). On August 7, 2012, the Ninth Circuit dismissed Blixseth's

appeal for lack of jurisdiction, concluding the order appealed f'rom was not a final ordenl

For purposes of the pending motion, counsel for Blixseth argues that the proposed

complaint attached to Blixseth's motion, is substantially similar to the complaint Blixseth filed

with the District Court. However, counsel also argues that the proposed complaint is different

and that Blixseth's counsel went ttto great lengths to delineate between what happened, you

know, malpractice . . .legal malpractice that occurred prepetition and legal malpractice that

occurred postpetition.''

DISCUSSION

ln Crown Vantage, 421 F.3d 963, the Ninth Circuit adopted a series of factors for a

court çtto consider in exercising its discretion'' to enjoin a party from proceeding with an action

against a court appointed officer, including (i) whether the acts or transactions at issue ttrelate to

the canying on of the business connected with the property of the bankruptcy estate''; (ii)

whether the claims pertain to actions of the tnzstee while administering the estate''' (iii) whether

çEthe claims involve the individual acting within the scope of his or her authority under the

Because Blixseth appealed Judge Molloy's decision to the Ninth Circuit, Brown and

GLR argued in their objection to Blixseth's motion that this Court did not have jurisdiction to

decide the pending matter. That argument is moot because the Ninth Circuit dismissed

Blixseth's appeal. Brown and GLR also argued that this Court did not have jurisdiction to decide

Blixseth's motion because Blixseth had appealed this Court's June 2, 2009, Order confirming the

Debtors' Third Amended Plan of Reorganization. On March 6, 2013, United Stated District

Court Judge Sam Haddon entered a Memorandum and Order dismissing Blixseth's appeal on

grounds Blixseth lacked standing to challenge this Court's Order confinuing the Debtor's Plan.

Consequently, this latter objection is also moot.


(44 of 3



08-61570-R8K Doc#: 2522 Filed: 03/15/13 Entered: 03/15/13 13:34:27 Page 9 of 12

statme or orders of the banknzptcy court, so that the tnlstee is entitled to quasi-judicial or

derived judicial immunity''; (iv) whether movants are tçseeking to surcharge the tnzstee, that is,

seeking ajudgment against the trustee personall/'; and (v) whether Etthe claims involve the

trustee's breaching her fiduciary duty either through negligent or willful misconduct.'' Crown

Vantage, 421 F.3d at 976 (quoting Kashani v. Fulton (In re Kashanl), 190 B.R. 875, 886-87

(9th Cir. BAP 1995)).

Judge Molloy has already detennined that Brown, in his capacity as the Chair of the

Unsecured Creditors Committee, was an officer of this Court. As an ofticer of this Court,

Brown ççis entitled to a form of derivative judicial immunity from liability for actions canied

out within the scope'' of his official duties. Kashani, 190 B.R. at 883.

The majority of the allegations in Blixseth's proposed complaint stem from Brown's

involvement with the Unsecured Creditors Committee. Other of Blixseth's allegations

complain that Brown served as counsel for both the Debtors and Blixseth and then divulged

infonuation that was protected by Blixseth's attorney-client privilege. The Debtors expressly

waived their attomey-client privilege and thus, Blixseth cannot complaint that Brown violated

the Debtors' attorney-client privilege. As for Blixseth's privilege, this Court has previously

concluded that Brown did not violate Blixseth's attorney-client privilege and further concluded

that the ttplethora of emails gsicq communications'' referenced by Blixseth were between Brown,

as a member of the Unsecured Creditors Committee, and the Unsecured Creditors Committee's

counsel. As such, the email communications, which did not divulge any of Blixseth's

privileged information, were in fact protected by the Unsecured Creditors Committee's

attorney-client privilege.


(45 of 3




It is also important to recognize that Brown did not serve as legal counsel for the

Unsecured Creditors Committee, so this is not a case of adverse representation. Brown served

on the Unsecured Creditors Committee, as a layperson, in an effort to collect a sizeable sum

that was due Brown and GLR. The Unsecured Creditors Committee had separate legal counsel

who had no prior involvement with Blixseth.

Blixseth also complains in several instances that Brown and GLR violated the Montana

Rules of Professional Conduct and the Montana Rules of Professional Responsibility. The

Montana Supreme Court has recognized that violation of the Montana Rules of Professional

Conduct does not create a private cause of action or a presumption that a legal duty has been

breached. See Carlson v. Morton, 2l9 Mont. 234, 237-38, 745 P.2d 1 133, 1 135-36 (1987).

Next, Blixseth takes issue with a legal opinion letter that Brown wrote in September of

2005 in connection with the Credit Suisse loan. At that time, Brown was listed as ttcounsel to

Borrowerg,l'' and the Borrower was identified as Yellowstone Mountain Club, LLC,

Yellowstone Club Development, LLC and Big Sky lkidge, LLC.The opinion letter was

addressed to Credit Suisse. ttA.s a general rule, an attorney's duty of loyalty nms to his client,

and not to third parties with whom he has no agency relationship.'' In Crane Creek Ranch, lnc.

v. Cresap, 324 Mont. 366, 1 1, 103 P.3d 535 (2004). Brown was retained by Yellowstone

Mountain Club, LLC, Yellowstone Club Development, LLC and Big Sky Ridge, LLC to give

an opinion to Credit Suisse. Yellowstone Mountain Club, LLC, Yellowstone Club

Developmellt, LLC, Big Sky Ridge, LLC and Credit Stlisse have released any claims each had

against the other. Blixseth has thus failed to show that Brown owed an independent duty of

care to Blixseth on that matter.


(46 of 3



O8-6157O-RBK Doc#: 2522 Filed: 03/15/13 Entered: 03/15/13 13:34:27 Page 1 1 of 12

Portions of Blixseth's proposed complaint also complain about Brown's participation

and involvement in the Debtors' bankruptcy cases and in the confirmation of the Debtors' Joint

Third Amended Plan of Reorganization. While the release provision in the Debtors' confirmed

Plan is narrow in both scope and time, and applies only to an S'act or omission in comlection

with, relating to or arising out of the Chapter 1 1 cases, the fonnulation, negotiation,

implementation, confirmation or consummation of this Plan, the Disclosure Statement, or any

contract, instrument, release or other agreement or document entered into during the Chapter 1 1

Cases or otherwise created in connection with this P1an(,)'' the Court finds that the release

provision releases Brown from any liability stemming from his participation in the confirmation

PI-OCCSS.

Finally, Blixseth's proposed complaint takes issue with advice provided by Brown to

Blixseth during his divorce from Edra. The problem with Blixseth's arguments on such matter

is that they, like the other arguments raised by Blixseth, are all crafted in such a fashion that

they are tied to Brown's actions as a member of the Unsecured Creditors Committee.

ln sum, Blixseth continues to complain that Brown has violated Blixseth's attorney-

client privilege. This Court has found that Brown did not violate Blixseth's attornepclient

privilege. Blixseth also seeks to assert claims that more appropliately belong to the Debtors.

Finally, a11 the allegations in Blixseth's proposed complaint are so intertwined with and

dependent upon Brown's actions as a member of the Unsecured Creditors Committee that it

makes it impossible for this Coul't to isolate Blixseth's so-called &&pre-petition malpractice and

malfeasance'' claims from Brown's activities as a member of the Unsecured Creditors

Committee. For the reasons discussed above, the Court will enter a separate order providing as


(47 of 3




follows:

IT IS ORDERED that the Amended Motion for Leave to Sue Stephen R. Brown and the

Law Firm of Garlington Lohn & Robinson, PLLP in the U.S. District Court for the District of

Montana filed by Timothy Blixseth on March 28, 2012, at docket entry no. 2445, is denied.

BY THE COURT

.

.

.

.

/q

' '

,:,

'

/

-.---.

tr:) . t

-

,-?''

.

.

ë ), i' . k:r-.-.. . J

HON. ALPH B. IGRSCHER

U.S. Bankruptcy Judge

United States Bankruptcy Court

District of Montana


(48 of 3



From:

Sent:

T@:

eox,

-

(?.ê&-.. v- EyHIBIT

K M rson-eell, CSR 3557

For I.D. < . vs- tm Pgs .3

Wimess: g'.vrex

-lta,m .a.u

am Byrne

Samrday, November 22, 2008 3:38 PM

Michel Meldman <mmeldmu@disçovellandK.com>' Joey Arenson

<[email protected]>; Schuyler Joyner <sjoyneediseoq'ellandco.com>

Cc: Mattbew Kidd <MKidd@cross>lrborcapizl.com>; joegephonsolo.com

Sublcct: RE: Notes &om Mo Call

Keep lhis insid. -

We egree. bQl EB heads t: do it (she Is the only one who can preKse DiP snandftq for 90 days tlnless a Tresteh is

apminsed) aôd she has to realize she is geMng totally rolled by Gr4enspan. She has 90 days extlu 'fvity to file a plan

and evel day tbat does by sNe is losing Ieverage. Sbe has a ton of Ieverage Kght now as these guys ere etfiied of a

xnverss:on to a Cbepter 7 (they lose lhe right to have a Mq %le :nd woeld have to foretlose if le US Trustee

aband:ns lhe eollateral, whlch Is ve@ highN Ilkely here). 8he needs to tell thlm to fund lhe DIP ferthe entire season wisb

DLC nlnning il lo her standaea<. or sh* wtll not luppoft It. We then must fund d, as we haye a fidulal obllgltken to

proted ôQr Investments there. lf she plays lt rlght in tourtvshe wlll Nave a perfed o>ning bke the last time and the judge

will jump on it.

This thlng ls teed up to get moving, btlt we nee her 1: go along. Wa want FM and Replay 0UT of lhere, as they are tolal

and complete sh'lK of CS. We On work w1th Mo. as the bondhgldeO (largef ones) apxar to listan lo tbem and lle is ve@

conseaale on valqe.

Mo told me that Tamaraek Is a total mess with a > State Court Rqcelver, and that they got primq by tbe Orrowef.

Pivolal Group, in Promenlory for $25 million. They have not won any of these deaY and he knows d.

Krom: MI aqI Meldman (fnaiito-mmefdman dKcoveltAndco.coml

t'tt tvrday, Novem r 12, 2008 3.30 PM

To* m Wme; lcey Arenson; huyler ) ner

Subleee Re: Noto from Mo 11

ney're aI1 assholes. 1 would submit a DIP to the court witb er without their consent

Fmm; Am 8yme

Tot Mlchael Meldman; J Arepson; Schuyler Joyner

Ant: Rt Nnv 22 t3:14:34 2O8

Subjee: Not- from Mo &d

From last night:

M: and l spoke for 45 mlns. He is elther a total shysler of he baëeve: that GH and DtC are his only sGlutlon. He claix

he jtlst has lo get the lendee lhere. The followlng are my detaîled ntles from the 011:

* Aoer s long da# lle believes thal the Sleeling Commlttee wants to *bobble sombtbing together* for the entire ski

seasnn (dldll'l xffect him pn cobble) in le form of fugdlng uf . DiP

Believes it is $16m plus wbat is already in there.

* nat this is the epreferred way to go. but clearly thele is sof- disagreemenl amongst lhe padies- and then

efundlng is an:ther matter altegether-

. I told him lhat l fe: lbal *ey wovld have a sght w% the judge under the molhball scenario and he agreed it

wouldn't necessali: go smoothly and that is why he is looking for something eKe lor a soltltion.

Ex . D- I 7

2

Sebject to Protective Order

CHE12611


(49 of 3



@e cleafl# believe 1at the markedng of the proa* would be *st prtcesed over tl e enNre ski season

and even menNoned Replay vs DLC In a Nsslbse deal - I >de it clear that we didn't hlre Mike Miller and

hIs team for a reason and wouldq't paddpate In anythlng along lhe llne of pultin: DLC out - we alreadk

picked our hooe)

*something came up, not unanimeus and l wanteö to run it by ycu' and he prolfered the folpowlng:

1. Get members commit to lull dues (13k) qp front for the yeal if we d: full sii seaAnn (clearly he will ask for anothe; 18

to open for summer if it came to that, as they afe heafing ffom Replay that lhe membeahip will slomach 40k)

2. As CrossHaeer already owns the Golf Course loh.we would but lhe remaining 10-1 1 al a edlsount refledng the

culent drcumstances*. Wouldn't need to close lmmedlatety. but ln 30-60 days agalnst a cemmitment (weeld this be

subjett to 363 bidding?). Felt that we mlght want to consotidale al of the holdlngs up 'hefe on the Goll Couoe . Note -

he doesn't realize it. but I alieve 6 ol the lots are the Yermuda Terrax- lotq afe could be quite valuable. Some of lhe

othea have real access isstles. nis was *strictly my idea bul think 1 cap get It done-. Net4: thls is how they have been

fundlng operatlons ln the Glnn deat with tubed Adler buylng up lits to fvnd operatons. l denx think they have real:

theught lt through.

3. CS woulö funö th: balance which might be palatable lo everyene as it mimlc the amoun the weul: need in the

mothball Renaflo.

* We didn't discuss how this eght work, and *ha didn't have unanlmiN on tbe idea but could likely get il doôe-. I

told him we were already Nery long IoKe at th: YC anö lbls ms probao nol that attradive to u$. but wou? pe

cohsidered depending on other eemYtments made to g8l lhô case out of the Chapter 11 ve@ quickly. He fellerated lhat

he theugbt it would ecome lo us, but that it needed some Nme.' I asked him why they couldn't just do the DlP for the fqll

amount (ha says $16m mora) and we jusl coujdn't pafïdpate in lhe DIP ln some way (noted that we would have certaîn

requirements)? His raspense was lhat it was *twe fold probleme:

o Dollaœ .-. his lendefs simply don't have the money le do it. or it might be Me@ hard to get it done, ealmcst

imposslble but Steve is teing really hard*. Only 4 of lhe SC members are in the QKginal DiP and Yne or two rxre qame

in for Ynimal dnllars. bQt really 11 is jqs the 4*: eEven tw; of the SC members are CLOs tbat have nc meney. and thls is

the case with the large balante of th: groupl

n Strucsural issue - while they wotlld fathor have es fonding t peopfe egpect lo be negotiating the Sale with tls

and it we are in the DlP we will have leverage ovef them (obvious: if lhey cannot do anolher onel). Uhey are reluctant to

put ttemsekes in lhis positian*. l pointed out that it was better than a Trusteê er coverfon.

* l told Mo we MIGHT be wildng to look at something on ALk the remaining Iots. jrovided we had some

Ommltmenk t: thefllqnce of the dlsposieon of the œse. Dldn't shara lt. but l was thinkng sometbirg like $250;ot for a1I

30 of the decent remalnlng inventory in btllk as a way to level down our exposure *n the GC Iets. Tbis would gike tzs a Iot

of Ieverage oMer any sale with lhis muth produd controlled al an average Investment at IeK than lm per dot (much sjfel

place t: b: than where we are today). We could even qive them a fe-purchase 'ght orl all of our lots f:r a period of tlma

(nclndiqg GG) at cost qltls 15* l dida't get into $he p 'te witll Nm on thls Idea al all. He sod of listvned, but clearly Ckes

his own 'dea and not thls on..

* Mo asked if I -.% on tbe broader lender call and 1 l:ld him n:. He sald that therê were some ereally bizarre*

and. what he ton<deled. *irat: comments':

o 'One was that sonwone said lhat lhey wnuldn't accept Iess than 1 n0 tents on the dollar and was dead serious-

He said that thls was a *no- y. but really silly aRd no1 help*r. 1 did men:on tbal one of the bondholders was reacKing

out diredly to members and making va/ous threats if they didn't get tQQ cenl cn the dollar. He claime real

disapeintment with lhss :n: wants to knpw wjo 1 is 8nd seld thfd they were mcting detfimenlell? lo the grollp sod he

would have SASMF deal with it.

o He said that there was seme eirate' and aersee people commenling on GH and that this wa: eoontefning- (1

wanted N tell him to steer thelr angef to CS. but didnn). 1 don't know if he tlon leferred to this call or the SC œII earleq

but he sald that he defended us. He said it was not Onsistenl for us lo want t: partidpale in llle DP and Pve a moAe lo

destfey #aIu* at lhe same llme. Ttld lhem a1l 110w much we had investe in the YC and that value detrutbon would çnly

hult us. 1 agreed and poinled oul that is why I offered $75 and nol ewhat I thlnk It is really going lo sell for in 12Q dayf. l

Sublect to Protective Or4er

CH;j2612 - -


(50 of 3



said it couîd easily be a lo1 less.

* I pqshed him Qn why we cxldn't move more quickly and have a sale, subjad lo a stalkag hoae wîth es only

asKng for our histo:cal expenses and a break up fee. He said i was too much for this greep to do something in 5 days.

He sald maybe iq 2-3 weeks they wou? be môre in a position to deal once thek knew more olwha, we knew.

o We got lnto our o#er a bjt and he made a point that while we were aligned on the back end. that the new money

had a gref and tha was somemlng mat was hard to s'wallow for peeple Qn llle SC. I Nlnted oul that JM rato CMUK

was trading at t+135Q today and that a 12-15 peften pref was adually below market. I teld bim 1 tould on# do it wilh themembership and that many people didn't want any Ieverage. btlt l g:t them over the lltlmp witb the non-starter argument.

I said it ceuld easily *go away* in 30 days.

@ He said il was ea ve@ diïcult group. teegh greup under huge stress and nel used to beiog in the ppsillon ol not

having Opital. AlI vely frustated at that - ve@ tough environment fer these gtlys* l sharêt my humlli? line agaln with

him and told him how bad my meetings were wlth ôur LPs where lhe co:senslls was It was ge/ng werse before better

and *at l cou? essily lose suppod forthe deal.

* Somehow we came back to Replay. I lo1 hIm 1 dldnx want lblngs to get confronta:onat but tbat wn had put in

place some things to proted oursehes witb Mrrl Bhseth that we would not glve up and fight hard over if we didR't see

things gelng in our diredien. He said *al Ye had b:th struderal and functlonal (Informatlnn) thlngs tha would keeg

peopla out of the dear and tllat eghl be wllal people 5nd difku.. bel he undeœtood thal mere were œthlngs out there'.

We dose with hIm asklng me to *please think about the G:lf Course deap and that mls whole thing ls a estruggle' and be

needed our help If the skI season is to be saved. l totd him that the only lssu: fof me on the skl season was waïMng away

from the blgger deal. He asked Yhat it would do to our existing inveslmenl* acd I reiteraled that we asready wfote off

tbls seasqn for sales and that we woklld tben just fquidate what we had and pack up until someone cafled us to eome in

for nothing 18 months from now when they needed a qquor the right tû buy the base area feal estale. It wasn'l

Onfrontatlonal. bu he saiu he eneeded us to get something done and wanled us to undeœtand lhat *dynamic of the

group. ve@ lough: veö lougll-. l relterated that l diun*t think Chlbi h1d the couds under cenlrol and thal they needed to

be careful. He sald that Mark was belng straight with the SC aeut the Msks * and thal lt was a Rough group*.

He wanls to lalk lcmnrrow 2nö keep the dialtgue going.

Bottom line - h: needs us, but eveeine thinks it is a set up. lf 1 can get to them individually. l can cunvince them ouf set

npwas for Tim B and not them, and that is wh# we lried to do a deal with them in Februaœ.

Talk tommorrow.

Subject to Protectlve Order

CHE12613


(51 of 3



09-00014-RBK Doc#: 487 Filed: 01/25/10 Entered: 01/25/1Q 17:13:09 Page 1 of 29

Brian Glasser

Bailcy & Glasser, LLP

209 CapitolSteet

Charleston, WV 25301

Telephone: (304) 340-2282

Facsimilc: (304) 342-1 1 l 0

Shane P. Coleman

Holland & Harta LLP

401 North 3 1't St

,

Suhe 1500

P.O. Box 639

Billings, MT 591 03-0639

Telepbone: (406) 252-2 166

Facsimile: (800) 565-7845

Steven L. Hoard

Mullin Hoard & Brown, LLP

5* S. Taylor, Suitz 800

P.O. Box 3 1656

Amarillo, TX 79120

Teleghone: (806) 372-5050

Facslmile: (206) 372-5086

AUORNEYS FOR MARC S. KIRSCHNEK AS TRUSTEE

OF THE YELLOWSTONE CLUB LIQUIDATING TRUST



Chapter 1 1

Case No. 02-61570-1 1 -RBKellowstone Mountain Club, LLC,

l g

L,

Debtors.

TIMOTIW BLIXSETH,

Plaintiff/counterclaim Defendant

Adversary No- 09-00014 and consolidated

with Adv. No. 09-00017-lkBK

MARC S.KIRSCHNER, AS

TRUSTEE OF THE YELLOWSTONE

CLUB LIQUIDATING TRUST,

Defendant/counterclaimant.

FIRST AMENDED ANSWER AND

COUNTERCLAIM OF MARC S.

KIRSCHNE , AS TRUSTEE OF THE

YELLOWSTONE CLUB

LIQUIDATING TRUST

The Debtors arc thc following entities; Yellowstone Mountain Club

,

LLC, Yellowstone Developmentl

ub, LLC and Big Sky Ridge

,

LLC, which entities are subslantively consolidated

.

and Yellowstone Club

onstruction Co., LLC, whlch isjointly administered with the other Debtors.


(52 of 3



O9-0O014-RBK Doc#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 2 of 29

Marc S. Kirsclmer, as Trustee of thc Yellowstonc Club Liquidating Trust (the tTrust'g)

successor-in-interest to thc Official Committee of Unsecured Crcditors

,

Glcs the following First

Amended Answer to the Complaint-ln-lntervtntion CCl'') filcd by Timothy L. Blixseth and First

Amended Counterclaim for relief against Timothy L. Blixscth (HBlixseth''):

FIRST AMENDED ANSWER

The Trus't admits that the allcgations of paragraph 1 ofthc C1 correctly rccilc

,

to

thc Trust's knowlcdgc. thc founding and location of the Yellowstonc Club

.

The Trust lacks

sufficicnt information to enable it to respond to the remainder of the allegations of paragraph l

To thc extent the allegations in paragraph 2 of the CI refer to documents

tbe Trust

admits only that such documcnts speak for thcmsclves

,

and denies al1 allegations and

characteriMtions that are inconsistcnt therewith

.

Upon infonnation and belicf, thc Trust admits

that control of the Dcbtors was eventually assumcd by Edra Blixscth

.The Trust denies amy

implications in paragraph 2 that the identified transactions arc not subject to avoidance and

recovery or subordination undcr fcderal and/or state law

.

To tlw extcnt further answer is

required, the Trust dcnies the allegations in paragraph 2

.

Answering the allegations of paragraph 3 of the C1, the 'Frust admits that the

Official Committee and Unsecured Creditors Cthe Committee'') filed a complaint (tûcommittee's

Complainf') in the stated adversry proceeding, and that tbe Committee's Complaint speaks for

itself. The Trtlst denies all allegations and characterizmions that are inconsistent with the terms

of the Committee's Complaint.

4. The allegations of paragraph 4 of the CI either state legal conclusions to which no

response is required, or refer to documcnts, which the Trust admits speak for thcmselves

The

Trust dcnies a11 allegations and characterizations that are inconsistent with such documents

,

and

FIRST AMENDED ANSWER AND COUNTERCLAIM OF MARC S

.KIRSCHNER.

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST- Page 2 4653ï00122087


(53 of 3



O9-00O14-RBK D0c#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 3 of 29

dcnics any implicationsin paragraph 4 that thcidentificd transactions are not subject to

avoidance and recovery or subordination under federal and/or state law

,

T0 thc extent funher

answer is required, thc Trust denies the allegations of paragraph 4

.

5. The allegations of paragraph 5 of the C1 state legal conclusions to which no

response is required. The Trust dcnics any implications in paragraph 4 that the identified

transactions arc not subject to avoidancc and recovery or subordination under federal and/or state

law. To the extent a further answer is rcquircd

,

the Trust denies the allcgations of paragraph 5

.

Thc allcgations of paragraph 6 of the C1 purport to be a description of this action

,

to Nvhich no response is rcquired.

Thc Trust admits the allegations of paragraph 7 of the C1

Answering thc allegations of paragraph 8 of the CI, thc Trust admits only tllat

Credit Suisse purports to bc a linancial senrices company and secured creditor of the indicatcd

entities, but dcnies any implication that Credit Suisse's purpofcd licns arc valid or not subjcct to

subordination.

The Tnlst admits the allegalions of paragraphs 9-12 of the CI

10. To thc cxtent thc allegations in paragraph 13 of the CI refcr to documents

,

thc

Trust admits only that such documcnts spcak for themselvcs

,

and denies al1 allegations and

characterizations that are inconsistcnt therewith. Thc Trust denies any implication in paragraph

13 that the identificd transactions are not subject to avoidance and recovery or subordination

undcr federal and/or state law. To the extent furthcr answer is required

,

the Trust denics the

allegations in paragraph 13.

To the extent the allegations in paragraph 14 of the CI statc legal conclusions no

response is required. To the cxtent such allcgations refer to documents

,

the Trust admits only that


.

KIRSCI INEK

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST- Pagc 3 4653ï00122427


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such documents speak for themselves, and denies a1l allegations and characterizations that are

inconsistent therewith. The Trusl denies any implication in paragraph 14 that the identified

transactions are not subject to avoidance and recovery or subordination under federal bankruplcy

law and/or state law. To the extent further answer is required, the Trust denies the allegations in

paragraph l 4.

l 2. To the extent the allegations of paragraph 1 5 of the CI state Iegal conclusions

,

no

response is required. To the extent such allcgations refer to documents, the Trust admits only that

such documents speak for themselves, and denies all allegations and characterizations that arc

inconsistent therewith. The Trust denies any implication in paragraph l 5 that the identified

transactions are not subject to avoidance and recovery or subordination under federal and/or state

law. To the extent further answer is required, the Trust dcnies the allegations in paragraph 15

.

l3. oAnswering the allegations of paragraph 16 of the Cl, the Trust admil.s only that

the Credit Suisse complaint speaks for itself and that the Committee's Complaint speaks for

itself. The Trust denies any implication in paragraph 16 that the identified transactions are not

subject to avoidance and recovery or subordination under federal and/or statc law.

-f0 lbc extent the allegations in paragraph 17 of thc CI refer to the existence of an

attorney/client relationship, those allegations state a legal conclusion to which no response is

required. To the extent the allegations refer to doculnents, the Trust admits only that such

documents speak for themselves, and denies al1 allegations and characterizations that are

inconsistent therewith.

Answering the allegations of paragraph l 8, the Trust admits only that Stephen R.

Brown was chair of the Trust. To the extent the allegations in paragraph 1 8 of the Cl refer to

FIRST AMENDED ANSWER AND COUNTERCLAIM OF MARC S. KIRSCHNER

,

M TRUSTEE OF TIIE YELLOWSTONE I-IQUIDATING TRUST- Page 4 4653800122087


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documtnts, the Trust admits only that such documcnts speak for themselves

,

and denies all

allegations and characterizations that arc inconsistent therewith

.

l6. R-0 thc cxtcnt the allegations of paragTaph 19 of the CI state legal conclusions

,

no

response is required. 'ro the extent the allegations in paragraph 19 of thc Cl rcfkr to the

Committee Complaint, the Trust admits only that the Committee Complaint spcaks for itself

,

and

dcnies a1l allegations and characterizations that are inconsistcnt therevvith

,

including thc claim in

paragraph 19 that thc Committee has admittcd that the usc of- the proceeds was tçlawf-ul

''

The allegalions in paragraphs 20 and 21 of thc CI refcr to documents, the contents

of wlnich spcak fbr thcmsclvcs. Thc Trust denics all allegations and characterizations that are

inconsistent therewith, and dcnies any implication that the identilied transactions are not subject

ttn avoidance and rccovery or subordination under fedcral and/or state law.

Upon information and bclief, thc Trust denies thc allegations in paragraphs 22-26

.

The Trust further denies any inplication that the identificd transactions arc not subject lo

avoidancc and rccovery or subordination undcr federal and/or state law.

19, To the extent allegations in paragraph 27 of thc CI refer to documcnts, the Trust

admits only that such documents spcak for themselves, and denies all allcgations and

characterizations that are inconsistent thcrcwith. The Trust otherwise Iacks sufficient information

and belief to enablc it to respond to the allegations of paragraph 27,

Tht allegations of paragraph 28 of the C1 puport to be a generalized description

and opinion conceming world-wide credit markets. To thc extent any response is required

,

the

Trust denies thc allegations in paragraph 28 of the CI.

2 l . The allegations of paragraph 29 of thc CI refer to a documcnt, which spcaks fbr

itself. The Trust dcnics aI1 allegations and charactcriations that are inconsistcnt therewith

.


.KIRSCHNER,

AS TRUSTEE OF THE YEI-LOWSTONE LIQUIDATING TRUST - Pagc 5 4653100122087


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22. The allegations ol- paragraph 30 purportedly quotc from a document

which

smaks for itsclf. The Tzust denies alI allegations and characterizations that are inconsistent

therewith.

23. Upon information and belief, the Trust adlnits the allegations in paragraph 3 l of

thc Cla and ftuther allcgcs that the bankruptcy petition speaks for itself

24. The allegations of paragraphs 32 and 33 of the C1 refcr to documents

,

including

the Committee Complaint. Tht Trust admiz only that such documents

,

including the Committee

Complainl, speak for themselvess and denies a1l allegations and characterizations that are

inconsistent therewith.

To the extent the allegations of paragraph 34 of the CI state lcgal conclusions

no

responsc is required. To the extent the allegations in paragraph 34 of the Cl refcr to the

Committec Complaint, the Trust admits only that the Committee Complaint speaks for itself

and

denies all allegations and characterizations that are inconsistent therewith. The Trust dcnics any

implication that the identified transactions are not subjcct to avoidance and rccovery or

subordination under federal and/or state law, and denies a1l remaining allegations of paragraph

25.

ANSWER TO BLIXSETH'S FIRST CLAIM FOR RELIEF

26. Answering the allegations of paragraph 35 of the Cl. the Trust adopts and

incorporates by reference the responses to a11 prior allegations as if fully set forth herein.

27. Answering the allegations of paragraph 36 of the C1, the Trust admits only that

Montnna Code Annotatcd j 2-2-204(1) speaks for itself, and denies all allegations and

characterizations that are inconsistent therewith.

2%. The Trust admits the allcgations in paragraph 37 of the Cl

FIRSTAMENDED ANSWER AND CODNTERCLAIM OF MARC S.KIRSCHNER.

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST- Pagt 6 4653h00122087


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Answering the allegations of parapaph 38 of the CI

,

thc Trust admits only that

Annotatcd 9 2-2-204(1) speaks for itself, and dcnies al1 allegations andontana Code

characterizations that are inconsistent therewith

.

To the cxtent the allegations of paragraph 38 of

the CI state legal conclusions, no response is required

.To the extent a funher answer is required

,

the Trust denies the allegations of paragraph 38

.

The Trust lacks sufficient information to enable it to respond to the allegations of

paragraph 39 of the CI.

Answering thc allcgations of paragraph 40 of the CI

thc Trust admits only that

Montana Code Annotated j 2-2-204(1) spcaks for itsclf, and denies a11 allegations and

charactcrizations that are inconsistent therewith

.

To the extent the allegations of paragraph 40 of

the CI state legal conclusions, no response is rcquired

.

To the extent a further answcr is required

,

the Trust denies tbe atlegations of paragraph 40

.

(a) The Trust aflinnatively plcads that thc statute of limitations for brcach of

fiduciary duty againsl Blixseth did not begin to run until well after Novcmbcr l 0

,

2005, and thus

the three-year statute of limitations had not expired at thc time the Debtors 5led bankruptcy on

November 10, 2008. This adversal'y procecding was commenced well within the two-year

period allowcd undcr 1 1 U.S.C. j 108(a).

(b) Thc Trust further pleads that the statute of limitations applicable to thc

claims assertcd hcrcin against Blixseth had not expired when suit was Gled by virtue of the

@bdiscovery rulc'' and also by the doctrine of t%fraudulcnt conccalment'' as codified in Scction 27-

2- 102-(3) of the Montana Code Annotated. Specifically, the facts constituting the claims against

Blixseth t'are by thcir nature concealed or self-concealing

,

'' and in additiom t'during or aftcr the

act causing the injury, (Blixsethj has taken action which prevents 1he injured party from

FIIBT AMENDED ANSWER AND COUNTERCLAIM OF MARC S

.KIRSC/INER,

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST - Pagc 7 4653500122087


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discovcring the injury or its cause.'' Blixseth affirmatively actcd to prevcnt inquiry or cscapc

investigation inlo his conduct and to mislead or hinder acquisition of information disclosing a

cause of action.

The Trust also pleads that the statute of limitations was tollcd undcr the

doctrinc of ttadvcrse domination.o* Limitations m.e tollcd with rcspcct to claims against directors

,

officcrs, and lnanaging mcmbers so long as they remain in control of thc cntity that has becn

injurcd by their actions. Blixseth controllcd the Dcbtors through at lcast August 2008.

ANSWER TO BLIXSETH'S SECOND CLAlM FO

-

R

RELIEF

Answcring thc allegations of paragraph 4 l of the C1

,

the Trust adopts and

incoporatcs by reference the responses to a11 prior allegations as if fully sd fol4h hcrcin

.

Answering the allcgations of paragraph 42 of the CI, the Trust admits only that

Montana Code Annotated j 3 1-2-333(1)(b) speaks for itsclf, and denies aI1 allcgations and

characterizations that are inconsistcnt thcrcwith.

To the extent thc allcgations in paragraph 43 of the CI refcr to documcnts

,

the

Trust admits only that such documcnts speak for themselves

,

and dcnics a11 allcgations and

characterizations that are inconsistent thercwith. To the extent fm-ther answer is requircd

,

the

Trust denies the allegations in paragraph 43.

35. Answering thc allegations of paragraph 44 of the CI

,

the Trust admits only thal

Montana Code Annotated j 31-2-333(1)(b)(i)-(iii) speaks fbr itself, and denies a11 allcgations and


36. To the extent the allegations of paragraphs 45 and 46 of the CI state legal

conclusions, no response is requircd. To the cxtcnt further answer is rcquired

,

the Trust denies

the allegations in paragraphs 45 and 46.

FIRST AMENDED ANSWER AND Cotm I'EIICLAIM OF MARC S

.

KIRSCHNER.

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST - Page S 46535001 22087


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ANSWER TO BLIXSETH'S THIRD CLAIM FOR RELIEF

37. Answering the allegations of paragraph 47 of thc Cl


incomorates by rcference the responses to all prior allegations as if fully se1 forth hcrcin

.

3E. To the extenl the allegations of paragraphs 48 and 49 of thc C1 state legal

conclusions, no responsc is rcquired

.

To the extent further answcr is required

,

the Trust dcnies

the allegations in paragraphs 48 and 49

.

(a) The Trust affinnatively plcads that any relcase of claims against Blixscth

purportedly given to Blixseth on bchalf of thc Dcbtors and/or BGl is unenforccablc as a matter of

law. The claims against Blixseth constilute a valuable assct of the Debtors' estate

.

The release

of such claims would constitutc a fraudulent transfer under Sections 3 1-2-333 and 31 -2

-

334 of

the Montana Code Annotated and Section 548(a)(1) of the U.S. Bankruptcy Code

,

and can be

avoided pursuant to Section 550 of thc U.S. Bankruptcy Codc and Scction 31 -2-339(a) of the

Montana Code Annotated. The releases were obtained by Blixscth with the actual intent to

hindcr, delay, or defraud the creditors of the Debtors

.

Likcwisc. the Debtors did not receive a

reasonably equivalent value in cxchange for thc rclcasc

.

No consideration was given to the

Dcbtors in rcturn for 1hc rcleasc. Thc Debtors were engaged or were about to be engaged in a

busincss or transaction for which their rcmaining assets were unzeasonably small in relation to

thc btsiness or transaciion, and Blixseth knew lhat Dcbtors had incurrcd debtors beyond the

Debtors' ability to pay as they bccame due

.

The Debtors were insolvcnt within the meaning of

Section 31-2-329(a) of the Montana Code Annotated and within thc meaning of Section

548(a)(1 )(B) of the U.S. Bankruptcy Code at the time the release was given. Blixseth was an

insider of the Debtors, and he eithcr knew the Debtors were insolvent or had rcasonable cause to

believe that the Debtors were insolvent.

FIRST AMENDUD ANSW'ER AND COUNTERCLAIM O17 MARC S

,

KIRSCHNEK

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST- Pagc 9 4653ï001 22087


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ANSWER TO BLIXSETH'S FOURTH CLMM FOR RELIEF

Answering the allegations of paragraph 50 of the CI


incomorates by reference the responses to all prior allegations as if fully set forth herein

.

40. Answeling thc allegations of paragraph 51 of the Cl

,

the Trust admits only that

Montana Code Annotated j 35-8-31 0 speaks for itself, and denies a1l allegations and


To the extent 1he allegations of paragraphs 52 and 53 of thc C1 state legal

conclusions, no response is rcquiretl. To the exlent further answer is required

,

the Trust denies

thc allegations in paragraphs 52 and 53

.

ANSVVR TO BLIXSETH'S FIFTH CLMM FOR RELIEF

42. Answering the allcgations of pazagraph 54 of the C1

,

thc Trust adopts and

incorporates by reference the responses to alI prior allegations as if fully sct fol'th herein

.

43. To the extent the allegations of- paragraph 55 of the CI state lcgal conclusions

,

no

response is rcquired. T0 the extent further answcr is rcquired, the Trust denies the allegations in

paragraph 55.

44. Upon information and belief, the Trust denies the allegations in paragraph 56 of

the C1.

To thc extcnt the allegations of paragraph 57 of thc C1 state legal conclusions

,

no

rcsponse is required. T0 the extent further answer is required, the Trust denies the allegations of

paragraph 57.

ADDITIONALDEFENSES

46. Blixseth's claims are barred by unclean hands

,

illegality, and in pari Jclfcft?.

FIRST AMENDED ANSWER AND COUNTERCLAIM 0F MARC S

.

KIRSCHNEK

AS TRUSTEE OF T1'IE YELLOWSTONE LIQUIDATING TRUST- Page 1: 4653'00122087


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47. To the extent the allegations contained abovc in this First Amcnded Answer or in

the Trust's Firsl

defenses, lhey arc incomoratcd hcrein.

A mended Counterclaim bclow are propcrlycharactcrized as affirmative

48. The Trust reservcs the right to assert additional affirmative defenscs

.

AVHEREFORE. having fully answered the CI

the Trust requests that 1hc same be

dismisscd with prejudice, no causc of action, and that the Court grant the Trust such other and

further rclicf as it deems just.

FIRST AMENDED COUNTERCLAIM OF THE TRUST

AGAINST TIMOTHY BLIXSETI'I

1. P.4JtTIES

Marc S. Kirschncr is the trustcc of the Trust and the dcfcndant and counter-

plaintiff in Adversary No. 09-00014 (consolidatcd with Adversary No. 09-000 l 7).

2. The Trust was formed under the Plan of Ikeorganization fiied May 22

,

2009, in

Case No. 08-61570 (dkt. #947) (the i:Bankruntcv Casc''), refiled May 29, 2009 (dkt. #955)

and

confrmed by this Court's Memorandum of Decision dated Junc 2

,

2009 (dkt. 1025) (hereinaher,

the ttconfirmed Plan of Reoraanization''). The Debtors arc Yellowstone Mounlain Club, LLC

(tYC'') Yellowstone Development, LLC (tçYD'') Big Sky Ridge, (::BSR'') and' 7 F

Yellowstonc Club Construction Company, LLC (''YCC'') (rcfel-red to collcctively as tzthe

Debtors'').

Pursuant to thc Confirmcd Plan of Reorganization and an Assignment of Claims

(Exhibit l hereto), Mr. Kirschner, as Trustee of the Trust succeeds to ttall Causes of Action that

the Debtors or their Estates could assen immediately prior to the Effective Date

,

'' except certain

claims released by the Conûrmed Plan of Reorganization

.


,

KIRSCHNER.

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATISG TRUST - Page 1 l 4653 0()1 22087


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Timothy L. Blixseth ('tBlixseth''), 1hc plaintiff and countcr-dcfcndant hcrcin, is a

resident of thc State or Nvashinglon. Hc u'as the controlling sharcholder of Blixseth Group

a

Inc.

n/k/a/ BLX Group, lnc. ($çBGl'') and sole member and manager Ycllowstone Club World, LLC

(t'YC$V*') through August of 2008. As such. he controlled BGI, YC, YD, BSR, YCC, and YCW.

II. OTIIER PERSONS NOT NAMED AS PARTIF.S

BGI is an Oregon corporation. lt is thc majority owncr of- YC and YD.

Edra Blixseth (together with Blixseth, the ltBlixseths'') was Chief Operating

Officcr of YC until she resigncd in latc 2005 or early 2006.

Upon her divorce from Blixseth in August, 2008. Ms. Blixseth bccame the

majority owner of BGl and YCW.

8. BGl and thc Blixseths are insiders of the Dcbtors.

YCW is a Washington State limited liability company. lt was majority owncd by

Timothy Blixseth. Sincc thc divorcc, VCSY' has been majority owned by Edra Blixscth, although

Washington Statc records still rcflcct that it is majority owned by Timothy Blixscth. h'C%' was

conceived by Timothy Blixseth as a world-widc corollary to the Yellowstone Club.

hrC%M is a debtor in Bankruptcy No. 09-60061-7 in tl7e United States Bankruplcy

Court for the District of Montana.

1 1. No relief is sought against YCW hcrein.

Edra Blixseth is a dtbtor in Bankruptcy No. 09-60452-7 in the United States

Bankruptcy Coul-t for the District of Montana.

No relief is sougbt against Edl'a Blixseth herein.

14. BGl is a debtor in Bankruptcy No. 09-61893-1 l in the United States Bankruptcy

Court for tht District of Montana.

FIRST AMENDED ANSWER AND COUNTERCI-AIM OF MARC S

.

KIRSCHNEK

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST - Pagc 12 4653î09122087


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No relief is sought herein against BGl .

111. .1IJmSDICTION AND VENUE

l6. This Court has jurisdiction ovcr this procecding pursuant to 28 U.S.C. j 1334.

This is a core procecding within thc meaning of 28 U.S.C

.

j 157(b)(2).

Pursuant to Rule 7008(a) of thc Federal Rules of Bankruptcy Procedure, if- any

claims are dctermined to be non-core. the Trust conscnts to the cntry of Gnal orders by the

Bankruptcy Court.

Venue is proper in this Court pursuant to 28 U.S.C. j 1409.

IV. GENERALALLEGATJONS

A. The Yellpwstone Club.

Timothy and Edra Blixseth conceived of and developed thc Yellowstonc Club

.

The Club is a l 3,500 acre exclusive membership resort comprising, among other

things, a 2,200 acre privatc ski resol-q a championship golf course

,

sccond homes, sold lots

awaiting developmcnt, unsold plattcd and unplattcd inventory and open space land

,

and the

125,000 square foot Warren Miller Lodge.

The Credit Suisse Loan Transaction.

22. As of September 29a 2005, the Ycllowstonc Club's properties carried lcss than

$25 million of sccurcd debt.

On September 30, 2005, Credit Suisse puportcd to loan $375 million to YC, YD

and BSR in a loan transaction (the ttoan Transaction'') pursuant to which Crcdit Suisse

purported to obtain mortgagcs. liens and security interests in nearly all these entities' propcrtics

24. The Loan Transaction was not made for the bendit of the Yellowstonc Club

.

Instead, the credit agreement evidencing the Loan Transaction (the ttcredit Agreemenf')

FIRSTAMENDED ANSWBR AND COUNTERCLAIM OF MARC S

.

KIRSCHNERV

AS YRUSTEE OFTHE YELLOWSTONE LIQUIOATINO TRUST - Page 13 4653'.00122087


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providcd that ncarly a11 the procccds of the loan wcre intended to bc used t'for purposes

unrclated'' to the Ycllowstone Club. Thc Grst recital of the Credit Agrccmcnt providcs:

WHEREAS, the Borrower dcsires that thc Lcnders extend certain senior

tel'm loans to thc Borrowcr hcrcunder, thc procceds of which will bc uscd:

(i) for distribution or loans up to $209,000,000 to (BGI) for purposes

tmrelated to the Yellowstone (Club),

(ii) for investments up to $142,000,000 into Unrestrictcd Subsidiarics

for purposes unzelated to thc Yellowstonc (C1ub),

(ii) to pay the Transaction Costs,

to refinance the Existing Indebtedness, and

(v) to finance a portion of thc devclopment and construction costs

associated with the Yellowstone gclub) in accordance with tile Financial

Plan.

Section 2.6 of the Crcdit Agrccmcnt which is substantially idcntical to the very

first recital of the Credit Agrcement, rcquircd that up to 94% of the face amount of the loan

would be used û'lbr purposes unrelated'' to thc Ycllowstone Club.

The Credit Agreement requircd lhc Yellowstonc Club and its unseclzrcd creditors

and mcmbers to sboulder all 1he risk of the Loan Transaclion.

Loan Transaction Proeeeds Distributed Pursuant to Paravraph 2.6(i) o

f the

Credit Azreement

Paragraph 2.6(i) of the Credit Agreemcnt provided thal up to 5209 millicn of the

Loan Transaction proceeds were required lo be ttdistributcd or loancd to ZBGI) for purposes

unrelated'' to the Yellowstone Club.

28. Pursuant to that provision, YC immediately distributed 5208,831

1 55.45 of the

Loan Transaction proceeds for tspurposes unrelated to'' the Yellowstonc Club, as follows:

525,000,000 certificate of deposit at First Bank in BGI's name

.

FIRST AMENDED ANSWER AND COUNTERCLAIM OP MARC S

,KIRSCHNEK

AS TRUSTEE OF THE YELLOWSTONE LIQUIDA'I'ING TRUST - Page 14 465310122087


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b. $ l 1 ,939,495 payoff to First Bank for Timothy Blixseth's primary

rcsidence at Porcupine Creek in Rancho Mirage, Califomia.

$17,000,000 certificate of dcposit at Palm National Bank in thc Blixseths'

1'1al-1Rc.

d. $ 1 4,01 6,227.87 deposit into a money-market account at Palm Dcsert

National Bank in Timothy Blixseth's name.

$4, 133,623.50 payoff to Palm Desert National Bank for the lbllowing

debts:

$3& 169, l 1 8.75 for charges related to liDesert Ranch,'' Timothy

Blixscth's personal housing development near Palm Springs, California.

$79,629.54 payoff of itEdra's Condo,'' a condo owned by Edra

Blixseth in Palm Desert, California.

$402,546.02 payoff of Timothy and Edra Blixseths' personal linc

of credit.

$482,329. 19 payoff of Edra Blixseth's personal linc of creclit.

$15,000,000 certificate of deposit at Jackson State Bank in Tilnothy

Blixseth's name.

g

h.

1-

$3,068,749.99 payoff to Amcrican Bank for unknown puposcs.

$975,908.57 payoff to American Bank for unknown pumoses.

$ 1 ,5 1 5,250 payoff to American Bank for unknown purposes.

$896,423.28 payoff to American Bank for unknown purposes.

$977,894.92 payoff to American Bank for unknown purposes,,

FIRST AMEN DED ANSWER AND COUNTErXLAIM OF MARC S. KIRSCHNER.

AS TRUSTEE OF '1-I'IE YELLOWSTONE. LIQUIDATING TRUST - Pagc 1 5 4653100122087


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1. $100,000,00: ccrtificatc of deposit at U.S. Bank in the Blixscths' name

,

from which $28,000,000 was used to purchase a privatc island in Turks and Caicos

m. $5,000,000 certificate of- deposit at Pacific Western Bank in the Blixseth's

namc.

$2,971,443.02 payoffof a personal note to Pacific Westcrn Bank

.

$160,765.83 payoff to Union Bank for a rental homc owned by Timothy

Blixseth.

$175,376.23 payoff to Union Bank for a rcntal home owned by Timothy

Blixseth.

$2,007,930.55 payoffto Commcrcial Bank for unrelated purposcs

.

$1,403,547 payoff to GECC for an ahplane owned by a Blixseth-owncd

company in which neithcr Ycllowstone Mountain Club nor Yellowstone Dcvclopmcnt have an

interest.

$2,454,774 payoff to GECC for an airplanc owncd by a Blixseth owned

company in which neither Yellowstonc Mountain Club nor Ycllowstone Developmcnt have an

interest.

$272,590 payoff to World Savings for a rental home owned by Timothy

and Edra Blixseth.

funds disbursed pursuant to pragraph 2.6(i) of thc Credit

Agreement, BGI cxccuted an unsecured demand note (dated as of Scptember 30, 2005, but

prcpared months t'hereaftcr) (the I%First BIJI Notc'') in favor of YC in the amount of

$208,831,158.45.

29. In respect of the

FIRST AMENDED ANSWER AND COUNTERCLAIM OI7 MARC S

.

KIRSCHNEK

AS TRUS'FEE OF THE YELLOWSTONE LIQUIDATING TRUST - Page 16 4653ï00 122087


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30. lt has bccn alleged that BG1 has made up to S90 million of interest and principal

reduction payments to YC in respect of the First BG1 Note

.

The Trust has not at this time been

able to verify whether these amounts were in fact paid or creditcd

.

The First BG1 Notc Nvas nol adcquate consideration or reasonably cquivalent

value to h'C for the benefits conferrcd on Timothy Blixseth for the ftmds reccived by him or lbr

his bcncfit from thc Loan Transaction procceds

.

The Firs: BGl Note was made payablc on demand by YC (controllcd at that timc

by Timothy Blixseth) from BGI (alsc controllcd at that time blr Timothy Blixscth).

The First BGI Notc was ncvcr intcnded to be collectable or collected.

The First BGl Note>s real value may be inconsequential in comparison to its face

valuc because BG1 is insolvent.

The Dcbtors received less t14% reasonabiy equivalent value - in fact no value

w'hatsocvcr - for the $208,83 l ,1 58.45 of liens placed upon thcir propertics pursuant to paragraph

2.6(i) of the Crcdit Agrccment.

D. Loan Transaction Proceeds Distribute

d Pursuant to Para:raph 2.6(iiJ of the

Crcdit Azrccmcnt.

Paragraph 2.6(ii) of the Credit Agreemcnt providcd that up to $142 million of the

Loan Transaction proceeds would be invested by others, etfor purposes unrelated'' to the

Yellowstonc Club.

Pursuant to paragraph 2.6(ii) of the Credit Agrtement, $ l 33, 1 10,262.53 of Loan

Agreement proceeds were disbursed to YD as follows:

$1 00 million was placed in a six-month certificate of deposit at U.S. Bank

in YD's namc;

FIRST AMENDED ANSWER AND COUNTIJRCLAIM OF MARC S. KIRSCHNEK

AS TRUS'FEE 0F THE YELLOWSTONE LIQUIDATING TRUST- Pagc 17 4657'800122087


(68 of 3



09-00014-RBK Doc#: 487 Fited: 01/25/10 Entered: 01/25/10 17:13:09 Page 18 Of 29

$30 million was placed in a six-month ccrtificate of deposit at Amcrican

Bank in YD's namc; and

$3, 1 1 0,262.53 rcmaincd in YD's checking account

although at lcast

$225,000 of thosc funds wcrc uscd for markcting YCNV

.

S80 million of the $1 30 million that was placcd in the two certificates of dcposit

referred to above was furthcr disbursed as follow,s:

$28 million was used

*

%

.

1 rancc,

to purchase Chateau de Farcheville located in

$40 millîon was used to purchase a resol't kn own as Tamarindo located in

hl 'c0'X1 ,

$ 12 million was used to purchase and improvc a golf property located in

St. Andrews, Scotland.

39. Pursuant to thc Crcdit Suisse loan agreement

,

these properties were purchased

ççfor puzposcs unrelatedn' to the Ycllowstonc Club

.

And only the Farcheville and St. Andrews

properties arc currently owned indirectly by YD. YD sold Tamalindo to Edra Blixseth in August

,

2008, for a $40 million unsccurèd note, $3 l .2 million of which remains outstanding

.

Shc

thcreafter transfen-ed it to Timothy Blixscth for unknown considcration

.

40. The Trust has not yet traced the $50 million balance from the certilicates of

deposit referred to above, but, on infonnation and belief

,

alleges that the Yellowstone Club did

not receivc rcasonably equivalent value for thc $50 million of liens placed on Club propcrtics

,

in

respect of such expenditures, pursuant to paragraph 2

.

6(ii) of the Credit Agreement.

The Debtors did not receive reasonably equivalent value for the $1 33

,

1 10,262.53

of liens placcd upon its properties pursuant to paragraph 2

.

6(ii) of the Credit Agreement.


.

KIRSCHNER,

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST - Page l 8 4(153'.00127087


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E. Loan Transac

tion Proceeds Distributvd Pursuant to Para

s

qraph 2.6(iii) of the

Credit Aereement.

Paragraph 2.6(iii) of Credit Agreemcnt provided that Loan Transaction proceeds

would be spent for Attransadion costs

.

''

43. Approximatcly $7.4 million ofthû Loan Transaction proceeds were paid in fees to

Credit Suisse.An additional $1.2 million were paid to other panics in fces

44. The Dcbtors did not receive reasonably cquivalent value for the $8

.

6 million of

liens placed upon thcir propertics pursuant to paragraph 2

.

6(iii) of the Crcdit Agrcemcnt.

F- Loan Transaction Proceeds D

-

istributed Pursuant to Parazraph 2

.6(iv) pf the

C

-

rvdit Aareement.

Paragraph 2.6(iv) of the Crcdit Agreement provided that Loan Transaction

procceds would be spent ttto refinancc the E'xisting lndcbtedness

''

A1 most, 524.2 million of Loan Transaction proceeds wcrc uscd to refinancc

cxisting secured indebtcdness owed by YC, YD and/or BSR

.

The Debtors rcccived no incremental bcnefit from the refinancing of the Existing

Indebtedness.

G- Lo

an Transactif)n Proceeds D

istributed P

ursuant to Paraaraph 2.6(v) of thc

Credit Azreement.

of the Credit Agreement provided that Loan Transaction

proceeds would be spent çtto financc a portion of thc development and construction costs

associated with thc Yellowstone (C1ub) in accordancc with the Financial Plan.''

49. Only $255,579.10 of Loan Transaclion proceeds remained

,

afte' the expenditures

refcrcnced above, but not including those unaccounted for

to financc dcvelopment and

construction costs associated with the Yellowstone Club

,

48. Paragraph 2.6(:/)

FIRST AMENDED ANSWFR AND COUNTERCLAIM OF MARCS

.KIRSCHNER.

AS TRUSWE OF TldE YELLOWSTONE LIQUIDATING TRUST- Pagc 19 4653h00121027


(70 of 3



09-0QO14-RBK Doc#: 487 Fiied: 01/25/10 Entered: 01/25/10 17:13:09 Page 20 of 29

50. Blith respect to paragraph 2.6(i) of thc Credit Agrecment, thc Dcbtors reccived no

value for tlne $208,831 , 1 58.45 or liens placed on Club propcrtics in connection with the Loan

Transaction.

5 1 . l'ith respect to paragraph 2

.

6(ii) of the Credit Agrccmcnt, the Debtors did not

receive reasonably equivalent value for thc $133

,

1 1 0,262.53 of licns placcd on Club propcrtics in

conncction with thc Loan Transaction.

W-ith respect to paragraph 2.6(iii) of the Credit Agreement, the Debtors did not

rcccive reasonably equivalent valuc for the 58

,

60 ,000 of liens placed on Club propcrties in

connection u'ith the Loan Transaction.

E ven assuming that the Dcbtors did receivc rcasonably equivalent value with

respcct to the $24.2 million and $258,579.10 disbursed pursuant to paragraphs 2

.

6(iv) and 2.6(:')

of thc Credit Agreement, il presently appears the Debtors only receivcd bctwccn $67

,

343,841 .53

(thc value of the refinance, plus the purchasc priccs of St, Andrews and Farcheville

,

plus the

amount remaining for operations, plus thc amount remaining in YD's bank account) ( l 7

99.4) and

S1 66,1 68,841 .55 (al1 disbursements exccpting the $208,831,1 58.45 disburscd to the Blixseths)

(44.304) of value in consideration for the $375 million of liens placed on the Club's properties in

connection with the Loan Transaction.

54. In either evcnl, the Dcbtors received far lcss than reasonably equivalent valuc -

between 17.9% and 44.3% - in considcration for the $375 million of licns placcd on the Club's

propcrties by Credit Suisse in connection with thc Loan Transaction

.

The Yellowsto

n

e Club's

lnevitable Bankruptcv.

By November, 200s, the Debtors were unablc to makc the interest payments

rcquired by the Credit Agreement.

lllfls'I' AMENDED ANSWER AND COUNTERCLAIM OF MARC S

.KIRSCIIKER,

AS 'IMUSTEE OF 'I'HE YELLOWSTONE LIQUIDATING TRUST - Pagt 20 4653,

00 1 22087


(71 of 3



O9-O0014-RBK DOc#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 21 Of 29

56. But for numcrous %tbail-out'' land purchases madc by intercstcd parties prior to

that timc, the Dkbtors would havc becn unablc to mcet thcir interest expense obligations long

befbrc.

As a consequence ol- the Loan Transaction, thc Deblors were rendercd insolvent

and required to scck Bankruptcy protection.

Additional Promissoo, Note

s Constitutinz Indebtedness of BGI to the

Debtprs.

BGI executed another unsecured demand note (dated as of Seplember 30, 2005,

but prcpared months thereafter) in favor of YD in the amount of 555,798,796.68 (thc ttsecond

BG1 Note'').

59. BGI execuled a third unsecured dcmand note (dated as of September 3û, 2005,

but prepared months thercaftcr) in favor of YC in thc amount of $7,800.000 (the tzThird BGI

Note'').

Demand has properly been made in respect of the Second and Third BGl Notes.

61 . Neithcr the Second nor thc Third BGI Notes pertain to any obligation to repay

funds disbursed pursuant to the Loan Transaction.

V. FIRST CAUSE OF ACTION

(Against Timothy Blixseth)

Breacltes ofFiduciary Dzz/.p

62. The Tntst incorporatcs by reference a11 the prior allegations of this Counterclaim

and the First Amended Answer.

As an owncr of YC, YD and BSR, Timothy Blixscth owed fiduciary duties to YC,

YD BSR, the minority owncrs of those cntities, and the Club and its members

,

lo protect their

interests in connection with the Loan Transaction.

63.

FIRST AMENDED ANSWER AND COUNTERCLAIM O17 MARC S. KIRSCHNEK

AS TRUSTEE OF Tl'1E YELLOWSTONE LIQUIDATING TRUST - Page 21 4653*122087


(72 of 3



O9-OO014-RBK Doc#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 22 Of 29

64. Timothy Blixscth brcachcd those duties by entering into the Loan Transaction and

usuping the procecds of the Loan Transaction for his own personal benefk or the benefit of

othcr entities in which he hcld an interest.

As a resuit of the Loan Transaction and Timothy Blixseth's breach

fiduciary duties, Debtors and lheir creditors have becn damaged

.

66. The Trust is entitlcd to judgment against Timothy Blixscth for al1 damages caused

by his breachcs of fiduciary duty in an amount to be provcn at trial

including withoul limitation

tbe cnlire amount of the procecds from thc Loan Transaction that werc distributcd to him or fbr

his dircct or indirect benelit.

VI. SE COND CAUSE OF ACTION


Violatiott z?

/*/#1:11/. Code f 35-8-604(1)

The Trust incolmorates by rcfcrence al1 the prior allegations of this Counterclaim

and thc First Amended Answer.

Blixseth's actions also constitulc a violation of Section 35-8-604(1)(a) and (b) of

thc M ontana Code Annotated, which prohibits distributions to thc mcmbers of a limited liability

company (ttLLC'') if such distributions render the LLC unable to pay its dcbts as they become

duc in the usual coursc of business and/or if such distributions cause thc LLC'S lolal assets to be

lcss than thc sum of its total liabilitics.

Thc Trust is entitled to judgment against Blixseth for the entire amount of the

procceds from the Loan Transaction that werc distributed to him or for his direct or indirect

benefit.

FlRS'l' AMENDED AN SWER AND COUNTERCLAIM OF MARC S

.KIRSCHNEQ

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST - Page 22 4653ï001 22087


(73 of 3



09-O0014-RBK Doc#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 23 of 29

VII. TI'I1ltD CAUSE OF ACTION


Alter Ego

70. The Trust incoporates by rcferencc all the prior allegations of this Countcrclaim

and the First Amcndcd Answcr.

During thc time that hc was the controlling sllareholder of BGI

,

Timothy Blixseth

dominated and conlrollcd the affairs of BGI to such an extent that BG1 has no separate comorate

identity apart from 'I-imothy Blixseth.

72. Tlmothy Blixseth has admitted that he and BG1 are onc and the same

.

It would be inequitable to prescrve the separate coporate idcntity of BGI

74. The Trust is entitlcd to a judgment declaring that Blixseth was the alter cgo of

BGI at the time complaincd of hercin and holding Blixscth liable for BGI's conduct and debts

.

VIll. FOURTH CAU

SE OF ACTION


Recovery p

fFzwl/#zz/ell/ Transfers

Rl7Ae Trust incomorates by references a11 the prior allegations of this Counterclaim


Much of the proceeds from the Loan Transaction wére transferred to 3GI and its

alter ego, Timothy Blixseth, yct the Debtors werc left with the obligation to repay the loans

resulting froln the Loan Transaction and with liens on their property intended to secure those

obligations.

The BGI Notes were not rcasonably equivalent value for thc loan proceeds

disbursed to BGl or its alter ego, Timothy Blixseth or for the liens placed on the Dcbtors'

property.

FIRST AMENDED ANSWER AND COUNTERCIaAIM OF MARC S

.KIRSCHNER.

AS TRUSTEE OFAI'HE YELLOWSTONE LIQUIDATING TRUST- Pagc 23 46,53'.0û122037


(74 of 3



09-00014-RBK Doc#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 24 Of 29

78. As a rcsult of thc Loan Transaction and the transfer ol- the proceeds therefrom to

BG1 and its alter ego, Timothy Blixseth

,

and the Iicns placed on the Deblors' property

s

the

Debtors w'ere left with an unreasonably small amount of asscts with which to continuc their

business.

As a result of the Loan Transaction and the transfbr of tbe proceeds therefrom to

BGl and its alter ego, Timothy Blixseth, and the liens placed on the Debtozs' property

,

the

Debtors knew or should have known they were incuning a debt they would not be able to rcpay

.

80. Pursuant to section 544(b) of thc Bankruptcy Code, the transfer of procceds to

BGI p-nd its alter ego, Timothy Blixscth, was a constructivcly fraudulent transrer tmder Mont

.

Code. Ann. 3 l -2-333( l )(b), and can be avoided pursuant to section 550 of the Bankruptcy Code

and Mont.Code. Ann. 31-2-339(1$.

81 . The Trust is entitled lo a judgment against BG1 and its aller ego, Timothy

Blixseth, for the value of the transfers to BG1 and its altcr ago. 'I'imothy Blixseth

,

and to any

mediate transferees, in an amount to be proven at trial.

IX. FIFTH CAUSE OF ACTION

(Against Timothy Blixscth)

Recovery ofFraudulent Transfcrs

82. The Trtzst incoporates by referencc a1l the prior allegations of this Counterclaim

and the First Amended Answcr.

83. Much of thc proceeds from the Loan Transaction wcre transferred to cntities other

than thc Dcbtors for the benefit of Timothy Blixseth, yet the Debtors were left with the

obligation to repay the loans rcsulting from the Loan Transaction and with liens on their property

intended to secure that obligation.

FIRST AMENDED ASSWER AND COUNTEZCLAIM OF MARC S

.

KIRSCHNER@

AS TRUSTEE OF -r1'IE YELLOWSTONE LIQUIDATING TRUST - Page 24 465310 1 22087


(75 of 3



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84. The Debtors did not receive rcasonably cquivalent value in cxchangc for these

transfers and liens.

As a result of the Loan Transaction and these transfers and licns

the Debtors uzre

left with an tmreasonably small amount of asscts with which to continue their business

86. As a rcsult of the Loan Transaction and these transfers and liens

.

the Debtors

knew or should have known they wcrc incurring a debt they would not be ablc lo repay

.

87. Pursuant to section 544*) of the Bankruptcy Code, the transfer of proceeds to

entities other than the Debtors for lhc benefit of Timothy Blixseth were constructively fraudulcnt

under Mont. Code. Ann. 31 -2-333(1)(b), and can be avoidcd pursuant to section 550 of the

Bankruptcy Code and Mont. Codc

.

Ann. 3 1-2-339(a).

88. The Trust is cntitled to a judgment against Timothy Blixseth and any mediate

transferees for the value of the transfers made for the benefit of Timothy Blixseth

.

in an amount

to be proven at trial.

X. SIXTH CAUSE OF ACTION


Conversion

29. 'rhe Trusl incomorates by reference a1l tlne prior allegations of the Counterclaim

and thc First Amended Answer.

90. Blixseth's vrrongful taking of the proceeds from the Loan Transaction also

constitutc convcrsion.

9 1. The Trusl is entitled to judgment against Blixseth for the entire amount of the

proceeds from the Loan Transaction that were distributed to him or for his direct or indirect

benefit.


.

KIRSCHNEK

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATCNG TRUST - Pagc 25 46535:9122057


(76 of 3



O9-OOO14-RBK Doc#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 26 of 29

Xl. SEW NTH CAUSE OF ACTION


Unjust Farïc/iale/z/

92. The Trust incorporates by refcrence all thc prior allegations of the Counterclainl


As a result of the above-dcscribed actionsand omissions. Blixseth has bccn

unjustly cnriched, and thc Trust has been unjustly injurcd, in an amount equal to thc wrongftll

distributions that Blixseth received directly or indircctly

.

ln additions as a result of the above-dcscribed actions and omissions

,

Blixseth

would be unjustly enriched at thc expense of thc Trust and to thc Trust's detriment if Blixseth

was allowcd to continue to usc thc cconomic bcncfits of the wrongful distributions.

95. The Trust is entitled to judgment against Blixscth for the entirc amount of the

proceeds from the Loan Transaction that were distributed to him or for his direct or indircct

benefi t.

X1I. EIGHT CAUSE OF ACTION

(Against Tjmothy Blixseth)

Punitlve Damages

96. The Trust incorporates by refcrencc a11 the prior allegations of this Counterclaim

and the First Amcnded Answer.

97. Pursuant to Mont.

awarded whcn thc defendant has bcen found guilty of actual fraud or actual malice. Pursuant to

Code j 27-1-221(1), rcasonable punitive damages may be

Mont. Code 9 27-1 -221 (2), a defenàant is guilty of actual malice if thc defendant has knowledge

of facts or intentionally disregards facts that create a high probability of injury to 1he plaintiff

and: (a) dcliberately proceeds to act in conscious or intentional disregazd of the high probability

FIRST AME-NDED ANSWER AND COUNTERCLAIM OF MARC S.

KIRSCHNER,

AS TRUD'EE 0F THE YE-LLOWSTONE LIQUIDATING TROST- Page 26 4653100122037


(77 of 3



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of injury to the plaintiff' or (b) deliberately procccds to act with indifference to thc high

probability of injury to the plaintiff.

As alleged herein, Blixseth is guilty of- actual malicc bccause he has had

knowlcdge of facts and/or intentionally disregarded facts that created a high probability of injury

to the Debtors and: (a) deliberately proceeded to act in conscious or intentional disregard or the

higb probability of injury to thc Debtors; and/or (b) delibcratcly procecded to act with

indifferencc to the high probability of injury to Plaintiffs.

al leged baerein, B li xseth, v,.r-th 'r 11. knosvledge of thc Debtors' rights and

înterests, actc.d in direct derogation of those rights, and through his unlawful and malicious acts

took asscts and funds belonging to the Dcbtors. He has deliberately and wrillfully actcd with

conscious or inlentional disregard of the high probability of injury to the Debtors and/or

dcliberately procccded to act with indiffercncc to the high probability of injury îo Plaintiffs.

l 00. Thc Trust is accordingly entitled to judgment against Blixseth for punitive

damagcs in an amount sufficicnt to deter Blixscth and othcr similarly situated persons from

committing such vq-ongful acts in thc future.

PRAYER FOR RELIEF

WHEREFORE, the Trust prays that this Court enter judgment upon its Counterclaim

against Timothy Blixseth as follows:

An award of actual damages in an amount to be determined at triai;

A11 Order requiring Blixseth to pay to the Trust the amount of all distributions that

Defcndants wrongfully diverted from the Debtors, plus interesl, and any and a1l

profits or gain Blixseth received from the use of the distributions;

7

FIRST AMENDED ANSW'ER AND COUNTERCLAIM OF &1AltC S

.

KIRSCHNER,

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING 'I'RUST- Page 27 4653ï00122087


(78 of 3



O9-00O14-RBK D0c#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 28 Of 29

o

D . An award of costs, disbursemcnl, attorneys' fces and prejudgment intercst as

permitted by N/lontana statutory and common law;

An award of punitive damages; and

5. Such other and further rclicf as the Court decms just and equitable,

- his 25'1: da of January

,

2010.AR ED t y

Respectfully submitted,

/s/ Shane P. Coleman

Charles %'. Hingle

Shane P. Coleman

Holland & Hartp LLP

40l North 315: St

Suite 1500

P.O. Box 639


Telejhone: (406) 252-2166

Facslmile: (800) 565-7845

Brian Glasser

Bailey & Glasser, LLP

209 Capitol Street

Charleston, WV 2530 1

Teleghone: (304) 340-2282

Facslmile: (304) 342- 1 1 1 ()

Stevcn L. Hoard

John G. Turner, 11l

Robert R. Bell '

Mullin Hoard & Brown, LLP

500 S. Taylor, Suite 800

P.O. Box 31656

Amarillo, TX 79120

Teleghone: (806) 372-5050

Facslmile: (s06) 372-5026

,

4 TTOKNEYS FOR MARC S. KIM CIINER: AS

TRUSTEE OF THE YELLOWSTONE CL UB

L QUIDA FJNG TRUST

FIRST AMENDED ANSWER AND COUNTERCLAIM OF MARC S. KIRSCHNEII,

.

4S TRUSTEE Of1 THE YZ- LLOWSTONE LIQUIDATING TRUST - Page 28 4653h00 122û87


(79 of 3



09-0O014-RBK Doc#: 487 Filed: 01/25/10 Entered: 01/25/10 17:13:09 Page 29 of 29

CERTIFICATE OF SERVICE

1, thc undersigned, ccrtify under pcnalty of-peljury that on January 25

,

20 l 0, or as soon as

possible thereafter, copies of the forcgoing First Amcnded Answcr and Counterclaim svas scrvcd

electronicalllr by the Court's ECF notice to all persons/cntities requesting special notice or

otherwise cntitled to samc and that in addition servicc by mailing a truc and correct copy

,

first

class mail, postage prepaid, was made to the following ptrsons/cntities who arc not ECF

registcred users: None.

/s/ Shane P. Colcman

-

Shane P. Coleman


.

