(1 of 364)

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INTHEUNI
F0R
TETHE
PSTAYE
SCO
URT
OF
NINTH
CI
RCUI
T APPEALS
NO.12-35986

TIMOTHYL.BLIXSETH

RU
Euy
cc.
#
la
v
v,o
p
wys
jc
jE
rjD
S.COURTOFA

Appellant,

AtJS
.122213
FILED

VELLowsToxsMOUNTAINCLIJB U
TXTED nvE

YELLOWSTONEDEVEOPMENT,lLC

INI
zI
,.

BIG SKY RIDGE,LLC

YELLOWSTONECLUB CONSTRUCTION CO.,LLC
Appellees.

EMERGENCMMOTIONPROCEEDI
UNPERCINGS
RCUITRULE27'3TOSTAY
Appealfrom theUnitedStatesDistrictCourtfortheDistrictof
Montana
CaseNo.2:11-73-BU-SEH
Telephone:(858)775-7624
mike@mjfesq.com

ChristopherJ.Conant
ConantLawLLC
73017t11Street
Suite200
Denver,CO80202

PhillipH,Stillman
Stillman&Associates
300SouthPointeDrive,
Suite4206
MiamiBeach,FL33139

MichaelJ.Ferrigno
LawOficeofMichaelFerrigno,
PLLC
1200N.MainStreet,Suite486
Meridian,ID 83680

MichaelJ.Flynn
P.O.Box690
RanohoSantaFe,CA92067

Telephone:(303)298-1800
cconant@conantlawyers.com

Telephone:(888)235-4279
Telephone:(208)319-3561
pstilhnD@stillmanassociates.
com
michael
#rri
gnoWerr
gno-law.
com
AttorneysforAppellantTimothyL.Blixseth

T
:
=

l
I

EXHI8IT

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CircultRule27-3Certificate
IdentifcationofotherParties:

YELLOWSTONEMOUNTAIN CLUB,JamesA,Patten,AttorneyGeneral
LLC
Direot:406-252-8500
Appellee,
Patten,Peterman,Bel
tkedahl& Green,
PLLC
Suite300
28172ndAvenueNqrth
Billings,MT59101
AD HOCGROUPOFCLASSB UNIT RonaldA.Bender,Attorney
HOLDERS
Direct:406-721-3400
Appellee,
WordenThane,P.C.
111N.Higgins
P.O,Box4747
Missoula,MT59806
CIPSUNRISERIDGEONVNER LLC BenjaminP.Hursh,Attorney
Appellee,
Direct:406-523-3600
CrowleyFleck,PLLP
305South4thStreetEast
Suite100
Missoula,MT59801
CIPYELLOWSTONELENDING LLC BenjaminP.Hursh,Attorney
Appellee,
Direct;406-523-3600

CROSSHARORCAPITAL

PARTNBRSkLpLpC
ellee,

(seeabove)
BenjaminP.Hursh,Attorney
Direct:406-523-3600
(seeabove)

MichaelR,Lastowski,Bsquire,
BankruptcyCounsel
Dired:302-657-4900
DuaneMorrisLLP
Suite1600
222DelawareAvenue

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MARC S.KGSCHNER
Appenee,

Wilmington,DE 19810
RobertR.Bell
MULLlN,HOARD Ar BROWN
50OsouthTaylor
Amarillo,TX 79120-1656
ShaneP.Coleman,Esquire,Attorney
HOLLAND & HART,LLP
401Nort
h31stStreet
P.O.Box639
Billings,MT59103-0639

CREDIT SUISSEAG,CAYMAN
ISLANDSBRANCH
Appellee,

CharlesWilliam Hingle,1,Esquire,
Attorney
HOLLAND & HART,LLP
401North31stStreet
P,O.Box639
Billings,MT59103-0639
EvanR.Levy,Attorney
Direct:212-735-3889
Skaddeny,
Aps,Slate,Meagher& Flom
LLP
FourTimesSquaze
New York,NY 10036

J.RichardOrizotti,Attorney
Direct:406-497-1200
POOREROTII& ROBINSON
1341HanisonAve.
Butte,MT59701-4898
GeorgeA,Zimmennan,Esquire,
Attorney
Direct:212-735-2000
Skadden,Arps,Slate,Meagher& Flom
LLP
212-735-3000

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FourTimesSquare
NewYork,'
NY 10036

The facts showing the existence ofthe nature ofthe claimed

emergency are set forth below in this Motion but in short,the
emergency requiringdefinitiveaction bythisCourtwithin 21daysis:

(1)thatbankruptcyjudgeRalph B.KirscheroftheU.S.Bankruptcy
CourtfortheDistrictofMontanahassetanevidentiaryhearingbefore

himselfforSeptember10,2013inwhich evidenceofhisownjudicial
misconduct/corruptionwillbepreentedfozwhichhewillbethefinder
offactofhisown misconduct. Thisisa patently absurdscenariowhile

these same faots m'

e the subjectofa still-pending ComplaintofJudicial
MisconductthatM<.Blixscthsubmittedthreemonthsago;and(2)JudgeKirscher
entereda$40millionjudgmentagainstMr.BlixsethinfavoroftheYellowstone
ClubLiquidatingTrust(SK
YCLT'')whichitisseekingto enforce,yetthe
beneficiariesoftheYCLT arethesamepartieswho haveparticipated

in Judge Kirscher's judicial misconduct to improperly benefit

themselves in their pursuit ofMr.Blixsoth,as demonstrated in the

evidencesupportingthejudicialmisconductcomplaint.

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These apparentgross deprivationsofMr, Blixseth'sdueprocessrights

throughjudicialmisconductbasedonthedocumentedandauthenticatedevidence
submittedtothisCoul'
tin connectionwithMr. Blixseth'sComplaintofJudicial
Misconduct,together with Judge Kirscher's directchallenge to this Court's

appellatejurisdictioninthependingappealoftheMotiontoDisqualifyisperse
irreparableharm justifying emergencyreliefatleastuntilsuchtimeasthe
ComplaintofJudiciz Misconductisactedupon by theChiefJudgeunder28

U.S.C.jj352or353.
Counselforthe otherpal-tieshavel
lotbeen'notifed ofthisEmergency
Motion orthegroundsforthisEmergencyMotion becauseofconcernsbyMr,
Blixseth'scounselofrunningafoulofanyconfidentialityrequirel
uentimposedby

28U.S.C,#360duetothefactthattllisEmergencyMotionisbased,inpart,and
relatedtothependingComplaintofJudicialMisconductpendiagasCaseNo. 1390073.

Forthe samereasons,the reliefsoughtinthisMotion wasunavailable

because thebasis,in part,pertainsto thestillpending ComplaintofJudicial
MisconductthatMr.Blixsethsubmittedthrcemonthsago;thus,neitherthedistrict

coul
'
tnorthebanluuptcycourthasanyjurisdictiontoadjudicatethisMotionsince

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onlythisCourthasjurisdictiontohearMr.Blixseth'sComplaintofJudicial
Miscondud.
con'tonnextpage

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MOTION
Appellant,Mr.Blixseth,herebysubmitsthisElnergency Motion to Stay

ProceedingspursuanttoCircuitRule27-3)andhisrequestforahearingbeforethe

ChiefJudgepursuanttoF.
R.
A.
P.27(e).Thisreliefisbased,inpart,onarecently
discoveredemailaccountandprofessionalrelationshipmaintainedbyaMontana

banknlptcyjudge,whoseconductisatissueinthispendingappeal,andMr.
Blixseth'sadversaries.

ThisrecentlydiscoveredevidencewassubmittedtothisCourtpursuantto28

U.S.C.j351onJuly8,2013,(Exhlbit1attached).Thisevidence,isinadditionto
otherevidenceofjudicialmisconductpreviouslysubmittedtothisCourtpursuant
to28U.S.C.j35landwhichhasbeenundersubmissionsinceMay3,2013.See
CaseNo.13-90073.ItwasfirststlpplementedonJune3,2013,again onJuly8,

2013aldthenagainonAugust1,2013.
JustninedaysaqertheJuly8,2013sublnissiontothisCoult,onJuly 17,
2013,inan apparentproceduralmaneuvertounderminesomeofthesubmitted

evidence,theMontaaabankruptcyjudgescheduledanevidentiaryhearingfo<
September10,2013,beforehimselfwherethecriticalgswc;
b'hisowncredibilit
y,
andthecredibilip ofawitnesswhosesef-servinginterestsaredirectl
kali
gned
withtheinterestsofthebankruptcyjudge.ThescheduledSeptember10hearingis
1

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basedonMr.Blixseth'smotiontovacatetheAP14judgmentledonDecember
19,2012,underFederalRuleofBankruptcyProcedure9024, (Ru1e60(b)(6)),
predicated on thejudge'sjudicialmisconductreoited in the May 3,2013
submissiontothisCourtpursuantto28U.S.C.j351.lnconsiderationofthe
newlydiscovered evidenceboth intheJune3,2013submission andtheJuly8,

2013submissionpursuantto28U.S.C.j351,andbasedonthefactsrecited
herein,Mr.Blixsethrespectft
lllyrequestsemergencyTelief.
Mr.Blixsethherebycel-tifiesthattherequestedl
-eliefisneededinlessthan
21daystoavoid irreparableharm asdueprocessdeprivationsgenerally inflict
in'
eparableharm perse.Goldie'
sBookstore,Inc. v.Superi
orCourtofStateof

Cal.,739F.
2d466,472(.
9thCir.1984)
ReliefRequested:Mr.Blixsethl'
equeststhatthisCom4stayal1litigationand

judgmentenforcementeffortsbeingpursuedagainsthim andhisassetsbythe
YellowstoneClubLiquidatingTrust;andtostayallproceedingscurrentlypendi
ng
beforeJudgeRalph Kirscher,Montalabankl
mptoyjudge,includingtheheating
scheduledforSeptember10,2013.
1. GROUNDSFORRELIEF

A. FactualBackground
lnNovember,2008,CrossllarborCapitalPartnersandEdraBlixsethputthe
YellowstoneClubintoaChapter11banlu-uptcyintheMontanabankl
mptcyoourt.

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CrossllarborandEdraBlixseth,aswellasCreditSuisseandMr.Blixseth'sformer
lawyer,ultimately proposed a plan of reorganization thathad CrossHarbor

purchasetheClubforonly$115million,freeandclear. Tenmonthsearlier,
Crossllarborhadcontractedwith Mr.BlixsethtopurchasetheClub for$455
lnlilli()z1.l

ThisEmergencyMotionismadeinconnectionwithtwopendingappealsin
this Courtfrom the ordersoftheU.S.Bankluptcy Courtfo<the Districtof

Montana(Kirscher,J.
)(dc
Montanabanlcruptcycourf'):(1)theordercontilmingthe
ThirdAmendedPlanofReorganization((T1an'')oftheYellowstoneMountain
Club,LLC etal(d
Debtors'')(NinthCircuitCaseNo.13-35190);and(2)order
denyingAppellant'sMotionfol'DisqualicationofJudgeKirscher(.
Ni1lthCkcuit
CaseNo,12-35986),aswellasthependingComplaintofJudicialMisconduotGled
byMr.Blixsetlt,CaseNo.13-90073.

B. ThePlan
TheorderoftheMontanabankruptcycourtcontirmingthePlanpresentlyon
appealisdatedSeptember30,2011.Ilowever,priortoJudgeKirscherapproving

1Thesefactsandmuchmol
-eareextensivelydetailedandsupportedwith
documentaryevidenceintheOfferofProofthatMr,Blixsethsubmittedinthe
proceedingsbelow andwhicharepartoftherecordinthisappeal.SeeMr.
Blixseth'sExcerptsofRecord,BR 3461-4779,CaseNo.13-35190;seealsoMr.
Blixseth'sOpeningBrieffiledinNinthCircuitCaseNo.12-35986,DktEntry13-1,
PP.9-11.
3

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thePlanonSeptember30,2011,JudgeKirscherhadapprovedtheexactsameplan

onJune2,2009.Mr.Blixsethappealed(YMCIappeal)thatJune2,2009order
because,amongstotherreasons,thePlanwasapprovedwithoutappropriatenotice

andcontainedan exculpationclausethatreleasednumerousparties(including
CreditSuisse,CrossHarborCapitalPartnersLLC,Mr.Blixseth'sformerattorney

and1aw frm,andMr,Blixsdh'sex-wife)from al1liabilitytoanythirdparty

(includingMr.Blixseth).Blixsethv.YellowstoneMountainClub,LLC,No.CV09-47-BU-SHE,2010WL4371368(D.Mont.Nov.2,2010).OnNovember2,
2010,theU.S.DistrictCourtfortheDistrictofMontanagrantedMr.Blixsdh's
appealandreversedandremandedthePlanbecausetheexculpationclauseinthe
PlanviolatedNinthCircuitlaw.Id.
Uponremand,however,JudgeKirscherre-approvedthePlanwiththeexact
sameexculpation clausethattheDistrictCourtpreviously threw outforCplain

enor.''Indeed,Judgelcirschersimplydisagreedwiththeappellatemandatefrom
theDistrictCourtthattheexculpationclauseviolatedNinthCircuitlaw. Inre
YellowstoneMountainClub,LLC,46OB.R.254,277tBankr.D.Mont.2011).

Mr.BlixsethappealedagaintotheDistrictCourt(YMC11appeal),butthis
time theDistrictComtdismissed Mr. Blixseth'sappealforlack ofappellate
standing. TheDistrictCourtsaidthat:<df'
hePlan'sexculpationclauselanguage

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neithercreatesnoTimposesliabilityonhim.Heisbevondthenmbitofitsreach

yndappliation.
''Ex.
2,p.4(emphasisadded).YetjustnlnedayslatertheJudge
KirscherTuledthatMr.BlixsethhadnolegalmalpracticeandbTeachoffiduciary

dutyclaimsagainsthisformerattorney,StephenBrownandhis1aw firm because

theexculpationclauseinthere-apmovedPlanreleasedMr.Brownofliabilityto

Mi-.Blixseth.Ex.3,p.11.

Mr.BlixsethappealedtheYMC11ordertothisCou14.2
WhenthePlanwasinitiallyconfirmedinJuneof2009,thePlancalledfor

thecreationoftheYellowstoneClubLiquidatingTrust(tV
YCLT'')topursueMr.
BlixsethasthesolelitigatioatargetforTepaymentofover$280lnilliontothe
unsecuredcreditors,SeeNinthCir.CaseNo.,12-35986,DktEnrty26-1,p.20.
AsadmittedbyCrossllalbor'sprincipalattheoutsetofthebankruptcy,theplan
evenbefol
'ethebanluuptcywasftledwastott
setup''M<.Blixseth.Ex.4,p.3.
Aocordingly,theYCLTtook overand initiatedahostoflitigation againstM1'.
BlixsethintheU.S.Banl
cuptcyCourtfortheDistrictofMontanaaswellasthe

2Mr.BlixsethisalsocurrentlyappealingJudgeKirscher'sorderthat
purportedlyappliedtheexculpationclausesinfavorofMr.Brown.
ThatappealiscurrentlybeforeJudgeHaddonintheDistrictCourtfor
theDistrictofMontana.However,amotionfordirectcertificationof
thatorderiscurrentlypendingbeforeJudgeHaddon.Ahearingonthe
certificationmotionissetforAugust9,2013.SeeTl
h?othyL.Blixseth
Tz.Stephen.
&.Brown,eta1,Mont.D.CaseNo.CV-13-32-BU-SEH,Docs.
5)6,14,19,and22.
5

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U,S.DistrictCourtfortheCentralDistrictofCalifolmia.JudgeKirscheristhesole

activebanl
uuptcyjudgeinMontanaandisthepresidingjudgeovera1lcasesin
Montanadescribedherein,

C. CasesinwhichMr.BlixsethisBeingSuedPursuanttothe
Plan
ThecasesinwhichtheYCLTiscurrentlysuingMr.Blixsethandhisassets
areidentiedasfollows:

1. Adv.CaseNo.09-14,Montanabanknptcycom'
t(Ex.5);
2. Adv.CaseNo.09-18)Montanabankluptcycourt(Ex.6);
Adv,CaseNo.10-159Montanabankruptcycourt(Ex.7),
.
4. Adv.CaseNo.09-64;Montanaballuuptcycourt(Ex.8);
CaseNo.CV-11-08283;U.
S.DistrictCotu-tfortheCentralDistrictof

California(Ex.9).
OnDecember5,2012,JudgeKirscherentereda$40millionjudgment
againstMr.BlixsethinfavoroftheYCLT inAdversryCaseNo. 09-14(C
C
AP14',
).fnrcYellowstoneMountalnClub,LLC,Adv.No.09-00014,2012WL
6043282,at*9tBanlfT.D,Mont.Dec.5,2012).Twenty-twomilliondollarsofthat
judgmentwasfortheplaintiffsinadversal'
ycaseNo.09-18,3therebydepiving
3Inthatcase,YCLTcontendsthatitisentitledtoapercentageofthe
verydistributionthatitcontended-andJudgeKirscherruled--inAP
09-14wasafraudulentconveyance
6

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Mr.Blixsethofatrialinthatcase.TheYCLT'SothercasesagainstM1'
.Blixseth
remainpending.
The YCLT'S Deoember5,2012judgmentagai
nstMr.Blixseth never
becameenforceablebecauseitwasstayedfor14dayspursurttoF.
R.
B.
P.7062

and before thatperiodlapsed,the Bankruptc,

y Appellate Panelreinstated an

involuntary bankruptcy petition filed againstMr.Blixseth by the Montana

DepartmentofRevenue on Deoember 17,2012 and therefore further stayed

enforcementoftheDecember5,2012judgmentinAP-14aswellasalltheother
litigationtheYCLT wasprosecutingagainstMr.Blixseth.SeeInreBlixseth,484

B.R.360(9thCir.BAP2012).
OnJuly 10,2013,theU.S.Banl
uuptoy Cou14fortheDistl-ictofNevada
dismissed the involuntary petition filed against Mr.. Blixseth. Ex. 10.4

Accordingly,theautomaticstayofjroceedingsandjudgmentenforcementefforts
againstM1'
.Blixsethisnow dissolved.

4TheMontanaDepartmentofRevenueandtheYCLTprosecutedthe
involuntarybankruptcypetition.ItwasunprecedentedfortheStateof
Montanatofkleaninvoluntarybankzuptcypetitionagainstany
taxpayer.TheStateofMontanaassertedthatMr.Blixseth

dundisputedly'owedtheState$219,000inincomestaxeseventhough
inon-goinglitigationtheStateofMontanawasseekingover$56million
incometaxesfrom M1'.Blixseth.JudgeMarltellappropriatelysaw that
theStateofMontana'sassertionwasmerelypretextfortheStatetotry

tocollectthe$56millionthatispresentlybeinglitigatedintheStateof
Montana'staxcourt.

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

December5,2012judgmentandtocontineitsprosecutionofitslitigationagainst
him,includinga11litigationbeforeJudgeKirscher.6 JudgeKirscherhasrecently
scheduledanevidentiaryhearingonSeptember10,2013onapendingmotionto

vacatetheM7-14judgmentpursuanttoFederalRuleofBanlaptcyProcedure
9024predicatedontheevidenceofjudicialznisconductrecitedintheMay3,2013
submission tothisCourtpursuantto28U.S.
C.j351.Ex.11attached. This
evidencewasdiscoveredandsubmittedtoJudgeKirscheronDecember19,2013
afterhispriorruling ontheMotiontoDisqualifynow onappealtothisCourt.
NinthCircuitCaseNo.12-35986. ThatappealpendingbeforeihisCourtdeprives

JudgeKirscherofjurisdictiontoconducttheSeptember10,2013evidontiary
hearingwhichisalsopredicatedonhismisconductanddutytorecusehimself. In
re Combncd Metals Reduction Co., 557F.
2d179,201(9th Cir.1977)(a

5TheYCLT hascrossappealedtheAP-14judgment.ltisMr.
Blixseth'spositionthattheYCLT'Scross-appealactstostay
enforcementofthejudgment.TennesseeValleyAuihorityTcAtlas
Mach.tf'Iron WWzWs,lhc.,803F.2d794,797(4thCir,1986)(t

Wherethe
p
r
e
v
a
i
l
i
n
g
p
a
r
t
y
i
n
t
h
e
l
o
we
r
c
o
u
r
t
a
p
p
e
a
l
s
f
r
o
m
t
h
a
t
c
o
u
r
t
'
s
j
u
dgment,
theappealsuspendstheexecutionofthedecree.')(citingBronsong.La

CrosseR.R.Co.,68U.S.(1Wall.)405,410,17L.Ed.616(1863)9Pricev.
FrankhInvestmentCo.,574F.2d594,597(D.C.Cir.1978);Luther!
z.
UnitedStates,225F.2d495,497(10thCir.19559;SealoverlcCarey
Canada,806F,supp.59,62(M.D.Pa.1992).
8

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bankrtptcy courtlacksjurisdictiontoenteranorderonanissuethatwould
elilninatetheneedtoresolveapendingappeal).
D. DisqualificationMotion
Afterseveralyearsofbeingthesolelitigatiol
ztargetbeforeJudgeKirscher
andaftertearningofnumerouscz:partecommunicationsthatJudgeKirscherand
his law clerks had with his adversaries, coupled with addi
tionaljudicial
improprietiesrecitedintheMotiontoDisqualifynow onappeal,coupledwitha

flagrantdenialofdueprocessinenteringa$22millionawardinajudgmentinone
adversarycase-A.
P-14,thereby denyingMr. Blixseth ofatrialinatleastone
otheradversary case,AP 18,6Mr,Blixseth filed amotion todisqualify Judge

Kirscherpursuantto28U.S.C.j455.
Afterholdinganon-evidentiaryhearing,JudgeKirscherassessedhisown

credibilityanddeniedtheDisqualifcationMotionbutindoingso,headmittedto
numerous exparte comnaunications with Mr.Blixseth's adversaries;and, he

simply disregarded additional documented and undisputed c.x parte email

communications thatunequivocally demanded his recusal. Mr.Blixseth is
presetltlyappealingJudgeKirscher'sdeniatoftheDisqualificationMotiontothis

Court(seeNinthCircuitCaseNo.12-35986)andthatappealisfullybriefedasof
July18,2013.

6Seeinfra.