KIRSCHNER.

AS TRUSTEE OF THE YELLOWSTONE LIQUIDATING TRUST- Page 29 4653100122087


(80 of 3



O9-OO@18-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 1 of 27

Steven L. Eoard

Joha G. T=c, 1II

MUIJJNHOAED & Bltom1 LLP

500 Soui Taylor, Suite 8ûû, LB#J,13

?.0. Box 31656

Avsrlno, Traxas 79120-1655

Telephono: (806) 372-5050

Facsllrdle: (806) 371-6230

BmaD.: Jboardembbmcom

Rrnail: #htrnar/sbraba.com

Jcseph W. aintlzony

Mm' L. K'noblauok

Mthony OstlundBaœ &Lcuwa#e PJ..

3600 Wells Fargo Center

90 Soutî Sevenf: Sfreet

AJ=' neapolisa AIN 55402

Telephone: (612) 349-6969

Pac -1=-1s: (612) 3494996

Bmatl: l'anhonvaaoblaw.com

P,,ma11: [email protected]

RnnnldA BenGer IACf #106)

Mattlmw J. nnee (.&1T #4448)

WORD>DANRF.C.

Attorneys at Law

P.O. Box 4747

Missoula, Montana 59206

Teieyhone: (400 721-3400

Facslmlle: (406) 721-6925

'R.m11: rbendertzwthlamnet

mcttfeawtbla.met

INTM UNITED STATESBAm UPTW COURT

TORM DISTRICT OPMONTANA

Iu re: Case No, 08-61570-11-Rbk

U LLOWSTOM MOTWTAW C'LTJB, Jbhttly Admlnlstered M?I:.IZ 08-61577. aud 08-

LLC) et a1., 61572, 08-61573 '

Debtor: Ckapter 41

Mkhael Snow, Greg C. Brauck A.C. and RIAST AM-RNDKD COU LA'ENT .

Leda Marlrknlx Cfrastees of tlte Arlixt

Trastly Spano Yellowstoxe Holdingg Limlted Adv.l>ro.No. 09-00018

ParGerslzis Robert P. aucl Icathariue M. Judge: Qnlplt B. Kirscker

Watgox Bomlrers Fiuandal.corporadox aud

Mountam Vista Properues AG

Plainfiffs,

VS.

BLX Group, Iqcu Fk/a Bsxseth Group, Ince

Tlmotkyl,. Blixseth, Xdra D. Blixseth, John

Does 1-1G antlMc Companies 1-15.

Defexdomts.

(4653ï0020154454*0C / 1)


(81 of 3



O9-OOO18-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 2 of 27

Plainfiffq Mickael Snow, &eg C. Branch, A.C. ancl L'no Mgrplrnla G'zustees of Ge

z

#

A'rlin Trastl, Spano Yellowstone Holegs Limited Pmrtnerslzip, Robezt P. and Kathm'ne M.

Waton, Baakers Financial Cozporaûon and Mounte Vista PropeOes Be (collecdvely, Tttize B

Members'' or 'Lplaint@ '), by and tïougî tlzeir undersired co=sel, herein s'tates their causes

of action and clm''ms 'orreûef agm'nqfDefendant TimothyL, Blixsel (tMz. Blixsetp'l.

N RODUCHON

'l'he Debtozs, Yellowstone Mountain Club, LLC aad Yellowstone 'Development

Company, LLC, owa and operate tb.e Yellowstone Gub wbich is one of Monea's most

swotxcular sh and golfreaort commuuifes.

Plaintifg are Clas B Members of fhe Debtors azd togethœ hold a 7.1428% equity

interes't in t:e Debtors.

BLX Gzoup, hc., Fk/aBlixsetiz C'rroup, Hc. (1%CIr'), a compaay 1at îas always

'

zrMs Blixsetp'; togeier witlk Mr.e= owaed and conknlled by Timotby azzcl Bdra Bliraetk ( .

Blixsetî tke ''Blixsetâss, owns au 82% eq'aity interest iu the Debtors. BGI has always beea the

sole 'managœ of the Debtors.

4. By tkek conluct described more 'I57lly herein, BGI and tke Blixneths breached

fdudary duties owing to Plainiiffq and eommitted other serious wrongdohg, omaning signifoa:lt

hrlrr.n atd damages to Plaklfilq - the ultlrnste consequence of which is Kainiifs m'e at zisk of

hae g tkeir equity interesls completely elirnimnted as pad of the Debtors' y1aa of eorgnnszatiom

Jn 2005, the Blixsetlts caused tke Debtors to bon'ow $375 ='llion pursuant to a

Içledit Apeement'' with Credit Sisse, Cayman islazds Brauoh (tcredit Suisse''l. A sigco' c=t

'oMon of the lo= proceeds were earmarked for distribufons lo tlle owners of the Debtors.

Instead of mqprimg aay dicc-butions to Pfaiues, nearly a'll of the Oredit Saisse loau proceeds

(4653î0:20..5445420C/ 1)


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09-00O18-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 3 of 27

were wzongfazy rNFrlributed to BGI oz t:e BM efhs personally. De Blixsetlls nrcheskated t'Izia

by way of purported **10a:1,'' âom tlze Debtors to BCI aad Yellowstone Club World LLC

(drY'CWr'), anotlv enti.t.r owned aad. contolled by tâe Bl:'vnot'iza wllioh recenfy soult

Bgmlcrnptcy protecticn. Ultlmately, BCC aad. YCW and other 7=1040*.. enfiûes ende; zp 5W.1

over $300 =1111*0n of tâe Credt Suisse lo=poceeds.

A centzal issue i:l this Court is whethez the Debtozs are entitled to recover tke

pcrgozted :1::cs77 made to B(E and YCW. 'lYe Oodal Crrmmsttee of Unsecured Deditors ttite

ccomvl'ttee''l has commenced aa adversarjrproceeeg againnf Edza Blixsefh and BGk seeking

'

to cozect on tbzee pronlissozy notes purportedly evidencing Qoaus': from fâe Debtors to B(E.

'I'he Cornmlttee also seeks to eajoic Edra Blixqet.h âom 'g'rtlner ennnmbezing assets acqtûred or

maintained 'wifh Ge Creclit Suisse loaa Troceeds. Finally, the Cormittee has received

auiotizaGon âom Gis Comt to su' Credt Suisse to avoid fâe Credit-suisse lo= as a âauiulent

convoyance.

rne Debtors' pl= of reorgnni%-edon corGrrned on J=e 2, 2009 in In re

Yellowstone Abpgnfcfs Club, MG Yellowatone Development Company. JZf.G, and 2fg ,7/1 kidge,

JWCRT >ocedurally consolidated Mnder case number 08-61570, curently pendiag in tlzis Comt

tthe t%anlmzmtoy Cases''l movides for tYe adversary proceeegs and potendally other

dedvative claims belonmg to tke Debtors Telafng to tîe Credit Suisse lom prooeec'ts to conHue

to be Jhgated after cor6vnadon in aEquidadontust.

8, J.n lhiq Comylaint, 'Plaintis' claim tkey are entitled fo a pcrqon of the Credt

Suisse loan proceeds and other amounts wlzich is or may be subject to clnimn by the Debtors.

Speoïcatly Plaintieq allege t'iat Bdra BlixseA Tim Blixseth and BGI bzeache; their Educia':y

dufeg acd commltleâ other wzongdohg by ma7ring dlsta-budons to tiemselves of tb.e Dedit

(4653ï0010154454.D0C/ 1) ' J


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09-OOO18-RBK Doc#: 140 Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 4 of 27

Suisse loanproceeds witâotzt Tnnlimggro rata dMbudons to Plaines as Class B members. Titç

issues presented by iese personal claims are relatsd 'both to the estate clm'ms aaserted in the

adversaryproceeegs by tke Committee and lo tâe B toy Cases generatly,

9. 'Ihè stattes of l:=l'tatBns in connection *t,11 the causes of acdon azsMed herein

were tozed by virtae of apeement b

etween fhe parAs, tâe discovery zule, âaudulent

concenlment and/or adverse dornhladoa

PAROESAMIRELXTBDENTITTRSO

WDIVDUALS

lqainuffs eaok own a 1.0204% iuterest in 'both Yellowstono Mounte Club, LLC

CYMC'') aad Yellowstone Development, LLC (tr&qr) (cozeodvely, the Tqrellowstono LLCs'').

Phintils are each Class B Members of tke Yezowstone LLCS. Togetbzr Plainos own 7.1428%

of the Yezowstone LLCS. In addition to their ownersbip kterest in theYezowstone LLcs, eao:

of the Plaintiffs own residenial propo . at tlne Yellowatone Ciub acd arô Pioneer members of

the Yellowstone Club.

11, BG'T9 an Oregon cozporaion. BG'I ls fhe soie manager of tâe Yellowstone LLCS.

BG' and Blixaeth Fmm'ly lnvesuents, LLC CtB1T'I are tite sole Class A members i;l the

Yellowstone LLCS. BG'I owos î2% of tâe Yellowston: LLCS. BFI owng 6.0204% of tb.

Yoiowstone LLCS and is wîolly-owned by Ms. Blixaetk. AllizLvoluntmypetEdon in b toy

was flled against BeI on Septembez 21, 2009 in the U.S. Bsnltvnptpy Court for fhe DisMot of .

Montaaa. This bxnknptcy is *71 pending. rIl=, no relief is sought against Bolhereia.

12. As t:e manager of the Yellowstone LLCS, B11 cwes each of t:e Plaintiffs a

Sdudary duty.

13. Az the majozity owaer of tlze Yollowstone LLCs, Be1 owes each of 'lhe Plaintifs

a fdudary duty.

(4653h0:*0154454.D0C/ 1.) 4


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O9-O0018-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 5 of 27

14. Defendmt Timothy L. Blixsel is aresidentof the Shte of Wnei'ngton- .As stated

by *. Blixsel in pleadings iu tbis Coart Qocket No. 359), he was tke founder md fozmer .

mata/ng member of tâe Yezowstone LLCS. Unfil Jaly or August 2008, Mr. Blixsei was the

Clziôf Bxecufve Oocer of tàe Yexowstono LLCS.

15. Bdra D. Blixseth is a resideat of tlze State of Califozcia. Until about January 2007,

Ms. Blixsetà was tb.e Cbief Operating Ofâcer of the Yellowstone LLCS. M,s. Blixjett ftled a

poliion for bnnkrnptcy on or about Ap:il 29, 2009, in tlze U.S. B toy Co'at't for tb.e Diskrict

of Montama . Thns, no relief is sougbl agsimqt Ms. Blixneth kerehz-

16. The Blirqetâs fozmed Yellowstone Club Worl; LLC CqrCW>'), a 'Waslimgton

State Tl'=1te(l iiability company, to be an exclusive membership clu: ofezing, according to its

formerwebsite Raa tmusual zeoreadoni access to (tâe2 fnest ameniûes, activides and serdces in

the most exolusive locadons aroutd the globe,'' YCW is now deflmot and Tec:ntly soult

B tcy protecion-

l7. 0. Blixnetk also bolds a 50% hterest in Big Sky E.idgexLLc ('%SR'') and Y.D

lolds the ooer s0%. lqainufs, twough tlxir ownersbip inyo, also own a pozuon of BsR- Mr.

Blixse formed BSk pzimmily as a laad-holeg venoxre for land contlgaous witll the

Yenowstone Club.

18. Togeler, the Blixsetits were tke controliiug sbvekolder of BGI and YCW. As

?

s'ach, the Blixsetl controlleâ BGI, the Yellowstone LLCS, and YCW. Itl particular, tkere was ao

diferenoe boYeen BO1 aad the Blixseths personally, otller thaafhe corporate stactare,

Because the Blixsetbs together were the contolling sharebolder of B(E which is

'

tîe maaager and majozity owner of tîe Yezowstone LLCS, tke BTivnetits owed a âdudary duty

to eacî of the Plaintiffq.

(465m00ï0015.145*4.D0C/1)


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O9-O0018-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 6 of 27

2O. Since August .of J0û8, upon her divorce âom Mr. Blixset, Ms. Blixseth alone

has been the contolling sHoiolder of B1I which kas continued to manage the Yenowstone

LLCS. M.s. Blixsci coneues to owe a Eduoiary cluty'to eao: of theTlaines.

Aas oEcers of tite Yezowstone LLCG the Bûrxseths owed a Educiazy duty to each

Of the Plainfiffq.

22. John Does 1-15 aad ARC Companies :-15g Ge idenddes of which are now

Imknown to Plainos, aided and abetëed in tb.e breaches of duty complaiaed of herein aad also

have be= unjustly enrioked to the defrloent of tite B Members. 1zl yarticular, on informafon and

beliefi certain enoes artd iadividuals involved ill tite disbuzsement of le Cre&t Suisse loazl

.

*

proceeés knowingly asisted B(E acd tite Blixaoths iq Ge brpaches and other wrongdoing

described hezsh to tlze detriment of the B Members.

U SDICTIONm 5+=

.

Tbis Court has gabjectmatterjtldstricion overthis adversatyproceeeg purmlamt

to 22 U.S.C. â 13349$. 'rhis is a ciO proceeeg mishg under Title 1 1 of the United States

Code, 11 U.S.C. jû 191-1532, or. adsing in or relatez lo cases 'tmder Title 11, 'n=ely In re

(Ewjswafopc Mountain C/X, ZSG Ycllowstonc Dcvelopment CbzzptzrJJ?, JXG andBîg ,7k.p Ridge,

JZ,G 'procedurally consolidated 'cnder case nxmnber 08-61570, rmrrently pending ic tbis Cotvt

tfhe t'Bamkrnptcy Case,s'/l.

24. 'TNsproceedingis a core procaeding 'witbin themeaming of 28 U.S.C. j 157($, TE'a

.

pnrticular, this is a cozeproceedhg puzvnant to 28 U.S.C. j 157(b)(2)(A), @) & (0).

Venuo is proper in f>iq Courtyurs-aant to 28 U.S.C. j 1409.

(4653h0:A00154454.50C/ 1)


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GEN'RQ AT, ALLBGATIONS

A. The Formiation of tll: Yellowstone LLCS.

26. The BAseths conceived and developed tiz Yellowsrtone Club.

'fhe Yellowstone Club is a 13,500 acre exclusive membersbip resot comprising,

among otb.e.r flu'mgs, a 2,200 acre pzivate sld 'resolt a c'hnrnpionalu'p golf course, second hcmes,

:1 1 ts awaieg developm=t ungold platted a'ad unplatted inventory l=.d, azd t'lle l25 O00o1 o , ,

square foot Wacren Mfller Lodge.

28. At one time, the Yellowstone Club was not mucî more 111=. madeveloped laad i'n

an attraofve part of tie worli J.c 1999 three-time Tour de Frmce wioner &eg LeMond as well

as oiers, inciuding Michael Snow and otîer of t:e Plainosp comrnlted io invest 17751150% of

dozars ic tâe Yellowotone Club aud to become Yellowstone Club membœs. Subsequently,

several oier investors committef to become Yellowstone Club membsrs.

Iu exohmg: for t%eir inveement of m=-11:.0ns of dollrs, eaoh of t:e Plainiiffq

became Pioneer membrs and later paid addidonal =ounts to reoeive a 1.0204% equity hterest

ia theYellowstone LLCS and become a Class B member of t>.e compacies.

30. 0. Blixset'k on beùa f of tb.e Yellowstone LLCS, entered into ao.d signed

Subscripdon Areements with each B Mezaber whiok speecally deson-bes aad limits the

business of tlle Yellowstone LLCS to tb.e ownersilip and opœaûon of a pzivate members/p club

in t'ile State of Mont=a. Noibsng in the Subsoription Apeements autkolized the Blixsets to

t'ausfo= tâe Yezowstone LLCS into a bnnk to fnanoe t'ile:iz own personal interests or hto a

worldwlde time-skare venture - wbich is exactly Brhat tke Blixseths did bep'mning ia 2005 aad

continuing aat51 just zeoently when their acdvifes forced the Yellowstone LLCS to seek

Bsnkvnptcypzotecuon.

(4653*0201544.54.D9C / lj


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31. Bach of the Yeilowsvtone LLC; is govezned by ac Operating Areement. Alttopgh

Aeole 6 of the Operatim.g Areententq for the Yezowstone LLCS gave tîe Members' zigkts to

iuformaNoa regarding the LLCS, despite repeated requests, Bœ and fâe Blixseths never made

aveable to the B Members the iafonnauon needed to mzociently analyze the Yezowstone

LLCS' eances.

32. Section 10.2 of tks Yellowstone LLC': Opel-ating Ape=ents provide that BeI

may bs liable for violatiozzs of tie Montàna T,mited Liabillty Compao.y Aot. To tlte extmt 1at

B@I violated an.y sec:on of the Montana Llmsted Liabiiity Compaay Act, it has fhcwfore

breacîecl the OperatingAreements.

33, Parapaph 12.2 of tàe Yellowstone LLC'S Operating Agreements provide:

Attomep fees. If suit, gction, or otker Troceeding of an.y nature

whatsoAer (inoiuding any prooeeeg under tb.e U.S. Banltnnptoy

Code) ia insdtated i. connection wit. any conkovezsy arisiug out

of this Agreement, or to hterpret or enforce any ripts hereunder,

tke prevailing party svl be endtled to recovœ its attorney fees,

paralegals, accomtants, and ofher expezts' fess, aad 21 other fees,

cosi, aad exwnses adually inrmrred aud reasonably necessary in.

connecion therewith, as determlreâ by the arbitrator or court at

fnn'n: or on any appeal or reviews in addition to at1 otbar =ounts

proddedby law.

B. BGTs2005

.

OFer to Purchase PlahltlWs' Iuterests ix the Yello

wstone LLCS axd

Plsuntlffs' Attempts to Access Hformation About the Yellowstone LLCS' Fixaxces.

34. On May 25, 2005, BGI, through Mr. Blixsex wzote the Yellowsvtone LLCS'

Class B unitkoldœs and offered tc purckase tkeir iaterests io. the Yellowstone LLCS.

35. 'lYe offer efectively gave fhe B Members two weelcs to accept tke offer.

Accoreg to BCII and Mr. Blixseth, tb.e decision to oser to purcbase tba B Members' hterest

was characterized as a 'fspur of ttle moment'' decision to Tkrjr ard own 100% of his (Blixsetlpsj

dream,'' Mc Blixsei iruformed tiz B Members that îe intended to obtain '1a francing'' to

(46531100154454.D0C/ 1) 8


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.

''

O9-OO018-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 9 of 27

purcxase tke B Members' interesà aad 1at he would ITtake tbis Su=cing on only if 1 can

reacqdre all of tlle outstanding B shares.': W. Blixseth dicl not menfon tke amount of tb.e

Enauoing norio baclclat he ictende; to use.

36. 1*. Blixsetlps ofer inoluded a cask and. property componeat wbich accoreg to

'him, was woA $3.25 'mglllon to eaoh B Member. BG'I aud *. Blixsetk charaoteriMed BGl's

May2005 cfer as a itdecent and fair oser'' and a ctemendous psen''

To evaluate BGrs offerp tb.e B Members subsequently nmmtccesqfnlly sought to

obtain 9om BG1 and txe Blixsetâs ftnanoial iufozmation about tile Yellowatone LLCS. B(E and

the Biixseths dtlzb'r iroreG stonewiled orrefased repeated requests for ftoMcial illfrrrnnnatîon.

38. BventuKy, i'a November 2005, M'r. Blixseirevoked Btx's offer.

39. 'l'he B Members did nôt le= =El muoh later why Mr. Blixseth changed com'se

and revoke; Btr's ofer,

C. The Blixseths

xncumber the Yellowstone LLCS ïo Provick Tbamselve, Di

stribqtioxs

H

-

Exeegs of $300 Ml'lllon t: the Exclusion of the B Members

.

40. Well aoar the fact tîe B Members lemed fhat BGI and the Blixset'hs caused the

Yellowsmtone LLCS acd BSR to bonow $375 Tnillion puzsua'at to a Rcredit Agre=enf ' *t.b.

Gedit Suisse dated September 3O, 2005.

41. Mr. Blixseth simed tlze Credit Ap-eement on bebalf of the Yellowstone LLCS and

BSR and caused tlze Yezowstone LLCS and BSR to pledge nearly atl of thoir aqsets as collatœal

for tb.e $375 mnillion loan.

42, The Czedt Ameemeat explicitly provided that $351 mnilllon of the $375 miltion

loa'a (93.6% of tite proceeds) could be used foz puposes uczelated to the Yellowstone LLCS. h

pngflmzla'r, Secion 2.6 of ûe Czedit Apeemeat stated titat $209 =:'111'on of the loan proceods

were for tffor disHbutlo:ns or loans.'' Fhrther, lu. coodenoal pmsentatioas=ade by the Blixseths

(4653ï00ï00154T54.10C/ 1)


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immediately preceeg the closhg. on tte loap 1ey stated Gat a.large yooon of tîe lo= wonld

be used for tb:e 4f.Refurzl of Capital'' - tkat is, a simple distn-bufon of ftmâs to 'the owners of tke

Yollowstono LLCS. Several docnments relaeg to t:e lo= s'ated iat tb.e Rrefnmn of capital'' was

icteaded to yrovide a disGbut-ion to ownerg,

p'factpczl and shareholders.

43. Trfead of mnlri'ng any distribudons to the B M=bers, nerly a'Ll tlle loa:l

proceeds were distributed to BeI or the Blixsetlzs personatly in violation of Al+iole 7 of tb.e

OpgzafngAp-eements.

D. The $309 Mimon :+4,a10: from-'G c tc BGI

'Jhe &st $209 rnillion of tite loal t/at was made to YMC was the11 purportedly

'rjoaaed'' to B(E pursngnt to a mromissozy ncte belring fhe date of Septembs.r 30, 2005. Mr.

Blixsei was on botk sides of tlzis kaasaclion, he sired tb.e prominaory note - wblcî was

simpiy a, demacd note. BeI did not pledge any collateral, connmit any fature enrnings or provide

any guarantees for fâe $209 =1111'on :r10=.'' 'I'b.e Nlixsafb: never intezde; for t'ile loan 'to B@1 to

be collectable or collected. lt was baobdated aud made to fsgaise the fxct that the Blixsebq

were in fact disttluting a clividen; to Gemselveg.

45. On iaformation acd beliefk t'lle vast majority of this $209 ml'll1'on 'Oka'' to B11

did not fmd'itaq way to any BGI acoount Htead, on info=ation acd 'beliet the Blirqetlls caused

the $209 milh'on to be s=t to 20 iiWerent deqfinsfiorts as follows:

a. $25,000,000 certificate of dmosit at Pirst Bnolr i'aBel's name.

b. $11,939,495 payof to Fizst Bsnk for the Bzxseis' prirnary residence at

Porcupin.e Aeek in Rarzcko Mirage, Califoznia.

$17,000,000 corftscat: of deposlt at >n1= Desert Nauonal Bsmt- rin the

Blixseo' mnrne.

d- $14 016,227.87 dmosit into a money-market accouct at Palm Desezt

,atonal Bamlc illMr. Blixsetk s name.

(465.:00ï00,154454.D0C / 1)


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$4,133,623-50 payos to P91= Deaert National Bnm'k- for tîe followin.g

debt: '

$3,169,118.75 for oharges zdated to resez't Rmch'' tb.e Blixqeis'

pœsonal housing devolopment nea'r Psl= Sprizga, Califoraia.

(2) $79,629.54 payos of tEdra's Condo,'' a condo owned by Mq.

Blixseth in.Pn1= Desc Cslifoznia.

(3) $402,546.02 payoff of b.e BWsefhs' personal li'ae of credit.

(4) $482,329.19 payoffof s. Blixqetll's personal li'n.e of ct-edlt.

$15,000,000 cerfilcate of deposit at Jackson State Bnn'ic i:a Wjr. Blixsetit's

Lc e.

$3,068,749.99 payoffto A'mezican Bnnk forpezsonal uses.

$975,902.57 payoffto Americaa Bsmlc forpersonal uses.

$1,515,250 payosto AmericmBnmk forpezsonaluses.

$896,423.28 payosto AmericanBsmk forpersonal uses.

$977,894.92 payofto Amerioan Bsnk- forpersonal uses.

$:00,000,000 cectilcate of deposit atU.S. Bnnlc itz tâe Blixseo' name.

m. $5,000,000 cerfiGoate of deposit at Paxc WestemBsr'ic i:i tlle Blixqetiuq'

ngme.

$2,971,443.02 payofof apersonal note to Padfc Wes'tem Bnnk.

e

'

$160,765.83 payoffto Union Bsm'ic for a rental home owned byBlixnetk.

$2,007,930.55 payofto Comnnerdal Bnmlc for persoaal uses.

$1,402,547 payoff to CXCC for an aiplane owaes by a Blixsetk-owned

companyin whioh neiler YMC aor YD have a:l hterest-

$2,484,774 payofto (313CC for an aizplane owned by a Blixseth-owne;

company in whiok neiûer Yellowstone Momtain Clu'b noz Yezowstone

Development have a z iuterest.

$272,590 payos to World Savicgs foz a rental home owneâ by the

(4653*0h00154454&0c/ 1) 11


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Blixsetlzs.

46. M icle 7 of the Oporatiug Agecments generGy movides, with certe itrelevant

excôpfons, 1at all dist-ibutlozhs/a:Eocaûom to Members must be allooated among the Members

pro rata :in proportion to a Member's pemenfage ownersllip in t:e reswcdve Yellowstone LLC.

47. B(E an:l the Blixsetlzs Wolate; tb.e provis-ions of Arlscle 7 of tize Operaeg

Apeoments by providing BGI, a'ad BC1 alone, with .the $209 =5'117*0n Zcreifrrn of capital''

distrt-bufon. 'T'%ig disfzibuiiono accoreg to Ariiole 7 of the Operaeg Areements, was required

to be allocated among tb.e Yellowstone LLCS' Members pro 7'atl in propooon to tke Members'

pœceatage ownezsïy :in fâe Yezowstone LLCS.

E. Tke

Blixsetls Usûd $10# 'Mlm'on of fbe L

oan Proceeds to nlrchzse Prope> All

Arouud Ge World.

48. On Octobœ 1, 2005, tiz day afer the $375 =i114'on lo= was funded by Credt

Suisse, Mr. Blixsei executed a 'Tive-party Agreemenf' on bohR16 of YMC, Y.D, BSK 'G'W

p

'

*

azd Be1 1at require; tlze Yellowsione LLCS azd BSR to invest up to .$142 rnl:l1on i:l one or

more resox locations ideneed byYc'W.

49. J.n connecion *t.11 t'iis Five-party Apaementa cn iuformnfon and beliefl

approximately $133 'million of tîe lomprooeeds weze disbursed to YD as follows:

&1Oû million was placed i'a a s-Jx-month cartiloate of deposi. at U.S. Bsnk'

inYo's name;

b. $30 =1'1h'on was placed in a six-=ontk certifoate of dmosit at Amnerioan

Bnnk inr 's name; and

c. $3,110,262.53 remained in D 's oheoldng accouat althougk at least

$225,000 of tlzose fauds was used for marketing YCSV.

50. On infozmatlon and beliet aher tlzs CDs above matare; t:e Blixsetb used $:08

million of tite $133 'million to yurckase three resozts and an island located outside t'i.e Uaited

(465,3ï00h00154454..17t:)6)/ 1) 12


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09-OOO18-RBK Doc#: 140 Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 13 of 27

States:

T28 million was useè to purchase Gateau de Faroba'dlie located Iin

France;

b. $4O ml'll:'on was used to purckase a resod lœow. as Tamarimdo located in

Moxico;

$28 rnilllon was used to purckase a pivate isl=d in Ttulcs & Caicos; a'ad

d. $12 million was used as down payment for propez-ty at St Mdrews

located i:l Scotland.

5:. 'The Tamatindo ancl T7lr1cq & Caicos propeoes are owned either outzigkt by *.

BHsetîpersonatly or tkough entldes he owns aad contoh.

52. 'Jhe Farcheville and SL Andrews prope es are purportedly ourrently owned

indirectly by YMC, YD or BSR. However, on iufo=adon azd be:ef; Ge Blixsefzs have

diMbuted to themAelvcs a sigaifoant poMon of equity or value tbat otherwise wo'uld be iteid in

iese yropeMes.

Tb.e Bllsels' use of. $108 mllllcn of t'Ne loat poceeds to purchase real estate

arolmd the world foz theiz own personal bemeEt was aa impropœ diqtrtbudon Gat violate; fhe

rovisions of Arb'cle 7 of txe Opôraeg Axeementst %iS rlie-butiow accoreg.to Aeicle 7 oj

fhe O

.

perating Agreemmts, was required to be a'llooated among the Yezowstone LLCS' Membors

pro 7=fc inproporGon to fhe Membœs' pccentage ownersilip in tîe Yezowston.e LLCS.

54- Th.e location and disposilion of tùe remairn-mg $25 ml-lllon (i.e. $133 'millionrninus

$108 million= $25 =illioal is tmcertain, To the exrtent tke Blixsetb.s used these fcnds i'n tb.e same

or sinnilar mnnner that tkey used tb. $102 mnll'on, tbis is = atlclilional improper disfzibuion ûat

violated tke providoas of AMcle 7 of tke Opgcating Ameements because it was not Gocated

among the Yezowstone LLCS' Members pro rata ia propoMon to tke Members' perceatage

owoarship inthe Yellowstoae LLCS.

(4653109ï09154454.D0c / 1) D


(93 of 3



O'b-OO018-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 14 of 27

K Apart from the Improper.bistribudors Relatiao to the Creclit SGsse Loax. BGI and.

Ge Blixseths Inmroperlv Recefved ax Additbnal %64.5 M$111om. :in Dlstributioms

from tke Yellowstnne LLCS. .

Jn a pronu'nsory note bes4i'ng tke date of September 30, 2005, M'r. Bzxseth

memozimll'med a'a Zleged d'lcaa'' â'onl YD to B(E i.n the amoun.t of over $55 =17110:a. 'I'. te=s of

tilis Gtprornissorynote'' are idenfcal to tâe fa'st $209 = '111on Kjprominsozynote,''

56. On icfozmation aad beliefi this $55 'million represents huadreds of witieawals

made byie Blirnetlls lom YD to B(K between Jlme 1, 2003, and December 31, 2005, mostly ia

increm=ts of $50,000, $100,000, $200,000, aud $250,000. Mao. of lese wiidrawals were

oziginally claseed as Rdisfributions'' to BOL

57. ln addifon tc the $55 =1'111'on Itpromissozy notey'' the Bzxsetits wititclrew $7.8

Irtêlqson from YMC, memorinlgzed in aaotker promissory note besring a date of September 30,

2005.

kl addluon to t:e $55 =4*11:'0a 'tpromissory note'' ard tlze $7.8 =llll'on Tromissory

note,'' the Bzxsels caused YMC to lo= titoir comp=y, YCW, over $908,000, wbich was

memozislizeâ in anotb.œ promissnzyaotebenring a date of September 30, 2005.

59. The $64.5 million of loans to BGI zzkxoz YCW were maie for tite Blixseo' own

personal beneft azld were improper distribuiozts that 'viplate; the provisions of Artide 7 of the

Operaticg Aveemeats. These clistribuuons, according to A'rtiole 7 of tie Operaeg Areements,

wero required to be allooated among t'o Yellowstone LLCS' Members pro rafl i.a poportion tc

t:e Membœs' pementage ownersllip iu the Yelbwstone LLCS,

In svumy BOI and tùe Blixset:s kave received rnsllions of clollazs in disG'butions

from YeYellowstone LLCS but tlte other equity owners of tb.e Yetlowstoae LLCS kave received

no*simg,

(4653ï00ï00154454.70C / 1)


(94 of 3



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Bers aad tlae Blivqeths' wzocgful actlons iiimately left tb.o Yellowstone LLCS

ti Ooient fnmds to pay tkeir debts' as tîcy came due, As a result, on'msolvent and wi out su

November 1h, 2008, tho Yezowstone LLCS were forced to seek Bnmlcnlptcy protection. Because

of Bll's and tlle Blixsetks' wrongful aouons, iu additbn to not zeceieg tho distribuuo:ls io

which they were rigklfnlly mtitled, tb.e equity iuterests of tke B Members are at risk of being

completely elirninated as part of a reorganization plan of fhe Yezowstone LLCS.

BGI aud Ms. BWseth tand. ox Mprma ti--n ---nd Belief- Mr--Blixsethh Conthme to

Bncam e

r Their Asse

ts

Such Gat

-

tlz

e B M

embers wil1

be Deprived of Aaw

MeaTdnofttl Reeoverv from Them.

62. Because of otîer prior litigaéon relaGg to Class B member iuterests in tike

Yezowstone LLCS, B(E and t:e Blixsot:s are awre of the sigaif ant claims iat B Members

have agab'mnt tb.c.

62. Wi1 thi.s Howledge, BIE acd Ms. BHsetb.tan.c1, oa mf ormation and beliefj Mz.

Biixsefh) have continued to enoumber tkeir aasets to paypœsonal exeponses of tkeBlixseths.

Porcupine Creek is a 230.5 acre Tesidendal componnd i. Rrcho Mirage,

Caiifoznh. It is Ms. Bzxsetk's primarjrresidence, but it is solely owned byBGl.

65. As deson-becl abovea $11.9 'milh'on of b.e impropœ (1+t:13nd011s t14a1 were made to

BG1 aa:l tlle Blixseths were uaed to pay osdebt on the Bljxsetlls' homo at Porouphe Creek

66. Since August 2002, Ms. Blixsei Xas oaused BG1 to enopnbœ Pormtpine C'reek

atd otiter B(E assefs 5571f.1 iibns to securo $49,425,545.46 of 10=. $15,775,545.46 of tkese liens

have beeareoorded since fhe Yellowstoae LLCB ftledbnntnnlptcy.

67. Tite Plaintiffs havô receatly leamed tkat *. Blixsei has tausfezred viztaally al.1

of his assets hto aa aaset yroteodon nfrllctureknown as the Desert Raach LLLP straoture.

68. Plaiutcs a':e endtled to an order of fhig Cou::t enjoirlïg M.r. Blixqetk.

(4653/:*q1544.54.D0C / 1).


(95 of 3



09-00018-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 16 of 27

temporarily, yrelirnirnrgy azd permanenfy, âom 'snrther spendm g, t'acsfterrsng, concealirgj.

dissipae' g, elmmbering, assigaiag) nWOT hypothecaeg his aasets.

Mr. Blhsetk Commlts Act.s of Selfbealing iu Comzection witiz tb.e Sale of Lots bv

BSR.

69, On April 1, 2002, Big Sk'y Ridge, LLC (BSR) purchased propezty condguous to

t'Ne Yezowstoae Club. The propeo was purchased from Silver Ridge, Tnc. in the amouat of

$3,500,000. At tbis time 'llle owner of BSR was Mr. Blixnetiu The consicferadon waa ill'the form

of aNote.

70. On May 7, 200% *. Blixneth sold a 50% htœest hBSR to Voyager &011.p, L.P.

an endty owned by James J. Dolan for $2,500,000. T:e ckeolcs from Voyager a're made payable

to BGk not Blixse,

71. M1', Blixsei tllea sold his remninlmg 50% interest EBSR to YD. Tbâs oonn=ed

on September 17, 2003. The yuzckase price was $17,000,000. This is a mere 16.to 17 months

after 0. Blixsetâ sold txe other 50% of BSR to Voyager for $2,500,000. 'Ihe purchase price

consisted of (1) $5,380,000 in cashi (2) 5 lots :Ln the Yexowstone Mountai'a Clu'b s'ubdivision

valued at $7,600,0009 (S) 2 proMssozy notes in the face amount of $920,000; and (4) a 1997

Broward Raised Pilot House Motor Yacht valued at $3,100,000. Mr. Biixsefh signed tb.e

areement :in his i'advidual capacity as seller and as President of Bll'xnef.. C'rrolp, Tnco as

Maaager of ellowstone Development, LLC.

72. lfn Septembor 2005, 0 . BHseth ptlrohased Voyagœ's 50% interes't foz

$3,000,000. AtMs point, BSR wa.s owned 50% by Blixseth and 50% by YD. It was (blring this

dme period, 2005 - 2098, that BSR owned real propezty in Madison County, Montaaa. n en

BSR sold c-aim lots, BSR would pay Ge sales proceeds as clividends to M'r. Blixnei and

Yezowstone Devdopment

(4653/:/0()154454.170C:/ 1)


(96 of 3




73. Wese disfzibudons includô fhe following disMbufons, all of whic: are refezred to

as t:e CSBSR Distributions.''

L $1.65 =A'7ll'on paid to Mr. Biixseth on oz about December 13, 2007, inco=ecfon wltb. tb.e sale of Lots 450, 457 and 499;

$1.65 rnlllion paid to Mc Blixseth on or abotzt D. ecembe,r 2O, 2007, i.c

connection Mrith the sale of Lots 459, 463 and 465, and

$500,000 paid to Mr. Blixsetî on or about Febraarjr 14, 2008, in

connecuon w111a tb.e sale of Lot 436.

74. 1r. adeon to fhe fozagoing M.r, Blixseth recoived $26,541,818.60 i: z distribudons

âom BSR byvirtae of his owners/p.

1. Mr. Blixseth Commlts Acts of Self Depllmz

-

D

-

coMecti

o

v-wi

-

tl1 the Sale of Suorise

Ricw-e.

75. On Februaty 1, 2005, *, BAseth purchased YD's 82% iuterest :in t:e S'lnriss

Ridg: Condomlni= Devolopment at Yellowstone Club, He gave YD a $5 million promissory

note in eonnecuon w1t11 this pumhaqe.

76. Subsequently, on J=e 28, 2006, the Slnm='Ke Ridge Condomim'.am Developm=t

was sold to CD Rumrise Pddge Owner, LLC, owne:l by Sam Byme for $60 Tnillbon- A11 toldm M'r.

Blixsetllreceiveâ $55,418,759 ia disM-bufon as aresult of h.e Snndse lkidge transaoéon-

Mr. Blixseth Commz-ts Acts of SelfDeRh-no in Comteetion M4G the Ove

rbokbeal.

77. 0. Blixsel's patt= of actiyity coneued in 2008 when MI. Blixseth and

Wayne Prinn (4Tri='') conmlmmated fhe Overlook tansaction. Ia tàe Ovœlook- t'ansaction, Mc

Bllxneth fozmed Overlook Pnrfnôrs, LLC (IçOP'') witk Pr1= Pr1= loaned OP $15,000,000.

BAseth t11% used tlle money to buy Sve lots 1om YD for $3,000,000 each. nis sale czosed on

or arotmd May 7, 2002. Blixsetit also oause; V.D to i'ad ' OP because a lis pendens bad

been fllerl against tlle lots by the LeMond Plaino s. 'Ihe lots Were beiag marketed for

(:165m00201544M.DX/ 1)


(97 of 3



09:0OO18-RBK Doc#: 140 Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page 18 of 27

$6,000,000 each audla; recentlybeen apmaised by Ctzsllman & Wakeâeld for $5,000,000 eacbv

makeimg tb.e value of this tansaction for OF betqreen $10,000,000 =d $25,000,000. Blixaetb.

ccnisrnned tilis value by irnmediately contacting on behalf of OP to cause tîe s=e lots to be

sold for no less 6:.= $5,500,000 each.Ihe net result was to liz.e Blixsetk's pooket by over $1O

-:1:- on771 .

K Mr. Blixsetk Commits Acts of

Self

bealiuc in-connectlon

-

with

.-

the Parchase of Lot

Y.D bought 1ot 90 for $3,950,000 i'a Deccmber 2006. 'Ihen on Febraaz'y 12, 2008,

lro transferred Lot 90 to Mr. Blixsett :in a casbless 'Hmmqacion. Speo cally, Mr. Blixseth,

thro'agh an enûtjr he owns atd contols, Casa 2O, LLC, purchased 1ot 90 for a $2 mlll:'on note and

for $500,000 iz: lzeviouslypaid consideraion.'' l'D never received any paments in connection

witîtbis aote.

Mr. Bzxsetk siaed tba ''Real Estatô Purchase and Sale Agreemeat'' botk on

behatf of himnself as tBuyer'' azd on behalf of Yezowstone Development as TGSeller.'' Mr.

Bzxseth t11% had Casazo, LLC tausfer Lot 90 to BalliaDorada S.A. de C.V., a Mefc= entity

he contols.

L. lVfr. Blixsetlps otker Acts of Selfbenllnz.

80. Mr. Blixsei has committed other act.s of setf deating besides Gose desczibed

above, a11 to the inju':y of the Plaiqflfcq. For iztstance, b.e caused YD to enter into a lease

areemeat with yroperty he owned in California called Poroupine Creek, erhls lease ameement

was for the years 2003-2007 ard oalled for lease paments of $1,500,000 per yeaz. 'Ihus, Mn

Blirqeth cause; Y.D to pay $7,500,000 in lease payments for which neiler YD nor the Plainos

received ao.y beaeût. Fueermore, *. Blixsei put his children on tite Yellowstone payzoll for

exozbita'at salades.

(4653$00ï00154454.D0C / 1).


(98 of 3




81. .. Likewise, M'r. Blixseth caused YD to sell Lot :47 to a company owned and/or

.ccntolled by his son, Beau Blfxseth for a >ce beloqr fair markat value, 'TNs sale occ=ed on

July 1î, 2006 acd tlze sales price was :1,500,000. Tb.e fair market value of Lot 147 was far irt

excess of this sales pzice.

82. Jn a sirnilar fasbiow Mr. Biixset caused WAIlz Unit 303 to be sold to his fziend,

Wame Pdm, for less t,1:= fai. market value. 'fàe femadcet value of this pzopertywas in excess

of :1.2 million. Pri'm, howevaq only paid $196,120 for Unit 303. 176177 also Kegedly forgave

an obligation of $750,000 titatD purpohedly owed hilm.

0, Blixseth also comrnitïed ads of self denling in eonnec:on w1111 the sale of

WML, Urit 304. Prior to Augast 2008, thiq Umit was owned by 1rD aud had a value of

approxl'mately $3.2 =ï'lll'on. YD owed A'rnerican Baak a debt of $2,511,000 that was sscured'by

Unit 304. *. Blixseth caused YD to convey Unit 304 to BOI, an entity tlmt he owned aad

controzed. Be1, in rettm assamed the debt to Arnerioan Bnnv. B(E tims A'mmediately

beaeûte; 9om tkis deal in ac =ount of af least $600,000, t111 amouat being tîe equity ia tite

propec.

84. Fiûally, M.z. Blixsel comnnu'tted acts of self dealing in connecéon 551..1 the

LeMond settlement. M'r. Blixsoth, who had been accused of iudividuazy breacH g his Educiarjr

dutles, allocated a pozdon of tke sedement paid to the LeMond Pletiff' :in such a way as to

cause Yezowstoae to inour a loss of at leas't $25 mnîllion.

(fortions Interferexee With Contact )

Plain'tifs incozyoratebyrefereace a1l the prior allegadons of tbis Complet-

86. B(E had a'ad eontinues to have valid and enfozceable contactui o'bligadons

(4653ï00/0154454.D0C/ 1)


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O9-'OO018-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13243:15 Page 20 of 27

owiugtc PlaAdffs purmlnrt to tlle Opsrating Apeements.

87, T m Blixsei iM, and still has, Howledge of Bol's contactal obligatbns

owi'cg to Plnirliif'fq

88. TH Blirneth intenfonzly Ztezfored and continues to icterfere witll Bccs

contactaal obDgations to tile defriment of Plaiafsf'Eq.

89. TM Blixsel was not and ias not justifad to interfere wi1 Bers contractlls:

obligations.

.

90. As a dirct and prorimate consequence of TM Blirnei's acïons and oHssions,

Plaino'fîq are enûtled to damages in an amount to be determined at ttial.

COTJNI' 2

(Aidiug-ind Abeeingl

91. Plainos incorporate byreference all tâe pzior allegations of tlzis Complaint.

:2, B(E owed eack of tlle (Nain'df' Scluciazy duûes. M set fqrtk hereic, BG'

breacked its fduciary dudes to PlainflfR.

93, TM Blirneth Howhgly pHcipated illBcls's breacles of fduciarjr duty.

94. TM Blixseth encowaged Rnrl nYrmatvely assisteâ BGl's 'breackes of fzuciary

duty.

95. TM Blixsetk helpeâBel to conceal ita breackes of Ecludazy d'aty.

Timblixset aided and abetted BGl's breaohes of Sduciazy dut'y described Jlereic-

97. As a direct acd prorimate consequenc: of Tim Blixsetk's actions and omissions,

Plainlif;q aro enftled tc damages :in au amouut to be determsmed at tziat

COUNT 3

CfimBlixsetll is Liablû for the Acdons of c

(465350020154454.10C/ IJ


(100 of 3




.

98. Platintiff, incozporate by refereace all tàe prior Vegations of tbis Complaint,

99. Dllrlng all relev=t ïirnes, BC'l was the alter ego of TH Blixsei, acd TH

Blixsetll was the altœ ego of BeI. TM Blixneth and Be1 are ono atd tb.e s=e.

100. Tâis Coud should piôrce the cozporate veil of BGI and âold TH Blixsetk liable

for Bœ's conduct and debts.

101. Plaizdf is entitled to judgmez. agasmqt Tim Blixsetk on all amoau.s and coan.s

owedbyBol.

C0UNT4

mreach Of Fidudarjr Dutjrl

102. Plainos incoporate by reference a'Il tâe prior Gegatlons of this Complaint.

102. As the majoritjr owns'r of tlw YeDowstone LLCS t'hrough lzis ownezslzi.p of BeI

and as an oocer of t:e Yellowstone LLCG TM Bliynetî owed fduciary dudes to Plaintiss to

protect Kainos' Hghts and htœests in the Yezowstone Lbcs, inclueg Piaizdfs' zights to

their pro rata share of distrzbutions made by tb.e Yellowstone LLCS.

104. Jn pecular, TM Bliraeth breached tllosô dckes in connecfon Wt.II the Credit

Szzisse Loac by patdoipaeg in tke lo= representing hio own interes/ only, by intentionslly

fslling to disclose tke Credit Suisse Loan and nxm'ng improper disMbudons made to BIE for his

own personal interest, witk a complete digregal.cl for Plaintifcq' zights.

:05. T:Lm Blixsel also breached bis Sduoia y clutls by commitfing tlle other acts of

selfdenling descrlbe:l herein.

106. .&s a Oeot and prorimate consequ=ce of TH Blixse's breaohes of Sdaciary

duty, Tlaizdffs respectfuliy request that this Court enter a judgmeat tilat orders TH Blixsefh to

compensato Plain

lisq for titeir damagea i'a an amount to be determbmed at triaî aad ozder

4455320/01541.54.1701 1)


(101 of 3




eqaitable relief as desczibe; hereic.

COVNT5

(Corversion)

107. Flaintiffs incozpozatebyreference all t:e pdor allegations of ihis Complsint.

TH Blixsei Mproperly convezted distrl'bufom gom tile Yellowstone LLCS that

belonged to tim B Members. He also coaverted assets of Yellowstoae Development titroug,k lzis

vazious acts of self-desb-ng.

:09. Jn additbn lo Tim Blixsei refurning to Plaictiffs the tlzeft portion of tb.e fbnds

improperly converted, Plaino s zequest a poOon of any future lost income and profts 'Plaintlf'fh

sufered âom Tim Blixsetlps convœsion.

COUNT 6

(Unjast Enrichment)

110, Plainiilq incozporate byreferenoe all tke prior allegatbns of t'is Complet.

M a result of tAeiz above-described actbns and omissions, TknBllxnetî llas been

unjcstly em-iched, acd Plaintifs have been unjustly iqjureda i.zt an amount to %e proven at trial.

112. Ta additionr as aresvalt of tlle above-descdbe:l actbns and oMssions, TimBlixseth

would be uajustly enriclled at the expense of PlaintiGq azd to Plainfifcq' defrinnent if TH

Blixseth were allowed to contkme to use tke economic benests of tb.e distribuons 1at sùould

have bcenmade to Piaintiffk, azd tba economicbenests of his acts of self-dealsmg.

113: Plaiatiffs request 1at fhe Co=4 accordhgly impose a cons%ctive %st over all of

TH Bliyneth's real and personf propeo tkat has benefteâ or prosted âom, or has be=

acqule:l or maintalued with, the aclawful distlibuuons aad acts of self-denlimg.

(4653ï00ï00154454.:17047/ 1)


(102 of 3



O9-ùO018-RBK Doc#: 14O Filed: 03/22/1 0 Entered: 03/22/10 13:43:15 Page 23 of 27

COUNT 7

(Accnuneg aud Coxstmzctive Trust)

114. (Kainos hcomorate by reference atl ieprior allegafons of tlnis Complaint.

115. Piainttffs are enftled to a detailed accounting v/ith regpect to any and. a11

ctistzibutions latwere unlawfuzymade.

Plajnti/s are entitled to aconstracdve trust witit respect to any and a11

cliskibufons and acts of self-dealing fhat were unlawfdly macle. Plaicfiffq are eatitled not only to

what 1ey lost by mot receieg tlleir propoMonate share of such distrlbutiozts but all of the gains

rpceived by Tim Blixsetll from tke unlawfal dinfribudons a'ad aots of self-deslimg,

Under iese oirc=stances, the Court has the autholity aad equiVble power to

impose a oonstruotive kust over all TH Blixsetips real and personal propelty tbat has beneâted

or profted gom, or has been acquired fr mab'mfailled with, tb.e ualawful distribufons, and acts of

self-denling inoluding, but not lp'=b'ted. to, Forctzpine C'reekz Chateau de Frcîeville, Tamsrimdo,

tb.e islao.d in Trrk'q & Cdcos aad the property in St. Andrews, Scotland.

COUNT 8

g.ju.eilveYqGtable Reliefl

118. Plaintiff.s incorporate byrefereace a'tl the prior allegadom of this Complaiat.

119. Plainos are endtled to tcmporary and pm anent injuncfve relief a'ad other

apmopriate eqlzitable zelief puzsnlnnt to Montana statatory and cornmon law. Jn pacticular,

Piainos aro enutletl to equitabls liens on a11 zoal property tkat has been acquireâ or maintaiaed

witll, the uzklawful distzibuions, and acts of self-denllng including, but not ll'=:'ted to, Porcupina

Creek, Chateau de Farchevitle, Tamnvindo, tite island 5n T.ICS & Calcos aEd tke property ia St

Anndrews, Scotland.

(4653h.0ï00154454.:f2)0C / 1)


(103 of 3



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COUNT9

(Conspiraey)

12,0. Plainfifs iucomorate byreforence a1l the prior allegations of tlkis Complet.

121. By tâeir above-desoribed action,s aud omiasions, Defendants havs lœowingly or

tacitly conspired together to deprive Plaintiffs of their zights under the Opernting Agreementw

ancl Monta'aa statutes ao.d comrnon law.

122. A-s a direct and pzoximate consequence of Defendants' actions azd onnl'nsions,

Flaintiffs have iccuu'ed damages in a l amount to be detecmimed at tzial. P:sintiffs aze enutled to

judnent agsinqt TM Blrx netlz for t:e amount of lese damages.

COUNTI

(nmithre Damages)

123. Plainos incoporate by referznce atl the prior allegatons of ikis Complet.

1.24. Parsuant to Mont. Code j 27-1-22141), reasonable punitive damages may be

awarde; when the defendant has been found gailty of acenn: âaucl or actaal malice. H suaut to

/

Mont Code j 27-1-22142), a defendrt is P'IiIT of actaal maliae iftb.o defendant has Howledg:

of facf.s or ictenionally disregards facts that create a lzigh mobability of i'aj'ary to the plaiu.o

and: (a) deliberately moceeds to act i'a consoious or intentlonal clisregard of tb.e Jligt probability

of injury' to the plaiulif'f; or (b) delt-berately proceeds to act wiG inclifferenoe to tlle Eg,IA

probablty of injuzy to the plaiatiftl

125. hs alleged hereic, Mr. Blixsetù is g2.111 of aotnal malice beoause he kas, ancl had,

Howledge of faots and/or intentionily disregarded facts 1at created a MF,II probability of injm.y

to Plaintifa md: (a) deliberately mooeeded to act azd continue to act :n consciou or intendonal

disregard of the YF,N pzobabilt of injuzy to Plaintirs; aad/or @) deHberately proceede; to aot

(4653*0ï001541.54.D0C / 1)


(104 of 3




and coneue to act with indifersnce to tlle idgh probablty of njul'y to Plainiiffs.

126. M Oeged herein, bccause *. Blixsei, witâ 6111 Howledge of Piaictiffs' dghts

antl htorest in tke Yeliowstone LLCS, acted in direct derogafon of tîose rilts, azd tbrougit lzis

zmlawful azd malicious acts took asset.s and fhmds bolonging to Plaintiss, aud he has deliberately

and willfhlly acted aud coneues to ad witll consdous or intentional deegard of the itiglk

probablty of iqjut'y to Plainûffs and/or delberately proceeded to act M4'LII indserence to the

lzigkpzobability of icjuryto PlainiiWq.

PRAYBRFORRXLVF

WMREFOM, Plaintiffs pray Gat tbis Court =ter judgalent upon its Complaint

ir.l and sevcally againgt Defendants as fozows:o y ,

An awa:d of aot'ual rlarnages agsslut TH Blixsetù in ac amount to be determlne;

at tri&19

2. Ajudrent req:p:ng Tim Blixsetk to pay to Plaintifs titeir moportionate share of

thu clistrlbutions that Defendants wrongfuzy diverted âom Plaiutes, plus hterest,

and any and all proûts or ga:in hcreceive:l âom tîe use of Plainos' clisu-buûoas;

Ajudrent orderimg Tim Blixseth to pay to Plainiifk Geir propoMonate Bhare of

ieprofts TimBlixsetk received fromhis acts of self-denpimg, plus Hterest

Ac accountins constructive tnlnt aad zecoupment from TM Blixsetll on atl t:e

distu-bctbns that Ticz Blixseth improperly divezted 9om Plaintiffs, and on a11 the

prosts b.e made 9om bis self-dsaling, plus interest, including a cons%otive t'ust

over Porcupine Creek, Chateau de Farokeville, Tamnrlmdo, t'Ne islard rin Turks &

Cicos aad ûeproperty in St. Andzews, Scotland;

Temporazy ao.d permaaeat equitable aad iajuncive relief as desmed appropriate

(4&53/0ï00151454..170C/ 2) X


(105 of 3



O9-OOO18-RBK boc#: 14O Filed: 03/22/10Entered: 03/22/10 1 b:43:1t- Page 26 of 27

dnring t:e course of the litigafoa;

5. .àn award of costa, clisb=sementj, attorneys' fees and prejudment hterest

agm'rqt Ti'm Blixsotà as pezmitïed by the Operating Areemeats, and Montana

statatory and corvon law;

An awazd of puaifve damages; md

7. Such oler snd fnrfherrelief as tbe Cou t deômsjust acd equitablô.

DAIED this

.

154 dayof Mrch2010

/s/ Jobn (). Tum-

ez. 1H

- - - --

Steven L. Hoard

Jo% G. T=œ, 111

Mtq,r HoAAn &BROWINA LLP

500 Soe mfsylor, Sdte 80û, LB#213

P.O.Box31656

Amsrillo, Texas 79120-1656

Joseph W. Mtioay

Mary L. Kuoblauch

Azoony Ostluzd Baer & Louwabe bA.

3600 Wells Fargo Center

90 Soui Seventh Steet

Mimmeapolis, MN 55402

RonaldA. Bender IMT #100Maeew J. Cafe (MT //4448)

WOKDBNTFTANRP.C.

Attomeys at Law

P.O. 80x4747

Missoulw Moatma 59806

264.653ï001()0154454.50C/ .)


(106 of 3



O9-OO018-RBK Doc#: 14O Filed: 03/22/10 Entered: 03/22/10 13:43:15 Page (7 of 27

C'ERTTWCATE OF SMRWCB

1, tb.e undersiredv cero' uader peMtjr of perjury that on March . 22 . 2010, or as soon

as possible thereeer, copies of tb.e foregolg Plaine First Amended Complet was served

electonicatly by tâe Cou's BCF nodce to all yersons/entdes requevsng special nofcs or

otherwise enûtled to tb.e s=e and fhat :in adclifon s=ice by npiling a trae and co=ect copy,

&st class mail, postage prepaid, was made to tlze following perso=/entities who are not BCF

registered users: None.

Ronald A. Bender

/s/ Ronald A. Berder

(4653h0(2002.:5:/454.2:10C/ 1)


(107 of 3



10-00O15-RBK DOc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 1 Of 22

Charles W. Hingle (Bar No. 1947)

Robert L. Stenlp (Bar No. 3533)

Shane P. Coleman (Bar No. 3417)

HOLLA'ND & HART LLP

401 North 31st Street, Suite 1500

P.O. Box 639

Billings, Montana 59103-0639

Teleghone: (406) 252-2166

Facslmile: (406) 252-1669

chinglerzhollandhart-com

l-stel-tlprzhollalltllAal-t-coln

spcoleluan:khollandlaal-t.coln

ATTORNEYS FOR MARC S. KIRSCHNER AS TRUSTEE

OF THE YELLOWSTONE CLUB LIQUIDVTFNG TRUST



ln re :

Yellorstone Motlntain Club, LLC,

et al.,

Debtors.

MARC S. KIRSCHNE , AS TRUSTEE

OF THE YELLOWSTONE CLUB

LIQUIDATING TRUST

Plaintiff,

DESERT RANCH LLLP, a Nevada limited

liability limited partnership; DESERT RANCH

MANAGEMENT LLC, a Nevada limited

liability company; TIMOTHY BLIXSETH, an

individual; BEAU BLFXSETH, an individtlal;

THORNTON BYRON LLP, an ldaho limited

liability partnership; GEORGE MACK, an

individual; JOHN DOES 1-100; and XYZ

CORPS. 1-100'

Defendants.

Chapter 1 1

Case No. 08-61570-1 1

Adversary No.

COMPLAINT

1 The Debtors are the following entities: Yellowstone Mountain Club

,

LLC, Yellowstone

Development Club, LLC and Big Sky Ridge, LLC, which entities are substantively consolidated, and

Yellowstone Club Construction Co., LLC, which is jointly administered with the other Debtors.


(108 of 3



10-0OO15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 2 Of 22

COMES NOW Marc S. Kirschner, as Trustee for the Yellowstone Club Liquidating Tnzst

(the EtTnzst''l, by and tlzrough counscl of record, and herein states his causes of action and claims

for relief against Desert Ranch, LLLP, Desert Ranch Management, LLC, Timothy Blixseth,

Beau Blixseth, Thornton Byron LLP, George Mack, John Does 1-100 and XYZ Coms. 1-100.

1. INTRODUCTION

This action pertains to ntlmerous transfers of assets by Timothy Blixseth and his

affiliated entities to Desert Ranch LLLP and its affiliates and subsidiaries. This is an action to

set aside those fraudulent transfers. Timothy Blixseth made these transfers in an effort to avoid

his obligation to his lawful creditors, including the Trust. Currently, the Trust and Timothy

Blixseth are involved in litigation in A.

P 09-00014 (hereinafter &KAP 145'), wherein the Trust seeks

to set aside certain fraudulent transfers made by Timothy Blixseth. The Trust also seeks a

money judgment against Timothy Blixseth for his breaches of his fiducialy duties to the Debtors.

The trial of A.P 14 is scheduled to continue on February 24, 2010. After trial, the Tnlst expects

to receive judgment for at least $ 286.4 million. lndeed, the judgment will come as no suprise

to Timothy Blixseth either. He fully anticipated this large judgment because, as will be shown,

he engaged in a fraudulent scheme to attempt to remove his assets from the reach of his creditors.

Each of the Defendants named and certain trusts identified herein participated in this scheme to

degaud. For the most part, the facts alleged in this Complaint are taken from the deposition of

Timothy Blixseth taken by the Tnlst on January 26, 2010.

Il. PARTIES

Plaintiff Marc S. Kirsclmer is Ttatstee of the Trust. Pursuant to the Confirmed

Plan of Reorganization (the ttconfirmed P1an'*) (case no. 08-61570, dkt. # 947) and Assignments

of Claims, the Tnzst succeeds to çiall Catlses of Action that the Debtors or their Estates could

(4653ï00ï00152392.170C / 1) 2


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10-O0015-RBK DOc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 3 Of 22

assert immediately prior to the Effective Date,'' except certain claims released by the Confirmed

Plan of Reorganization. The causes of action to which the Tnlst succeeds incltlde the fraudulent

transfer and related claims stated in this Complaint.

Defendant Desert Ranch, LLLP (ttDesert Ra1&ch'') is a Nevada limited liability

limited partnership. Desert Ranch is a t'ransferee of the assets for which avoidance is sought by

this Complaint. Desert Ranch may be served with process by serving its registered agent

Resident Agents of Nevada, lnc., 71 1 S. Carson Street, Suite 4, Carson City, Nevada, 89701. As

will be described more fully herein, Desert Ranch participated in a fraudulent scheme to defraud

the Debtors, who are Montana residents.Furthennore, the fratldulent scheme caused harm that

Desert Ranch knew would be suffered in Montana.

4. Defendant Desert Ranch Management, LLC (toesert Ranch Manazemenf') is a

Nevada limited liability company. Desert Ranch Management is the general partner of Desert

Ranch and as such has an interest in the assets transferred.Desert Ranch Manageluent may be

served with process by serving its registered agent Resident Agents of Nevada, lnc., 71 1 S.

Carson Street, Suite 4, Carson City, Nevada, 89701. As will be described more fully herein,

Desert Ranch Management pal-ticipated in a fraudulent scheme to defraud the Debtors, who are

Montana residents. Furthermore, the fraudulent scheme caused harm that Desert Ranch

Management knew would be suffered in Montana.

Defendant Timothy Blixseth (ttBlixseth'') is a citizen of the United States and a

resident of the State of Washington. Blixsetlz owns a minority interest in Desert Ranch

Management and as such has an interest in the assets transferred to Desert Ranch. He may be

tll

served with process at 1000 Second Avenue, 30 Floor, Seattle, WA 98 104. Blixseth at one

time owned Yellowstone Mountain Club which is located in Montana. He has filed a Proof of

Claim in this Court against Debtor Yellowstone Mountain Club, LLC. Furthermore, as will be

(4653h00ï00152392.170C / 1 )


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10-O0O15-RBK DOc#: 1 Filed: 02/19/10 Entered: 02/19/10 15242:54 Page 4 Of 22

described more fully herein, Blixseth pal-ticipated in a fraudulent scheme to defraud the Debtors,

who are Montana residents. Furthermore, the fraudtllent scheme caused halnu that Blixseth knew

would be suffered in Montana.

Defendant Beau Blixseth, the son of Blixseth, is a citizen of the United States and

a resident of the State of Washington. Beau Blixseth owns a minority interest in Desert Ranch

Management and as such has an interest in the assets transfen'ed to Desel't Ranch. He has filed a

Proof of Claim in this Court against Debtor Yellowstone Motlntain Club, LLC. Furthermore, as

will be described more fully herein, Beau Blixseth participated in a fraudulent scheme to defraud

the Debtors, who are Montana residents. Furthenuore, the fraudulent scheme caused harm that

Beau Blixseth knew would be suffered in Montana.

Defendant George Mack (tiMack'') is a citizen of the United States and a resident

of the State of Oregon. Mack as trustee of two tl-usts owns a minority interest in Desert Ranch

Management and as such has an interest in the assets transfen'ed to Desel't Ranch. He may be

senred with process at 1 1 1 SW Coltlmbia Street, Suite 700, Portland, OR 97201. Furthermore,

as will be described more fully herein, Mack participated in a fraudtllent scheme to defraud the

Debtors, who are Montana residents. Furthermore, the fraudulent scheme caused harm that

Mack knew would be suffered in Montana. Finally, Mackworked extensively in Montana,

controlled actions of employees of Mack in Montana and had regular contact with the State of

Montana.

Defendant Thornton Byron LLP (ûç-l-hoznzton Byron'') is an Idaho limited liability

paMership and has filed a Proof of Claim in this Court against Debtor Yellowstone Mountain

Club, LLC. Furthenuore, as will be described more fully herein, Thornton Byron participated in

a fraudulent scheme to defraud the Debtors, who are Montana residents. Furthermore, the

fraudulent scheme caused harm that Thornton Byron knew would be suffered in Montana.

(4653ï00ï00152392.170C / l )


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10-OOO15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 5 Of 22

John Does 1-100 and XYZ Corp. 1-100 and Unidentified Trusts 1-100 are,

respectively trusts, unknown individuals, comorations, or other btlsiness entities, who are

transferees or who facilitated the transfers of the assets desclibed herein, and who will be named

9.

in an amended pleading when they are identified.

111. JURISDICTION & VENUE

10. This Court has jurisdiction over the subject matter of this Complaint pursuant to

28 U.S.C. jj 157(a)-(b) and 1334, Standing Order 12 (Revised), U.S. Dist. Ct., D. Mont., and

Section 10.1.4 of the Confinned Plan of Reorganization.

l l . This is a core proceeding under 28 U.S.C. j 157(b)(2). The Trust hereby consents

to ently of final orders andjudgment by the Bankruptcy Cotlrt.

In the alternative, Counts 11 - IV are related to the core proceeding stated in Count

l for avoidance and recovery of fraudulent transfers to Desert Ranch, as contemplated by 28

U.S.C. jj 157(a) and 1334.

Venue is proper pursuant to 28 U.S.C. j 1409.

lV. RELEVANT FACTS

Blixseth fraudulentlv transfers assets to Desert Ranch

14. ln the summer of 2008, Blixseth and his wife, Edra Blixseth, entered into a

Marital Settlement Agreement (1tMSA''), pursuant to which the parties divided their marital

estate. lmmediately upon consummation of the MSA, Blixseth implemented a scheme to

degaud his creditors, including the Debtors. Specifically, beginning in August 2008,

approximately three months prior to the filing of this bankruptcy, Blixseth personally transferred

or caused to be transferred virttzally al1 of his assets to Desel't Ranch for less than reasonably

equivalent value. At the time he made these transfers, Blixseth knew that the Debtors had

(4653y00h00152392.170C / 1 ) 5


(112 of 3



10-O0O15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page G of 22

substantial claims against him relating to the Credit Stlisse loan and he knew that the Debtors

were in serious financial trouble. At the time of the Desert Ranch Transfers, Blixseth was

insolvent or became insolvent as a restllt of the tralzsfcrs. Blixseth was either insolvent or

rendered insolvent by the transfers.

Desel't Ranch was crcated as part of a group of entities specifically designed as

vehicles to assist Blixseth in his attelupts to shield assets from his creditors. Defendants Beau

Blixseth, Thornton Byron, and Mack each participated in Blixseth's scheme to defraud his

creditors. Beau Blixseth and Mack participated by accepting ownership interests in and control

over the fraudulently transfen-ed assets. Thonzton Byron took al1 of the action described in their

billing records as set forth below.

Desert Ranch is a Nevada limited liability limited partnership. Blixseth owns a

98% limited partnership interest in Desert Ranch. In other words, Blixseth has a 98% economic

interest in Desert Ranch, but allegedly has no control.Blixseth has admitted, however, that

despite of the corporate structure that he controls Desert Ranch. The 2% general partner of

Desert Ranch is Desert Ranch Management, which is a Nevada limited liability company.

Blixseth owns 40% of Desert Ranch Management and Beau Blixseth owns 30% of this entity.

The remaining 30% ownership in Desel't Ranch Management is owned by two trusts witlz Mack

serving as Tnlstee of those trusts. Mack is a long time friend and business associate of Blixseth.

The foregoing structure is a garden variety asset protection plan. It seeks to remove assets from

&icontrol'' of the debtor, Blixseth, so that creditors cannot attach those assets, yet the debtor

continues to enjoy the economic benefit of those assets.

Upon infonnation and belietl the following assets have been transferred to Desert

Ranch:

(4653ï00ï00152392.170C / 1 ) 6


(113 of 3




a.

current valtlation from Blixseth's experts in AP- 14 values this asset at $40 million;

One-third ownership interest in Westelm Pacific Timber, LLC. The most

A11 ownership interest and/or the assets of Casa 18, LLC, Casa l9, LLC,

and Casa 20, LLC. These three entities own stock in a Mexican company the name of

which is not currently known, which in t'tlrn owns residential propelies in Tamarindo,

Mexico. Blixseth reported that the acquisition costs of these residential properties were

approximately $2 million;

50% ownership in a 640-acre parcel of land in Bozeman, Montana referred

to as ççsection 5'1.

A11 ownership interest in and/or the assets of the Buffalo Bill Ranch in

Cody, Wyoming. The most current valuation from Blixseth's experts in AP-14 values

this asset at $3.5 million;

All ownership interest inand/or the assets of Westenz Air & Water

(formerly known as Westelm Aviation & Marine).The most current valuation from

Blixseth's expel'ts in AP-l4 values this asset at $25 million;

f A1l ownership interest in and/or the assets of Emerald Cay, Ltd, which

owns a private island in the Turks & Caicos. The most cun-ent valuation available to the

Tnzst values this asset at $35 million;

h. All ownership interest in and/or the assets of Desert Ranch, LLC, which owns

3,000 acres of land, which were transferred into that company by Blixseth. The most

current valuation from Blixseth's experts in AP-14 values this asset at $100 million;

A resort in Mexico known as Tamarindo. The acquisition cost of this asset

was $40 million;

(4653h00h00152392.170C / 1 )


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10-0OO15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 8 Of 22

A1l ownership interest in and/or the assets of the following entities located in

the United States: Blixseth Group of Washington, LLC; Friday Records, LLC, Hole 13

Partners, LLC, Kawish, LLC, La Paz, LLC, Little Bear Development, LLC, Lone Moose

Meadows, LLC, Mexican Moon Investluents, Overlook Partners,

Renaissance Development, LLC, Resort Acqtlisition, LLC, Tamarindo, LLC, TWJ

Holdings, LLC, YS Collection, LLC, Yellowstone 123, LLC, and Yellowstone L30,

LLC, Cody Ranch, LLC, Blixseth Resorts, LLC and Oasis Estate L.P.;

k. Al1 ownership interest in and/or the assets of the following entities located

Casa 20, S. De R.L. De C.V., La Paz Conselwatoly SRL, a Mexican Entity, La Paz

Partners Conselwancy, S.C., La Paz Development SlkL, a Mexican Entity, La Paz

PaMners SRL, a Mexican Entity,La Paz Pal-tners Development, S. De R.L. De C.V.,

Operado Tamarindo SRL, a Mexican Entity, Operindo E1 Tamerindo, S. De R.L. De

Worldwide Commercial Properties, a Turks and Caicos Islands Entity,

Yellowstone Club World Tamarindo, S. De R.L. Dc C.V., and Yellowstone Holdings

Mexico, S. De. R.L. De C.V.

The transfers of assets described above will be referred to collectively as the tresert Ranch

Transfer'' or the Et-l-ransfen-ed Assets.''

1 8. As described in paragraph 14 above, the Desel't Ranch Transfers occurred within

tllree months of the Debtors filing their respective petitions for bankruptcy.

Blixseth received an ownership interest in Desel't Ranch in exchange for the

Transferred Assets. Specifically, he received a limited partnership in Desert Ranch and a

minority ownership interest in Desert Ranch Management, the general partner of Desert Ranch

.

(4653ï00y00152392.12,0C / 1 ) 8


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10-O0O15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 9 Of 22

However, these interests do not constitute reasonably

Assets.

equivalent value for the Transferred

20. Blixseth caused the Desert Ranch Transfers to be made with the acttzal intent to

hinder, delay, or defraud creditors.As set forth below, just prior to the Desert Ranch Transfers,

Blixseth received legal advice with respect to his potential liability to the Debtors and ways in

which he could attempt to re-structure his assets to avoid exposure for those liabilities.

Defendants Blixseth, Beau Blixseth andMack, as persons with ownership

interests in Desert Ranch, and the trusts for which Mack is the trustee are individuals or entities

for whose benefit the Desert Ranch Transfers were made, or were mediate or intennediate

transferees of the Transferred Assets.

The Trust is a creditor of Blixseth and has a1l of the rights of a creditor to bring

avoidance claims tmder applicable state law.

B. Thornton Bvron's role in the fraudulent transfer scheme.

23. This action also pertains to fraudulent transfers of at least $207,597.09 paid to

Defendant ThonAton Byron. Thornton Byron is a Boise law finu that performed work for

Blixseth personally in connection with his divorce, yet its bills were paid by one or more of the

Debtors. This work included not only advice as to how to stnzcture the divorce to maximize the

tax benefit to Blixseth, but also how to ttisolate'' Blixseth's assets from the imminent bankruptcy

that would result from the asset and liability division set fol'th in the MSA.

Thornton Byron's invoices indicate that its work ilwolved discussions with

Blixseth's advisors ttregarding Timothy Blixseth's possible liability to creditors of Mrs. Blixseth,

Blixseth Group, lnc. or the Yellowstone Club entities gifj Mrs. Blixseth were to assume liabilities

of business entities and the maritalcommunity on which Timothy Blixseth is currently

obligated.'' Thornton Byron also addressed the specific problems created if Blixseth's ttpersonal

(46531.00ï00152392.D0C / 1) 9


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1O-0OO15-RBK DOc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42254 Page 10 Of 22

debt to BG1 and from BGI to Yellowstone entities is not repaid as pa14 of sale of Yellowstone

Club assets.'' Thonzton Byron's work contemplated the Yellowstone Club banknzptcy, and

analyzed tithe proper approach to the restrtlcttlre of Timothy Blixseth's note in order to protect

him f.1-0111 potential forgiveness of debt and thus a potential banknlptcy.'' Among other work,

Thornton Byron assisted Blixseth with &çthe potential exposure vis-à-vis a bankruptcy by BGl

and/or Mrs. Blixseth to provide maximum protection for Timothy Blixseth.'' This work

culminated in the transfer of Blixseth's significant assets to Desert Ranch in order to ttisolate''

these assets from creditors.

25. These professional services benefited Blixseth personally and did not benefit the

Debtors. Yet, Blixseth and his advisors caused the Debtors to pay Thornton Byron's invoices for

this work, and the Thornton Byron firm filed a Proof of Claim in the Consolidated Cases for the

amount of its unpaid invoice. The payment of these invoices for the personal asset planning

services provided to Blixseth is recoverable as fraudulent transfers as described herein.

26. During the four years prior to the Petition Date, the Debtors paid Thornton Byron

for professional services that were rendered for the benefit of Blixseth and other non-debtor

individuals and entities. For example, Thornton Byron billed Debtors for at least the following

services, which were not for the Debtors' principal benefit:

(4653ï00ï00152392.170C / 1 l 10


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1O-OOO15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 11 Of 22

June 17-08 Analysis of Closing Agreement received from Steve

Kolodny's office to refine initial analysis of tax and

economic concel'ns presented by same; draft

correspondence to Mr. Blixseth and representatives

regarding concerns raised by Closing Agreement from

tax liability perspective; discussion with George Mack

regarding partictllar concern regarding Mr. Blixseth's

possible liability to creditors of Mrs. Blixseth, Blixseth

Group, Inc. or the Yellowstone Club entities is gsicj

Mrs. Blixseth were to assume liabilities of business

entities and the marital community on which Mr.

Blixseth is currently obligated' revise correspondence to

client and representatives regarding same; analysis of

documentation and transactional steps to limit Mr.

Blixseth's expostlre on subsequent collection efforts

with respect to liabilities asstlmed by Mrs. Blixseth;

discussion to analyze same; draft correspondence

regarding recomlnendations for limiting Mr. Blixseth's

liability after Mrs. Blixseth's assumption of debt; draft

multiple correspondence responding to questions and

concerns raised by Mr. Blixseth and other

representatives regarding same.

NO CHARGE. Finalize memorandum regarding Code

1031 like-kind exchange and planning to isolate Desert

ranch property received with respect to same in separate

holding company to limit potential liability; translnit

same to client and co-counsel; draft correspondence to

co-counsel summarizing same and responding to various

issues raised with respect to prospects for like-kind

exchange versus global settlement of a11 property

division issues between the Blixseths.

Address the prior factual analysis of the BGl 1031

exchange and split to finalize in event that such result is

reversed; assess possible issues of Mrs. Blixseth is to

purchase Mr. Blixseth's interest in BGI; focus on major

issues relating to the handling of income and/or loss on

the subchapter S return for the period of time up to the

division of stock' evaluate the cancellation of debt

considerations and potential issues with respect to a

bankruptcy.

B. June- 1 0-08

June-09-08 DJT

June-06-08 DJT Follow up on the status of the revised proposal and

address the issues re the potential expostlre vis-à-vis a

balzkruptcy by BG1 and/or Mrs. Blixseth to provide

maximum protection for Mr. Blixseth.

(4653$00ï00152392.D0C / 1 )


(118 of 3




June-02-08 JCJ Discussion to analyze concerns raised by possible Code

103 1 like-kind exchange of Porcupine Creek for Desert

Ranch properties in light of Blixseth Group lnc.'s

substantial liabilities and planning options to limit

potential adverse consequences of same; analysis of

transactional steps involved in transfening Desert Ranch

property received in like-kind exchange to new entity to

isolate property from BGl's liabilities and potential tax

issues presented by same' draft charts outlining steps in

transaction to accompllsh like-kind exchange and

isolation of Desert ranch property from BG1's liabilities

and summarizing expected tax consequences of each

step in the transaction; technical analysis under related

party like-kind exchange nlles to detennine effect of

subseqtlent transaction on triggering gain recognition

nlles.

Discussion to analyze latest correspondence from

Mrs. Blixseth's attorney regarding Porcupine Creek

property and intent to seek order that property be

distributed in a taxable transaction and appropriate

content of declaration requested by Stephen Kolodny in

opposition to that plan; discussion with George Mack

regarding content of declaration in opposition to

Mrs. Blixseth's attempt to force taxable distribution of

Porcupine Creek property from BG1 and tax

consequences of same; draft statements for declaration

opposing taxable distribution of Porcupine Creek

property from BG1 and transmit same to Stephen

Kolodny's office; draft correspondence to client

addressing questions raised with respect to adverse tax

consequences associated with related party Code 1031

like-kind exchanges.

Address the revised proposal from Edra's attorney,

particularly the approach to the next phase of

negotiations on the valuation and debt assumption as

affected by a purchase by Mr. Blixseth based on

Mrs. Blixseth's tax analysis, debt analysis and fair

market value analysis; analyze post divorce

opportunities purstlant to 1041 and 1031 scenarios to

avoid two-year sale penalty on a property sale.

May-29-08 JCJ

Map25-08 DJT

H. May-19-08 Analysis of correspondence from Kolodney and Anteau

regarding stldden change in position of Mrs. Blixseth's

attonzeys with respect to liabilities associated with

CSFB loan to Yellowstone entities; draft spreadsheet

analyzing known tinancial information for major assets

involved in Blixseth divorce settlement negotiations for

use in mediation proceedings with respect to same.

(4653h00h00152392.1()0C / 1 )


(119 of 3




May-16-08 Followup on meeting with Messrs. Blixseth, Mack and

Kolodny to prepare for the mediation and to establish

alternate game plans for Mr. Blixseth to purchase

Mrs. Blixseth's interest in BGI; consider opportunities

to lninimize income tax conseqtlences on distribution of

the Palm Desert residence from BGI.

Meeting and discussions with George Mack regarding

our memo and position paper on the structure of the

buyout by Mrs. Blixseth' preparation of materials for

meeting with Messrs. Koldony, Mack and Blixseth to

update strategy and to provide infonuation for the

San Francisco mediation regarding a global settlement.

Continued planning to finalize the tax approach and

handle issues for the buyout of Mr. Blixseth vis-à-vis

BG1 based on a potential spinoff to avoid income tax

liability and basis allocation; prepare for meeting with

Messrs. Mack, Kolodny and Blixseth regarding the next

phase of negotiations.

May-14-08 DJT

K. May-12-08 DJT

May-09-08 DJT Review of fnancial statement and Yellowstone Club

valuation forwarded by Mr. Mack; consider counter

proposals and valuation for Mr. Blixseth to retain BGI;

consider income tax issues for Mr. Blixseth regarding

BGl for 2008 based on who ultilnately is awarded BG1

and timing of tax allocations.

Continued planning and tax analysis for BGI and Mr.

and Mrs. Blixseth' assessment of the most tax effective

means of a potential spinoff based on the proposal by

Mrs. Blixseth' consider alternatives such as a direct

purchase of a specified asset, an exercise of an option or

transfer of an option; review of tax basis to maximize

benetits for Mr. Blixseth vis-à-vis existing basis and

liability assunption for St. Andrews at the corporate

level.

M. May-07-08 DJT

Apr-29-08 GAB Review technical issues relating to the purchase of

Mr. Blixseth's shares of BG1 by Mrs. Blixseth and the

distribution of certain assets held in the Yellowstone

Club entities, including valuation and income tax issues

associated with the distribution of the assets,

qualitication for Code j 355 and limitations on the

recognition of loss on distributions of coporate assets.

Apr-29-08 DJT Discussions with George Mack regarding pursuit of a

new option to include the purchase of BGl by Edra

Blixseth' analysis of various options to accommodate

the revised structure and to allow for minimal tax

consequences at the BGl level as well as to Mr.

Blixseth' analysis of financial data and prepare outline

of additional issues requiring input prior to separation.

(4653h00ï00152392.170C / l )


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1O-00O15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42254 Page 14 Of 22

Apr-28-08

Apr-25-08

DJT Discussions relative to the division of assets; analysis of

options regarding major assets of BG1 vis-à-vls the

Desert propel-ties as well as analysis of the Yellowstone

Club limited liability companies in addition to related

debt for borrowing from BGl and Mr. Blixseth

regarding the debt incurred at the Yellowstone Club;

prepare for discussions with Mrs. Blixseth's tax

attorneys.

RMW Review issues related to the preliminal transfer of

shares by Tim to Edra; consideration of issues related to

the form and illustration of the corporate division;

consideration of issues related to basis and debt issues

raised by j 368(a)(1)(D),'analysis of requirelnents under

j 355. analysis of issues related to continuity of

btlsiness enterprise with presentation of

recommendations for conduct post-distribution; review

issues related to reporting requirements for the 355 and

factors to be considered in presenting Fonzz 1 120S for

2007 and 2008.

Apr-25-08 DJT Preliminaly review and analysis of issues surrounding

the income tax retulms; scrutinize the BG1 assets and

restructuring relative to the transfers of various assets

into entities to minimize potential 33 1 gain issues at the

corporate level upon distribution.

Apr-24-08

Apr-23-08

Apr-23-08

Apr-22-08

GAB Detailed analysis of the technical issues and the

implementation of a like-kind exchange or j 355 spin

off for BGI, lnc., including tax consequences of failed

j 355 distlibtltion, impact to the continuing shareholders

and exiting shareholders, valuation issues and impact of

inclusion of nonoperating assets or boot in the

transaction.

GAB Outline issues relating to 2007 income tax reporting for

BGI, lnc. in the context of the alternatives for the

Porcupine Creek assets and operations, including the

reporting of the income and expenses and the

description of the business activities of the corporation;

review 2005 and 2006 income tax returns and trial

balances for the assets and operations of BGI.

Consideration and analysis of the information provided

by Messrs. Blixseth and Mark regarding the assets

allocated to each party as well as assets which are yet to

be divided vis-à-vis the dissolution proceedings;

consider options for separation of assets and information

to provide to Mrs. Blixseth's attolmey.

Review, organization and consolidation of documents

relating to property at issue in divorce negotiations;

consultation with attorneys on tax returns and fnancial

statements to provide opposing counsel.

DJT

MKF

(4653h00h00152392.170C / 1 )


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lO-OOO15-RBK DOc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 15 Of 22

W. Mar-26-08 JCJ Teclmical analysis of tax consequences associated with

alternate plan for divorce property settlement under

which Mr. Blixseth would receive family estate,

Tamarindo and St. Andrews and Mrs. Blixseth would

retain al1 other assets in Blixseth Group, lnc.; prepare

spreadsheet to calculate tax costs of alternate property

settlement plan; analysis to compare and contrast results

under asset sale and redemption of Mr. Blixseth's shares

in BG1 with alternative property settlement plan.

Revise memorandum detailing tax consequences in

proposed steps for sale of Yellowstone Club assets and

redemption of Tim Blixseth's interest in BGI; technical

analysis of tax consequences under applicable

partnership and corporate tax statmes of alternate plan

for accomplishing propel'ty division in which limited

assets are transfen'ed to Mr. Blixseth immediately and

Mrs. Blixseth bears business and tax burdens associated

with the sale of the Yellowstone Club assets; revise

memoranduln regarding sale and stock redemptionproposal to retlect unverified nattlre of financial

information used in analysis and to clarify ownership of

BG1 stock at time of complete redemption.

Mar-25-08 JCJ

Z.

Mar-l 1-08 RMW Consideration of issues related to liability of the owner

of separate property for tax related to the spouse's share

of community income under 1RS guidance and court

cases' analysis of issues related to treatment of

community income liability if the spouse to whom the

community share belongs fails to pay.

Mar-05-08 JCJ Discussion to analyze tax consequences of repaying

personal debts as pal4 of sale of Yellowstone Club assets

versus retaining debts and paying at later date to

improve cash flow; technical analysis of Code 752 and

the Regulations theretlnder to determine appropriate

treatment of liabilities ultimately satistied or assumed as

part of sale of Yellowstone Club assets; revise

spreadslzeet analyzing tax and financial consequences of

Yellowstone Club Asset sale, repayment of personal

debts to BGI and from BGI to Yellowstone entities'

repayment of Yellowstone Entities' liabilities and

redemption of Mr. Blixseth's interest in BG1 for

interests in LLC holding keeper assets; prepare

spreadsheet analyzing tax and tinancial consequences of

proposed transaction if personal debt to BGI and from

BGI to Yellowstone entities is not repaid as part of sale

of Yellowstone Club assets' discussion regarding cause

of higher tax consequence for redemption of BGI shares

after repayment of debt versus same transaction without

repayment of debt stemming from basis reduction

restllting form (sicj distribution of amounts sufficient to

satisfy outstanding obligations owed to BG1 by the

Blixseths and to the Yellowstone Club entities by BGI.

(4653ï00ï00152392.170C / 1 )


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10-OOO15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15242:54 Page 16 Of 22

AA. Mar-03-08 DJT Followup on discussions relative to the positions taken

by the other attorneys for Mrs. Blixseth and the division

of the Yellowstone Club; provide data as to the lack of

feasibility to successfully completing a 1031 exchange

and/or a tax free division and reorganization of assets.

Final preparation for meeting with Mr. Blixseth and his

tax advisors concerning the handling of variotls aspects

of division of assets and sale of assets; meeting to

disctlss altel-natives; address issues and requirements to

meet capital opportunity versus ordinary income;

analysis of most recent financial data and projections as

to the tax conseqtlences of various transactions.

Discussion with Chad Herman regarding basis

infol-mation for keeper assets from Yellowstone Club

sale and Porcupine Creek property; draft

correspondence regarding same; discussion with George

Mack regarding inherent gain in Yellowstone Club

keeper assets and basis infonnation for Porcupine Creek

property and equipment; discussion to analyze merit and

result of Code l 031 exclzange of Porcupine Creek

property for one-half interest in Royal Land.

BB. Feb-06-08

Feb-O5-08 JCJ

Feb-05-08 Review, analysis and consideration of a1l tax issues

arising from the Yellowstone Club sale, distribution and

separation from M-rs. Blixseth relative to the

Palm Desert complex' consider using valuation

discounts to minimize issues concerning the Code 31 1

gain in the real propel-ty and the personal property; final

review of Mr. Mack's tinancial data and preparatlon for

meeting in Portland.

Revise letter to client regarding qualifying exchange of

Porcupine Creek property for undivided, one-half

interest in Royal Lane Propel'ty as a tax-free exchange

under Code 103 1 ; revise memorandum regarding issues

presented by proposed Code 1031 exchange including

issues related to use of master residence on Porcupine

Creek property.

EE. Dec-17-07 JCJ

(46531.00ï00152392.170C / l )


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Dec-10-07 JCJ Technical analysis of Code Regulations and case 1aw

authority regarding applicatlon of related party nlles in

like kind exchanges of real property to verify that

divorced couples are no longer related parties for

purposes of applying two year, post-exchange holding

requirelnent and to analyze tax consequences of

proposed like kind exchange of interest in properties

between Mrs. Blixseth and Blixseth Group Inc.,

discussion to analyze same and potential that

Mrs. Blixseth would it gsicjqualify for like kind

exchange treatment on receipt of property; discussion

with George Mack regarding gain characterization and

cash flow problems associated with offer for purchase of

Yellowstone Club property by third part

y for

combination of cash and assumed debt.

Upon information and belief, similar services were performed by Thornton Byron

for Blixsetll and other non-Debtor individuals and entities, but paid for by Debtors, in the four

years preceding the Petition Date

Thornton Byron's time entries in their invoices make clear that this work, and

other work, was performed for the benefit of Blixseth and other non-Debtor entities and in

furtherance of the fraudulent scheme to attelupt to reluove assets from the reach of Blixseth's

creditors, including the Tl-ust as successor in interest to the Debtors. lndeed, the vel-y purpose of

this work was to ttisolate'' Blixseth's personal assets from the Debtors' liabilities, in the

expectation that the Debtors would be forced into banknzptcy. Debtors did not receive

reasonably equivalent value for the amounts paid to Thornton Byron for these professional

services.

29. When Debtors paid Tholmton Byron for these professional services rendered for

Blixseth and other non-Debtor individuals and entities, the Debtors' remaining assets were

unreasonably small, and the Debtors and their principals should have reasonably believed that

the Debtors would be unable to pay their debts as they came due.

(4653ï00ï00152392.170C / 1 )


(124 of 3




30. When Debtors paid Thornton Byron for these professional selwices rendered for

Blixseth and other non-Debtor individuals and entities, Debtors were insolvent or became

insolvent as a result of the payments.

When Debtors paid Thornton Byron for these professional services rendered for

Blixseth and other non-Debtor individuals and entities, Defendants were engaged or were about

to engage in a business or transaction for which their remaining assets were unreasonably small

in relation to the payments for these professional services.

The payments were directed to be made by Blixseth, who was acting with the

intent to hinder, delay, or defraud creditors of the Debtors.

Thornton Byron has filed Proof of Claim No. 734 in the Consolidated Cases.

Thonzton Byron's proof of claim includes claims for professional services that were rendered for

Blixseth and other non-Debtor individuals and entities.

34. The Tnzst has al1 of the rights of a creditor to bring avoidance claims under

applicable state law.

CAUSES OF ACTION

COUNTI-AVOIDANCE OFFRAUDULENT TRANSFERSTO DESERT RANCH

(Against AIl Defendants Except Thornton Byron)

The Trustee hereby restates each and every preceding paragraph, as if specifically

stated herein.

36. The transfers described herein constitute fraudulent transfers under Sections 31-2-

333 and 31-2-334 of the Montana Code Annotated and Section 548(a)(1) of the U.S. Bankruptcy

Code, and can be avoided pursuant to Section 550 of the U.S. Banknlptcy Code (the <çCode'') and

Section 3 1-2-339 (1)(a) of the Montana Code Annotated. The transfers can be avoided as to

(4653ï00ï00152392.170C / 1) 18


(125 of 3



10-O0O15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15242:54 Page 19 Of 22

every person or entity having an ownership interest in Desert Ranch or Desel't Ranch

Management.

The transfers were made with the actual intent to hinder, delay, or defraud

creditors. Likewise, Blixseth did not receive reasonably equivalent value in exchange for the

transfers. Blixseth was insolvent within the meaning of Section 31-2-329(a) of the Montana

Code Annotated and within the meaning of Section 548(a)(l)(B) of the Code at the time the

transfer were made or the transfers rendered him insolvent.

Furthermore, pursuant to section 544(17) of the Bankruptcy Code, the transfers

were constructively fraudulent transfer under Mont. Code. Ann. 31-2-333(1)(b), and can be

avoided pursuant to section 550 of the Bankruptcy Code and Mont. Code. Ann. 31-2-339 (1)(a).

The transfers were made for less than reasonably equivalent value at a time that Blixseth was

insolvent or the t'ransfers rendered him insolvent.

Upon avoidance, the Defendants Desert Ranch,Desel't Ranch Management,

Blixseth, Beau Blixseth, Mack and the tnlsts for which Mack is the Trustee are jointly and

severally liable to convey the Transferred Assets to the Tnlst or to pay the Trust the value of

Transfen-ed Assets described herein.

COUNT 11 - AVOIDANCE OF FRAUDULENT TRANSFERS TO THORNTON BYRON

(Defendant Thornton Byron)

40. The Tnlst hereby restates each and evel'y preceding paragraph, as if specifically

stated herein.

The Debtors had unpaid creditors whose clailus were in existence when Debtors

paid Tholmon Byron for these professional services rendered to or for the benefit of Blixseth and

other non-Debtor individuals and entities, which claims are to be paid through distribtltions from

the Trust.

(4653ï00h00152392.170C / 1)


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10-O0O15-RBK Doc#: 1 Filed: 02/19/10 Entered: 02/19/10 15:42:54 Page 20 of 22

42. Pursuant to 1 1 U.S.C. j 544(b), the payments to Thornton Byron for professional

services rendered for Blixseth and other non-Debtor individuals and entities, were fratldulent

transfers under Mont. Code Ann. jj 31-2-333, -334.

The paylnents to Thornton Byroll for professional services rendered to or for the

benefit of Blixseth and other non-Debtor individuals and entities were fratldulent transfers under

1 l U.S.C. j 548.

44. Accordingly, the payments to Thornton Byron for professional services rendered

to or for the benefit of Blixseth and other non-Debtor individuals and entities may be avoided

pursuant to 1 1 U.S.C. j 550.

45. Upon avoidance, Thornton Byron must pay the Trust the amount of the payments

to Thornton Byron for professional selwices rendered for Blixsetll and other non-Debtor

individuals and entities. These amounts total at least $207,597.09.

COUNT 111- CLAIM OBJECTION

(Defendant Thornton Byron)

46. The Tnzst hereby restates each and evely preceding paragraph, as if specitkally

stated herein.

47. For the reasons stated above and the other reasons stated in the Trustee's

Objection (case no. 08-61570, dkt.

disallowed.

#1382), Thornton Byron's proof of claim should be

COIJNT IV - PRELIMINARY INJUNCTION

(All Defendants)

48. The Tnzst hereby restates each and every preceding paragraph, as if specifically

stated herein.

(4653ï00h00152392.170C / 1 ) 20


(127 of 3




49. The Tnlst requires injunctive relief to maintain the status quo and prevent any

further transfer or dissipation of assets.

50. The Trtlst has alleged several causes of action against the Defendants, and as

indicated in this Complaint the Trust has shown a probable right of recovery and likelihood of

success on the merits, the Trust will suffer imminent, irrcparable harm without Court

intervention, and there is no adequate remedy at law.

As a direct and proximate result of thc Defendants' wrongful actions as allcged in

this petition, the Trust will suffer imminent injury that will be in-eparable and for which no

remedy at law exists without the protections of injunctive relief.

The only adequate, effective, and complete relief to the Tl-tlst is to restrain the

Defendants from f'urther engaging in certain proscribed activities, as set forth below. Ptlrsuant to

Fed. R. Civ. P. 65 (a) and Bankruptcy Rule 7065 and in order to preselwe the status quo dtlring

the pendency of this action, the Trust seeks upon hearing, a preliminary injunction, ordering and

immediately restraining the Defendants, including the Defendants' agents

,

servants, employees,

independent contractors, attorneys, representatives, and those persons or entities in active concel't

or participation with them from transfelning, concealing or otherwise dissipating any of the

Transferred Assets or any asset cun-ently held by Desel't Ranch.

WHEREFORE Plaintiff prays:

For an Order of this Court that the Desel't Ranch Transfers be set aside and

avoided;

B. For judgment against Desel't Ranch and all ilnmediate and mediate transferees of

the Desert Ranch Transfers, including Blixseth, Beau Blixseth, Mack, Desert Ranch Managelnent

and the trusts for which Mack is Tnlstee requiring the conveyance of the Transferred Assets to the

Trust or for the value of the Transferred Assets;

(4653h00h00152392.170C / 1) 2

j


(128 of 3




C. For judgment against Desert Ranch, Desert Ranch Management, Blixseth, Beau

Blixseth and Mack, as parties for whose benefit the Desert Ranch Transfers were made, for the

value of the Transferred Assets;

D. For judgment against the ThorntonByron in an amount of not less than

$207,597.09 for the f'audulent transfers of the professional payments described herein;

E. For an order against Blixseth, Desert Ranch, Desert Ranch Management, Beau

Blixseth, Mack and the trusts for which Mack is Tnzstee enjoining the sale, transfer, or encumbering

of al1 assets currently held by Desert Ranch and all personal and real property associated with

Desert Ranch's membership or shareholder interests in any other entity related to the Transferred

Assets;

For prejudgment interest;

For attolmeys' fees and costs; and

For such other and further relief that the Cotu't deems proper.

Dated: Febrtzary 19, 2010.

/s/ Shane P. Coleman

Charles W. Hingle

Shane P. Coleman

RobeM L. Stertlp

HOLLAND & HART LLP

401 North 3 1st Street, Suite 1500

P.O. Box 639

Billings, Montana 59103-0639

ATTORNEYS FOR MARC S. KIRSCHNER,

TRUSTEE OF THE YELLOWSTONE CLUB

LIQUIDATING TRUST

4737355 l .DOC

(4653ï00ï00152392.170C / 1) 22


(129 of 3



09-00064-RBK Doc#: 22 Filed: 11/25/09 Entered: 1 1/25/09 1 5:57:59 Page 1

Charlcs qf. I lingle (Bar No. 1 947)

Robcrt L. Stcrup (Bar No. 3533)

Shane P. Coleman (Bar No. 34 I 7)

l 1()l.l-AND & HART I

I.P

401 North 3 1 st Strect, Stlitc l 500

P.O. Box 639

13 illings, Montana 59103-0639

Telcphone' (406) 252-2 1 66

F acsimilc: (406) 252- 669

ch iqg

-

l

ç.(.i1; llqtlqpdharl,conl

rsterun

r

la- lo l lall.fJ hal4-ctly

pl.

spqf.-l

..

I)l nt''? llol la lpd

hal-t .q

.t'Jp

A'ITORNEYS FOR MARC S

.

KIRSCI INER, AS TRUSTEE

OF TI.IE YELLOWSTONI CLUB LIQUIDATING TRUST


FOR TI IE DISTRICT Ol2 MON-I'ANA

Yellowstonc Mountain Cltlb

,

Ll-C,

#1p1.,

Dcbtors.

MARC S. KIRSCI INER. AS TRUSTEE

OF THE YELLOWSTONE CLIJB

I.IQUIDATING 'INRUST

Plaintiff

Chaptcr l l

Casc No. 08-6 I 570-1 1

Adversary No. 09-00064

FIRST AMENDED COMPLAINT

TIMOTI IY BIZIXSETH; CASA 20 LLC;

TAMARINDO, l-1-.Cl John Docs 1-1 00; and

XYZ Corp. 1-100)

Defendants.

à The Debtors art tht following entities: Yellow

stonc Mountain Club. LLC, Ycllowstonc

Development Club. LI-C and Big Sky Ridge

,

LLC, which cntities arc substantivcly consolidated

.and

ellowstone Club Construction Co

.s

LLC, which is jointly administercd with the other Debtors


(130 of 3



O9-0OO64-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 2 of 1 3

COMES NOW Marc S. Kirschncr

as Trttstce for thc Ye1 Iosvstone Club Liquidating Trtlst

(thc btYCLT''), by and throtlgh counsel of rccord, hcrcin statcs his causcs of action and claims for

relief-against Timothy Blixscth

,

Casa 20, LLC, and Tamarindo, LIC.

INTRODUCTION

-l-his action pertains to tvvo discrcte transfcrs of propcrty tkom Yellowstone

Devclopmcnts LI.C (itYD*') to rlnilnothy Blixseth antl his af-filiatëd entitics

'I-he propcrties arc

commonly known as 'tlwot 90'9 in thc Ycllowstonc Club and the ii-ramarindo'' rcsort in Mcxico

.

The transfbrs at issue occurred less than a year bcfbre YD fi led bankruptcy

.

2. l-his action also pertains to mcmbcr distributions from Big Sky Ritlge

,

LLC

(tûBSR'') to Timothy Blixseth or his affiliatcd entitics. 'Fhese distributions sclate to thc proceeds

ofthe salcs or lots in thc Yellowstone Cltlb that were owned by BSR and incltlde distributions

paid less than one year betbrc BSR filed bankruptcy

.

PARTIES

Plaintit-f Marc S. Kirschncr is the trustcc orthe YCI

T.

4. YCLT was formcd tlndcr thc Plan of Rcorganization fsled May 22

,

2009. in Case

No. 02-6 I 570 (dkt. //947) (the b'Bankruptcv Case''), rcfiled May 29. 2009 (dkt

//955), and

contirmed by this Court's Nlemorandum of Decision dated Jnne 2

,

2009 (dkt. // l 025)

(hereinafter, the etconfirmed Plan of Reorganization'').

5. YD is a Montana limited liability company and is one of the dcbtots in

Bankrtlptcy Casc.

BSR is a Nlontana limited lîability company and is onc of the debtors in

Bànkruptcy Case.

Pursuant to the Confirmed Plan of Reorganization and Assignments orclaims

(Exhibit l heretols Mr. Kirschner, as Trustcc orthe YCLT, succecds to :%aIl Causcs of Action that


(131 of 3



09-0O064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 15:57:59 Page 3 of 13

the Debtors t)r their E states could assert immediately prior to the E frective Datc

,

'- except certain

claims releascd by the Confirmcd Plan of Rcorganization

.ln particulars Plaintif'r succeeds to the

interests ofthc Iitigation clailns of YD and BSR

,

and thcir respcctive estates

.

'rimothy Blixseth is a citizcn ol-the United Statcs and a rcsident of the Statc of-

lvashington. Timothy Blixsctll is a transferec of the asscts and cash distributions #br which

avoidance is songht and is the obligor on the Lot 90 Notc (defincd below) fbr which collection is

sought.

Casa 20, I..LC is a qvash ington l im itcd Iiabil ity company controlled by Timothy

Blixseth and is a transferec of asscts f'r w'hich avoidancc is sotlght

''I-imothy Blixseth is the sole

member of- Casa 20s I.I

-

C.

1 0. ''ramarindo, L1

C is a svashington 1 imited I iability company control led by

Timothy Blixscth and is a transfkrcc of- asscts fbr Nvhich avoidancc is sought

John Does l - l00 and XYZ Corp

.1-100 are, respcctively, unknown individuals

and corporations or other business cntities

.

who are transfkrees or who f-cilitatcd the transfcrs of-

thc assets or cash distributions described herein

,

and wllo will be namcd in an amcnded pleading

when they arc identificd.

JURISDICTION AN1) VENIJE

12. This Court hasjtlrisdiction over this lnatter pursuant to 28 (J

S.C. j 1334,

Standing Order 12 (Revised), IJ.S. Dist. Ct.s D. Nlont.. and Scction 1 0

1 .4 of the Consrmed Plan

ol- Reorganization.

13. Venuc ls propcr ptlrstlant to 28 U

.

S.C. j 1 409.

14. This is a K'corc'' proceeding

.

YCLT hcreby conscnts to entry of flnal ordcrs and

judgment by the Bankruptcy Court.


(132 of 3



09-OO064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 4 of 13

COIJNT 1. AVOIDANCE OF THE CCLI)T 9093 TRANSFER

Plaintiff hereby restates cach and every preceding paragraph

,

as il- specifically 5.

stated herein.

On Dccembcr 29, 2006, YD ptlrchascd real property located Madison County

described as follows:

Lot 90, Yellowstone Mountain Club Stlbdivision

,

Phase l and 2,

Madison Cotlnty, Montana

,

according to the oftscial plat thcrcof on

file and of record in thc offlce of thc County Clcrk and Rccorder

,adison County

,

Montana.

This property is commonly known as til

ot 90.9'

l 7. On Fcbruary 12, 2008, less than one year prior to the filing of this bankrtlptcy

,

YD transferred Lot 90 to 'I-imothy Blixseth in a cashlcss transaction at a stlbstantial loss

.

Timothy Blixseth receivcd Lot 90 in exchange for (i) a $2 million promissory' note from Timothy

Blixseth to YD (the çtlzot 90 Note'%), and (ii) $500,000 in tiprcviously paid considcration

.

''

Timothy Blixseth signed the ttlteal Estate Ptlrchase and Sale Agrecment'' both on behalf o1-

himself as tiBuycr'' and on behalf of YD as itscller

''

1 8. On inforlnation and belief

Lot 90 has bccn transfcrrcd, eithcr as a parl of the

initial transfcr or in onc or morc subsequcnt transfers

,

to Defcndant Casa 20, LLC and/or to

Bahia Dorada S.A. de C.V

.,

a Mexican entity.

C.V. is thc present owner of record of- Iaot 90

.

0n înlbrmation and bclier Bahia Dorada S.A. de

20.

YD receivcd no payments undcr the l

ot 90 Notc.

YD did not receivc reasonably cquivalent valuc fbr the transfbr of Lot 90

.

At the time of the l-ot 90 Translbr, YD's remaining asscts werc unrcasonably

small, and YD and Tilnothy Blixseth should havc reasonably believed that YD would bc unablc

to pay its debts as they camc due.


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09-0O064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 15:57:59 Page 5 of 13

22. At the timc of thc I

ot 90 'l-ranstkr, YD Nvas insolvcnt or bccanle insolvent as a

restllt ofthe transf'r or obligation.

23. At thc time of thc I-ot 90 'l-ransfbr

YD was engaged or was about to engagc in a

business or transaction for which its remaining asscts were unrcasonably small in relatio

n to thc

btlsiness or transaction

.

24. At the timc ofthc l-ot 90 'I-ransfkr

YD intcnded to incurs or bclieved Or

rcasonably should have bclieved that it wotlld incur

debts bcyond its ability to pay as thcy

became due.

Thc I-ot 90 Transfer was madc with thc intcnt tta hinder

dclay, or dcfrand

crtditors OCYD.

The YCL'T' has a1I of thc rights of-creditors to bring avoidancc claims tlnder

applicable state laNv.

YD llad unpaid crcditors whosc claims were in cxistence on the datc of-the

l..ot 90 Translkr, Avhich clailns are to be paid throttgh distribtltions from the YCI

z'1-,

2s. Pursuant to 1 1 U.S.C

.

j 544(b), the Lot 90 Transfbr vvas a fraudtllent transf'r

tlndcr Mont. Code Ann. 99 3 1 -2-333, -334.

29. The Lot 90 Transfcr was a fratldulent transfer tlnder 1 l U

.

S.C. j 548.

3û. Accordingly, the Lot 90 Transfer may bc avoided pursuant to 1 1 U

.

S.C. j 550.

31 . Upon avoidancc

,

Tim Blixscth and Casa 20

,

LLC mtlst pay the YCLT the valuc

of lwot 90.

COUNT ll. ECLO.1* 9099 PROMISSORY NOTE

Plaintiff hereby rcstates each and cvcry preceding paragraph

,

as if spccillcally

stated herein.


(134 of 3



09-O0064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 6 of 13

33. 'l-his Count 11 is brought in the alternative to Count 1

,

in the cvcnt that thc Lot 90

Transfcr is found to not be an avoidable translkr

The YCI-T is the ovvner of a promissory note f-rom Tinnothy Blixscth

.

datcd

February 1 2. 2008 (thc ttl-ot 90 Note'*). A true, correct

and complete copy of the Lot 90 Notc is

attachcd hereto as Exhibit 2.

34.

Pursuant to the terms of 1hc I

ot 90 Note, payment w'as duc in f-ll by March of

2009.

36. Timothy Blixseth has fai Ied or rcf-used to make payments dtle under thc Lot 90

Notc.

The YCLT is entitlcd to jtldgment against Timothy Blixseth fbr 1hc principal

amount of $2,000p000 dtle tlnder the Notc

,

plus interest at the anntlal rate of 6

.25% and attorncys

Ibes.

To the cxtent that Defcndants may assert that the Lot 90 Notc was cancclcd or

paid purstkant to Timothy Blixscth's (livorce proccedings

,

any stlch cancellation wotlld bc invalid

as a voidablc transfer, because YD was insolvcnt at thc timc of Timothy Blixscth's divorce

proceedingsa could not pay its debts as they camc due

,

and did not reccive rcasonably cqtlivalent

valtle for the Lot 9() Note

.

COtJNT 111. AVOIDANCE OF THE SVTAMARINDO'' TRANSFER

39. Plaintiffhereby rcstates each and cvcry prccctling paragraph

,

as if- specifically

stated herein.

40v In early 2008 and vvithin a year prior to YD's bankruptcy

,

YD ovvned ccrtain

inlerests in Mcxican corporate entities rclatcd to thc tû-ramarindo-' beach resort Tvorth at lea

st $40

million. In particular:


(135 of 3



09-00064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 15:57:59 Page 7 of 13

YD ow'ned 99

.

99% of Yelloqvstone Club W'orld Tamarindo

,

S. de 1t.I,. de

C V (%GYC ïV-l-'*) a Nlcxican cntity ;

YD also owned 99

.

99%e ofYellowrstone I loldings Mcxico S

.

dc R.l.. de

C.V (%1YlIM'-), a Mcxican entity;

YH&1, in ttlrn, owncd the rcmaining

0 l % of YCW/-l-' and

'

Blixseth Group lnc

.

(%'BGl''), an Oregon corporation, owncd the.

rclnaining 0. l % of YHM

,

havillg a par value of I peso

.

YCW. ?T's principal asset is a resort in Mcxico known as :t-ramarindo

,

'* wh ich

kvas valtled by Timothy Blixseth and Edra Blixscth at $40 million

.

42. In early 2008

.

divorce proceedings vvere pending betwecn Timothy Blixseth and

Edra Blixseth. Thosc divorce proceedings concltlded with an agree

mcnt betwccn thc Blixscths

known as the Marital Scttlemcnt Agrecnnent ($eMSA'')

The MSA has a statcd -iclosing Datc'' of-

Jtlly 3, 2008, but on information 1:nd bclief actually closed on or abo

ut August l 3, 2008.

43. Among othcr mattcrs

.thc 51SA reqtlired Edra Blixseth to transfcr to Timothy

Blixseth the ihcqtlivalent of Sixty Million Dollars

'' '-l'hc $60 million payment includcd

mcmbership interests in foreign entities that held idthe Tamarindo

,

Mcxico resort propcrty in

which Yellowstone Dcvelopmcnt

,

LLC holds an interest

'' u'hich thc Blixscths valued at

$40 million (the 'YTamarindo Transfbr*')

44. To eftkct the Tamarindo Translkr undcr thc MSA

,

thc fbllowing transactions

occurred:

YD transfcrrcd aIl of its interest in YCW''1- and YHM to Edra Blixseth i

n

exchangc for (i) a rccital that $5,000 cash was paid to YD

,

vvhich was never actually rcceivcd

,

and (ii) a $39,995,000 note from Edra Blixseth to YD

,

A truc, corrcct. and complete copy of the

undated è%Assignment ol-company lntercsts Agrccment'' is attachcd hcrcto

as Exhibit 3. A trtle,


(136 of 3



O9-00064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 8 of 13

correct, and complcte copy of thc undatcd k'Promissory Notc'' fiom Edra Blixscth is attachcd

hcreto as Exhibit 4. Edra Blixscth signcd thc Assignment document both individtlally as

transferec and on bchall- of YD as transtkror

BGI transferrcd its .0 l % interest in YHM to %tTamarindo

,

I.l-C'* pursuant

to an undated tiAssignment orc-ompany Intercst'' agreemcnt

a truc, correct, and complctc copy

of which is attachcd llereto as Exhibit 5

.

Timotlly Blixseth is named as thc 'imanager'' of

Dcfcndant Tamarindo, LI

.

C, a Washington entity.

c. Edra Blixseth immediatcly 'tdonatcd'' her newly-acqtlircd intcrests in

YCq?-I- and YHM to Tim Blixseth, by an undatcd %llAonation ofcompany lnttrcsts'l agreemcnt

,

a

true, corrcct. and complete copy of ïvhich is attached hcrcto as Exhibit 6

,

45. In summary. prior to thc Tamarindo Transf-r

YD owned a 99.999999% interest

in resort properly valued at $40 mlllion

.

ln cxchange fbr this intcrcst, YD rcccived a notc from

Edra Blixseth fbr $39,995,000 and a recited, btlt unpaid

s

cash componcnt of- $5,000.

46. YD did not receive reasonably eqtlivalcnt valuc Iiom the trnnsfcr of its intcrests

in YCSVT and Y1'IN1. The note from Edra Blixscth Tvas worth matcrially less than thc value of

thc transferrcd property bccause shc did not havc the financial B'herewitllal to make payments on

thc note whcn she signcd the note

,

she did not evcr intend to repay thc note and shc 5led

personal bankruptcy just months later. Further, Edra Blixseth did not even pay YD the rccitcd

$5,000 in cash.

47. At thc time ofthc Tamarindo 'l-ranslbr

,

YD'S remaining assets wcre

unreasonably small and thc parties to that transaction

,inclttding Timothy BI ixscth, shotlld have

reasonably bclieved thal YD would be tlnablc to pay its debts as they camc due

.

48. YD w'as insolvent at thc time ofthc 'I-amarindo Transfcr or becamc insolvent as

a rcsult ofthc Tamarindo translkr

.


(137 of 3



O9-00064-RBK Doc#: 22 Filed: 11/25/09 Entered: 1 1/25/09 15:57:59 Page 9 Of 13

49. 'I-he Tamarindo ''-ransfbr

,

as effcctcd b)z thc MSA and thc rclatcd documcnts

was intended to hinder

delay or defrattd creditors

,

incltlding crcditors of YD

.

50. At the timc of the Tamarindo Transfer

,

YD w'as engagcd or was about to engage

in a business or transaction for Nvhich its remaining assets werc unrcasonably small in r

elation to

the business or transaction

,

At the time of the Gl-amarindo -l-ransfbr

,

YD intcnded to inctlr, or believcd or

reasonably shotlld havc belicvcd that it would incur

,

dcbts beyond its ability to pay as they

bccame due.

'l-he YC1--I- has a11 orthe rights ofcrcditors to bring avoidancc claims under

applicablc statc law.

Yl3 had unpaid crcditors whosc claims wcre in cxistencc on the datc of-the

Tamarindo Transfers which claims are to be paid through distribtltions fiom thc YCLT

.

The Tamarindo Transfkr, as cffccted by the MSA and thc rclated doctlments

,

is a

fraudulent transfcr under 1 1 U

.

S.C. j 544 and Mont. Codc Ann, jj 31 -2-333, -334

.

Thc Tamarindo Transfkr, as cffected by the MSA and the rclated documcnts

,

is a

l-raudulent transfer undcr l 1 U

.

S.C. j 548.

56. Accordingly, the Tamarindo Transfbr may be avoided ptlrsuant to 1 I U

.

S.C.

j 550.

The Tamarindo Transfers as cffectcd b).' the MSA and the relatcd docutncnts

,

was lnade fbr thc bcnefit of Timothy Blixseth and Tamarindo

,LLC. Timothy Blixscth is liablc

to the YCLT fbr the value of thc asset transrerred

,vvllich is at Icast $40 million

,

or alternativcly,

for thc return of the transferred interests

.

58. Tamarindo, LLC is liablc to BGI for the rcturn of its transferrcd

0 l % intcrest in

YI-IM.


(138 of 3



09-00064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 1 O of 13

COUNT 1V. AVOIDANCE OF BSR DISTRIBUTIONS

Plaintiff hercby restates each and cvcry preceding paragraph

,

as if speciscally9.

stated herein.

Belween 2005 and 2008

,

BSR owned ccrtain real property in Madison Cotlnty

,

Montana.

6 1 .

57 D

62.

proceeds as dividcnds to Timothy Blixseth and YD

.

'rhesc distribtltions include vvithout lilnitation

,

thc fbllowzing (1 istribtltions lnade

Nvithin onc ycar of thc fi Iing of BSR'S bankrtlptcy

,

as B'ell as othcr prior transactions. a11 of-

which are collcctively' refcrrcd to as the *tBSR Distributions'':

a. $ 1 .65 nlillion paid to Timothy lllixseth on or abotlt Dccclmbcr 1 3

,

2007. in

connection wzith the salc of I-ots 499, 450, and 4579

b. $ l .65 Inillion paid to Timothy Blixscth on or abotlt DeccnAber 20

,

2007,

in conncction wilh the salc ol- Lots 459

,

463, and 465,.and

During this timc period

,

BSR was owncd 50% by 'I'imothy Blixscth and 50% by

On infbrmation and bclicf' whcn l3SR sold certain lots

,

BS R paid thc sales

$500,000 paid to rl-imothy Blixscth on or about February 14

,

2008.

connection with thc salc of Lot 436.

64.

lbr the BSR Distributions

65. At thc time ofthc BSR Distributions

,

BSR'S remaining asscts were

BSR did not receivc any considcration

,

Imtlch lcss rcasonably cqtlîvalent valtlc

,

unreasonably small and BSR shotlld llave rcasonably be1 icvcd that BSR wotlld be tlnablc to pay

its debts as they canpe due.


(139 of 3



O9-00064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 1 1 of 13

66. At thc time of thc BSR Distributions

,

BSR was insolvent 01. became insolvcnt as

a result of-the distribtltions.

67. At thc time of thc BSR Distributions

,

BSR was cngagcd or was about to engagc

in a business or lransaction for which its remaining asscts were tlnrcttsonably small in relation to

the distributions.

68. At thc time of the BSR Distributions

,

BSR intcnded to incur, or bclicved or

rcasonably shotlld have bclieved that it Nvottld incur

dcbts beyond its ability t() pay as thcy

bccame due.

69. -lAl1e BSR Distributions B'ere made with thc intent to hinder

,

dclay, or defi-atld

crcdltors and other sharcholdcrs of- l3SR and its affiliatcd entitics

.

70. Thc YCLT has 1111 ot-thc rights of crcditors to bring avoidancc clailns ttndcr

applicable state law.

BSR had unpaid crcditors whose claims were in cxistcnce on thc date of thc

BSR Distrlbutions, Nvhich clailns arc to be paid through distribtltions fron: the YCl

.

T.

Pursuant to l I U .S.C. j 544(b), thc BSR Distributions werc fraudulent translkrs

unclcr Mont. Code Ann. jj 3 l -2-333, -334.

73. Thc BSR Distributions Nvcre fraudulent transfkrs under I l U

.

S.C. j 548.

Accordingly, the BSR Distributions may be avoidcd pursuant to l I U

.S.C.

j 550.

75. Upon avoidancc, Tim Blixscth must pay thc YCLT the amount ofthc BSR

Distributions to bc proven at trial, which in no cvcnt is less than $3

.

8 million.

COUNT V. WRONGFLIL DISTRIBUTIONS UNDER STATE LAW

76. Plaintif-fhereby restates cach and cvcry preccding paragraph

.as if specifically

stated herein.


(140 of 3



O9-O0064-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 1 2 of 13

77. Thc BSR Distributions described abovc were madc while BSR was unable

,

or

bccame tlnable, to pay its dcbts as they canw due in the usual course of busincss

.

78- BSR was insolvent Nvhen it made thc BSR Distributions

.

Thc BSR Distribtltions are w'rongful distributions under Nlont

Clode Ann. j 35-

8-604.

80. Timothy Blixseth is pcrsonally liablc

,

as membcr and manager of BSR who

causcd the BSR Distributions to occur, for the rcturn 01' thc BSR Distributions to the YCL'I-

ptlrsuant to Nlont- Code Ann- j 35-8-605.

8 1 . The YCI-T is entitled to judgment againsl -l-ilnothy B lixscth in the amotlnt of- the

BSR Distributions, to bc proven at trial

B'llicll in no cvent is Icss than $3-8 mill ion.

W'HERE FORE Plaintiff prays:

Forjudgment against Timothy Blixscth, Casa 20, Ll-C-, and al othcr transferees of

Lot 90 for the valtlc orl-ot 90;

Altcrnatively, forjudgnnent against 'l-imothy Blixscth fbr amounts owcd under the

Lot 90 Note, plus intcrcst and attorncys fccs;

3. For an Ordcr of this Court that the transfcr orthe membcrship interests in thc

business entities holding the Tamarindo proptrty

,

including YCNVT and YHM, from

Yellowstone Development, LLC and BGI to Edra Blixseth

,

Timothy Blixseth, Tamarindo. I.LC.

and/or any other transferees bc sct aside and voidcd'

For judgmcnt against Timothy' Blixseth, 'ramarindo, LLC, and all other transfbrees

of the Tamarindo property or of oNvncrship intercsts in cntities owning or controlling the Tamarindo

property for thc value of the transferred mcmbcrship intercsts'


(141 of 3



O9-00O64-RBK Doc#: 22 Filed: 1 1/25/09 Entered: 1 1/25/09 1 5:57:59 Page 13 of 13

For an order enjoining the sale. transfbr, or cnctlmbering. ofthe Tamarindo propcrty

,

aIl assets associated with such properties

,

and any entities that own or control such properties or

asscts;

6. For an ordcr ot-this Oourt that the BSR Distribtltions to 'I-imothy Blixseth be set

aside and voidedx

Forjtldgment against Timothy Blixseth fbr the amount of thc BSR Distribtltions;

For prcjudgment interest;

For attorneys fces and costs; and

For such other and further relief that thc Cotlrt dccms proper

8.

9.

1 0.

Dated: November 25, 2009

.

/s/ Shanc I7. Coleman

Charles %%' . H inglc

Shane P. Coleman

Robert L. Stertlp

1''I()1,l-AND tk,H-AR-I''1

-1:

40 North 3 1 st Street, Suite l 500

P.O. Box 639

Billings, Montana 59 l 03-0639

ATTORNEYS FOR MARC S. KIRSCHNE

J

TRUSTEE OF T1'1E YELLOWSTONE CLUB

IJIQUIDATING TRUST

4604095 3 DOC


(142 of 3



1 steven L. Hoard (Texas Bar No. 09731600) ex o

shoard@mhb m com U

Mtil-tlxl-loxR.o & BRowN, L.L.P:

3 . o. B ox 3 l 6 56

Ama 'llo, Texas 79120-1656

4 Te1: (8û6) 372-5050/Fax: (806) 372-5%6

5 Brian Glasser ckqax

,

u.s.

7tlilcr copnT

BGlasserobaileyglasser.com ' '

BAïLEY-& GLASSER, LLP g

02T - b 2 ,û9 Capitol Street

7 Ch

arleston, WV 2530 l

g Tel : (304) 340-228247>: (304) 342- 1 il 10 gygytj jjjqjg or cr)lljpllt;

.

'

9 Steven Jay Katzman, State Bar No. 132755

skatoan@bmkattorneys com0

BIENSRT, MII-LSR & kATZMAX, &c

1 1 903 Calle Amanecer, Suite 350San Clemente, Califomia 92673

12 TeI: (949) 369-3700+ax: (949) 369-379 1

13 Attomeys for Plaintiff

MARC S. KIRSCHNER, as Trustee of the Yellowstone 4

club Liquidating Trust

1 5

16 IN THE UNITED STATES DISTW CT COURT

17 FOR THE CENTRAL DISTRICT OF CALIFORNIA

18 EASTERN DIWSION

19 *p , 1 --' n g : . : QF SFx

20 MARC S. KIRSCHNEK AS TRUSTEE Case No.

OF TI-IE YELLOWSTONE CLIJB l

LIQUIDATING TRUST,

22

Plaintiff, COMPLAINT FOR:3

(1) Fraudulent Transfer (State Lawll

24 v. (2) Fraudulent Transfer (Federal

Bankruptcy Law); and5

TIMOTIW L. BLIXSETH (3) Breach of Contraet (Unpaid

26 Promissory Notesl.

Defendant.7

28

1

öMPLAINT ''

;


(143 of 3



1 Marc S. Kirschner, as Trustee of the Yellowstone Club Liquidating T

2 (($YCLT''), pursuant to an assignment for purposes of collection by Carl A. Eklund

3 Trustee of the bankrupt estate of BLX Group

,

lnc. (i%LX''), makes the following Orig

4 Complaint against Timothy L

.

Blixseth.

5 1

.

INTRODUCTION

6 1 . This case involves a suit on two promissory notes

,

the looting of a busin

7 by the defendant, Tim Blixseth (<sBlixseth''), and Blixseth's attempts to absolve himsel

8 any liability through the execution of a fraudulent release

.

At one time, Blixseth was

9 President, CEO and sole shareholder of BLX

.

He used these positions to transfer o

10 $199 million to various accounts that he owned and/or controlled so that the funds co

1 1 be used for his own personal benefit. To memorialize these transfers

,

Blixseth execu

12 two promissory notes dated December 31

,

2006 - one for $58,305,147.60 and the ot

1 3 for $140,819,333.28 (içthe Notes''). Thenj on or about August J 3, 2005, as a part of

l 4 divorce proceeding from his former wife

,

Edra Blixseth, Blixseth caused BLX, which w

15 not a party to the divoroe, to execute a Mutual Waiver and Release Agreement (ft

16 Release''). The Release ostensibly released Blixseth from liability on the Notes. Wh

17 not dealing directly with the Notes, as explained below

,

another court has already fou

1 8 that this very same Release constitutes both an actual and a constructive fraudule

19 transfer and is therefore unenforceable. Blixseth controlled BLX and caused it to execu

20 the Release with the actual intent to hinder, delay or defkaud its creditors

.

ln additio

21 BLX was insolvent (01' was rendered insolvent) when it gave Blixseth the Release, a

22 BLX did not receive reasonably equivalent value for the Release

. ln fact, BLX did n

23 receive anything of value in exchange for the Release. The Release should be set aside

24 a fraudulent transfer, and judgment should be entered against Blixseth for the full amou

25 of principal and interest due on the Notes.

26 2. The backdrop of all this relates to the spectacular failure of Yellowsto

27 Mountain Club (içthe Club''), a luxury resort located in Montana. The Club became th

28 subiect of a bankruptcy tiled on November 10, 2008 in Bankruptcy No. 08-61570 (th

2

èoMptAik'r


(144 of 3



1 tsYellowstone Bankruptcy Case'') in the United States Bankruptcy Court for the District

2 Montana (the iGBankruptcy Cou1't''). The Debtors in the Yellowstone Bankruptcy Case a

3 the following entities: Yellowstone Mountain Club

,

LLC C<YC''), Yellowsto

4 Development Club, LLC ((çYD'') and Big Sky Ridge, LLC (iiBSR''), which entities a

5 substantively consolidated, and Yellowstone Club Construction Co

.,

L1wC, which is joint

6 administered with the other Debtors

The genesis of those bankruptcies can be traced to

7 $375 million loan made by Credit Suisse, Cayman lslands Branch (dicredit Suisse'') to th

8 Club on Septelnber 30, 2005. During the bankruptcy

,

the Debtors and the Offici

9 Committee of 'Unsecured Creditors isled Adversary Proceeding No

.

09-00014 (ttAP-14

10 to equitably subordinate the claim of Credit Suisse based upon its alleged complicity

1 1 facilitating Blixseth's breach of fiduciary duty to the club in connection with his lootin

12 of the Credit Suisse loan proceeds. Blixseth voluntarily intervened in AP-I 4 seeking

13 declaratory judgment that he had not breached his fiduciary duty to the Club. 'rh

14 Debtors and the Committee stlbsequently filed a third-pally counterclaim against Blixset

1 5 for breach of tiduciary duty and for fraudulent transfers. Following contirmation of

16 Chapter 1 1 plan in the Yellowstone Bankruptcy Case, the Yellowstone Club Liquidatin

17 Trust was formed under the laws of the State of Montana to become the successor to th

18 Debtors' and the Committee's claims and to continue prosecution of AP- 14 after the Clu

19 was sold. After a nine-day bench trial, the Bankruptcy Court issued a 135 pag

20 Memorandum of Decision CçMOD'') dated August 16, 2010, finding that Blixset

21 breached his fiduoial'y duties to the Debtors and received constructive and actua

22 fraudulent transfers. A judgment in excess of $40 million was subsequently entere

23 against Blixseth on September 7, 2010. The judgment is currently under appeal in Cas

24 Nos. CV-1O-49-SEH and CV-10-1 0-51 -SEH in the United States District Court for th

25 District of Montana, Butte Division,

26 3. The very same Release that is the subject of the fi'audulent transfer claims i

27 the instant action was also assex'ted as a defense to the claims of YCLT in AP-14

28 Blixseth claimed in AP-14 that this release extended to the Yellowstone Club Debtor'

3

couff,AlkY


(145 of 3



1 claims for breach of tiduciary duty and fraudulent transfer with respect to the Cre

2 Suisse loan proceeds. The bankruptcy court rejected Blixseth's defense, conclud

3 instead that the release itself constituted both an actual and a constructive fraudul

4 transfer and was therefore unenforceable. The judgment entered in AP-14 is on appe

5 The claims asserted herein on the Notes are independent of the claims asserted by YC

6 in AP-14.

7 II. PARTIES

8 4. Plaintiff Marc S. Kirschner (a New York resident) is the trustee of YCLT t

9 was formed under Debtors' Third Amended Plan of Reorganization filed May 22, 2009

10 the Yellowstone Bankruptcy Case and confirmed by the Bankruptcy Court in Montana

l 1 June 2, 2009. BLX Group, lnc. ($$BLX'') (f/k/a Blixseth Group, 1nc.) is a corporat

12 organized under the Jaws of the state of Oregon. Defendant Timothy Blixseth served

13 President and CEO of BLX from 1999 to mid-August 2008. Blixseth was also the s

14 shareholder of BLX. BLX was the owner and holder of the Notes executed by Blixse

15 On September 21, 2009, an involuntary petition for relief against BLX was filed und

16 chapter 1 1 of title 1 1 of the United States Code in the Bankruptcy Court. An Order

17 Relief was subsequently entered effective October 9, 2011. On October 29, 2009, Carl

18 Eklund (the EtBLX Trustee'') was appointed Trustee pursuant to 1 l U.S.C. j 1 104(d).

19 5. By order dated August 30, 201 1, the Bankruptcy Coul't approved

20 assignment of claims from the estate of BLX to YCLT for pul-poses of collection. T

21 claims inciuded claims BLX had against Blixseth, including without limitation claims f

22 fraudulent transfer and claims for collection of the Notes. Accordingly, YCLT stands

23 the shoes of the BLX banknlptcy estate and is the holder and owner of the claims assert

24 herein against Blixseth.

25 6. Timothy L. Blixseth (iiBlixseth''), defendant herein, is a resident of the Sta

26 of Washington.

27

28

4

coMpl-Aik'r


(146 of 3



1 111. JURISDICTION AND VENUE

2 7

.

This Court has jurisdiction over this proceeding pursuant to 28 U.S.C

3 1332. YCLT is a liquidating trust established by the bankruptcy court in Montana

,

wi

4 trustee who is a resident of New York. Additionally

,

YCLT is acting as assignee of

5 Oregon corporation

,

which is in bankruptcy in Montana. Blixseth is a resident

6 Washington. Thus, plaintiff and defendant are citizens of different states

Furthermo

7 the amount in controversy exceeds $75,000. Blixseth is subject to personal jurisdiction

8 California because (1) both the promissory notes at issue in this case were made paya

9 in Rancho Mirage, California; (2) upon information and belief Blixseth was a residen

10 the State of California at the time the promissory notes were executed; and (3) the Rele

1 1 that is the subject of the tkaudulent transfer actions assel-ted herein was executed pursu

12 to the Marital Settlement Agreement in Blixseth's Califomia divorce proceeding C

13 Number R1DlND91 152 in the Superior Coul't of California, County of Riverside

.

14 8. Venue is proper in this Court pursuant to 28 U.S.C

.

j 1391(a). The notes

l 5 issue in this case are payable within this judioial district, a substantial portion of the fun

16 advanced pursuant to the promissory notes was deposited into Blixseth's bank accounts

17 banks located within this judicial district, and the Release that is the subject of t

18 fraudulent conveyance actions arose out of Blixseth's divorce proceeding, which was fi

19 within this judicial distlict.

20 IV. GENERAL ALLEGATIONS

21 A. The Club and the Credit Suisse Loan Transaction.

22 9. Blixseth and his then-wife, Edra Blixseth, conceived of and developed t

23 Club.

24 10. The Club is a 13,500 acre exclusive membership resort comprising, amo

25 other things, a 2,200 acre private ski resort, a championship golf courses second home

26 lots awaiting development, platted and unplatted inventory and open space land, and t

27 125,000 square foot Warren Miller Lodge.

28

5

COMPLAINT


(147 of 3



1 1 1. On September 30

,2005, Credit Suisse purpol-ted to loan $375 million to Y

2 YD and BSR in a loan transaction (the çtlvoan Transaction'') pursuant to which Cre

3 Suisse obtained mortgages, liens and security interests in nearly a1l these entiti

4 propmlies.

5 12. The Loan Transaction was not made for the benefit of the Club

. lnstead,

6 credit agreement evidencing the Loan Transaction (the tscredit Agreement'') provided t

7 nearly al1 the proceeds of the loan were intended to be used SGfor pul-poses unrelated''

8 the Club. The first recital of the Credit Agreement provides:

9 ICWHEREAS, the Borrower desires that the Lenders extend certain senior

1 0 term loans to the Bon'ower hereunder, the proceeds ofwhich will be used:

1 1 (i) for distribution or loans up to $209,000,000 to (BLXj for

1 2 purposes unrelated to the Yellowstone gclubj,

l 3 (ii) for investments up to $142,000,000 into Unrestricted

14 Subsidialies for purposes unrelated to the Yellowstone (Club1 ,

15 (iii) to pay the Transaction Costs,

16 (iv) to refinance the Existing lndebtedness, and

17 (v) to finance a portion of the development and construction costs

18 associated with the Yellowstone (Clubq in accordance with the

19 Financial Plan.''

20 B. Loan Transadion Proceeds Distributed to BLX.

2 1 13. Paragraph 2.6(i) of the Credit Agreement provided that up to $209 million

22 the Loan Transaction proceeds were required to be tddistributed or loaned to (BLXj f

23 puposes unrelated'' to the Club.

24 14. Pursuant to that provision, YC immediately distributed $208,831,158.45

25 the Loan Transaction proceeds for iGpurposes unrelated to'' the Club, as follows:

26 a. $25,000,000 certificate of deposit at First Bank in BLX'S name;

27 b. $1 1,939,495 payoff to First Bank for Blixseth's then primary

28 residence at Porcupine Creek in Rancho Mirage

,

Califolmia;

6

COMPLAINT


(148 of 3



$17,000,000 certificate of deposit at Palm National Bank in the

Blixseths' name;

d. $14,016,227.87 deposit into a money-market account at Palm

Desert National Bank in Blixseth's name;

e. $4,133,623.50 payoff to Palm Desert National Bank for the

following debts:

(1) $3,169,) 1 8.75 for charges related to dtDesel-t Ranch,''

Blixseth's personal housing development near Palm

Springs, Califolmia;

(2) $79,629.54 payoff of GûEdra's Condo,'' a condo owned by

Edra Blixseth in Palm Desel't, California;

(3) $402,546.02 payoff of Timothy and Edra Blixseth's

personal line of credit; and

(4) $482,329. 19 payoff of Edra Blixseth's personal line of

credit.

$15,000,000 cel-tificate of deposit at Jackson State Bank in

Blixseth's name;

g. $3,068,749.99 payoff to American Bank for unknown purposes;

h. $975,908.57 payoff to American Bank for unknown purposes;

$1,515,250 payoff to American Bank for unknown purposes;

$896,423.28 payoff to American Bank for unknown purposes;

k. $977,894.92 payoff to American Bank for unknown pulposes;

$100,000,000 certificate of deposit at U.S. Bank the

Blixseths' name, from which $28,000,000 was used to purchase

a private island in Turks and Caicos;

m. $5,000,000 certificate of deposit at Pacific Western Bank in the

Blixseth's name;

C.

7

COMPLAINT


(149 of 3



1 n

. $2,971,443.02 payoff of a personal note to Pacitic Western

2 Bank;

3 o

.

$ 160,765.83 payoff to Union Bank for a rental home owned by

4 Blixseth;

5 p. $175,376.23 payoff to Union Bank for a rental home owned by

6 Blixseth;

7 q. $2,007,930.55 payoff to Commercial Bank for unrelated

8 purposes;

9 r. $1,403,547 payoff to GECC for an airplane owned by a

10 Blixseth-owned company;

1 1 s. $2,484,774 payoff to GECC for an airplane owned by a

12 Blixseth-owned company; and

13 t. $272,590 payoff to World Savings for a rental home owned by

14 Timothy and Edra Blixseth.

15 15. Not surprisingly, Blixseth's Iooting took its toll on both the Club and BLX

16 By November, 2008 (immediately after the Blixseth divorce proceeding), the Club wa

17 unable to make the interest payments required by the Credit Agreement. But for numerou

18 Kibail-out'' Iand purchases made by interested pal-ties prior to that time, the Club woul

19 have been unable to meet their interest expense obligations long before. As

20 consequence of the Loan Transaction and the looting of the loan proceeds by Blixseth

,

th

21 Club was required to seek bankruptcy protection.

22 C. Blixseth Executes Promissory Notes in Favor of BLX.

23 16. As can be seen from the foregoing, Blixseth personally benefited from th

24 Loan Transaction by virtue of his receipt of millions of dollars, Consequently, o

25 December 31, 2006, Blixseth executed two promissory notes payable to BLX (previousl

26 defined as the ttNotes''). One promissory note is in the amount of $58,305,147.60, and th

27 other is in the amount of $140,819,333.28. The total amount of both Notes i

28 $199,124,480.88. These ftmds were, in fact, actually received by Blixseth. True and

8

COMPLAINT


(150 of 3



1 correct copies of the Notes are attached hereto as Exhibits A and B and incorporat

2 herein by reference

.

The Notes themselves do not represent legitimate <6loans

.'' Th

3 were part of Blixseth's ffaudulent scheme to loot the Credit Suiss loan proceeds from t

4 Club through BLX. Blixseth's own fraud

,

howevex, is not a defense to enforceability

5 the Notes.

6 17

.

Both Notes provide that çsgtlhe payment of principal and a1l accrued inter

7 shall be made upon written demand of Payee

.

'' Likewise, the Notes provide for t

8 payment of attorneys' fees and various costs if a suit is brought to enforce the Notes

.

9 18. On September 2 1

,

2009, an involuntary petition for l'elief against BLX w

10 filed under chapter 1 1 of title 1 l of the United States Bankruptcy Code in the Bankrupt

1 1 Court. An Order for Relief was subsequently entered effective October 9

,

2009. O

12 October 29, 2009

,

the BLX Trustee was appointed trustee pursuant to 1 1 U

.

S.C.

13 1 104(d).

14 l9

.

The BLX Trustee filed a Motion for Order Authorizing Assignment

1 5 Claims for Purposes of Collection on August 12

,

20 1 1 . By this motion, the BLX Truste

16 sought court approval from the Bankruptcy Court for the assignment of the <tEsta

17 Blixseth Claims'' to YCLT

.

The motion defines the ttEstate Blixseth Claims'' as itclaim

18 and causes of action . . . against Tim Blixseth or an entity or entities directly or indirectl

19 owned or controlled by Tim Blixseth

. .including without limitation, claims or causes o

20 action arising out of or in connection gwith) the promissory notes payable to the Debto

2 l made by Tim Blixseth in connection with or response to the loan made by certain lender

22 with Credit Suisse, Cayman lslands Branch

, . . .

'' The Estate Blixseth Claims were asse

23 of BLX'S bankruptcy estate and include the Notes

24 20. By order dated August 30

,

201 1, the Bankruptcy Court approved th

25 assignment of the Estate Blixseth Claims from the estate of BLX to YCLT

.

A true an

26 con'ect copy of the August 30, 201 1 order entered by the Bankruptcy Court is attache

27 hereto as Exhibit C and incorporated herein by reference

.

The BLX Trustee executed an

28 Assignment of Claims for Purposes of Collection as of the same date whereby it assigne

9

COMPLAINT


(151 of 3



1 the Notes to YCLT as well as a1J other E tate Blixseth Claims

.A true and correct copy

2 the Assignment of Claims for Purposes of Collection is attached hereto as Exhibit D

3 incorporated herein by reference

.

Accordingly, YCLT is the owner and holder of

4 Notes and as the assignee of BLX

,

YCLT stands in the shoes of BLX and has a1l right

5 the collection of the Notes and/or the recovery of monies BLX paid to Blixseth

6 connection with the Notes

. YCLT succeeded to all the avoidance powers of the B

7 Trustee and is deemed to be a good faith purchaser for value

.

8 21

As stated, the Notes are demand notes. By letter dated September 12

,

20

9 YCLT made written demand on Blixseth requiring him to pay the full amount of princi

10 owed on the Notes by September 16

,

20 1 1. A true and correct copy of this letter

1 1 attached hereto as Exhibit E and incorporated herein by reference

.

Blixseth has failed

12 pay the amounts due on the Notes and

,

therefore, has defaulted on the Notes.

13 22

.

In addition, Blixseth owes YCLT through September 16

,

2011, the inter

14 that is due on the Notes as set forth in paragraph one of each of the Notes

. Af

15 September 16

,

201 1, the interest Blixseth owes YCLT accrues at the rate set fol'th

16 paragraph six of each of the Notes

.