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Amongst the 111Et

1))?documented grounds requiring Judge K-irscher's

disqualifcationofwhichMr,Blixsethwasawarein2011werethefollowing:
1. JudgeKirscherentertainedft
confidential''iheadsup''col
nmunications
aboutf'
uturecasesfrom leadlocalcounselfortheYellowstoneClub,AndyPatten;
2. JudgeKirscherpresided overexpartesettlementnegotiationsin a

hotelwithCrossHarbor,CreditSuisseandtheYellowstoneClubdebtors(with
AndyPattenagcounsel),inwhichthesepartiesagreedtoaplanofreorganization
thatmadeMr.Blixseth thesolelitigation targetoftheplan,whileexculpating
themselves,t
.
hatcalledfo'
rJudgeKirschertoenterhundredsofmillionsofdollars

injudgmentsagainstMr,Blixsethfortheplantobesuccessf
ul;i.e.,topaythese
samepartiesfrommulti-milliondollarjudgmentsagainstMr.Blixsethenteredby
Judge Kirscher. Mr.Blixseth was notmade awareofnorinvited to these
settlementnegotiationspresidedoverbyJudgeKirscherin ahotelinwhichMr.

Blixsethwasmadethetargetoftheplan;andthejudgepermittedtheotherparties
tobeexculpatedfrom claimsMr.Blixsethhadagainstthem.

3. Judgelfirscherentereda$40millionjudgmentagainstMr,Blixseth
admittedlywithoutaffordingMr.BlixsethanyoppoTtunitytorespondorbeheard,

10

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ThelistgoesonandissetforthindetailwithreferencetotherecordinMr.
Blixseth'sOpeningandReplybriefsinNinthCircuitCaseNo. 12-35986,al1of

whichisincorporatedhereinbyreference.
However,silce Judge Kirscherdenied the Disqualit
kation Motion, Mr.
Blixseth hasbecome aware ofeven more disqualifying factsproving Judge

Kirscher'sactualbiasandjudicialmisconduct(discussedinfra)thatcompelthe
stayofa11proceedingsinvolvingMr.Blixseth.
WhenMr.Blixsethbecameawareofandhadsufcientlyauthenticatedthe

evidence,heimmediatelyfiled amotionunderFederaluleofBankmptcy
Procedure9024(Ru1e9024Motion)inA.
17-14tovacatethe$40millionjudgment
thatJudgeKirscherhadenteredagainsthim.A copyofthatmotionandsupporting
replybriefareattachedheretoasExhibit1l.Becausetheevidencesubmittedin

supportoftheRule9024 Motion directly implicatedJudgeKirscherin blatant

judicialmiscondud,Mr.BlixsethreasonablyassumedthatJudgelfirscherwould
notbethejudgetohearanddecidetheevidenceasitdetiesa1lnotionsofdue
processforajudgetoactashisownjurywhenpresentedwithevidenceofhis
corruption.However,onJuly17,20l3,JudgeKirschersetanevidentiaryhearing

ontheRule9024MotiontobeheldonSeptember10,2013(Ex.11);andbecause
heisthesoleactivebanluuptcyjudgeinMontana,itappearsJudgeltirschel'

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intendstopresideoverthetrialofhisownconuption. Thisappearstoconform to

Montana'sownbrandofnUwjudiciallyrecognizedcorruptionbytheMontana
SupremeCourt.WesternTraditonPartnersh,Inc.v,AttorneyGeneralofstate,
271P.3d1,8-10,12-13(Mont.2011).
E. GroundsforEmergencyRelief
Mr.BlixsethseeksemergencyreliefinthisCourttostayimplementationof
thePlaninsofarasthePINAcontemplatesandauthorizestheYCLT'Sprosecution

oflitigationandjudgmentcollectionagainstMr.Blixseth;andinconnectionwith
a11proceedingscunentlypendingbeforeJudgeKirscher. Such relieftherefore
seeks an order from this Courtstaying a11litigation in the above-referenced
lawsuitsagainstMr.BlixsethaswellasstayinganyeffortbytheYCLTtoenforce

theDecember5,2012judgmentagainstMr.Blixseth.
Asthebasisforsuchrelief,Mr.Blixsethhasrecentlydiscoveredadditional

evidence indicating thatJudge Kirscherhasengaged in egregiousjudicial

impfopriety amounting to constitutionaldeprivations ofdue process directed
towardMr.Blixseth.Captertonv.z4.Z MasseyCoalCo.,Inc.,556U.S.868,883-

884(2009)(DueProcessClauserequirestheappearanceofjudicialimpartiality);
Lilebergv.HeaIths'
crvfcc.
AcquisitionCorp.,486U.S.847,864-869(1998).This
evidenceisin additiontotheevidencerecitedinthebriefsandrecord inNinth
12

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CircuitCaseNo.12-359869and ispresently beforethesubjectofpending

ComplaintofJudicialMisconductsubmittedpursuantto28U.S.C.j351.
(1) InternalDocumentsRetrievedfrom EdraBlixseth's
Computers
lnDecemberof2012,EdraBlixsethauthenticatedadocumentreferringto
JudgeltirscherandtheYMCbanlmlptcywhereinshestated,ddlkememberwehave

addedhelptherefrom theBKJudgewholovesus,andhatesTim (Blixsethland

MikeFlynn, Eitherway,SB andBShavethingsinplaceinthatcourtroom to
help us.'' Exhibit13.7, Inhertestimony,EdraBlixseth identifies<$SB''asa

referencetoSam Byrne,principalofCrossl-larbor.Mr.Blixsethbelievesthat<%S''
refers to then Montana Governor,Bl
ian Schweitzer. The statementin this
documentthatC'SB''andCIBS''fhavethingsinplaceinthatcourtroom tohelpus'

isevidencethatByrne,whoultimatelypurchasedtheCluboutofthebankmptcyat
a75% disoounttowhathehadcontractedtopurchasetheClubayearearlierwith
theapprovalofJudgeKirscherafterexpartediscussionswithhim,hasimproperly

influenced JudgeKirscher.Moreover,Crossl-larborisasignificantbeneficiary
withintheYCLT andmaintainsaseatonthe7-memberYCLT AdvisoryBoard.

7Exllibit13consistsofexcerptsofEdraBlixseth'sdepositiontranscript
inwhich sheandherattorneyauthenticatethequotedfrom document.
ThedocumentitselfisExhibit11toEdra'stranscript,whichispartof
Exhibit13hereto.Mr.Blixseth directsthisCourt'sattentiontopage7
ofExhibit11tothetranscriptexcerpt.
13

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Ex.14,pp.6,18hereto.Further,Sam ByrneandthenGovernorSchweitzerhavea

political/businessrelationship.Ex15.GovernorSchweitzerhasevenvisitedMr.
Bpne'shedge-fundofficesinBostononprioroccasions. f#.
Inanotherdocumentretrievedfrom EdraBlixseth'sharddrives,shestatesin

refel'
encetoJudgeKirschertilwleneedthiscasemovedbacktoMontanaata11
costs,SB andBShavespentenormouscapitalandpoliticalfavorstoensurethey

.gettherightoutcomefrom theMontanabrkruptcyjudge.'' A tluecopyis

attachedasExhibit16(emphasisadded). AswithExhibit13,Mr,Blixseth
retainedacomputerexperttoverifyifthisdocumentwaslastmodifedonadate
whenitisbelievedthatEdraBlixsethhadpossessionandoontrolofthecomputer
from which the documentwasretrieved. This documentisreferred to EC
DH
Points,
pdf'in the declaration ofM1'.Blixseth'scomputerexpertattached as
Exhibit17. Mr.Blixseth's conputerexpel
'
ttestifesthatthisdocumentwas

created a'
nd lastmodifiedon July 11,2011,which iswhen EdraBlixseth is
believedtohavehadexclusivecontrolofhercomputer.

(2) JudgeKizscher'
sApparentContinuedRelationsMp

withthelaw lrm WordenThane,P.C.

Mr.Blixseth has discovered through the business information website
data.com,thatRalphB.Kirscheriscurrentlyidentiedasaf
vicepresident''ofthe

1awrmWordenThaneP.C.(formerlyWorden,Thane& llaines,P.
C,
)locatedin
14

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Missoula,Montana.EnclosedherewithasExhibit1(pp.3-4)aretwoscreenshots
taken from arecentsearch on data.
com forthecurrentecaployqesofSvorden
Thane,P.C.

Asthesescreenshotsdemonstrate,RalphB.Kirscherisidentifiedas(Gvice
president' of Worden Thaae and datao
com represents that its database of

infolmationonRalphB.KirsoherwaslastupdatedonSeptember12,2012(Judge
Kirscherwasappointedasbanluaptcyjudgein1999).
Fulher,asearchofpubliclyavailableemailaccountsonintelus.com ret
lects

thattheemailaddressrkirscher@wthlaw.
netiscurrentlyassociatedwithRalphB.
Kirscher.SeeExhibit1,p.5.Thedomainnamewthlaw.
netisownedbyWorden
Thane.

AsthisCourt'srecordsrefleot,beforebecomingtheonlyadivebankruptcy

judgeintheStateofMontanain1999,JudgeKirscherwasapartnel
-atWorden,
Thane& Haines,P.C.SeeNinthCircuitMediaReleasedatedNovember15,1999,

OfpaTticular siglnsficancetoMr.Blixseth isthe factthatJudge

KirscherinSeptemberof2010entereda$40millionjudgmentagainst
Mr.Blixseth based on amotiontozeconsiderfiledby theYCLT in AP14withoutaffordingMr.Blixseth thel4-daystowhich hewasentitled

tofilea response. Ofthat$40millionjudgment,$22 million was

15

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earmarked to satisfy the claimsheld by 7 minority 'B''shareholders

'

against the Yellowstone Mountain Club LLC and$Mr. Bhxseth.

Moreover,atthetimeJudgeKirscherincludetheBShareholders'$22
millionclaim withinthe$40millionjudgmentinAP-14,theunderlying
validityoftheB Shareholders'claimswerebeinglitigatedandyettobe
triedinAdversaryCaseNo.09-18.8
As it relates to this matter,those (IB''Shareholders were and are

representedbyWordenThanebeforeJudgeKirscherinconnectionwiththeir$22
million claim. lnotherwords,itappearsthatJudgeKirschercontinuestohave

someundisclosedrelatiohship withthelaw 51'

111ofWol'
denThaneandWorden

ThanecurrentlyrepresentsclientsinwhosefavorJudgeKirscheriseatering$22

millionjudgmentswithoutahearingortrialagainstMr.Blixsethonthat$22
million.
Moreover,the Sacramento Beehasrecently reportedthatitisin actual
possessionofemailsfrom theabovereferencedemailaccountbetween Worden

8Forafullexplanationoftherelationshipbetweenthe7B

shareholders'claimsandtheinclusionthereofinthe$40million
judgmentagainstMr.Blixseth,wereferthisCourttoMr.Blixseth's

OpeningBriefandrelatedExcerptsofRecordinthisCourt'sCaseNo.
13-35113.
16

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ThaneandJudgeKirscher.Exhlbit18attached.Mr.Blixsethhasbroughtthese

issuestotheattentionofthisCourtpursuantto28U.S.C.j351,
Thisapparentconflictofinterestraisesa seriousspecterofjudicial
misooudud dirededtowardMr.BlixseththatoompelsthisCourtpursuanttoits

supervisoryauthorityunder28U.S.C.j2106tostaya11litigationandcollection
effortsbeingprosecutedbytheYCLTagainstMr.Blixsethasjustcircumstances
arisehere,

Thecollectiveimpactoftheextrinsicevidencewarrantingdisqualification
coupledwithJudgeKirscher'srecentschedulingorders,andhisrecentscheduling

ofanevidentiaryhearingontheRule9024Motionbeforehimsef coupledwith
what only can be described as bizarrerulingspermeated with duePCOCWSS

violations,compelsemergencyrelief(seealsoMr.Blixseth'sDisqualiscation
MotionatCaseNo.12-35986,ER232-462,522-549,553-594).
Such constitutionaldeprivationsofdueprocesswilloccuron an

on-goingbasisifnostayisimposedbecause:(1)JudgeKirscherwill
otherwisebethepresidingjudgeovernumerousadversaryproceedings
againstMr.BlixsethbeingprosecutedbytheYCLT;and(2)theYCLT'S
judgmentinAP-14isconstitutionallysuspectinlightofthefactthat
such actionsstem from JudgeKirscher'srulingsand ordersin 7tP-14
17

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and in approving the Plan,al1ofwhich appeartobetheproductof

judicial impropriety amounting to deprivations of due process.

Constitutionaldeprivationsofdueprocessaregenerally presunled to

resultinirreparableinjury.Goldie%Bookstore,Inc.ir.SuperiorCourt
of State of Cal.,739 F.2d 466,472 (9th Cir.1984) (C
(
An alleged
constitutional inlingement will often alone constitute irreparable

ha.
rm.''
).
ThisCourt,pursuanttoitssupervisoryauthorhyunder28U.S.
C.j2106has
theplenarypowerto granttherequestedrelief. MatterofInvestigation of
AdministrationofBankruptcyCourt,607F.
2d797,798(8thCir.1979)(tinding
sufficientauthorityundeT28U.S.C.j2106tostayadistrictcourtorderremovinga
disgracedbanltruptcyjudgeuntilthebanlcuptcyjudgelladtimetoappealhis
removal),followedupin642F.
2d227(8thCir.1981);US.v.Morales,465
Fed.Appx.734,740 (9th Cir.2012) (granting emergency motion to stay
proceedingsinsimilarsituationduetoreuonableexpectationoftrialjudgeto
follow appellatemandate);Zankv.Landon,205F.2d615,616(9thCir.1953)
(citingPattersonv.StateofAlabama,294U.S.600,607(1935)(f
indetermining
whatjustioedoesrequire,theCourtisboundtooonsideranychange,eitherinfact
orinlaw,whichhassuperveledsincethejudgmentwasentered.
').
18

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Accordingly,untilsuchtimeItstheevidenceofJudgeUrscher'sjudicial
improprietyisresolvedunder28U.S.C.351cfseq-,itisadeprlvation ofMr,
Blixseth'sdueprocessrightstoallowtheYCLTtoprosecuteorenforceanymatter

againstMr.BlixsethandforJudgeKirschertobehisownjuryinconnectionwith
Mr.Blixseth'spendingRule9024Motion,whichJudgeKirscherhasscheduledto
beheardonSeptember10,2013.

A stayisfurtherwarrantedbythefactthattheheatingontheRule9024
Motion thatJudgeKirscherhasscheduledtobeheard on September10)2013
implicatesJudgeKirscher'sactualorappardntbiasunder28U.S.
C.q455.

JudgeKirschergrantstheRule9024Motion(whichlitigantscannotassumethathe
willdoonewayoranother),thensuchagrahtwillnecessalilymeanthatJudge
lurscherbelievesthatthereexistsanactualorapparentlackofimpartialitytoward

Mr.Blixseth. Such aconclusionwillnecessarilyvacatehispriordenialofMr.

Blixseth'sDisqualificationMotionunder28U.S.
C,j455)andwhichispresently
otlappealbeforethisCourtin CaseNo. 12-35986.However,becauseofthat

appealpendingbeforethisCourtinCaseNo. 12-35986,JudgeKirscherhasbeen

divestedofjurisdictiontomakeanysuchrulingthateffectivelyvacateshisprior
denialoftheDisqualifcationMotionorobviatetheneedforthisCourttoconclude
thatappeal.InreCombinedMetalsReductionCo.,557F.
2d179,201(9thCir.
19

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1977)(abankrnptcycourtlaoksjmisdioticntoenteranorderonanissuethat
wouldeliminatethene-.
dtoresolveapendingappeal).
Dated,August8,2013:
MlchaelJ.Flynn

'

J*
.Conant

chaelJ.Ferrigno

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PhilipH.Stmman
AttorneysfortheAppellant

20

(27 of 364)
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DocketNo.13-90073
TimothyBlixseth
71-434SaharaRd.
RanchoMirage,CA 92270
tel:7607766622

MichaelJ.Flynn,Esq.
CluistopherJ.Conant
73017thStreet,Suite200
POBox690
RanchoSanteFe,CA92067 Denver,CO80202
tel:8587757624

July7,2013

vlAOVERNIGHTDELIVERY

Clerk,UnitedStatesCourtofAppeals,NinthCircuit
Attn:CathyCatterson
95SeventhStreet
SanFrancisco,CA 94103
Re:SupplementtoComplaintofJudicialMisconductDocketNo.13-90073
InMay,Mr.BlixsethsubmittedaComplaintofJtldicialMisconductconcerningbankruptcy
judgeRalphB.KirscheroftheU.S.BanknzptcyCourtfortheDistrictofMontana.Uponreceipt
ofourComplaint,thisCourtassignedtheabove-referencedDocketNo.tothematter.
SincesubmittingtheComplaint,wehavediscoveredadditionalfactsthroughpubliclyavailable
sourcesthatareprobativeofthemattersraisedintheComplaint.
Specitically,wehavediscoveredthroughthebusinessinfonnationwebsitedata.com,thatRalph
B.Kirscheriscurrentlyidentifiedasativicepresident''ofthe1awfinnWordenThaneP.C.
(formerlyWorden,Thane&Haines,P.C.
)locatedinMissoula,Montana.Enclosedherewithas
Exhibit1aretwoscreenshotstakenfrom arecentsearchondata.com forthecurrentemployees
ofWordenThane,P.C.
Asthesescreenshotsdemonstrate,RalphB.Kirscherisidentifiedasvicepresident''ofWorden
Thaneanddata.com representsthatitsdatabaseofinformationonRalphB.Kirscherwaslast

updatedonSeptember12,2012(JudgeKirscherwasappointedasbankmptcyjudgein1999).

Further,asearchofpubliclyavailableemailaccountsonintelus.com reflectsthattheemail
a
ddressrkirscher@wthlaw.
netiscurrentlyassociatedwithRalphB.Kirscher.SeeExhibit2
enclosedherewith.Thedomainnamewthlaw.netisownedbyWordenThane.Wecurrentlydo
nothavethetechnicalresourcestodeterminewhetherthisemailaddressisactivelybeingused.

AsthisCourt'srecordsreflect,beforebecomingtheonlyactivebankruptcyjudgei
ntheStateof
Montanain1999,JudgeKirscherwasapartneratWorden,Thane&Haines,P.C.SeeNinth
CircuitMediaReleasedatedNovember15,1999

OfparticularsigpificancetoMr.Bli
xsethisthefactthatJudgeKirscherinSeptemberof2010

entereda$40mlllionjudgmentagainstMr.Blixsethbasedonamotiontoreconsiderfiledbythe
plaintiffinAdversaryCaseNo.09-14(WP-14''
)withoutaffordi
ngMr.Blixseththel4-daysto

(28 of 364)
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whichhewasentitledtofilearesponse.Ofthat$40millionjudgment,$22millionwas

earmarkedtosatisfytheclaimsheldby7minorityCEB''shareholdersagainsttheYellowstone
MotmtainClubLLCandMr.Blixseth.Moreover,atthetimeJudgeKirscherincludedtheB
Shareholders'$22mill
ionclaimwithinthe$40millionjudgmentinAP-14,theunderlying
validityoftheBShareholders'claimswerebeinglitigatedandyettobetriedinAdversaryCase
No.09-18.1
Asitrelatestothismatter,those7CCB''ShareholderswereandarerepresentedbyWordenThane
beforeJudgeKirscherinconnectionwiththeir$22millionclaim.Inotherwords,itappearsthat
JudgeKirschercontinuestohavesomerelationshipwiththe1aw firm ofWordenThaneand
WordenThanecurrentlyrepresentsclientsinwhosefavorJudgeKirscherisentering$22million

judgmentswithoutahearingortrialagainstMr.Blixsethonthat$22million.

Webelievetheserecentlydiscoveredfactsareprobativeofthemattersaddressedinthe
ComplaintofJudicialMisconductpreviouslystlbmittedbyMr.BlixsethandsubmitfortheChief
Judge'sfurtherconsiderationandinvestigation.
/s/MichaelJFlvnn /s/TimothvL.Blixseth
MichaelJ.Flynn TimothyL.Blixseth
attorneyfor
TimothyL.Blixseth
cc:ChristopherJ.Conant,attorneyforTimothyL.Blixseth
Enclosures: Exhibit1and2

1Forafullexplanationwithoftherelationshipbetweenthe7Bshareholders'claimsandthe

inclusionthereofinthe$40millionjudgmentagainstMr.Blixseth,wereferthisCourttoMr.
Blixseth'sOpeningBriefandrelatedExcerptsofRecordinthisCourt'sCaseNo.13-35113.

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O TRODUW D N

Appellant,TimothyL.BlixsethtBlixsethl,hasappealedfromthe
September30,2011,OrderoftheUnitedSotesBankruptcyCoudfortheDistrict
ofMontana,adoptingandratifyingitsMemorandum ofDecisionandOrderof
June2,2009,whichconfrmedDebtors'ThirdAmendedPlanofReorganization.

ThisCourthasjurisdictionunder28U.S.C.9l5S(a).

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BACKGROUND
BlixsethwasoneoftheprincipalfoundersofYellowstoneMountainClub,
LLC.lnNovember2008,YellowstoneMountainClub,LLC,Yellowstone

Development,LLC,BigSkyRidge,LLC,andYellowstoneClubConstmction

Company,LLC(collectivelyDebtors)fledforChapter11bankruptcyprotection.l
Debtors'submittedaThirdAmendedPlanofReorganizationonMay22,2009.lt
wasconfrmedbytheBankruptcyCourtonJune2,2009.

AnunsecuredclaiminfavorofBlixsethfor$26,000waslistedin
AmendedScheduleFtotheAmendedVoluntaryPetitionofDebtorYellowstone

MountainClub,LLC .2Thisscheduledclaim wassupersededbyBlixseth'sfiling

ofProofofClaimNo.714intheamountof$250,000foralifetimeclub
membership.3OnSeptember14,2010,BlixsethandothersfiledantAgreed

MotiontoAllow WithdrawalofProofsofClaim.''4r
fheBanknzptcyCourtgranted

1BankruptcyCase08-61570-11.
2SeeBnnknlptcyCase08-61570-11)Document407-6at32.Thebasisforthisolaim was
describedbytheTrusteems4tunknown''astheTrusteelackedsuocientinformationtoevaluate
whetherthescheduledclaim representedalegitimateclaim agalnstDebtor'sbnnkmlptcyestate.
SeeBrmknlptcyCase0:-61570-11,Docllment1432at2.
3neBlnknlptcyCourt'sClaimsRegisterinBanknlptcyCase08-61570-11reiectst%t
BlixsdhfiledProofofClaimNo.714onMarchI8.2009.
4SecBqnkruptcyCase08-61570-11,Document1952.
2

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themotiononSeptember15,2010,5endingBlixseth'sstxndingasacreditorinthe
proceedlngsDISCUSSION

Thisappealassertsnumerouschallengestotheactionsanddecisionsofthe
BanknlptcyCourtinre-approvlgDebtors'ThirdAmendedPlanof
ReorganizationonSeptember30,2011,followingremand.
6Extensivebriefsand

recordexcerptshavebeensubmittedbytheparties.OnOctober18,2012,the

CourtconductedajointhearinginthisappealandtheappealinCause11-66-BUSEH.TheCourtheardapproximately3%hoursoforalargument.However,none
oftheissuespresentedareappropriateforresolutionasBlixsethlacksstandingto
assertthem onappeal.

SspndingtoappealadecisionofaBankruptcyCourtistobedistinguished

5SeeBanknlptcyCase08-61570-11,Document1956.
SneapptalissuesasstatedbyBlixsethare:

Wasitreversibleerrorforthebankruptcycourttoconfrm thePlan
containhzgidenticalexculpatoryclausesthatthisCourtpreviouslyheld
violatedNinthCircuitlaw?
2, WasitreversibleerrorforthebankruptcycourttoapprovetheSettlement
Term SheetwithoutaproNrRule9019Motionbeforeitandwithout
applyingthAICProperdesfactorstotb.
epresentcircnmstances?
3. Di
dthebankmptcycourterrindenyingBlixseth'sRule60(b)Motion?

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from standingtoappearandparticipateinproceedingsbeforetheBanknlptcy
Court.SeeMotorVeMcleCa-sm ltyCo.v.ThopeInsulationCo.(1nren orpe

InsulationCo.J,677F.3d869,883-84(9*Cir.2012).Apartyhasstandingto
contestaBankruptcyCourtorderonappealonlyifhecanshow thattheorder
beingappealedhmsapresent,directandadverseaffectonhispeclmiaryinterests.

M.;DuckorSpradling&Metzgqrv.BaumTmst(lnreP.R.T.C..lnc.).
,177F.
3d

774,777(9ZCir.1999))Fondillerv.Robertson,707F.2d441,443(9t
hCir.1983)4
InreCombustionEneineering.Inc.,391F.3dl90j214-17(3'dCir*2005).Future,
contingensorpotentialadversepecuniarydevelqpmentsdonotsuffice.

Fondmiller,707F.2dat443;InreCombustionEnpinetring.lnca,39IF.
3dat215Blixseth,havingwithdrawnhisclaims,isnolongeracreditor.Hehasno
standingassuchtochallengetheBanknlptcyCourt'sre-confirmationoftheThird
AmendedPlanofReorganizationasthePlanhasnodirectandimmediatehnpact
onhispropert
yorhisrights.ThePlan'sexculpationclauseIanguageneither
createsnorimposesanyliabilityonhim-Heisbeyondtheambitofitsreachand
application.Similarly,Bliuethcanclaim noimmediateadverseeffectuponhis
propertyorhispecuniaryinterestsbyreasonofanycomplianceornon-compliance

withBanknlptcyRule9019intheapprovaloftheSettlementTennSheetasheis
notacreditor.

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ConsiderationofanyissuerelatedtothemotiondenominatedStMotionfor

Relieffrom OrderConsnuingThirdAmendedPlanofReorganization''sled

November30,2010,andcharacterizedinBlixseth'sbriefasaRule601)motion
is,bydefnition,dtpendentuponstandingtoclaim capacitytorserttheissuein
theIirstinstance.Thatstandingisabsent.NeitherhowtheBankruptcyCourt

addressedthemattersassertedinthemotion,norhow itresolvedthem,resultedin
apresentadverseaffectonBlixseth'specuniaryinterests.
CONCLUSION
BlixsethlacksstandingtochallengetheBankruptcyCourt'sMemorandum
ofDecisionandOrderofSeptember30,2011.
ORDER

ThisappealisDISMISSED.

DATEDthi
sf dayofMarch,2013.
AM E.HADDON
UnitedStatesDistrictJudge

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UNITEDSTATESBANKRUPTCY COURT
FORTHEDISTRICTOFMONTANA
Inre

CaseNo.08-61570-11

YELLOWSTONEMOUNTAINCLUB,
LLC,
Debtor.
lnre

YELLOWSTONEDEVELOPMENT,
LLC,
Debtor.
Inre

CascNo.08-61571-11

YELLOWSTONECLUB
CONSTRUCTION COMPANY,LLC,
Debtor.

CaseNo.08-61573-11

Inre

BIG SKYRIDGE,LLC,
Debtor.

CaseNo.08-61572-11

MEMORANDUM ofDECISION
AtBut'
teinsaidDistrictthis15tbdayofMarch,2013.
InthisChapterllbankruptcy,afterduenotice,ahearingwasheldOctober9,2012,in
ButteontheAmendedMotionforLeavetoSueStephenR.BrownandtheLawFinuof
1

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GarlingtonLohn& Robinson,PLLPintheU.S.DistrictCourtfortheDistrictofMontanafiled
byTimothyBlixsethonMarch28,2012,atdocketentryno.2445.M drew E.Hawesand
MichaelJ.FerrignoofBoise,Idaho,andChristopherJ.ConantofDenver,Coloradoappeared

atthehearingonbehalfofTimothyBlixseth(&
Blixseth'
);MikelL.MooreandDaleR.
CockrellofKalispell,MontanaappearedatthehearingonbehalfofStephenR.Brown

(i1
Brown')andGarlington,Lohn&Robinson,PLLP(
tGLR''
)'RobertF.JamesofGreatFalls,
MontanaandRobertC.WeaverofPortland,Oregon,appearedatthehealingonbehalfof
ThomasHutchinsonandBullivant,Houser,Bailey,P.C.;TrentGardnerofBozeman,Montana

appearedatthehearingonbehalfofJ.ThomasBeckettandParsonsBehle& Latimer;and
MichaelF.McMahonofHelena,MontanaappearedatthehearingonbehalfofJamesA.Patten
andPattenPetermanBekkedahl&Green,PLLC.TheCourtheardargumentfrom counselfor
Blixseth,BrownandGLR.
BACKGROUND

Inthelate1990s,Blixsethandhisformerspouse,EdraBlixseth,begandevelopingthe
YellowstoneClub,''whichwas,andstillis,amembersonlymaster-plannedunitdevelopment,
situatedon13,500acresofprivatelandinMadisonCountynearBigSlty,Montana.Until
Augustof2008,theYellowstoneClubwasownedandoperatedbyBlixseththroughfour
companies,namely,YellowstoneMountainClub,LLC,YellowstoneDevelopment,LLC,Big
SkyRidge,LLC,andYellowstoneClubConstnzctionCompany,LLC.From theirinceptionto
Augtzst12,2008,YellowstoneMountainClub,LLCandYellowstoneDevelopment,LLCwere

controlledbyBlixseththroughhisholdingcompany,BlixsethGroup,lnc.(t1
BGl''
).Between
Augustof2001andAugustof2008,BGlowned82.6532percentoftheClassA stockin

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YellowstoneMountainClub,LLCandYellowstoneDevelopment,LLC.
lnlate2004orearly2005,BlixsethandCreditSuissebegandiscussingthepossibilityof
theYellowstoneClubbon-owingmoneyfrom CreditSuisse.Theloanamount,whichinitially

startedoutaround$125to$150million,eventuallyincreasedto$375millionandinSeptember
of2005,CreditSuisseloanedYellowstoneMountainClub,LLC,YellowstoneDevelopment,
LLC,andBigSkyRidge,LLC$375million.
Onthedaytheloanfunded,Blixsethtransferred$209millionoftheloanproceedsfrom
theYellowstoneClubentitiestotheirparentcompany,BGI.Thefollowingday,Blixseth
transferred$209millionfromBGItoaccountsinBlixseth'sname.
Blixsethcontendshetransferredthe$209milliontohimselfbasedupontheadviceof
counsel,namelyBrown.TheadviceuponwhichBlixsethreliesissetforthinaletterdated
September30,2005.TheSeptember30,2005,letterwaswrittenbyBrownoftheGarlington,

Lohn& Robinson,PLLP1awfirm,andwasaddressedtoCreditSuisse.lntheletter,Brown

statesthat
asof(September30,20051...gelachLoanPar'
tyhastherequisitepowerand
authoritytoexecute,deli
verandperformitsobligationsundertheLoanDocumentsg,
'j...gandq
gelxecutionanddelivelybytheLoanParties,andperformanceoftheirrespectiveobligations
under,theLoanDocumentsdoesnot:violateanyoftheirorganizationaldocuments;violateany

laws;tothebestofourknowledgeviolateanyorders,judgments,ordecrees;tothebestofour
knowledge,breachanymaterialcontractorcreateliensorencumbrances;orrequirefilingor

registrationwithanygovernmentalagency.'Theletterprovidesthattltlheforegoingopinionis
beingdeliveredsolelytotheaddressees(i.e.,theAdministrativeAgentandtheLenders)names
inthisletter...andmaynotberelieduponbyanyotherpersonorentityandmaynotbe

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disclosed,quoted,filedwithagovernmentalagencyorothemiserefen-edtowithoutourwritten
Consellt.11

BlixsethandEdraseparatedonoraboutDecember1,2006,andaPetitionfor
dissolutionwasfiledonoraboutDecember15,2006,intheSuperiorCourtofCalifornia.
Followingacontentiousdivorce,BlixsethandEdrafinallyreachedanagreementastothe

divisionofmaritalpropery Aspartoftheiragreement,Edrawas,inAugustof2008,awarded
BGlandtheYellowstoneClubentities.EdracausedthefourYellowstoneClubentitiestofile
voluntaryChapter11bankruptcypetitionsonNovemberl0,2008.TheDebtorswere
representedbyThomasHutchinsonandotherattorneysfrom theBullivant,Houser,Bailey,P.C.
lawfirm,andbyJamesA.Pattenandotherattorneysfrom thePattenPetermanBekkedahl&
Green,PLLClawfirm.
BrownrepresentedYellowstoneMountainClub,LLC,YellowstoneDevelopment,LLC,
andBigSkyRidge,LLCinvariousmattersbetweenthelate1990sthrough2008,includinga
statecourtmatterfiledbyGregLeMondagainstYellowstoneMountainClub,LLCand
YellowstoneDevelopment,LLC.BrownalsorepresentedBlixsethpersonallyfrom Juneof
2008tosometimeinthcfallof2008inconnectionwithBlixseth'sdivorce,butonlyasit

pertainedtothedivisionofMontanaassets.
AsofNovember10,2008,thedatetheYellowstoneClubentitiessoughtprotection
undertheBanknzptcyCode,Brownandhislaw firm,GLR,wereowedasubstantialsum for
unpaidlegalfees.Asaresultoftheirprepetitionclaim,GLRfiledinYellowstoneMoulztailz
Club,LLC'Sbankruptcycase,onFebrtlaly25,2009,ProofofClaimNo.372assertingan

tmsecuredclaimof$16,569.66andfiledAmendedProofofClaimNo.738onJuly23,2009,
4

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assertingaclaim of$345,590.00forunpaidlegalfees.IntheYellowstoneDevelopment,LLC
banknlptcycase,GLRfiledProofofClaim No.101onFebrtzary25,2009,assertingan
unsecuredclaimof$386,582.29andamendedsaidclaimonJuly23,3009,toassertan
unsecuredclaimof$65,291.00forunpaidlegalfees.lnall,GLRclaimedthatasofNovember
10,2008,itwasowedinexcessof$410,000.00fromYellowstoneMountainClub,LLCand
YellowstoneDevelopment,LLCforunpaidIegalfees.
BecauseofGLRandBrown'ssubstantialunsecuredclaim,Brownagreedtoserveas
ChairmanoftheUnsecuredCreditorsCommittee.InconnectionwithBrownagreeingtosel'
ve
ontheUnsecuredCreditorsCommittee,theYellowstoneClubentitiesexplicitlywaivedthe
attorney-clientprivilegeandBrownwithdrewastheDebtors'counselintlzefallof2008.Also,
becauseBrownhadalsorepresentedBlixsethincertainmatters,Browndidnot,whileserving
asChairoftheUnsecuredCreditorsCommittee,participateinmattersinvolvingBlixseth.
Brownwasonememberonanelevenmembercommitteeandservedasalaypersonon
theCommittee,performingnolegalworkfortheUnsecuredCreditorsCommittee.The
UnsecuredCreditorsCommitteewasrepresentedbyJ.ThomasBeckettandotherattorneys
from Parsons,Behle&LatimerofSaltLakeCity,UtahandbyattorneyJamesH.Cossittof
Kalispell,Montana.
TheUnsecuredCreditorsCommitteeeventuallyfiledalawsuitagainstCreditSuisse.
BlixsethintervenedinthatactionandthisCourthassinceenteredaJudgmentagainstBlixseth
intheamountof$40,992,210.81ongroundsBlixsethfraudulentlymisappropriatedthe
proceedsfwm theCreditSuisseloan.
lnresponse,BlixsethfiledonJune8,2011,acomplaintintheUnitedStatesDistrict
5

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Coul'
tfortheDistrictofMontana.Theaforementionedcomplai
ntfor:(1)legalmal
practice;(2)
breachoffiduciaryduty;(3)fraud;(4)breachofcontract;(5)equitableindemnification;(6)
comparativeindemni
ty;(7)contribution;(8)mal
practiceforfailingtodiscloseconflictof
i
nterest;(9)conspiracy;(10)aidi
ngandabettingcommissionoftort
s;and(11)aidingand
abettingcommissionoftortsnamedBrown,GLR,JamesA.Patten,PattenPetermanBekkedahl
& Grcen,PLLC,J.ThomasBeckett,ParsonsBehle& Latimer,ThomasL.Htltchinson,
Bullivant,Houser,Bailey,P.C.,SamuelT.Byrne,CrossllarborCapitalPartners,LLC,andJohn
Does1-l00asdefendants.
OnMarch5,2012,UnitedStatesDistrictCoul'tJudgeDonaldW.Molloyconcluded

thatal1Blixseth'sclaimsweresubjecttotheBartonDoctrine,andthatnoexceptionsapplied.
JudgeMolloythusentercdanOrdcrdismissingBli
xscth'scomplaintforlackofsubjectmatter
jtl
risdiction.JudgeMolloyexplainedintheOrderenteredMarch5,2012,
TheBartonDoctrineisderivedfrom theUnitedStatesSupremeCourt's
decisioninBartonv.Barbour,104U.S.l26(1881).ltrequiresapartytoit
first
obtainleaveofthebanknzptcycourtbeforeitinitiatesanactioninanotherforum
againstabanknlptcytnzsteeorotherofficerappointedbythebankrtzptcycourtfor
actsdoneintheofficer'sofficialcapacity.''CrownVantage,Inc.v.FortJames

Corp.,421F.3d963,970(9t
hCir.2005)(discussingBartonj.lftheBanknzptcy
Courthasnotgrantedleave,thenothercourtsdonothavesubjectmatter
jurisdiction.1d.at971;seeal
soMcDanielv.Blust, F.3d ,2012WL
401591at*1-*3(4thCir.Feb.9,2012).

ThepurposeoftheBartonDoctrineistocentralizebankrtzptcylitigation,
whichhelpsavoidinconsistentrulingsfrom differentcourtsandensuresthatthe
forum mostfamiliarwiththecase-thebankruptcycourt-presidesoverrelated
claims.SeegenerallyCrownVantage,42lF.3d963.Thatconcenlisparticularly
relevanthere,sincetheBanknlptcyCourthasaddressedorisaddressingissues
thataresimilar(ifnotthesame)tothosepresentedinBlixseth'scomplaint.Ifthis
Courtweretonow intercedeanddecidethemeritsofBlixseth'sclaims,itwould
nm theriskoffnlstratingthebanknlptcyproceedingsthrotlghacollateralattack.
6

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TheBartonDoctrinealsoenablesthebankruptcycourttokeepawatchful
eyeoncourt-appointedor-approvedofficers.AsJudgePosnerdescribed:
Justlikeanequityreceiver,atrtlsteeinbankruptcyisworkingineffect
forthecourtthatappointedorapprovedhim,administeringpropertythat
hascomeunderthecourt'scontrolbyvirtueoftheBankruptcyCode.lf
heisburdenedwithhavingtodefendagainstsuitsbylitigants
disappointedbyhisactionsonthecourt'sbehalf,hisworkforthecoul't
willbeimpeded.
Thisconcernismostacutcwhensuitisbroughtagainstthetnzsteewhile
thebanknlptcyproceedingisstillgoingon.Thethreatofhisbeing

distractedorintimidatedisthenverygreat....WithouttheLBarton
Doctrinel,tnzsteeshipwillbecomeamorei
rksomeduty,andsoi
twill

beharderforcourtstofindcompetentpeopletoappointastrustees.
Trusteeswillhavetopayhighermalpracticepremiums,andthiswill

maketheadministrationofthebankruptcylawsmoreexpensive(andthe
expenseofbanknzptcyisalreadyasourceofconsiderableconcenz).
Furthermore,requiringthatleavetosuebesoughtenablesbanknlptcy
judgestomonitortheworkofthetnlsteesmoreeffectively.ltdoesthis
bycompellingsuitsgrowingoutofthatworktobeasitwereprefiled
beforethebankruptcyjudgethatmadetheappointment;thishelpsthe
judgedecidewhethertoapprovethistrusteeinasubsequentcase.
MatterofLinton,136F.3d544,545(7t
hCir.1998)4seeal
soCrownVantage,421
F.3dat970-71;McDaniel,- F.3d ?2012WL401591at*3-*4;Carterv.

Rodgers,220F.3d1249,1252-53(VhCir.2000).

TheBartonDoctrinegenerallyappliesifthreeconditionsaremet:(1)the
plai
ntiffmustbeattemptingtolt
initiategqanactioninanotherforum''(2)
against
abankrt
zptcytnlsteeorotherofficerappointedbythebankruptcycourt'(3)G
Efor

actsdoneintheofficer'sofficialcapacity.''CrownVantage,421F.3dat970.
Eachoftheseconditionsismethere.
IndismissingBlixseth'scomplaint,JudgeMolloyccmcludedthatthisCourtwasadifferent
forum thantheDistrictCourt;thatBrown,whoselwedastheChairoftheUnsecuredCreditors
Committee,wasatcourt-approved''officer;andthatal1ofBlixseth'sclaimswereeitherbased
onBrown'sallegedmisconductasChairoftheUnsecuredCreditorsCommittee''ordidnot

accl'ueuntilBrownbecameChairoftheUnsecuredCreditorsCommittee.

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BlixsethappealedJudgeMolloy'sdecisiontotheUnitedStatesCourtofAppealsforthe

NinthCircuit(Gt
NinthCi
rcui
f).OnAugust7,2012,theNinthCircuitdismissedBli
xseth's
appealforlackofjurisdicti
on,concludingtheorderappealedf
'
romwasnotafinalordenl
Forpurposesofthependingmotion,counselforBlixsetharguesthattheproposed
complaintattachedtoBlixseth'smotion,issubstantiallysimilartothecomplaintBlixsethfiled
withtheDistrictCourt.However,counselalsoarguesthattheproposedcomplaintisdifferent
andthatBlixseth'scounselwenttttogreatlengthstodelineatebetweenwhathappened,you
know,malpractice...legalmalpracticethatoccurredprepetitionandlegalmalpracticethat

occurredpostpetition.''
DISCUSSION
lnCrownVantage,421F.3d963,theNinthCircuitadoptedaseriesoffactorsfora

court
toconsideri
nexercisingitsdiscretion''toenjoi
napartyfromproceedi
ngwi
thanaction
againstacourtappointedofficer,including(i)whethertheactsortransactionsatissuett
relateto
thecanyingonofthebusinessconnectedwiththepropertyofthebankruptcyestate';(ii
)
'
whethertheclaimspertaintoactionsofthetnzsteewhileadministeringtheestate'')
'(iii)whether
Etheclaimsinvolvetheindividualactingwithinthescopeofhisorherauthorityunderthe
BecauseBlixsethappealedJudgeMolloy'sdecisiontotheNinthCircuit,Brownand
GLRarguedintheirobjectiontoBlixseth'smotionthatthisCourtdidnothavejurisdictionto
decidethependingmatter.ThatargumentismootbecausetheNinthCircuitdismissed
Blixseth'sappeal.BrownandGLRalsoarguedthatthisCourtdidnothavejurisdictiontodecide
Blixseth'smotionbecauseBlixsethhadappealedthisCourt'sJune2,2009,Orderconfirmingthe
Debtors'ThirdAmendedPlanofReorganization.OnMarch6,2013,UnitedStatedDistrict
CourtJudgeSam HaddonenteredaMemorandum andOrderdismissingBlixseth'sappealon
groundsBlixsethlackedstandingtochallengethisCourt'sOrderconfinuingtheDebtor'sPlan.

Consequently,thislatt
erobjectionisalsomoot.

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stat
meorordersofthebanknzptcycourt,sothatthetnlsteeisentitledtoquasijudicialor
derivedjudicialimmunity'';(iv)whethermovantsaret
seeki
ngtosurchargethetnzstee,thatis,
seekingajudgmentagainstthetrusteepersonall/';and(v)whetherEtheclaimsinvolvethe
trustee'sbreachingherfiduciarydutyeitherthroughnegligentorwillfulmisconduct.''Crown

Vantage,421F.3dat976(quotingKashaniv.Fulton(InreKashanl
),190B.
R.875,886-87
(9t
hCir.BAP1995)).
JudgeMolloyhasalreadydetenninedthatBrown,inhiscapacityastheChairofthe
UnsecuredCreditorsCommittee,wasanofficerofthisCourt.AsanofticerofthisCourt,

Brownisenti
tledtoaformofderivativejudicialimmunityfromliabilityforactionscanied
outwithinthescope''ofhisofficialduties.Kashani,190B.R.at883.

ThemajorityoftheallegationsinBlixseth'sproposedcomplaintstemfromBrown's
involvementwiththeUnsecuredCreditorsCommittee.OtherofBlixseth'sallegations
complainthatBrownservedascounselforboththeDebtorsandBlixsethandthendivulged
infonuationthatwasprotectedbyBlixseth'sattorney-clientprivilege.TheDebtorsexpressly
waivedtheirattomey-clientprivilegeandthus,BlixsethcannotcomplaintthatBrownviolated
theDebtors'attorney-clientprivilege.AsforBlixseth'sprivilege,thisCourthaspreviously
concludedthatBrowndidnotviolateBlixseth'sattorney-clientprivilegeandfurtherconcluded

thatthett
plethoraofemailsgsicqcommunications''referencedbyBlixsethwerebetweenBrown,
asamemberoftheUnsecuredCreditorsCommittee,andtheUnsecuredCreditorsCommittee's
counsel.Assuch,theemailcommunications,whichdidnotdivulgeanyofBlixseth's
privilegedinformation,wereinfactprotectedbytheUnsecuredCreditorsCommittee's
attorney-clientprivilege.