Paragraph 7 of the Notes also provides that in t

17 event suit is brought on these Notes that the prevailing party is entitled to recover

18 attorney fees and all other cost and expenses incurred and reasonably necessaly therewit

19 D. Blixseth's Fraudulent Attempt to Absolve Himself From the Consequences

20 His Actions.

21 23

. No doubt understanding that he owed BLX approximately $18 1 millio

22 Blixseth attempted to absolve himself of this debt through the execution of a fraudule

23 release that was done within the context of his divorce

,

ln December of 2006, Ed

24 Blixseth filed for divorce

.On or about June 26, 2008, Tim and Edra Blixseth entered in

25 a Marital Settlement Agreement (t<MSA''), whereby they agreed to a division of marit

26 assets. Later

,

on August 13, 2008, Tim and Edra Blixseth executed a separate docume

27 entitled Mutual Waiver and Release Agreement (previously defined as the 'Aelease''),

28 true and correct copy of which is attached hereto as Exhibit F and incorporated herein b

l 0

coMptA-fk-'i


(152 of 3



1 reference. Pursuant to the terms of the Release, BLX purportedly released claims agai

2 Blixseth, including its claims under the Notes

.

As part of the marital dissolution and

3 execution of the Release, Edra Blixseth executed an <Wmended and Restated Promiss

4 Note'' in the amount of $1 99,134,480.88, which allegedly supersedes the Notes, and

5 Notes were marked tçsuperseded by Replacement Note.'' A true and correct copy of

6 Amended and Restated Promissory Note is attached hereto as Exhibit G. True and corr

7 copies of the marked-up Notes are attached hereto as Exhibits H and 1. Finally, BL

8 executed an Assumption Agreement that ostensibly cancelled the Notes and releas

9 Blixseth from any clailns under the Notes. A true and correct copy of the Assulnpt

10 Agreement is attached hereto as Exhibit J. Whenever YCLT alleges that the Release i

1 l fraudulent transfer, the same allegations are made with respect to the Amended a

12 Restated Promissory Note, the Assumption Agreement, and, to the extent necessary

,

t

13 marking of the Notes' with the legend ïtsuperseded by Replacement Note.'' A1l of the

14 actions, which occurred contemporaneously, were part of the same transaction and a

15 unenforceable as a fraudulent transfer.

16 24. The Release was made at a time when BLX was insolvent (01' was render

17 insolvent by the transfer of the Release). ln addition, BLX did not receive reasonab

18 equivalent value in exchange for the transfer. Blixseth conceded that both BLX and Ed

1 9 Blixseth were insolvent as of August l 3, 2008, in an expert report filed on Blixseth

20 behalf in Adversary Proceeding No. 09-00018 in the U.S. Banltruptcy Court for t

21 District of Montana, styled Snow v. BLX Group, Inc., et al. (CCAP 1 8'5).

22 This report concluded that BLX and Edra Blixseth were insolvent under the balance she

23 test, the debt service test, and the capital adequacy test. The Amended and Restat

24 Promissory Note that BLX received ffom Edra Blixseth in exchange for releasing Blixse

25 had no value due to Edra Blixseth's insolvency. A replacement note that is worthless

26 not reasonably equivalent in value to Blixseth's obligation to pay BLX approximate

27 $181 million.

28

11

COMPLAINT


(153 of 3



1 25. As stated in the MOD in AP 14

,

ifBlixseth dominated and controlled t

2 affairs of BG1 (n/k/a BLXI to such an extent that BG1 had no separate colporate ident

3 apalï from Blixseth

.

Blixseth and BGl were one and the same. . . . BGI was clear

4 Blixseth's alter ego.'' MOD at 95

.

The Release was not an arms length transaoti

5 because Blixseth was negotiating the Release while he was in control of BLX

. BLX w

6 not a party to the divorce proceeding and had no opportunity to contest or litigate t

7 Release. Nothing that occun'ed in the Blixseth divorce proceeding is binding upon BLX

8 26. The Release was obtained with the actual intent to hinder

,

delay and deikau

9 At the time Blixseth obtained the Release, he was well aware of the serious financi

10 problems faced by the Club. He knew there had been material negative market chang

1 1 and that ttprices have stopped escalating and buyers have dried up

.'' In pleadings filed

12 connection with the divorce, Blixseth recognized that there had been dramatic change

13 the economy and stock markets in the United States and the world and there had be

14 <tchange and uncertainty in the financial and lending markets.'' Ful-ther, according

15 Blixseth, 'dgbjecause of the overall slow-down in the real estate market, sales

16 Yellowstone Club, which have been the primary source of cash funding . . . hav

17 diminished dramatically.''

18 27. In late 2007 and early 2008, Blixseth was attempting to sell the Club to Cro

19 Harbor Capital Partners, LLC tsdcl'oss Hal'bor''), an entity owned by Sam Byrne. Blixset

20 has maintained that Byme pulled out of the sale so that he could enter into a conspirac

21 with Edra Blixseth and others to bankrupt the Club so that Byrne could purchase the Clu

22 for a much cheaper price. This so-called çsconspiracy'' is a tigment of Blixseth

23 imagination. lnstead, Blixseth did not want to consummate this proposed sale to Byrn

24 because he recognized that the proceeds from the sale would not have been sufficient t

25 pay off the Credit Suisse debt and the taxes that would be owed as a result of the sale

26 Blixseth testified at a March 21, 2008 hearing in the divorce proceeding that he estimate

27 that he and Edra would owe between $50 to $1 00 million in taxes as a result of the Cros

28 Harbor sale and that tdthe proceeds may not have been suffioient to pay everything and a

l 2

COMPLAXY


(154 of 3



1 of the taxes.'' Blixseth thus understood that, if the Cross Harbor transaction had bee

2 consummated, he would not have received any money from the sale and

,

in fact, wou

3 have had to come up with additional funds to ensure that the sale closed

.

Five days aft

4 this testimony by Blixseth, the Cross Harbor deal was terminated

.

5 28. Blixseth has testifed that it was Cross Harbor that wanted to terminate th

6 sale; however, Blixseth's own e-mails show otherwise

.On March 26, 2008 at 10:10 p.m

7 Blixseth e-mailed his lawyer, Mike Doyle, indicating that he was çiin 100% opinion NO

8 to extend'' the closing date for the transaction. Sixteen minutes later, Mike Doyle send

9 an e-mail indicating that 'twe will be sending a tenuination notice shortly

.

'' Subsequentl

10 Cross Harbor sent its termination letter in order to preserve its right to a refund of i

1 1 deposit. However, upon information and belief, it was Blixseth that wanted to termina

12 the deal. After the sale to Cross Harbor fell through

,

Blixseth agreed to transfer th

13 Debtors to Edra Blixseth as pal't of the MSA. By doing so, Blixseth avoided this $50

14 $100 million tax liability, instead foisting this potential tax liability upon his ex-wife.

15 29

.

Blixseth and the financial and legal professionals he retained were concerne

1 6 about Edra Blixseth and/or the Club or BLX tiling bankruptcy and the effect that migh

17 have on Blixseth. ln a June 17, 2008 e-mail between Blixseth and eight of his legal an

18 financial advisors, the tipotential for a tax liabilily arising if Yellowstone Club, BLX

19 and/or Mrs. Blixseth declared bankruptcy and defaulted on the (Credit Suissej loan afte

20 the property settlement and divorce were final'' was discussed. During the course of hi

21 divorce proceedings, Blixseth sought legal advice from the law firm of Thornton Byro

22 LLP for alleged estate planning purposes, but the invoices from that t'irm indicate h

23 actually sought a means to avoid any liability.

24 30. The invoices from Thornton Byron (Blixseth's iiwealth preservation

25 lawyers) are replete with references to analyzing ways to shield Blixseth from potentia

26 liability to the Club and BLX. For example, one entl'y on the Thornton Byron invoic

27 provides:

28

1 3

POMPI-SINT


(155 of 3



1 IDliscussion with George Mack regarding particular concern

2 regarding Mr. Blixseth's possible liability to creditors of Mrs.

3 Blixseth, Blixseth Group, Inc. or the Yellowstone Club entities ilf)

4 Mrs. Blixseth were to assume liabilities of business entities and the

5 marital community on which Mr. Blixseth is currently obligated;

6 revise correspondence to client and representatives regarding same;

7 analysis of documentation and transactional steps to limit Mr.

8 Blixseth's exposure on subsequent efforts with respect to Iiabilities

9 assumed by Mrs. Blixseth; discussion to analyze same; draft

10 correspondence regarding recommendation for limiting Mr.

1 l Blixseth's Iiability after Mrs. Blixseth's assumption of debt; draft

12 multiple correspondence responding to questions and concerns raised

1 3 by Mr. Blixseth and other representatives regarding same. (Emphasis

14 added).

15 31 . The foregoing illustrates that Blixseth and his advisors knew about the lik

16 bankruptcies of the Club, BLX and Edra and that they developed a plan in an attempt

17 allow Blixseth to walk away froln the obligations he created without returning one pen

18 This plan not only involved obtaining releases from BLX and the Club, it involved

1 9 creation of Desert Ranch LLLP, a structure referred to by his attorney as a ttperso

20 Berkshire Hathaway'' that provided tdgeneral creditor protectionx'' As admitted

2 1 Blixseth's own lawyer, one of the pumoses of this structure is to remove assets from

22 reach of creditors. Virtually all of Blixseth's assets were transferred into this vehio

23 Revealingly, Desert ltanch LP was converted to Desel't Ranch LLLP on November

24 2009, a mere two days after the Club filed bankl-uptcy.

25 32. The Desert Ranch structure was the culmination of Blixseth's plan to shie

26 himself from the consequences of his actions. The begizming of the plan was to obtain

27 Release. Indeed, Blixseth testitied unequivocally that getting a release from any claim

28 for breach of fiduciary duty or fraudulent transfer was the itcornerstone'' of the MS

14

coApl-AiN'r


(156 of 3



1 Blixseth obtained the Release with the actual intent to hinder, delay and defraud

2 creditols, including BLX. Under the facts and circumstances as found herein

,

it would n

3 be appropriate to allow Blixseth to rely on the Release as a defense to the claims asser

4 by YCLT, and the Release should be set aside as both an actual and a construct

5 fraudulent transfer.

6 33. Indeed, in the context of the Yellowstone Club bankruptcy, the Bankrup

7 Com't has already determined that the Release should be set aside as both an actual and

8 constructive fraudulent transfer. ln determining to set aside the Release as actua

9 fraudulent, the Banklrptcy Court concluded that tiBlixseth's fraudulent intent could not

10 more clear'' and that the Release had been obtained ttwith the actual intent to hinder, del

1 1 and defraud his creditors.'' MOD at 109.

12 V. FIRST CAUSE OF ACTION

13 Setting Aside Release as Fraudulent Transfer Undcr N/s/c Law

14 34. YCLT incorporates by reference a11 prior allegations in the Complaint.

15 35. The Release was obtained from BLX within four years prior to the filing

16 the BLX banltruptcy.

17 36. Plaintiff is informed and believes and thereupon alleges that creditors of BL

1 8 existed at the time of the Release who remained unpaid as of the date that BLX w

19 placed into a Chapter 1 1 bankruptcy, and creditors of BLX existed following the Relea

20 who remained unpaid as of the date that BLX was placed in Chaptet' 1 1 bankruptcy.

21 37. As set forth above, the Release obtained by Blixseth as pal4 of the MSA w

22 obtained with the actual intent to hinder, delay and/or defraud the creditors of BLX.

23 38. Fullhermore, BLX did not receive reasonably equivalent value in exchan

24 for the Release, and BLX was at the time of the Release engaged or was about to enga

25 in a business or a transaction for which the remaining assets of BLX were um'easonab

26 small in relation to the business or transaction, and/or at the time of the Release BL

27 intended to incur, or believed or reasonably should have believed it would incur, deb

28 beyond its ability to pay as they because due.

15

COMPLAmT


(157 of 3



1 39. Therefore, the Itelease constitutes a fraudulent transfer under Cal

Civ. Cod

2 j 3439.04 (a) (1) and (2) and j 3439.05: and should be avoided pursuant to Cal. Civ. Co

3 j3439.07 (a) (1). YCLT asserts this claim pursuant to 1 1 U.S.C.j 544.

4 40. YCLT is entitled to a judgment against Timothy Blixseth setting aside t

5 Release as a fraudulent transfer under California law.

6 vI. SECOND CAUSE OF ACTION

7 Setting Aside Release as Fraudulent Tranîfer Under Federal Law

8 4 1 . YCIVT incorporates by reference a11 prior allegations in the Complaint.

9 42. As set forth above, the Release obtained by Blixseth as part of the MSA w

l 0 obtained with the actual intent to hinder, delay and/or defraud the creditors of BLX.

1 1 43. Ful-thermore, BLX did not receive reasonably equivalent value in exchan

12 for the Release, and BLX (i) was insolvent at the time of the Release or was render

1 3 insolvent as a result of the Release; (ii) was engaged or was about to engage in a busine

14 or a transaction for which any property remaining with BLX was an unreasonably slna

15 capital; and/or (iii) intended to incur, or believed it would incur, dxebts beyond its ability

16 pay as such debts matured.

1 7 44. For the reasons set forth above, the Release also constitutes as a fraudule

18 transfer under Sections 548(a)(1)(A) and (B) of the United States Bankruptcy Code an

1 9 should be avoided pursuant to Section 550 of the United States Bankruptcy Code.

20 45. YCLT is entitled to a judgment against Timothy Blixseth setting aside th

21 Release as a fraudulent transfer under federal bankruptcy law.

22 v. THIRD CAUSE OF ACTION

23 Breach ofcontract (Promissory Notes)

24 46. YCLT incorporates by reference all prior allegations in this Complaint.

25 47. Because the Release must be set aside as a fraudulent transfer, YCLT

26 entitled to recovery on the Notes.

27 48. On December 31, 2006, Blixseth made the notes payable to BLX. One not

28 is in the amount of $58,305,147.60 and the other is in the amount of $ 140,8 19,333

16

COMPLAINT


(158 of 3



1 These funds were, in fact, actually received by Blixseth.

2 49. The Notes are demand notes. Blixseth has not made payment on either of

3 Notes. A1l conditions precedent for the collection of the Notes have been satisfied

.

4 50. By letter dated Septelnber 12, 201 1, YCLT made written demand on Blixs

5 requiring him to pay the full amount of principal and interest owed on the Notes

6 September l6, 201 1. Blixseth has failed to pay the amounts due on the Notes a

7 therefore, is in default. Paragraph 7 of the Notes also provides that in the event suit

8 brought on these Notes that the prevailing pally is entitled to recover its attolmey fees a

9 all other cost and expenses incurred and reasonably necessary therewith.

10 51 , Blixseth also owes YCLT interest that is due under the Notes. Throu

1 1 September l6, 201 1, the interest on both Notes accrued at the KtNote Rate'' as set forth

1 2 paragraph 1 of the Notes. After September 16, 20 1 1, the interest accrues at the rate of 5

13 per annum above the tGNote Rate.''

14 52. Because YCLT has been forced to bring suit on the Notes, YCLT is a

1 5 entitled to recover its reasonable and necessary attorneys' fees and other costs as set fo

16 in paragraph 7 of the Notes.

1 7 1lI

1 8 ///

1 9 ///

20 ///

2 1 ///

22 ///

23 #/

24 ///

25 ///

26 ///

27 ///

28 ///

17

COMPLAINT


(159 of 3



PM YER FOR RELIEF

WHEREFORE, the YCLT prays that this Court enter judgment upon its cla

against Blixseth as follows:

1. An order setting aside the Release as a fraudulent transfer under b

California 1aw and federal bankruptcy law;

An award of actual damages in an amount to bedetermined at trial;

fees and prejudgment interest

2.

3. An award of costs, disbursements, attorneys'

permitted by Califolmia and federal statutol'y and common law; and

Such other and further relief as the Court deemsjust and equitable.

8

9

10

4.

october 6* , 201 1 BIENERT, MILLER & KATZMAN, PLC

>

By:

S en Jay Katzman

Susann K. Narholm

Attorneys for Plaintiff

MARC S. KIRSCHNER, as Trustee of the

Yellowstone Club Liquidating Trust

MULLIN HOARD & BROWN, L.L.P

Steven L. Hoard

John G. Turner, Ill


MARC S. KIRSCIAE as Trustee of the

Yellowstone Club Llquidating Trust

BAILEY & GLASSER, LLP

Brian Glasser

Thanos Basdekis


MARC S. KIRSCHNE ? as Trustee of the

Yellowstone Club Liquidating

21

18

COMPLAINT


(160 of 3



E X H IB IT

iiyjk55


(161 of 3



Dupllcate Or/g/rl'fr/

PROMISSORY NOTE

$58,305.147.60 Decem/r 3 l . 2006

FOR VALUE RECEIVED, (the undersigned, individually and colloctively (''Pay0P')

promises to pay te the order of BLIXSETH GROUP, INC.. at 7 1-534 Sabara Road' Rancho

Mirage, CA 92270, or at such other place as the Nolder of this Note (''Payee'') may from time

to time dosignate in writing, lht sum orFifty Eight Million Three Hundred Five nousmld

One Hlmdrcd Forty Seven and 60/100 Dollat's ($j8.305x 147.60) in lawrul money of the

Uniyed Stvtes, with interest thereon from the date of this Note until paid at the rate sot forth

below, computed on rnonthly baluces. Interest fol' each tkll calendar month during the terrn

cf this Note shall be calculated on the b%is of a 365 or .'ti6-day year and tlje actual numbcr

ofdays in thal month.

1 - Intercst Rate. 'f'hc pec tmnum interest rate hereunder (''Note Ratc'') shall bc at

lLe AFR Blcndcd Rate.

2. Maturlty. The payment of pringipal and al1 accrued interest shall b: made

tlpon writtea dcmand of Payce.

3. Applicatlon of Payments. Paymcllts sllall bc applied firsl to the payment Qf-

accrued interest; secondv at the option os Payee, to lhe payment of any latt charges due

hereunder; and r-hird, to the reduction of principal of tllis Notc,

4. Prepaymeut- Payor may prepay it,s obligation undtr thïs Note in full or in part

at any tlme or from timc to time without premium or penalty.

5. Late Charge. I f ltny amount payable heretmdtsr is paid more t17111: tCJI ( 10) days

after Lhe due date thereot Payor promises to pay a late charge of five peroent (5%) of the

delinqucnl amount as liquidated darnagu for thc extra experssc in handling pax due

payments.

6, Derault; Remedies. lf default is made in the payment of any aznount payablc

hereunddr when due, lben, at thc option of'payee. the entire lndebtcdneas evidenccd hereby

shall become îmmcdiately due and payable, and a11 such mnounts, includlg a11 accrucd but

unpaid in:erest, shall tiàereafter bear interest at the rate of Gve percent (5%) pçr snnum above

tbe Notc Rate, Failure to exercise thi: option shall not waivc the right to exercise the same in

tbe event of any subsequent default.

7. Attorney Feed. If suit, action, or omer proceedjng of any natktre whaloevtr

(including any proceeding undcr the U.S. Baltkruptcy Code) is instittzrcd irh cormecdon with

1 - PROMISSORY NOTE EXHIBIT

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(162 of 3



any cûntroversy arising out ol- this agreement or to intepret or enforcc any rigius hereunder,the prevalling party shall be entitled to recover its auorney fces. garalegals, accotmtants. and

other txperts'feos, and a1l other feesv costs, and expensos actually incurred and reasonably

necessary in connection therewith, as determincd by the court at trlal or on any appeal or

review. in dddition to al1 other amonn:s providcd by Iaw.

8. Miscellaneous.

8.1 Every peuon or entity at any lime liable for tl)e payment of the

indebtedness evidenced boreby waives presçntment fbr paymcnt, demand and noticô of

nonpayment of thfs Notc. Every such pcï-son or entity furthtr hercby conscnts to any

extension of fhe time of paylnent hcreof or other moditlcation of (he terms ofpayment of this

Note. the reltase of a1l or mày part of the sccurity htrelbry or tlse rclemse of any party iiabie t-or

the payment of the indcbtcdness evidenced hereby at Jmy limû and from time to timc, at th:request ot-anyone now or hcreatter Iiablc thrrefor. Any such extensiotl or relemse may l;c

made without notlce to any of such persons or tnlitle.s and wilout discharging tbeir liability.

8.2 The headlnp to the various sections have been inserted for convenience

ot- retbrcncc only and do not define, limit, modifyy or expand thc eypreass provisions orthis

Notc.

8.3 This Note is mado w'ith refbrence to and is to be consû-ued in accordana

with the laws of the state of Calitbroia.

By: -X '

TlMo'niv .BL 'rH

2 . PROMISSORY NOTE


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E X H IB IT

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(164 of 3



Duplicate Orlkinal

PROMISSORY NOTE

$140.81 9.333.28

FOR VALUE RECEIVED, (the undersigned. individually and collectively (ê'Payor'')

promises to pay to the order of BLIXSE'I-H GROUP, lNC.x at 71 -534 Sahara Road, Rancho

Mirage, CA 92270. or at sucl) other placo ms the holder of tbis Nole (''Payee'') may hom time

lo time designale in writing, thc slzm of One Hundrod Forty Million Eight Hundred Ninetcen

A-housand nree Htmdred nirty Threc tmd 28/100 Dollars ($140.8 t9,333.28) In Iawful

moncy of the United States. with interest thcreon from lhe dato of this Note until paid at thecdte set fortlt below, computed on monthly balances. fnlerest for each full calcndar month

during the tzrm of this Note shall be calcutared on the bxsis of a 365 or 36&day year and the

acmal number of days in tha month.

Dccember 31% 2006

Interest Rntt. 'l''he plr mmum intercst ï'mc hm-eunder ('Wote RntcN) shall be a:

tht samu rate Payce i: required to pay Yellowstont Mounvin Club, LLC under pm'agraph

23A of thc Credit Agrefnen entered into belween Ycllowstone Mountain Club, LLC,

Yellowslone Development. LLC aad B1: 8ky Rioge. LLC as Borrowenm mld Credit Suissc

Pirst Boston, datcd September :10, 2005.

2, Maturity. Thc paymen: ofprincipal and a1l accrued intcrest shall be madc

upon vvritten demand of- Payec.

3. Applicatiou of Payments. Payments sllal) be applied firsî to the payment of

accnxd interesq seçond, at tbe option of Payee, to the payment of any iate cbarges due

hereunder; and third. to thc rcduction of principal ortllis Note.

4. Prepayment Payor may prepay its obligatlon under this KoT: in fu11 or in part

at any time or from timc to tîme without premium or penalty.

5. Late Chargm lf'any mnount payahle hereunder is patd more than ten (10) days

aher tht due date thcrvotl Payûr promises to pay û Iatt charge of fi've ptrcent (5%) of tht

delinquent amount as liquidated damagts for the extn expenso in handling pas due

Py

6. Default; Remediiu- ll-dcfhult is made iI1 thc payment of any amonnt payable

bereunder when due, then, at the option of Payee, tlne entire indebtedness evidenccd hereby

shall btcome ilnmediately duc and payable. and alI such amounts. including all accrued but

unpaid lnte,restz shall thereafttr beear interest at tlte ratv of'five percent (5%) per annum above

the Note Rate. Failure to exercise this option shall not waivq the rlght lo txtrcise the same in

the even of any subsequent default.

I - 8ROMIdSORY NOTE EXHIBIT

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7. Attotmey Fees. lf suit action, or othez' prûceeding of any naturc whatsoever

(includiag any proceeding under the U.S. Bankrupycy Code) is institute'd in conneolion with

afly controversy arising out of tkis agreement or to interpret or onrorce any rlghts hcreunder,

the prevailing party shall be entitled to rccovm- its attornty fees, paralegals, Rccountant:. Md

olher experts' fees, and a)1 other fees. coscs, and expenses actually iucurxd artd reasonably

necessary in conneotion tkerewitk as determined Ly 'the couzt at kial or on any appci or

review. ln addition to al1 otber m'nounts providcd by law.

8. Miycellaneous-

8.l Every person or tntity at any tinw Iiabl: for tl:e payment of the

indebtedness evidcnced hereby waives presentment for payment demand and noticc of

ftonpaynlent of tttis Note. Every such pentm or enthy further htreby constmts to anyextension of the time of payment llereofor othcr modiscatïon Of the œrms of payment Of this

Note. the release ol-all or m y part of the secuzity hcrefor. orthe rel= e of any party llable for

tllc payment of the indebtedness evidenced hereby at any *mt and from time to time. M thc

rcquest of anyone now or hereafter Iiable therelbr. Any such extcnsion or release may be

fnade without notice to Jmy of suclt persons or cntitie. and without discharging their liability.

8.2 ne headings Io the various sections havc been inserted for convenience

of referonce only and do not define, limk, modify. or expand the express provisions oftbls

Notc.

8.3 This Notc is lnade with referencc to and is to be construcd iu accortlance

witb the laws of the state of California.

By: .-

--.

TIMO'I'IT L. BLI ETH

2 - PROMISSORY NOTE


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E X H IB IT

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09-61893-R8K Doc#: 769 Filed: 08/30/1 1 Entered: 08/30/1 1 10:33:46 Page 1 of 3



1E k -f)

BLX GROUP INC,

Debtor.

Case No. 09-61893-11

ORDER

At Butte in said District this 30:1, day of August, 201 1 .

Carl A. Eklund. the duly appointed chapter l l trustee herein tt'Trtlsteef'l for the

bankruptcy estate of BLX Group, lnc. (the ''Debtol'''), filed a Motion for Order Authorizing

Assignment of Claims for Purposes of Collection on August 12, 20l 1 (Dkt. #752, the ttMotion'').

In accordance with Mont. LBR 9013- 1 , thc Trustec attached a è'Notice'' to his motion advising

interested parties that they had fourteen (1 4) days within which to respond to the Trustee's

motion. In the absence of any outstanding opposition after notice

IT IS ORDERED:

The Trustee's Motion for Order Authorizing Assignment of Claims for Purposes of

Collection filed August 1 2. 20 1 . at docket entry no. 754. is granted.

B. Pursuant to 1 1 U.S.C. j j l 05(a) and 363, the Trustee is authorized to consummate

the transactions described in the Motion in accordance with the following terms and conditions.

which are hereby made an order of this Court, and pursuan: to stlch other terms and conditions

and such documentation as is consistent herewith and otherwise in form and substance

EXHIBIT

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09-61893-R8% Doc#: 769 Filed: 08/30/1 1 Entered: 08/30/11 10233:46 Page 2 of 3

satisfactory to the Trustee:

(i) The Yellowstone Club Liquidating Tl'ust ('IYCLT') and the YCLT Trustee

shall have standing to and shall be responsible for bringing any suit,

proceedings or contested matter to pursue any claims and/or causes of

action the bankruptcy estate holds or Inay hold against Timothy L.

Blixseth or an entity or entities directly or indirectly owned or controlled

by Timothy L. Blixseth, including, without limitation, filing and

adjudication of any proof of claim in any bankraptcy of Timothy Blixseth

or avoidance of any of the purported transfers by Timothy Blixseth to Edra

Blixseth of the promissory notes payable to the Debtor made by Timothy

Blixseth in connection with or in response to the Credit Suisse

Transacrion.

A ratable share of any out-of-pocket costs incurred by YCLT or the YCLT

Trtlstee in pursuit of the Estate Blixseth Claims and the YCLT Blixseth

Claims (based upon the allocation set forth below of any recoveries from

Tim Blixseth or any Tim Blixseth Entity in respect of thc YCLT Blixseth

Clailns and the Estate Blixseth Claims) shall be payable to the YCLT out

of any recoveries on the Estate Blixseth Claims prior to remittance of such

recoverics to the Estate,

1701' purposes of allocating any aggregate rccoveries (net of contingent fce

payments) on the YCLT Blixseth Claims and the Estate Blixseth Claims

from Tim Blixseth or the Tim Blixseth Entities between the YCLT

Blixseth Claims and the Estate Blixseth Claims, the YCLT shall be

deemed to be entitled to 58% thereof, and the Estate shall be decmed to be

entitled to 42% thereof. This allocation is intended as a pro rata

application of such recoveries, based on tLe share of the total claims

asserted or assertable against Tim Blixseth or tbe Tim Blixseth Entities by

the Estate and the YCLT, respectively,

This Court retains jurisdiction to enforce and implement the terms and provisions of

this Order dnJ dny other documentation executed with regard to the transaclion.g described herein

and in the Moîion. This Order, the terms and conditions hereof. and the assignment of the Estate

Blixseth Claims contemplated hereby shall remain in full force and effect notwjthstanding

confirmation of any plan of reorganization or liquidation, or any dismissal or conversion of this

proceeding lo a proceeding nndrr Chapter 7 of the Bankruplcy Code.


(169 of 3



09-61893-R8K Doc//: 769 Filed: 08/30/11 Entered: 08/30211 10:33:46 Page 3 of 3

D. This Court finds that there is good cause to waive the 14-day stay under Rule

6004(h) of the Federal Rules of Bankruptcy Procedure. Accordingly, this Order shall not be

dtayed far 14 days aftcr :he entry of this Order and shall be cffective and cnforccablc immediatcly

upon cntry.

BY THE COURT

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HON. l ALPH B. KIRSCHER


Unitcd States Bankruptcy Court

Dbstrict of Montana


(170 of 3



E X H IB IT

iiD 55


(171 of 3



ASSIGNMENT OF CLAIMS FOR PURPOSES OF COLLECTION

As of August 30, 201 1, Carl A. Eklund. as duly appointed Chapter 1 l Trustee for the

bankrupt estale of Blixseth Group. lnc. (ltAssignor''), hereby assigns. conveys, transfers and

delivers to the Yellowstone Club Liquidating Trust, for purposes of collection, a1l of Assignôr's

right, title and înterest in and to:

1 . that certain Plomissory Note dated December 3 1 . 2006, in tlle origina) princigal

amount of $58,305, 147,60 made payable by Blixseth Group, Inc.:

2. that certain Promissory Note dated December 3l, 2006, in the original principal

amount of $140,819,333.28 made payable by Blixseth Group, Inc.; and

3. all other Estate Blixseth Claims as such term is defined in the Order (desned

below).

This Assignmcnt is macle pursuant to and subject to the tcrms of the Ordcr Authorizing

Assignment of- Claims For Pupose.s ot- Collection (the ''Order) dated August 30. 2O1 l : granled

by the United States Bankruptcy Colzrt for îhe Distl'ict of Montana in the casc entitled h: re

Blt'xseth Group. /n&.& Case No. 09-61 893.

,

w . y-

Carl A. Eklund, as Trustee

5219252 1 - 1)0C

EXHIBIT

)

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E X H IB IT

iiE ',


(173 of 3



MARC S. KIRSCHNER

AS TRUSTEE f)F THE

YELLOWSTONE CLUB LIQUIDATING TRUST

l 8 East 94th Street

Suite IA

New York, New York 10128

(2 12) 348-2803

lnskil'[email protected]

September l2, 20 l l

Timotlly L, Blixseth

Re: $58,305,147.60 Promissory Note, December 31. 2006

$149,819,333.28 Promissory Note, Deccmber 31, 2006

Dear Mr. Blixseth:

1 am the Tmstec of the Yellowstone Clab Liquidating Trust (16YCLT''). YCLT is the

owner and holder of the two promisso:y notes Iisted aLove executed by you (collectivcly, the

unotesn). True and correct copies of the notes are attached, Pursuant to paragraph 2 of each of

the notes, dcmand is hereby made for payment of each of the notes described above, in full,

together with interest at the t'Note Rate'' (as that term is defined in paragraph 1 of- eacb of the

notes) no later than September 16, 201 1. Jf paylnent is not received by September l6, 201 1, then

thereaftcr interest will accrue at the rate of 5% pcr annum above the Sçlqote Rate'' as sct forth in

paragraph 6 of each of the notes. YCLT also reserves the right to seek its attorneys' fees and

other costs if suit, action or other groceeding orany nature whatsoever is instituted in connection

witb collection of the above-descrlbed notes.

This demand is made pursuant to the Order Granting Trustee's Motion for Authority to

Assign Claims For Purposes of Collection, dated August 3O, 201 1 (docket $769), in tlw

Banknzptcy Case entitled In Re S. ..Y Group, lnc., Case No. 09-61893, in the United States

Banknzptcy Court for the District of Montana, and the Assignment of Claims for Purposes of

Collection made ptu-suant to thc forcgoing as of the snme date.

Oovern yourself accordingly.

Sincerely, .

2

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.

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arc S. Kirschner, Trustee

Yellowstone Club Liquidaling Trust

(.J290ït)0ï00.$.95474.1.0C J l )

EXHIBIT

1> :


(174 of 3



Cc: Mike Flyrm

Philip Stlllman

1$296)ïf)1A0(83()471.1700 / l )


(175 of 3



E X H IB IT

iiF ''


(176 of 3




MUTUALWAIVERAND RELEASE AGREEMENT

X'' ''% Zlhleosoîgreement (refen'ed to ms this ''Ap'ec

m

-

enlt'l mades Muoml waivers an

and elecuve as or 1é6I , 2:0: tthe 'tBtrtclive Date''), is enterod into by TIMOTHY L.

BLGSE'I'H e-l-imotlw.l) and the enuties listed on E-xhibit A (the ç'Timothv Bnti '1es''), on the one

handv and EDRA BLWSETH (''Fdm'') and tlw entities listed on Exhlblt B (the ''F.fI.> Entiues'').

on the oier hsnd. A1l of the parties to this Amement art refeaed to collec6vely as the

ççparges'' wheo appropriate.

RECITAI-S

A. Timothy and Fzlrn are involved in Marital Dissolution Proceedings pending in the

Superior Court of Californlw Riverside, Case No. RIDINIHI 152.

B. Timothy and Edra have entered into a Marital Settlement Agrcement dated June

26, 2008, as lmended July 2, 2008 (collecuvely, th: Otinulation'').

C. Pll-mnt to Paragraph 36 of the Stipulation, Tlmothy and IMm are each requireu

to cause each entity described below hl Paragaph 36 of the Supttlation (colleevely, the

'tEntit4'es''l to execute a fullj complete, absolute and unconditional release of all claims e-nnh sucb

entity has agaimst the other party (a) individually and/or (b) any entity which the other party

receives ôr received ntlrstlnnt to the Sdpulation or any pHor Stiptllafon and Order.

D. nis Agreement is entered into by tlm Parties in connection Vt.II the Settlement

Agcment.

NOW, THEREFORE in considtration of the promises' covenanl and am ements

heminnfhr set forth and the excbnnge of other good and valuable comsideration, the sumciency

of which is hereby acknowledgc the Pardes hereby agree as follows:

1. Incomorasion of Reciols. Each and every rccltal set fo% above is incorpomted

by this reference ms though fully set forl at length herein.

2. Timothy Enuties. Timothy has listed on Bxhibit A attache,d heato and made a

part hereof ennb of the enuties wllich, to the best of his knowledge, he:

(a) owns or will receive purs',nnt to the terrnq of the Stipulation or any prior

Stipulation and Order;

(b) mannges or w1ll manage aier the implemeutation of the Stipulation or any

prior Stipulatlon and Order;

(c) conkols or will control after the implementation of the Stipulation or any

prior Stipulation and Order; or

(d) has or will have a majority interest aRer the implementation of tlze

Stipulation or any prior Stipulation and Order.

l

0:39611/(*1/399205+

EXHIBIT

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(177 of 3




3. F/rn Bnlities. Edra has llsted on Exhibit B attached hereto and made a pazl hereof

each of the entltles which, to the best of her knowledgo, she:

(a) owns or will receive pursuant to the terms of the Stipulation or any prior

Stiplation and Order;

(b) manages or will managc aûer the lmplementation of the Stipulation or any

prior Sipulation and Order; '

(c) conkols cr will control aher the implementation of the Stipulatîon or any

pHor Stlpulation mld Order; or

(d) IIJIA or will have a. majority lntercst aher the implementation of the

Stlpulation Agroment or any prior Stipulation and Order.

4. Mutual Releases and Waivers.

(a) By Timûthv Bntitie:. Except with xspect to tlze rtpresentations,

warrandes, covenants and aeoments of Timothy (hmluding the indemnlGcation and hotd

hnrmloss provisions) set forth ia the Stipulation or any prior Sflptllatlon or Order (tho 'enmotlw

' Resewed Obllcationr), each of the Timothy Entities hereby llly and absolutely releases and

discharges F'dra and each of tlle E&a Entities (collectlvely, the tsEdm Released Parliesl'l. 9om

any chlm, right or demand that any such Timothy Entity hms, or may have agninnt any of the

Edra Released Parties baze,d on conduct âom the beginning of time tmtil the BFective Date

relatlng to. or bascd on any fact, chcumstance, event or document signed by Edra or any of tlw

E&a Released PMies, including, but not limited to, (a) breach of fiduciary duty, (b) breach of

corpûmte or business opporhlm' 'les, (c) any similar type of poteatial liability based on failure of

any bf the Fzra Released Partits to act promrly on behalf of any said IMm Entity or (d) any

doc=ent sjgned by Edra or any of the Fzra Released Partles. 'I'lle Fzlrn Released Pnrtits do not

include presenl and fonner olcers, directors, shareholders, employees, parlrltrs, lnembers,

attomcys, associatts, managers, bushzess mnnngers, pmfeasional represuntatives of any kind,

agentw prcdecessors. successors, assigms, heirs, executors and adminlstratozs, nmliates. parent

and subsidiary corporations, compmties and divisions of Edra or tlze Edm EntYes, as applicable

tthe '' Mm Exclu .-qd Parties''l, and the foregoing release sball in no way relea;e or discharge any

of tlm Fzl- Excluded Parties âom any clnlm, right or demand that any such Timothy Entity has,

or may have agnlnAt aay of the l7.drn Excludcd Pmics.

(b) By Edl'a Entities. Exxpt w1t11 respect to the represenKtions, warranues,

covvnnnts and agrezments of EIIm (including the indemnlscation aad hold hnrmless pmvisions)

sd fo% in the Stipulatlon or any pHor Stipulation or Order tthe 'çp/r--Reserved Obliqations'l,

eacb of the Bdm Entlties hereby fully and absolutely releases and discharges Timothy and each

of the Timothy Bntiues (collectively, the G'l-imotlzy Released Parties'y), from any clatmx rigbt or

dem=d tlmt any such 17fl= Entity has, or may have agairlst mzy of the Timothy ReleasH Partios

bmsed on conduct from the beginnlng of time until tlw Eflkctive Date relaeg to, or based on any

fact circllmAtanco, event or document si>ed by Timothy or any of the Timothy Releucd

Pees, including, but not liml'ttd to, (M breach of fiduciary duty, (b) breach of corpomle or

business opporttmities, (c) any siznilar type of potential liability based on failttre of any of the

0039&14/091/399265v:9


(178 of 3



O9-0OO14-RBK D0c#: 181 Filed: 04/20/09 Entered: 04/20/09 22:36:35 Page 3 of 21

Timothy Released Parlies to act properly on bchalf of any said Timothy Entity or (d) any

document signed by Timothy or any of the Timothy Released Parties. The Timothy Rdeased

Palfes do not include present and former oëcers, dlrectors, shareholdets, employees. pnrlners,

members, attorneys, associates, managelx business managers, professional representativts of

any kind, agents. gredecessorst successors, a:signs, heirs, execmors and adminiseators, nmliates,

parent and subsithaq corporatlons, companies and divisions of Timothy or the Timothy Entities,

as ajplicable (thc ''T lmotlw Excluded Partlesf'l and the foregoing release shall in no way release

or dlscharge any of tbe Timothy Excluded Partxs 9om any clalm, rkht or demand that any such

17zlm Bntity has, or may have against any of the Timothy Excluded Parties.

(c) ne waivers and releues confmined in tltis Apeement relate to any

conduct for whlch a claim of any nature could be based against a released party or released

entity, whether known or llnknown ms of the time of the signlng of this Agreement wlkich

occurred prior to thc Electivc Datt.

5. Each of the Partîes to this Apeement hereby does waive, the provisions of

Califomia Civil Code 91542 which provides 1ts follows:

<êA OENEM L RELEASE DOES NOT EXTBND TO CLMMS WHICH T1IE

CREDITOR DOES NOT KNOW OR SUSPECT TO EMST IN IUS OR HBR FAVOR AT THE

TIME OF BM CUTING THE RELEASES WHICH 1F KNOWN BY 11IM OR I'IER MUST

HAVE MATEIUALLY AFFBCTED HIS OR IIER SEWLEMBNT WITH THE DBBTOR.''

BFective upon execution of this Agrcement, the Pnrdes waive and relinquish al1 righ?

and beneGts whkh they have or may have under Section 1542 or tlw law of any other state or

jtuisdiction to the stuuc or similar efl-ect to tlle full exten that îhey may lawfully waive and

mlinqaish a11 z'ighta and benefits pertining to the subject matter of this Agreement (other fIImI

with respect to the Timothy Reserved Obligations and the Edra Reserved Obligatlons).

Each of the Parties reprcsents, warrants and agrees to the other as follows:

(a) Each Party has received independent legal advice from his or ita attomeys

with respect to thc addsabllity of entering hlto the waiver and releases provided for hcrein;

(b) Each Parly has careflzlly read this Ageement, tmdemtnnds the contenB

and legal efects of eaoh provision lmreofl including the releascs contnlned herein:

(c) ne persons executing this Ageement have the fttll right and authority to

enter into this Apeement on behalf of the Parties hercto and to fully bind said Pardes to the

termn and obligations of this Apeement; and

(d) Each Party acknowledges tbat no other Party, nor agent or attomey of any

other Party, has made any promise, representation or warranty whatsoever, express or implied.

not confpl'ned herein, to mduce them to execute tllis Agreementv and acknowledges that they

llave not execnkd this Areement in reliance upon any such promise, repreœntation or warranty

not contained hereln. ne Parties have each had an adequate oppprttmity to make an

indegendent lnvestigation of the subject matter of this Agreement and the advisability of entering

into lt. have done so, and in entering into this Agreement are relying solely and exclusively on

003#&N/X1/JW205eJ


(179 of 3




such independenl investigation and n0t on any such unexpressed promise, rtpresenVtion or

wan'anty in tntering into tlûs Agreement.

(e) In enteHng into this Agreemen: the Partie,s represent that they bave relied

upon the logal advice of attomeys of their own choice, and that the terms of tlzis Aveement have

been completely explained to them by their attomeys, and tbat those ternm are fully tmderstood

and voluntarily accepted by them.

7. 11 ls unuerstood and apveà that tllis Agrecment shall be bindlng upon and 1n. to

tlze benent of eaoh of tha Parties and thek respective successorsand assigns.

8. lf any action, at law or in equity, includlng an action for deolamtory reliefk is

broult to erdbrce or interpret tlle provisions of this Agreement, the prevailing pmly sbnll be

entitled to recover its reasonablt attorneys' fees and costs, in addition to any other relief to wbich

it may be entitled-

9. The Parlles undersed and agree tlmt this Agreemem is given in conncction with

the compromise of disputed claims mld tlmt the tmdersigned Pnrlles each deny liabilll to each

other. Tlûs Aveoment shall never at any time or for any purpose be considered ms an ndmlsskon

of liability on the part of the undersigned Pnrties.

10. nis Aweement is also subjcct to tlm following misoellaneous provisions:

(a) This Agreement shall be construed in accordance w1t.11 and a11 disputes

heretmder sball be govemed by the laws of the State of Califomia.

(b) nis Aveement may be executed in one or more counterparts, but shall be

hgerpreted and construed as if signed in onc document. Additionally. sipmtures tnmptnitted by

facsimile shall luave the same fo= and elrect as original si>atures.

(c) Tltis A-ement and the Stipulation constituto the entire aveement

between the Parties and all other prior agreements, ammgemtnts or uaderstandings, oral or

writttw m'c merged into and superseded by the terms of tbis Agrvement which may no1 be

altered, amended, modiûed or otherwise ehanged except by a writing signed by th: duly

authorized representative of the Parties of tlgs Apeement.

(d) Each of tlz Parties shall, from time to time at the request of another Party,

execute and deliver to the other Parties such other imstrmntnl as rnay bc roasonably reques'ted to

more completely or eFectively carry out the terms of this Apwment.

(Remainder of page intentionally le: blnnkj

4

*0396+*t12%2*5*


(180 of 3



09-00014-RBK Doc#: 181 Filed: 04/20/09 Enteredl 04/20/09 22:36:35 Page 5 of 21

IN WIINESS WHEREOF, the Pardcs hertto have executed and deliverod this

Agreoment as of the date and ytar set forth opposite their respective signatm'es below.

T/M:

Ti y L. Blixseth

TIM ENTITIES POMESTIC:

BC Broadband Partuers, LLC,

a Delawa limite,d Iiability compOy

By: --

-.

Timothy L. Blixsel its Authozlze,d Member

Blixaeth Group of Wasltingfon. LLC,

a Washington l'mited liabillty company

By: x X --

Timothy L. Blixsel 11 Manager

Casa 18, LLC,

a Washington limited liabfllty oompany

By:

Timo y L. Blixseth :1 Sole Member

Casa 19, LLCl

a Washington lmzitcd liability compoy

By:

-

-- -

Timothy L. Blixseth, its Sole Membcr

5

*39634M33/3992ù5*


(181 of 3



09-0O014-RBK Doc#: 181 Filed: 04/20/09 Entered: 04/20/09 22:36235 Page 6 of 21

Casa 20, LLCt

a Washington hrnited liability company

By: .-

Timothy L. Blixseth, its Sole Member

Desert Ranch, LLC,

a Wasltington limited liabillty company

li3k 1, : . - ...-

Timothy L. Blixsel its Manager

FHday Reeordsy LLC.

a Delaware limited llabllity company

By; --

Timothy L. Blixsetlz, its Authorized Membe-'

Hole 13 Partners, LLC,

a Montana limite.d liability company

By: 'a-

-

Timothy L. Blixseth, it.s Authorized Member

lfawi:h: LLC,

a Washlngton Iîmited Iiabllity company

By:

Timothy L. Blixsec its anager

La Pazl LLG

a Wahmgton limitcd liability company

By; - -

Timothy L. Blixsel. its MemberNanager

6

0:39614/:01/ 399285v09


(182 of 3



09-00014-RBK Doc#: 181 Filed: 04/20/09 Entered: 04/20/09 22236:35 Page 7 of 21

Little Bear Devtloyment, LLG

a MontMa llmited llabglity company

By: t.'wl

Timothy L. Blixsel its Authölized Member

Ltme Moose Meadows IAC,

a Montana limited liabfhty company

B5

- -- . . -

Timothy L. Bllxseth, its Authozized Member

Mexican Mqon Investmeuts, LLG

a Washlngton limited Iiabilfty company

By: t

-

Timothy L. Blixsetln 11 Aptlmzized Member

Overlogk Partners, LLC,

a wasllington limited Iiability compmzy

By:

-. .

Vfimotlly L. Blixsetha its Manager

ltvnabxance bevebpmen: LLC,

a Callforztia limited liability company

By:

Thnoiy L. Blixsetlh it< Mnunger

Roort Acquidtion? LLC,

a Montana limited ljability company

sy: av.,r #

Timothy L. Blixsetk il.s Manager

0439634/001/39*20#v*


(183 of 3



O9-00014-RBK Doc//: 181 Filed: 04/20/09 Entered; 04/20/09 22:36:35 Page 8 of 21

Seatfle Jet Center, LLC,

a Washlngton limited Iiability company

By:

Timothy . Blixseth, its Manager

Tgmadndw LLC,

a Washington Iimited liability company

By:

.

Timothy L. Bllxse , its Manager

TWJ Htjldlngs, LLC

an Idaho limited liabillty company

By: .

Timothy L. Blixseth, its Manager

Western Air & Wattr, LLC,

an Oregon limlted liability company

By:

Timothy L. Blixseth, its Sole Member

Western Aviatlon and Marlne LLC, f/k/a

Yellowstone Aviatjon and Mqrihe, LLG f/lf/a

Ytllowsfoue Avlaenj LLC,

a Montana llmited llabllity eompany

By:

--

Timotky L. Blixsethy its Manager

Western Paeinc Tlmber, LLC, f/k/a Westelm

Pacific Land, LLC

603984/0:1/399205+


(184 of 3



09-00O14-RBK Doc#: 181 Filed: 04/20/09 Enteredr 04/20/09 22:36:35 Page 9 of 21

a Washingon limhed liability cnmpany

By:

Timothy L. Blgxseth, its Manager

YC Collmctlout LLC

a Washlngton llmited Iiability company

By:

.

Timothy L. Blixseth, its Mmmger

Yellewstone 1..3th LLC

a (J limited liability company

By:

. . . . - -.-. -.-.

Timothy L. Blixseth, its Authoriztd Membcr

Yellowsfone 123, LLC

a t) Iimited liability compmzy

By:

. .

Timothy L. Blixseth, its Authorized Member

T1M ENTITIES FOREIGN

Casp I8, S. De R'L.De C.V

By:

- . -- . ....

Timothy L. Blixsetlv its Sole Manager

Casa 19. S. be R-L.D. C.V.

By: . *''-- -

Timothy L. Blixseth, its Sole Manager

9

*3984/û01/3*205*


(185 of 3




Casa 20, S. De R.L. De C.V.

By;

Timbthy . Blixseth, it: So e Manager

Emcmld Cay Ltd.

a Turks and Caicos Islands company

By:

-

Timothy E,. Blixseth its Director//resident

La Paz Partner: Couservancy, S.C

By: -''t-.

Timothy L. Bllxsvth, its President

La Paz Partners Dcvclopment, S. Dc R.L. be

C.V.

By:

-

Timothy L. Blixseth, its President

La Paz Partners, S. De R.L. De C.V.

By:

-

<)

- .-

Timothy L. Blixseth, its Sole Manager

Operado El Tamariudo, S. be WL. De C.V,

By:

Timothy L. Blixsetlv its Sole Manager

10

0939:34/101/399205*97


(186 of 3



09-00014-RBK Doc#: 181 Filed: 04/20/09 Entered: 04/20/09 22:36:35 Page 1 1 of 21

Worldwide Commvrdal Propertiew Lfd.

a Turk.s d 'cos lands company

By:

Timo y L. Blixsel its Director

Yellowstone Club World Tamarlndny S. De R.L.

De C.V.

By:

Timo y L. Blixseth, 11 President

YelloWstone Holdings Mexico, S. De R.L. De C.V.

By:

-

Timo y L. Blixseth, its President

Edta D- Blixseth

EDFA ENHTIFADDMKSV-C:

mg Sky mdge, LLC,

a Montana limited liability company

RY:

-- ..... .- . -

Edra D. Slixseth, ig Vallager

B1g Sprinp Realts LLC,

a Montana Iimlte,d Iiability compOy

By:

--..-- - . -- .

Edra D. Bllxsetla, its Mnnsger

0:3M54201/39F205*9


(187 of 3




Operado El nmarlndo, S. De R.L. m C.V.

By

Timothy L. Blixsetll, its Sole Manager

Wcrltlwid: Commarclal Proptreew Ltd:

a-lbrb and Calcos lelrtls company

By

Mmothy t,. Blixseth, its Diredor

Yellowston: Club World Tamarindo, S.De R.L.

De C.V.

Byi

Timothy L. Blixseth, its Prcsidont

Yellowstone Holdlngs Mexleo, S.De RL De C.V.

Ryl

Timothy L BBXSCtII, its Presidcnt

EMRA:

ra D. Blixseth

XNRA ENITNES-O MXSTXCJ

Big SIT mdgh LLC,

aMlmtan: limite Iiabflity comp-y

By) - - .

Ef'I- D. Blixseth, its Manager

BIg Sprlum Realty, LLC,

a Montana limlted liabllity company

11

(k0:9514*11)1/399218702


(188 of 3




BF

E raD. Blixseth, its Manager

Blixyeth Famlly luvestments, LLC,

a Montanalimlted liability company

.

lixstth, ita Manager

Bllxdeth Group, Ium,

an Oxgon torporatlon

B

Edt , Blixseth, 1t.s P=ident

Bhwarw LLC)

a Delaware limlted liability cnmpany

B .

D. Blixseth. its Manager

IIB Haldlngs Mauapementy LLC,

a Delawa limited hability company

BF

17.:1- . Blixse, its Manager

EB Photnlxt LLC,

a Delawr lnnite,d liability oompany

Pzlrn D. Blixseth, its Moager

12

*396M*01/:9+5*


(189 of 3




JEF rroduc y y .

a Cqlifomia

By:

Jory Rmsse , ts e

Monarch Desln LLCt

a Montana limitd liabillty company

By:

'

.

lixseth its Manager

Mqasrch hwstmeutw LLC,

a Montana limittd liabllity company

B .

Blixsetlb its Manager

Opgprhg, LLC.

a Washington gmie liability oampaay

By:

Pzlm . lixset%, its Manager

PC Rexourcp LLC,

a Delaware lmzite liability colnpany

PZm . lixsG its Managgr

Pcrcupiue Creph LLC,

a Delaware Ifmfted llabillty company

BF . .

Fœlrl D. Blixsetllv its Menager

13

QtB9611*1/1#72Wv0,


(190 of 3




Nauphle Creek HoldgngG LLC.

a Delawm'e limite liabillty company

By

Edra . Blixseth, 11 Manager

Sunrke mdge at Yellowstone Club, LZC,

a Montnnn lhplted liabllity company

B

Ed . Blixseth 11 Manager

Yellowstone Club Cowstruction Company, LLC,

a Monfzmn limited ljabllity company

BF Yellowstone Davelopmen: LLCt

a Montana limited liabillty company, 1t.s Nfanager

By: Blixsetlt Cztoup, 1110..

an Oregon corporation, its Manager

B .

k

Edra D. Blixseth 1+ Presjdent

Yellnwstone Cltxb World, LLC,

a Was ' o ' itM llsbility company

P,dr . Blive, itc Manager

Yellow4toue Developmeuq LLc,

aMontana llmited liabllity company

By: Blixseth Group hm.,

an Oregou ço m ' n, its Mmmger

BF

raD. Blîxsetln Predent

l 4

t0)9634&Bl/39#20Sv9l


(191 of 3



09-00014-RBK Doc#: 181 Filedz 04/20/09 Entered: 04/20/09 22:36:35 Page 16 of 21

Yellowxdone Homebullder:, LLC,

a Montana 1- ' illlity company

By '

Fzra D. Blixaeth its Manager

Yellowstone Hotel Mauagemen% LLC,

a Montana li ' liability company

By: . - ---

EH D. Bllxsetll, 11 MmIVG

YellowstnneX arkltula, LLC,

a Monbma limited llabilit

y company

BF Ydlow:tone Homebuildez's) LEC,

a Montana ljmlte liabllity company, its Manager

By'

EH . Blixseth, ita Managor

Yellowstone Mountaln Club, LLC,

a Montana limie lia:ility company

By: Blixseth Goup, lnc.,

an Oregon comoratlon, 1t6 Manager

B . - -

F'dm D. Blixseth, its President

Yellowgtone Umltlesj LLC,

a Monfnmn Ilmited liabllity company

BF Yollowstone Devolopmea: LLC.

a Montana limited liabinty tompany, its Manager

BF Blixseth Group, Inc.,

an Oregoa Orpor 'tmm its Managc

By:

15

6439434::1t/399205v::


(192 of 3




Pzra D. Blixsel its President

N BDTO COG M SIG BLOCKI

IDRA KNTFNE-S D.RKIG-N;

Coaborn Invedtments, B.V..

a Netherlands entlty

YZ .

. - - .

. . ..

NRmC:

Title:

(NEED TO CONFIRM S1G BLOCK)

Danlka bwpsfmenl Llnuted,

anMsh company

By;

- - . - -- - - . .

Namc:

Title:

(NBBD TO CONFIRM SIG BLOCK) Jaroup Inveseeuts B.V.,

a Netherlands company

By: ..

Nae'

Title:

St- Audrew: Iuternatloual Golf Club Limited,

a scotu y

B ; -- - -

Fulrs D. Blixseth if.s S

16

0139631*:1/397245+


(193 of 3




EXHIBIT A

Timothy Entitieg

Domeslie:

BC Broadband Pnrfners. LLC (a Delaware limlted liability company)

Blixseth Group of W%hington, LLC (a Washington Iimited Iiability company)

Casa 18, LLC (a Wmshington limited liability company)

Casa 19. LLC (a Wasllington limlted liability company)

Casa 20, LLC (a Washington lhnitcd liability company)

Desert Nnnch, LLC (a Washlngton limitcd liability company)

Friday Records, LLC (a Delaware limlted liability compmzy)

Hole 13 Partlwrs, LLC (a Mon>a llmlted Iiability companyj

Kawish, IIC (a Wasllington limited liability company)

La Paz, LLC (a Wmshingttm limsted Iiability compaay)

Little BezDevelopment, LLC (a Montana limited liability company)

Eone Moose Meadows, LLC (a Montan; limited Iiability company)

Mexicau Moon Investments, LLC (a Washington limited liability compalty)

Overlook PaAers, LEC (a Wmshington limited liability company)

Renaissance Developmentv LLC (a Califomia limited liabilitycompany)

Resort Acquisition, LLC (a Montnnn Iimited liability company)

Seattle Jet Center, LLC (a Washington limited liability company)

Tamnrltado, LLC (a Wmshlngton limited Iiability company)

TWJ Holdings, LLC tan Idaho limited liability company)

Westem Air & Water, LLC tan Oregon lhnitcd liability company)

Westem AviaEou and MnHnc, LLC (a Montana limited liability company). f/k/a Yellowstone

Aviation and Mmine, LLC, f/k/a Yellowstone Aviation, LLC

17

039634/*1/ 3*2:5:*


(194 of 3



09-O0O14-RBK Doc//l 181 Filed: 04/20/09 Entered: 04/20/09 22:36:35 Page 19 of 21

Western Pacisc Timber, LLC, an Oregon limited liability company), f/k/a Western Pacisc Land,

LLC

Yc collectiom LLC (a Wasbington limited liabilt company)

Yellûwstone L30, LLC (a èeorgia lfnzited liabflity company)

Yellowstone 123, LLC (a Florida limited liability company)

Foreia:

Caaa l 8 SRL (a Mexican entity)

Casa 19 SRL (a Mexican entity)

Casa 20 SRt, (a Mexican entity)

Bmerald Cay, Ltd (f$ Tm'ks & Caicos Islands entity)

La Paz Consewatory SRL (a Mexican enity)

La Paz Development SRL (a Mexican entity)

La Paz Parmers SRL (a Mezcan entity)

Opemdo Tammindo SRL (a Mexicmz entity)

Worldede Conunemial Properdcs, Ltd. (a Tnrks & Caltos Islands entity)

Yellowstone Club World Tamndndo SRL (a Mexgman endty)

Yellowstone Holdings Mexico SA De lU- De CV (a Mexioan entity)

18

003904/ê01/399205v*


(195 of 3




EMM IT B

Edra Eutities

Domestlc:

Big slcy Ridge, LLC (a Montana limîted liabillty company)

Blg Springs Realty, LLC (a Montnnn limited liability company)

Blixseth Family hwes%ents, LLC (a Montana limited liability company)

Blixseth Group, Inc. (an Orcgon corpomtion)

Blxware, LLC (a Delawm'e limited Ifabillty ccmpauy)

EB Holdhlgs Managemml LLC (a Delaware Iimitcd liability company)

EB Phoenix, LLC (a Delaware llmitM liability company)

JEF Productions, lnc. (a Caliromia comoration)

Monarch Desir, LLC (a Montana limitead Iiability company)

Monm'ch Invesûnents, LLC (a Montana lîmited llability company)

Opspring, LLC (a Wmshington limited liability company)

PC Rtsources. ELC (a Delawaze Iimlted liability company)

Porcupine Creek LLC (a Delaware llmltcd liability compey)

Pomupine Crcck Holdlngs, LLC (a Delaware limltod liability company)

Sllnrise Ridgg at Yellowstone Club, LLC (a Montana Ilmlted Iiability company)

Yellowstono Club Cons%ctlon Company, LLC (a Montana limitM llability company)

Yellowstone Club World, LLC (a Washington llmited Eability company)

Yellowstone Development LLC (a Montana Iimited liability company)

Yellowstoae Home Builders, LLC (a Monea Iirnitvd liability company)

Yellowstone Hotcl Mnnngementx LLC (a Montana Iimited Iiability company)

YellowstoneNarkkulw LLC (a Montana limlted liability company)

A-l

0439614/001/39920:v09


(196 of 3




Yellowstone Mountmin Club, LLC (a Montana limited liability company)

Yellowston: Utilities, LLC (a Montmla limited Iiability company)

Foreia:

Cosbom InvesMents B.V. (a Netherlands entity)

Dnnlka lavestments Limited (an Irish ccmpany)

Jaroup Investments B.V. (a Nelerlands entity)

St. Mdrews International Golf Club Limited (a Scottish company)

A-2

(%396M/Ol? 399205+


(197 of 3



E X H IB IT

iijki's


(198 of 3



AG O ED AND REdTATED

PRONHSSORY NOTE

Ori - Note Amount: $1 99,124,480.88

Pn'Mipal Amoutzt as of Date of Amendcd

a zd Restated PromissoryNote: $ .

'fie Amrzzded and Restated Pzomissozy Notz tthis 'rNo*'3 am:nds, restae and

supergedes (l)Otc- 1'nPDesocNote%eD=> 3l, ze ofrfimothyL.Bsmqdh ln

favor of BlixsA Group. Inc. ('%OF3 in the principal amount of $58.305,147.60 and (ii) that

e.ertmln PromtqqoryNoto tlatezDe.e- hY3l, 2006 ofTimothyL. Blixsethinfavorooolin tlle

prinoipal amotmtof $140,819733.28 (collectively, tlle Gorim'nnl NoteB-D. The Ori#ïlal Notc

and all obligatiom th- dc 1114 fally sùlxqfedwl.hy

,this Ammd/ apd.p-tated Pmmimqozy

Note, and tho 0:81na1 Noteaq are no longc enforceable.

Date of OHgM NOtO:DOIX'mI)G 31,2006

FOR VALUB RBCBM D, tthe undezslgnc iudividually and collœGvely (''Payor'')

proznises lo pay to tbe order of BG1 at 71-534 Sabava Ro< Rnncho Mirage, CA 92270.0r at

such otherplace aa the holder of thia Note (''PayeeX) may from time to time d>ignate in

writtug , the m>m of One Htmdred Eight One Million Bleven Thousand Nine Htmdre.d Hghty

Five aad No/l00 Dollm ($181,011,925) in lawfnlmoney of the Unite,d States, witb hltezwt

tllmvoa âom the date of thia Note tmtil paid at the rate sd fortb below, compuu on montbly

balances. Iuterest for each full calendar month duzing the term of this Note shall be

calculatd on the basis of a 365 or 366-* year aud the actaal number of days iu that montb.

1. Intere:t Ra4e. 'l'he per =um hlterest rate hermmder ('Note RateNl shall l)o at

the APR Blendodltate.

2. Matxritp 'l'he pamemt of principal and aE nccrued interest shaz bemade

upun written d-nnd of Payoe.

3. Applicatiou of Paymcnts. Paymenl shall l)e applied f1- to the paymertt of

ac,ovued 11ïte1< seconda at the opNou of Payee, to the payment ef any latc charge,s due

hermmdeq and tilirdz to the rduction of prinçipal Qf this Note.

4. Prepam elm Payor may prbwy il obllgadon undcr tllis Notc in full or in palt

al aùy time or from time to time without premium orpenalty.

5. Late Clmrge. lf any amotmt paygblc hemmde,r is pald mom fhnn tea (10) days

after tho due (1a1 thqreofv Payor prozniscs to pay a hte charge of lve percent (5%) of the

delinquent amotmt as liqaidated damages for the exlza expense in handling past due

PBYIRCEO'

I-PRONHSSORY NOTE

EXHIBIT

a G


(199 of 3



6. Dpfaalq Remedl- If defauRigmadelntlwpammtof anymolmtpayme

h= ze when due,thew atleopEonofpayN t:e emtlreindebtemexq s'WdmzoMhmvby

dhan Y',nme lmmeatelydueandpapblw m:d a11 suqh ammml, Kolude aq S- M but

ueaid ln- t shaEolereafkrbearizïtmwtattllera* of 5v: pmetts%lporamltmzallovo

ONA Rate. M uroto exclse thk opGon ghzl nptwdve the rlghtfo exe tl = G in

th: ovent of ahy subsequent dtfault '

7. AttorngyFees. If sai: aioworœerproceedlng of anynat= whatst-

tlncludizganypnxee guntlcrthou.s.BanhuptcycAl ià inotatedfnconrv*zloawii

anymmtmvexgye hôcdoflhb- mdcvtG Morme mvHghphexnn&v,

Oe a - e aeoM*a vciî- f-p> t> yrrvln- 'e

0t1<- ' f-, aB4G othcrfa, c* , xzd oxpe- aotuallyinmmwland-vmnNly

nev-o jn coanuou th- ittn = dezermlnnd bythe *1u1 at trial orou auye c

xvvieel inaddldonto an otAorammmts proWded byhw.

8. Mlscdlaueoug.

3,1 Bvelypelwa or Gtdty atmzy titno liable for tlzo pam=t of l1le

indmzvln- evidonced herebywalvomevtmeat forpayment demand andnouc* of

noapxym=t of thb Noto. Eve:y ynchpmon çtz entlty ftzrther haby cona=ta to a.

extmaion of the time of pa- tàeteof orotâbvmodisca:on of t:o tô= ofpo ratof 0)ls

NG tlze release of a: oz aaypart of th5 sece hmefor, or tbemlea:e of aaypartylhble for

(1m papxent oftbe iadebtodae evidoae hmvbyat aqytime and fzozh tlme to tlmw < tbr

roquY of anmnonow orhomalterliablothfe r. Any mch extenm'on orale tnay be

madee outnodce t: Myof guchperm or endues aud Mdloutdl:oharglng *eirlsabûity.

8.2 The headings tv thevarlouz secuoûs havob= lne ez foroonv=imloe

of mftmuco oniy asd do rot d/snq 11G molfy, or expand tboexpre pzoe= of tbig

Note.

8.3 ThlsNOte Is madowlthzefx ceto andl tobe cme inacooxxhnfe

+11 tht laws of thestataof Ce rnh.

--% a

-- - - - - ---.- ..-.

BDRA D.BIJXSBTH

Z-FROMBSORY NoTg


(200 of 3



E X H IB IT

iijjj's


(201 of 3



Duplicate t.h-/##'t)/

PROMISSORY NO'rE

$58.305,147.60

FOR VA L1 JE RECf''l Vl:.:'I7s q tIj lcrsi

t led. itldividtlally ltnd col lectively (''P1ty()I-'')

prtllnises t() pay to the ol-dej- of BLIX- -'- I GR(7l..I1.'s I NfJ.. at 7 1 -534 Saharc Road, Rlulcllo

Mil-age. CA 92270. ()1- at such other place ns tlle hold o lli. Not,e (''Paycc'') ntay fl-ol'n tilnc

to tin-lc dcsignate i1) uzritinga tl1 -tliA4 ()f Fifty Eig tïn Tlll'ee 1-l undred Five -'I-hotlsand

()l:e fltlndretl F tlrll' Seazen and 6 00 Dollars ($ - 5. 147.60) in laïvfbl n'loney of the

tlllited Stal-es, Avith ïnterest thef A'f1'n 01.)-1 thc edltjt ( ,his Note tlntil paid at tlle. rate set I-tlrtll

bclow. colnputcd ()1) l'nontllly bf - -'es. Illtcrcst 'each 1-ull cûlelldal- nnol-lth dul-ing tl:e terll.l

oftllis Note shllll bc ealctl latc on f'htt basis * . 65 or 366-day ycar and the acttlal ntllnbcl-

of days i11 tllt'tt nlonth. .

I :,1 terqst. lt -1 'he pel- ltnlltlln illtel-est rate hcrctllldel- (''Note It1)Lc''. sl3a 1 1 L7e at

tlle A. Ik Blcnded Rate.

. .

. wb

2 - lkli u -- - ' l -he pklylnent () f pri llci p 'l tC 1 accrtlcd intel-est shal 1 be ll,ade

tlpon vv I-i tten (1 el nl t- Payee. '

Decelnbcr 3 1 s 2()0(t

1

3. lplicaflon of Pay nts-

accrtled interesl: second. at thc : -1 m

llcrtttlllda- ' (l'1ir(I

to thc rc tl Itla

Payln 's sha I I be Hppl ied flrst lo (he paylllen t of

o1- P . - to the payluent () 1- 1, ny Iate cllal'ges due

o1- rl nc - al o f th is Note .

itg obl igatit).n tlllder this Note i n f'ul 1 ol' i1) partil .

repaylnen < yor luay % 1.1).3

ar allv tit'n - r l-r()1u t i11 c .il-ne 5vi l rel'n itll'n or pcnlllty.

5. Latc . . ge- I 1- any anxlltll'lt payllble llerettndcl- is paid nlore thal-l tel) ( 1 0) (lays

a vr thc due dt 1ht.()(-, Payor prôjnisc: t() pay st late charge 01.- f-ive percent (5$$) of tlle

t inquent alzloujlt liq uidaled dalnages lbr thc cxtra expense il1 hal3dling past (lLlc

paynlqnts. .

, efault; Renledies. l 1- deliltllt is lnade in the payltlent o1- any alhlotlnt payablc

herfl:l) . x1R due, tllcll. nt the oplioll ol-payee. tlle elllirc indebtedness cvidellcetl hereby

'

11 l'tu l'e ilnlnetliiltely due and payablc. and a 11 stlch alnounts. incltdtlillg a11 accrtled butl)

ul'l aid iltterest, sllal 1 tllereaftcr beal- interest at the rate of l5ve perccn't (504) per anntll'n above

the Note Ratc. Fai Ithre to exereisc this oplion shftll 1)()t xvaive the l-ight to exercise thc salne in

the event of ally subscquent del-atlll.

7. Attorney Fces. lf suit. action- or tlther proceedillg (11- ally natul-e vvllatsoever

( including nny p/oceedîllg undcr l'he LJ.S. Bankrulltcy Co(Ie) is il-lstituted il) connection î&.itll

I - f' R0 M l SS O R Y NOTl.f

EXHI:IT

1

H


(202 of 3



any controversy al-ising otlt ()1- this agrccn-lel't or to intelpret 01- ellibrce any rights llel-etllldcr,

thc pl-cvailing party shall be entitlcd t() rccover its attonley Ikes, pnrulegals, aecotjntantsq al'1d

(ltlle ' expells' fbes, and all other Ibeg. ctlsts, al'd cxpënses actually inctlrrcd alld rcasonably

neecssary in conlqection tllerevvith, as deterlmi ncd by the cflurl at trial fnr on sny appeal or

review- in addititln to al l othel- al-nounts pl-lyvitled by IaNv.

8. lWiscellaneous.

8. 1 E very pcrstln or entity at a11y lîn-le 1 iable lkl.1- tilc paynlelèt of tlle

indebtedness evidenced Ilercby vvaivcs pl-esenlnlent fol' plïylucnt, delmand and ltotice o1-

nonptlyn-ient ()1.- this No-te. Iqvery stùch pergon or elltity further llek-eby conscnts to any

extellsiolp of the f ilne (1f- payll')enl hereof or thther n-ltldi fication of (1)e tenns of paylment of this

Notcf the release o1- a1 or uny pal4 of tlle sectll-gty llerefbl's ()r l'llc l-elease of any party liable fbl-

l hc payl-nent of'the illdebtedllcss cvidenced hereby p-t ally tirnc and fi-ol-n tllne to tilnc, at thc

retluust ()f- anyolle nou? or hereaftci- l iablc therefor. A- 14' suol'i extcnsilln or reletlse lnay btt

ynntle Nvitllou l'ltltice to alpy of stlch pcrsllns (Jr entitfes altd tvithtltlt ttischarging Iheir l îabi lity.

8.2 -'1-11tt hcltdillgs l,o the variotls scctions have beetl insctlcd fbl- convellience

of refbl-ence only al1(1 d() l1()t defi ne. liln itq Inodify, or expand the express prtlvisiol'ls of tllis

Ntlte.

8-3 ' l'hi k Note is luadc Avilh l'eferellce to aot. is to be construed in acctlrdanee

hvi th the lllu's ()f tllc state of (-.a1 i lbl-n ia.

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2 - PROMISSOII Y NOTI:.


(203 of 3



E X H IB IT

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Dupliz-ttte Oz'/é*i/z/

PROMISSORY NOTE

$ l 40.8 l 9,333.28 Decelllber 3 1 . 2006

FOlt VALUE RIR-CIRIVRD. (the llndersiglled. individually and col lcctivcly (''Pl.tyt1r'')

pl-olmiseg to pay to the order ()1- BLI XSIYI-H (.')R(.)tJP. IN()-, at 7 l -534 Sallara Road. Rancl-lo

Mil-agcs CA 92270. oI. ftt stùcb otller place as thc holdcr o1- this Note (''Payee'') lnay 9-t-)n7 tfme

to tilne designate in bvriting. thc stll-n o1- One Htllldred Forty 51il Iion Eight I Itlndrcd Ninctcell

'I-hcqlsand Threc I Iundl-etl R-hirty Thrô etlld 2:/1 ()0 Ilollars ($ I 40.8 l 9.333.28) in lawzlbl

Illoney ofthe tllAitetl Statcs. >vi in ereoll - on he dal'e ofthis N()le until paill l't thc

l-ate scr forth beltnvs ctll-nplltetl ()1 ( thly ba - . nterest for ench fbl I calcndar n-l(h11(h

durillg tlle tel-l'n of this Notc shall 1.)c valculated o the basis t)f a 365 or Est-'t'i-day ycar and thc

acttlal nunlbcr ofdays in that 1u011th.

*z

,

lnterest Rate 'le 17er 111'1 n ' ereàt ratc Ileretlnder (''Note Rate'') sllall be at

the salne rnte I'ilyee is I-equ .c

() plly Yel l(t sf.tlnc Mllulytail) CI ttb, LLC tlnder pilragrapll

23A of'the C't-cdit A rcelncnt cnl.crcll illtf., belïveell Yelltlu/stone Ndotlntail) (J..It:b. l -1 ,(-*.

Ycllou?stone flevelo -. 1..-(.1. and Big Slty Ridge- I -i -C.*. ns Borrovvers. and C$,1-ed it Suissc

It-irst Boston. dated S l'i'i '. ber 300 .- .

y

''

2- lWat i . The payl ,

of' k'l1- èipal athd al I accrtled intel-est shal l be l-nade

.

- - S ' '1p()l1 vvrittell d - (,1 Payee

-. .. ''

3. pplieation of nlents. -. vlnents shal 1 bc appl i utd f-irst l() thc paylmcllt (Jf

accrued int s ; seconds at

.

*

option - Pay e, to thc payl-ncnt of' any latc chargcs duc

heretlnderz third, to t I-iu luotion of 7 - cipal oftllis Note.

1,

.

Prepay) e .. l'ay - lna repay its ob1 igatioll tlnder this Note in I-ul1 or in Ilart

at an til e or li-oln t -lme o l ilme 1 t pl-elui tll'n or penal ty.

5. Late I1a rge. 1 f any alnount paya b Ie llclvundcr is paid ln()rc than tcn ( 1 0) days

ft 1-t the (1 tp e d- t ereo 2 Payor pron: ises to pay a l ate ch a rgt o 1- I5ve pcret n t ( 5f,) () (' tlltt

del inquen a unt r . I iquidaîed dalmages for tlhe extra expense in handlillg past dtle

pltylnc .

6. Defau It1 Remedies. l f dcfi- tllt is nlndc in the paynhellt of atly i-tlllotlnt payable

heretlnder ïvhel-l duc. thcn. 1lt tllc optityn of' Payce- the elltil-e indebtedness evidellced hereby

sllall becGlne llnluedialzly dt-te and payablex and all such almotlnts, including. aI1 accrued but

tllppaid inlerest, shall Lllereft I-ter bear ilttek-cst nt thcl-atc of t-ive percellt (5$1) per aulluln abtlvc

the Ntlttt Rhltc- I--kliltll'c to t:xcl-cist: l.I)is ()1)ti()n shal i no ïvaivc thc right tth exercise the sanle in

the event of any sttbsequent default.

l - làIlOM ISS(.IR Y N(.)-I-1: EXHIBIT

1

: I


(205 of 3



7- Attorney Fccs. lf stlil- acîiollx (.)1- (ltller Ilroceeding ()f any llltttll-e ïvhatsoevel-

( incltdding 1111y proceeding tlnller the U.S. Ballkruptcy Code) is illstittlted i1l conllectioa w'ith

any contl-oversy arisil'lg otll () 1- this agreclllent 01- t() illterprtt o1- enfklrcc any rigllts heretlnder.

thc prôvai Iing party shall be entitled to rccovcr its attorney t'ees. paralegalss accountants, Jtnd

othcl' experts' fbcsx ant.l al l oîher fees. cthstsa dnd expenses actulllly illctlrl-ed and reasonably

necessary il) donnection therelviths as detenuinetl hy the cotlll at rrial ol- on ally appeal or

I-evieuz. iI) addition to al l other almotlnts provided by Iaw'.

8 Misccllaneous'.

8. l Evely persoll ('r tlntity al any ti l'ne liablc for the paylnent of thc

illdebtedness evidenced hcrcby uzaives pl'eselltl-ntzl'lt fbr payment. delmalld and ntlticc o1-

lltlllpaylneltt oftllis loote. 12, very sucll person or entity furtlècr lyereby consents t.() any

extensilln o1- the tinhe 0f- payl-ncllt hereof or other n'tldit-icatîon oI* the ten'ns of paylnëtl t of this

Note. thc rclease t5f a I l or alllz part (11- the sccurity herefill-. (31- the release of- ally pal-ty lîablc fbr

l)c paylmôlll- ()f the illdcbtcdllcss cvitlenced Ilel-eby étt any tfl'ne all,d l-l-tnl'l'1 tilnc 1.4) 1 iTntts 1tt tlle

req tlest of- anyone nttuz ()1' l'lereal-ter liable l'l'keë'ef'tlr. Ally suclh exrellsion ol- relcase lnay be

ltlade vvithout noticc l() nny ol- sucl) lnersons or cnti ties and u/ithout dischargillg tlèeir l iabil ify.

8.2 -'l7le lleadings to tilc variotls seclions have bccn inscrled 1*01. collvenielnce

()1- l-el-elwellce ollly al'ld do not del-ille, l ill'i t. Illodlfyq (71- cxpllnt) tlle expl-ess pl-ovisions ()f- this

Note.

8.3 Tllis Note is tmade hvitll l-etb. rejlce to ttlld is to bt tonstl-uetl in aceordance

vvi tl) 1.he laws t'f t I1c s tJl t.e (lf- (.* al i I-t').l-I.1 i t't -

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-1- IN'lO I H I -. B I -1 X. l':T1 I

2 . PRIIM ISSORY NIJTE


(206 of 3



E X H IB IT

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(207 of 3



w/xz r v. vz w.u v o x.tl . r. .t.r ?AA e) û 0 1

ASSIMPTION AGIGRIWKNT

PARTIR:

BLIXSFTH Clkotn3, mC,

OItA ZUICS)$rH

czjd

TNOTIW /,, BIJXSBTA

(:<n Ejt'.)

(.d1?1 qrl+1>1(:11(r1 1t'')

I'%ISSPOND&1T''I

RIICITAT,S:

A. Peiitioner ;nd Reapondmut m itwolvop lM Mqzlfal Dksoluiion Prooewsng

pendlng in the Superior Court of Califvrzzaa Itivtlolde, Casr N(). 1*1ND91 152.

B. B(31 fs an Oregon $ Cûpootitm. K>poudqnt is thQ sole shhrelloldej' of

BGï, subjeet to a conmmàtyproml'ty intcrvsf daim lzg Fedtityxer.

C. Dtitlonet m:d Rezlxmdent havo entercrl inlo a Madtrl Sottlement

Agvm>to dAted Jtme 26, 700B, as ameme Jllty % 2008 (the l'Maritzl Settleznttt

Aqrdrmenf 3.

D. Peoone,r %4 Rewprmdlmt aekuowlodge Gat tlœ'hzg thefr rnarzjase the

Rcpond'ent md/or th: Petluorer nnd/or both of thtmy bormwetl moe frozri Eme to time

fi'tau BGI. znd tbat mese bûrzpwho llavo been docttm=ted in cerflip rromissoly Not::

expcuted by Remonllvni iq fayor of BQj (colleevaly, RBGI lradplztadzlegn'), wlli:h BGl

lqdebtodtlesB is ovldrmce by (l) t11: Proexty Notl daty'l Decam'tr 31, 2006 of

Rcs'ptme t .a favor of BG1 ' tlw prlrtcipal athnuz: of $5$.305,147.60 attaclïed Iw*

amf lncorp-te lïtrein a: Fxb-bit A Cxvgpsdent Nœ A'') ntld (R) the Palnlsory

ofe datatl Dectmty';r :# 1, z006 orlkesjxmdont iu hwr vf B*i in 'tlm prlnvlpal amourzt ôf

*14t,,81*,0:3.28 aëachedlmroto aad incorpomted herelrl as Exirilblt B CxemponrlfmtNote

B'') (colletivply, f'Respozzd=t's Notvx'hl.

E. ne MazlY @eîllcmorlt Agtcement contemplar resnqulFhmms by

Respondoat bf v1l of lli: êlght clasm a:14 iatereslia the BCII clyltal stQ:.k to Pbtldon<r aud

Peltl onm-'a assumpdo of zt of t'he rnrtrital coynmtmity's lisbilltles ;I:If obljgation: to

BGl as roflocted în tbe B(1I hdebteednea

M8IMQJONAGRBUMDIT

Aage 1 of 7

EXHIBIT

: J


(208 of 3



Q 00 2

A O tM MKN T ' :

1. Fecltpls. The abov; leoitals aze deemed * bo lme and are iuoorpomted

b*e.

2. ke:pe.udenlNlyt:s. Ropoudcat rep=en/ aud v'qrlmot.s fl/at as of ttti dato

hereGf, tlte oufcfamding balocq 1t461u21% RcmM *4 unp dd lnfôtesk of the Bœ

Tftdebfedposa le leoss fhon :190,0û0x000. Resmndwtt dlm1l ly:ovlde Pôtitlotv 1t.1) aa

ogts-tâatllag balanco of the B0l lndplrtodnep c of Jva: 18, 2002, tpgethe,r with backup

documeitl.

3. j'etltbuûr's Asramldon pf BG1 Tndebltdnesg, fn oonnzcuo: with tlm

Marlul Settleaue/t Agxoraent lmd as part of the nmtàod by whiih the f'e 'ttlozïtr mzd

Reapontmlt aro (Iividing up lhe 1$41 and llabiliti- of tli 'ir malifal eatute. Fotioner

hgreby assumes alt tyf tlke BCI hdobtednega aud agrdv: to save ahd hold kmpcldent

comploto freo and hatmlœ& âom flte B01 Nehtcduess. Jr ct-ecson dmzewltly atd

slmnltemousïy lwzpwsfhz tlze Respûhd-tNotu m btitlg eendoli Od zestmfs to reflet

Petlflûrïer'g ayatlmpuon thexrYf pursuqat to 111 erkt aad fhc stbàtitutbx ûf

Fvqtlo> for Relpoztdext > obllgur therepuder ptrxuarlt fo tlle Ameqdcd :114 Rotated

homksnryNote atlaöhe,d ftz Exhilét C htato,

4. Slth4dtvtîozt :1,4 Rdegvev Jn con:ldomyion of 1be ay:umplsor cf dte BG1

lndebtedncds I)y Poddoser, and ltt rrrcognitie 4f Pelilioner'l) fumre managemw)t aud

eoutm) ol-DGl antl the adccfs and entittr.z ovm. wlliçh lt 11% lhe dlt of owieolzlp pnd/ôr

mangemmtt, BGï heroby role-en Rewpouderlt Mm axty aud a11 (rlltxn7q, obligatibY cr

111$116- ésxdatcd wilh Ge BO ludebfednegô, Nâmultartxltgly herewltb. B(1I là

deliver;e flze oriyiual Reapoudent Nofts f.o Petitiône,r * b*, rnm> evsupercedd by

RoplacementNofea.

5. nrthet As:txojkees. PAcà of thc pmios sitall, upm thç T4azoaablf

m,quegt of the o*r paxty antl at 1ho mxpertse of tho zequedtvw pety, execttt: and deliver

sucli atklfooztt l docum:htz ihA mvybe t'eacoaably zlete:gazy for the ptupos.e uf çvldeztoiy

o4.xrfectirtg yuy rlghts or iïttzresl esâng hrundcr.

6. SucteAor; and Aepls. A11 of lm ttrms. Jltovlvlons m44 cMdition:

llcemf a lan be binf.W upcn aad 1:t1> to tlze btvet of tlte lleirsa stvcce-re and assigng

of tlm Dsmctlvoparlles.

7. Attûtx-y I?aA. If tuity acliow or other yaoee-cllzxg d gqy xmtam

whatdo4vor tbll8lu(1ins any proxading lulder tlzn U-S. BâMkr.dptoy Code) ie in,s 'ttatell iIï

oonneofion wifh uay cozltro#zlvy qzislng oat of thl: Avmjtnptioll Awçrme.nl or * kifea'pre,t

ASCUMPWOHAGRKL?MHI.IT

Pq:2 os7


(209 of 3



Iioco

or onfome any rigkts hemtmdrr, tlle pzw#llng party slwll bo ehûtte,d * recovc )ts

remso>ble out-ofmcdköt attœntys' feu expo' feea anfl Atl othor roaaoonblz pufcyf-

pxket fbo, cosl, and exprmsen ace ly mclzrmd aud reamnnhly nxtssaryin eoauepkhn

tlwmw3l ag determlnpd by flzç çotlrt âtfrlal or on any appeal or review. jn xdflititm to a11

other vmoun'l pznvfded by law. .

8. Choiee ef Vsw. Tll1: Aotlmpqon Agaômnh t à, yov:med by the laws of

the .wto of CalifoYak withoutregvd fo flo clmic.e of 1aw mle:

9. lyntir: Agreement 'J'lzli Ariauuptlorj Ayexrmontj t4gbt.llêz' wi* all

Exhibië gtlaoh:; hnmto and the Madi: Vdtlempmt Agteomlmt, constituto a &1 aud

ftnjtl yxpmsnion by tll: palïiaç aIIII Mpezvexfas 21 prlpr ora: or written negodadons aud

agraememts rôgardingtlp Gubject mxtiqrfyrthi: Acsumpdon Aglrewxent

10. Counterpatt,. 'f> Agroommx may bo eAecuttxl ltk one ()x mor:

coutztgzparl. eaeh ofwMch shnll l): fflr-e,d ac orlgicaly but q11 pf which tak- togefhet

:1w11 conmtitute ouc aud ilm:ittte lnstrumeat

glteraasndèr of page intentfonally 1d1 bl/zûc)

MgllMFrIflN AGRE z

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u o z v o z z. v t tl a. o ; < .h r/kA 12)(,:5

.

1N 21 WHBMOF, each llarty 1- dttly extxute,l Md denvemd sàis

Agreem/m as of tlte date tkzt wzittrn above.

PETMONBR:

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BLIXSEU

POND '-

'rikùiliik t,, lilaikjibi'li- -

AGMBD 'ro A>D AccBp'rpm

As ov JULY- 2:0: FIIR ptnlposns

oF sscaqox-i-ov 'rms AGRBTM NT:

BIJXSBTH CIRDUP, INCV

> Oregon Corptàatlfm

-<q

1) . ..

IMSETK, Pmsient

BdraBlixletk atkmwlees tlwa Jho is exobnptlzB tlzig Assmnpsi-AFeament h h4f

cspeify a: Presideût of BG #rmnedately efter glx h'tq accogtMthe sttck Certificateaad

tlzeagzignmonl dgçvtmonts o sfmrtpg fvllarall ofltemfyztdent's rilt, title ahd Inlmst

itt Bû11.

MSUMRCTIDN AGRESMB'NT

Faga 4 of 1


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RITSPONNBNT Ntn'f A '

tAtlacheë

ASSUMFHONACIRRI?M> '

Page 5 gf 7


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PROMADRY NO'l%

*5:,3(5,1 47.6:

FiaR vAt.œ RFX- , (tie îtvlcttjryœë Kfllvldaelly azk: txllxltve lvtr.glx'*j

pmmlsœ.wmy tô lhôordw of btlx&E'rg (1R01115 1N(1., at ?1v5 $ *avr&ko,i Ilwaçko

Mûvlp, IM 92270, ox <mxh Otrpl- - fbwlmldaesfRi: llplzlxpgyer Itwy &om tlm:

to 'zlmduvg* ln 1wl 'f%, l%e,iuh ##1*RI@(V1lkç>> Ru:2<M#4Ao>e

0n4 l'ltaodFprtgsevoo au4 */ltpp4jrm, ($Rï0J.14'/.dg) IR Iawfall>tzûl'fflr

Ugfad Shlcd, wllh fnlwp l llï-ton M)I/I l1< dafvorggs Noto qbtg pt2g 4, llmrategdrorm

b41:*, pdmpulâd * Mnntllly Nlanaa, Itge-t lâ(-rA full adeafllmopthdte/lg lllo >

of htr Neloawll bq etulated Im jlm bmlp çf : K5 n' 3E6zdA'yyer 1n1 l:; gdud hllmthrt

of dqp ln pml malllà.

1- Ilttglotthktez Aa pe.t telftgm jltarast rnzehçdztlhtlet:hlt)ta ltltofqdhll ha at

l5e AIW Bllldt,l Dle.

b- >r31,1106

2, Mxtuylty, Tike.pyrgftnt ntprlcclpal llm1 &yI eoènaj Yzrrasl $lujl io m:jo

uztm wrtdc dr-mûlld otny'crl

3. Applleôn ofpapjteml. lïazmontN àh:)î bo ltppllr.ts 1%%1 todwmymartt of

açcrtlôd i/lledmq xtlconft 41 tlm qxf4n ncjAwt * flI@ y&mgqt ofanle l: e <kxrgres dtk

eatlftdlq and thll $4 îloaduclfofl of yzsrwlplg of ,11LCN(e.

4. ïil*plymelif. vqyttmv p/4pv il$ obliNn unllae lhTablole iR fall arln put

al An. t'lrrm or fozn Ila/fo tlme wlmout yrelgm pr pcngltya

5. fate Cpftftm lfaaymnouutpqmhlp harôuadcf ;y jlald moro lllm ran (1:) dwp

aftm'' llmdge tvo lhcrrot lNy4tpflfllso.y 1: my a l:lo ehftr14 or:ve yrrml (J%) ofllm

dclhxpcat àrhAflt Jty Ilwillnttd tlnrflqç, fcr rhz ç7lml-s&szae Inlhezidllnyptld dB;

?@;iOi''

4. befkulq Replsttlol, If defzofi ivmada ln 1:: paymot vïralwlytlàwoyyàbl,

herutjudey' whx) doô, xflrzuat 11< oytion prpxzxo. thevallro-ndeebjodrw evlo* louby

r'hall tpvvolga lxlnellattty duv edtràyolvj WZI/V 4xh oount, IrlelllllTwAll moe.l wr

vrmpN lntzlmi Xlall thereynGlatrfnlzrest el 111: t'la ef âV: ferclnl (ssflpflraalpaalzovc

tlwNotrlta. Fllbrelû twelelx l1A pptlcn zkell qcvedv:tbg dghio >94#* Ql*vnno 1a

*4 oet ûroy zubltxpvnt efkqlt

7s Atlem:yFen lNult dtdlpq, ôr ààrrprywxeg ôféflybamrewltmm)r

Cmcdudenayllmce<f-gufllerelscl.&. axAfuploycodo) k itudlt:- lpçvaneplkw)gs

any OMN- adlng Qut otlll azlwtmtm nr Ib lnpnvor pp rnlizmt; wH#Ikf tlxucdw;

prlsr#vallpng prrtll&hûll 1/4 eptttlsd lu rracvvçrlwntlnrrvy r=. pargllr>ts. gcœuwonx lm4

l - IAIMDFQAYI?GR


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rtt- oln (xmueo iN:tawltb, 8: G 'œ iylhn rrtft At ttlal orcn mveplyOlor

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indcblèNw: ovi?m4crxlhtrvlx.ilwAlvoyrr--tï-tferyex: dmtluldâudaôdxnr

nvl4lhpwrd of tllls N:lv' Vvkn'Kutll p- ortntiT O rkuly- -/ t: âny

cxtefalcn ôftlotlmç afpaAmentl>nrcr elhr,rmbdl:œjpa 4êt1tt - ofygpuMt Afthls

NG ihomleas:ortdl e'eyp#tof tlsxgrltyllef4xj < tlloalezye nfypypytylfabll f4r

S>,pqymtptofll o indtseo, evidthce.l htie xt x)y tjymuëFlunttnw pçlmzz uthr

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tn,#ô wïlhputqodx to- ifsupi ,=41/ l t'Arltwmldwillzîij Jltcll,tllng ''r Ilmlliy,

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of tefàreavK only .:14 dô rttlt deflrle, Iffftflj mqdlfyporvxpaa yI;% oplws povklofjsoftlè

A1gt#.

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POXISSORY NOIX

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rô k VALUBG NG . ttuundezsûtd, lrtufvldsallx agd xljKçlivlzcewmrwl

I,aml='tt/Nyx:tlp pzgrof BLIX8E-IRIItWP, 1NOv etFj-szzl @ZIKURU. ltsnoho

Mlroz ()A :2:)70.œ,-1, otlwrplm- llwholda'orllzylfy4 (''y4>'j mâxje gm,

lo *n: 4*/5% 11: 'wdtflm qlplpm mrgga 11ln1de NoMllhgnjkytlfnndxl Nl-t.l

œlzlandnrez llen/ldnlrty'rhro itu2#194>lIap.#@1z1;.%l(lq33;Q$) 1: 1:*1

moae erllgvTztdted afaf-, witAlntef-tkwzetm âorn th; dafô qftllhlNotattntapaldattlw

lllt4tgl fte belowGlmgql? Gt mpnfll#lalecol Nttrçat >qadl fufl ggRndcratk

dlltllvotpnattrthl&Npk,vl ll:cgllealcledtmllkettayl: pf a 365 f)r3<4-d+y*k>Id e:

achzalnœmpgroddm lf1 tltnoth.

D- hG$l, 2:*

1. Nt4rzat %îm N'/ pçrmmvm hlkaat ratlllyhmyedirtDNè e Rmsâhâfl bo Rt

tlaMmô t'lç ?4> IK Kqulrtd * p. Yrlltkwylxs Motm a n flub, tïr uljdcr pmz-ph

ZZSA.IICtIIICïMII cnsepte lntB k.llwçl4 Wllmwlte pfoeflwln clvb. rlr

Yatlifwalhnertvwlqlenmk Izlz Mtl BQSky Rîdgtj falzç Il, %çlmwztx, and cmdit :vlj,tï

Fzr:llltMlxhziydqldscltealbrllûaltDl- . . ,. . . ,

1, Mafnrply. 'rl,n ppmcnt of prhleltl .4 A)1 zcorredlxaanl .iqll l/ymntlc

klpo NwktM demqad Oi'PV4SI.

3. Apllllcaîiiu càwzmaul,. llayalonk shxll bo pjltle4 Jkdj 11 llllrly4ymunt ox

ae<-nrd hilëelqyecxmdeallha q/lltmol'plu lo 1119 Iwlrncrz crnl' litq qhwo :4ç

herennlhc ârl; tht< oerodunlltm oêprfndpll vrtlg: Nnïw.

:. Papppll-l- Fayor mAyprtpay ;l: œlg4tloh sKtdepthl& No1 ia fi)n tr1 pkrt

et :11y t$)1I: or Amyï tlme to tlmn willxlugyvtmtvm orprmàlp,

5. Lûoopum ï3',y nammlpxyëbblxretmllvril'yaid m0at1111 1e41 (ln) de:

altgflmilualm thdrcq liyepr-pfsn tppay a. Iat; (hb4rj. bf 5vo )3:u):-(5:1) of'dho

ddlElle mvvnptwll%tlldfte d-gcftz.tilooxtm explmxkjhlusldjïgmùtdx

G bo&ultjllsm:dll. lr/ohtgt lazrkyllp j(' Sitkpaym4prteafe Iwngumpaynblt

Mm dœwào d:w *4N nl lbiôpooqpfl'q eetîtlri tn&hudne: evldçnqehuoy

shall buotlm: lmppdloly Ap Ndpayablh Iq)d wllxual > =f&# lacrudloy afI urdiytehktl

Mnpid intetutj dx1l tllepaïtKrbçitr 11-* it Rolklô of R?< ptrteot (J%) prralmumKlmpd

tlmNô*1I:I. F4Ilum 1(1 *Ier:R: lhlgtyltlôvglltïll nol walo lhsatlg t? O:fee tk, yvrl: la

tlloomrmf Mpyzulmqtlùjil tleâtllt- '

1 .I?x4MMAAYNOTS


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1. atfzrllyl?v Jssttls gli*, ef ëhepvxdlag oflllvnstutewkeave

(i=l4d3gy> pxlzcdlng wlderthtuxljwab'ptoy Codo) lp bwtr&lfe.d inmznnlMdoawltll

aay rzmKmowy4zl:e pqt d'dlb croemgvll6to intorproteemlpv xtF K4lMll-nndm

fhol- llïngpnlypiiul lpRided fo I=VNIIJ atttpmv prg

, parale .aa>el Md

otbpêxre -l :ud e11 e*erf-, - &=J ex-- o-ny lnflm>dandz-tobly

pzeer.uuzy Jnfatuprzlc4ze llt. as dswmyckdàz fllo togrfAt 1611 orml uynppad 4r

vedewv ' etfllflwn to ulI ûlllqç pmmmw pvWded by fhw

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itmpymonl ordlblfotrs ûvqry&œ N n or mlty fùsfl-eljeruby xtuwjtz (o wv '

tweawiqn pfav Itt- ofpemotli- f orcthzrmal/eatic or4l: ferme nepo ax oêtlds

Nolhtktml=o nrzll orAepMorltmgJykamfwKiclhemlMppfepulll/lehr

llwtwmrzlzoflko Mfleektaqcvld:nealhrzzby 1Ry fimeaml Amîfm fo Emq Etlh:

rmph t Xepn: :rrse MrllerztHlKœ liailô thrrmfpr. Are :edl qxtmsllla of rflç:

sï mA bcnldo williiul

ptûtlc.ç t(y aaY ozsutlzpozgpnkm' œtltle.ç atdwlluut (Iltoarghg (helrljRbility.

fI.2 Mlellw'M/ûa4 ttydIovzfïips44:jloms llhwppqq lli&vrltzl fbrtxxmcnlrmz)tl

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MSUIWM ONAGREEMFNT

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AMVNDED AND RESTATIID

PROMSSORYNOTE

OrignalNote Amount $199,124,420.28

Pecîpal Amount as of Date of AmcndM

hnu Rissîae rroynlasory Nok; $

. ..

.

This Ametde,d Md Rostated Promi:sozy Noff (tbiy :1N0t*3 ameadz, reAtates and

supeàedes (i) 'bntce proei:ouNoMA*dDaxmhc: ly 2006 ofTimofltyt,. Xllxseflzia

favor of DlNso* (Xoup, >c. ('tBeP') in the mimipal ampvnt of $58,305,147.60 and (ii) flaat

cerinl'm Proml-sozyNotö dmdDecon+er31,2006 of Timötbylw Blixset:iafavorofBGlin the

principal amoaût of $140,819,333.28 (collectively, O f'Qn'tippl Notz,-s-'')- '17m Original Notlw

at;d :11 obligatiort# tlmhmmrler ere fttlly mperseded

by tbls Aftïqadtp *;d Xestated Proznbsotg

Note, ard fxo Ohginal Note,s are uo loeor rlnfomeable.

Dfïl: of Orkiml Now: Deçfmxber 31,1

FOR VALUE RE/BIVBD, ttlle uavfignedy irlclividually and eellecdvely ('Payor'')

promiser lo pay to the örde,r of B(H af 71-534 s1t1:> Ro< ltnnclzo Mhu.. CA 92270, or at

atzc.lx oierplace zz tite hclder of thla Noto ('Payso'') may from timeio timo uesignatg iu

writmg , the mtef of One Hunl'lreed Eigllt One Millioa joàven 'lnbousand NineHlmdrod Klty

Five and No/$00 Dollm ($131,011,985) ia lawlbl moûay of tlm Uuited Statea, witlljnterest

thoreon llom the dato ertbid Noto tmtil paid at the raAe yot forth helqw. computod on menully

balntlrles. ïnlareat for each f4z1l oalenda: month tbm-ug the 'lxuo of Qtis Note :hal1 be

calculaîed on tl:e basis of a 365 or 366-* year aad th: achul tlumber of dap is thaf nmnth.

1. yn4ereat Ratm TlAc per annhm interesî rate hetmmder ('Wôte R;x'l shâll be at

tlze A'FR Blzmrlmd IRatc.

2- Mature. Ttte paymext of priacipal Ahd dà accmed iaterett +atl be matb

upou wrmeu divnlmfj oi'jAs'oq.

3. Applicafbn of Paymznia, Pyymentq giïall be pplie,d fsot to tb.e paymeut of

aoomed iater>t; socond, at tlle option of Paybq h) tlxe yaymeint of anv lato càaz'ge.d dne

lmreuaderi gUJ. tlkrdp to t174 xductton ofprhwipal of th's Nofe.

4. Prepam entz Pâypr may pzepo itd pbligadon undor tlaJ'l Nit: i:l 9111 or in pm

at ltïy time or Ctom flme io flme withoutmemlum ôx peualty.

5, Late CAxrge. lf gny amolmtpayable herounderr is pald zzmre tlzan 'ttxa (1û) dmyK

aftea- the duq flate tlwaos Pgyor promises to pay a late charps of flve pcment (5%) of tlke

delizquont amountas lsqutdated dazrmgea forie extra expence in hualing past dtle

P'ymtnts-

k - PROMLMROPNNO'I'E


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6. Defeldt Remiflie,, lfdefavlt is nvf?e ia thopaymeaf of nny nmouaspaymç

herennde: when tlue, tlmn, ôt tâe opoor of 'ayeeo tlle entlro 'debteM- widendel hcreby

shall beOme hvlmeMely duo mul p&yâblw aad a1 mwh qmouxta, Inoluding all :xnzed but

anpftld hterest sbzl tbzmo rbear lnter-s nt therato of Hze perant (5%) pv pnrmm.alyovo

QI/NtA R>, FAII M to exercbe tltis op:ox ghall not waive tlte Hght to exercise the sacm in

tho tvçat of any 4ubxqueat del4t. '

1. Atfgraey Fees. lf su1'l? actlfmy er otâer pzocerdlr? Qf Rnylzatnrtl whafzo've

(laoluding aaypm ' tlndm'tho U.S. mnlmï p*y Code) ls lnydtue h oomo-lon wIG

any contrpverty $*1% oxt of tNF ngreementorfb iatepmt or Iinforçz anyrlghts ll=vndôry

tlo vrovailing patty 613/11 bt attitled to zecmerlë a,ttornoy fru, parogalsj acçolmfznts, and

otbe,r exports' rooBz andatl othcfxs costs aud ôxpana- aotualjyfncj.rrwdandx onably

neo-azy in colmemtïos tltereAvith, a: t4tlyl'm' ed by t10 comt at tï)hl or on any ap-l or

revimv: hl Adllition to all otkçr amovnts provldd by law,

8, lsf&elellalaoq..

:11 I3v&ypemon or entity at auy ftae liablq Alrtlte paymenx of tlw

indebtedneps ovldonx4 hemby wajvgs prm enext formymerttv demqni Alku pottcx of

uonpitjrzzjenù ol-tllis Nntv, Vvory mtch peaon or Khtlty fheer lreroby ::-œt1: to aay

tatorssloa of the llme Qf payment hereof çr ctlmrmodlfcatiortflf tlw ttrms cf paymeat tf tllis

Notez tlle reloaae of a11 or any plrt bf tho securltyhirefor. ot tlle releaae of mypa'tty Ifable foz

the IIa.PIJanL of the hdebtcdzsess w'vtdezrmult Nerety at auytlmo laxf k'cm 6me to *no, xt tho

request of Oyûlm zmw or hezrttghe liablo tbgfefpr, Any daclz eitt=ion or Tdemqe may be

m4d. wilhtmt notlcs tc tmy ôf sncl) perao- ôr œltitlcg aud Mtlstmt dllc ' tlze,b lfahilfy

8.2 Tlw heading: to tlm vmiow seotlons bavo be,on lnscrf,rl for coxv4zûtelïtb

of mfereace ôtzly Od do uotdeinö, yimity modify, or exped ttke oxpras mïMsifms of Qlls

Notv.

8.3 Thls Note k mad: witb mjbmac: tg RJ is: to be colptmtll hz acçordauoo

wi1 tlo law: of tlto Male of Cûlifornl.

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Fex; ltô:) >17343

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juflgqhlgn tc mtif er wllar thl: Wpulxee tlk thy falbh 'e4watx- . n: govd #f$

rotelnlgrlsdfdllrl NdKto enf<- *4 lefflm Df thl; snpelale 1: 1bp A*lt ora drYuh +

o-lgïa? pArty.

Iulyvqsao:nn Aplllkivgx'lse :9ïm:owo4?&N4 Awopaovlaiol'a t uNnKnnAwp

rFlz'f 'nIISSTIF'IJLATION MAY PT e:yn'rxpw'rlK plyug' w lm mlla Aé OAôFA OF 'aIE

cotmT, I uûuesvxua'r'rhl: eotmT lppxpv. pupm'llpelvl:g-p pltdrpeMpurflut-t&'r

Mqqmo tf av% , IgN@l@ vo tNFOIKRAA: Ilsbx?t QF :k1: coua: TIIA'K #ltzzawn eAtm

or $lamNp hcAwl- %, Tldtv: paolsvaryla4eo.

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lllmsslf bvrlp 'aa gloa a: h*/edrl pmWdad.

64.

.

Extmptaeolbelwlsewwltlsdhomin.jho collrtahall Mt rolaîn

Jtl*dldlon t: modl 0/ vltqq lhW :IfPtIIVC,N hl any œhlbn wh:e ver. nd Cou/ wfll

fellplurlgdldlon m #* orlta- tlle t4mjq cflhle wlfpulaen ln t1w evelly of a bmgdl by

ojiiwr party.

l IIAYM RF.A5 ANb aehlvl M1E FOReNOIOT:IIiI: AND PRQVZIQNS. I tINDERJTAZD

THAY Tf11: STM: 'AfI0N MAQ BE SDB#R'I'O TD 9/11/ cgllB'r Tb BE ISIAD' AN (MS'R UF TI<e

GOU JT l rIEIItJESTJIIAA'THP qotlansAp#aevd Otm 4IIPIJL#TION Aplp SIBN 'YlIl8 DOOUMENT

MAK*; lr A Vht . BIIIDINO MD KNF/RtIP.AmA ORPER * F THE OUIRYTHAT W1L& RIND SADH

OF tla AMD nP./OL%(: TMBB: PRS'PER'Y IAtLIRK

DAV ' W-.. 2(198 Pmtedilena . 2008

1

DLIM H TIMOT#IY L.BLIX WTI

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APPRUVED ONLY M CONFORMIN? T0 THE PARTIE8' APREEMRA:

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(224 of 3



Case 11-15O10-bam Doc 528 Entered 07/10/13 16:59:52 Page 1 Of 17

>A' 1 zl %

.

# m 4 't

.

1 . y y

Honorable Bruce A. Markell

. U ited States Bankruptcy Judge pz ' ** *' J

G +TOFA

Entered on Docket

July 19, 2013

4

5 NOT FOR PUBLICATION

6


7

DISTRICT OF NEVADA

8

******

9

In re: ) Case No.: BK-S-I 1-15010-BAM

10 )

TIMOTHY L. BLIXSETH, ) Chapter 7

l 1 ) Involuntaly

Alleged Debtor. )

12 ) Dates: July 5, 2013

) Times: 1:30 p-m.

13 )

14

ORDER GRANTING MOTION TO DISMISS INVOLUNTARY CASEI

1 5

1. Introduction

16

On April 5, 201 1 (the Eipetition Date''), petitioning creditors Montana Depal-tment of Revenue

17

(ttMontana''), ldaho State Tax Commission (ççIdaho''), and California Franchise Tax Board

18

(ticalifornia'') (collectively, ttpetitioning Creditors'') filed an involtlntaabanGlptcypetition inunited

19

States Bankruptcy Coul't, District of Nevada, against alleged debtor Timothy L. Blixseth (&iBlixseth'').

20

(Dkt#1).

2 1

22

23

24 tunless otherwise speciûed

,

a11 çlsection'' references are to the Bankruptcy Code, 11 U.S.C.

jj 101-1532, a11 E&FRCP'' and itcivil Rule'' references are to the Federal Rules of Civil Procedure; al15

ttyRBp'' and tçltule'' references are to the FederalRules of anknlptcy Procedure; aIIETRE'' references

are to the Federal Rules of Evidence.6

Al1 references to 61Dkt#'' are to the ECF number as assigned on the docket for documents filed

electronically through CM/ECF in the above referenced banknlptcy case.


(225 of 3



Case 11-15OlO-bam D0c 528 Entered 07/10/13 16:59:52 Page 2 of 17

1 The petition set forth the amount and nature of the claim held by each entity: Montana, tax

2 claim, $219,258.00; ldaho, tax claim, $1,1 17,914.00; and California,tax claim, $986,957.95. (Dkt#1).

3 Petitioning Creditors' claims totaled $2,324, 129.95. (Dkt#1).

4 On April 19, 201 1, ldaho entered into a settlement agreement with Blixseth whereby Blixseth

5 would pay Idaho $925,000 tûin complete settlement of all income taxes, penalty, and interest for (tax

6 years 2005, 2007, 2008j''-the tax years for which ldaho asserted Blixseth owed a tax debt in the

7 amount of $1, 1 17,914.00. (Dkt#32, p. 9) Vee also Trial Ex. BC). In exchange, ldaho would withdraw

8 its participation as a petitioning creditor in the Bankruptcy ntmcpro tunc. (Id.4. ldaho's Withdrawal

9 of PaMicipation Nunc Pro Ttlnc entered on docket April 20, 201 1. (Dkt#20).

10 On April 20, 201 1, California entered into a settlement agreement with Blixseth whereby

1 1 Blixseth would pay California $992,300.99 (plus $108.75 for each day after April 18, 2011)-the

12 amotmt Califolmia assel-ted Blixseth owed as a tax debt arising from tax year 2007. (Dkt#32, pp. 4-7)

13 (see also Trial Ex. AH). ln exchange, California wotlld withdraw its participation as a petitioning

14 creditor in the Bankruptcy nuncpro /lf?7c. Vd.4. California's Withdrawal of Participation entered on

15 docket April 20, 20l 1 . (Dkt#26).

16 Afterthe coul't initially dismissedthe case for impropervenue, the BankruptcyAppellate Panel

17 found this court to be a proper venue. (1n re Blixseth, 484 B.R. 690 (B.A.P. 9th Cir. 2012)) (see also

18 Dkt#250). On January 7, 2013, the Ninth Circuit Bankruptcy Appellate Panel (ttBAP'') issued a

19 mandate restoring this Cotu-t's jurisdiction over the Banknlptcy. (See Docket in BAP Case No.

20 NV-I 1-1305-PaJuH, Document No. 37).

21 Before the court are Blixseth's pleadings, the Renewed Motion to Dismiss Involuntary Case

22 (Dkt#261) and the Amended Motion to Dismiss Involuntary Case and Memorandtlm of Points and

23 Authorities ln Support Thereof (Dkt#309) (collectively, the EtlMbtion to Dismiss''). Montana's

24 pleadings, Petitioning Creditor Montana Department of Revenue's Opposition to Mr. Blixseth's

25 Amended Motion to Dismiss (Dkt#437) and El-rata to Petitioning Creditor Montana Depadment of

26

2


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Case 11-15O10-bam Doc 528 Entered 07/10/13 16:59:52 Page 3 of 17

1 Revenue's Opposition to Mr. Blixseth's Amended Motion to Dismiss (Dkt#438) (collectively, the

2 tçopposition to Motion to Dismiss''), are also before the Court, as is Blixseth's Reply to Petitioning

3 Creditor Montana Department of Revenue's Opposition to Amended Motion to Dismiss (Etlteply to

4 Motion to Dismiss'') (Dkt#470).

5 On May 8, 2013, the Yellowstone Club Liquidating Trtlst (EtYCLT'') submitted its Notice of

6 Joinder in Involuntaly Petition (tIYCLT Joinder''). (Dkt#359). Blixseth's counsel submitted its

7 Memorandum Re: Yellowstone Club Liquidating Tnlst Notice of Joinder (Dkt#402) and its Amended

8 Memorandum Re: Yellowstone Club Liquidating Trust Notice of Joinder gsicl (Dkt#404),' both

9 documents entered on docket May 20, 2013 (collectively, the ttMemoranda''). Counsel for Blixseth

10 later submitted its Opposition to Yellowstone Club Liquidating Trust's Notice of Joinder (Dkt#453),

1 1 entered on docket June 3, 2013, as well as its Errata to Opposition to Yellowstone Club Liquidating

12 Tnlst's Notice of Joinder (Dkt#459), which also entered on docket June 3, 2013 (collectively with the

13 Memoranda, the ççopposition to YCLT Joinder''). YCLT'S Memorandum in Support of Yellowstone

14 Club Liquidating Trust's Joinder Under Section 303(c) of the Bankruptcy Code (tçMemorandum in

l 5 Suppol't of Joinder'') (Dkt#467), entered on docket Jtme 5, 2013.

16 Trial on the matters set forth in the Motion to Dismiss, the Opposition to Motion to Dismiss,

l 7 the Reply to Motion to Dismiss, the YCLT Joinder, the Opposition to YCLT Joinder, and the

l 8 Memorandum in Suppol-t of Joinder took place on June l 3, 2013, and June 14, 2013 (ççTria1''). The

19 Court's Omnibus Rulings on Evidentiary Objections there presented then followed. (Dkt#512).

20 Closing arguments for Trial took place on July 5, 2013, with YCLTZ and parties Blixseth3 and

2 1

22

23

24 2 post

trial ggpmomptljp?i In skpporj ofthe Jpvtp/tfn/tzry Petition Under Section 303 ofthe

Stzn/lrtwfc

p Code (Dkt#51 1).5

26 3 Post-trial Closing Briefin Support ofAmended Motion to Dismiss (Dkt#515).

3


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1 Montana4 having submitted post-trial briefs in advance of their appearances on July tifth. Against this

2 background, the court grants the motion to dismiss for the reasons stated in this order.

3 Blixseth brought the Motion to Dismiss under Civil Rule 12(b)(6), incorporated by Rule

4 101 1(c). A1l parties immediately conducted discovery and consented to a two-day hearing on the

5 Motion to Dismiss, atwhich time testimonial and documentary evidence was taken (the same çûTrial'').

6 This convel-ted the Motion to Dismiss under Civil Rule 12(b)(6) into a partial summal'y judgment

7 motion (the ççMotion''). (Civil Rule 12(d)). As a1l parties had çça reasonable opporttmity to present al1

8 the material that is pertinent to the motion,'' the Courthas considered this Motion under Civil Rule 56,s

9 standard that Blixseth must lûshowgj that there is no genuine dispute as to any material fact and Ehe)

10 is entitled to judgment as a matter of law.'' (Civil Rule 56(a), incorporated by Rtlles 1018 and 7056)

1 1 (see also Ftlcz/.y Media, Inc. v. Nat 'lBroad. Co. (In re Foctts Media, 1nc.), 378 F.3d 916 (9th Cir. 2004)

12 (determining qualifications of petitioning creditors on summalyjudgmentl).

13 ll. Merits

14 Blixseth's argument is relatively simple. He claims that the relevant standard requires three

15 qualifying petitioning creditors, and that of the four candidates, none qualify. As a matter of law,

16 therefore, he contends that there is no material dispute offact (albeit he acknowledges that there are

17 significant disputes as to the law), and he is thus entitled to judgment as a matter of law.

1 8 The legal standard for Blixseth's Motion to Dismiss is relatively easy to articulate. Section

19 303(b) requires that a qualifying petitioning creditor must be &(a holder of a claim against such person

20 that is not contingent as to liability or the subject of a bona fide dispute as to liability or amotmt . . . .''

21 1 1 U.S.C. j 303(b)(1). There must be at least three petitioning creditors holding such qualifying

22 claims unless tithere are fewer than 12 such holders, excluding . . . any t'ransferee of a transfer that is

23 voidable . . . .'' f#. at j 303(b)(2). ln this latter case, there need be only one qualified petitionilzg

24

25 4 ' cl

osing Arguments in f/ycetitioning Creditor Montana Department ofRevenue s

26 Evidentiary Hearing on Mr. Blixseth 's Amended Motion to Dismiss (Dkt. 11309) (Dkt#5 16).

4


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1 creditor. fJ. Regardless of the required number of petitioning creditors, however, the aggregate

2 amount of claims held by a1l petitioning creditors not secured by the debtor's property-generally

3 referred to as unsecured claims-must total at least $ 14,475.5 f#.

4 Noparty contests that the Petitioning Creditors' collectivelyholdunsecured claims that exceed

5 the minimum amount. No party seriously contests that the Petitioning Creditors claims are contingent;

6 that is, dependent on some third-party or extelmal action other than litigation between the parties.

7 What is contested is whether Blixseth has more than eleven creditors, and whether the claims of the

8 Petitioning Creditors are tlthe subject of a bona fide dispute as to liability or amount.''

9 A. Did Blixseth Have More than Eleven Creditors?

10 A critical point is the number of the alleged debtor's creditors. lf eleven or less, there need be

1 1 only one qualifying petitioning creditor. lf twelve or more, there needs to be three. Nonmally, if the

12 number of creditors is contested, the alleged debtor files an answer to the petition, and tçgijf the answer

13 to an involuntary petition filed by fewer than three creditors avers the existence of 12 or more

14 creditors, the debtor shall file with the answer a list of a11 creditors with their addresses . . . .'' (Rule

15 1003(b)). Here, however, Blixseth didnotfile an answer, taking advantage of Rule l0l l incorporation

16 of Civil Rule 12, filing a motion to dismiss before filing an answer. Thus, this Court previously nlled

17 that Rule 1003(b) did not apply-thereby obviating any obligation to file such a statement.

18 What Blixseth did do, however, was to respond in discovery with a non-exhaustive list of 18

19 creditors he claimed he had on the Petition Date. Montana, onbehalf of the Petitioning Creditors, then

20

2 1

22 5

Although the threshold amount listed in 1 1 U.S.C. j 303(b)(1) is $10,000, Congress

23 provided that this threshold is to be adjusted for inflation at three year intervals. See 1 1 U.S.C.

j 104. The requirement in effect when this proceeding commenced was $14,425. See Revision of

24 Certain Dollar Amounts in the Bankruptcy Code Prescribed Under Section 104(a) ofthe Code, 75

Fed. Re. 8747 (Feb. 1(i, 2010). lt is now $15,325. Revision ofcertain Dollar Amounts in the5

Bankruptcy Code Prescribed Under Section l04(a) ofthe Code, 78 Fed. Re. 12,089 (Feb. 21,

26 2013).

5


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Case 11-15O10-bam D0c 528 Entered 07/10/13 16:59:52 Page 6 of 17

1 engaged in extensive cross examination on this issue. Despite this, the Court is unpersuaded that more

2 than six of these creditors should bc disqualified.

3 As a starting point, it is the Petitioning Creditors' burden to show that they have met all of the

4 requirements of Section 303(b). This includes showing thatthey collectively have a sufficient number

5 of petitioning creditors.

6 The creditors listed by Blixseth were:

7 Credit Card

Neiman Marcus

8 US Bank

Utilities

9 City of Medina

Puget Sound Energy

10 Comcast

Qwest

1 1 Other Unsecured Creditors

Medina Gardening and Landscape, lnc.

12 Big Horn Golf Club

Lewis Cellars

13 TransAmerica Life Insurance

ADT

14 Prudential Life lnsurance

Chubb Casualty

15 Professionals

Mack, Roberts & Co.

1 6 Mike Flynn

Stillman & Associates

17 Rosen Law

Hagen & O'Connell

l 8

19 Atthe hearing, Blixsethreiteratedllis discovelyresponses and atlthenticated documents related

20 to each of these creditors. In many cases, the documents provided indicated balances due and owing

21 before April 5. lndeed, in some cases-Neiman Marcus, and most of the utilities-it is likely that the

22 bills were paid before the Petition Date.

23 But that is not fatal. The bills themselves were evidence of ongoing, recuning debts, such as

24 cable and electrical service, and it begs common sense to believe that these entities did not provide

25 services after payment, thus possessing accrued but unbilled balances on the Petition Date. When

26

6


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1 there is a periodic, recurring debt that the alleged debtor does not dispute, evidence of a recent

2 liquidation of that debt such as abill or invoice, and no evidence that such relationship tenuinated after

3 the petition date for nonpayment, there is a debt for puposes of Section 303(b)(2). See 2 COLLIER ON

4 BANKRUPTCY 303. 14g4j (AlanN. Resnick & Henry J. Sommer, eds., 16th ed.). Indeed, as toNeiman

5 Marcus, Puget Sound Energy, Comcast, and Qwest, the Court so finds.

6 The Petitioning Creditors also note that Blixseth's habit of paying early his US Bank credit

7 card-which seemed to average more than $30,000 per month-meant that that credit card bill had been

8 paid as of April 5. Blixseth denied this, but even if this bill had been paid, it is reasonable to assume,

9 from the sheer amount of monthly charges, that some new charges would have been incun'ed and were

10 thus owing as of the Petition Date.f

1 1 Blixseth's assertion of debts owing to Big Horn Golf Club, TransAmerica Life lnsurance,

12 Medina Gardening and Landscape, lnc., Pnzdential Life lnsurance, Chubb Casklalty (and its variotls

13 insurers), and ADT are similar. Each is a periodic, recurring debt that Blixseth testified was owed,

14 undisputed and generally paid in the ordinary course. Again, if only the accrual of debt existed on

l 5 April 5, it was still debt which counts for Section 303(b)(2).

16 This leaves the five professionals. Again, Blixseth authenticated these debts to the court's

17 satisfaction. He testified and was subject to cross examination as to the existence and validity of these

18 debts, and the court credits his testimony.? When combined with the other recurring debts, this means

l 9

20 6 This same logic does not

,

however, apply to the debt to Lewis Cellars, a regular creditor

of Blixseth's, but by no means as regular and periodic as Blixseth's utility providers or his credit 1

card companies. So, too, as to the debt owed to the City of Medina. Neither of thcse debts have

22 the regularity of occurrence that wouldjustify finding that there was an accrual of debts to these

entities as of the Petition Date. As a consequence, the court finds that any debts owed Lewis

23 Cellars or the City of Medina do not count for puposes of Section 303(b)(2).

24 7 The Petitioning Creditors cry that they stonewalled as to further information on these

debts and didn't follow up before the Trial because they ran out of time. (See note 2 in Closing5

Arguments). Hogwash. Although the Motion to Dismiss was held on a somewhat accelerated

26 schedule, none of the Petitioning Creditors ever brought a motion to compel, or ever made a formal

7


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1 Blixseth has established that there were at least 16 creditors as of April 5, 201 1. And this is before the

2 Court considers the claims of the eight members of Yellowstone Club World with whom Blixseth had

3 settled some outstanding claims (ECYCW Members''). The YCW Members had filed a request for

4 notice in this case-indicating that they still consider themselves creditors-and the YCW Members

5 provided evidence from which it could be inferred that Blixseth had direct, although shared, liability

6 to them. ln any event, the Petitioning Creditors failed to establish that Blixseth had less than twelve

7 creditors as of the Petition Date.

8 The Petitioning Creditors make much of the fact that many of the creditors listed by Blixseth

9 received payments after the Petition Date. Citing In re Teledata Corp., 12 B.R. 879 (Bankr. D. Nev.

10 198 1) (George, J.), the Petitioning Creditors contend that each of those creditors receiving payment

l 1 on aprepetition claim are ineligible because Sectio11303(b)(2) renders ineligible those creditors whose

12 post-petition transfer would be avoidable under Section 549. The burden of establishing avoidability,

13 however, rests on the Petitioning Creditors. While some of the entities may have received avoidable

14 transfers, the Court is lef4 to guess what was paid, from what source, and for what consideration. lt

l 5 could be, for example, that payment came from non-estate propel'ty such as postpetition earnings, or

16 it could have come from an affiliated entity. In such a case, without a transfer of estate property, there

17 couldbe no Section 549 avoidance. See COLLIER, supra, at 303.14g3). Altenzatively, payments could

18 have been structtlred in such a way that necessary services, such as utilities, would contintle to be

19 providedpost-petition, therebyproviding a Section 549(b) defense. Withoutmore or credible evidence

20 of avoidability, the Court does not disqualify any of the 16 creditors selected above from the count

21 required by Section 303(b)(2).

22

23

24 objection at the pretrial of these matters. Even if the court did not find that these five professionals

were each creditors on the petition date, which it does, the inaction of the Petitioning Creditors5

estops them from complaining now about opportunities to develop evidence that they consciously

26 elected not to pursue.

8


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Case 11-15O1O-bam Doc 528 Entered 07/10/13 16:59:52 Page 9 Of 17

1 As such, any involuntary petition against Blixseth must have had at least three petitioning

2 creditors.

3 #. Standardfor plfc/#./zlg Petitioning Creditors

4 Section 303(b)(1) requires that each qualifying petitioning creditor must hold a claim that is

5 not çtthe subject of a bona fide dispute as to liability or amount.'' As to the standard for whether a

6 dispute is bona fide, the Ninth Circuit is clear. In Liberty Tool tf Manufacturing v. Vortex Fishing

7 Systems, Inc. (In re Vortex Fishing Systems, 1nc.), 277 F.3d 1057, 1064-65 (9th Cir. 2001), the cour't

8 stated:

9 (Aq1l other circuit courts that have considered the question have adopted

some variation of LIn re fsf-çfc/c's (831 F.2d 745 (7th Cir. 1987))) ttobjective

10 test'' first set out in In re Lough? 57 B.R. 993, 996-97 tBkrtcy. E.D. Mich.

1986) (Iïgljf there is either a genulne issue of aterial fact that bears upon' the

1 1 debtor's liability, or a meritorious contention as to the application of law to

undisputed facts, then the petition must be dismissed.'').

12

13

We join our sister circuits in adopting the objective test for disputes

14 regarding liability or amount.

l 5 But there is a wrinkle here. Section 303(b)(1) was amended in 2005 to add the words fças to liability

16 or amount.'' This raises the question of whether, as was the prior practice, petitioning creditors may

17 still qualify as such if only pal4 of their claim is dispute, in essence relying on that pal4 of the claim

18 which, for various reasons is not disputed.

19 The question of whether any pa14 of a disputed claim could serve as a claim justifying an

20 involuntaryballkruptcy has long been a subject of discussion. In 1984, Congress attempted to address

21 this issue definitively by amending Section 303(b) to specifically address this issue. The Banknzptcy

22 Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333, amended

23 subsections (b)(1) and (h)(1) of section 303 to add the words Etor the subject of a bona fide dispute''

24 to further condition the types of claims that could qualify for purposes of an involuntaly petition.

25

26

9


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1 By narrowing the type of qualifying claim, Congress recognized and remedied the problem of

2 creditors holding disputed claims being able to force a debtor into bankruptcy. (See 130 Cong. Rec.

3 S. 76 18 (daily ed. June 19, 1984) (Floor Statement of SenatorMax Baucus) (::1 believe this amendment

4 although a simply (sic) one is necessary to protect the rights of debtors and to prevent misuse of the

5 bankruptcy system as a tool of coercion.''l).

6 The new language, however, did not specify the kind of bona fide dispute contemplated by

7 Congress. In other words, the new language did not indicate expressly whether a bona fide dispute

8 regarding the amount of a debt was sufficient to disqualify a petitioner's claim, when the debtor did

9 not dispute that there was some liability. See COLLIER, stpra, at 303.1 1(21 (Ei-fhel'e was considerable

10 question before the 2005 amendments whether disptltes as to amount alone were enough to make a

1 1 petitioning creditor's claim invalid for purposes of filing an involuntary case.'').

12 The Ninth Circtlit Court of Appeals and other cotlrts answered that question by holding that

13 a disptlte as to amotlnt could disqtlalify a claim, but only if the disptlte would redtlce the total amotlnt

14 of the petitioners' claims below the required dollar amount. Focus Media, Inc. v. Nat'l Broadcasting

l 5 Co. Inc. rfn re Ftpczfuç Media, Inc.), 378 F.3d 9 16, 924-25 (9th Cir. 2004)* Chicago Title fn-çzfrt-/ncc Co.

16 v. Seko Investlnent, Inc. (1n re uvc/ftp Investment, 1nc.), 156 F.3d 1005, 1008 (9th Cir. 1998).

17 ln In re Focus Media, W7c., seven petitioning creditors forced the debtor into an involuntaly

18 bankl-uptcy. (378 F.3d at 921). Shortly thereafter, the bankl-tzptcy coul't granted the petitioning

19 creditors' motion for summaryjudgment on the involuntaly petition, finding no genuine issue for t'rial

20 as to the petitioners' showing that the claims were not subject to a bona fide dispute, among other

21 issues. (fJ. at 921-22). On appeal, Focus Media argued that the petitioning creditors' claims were

22 subject to bona fide dispute because they were subject to potential adjustments that could not then be

23 ascertained with any cel-titude. (f#. at 924-25). Focus Media further argued that Efany uncertainty or

24 dispute as to the amount of a debt is a bona fide dispute unless the dispute arises from a transaction

25 that is wholly separate from the debt itself.'' (1d. at 925). The Ninth Circuit rejected these argtlments,

26

10


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Case 11-15010-bam DOc 528 Entered 07/10/13 16:59:52 Page 11 of 17

1 concluding that ççeven assuming there was an actual, non-theoretical dispute as to the precise amounts

2 Focus owed the petitioning creditors . . . such a dispute is relevant only if it takes the total debt below

3 (the statmory thresholdl.'' tf#. at 925-26).

4 ln response to Focus Media and cases like it, in 2005 Congress again amended Section 303(b).

5 ln particular, Congress added the words ttas to liability or amount'' to subsections (b)(l) and (h)(l).

6 (Bankruptcy Abtlse Prevention and Consumerprotection Act of 2005, Pub. L. No. 109-8, 1 19 Stat. 23,

7 enacted April 20, 2005 (EtBAPCPA'I). Accordingly, as of April 20, 2005,8 Section 303(b)(1) provided

8 as follows:

9 (b) An involuntary case against aperson is commenced by the filing with the

bankruptcy court of a petition under chapter 7 or 1 1 of this title-

10 (1) by three or more entities, each of which is either a holder of a claim

against such person that is not contingent as to liability or the subject of a

1 1 bona tide dispute as to liability or amount: or an indenture tnzstee

representing such a holder, if such noncontlngent, undisputed claims

12 aggregate at least $ 10,000 more than the value of any lien on property of the

debtor securing such claims held by the holdel-s of such claims;

l 3

14 1 1 U.S.C. j 303(b) (2006) (emphasis added). With the exception of an adjustluent to the threshold

15 dollar amount, this was the version of section 303(b) in effect on April 5, 201 1, the Petition Date. See

16 11 U.S.C. j 303(b).

17 In light of Focus Media and similar cases that preceded BAPCPA, coul'ts have interpreted the

1 8 2005 amendment to express the intent of Congress that a bona fide dispute as to any amount is

19 sufficient under Scction 303(b) to disqualify the claim of a petitioning creditor. For example, in ln re

20 Excavation, Etc., LL C, 2009 Ballkr. LEXIS 1905 tBankl-. D. Or. June 24, 2009), one of three

21 petitioning creditors argued that as long as the çtundisputed portion'' of its claim was above the

22 statutory threshold, a dispute regarding the amount of its claims was insufficient to disqualify the

23

24

8 Most of the provisions of BAPCPA were made effective as of October 17

,

2005. The5

changes to section 303(b), however, were made effective immediately on enactment on April 20,

26 2005.

1 1


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Case 11-15010-bam D0c 528 Entered 07/10/13 16:59:52 Page 12 of 17

1 creditors under Section 303(b). The court rejected this argument, holding that the BAPCPA

2 amendments to Section 303(b) ovenuled Focus MediaL

3 There is also a bona tide dispute with respect to Hilton Oi1 Company,

one of the three original petitioners. The parties acknowledge that their

4 understanding of the amount owed by Hilton are tens of thousands of dollars

apart. Hilton, relying on In Focus Media, 378 F.3d 916, 926 (9th Cir. 2004),

5 argues that this doesn't matter, because at least part of the debt is

acknowledged by the alleged debtor. In Ft/csf.ç, following In re Seko

6 Investment, Inc., 156 F.3d 1005 (9th Cir. 1998), provides that a çtdispute as

to the amount of the claim gives rise to a bona fide dispute only when (1) it

7 does not arise from a wholly separate transaction, and (2) fnetting out the

claims of debtors' could take the petitioning creditors below the amount

8 threshold of j 303.''

The BAPCPA amendments of 2005 added to j 303 a provision that

9 a claim would be excluded if stlbject to a bona fide disptlte as to liability or

amount. This ovezrules Seko and In Focus. If the fn Focus nzle were to

10 remain in effect, the <fand amount'' language would be superfluous, since

under fn Focus the only dispute as to amount is a dispute over the entire

1 1 claim, or at least a big enough dispute that netting out would take the claim

below the monetaly threshold. It is a basic canon of statmol'y construction

12 that language be givcn its f'ull effect. See, e.g., U.S. v. Church ofscientology

Western ULS., 973 F.2d 715, 717 (9th Cir. 1992); U(S. v. Allen, 341 F.3d 870,

13 878 (9th Clr. 2003). That would not occur if n Focus is applied. Because the

debt of Hilton Oi1 Company is subject to a bona fide dispute as to amount,

14 Hilton Oi1 Company is not a valid petitioning creditor.

1 5

16 (f#. at *3-*5; see also In re Euro-American Lodging Corp., 357 B.R. 700, 712, n.8 (Bankr. S.D.N.Y.

17 2007) (prior to 2005 Amendments, a dispute as to amotmt gave rise to a bona fide dispute when it,

18 among other things, reduced the petitioning creditors' claim below the monetary threshold of Section

19 303(b); the 2005 Amendments itpresumably eliminated'' thatpart of the testjkReg'lAnesthesiaAssocs.

20 PC v. PHNphysician uonw. (In re Reg'l Anesthesia Assocs. PC), 360 B.R. 466, 470 tBankl-. W.D. Pa.

21 2007) (ttAs a result of the amendment, any dispute regarding the amount that arises from the same

22 transaction and is directly relatedto the tlndcrlying claim shouldrenderthe claim subjectto abona fide

23 dispute.'') (citation omittedl).

24 fn re Hentges, 351 B.R. 758 tBanlu'. N.D. Okla. 2006) reached the same conclusion. After the

25 2005 Amendments had become effective, three petitioning creditors filed an involuntary petition

26

12


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Case 11-1501O-bam D0c 528 Entered 07/10/13 16:59:52 Page 13 of 17

1 against the alleged debtor, Hentges. (Id. at 762). Hentges admitted liability with respect to two of the

2 three petitioning creditors, but denied liability with respect to the third creditor, Tulsa National Bank

3 (:çTu1sa''). f#. ln the involuntaly petition, Tulsa had asserted a claim against the debtor for $39,253.15

4 based on a note and guaranty. (f#. at 763). Following a trial on the merits of the petition, the court

5 determined that the amount of Tulsa's claim was in bona fide dispute. (f#.). Although there was no

6 bona fide dispute that Hentges owed $29,400.00 as guarantor of the promissory note, Tulsa failed to

7 demonstrate its entitlemellt to an additional $8,500 in attonzey fees and expenses that were included

8 in its claim. (f#.). Based on this dispute, and notwithstanding the fact that the içundisputed portion''

9 of the claim was over the minimtlm amotlnt established by Section 303(b)(1), the court concltlded that

10 Tulsa did not qualify as a petitioning creditor, and dismissed the involuntaly petition. (f#. at 763).9

1 1 Against this backgrokmd, and given the history and purposes of Section 303(b) and the 2005

12 changes to it, Section 303(b)(1) should now be construed to disqtlalifypetitioning claims based on any

l 3 bona fide dispute as to amotlnt, even if some (tportion'' of the claim is undisputed. This interpretation

14 not only is consistent with the legislative history of Section 303(b), but with the legislative history of

1 5 the previous Bankl-uptcy Act. In 1962, Congress deleted language related to the requirement of

16 liquidated claims because it was concmmed that this langtlage ttforeclosegdj a creditor with a large

17 unliquidated claim . . . from joining in a petition, although it can be made abundantly clear that his

18 claim exceeds the statutoly minimum. lndeed, the bankrupt, by urging counterclaims against the

19 apparently liquidatedclaims of the petitioning creditors, mayremove them from the category of claims

20 Kliquidated as to amount' alldprocure a dismissal of the petition.'' See H.R. Rep. No. 1208, 87th Cong.,

21 1st Sess. j 7 (1961). The reinsertion in 2005 of language similar to that which was deleted in 1962

22

23

9 Not every court has construed BAPCPA as changing the ççbona fide disptlte'' analysis

.See

24 In rc Demirco Holdings Inc

.,

2006 Bankr. LEXIS 1 13l , *8-* 10 tBank1-. C.D. 111. June 9, 2006)

(even after 2005 Amendments, a bona fide dispute as to amotmt only disqualifies a petitioning5

creditor if it has the potential to reduce total amount of petitioning claims below the statutory

26 threshold).

13


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Case 11-1501O-bam DOc 528 Entered 07/10/13 16:59:52 Page 14 of 17

1 mustbe understood to mean that Congress intendedto disqualify the very claims that Congress sought

2 to qualify in 1962 for ptlrposes of an involuntary petition.

3 C. Claims ofcalfornia and Idaho

4 After the involuntary petition was filed, both Califonlia and Idaho independently agreed to

5 settle the amounts owed them. Although payment of debts owed to petitioning creditors do not

6 disqualify them for cotlnting pul-poses tmder Section 303(b)(1), these settlements do call into question

7 as to whether the debts so settled were subject to a bona fide dispute.

8 The facts clearly show that they do. Idaho's settlement reflected a discount from the claimed

9 liability. The willingness to take a discount in light of Blixseth's denials of liability provides strong

10 evidence that a dispute existed; otherwise, why settle? Montana contends that the settlement was for

1 1 nuisance value and thus should not provide evidence of a dispute. The fact remains, however, that a

12 petitioning creditor took a discounted settlement when it had previously filed an involuntal'y petition,

13 and this court is in no position-because there was no evidence presented in support-to detel-mine how

14 much of the discount was trtzly nuisance and how much was a calculated move designed to fend off

15 liability disputes down the road.

16 California presents a somewhat different problem. 1ts settlement agreement does not discount

17 the amount it had contended it was owed. But its settlement agreement does acknowledge that

18 Blixseth disputed the claim-again, strong evidence of a dispute: why sign an agreement that contains

19 known lies? lndeed, the evidence of the dispute was necessaly to effect the settlement. A debt cannot

20 be tçsettled'' for its full amount because there is no consideration exchanged. See, e.g., RESTATEMENT

21 (SECOND) OF CONTRACTS j 74, com. c (1981) (fspayment of an obligation which is liquidated and

22 undisputed is not consideration for a promise to surrender an unliquidated claim which is wholly

23 distinct.''). California apparently wished to avoid potential liability under Section 303(i). To obtain

24 an enforceable promise from Blixseth to that effect, it had to acknowledge a good faith dispute, which

25 is what it relayed in the settlement agreement's Recital. To suggest otherwise, as Montana does, is to

26

14


(238 of 3



Case 11-15O10-bam D0c 528 Entered 07/10/13 16:59:52 Page 15 of 17

1 suggest that Califolmia settled in bad faith-creating a bogus dispute to validate a shield against

2 liability-and there is no evidence of that level of bad faith. As a conseqtlence, by California's own

3 actions, its claim was subject to a bona fide dispute.

4 The disqualification of Idaho and California means that the number of petitioning creditors is

5 insufficient to sustain the involuntary petition. To avoid confusion should there be an appeal and any

6 remand, the court will also assess YCLT'S and Montana's qualitkations.

7 D. YCLT

8 YCLT claims qualifyingpetitioning creditor status on the basis of anunstayedjudgment arising

9 from the banknlptcy court in the District of Montana. lt has cross-appealed thatjtldgment, seeking a

10 judgment approximately four times the amount of the origillaljudgment.

1 1 YCLT is a joining petitioning creditor under Section 303(c). As such, it claims that the

12 reqtlirements of tlndisputed debt do not apply to it. 1ts argtlment is based on the language of Section

13 303(c), which states:

14

After the filing of a petition under this section but before the case is

15 dismissed or relief is ordered, a creditor holding an unsecured claim that is

not contingent, other than a creditor filing under subsection (b) of this

16 section, may join in the petition with the same effect as if such joining

creditor were a petitioning creditor tlnder subsection (b) of this section.

17

l 8 This section does not contain l-estrictions on the type of debt that may join. Under its text, creditors

19 with contingent claims or disputed claims may join the petition and iEwith the same effect as if such

20 joining creditor were a petitiolling creditor.''

21 This seemingly anomaly has existed for many years with respect to contingent creditors-they

22 were never excluded from Section 303(c)-but since 2005 this anomaly has been extended to debts

23 disputed as to liability and amount as well. COLLIER Vupra, at 303.19(15) states that the disputed

24 test should apply to Section 303(c) creditors. There exists some case authority for this proposition.

25

26

15


(239 of 3



Case 11-15010-bam Doc 528 Entered 07/10/13 16:59:52 Page 16 Of 17

1 (In l.e Ktjawa, 1 12 B.R. 968 tBankr. E.D. Mo. 1990) (disputed claiml; c/ In re Braten, 86 B.R. 340,

2 343 (Bankr. S.D.N.Y. 1988) (contingent claiml).