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ItisalsoimportanttorecognizethatBrowndidnotserveaslegalcounselforthe
UnsecuredCreditorsCommittee,sothisisnotacaseofadverserepresentation.Brownserved
ontheUnsecuredCreditorsCommittee,asalayperson,inanefforttocollectasizeablesum
thatwasdueBrownandGLR.TheUnsecuredCreditorsCommitteehadseparatelegalcounsel
whohadnopriorinvolvementwithBlixseth.
BlixsethalsocomplainsinseveralinstancesthatBrownandGLRviolatedtheMontana
RulesofProfessionalConductandtheMontanaRulesofProfessionalResponsibility.The
MontanaSupremeCourthasrecognizedthatviolationoftheMontanaRulesofProfessional
Conductdoesnotcreateaprivatecauseofactionorapresumptionthatalegaldutyhasbeen

breached.SeeCarlsonv.Morton,2l9Mont.234,237-38,745P.
2d1133,1135-36(1987).
Next,BlixsethtakesissuewithalegalopinionletterthatBrownwroteinSeptemberof
2005inconnectionwiththeCreditSuisseloan.Atthattime,Brownwaslistedasttcounselto

Borrowerg,l''andtheBorrowerwasidentifiedasYellowstoneMountainClub,LLC,
YellowstoneClubDevelopment,LLCandBigSkylkidge,LLC.Theopinionletterwas

addressedtoCreditSuisse.ttA.sageneralrule,anattorney'sdutyofloyaltynmstohisclient,
andnottothirdpartieswithwhom hehasnoagencyrelationship.''InCraneCreekRanch,lnc.

v.Cresap,324Mont.366,!11,103P.
3d535(2004).BrownwasretainedbyYellowstone
MountainClub,LLC,YellowstoneClubDevelopment,LLCandBigSkyRidge,LLCtogive
anopiniontoCreditSuisse.YellowstoneMountainClub,LLC,YellowstoneClub
Developmellt,LLC,BigSkyRidge,LLCandCreditStlissehavereleasedanyclaimseachhad
againsttheother.Blixsethhasthusfailedtoshow thatBrownowedanindependentdutyof
caretoBlixsethonthatmatter.

(47 of 364)
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O8-6157O-RBK Doc#:2522 Filed:03/15/13 Entered:03/15/1313:34:27 Page11of12

PortionsofBlixseth'sproposedcomplaintalsocomplainaboutBrown'sparticipation
andinvolvementintheDebtors'bankruptcycasesandintheconfirmationoftheDebtors'Joint
ThirdAmendedPlanofReorganization.WhilethereleaseprovisionintheDebtors'confirmed
Planisnarrowinbothscopeandtime,andappliesonlytoanS'actoromissionincomlection
with,relatingtoorarisingoutoftheChapter11cases,thefonnulation,negotiation,
implementation,confirmationorconsummationofthisPlan,theDisclosureStatement,orany
contract,instrument,releaseorotheragreementordocumententeredintoduringtheChapter11

CasesorotherwisecreatedinconnectionwiththisP1an(,
)''theCourtfindsthattherelease
provisionreleasesBrownfrom anyliabilitystemmingfrom hisparticipationintheconfirmation
PI-OCCSS.
Finally,Blixseth'sproposedcomplainttakesissuewithadviceprovidedbyBrownto

Blixsethduringhisdivorcefrom Edra.Theproblem withBlixseth'sargumentsonsuchmatter

isthatthey,liketheotherargumentsraisedbyBlixseth,areallcraftedinsuchafashionthat
theyaretiedtoBrown'sactionsasamemberoftheUnsecuredCreditorsCommittee.
lnsum,BlixsethcontinuestocomplainthatBrownhasviolatedBlixseth'sattorneyclientprivilege.ThisCourthasfoundthatBrowndidnotviolateBlixseth'sattornepclient
privilege.BlixsethalsoseekstoassertclaimsthatmoreappropliatelybelongtotheDebtors.
Finally,a11theallegationsinBlixseth'sproposedcomplaintaresointertwinedwithand
dependentuponBrown'sactionsasamemberoftheUnsecuredCreditorsCommitteethatit
makesitimpossibleforthisCoul'ttoisolateBlixseth'sso-called&&pre-petitionmalpracticeand
malfeasance''claimsfrom Brown'sactivitiesasamemberoftheUnsecuredCreditors
Committee.Forthereasonsdiscussedabove,theCourtwillenteraseparateorderprovidingas

(48 of 364)
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08-6157O-RBK Doc#:2522 Filed:03/15/13 Entered:03/15/1313:34:27 Page12of12

follows:
ITISORDEREDthattheAmendedMotionforLeavetoSueStephenR.Brownandthe
Law Firm ofGarlingtonLohn&Robinson,PLLPintheU.S.DistrictCourtfortheDistrictof
MontanafiledbyTimothyBlixsethonMarch28,2012,atdocketentryno.2445,isdenied.
BYTHECOURT
.

. ./
??'q.
/-.--. . ,'
.

''

,
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,

:
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(J -tr.
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, i
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.
..
.- .

HON. ALPHB.IGRSCHER
U.S.BankruptcyJudge
UnitedStatesBankruptcyCourt
DistrictofMontana

(49 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 49 of 228

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wouldn'tnecessali:gosmoothlyandthatiswhyheislookingforsomethingeKelorasoltltion.
Ex.D-I7.2

SebjecttoProtectiveOrder

CHE12611

(50 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 50 of 228

@nedcele
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pickedourhooe)

*somethingcameup,notunanimeusandlwantetoruni
tbyycu'andheprolferedthefolpowlng:

1. Getmemberscommittolulldues(13k)qpfrontfortheyealifwed:fullsiiseaAnn(clearlyhewillaskforanothe;18
toopenforsummerifitcametothat,astheyafeheafingffomReplaythatlhemembeahipwilslomach40k)
2. AsCrossHaeeralreadyownstheGolfCourseloh.wewouldbutlheremaining10-11alaedlsountrefledngthe

culentdrcumstances*.Wouldn'
tneedtocloselmmedlatety.butln30-60daysagalnstacemmitment(weel
dthisbe
subjettto363bidding?).Feltthatwemlghtwanttoconsotidalealoftheholdlngsup'hefeontheGollCouoe.Noteh
terera
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theughtltthrough.
3. CSwoulfunth:balancewhichmi
ghtbepalatableloeveryeneasi
tmimlc theamoun!the weul:needinthe
mothballRenaflo.

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dn'
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amount(hasays$16mmora)andwejuslcoujdn'
tpafdpateinlheDIPlnsomeway(notedthatwewouldhavecertan
requirements)?Hisraspensewaslhatitwas*twefoldprobleme:
o

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anditweareintheDlPwewillhaveleverageovefthem(obvious:iflheycannotdoanolheronel
).Uheyarereluctantto
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deaalall.Hesodoflistvned,butclearlyCkes
hisown'deaandnotthlson..
*
MoaskedifI-.%ontbebroaderlendercalland1l:ldhimn:.Hesaldthattherweresomeereall
ybizarre*
and.whatheton<deled.*irat:comments':
o
'Onewasthatsonwonesaidlhatlheywnuldn'tacceptIessthan1n0tentsonthedollarandwasdeadseriousHesaidthatthlswasa*no- y.butreall
ysillyaRdno1hel
p*r.1didmen:ontbaloneofthebondhol
derswasreacKing
outdiredlytomembersandmakingva/ousthreatsiftheydidn'
tgettQQcenlcnthedoll
ar.Heclaime real
di
sapeintmentwithlhss:n:wantstoknpwwjo1!is8ndseldthfdtheyweremctingdetfimenlell?lothegrollpsodhe
wouldhaveSASMFdealwithit.

Hesaidthattherewassemeeirate'andaerseepeoplecommenlingonGHandthatthiswa:eoontefning-(1

w
atnh
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to
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l110wmuchwehadinveste intheYCandthatvaluedetrutbonwoulde
nll
yo
hultus.1agreedandpoinledoulthatiswhyIoffered$75andnolewhatIthlnkItisrealygoinglosellforin12Qdayf.l

SublecttoProtectiveOr4er

CH;j2612--

(51 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 51 of 228

saiditcoudeasilybealo1less.

*
IpqshedhimQnwhywecxldn'tmovemorequicklyandhaveasale,subjadloastalkaghoaewthnes
onl
y
asKngforourhisto:calexpensesandabreakupfee.Hesaidi!wastoomuchforthisgreeptodosomethingi
5days.

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o
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ha
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en
t.

Isaiditceul
deasil
y*goaway*in30days.
@
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?l
ineagalnwith
himandtoldhimhowbadmymeetingswerewlthurLPswherelheco:sensllswasItwasge/ngwersebeforebetter
and*atlcou?essilylosesuppodforthedeal.
*
SomehowwecamebacktoReplay.Ilo1hIm1dldnxwantlblngstogetconfronta:onatbuttbatwnhadputin
placesomethingstoprotedourseheswitbMrrlBhseththatwewoul
dnotglveupandfighthardoverifwedidR'tsee
t
h
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eg
re'.
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neededourhelpIftheskIseasonistobesaved.ltot
dhimthattheonlylssu:fofmeonthesklseasonwaswaMngaway
fromtheblggerdeal.HeaskedYhatitwoulddotoourexi
stinginveslmenl*acdIreiteraledthatweasreadywfoteoff
t
b
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s
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fornothing18monthsfromnowwhentheyneededaqquort
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Onfrontatlonal.bu!hesai
uheeneededustogetsomethingdoneandwanledustoundetandlhat*dynamicofthe
group.ve@lough:velougll-.lrelteratedthatldiun*tthinkChlbih1dthecoudsundercenlrolandthaltheyneededto
becareful.HesaldthatMarkwasbelngstraightwi
ththeSCaeuttheMsks*andthalltwasaRoughgroup*.
Hewanlstolalklcmnrrow2nkeepthedial
tguegoing.
Bottomline-h:needsus,buteveeinethi
nksitisasetup.lf1cangettothemindi
vidualy.lcancunvincethemoufset
npwasforTimBandnotthem,andthatiswh#welriedtodoadealwiththeminFebrua.
Talktommorrow.

SubjecttoProtectl
veOrder

CHE12613

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ag228
e1of29

BrianGlasser
Bailcy&Glasser,LLP
209CapitolSteet
Charleston,WV25301

Telephone:(304)340-2282
Facsimilc:(304)342-11l0
ShaneP.Coleman
Holland&HartaLLP
401North31'tSt.,Suhe1500
P.O.Box639
Billings,MT59103-0639

Telepbone:(406)252-2166
Facsimile:(800)565-7845

StevenL.Hoard
MullinHoard&Brown,LLP
5* S.Taylor,Suitz800
P.O.Box31656
Amarillo,TX 79120

T
ecle
ho
(8
Fa
sg
lm
iln
ee
::(2
00
66
))33
77
22
-55
00
85
60

AUORNEYSFORMARCS.KIRSCHNEKASTRUSTEE
OFTHEYELLOWSTONECLUBLIQUIDATINGTRUST
UNITEDSTATESBANKRUPTCY COURT
FORTHEDISTRICTOFMONTANA

YellowstoneMountainClub,LLC,
t!g.L,l

Chapter11
CaseNo.02-61570-11-RBK

Debtors.
TIMOTIW BLIXSETH,
Plaintiff/counterclaim Defendant,

AdversaryNo-09-00014andconsolidated
withAdv.No.09-00017-lkBK

MARCS.KIRSCHNER,AS
TRUSTEEOFTHEYELLOWSTONE

FIRSTAMENDEDANSWERAND
COUNTERCLAIM OFMARCS.
KIRSCHNER,AS TRUSTEEOFTHE
YELLOWSTONECLUB

CLUBLIQUIDATINGTRUST,

Defendant/counterclaimant.

LIQUIDATINGTRUST

! TheDebtorsarcthcfollowingentities; YellowstoneMountainClub,LLC,YellowstoneDevelopment
Cl
b,LLC andBigSkyRidge,LLC,whichentitiesaresubslantivelyconsolidated. andYellowstoneClub
Cou
nstructionCo.,LLC,whlchisjointlyadministeredwiththeotherDebtors.

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MarcS.Kirsclmer,asTrusteeofthcYellowstoncClubLiquidatingTrust(thetTrust'g),
successor-in-interesttothcOfficialCommitteeofUnsecuredCrcditors,GlcsthefollowingFirst

AmendedAnswertotheComplaint-ln-lntervtnti
onCCl''
)filcdbyTimothyL.Bli
xsethandFi
rst
AmendedCounterclaimforreliefagainstTimothyL.Blixscth(HBlixseth''
):
FIRSTAMENDEDANSWER
TheTrus'tadmitsthattheallcgationsofparagraph1of-thcC1correctlyrccilc,to
thcTrust'sknowlcdgc.thcfoundingandlocationoftheYellowstoncClub.TheTrustlacks
sufficicntinformationtoenableittorespondtotheremainderoftheallegationsofparagraphl.
Tothcextenttheallegationsinparagraph2oftheCIrefertodocuments,tbeTrust
admits only thatsuch documcnts speak forthcmsclves, and deniesal1allegations and
characteriMtionsthatareinconsistcnttherewith.Uponinfonnationandbelicf,thcTrustadmits
thatcontroloftheDcbtorswaseventuallyassumcdbyEdraBlixscth.TheTrustdeniesamy

implicationsi
nparagraph2thattheidentifiedtransactionsarcnotsubjecttoavoi
danceand
recovery orsubordination undcrfcderaland/orstatelaw. Totlw extcntfurtheransweris
required,theTrustdcniestheallegationsinparagraph2.
Answeringtheallegationsofparagraph3oftheC1,the'Frustadmitsthatthe

OfficialCommitteeandUnsecuredCreditorsCtheCommi
ttee''
)filedacomplaint(t
committee's
Complainf')inthestatedadversryproceeding,andthattbeCommittee'sComplaintspeaksfor
itself.TheTrtlstdeniesallallegationsandcharacterizmionsthatareinconsistentwiththeterms
oftheCommittee'sComplaint.
4. Theallegationsofparagraph4oftheCIeitherstatelegalconclusionstowhichno
responseisrequired,orrefertodocumcnts,whichtheTrustadmitsspeakforthcmselves. The
Trustdcniesa11allegationsandcharacterizationsthatareinconsistentwithsuchdocuments,and
FIRSTAMENDEDANSWERANDCOUNTERCLAI
MOFMARCS.KIRSCHNER.
ASTRUSTEEOFTHEYELLOWSTONELIQUIDATINGTRUST-P
age2

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dcnicsany implicationsi
nparagraph4 t
hatthci
dentificd transactionsarenotsubjectto
avoidanceandrecoveryorsubordinationunderfederaland/orstatelaw,T0thcextentfunher
answerisrequired,thcTrustdeniestheallegationsofparagraph4.
5. Theallegationsofparagraph5oftheC1statelegalconclusionstowhichno
responseisrequired.TheTrustdcnicsanyimplicationsinparagraph4 thattheidentified

transactionsarcnotsubjecttoavoidanccandrecoveryorsubordinationunderfederaland/orstate
law.Totheextentafurtheranswerisrcquircd,theTrustdeniestheallcgationsofparagraph5.
Thcallcgationsofparagraph6oftheC1purporttobeadescriptionofthisaction,
toNvhichnoresponseisrcquired.
ThcTrustadmitstheallegationsofparagraph7oftheC1.
Answeringthcallegationsofparagraph8oftheCI,thcTrustadmitsonlytllat
CreditSuissepurportstobcalinancialsenricescompanyandsecuredcreditoroftheindicatcd

entiti
es,butdcni
esanyimplicationthatCreditSuisse'spurpofcdlicnsarcvalidornotsubjcctto
subordination.

TheTnlstadmitstheallegalionsofparagraphs9-12oftheCI.
10. Tothccxtentthcallegationsinparagraph13oftheCIrefcrtodocuments,thc
Trustadmitsonlythatsuchdocumcntsspcakforthemselvcs,anddeniesal1allegationsand
characterizationsthatareinconsistcnttherewith.ThcTrustdeniesanyimplicationinparagraph

13thattheidentificdtransactionsarenotsubjecttoavoidanceandrecoveryorsubordi
nation
undcrfederaland/orstatelaw.Totheextentfurthcranswerisrequired,theTrustdenicsthe
allegationsinparagraph13.
Totheextenttheallegationsinparagraph14oftheCIstatclegalconclusionsno
responseisrequired.Tothecxtentsuchallcgationsrefertodocuments,theTrustadmitsonlythat
FI
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agIc

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suchdocumentsspeakforthemselves,anddeniesa1lallegationsandcharacterizationsthatare
inconsistenttherewith.TheTrusldeniesanyimplicationinparagraph 14thattheidentified

transactionsarenotsubjecttoavoidanceandrecoveryorsubordinationunderfederalbankruplcy
lawand/orstatelaw.Totheextentfurtheranswerisrequired,theTrustdeniestheallegationsin
paragraphl4.
l2. Totheextenttheallegationsofparagraph15oftheCIstateIegalconclusions,no
responseisrequired.Totheextentsuchallcgationsrefertodocuments,theTrustadmitsonlythat
suchdocumentsspeakforthemselves,anddeniesallallegationsandcharacterizationsthatarc
inconsistenttherewith.TheTrustdeniesanyimplicationinparagraph l5thattheidentified

transactionsarenotsubjecttoavoidanceandrecoveryorsubordi
nationunderfederaland/orst
ate
law.Totheextentfurtheranswerisrequired,theTrustdcniestheallegationsinparagraph15.
l3. oAnsweringtheallegationsofparagraph16oftheCl,theTrustadmil.
sonlythat
theCreditSuissecomplaintspeaksforitselfandthattheCommittee'sComplaintspeaksfor
itself.TheTrustdeniesanyimplicationinparagraph16thattheidentifiedtransactionsarenot

subjecttoavoidanceandrecoveryorsubordinationunderfederaland/orstatclaw.
-f0lbcextenttheallegationsinparagraph17ofthcCIrefertotheexistenceofan
attorney/clientrelationship,thoseallegationsstatealegalconclusiontowhichnoresponseis
required.Totheextenttheallegationsrefertodoculnents,theTrustadmitsonlythatsuch
documentsspeakforthemselves,and deniesal1allegationsand characterizationsthatare
inconsistenttherewith.
Answeringtheallegationsofparagraphl8,theTrustadmitsonlythatStephenR.
BrownwaschairoftheTrust.Totheextenttheallegationsinparagraph18oftheClreferto

FIRSTAMENDEDANSWERANDCOUNTERCLAIMOFMARCS.KIRSCHNER,

M TRUSTEEOFTIIEYELLOWSTONEI
-IQUIDATINGTRUST-Page4

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documtnts,theTrustadmitsonlythatsuchdocumcntsspeakforthemselves,anddeniesall
allegationsandcharacterizationsthatarcinconsistenttherewith.
l6. R-0thccxtcnttheallegationsofparagTaph19oftheCIstatelegalconclusions,no
response isrequired.'rotheextenttheallegationsinparagraph 19ofthcClrcfkrtothe
CommitteeComplaint,theTrustadmitsonlythattheCommitteeComplaintspcaksforitself,and
dcniesa1lallegationsandcharacterizationsthatareinconsistcnttherevvith,includingthcclaim in
paragraph19thatthcCommitteehasadmittcdthattheuscof-theproceedswastlawful.''
Theallegalionsinparagraphs20and21ofthcCIrefcrtodocuments,thecontents
ofwl
nichspcakfbrthcmsclvcs.ThcTrustdenicsallallegationsandcharacterizationsthatare

inconsistenttherewith,anddcniesanyimplicationthattheidentil
iedtransactionsarenotsubject
ttnavoidanceandrccoveryorsubordinationunderfedcraland/orstatelaw.
Uponinformationandbclief,thcTrustdeniesthcallegationsinparagraphs22-26.

TheTrustfurtherdeniesanyinplicationthattheidentificdtransactionsarcnotsubjectlo
avoidanccandrccoveryorsubordinationundcrfederaland/orstatelaw.
19, Totheextentallegationsinparagraph27ofthcCIrefertodocumcnts,theTrust
admits only thatsuch documents spcak forthemselves,and denies allallcgations and
characterizationsthatareinconsistentthcrcwith.TheTrustotherwiseIackssufficientinformation
andbelieftoenablcittorespondtotheallegationsofparagraph27,
Thtallegationsofparagraph28oftheC1puporttobeageneralizeddescription
andopinionconcemingworld-widecreditmarkets.Tothcextentanyresponseisrequired,the
Trustdeniesthcallegationsinparagraph28oftheCI.
2l. Theallegationsofparagraph29ofthcCIrefertoadocumcnt,whichspcaksfbr
itself.TheTrustdcnicsaI1allegationsandcharactcriationsthatareinconsistcnttherewith.
FIRSTAMENDEDANSWERANDCOUNTERCLAIMOFMARCS.KIRSCHNER,

ASTRUSTEEOFTHEYEI
-LOWSTONELIQUIDATINGTRUST-Pagc5

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22. Theallegationsol
-paragraph 30purportedlyquotcfrom adocument, which
smaksforitsclf.TheTzustdeniesalIallegationsandcharacterizationsthatareinconsistent
therewith.
23. Uponinformationandbelief,theTrustadlnitstheallegationsinparagraph3lof
thcClaandftutherallcgcsthatthebankruptcypetitionspeaksforitself.
24. Theallegationsofparagraphs32and33oftheC1refcrtodocuments,including
theCommitteeComplaint.ThtTrustadmizonlythatsuchdocuments,includingtheCommittee
Complainl,speak forthemselvessand deniesa1lallegationsand characterizationsthatare
inconsistenttherewith.
Totheextenttheallegationsofparagraph34oftheCIstatelcgalconclusions,no
responscisrequired.Totheextenttheallegationsin paragraph34 oftheClrefcrtothe
CommittecComplaint,theTrustadmitsonlythattheCommitteeComplaintspeaksforitself,and
deniesallallegationsandcharacterizationsthatareinconsistenttherewith.TheTrustdcnicsany

implicationthattheidentifiedtransactionsarenotsubjccttoavoidanceandrccoveryor
subordinationunderfederaland/orstatelaw,anddeniesa1lremainingallegationsofparagraph
25.
ANSWERTOBLIXSETH'SFIRSTCLAIM FORRELIEF
26. Answeringtheallegationsofparagraph 35 oftheCl.theTrustadoptsand
incorporatesbyreferencetheresponsestoa11priorallegationsasiffullysetforthherein.
27. Answeringtheallegationsofparagraph36oftheC1,theTrustadmitsonlythat

Montnna CodeAnnotatcd j2-2-204(1)speaksforitself,and deniesallallegationsand

characterizationsthatareinconsistenttherewith.
2%. TheTrustadmitstheallcgationsinparagraph37oftheCl.
FIRSTAMENDEDANSWERANDCODNTERCLAIMOFMARCS.KIRSCHNER.