3 But these cases predate the 2005 amendments. When a known anomaly is not addressed in

4 subsequent legislation, the presumption is that Congress did not intend to change it. Cf Zlf?7J' Public

5 School Dist. No. 89 v. Dep 't ofEduc., 550 U.S. 8 l (2007) (in context of agency interpretationsl;

6 Chisom v. Roemer, 501 U.S. 380 (1991) (same). As a consequence, since YCLT'S claim is not

7 contingent, it mayjoin the petition çGwith the same effect as if suchjoining creditor were a petitioning

8 creditor.''

9 E. Montana

10 Montana contends its has over $50 million in claims against Blixseth. Most of these are

1 1 disputed, and disputed intensely. Montana's claim here (termed çiAudit Issue 4'' by the parties),

12 however, amotlnts to approximately $219,000 and arises from the denial of a deduction taken by one

13 of Blixseth's entities-one result of Montana's audit of Blixseth's income intax years 2002 - 2006 (the

14 <:Audit''). That denial effectively increased the entity's income by approximately $1.5 million for tax

15 year 2004. With respect to tax year 2004, however, Blixseth is hotly contesting other aspects of the

16 Audit. This raises the issue of what Montana's claim is, and whether it is not trtzly subject to bona fide

17 dispute as to liability or amotlnt.

l 8 For a natural person, a taxing entity generally has but one claim for each calendar year of a

19 taxpayer's life. As stated in In z'c Blue Coal Corp., 166 B.R. 8 16 (Bankr. M.D. Pa. 1993):

20 Therelationship of taxpayerto taxrecipient is such thatthe cl'editor-debtorrelatiolAship

accrtzes on an annual basis rather than on some sort of open account

Each tax year

21 represents a separate claim. Klncome taxes are levied on an annual basis. Each year is

the origin of a new liability and of a separate cause of action.'

22

23 1d. at 822 (quoting In z-c Hartman Material Handling Systems, Inc, 14l B.R. 802, 810 (Ba11kr.

24 S.D.N.Y. 1992), in tul'n citing Commissioner v. Sunnen, 333 U.S. 591 (1948)). See also MONT. CODE

25 ANN. j 15-30-2604 (2013),. C/MONT. CODE ANN. j 15-30-2629 (2013). That is no different here.

26

16


(240 of 3



Case 11-15010-bam Doc 528 Entered 07/10/13 16:59:52 Page 17 of 17

1 With the other audit issues still live, it is beyond cavil that Montana's claim for tax debt arising from

2 tax year 2004 is disputed. Montana has not shown sufficiently that it was either authorized to create

3 a separate liability or claim related to Audit Issue 4 - such as a jeopardy assessment - or that, if

4 authorized, it took the proper steps to separately create and present its claim. And that was its burden.

5 Nevel-theless, Montana contends that the assertedtax debt arising from Audit Issue 4 is beyond

6 dispute. It is Montana's belief that Blixseth has conceded he owes at least the amount in Audit lssue

7 4. The problem with this view is twofold: First, Blixseth has not conceded a minimum amount of tax

8 due and owing for tax year 2004 (even if he conceded liability related to the disallowance of the

9 deduction that gave rise to Audit lssue 4, he alleges other changes to his income and deductions for

10 tax year 2004). Second, even if Blixseth had, this court's analysis, supra, regarding the implicit

l 1 overruling of Foctts Media by the 2005 BAPCPA legislation demonstl-ates that, so long as part of a

12 claim is disputed, the creditor may not qualify as a petitioning creditor for purposes of Section 303(b).

13 111. Conclusion

14 This court finds that Blixseth had at least 12 creditors who qualify tmder Section 303(b)(2).

15 Consequently, the involuntary petition required three or more petitioning creditors. The involuntary

16 petition does nothavc the required amount. Therefore, the Motion is GRANTED, and the Bankruptcy

17 is DISMISSED.

18 Copies sent to:

19 CM/ECF ELECTRONIC NOTICING

20 BNC MAILING MATRIX

2 1 # # #

22

23

24

25

26

17


(241 of 3



Q9-00014-RBK Doc#: 734 Filed: 07/17/13 Entered: 07/17/13 16:17:43 Page 1 of 2



In re

YELLOWSTONE MOUNTAIN

CLUB, LLC,

Debtor.

TIMOTHY L BLIXSETH,

Plaintiff.

-

VS-

MARC S KIRSCHNER, TRUSTEE OF

THE YELLOWSTONE CLUB

LIQUIDATING TRUST,

Defendant.

Case No. 08-61570-11

Adv No. 09-00014

ORDER

At Butte in said District this 17th day of July

,

2013.

Upon review of Yellowstone Club Liquidating Trust' s (CEYCLT'') response to Timothy

Blixseth's (diBlixseth'') motion pursuant to Federal Rule of Bankruptcy Procedure 9024, filed

December 21, 2012 (Docket No. 724), together with YCLT'S Notice of Dismissal of Involuntary

Bankruptcy Filed Against Timothy Blixseth filed July l7, 2013,

IT IS ORDERED and NOTICE IS HEREBY GIVEN that an evidentiary hearing will

be held on TUESDAY, September 10, 2013, at 9:00 o'clock a.m., or as soon thereafter as

counsel can be heard, in the 2* FLOOR COURTROOM, FEDERAL BUILDING, 400 N

.


(242 of 3



O9-O0014-RBK Doc#: 734 Filed: 07/17/13 Entered: 07/17/13 16:17:43 Page 2 of 2

MAIN, BUTTE, MONTANA, on Blixseth's motion pursuant to Federal Rule of Bankruptcy

Procedure 9024, t'iled December 19, 2012 (Dkt. 714) and YCLT'S response thereto (Dkt. 724);

and the parties shall file and exchange lists of witnesses and exhibits

,

duly marked, not less than

five (5) business days before the hearing, the failure of which may result in denial of admission

of exhibits and witness testimony for failure to comply.

BY TllE COURT

;

.-

#. '' L.

-

-

.

.,/J r . s-.. .

HON. H B. KIRSCHER


United States Bankruptcy Court

District of Montana


(243 of 3



09-OO014-RBK Doc#: 714 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 1 of 8

Patrick T. Fox (#8071)

DOUBEK PYFER & FOX LLP

PO Box 236

Helena MT 59624

406 442 7830 ph

406 442 7839 fax

[email protected]

Attorneys for Timothy L. Blixseth



Case No. 08-61570-1 I-RBK

ln Re:

Jointly Administered with 08-61571 and

YELLOWSTONE MOUNTAIN CLUB, LLC, 08-61572

,

08-61573et a1.,

Debtors.

TIMOTHY L. BLIXSETH

Adv. No. 09-00014

V.

MOTION PURSUANT TO FEDERAL RULEARC S KIRSCHNER

,

TRUSTEE OF THE OF BAMCRUPTCY PROCEDURE 9024

YELLOWSTONE CLUB LIQUIDATING

TRUST

Pursuant to Federal Rule of Banknzptcy Procedttre 9024 and Federal Rule of Civil

Procedure 60(b)(6), Mr. Blixseth hereby requests relief from the purportedjudgment entered on

December 5, 2012. Rule of Bankruptcy Procedure 9024 incorporates Rule of Civil Procedure 60

into bankruptcy practice and procedure.Rule 60(b)(6) allows relief from a judgment for ttany

other reason thatjustifies relief.'' Newly discovered and authenticated evidence demonstrates that

relief is appropriate under Rule 60(b)(6).

1


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O9-OOO14-RBK Doc#: 714 Fibed: 1 2/19/12 Entered: 12/19/12 16:32:42 Page 2 of 8

Attached hereto as Exhibit 1 is an executed declaration of Dennis L

.

Montgomery

('çMontgomeryvDecl-'') signed under penalty of perjury on December 13, 2012 and filed with the

California Superior Court, Riverside County on December 14

,

2012. Relevant to this Motion,

Mr. Montgomery authenticates in his Declaration two documents that Mr

Blixseth believes

justify reconsideration of this Court's final judgment, which are authenticated in and attached to

Mr. Montgomery's Declaration as Exhibits 10 and 1 1. See Montgomery Decl

22(b),(c). Mr.

Blixseth is attaching Exhibit 10 to Mr. Montgomery's Declaration to this Motion as Exhibit 2

,

for ease of reference, however, Exhibit 10 to Mr

Montgomery's Declaration will be referred to

as tIMSA Bullet Points.''

Mr. Blixseth is attaching Exhibit 1 1 to Mr. Montgomery's Declaration to this Motion as

Exhibit 3, for ease of reference, however, Exhibit 10 to Mr

.

Montgomery's Declaration will be

referred to as ItNotes on the MSA''

These two documents independentlyjustify Mr. Blixseth's

relief from the purportedly finaljudgment in this case.

First, the Notes on the MSA document was prepared by Edra D

.

Blixseth and in

connection with fonuulating a basis to set aside the Marital Settlement Agreement between her

and Mr. Blixseth. Rough Transcripts-om December 14, 2012 deposition ofEdra D. Blixseth, pp.

264-272, attached hereto as Exhibit 4. Her attorney Mr. Holahan

,

claims to have crafted this

document with or for Ms. Blixseth. 1d. On page 7 of itNotes on the MSA'' Ms

Blixseth states 4tl

think this helps us to justify why we are filing our motions on the MSA in the BK courts in

Montana, don't you? Remember we have added help there from the BK Judge who loves us

,

and

hates Tim and Mike Flvxm. At this point they could not get a decent ruling in their favor from

that Judae if they tried. Either wav. SB and BS have things in place in that courtroom to help

â.'' Notes on the MSA, p.7 (emphasis added); Montgomery Decl. 22(c). Ms. Blixseth


(245 of 3



09-0O014-RBK Doc#: 714 Fiîed: 12/19/12 Entered: 12/19/1 2 16:32:42 Page 3 of 8

testified at her deposition that KESB'' refers to Sam Byrne. See Rough Transcripth'om December

14, 2012 deposition ofEdra D. Blixseth, pp. 264-272, attached hereto as Exhibit 4. Ms. Blixseth

did not testify as to whom EIBS'' refers to but in light of other evidence in the record concerning

Mr. Byrne's relationship and meetings with the Governor of Montana, it is reasonable to infer

that (CBS'' refers to Governor Brian Schweitzer. See Docket No. 686-1, 27,. Docket No. 686-

4, Bates Stamp pages l 161-1 166 (Matthew Kidd of CrossHarbor asking Sam Byrne Eçl-low were

meetings with the Gov and Burk1e''), Docket No. 686-3: Bates Stamp page 741-742, transcript

pages 50:23-53:2, Bates Stamp pages 780-781, transcript pages 208:1-209:4 (Matthew Kidd

acknowledging Mr. Byrne's relationship with the Governor of Montana and that Mr. Byrne met

with him on several occasions about the Yellowstone Club). While Mr. Montgomery validly

authenticated this document in his Declaratioll, Ms. Blixseth also authenticated this document at

her deposition on December 14, 2012.

Second, and perhaps most directly indicative of the need for this Court to vacate the

purportedly final judgment it entered on December 5, 2012 is Ms. Blixseth's statement in her

&&MSA Bullet Points'' memo. In this document, Ms. Blixseth states, iiWe need this case moved

back to Montana at a1l costs, SB and BS have spent enonnous capital and political favors to

ensure they get the rigs

ht outcome from the Montana banknzptcy iudge. 1 suspect TB and MF

have known this for some time, and gave up fighting that battle.'' See MSA Bullet Points

(emphasis added); Montgomety Decl. 22(b).

These documents represent newly discovered evidence that Mr. Blixseth could not

previously have obtained with reasonable diligence. These doctuuents were contained in

electronically stored media that were in Ms. Blixseth's possession and which she left in Mr.

Montgomely' custody and control in 2011. Montgomery Decl. 22, Mr. Montgomery turned


(246 of 3




over these electronic data storage devices and other documents to a third party computer expert

in response to a subpoena duces tecum that was recently served on him by Michael J. Flynn in

another case. Montgomery Decl. 2 1. Only on December 13, 2012, did Mr. Montgomery

authenticate these documents and only on December 14, 2012 did Ms. Blixseth authenticate the

1 Rough Transcript from December 14

,

2012 deposition of Edra D.otes on the MSA document.

Blixseth, pp. 264-272, attached hereto as Exhibit 4.

The authenticated statements of Ms. Blixseth that EtSB and BS have things in place in that

courtroom (referring to the Montana banknzptcy courtj to help us'' and that tESB and BS have

spent enormous capital and political favors to ensure they get the right outcome from the

Montana banknlptcyjudge'' is at a minimum, strong evidence from third parties of improper

judicial influence and therefore is evidence of ttextraordinary circumstallces'' that existed at the

time that this Court entered its finaljudgment in this case whichjustify relief tmder Rule 60(b).

Montgomery Decl. I 22(b)(c) (explaining that these documents existed in 2011, although they

may have been created much before then); f iljeberg v. Health Services Acquisition Corp., 486

U.S. 847, 864-869 (1998) (finding extraordinary circumstances under Rule 60(b)(6) to vacate

judgment when the risk of injustice to parties, the risk that denial will produce injustice in other

cases and the risk of undermining the public's confidence injudicial process were high in light of

facts demonstrating that the trial judge was not impartial).

1 P h 4 of Mr

.Montgomery's declaration indicates that Ms. Blixseth was gainingragrap

unauthozized access to Mr. Blixseth's email and the emails of his attomeys during the

banknzptcy litigation against him and that she was providing these emails to Mr. Blixseth's

litigation opponents. These facts are grounds for terminating sanctions in all adversary cases

being pursued against Mr. Blixseth but Mr. Blixseth will not be filing such a motion until

additional evidence of Ms. Blixseth obtaining unauthorized access to Mr. Blixseth's and his

attorneys' emails can be developed.

4


(247 of 3



O9-OO014-RBK Doc#: 714 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 5 of 8

Moreover, even if the statements in Ms. Blixseth's own documents are untrue, the fact

that this evidence is sufficiently authenticated creates, at a minimum, a reasonable question as to

whether Judge Kirscher is impartial conceming matters involving Mr. Blixseth and that is

sufficient to vacate the final judgment in this case. Preston v. US., 923 F.2d 731, 734-735 (9th

Cir. 1991).

Finally, while neither Ms. Blixseth nor Sam Byrne of CrossHarbor are parties to this

case, their relationship to these proceedings and parties is undoubtedly close enough to trigger a

sufficient appearance of bias based on Ms. Blixseth's authenticated statements. See Preston, 923

F.2d at 735 ($<The Supreme Court has never limited recusal requirements to cases in which the

judge's conflict was with the parties named in the suit. Rather, the focus has consistently been

on the question whether the relationship between the judge and an interested party was such as to

present a risk that the judge's impartiality in the case at bar might reasonably be questioned by

the public.'') (internal citation omitted). Ms. Blixseth was manager of the DlP during the

Yellowstone Mountain Club bankruptcy proceedings, she approved the Club's plan of

reorganization on behalf of the DlP and she was an integral player and witness tltrough a1l the

Yellowstone Club banknzptcy proceedings and adversary cases. She is also a Debtor before this

Court in In re Edra Blixseth, Case No. 09-60452. For his part, Mr. Byrne is the owner of

CrossHarbor Capital Partners LLC, which through its affiliates and subsidiaries had this Court

approve: (1) its $35 million D1P loan; (2) the Club's plan of reorganization through which

' f r only $1 15 millionz which was a nearly 75%rossHarbor purchased the Club s assets o

discount from the $455 million purchase price it had contracted for only eight months before the

2 As ointed out in yrior filings in this case, CrossHarbor's $1 15 million purchase price is

misleading. $80 mlllion of this $115 million consisted of restructured debt owed to Credit

Suisse. Of the remaining $35 million, $22.5 million went to repay a CrossHarbor affiliate's DlP

loan. In short, Crossl-larbor advanced very little new cash as part of its $1 15 million purchase.


(248 of 3




.

3 d (3) is a significant beneficiary of and holds an Advisory Boardlub filed its petition, an

position on the Yellowstone Club Liquidating Trust and will obtain millions (if not tens of

millions) of dollars from the YCLT should it ever succeed in litigation against Mr. Blixseth.

Moreover, over and above the minor investment of new cash for the purchase of the Club,

CrossHarbor also obtained very valuable assets of Eclra Blixseth and her companies such as the

Family Compound and Porcupine Creek. When the value of those assets is considered,

Crossllarbor paid less than nothing for the Club.

These facts in connection with Ms. Blixseth's statements concerning Mr. Byrne having

Ssthings in place in that courtroom to help us'' and having Klspent enormous capital and political

favors to ensure they get the right outcome from the Montana banknzptcy judge'' are sufticient to

create, at a minimum, a reasonable question concerning Judge Kirscher's impartiality in a1l

matters involving Mr. Blixseth. Id.

This evidence, and a11 the evidence previously introduced by Mr. Blixseth in comlection

with the prior recusal motion, warrant Judge Kirscher's recusal from a11 cases involving Mr.

Blixseth and vacating the çttinal judgment'' in this case under Rule 60. Lilieberg, 486 U.S. at

864-869.

DATED this 19th day of December, 2012.

/s/ Patrick T. Fox

Patrick T. Fox


Attorneysfor Timothy L. Blixseth

3 N 1 discovered evidence shows that Crossllarbor's attonleys prepared the Club'sw y

bankruptcy petition filings. See Exhibit 5 attached hereto.


(249 of 3




/s/ Michael J. Flynn

Michael J. Flynn

One Center Plaza, Suite 240

Boston, MA 02018

Telephone: 858-775-7624

Facsimile: 858-759-0711

[email protected]

NOTICE OF OPPORTUNIW TO RESPOND

AND REQUEST A HEARING

If you object to the motion, you must file a written responsive pleading

and request a hearing fourteen (14) days of the date of the motion. The

responding party shall schedule the hearing on the motion at least

twenty-one (21) days after the date of the response and request for

hearing and shall include in the caption of the responsive pleading in

bold and conspicuous print the date, time and location of the hearing by

inserting in the caption the following:

NOTICE OF HEARING

Date:

Time:

Locations:

If no objections are timely filed, the Court may grant the relief

requested as a failure to respond by any entity shall be deemed an

admission that the relief requested should be granted.


(250 of 3



09-00014-RBK Doc#: 714 Filed: 12/19/12 Entered: 1 2/19/12 16:32:42 Page 8 of 8


1 Patrick J. Fox, hereby certify under penalty of perjmy that on the 19th day of

December, 2012, copies of the above document were served electronically by ECF notice to a1l

persons/entities requesting special notice or othelwise entitled to same and that in addition, I

hereby certify that I have mailed or served the document to the following non-ECF participants

in the manner indicated by the non-participant's name:

No manual recipients.

By /s/ Patrick J Fox


(251 of 3



09-O0O14-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 1 of 10

1 CHRISTOPM RJ. CONANT

Cal. B/ No. 244597

730 17m Street Suite 200

Denver, Colorado 80202

Telephone: (303) 298-1800

4 Facsimile: (303) 298-1804

Email: [email protected]

5 Attomey for Timothy L. Blixseth

6

7

8 supEroR cotm'r oF CALIFORNIAFOR 1uE colm'rv oF mvEltsmE

9 In re the Marriage of: Case No

.RIDmD91152

(Reassi>ed to Dept 10 from Dept F50110

jaintjgetitioner: P

11 a DECI,ARATION OF DENNIS L.

Mu MONTGOG RY IN SUPPORT OF

12 RESPONDENT'S MOTION FOR

Respondent: Timothy L. Blixseth sAxcTloxs AND TO SHOW CAUSE

13

Judge: Sharon J. Waters4

Hearing:

15 Time:

Dept. 10

16

17

18

19

20

21

22

23

24

25

26

27

28

DECLMATION OF DENNIS L. MONTGOMERY


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O9-OOO14-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/1 9/12 16:32:42 Page 2 of 10

1 1, Dennis L. Montgomery do hereby declare under mnalty of perjury of the laws of the

2 State of Washington as follows:

3 1. ln appmxlmately 2006, l began working with Edra D. Blixseth to develop software

4 technology foz her and her companies. I worked for her in numerous capaciies. At umes I was

5 an employee of one of her companies Blxware LLC or Opspring LLC. 1 waq hwolved in various

6 tçpsrtnersMp'' activities with her over the last 6 years.

7 2. As Ms. Blixseth's employee and mssociate I was responsible for developing

8 soRware technology. Ms. Blixseth's role in our psgtneohip was to provide funding for olr

9 operations and to bring in customers to purchase/license the soH are that thA was being

10 develomd for her blzsiness. Because of Ms. Blixsetlfs enormous wealth, Ms. Blixseth had

11 contacts at the highest levels of business and the U.S. Government to whom Ms. Blixseth could

12 sell/license my software teclmology. Ms. Blixseth has been trying to sell the Blxware technology

13 before, dun-ng, and aier her bnntmlptcy.

14 3. From approximately December, 2011 through June of 2012, 1 and others worked

15 feverishly for Ms. Blixqeth tbrough a company called PC1 to develop the soûware for the needs of

16 the customers that Ms. Blixseth had procuM. Ms. Blixseth had representadves &om the US

17 Govemment come to our building in March and April of 2012. At that meeting the US

18 Govemment told Ms. Blixseth they could move quickly into conkact negotiations. Ms. Blixseth

19 told the US govemment she had invested over $15 million into thc technology and was looking

20 for a lcge initial payment, and felt it was best to contract with a third party for the licensing of

21 the tecbnology. Finnlly, ill Ap111 of 2012, l delivered much, but not all, of the source codt that I

22 had updated and developed for Ms. Blixseth to her and her customers ms they had demanded

23 access to the source code so that tbey could Nalidate'' it and ensme that it performed as

24 represented. Althouglz 1 was reluctant to deliver the source code to these customers due to my

25 concern that they could then abscond w1111 it once it was in their mssession, Ms. Blixseth had

26 convinced me that I could mzst her and these customers. Moreover, because Ms. Blixseth had

27 promised to share equally in all proceeds from tlw source code with me, and because that payout

28 was represented to be approvimstely $50-100 milliow l believed the pamut outweighed any risk.

l

DECLAMTION OF DENNIS L. MONTGOMERY


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O9-O0O14-RBK Docg: 714-1 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 3 of 10

1 Unforhmately my fears were confmned. Shortly aher I delivered part of (but not all) the source

2 code to Ms. Blixseth's customers; l stopmd receiving payments and regular communications

3 from Ms. Blixseth and her customtrs.

4 4. Besides these business dealings, I have personal knowledge that Ms. Blixseth paid

5 individuals to hack or otherwise interccpt the email communication of Tim Blixseth and his

6 lawyers. I have personal uowledge that Ms. Blixseth provided Mr. Blixsetlps and his lawyers'

email commtmications to Paul Moore, Marc Kirschner, who is the Trustee for the Yellowstone

8 Club Liquidaing Trusty and lawyers representing Credit Suisse.

9 Ms. Blixsel also informed me over the last 3 years, on many occasions that 'sshe

10 had to live and work underground'g. Ms. Blixseth told me that she didn't want the IRS, Montana

11 or California taxing authorities, or TM Blixseth to fmd out how she is being compennted. Ms.

12 Blixseth told me that money was being ftmneled to her through Sam Byrne, Mike Meldman,

13 DenniK Holaban, Pat Yarborough, FFAE Liquidators, and Bob Brown RRed Baron'' auction house

14 and others to avoid IRS and state tax authority detection of her assets and income.

15 6. Ms. BlixKeth told me she was tlle owner and manager of FF&E Liquidators. lnc,

16 Ms. Blixseth told me that FF&E w%just a front company 1at she used to move monty through

17 so as to bdter conceal it from numerous parties. Ms. Blixseth also told me FF&E was owned and

18 managed by her, but was omrated by Pat YarYrough and her attomey Dennis Holnbnn. Ms.

19 Blixseth told me that Dennis Holnhnn would make cash deposits 9om his attomey client accotmt

20 into the FF&E account or deliver cash directly to her.

21 7. l have seen Ms. BIKXI receive envelopes containing $9,000 in cash 9om Dennis

22 Holnhnn on several œcmsions in both 2011 and 2012.

23 8. I and others were commnute-d by Ms. Blixseth for work in 2011 and 2012 in the

24 following manner:

25 (a) Ms. Blixseth or her agents (which 1 understand to be Dennis Holahan, Pat

26 Yarborough or Olivia Scalia) would pay me or others by depositing cash or

27 checks into our personal acco=ts.

28 (b) Ms. Blixseth or her agents would pay me or others through another

2

DECLARATION OF DENMS L. MONTGOMERY


(254 of 3



09-00014-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/19/12 1 6:32:42 Page 4 of 10

1 company by depositing cmsll or checks into PC1 bank account.

2 (c) Ms. Blixseth or her attorney, Dermis Holahm or his office Ktaff, would pay

3 me or others by demsiting cash or by wiring money from ltis Dennis

4 Holahan law omce accotmt directly into PCI's company bnnk accotmt.

5 (d) Ms. Blixseth or her agents would pay me or others by demsieg cash or

6 checks written by her comp'my called FF&E Liquidators, Inc., ItO PCI's

7 bnnk account.

8 (e) Ms. Blixseth or her agents Would pay me or others by demsiting cœsh or

9 checks written by her son

10 (9 Mathew Crocker or his girlfriend Becky Barnett into PC1 or our personal

1 1 bank accotmts.

12 (g) Ms. Blixseth or her agents would pay me or others by endorsing checks by

13 Shared Slxmng Services, LLC, and depositing then into PCI's bank

14 account.

15 9. To pay for PC1's rent and elecic bill, Ms. Blixseth on at least two occasion wired

16 funds directly into the accotmt of PCl's landlord or the electric company. 'Ihis is reflected in an

17 email exchange between me and Ms. Blixseth, a true and coaect copy of which is attached hereto

18 as Eolblt 1. For the Court's reference, my email address is dennis@vncodennd and Ms.

19 Blixseth's email addresses are [email protected] and [email protected]. Ms. Blixsdh paid for

20 PC1's commercial lease because it was Oough PCI's omce that I would develop soRware for her

21 and because Ms. Blixsel ran her own business operauons out of PC1's omce.

22 10. Dllring tllc six years in which 1 have worked with and for Ms. Blixseth, we shared

23 omce space and Ms. Blixsdh would conduct her mrsonal and non-software bwiness in our

24 shred oflke. Because I bsd soH are and teclmical expese thst Ms. Blixseth lacked and

25 because l was readily accejsible to Ms. Blixseth she had me establish nnd maintnin mitten

26 domlments, nlzmerous computers, ndwork servers and hard Oves which not only contnlned the

27 fles associated w1t11 her businesses, but also Ms. Blixsdh's personal 5les and emails. Ms.

2: Blixseth or her usistant would provide me on occasions with removable eleckonic stomge

3

DECLARATION OF DENNIS LMONTGOMERY


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09-00O14-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 5 of 10

devices (i.e., thumb ddves) which contained her personal files, and on occasion Ms. Blixstth

2 would give me access to her email accotmts.

3 1 1. For reasons relating to my various activities on her behalf, Ms. Blixseth would

4 oRen fo-ard to me email communications between her and other attomeys. Ms. Blixseth would

5 want me to read the communications and give her my thoughts regarding them.

6 12. Attached hereto as Exhibit 2 are true and correct copies of bnnk records that I

7 downloaded from the online bnnking feature of PCI's bnnk account at Bnnk of America- These

8 records reflect numerous checks and odler deposits to PCI from FFAE Liquidators, Inc and Edra

9 Blixseth.

10 13. On December 9 and 15, 201 1 Ms. Blixseth invited me and others to her apsument

in Beverly Hills. I accepted the invitation. Ms, Blixseth's apnrtment is located at 202 N.

12 Crescent Drive, Unit 1, Beverly Hills, CA, which places her residence in one of the more %ttony''

13 neighborhoods of Beverly Hillsyjust blocks away from Rodeo Drive. While I was at Ms.

14 Blixseth's apartmenk l observed a plethora of fme art, antiques, and mrniture. l was so amazed

15 by the lavishness of her furnishings, that l took numerotzs pictures of the interior of her apartment.

16 Attached hemto as Exhibit 3 is a collection of tnze and correct copies of the pictures that l took

17 on December 9 and 15, 2011.

18 14. While 1 was there at Ms. Blixsdh's apnrtment in December 2011, Ms. Blixsdh

19 took me upstairs and showed me over $250,000 in cash in envelopes. Ms. Blixseth told me she

20 had received them from Dennis Holaban. ln January 2012, Ms. Blixseth gave me three of those

21 envelopes witiz contahwd $15k in c%h.

22 15. Ms. Blixseth told me she receivcd millions of dollars in furniture, art work and

23 antkues from Sam Byme and or Ms company while she was in bsnkrnptcy as well as after her

24 discharge from bnnkrnptcy. Ms. Blixseth told me the items being sold were from her warehouses

25 in Califomia and the auctions were being t'staged.'' Ms. Blixseth told me that she received an

26 interest in these assets in return for her Rhelping'' Mr. Bm e. Ms. Blixseth lold me that these

27 ttstaged'' auctions took place in 2010-2012 at Red Baron auction house in Atlantw Georgia and

28 King Oalleries. In mttictllar, Ms. Blixseth informed me that because she was in bnnknlptcy and

4

DECLARATION OF DENNIS L. MONTGOWRY


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09-00Q14-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/1 9/12 16:32:42 Page 6 of 10

1 because she was attempting to hide her padnersltip relationship w1t11 CrossHarbor Capital

2 Pn-ers LLC from Mr. BlixseA her bnnknlptcy trustee and the bnnknlptcy couG she had to

3 devise a my of having Cxssl-larbor (Sam Byrne) and Discovery Land Company (Mike

4 Meldman) pay her millioms of dollars without the tranqactions being %ceable to them. Ms.

5 Blixseth told me that do this, CrossHarYr took possession of a11 the furniture, art and fnmishings

6 located in Porcupine Creek tbrough its purported foreclosure of its security interests in that

7 personal property, then after Crossllarbor foreclosed, it %tconsulted'' with EH Blixseth to sell that

8 Glnu'ture for it or its agents. lt appears this Rconsultant'' relationship was simply a charade for a

9 çskiting'' scheme whereby Fzlga Blixseth would sell the Porcupine Creek personal property at

10 auction for Crossl-larbor or its agents but then Crossllarbor, through straw buyers, would overbid

11 at tbat audion aad purchase its own asets for amounts above their auction market value. As a

12 result of Cross Harbor's ptlrchases at these aucions, its money wollld flow to Edra Blixseth or her

13 cntities, thereby providing Edra Blixsetb w1t1: significmlt amounts of money in furtherance of its

14 partnership with her. which partnership she wms attempting to Ede and this tçkiting'' scheme is

15 how she concealed that relationship. Moreovery once it purchased its own Porcupine Creek

16 mrsonal moperty through the auctions that Eœa wolzld arrange, it wotzld then give that N sonal

17 promrty back to Ms. Blixseth to either cycle tlzrough the Yting'' scheme again or for her to keep

18 for herself See <tphase 2'' in Eoibit 4 (1 received Exhibit 4 from Olivia Scalia's computer while

19 repaizing her machine =der her ins%ction. ne hard drive repair work required me to copy her

20 machine to ensure no infonnation was lost in case the repair failed and the hard drive crashed).

21 16. Ms. BlixKeth told me on several occasions she would contract items that she

22 received 9om Sam B>e to be sold with Mr. Bob Brown (the owner of Red Baron). Ms.

23 Blixseth told me Mr. Byme and or his agents would purchase the very same items that he gave to

24 ber to sell and that Ms purchqse price for these items were sold at higher than normal prices, alzd

25 that the money would be fnnnel back to Ms. Blixseth. Ms. Blixseth told me that after the auctions

26 M.r. Bm e and or lzis agents would rrtllrn some of the very Ome assets that it Dught at these

27 auctions to her so that she could keep these items or try to sell them again. In the last auction in

28 the sllmmer of 2012, RM Baron sold many of Ms. Blixseth's vallmble Mtiques and artwork that 1

5

DECLMATION OF DENNIS L. MONTGOMERY


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09-O0O14-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 7 of 10

have observed in the past. Some of these items Ms. Blixseth had told me she had alzeady sold to

2 Mr. Byme in previous auctions and that he had given them back to her and that she was reselling

3 them. The items that Sam Byme had given to Edra Blixseth to sell in the scheme described above

4 cmme from her former personal residence known as Porcupine Creek.

5 17. ln the pasty Ms. Blixseth told me the malority of those ftmds were either flmneled

6 through FF&E or tbrough Mr. Holahan's attomey client trust accotmt and ultimately to back to

Ms. Blixseth.

8 1 8. Ms. Blixseth employed Olivia Scalia and her son Mathew Crocker to manage and

9 help sell many of these assets àlso tllat were stored at O'Neil storage located in Santa Ana,

10 Califomia. Ms. Blixsel told me that O'Neil storage wms not in her nanm but in Crossllarbor

11 Capital's name to avoid any chance of a subpoena or a search warrant issued on those storage

12 tmits.

13 19. Ms. Blixsdh asked me to falsify documents that would substantiate her claims that

14 Mike J. Flynn had acted as her attomey, 1 refused to do so because I had in my possession many

15 emails that had been copicd to me and written by Ms. Blixseth tbat con%dicted those statements.

16 20. ne emails tIZM conkadict Ms. Blixseth's claims that Mr. Flynn was her attorney

17 are as follows:

18 (a) Attached hereto as Eeibit 5 is a tnle and correct copy of a July 9, 2007

19 email th1 Ms. Blixseth sent to me, among others (including her attomey

20 Deborah Klarl, concerning Michael J. Flynn.

21 (b) Aflnrthed here to as Exhibit 6 is a true and correct copy of a July 23, 2007

22 email that Ms. Blixseth sent to me, among others (including her attorney

23 DeborA K1r)m conccming Michael J. Flynn.

24 (c) Adnched here to as Eeibit 7 is a true and corred copy of an Augus't IK

25 2007 emm'l that Ms. Blixseth sent to me, among others (including her

26 attomey Deborah K1arl, conceming Michnel J. Flynn.

27 (d) Aenrthed here to ms Exhibit 8 is a Ae and correct copy of an October 20s

2: 2007 email that Ms. Blixgeth sent to me, among others (including her

6

DECLARATION OF DENNIS L. MONTGOMERY


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O9-00O14-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 8 of 10

I

1 attomey Deborah K1ar), conceming Michael J. Flynm

2 21. I wms served with a subpoena by attomey Mike J. Flynn to produce any mld al1

3 documents and computer records relating to Ms. Blixseth. 1 turned over documents

,

computers

4 and hard drives to a third party expert as directed to do so.

5 22. The following are mze and correct copies of some of tlle documents contained on

6 the computers and hard drives that I produced in response to Mr. Flymfs subpoena.

7 (a) Attached hereto as Exhibit 9 is a mze and correct copy of a document titled

8 ltMy Dearest Jack'' that 1 found on Ms. Blixseth's Mac computer that she

9 left in my custody and conkol in 2011.

10 (b) Attached hereto as Exhibit 10 is a true and correct copy of a tçbullets

1 1 point'' memo that Ms. Blixseth prepared for her attorney Mr. Holahan in or

12 around July 20l 1. Ms. Blixseth stored this document in eleckonic format

13 on a thumb drive +at she then provided to me w1t.* no resMctions on

14 access.

15 (c) Attnched hereto as Exhiblt 11 is a trtze and correct copy of a document

16 titled RNotes on the MSA'' that 1 found on Ms. Blixseth's Mac computer

17 thnt she leR in my custody and conlol in 201 1.

18 23. Attached as Exhibit 12 heretoa is a tnze and correct copy of tlw picture l took of a

19 diavam on a whiteboard located within Pclls offices on January 25, 2012. Along the top of tbis

20 email are the words tttell the truth as long as u (sicj cmf'. 1 personally observed Ms. Blixseth

21 writc lose words on tbe whiteboard.

22 24. In the six years I was involved w1t11 Edra Blixseth in Opspring, Blxware, or any of

23 the teclmology companies, Fzlzn lnsisted on keeping Tim Blixsei in the drk, and isolated from

24 any knowledge, cost, value or potential income from those companies.

25

26

27

28

DECLARATION OF DENMS L. MONTGOMERY


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09-0OO14-RBK Doc#: 714-1 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 9 of 10

1 1 declare under mnalty of perjury of the laws of the State of Washington that the

2 fomgoing is true and correct.

3

4 Dated: December 13, 2012

5

6 oennis L

.

M t o ery

8

9

10

1 1

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

2:

DECLARATION OF DENNIS L. MONTGOMERY


(260 of 3




1 PROOF OF SERWCE

.

2 1, Christopher J. Conant, declare:

3 l mp a rejident of the State of Colorado and pver the age of eighteen years, and not

a party to the whbln actlon. My busincss address ls 730 17u' Street, Suhe 200, Denver, CO

4 80202. On l # , 2012, l served the within documentts):

5 DECLAM TION OF DENNIS L. MONTGOMERY IN SUPPORT OF

RESPONDENT'S MOTION FOR SANCTIONS AND T0 SHOW CAUSE

6

Z by transmifling via facsimile the documentts) listed above to the fax numberts) set

forth below on this date.

8 IN by placing the documentts) listed above in a ntuled envelom with postage thereon

fully prepaid, in the United States mail at Denver, Colomdo addressed ms set forth

above.

10 IZ I caused such envelope to be delivered via oveznight delivery addressed as

indicated on the attached service list. Such envelom was deposited for delivery by1

, jj uwss practices.PS following the flrm s ordinary us

12 Z via eleckonic/e-mail service. ne documentts) listed above were scrved via e-mail

to the addressees listed.3

14 Dennis J. Holallan

2049 Century Park E #3180

15 Los Angeles

,

CA 90067

Attonwy for Edra D. Blixsdh6

17

I mn readily familiar with the lsrm's practice of collection and processing

18 correspondcnce for mailing. Under tha practice it would be deposited 'th UPS on th2 smne b

us'ess

.1 am aware that onay wlth postage thcreon fully prepald m the ordinary course o

19 motion of the party served, service is presumed invalid 'fpostal cancellation date or postage

mcter date is more than one day aher datc ef deposit for ma-ling ' amdavitl

20

I declare tmder penalty of perjury under the laws of the State of Colorado tbat the

21 foregoing is true and correct.

22 Executed on ( Q , 2 ' 12 at Denver, Colorado.

N

23

24 chusMpherl

.

Consnt

25

26

27

28

P0S


(261 of 3



O9-O0014-RBK Doc#: 714-2 Filed: 12/19/12 Enlered: 12/19/12 16:32:42 Page 1 of 1

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b ?a 'v. i'? t-- p u- i d e t4- l o t 1., t l 1 s .k. : ) c. T' t.: :'h .

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DM Exhibit 10


(262 of 3



O9-00014-RBK Doc#: 714-3 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 1 of 7

Notes on the MSA, includhg amendments and the mini settlements

(Edra's comments in Green)

Full MSA- Paaes 1 - 42 - Case No. 111D10 91152 in the Riverside Countv. CA

* 1 of Page 1 says, G'This Stiptllation is entered into for the ptlrpose of

compromising and settling contested isstles between the parties. If for any reason

the waivers and releases in this Stipulation are not accepted by the Cou14 and this

Stiptllation becomes null and void, o1. this Stiptllation fails for any other reason

whatsoever, nothing contained herein shall be an admission of fact or a statement

against interest. Each pal-ty has refrained from making contentious statements, or

assel-ting positions, which might catlse the othef to be upset, so that colupromise

and settlement could be promoted and acllieved.''

a

sYlso, renlelnber tlzat I u.ras con-lpletely frozen out o 17 a1l the colupani es and any

infonmation fron: shol-tlv after 1 171 l0d for diArorce (Dec 06) tlnti l itlst at before the closing

of the l5nal 5'lsz4..

* 4 of Page 2 - Read all of it and A - C

They could use this as an argtlnnent that 'B'e agreed not to go baclc to the values ofthe

assets sve agreed to take. I svill go into the di llkrent asscts as v,e go throtlgh this, btlt one

thing that should be pointed otlt bere. i s 7-il-n- s ver-v' ovvm testin-lony 1- 14 the fal-nily court.

l4e lnade luany false staten-tents. V-rhen I urould point tllat out to the Judge àvaters, her

resp onse 'was alNva. ys that T inn- being given the Caption of the Ship title f0l- our assets by

her, had a flduciat-y responsibi lity to nne, 1 f it svas found that he Nvas not telling the truth.

z

'k feNv examples of this svould be Til'n sta. ting that their was no con-iluunity cash 110-0-,

Nvhen he Nvas taking ftlnds fronl Big Springs Reality (not paying connluissions to the sales

people), Sunrise Ridge (not paying the partners their share 'hen hc took fundslo selling

col-nl-ntlnity assets and using the funds Nvithout a division given to me, and there are lnore

exal-nples.

Til'n also lied in a hearing when l was trying to stop CH ffon'l bklying the golf course lots.

First, he had a sales person, Eric Ladd, not the VP of Sales. which woulcl be l'nore

standard, stlbnait an aft-idavit suppol-ting Tim's clail-n of thc value of the Lots. Tim stated

that no conllnissions 'were being paid for the sale of these Lots to Cl-l. Yet. later we 'Iind

out that none other then Eric Ladd 'was pronAised 500k, of which 25011 was paid to hinA.

Eric later filed a suit and got a J'tlclgllzel-tt against nAe for greater then this mnount.

* 8 of Page 4 all of page 5 - Can you read and tell me if you thilzk this is binding or

it goes to the fratld that we talked abotlt?

DM - Exhibit 11


(263 of 3



09-00014-RBK Doc#: 714-3 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 2 of 7

K 16 of Page 6 and al1 references to BGI stock below

This is vvhere things coklld get a little grey to uqllat is Nvritten

.Nvhat v/as said and Nvhat 'was

intendecl. N'le taking the 1)GI stock Ava. s tlze svay to finally get PC and Casa Captiva into

n'1).- lcgal onmership after being aNval-ded it i11 tl-te sectnncl lmini settlclnent

11, you u'ill go

back alld l-ead those, l'otë urill l5nd that Til'n and his accotlntants Nvere to f-ind a uray to get

both of these assets into n-3)

,.

' nanae u'itllout crea ing tax issues. Taking thc BGl stock' novv

-

in thia l5nal :4Sz-, l Nvas told vvotlld rcsol-v'c this

.

A lsk')- sincc 1 'was also taking the N-C

entities. it scelned like a natural to sin-lply taltc Tilu's ovvnership of the stock

.

t'Reluenlber, if though a'1 l ofthe stock u'as in Til'n -s nalne

,

it 'w-as still a conlnxunity

propel-ty asset-)

l vvellt illto this agreelnent sti 11 svith the understanding tl-lat both Tin'1 and George lklaclk

had told lne that the BGI notes to YDI as u,ell as the Tinà Blixseth notes to BGl tlvhicll l

ended up svith as 'sisrell .) w-ould have a 'way of vvorking thelu out as years Nvent along as

cûfol-given'' w-hen ure needed the tax svi-ite off-s

.

Til-n had alvvuys said that. l u'-ill go illto

this in naore detail u'hen l talk aboklt the -l'aluerendo transfer, but Tinl also said that about

the 4'' Onxl'n.for that.

lf the above urotlld have been as it Nvas told to nèe, then the YC's Nvould have paid thc CS

loan off uith the proceecls frol'n l-ot sales.

llpon tlle closing of the h& 1.S .A., tlne bank accounts had been drained antl/or svere

overdraurn. Pat ean go 1 nto nnore detai s of lhat as vv'ell . I of eourse, vz'as not coklnti ng on

this. Both Aluerican Banlt and Pa lnA Desert aecounts n-ere like tllis.

In ad dition, the books and records that Nvere tulmed over cannot be reconciled. Tl-ie trail

balances do not jave. Again, Pat can go into luore detail on this.

There were contracts ancl payables that Tim entered into at-ter knowing n'e w'ere going to

bc closing the IWSA. Bob Sumpter employlnent contract for one.

K (a) of Page 7

CB Sulu-ise IAal4llers, LLC is the one that A,loses lkloore (YC's controller) told lne that

Til'n had taken the funds whcn things sold and had not paid the partners in this.

Til'n had also signed agrcelnents fro solue nlanagenlent f r St. Anclre'ws after our signing

of knoNving 1 Nvas getting this. He did this both in YDl and in YCW.

* (c) of Page 7 - This did not happen and we had issues trying to make it happen.

M (e) of Page 7 - Talk to Andy Patten about this. lt was brought up in the UCC vs.

CS and Tim Blixseth with how Tim bouglzt and sold this to himself By the time 1

got it, he had taken the value out of it cluring the time l was frozen out of the

businesses. YC had an expel't testify with how this was handled.

DM - Exhibit 11


(264 of 3




* B. of Pagt 9 - 'YC' %Y' Nvas il-lsolvel-lt s'llel)

l receivcd it. 'Fhe Nvay' this is Nvritten

.l

vvould have l-lo svay of knosving tllat

* C of Page 10 and (1) - (3)

z

X gain, z/-kncly Patten w'ill be helpftll here

.

Tiln did not disclose that he had taken luill ions

otlt of Big Springs Renlity before this and had not paid connluissions

.-l-here has been

soluethil'lg l'led against hilu on this

.

prtlRtly Avill have the details. Tllis is also xa-here he

states that ITl-ic Ladd vvas paid :4 eolyluissioll 1-01- the Golf Course Lot sale to CH

.ln

flannily court he testitscd that there Nvas no coluluissions to be paid

,

but he already had the

deal 'with Eric, nrhich 1 believe is hon, he got E ric to give the stateluent of value

.The VP

of Sales should have done that. if it svere to be done

-

but he cotlld not be kùbought''. A- ND

500It vva. s not nea. rly svha. t 'kvas ovvcd to the sales people

.

I knonw tllat Charlie w-ould be

happy to talk Nvith yotl about the exact al-nounts

btlt this shoulcl also be in w'l-a. t Avas f'iled

.

A the tinle -rinA d id not 17:1

)/ thena. svhich Avas l-ntlch longer thel'l ::30 - 60 days in arrears-'

l&e told thenn that the luoney svas needed to N-C opera ions

.

They later fbund otlt that the

funds w-ere tlsed for boat slips :11-1:1 other things f0l- Tinè

This Nvas also cluring the -tfl-ozen

out'' part for l'ne- but Big Springs uras in 7-il'n's nanne and therefore a conànaunity property

asset. At the tilne he nras taking ftlnds out of Big Springs for his use

a

he w-as also stating

in faluily court that there 'was no colunaunity cash tlonr

K D of Page 10 1 alread ),' addressed. Big Sk)'' Ridge

,

above.

R- idge uras part of the ''C Chapter l l .

Piease nole that Big Sky

K E of Page 11 -/&gain tlnis Nvas alreadl' addressecl regard ing Sunrise Ridge and

hzloscs N'Ioore stating that Tinn told the ftlnd s as tlhis ou'n persona.1 piggy bank--

and did not pay the pa. rtners. Tinn dicl not disclose this

.This uras also colnnaunity

cash tlow.

K G of Page 11 This is a good one for the M/estern claims.

* H of Page 11 This did not happen and ended up being part of the YC BK.

K A11 of the assets lis.ted that Tim got, starting on 1. of page 12, had the value

that was perceivd and no unforeseen liability.

K 17. of Page 14

At the time of signing this, Tim told me that the LeMond group would do this, just

to be rid of him, by getting 1.0 to 2.0mm on closing. I ended up having to pay them

8mm of the 35mm 1 got from CH, to get them to sig'n off. I was to get this back 9om

YC, as they were going to be the owners of these B shares and not me personally. ()f

comse youknowthat did nothappen. (Remember as well, I did not really gd

35mm from CH, but only 22mm. Thn had borrowed 13mm 9om them in 2007 and

I took over that promissory note when 1 got the Family Compotmd back.)

DM - Exhibit 11


(265 of 3




* 20. of Page 14 -l-his is not a big deal

btlt Tiln took luost of this otlt

S oluethings

Nvere brought back by the 'YC el-np

loyees that relnov'ed it per his direction once

tlley kneu- that he 'hs'..as not t(n takc it

btlt l'ot lleal'll' a11 .('

à'.zlal'be this is nrllere 11e

got the iclea that 1 Nvould take nnorc otlt 0f l 76f

))

* (3) of Page 15 including (a) - (d)

Thi s is u-here 7-il'u transl rred Tanlarinclo to hiluself

,

tnefore the tinal d vol-ce clecrce

.

I-1e

stated to n'e tl-lat George cotlltl llel' inle do the salue on this pronai ssory note to A'DI a s

they had i ntended to do u.-ith the other notes for the nloney that Nvas taken fronl the C

.

S

l0alz. He vvrent otlt of his Nvay.to I-nake this clear

as hc also stated t'at he did not urant to

have a ny tax 1- sskles froln getting Tal-narindo in his nalne n'l-len the funds tha t ptlrchased it

N'ere frolu the (?S loan. 01'- cotlrse nt) taxes 'w.rerc pai d on any of that luoney

s

20k1nn1.- as it

'a-as book cd a 1-. 1 oa. n and not a dihri den

rl-l'1i s i s the 1)o i nt of the l

-TC C t'i l 1 ng a gai st -1-1 n)

.

That stll t conti nues in F b 20 l 0

.

zïncly Patten and Troy Gl-eenlrleld ca bc helpftll here

.

* C of Page 16

Turks and C'aiscos l:)ropel4l, qvas also purclèased vvith CS loan funds

-

yet Tiln svas

aNvarded this uritllout having to pay

baclx: the funcls for the purchase price. 1 thi nk tllis

s

Tal-nerndo and the other things go to shoïv that

Ilaving l%e take on thc entire prol-nissoi-y

notes for all the funds taken out by BGl and tlcel4 Tinn

-'would not bc a fair division of

property- l in fact- 1 hacl to pay baelk those notes and Tiln got 8111 of- those pl-operties

.

Ij-1

other w-ordss jklst Ttlrks and Taluerelldo alone aecount f-ol- over 70$-1-11% of the 2081-911-1-1

taken out- plus the other things that Ile got in thc t-il4al IVISA alul the tw'o l'uini settlelments

.

lf he had not told l'ne that those notes eoulcl be n'orked out another 4.va)., and they Nvere

never intended to be paid back, 'wotlld 1 llave thotlght taking that on Z-YND giving hil-n

these assets free and clear 'was a fair division'? NO .

K 0. of Page 18

l later founcl out that who that 'was transfen-ed to 'was Jil'n Dolan. ''l'hel-e are several things

that Nvere transferred to hinz dtlring the tinle of 14ay ckfrozen otlt-'. Jiln Dolan is also a third

partner of Tinn 's in %j4 estelm Pacifsc Tin-lber Conapany. He is also 'who Tilu sold. Nvell

under valtled, our personal interest in the FBO in Bozeluan. .1.ilu Dolan is also the one

that prol-nised to be paying the BFI note on til-nc, yet adluitted to nle and others that he

nras talking nzith Til'n at the salne tilne abotlt the payluent. Tiln Nvas telling others that

Jil'n vvas not going to be nlaking the paynxent to keep lue out of nnoney.

l clon't know svhere this fsts in, but there is not any pal4 oflny assets that l was awarclecl

that Til'n did not call people and interfere w'ith l'ne being able to do things for the good

and benefit of n'lyself. He contacted Alan Rye about mlr loans- which ptlt Alan in fear of

his collateral in này share of BFI- Tim had no current business with Alan and his bank.

He contacted A'Van'en Trepp regarding Blxware and catlsed all kinds of issue there where

we could not move forward. He hired Mike Flynn, who was Delmis 1$4 laxvyer and

DM - Exhibit 11


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O9-0O014-RBK Doc#: 714-3 Filed: 12/19/12 Entered: 12/1 9/12 16:32:42 Page 5 of 7

ha ndled tlkings for Blxv/are. Irle alzd Nzl ike Flynn started a press 'zatnpaigu aga.inst lue

l'lal-tl? reportcrs havc col-itsrlued tllat 'Film 01

Flynn Avotlld call thenà and tcll thel'n Avhere to

go and look things ttp that Nvere f'i led in the Reno courts. These urerc filed by Flynn

.

,N1an), tinzes J'tldge Cook urotlld I'ot let theln stand- but the dal-nage svas done as the

reporting had already happelèed. 'A ''e luust knock hlilke 1- l).J'n knl7f the ?S.ISï'& l-natter. V/e

need to do Nvhatcver it takes- 1-101- luatticr Nvha t u'e have to 1'i 1e

.

l-le does sti 11 ha'$'e business urith Palyu Desert National Bank. but continued' to gi ve thelu

naisinfolnnation abotlt luy btlsinesses a d l'ne.

* 25. of Page 20

'Fhis is anol'l-ter area tllat -/kndy Patten can help ).'0t

l unde rstand. Thcre has been

onlethi ng l'iled ag ai l'st -Fi n-). - 1-1 regard to tl'e 'andli nt' o 1-- tl2 1 s *ot. I-le l'latl - tlst be l-ore he -

.

ktsold it to hilnself vvith no ca.sh dosvn and a pl-ol-ni ssor), note c,f'- z1-nln-' ha pla ed a value

of -.1 /.1 lulu on it. 'YC has flled thi s acai nst 1'11 l'n . 'atl l A- 'loore n-1 i cht al so have addi ti 011:.1

.

.

q . tjj (jj j y 1-1 O l 13. a .

yh.'l'-tltlr the closi n c of tlle 5 S ' /5s l 'l:tltlnd t7tlt that 7-i n-1 ellûl-c d tt 7 sol-nello'v qettint't th is L.ot to

w. 5 z <

.

w

the i'nan that he ptlrchasod l-al-nernt'lo firolu . J 'el i elv'e tllat -1-1 n').i'le-v'cl- intellt-led to pav tlzi s

2n:ln to YC - t1st li ke all thc other prol-n 1 ssoi-v note he llacl si cne u-i th %fC.h'- Dl .

K C. of Page 22 Read and tell l'ne hvhat A'otl tl'k1 nk o' thi s one.

K E. .G. of Pages 22/23

hTe ncver receivcd propcr books and records, luinutes and other things. 17at can go into

this n-lore- 1,-$,Te still, a. year la. tcr, have not been able to flg.ure l-nuch of this out with hosv

they turned Nvhat they did over.

K J. of Page 23

It states here that as of Jtlne l r 200 1 was to l'eceive a1l cash etc . . . . . . . . . . . .-again, Pat can

tell you how things w-ere turned over to us. Tim also entered into several contracts that l

tsvo of which I have nlentioned already. 'l-im also told nze that 1ze had paid a1l of YC

payables ctlrrent 'with a deal he did 'with M/ayne Prinl (the otller third owner of IVPT)

This turned out not to be trtle. 1 talked to svayne about this. In Judge Tuckerscourtrooln, Bob Sunnpter. on Tim's behalf, in April or lklay of 2008, stated as much as

well .

* Pages 24/25/26/27 in reference to taxes I want to talk about in our meeting, as

it is too hard to put in all in this overview.

DM - Exhibit 11


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09-O0014-RBK Doc#: 714-3 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 6 of 7

* (a) of Page 27

lnteresting tl-tat tlley adnlit llere that thel-e Nvas con-llmtlllity cash llovv frol-n Big Springs

Big Sky Ridge LL.C

-

alld Sulprise Ridge I-LC and that Tilu took all (

Af that lnoney. This

vvas during thc tinlc that he 'Bzas stating that therz Nvas no conllnuni ty cash t-lou'

1 had to

bon-ou- l'noney to just live dtlring this tilue, as I d id not get a pennl, ot- tel-nporall' spousal

stlpport nor lolag tenn after. l did l'iot catch this before.

* 33. of Page 29

This is Nvhere -1-1-t)), Greenl-ield had a hifield'- day duri ng the UCC vs C'

S and Til'n Blixseth.

l-ilu stated on the stand tllat the h-cornerstone of the S'ISA 1701- hilu7' u-as l-ne taking o'er

his i'idtlciary responsibility for any arid a.11 of his actions in the btlsiness that he llad run

and I g ot. lt Avould be Nvorth a phone call to hinn on this one

. .Atnd- y Patten Nvas there as

Avell. -1-'l'oy told l'e that he did not think' that this area of the IVISZQ Avoklld stand t p a I

cotlld not hold ''-ilu harlnless nor take on lèis actions if there rvere fraud and othcr things

in-v'tllvred. 1, of course, tlntil Tilu stated that in cotu''t

did not think in a nyavay that the

èteornerstone-' of the NISA. but I vvas sulvl), axvare that it vvas inAportant to hin-l

1-1t7u.7 can

I get around this issue ??

* 35. of Page 30

l'lere is vvhere l think 're havc a 1..1 LTGE tlps itl e i f you can tind in the laur' u'here th i s

uuiver cannot stand. As l told yotl. 'vvhen Jafl'e ptlt together the 'IJ ling for spotlsal stlppol-t

it pencilecl out at over 2.014'114: per l'nonth. but l never expected to get that

Tilu repeatedly said at sol-rle point that there 'wus no nRore colulutlnity cash flou'

V/e

haAre since found out that this 'was not true. l-le just kept all the luoney fbr hiluself.

Becatlse l1e n-as saying there '-vas no cash flosv- I had to borron' l-noney to live on, A-vhel-l

there vras in fa. ct funcls for the colul-nunity.

If the assets hvotlld have been 'wllat 1 'was lead to believe they -ç,ï.'erc AN D if Tinn had not

stal-ted his calupaign to ûûcrush and destroy lAer''. . . . . . . .tit then turned into i:keep a'fter her

until she is crushed or deadr'). . . . . . ..1 'would not ha'k'e needed the spousal support.

But the facts are now' clear that there w'as cash flovv that 1 should have received at the

til-ne I Nvas frozen otlt. The assets and nzore o'ver the liabilities that I 'was lnislead about,

Nvere such t0r not such as far as assets go) to naaintain lny lifestyle, 'which is the lctter of

the falnily laNvo let alone, any lifestyle. I an4 sitting here in a Chapter 7.

Last year at about this time, just befbre signing the MSA, 1 had manageable liabilities, no

money borrowed against Porcupine Creek nor Casa Captiva. The fact is that Tim la ew

exactly what he was doing and what I was getting myself into, which is why the

colmerstone of the NISA to him, was what it was.

6

DM - Exhibit 11


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O9-00014-RBK Doc#: 714-3 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 7 of 7

l f I had k l'loNvn any of this- l 'vvould not have settlecl in the vvay l did

.I Nvotlld l'lave been

granted botll tel-np. and long-tenu spousal suppol-t. 1 u otlld not have had to continue to

borron' naoney to 1 i ve. 1 lvould not ha. ve borroNved 3511414-1 to gct the (/IS

-

A

.k

closecl .

Reluenlber, of tlle 351-n1n- I personally only got

itlst oqper 1 sol'nnn.of that. The rest urent to

Tiln or to ''/C. '1-l'1e pal''t that 'oeent to -ïrC shotlld have been paid back to lue

.

if things tllere

NN'e1-e Z.S tllcy NNrerc p. l-eSC11t0d .

ln C.-z- Palni l)' lan-, a 25 year luan-i ttge 'w'i tl'l tlle 1 ncolue and tax returns tl'la.t v/'e had

,

B.'t-? tll d

haNre given lue a verl- nice annual incolue fronl spotlsal support.

M 36. - 44. of Pages 30 - 34 You gtlys are going to have to read and tell me what

rou think'.

* Really for you guys.........it's all the reps and warranties you will have to tell

me what youthink.

K 64. of Page 41

l thilzk this helps tls to j ustify svhy Ave are filing our lnotions on the S'ISA in the BK courts

in iklontana, don' t you? Ren-lelnber Nve have added help thcre fronA the BK Jtlclge w'ho

loves tls. and hates -l-il'n and Mike Flynn. -4t this point they coulcl not get a d ecent ruling

in their favor frona that Juclge if they tried. f---ither u-ay, SB ancl BS have things in place in

tllat courtroon' to help tls. %Ve neecl to make stlre the validity of the S/ISA never ends tlp

being decicled b),, .J tldge Xv's'-aters. That svould be a nightl-nare for all of us.

Okay. 1 naost likely gave you lnore then yotl wantecl and it's not in great order. Sorry.

Let l'ne knosv if solnething does not n-lake sense. I tlzink Joe E l'night be of sol-ne help here

too.

You guys should also read the Assignluent Of Company lnterests Agreement and the

Assul-nption Agreenzent. There are several things in the mini settlements, like Tim was to

keep paying the overhead for PC, but that ended as l1e said there was no colnmtlnity cash

flow'. $Ve now know there was, so 1 anA not stlre where m'e can t-it that in.

I-lope this helps. Edra

DM - Exhibit 11


(269 of 3



09-OOO14-RBK Doc#: 714-4 Filed: 12/1 9/12 Entered: 12/1 9/12 16:32:42 Page 1 of 13

Rough Draft Do Not Cite


DISTRICT OF MONTANA

IN RE

EDRA D. BLIXSETH,

Debtor. Case No. 09-60452-7

RICHARD J. SAMSON, as Chapter 7 Trustee ) Adversary N0. 10-88

of the Estate of Edra Blixseth,

Plaintiff,

V.

TIMOTHY BLIXSETH, DESERT RANCH LLLP,

DESERT RANCH MANAGEMENT LLC, AND DOES

1-5,

Defendants.

)

Deposi ti on of : EDRA D . BLIXSETH

volume I : Pages 1 through 300

Date : December 14 , 2012

Reported by : James Matthews , CSR NO . 7916

Page 1


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Do Not Ci te

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Deposition of EDRA D. BLIXETH, Volume taken on

behalf of the Plaintiff, before James Matthews, a Certified

Shorthand Reporter, commencing at the hour of 9:18 a.m., on

Friday, December 14, 2012, at 131-A Stony Circle, Suite 500,

Santa Rosa, California.

APPEARANCES

For the Plaintiff and the witness:

FEDERATED INDIANS OF GRATON RANCHERIA

BY: DENNIS HOLAHAN

In-House Legal Counsel

6400 Redwood Drive, Suite 300

Rohnert Park, California 94928

707.566.2288

For Defendant Timothy Blixseth:

STILLMAN & ASSOCIATES

BY: Philip Stillman

Attorney at Law

300 Southpoint Drive, Suite 4206

Miami Beach, Florida 33139

For Defendant Timothy Blixseth

HATCH, RAY, OLSEN & SANBERG, LLC

Page 2


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APPEARANCES (CONT'D):

BY: christopher J. conant

Attorney at Law

730 Seventeenth Street, Suite 200

Denver, Colorado 80202

303.298.1800

For the Trustee Richard Samson (Appearing by telephone)

DATSOPOULOS, MACDONALD & LIND, P.C.

BY: David B. Cotner

Attorney at Law

201 W. Main Street, Sutie 201

Missoula, Montana 59802

406.728.0810

For the Trustee Richard Samson

DAVIS, WRIGHT & TREMAINE, LLP

BY: Bradley R. Duncan

Attorney at Law

1201 Third Avenue, Suite 2200

Seattle, Washington 98101

206.622.3150

Page 3


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INDEX

Deposition of EDRA D. BLIXSETH, Volume

Taken on Friday, December 14, 2012

Examination by: Page

MR. STILLMAN

Afternoon Session

Exhibits:

Page 4


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MR. STILLMAN: That's the beauty of having a

transcript

A. Okay.

Q. It is what it is. Whether I say you said something

or Dennis says you said something, it is or isn't in the

transcript.

A. Okay.

Q. Do we have copies of this?

MR. CONANT: YeS.

MR. STILLMAN: Yeah.

THE WITNESS: Are we done with this?

MR. STILLMAN: Oh, no, no, we've got plenty of

that.

MR. HOLAHAN: You've gOt 50 minutes. Next exhibit.

(Whereupon Exhibit 11 was marked for

identification.)

MR. STILLMAN: Q. I'm going to put Exhibit 11 in

front of you. You've seen this document before.

A. Um-hum.

Q. And that's yes?

A. I have seen this document before, yes.

Q. And the green as we've seen before your

customary way of commenting?

Edra's comments.

Q. Yes, Edra's comments in green, correct?

Page 264


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MR. HOLAHAN: H01d on one second.

(Pause.)

MR. STILLMAN: Why don't I ask a question when I

will your counsel is -- 2 no, hold on a second. Sorry.

MR. STILLMAN: I1m Sorry.

MR. HOLAHAN: I just need a minute.

MR. STILLMAN: Sure.

(Pause.).

MR. HOLAHAN: Year going to Object to this exhibit

as work product.

MR. STILLMAN: Okay.

MR. HOLAHAN: We're going to Object to this exhibit

as work product. helped the client prepare this document.

And it's -- was work product. I'm going to object to that.

MR. STILLMAN: Okay,

MR. HOLAHAN: F0r yOu to make it an exhibit or to

ask any questions.

MR. STILLMAN: Well it's already been made an

exhibit and the client has said that this is her comments in

green so her comments are obviously not work product, Dennis.

MR. HOLAHAN: Hotel

MR. STILLMAN: SO that's the way it goes on that.

MR. HOLAHAN: Okay, this exhibit, to be to be

accurate, this exhibit which is called notes on the MSA

including amendments and mini-settlements Edra's comments

Page 265


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09-0Q014-RBK Doc#: 714-4 Filed: 12/19/12 Page 7 of 13

Do Not Cite

1 green was prepared in conjunction with her attorneys, and so

as such it is work product. And subject to the work product

privilege. So we object to it being made an exhibit and

4 request that you not make an exhibit to this deposition based

on that, and we also don't want her to answer any questions

based on it.

7 MR. STILLMAN: Well, going to be an exhibit.

8 Any work product to the extent it's even applicable has been

9 waived.

10 MR. HOLAHAN: H0w Where it waived?

11 MR. STILLMAN: It'S been I1m nOt even going to

12 get into if it's going to be an exhibit you have your rights

13 to make a motion if you want.

14 MR. HOLAHAN: Okay.

15 MR. STILLMAN: And that's just that's it. But

16 you remember the context, Edra,

17 MR. HOLAHAN: She's not going to anticipates any.

18 MR. STILLMAN: Q. DO yOu remember Why that

19 documents was created.

20 MR. STILLMAN: I'm no, sir talking about the

21 contents wore talking about creation now wore not talking

about the contents.

23 MR. STILLMAN: Q. DO y0u remember Why that was

24 created.

A. Not exactly.

Page 266

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MR. COTNER: EXCUSe me, bill I Couldn't marry quite

Dennis's objection.

MR. HOLAHAN: My Objection, Dave, that this

document did you hear my full objection?

MR. COTNER: I did but didnlt yOu in your

explanation you described communications between lawyer and

client which I trust you mean you're also objecting on a

privilege basis is that right and I'm nut sure if you

indicated that in your objection.

MR. HOLAHAN: 1'11 objecting to it On the basis of

work product you're right and attorney-client privilege.

MR. COTNER: Okay, thank you.

MR. HOLAHAN: It'S Communications between Edra and

her attorneys and it's also attorney work product, so we're

objecting to this exhibit being made -- this document being

made an exhibit to this deposition and I'm instructing the

client not to answer any questions about it.

MR. COTNER: Thanks Dennis.

MR. CONANT: Did you work on the document Mr. Who

will.

MR. HOLAHAN: You're nOt asking questions here.

MR. STILLMAN: YOu haven't laid any foundation for

why that would be work product the all.

MR. HOLAHAN: I don't have have to.

MR. STILLMAN: Sure, what makes this -- this

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Exhibit 11 and there's now a11 in green is Edra's

acknowledged is her comments and then there's

there's I'm only see -- and maybe you can help me

out -- because I'm trying to understand why this would be

work product but a11 I see is Edra's comments about each

each one.

MR. HOLAHAN: And we've made Our Objections.

MR. STILLMAN: Wait a minute, Dennis, please. A1l

I see is Edra's comments and I don't see anything at al1

this document other than Edra's comments.

MR. HOLAHAN: Y0u don't have to see anything.

MR. STILLMAN: Perhaps yOu Can me where iti

on this document that you believe to be a work product.

MR. HOLAHAN: This document was prepared pursuant

to communications between Edra and her attorneys. also

work product. It came out of my office. It's work product.

And it was prepared pursuant to communications between Edra

and her attorneys. So it's work product.

MR. STILLMAN: What attorneys? You?

MR. HOLAHAN: Me.

MR. STILLMAN: Okay. Edra and you.

MR. HOLAHAN: Work product and attorney Client

privilege.

MR. STILLMAN: Let me just make sure I gOt it.

appreciate your help. So you you tell Edra to prepare

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MR. HOLAHAN: N0.

MR. STILLMAN: Some analysis, and then she

prepares Right?

MR. HOLAHAN: I'm nOt going to go into how Or how

the document wàs prepared.

MR. STILLMAN: Well the reason I go into it is I'm

looking at it I don't see anything at a11 other than Edra's

comments so I'm not sure just because you tell Edra to write

something down it didn't moan that that becomes protected

in any way. She's got she's writing her analysis there.

MR. HOLAHAN: She Was communicating her analysis

me. I'm her attorney. It can't be simpler than that.

MR. CONANT: don't need it raise your voice Mr.

Who will.

MR. STILLMAN: Don't worry about 2.

MR. HOLAHAN: That's the communication 20 Edra and

her attorneys, it's privileged and it's work product.

MR. STILLMAN: Well I guess we'll flag that for

another day.

right let's get onto the next paragraph, then.

MR. COTNER: Before We move 0n, Phil, what's the

status of that exhibit with regard to making it part of the

record?

MR. STILLMAN: Weli it's in the record. It's

Exhibit 11. And Dennis is objecting to it being in the

Page 269


(279 of 3



09-00014-RBK Doc#: 714-4 Filed: 12/19/12 Entered: 1 2/19/12 16:32:42 Page 1 1 of 1 3

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record.

MR. HOLAHAN: I'm Objecting it it being made an

exhibit as attorney-client communication and as an attorney

work product.

MR. COTNER: I understand a11 that. So Phil is it

my understanding that we are not attaching Exhibit 11 to the

transcript?

MR. STILLMAN: NO, we are attaching it to the

transcript. It's a marked and authenticated exhibit.

MR. HOLAHAN: Who authenticated it?

MR. STILLMAN: Edra and nOw you. SO it's nOW any

privilege to the extent there was one has been long since

waived. So --

MR. HOLAHAN: And how is it waived? Why don't yOu

tell us how it was waived if it's going to be attached as an

exhibit.

MR. STILLMAN: It is going to be attached to as an

exhibit.

MR. HOLAHAN: HOW is it waived?

MR. STILLMAN: Dennis, I'm nOt going to get into an

argument with you.

MR. HOLAHAN: Why not? This seqious matter.

MR. STILLMAN: agree, and I am -- and So is this

lawsuit.

MR. HOLAHAN: When waS it waived? It's a simple

Page 270


(280 of 3



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question.

MR. STILLMAN: Dennis, I'm n0t answering your

question. I'm going to continue with the examination because

I only have 45 minutes left today.

MR. HOLAHAN: Okay, let's go.

MR. STILLMAN: If you Want to argue about it,

argue we'll argue and argue and use up the time and then

we'll that will be it and we'll come back again another

day.

MR. HOLAHAN: Okay.

MR. STILLMAN: SO I'm trying to get as much done as

I can.

MR. COTNER: Phill? Let me make a suggestion that

Exhibit 11 be placed under seal as part of the record at

least until we can determine if some kind of privilege

protects it from being part of the public record, and if that

can't be agreed upon then I would request that the court

reporter not publish the exhibits until we have an

opportunity to present the issue to the court.

MR. CONANT: Mr. Holahan, please place the exhibit

back.

MR. COTNER: I'm Sorry?

MR. HOLAHAN: DO yOu have a copy Of this for me?

MR. CONANT: Yeah, We have a copy.

MR. STILLMAN: We didn't give yOu a Copy?

Page 271


(281 of 3



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MR. CONANT: We gave you a black and white copy.

You have a copy.

MR. STILLMAN: Oh, I've gOt the black and white

copy. Here, you can have my copy. There you go.

MR. HOLAHAN: Thank you.

MR. STILLMAN: Q. A11 right. So noW let's taik

about misrepresentations made during the divorce proceedings.

Let's just go right to let's say paragraph 24.

Have you had a chance to read 24?

A. Three lines.

Q. Okay.

A. Do you want me to read the whole thing or do you

want to just start asking questions.

Q. ask questions unless you feel the need to read

the whoie paragraph.

(Pause.)

A. Okay.

Q. Well, we've already discussed, haven't we, this

morning that as of April, 2008 you knew that it was serious

financial problems with the Yellowstone Club, correct?

A. Correct.

Q. And so what representations were he relying on that

were regarding BGI the Yellowstone Club and other assets and

liabilities under his control when negotiating the MSA?

There -- even though I knew that there was a lot of

Page 272


(282 of 3



Redacted

Fom: Chehi, Mark S (mailto:[email protected]

Ant) Friday, January 09, 2009 5:20 PM

To: Andy Patten; LARRY.RMM@BULUVANT-COM; rickbirinyi@Bullivant,com; Greenspan, Ron; Fosler, Brad;

[email protected]

Cc: Levy, Evan R (NYC); Chuck Hingle; Ocketk J. Thomas; Stephen [email protected]; Saunders, Rober't S

(WIL); Greenspan, Ron; Foster, Brad; I parGzlaol-com; Shane Coleman

Sublect: RE: Order to Show Cause Hearing

Let us know when Edra and Ron wlll be arrivlng in Montana. Perhaps we can do it Monday aiernoon or evening.

From: Andy Patten gmailto:[email protected]

Rnt: Friday, January 09, 2009 7:16 PM

To: Chehi, Mark S (WIL); [email protected]; rick.birinyilBullivant.com; Greenspan, Ron; Fœter, Brad;

[email protected]

Cc: Levy, Evan R (NYC); Chuck Hingle; Ockett, J. Thûmas; [email protected]; Satlnders, Robert S

(WIL); Greenspan, Ron; Foster, Brad; I parGz@aol-com; Shane Coleman

Subjed: RE: Order tû Shcw Cause Hearing

Mark - I guess we will just have to agree to disagree. I don't know how we would do depositions between now and

Tuesday. I will inquire about some informal procedure but trying to establish something at 5:15 On a Friday night makes it

kind of difficult.

Fom: Chehi, Mark S (mailto:Mark,[email protected]

Rnt: Friday, January 09, 2009 5:08 PM

To: Andy Patlen; LARRY,REAM@BULUVAINT-COM; [email protected]

Cc: Levy, Evan R (NYC); Chuck Hingle; Yckett, J, Thcmas; [email protected]; Saunders, Robert S

(WIL); Greenspan, Ron; Foster, Brad; l parGz@aol-com; Shane Coleman

Subjed: RE: Order to Show Catlse Hearing

Andy,

For the record, the Lenders simply agreed that Ron was an acceptable CRO candidate. It goes to0 far to say that

the Debtofs ''appointed Ron Greenspan at CS's insistenœ.''

Actually, R0n Greenspan was named in the first instance and promoted by Edra Blixseth's perscnal counsel.

Edra's counsel urged the Lenders to agree to Ron Greenspan even after being told it was in the best interests of alI

padies to find a CRO that was nût had picked by Edra Blixseth. lf Ron was not seleded by Edra, who seleded him?

When it became clearthat the Company's snancial condition was even worse than dire, and the Company was not

moving towaMs employing any other CRO, the Lenders eventually agreed that Ron Greenspan was acceptable to the

Lenders.

At that time, the Lenders were very ccncened about abcut fiduciary issues, and their cûncerns were not misplaced.

The Company had no money and was requesting significant deblor-in-possesion ùnancing from the Lenders; the

Company itself had no Independent bankruptcy counsel or other counsel as far as we know; It had no management

experienced in bankruptcy' and we received a call from CrossHarbor's counsel saying CrossHafbor's counsel was

5A0001


(283 of 3



O9-O0014-RBK Doc#: 715 Filed: 12/19/12 Entered: 12/1 9/12 16:49:40 Page 2 of 2

preparing 1he Cimpany's bankruptcy filings when the Company had ne cûunsel Of its own.

The Lenders were also concerned abnut fiduciary ccnflicts related to Edra's own di#icult financial circumstances

,

her

enormous Nnancial obligations to CrossHarboq and CrossHarbor's self-interested objectives and control over the Debtors

entry into bankruptcy.

For many of the same reasons and œnflids, the Lenders have continuing concerns

.

They are elevated by

your reludance tn give up control over the claic against the insider obligol.

The Debtors' professsionals should be fncused on maximizinq the entemrise value cf the business and prcperties, and

being sure that an effective and fair sale and/cr plan process Is cnmmenced withcut delay. They should devote their

Iimded resources - - and Iimlted tlme remaining under the hair trigger CrossHarbor financlng - - to the chamer 1 1

process. I assure you that counsel for the Committee and Credit Suisse will manage the collection adion more electively

than EL'Tl and Debtors' counsel have been managing the reorganization process to date

.

It is in the best interests of the estate and aII parties for the Debtors to consenlto the Stipulation and direct their

professionals to focus on maximizing value for their creditol's in the reorganization process, not the Iitigation over the

Notes.

Let us and the Committee kncw as soon as possible what path you will take, so that we can possibly avoid unnecesssary

Iegal costs preparing forthe evidentiaœ hearing.

Please also œnfirm whether Ron Greenspan and Edra Blixseth will make themselves available for depostions and/or

informal questioning in advance of the hearing (assuming the Debtors do not consent to the Stipulation).

Also, we want to get a candid report and update in Montana on where the Debtors are in the plan/sale/marketing

process. Time is running otzt.

Fom: Andy Patten (mailto:eatten@ppbglamcomj

Ant: Friday, January 09, 2009 5:57 PM

To: Chehi, Mark S (WlL); [email protected]; rick.birinyi@œllivant.com

Cc: Levy, Evan R (NYC); Chuck Hingle; Rckett, J. Thomas; Saunders, Robert S (WlL); Stephen.Yankauer@credit-

suisse.com; Saundels, Robert S (WIL); Greenspan, Ron; Foster, Brad; Leafz@aol,com

SuWed: RE: Order to Show Cause Hearing

Mark-

I think Credit Suisse has potential conflids with lhe cclledion of these notes. The claim thatthe debtors and their legal

professionals are inevitably conflicted by Edra ignores the cro, Ron Greensqan, who was appointed at CS's insistence in

this case. More importantly, giving 1he debtors the same rights as Credit Sulsse provides additional transparency in the

process. Freezing the debtor oul of the collection of a substanlial estate asset, and one in which from aII appearances and

evidence has subtantial valuo to the eslate, iG n0t in the best interests of the estâte. Remember Credit Suisse's claim

appears to be secured to the etent of $310 million by its real estate collateral' the total remaining unsecured claims are

Iess than 50% of the face amotlnt of the notes. The debtor's interest in the asset is obvious. Plainly the debtor has a more

substantial interest in ccllcdion of the notes than dces Credit Stlisse.

l can't make Credit Suisse agree to the proposal. l thotlght it was a reasonable accomodation

.If not acceptable to

credit Suisse, so be h.

Please be assured that none of the professional are kowtöwing to either Edra or Crûss Harbor. Indeed Edra has made

no demand, reguest, suggestion or any such thing in connedion with the BGI notes. Please also be assured that the

debtor is focuslng on maximizing its recoveries for the benefit of the estate which includes aII creditors' that includes

recovery of the BGI notes and claims against any subsequent transferees.

O y don't you reconsider and allow the debtortc participate in the collection of the notes? Should the debtor engage in

any inappropriate condud you will Qbviously know. lf the debtor violates i1s fiduciafy duties tc the estate there will be a

remedy f0r you.

Andy

Redaded

5A0001


(284 of 3



09-00O142RBK Doc#: 725 Filed: 12/28/12 Entered: 12/28/12 16:29:04 Page 1 Of 5

Patrick T. Fox (#8071)


PO Box 236

Helena MT 59624

406 442 7830 ph406 442 7839 fax

[email protected]





In Re:

Jointly Administered with 08-61571 and


,

08-61573

et a1.,

Debtors.

TIMOTHY L. BLIXSETH

Adv. No. 09-00014

M.

REPLY BRIEF IN SUPPORT OF MOTIONARC S KIRSCHNER

,

TRUSTEE OF THE PURSUANT TO FEDEM L RULE OF

YELLOWSTONE CLUB LIQUIDATING BANKRUPTCY PROCEDIX 9024

TRUST

Mr. Blixseth hereby files this reply in support of Mr. Blixseth's Motion pursuant to

Federal Rule of Banknzptcy Procedure 9024 (hereinafter E<Motion').

The YCLT'S request that this Court deny Mr. Blixseth's Motion without a hearing

must be denied. First, given the Court's long-standing practice to try facts based upon live

testimony versus affidavit testimony, a hearing is required. See Transcript of December 2, 2010

Hearing , p. 18: 22-25 ('ETHE COURT: Well, I guess l'm not so certain that the case law


(285 of 3



09-00Q14-RBK Doc#: 725 Filed: 12/28/12 Entered: 12/28/12 16:29:04 Page 2 of 5

supports -- as you know from prior appearances, we don't tr

y things in this court by affidavit.'').

Second, Mr. Blixseth asserts that an evidentiary hearing should be held before a differentjudge.

ln light of the recently discovered evidence and the complete record before this Cotu't, including

the record submitted with Mr. Blixseth's recusal motion, Mr. Blixseth respectfully asserts that it

would be improper for Judge Kirscher to preside over an evidentiary hearing on the pending

Motion. Accordingly, Mr. Blixseth respectfully requests that Judge Kirscher recuse himself from

hearing this Motion and instead assign the matter to anotherjudge within the District of

Montana.

The YCLT argues that a hearing is unnecessary because Mr. Blixseth's Motion

relies on a declaration of Dennis Montgomery. Mr. Montgomely's declaration solely

authenticates documents that came from Edra Blixseth's (herein, 1çEdra'') computer.

Accordingly, Mr. Blixseth relies solely on Mr. Montgomely's lawful prodtlction and subsequent

authentication of documents. The substantive evidence the Court must consider is Edra's

statements. YCLT'S reference to Montgomery's credibility is irrelevant.

At a hearing on these issues, Mr. Blixseth will present documents and witnesses

that will establish the following: Since 2006, Edra partnered with Mr. Montgomery and relied

upon him for the success of her technology company, Blxware, LLC. Edra came to Mr.

Montgomery's defense when he opposed Mr. Flynn's motion for summary judgment seeking to

deny his bankruptcy discharge. See Exhibit 1 hereto. In late-luly 2012, Mr. Flynn served Mr.

Montgomezy with a valid and enforceable subpoena duces tecum under Fed.R.Civ. P. 69 in an

unrelated lawsuit. In compliance with the subpoena, Mr. Montgomely produced Edra Blixseth's

MacBook computer and a içthumb drive'' that Edra Blixseth asked Mr. Montgomery to store for

her. Mr. Montgomery delivered these electronic media directly to an independent computer

expert Robert Whiteford, to create forensic images of these data files, analyze when the files

were creatcd and modified, and to maintain the originals in his possession. Once Mr. Whiteford

created forensic images of these electronic media, he made them available for review in

November 2012. According to Mr. Whiteford and based upon an analysis of the documents'


(286 of 3




metadata, the documents were created and last modified by Edra. See Whiteford Declaration,

attached as Exhibit 2. On December 14, 2012, Mr. Blixseth took Edra's deposition in AP-88, the

case in which Eclra's banknzptcy tnlstee is trying to set-aside the Marital Settlement Agreement.

The full deposition transcript reveals that it was necessary for Mr. Blixseth to elicit substantial

and time-consuming testimony regarding AP-88. At the end of the deposition, Ms. Blixseth and

her attorney, Mr. Holahan, authenticated the t&Notes on the MSA'' and the deposition was

promptly terminated by Mr. Holahan.

4. While the YCLT focuses on Mr. Montgomery's credibility, it does not address the

statements made by Edra. The failure to address the substantive statements by Edra regarding

judicial intluence is telling and in itself an acknowledgment that an evidentiary hearing before a

different judge is appropriate.

Edra consistently has been fotlnd credible by this Court ln its August 16, 2010

Memorandum of Decision in this case (and in other opinions issued by this Court in other related

cases), this Court found Edra's testimony credible over that of Mr. Blixseth (other citations to the

Court's credibility findings regarding Edra are contained in Mr. Blixseth's recusal motion and

supporting documents). Thus, to the limited extent (i.e., the atlthentication of documents) Mr.

Blixseth relies on Mr. Montgomery's testimony, the underlying facts regarding the relationship

between Edra and Mr. Montgomery support the veracity of his authentication. Similarly, Mr.

Blixseth lzrges the Court to consider that the limited purpose of Mr. Montgomel-y's testimony at

the very least does not impact any material credibility issues but only reinforces the partnership

association between Mr. Montgomery and Edra and Edra's apparent willingness to share

infonuation with Mr. Montgomery for the last six years.

6. The YCLT'S contention that the evidence presented by Mr. Blixseth is not Kinewly

discovered'' is untenable. First, as set fol'th above, the evidence was not previously available to

Mr. Blixseth and only recently became available to him. The only evidence that Mr. Blixseth

received from Edra was in the summer of 2009 when Edra attempted to conceal evidence, as set

fol'th in the documents filed at Docket Nos. 473 et seq. in this case and for which this Court did

3


(287 of 3



09-0QQ14-RBK Doc#: 725 Filed: 12/28/12 Entered: 12/28/12 16:29:04 Page 4 of 5

not hold an evidentiary hearing. Edra has withheld and never produced the tçNotes on the MSA''

and &IMSA Bullet Point'' documents from Mr. Blixseth. Mr. Blixseth's presentation of the new

evidence to this Coul't is notjust a rehash of the Eçgrand conspiracy theory'' as the YCLT asserts.

This is new evidence that when construed by its plain language strongly suggests inappropriate

actions by 4CSB'' and IIBS '' and direct inference of improperjudicial influence.

The YCLT'S argument that a etnewly discovered evidence'' analysis is irrelevant

because such inquiries are only relevant under Rule 60(b)(2) is also without merit. Mr.

Blixseth's motion was not based on Rule 60(b)(2) but on Rule 60(b)(6). The Supreme Court in

L ilieberg v. Health Services Acquisition Corp., 486 U.S. 847, 864-869 (1998), made clear that

the elements and considerations that go into the ççany other reason that justifies relief ' standard

of Rule 60(b)(6) are mutually exclusive of the grounds for relief under Rule 60(b)(1)-(5). Edra's

statements that '&SB'' (i.e., Sam Byrne) had ensured the right result for her in the Montana

batlknlptcy court undoubtedly satisfies the çtextraordinat'y circumstances'' standard of Rule

60(b)(6) as set forth in f ljeberg.

Finally, Bankruptcy Local Rule 9013-149 requires that a hearing on any motion

be set no earlier than 21 days after the Response is filed. Given the nature of this Motion

,

the

Court must apply this Rule in this instance. Accordingly, Mr. Blixseth objects to the January 8,

2012 hearing date set by the YCLT as it violates L.B.R. 9013-1(9.


/s/ Patrick T. Fox

Patrick T. Fox


/s/ Michael J. Flvnn

Michael J. Flylm

One Center Plaza, Suite 240

Boston, MA 02018

Telephone: 858-775-7624

Facsimile: 858-759-0711

miker/mifescl.com



(288 of 3



09-Q0014-RBK Doc#: 725 Filed: 12/28/12 Entered: 12/28/12 16:29:04 Page 5 of 5


th d f'

,Patrick T. Fox, hereby certify under penalty of perjtlly that on the 28 ay o

December, 2012, copies of the above document were served electronically by ECF notice to a1l

persons/entities requesting special notice or othelwise entitled to same and that in addition, 1




By /s/ Patrick r Fox


(289 of 3



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Main Document Page 1 of 3

l WILLIAM E. CROCUTT (SBN 129383)

STEVEN R. SKIRVIN (SBN 179946)

2 DION-KINDEM & CROCKETT

21271 Burbank Boulevar , Suite 100

3 Woodland Hills, CA 91367

Telephone: (818) 883-44004 Fac Vlmile: (818) 676-0246

5 Attomeys for Defendants

Dermis and Brenda Montgomery

6

7

8 UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

9 LOS ANGELES DIVISION

1 0

ln re: ) Case No.: 2:10-bk-18510 BB

11 )

DENNIS LEE MONTGOMERY and ) Chapter 7

12 BRENDA U THLEEN MONTGOMERY

, )

) Adv. No. 2:10-AP-01305 BB

13 Debtors. )

) DECLAM TION OF EDRA BLIXSETH

14 ) IN SUPPORT OF OPPOSITION TO

MICHAEL JOSEPH FLYNN, ) MOTION FOR SUMMARY JUDGMENT5

) OR IN THE ALTERNATIVE FOR

Plaintif, ) SUMMARY ADJUDICATION

1 6 )

v. ) 7

)

DENNIS LEE MONTGOMERY, et a1., )8

) Date: December 6, 201 1

Defendants. ) Time: 2:00 p.m.

19 ) Courtroom 1475

) 255 . Temple Street0

) Los Angeles, CA 90012

) 1

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1 DECLAM TION OF EDRA BLIXSETH

2 1, Edra Blixseth, hereby declare as follows:

3 1. I am over 18 years of age. l have personal knowledge of the facts set forth

4 below and, if called to testify, 1 could and would testify competently thereto

.

5 2. I was majority stockholder and CEO of Opspring, LLC and Blxware, LLC

6 during the time Dennis Montgomery was an employee of these companies

Dennis

7 Montgomery was an employee from 2006 to 2009

.

8 3. The softwaze technology developed by Mr. Montgomery for both Opspring and

9 Blxware was offered to the U.S. Goverament for testing and further development

The

10 company became a contractor for this technology and it was tested within that contract

I never

l 1 received any communication from the govemment stating that the teclmology did not work as

12 represented. The members in the govermnent department with which we were working

,

13 including the people 1 worked with directly, never expressed any concems of fraud or that the

14 teclmology was a shnm.

15 4. To the best of my knowledge, the only person who has said this teclmology

16 doesn't work is Mr. Flyrm, those who were quoting Mr

.

Flynn or those solicited for sucfk

17 statement by Mr. Flyrm. The statements and actions of Mr. Flynn seemed to start

18 simultaneously with both the termination of his son's employment with the company and Mr

19 Flynn's termination of his services as our lawyer

Just prior to this, Mr. Flynn was attempting

20 to pressure the company into giving him pa14 ownetship of the company and the teclmology

.

2 1

22 I declare under penalty of perjury under the laws of the United States of America that

23 the foregoing is true and correct to the best of my knowledge

.

24 Executed this 14th day of November

,

201 1, at *

,

O .

25

26

EDRA BLIXSETH7

28

2


(291 of 3



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1 NOTE: When using this form to indicate service of a prepesed order, DO NoTlist any person or entity in

Categery 1.

2 Proposed orders do not generate an NEF because only orders that have been entered are placed on

the CM/ECF docket.

3

PROOF OF SERVICE OF DOCUMENT

4

l am over the age of 18 and not a pady to this bankruptcy case or adversary proceeding

.

My business

5 address is: 21271 Burbank Blvd. Suite 100, Woodland Hills

,

CA 91367.

6 A true and correct copy of the foregoing document described as Beclatation of Edra Blixseth fn

slzpport of Oppositlon to Motion for Summaw Jlzdpmentwill be served or was served (a) on the

7 judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner indicated

below:

8

1. TO BE SERVED BY THE COURT VlA NOTICE OF ELECTRONIC FILING (t'NEF'') - Pursuant to

controlling General Orderls) and Local Bankruptcy Rulets) CLBR''), the foregoing document will be

served by the court via NEF and hyperlink to the document. On November f5v 2011, I checked the

CWECF docket for this bankruptcy case or adversary proceeding and determined that the following0

personls) are on the Electronic Mail Notice List to receive NEF transmission at the email addresstes)

indicated below:1

.

Thomas M Geher, [email protected], Christopher Conant, [email protected]

Jason M Rund, [email protected], [email protected]

United States Trustee (LA), [email protected]

13 Lservice information continued on attached page

14 II

SERVED BY U.S. MAIL OR OVERNIGHT MAIL (indicate method for each person or entitv served):

On November f5, 2011. I served the following personts) and/or entitylies) at the Iast known5

addresstes) in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof

in a sealed envelope in the United States Mail first class, postage prepaid, and/or with an overnight

16 mail service addressed as follows. Listing the Judge here constitutes a declaration that mailing to the

judge will be completed no Iater than 24 hours after the document is filed.

17

Raphael 0. Gomez (Rejular Mailj The Honorable Sheri Bluebond

18 U.S. Department of Justlce United States Bankruptcy Court

20 Massachusetts Av NW/PO Box 883 Edward R. Roybal Federal Building

19 Washjngton

,

DC 20044 255 E. Temple Street, Suite 1422

Counsel for Interested Party, U.S. Government Los Angeles, CA 90012

20

Zservice information continued on attached page

2 1

111. SERVED BY PERSONAL DELIVERK FACSIMILE TRANSMISSION OR EMAlLtindicate method

22 for each person or entitv served): Pursuant to F.R.CiV.P. 5 and/or controlling LBR, on November 15

.

20f#, I served the following personls) and/or entityties) by personal delivery, or (for those who

23 consented in writing to such service method), by email as follows. Listing the judge here consdtutes a

declaration that personal delivery on the judge will be completed no Iater than 24 hours after the

24 document is sled.

Zservice information continued on attached page

25

l declare under penalty of perjury under the Iaws of the United States of America that the foregoing is

:6 true and correct.

zy November 15, 2011 Steven R. Skirvin /Wsteven R. Skirvin

Date Type Name Signature

28

3


(292 of 3



x

x .

'

.

: ' '

.

O9-00014-RBK Doc#: 725-2 '.. 'pilàd' 12/28/1:Entered: 12/28712 16:29:04 Page 1 Of 3

Patrick T. Fox (#807 1)


PO Box 236 ' '

Helena MT 59624

406 442 7830 ph

406 442 7839 fax

patrickfox@doubekpyfer.çom

Attorney; for Timothy 1=.Blirseth

UMITED STATES BANKRUPTCY COURT


'

'

Case No. 08-61570.1 I-RBK

In Rc:

J intly A4ministered with 08-61571 and


,

08-61573

et a1.,

Debtors.

TIMOTHY L, BLIXSETH

Adv. No. 09-00014

V.

j ops zus DECLARATION OF ROBERT WHITEFORDARC S KIRSCHNER

,

TRUSTE

YELLOWSTONE CLUB LIQUIDXTING

TRUST

1, Robert Whiteford, do hereby declare as follows:

i hteen years of age and have personal knowledge of the Vcts testified am over e g

to herein.

With respect to my experience and knowledge, I hereby incorporate by reference

my sworn statements set forth in my declaration, Paragraph 2.

On September 25, 2012, Dennis L. Montgomery had an Apple Power Mac 65

compttter (serial number 6853 1 1 IURUO) delivered to me by Brian Calhoun. This computer

* g


(293 of 3



O9-OOOl4-RBK Doc#: 725-2 Filed: 12/28/12 Entered: 12/28/12 16:29:04 Page 2 of 3

contained one hard drive (Model WD3200AAKS, Serial Number WCAWFD924346).

On September 25, 2012, Mr. Montgomery had a hard drive (Model

WD3200AAKS, Serial Number WCAWFD940504) delivereé tb me via UPS (Tracking Number

127174Y152468329746). This drive is a SATA hard drive that was not installed in a computer or

external enclosure. This is commonly known as a (tbare drive''.

Mr. Montgomery inforped me that these devices were Edra Blixseth's and that

Ms. Blixseth left these devices in his custody and control.

6. Upon receiving these devices, I made forensic image copies of the files contained

thereon. The process of making these forensic images ensured that the Cdmetadata'' on the files

was prestrvtd unaltertd so that a user of the files could review the ttmctadata'' on these files and

from that ismetadata'' determine the date that the files were created and the Iast that they were

modified.

From the Power Mac hard drive I retrieved the file known as S'Notes on the

MSA.doc''. I reviewed the metadata on this f5le and found that this document was created on

09/20/2009 09:33:37 and last modified on 10/23/2009 l 5:3 1 :49.

8. From the bare drive drive l retrieved the document known as S'Dl-lpoints.pdf '.

Mr. Montgomery refers to this file as S'MSA Bullet Points''. I reviewed the metadata on this file

and found that this document was created on 07/1 7/201 1 19:1 8:10 and last modified on

07/17/201 1 19:18:1 1.

9. l reviewed informatipn on the Power Mac to determine if the computer clock had

been altered in such a way that would allow a user to manipulate the metadata contained on the

files thereon. I found no indication of any such tampering.

k

w

I declare under penalty of perjury of the laws of the United States that the foregoing is

true and correct to the best of my knowledge.

2


(294 of 3



O9-0OO14-RBK Doc#: 725-2 Filed: 12/28/12 Entered: 12/28/12 16:29:04 Page 3 Of 3


Robert Whiteford


lt of perjury that on the 27th day of, Patrick J. Fox, hereby certifz under pena y

December, 2012, copies of the above document were served electronically by ECF notice to a11

perspns/entities requesting special notice or otherwise entitled to same and that in addition, I




By /s/ Patrick s/ Fox


(295 of 3



Edra D. Blixseth, Volume I - December 14, 2012


DISTRICT OF MONTANA

IN RE: )

EDRA D. BLIXSETH, )

Debtor. ) Case No. 09-60452-7

)

RICHARD J . SAMSON , as Chapter 7 Trustee ) Adversary N0 . 10-88

of the Estate of Edra B1i xseth ,

Plai nti ff , )

)

TIMOTHY BLIXSETH ; DESERT RANCH LLLP ; )

DESERT RANCH MANAGEMENT LLC ; AND DOES )

1- 5 , )

Defendants . )

Deposi ti on of : EDRA D . BLIXSETH

Volume I : Pages 1 through 305

Date : December 14 , 2012

Reported by : James Matthews , CSR No . 7916

Page 1

YATES COURT REPORTERS 800.669.1866


(296 of 3




1 Deposi tion of EDRA D. BLIXSETH , Volume I , taken

2 on behalf of the Defendant Timothy Blixseth , before James

3 Matthews , a Certi f i ed Shorthand Reporter , commenci ng at

4 the hour of 9 :18 a.m. , on Fri day, December 14 , 2012 , at

5 131-A Stony Ci rcle , Sui te 500 , Santa Rosa, Cali forni a.

6

7 APPEARANCES :

8

9 For the Plai nti ff and the Wi tness :

10 LAW OFFICES OF DENNIS HOLAHAN

11 BY: DENNIS HOLAHAN

12 Attorney at Law

13 3640 Ke1 sey Knoil s , Sui te 832

14 Santa Rosa, Ca1 i forni a 95403

15 707 . 62 3 . 9116

16

17 For Defendant Timothy B1i xseth :

18 STILLMAN & ASSOCIATES

19 BY: Phi li p Sti i lman

20 Attorney at Law

21 300 Southpoi nt Drive , Sui te 4206

22 Miami Beach , Florida 33139

2 3

24

2 5

Page 2



(297 of 3




1 APPEARANCES (CONT' D)

2

3 For Defendant Timothy Blixseth

4 HATCH , RAY, OLSEN & SANDBERG , LLC

5 BY: Chri stopher J . Conant

6 Attorney at Law

7 730 Seventeenth Street , Suite 200

8 Denver , Colorado 80202

9 303 . 298 . 1800

10

11 For the Trustee Ri chard Samson (Appeari ng telephoni cally)

12 DATSOPOULOS , MACDONALD & LIND , P .C .

13 BY: Davi d B . Cotner

14 Attorney at Law

15 201 W. Mai n Street , Suite 201

16 Mi ssoula, Montana 59802

17 406 . 728 . 0810

18

19 For the Trustee Ri chard Samson

20 DAVIS , WRIGHT & TREMAINE , LLP

21 BY: Bradley R. Duncan

22 Attorney at Law

23 1201 Thi rd Avenue , Sui te 2200

24 Seattle , Washi ngton 98101

25 206 . 622 . 3150

Page 3



(298 of 3




1 INDEX

2 Deposi ti on of EDRA D . BLIXSETH , Volume I

3 Taken on Fri day , December 14 , 2012

4

5 Exami nati on by: Page

6 MR . STILLMAN 6

7 Af ernoon Sessi on 139

8

9 Exhi bi ts : Page

10 1 November 5 , 2008 e-mai 1 f rom Denni s to Edra 69

11 B1 i xseth and previ ous e-mai l

12 2 Af f i davi t of E . Bl i xseth i n Support of B1 i xseth 101

13 Fami ly Investments , LLC' s Emergency Moti On for a

14 Temporary Restrai ni ng Order and Order to Show

15 cause Regardi ng Prelimi nary Injuncti on and for

16 Expedi ted Di scovery

17 3 Agreement between Ti m and Edra B1i xseth dated 129

18 J u ne 4 , 2008

19 4 Apri l 16 , 2008 e-mai 1 f rom Zemosv@aol . com to 155

20 Jory Russei 1 and previ ous e-mai l s

21 5 Assumpti on Agreement 168

22 6 U .S . Department of Justi ce l etters to Ti mothy 200

23 Blixseth dated November 8 , 2007 and December 12 ,

24 2007

25 (Conti nued)

Page 4



(299 of 3



Edra D. Blixseth, Volume I December 14, 2012

1 Exhibits: Page

2 7 August 11, 2008 e-mail from LearGz to dennis and 214

3 previous e-mail

4 8 Order Approving Waivers and Releases 227

5 9 December 29, 2008 e-mail from LearGz to Sam Byrne 245

6 10 Amended Complaint 250

7 11 Notes on the MSA, including amendments and the mini 268

8 settlements

9 12 TaX Analysis Memo 279

10 13 June 26, 2008 letter from Timothy Blixseth to Edra 293

11 Blixseth signed by Edra Blixseth and copy signed

12 by Timothy Blixseth

13 14 June 1O, 2008 letter from Jaffe to Edra Blixseth 294

14 15 November 2, 2011 letter from Holahan to Kolodny, 3O3

15 conant, Hatch and Flynn

16

17

18

19

20

21

22

23

24

25

Page 5



(300 of 3




1 Q. Well, and you -- mean -- you often refer to

2 people by -- in, you know, initials and stuff like that in

3 your e-mails.

4 A. Oh, a11 the time.

5 Q. Right?

6 A. Yeah.

7 Q. So you know, I don't know Dennis, would he be a

8 DM?

9 A. I'm sure. His name is Dennis Montgomery. SO

10 Q. And of Course we're going to get into this a littie

11 bit later. But I know I've seen, you know, Sam Byrne was

12 referred to as SB. That was something that you normally did?

13 A. I'd have to see it because I know others that are

14 SB. But probably.

15 Q. And Tim I guess we've talked about is Toxic?

16 A. That's not the only thing I refer to him as but

17 Toxic is one of them.

18 Q. Okay. And Mike Flynn would be MF?

19 A. MF.

20 Q. Right?

21 A. Yeah.

22 Q. And I think and Burt Sugarman?

23 A. And that could be other things besides Mike Flynn

24 as weli.

25 Q. Depending on the context.

Page 76



(301 of 3




1 EDRA D. BLIXSETH

2 having first stated that she would testify the truth, the

3 whole truth, and nothing but the truth, testified as follows:

4 EXAMINATION BY MR. STILLMAN

5 MR. STILLMAN: Q. A11 right. Good morning, Mrs.

6 Blixseth. We've agreed we're going to be a little bit

7 informal and call you Edra since there's obviously also Tim

8 Biixseth, so we'll refer to Tim as Tim and you as Edra if you

9 don't mind.

10 A. Perfect.

11 Q. Good. We've never met?

12 A. No.

13 Q. My name is Philip Stillman and I'm one of Tim

14 Blixseth's lawyers. We're here obviously for your deposition

15 in Adversary Proceeding Number 88 that's pending in Montana

16 Bankruptcy court in the bankruptcy case that you had fiied

17 personally.

18 So before we get started I know you've been deposed

19 and testified many times, so we'll kind of fast forward

20 through that. But you understand of course you're testifying

21 today under penalty of perjury?

22 A. I do.

23 Q. And you understand that the court reporter is

24 taking down everything and the idea here is to 1et me get a

25 complete question out and you get a complete answer out

Page 6



(302 of 3




1

2

3

4

5

6

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

or Dennis says you said something, it is or isn't in the

transcript.

A. Okay.

Q. Do we have copies of this?

MR. CONANT: YeS.

MR. STILLMAN: Yeah.

THE WITNESS: Are we done with this?

MR. STILLMAN: Q. Oh, n0, nO. We've g0t plenty of

that.

MR. HOLAHAN: Youlve gOt 50 minutes. Next exhibit.

(Whereupon Exhibit 11 was marked for

identification.)

MR. STILLMAN: Q. I'm going to put Exhibit 11 in

front of you. You've seen this document before?

A. Um-hum.

Q. And -- that's yes?

A. I have seen this document before, yes.

Q. And the green is as we've seen before your

customary way of commenting?

A. Edra's comments.

Q. Yes. Edra's comments in green, correct?

MR. HOLAHAN: Hold on One second.

(Pause.)

MR. STILLMAN: Why don't I ask a question while

your counsel is --

Page 268



(303 of 3




1 MR. HOLAHAN: NOj hold on a second. Sorry.

2 MR. STILLMAN: I'm Sorry.

3 MR. HOLAHAN: I just need a minute.

4 MR. STILLMAN: Sure.

5 (Pausea)

6 MR. HOLAHAN: We're going to Object to this exhibit

7 as work product.

8 MR. STILLMAN: Okay.

9 MR. HOLAHAN: We're going to Object to this exhibit

10 as work product. I helped the client prepare this document.

11 And it's was work product. I'm going to Object to that.

12 MR. STILLMAN: Okay.

13 MR. HOLAHAN: FOr yOu to make it an exhibit or to

14 ask any questions.

15 MR. STILLMAN: Well, it's already been made an

16 exhibit, and the client has said that this is her comments in

17 green. So her comments are obviously not work product,

18 Dennis.

19 MR. HOLAHAN: Hold it.

20 MR. STILLMAN: SO that's the Way it goes On that.

21 MR. HOLAHAN: Okay. This exhibit, to be to be

22 accurate, this exhibit which is called Notes on the MSA,

23 including amendments and the mini settlements, Edra's

24 comments in green was prepared in conjunction with her

25 attorneys, and so as such it is work product and subject to

Page 269



(304 of 3



1 the work product privilege. So we object to it being made an

2 exhibit and request that you not make an exhibit to this

3 deposition based on that, and we also don't want her to

4 answer any questions based on it.

5 MR. STILLMAN: Well it's going to be an exhibit.

6 Any work product to the extent it's even applicable has been

7 waived.

8 MR. HOLAHAN: HOW? Where is it waived?

9 MR. STILLMAN: It'S been -- I'm nOt even going to

10 get into it. It's going to be an exhibit. You have your

11 rights to make a motion if you want.


13 MR. STILLMAN: And that's just that's it.

14 Q. But you remember the context, Edra?

15 MR. HOLAHAN: She's not going to answer any --

16 MR. STILLMAN: Q. DO yOu remember Why that document

17 was created?

18 I'm not talking about the contents, we're talking

19 about creation now. We're not talking about the contents.

20 Q. Do you remember why that was created?

21 A. Not exactly.

22 MR. COTNER: EXCUSe me, Phil.

23 MR. STILLMAN: Yeah?

24 MR. COTNER: I Couldn't quite hear Dennis's

25 objection.

Page 270




(305 of 3




1 MR. HOLAHAN: My Objection, Dave, is that this

2 document -- did you hear my full objection?

3 MR. COTNER: I did, but I didn't -- you, in your

4 explanation you described communications between lawyer and

5 client which I trust you mean you're also objecting on a

6 privilege basis; is that right? And I'm not sure if you

7 indicated that in your objection.

8 MR. HOLAHAN: Iïm Objecting to it On the basis Of

9 work product. You're right. And attorney-client privilege.

10 MR. COTNER: Okay, thank you.

11 MR. HOLAHAN: It'S Communications between Edra and

12 her attorneys. And it's also attorney work product. So

13 we're objecting to this exhibit being made -- this document

14 being made an exhibit to this deposition, and I'm instructing

15 the client not to answer any questions about it.

16 MR. COTNER: Thanks, Dennis.

17 MR. CONANT: Did yOu work on the document, Mr.

18 Holahan?

19 MR. HOLAHAN: You're nOt asking questions here.

20 MR. STILLMAN: YOu haven't laid any foundation f0r

21 why that would be work product at all.

22 MR. HOLAHAN: I don't have tO.

23 MR. STILLMAN: Sure, what makes this -- this is

24 Exhibit 11, and there's now a11 in green is Edra's

25 acknowledged is her comments -- and then -- there's --

Page 271



(306 of 3




1 there's -- I'm -- I only see -- and maybe you can help me

2 out because I'm trying to understand why this would be

3 work product -- but a11 I see is Edra's Comments about each

4 one.

5 MR. HOLAHAN: And We've made Our Objections.

6 MR. STILLMAN: Wait a minute, Dennis, please. A11

7 I see is Edra's comments and I don't see anything at a11 in

8 this document other than Edra's comments.

9 MR. HOLAHAN; YOu don't have to see anything.

10 MR. STILLMAN: Perhaps y0u Can tell me where it is

11 on this document that you believe to be a work product.

12 MR. HOLAHAN: This document waS prepared pursuant

13 to communications between Edra and her attorneys. It's also

14 work product. It came out of my office. It's work product.

15 And it was prepared pursuant to communications between Edra

16 and her attorneys. So it's work product.

17 MR. STILLMAN: What attorneys? You?

18 MR. HOLAHAN: Me.

19 MR. STILLMAN: Okay. Edra and you.

20 MR. HOLAHAN: Work product and attorney Client

21 privilege.

22 MR. STILLMAN: Let me just make sure I gOt it.

23 appreciate your help. So you -- you tell Edra to prepare --

24 MR. HOLAHAN: NO.

25 MR. STILLMAN: -- Some analysis, and then she

Page 272



(307 of 3




1 prepares it. Right?

2 MR. HOLAHAN: I'm nOt going to go into h0w -- or

3 how the document was prepared.

4 MR. STILLMAN: Well, the reason I go into it is

5 because it doesn't -- I'm looking at it. I don't see

6 anything at ai1 other than Edra's comments. So I'm not sure

7 just because you tell Edra to write something down -- it

8 doesn't mean that that becomes protected in any way. She's

9 got -- she's writing her analysis there.

10 MR. HOLAHAN: She was Communicating her analysis to

11 me. I'm her attorney. It Can't be simpler than that.

12 MR. CONANT: Y0u don't need to raise your Voice,

13 Mr. Holahan.

14 MR. STILLMAN: Don't worry about.

15 MR. HOLAHAN: That's the communication between Edra

16 and her attorneys. It's privileged and it's work product.

17 MR. STILLMAN: Well I guess we'll flag that for

18 another day.

19 A11 right, let's get onto the next paragraph then.

20 MR. COTNER: Before we move On, Phil, what's the

21 status of that exhibit with regard to making it part of the

22 record?

23 MR. STILLMAN: Well, it's in the record. It's

24 Exhibit 11. And Dennis is objecting to it being in the

25 record.

Page 273



(308 of 3




1 MR. HOLAHAN: I'm Objecting to it being made an

2 exhibit as attorney-client communication and as an attorney

3 work product.

4 MR. COTNER: I understand a11 that. So Phil, is it

5 my understanding that we are not attaching Exhibit 11 to the

6 transcript?

7 MR. STILLMAN: NO, we are attaching it to the

8 transcript. It's a marked and authenticated exhibit.

9 MR. HOLAHAN: WhO authenticated it?

10 MR. STILLMAN: Edra and nOW you. SO it's nOW, any

11 privilege, to the extent there was one, has been long since

12 waived. So --

13 MR. HOLAHAN: And how is it Waived? Why don't you

14 tell us how it was waived if you're going to attach it as an

15 exhibit.

16 MR. STILLMAN: It iS going to be attached as an

17 exhibit.

18 MR. HOLAHAN: HOW is it waived? HOW iS the

19 privilege waived if this is the first time --

20 MR. STILLMAN: Dennis, I'm nOt going to get into an

21 argument with you.

22 MR. HOLAHAN: Why not? This is a Serious matter.

23 MR. STILLMAN: I agree, and I am -- and SO is this

24 lawsuit.

25 MR. HOLAHAN: When waS it waived? It'S a Simple

Page 274



(309 of 3




1 question.

2 MR. STILLMAN: Dennis, I'm nOt answering your

3 questions. I'm going to continue with the examination

4 because I only have 45 minutes left today.

5 MR. HOLAHAN: Okay, let's go.

6 MR. STILLMAN: If y0u want to argue about it 1'11

7 argue -- we'll argue and argue and use up the time and then

8 we'll -- that will be it and we'll come back again another

9 day.


11 MR. STILLMAN: SO I'm trying to get as much done as

12 I can.

13 MR. COTNER: Phil? Let me make a suggestion that

14 Exhibit 11 be placed under seal as part of the record at

15 least untii we can determine if some kind of privilege

16 protects it from being part of the public record, and if that

17 can't be agreed upon then would request that the court

18 reporter not publish the exhibits until we have an

19 opportunity to present the issue to the court.

20 MR. CONANT: Mr. Holahan, please place the exhibit

21 back.

22 MR. COTNER: I1m Sorry?

23 MR. HOLAHAN: D0 y0u have a copy of this for me?

24 MR. CONANT: Yeah, we have a copy.

25 MR. STILLMAN: We didn't give you a Copy?

Page 275



(310 of 3




1 MR. CONANT: We gave yOu a black and white copy.

2 You have a copy.

3 MR. STILLMAN: Oh, I've gOt the black and white

4 copy. I'm sorry. Here, you Can have my copy. There you go.

5 MR. HOLAHAN: Thank you.

6 MR. STILLMAN: Q. Al1 right. So now let's talk

7 about misrepresentations made during the divorce proceedings.

8 Let's just go right to let's say paragraph 24.

9 Have you had a chance to read 24?

10 A. Three lines.

11 Q. Okay.

12 A. Do you want me to read the whole thing or do you

13 want to just start asking questions?

14 Q. 1'11 ask questions unless you feel the need to read

15 the whole paragraph.

16 (Pause.)

17 A. Okay.

18 Q. Well, we've already discussed, haven't we, this

19 morning, that as of April 2008 you knew that it was serious

20 financiai problems with the Yellowstone club, correct?

21 A. Correct.

22 Q. And so what representations were you relying on

23 that were regarding BGI, the Yeliowstone club and other

24 assets and liabilities under his control when negotiating the

25 MSA?

Page 276



(311 of 3



Notes on the MSA, including amendments and the mini settlements

(E(Ira's conllnents in Green)

Full MSA - Paaes 1 - 42 - Case No. 111D1N1)91152 in the Riverside Count'v, CA

M 1 of Page 1 says, tt-fhis Stipulation is entered into for the purpose of

compromising and settling contested issues between the parties. If for any reason

the waivers and releases in this Stipulation are not accepted by the Court and this

Stipulation becomes null and void, or this Stipulation fails for any other reason

whatsoever, nothing oontained herein shall be an admission of fact or a statement

against interest. Each party has refrained from making contentious statements, or

asserting positions, which might cause the other to be upset, so that compromise

and settlement could be promoted and achieved.''

-

/Xl so, reiueluber tllat ufas corngletely l'-ozen out of a 11 thtz conlpanies and ally

illfbf-lllatitln .11-() n-t shol-tly i'l.f't'er ( t5led 'Ibl' divorce (Jlec.06 ) until j ust at betbre tlle closillg

o f t k e t'' l , a l ' . S -A .

K 4 of Page 2 - Read aII of it and A - C

T-'1eh

., could use thi s as al' al-gttnlent tllat w'e agreecl not to go back to tllfz vall Les 01.- tl-te

assets hîze agreed to take. l NN;ill go J nto tl-te dsfferellt assets as 'bvtt go throug h thi sa but ol-je

tlling tlèat shotlld be pointed out here, is Til'n' s very ()vv1) testinlony 1*:1 tlle fanlily c.otll4.

1'-1e Illadtl rtqally f-alse statelllents. szvhen 1 'svot.l-d point tllat. otlt to tlle Judge 'h$ ''a el's, l1eI-

-esponse vvas alrvays that -1-1 lm being gi ven the (.'.p plion of the S llip title fol- ottr assets bl..

a . . .

hel- llad a 15 du ci a 17-, respon si b - I 1 ty t o i'l-le- if 1 t xr$/t. s fotlllcl t Iyat 1.e v-.as Ilot tell 1 ng the tl-uth.

z'' jrevv exannp 1 f.: s ot- thi s vvoul d l)e -1-1 n.l stati ng tlla t tllei. 1- x&zwas 1'10 coill lnu 111 t y cash tl()ï,,

î.v.' i) e1) I1e ' vas tak 1 ng ftl nds 171-0 n'l B ig S p ri l'lg' s Rea l 1 t j'' ( l') ot pay 1 j) g colu I 1) 1 s s - o 11s to t 11e s:' l es

peoplel; Sunri se Ridge (

/lot Ilal,/ii'lg tIpe lli-èl-t'llel-s tlleil- shap-e 'kvhen he took f-tdllt1sl, sell 1 ng

colulllu 171 ty assets and t.1 sing the '-l 11(1 s Nvithotlt a (11 %' 1 si (-731 gi ven 'to luex a 11:1 t'llel-e al-e J'llore

fzxaluples.

-1-1 n) a l s() li ed il).a l'leari ng Avhell I 'tvas t l-yi llg' t.o stop t--7.-1 fron'i buyi 1)g tl'le golf course Illts.

fl-l-sta Ile had a sales pel-solln E ric 1.-.1.(1(1. llot the N?-l3.of w-tcles, Avll ich Avotllti be nqol-e

tand a rd subluit t) n aft-ldavi ( supportilèf. , -1-1- n-1 - s cl a 1 n-1 of tl'le valtle of the L o t s. Ti nn stated

c . w

that no col-nl' issi olls vvere being pai d for the sale 01:- these l-ots to C--l-l .''fc. t- later vve 1511(1

out tl-i at none other then E'- ri c .La(ld svas pronni sed 5 Ookz--,of vvhi ch 2 50k- ïvas pai (1 to hi i'n .

'-- ri c later fl le(l a stli t allu1 got a 1 udgnnellt agai nst l-ne fol- greater thell tlli s almotlnt.

K 8 of Page 4 aIl of page 5 - Can yol.l l'eaul and tel l lue if you think this is billding or

it goes t() the fraucl that vve talked abotlt? - (::h (&.;, .

: ExlllBlT

l >

8 .

.

.

-

,-

v6 - fo j.çzg/u...


(312 of 3



* 16 of Page 6 and all references to BGI stock below

-1-111 s 1 s v-zllel'e ( 111- 1.1 us co tl l d ttet'a I itt 1f.. u' l-ev t() 'îs-l-la't i s vvrit ten vvha t 'vas saitl ét 1-f(. àvhtl t 'vvas

u

.

u.' w. .. '

i nten d ed. Nt ,-1 e talci 11

::

:' 21 ).e B C.'l stock Nva s t 11 e 'k-a s; t o fi 1 ) a l l v qet P Q'- tl n(1 (- a sa (. a1) ti v (1 1 n to

' .. <. 1

-

1 e a l ohvncl-shi 1) tl t1'el- Ile1 1-1 q a3-N.al-(.ed it 1 1) tl-le sect-lnt. n).1 ni settlen-tellt . 1 f .0t. v/i 1 1 q()Fl J.

,

g . . ) ...

back al-td rea d those yotl vvi l 1 fl n(l that ''Fi 1'n a l-ld 141 s a ccotlnîa 11t s vvere to l'i nd a hvay 1'o g et

'?c)l'1) (-f'tlle se assets 1 nl.'t) nlv nal'ne ï.lthtltl.t creati nq tax issues. Taki ng the '1%Cz' 1. stock lltnn.',

.

'

tl-3. the 'F' n al êN?'I. % ?t.: I vvas to ld Axrould resolve.t 111 s . ?'N. I so- si ncc 1 vvas also ta ki nq the N'C

t 1- 't 1 e 1 t s e el 1'1 e d l 1 k a 1 ) at tl ra l t s 1 n'l p l v t a k e. -l- 1 nn ' s o vvners h I. o f t e s o c 1N; .n

. .

( Ittznael-nbel's i 17 t'I-totl qh a1l ol- tlle st ock vva s -n -1- 1 1.11 ' s l'al-n e, 1 t vvas sti 1 1 a co 1..,11,1) ulli t'v

Jll-tnlnerl&v' a Sfitlt. )

1 yvent int () thi s agreenl ellt sti 11 ''i tl1 tlle ullderstantl ing ti-lat botl) e'-i 11-) a nd ta'- eo rge .Ek1 at: k

l) ak-l t o l d i -f) e that t 1) e BC.) l n ot es to 'Y D1 a 'xel 1 11 s t l 'le 'I- 1 11-t 1) I 1 x selh note s to (-) G' 1 ( A.ll - c.I ) l

end ed kl 13 u,.1 t h as u-eei 1.J NN z'otl ld llave a vv:4 jt o f' svoi-k i ag tlleln otlt a s yeai-s v.,'e1)t' along as

llfoy-gi vel-l'' vvhell '?e needed the tax 'vvrite ofihs 1-- lu 1) ad a l ï&'a ys sa i d tllat . 1 vvi 1 1 go i nto

t 1) i s 1 1) 1) ' ore d eta 1 ) .11 en 1 t a lk abotlt the -I- a lrlcre ) d o t ra n s fel'. 1) L.l t 7- 1 l-n a 1 st) sa 1 d t 1,1 at abo tkt

tlèe .1.()1-l'11'11 fol- tllat.

LJ t'l(') I't the cl osi 1lg of- the '. /lS A .z tlle ba nk accotll-its l-lad beel't (lra ilèed a ntl/0 - 'vvel'e

ovurd raxvn . Pat c:4 ().g'o i nto l-aore detai 1 s ()f tllat as Lve 11 . 1'- 01:- course- vva s not c.ouati ng ol'l

t'li s . l3ot 1) -s% na eri call 13 a nk :1.1):.. Pal 1-11 I'lt'?sel't accou rlts yvere li ke th - s .

M (a) of Page 7

7-' llad also siqned a ktreen? ents t'ko sol-ne lnallaçzenaenf' ï-ol' 'Rt ,. ndl-eAvs a 1-1 e1- t.ur sittnil'q

1 j1-) . cp w . w .

of klloza. -'1 nf. l '%'aas uetti n a tlli s. J.le di (1 t'is both 1 :1 A. ? .1 :1 nd i 1) Af(-'tV

M (c) of P. ao'e 7 - This (1. 1 d nol' -laplleil and 'w-e haq.q 1 sstl es tryin q 1,o J-llalf (.) 1 t lla ppen.

& . u

t-J'' (e) of Page 7 - Talk to pïntly Patte.n alltltll this. lt vvas brtAught tlp i,) t 1)t7 (JC-(.- v.s.

C--S and 'Fi 1-1.1 B' lixsel'h svith hoAv Tin: bought and sol d thi s to hilusel t- By tlle time 1'

got it- he had taken 1he value out of it dl-ll'ing 'the til-tttcl l Nvas t'i-ozen otlt ofthe

busi yèesses. N-C. had an expert testify 'vit h htluz' tl-lis 'w-as halld' 1ed .


(313 of 3



* B. of Page 9 - I'/C--IV Nvas insolvent Nvhell 1 i-eceiv-ed it.

vv/otl ld Ila'î-,'e 1,0 yvay otll.l'lo''ing that.

* C of Page 10 and (1) - (3)

-1-1,te '.&-'a'y t 1-i- s 1 s ïvl-i tt en 1'

'' 'b

kt-gai n- z' dy Pattel) .v1 11 be helpful here. Ti lu di d not disclose that 1)e llè'ttl takel) 1-17-1 1 l 1 olls

otlt o#- Bi g Spl-i ng lleal - ty before tlli s and had l'ot Ilaid col-nlmi ssi ons. l-llere has beell

soluetlling 1'1 I e(l agai 11 st l)i ')p (.11 tl- * s . ztkndy 'vi 11 have tlle d etai 1 s. 'Fhi s i s al so vvl-terc he

states tllat f'-'r- c lwadd 'vas Ila1 d a co nllnission for the (.1.01 f Ca()llrse 'Lot sal e tt7 C.-'1-1 . l'n

fa 1'ë) 1 ly cotl 1-t 11,t' t essi f-ied tha.t th el-e vvas no con) i)) i ssi o 1) s to bfz pai d- bu t 1) e alrea d j' had tlle

dea l vvi t 11 Fcric yvh i c11 1 be l 1 eve is llol-r.k' he got E ri c to gi ve t I)e sta tef 'nent of N.-:4 l u e. 7-11 i. AJP

of %- ales sllould hav'e tlone tIlat, 11:- it Mzere to be (ltal'te- btlt he could not be -Lbtltlgllt-- .. N' ')

5001c vvas not llearly vvhat 'ura s ovv/ecl tt) tl'te sa les people . l k lpovv that (-' harl - e vvotllll be

llallpy to ta1 k hvi t I l yotl abotlt the exact all) ounts, btlt thi s should a I so be J' 1: hvhat 'ïvas '151 ed .

A t the ti lrte -1-i 1n (1 *1d not pay them. î,l) 1 ch svas lnuch l ()llgeq- tI) el') -û3() - 6 0 d ays 1 11 an-ears-;

1-1 e told tllel'l) tilat the nnon ey vvas nfzeded t o 5/C.1 (. pera ti olls . ''l-lley 1 a tey' fou 1) (1 o tt' t ha. t ?1lta

'

I-l ncl s n ere tl skzd for boat sl i 1) s alld otl) e5' t 11 i l'ij?s 'br -.(- - 1)'t . 7-11 's vvas a l so (ltt -1 J-l rzt the k- lkozen3- ''

t 1'''r l-lltt btlt .lè) ig S )i-i nqs vvas i n -I- 1 ln ' s na :l1e and theref?ol-e a comlm ts 1-1 ity llrop e14yut pal (

, 1 -

a sset . -.t'k.t t 1) e 1. i l'n e he vva s talci l'lg ftr l'd s otlt of 1) i g S p 1-1 ng s fo 1- h is t s ep he bv as a l so stat 1 ng

1 11

('-aln i 1 y couf't tha t tllere ïva s no col-nrn LLI'I ity ca s 1) tl olv .

K E of Page 11 1k qa 1 n Lll - s vvas a l re ad'-v'add res setl l'ea arcl 1 i-i S..s q. u 1-1 1' 1 se lk 1 dge al'l :1

. G t- uv

1N zloses . loore stati nt?- that -1-1 ln told t l'le fulld s as k: 1- i s ()'îA,1' persoll a 1 4:11 qfzy ba nk''

:11.1.:1 di (1 n ot pav the nallners. -1-1 l'-i d -d not di sclo se tl-si s .-I''11i s yî.'a s a I so co n'il'itl n itv

cash flow.

* G of Page 11 Tllis is a good one for tlle )). Festenl clailus.

M H of Page 11 This did llot happell al'td endecl up being part of- tlqe YC 131k. .

K AIl of the assets listed that Tim got, starting on 1. of page 12, had the value

that was perceived and no unforeseen liability.

M 17. of Page 14

z

zl

tt tl'e tin'le 01- siszllill q th 2. s -'fi1n tûld lne that th e 'Lezs'3 ono' o'ro up nzou I (1 d (j tll is, j ust

x..

D ?.*

to be l-id of 11 i i'n, by .etti 11$: 1 .Q t() 2.0Inn1 on clos 1,nu. . entltld )4 D h avi tz to jla- thttlu

8nz ll't of i'-) f) 35 1'n In I trot frol' fJ.,'1.*. to qet t llen: to siqn of -. 1. u?as to :et th is baclk fl-t')ln

x-

c- u- v-

l.'-f-' as they 'w-es-e o'faillu to 'e tlle ogrllel''s t')f tllese Q.- s'lares lrnd tlflt n'I e pel-solzallv'. t-7f

ê:h .-. - .

course you klhfl'w, t'lla't did jlflt.l1a')l)e ).- (l-enleln ber as M,ell, 1 did nt'it reajly gtt

t Q w.

35 ln nz lsaon'l f-' 11., b ut bltly 2 2 n'ln) . Ti lu Ilad bo rrtnved 1 3n') l11 fro I1l t'nêln 1 31 2007 and

1 toolt over that jlrorn i ss0 lar Ilot: v,-h en 1 ttot tl3 tt I-)aCA n' ily t--a't-l Inpou 11.(1 ilaclkvl

'>

D


(314 of 3



> 20. of Page 14 This is not a big deal, btlt ef'il'rl took Izlost ot' this out.Soluethillgs

v&..ere brotlght baclc b),' tlle 5.-C enlployees that rellloved it per his direction once

they kne-kv' that 1)e vvas not to talte it, but not lpeal-ly al1 ,(-N l'aybt.) tlli s is ïvllere he

got the idea that l 'votlld take lnore out 01*- l 76'.7)

M (3) of Page 15 including (a) - (d)

'rhi s is vvhktl-e 'l-il'n transferred Talllal-illd' o to hinlself befol-e tlqe 'iina l divorce decree. 1-1e

statecl to l'ne tllat (-Jetll'g'e cotlld I1ell) nle t1() the sanle ol'l this prop'1-li ssory note t.() 'YI)1 as

t1).e). l'latl intended to do vvitll l'he other l'otes 1'b- r tile nloney tllat ïvas takel'l fi-olll tlle CS

1oa n. .î-'1.e v'v-ent out o k- 1-1 s yvay to nlake this clear, as he also stated tipat he d i(1 not h,k'al'tl'1()

have any tax isstles f'rorrt gettillg ''FaTllal-ind.o in hi s ilal'e vvlèen the fttnds tlltit ptlrcllased it

vvttre fi-olm the (7S loal'l. Of c.otlrse t'lo taxes Nvere. paid on ally (712 tl-lat nlolley, 2081M111, as it

Ava s booked as a loa n and llot a di viden.'I-lli s i s tIle poi 111 ot- the LIC(.-- 1:5 l illg against -I-i 171.

''

.

I-l)at stlit collti tlues i 11 Feb 20 l () . -zv..slclly Patten alld 1-r0y Clreen 1-1 eld ca 1) be I)e1 pftll hel-e.

* C of Page 16

I'tll-lcs and Ca i scos pl-operty h.$.11 s al so pt rcllasecl y'it i: ('-. S loan f'btl) d sn yet 7-i nl y'as

ahvarded ('llis vvit l'lout l'lavi l1g to pay back lhe fu :1d s f'o r t he purcha se pri ce. I tl'li nk. thi s,

-l-al-llel-llclo allcl the otllel- tlli ngs go to sllovv tlli-tt, havi ng I'ntt take (J)1'l tlle ent ire prolni ssoi-y

l'totes for al1 tl'le l'ttl-lfj s t ak el) out by .l3 (71 and tllen -l-i 17-1- vvottld l'lot be a t-ai 1' (11 vi sio 1) of

pi-ollel-t'l,: 1.i 1) fact, I ha d to p. az,? bac k tllose llotes :1 l'lcl ''l-i 1') got al 1 o f- tllose pl-opel-ties . I 1)

other w tlrdsc itlst -l-ttrlts and -l-aiuel'enclo alone accottlèt t'br ()veI' 701-1-117) ()1: tl1e 2tJ 8 î'Ill'

tak el1 out- pltls tlpe other tl-lillgs tilat l)e got iJ) tlle l'i l-lal 5.1 S-/- al')d tlle thvo lllin i settlellèents.

lf he llad llt')t tolcl n'e that thtlse llotes cottld t)e 'Georked ()ut allother Avay and they vvere

neyzer i ntelldecl to be Ilaid tlack- l'/tlultl l l'avtp t'hotkgllt tak ing îlna t' on ,.4.'hi 13 gi 'v-ing hi ln

these assets '-e:e alld clear ïvas 8). fair d ivi sioll'? 1'-().

K 0. of Page 18

l later found out t lèat yvl'ltl lhat Avas transferl'ed to Nvas .' i n'l IDo Ia1). -1-I3e1-e al-e severa I tllillgs

tllat vvere 'trallsferred tc) 1) i In dui-i llg't he ti lne of l'ny çzfrozen out7'. Jil'n L'loian is a 1 so a tl' il-d

partner of l-in'l' s in $.$ Festern Paciisc '.I7i luber Conlpany. 1- le is al so :.,1-1() -l-il-jl soldc 's&,'ekl

undel' v'altled, otll- persollal interest 111 tlle 178 (7 i 1 lqozfztnan. Jil'n Dolan b s also the one

thal pronnised to be payi 1)g tlle B, 17.1 Ilote ol't tillle, yet atllllitted to lue a 17(JI otllej-s that he

u'ê'ts tal k i ng Cvith ''Fi 1'p) at the say'ne tinle about the payluent. 'Fin-l vvas 'tel ling otllers that

Ji ln T&,'as not goillg to be lnllkillg tlle lnalzlllent to keep 11)t) oul'of Jnollcy.

I dol: ' t 1u- no'w, 'wllere thi s fi ts i l)- btlt t'hel-e 1 s lèot ally part (..f nl),' assets t'llat l vvas a'vt-ll-ded

that Ti n) tlid not c.n11 peotlle alld intel-fere xvith n'le being a ble to do tlli ngs for the gknocl

al)(1 'enel'iz of l7-lJ?sell'l 1'-1e colltacted .Alall .po,e abottt J'ny loans. uzhicll pttt Alan in fear of

ilis collateral in 1.-12/ sllal'e o'' B.DI.. ''1''io-1 llad l'lo ctëi-rent busilless vvitll .la1) and his ballk.

i-le c.olltactecl SN'arf-er) Trepp f'egarding B lxîvare al4d catlsed a.ll kinds ol7 issue there l.Azl-lcl-e

vve could not rnove fonval-d.l.-le hirecl 'N tike .r- 1 ylll:1. hvho Avas Dellnis ?$ .1'lavvyer and

4


(315 of 3



hand led things tbr B1 x vvare. 11.e a r1(l N.,li ke 1.1 ,/9-1 il stal-ted a I'll-ess calnpa 'gl'l agai l'ls l'ne.

N fflny 1-017()l-tCrS 171.tAk7e ctnnlulrlllell that T. 111.).Q)1- F lynn 'tvotlld t7all thenl alld ('e11 tl-lell) S.. 'lzere tk3

go and loolk thing s up tllat Avel-e flled 111. the Ikeno cotlrts. l-hese vxkzel'e 171 led by F Iyl'1l1 .

A, 'al'lJ. ti n'lcs Jttdge r'iook vfottlcl not let tllenl slantla btlt the da lmtlge tVtl S dontt a.s the

repoi4i ng hatl a li-eady 1)a )I)en etl .jhlbt n'iu st lcnock l's. .l 1 k e F lyl'l n (3t-1D t'he '.$, .'1 S ?'k l'natter. 'yte

lleed to Clo vvhatever it takes. at7i- lnattef' v/l'1at mze h.aave to fi le.

K 25. of Page 20

-1-11 is i s anotller area tllat. ,4 l)k1 y Patten calè llelp you tlndeî-stand. --I-l)eI'e lla.s lleell

solmething tilecl against 'Filu in I'egartl to tlle hallcl I i 1)g of-lhis I-zot.l7le l'lad just be'fbl-e he

k-sold it 'o hiinself 'îvitl' 11o casll dovvn allt'l a pl-olnissol'y llote (7P 2j13111-' had placed a valtle

(- I- 3 . zlt-tnn't o1) it. A,- (- has f-i led 1'1) i s against hil'n . I7au I Nloore inighl also ha ve adc1 it ionill

in t'brluatio 1) .

r.

tt-'tel' the closi l'lg o(7 tlle lN ,.1 S ,4., .i f-otlnd out tllat ''l-i1'1'l tnldet' tlI) stll-lllel'tlï&' g' etti llg'tllis 'Iwot to

t'he ll-kai'l tlèat he purchased ''l'-a Iuel-ndo f'l-onl. I beliex--'e that 7-i 1-1.) nevei- intejlded to pay thi s

21-11 nn to ''ft? i ust l i ke a 11 tl'e ()l)l'er 1- 1-01-1.1 i sso 1-y n ote 11e l'lacl siglletl vvi 1,1) bz-().,'h'- L'7 I

C. of Page 22 Rei-tcl alld tell lne ïvhat you tlèinlc of tlli s one.

* E./F.G. ()f Pages 22/23

qive 'le&.?el- received pl-oper books a nti records- lnl ntttes and other f'hiogs. Pat can g () 1 nto

tllis l-nore. 'ï...'e still a year later, have aot been able to f'lgu'e lntlch ot- tlli s otlt 'qzltll hohv

tlley tul'aed 'v.l'1at they cli cl o-s-el-.

* J. of Page 23

lt states here tllat as tlf- J une I - 2008 1 hk&zras to recgive illl casl' etc. . . . . . . . . . ...againn Pat call

tell yot' I'loïv tllings Avere ttumed ovev to tls. Till) also entel-ed into several contl-acts that 1.

tu'o of urhich 1 have lllentioned a'ready. -l''ilu also told ine tlqat he had paid al 1 of k' C

payables cun-ent Nvith a deal 1)e did vvith y'$' faylle Priln (the otl-ter tllirtl ()î,nel- ot' îh. ''l3T-)

This turned out ll()t to be tï-ue. l tallced tt7 ïVaylle abotlt thi s. 111 Judge Tuckers

courtrooln, Bob Stllnptelc oI) Tiluz s bellalf- i1) Jtpri 1 or s,ray o17 2008- statecl as l'nuch i'ts

w'ell.

* Pages 24/25/26/27 in reference to taxes I want to talk about in our meeting, as

it is too hard to put in aIl in this ovel-view.


(316 of 3



K (a) of Page 27

I nLeresti ng that they adnlit llere tl-lat there xvas ct'llyltnuni ty casl'l 't1 oqk' fron-l B ig Springs:

Big S ky lkitlge l-I'w(>. antl Sunri se 'idge 1.-.1-,(7. a 11.:1 tllat 'Ti nl took 1)11 (. (-- tllal lnoney. Tllis

vvlls dui-ilèg the tinlt. that lze u-4) s stati ng ll'1dlt thel-e vvas 1,0 ctllnulunity cash tlovv. 1 had tk7

borrov.. lllol-ltz)yr to just I ive duri ng tllis tilne. as I did not get a penny ()f' telnglfll'al.3, spotlsal

suppol't 1.01- 1()1'lg tel'iu af 'er. 1* di (1 Ièot catcl, tllis tnefore.

* 33. of Page 29

'Flli s is 'kvhel-e 'Tr0y (Jl'een t'iel d had a -2171 eltl-- d ay dtlrillg tllt't 't,Jf.-.(..vs f -S and l-iln B l ixsetl't.

-I''i f'n statetl ol-l tl'le stancl tha t tlle --corllerstolle 01'- tlle N .1Sz& for l'i nlD- vvas nne t'alci j'lg ovzer

hi s 'i-idu cial-y respol'1 sibil ity for any antl al 1 of l'i s actiolls il.1 the btlsi ness tlpat l'e had l-t.lll

al'd 1 got. lt vvotl I d be Lvol-th a 1.)1) one ca l i to l)i l1l on thi s o3-le. -As ntly Patten vvas there as

ïvell . -1- roy told l'ne that 1. e did not thi l'tlc that t I1i s al'ea 01:- tlle N tl S.A.vvotlld stand up :ts 1

cou l(1 not hold -f'i n'1 l'tlll-l-n l (')ss nor take on l)i s actiol) s i 1:- there vvl.re ti'aucl and otllef- tlli llg. s

i llvolvred. 1 , (.'1- cou rseo ullti I ''f-i 1'1) stateti tlèat in cotlrt- diti not thiltk i 11 allyuzay that tl-te

tkcol-y-lel'sto 1'tc7 - o f- tlle Nz'l S.,4 -btlt l Avas stlrel y avva re tllat it vs.-as i t'n pol-tan t to l' i 17)..1.40 'v can

I gel al'()ttl) d t 11 is isstle '? ê'

M 35. of Page 30

lrlere is vvl-tel-e l tl) Elllc.'kve l-lav'e a 1'ILfCilZ' tlpside if you call f-1 ncl i n tlpe lasv ys..llel-e thi s

vvai ver callllot stand . ,#N s I l'old yotl, vv'hen Jafl-e put together the t'-i l ing 1701, sllousal stlppol-t-

it Iltclnciled otlt at' cl.-.rel- 2.0n'1l-n Iler 1)7()ntI1- bttt 1. nevel' exllected to get that.

-1'-i ,') I-ellea tedly sai d at soln e 1)0- l'lt' tllat there Nvas no lllorc.co t.n nltl 171 tv casll f'ovv . 'A/e

11 ave s ince fot nd otrt tlla't thi s yvas llot t'rtle. l-1.e 1 tl s t 1$: ept al 1 the nnoney 1 01- 1,1 'nlself. .

f.3 eca se he vvas saying tllere w'as 11f:) cash '1 o-tv, ( llad to btll'l-o.îv lnoney to 1 1 ve ()lla 'wzllen

there xvas 1 :-t f'tt(.-.t ftknds for tlle ool-nluulli ty .

l t- t 11e assets vv'(.ult1 hilve beel-l vvhat l vva s lea(1 to belittve they svere .tï N'*13 i f -1'' 1 n-t llad nknt

ttlrted 1-1 is cltlnpa i g. n t() -tkzrusl' ancl (1 estroy l-ier'- ( 1 t tllen ttln) ed i nto --lteep. after her

ulltil she is cl'tlslled or dead7'') .. . . . . ..1.u''oul(1 not llave needed the spotlsal stlpport'.