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Answeringtheallegationsofparapaph38oftheCI,thcTrustadmitsonlythat

MontanaCodeAnnotatcd9 2-2-204(1)speaksfori
tself,and dcniesal1allegationsand
characterizationsthatareinconsistenttherewith.Tothecxtenttheallegationsofparagraph38of
theCIstatelegalconclusions,noresponseisrequired.Totheextentafunheranswerisrequired,
theTrustdeniestheallegationsofparagraph38.
TheTrustlackssufficientinformationtoenableittorespondtotheallegationsof
paragraph39oftheCI.
Answeringthcallcgationsofparagraph40oftheCI,thcTrustadmitsonlythat

MontanaCodeAnnotated j2-2-204(1)spcaksfori
tsclf,anddeniesa11allegationsand
charactcrizationsthatareinconsistenttherewith.Totheextenttheallegationsofparagraph40of
theCIstatelegalconclusions,noresponseisrcquired.Totheextentafurtheranswcrisrequired,
theTrustdeniestbeatlegationsofparagraph40.

(a) TheTrustafl
innati
velyplcadsthatthcstatuteofli
mi
tationsforbrcachof
fiduciarydutyagainslBlixsethdidnotbegintorununtilwellafterNovcmbcrl0,2005,andthus
thethree-yearstatuteoflimitationshadnotexpiredatthctimetheDebtors5ledbankruptcyon
November10,2008. Thisadversal'
yprocecdingwascommencedwellwithinthetwo-year

periodallowcdundcr11U.S.C.j108(a).
(b) ThcTrustfurtherpleadsthatthestatuteoflimi
tationsapplicabletothc
claimsassertcdhcrcinagainstBlixsethhadnotexpiredwhensuitwasGledbyvirtueofthe
@bdiscoveryrulc''andalsobythedoctrineoft%fraudulcntconccalment''ascodifiedinScction27-

2-102-(3)oftheMontanaCodeAnnotated.Specifically,thefactsconstitutingtheclaimsagainst
Blixsetht'arebythcirnatureconcealedorself-concealing,''andinadditiom t'duringoraftcrthe

actcausingtheinjury,(Blixsethjhastakenactionwhi
chprevents1heinjuredpartyfrom
FII
BTAMENDEDANSWERANDCOUNTERCLAIMOFMARCS.KIRSC/INER,
ASTRUSTEEOFTHEYELLOWSTONELIQUIDATINGTRUST-P
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discovcringtheinjuryoritscause.' Blixsethaffi
rmativelyactcdtoprevcntinquiryorcscapc
investigationinlohisconductandtomisleadorhinderacquisitionofinformationdisclosinga
causeofaction.
TheTrustalsopleadsthatthestatuteoflimitationswastollcdundcrthe
doctrincofttadvcrsedomination.o*Limitationsm.
etollcdwithrcspccttoclaimsagainstdirectors,
officcrs,andlnanagingmcmberssolongastheyremainincontrolofthccntitythathasbecn

injurcdbytheiractions.BlixsethcontrollcdtheDcbtorsthroughatlcastAugust2008.
ANSWERTO BLIXSETH'SSECONDCLAlM FO-R- RELIEF
Answcringthcallegationsofparagraph4loftheC1, theTrustadoptsand
incoporatcsbyreferencetheresponsestoa11priorallegationsasiffullysdfol4hhcrcin.
Answeringtheallcgationsofparagraph42oftheCI,theTrustadmitsonlythat

MontanaCodeAnnotatedj31-2-333(1)(b)speaksforitsclf,anddeniesaI1allcgationsand
characterizationsthatareinconsistcntthcrcwith.
Totheextentthcallcgationsinparagraph43oftheCIrefcrtodocumcnts,the
Trustadmitsonlythatsuchdocumcntsspeakforthemselves,anddcnicsa11allcgationsand
characterizationsthatareinconsistentthercwith.Totheextentfm-theranswerisrequircd,the
Trustdeniestheallegationsinparagraph43.
35. Answeringthcallegationsofparagraph44oftheCI,theTrustadmitsonlythal

MontanaCodeAnnotatedj31-2-333(1)(b)(i)-(iii
)speaksfbritself,anddeniesa11allcgationsand
characterizationsthatareinconsistenttherewith.
36. To theextenttheallegationsofparagraphs45and46 oftheCIstatelegal
conclusions,noresponseisrequircd.Tothecxtcntfurtheranswerisrcquired,theTrustdenies
theallegationsinparagraphs45and46.
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ANSWERTO BLIXSETH'STHIRDCLAIM FORRELIEF

37. Answeringtheallegationsofparagraph47 ofthcCl,theTrustadoptsand
incomoratesbyrcferencetheresponsestoallpriorallegationsasiffullyse1forthhcrcin.
3E. To theextenltheallegationsofparagraphs48and49 ofthcC1statelegal
conclusions,noresponscisrcquired. Totheextentfurtheranswcrisrequired,theTrustdcnies
theallegationsinparagraphs48and49.

(a) TheTrustaffinnati
velyplcadsthatanyrelcaseofclaimsagainstBli
xscth
purportedlygiventoBlixsethonbchalfofthcDcbtorsand/orBGlisunenforccablcasamatterof
law.TheclaimsagainstBlixsethconstiluteavaluableassctoftheDebtors'estate. Therelease
ofsuchclaimswouldconstitutcafraudulenttransferunderSections31-2-333and31-2-334of

theMontanaCodeAnnotatedandSection548(a)(1)oftheU.S.BankruptcyCode,andcanbe
avoidedpursuanttoSection550ofthcU.S.BankruptcyCodcandScction31-2-339(a)ofthe
MontanaCodeAnnotated. ThereleaseswereobtainedbyBlixscthwiththeactualintentto
hindcr,delay,ordefraudthecreditorsoftheDebtors. Likcwisc.theDebtorsdidnotreceivea
reasonablyequivalentvalueincxchangeforthcrclcasc. Noconsiderationwasgiventothe
Dcbtorsinrcturnfor1hcrcleasc.ThcDebtorswereengagedorwereabouttobeengagedina
busincssortransactionforwhichtheirrcmainingassetswereunzeasonablysmallinrelationto

thcbtsinessortransaciion,andBlixsethknew lhatDcbtorshadincurrcddebtorsbeyondthe
Debtors'abilitytopayastheybccamedue. TheDebtorswereinsolvcntwithinthemeaningof
Section31-2-329(a)oftheMontanaCodeAnnotatedand withi
n thcmeaningofSection
548(a)(1)(B)oftheU.S.BankruptcyCodeatthetimethereleasewasgiven.Bli
xsethwasan
insideroftheDebtors,andheeithcrknewtheDebtorswereinsolventorhadrcasonablecauseto
believethattheDebtorswereinsolvent.
FIRSTAMENDUDANSW'ERANDCOUNTERCLAIMO17MARCS,KI
RSCHNEK

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ANSWERTOBLIXSETH'SFOURTH CLM M FORRELIEF

Answering theallegationsofparagraph50oftheCI, theTrustadoptsand
incomoratesbyreferencetheresponsestoallpriorallegationsasiffullysetforthherein.
40. Answelingthcallegationsofparagraph51oftheCl,theTrustadmitsonlythat

Montana Code Annotated j 35-8-310 speaks foritself,and deniesa1lall

egationsand
characterizationsthatareinconsistenttherewith.
Totheextent1heallegationsofparagraphs52 and 53 ofthcC1statelegal
conclusions,noresponseisrcquiretl.Totheexlentfurtheranswerisrequired,theTrustdenies
thcallegationsinparagraphs52and53.
ANSVVR TO BLIXSETH'SFIFTH CLMM FORRELIEF
42. Answering theallcgationsofpazagraph54 oftheC1, thcTrustadoptsand
incorporatesbyreferencetheresponsestoalIpriorallegationsasiffullysctfol'thherein.
43. Totheextenttheallegationsof-paragraph55oftheCIstatelcgalconclusions,no
responseisrcquired.T0theextentfurtheranswcrisrcquired,theTrustdeniestheallegationsin
paragraph55.
44. Uponinformationandbelief,theTrustdeniestheallegationsinparagraph56of
theC1.
Tothcextcnttheallegationsofparagraph57ofthcC1statelegalconclusions,no
rcsponseisrequired.T0theextentfurtheranswerisrequired,theTrustdeniestheallegationsof
paragraph57.
ADDITIONALDEFENSES
46. Blixseth'sclaimsarebarredbyuncleanhands,illegality,andinpariJclfcft?.

FIRSTAMENDEDANSWERANDCOUNTERCLAIM0FMARCS.KI
RS
CHNEK
ASTRUSTEEOFT1'
IEYELLOWSTONELIQUIDATINGTRUST-Page
1:

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47. TotheextenttheallegationscontainedabovcinthisFirstAmcndedAnswerorin
theTrust'sFirslAmended Counterclaim bclow are propcrly charactcrized asaffirmative
defenses,lheyarcincomoratcdhcrein.
48. TheTrustreservcstherighttoassertadditionalaffirmativedefenscs.
AVHEREFORE.havingfullyansweredtheCI,theTrustrequeststhat1hcsamebe

dismisscdwithprejudice,nocauscofaction,andthattheCourtgranttheTrustsuchotherand
furtherrclicfasitdeemsjust.
FIRSTAMENDEDCOUNTERCLAIM OFTHETRUST
AGAINSTTIMOTHYBLIXSETI'I
1.P.
4JtTIES
MarcS.KirschncristhetrustccoftheTrustandthedcfcndantandcounter-

plaintiffinAdversaryNo.09-00014(consolidatcdwithAdversaryNo.09-000l7).
2. TheTrustwasformedunderthePlanofIkeorganizationfiiedMay22,2009,in

CaseNo.08-61570(dkt.#947)(thei:BankruntcvCasc''),refiledMay29,2009(dkt.#955),and
confrmedbythisCourt'sMemorandumofDecisiondatedJunc2,2009(dkt.1025)(hereinaher,
thett
confirmedPlanofReoraanization''
). TheDebtorsarcYellowstoneMounlainClub,LLC
(t
YC''
)r
'Yellowstone Development,LLC (t
YD')7Big Sky Ridge, (:BSR')Fand
YellowstoncClubConstructionCompany,LLC (''YCC'')(rcfel-redtocollcctivelyastzthe
Debtors''
).
PursuanttothcConfirmcdPlanofReorganizationandanAssignmentofClaims

(Exhibitlhereto),Mr.Kirschner,asTrusteeoftheTrustsucceedstottallCausesofActionthat
theDebtorsortheirEstatescouldassenimmediatelypriortotheEffectiveDate,''exceptcertain
claimsreleasedbytheConrmedPlanofReorganization.

FIRSTAMENDEDANSWERANDCOUNTERCLAIMOFMARCS,KIRSCHNER.

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TimothyL.Blixseth('t
Blixseth''
),1hcplai
ntiffandcountcr-dcfcndanthcrci
n,i
sa
residentofthcStateorNvashinglon.Hcu'asthecontrollingsharcholderofBlixsethGroupaInc.

n/k/a/BLXGroup,lnc.($BGl'')andsolememberandmanagerYcllowstoneClubWorld,LLC
(t'YC$V*')throughAugustof2008.Assuch.hecontrolledBGI,YC,YD,BSR,YCC,andYCW.
II.OTIIERPERSONSNOTNAMEDASPARTIF.
S

BGIi
sanOregoncorporation.ltisthcmajorityowncrof-YCandYD.
EdraBlixseth(togetherwi
thBlixseth,thel
tBlixseths''
)wasChiefOperating
OfficcrofYCuntilsheresigncdinlatc2005orearly2006.
Upon herdivorcefrom Blixseth inAugust,2008.Ms.Blixsethbccamethe

majori
tyownerofBGlandYCW.
8. BGlandthcBlixsethsareinsidersoftheDcbtors.

YCW isaWashingtonStatelimi
tedliabili
tycompany.ltwasmajori
tyowncdby
TimothyBli
xseth.Si
nccthcdivorcc,VCSY'hasbeenmajori
tyownedbyEdraBli
xscth,although
WashingtonStatcrecordsstillrcflcctthatitismajori
tyownedbyTimothyBlixscth.h'C%'was
conceivedbyTimothyBlixsethasaworld-widccorollarytotheYellowstoneClub.
hrC%MisadebtorinBankruptcyNo.09-60061-7intl7eUnitedStatesBankruplcy
CourtfortheDistrictofMontana.
11. NoreliefissoughtagainstYCW hcrein.
EdraBlixsethisadtbtorinBankruptcyNo.09-60452-7intheUnitedStates
BankruptcyCoul-tfortheDistrictofMontana.
NoreliefissougbtagainstEdl'aBlixsethherein.
14. BGlisadebtorinBankruptcyNo.09-61893-1lintheUnitedStatesBankruptcy
CourtforthtDistrictofMontana.
FIRSTAMENDEDANSWERANDCOUNTERCI-AIMOFMARCS.KIRSCHNEK

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NoreliefissoughthereinagainstBGl.
111..1IJmSDICTIONANDVENUE

l6. ThisCourthasjurisdictionovcrthisprocecdingpursuantto28U.
S.C.j1334.
Thisisacoreprocecdingwithinthcmeaningof28U.S.C.j157(b)(2).
PursuanttoRule7008(a)ofthcFederalRulesofBankruptcyProcedure,if-any
claimsaredcterminedtobenon-core.theTrustconscntstothecntryofGnalordersbythe
BankruptcyCourt.

VenueisproperinthisCourtpursuantto28U.S.C.j1409.
IV.GENERALALLEGATJONS
A. TheYellpwstoneClub.
TimothyandEdraBlixsethconceivedofanddevelopedthcYellowstoncClub.
TheClubisal3,500acreexclusivemembershipresortcomprising,amongother
things,a2,200acreprivatcskiresol
-qachampionshipgolfcourse,sccondhomes,soldlots
awaitingdevelopmcnt,unsoldplattcdandunplattcdinventoryandopenspaceland,andthe
125,000squarefootWarrenMillerLodge.
TheCreditSuisseLoanTransaction.
22. AsofSeptember29a2005,theYcllowstoncClub'spropertiescarriedlcssthan
$25millionofsccurcddebt.
OnSeptember30,2005,CreditSuissepuportcdtoloan$375milliontoYC,YD

andBSR inaloantransaction(thettoanTransaction'')pursuanttowhichCrcditSuisse
purportedtoobtainmortgagcs.liensandsecurityinterestsinnearlyalltheseentities'propcrtics.
24. TheLoanTransactionwasnotmadeforthebenditoftheYellowstoncClub.

Instead,thecredi
tagreementevidencingtheLoan Transacti
on(thett
creditAgreemenf'
)
FI
RSTAMENDEDANSWBRANDCOUNTERCLAIMOFMARCS.KIRSCHNERV

ASYRUSTEEOFTHEYELLOWSTONELIQUIOATINOTRUST-Page13

4653'
$00122087
.

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providcd thatncarlya11theprocccdsoftheloan wcreintendedto bcusedt'forpurposes

unrclated''totheYcllowstoneClub.ThcGrstrecitaloftheCreditAgrccmcntprovidcs:
WHEREAS,theBorrowerdcsiresthatthcLcndersextendcertainsenior
tel'm loanstothcBorrowcrhcrcunder,thcproccedsofwhichwillbcuscd:

(i) fordistributionorloansupto$209,000,000to(BGI)forpurposes
tmrelatedtotheYellowstone(Club),
(ii) forinvestmentsupto$142,
000,000intoUnrestrictcdSubsidiarics
forpurposesunzelatedtothcYellowstonc(C1ub),
(ii) topaytheTransactionCosts,
torefinancetheExistingIndebtedness,and

(v) tofinanceaport
ionofthcdevclopmentandconstructioncosts
a
ssociatedwiththeYellowstonegcl
ub)inaccordancewithtil
eFi
nanci
al
Plan.
Section2.6oftheCrcditAgrccmcntwhichissubstantiallyidcnticaltothevery
firstrecitaloftheCreditAgrcement,rcquircdthatupto94% ofthefaceamountoftheloan
wouldbeused'lbrpurposesunrelated''tothcYcllowstoneClub.
TheCreditAgreementrequircdlhcYellowstoncClubanditsunseclzrcdcreditors
andmcmberstosboulderall1heriskoftheLoanTransaclion.
LoanTransactionProeeedsDistributedPursuanttoParavraph2.6(i)o.fthe
CreditAzreement

Paragraph2.6(i)oftheCreditAgreemcntprovidedthalupto5209millicnofthe
LoanTransactionproceedswererequiredlobett
distri
butcdorloancdtoZBGI)forpurposes
unrelated''totheYellowstoneClub.
28. Pursuanttothatprovision,YCimmediatelydistributed5208,831,155.45ofthe
LoanTransactionproceedsfortspurposesunrelatedto''theYellowstoncClub,asfollows:
525,000,000certificateofdepositatFirstBankinBGI'sname.
FIRSTAMENDEDANSWERANDCOUNTERCLAIMOPMARCS,KIRSCHNEK

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'INGTRUST-Page14

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b. $l1,939,495 payoffto First Bank forTimothy Blixseth's primary

rcsidenceatPorcupineCreekinRanchoMirage,Califomia.
$17,000,000certificateofdcpositatPalmNationalBankinthcBlixseths'
1'
1al1Rc.

d. $14,016,227.87 depositinto amoney-marketaccountatPalm Dcsert

NationalBankinTimothyBlixseth'sname.
$4,133,623.50payofftoPalm DesertNationalBankforthelbllowing
debts:
$3&169,l18.75 forchargesrelatedto liDesertRanch,''Timothy
Blixscth'spersonalhousingdevelopmentnearPalm Springs,California.
$79,629.54payoffofitEdra'sCondo,''acondoownedbyEdra
BlixsethinPalmDesert,California.
$402,546.02payoffofTimothyandEdraBlixseths'personallinc
ofcredit.

$482,329.19payoffofEdraBlixseth'spersonallincofcreclit.
$15,000,000certificate ofdepositatJackson StateBank inTilnothy
Blixseth'sname.

749.99payofftoAmcricanBankforunknownpuposcs.
g. $3,068,
h. $975,908.
57payofftoAmericanBankforunknownpumoses.
$1,515,250payofftoAmericanBankforunknownpurposes.
$896,423.28payofftoAmericanBankforunknownpurposes.
k, $977,894.92payofftoAmericanBankforunknownpurposes,
1-

FIRSTAME'
NDEDANSWERANDCOUNTErXLAIMOFMARCS.KIRSCHNER.

ASTRUSTEEOF'
1-I'
IEYELLOWSTONE.LIQUIDATINGTRUST-Pagc15

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1. $100,000,00:ccrtificatcofdepositatU.S.BankintheBlixscths'name,
fromwhich$28,000,000wasusedtopurchaseaprivatcislandinTurksandCaicos.
m. $5,000,000certificateof-depositatPacificWesternBankintheBlixseth's
namc.

$2,971,443.02payoffofapersonalnotetoPacificWestcrnBank.
$160,765.83payofftoUnionBankforarentalhomcownedbyTimothy
Blixseth.

$175,376.23payofftoUnionBankforarcntalhomeownedbyTimothy
Blixseth.

$2,007,930.55payofftoCommcrcialBankforunrelatedpurposcs.
$1,403,547payofftoGECC foranahplaneownedbyaBlixseth-owncd
companyinwhichneithcrYcllowstoneMountainClubnorYellowstoneDcvclopmcnthavean
interest.
$2,454,774payofftoGECC foranairplancowncdbyaBlixsethowned
companyinwhichneitherYellowstoncMountainClubnorYcllowstoneDevelopmcnthavean
interest.
$272,590payofftoWorldSavingsforarentalhomeownedbyTimothy
andEdraBlixseth.
29. In respectofthefundsdisbursedpursuanttopragraph2.
6(i)ofthcCredit

Agreement,BGIcxccutedanunsecureddemandnote(datedasofScptember30,2005,but
prcpared monthst'
hereaftcr)(theI
%FirstBIJINotc''
)in favorofYC intheamountof
$208,831,158.45.

FIRSTAMENDEDANSWERANDCOUNTERCLAIMOI
7MARCS.KI
RSCHNEK

ASTRUS'
FEEOFTHEYELLOWSTONELIQUIDATINGTRUST-Page16

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30. lthasbccnallegedthatBG1hasmadeuptoS90millionofinterestandprincipal
reductionpaymentstoYCinrespectoftheFirstBG1Note.TheTrusthasnotatthistimebeen
abletoverifywhethertheseamountswereinfactpaidorcreditcd.
TheFirstBG1NotcNvasnoladcquateconsiderationorreasonablycquivalent
valuetoh'CforthebenefitsconferrcdonTimothyBlixsethfortheftmdsreccivedbyhimorlbr
hisbcncfitfrom thcLoanTransactionprocceds.

TheFirs:BGlNotewasmadepayablcondemandbyYC(controllcdatthattimc
byTimothyBlixseth)fromBGI(alsccontrollcdatthattimeblrTimothyBlixscth).
TheFirstBGINotcwasncvcrintcndedtobecollectableorcollected.
TheFirstBGlNote>srealvaluemaybeinconsequentialincomparisontoitsface
valucbecauseBG1isinsolvent.
TheDcbtorsreceivedlesst14% reasonabiyequivalentvalue-infactnovalue
w'
hatsocvcr-forthe$208,83l,158.45ofliensplaceduponthcirproperticspursuanttoparagraph

2.6(i)oftheCrcditAgrccment.
D. LoanTransactionProceedsDistribute-dPursuanttoPara:raph2.
6(iiJofthe
CrcditAzrccmcnt.

Paragraph2.
6(ii)oftheCreditAgreemcntprovidcdthatupto$142mili
onofthe
Loan Transaction proceedswouldbeinvestedby others,etforpurposesunrelated''to the
YellowstoncClub.

Pursuanttoparagraph2.6(ii)oftheCreditAgrtement,$l33,110,
262.
53ofLoan
AgreementproceedsweredisbursedtoYDasfollows:
$100millionwasplacedinasix-monthcertificateofdepositatU.S.Bank
inYD'snamc;

FIRSTAMENDEDANSWERANDCOUNTIJRCLAIMOFMARCS.KIRSCHNEK
ASTRUS'FEE0FTHEYELLOWSTONELIQUIDATINGTRUST-Pagc17

4657'
800122087

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$30millionwasplacedinasix-monthccrtificateofdepositatAmcrican
BankinYD'snamc;and
$3,110,262.53 rcmaincd inYD'scheckingaccount, althoughatlcast
$225,000ofthoscfundswcrcuscdformarkctingYCNV.
S80millionofthe$130millionthatwasplaccdinthetwocertificatesofdcposit
referredtoabovewasfurthcrdisbursedasfollow,s:
$28million wasused to purchaseChateau de Farchevillelocatedin
1*A%rancc.,

$40millonwasusedtopurchasearesol'
tk-nownasTamarindolocatedin
hleX1
'c0,
'

$12millionwasusedtopurchaseandimprovcagolfpropertylocatedin
St.Andrews,Scotland.
39. PursuanttothcCrcditSuisseloanagreement,thesepropertieswerepurchased
forpuzposcsunrelatedn'totheYcllowstoncClub.AndonlytheFarchevilleandSt.Andrews
propertiesarccurrentlyownedindirectlybyYD.YDsoldTamalindotoEdraBlixsethinAugust,
2008,fora$40millionunsccurdnote,$3l.2 millionofwhichremainsoutstanding. Shc
thcreaftertransfen-edittoTimothyBlixscthforunknownconsidcration.