Btlt the facts al'e llln'$.v clear lhat there Ava s cash 1l onz that 1 should have r'eceived at tl'e

tinle 1 'svas l'-rtlz(tl' otlt. 'l-he assets antl l'uol-e (l-k.'er tlle liabilities that. l 'vvas lnisleêtd abotlt,

vvere such (-01- not such as far as assets go

-

'

) to J'naintaii) nly lifestyle, îvhicl? is the letter of

tlle falui ly lavv', 1et alone, any lilbstyle. l anl sitting llere ip'l a (7-h apter 7.

l ast yeal- at abotlt this ti lne just before sigl-li 1,1 fz the IVISA 1 hacl lna- nageable l - abll 1 ties l'io. a . w.. a y

'

b ' ? -1 a ail7st Porctlpine C'-reek 11k7r Casa. Cap'ti va ''l''he fkct is tl-lat -1-1 J-l) knehvnoney, ol t'on ek g .

exactly Nvhat 1)e vvas cl0i ng allJ.- vvllat .1 w'as getti l3g Illyself iïlto- 'vvhi ch 's vvhy the

corllel-stone of the N fS ik to hiln- î'$ 'as ''.,l')at 1 t Nva.s .


(317 of 3



lf 1 l-lad k llt3vN,'ll ally ol- thi s, l vkvotl Id no t ka&.,r(. set tl ed i 1) tl'e 'vay ( did. I vvotlld llave beel'i

granted both ttlnzp and long-tel'n' spotlsa 1 support. l rx,.,'otlld lz()t ha-v-e J'la- d to conti nue to

borl-otk' J'nolley to live. l Nvotlld not have tlorroAved 3 517-1 ln to get the 'i' S -4 closed.

Ikenlelnbel-c of the 3 .' n-1n'l, 1 personally (7111).- g t ju st over 1 .01-n13) of that. The rest Avent t()

''l-ilu o1- to '$f(-' . -l-l).e part tllat 'vvent to '%'(h- shottld lèave been paitl back to Ine, i t' things tllere

vvere as tlley lvere pl'esellted ,

2i' 36. - 44. of Pages 30 - 34 You gtlys are goi I1g to have t() read all(1 tcll nle w'hat

,

yt.'tl tl3i l-llk .

M Really for you guys.........it's all the reps and warranties you will have to tell

me what you think.

* 64. of Page 41

I t llink tlli s l-lel p s tls to j u sti .-y Ts.'1)y vv'e al-e 151 i ng ot tI' luk') tions o1) tlle 'k1'S hj i 11 tlle 13 14' courts

in ik1 ol-tana - don ' t yotl? .1.e1-n elnber A&,'e 1)a1..e a dded hel p t llere fro n-) the .B1x( Ju dge vs; ho

loves us- and hates -1- 1 ll'i al-ld iklike F1

y1-111. ,f3't thi s poi î)t the- could ll:)t get a decent rtllil'lg

i 1) tlèei 1- 'llavol- 1:1-0 l)1 tllat J ttclge i . tlley trîed . F.:i tllel- hvay, S.B and ' . S 11 avc. tl4i ngs i 1-1 p.l ace i 1-1

that courtl'ool'n to llel p tts. 'l/e need lo luake sul-e the vali dity (7'- tlle lklSzN Ilever ellds tkp

bei ng deci ded by -1 u dge JA .a tel-s . ''l-llat yvoulcl be a 1-1 i t'l).t I'lal'e for all o f us .

tlkay, l lmosl I ikesy gave you luof-e then yotl uzanted and iî - s not 1 11 great order, Sorly.

Let l'ne kllovv if s() Il-lething does not nlake. sellse. l think Joe .- lnigllt be of sonle IlelJ) l'lere

too.

A'%ltl quy's sl-lotfld also l-ead the rïssigfllllent Of7 ('-olupanjz Intrerests Aureen-tent allcl t l-le

u. w

A sst ln pti (7n zz-fzl'eei' el'it . -l-hei-e al-e sev-era I thing s 1 n the lu 'l').- set t lelnent s, 1 1 k e -f1 11-k v..x'as to

: . :

keep yna.,i ag the ovel-head for PC but that tn-lded as he sai d tllel-tt vvas no collllmtlllitv casl)

. .

Ilovv. l)7e novv knovF there svasa so .I. an) llt7l stll-e vvhe re hve can 1.71t tlqat il'l .

l-xl.olle tizis hel ps. Edl-ft


(318 of 3



i

1 lwars K- Evensen, Esq.

Nevada Bar No. 806 1

2 HOLLAND & I.IAItT Lt

la

9555 I-lillwood Drive, 2nd Floor

Las vega a Nevada 89l 34

Phone: (742) 669-4600

Allorneysfol. p.?rjt-n A. G/'ru-.j-c?-, as 7)-?,zî'/t?e

.

qf //'f? Yellowslone Club 14l?2#t?Jn7g Trust

6

7


8

DISTRICT OF NEVADA

9

10 In Re: Case No

.: BK-S-I 1-150l0-BAM

; Chapter.: 7 (Involuntary) 1 1

2 TIMOTHY L. BLIXSETH, TRUSTEE OF THE '

12 YELLOWSTONE CLUB

;y X

.

: LIQUIDATING TRUST'S

b, 7 '> t, 13 Alleged Debtor

RESPONSES TO TIMOTHY L.-J

< v-.0 k BLIXSETI<'S FIRST SET OF

x .1 > L= 14 INTSRROGATORIES

,

FIRSTt ;6

*

7 - e TkcfouEs'rs FoR PrtopucrrloN

A 'B fnu'' 15 oF oocuMENTs

,

AND FIRST î T 7 RsquEs'rs FoR A

llMlssloNs s @

= z : )?

1 6

s

a ,

o Tl :

x ï) t, 1 7

To: Timothy L. Blixseth (LtBlixsdh''l, by and through his attorneys of record, Brett A.

..

@ 1 8

m Axelrod, Fox Rothschild LLP 3800 Howard Hughes Parkway, Suite 500, Las Vegas, Nevad

1 9 89169

.

20

- - ,tvcu.yj,i xspondrian Glasser, as Trustee of the Yellowstone Club Liquidating 1 rust ( ,

2 l -

,o -1 imothy L. Blixseth s First Set of Interrogatories, First Requests for Production of

22 D

ocuments, and First Requests for Admissions to Trustee of the Yellowstone Club Liquidatin

23 -

tvoiscovery Requests'') as follows:1 rust (the

24

GENEIGL OBJECTIONS

25

E ch of these General Objections is incorporated by reference in each of the specifi

26

objections and responses below as if fully set forth therein.

27 -

l . YCLT objects to the Instrtlctions and Defsnitions (or the Discovery Requests t

28

the extent they purport to require production of information or the identification or description o

-

l-


(319 of 3



1 documents that are subject to any privilege, privacy right, immunity, or obligation o

2 confidentiality, including, without limitation, the attonley-client privilege

,

the attorney wor

3 product doctrine, the consulting expert privilege and the common interest privilcge

.

Thi

4 objection includes iylformation and materials prepared in anticipation of litigation that contai

5 mental impressions, conclusions, opinions, or legal tlwories of any attorney o'r cthcr legal

6 representative of YCLT and thus are not discoverable. Specific objections on the grounds o

7 privilege are provided for emphasis and clarity only

,and the absence of a specific objectio

8 should not be interpreted as evidence YCLT does not object to a particular Discovery ltequest ol

9 thc basis of an applicable privilege. By responding to these Discovery ltequests

,

YCLT does no

1 O waive its right to assert any and al1 privileges at any time

.

X

, - 1 1 2. YCL 1 objects to the Instructions and Deûnitions incltlded in tlle Discover

N ' ? 12 Requests to the extent they seek to impose requirelnents inconsistent with

,

or beyond thosS &

QmV 0

l ted by, the Federal lkules of Bankruptcy Procedure and the Federal Rules of Civi -R w 13 contemp a

c.q J:

< p- c'n i

t > ;=' 14 Procedure madc applicable to this proceeding by the Federal Rules of Bankruptcy Procedure

. . ;Z

7 - g:

Q g) T 1 5 YCLT will construe and respond to the Discovery Requests in accordance with the requirelnentî

>i

s 4 z j I 6 of the Federal Rules of Bankruptcy Procedure and the Federal Rules of Civil Procedure mad &

1 X g

> L) w 17 applicable to this proceeding by the Federal Rules of Bankruptcy Procedure

.

ï

..

2 18 3. YCLT objects to the Instructions and Definitions for the Discovery Requests t

l 9 the extent that they are not reasonably calculated to lead to tl4e discovery of admissible evidenc

20 and/or pulyol't to require the production of information or the identification or production o

21 documents that are not relevant to the claims or defenses in this involuntary bankruptc

22 proceeding.

23 4. YCLT objects to the definition of t'You'' in the Discovery Requests in that it i

24 overly broad and seeks to require YCLT to respond on behalf of individuals and entities ove

25 which YCLT has no control. Specifi ally, Blixseth defines t'You'' to includc û'bentficiaries o

26 the trust'' and &çAdvisory Board Members.'' YCLT does not have control over these entitie

27 and/or individuals and cannot be required to respond to the Discovery Reqtlests on behalf o

28 either the 'tbeneticiaries of the trust'' or çtAdvisol'y Board Members.''

-

2-


(320 of 3



otô

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NT

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=2

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= 4 c> o

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= = a <

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l 5. The production of any documents or provision of acccss to any dccuments t

2 Blixseth does not constitute an admission by YCLT regarding the authenticity, relevance, ol

3 admissibility in evidence of such documents. YCLT reserves the right to object to th

4 introduction of or use of such documents in this or any other proceeding.

5 6. These responses are based on current knowledge and further investigation ma

6 reveal additional facts or information that could lead to the supplementation or modiscation o

7 these responses. YCLT expressly reselwes the right to supplement, amend, correct, clarify, o

8 modify tlw responses as further information becomes available.

9 SPECIFIC RESPONSES AND OBJECTIONS

10 Subject to and incorporating the general objections set forth above, YCLT responds t

1 1 Blixseth's Discovery Requests as follows:

12 INTERROGATORY NO. 1: To the extent colnmunications between the YCLT an

1 3 MDOR are not in written form, describe aIl communications and dates of such communication

14 the YCLT Iias had with MDOR and its attorneys to date concerning Mr. Blixseth.

15 RESPONSE: The YCLT sets forth below the communications it can recall that may no

16 be memorialized.

17 Before MDOR initiated these involuntary proceedings on April 5, 20 1 ls its counse

18 contacted the YCLT to ascertain whether thc YCLT would be willing to join in an involuntar

1 9 bankruptcy petition. The exact dates of those conversations are tmknown, but are believed to b

20 within a few months leading up to April 5, 2011. Ultilnately, the YCLT stated to the MDOR tha

2 1 it would not be a petitioning creditor.

22 From December 17, 2O1 2 to May 1, 2013, there were conversations between counsel fol

23 YCLT and counsel for MDOR about the possibility of YCLT ioining as a creditor pursuant t

24 Section 303(c) of the Bankruptcy Code. On or about April 1 5, 2013, counsel for YCLT als

25 discussed with counsel for M17OR the upcoming deposition of Mr. Blixseth and the Mexica

26 property knou'n as StTamarindo.''

27

28

-

3-


(321 of 3



1 During this same time frame, counsel for MDOR and counsel fbr the YCLT also ha

2 conversations regarding a potential mediation with Mr

Blixseth. Thcse conversations concerne

3 the logistics of lnediation and potential mediators

.

4 On May 1 , 2013, the YCLT decided to join as a creditor pursuant to Section 303(c) of th

5 Bankruptcy Code. The YCLT believes that all of its communications with the MDOR from an

6 after the YCLT'S decision on May 1 , 201 3 to become a joining creditor under Section 3O3(c) ar .

7 protected from disclosure on the basis that the YCLT and MDOR had a common intercst/join

8 defense such that their conversations after that date are privileged under the commo

9 interest/joint defense privilege, and ohiection is hereby made to disclosing the conlents of suc

10 conversations on and after May 1, 2013.

@

T 1 1 INTERROGATORY NO. 2: Explain all facts and circumstances surrounding why Mar

&

> 8 è@ 12 Kirschner resigned as Trustee

.

m ..2 a m

.. .

'?' t'< RESPONSE: YCLT objects to this Intenogatory as overbroad

,

unduly burdensome

-ç '': - , 3

cxt g:

.

< .,- co k

> fa- 14 harassing

,

and not reasonably calculated to lead to the discovery of admissible evidence

.

Th . .

c's z

-

- e id '-' f

or Mr. Kirschner's resignation have no relevance to any of the issues before this Cour t.n T 15 reasons > &

s z-; x j 16 in this involuntary proceeding. YCLT also objects on the basis that this Interrogatory seek

-

g? T1

g gt

w

1 7 infonnation that is protectcd from disclosure by the attorney-client privilege and the commo

ï

.

: 1 8 interest/joint defense privilege. Notwithstanding the foregoing objections, and without waivin

m

19 Same, YCLT directs Blixseth's attention to YCI-T'S responses to Requests for Admission Nos

.

20 and 3.

2 1 INTERROGATORY NO. 3: To the extent conununications by and between the YCL-

22 and anyonc concerning putting Mr, Blixseth into an involuntary bankruptcy and/or joining in a

23 involuntary petition against Mr

.

Blixseth are not in written fonn, describe al1 sucl

24 communications, the date of such communications

,

and the identity of tl4e person with whom th

25 YCLT colnmunicated,

26 RESPONSE: To the extent this Interrogatory seeks the disclosur: of communication

27 between the YCLT, its counsel, and Advisory Board melnbers or their agents/counsel

the YCL'I

28 Objects on grounds of attorney-client privilege and the common interost/joint defensc doctrine.

-

4-


(322 of 3



l Outside of the comlnunications described in the answer to lnterrogatory No

.

1 above, th

2 YCLT is not aware of any other communications it has had with anyone about putting Mr

.

3 Blixseth into an involuntary bankruptcy or joining an involuntary petition under Section 3O3(c

4 of the Bankruptcy Code. The YCLT also objects to the form of this lnterrogatory because th

5 YCLT is not capabie of ttputting Mr. Blixseth into an involuntary bankruptcy''; that is a decisio

6 reserved for a United States Bankruptcy Court Judge.

7 INTERROGATORY NO. 4: Identify when the YCLT first contemplated putting Mr

8 Blixseth in an involuntary bankruptcy.

9 RESPONSE: Thc YCL'l- obiects to the form of this lnterrogatory becatlse the YCLT i

10 not capable of i'putting Mr. Blixseth into an involuntary bankruptc/'; that is a decision resel've

4 1 1 for a United States Bankruptcy Court Judge. In tenns of joining an involuntary petition, th

@

- , 8 12 YCL'I first considered this when contacted by MDOR s counsel as described in the res

ponse ta X

xmwg

''q 12- l 3 Interrogatory No

.

1 above.-' 7

cq g:

< p- .: i

2 > m 14 INTERROGATORY NO

.

5: Describe how much money in attorney time and costs th . +

ct h

= . g 'Y l fi

rm of Bailey & Olasser has incurred to date in representing the YCLT in its claims agains k, # 1 5 awî

>y

m z x

-

1 16 Mr. Blixseth.

k:;x G

g L)

w

17 RESPONSE: YCLT objects to this Interrogatol'y as overbroad, unduly burdensome,

.

: 18 harassing, and not reasonably calculated to lead to the discovery of admissible evidence

.

Withou

m

1 9 waiving these objections, as described in greater detail in the answer to lnterrogatory No: 1 5

20 Bailey & Glasser has a contingency fce arrangelnent with the YCLT. The total amount o

2 1 uncompensated attorney time is 5,293.94 hours. The total amount of unreimburscd expenses i

22 $1,012,755.21 .

23 INTERROGATORY NO. 6: Describe how much money to date the law firm of Baile

24 & Glasser has been paid in representing the YCLT in its claims agalnst Mr. Blixseth

.

25 RESPONSE: YCLT objects to this Interrogatory as overbroad, unduly burdensome,

26 harassing, and not reasonably calculated to lead to the discovery of admissible evidence

Withou

27 waiving these objections, the YCLT believes that Bailey & Glasser has received receipts (fee.

28 and expenses) of approximately $856,261.74.

..

.5..


(323 of 3



1 INTERROGATORY NO. 7: State how much thc YCLT believes its ijudgment'' in AP

2 14 should be assuming it is successful in its oross-appeal in AP-14

.

3 RESPONSE: lf the YCLT detenuines to pursue its cross-appeal and is successful

thel

4 the YCLT would expect the judgment to increase to $286.4 million, plus interest.

5 INTERROGATORY NO. 8: Describe in detail what was discussed and by whol

6 during any and all discussions involving the YCLT Advisory Board concerning placing Mr

7 Blixseth into an ilwoluntary bankruptcy and/or joining the involuntary petition.

8 RESPONSE: This lnterrogatory seeks the disclosure of colnmunications between th

9 YCLT, its counsel, and Advisory Board members or their agents/counsel

,

and thus the YCL

10 Objects on grounds of attorney-client privilege and tlle common interesttjoint defense doctrine.

Z

. a -j- Agvjsory Board and th 1 1 INTERROGA I ORY NO. 9: Identify all members of the YCI.,

é S

m 12 constituents each member represents

= -9 a m

'; 771 0 RESPONSE

: The YCL'I- responds as follows:-, w 13

ca J:

< # 'x' k

x . > m 14

m

c z *.

'-' 8 Trust Advisoor Board: Graham F'

Hunt, Chairlnan' 'B

) 4 1 5f v

ofco LLc f > &

-'k FJ Y 405 Lexington Ave

.,

Suite 2637 z êt 1 6

Q = & xew york

,

NY 101741 & ï

t 17 Constituentts): Pre-petition Lenders

ï

2 18 clark T whitmore

X4 .

j 9 Maslon Edelman Borman & Brand, LLP 3300

M/ells Fargo Center

20 90 South Seventh Street

Minneapolis, MN 55042 1

constituentts): 7B's

22

Matthew E. Kidd

23 Crossl-larbor Capital Partners LLC

One Boston Place4

Boston, MA 02108

Constituentts): CrossHarbor5

26 Alternate: Paul D. Moore

Duane Morris LLP

27 470 Atlantic A3'e

.,

Suite 50O

'

Boston, MA 0221 08

-

6-


(324 of 3



Mike Renoff1

Scoggin Worldwidc Fund Ltd.

2 660 Madison Avenue, 20th l2loor

New York, NY 10021

3 Constituentls): Pre-lxetition Lenders

4 Alt

ernate: Dev Chodry

5 Scoggin Worldwide Fund Ltd.

660 Madison Avenue, 20th Floor

6 New York NY 1 002 1

7 v ucoonuellm

Babson Capital Management

20l South College Street

9 Charlotte, NC 28244

Constituentts): Pre-petition Ixnders0

2 Alternate: Michael J

.

Fey l 1

& Michelle Manha

X ' Y 12 Babson Capital Management LLC

2 a m

201 s college Street, Suite 2400$ p .

.

': w 1 3

cq J

x

i

.

p' m

.

14 Kenneth McGloin

c's m 21 Greenleaf street4

-

g

t,n 4 l 5 Rye, NY 10580 î

> & constituentts): pre-petition Lenders F

-

s k;y x :( I 6

Q = kcx

1 X p

> ït w 1 7

j INTERROGATORY NO. 10: To the extent conununications, that the YCLT has ha

.

: 1 :

m with the Pre-petition Lenders and/or representatives of the Pre-petition Lenders (suc

1 9

representative may include, but is not limited to, Steven Yarlkauer, E an Levy, Georg

20

Zimmerman, Mark McDermott, the Pre-petition Lenders' representatives on the YCI

a-I- Advisor)

2 1

Board) from November of 2010 to the present concerning Mr. Blixsctll in any way are not il

22

written form, describe in detail the commtlnications and the identity of the individuals wit

23

whom the YCLT communicated.

24

RESPONSE: 'F0 the extent this Interrogatory seeks the disclosure of communication

25

between the YCLT, its counsel, and Advisory Board members or their agents/counsel, the YCL'I

26

objects on grounds of attorney-client privilege and the common interest doctrine.

27

Marc Kirschner, the former Trustee of the YCLT, on one occasion had a conversatio

28

with Evan Levy, cotmsel for Credit Suisse. Mr. Kirschner stated to Mr. Levy that it would b

-

7-


(325 of 3



l beneficial if Mr. Levy's client, Credit Suisse, contributed ynoney to help fund an overal

2 settlement of Blixseth-related litigation. Tl4e precise date of this conversation is not presentl

3 known, but it is believed to have occurred within the last two years.

4 In addition, over the course of the past two to three years, counsel for the YCLT ha-

5 occasionally had calls with Mr. Levy. In these calls, Mr. Levy requested information about th

6 progress of the cases and adversary proceedings involving the YLCT. Some answers wer

7 provided, but counsel for the YCLT at no time disclosed confidential or privileged informatiol

8 or work product to Mr. Levy.

9 On February 25, 20 1 3, counsel for the YCLT had a telephone conversation with Mr.

l 0 Levy in which he asked if Mr. Levy's client, Credit Suisse, would be participating in a propose

é l 1 mediation with Mr. Blixseth. Mr. Levy communicated that Credit Suisse might attend such

m 8 )@ 12 mediation

.

=2 pm

$ 0 c 1 for the YCLT and M

r. Levy also had approximately three conversations over ''8 - 13 ounse

cx g:

< -- x k

> m 14 period of months concerning the proposed sale of the Farcheville farmland property in France . .

r z

-. eB iu '-' d

the distribution of proceeds from same. These Farcheville conversations occurred in 20l o ta T l 5 an&>é

< z :4 k'Y 16 and 201 3, but the exact dates are unknown are the present time. Credit Suisse has a priorit =

&J g

x g) w 1 7 under the Plan for distributions out of Farcheville.

ï

.

: 18 INTERROGATORY NO. 11: To the extent that communications, that the YCLT ha

m

1 9 had with Crossl-larbor Capital Pal-tners, LLC and/or a representative of CrossHarbor Capital

20 Partners, LLC from Novelnber of 20 10 to the present concerning Mr. Blixseth in anyway are no

2 1 in written form, describe in detail the communications and the identity of the individuals witl

22 whom the YCLT communicated.

23 RESPONSE: Crossl-larbor Capital Partners, LLC Cscrossl-larbor'') is a member of th

24 Advisory B oard of the YCLT, and has been since June 22, 2010. Accordingly, this Interrogator

25 seeks the disclosure of communications between the YCLT, its counsel, and Advisory Boar

26 members or their agents/counsel, and the YCL'l- objects on grounds of attorney-client privileg

27 and the common interest/joint defense doctrine.

22

-

8-


(326 of 3



1 INTERROGATORY NO. 12: Describe all efforts the YCLT undet4ook to enforce th.

2 tjudgment'' it obtained against Mr. Blixseth in AP-l4 between December 5, 20 l 2 and Decelnbe

3 1 7, 2012.

4 RESPONSE: 7-0 the extent this lnterrogatory seeks thc disclostlre of ccmmtlnication

5 betwcen the YCLT, its counsel, and Advisory Board members or their agents/counsel, the YCL'I

6 objects on grounds of attomcy-client privilege and the common interesqjoint dcfense doctrine. I

7 terms of publicly filed documents, the YCLT does not believe that it fi led any in support of th

8 enforcement of the judgment during this period of time.

9 INTERROGATORY NO. 13: Describe al1 effol'ts the YCLT undertook to enforce th

10 çjudgment'' it obtained against Mr. Blixseth in AP-14 belween December 17, 2012 an

T I 1 Decelnber 3 1 , 20 12.

m

x m 12 RESPONSE: To the extent this Interrogatory seeks the disclosure of communication

&

$ ? between the vcl

-er, its counsel, and Advisory Board members or their agents/counsel, the vcl.- s: - la

1 = m o

14 objects on grounds of attorney-client privilege and the comnlon interest/joint defense doctrine. 1

7 s g

''J f blicly filed documents, the YCLT filed a notice of cross-appeal during this period o t;a T 15 terms o pu >i

< :f Y 16 time

. =&

1 12 g

> L) w 17 INTERROGATORY NO. 14: 12or any response to a Request for Admission smwe

..

@ 18 concurrently with these interrogatories that you answcred with a denial or qualified admission

m

19 explain in full the basis for such and identify a11 supporting doculnents.

20 RESPONSE: With respect to Request for Admission No. 1 , the YCLT has denied thi

2 1 Request for Admission because Mr. Glasser docs not believe he luade such a statement. Witl

22 respect to Requests for Admission Nos. 2 and 3, those have been denied because they are no

23 true. The YCLT ohiects to the identification or production of so-called ttsupporting documents''

24 on the basis of the attorney-client privilege and attorney work product doctrine.

25 INTERROGATORY NO. 15: Describe the fee arrangelnent the law firm of Bailey

26 Glasser has with the YCLT.

27 RESPONSE: YCLT objects to this lnterrogatory as overbroad, unduly burdensome,

28 harassing, and not reasonably calculated to lead to tlle discovery of admissible evidence. Withou

-

9-


(327 of 3



1 waiving these objections, Bailey & Glasser, along with Mullin Hoard & Brown (collectively, th

2 ''lzi1-nls'') have the following fee agreement with the YCLTI

3 The Firms will represent the Liqtlidating 'l-rust in the Matters and related litigation in th

4 United States through final itldgment and in any collection actions related to such final judgmen

5 on the following terms and conditions:

1 1 ted to th (1) A contingency fee of 20% on all amounts actually received in cash re a

7 Matters ul) to the lesser of (a) a maximum of $1 8.3 million or (b) al1 amounts actually required t

8 pay the Trade Creditor Fund (as it may be reduced by virtue of Cross Harbor having cease

9 purchasing ordinary trade claims) and payments from any source on a1l allowed claims in th .

10 $ 10 million tranche of Class 4 claims, which amount is expected to be approximately $ 16.3

2 . -

4 l l million but which amount will not in any event exceed $ 1 8.3 million. 1he lesser of (a) and (b

R< b èî 12 plus thc funds necessary to pay the contingency fee of 20% is the fiThreshold

.

''

QA pm

A 8 2) 'rhe contingency fee atlributable to l(a) or (b) above shall be paid to the l-irmsypar- -'p - l 3 (

x c4 31

< o, x k

> .; > ;'- 14 passu at 6.25% until the Tltreshold is reached; after that

,

the Firms will be entitled to a catch upz+

V

. #:

.5 ''l é 15 or true up, to collect the full 20% before any additional monies are distributed. In other words, tzx

.

i

Q = 10 .' 16 the contingency fee catch up on 1(a) or (b) above shall be paid before additional distribution = a

Q 12 g -

> E) w 17 from thc Trust, including without limitation with respeot to the remaining balance of the 'lrad

..

: 1 8 Creditor Fund.

19 (3) Once the Threshold is reached, then a contingency fee of 25% on all amount

20 actually received in cash related to the Matters by the Liquidating 'rrust shall be paid to th.

2 1 Firms.

22 (4) There will be no cap on the contingency fee.

23 (5) lf a contingent fee is paid, then the Liquidating Trust will not be given a set-off fo

24 all fees previously paid to the Finns prior to January 3 1 , 2010 under the September 22, 200

25 retainer agreement.

26

27 l If the Liquidating Trust receives an asset, the Firnls ullderstand that it will be convcrted to cash and tha

the Firms' paynzent will be based on the cash received at the tinle it is rceeivcd. ln tlle unlikely event of- in kin

28 distributions, the Liquidating Trust will usc its bcst efforts to pay the Finns their share in cash, but if it cannot, th .

Finns will take the in kjnd paylnent.

-

l 0-


(328 of 3



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l (6) The l7irms understand the Liquidating Trust and its Trtlst Advisory Board

2 approve any and all proposals to compromise the claims covered hereby.

3 If local cotlnsel (including but not limited to Holland & I-lart), or if foreign

4 and/or foreign counsel, are needed for litigation purposes or to investigate and collect assets,

5 such expenses will be costs to the Liquidating Trust. These latter costs will be

6 Extraordinary Expenses, will not be incurred without the Trustee's approval, Al1

7 Expenses attribtltable exclusively to efforts to increase the amount of the judgment

8 $40,067,962.43 million (which includes all expenses for Quinn E anuel) shall be paid in

9 immediately after reaching the Threshold amount, but a1l other Extraordsnary Expenses will

10 paid back t() the Firms t'irst in priority, before any payments to the Trade Creditor Fund

1 1 other payments are made. The decision as to which Extraordinary Expenses are

12 exclusively to efforts to increase the amount of the judgment (with the exception of expenses

1 3 Quinn E nanuel, which shall be deemed to be attributable exclusively to effol'ts to increase

14 amount of the judgment over $40,067,962.43) shall be made in the sole and exclusive

1 5 of Chuck I-lingle.

16 REOUESTS FOR PRODUCTION

l 7 REQUEST FOR PRODUCTION NO. 1: Produce a11 communications between

18 and MDOR and its attorneys from December 2009 to date.

19 RESPONSE: The YCLT believes that al1 of its communications with the MDOR

20 and after the YCL-1-'S decision to join the involuntary petition on May 1, 20 13 are protected

21 disclosure on the basis that the YCLT and MDOR had a common interest/joint detknse

22 such that their conversatiuns in this regard are privileged, and objection is hereby lnade

23 disclosing the contents of such conversations on and after May 1 , 2013.

24 Subject to this objection, and without waiving same, the YCL'l- is producing all

25 privileged communications it could locate responsive to this request.

26 REQUEST FOR PRODUCTION NO. 2: Produce al1 documents related to why

27 Kirsclmer resigned as t'rustee.

28

-

11-


(329 of 3



1 RESPONSE: YCLT objects to this Request as being overbroad, undtlly burdensome

2 harassing, and not reasonably calculated to Iead to the discovery of admissible evidence. Th

3 reasons for Mr. Kirschner's resignation have no relevance to any of the isstles before this Cou:

4 in this involuntary proceeding. YCLT also objects on the basis that this Interrogatory seek

5 infonnation that is protected fkom disclosure by the attonley-olient privilege and the commol

6 interesvjoint defense privilege.Subject to these objections, and without waiving same, YCLT i

7 producing Mr. Kirschner's resignation letter.

8 REQUEST Folk PRODUCTION NO. 3: Produce a1l comlnunications with anyone

9 including YCLT internal colnmunications, concerning placing Mr. Blixseth into an involuntar

1 O bankruptcy and/or joining in an involuntary petition against Mr. Blixseth.

é 1 1 RESPONSE: To the extent this Request seeks the disclosure of comlnunication

m ' ï ) 2 between the YCLT its counsel

,

and Advisory Board members or their agents/counsel, the YCL2

n 'm

7i & bjects on grounds ofz attorney

client privilege and the common interest/joint defense doctrine. ''8 - l 3 o cq B1

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2 > û'- 14 Outside of the columunications being produced in response to Request No. 1 above

,

th . .

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s not aware of any other communications it has had with anyone about putting Mr. t? T 1 5 î

> &

?u )g x j 16 Blixseth into an involuntary bankruptcy or joining an involuntary petition under Section 3O3(c R

1 12 @ - -

> T w 17 of the Bankruptcy Code. l he YCL'I also objects to the form of this Request because the YCLi $1 i

ng Mr. Blixseth into an involuntary bankruptcf'; that is a decisiol.: 1 8 is not capable of putt

m

1 9 reserved for a United States Bankruptcy Court Judge.

20 REQUEST FOR PRODUCTION NO. 4: Produce a1l minutes of meetings of th

21 Advisory B.oard from November 20 12 to the present.

22 RESPONSE: Since November 2012, there has been one Board Meeting, which occurre

23 on April 26, 201 3 and was continued to May l , 201 3. No formal minutes from that meeting hav

24 been prepared. Chuck Hingle took notes from the meeting which do not constitute minutes, an

25 which reflect his mental impressions and may contain the substance of privilege

26 connmunications, and thus are privileged under the work product doctrines the attorney-clien

27 privilege, and the common interest/joint defense privilege.

28

-

1 2-


(330 of 3



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l REQIJEST FOR PRODUCTION NO. S: Produce all documents, including email

2 communications, by and between the Advisory Board members and the 'l-rustee from Novembel

3 20 12 to the present concerning Mr. Blixseth in any way.

4 RESPONSE: Tbis Request seeks the disclosure of communications between the YCLT

5 its counsel, and Advisory Board members or their agents/counsel, and thus the YCLT objects ol

6 grounds of attorney-client privilege and the common interest/joint defense doctrine.

7 REQUEST FO1k PRODUCTION NO. 6: Produce all documents, including emai

8 communications, that the YCLT has had with the Pre-lletition Lenders and/or representatives o

9 the Pre-petition Lenders (such representative may include, but is not limited to, Steve

10 Yankauer, Evan Levy, George Zimmerman, Mark Mcl7ermott, the Pre-petition Lenders'

1 ) representatives on the YCLT Advisory Board) from November of 2010 to thc present concemin

12 Mr. Blixseth in any way.

13 RESPONSE: This Request seeks the disclosure of communications between the YCLT


1 5 grounds of attorney-client privilege and the common interest/joint defense doctrine. Subject t

16 the foregoing objections, and without waiving same, YCLT has to date been unable to locate anj

17 non-privileged responsive documents but will continue its search for same.

18 REQUEST FOR PRODUCTION NO. 7: Produce al1 documents, including email

1 9 colnmunications, that the YCLT has had with Crossl-larbor Capital Partners, LLC and/or

20 representative of Crossl-larbor Capital Partners, LLC fkom May of 2009 to the presen

21 concenping Mr. Blixseth in anyway,

22 RESPONSE: CrossHarbor Capital Partners, LLC CCcrossl-larbor'') is a member of' th

23 Advisory Board of the YCLT, and has been since June 22, 2010. Accordingly, this Request seek

24 the disclosure of communications between the YCLT, its counsel, and Advisory Board member

25 or their agents/counsel, and the YCLT objects on grounds of attorney-client privilege and th

26 common interest/joint defense doctrine. YCLT is producing responsive emails it has located

27 from prior to June 22, 201 0.

28

-

I 3-


(331 of 3



1 REQUEST FOR PRODUCTION NO. 8: Produce all documcnts prepared by th

2 YCLT including Nvithclut lilnitation internal naenAoranda and ennails, in connection with it

3 decision to file its Sçhlotice of Joinder'' in this case.

4 IUSSPONSE: This Request seeks the disclosure of conamunications between the YCLT

.


6 grounds of attorney-client privilege and the common interest/joint defeuse doctrine. The YCL

7 also objects on the basis of the attorney work product doctrine.

8 REQUEST FOR PRODUCTION NO. 10: Produce a1l documents reflectin

9 communications between the YCLT and Itichard J. Samson (including his attorneys and agents

1 0 concerning Mr. Blixseth from June of 2009 to the present.

4 1 1 RESPONSE: The YCLT is producing all such communications it has been able t

m : Y jp

locate.2

am

7) # :' duce alI documents

,

including but no- '@ w' 13 REQUEST FOR PRODIJCTION NO. 11: l ro cx m

< >$' * i

> .2 > ;' 14 limited to emails and text messages, between you, on one hand, and Edra Blixseth and/or he

o h g

Y ; loyee

,

agent or reprtsentative, on the other hand, k, é l 5 empî

>i

n g x j 16 RESPONSE: The YCLT is producing a1l such communications it has been able t

g? 41

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w

17 locate.

ï

..

: 12 REQUEST F()R PRODUCTION NO. 12: All documents, including but not limited t

m

19 emails and text messagcs, between you, on cme hand, and anyone else, on the other hand, related

20 to Edra Blixseth. '

21 RESPONSE: This Request secks the disclosure of communications between the YCLT

22 its counsel, and Advisory Board members or their agents/counsel, and thus the YCLT objects o

23 grounds of attorney-client privilege and the common interest/joint defense doctrine. Subiect tt

24 these objections, and without waiving same, YCLT is producing all responsive documents i

25 could locate.

26 REQUEST FOR PRODUCTION NO. 13: All documents, including but not limited t

27 emails and text messages, between you, on one hand, and the B Shareholders and/or their agents

28 employees or attorneys, on the other hand, related to Mr, Blixseth.

-

1 4-


(332 of 3



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1 RESPONSE: 'rhis Request secks the disclosure of communications between the YCLT

2 its counsel, and Advisol'y Board members or their agents/counsel, and thus the YCLT objects o

3 grounds of attorney-client privilege and the common interest/joint defbnse doctrine. Counsel fb1

4 the B Shareholders, Clark Whitmore, serves on the Advisory Board of the YCLT, where h

5 represents the B Shareholder constituency. Moreover, counsel for the YCLT also serves a

6 counsel for the B Shareholders pursuant to an agreement between the B Shareholders and th

7 YCLT, and thus this requtst seeks the disclosure of inforlnation protected by the attorney-clien

8 privilege. Finally, on November 23, 2009, the YCLT and the B Shareholdel's entered into

9 preliminary joint prosecution agrcement, and thus the YCLT obiects on grounds of the commo

10 interest/joint defense privilege as well.

1 l REQUEST FOR PRODUCTION NO. 13: Al1 documents, including but not lilnited t

12 emails and text messages, betwecn you, on one hand, and Michael Snow and/or his agents

1 3 employees or attorneys, on the other hand, related to Mr. Blixseth.

14 RESPONSE: This Request seeks the disclosure of communications between the YCLT

1 5 its counsel, and Advisory Board lnembers or their agents/counsel, and thus the YCLT objects o

l 6 grounds of attonzey-client privilege and the common interesbjoint defense doctrine. Counsel fo

17 Mr. Snow, Clark Whitmore, serves on the Advisory Board of the YCLT, where he represents th

18 B Shareholder constituency, including Mr. Snow. Moreover, counsel for the YCLT also serve

19 as counsel for Mr. Snow pursuant to an agreement between Mr. Snow and the YCLT, and thu

20 this request seeks the disclosure of information protected by the attorney-client privilege. Finally,

2 1 (7ll November 23, 2009, the YCL'1- and Mr. Snow entcred into a preliminary joint prosecutiol

22 agreelnent, and thus the YCLT objects on grounds of the common interest/joint defense privileg

23 as well.

24 REQUEST FOR PRODUCTION NO. 13: All doculnents, including but not limited t

25 emails and text messages, between you, on one hand, and Greg Lemond and/or his agents,

26 employees or attorneys, on the other hand, related to Mr. Blixseth.

27 RESPONSE: The YCI--I- is producing al1 such communications it has been able t

28 locate.

-

1 5-


(333 of 3



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1 REQUEST F()R PRODUCTION NO. 14: All documents, reflecting why the YC1a'l

2 has not pursued claims against Crossl-larbor Capital Partners, LLC and/or its afûliates.

3 RESPONSE: YCLT objects to this request to the extent it seeks disclosure o

4 information that is protected by the attorney-client privilege or attorney work product doctrine,

5 Subject to this objection, and without waiving sames YCLT is not aware of any document

6 responsive to this requcst.

7 REQUEST FOR PRODUCTION NO. 15: AIl documents, reflecting why the YCI-J

8 has not pursued claims against Credit Suisse and/or its affiliates.

9 RESPONSE: YCL'l- objects to this request to the extent it seeks disclosure o

10 information that is protected by the attornty-client privilege or attorney work product doctrine.

1 1 Subject to this objection, and without waiving same, YCLT is producing the Settlement Terl

12 Sheet.

13 REQUEST FOR PRODUCTION NO. 16: A11 documents, retlecting correspondenc

14 with any agent of the U.S. governlnent concerning Mr. Blixseth.

15 RESPONSE: The YCLT has not located any documents responsivc to this request.

l 6 REQUEST FOR PRODUCTION NO. 17: Al1 documentsj reflecting correspondenc

l 7 with any person in the judicial chambers of the U.S. Bankruptcy Court for the District o

l 8 Montana concerning MI.. Blixseth.

1 9 RESPONSE: The only responsive documents the YCLT has located are documents tha

20 Mr. Blixseth attached as an exhibit to a filing he made. YCLT is producing Mr. Blixseth'

21 exhibit back to him.

22 REQUEST FOR PRODUCTION NO, 18: All documents, reflecting correspondenc

23 with Jim Manley concerning Mr. Blixseth.

24 RESPONSE: The YCLT has not located any documents responsive to this request.

25 REQUEST FOR PRODUCTION NO. 19: Al1 documents, reflecting con-espondenc

26 with Ron Burkle and/or his agents and/or entities concerning Mr. Blixseth.

27 RESPONSE: The YCLT has not Iocated any documents responsive to this rcquest.

28

-

j6-


(334 of 3



1 IIEQUEST FOR PRODUCTION NO, 20: AIl doctlments, reûccting correspondenc

2 with any person purporting to act on behalf of the State of Montana concerning Mr, Blixseth.

3 RESPONSE: Please see documents produced in response to Request for Production No

4 1 .

5 REQUEST FOR PRODUCTION NO. 21: A11 documents, reflecting correspondenc

6 with Steven Fagel concerning Mr. Blixseth.

7 RESPONSE: The YCLT has not located any documents responsive to this request.

8 REQUEST FOR PRODUCTION NO. 22: All documents, retlccting con'espondenc

9 with John Garland concerning Mr. Blixseth.

l 0 RESPONSE: The YCLT has not located any doouments responsive to this request,

T 1 l ADMISSIONS

m b Y 12 ADMISSION NO

.1: Admit that during the timeframe of March 2012 through Jun

.

Q axm

$ 8 2012 Brian Glasser told christopher conant during a telephone conversation between the tw-. ng

-

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x . > m 14 that the YcI

-

T intended to obtain three judgments against Mr. Blixseth and then f5le a

c % +

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'oluntary bankruptcy petition against him. l,n T 1 5 m î

> &

PJ lg z

sa

: 16 RESPONSE: Denied.

g? C p

. g) w l 7 ADMISSION NO. 2: Admit that the YCLI- did not join in the involuntary bankruptcï

.

: 18 petition that MDOR filed against Mr. Blixseth in April of 201 1 because the YCLT believed tha

m

19 the judgment it then had against Mr. Blixseth was subject of a bona fide dispute.

20 RESPONSE: Denied.

2 1 ADMISSION NO. 3: Admit that Marc S. Kirschner resigned as Trustee, at least in part,

22 because he did not believe it was appropriate for the YCLT to join in the involuntary bankruptc

23 petition.

24 RESPONSE: Denied.

25 ADMISSION NO. 4: Admit that the YCL'1- has cross-appealed the 'judgment'' in AP-

26 14 for the purpose of increasing the ljudgment'' award.

27 RESPONSE: Admit.

28

..

1 7-


(335 of 3



1 ADMISSION NO. 5: Admit that CrossHarbor Capital Partners LLC (or one of it

2 affiliates) holds a position on the YCLT Advisory Board.

3 RESPONSE: Adlnit.

4 ADMISSION NO. 6: Admit that Samuel T. Byrne is a principal of CrossHarbor Capita

5 Partners, LLC.

6 RESPONSE: The YCLT admits that Samuel T. Byrne purports to be a Managing P artnel

7 of CrossHarbor Capital Partners, LLC, but is without sufficient knowledge to know if this make

8 M'r. Byrne a Stprincipal'' ofcrossHarbor.

9 / L

ars K. Evensens

l 0 LQVS K. Evensen

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(336 of 3



VERIFICATION

The language of the foregoing interrogatory responses was prepared in whole or in part

by counsel. I am signing these responses based upon my personal knowledge and upon

information supplied directly or indirectly to me by counsel

Pursuant to 28 U.S.C. j 1746, 1

declare under penalty of perjury that the foregoing interrogatory responses are true and accurate

to the best of my knowledge and belief.

Brian A. Glasser


(337 of 3



Samuel Byrne, Volume I


Eastern District of Massachusetts

MICHAEL SNOW,

Plaintiffs,

Civil Action

08-61570-11

BLX GROUP,

Defendants.

VIDEOTAPED DEPOSITION OF SAMUEL BYRNE, VOLUME I

June 24, 2010

9:16 a.m.

DUANE MORRIS, LLP

Bostonr Massachusetts

Reporter: Nancy L. Lacivita

US LEGAL SUPPORT

(619) 573-4883


(338 of 3




APPEAMNCES :

BAILEY & GLASSER, LLP

4 By Brian A . Glasser, Esquire

2 0 9 Capital Street

( 3 0 4 ) 3 4 5- 6 5 5 5

8 counsel the Plaintif f s

DUANE MORRIS , LLP

Paul D . Moore, Esquire

12 Atlantic

Su i te 5 O 0

Boston, Massachusetts 022 10

4 8 8 - 4 2 0 0

16 Counsel the Deponent

MICHAEL J . FLYNN, ATTORNEY AT LAW

6156 La Flecha

20 Box 69O

21 Rancho r Sante Calif ornia 92067

(858 ) 775-7624

Counsel Timothy Blixseth

2 4

2

US LEGAL SUPPORT

(619) 573-4883


(339 of 3



Samuel Byrne, Volume l

1

2 EXAMINATION PAGE

3 SAMUEL BYRNE

4

Direct Examination by Mr . Flynn

6

7

8 E I

NO . PAGE

11 E-mail dated 9/17 /0 6

E-mail dated 12/27/0 6

E-mail dated 12/30/0 6

E-mail dated

15 E-mail dated 3/28/07 8 6

16 E-mail dated 4/18/07

E-mail dated 4/25/07

E-mail dated 4 /2 6/07



E-mail dated

Veri f ied complaint

E-mail dated 6/8 /07

E-mail dated 6/13/07

3

US LEGAL SUPPORT

(619) 573-4883


(340 of 3




l wouldnrt have because didn't have any

2 knowledge apart from this.

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MR . GLASSER : I l would

prof f er on the record of how speaki ng to the governor

10 the last month relates case, pleaser

11 Flynn . would l i ke prof f er f or the

l e a s e .7

FLYNN :

Mr . Byrne --

15 MR

GLASSER : Excuse me ,

16 Boston, Massachusetts f or two days

B ' s l aw s u i t a g a i n s t M r . B li x s e t h .

re f u s e t o ma ke a p ro f f e r o f how thi s li ne o f

20 MR

FLYNN : You ' re obstructi ng and

2 1 de layi ng .

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US LEGAL SUPPORT

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3 you do that as part of your plan to put

4 political pressure

Certainly not.

those

bankruptcy proceedings?

The governor has nothing with the

bankruptcy proceeding.

you tell people that you were going to

11 talk to the governor

12

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During January of '09, during the bankruptcy

18 proceedings, you meet with Ron Burkle?

19 believe met with Burkle during the

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him briefly. I was introduced

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Who introduced you

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25

US LEGAL SUPPORT

(619) 573-4883


(342 of 3




hi . He was a guest of the Sugarman ' s at

2 Does Burkle own any

Ye llows tone Club?

4 He does . He does now

,

yes .

5 percentage

6

can ' t say exactly . Somewhere

pe rcent 3 0 pe rcent range a s a li mi te d

artner . of many .

l 0 hundred li mi ted partne rs .

Please record what your best

12 memory when f i rst spoke Mr

Burkle .

l 3 S ome t i me i n Ma r ch o r Ap r i l r 0 9

introduced to him by Mr. Sugarman.

15

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26

US LEGAL SUPPORT

(619) 573-4883


(343 of 3




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5 Same question with regard Ron Burkle

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6 Please state the record what

, anything,

7 Edra Blixseth about Ron Burkle's involvement in

8 bankruptcy proceedings in Montana

.

Ron Burkle didn't invest the club until

10 almost --

11 bankruptcy proceedings were concluded

.

don't know

specific recollection.

Have you to anyone regarding the

15 political pressure would judicial

proceedings bankruptcy proceedings in Montana?

would have to see them

existed, I

19 Q. Have you

everything said and done, she will be paid by

in connection proceedings

Montana?

23 A

. Paid for

24 any form

,

Mr. Byrne.

27

US LEGAL SUPPORT

(619) 573-4883


(344 of 3




me today. didn't have state of mind. I thought

2 of them were a honest

Thank you. before you made the agreement

4 in which she was going

5 make $600 million dated August :08, thought

6 crazy?

7 MR

.

GLASSER: Objection.

8 clearly when the deal got terminated,

9 was very angry and about existing

10 investments at the club.

Let me ask you further about Mr. Wilkie.

12 Blixseth you any form words what her

political contacts were within

A. No.

15 Q. Did you

your contacts were within the democratic party?

Blixseth?

Ms. Blixseth.

19 MR

.

GLASSER: Objection.

20 don't know.

MR. GLASSER: What does this have to

22 the B's lawsuit?

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354

US LEGAL SUPPORT

(619) 573-4883


(345 of 3




1 A

. I don't know. donlt think I met him in

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) . when she

believe your testimony is the f irst thing you

Sumpter?

talked Barry . was at the club . So

and spoke to Sumpter it, told him this was

disconcerting and I would like to understand . Clearly

investigating Tim . Tim told us that . Kelly, Tim,

does not strike

18 when did you call your partners and your

20 don ' t know when talked them

.

I ' m sure

talked them about f requently . What does that

remotely have to do with anything here, my investors?

23 It ' s of fensiver Mike

24 With regard to the f raud believe

355

US LEGAL SUPPORT

(619) 573-4883


(346 of 3



From: [email protected]

Sent: Saturday, August 2, 2008 6:12 PM

To: [email protected]; Sam Byrne <[email protected]>

Subject: Re: What is the plan for tonight?

Jack and I...........and we hope you and others are going to go down to the BBQ to have a presence and meet and jreet

da yada... . .-.then arnund 8:00ish we will a1l head uq the Sunrise Rdge model for dinner with the Gov and his wlfea

Mn). Franûlin Hall (sotlnded sort oi like maybe his chlef of stafr?) Casey you guys and us are al1 that will be there.John of course as well. He said VERY Montana casual. Hans has ôfferel to help If an#hing joes sideways wilh a quick

phnne call. Thars alI l know Ghris. See you tonlght. Are you going to stop by the BBQ? Hoplng Todd and others that

might not be as Mendly, if you know what l mea ? might also be at the BBQ. 1 did let Hans know that we plan to close on

Monday and thanked hlm for how he has handled this dimcult week. Edra

*** e

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CX '

Subject to Protective Order

CHE02051


(347 of 3



Fron ve Maeew Kidd

Sent: Wednesday, January 14, 2009 6:38 PM

To: Sam Byrne <[email protected]

.

Sublect: RE: oell phones.......

l am at home. Did you try to call...my cell phone may have been off, but you can try now if you want.

We are doing our best to fund...l have been asking for a budget since the weekend and have yet to see one, so that ball is

in their court. l have sent the subordination agreements (you were on the email yesterday). but acknowledged the # may

change depending on the budget. I can just make it $5 MM though if that's what you want to do.

Disaqpeinsng about Yankhauer-..l was hoping you cut a deal so we could aIl just take a vacation. #k. How were your

meeàngs with the Gov and Burkle?

1 am surprised there are direct flights from MSP to C-ville. Are you meeting with the VRS in Charlottesville, not

Richmond?

Matthew E. Kidd

CrossHarbor Capital Padners LLC

(61D 624-8326

PRWILEGED AND CONFIDENTIAL COMMUMCATION

This communication is intended only for the use of the individual or entity nnmed as the addressem It contains information

which is privileged and/or confidential under applicable lam If you are not the intended recipient or such recipient's

employee or agenh you are hereby notified that any dissemination, copy or disclosure of this communication 1s strictly

prohibited. If you are the intended recipient of fhis communication, you are hereby notmed that auy disseminatbn of this

$?' communication to others, or any disclosure of the information that i: contained within it, is strictly prohibited. lfyou have

.

received this communication in error, please immediately notify me at (617) 6244326 or via return Internet e-mail to

[email protected] and expunge this communication wlthout maklng any copies. Unintended transmlssion shall

not constitute waiver of the attorneyelient or any other privilegm Thank you for your cooperation.

Where are you? l thought we were working towards funding tomorrow of Friday under the new loan? ls itjust in her court

to get the subordinations now? Do they have them?

Have you agreed to the budget?

Why cant we get them to subordinate to a big ntlmber and get that done; a) so that they can go focus on something and

make it their issue. and ; b) so that we can use any number smaller than that? Make it for $5m and make her go get

them?

Today was surreal - Yankauer is impossible. Sitling in MSP waiting on a 3 hour puddle jumper to Charlottsville. Where

are you?

From: Matthew Kidd

,'

'

nt: n day, Janua 14, 2009 6*.17 PM

'

Top m Byrne

Subject to Protective Order

CHE67398


(348 of 3



O9-0OO14-RBK Doc#: 714-2 Filed: 12/19/12 Entered: 12/19/12 16:32:42 Page 1 of 1

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DM Exhibit 10


(349 of 3



l CHRISTOPHER J

.

CONANT

cal.Bar No. 244597

2 730 l 7tb street

,

suite 2Q0

Denver, Colorado 80202 .

Telephone: (303) 298-1800

4 Facsimile: (303) 298-1804


Attorney for Timothy L. Bllxseth

6

7

8 SIJPERIOR COURT 017 CALIFORNIA l7()R THE COUNTY OF RIVERSIDE

9 Itjojxog I j jz

n re the Marriage of: Case No.

LReassigned to Dept. 1 0 from Dept. F501) 0

Petitioner: Plaintiff

1 1 DECLARATION OF ROBERT WHITEFORD

and

1 2 Judge: Sharon J

.Waters

Respondent: Timothy L. Blixseth uearjng: Jan

.14, 2013 3

Time: 8:30 a.m.

'

Dept. 10 4

15

16

7

18

19

20

21

22

23

24

25

26

27

28

DECLARATION OF ROBERT WHITEFORD


(350 of 3



3

4

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

28

1, Robert Whiteford, do hereby declare under penalty of perjury of the laws of the State of

California as follows:

I am over eighteçn years of age and have personal knowledge of the facts testified

to herein.

With respect to my experience and knowledge, l hereby incorporate by reference

my sworn statements set forth in a prior declaration that I filed in the Montana bankruptcy court,

Paragraph 2, which is attached hereto as Exhibit 1.

3. On September 25, 2012, Dennis L. Montgomezy had an Apple Power Mac 65

computer (serial number 68531 1 l URUO) delivered to me by Brian Calhoun. Thij computer

contained one hard drive (Model WD3200AAKS, Serial Number WCAWFD924346),

On September 25, 2012, Mr. Montgomery had a hard drive (Model

WD3200AAKSs Serial Number WCAWFD940504) delivered to me via UPS (Tracking Number

1Z7F4Y 152468329746). This drive is a SATA hard drive that was not installed in a computer or

external enclosure. This is commonly known as a çtbare drive''

5. Mr. Montgomery informed me that these devices were Edra Blixseth's and that

Ms. Blixseth left these devices in his custody and control.

6. Upon receiving these devices, l made forensic image copies of the files contained

thereon. The process of making these forensic images ensured that the ûçmetadata'' on the files

was preserved unaltered so that a user of the files could review the ttmetadata'' on these files and

from that ttmetadata'' determine that date that the filçs were created and the last that they were

modified.

From the Power Mac hard drive l retrieved the file known as tsNotes on the

MSA.doc''. l reviewed the metadata on this f5le and found that this document was created on

09/20/2009 09:33:37 and last modified on 10/23/2009 15:3 1 :49.

8. From the bare drive I retrieved the document known as ''Dl-lpoints,pdf''. 1

reviewed the metadata on this file and found that this document was crvated on 07/17/201 1

19: 18: 1 0 and last modifiçd on 07/1 7/201 1 19: 1 8:1 1 .

9. From the Power Mac hard drive l retrieved the file known as çdMy Dearest

DECLARATION OF ROBEFI' WHITEFORD

'

.

'

.


(351 of 3



1 Jack.doc''. 1 reviewed the metadata on this t5le and found that this document was created on

2 10/25/2009 1 5:59:42 and last modified on 10/25/2009 1 6:34:20,

3 I reviewed information on the Power Mac to determine if the computer clock had

4 been altered in such a way that would allow a user to manipulate the metadata contained on the

5 files thereon. I found no indication of any such tampering.

6

7 l declare under penalty of perjury of the laws of the United States that the foregoing is true

8 and correct to the best of my knowledge.

9 DATED this 3rd day of January, 2013.

1 0

1 1 Dated: January 3

,

2013

1 2

13 Robe iteford '

1 4

1 5

1 6

1 7

1 8

1 9

20

2 1

22

23

24

25

26

27

28

DECI-ARATION OF ROBERT WHITEFORD


(352 of 3



Exhibit1


(353 of 3




Michael J. Flylm, Admitted Pro Hac Vice

One Central Plaza, Suite 240

Boston, MA 02108

Telephone: 858-775-7624

Facsimile: 858-759-071 1


Attorney for Plaintiff-lntelwenor

Timothy L. Blixseth

UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF MONTANA

ln re:

YELLOWSTONE MOUNTAW CLUB,LLC,

et a1.,

Debtors.

TIMOTHY BLIXSETH, an individual,

Plaintiff-lntervenor,

MARC S. KIRSCHNERUYS TRUSTEE OFHE YELLOWS

TONE CLUB LIQUIDATING

TRUST,

Defendant and Counter-plaintiff.


Jointly Adluinistered with 08-

61571, 08-61572, and 08-61573

Chapter 1 1

Adv. Pro. No. 09-00014 and

consolidated with Adv. No. 09-00017

AFFIDAVIT OF ROBERT

WHITEFORD IN SUPPORT OF

MOTION FOR SANCTIONS


(354 of 3




1, Robert Whiteford, depose and state:

I am over eighteen years of age. I have personal knowledge of the facts stated

herein, and if called as a witness, I could and would testify competently to them.

I am an IT consultant with extensive experience in the recovery of data from

domputer storage media and recovery of Microsoft Exchange and Microsoft Outlook data.

A true and correct copy of my curriculum vitae is attached hereto as Exhibit 1 .

3. I was retained by Timothy Blixseth to, among other things, conduct a forensic

examination of certain hard drives that were obtained from Jory Russell, a witness in the

above case.

4.

the hard drives, Iooking specifically for email that had been deleted and in addition,

attempted to recover files that had been deleted.

From August 3, 2009 through August 22, 2009, I conducted an examination of

In this regard, l reviewed and relied upon the deleted file analysis performed by

Guidance Software, another forensic computer expert. Guidance Software received the

image files from the Jory Russell drives and scanned the drives for deleted files, those

folders/files which could be recovered, and user activity.Those files provided tp me and

created by Guidance Software are attached hereto as Exhibits 2-7.

Attached hereto as Exhibit 2 is the spreadsheet ''Sony VAIO Laptop

-

Deleted

file Iisting,'' which displays aII active files which were marked as deleted.

Attached hereto as Exhibit 3 is the spreadsheet ''Sony Desktop

-

Deleted file

Iisting,'' which displays aII active files which were marked as deleted on the 'ddesktop'' hard

drive.


(355 of 3




Attached hereto as Exhibit 4 is the spreadsheet ''Sony VAIO Laptop

Recovered

Folders file Iisting'' which displays the folders/files which were able to be recovered on the

drives.

Attached hereto as Exhibit 5 is the spreadsheet Sony Desktop

-

Recovered

Folders file Iisting'' that displays the folders/files which were able to be recovered on the

drives.

10. Attached hereto as Exhibit 6 is the spreadsheet ''lnitialize Case

-

sony Desktop''

that shows the users which have accounts on the Desktop and the associated

dates/times for each user as well as the date/time the Operating System was installed.

Attached hereto as Exhibit 7 is the spreadsheet ''Initialize Case

-

sony Laptop.''

This document shows the users which have accounts on the Desktop and the associated

dates/times for each user as well as the date/time the Operating System was installed.

12. Guidance also stated in its transmittal Ietter that it ran a t'date filter'' on the

deleted data, for the Last Accessed date/time, from June 23, 2009 to present and

exported the results into two spreadsheets, ''Sony

vAlo

-

Laptop

peleted File

Listing

-

062320O9-Present.xIs'' and ''Sony VAIO Desktop

-

Deleted File

Listing

-

06232009-Present.xIs,'' which show the files deleted from the laptop and the

desktop after June 23, 2009, the date on which I understand the bankruptcy court had

ordered the production of the drives. These are attached as Exhibits 8 and 9,

13. In addition to reviewing the files obtained by Guidance Software, I attempted to

review and recover email from Jory Russell's drives. I was able to Iocate an olline data

file called an .OST file, which is a Microsoft Outlook file that stores emailsent and


(356 of 3



09-0OO14-RBK Doc#: 473-3 Filed: 01/16/1 0 Entered: 01/16/10 12:48:30 Page 4 of 194

received, contacts, and other information that resides on a Microsoft Exchange server - it

is essentially a data file for Microsoft Outlook.

14. The Iargest and most current set of emailthat was recovered from Jory

Russel's machines was the Microsoft Outlook offline folder file Iocated on the Sony VAIO

Laptop. The drive used was Guidance Software Evidence # 1 10-00175. Emails were

found in a file named:

ïz64l46-EolAïsonyvAlo

-

LaptopïcïDocuments and SettingsuoryïLocal

SettingsWpplication DataïMicrosoqïoutlookyoutlooko.ost

In order to view the data in the OST file that I had Iocated, I used ''Advanced

Exchange Recovery v2.0'' software to recover emails from the .OST file to a .PST file that

hcan be viewed using Microsoft Outlook 2003 or newer. A total of 60,132 items were

N

recovered from this OST file. The recovered items include any recoverable deleted

messages.

16.

an Outlook PST or OST file.

However, It is not possible to determine the total number of emails deleted from

AII email messages are stored in a database format. When

one or more messages are deleted, it is only possible to recover the messages for a

Iimited amount of time. The ability to recover deleted data is greatly reduced over time as

the computer and Outlook is used. If the database is compacted it is impossible to

recover deleted items.

In padicular, every month it appears that there were hundreds of emails sent

and received by Mr. Russell. However, the number of sent messages from October 1,

2008 to October 31 , 2008 in the recovered OST file differs from the PST files that were


(357 of 3



O9-00014-RBK Doc#: 473-3 Filed: 01/16/10 Entered: 01/16/10 12:48230 Page 5 of 194

provided. There are 71 messages that are in the recovered OST that are missing from

the PST files on the evidence hard drives for October 2008.

I declare under the penalty of perjury under the Iaws of the United States and the

State of Montana that the forgoing is true and correct, this 12th day of January 2010

.

/s/ R& A#fzeN

Robert Whiteford


(358 of 3




Exhibit 1


(359 of 3




ROBERT WHITEFORD

4202 Sorrento Valley Blvd., Suite S

San Diego, CA 92121

(619) 741 -4579

E-mail: [email protected]

EDUCATION

Coastal Carolina University, Conway, SC

Pursued B.S., Computer Science, 1998 - 2000

Northland College, Ashland, WI

Pursued B.S., Computer Information Systems, 1996 - 1998

PROFESSIONAL EXPERIENCE

IT Services Company Owner

Business Computer Solutions, San Diego, CA

February 2003 - Present

Provide IT consulting services to businesses and individuals. Suppol't computer

networks ranging in size from home offices to companies with over 1000 employees.

Support Iarge email systems including Microsoft Exchange 2000 - 2007. Perform data

recovery and forensic work.

Senior Network Technician

Network Resources Inc., La Mesa, CA

February 2002 - February 2003

Provided IT consulting services for customers and trained network technicians.

Deployed and maintained file servers, email servers and workstations. Performed data

recovery and forensic work.

Network Technician

The Automated Office, Fullerton, CA

June 1996 - February 2002

Provided IT consulting services for customers. Deployed and maintained file servers,email servers and workstations. Pe/ormed data recovery and computer repair.


(360 of 3



1 PROOF OF SERVICE

2 1, Christopher J. Conant, declare:

3 l am a resident of the State of Colorado and Qver the age of eighteen years, and not

a party to the within action. My business address is 730 17* Street, Suite 200, Denver, CO

4 80202. On January 7, 2013, l selwed the within documentts):

5 DECLARATION OF ROBERT WHITEFORD

6 IZ by transmitting via facsimile the documentts) listed above to the fax numberts) set

forth below on this date.

r-1 by placing the documentts) listed above in a sealed enveiope with postage thereon

fully prepaid, in the United States mail at Denver, Colorado addressed as set forth

above.

IZ I caused such envelope to be delivered via ovemight delivery addressed as0

indicated on the attached service list. Such envelope was deposited for delivery by

UPS following the firm's ordinary business practiccs.1

rz via electronic/e-mail selvice. The doculnentts) listed above were selwed via e-mai2

to the addressecs listed.

13 IW By having a copy delivered personally to Mr. Holahan's offlce at the address listed

below

1 4

Dennis J. Holahan5

2049 Centtu'y Park East

16 Suite 3180

Los Angeles, CA 90067

17 Fax: (707) [email protected]

f. yzya o. slixsethttorney or

1 9

I am readily familiar with the firm's practice of collection and processing

20 dence for mailing

.

Under that practice it would be deposited with UPS on that sameorresgon

day wlt'h postage thereon fully prepaid in the ordinal'y course of business. l am aware that on

21 i f the pmy selwed

,

service is presumed invalid if postal cancellation date or postageot on o

meter date is more than one day after date of deposit for mailing in affidavit.g2

I declare under penalty of perjury under the laws of the State of Colorado that the3

ing is true and correct.brego

24 E ecuted on January 7

,

20'1.3.#t Denver, Colorado.

<N

25

X

26 N istopher J

.

Conant

27

28

POS


(361 of 3



CàSTRS invemant Ytangld in lœal dimute ovœ plwground for rich - Buïne - The

..

Pœe 1 of 3

ht m l

1-1 I 1( SAc I'AAI l(N-I-() 111(1( .. ..

-

CaISTRS investm ent entangled in Iegal

dispute over playground for rich

[email protected]

Published Wednesday, Jul. 31 , 2013

Tucked away in the vast investm ent portfolio of the California teachers pension fund is a

Iuxury resort in Montana that features Iavish villas

,

pristine golf Iinks and world-class ski

slopes.

The California State Teachers' Retirem ent System classifies its $ 1 00 m illion investm ent in

the fund that owns Yellowstone Club as ''high-risk

,

high reward .'' Whether its investm ent

turns out to be a winner or a Ioser m ay depend on the outcome of a raft of Iawsuits pending

in California and Montana.

Crossharbor Capital Partners

,

using m oney from CaISTRS and other investors

,

bought the

Yellowstone CIu b out of ban kruptcy in 2009 for $ 1 1 5 m illion

Now the club's co-founder

,

Tim othy Blixseth , has accused federal bankruptcy judge Ralph B.

Kirscher of m isconduct in his handling of Iawsuits spawned by that bankruptcy

.Blixseth

alleges that Kirscher facilitated a below-m arket sale of the club to CrossHarbor's benefit

.He

also accused the judge of im proper com m unications with Blixseth's Iegal adversaries

.

Kirscher is hearing Iawsuits over the exclusive resort com m un ity in Big Sky

,

Mont., which

published reports have said counts Microsoft Corp

.co-founder Bill Gates and entertainer

Justin Tim berlake as m em bers. I t features m ountainside chalets that start at $8 m illion

according to a sales brochu re,

Blixseth's com plaint, filed in the U

.

S. District Court of Appeals for the 9th Circuit in San

Francisco, accuses Kirscher of m isconduct in num erous Iawsuits in which investors and

creditors for the upper-crust playground are seeking monetary dam ages from Blixseth

A self-made real-estate tycoon, Blixseth once ranked 322 on the Forbes magazine Iist of

wealthiest Am ericans.

Through a court clerk, Kirscher declined to com m ent

,

in keeping with 9th Circuit rules.

The 9th Circuit could dism iss the m isconduct claim

censure Kirscher or rem ove him from

office. Or it could opt not to reappoint the judge, whose term expires in Novem ber

The vast m ajority of such m isconduct claims are dism issed for lack of m erit

But few involve

m ajor com m ercial cases, and claim s filed by established Iawyers in high-stakes cases m ight

be taken seriously, said Robert Weisberg

,an ethics scholar at Stanford University School of

Law.

fiIe:///C:/U=WC.J.%o20Con&VAppD#WLoY/T>p/Frr >or=CàSTRS%20inv*mœt

..

8/1/2013


(362 of 3



CàSTRS invemœt entangle in Iœal dimuteovœ playground for rich - Buén- - The

.. Pœe2 of 3

CaISTRS spokesm an Michael Sicilia said the fund's $1 00 m illion com m itm ent to CrossHarbor

cam e in 2005, before its acquisition of Yellowstone Club

,from a $ 1 0 billion ''opportunistic

investm ents portfolio,'' part of CaISTRS' $22 billion in real estate holdings.

After the real estate crash , CaISTRS - Iike its Iarger cou nterpart for state em ployees

,

the

California Public Em ployees' Retirement System - began to m ove som e of those holdings out

of riskier ventures.

A 20 1 2 CaISTRS report showed that CrossHarbor had used about $65 m illion in CaISTRS

f unds for Yellowstone Club and other properties

,

and that CaISTRS consistently had shown

modest Iosses on the investment.

CrossHarbor recently increased the am ount of CaISTRS funds in its investm ent pool

,

and

results have im proved, Sicilia said, without providing details

.CrossHarbor has the right to

invest aII $ 1 00 m illion com m itted by CaISTRS.

Blixseth's attorney, Michael Flynn

,

said his client is seeking ''m assive''dam ages

,

into the

hu ndreds of m illions of dollars, from CrossHarbor and others involved in the dispute

.

The

outcom e of the m any Iegal cases could dictate the outcom e of CaISTRS' CrossHarbor bet

Sicilia declined to com m ent about the court fights over the Yellowstone Clu b

.

''We take a

Iong-term view on aII our investm ents, and we think that in the Iong term things will work

out,'' he said.

CrossHarbor executives declined to be interviewed

but in a written statem ent said that they

believe no judicial m isconduct occu rred . ''CrossHarbor has always acted in good faith , and

will continue to do so, ''the statem ent said

,

noting that ''conspiracy claim s'' by Blixseth

previously had been rejected in court.

The Blixseth com plaint also alleges that Kirscher maintained an im proper relationship with

Missoula Iaw firm Worden Thane PC, where he formerly was a partner

The firm represents

form er m inority shareholders in Yellowstone Club

,

who say that Blixseth owes them m illions

of dollars. Kirscher's award of $22 m illion to that group has been appealed.

Blixseth, a Washington resident, and his ex-wife

,

Edra Blixseth , have been accused of

converting m ore than $200 m illion Ioaned to Yellowstone Club to their personal use, Ieading

to the club's financial collapse.

l n a ruling, Kirscher called Blixseth's actions ''self dealings'' that caused ''substantial harm

''

After an acrim onious divorce in 2008

,

Edra Blixseth ended up with sole possession of the

couple's m ajority club ownership. After the credit and real estate collapse, she and

Yellowstone CIu b d eclared ban kruptcy.

According to Blixseth's 9th Circuit com plaint, in 2009 Kirscher approved a settlem ent in the

Yellowstone Club bankruptcy that am ounted to collusion between Edra Blixseth and

CrossHarbor, am ong others, to im properly make Tim othy Blixseth sole target for the club's

creditors, including CrossHarbor.

Blixseth had earlier asked Kirscher to recuse himself based on that claim and others

.

The

judge rejected the request as groundless, a ruling affirm ed by a separate federal judge.

The com plaint to the 9th Circuit adds evidence

,

said to com e from public records, that

Kirscher recently m aintained an em aiI address at Worden Thane and served as the firm 's

vice president, then awarded the firm 's clients $22 m illion .

Em ails obtained by The Bee show correspondence about the Yellowstone Club case between


(363 of 3