40. TheTrusthasnotyettracedthe$50millionbalancefrom thecertilicatesof

depositreferredtoabove,but,oninfonnationandbelief,allegesthattheYellowstoneClubdid
notreceivcrcasonablyequivalentvalueforthc$50millionofliensplacedonClubpropcrtics,in
respectofsuchexpenditures,pursuanttoparagraph2.6(ii)oftheCreditAgreement.
TheDebtorsdidnotreceivereasonablyequivalentvalueforthe$133,110,262.53
ofliensplaccduponitspropertiespursuanttoparagraph2.6(ii)oftheCreditAgreement.
FIRSTAMENDEDANSWERANDCOUNTERCLAIMOFMARCS.KIRSCHNER,
ASTRUSTEEOFTHEYELLOWSTONELIQUIDATINGTRUST-Pagel8

4(
153'
$00127087
.

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E. LoanTransac
ionProceedsDistributvdPursuanttoParasqraph2.6(iii)ofthe
-t
CreditAereement.

Paragraph2.6(iii)ofCredi
tAgreemcntprovidedthatLoanTransactionproceeds
wouldbespentforAttransadioncosts.''
43. Approximatcly$7.4millionofthLoanTransactionproceedswerepaidinfeesto
CreditSuisse.Anadditional$1.2millionwerepaidtootherpanicsinfces.
44. TheDcbtorsdidnotreceivereasonablycquivalentvalueforthe$8.6millionof
liensplaceduponthcirproperticspursuanttoparagraph2.6(iii
)oftheCrcditAgrcemcnt.
F- LoanTransactionProceedsD
stributedPursuanttoParazraph2.6(i
--i
v)pfthe
C-rvditAareement.

Paragraph 2.
6(i
v)oftheCrcditAgreementprovidedthatLoanTransaction
proccedswouldbespenttttorefinancctheE'xistinglndcbtedness.''
A1most,524.2millionofLoanTransactionproceedswcrcuscdtorefinancc
cxistingsecuredindebtcdnessowedbyYC,YDand/orBSR.
TheDebtorsrcccivednoincrementalbcnefitfrom therefinancingoftheExisting
Indebtedness.
G- Lo-anTransactif)nProceedsD-istributed-PursuanttoParaaraph2.6(v)ofthc
CreditAzreement.
48. Paragraph 2.6(:/)ofthe CreditAgreementprovided thatLoan Transaction
proceedswould bespentttofinanccaportionofthcdevelopmentandconstructioncosts

associatedwiththcYelowstone(C1ub)inaccordanccwiththeFinancialPlan.
''
49. Only$255,579.10ofLoanTransaclionproceedsremained,afte'
rtheexpenditures
refcrcnced above,butnotincluding those unaccounted for, to financcdcvelopmentand
constructioncostsassociatedwiththeYellowstoneClub,

FIRSTAMENDEDANSWFRANDCOUNTERCLAIMOFMARCS.KIRSCHNER.

ASTRUSWEOFTl
dEYELLOWSTONELIQUIDATINGTRUST-Pagc19

4653h00121027

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50. Blithrespecttoparagraph2.6(i)ofthcCreditAgrecment,thcDcbtorsreccivedno
valuefortlne$208,831,158.45orliensplacedonClubpropcrticsinconnectionwiththeLoan
Transaction.
51. l'ithrespecttoparagraph2.6(ii)oftheCredi
tAgrccmcnt,theDebtorsdidnot
receivereasonablyequivalentvalueforthc$133,110,262.53oflicnsplaccdonClubpropcrticsin
conncctionwiththcLoanTransaction.

W-ithrespecttoparagraph2.6(iii)oftheCreditAgreement,theDebtorsdidnot
rcccivereasonablyequivalentvalucforthe58,600,000ofliensplacedonClubpropcrtiesin
connectionu'iththeLoanTransaction.
EvenassumingthattheDcbtorsdidreceivcrcasonablyequivalentvaluewith
respccttothe$24.2millionand$258,579.10disbursedpursuanttoparagraphs2.6(iv)and2.
6(:')
ofthcCreditAgreement,ilpresentlyappearstheDebtorsonlyreceivcdbctwccn$67,343,841.53

(thcvalueoftherefinance,plusthepurchascpriccsofSt,AndrewsandFarcheville,plusthe
amountremainingforoperations,plusthcamountremaininginYD'sbankaccount)(l7.99.
4)and
S166,168,841.55(al1disbursementsexccptingthe$208,831,158.45disburscdtotheBlixseths)
(44.304)ofvalueinconsiderationforthe$375millionofliensplacedontheClub'spropertiesin
connectionwiththeLoanTransaction.
54. Ineitherevcnl,theDcbtorsreceivedfarlcssthanreasonablyequivalentvalucbetween17.9% and44.3% -inconsidcrationforthe$375millionoflicnsplaccdontheClub's
propcrtiesbyCreditSuisseinconnectionwiththcLoanTransaction.
TheYellowsto-n-eClub's-lnevitableBankruptcv.
ByNovember,200s,theDebtorswereunablctomakctheinterestpayments
rcquiredbytheCreditAgreement.
llfls'I'AMENDEDANSWERANDCOUNTERCLAIMOFMARCS

R2
S0
CIIKER,
AS'IMUSTEEOF'I
'HEYELLOWSTONELIQUIDATINGTRUST-.PK
agI
t

4653,
$
00122087

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56. Butfornumcrous%tbail-out''landpurchasesmadcbyintercstcdpartiespriorto
thattimc,theDk
zbtorswouldhavcbecnunablctomcetthcirinterestexpenseobligationslong
befbrc.
Asaconsequenceol-theLoanTransaction,thcDeblorswererendercdinsolvent
andrequiredtoscckBankruptcyprotection.
AdditionalPromissoo,Note-sConstitutinzIndebtednessofBGItothe
Debtprs.

BGIexecutedanotherunsecureddemandnote(datedasofSeplember30,2005,
butprcparedmonthsthereafter)infavorofYD intheamountof555,798,796.
68(thcttsecond
BG1Note'').
59. BGIexeculedathirdunsecureddcmandnote(datedasofSeptember3,2005,
butpreparedmonthsthercaftcr)infavorofYCinthcamountof$7,800.000(thetzThirdBGI
Note'').
DemandhasproperlybeenmadeinrespectoftheSecondandThirdBGlNotes.
61. NeithcrtheSecondnorthcThirdBGINotespertaintoanyobligationtorepay
fundsdisbursedpursuanttotheLoanTransaction.
V.FIRSTCAUSEOFACTION

(AgainstTimothyBlixseth)
BreacltesofFiduciaryDzz/
.p

62. TheTntstincorporatcsbyreferencea11thepriorallegationsofthisCounterclaim
andtheFirstAmendedAnswer.
63. AsanowncrofYC,YDandBSR,TimothyBl
ixscthowedfiduciarydutiestoYC,
YD BSR,theminorityowncrsofthosecntities,andtheClubanditsmembers,loprotecttheir
interestsinconnectionwiththeLoanTransaction.
F
ST
AS
ME
NDTC
ER
ATI
MI
7
RTC-SP
.K
SC
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ED
OEFDTA
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YWE
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4653*122087

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64. TimothyBlixscthbrcachcdthosedutiesbyenteringintotheLoanTransactionand
usupingtheprocecdsoftheLoanTransactionforhisownpersonalbenefkorthebenefitof
othcrentitiesinwhichhehcldaninterest.
AsaresuitoftheLoan Transaction and Timothy Blixseth'sbreach
fiduciaryduties,Debtorsandlheircreditorshavebecndamaged.

66. TheTrustisentitlcdtojudgmentagainstTimothyBli
xscthforal1damagescaused
byhisbreachcsoffiduciarydutyinanamounttobeprovcnattrial,includingwithoullimitation
tbecnlireamountoftheprocecdsfrom thcLoanTransactionthatwercdistributcdtohim orfbr
hisdircctorindirectbenelit.
VI.SECONDCAUSEOFACTION

(AgainstTimothyBlixseth)
Violatiottz?
./
*
/
#1:1/.Codef35-8-604(1)

TheTrustincolmoratesbyrcfcrenceal1thepriorallegationsofthisCounterclaim
andthcFirstAmendedAnswer.

Blixseth'sactionsalsoconstitulcaviolationofSection35-8-604(1)(a)and(b)of
thcM
'ontanaCodeAnnotated,whichprohibitsdistributionstothcmcmbersofalimitedliability

company(ttLLC'')ifsuchdistributionsrendertheLLCunabletopayitsdcbtsastheybecome
ducintheusualcourscofbusinessand/orifsuchdistributionscausethcLLC'Slolalassetstobe
lcssthanthcsum ofitstotalliabilitics.

ThcTrustisentitledtojudgmentagainstBlixset
hfortheentireamountofthe
proccedsfrom theLoanTransactionthatwercdistributedtohim orforhisdirectorindirect
benefit.

FlRS'
l'AMENDEDANSWERANDCOUNTERCLAIMOFMARCS.KIRSCHNEQ

ASTRUSTEEOFTHEYELLOWSTONELIQUIDATINGTRUST-Page22

465300122087

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VII.TI'
I1ltDCAUSEOFACTION

(AgainstTimothyBlixseth)

AlterEgo
70. TheTrustincoporatesbyrcferenccallthepriorallegationsofthisCountcrclaim
andtheFirstAmcndcdAnswcr.

DuringthctimethathcwasthecontrollingsllareholderofBGI,TimothyBlixseth
dominatedandconlrollcdtheaffairsofBGItosuchanextentthatBG1hasnoseparatecomorate
identityapartfrom '
I-imothyBlixseth.
72. TlmothyBlixsethhasadmittedthatheandBG1areoncandthesame.
ItwouldbeinequitabletoprescrvetheseparatecoporateidcntityofBGI.

74. TheTrustisentitl
cdtoajudgmentdeclaringthatBlixsethwasthealtercgoof
BGIatthetimecomplaincdofhercinandholdingBlixscthliableforBGI'sconductanddebts.
VIll.FOURTHCAU-SEOFACTION

(AgainstTimothyBlixseth)
Recoveryp-fFz
wl/#zz/ell/Transfers

Rl7AeTrustincomoratesbyreferencesa11thepriorallegationsofthisCounterclaim
andtheFirstAmendedAnswer.

Muchoftheproceedsfrom theLoanTransactionwretransferredto3GIandits
alterego,TimothyBlixseth,ycttheDebtorswercleftwiththeobligationtorepaytheloans
resultingfrolntheLoanTransactionandwithliensontheirpropertyintendedtosecurethose
obligations.
TheBGINoteswerenotrcasonablyequivalentvalueforthcloanproceeds
disbursedtoBGloritsalterego,TimothyBlixsethorfortheliensplacedontheDcbtors'
property.
FIRSTAMENDEDANSWERANDCOUNTERCIaAIMOFMARCS.KIRSCHNER.

ASTRUSTEEOFAI'HEYELLOWSTONELIQUIDATINGTRUST-Pagc23

46,
53'
.0122037

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78. AsarcsultofthcLoanTransactionandthetransferol-theproceedstherefrom to
BG1anditsalterego,TimothyBlixseth, andtheIicnsplacedontheDeblors'propertysthe
Debtorsw'ereleftwithanunreasonablysmallamountofassctswithwhichtocontinuctheir
business.
AsaresultoftheLoanTransactionandthetransfbroftbeproceedstherefrom to
BGlanditsalterego,TimothyBlixseth,andtheliensplacedontheDebtozs'property,the
Debtorskneworshouldhaveknowntheywereincuningadebttheywouldnotbeabletorcpay.

80. Pursuanttosection544(b)ofthcBankrupt
cyCode,thetransferofproccedsto
BGIp-nditsalterego,TimothyBlixscth,wasaconstructivclyfraudulenttransrertmderMont.

Code.Ann.3l-2-333(l)(b),andcanbeavoidedpursuanttosection550oftheBankruptcyCode
andMont.Code.Ann.31-2-339(1
$.
81. TheTrustisentitledloajudgmentagainstBG1anditsallerego,Timothy
Blixseth,forthevalueofthetransferstoBG1anditsaltcrago.'I'imothyBlixseth,andtoany
mediatetransferees,inanamounttobeprovenattrial.
IX.FIFTHCAUSEOFACTION

(AgainstTimothyBlixscth)
RecoveryofFraudulentTransfcrs

82. TheTrtzstincoporatesbyreferencca1lthepriorallegationsofthisCounterclaim
andtheFirstAmendedAnswcr.
83. Muchofthcproceedsfrom theLoanTransactionwcretransferredtocntitiesother
than thcDcbtorsforthebenefitofTimothy Blixseth,yettheDebtorswereleftwiththe
obligationtorepaytheloansrcsultingfromtheLoanTransactionandwithliensontheirproperty
intendedtosecurethatobligation.

FIRSTAMENDEDASSWERANDCOUNTEZCLAIMOFMARCS.KIRSCHNER@

ASTRUSTEEOF-r1'
IEYELLOWSTONELIQUIDATINGTRUST-Page24

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84. TheDebtorsdidnotreceivercasonablycquivalentvalueincxchangcforthese
transfersandliens.
AsaresultoftheLoanTransactionandthesetransfersandlicns,theDebtorsuzre
leftwithantmreasonablysmallamountofassctswithwhichtocontinuetheirbusiness.
86. AsarcsultoftheLoanTransactionandthesetransfersandliens.theDebtors
knew orshouldhaveknowntheywcrcincurringadebttheywouldnotbeablclorepay.

87. Pursuanttosection544*)oftheBankruptcyCode,thetransferofproceedsto
entitiesotherthantheDebtorsforlhcbenefitofTimothyBlixsethwereconstructivelyfraudulcnt

underMont.Code.Ann.31-2-333(1)(b),andcanbeavoi
dcdpursuanttosection550ofthe
BankruptcyCodeandMont.Codc.Ann.31-2-339(a).
88. TheTrustiscnti
tledtoajudgmentagainstTimothyBlixsethandanymediate
transfereesforthevalueofthetransfersmadeforthebenefitofTimothyBlixseth.inanamount
tobeprovenattrial.
X.SIXTH CAUSEOFACTION

(AgainstTimothyBlixscth)

Conversion
29. '
rheTruslincomoratesbyreferencea1ltlnepriorallegationsoftheCounterclaim
andthcFirstAmendedAnswer.
90. Blixseth'svrrongfultaking oftheproceedsfrom theLoanTransaction also
constitutcconvcrsion.

91. TheTruslisenti
tledtojudgmentagainstBlixsethfortheenti
reamountofthe
proceedsfrom theLoanTransactionthatweredistributedtohim orforhisdirectorindirect
benefit.

FIRSTAMENDEDANSWERANDCOUNTERCLAI
MOFMARCS IRSCHNEK
ASTRUSTEEOFTHEYELLOWSTONELIQUIDATCNGTRUST-.PK
agc25

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Xl.SEW NTHCAUSEOFACTION

(AgainstTimothyBlixscth)
UnjustFarc/iale/z/

92. TheTrustincorporatesbyrefcrenceallthcpriorallegationsoftheCounterclainl
andtheFirstAmendedAnswer.
Asaresultoftheabove-dcscribedactionsandomissions.Blixsethhasbccn

unjustl
ycnriched,andthcTrusthasbeenunjustl
yinjurcd,inanamountequaltothcwrongftll
distributionsthatBlixsethreceiveddirectlyorindircctly.

lnadditionsasaresultoftheabove-dcscribedactionsandomissions,Blixseth

wouldbeunjustlyenrichedatthcexpenseofthcTrustandtothcTrust'sdetrimentifBlixseth
wasallowcdtocontinuetouscthccconomicbcncfitsofthewrongfuldistributions.

95. TheTrustisentitl
edtojudgmentagainstBli
xscthfortheentircamountofthe
proceedsfrom theLoanTransactionthatweredistributedtohim orforhisdirectorindircct
benefit.
X1I.EIGHTCAUSEOFACTION

(AgainstTjmothyBlixseth)

PunitlveDamages
96. TheTrustincorporatesbyrefcrencca11thepriorallegationsofthisCounterclaim
andtheFirstAmcndedAnswer.
97. PursuanttoMont.Codej27-1-221(1),rcasonabl
epuni
ti
vedamagesmaybe
awardedwhcnthcdefendanthasbcenfoundguiltyofactualfraudoractualmalice.Pursuantto

Mont.Code927-1-221(2),adefenantisguil
tyofactualmaliceifthcdefendanthasknowl
edge
offactsorintentionallydisregardsfactsthatcreateahi
ghprobabilityofinjuryto1heplaintiff
and:(a)dcliberatelyproceedstoactinconsciousorintentionaldisregazdofthehighprobability
FIRSTAME-NDEDANSWERANDCOUNTERCLAIMOFMARCS.

RSCHNER,
ASTRUD'EE0FTHEYE
-LLOWSTONELIQUIDATINGTROST-PK
agIe
26

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ofinjurytotheplaintiff'
,or(b)deliberatelyprocccdstoactwithindifferencet
othchigh
probabilityofinjurytotheplaintiff.
Asalleged herein,Blixseth isguilty of-actualmaliccbccause he hashad

knowlcdgeoffactsand/orintentionallydisregardedfactsthatcreatedahighprobabilityofinjury
totheDebtorsand:(a)deliberatelyproceededtoactinconsciousori
ntentionaldisregardorthe
higb probability ofinjury tothcDebtors;and/or(b)delibcratclyprocecdedto actwith
indifferencctothehighprobabilityofinjurytoPlaintiffs.
allegedbaerein,Blixseth,v,
.
r!th p
'
ra11
.knosvledgeofthcDebtors'rightsand
nterests,actc.
dindirectderogationofthoserights,andthroughhisunlawfulandmaliciousacts
tookassctsandfundsbelongingtotheDcbtors.Hehasdeliberatelyandwr
illfullyactcdwith

consciousorinlentionaldisregardofthehighprobabilityofinjurytotheDebtorsand/or
dcliberatel
yprocccdedtoactwithindiffercncctothehighprobabilityofinjuryoPlaintiffs.
l00. ThcTrustisaccordinglyenti
tl
edtojudgmentagainstBlixsethforpunitive
damagcsinanamountsufficicnttodeterBlixscthandothcrsimilarlysituatedpersonsfrom
committingsuchvq-ongfulactsinthcfuture.
PRAYERFORRELIEF

WHEREFORE,theTrustpraysthatthisCourtent
erjudgmentuponitsCounterclaim
againstTimothyBlixsethasfollows:
Anawardofactualdamagesinanamounttobedeterminedattriai;
7
A11OrderrequiringBlixsethtopaytotheTrusttheamountofalldistributionsthat
Defcndantswrongfullydivertedfrom theDebtors,plusinteresl,andanyanda1l
profitsorgainBlixsethreceivedfromtheuseofthedistributions;

FIRSTAMENDEDANSW'ERANDCOUNTERCLAIMOF&1AltCS.KIRSCHNER,
ASTRUSTEEOFTHEYELLOWSTONELIQUIDATING'I'
RUST-Page27

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10 EntereDktEntry:
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017:1
3:09 Page28Of29

D. Anawardofcosts,disbursemcnl,attorneys'fcesandprejudgmentintercstas
permittedbyN/
lontanastatutoryandcommonlaw;
Anawardofpunitivedamages;and

5. Suchotherandf
urtherrclicfastheCourtdecmsjustandequitable,
DAR-EDthis25'1:dayofJanuary,2010.
Respectfullysubmitted,
/s/ Shane P.Coleman
Charles%'.Hingle
ShaneP.Coleman
Holland&HartpLLP
40lNorth315:St. Suite1500
P.O.Box639
Billings,MT 59103-0639

Tel
ejhone:(406)252-2166
Facslmile:(800)565-7845
BrianGlasser
Bailey& Glasser,LLP
209CapitolStreet
Charleston,WV25301

Tel
eghone:(304)340-2282
Facslmile:(304)342-111()

StevcnL.Hoard
JohnG.Turner,11l
RobertR.Bell'
MullinHoard&Brown,LLP
500S.Taylor,Suite800
P.O.Box31656
Amarillo,TX 79120

Tel
eghone:(806)372-5050
Facslmile:(s06)372-5026

,4TTOKNEYSFORMARCS.KI
M

CIINER:AS
TRUSTEEOFTHEYELLOWSTONECLUB

LIQUIDAFJNGTRUST
FIRSTAMENDEDANSWERANDCOUNTERCLAIMOFMARCS.KIRSCHNEII,
.
4STRUSTEEOf1THEYZ
-LLOWSTONELIQUIDATINGTRUST-Page28

4653h0012287

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CERTIFICATEOFSERVICE

1,thcundersigned,ccrtifyunderpcnaltyof-pel
juryt
hatonJanuary25

0i,
aa
ssso
ornvc
as
possiblethereafter,copiesoftheforcgoingFirstAmcndedAnswcrandCoun,t2
er0clla
morsv
sc
d
electronicalllrbytheCourt'sECF noticetoallpersons/cntitiesrequestingspecialnoticeor
otherwisecntitledtosamcandthatinadditionserviccbymailingatrucandcorrectcopy,first
classmail,postageprepaid,wasmadetothefollowingptrsons/cntitieswhoarcnotECF
registcredusers:None.
/s/ShaneP.Colcman
ShaneP.Coleman

FIRSTAMENDEDANSWERANDCOUNTERCLAIMOFMARCS

.KI
R2
S9
CHNER.
ASTRUSTEEOFTHEYELLOWSTONELIQUIDATINGTRUST-P
age

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StevenL.Eoard
JohaG.T= c,1II
MUIJJNHOAED&Bltom1LLP
500SouiTaylor,Suite8,LB#J,
13
?.0.Box31656
Avsrlno,Tr
axas79120-1655

Telephono:(806)372-5050
Facsllr
dle:(806)371-6230
BmaD.
:Jboardembbmcom

Rrnail:#htrnar/sbraba.com
JcsephW.aintlzony
Mm'
yL.K'
noblauok
MthonyOstlundBa&Lcuwa#ePJ.
3600WellsFargoCenter
90SoutSevenf:Sfreet
AJ=
'neapolisaAIN55402

RnnnldABenGerIACf#106)
Ma
l
m>DA
wJ.nnNeReF(.
&C1T
WOt
Rt
D
.
.#4448)

AttorneysatLaw
P.O.Box4747
Missoula,Montana59206

Ta
ei
e
y
ho
nee
:(
(4
06
0)7
21
1-3
42
05
0
F
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:
4
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7
2
6
9
'
R.
m11:rbendertzwthlamnet
mcttfeawtbla.
wmet

Telephone:(612)349-6969
P
cmt-1
1
:ho
(61
349
4l9
96
Ba
ma
l=
:l
's
an
n2
v)
aa
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aw
.com
P,ma11:mnt-noblauclz@aoblaw.com
INTM UNITEDSTATESBAm UPTW COURT
TORM DISTRICTOPMONTANA
Iure:
CaseNo,08-61570-11-Rbk
U LLOWSTOM MOTWTAW C'
LTJB, JbhttlyAdmlnlsteredM?
I:.
IZ08-61577.aud08LLC)eta1.,
61572,08-61573
'
Debtor:
Ckapter41

MkhaelSnow,GregC.Brauck A.C.and RIASTAM-RNDKDCOU LA'

ENT
LedaMarlrknlxCfrasteesoftlteArlixt
TrastlySpanoYellowstoxeHoldinggLimlted Adv.l>ro.No.09-00018
ParGerslzis RobertP.auclIcathariueM.Judge:QnlpltB.Kirscker
WatgoxrBomlrersFiuandal.corporadoxaud

MountamVistaProperuesAG

Plainfiffs,
VS.

BLX Group,IqcuFk/aBsxsethGroup,Ince
Tlmotkyl,.Blixseth,XdraD.Blixseth,John

Does1-1GantlM cCompanies1-15.

Defexdomts.

(46530020154454*0C/1)

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Page
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18-RBK
Doc#:1
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/228739867,
/10 Enter
ed:03/22/52-1,
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43:1582Pof
ag228
e2of27

PlainfiffqMickaelSnow,&egC.Branch,A.C.anc
lL'
ino MgrplrnlaG'
zusteesofGe
z#
A'
rlinTrastl,SpanoYellowstoneHolegsLimitedPmrtnerslzip,RobeztP.andKathm'
neM.
Waton,BaakersFinancialCozporaonandMounte VistaPropeOesBe(collecdvely,TttizeB
Members''or'
L
plaint@ '),byandtougtlzeirundersiredco=sel,hereins
'
tatestheircauses
ofactionandclm'ms'
forreefagm'
nqfDefendantTimothyL,Blixsel(tMz.Blixset
p'
l.
N RODUCHON
'
l'heDebtozs,YellowstoneMountainClub,LLCaadYellowstone'
Development
Company,LLC,owaandoperatetb.
eYellowstoneGubwbichisoneofMone a'smost
sw otxcularshandgolfreaortcommuuifes.
PlaintifgareClas!BMembersoffheDebtorsazdtoget
hholda7.1428% equity
interes'tint:eDebtors.

BLXGzoup,hc.
,Fk/aBlixset
izC'
roup,Hc.(1%CIr'
),acompaay1atasalways
'

be= owaedandconknlledbyTimotbyazzclBdraBliraet
k(zr
Ms.Blixsetp'
;togeierwitlkMr.
Blixset
tke'Bli
xset
ss,ownsau82%eq'
aityinterestiutheDebtors.BGIhasalwaysbeeathe
sole'managoftheDebtors.
4. Bytkekconluctdescribedmore'I
57llyherein,BGIandtkeBlixnethsbreached
fdudarydutiesowingtoPlainiiffqandeommittedotherseriouswrongdohg,omaningsignifoa:lt
hrlrr.
natddamagestoPlaklfilq-theultlrnsteconsequenceofwhichisKainiifsm'
eatziskof
hae gtkeirequityintereslscompletelyelirnimntedaspadoftheDebtors'y1aaofTeorgnnszatiom
Jn2005,theBlixsetlt
scausedtkeDebtorstobon'
ow$375='llionpursuanttoa

IleditApeement''wi
thCreditSisse,CaymanislazdsBrauoh(tcreditSuisse'l.Asigco
'c=t
poMonofthelo= proceedswereearmarkedfordistribufonslotlleownersoftheDebtors.
'

Insteadofmqprimgaaydicc-butionstoPfaiue s,nearlya'lloftheOreditSaisseloauproceeds
(46530:20.
1.
5445420C/1)

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werewzongfazyrNFrlributedtoBGIozt:eBM ef
hspersonally.D eBlixsetllsnrcheskatedt'
Izia
bywayofpurported**10a:1,''om tlzeDebtorstoBCIaadYellowstoneClubWorldLLC

(drY'CWr'),anotlv enti.
t.
!rownedaad.contolledbyteBl:
'vnot'
izawlliohrecenfy soult
Bgmlcrnptcyprotecticn.Ultlmately,BCCaad.YCW andother7=1040*.
r.enfiesende;zp 5W.
1
over$300=1
*111
*0nofteCredtSuisselo=poceeds.
A centzalissuei:lthisCourtiswhetheztheDebtozsareentitledtorecovertke

pcrgozted:
1::
cs77madetoB(EandYCW.'
lYeOodalCrr
mmstteeofUnsecuredDeditorsttit
e
ccomvl
'
ttee''
lhascommencedaaadversarjrproceeegagainnfEdzaBlixsef
handBGkseeki
ng
tocozectontbzeepronlissozynotespurportedlyevidencingQoaus':from feDebtorstoB(E.

'

'
I'
heCornmltt
eealsoseekstoeajoicEdraBl
ixqet
.
hom'
g'rt
lnerennnmbezingassetsacqt
redor
maintained'wifh GeCreclitSuisseloaaTroceeds.Finally,the Cormitteehasreceived
auiotizaGonomGisComttosu'
eCredtSuissetoavoidfeCredit-suisselo= asaauiulent
convoyance.

r
n eDebtors'pl= ofreorgnni%edon corGrrned on J=e2,2009 inIn re
YellowstoneAbpgnfcfsClub,M G YellowatoneDevelopmentCompany.JZf.G,and2fg,7/1kidge,
JWCRT>ocedurallyconsolidatedMndercasenumber08-61570,curentlypendiagintlzisComt

tt
het%anl
mz
mtoyCases''
lmovidesfortYeadversaryproceeegsandpotendallyother
dedvativeclai
msbelonmgtotkeDebtorsTelafngtoteCreditSuisselomprooeec
'
t
stoconHue
tobeJhgatedaftercor6vnadoninaEquidadontust.
8, J.
nlhiqComylaint,'
Plaintis'
sclaim tkeyareentitledfoapcrqonoftheCredt

SuisseloanproceedsandotheramountswlzichisormaybesubjecttoclnimnbytheDebtors.
SpeocatlyPlaintieqalleget'
iatBdraBlixseA TimBlixsethandBGIbzeache;theirEducia'
:y
dufegacdcommltleotherwzongdohgbyma7ringdlsta-budonstotiemselvesoftb.
eDedit

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SuisseloanproceedswitotztTnnlimggroratadM budonstoPlaine sasClassBmembers.Tit

issuespresentedbyiesepersonalclaimsarerelatsd'
bothtotheestateclm'msaasertedinthe
adversaryproceee gsbytkeCommitteeandloteB toyCasesgeneratly,
9. '
Ihstattesofl:
'=l
'tatBnsinconnection*t,
11thecausesofacdonazsMedherein
weretozedby virtaeofapeementb.etween fheparAs,te discovery zule,audulent
concenlmentand/oradversedornhladoa
PAROESAMIRELXTBDENTITTRSO- WDIVDUALS
lqainuffseaokowna1.0204%iuterestin'
bothYellowstonoMounte Club,LLC

CYMC')aadYellowstoneDevelopment,LLC(tr
&qr)(cozeodvely,theTqrellowstonoLLCs''
).
PhintilsareeachClassBMembersoftkeYezowstoneLLCS.TogetbzrPlaino sown7.1428%
oftheYezowstoneLLCS.InadditiontotheirownersbipkterestintheYezowstoneLLcs,eao:
ofthePlaintiffsownresidenialpropo .attlneYellowatoneCiubacdarPioneermembersof
theYellowstoneClub.
11, BG'
T9anOregoncozporaion.BG'IlsfhesoiemanagerofteYellowstoneLLCS.

BG'
IandBl
ixaethFmm'
lylnvesuents,LLC Ct
B1T'
Iaret
it
esoleClassA membersi
;lthe
YellowstoneLLCS.BG'
Iowos2% ofteYellowston:LLCS.BFIowng6.0204% oftb.
e
YoiowstoneLLCSandiswolly-ownedbyMs.Blixaetk.AllizL
voluntmypetEdoninb toy
wasfledagainstBeIonSeptembez21,2009intheU.S.BsnltvnptpyCourtforfheDisMotof.
Montaaa.Thisbxnknptcyis*71pending.rIl=,noreliefissoughtagainstBolhereia.
12. Ast:emanageroftheYellowstoneLLCS,B11cweseachoft:ePlaintiffsa
Sdudaryduty.

13. AzthemajozityowaeroftlzeYollowstoneLLCs,Be1oweseachof'
lhePlaintifs
afdudaryduty.
(4653h0:*0154454.
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O9-O0Case:
018-RB12-35986,
K Doc#:1
4O Filed:03
/228739867,
/10 Enter
ed:03/22/52-1,
1013Page
:43:1585Pofag228
e5of27

14. DefendmtTimothyL.BlixselisaresidentoftheShteofWnei'ngton-.Asstated

by*.Bli
xselinpleadingsiutbisCoartQocketNo.359),hewastkefoundermdfozmer.
mata/ngmemberofteYezowstoneLLCS.UnfilJalyorAugust2008,Mr.Blixseiwasthe
ClzifBxecufveOocerofteYexowstonoLLCS.
15. BdraD.BlixsethisaresideatoftlzeStateofCalifozcia.UntilaboutJanuary2007,
Ms.Blixsetwastb.
eCbiefOperatingOfceroftheYellowstoneLLCS.M,
s.Blixjettftleda
poliionforbnnkrnptcyonoraboutAp:il29,2009,intlzeU.S.B
toyCo'
at'tfortb.
eDiskrict
ofMontama.Thns,noreliefissougblagsimqtMs.Blixnethkerehz-

16. TheBlirqet
sfozmedYellowstoneCl
ubWorl;LLCCqrCW>'
),a'
Waslimgton
StateTl
'=1te(liiabilitycompany,tobeanexclusivemembershipclu:ofezing,accordingtoits

formerwebsiteRaatmusualzeoreadoniaccessto(te2fnestamenies,actividesandserdcesin
t
hemostexolusivelocadonsaroutdt
heglobe,
'YCW isnow defl
motandTec:ntlysoult
B

tcyprotecion-

l7. 0.Blixnet
kalsoboldsa50%hterestinBigSkyE.
idgexLLc('%SR')andY.
D
loldstheooers0%.lqainufs,twoughtlxirownersbipinyo,alsoownapozuonofBsR-Mr.
Blixse formedBSk pzimmily asalaad-hole gvenoxreforland contlgaouswitllthe
YenowstoneClub.
18. Togeler,theBlixsetitsweretkecontroliiugsbvekolderofBGIandYCW.As
?
s'ach,theBlixsetl controlleBGI,theYellowstoneLLCS,andYCW.Itlparticular,tkerewasao
diferenoeboYeenBO1aadtheBlixsethspersonally,otllerthaafhecorporatestactare,
BecausetheBlixsetbstogetherwerethecontollingsharebolderofB(Ewhichis
'

temaaagerandmajozityowneroft
eYezowstoneLLCS,tkeBTivnet
itsowedadudaryduty
toeacofthePlaintiffq.
(465m000015.
145*
4.
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2O. SinceAugust.ofJ08,uponherdivorceom Mr.Blixset,Ms.Blixsethalone

hasbeenthecontollingsH oiolderofB1IwhichkascontinuedtomanagetheYenowstone
LLCS.M.s.BlixsciconeuestooweaEduoiarycluty'toeao:oftheTlaine s.
Aa
soEcersoftiteYezowstoneLLCGtheBrxsethsowedaEduciazydutytoeach
OfthePlainfiffq.
22. JohnDoes1-15aadARC Companies:-15gGeidenddesofwhicharenow
ImknowntoPlaino s,aidedandabetedintb.
ebreachesofdutycomplaiaedofhereinaadalso

havebe=unjustlyenriokedtothedefrloentoftiteBMembers.1zlyarticular,oninformafonand
belieficertain
enoesartdiadividualsinvolvedilltitedisbuzseme*ntofleCre&tSuisseloazl
.
proceesknowinglyasistedB(E acdtiteBlixaothsiqGebrpachesandotherwrongdoing
describedhezshtotlzedetrimentoftheBMembers.
U SDICTIONm 5+= .
'

TbisCourthasgabjectmatterjtl
dst
ricionoverthisadversatyproceeegpurmlamt
to22U.
S.
C.13349$.'
rhisisaciO proceeegmishgunderTitle11oftheUnitedStates
Code,11U.S.C.j191-1532,or.adsinginorrelatezlocases'
tmderTitle11,'
n=elyInre
(EwjswafopcMountainC/X,ZSGYcllowstoncDcvelopmentCbzzptzrJJ?
,JXG andBg,7k.pRidge,
JZ,G'
procedurallyconsolidated'
cndercasenxmnber08-61570,rmrrentlypendingictbisCotvt

tfhet'
BamkrnptcyCase,
s'/
l.
24. '
TNsproceedingisacoreprocaeding'
witbinthemeami
ngof28U.
S.
C.j157($,T
E
'
a
.pn
rticular,t
hisisacozeproceedhgpuzvnantto28U.S.
C.j157(b)(2)(A),@)&(0).
Venuoisproperinf>iqCourtyurs-aantto28U.S.C.j1409.

(4653h0:
A00154454.
50C/1)

(87 of 364)
08/12/2013,
ID:
DktEntry:
O9-OOCase:
O18-RB12-35986,
K Doc#:1
4O Filed:03
/228739867,
/10 Enter
ed:03/22/52-1,
1013Page
:43:1587Pof
ag228
e7of27

GEN'RQAT,ALLBGATIONS
A. TheFormiationoftll:YellowstoneLLCS.
26. TheBAsethsconceivedanddevelopedtizYellowsrtoneClub.
'fheYellowstoneClubisa13,500acreexclusivemembersbipresotcomprising,

amongotb.e.
rflu'mgs,a2,200acrepzivatesld'
resoltac'hnrnpionalu'
pgolfcourse,secondhcmes,
so1:11otsawaiegdevelopm=t,ungoldplatteda'
adunplattedinventoryl=.d,azdt'
llel25,O00
squarefootWacrenMfllerLodge.
28. Atoneti
me,theYellowstoneClubwasnotmucmore111=.madevelopedlaadi'
n
anattraofvepartoftieworliJ.
c1999three-timeTourdeFrmcewioner&egLeMondaswell

asoiers,inciudi
ngMichaelSnowandot
eroft
:ePlainospcomrnltedioinvest1751150% of
dozarsicteYellowotoneClubaudtobecomeYellowstoneClubmembs.Subsequently,
severaloierinvestorscommitteftobecomeYellowstoneClubmembsrs.
Iuexohmg:fort%eirinveementofm=-11:
.0nsofdollrs,eaohoft:ePlainiiffq
becamePioneermembrsandlaterpaidaddidonal= ountstoreoeivea1.0204%equityhterest
iatheYellowstoneLLCSandbecomeaClassBmemberoft>.
ecompacies.

30. 0 .Blixset'k onbea!foftb.

eYellowstoneLLCS,enteredintoao.
dsigned
SubscripdonAreementswith eachB Mezaberwhiok spee cally deson-besaadlimitsthe
businessoftlleYellowstoneLLCStotb.
eownersil
ipandopaonofapzivatemembers/pclub
int'
ileStateofMont=a.NoibsngintheSubsoriptionApeementsautkolizedtheBlixsetsto
t'
ausfo= teYezowstoneLLCSintoabnnktofnanoet'i
le:
izownpersonalinterestsorhtoa
worldwldetime-skareventure- wbichisexactlyBrhattkeBlixsethsdidbep'mningia2005aad

continuingaat
51justzeoent
lywhenthei
racdvifesforcedt
heYellowstoneLLCStoseek
Bsnkvnptcypzotecuon.
(4653*0201544.
54.
D9C/lj

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31. BachoftheYeilowsvtoneLLC;isgoveznedbyacOperatingAreement.Alttopgh
Aeole6oftheOperatim.
gAreententqfortheYezowstoneLLCSgaveteMembers'zigktsto
iuformaNoaregardingtheLLCS,despiterepeatedrequests,B andfeBlixsethsnevermade
aveabletotheB MemberstheiafonnauonneededtomzocientlyanalyzetheYezowstone
LLCS'e ances.
32. Section10.2oftksYellowstoneLLC':OpelatingApe= entsprovidethatBeI
maybsliableforviolatiozzsoftieMontnaT,
imitedLiabilltyCompao.
yAot.Totlteextmt1at
B@Iviolatedan.
ysec:onoftheMontanaLlmstedLiabiiityCompaayAct,ithasfhcwfore
breacec
ltheOperatingAreements.
33, Parapaph12.2ofteYellowstoneLLC'SOperatingAgreementsprovide:
Attomep fees.Ifsuit,gction,orotkerTroceedingofan.
ynature

whatsoAer(inoiudinganyprooeeegundertb.
eU.
S.Banl
tnnptoy
Code)iainsdtatedi
nconnectionwi
.
t.
kanyconkovezsyarisiugout
ofthisAgreement,ortohterpretorenforceanyriptshereunder,
tkeprevailingpartysv lbeendtledtorecov itsattorneyfees,

paralegals,accomtants,andofherexpezts'fess,aad21otherfees,
cosi,aadexwnsesaduallyinrmrredaudreasonablynecessaryin.
conneciontherewith,asdetermlrebythearbitratororcourtat
fnn'n:oronanyappealorreviewsinadditiontoat1otbar= ounts
proddedbylaw.
rtoPurchasePlahltlWs'IuterestsixtheYello-wstoneLLCSaxd
B. BGTs
- 200
-5.OFe
Plsuntlffs'AttemptstoAccessHformationAbouttheYellowstoneLLCS'Fixaxces.

34. OnMay25,2005,BGI,throughMr.Blixsex wzotetheYellowsvtoneLLCS'

ClassBunitkoldsandofferedtcpurckasetkeiriaterestsio.theYellowstoneLLCS.
35. 'lYeofferefectively gavefheB Memberstwoweelcsto accepttkeoffer.
Accore gtoBCIIandMr.Blixseth,tb.
edecisiontoosertopurcbasetbaB Members'hterest

wascharacterizedasa'
f
spuroftt
lemoment'decisiontoTkrjrardown100% ofhis(Bli
xsetl
psj
dream,''McBlixsei iru
formedtizB Membersthateintendedtoobtain '1afrancing''to
(46531100154454.
D0C/1)

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(89 of 364)

O9-OO018-RBK Doc#:14O Filed:03/22/10 Entered:03/22/1013:43:15 Page9of27

purcxasetkeB Members'interes aad1athewouldITtaketbisSu=cingononlyif1can

reacqdrealloftlleoutstandingB shares.':W .Blixsethdic
lnotmenfontkeamountoftb.
e
Enauoingnoriobaclclatheictende;touse.

36. 1*.Blixsetlpsoferinoludedacaskand.propertycomponeatwbichaccore gto

'
him,waswoA $3.25'
mglllontoeaohBMember.BG'
Iaud* .BlixsetkcharaoteriMedBGl's
May2005cferasaitdecentandfairoser''andactemendouspsen''
ToevaluateBGrsofferptb.
eBMemberssubsequentlynmmtccesqfnllysoughtto
obtain9om BG1andtxeBlixsetsftnanoialiufozmationabouttileYellowatoneLLCS.B(Eand

theBiixsethsdtlzb'riroreGstonewiledorrefasedrepeatedrequestsforft
oMcialillfrrrnnnaton.
38. BventuKy,i'
aNovember2005,M'
r.BlixseirevokedBtx'soffer.
39. '
l'
heBMembersdidntle= =ElmuohlaterwhyMr.Blixsethchangedcom'
se
andrevoke;Btr'sofer,
-s
tribqtioxs
C. TheBlixseths-xncumbertheYellowstoneLLCSoProvickTbamselve,Di
.
E
x
e
e
g
s
o
f
$
3
0
0
Ml
'
l
l
l
o
n
t
:
t
h
e
E
x
c
l
u
s
i
o
n
o
f
t
h
e
B
Me
mb
e
r
s
.
H40. WellaoarthefactteBMemberslem edfhatBGIandtheBlixset'
hscausedthe
YellowsmtoneLLCSacdBSRtobonow $375Tnillionpuzsua'
attoaRcreditAgre=enf'*t.
b.
GeditSuissedatedSeptember3O,2005.
41. Mr.BlixsethsimedtlzeCreditAp-eementonbebalfoftheYellowstoneLLCSand
BSRandcausedtlzeYezowstoneLLCSandBSRtopledgenearlyatlofthoiraqsetsascollatal

fortb.
e$375mnillionloan.
42, TheCzedtAmeemeatexplicitlyprovidedthat$351mnilllonofthe$375miltion

loa'
a(93.6%oftit
eproceeds)couldbeusedfozpuposesuczelatedtotheYellowstoneLLCS.h
pngflmzla'
r,Secion2.6ofeCzeditApeemeatstatedtit
at$209=:
'111
'onoftheloanproceods
werefortffordisHbutlo:
nsorloans.''Fhrther,lu.coo denoalpmsentatioas=adebytheBlixseths
(46530000154T54.
10C/1)

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immediatelypreceegthecloshg.ontteloap1eystatedGata.
largeyooonoftelo= wonld
beusedfortb:
e4f
.
RefurzlofCapital''- tkatis,asimpledistn-bufonofftmsto'theownersoftke
YollowstonoLLCS.Severaldocnmentsrelaegtot:elo= s'
tatediattb.
eRrefnmnofcapital''was
icteadedtoyrovideadisGbut-iontoownerg,.p'
factpczlandshareholders.
43. Trfeadofmnlri'ng any distribudonstotheB M=bers,nerly a'
Lltlleloa:l
proceedsweredistributedtoBeIortheBlixsetlzspersonatlyinviolationofAl+iole7oftb.
e
OpgzafngAp-eements.
D. The$309Mimon:+4,a10:from-'G ctcBGI

'Jhe&st$209rnillionoftiteloalt/atwasmadetoYMCwasthe11purportedly
'rjoaaed''toB(EpursngnttoamromissozynctebelringfhedateofSeptembs.
r30,2005.Mr.
Blixsei wasonbotksidesoftlziskaasaclion,hesiredtb.
eprominaorynote- wblcwas
simpiya,demacdnote.BeIdidnotpledgeanycollateral,connmitanyfatureenrningsorprovide
anyguaranteesforfe$209=1111
'on:r
10=.'''
I'
b.eNlixsafb:neverintezde;fort'
ileloan'
toB@1to
becollectableorcollected.ltwasbaobdatedaudmadetofsgaisethefxctthattheBlixsebq
wereinfactdisttlutingaclividen;toGemselveg.

45. Oniaformationacdbeliefkt'
llevastmajorityofthis$209ml
'll1
'on'Oka''toB11
didnotfmd'ita
qwaytoanyBGIacoountHtead,oninfo=ationacd'
beliettheBlirqetllscaused
the$209milh'ontobes=tto20iiWerentdeqfinsfiortsasfollows:
a. $25,000,000certificateofdmositatPirstBnolri'
aBel'sname.
b. $11,939,495payoftoFizstBsnkfortheBzxseis'prirnaryresidenceat
Porcupin.
eAeekinRarzckoMirage,Califoznia.
$17,000,000corftscat:ofdeposltat>n1= DesertNauonalBsmt-r
inthe
Blixseo 'mnrne.
d- $142016,227.87dmositintoamoney-marketaccouctatPalm Desezt
NatonalBamlcillMr.Blixsetk,sname.

(465.
20000,
:
154454.
D0C/1)

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$4,133,623-50payos toP91= DeaertNationalBnm'

k-fortefollowin.
g
debt:
'

$3,169,118.75forohargeszdatedtoresez'tRmch''tb.
eBlixqeis'

psonalhousingdevolopmentnea'
rPsl= Sprizga,Califoraia.

(
2) $79,629.54payos oftEdra'
sCondo,'acondoownedbyMq.
Blixsethin.Pn1=Desc Cslifoznia.
(3) $402,546.02payoffoftb.
eBWsef
hs'personalli'
aeofcredit.
(4) $482,329.19payoffofMs.Blixqetll'spersonalli'n.
eofct-edlt.
$15,000,000cerf
ilcateofdepositatJacksonStateBnn'i
ci:
aWjr.Blixsetit's
Lc e.

$3,068,749.99payofftoA'
mezicanBnnkforpezsonaluses.
$975,902.57payofftoAmericaaBsmlcforpersonaluses.
$1,
515,250payostoAmericmBnmkforpezsonaluses.
$896,423.28payostoAmericanBsmkforpersonaluses.
$977,894.92payoftoAmerioanBsnk-forpersonaluses.
$:00,000,000cectilcateofdepositatU.S.BnnlcitzteBlixseo 'name.
m. $5,000,000cerfiGoateofdepositatPax cWestemBsr'
ici:itlleBlixqetiuq'
ngme.
'

$2,971,443.02payofofapersonalnotetoPadfcWes'tem Bnnk.
e
$160,765.83payofftoUnionBsm'i
cforarentalhomeownedbyBlixnetk.
$2,007,930.55payoftoComnnerdalBnmlcforpersoaaluses.
$1,402,547payofftoCXCCforanaiplaneowaesbyaBlixsetk-owned
companyinwhiohneilerYMCaorYDhavea:lhterest-

$2,
484,
774payofto(313CCforanaizplaneownedbyaBlixset
h-owne;

companyinwhiokneierYellowstoneMomtainClu'bnozYezowstone
Developmenthavea!ziuterest.
$272,590payos toWorldSavicgsfozarentalhomeownebythe
(4653*0h00154454&0c/1)

11

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Blixsetlzs.
46. M icle7oftheOporatiugAgecmentsgenerGymovides,withcerte itrelevant
excpfons,1atalldistibutlozhs/a:Eocaom toMembersmustbeallooatedamongtheMembers
prorata:
i
nproportiontoaMember'spemenfageownersllipint:eresw cdveYellowstoneLLC.
47. B(E an:ltheBlixsetlzsWolate;tb.
eprovisionsofArlscle7oftizeOperaeg
'

ApeomentsbyprovidingBGI,a'
adBC1alone,with.
the$209=5
'117
*0n Zcrei
frrnofcapital''
distrt
-bufon.'T'%igdisf
zibuiionoaccore gtoAriiole7oftheOperaegAreements,wasrequired
tobeallocatedamongtb.
eYellowstoneLLCS'Memberspro7'atlinpropooontotkeMembers'
pceatageownezsy:
infeYezowstoneLLCS.
anProceedstonlrchzsePrope> All
Mlm'onoffbeL
-o
E. Tke-BlixsetlsUsd$10#'
ArouudGeWorld.

48. OnOctob1,2005,tizdayaferthe$375=i114
'onlo= wasfundedbyCredt
Suisse,Mr.Blixsei executeda'Tive-partyAgreemenf'onbohR16ofYMC,Y.D,BSK '
YG'
W
*
azdBe11atrequire;tlzeYellowsioneLLCSazdBSRtoinvestupto.
$142rnpl:l1oni:loneor
moreresoxlocationsideneedbyYc'
W.
49. J.
n connecion *t
.
11t'
iisFive-partyApaementacn iuformnfon andbeliefl
approximately$133'
millionoftelomprooeedswezedisbursedtoYDasfollows:
&1Omillionwasplacedi'
aasJx-monthcartiloateofdeposi.
tatU.S.Bsnk'
inYo'sname;

b. $30=1
'1h'onwasplacedinasix-=ontkcertifoateofdmositatAmnerioan
Bnnkinr 'sname;and
c. $3,110,262.53remainedinD 'soheoldngaccouatalthougkatleast
$225,000oftlzosefaudswasusedformarketi
ngYCSV.
50. OninfozmatlonandbelietahertlzsCDsabovematare;t:eBlixsetbused$:08
millionoftite$133'milliontoyurckasethreeresoztsandanislandlocatedoutsidet'
i.
eUaited
(465,
300h00154454.17t:)6)/1)

12

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States:

T28milionwasusetopurchaseGateaudeFaroba'
dlielocatedI
i
n

France;

b. $4Oml
'll:
'onwasusedtopurckasearesodlow.
nasTamarimdolocatedin
Moxico;

$28rnilllonwasusedtopurckaseapivateisl=dinTtulcs&Caicos;a'
ad
d. $12millionwasusedasdownpaymentforpropez-tyatStMdrews
locatedi:lScotland.
5:. '
TheTamatindoanclT7lr1cq& Caicospropeoesareownedeitheroutzigktby* .
BHsetpersonatlyortkoughentldesheownsaadcontoh.
52. 'JheFarchevilleandSLAndrewsprope esarepurportedly ourrentlyowned
indirectlybyYMC,YD orBSR.However,oniufo=adonazd be:ef;GeBlixsefzshave
diM butedtothemAelvcsasigaifoantpoMonofequityorvaluetbatotherwisewo'uldbeiteidin
ieseyropeMes.

Tb.eBllsels'useof.$108ml
'lll
'cnoft'
Neloatpoceedstopurchaserealestate
arolmdtheworldfoztheizownpersonalbemeEtwasaaimprop diqtrt
-budonGatviolate;fhe

ProvisionsofArb'cle7oft
xeOpraegAxeementst%iSr
lie-butiowaccoreg.
toAei
cle7oj
fheO.peratingAgreemmts,wasrequiredtobea'looatedamongtheYezowstoneLLCS'Membors
pro7=fcinproporGontofheMembs'pccentageownersilipinteYezowston.
eLLCS.

54- Th.
elocationanddisposilionofteremairn
mg$25ml
lll
-on(i.e.$133'
mi
llionrninus
$108million=$25=illioalistmcert
ain,Totheexr
tenttkeBl
ixsetb.
susedthesefcndsi'
ntb.
esame
orsinnilarmnnnerthattkeyusedtb.
e$102mn
3ll
'on,tbisis= atlclilionalimproperdisf
zibuionat
violatedtkeprovidoasofAMcle7oftkeOpgcatingAmeementsbecauseitwasnotGocated
amongtheYezowstoneLLCS'MembersprorataiapropoMontotkeMembers'perceatage
owoarshipintheYellowstoaeLLCS.
(465310909154454.
D0c/1)

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Apartfrom theImproper.
bistribudorsRelatiao
ztotheCreclitSGsseLoax.BGIand.
GeBlixsethsInmroperlvRecefvedaxAdditbnal%64.5M$111
'om.:
in Dlstributioms
from tkeYellowstnneLLCS.
.
Jnapronu'nsorynotebes4i'
ngtkedateofSeptember30,2005,M'
r.Bzxseth
memozimll
'meda'
aZlegedd'lcaa'''onlYDtoB(Ei.
ntheamoun.
tofover$55=1
7110:
a.'
I'
b.
ete=sof

tilisGtprornissorynote''areidenfcaltotefa'
st$209=!
'111
'onKjprominsozynote,''
56. Onicfozmationaadbeliefithis$55'millionrepresentshuadredsofwitieawals
madebyieBlirnetllslomYDtoB(KbetweenJlme1,2003,andDecember31,2005,mostlyia
increm=tsof$50,000,$100,000,$200,000,aud$250,000.Mao.
yoflesewiidrawalswere
oziginallyclase edasRdisfributions''toBOL

57. lnaddifontcthe$55=1
'111
'onIt
promissozynotey''theBzxsetitswititclrew$7.8
IrtlqsonfromYMC,memorinlgzedinaaotkerpromissorynotebesringadateofSeptember30,
2005.

kladdluontot:e$55=4
*
11
:
'0a'
t
promissorynote''ardtl
ze$7.8=l
'lll
'
onTromissory
note,''theBzxselscausedYMCtolo= titoircomp=y,YCW,over$908,000,wbichwas
memozislizeinanotb.
promissnzyaotebenringadateofSeptember30,2005.

59. The$64.5millionofloanstoBGIzzkxozYCWweremaiefortiteBlixseo'own
personalbeneftazldwereimproperdistribuioztsthat'
viplate;theprovisionsofArtide7ofthe
OperaticgAveemeats.Theseclistribuuons,accordingtoA'
rtiole7oftieOperaegAreements,
werorequiredtobeallooatedamongt'
ioYellowstoneLLCS'Membersprorafli.
apoportiontc
t:eMembs'pementageownersllipiutheYelbwstoneLLCS,
InsvumyBOIandteBlixset:skavereceivedrnsllionsofclollazsindisG'
butions

fromYeYellowstoneLLCSbuttlteot
herequityownersoftb.
eYetlowstoaeLLCSkavereceived
no*simg,
(46530000154454.
170C/1)

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013:4
3:1595Paofge228
15of27

BersaadtlaeBlivqeths'wzocgfulactlonsiiimatelylefttb.
oYellowstoneLLCS

i'
msolventandwit
ioutsuOoientfnmdstopaytkei
rdebts
'astcycamedue,Asaresult,on
November1h,2008,thoYezowstoneLLCSwereforcedtoseekBnmlcnlptcyprotection.Because
ofBll'sandtlleBlixsetks'wrongfulaouons,iuadditbntonotzeceie gthodistribuuo:lsio
whichtheywererigklfnllymtitled,tb.
eequityiuterestsoftkeBMembersareatriskofbeing
completelyelirninatedaspartofareorganizationplanoffheYezowstoneLLCS.
BGIaudMs.BWsethtand.oxM prma
-ti
-on-an-dBelief.Mr.-BlixsethhConthmeto
beDeprived ofAaw
e
mb
e
r
s
wi
l
1
t
l
z
e
B
M
Bncambe-rTheirAsse-t-sSuch Gat-- - MeaTdn,
oftlReeovervfrom Them.
62. BecauseofoterpriorlitigaonrelaGgtoClassB memberiuterestsintike
YezowstoneLLCS,B(Eandt:eBlixsot:sareawreofthesigaifcantclaimsiatBMembers

haveagab
'mnttb.
c.

62. Wi1thi
.
sHowledge,BIEacdMs.BHset
b.tan.
c
1,oamf
'ormationandbel
iefjMz.
Biixsef
h)havecont
inuedtoenoumbertkeiraasetstopaypsonalexe
ponsesoftkeBlixseths.
PorcupineCreek isa230.5 acreTesidendalcomponndi.
n RrchoMirage,
Caiifoznh.ItisMs.Bzxsetk'sprimarjrresidence,butitissolelyownedbyBGl.

65. Asdeson-beclabovea$11.9'
milh'onoftb.
eimprop(1+t:1
3nd011st14a1weremadeto
BG1aa:ltlleBlixsethswereuaedtopayosdebtontheBljxsetlls'homoatPoroupheCreek
66. SinceAugust2002,Ms.BlixseiXasoausedBG1toenopnb PormtpineC'reek

atdotiterB(Eassefs5571f.
11iibnstosecuro$49,425,545.46of10= .$15,775,545.46oftkeseliens
havebeeareoordedsincefheYellowstoaeLLCBftledbnntnnlptcy.
67. TitePlainti
ffshavreceatlyleamedtkat* .Blixseihastausfezredviztaallyal.
1
ofhisassetshtoaaaasetyroteodonnfrllctureknownastheDesertRaachLLLPstraoture.

68. Plaiutcsa'
:eendtled to an orderoffhigCou:tenjoirl
gM.
r.Blixqetk.
(4653/:*q1544.
54.
D0C/1).

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temporarily,yrelirnirnrgyazdpermanenfy,om '
snrtherspendm
'g,t'
acsfterrsng,concealirgj.
dissipae'g,elmmbering,assigaiag)nWOThypothecaeghisaasets.
Mr.BlhsetkCommltsAct.
sofSelf-bealingiuComzectionwitiztb.eSaleofLotsbv
BSR.

69, OnApril1,2002,BigSk'yRidge,LLC(BSR)purchasedpropeztycondguousto
t'
NeYezowstoaeClub.Thepropeo waspurchasedfrom SilverRidge,Tnc.intheamouatof
$3,500,000.Attbistime'
llleownerofBSRwasMr.BlixnetiuTheconsicferadonwaaill'theform
ofaNote.

70. OnMay7,200%* .Blixnethsolda50%htesthBSRtoVoyager&011.

p,L.P.
anendtyownedbyJamesJ.Dolanfor$2,500,000.T:eckeolcsfromVoyagera'
remadepayable
toBGknotBlixse,
71. M1'
,Blixseitlleasoldhisremninlmg50%interestEBSRtoYD.Tbsoonn=ed
onSeptember17,2003.Theyuzckasepricewas$17,000,000.Thisisamere16.to17months
after0 .Blixsetsoldtxeother50% ofBSRtoVoyagerfor$2,500,000.'Ihepurchaseprice

consistedof(1)$5,380,
000i
ncashi(2)5lots:
L
nt
heYexowstoneMountai'
aClu'
bs'
ubdivision
valuedat$7,600,
0009(S)2proMssozynotesinthefaceamountof$920,000;and(
4)a1997
BrowardRaisedPilotHouseMotorYachtvaluedat$3,100,000.Mr.Biixsefhsignedtb.e
areement:
inhisi'
advidualcapacityassellerandasPresidentofBll
'xnef.
b.C'rolp,Tncoas
MaaagerofYellowstoneDevelopment,LLC.
72. l
fn Septembor 2005,0 .BHseth ptlrohasedVoyag's 50% interes'tfoz
$3,000,000.AtMspoint,BSRwa.
sowned50%byBlixsethand50%byYD.Itwas(
blringthis
dmeperiod,2005-2098,thatBSRownedrealpropeztyinMadisonCounty,Montaaa.n en
BSR soldc-aimlots,BSR wouldpayGesalesproceedsasclividendstoM'r.Blixnei and
YezowstoneDevdopment
(4653/:/
0()154454.170C:/1)

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73. WesedisfzibudonsincludfhefollowingdisMbufons,allofwhic:arerefezredto
ast:eCS
BSRDistributions.
''
L $1.65=A
'7ll
'onpaidtoMr.BiixsethonozaboutDecember13,2007,in
co=ecfonwltb.tb.
esaleofLots450,457and499;

$1.65rnlllionpaidtoMcBlixsethonorabotztD.ecembe,
r2O,2007,i.
c

connectionMriththesaleofLots459,463and465,
.and
$500,000paidto Mr.Blixset on oraboutFebraarjr14,2008,in
connecuonw111atb.
esaleofLot436.
74. 1r.ade ontofhefozagoingM.
r,Blixsethrecoived$26,541,818.60i:
!zdistribudons
omBSRbyvirtaeofhisowners/p.
-wi
l1theSaleofSuorise
Mecti
.-t
1. Mr.BlixsethCommltsActsofSelfDepllmz-D
- -co
-o
-v
Ricw-e.
75. OnFebruaty1,2005,* ,BAsethpurchasedYD's82% iuterest:
int:eS'lnriss

Ridg:Condomlni= DevolopmentatYellowstoneClub,HegaveYDa$5millionpromissory
noteineonnecuonw1t11thispumhaqe.
76. Subsequently,onJ=e28,2006,theSlnm='KeRidgeCondomim'.
am Developm=t

wassoldtoCD RumrisePddgeOwner,LLC,owne:lbySamBymefor$60Tnillbon-A11toldmM'
r.
Blixsetllreceive$55,418,759iadisM-bufonasaresultoffh.
eSnndselkidgetransaoonMr.BlixsethCommz
-tsActsofSelfDeRh-no
.inComteetionM4G theOve-rbokbeal.
77. 0 .Blixsel'spatt= ofactiyityconeuedin2008when MI.Blixset
h and

WaynePri
nn(4Tri
=')conmlmmatedfheOverlooktansaction.Iat
eOvlook-t'
ansaction,Mc
Bllxnet
hfozmedOverlookPnrfnrs,LLC(I
OP''
)witkPr1
= Pr1
'
= loanedOP$15,000,000.
BAsetht11% usedtllemoneytobuySvelots1omYDfor$3,000,000each.nissaleczosedon
orarotmdMay7,2002.Blixsetitalsooause;V.Dtoi'
ad ' OPbecausealispendensbad
beenfllerlagainsttllelotsbytheLeMondPlaino s. '
IhelotsWerebeiagmarketedfor
(:165m00201544M.DX/1)

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$6,000,000eachaudla;recentlybeenapmaisedbyCtzsllman&Wakeeldfor$5,000,000eacbv
makeimgtb.evalueofthistansactionforOFbetqreen$10,000,000=d$25,000,000.Blixaetb.
ccnisrnnedtilisvaluebyirnmediatelycontactingonbehalfofOPtocausetes= elotstobe
soldfornoless6:.=$5,500,000each.Ihenetresultwastoliz.
eBlixsetk'spooketbyover$1O
3771
-:1:
-on.

h.-theParchaseofLot
- t
Mr.BlixsetkCommitsActsof-Sel-fbealiucin-connectlon-wi

Y.Dbought1ot90for$3,950,000i'
aDeccmber2006.'
IhenonFebraaz'
y12,2008,
lro transferredLot90toMr.Blixsett:i
nacasbless'
Hmmqacion.Speo cally,Mr.Blixseth,
thro'
aghanentjrheownsatdcontols,Casa2O,LLC,purchased1ot90fora$2ml
'll:
'onnoteand

for$500,000iz:lzeviouslypaidconsideraion.
'l'Dneverreceivedanypamentsinconnection
wittbisaote.
Mr.Bzxsetksiaedtba''RealEstatPurchaseandSaleAgreemeat''botkon
behatfofhimnselfastBuyer''azd onbehalfofYezowstoneDevelopmentasTGSeller.
'' Mr.
Bzxsetht11% hadCasazo,LLCtausferLot90toBalliaDoradaS.A.deC.V.,aMefc= entity
hecontols.
L. lVfr.BlixsetlpsotkerActsofSelfbenllnz.
80. Mr.Blixsei hascommittedotheract.sofsetfdeatingbesidesGosedesczibed

above,a11totheinju'
:yofthePlaiqflfcq.Foriztstance,b.
ecausedYDtoenterintoalease
areemeatwithyropertyheownedinCaliforniacalledPoroupineCreek,erhl
'sleaseameement
wasfortheyears2003-2007ardoalledforleasepam entsof$1,500,000peryeaz.'Ihus,Mn
Blirqethcause;Y.
Dtopay$7,500,000inleasepaymentsforwhichneilerYDnorthePlainos
receivedao.
ybeaet.Fueermore,* .BlixseiputhischildrenontiteYellowstonepayzollfor
exozbita'
atsalades.
(4653$0000154454.
D0C/1).

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81. ..Likewise,M'
r.BlixsethcausedYD tosellLot:47toacompanyownedand/or
.

ccntolledbyhisson,BeauBlfxsethfora>cebeloqrfairmarkatvalue,'TNssaleocc=edon

July1,2006acdtlzesalespricewas:1,500,000.Tb.efairmarketvalueofLot147wasfarirt
excessofthissalespzice.
82. JnasirnilarfasbiowMr.Biixset causedWAIlzUnit303tobesoldtohisfziend,
WamePdm,forlesst,
1:= fai.
rmarketvalue.'
fefemadcetvalueofthispzopertywasinexcess
of:1.2million.Pri'
m,howevaqonlypaid$196,120forUnit303.176177alsoKegedlyforgave
anobligationof$750,000titatD purpohedlyowedhilm.
0 ,Blixsethalsocomrnitedadsofselfdenlingineonnec:onw1111thesaleof
WML,Urit304. PriortoAugast2008,thiqUmitwasownedby1rD audhadavalueof

approxl
'mately$3.2=
'lll
'on.YDowedA'rnericanBaakadebtof$2,511,000thatwassscured'by
Unit304.* .BlixsethcausedYD toconveyUnit304toBOI,anentitytlmtheownedaad
controzed. Be1,inrettm assamedthedebttoArnerioanBnnv. B(E timsA
'mmediately
beaete;9omtkisdealinac=ountofafleast$600,000,t111 amouatbeingteequityiatite
propec.
84. Fially,M.
z.Blixsel comnnu'ttedactsofselfdealinginconnecon 551.
1.
11the
LeMondsettlement.M'
r.Blixsoth,whohadbeenaccusedofiudividuazybreacH ghisEduciarjr
dutles,allocatedapozdonoftkesedementpaidtotheLeMondPle tiff'
s:
insuchawayasto

causeYezowstoaetoinouralossofatleas't$25mnllion.

(fortionsInterferexeeWithContact)
Plain'
tifsincozyoratebyrefereacea1lthepriorallegadonsoftbisComple t86. B(E hada'
adeontinuestohavevalidandenfozceablecontactui o'bligadons

(465300/0154454.
D0C/1)

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owiugtcPlaAdffspurmlnrttotlleOpsratingApeements.
87, Tim Blixsei iM,andstillhas,HowledgeofBol'scontactalobligatbns

owi'
cgtoPlnirliif'fq
88. TH Blirnethintenfonzly Ztezfored and continuesto icterferewitllBccs
contactaalobDgationstotiledefrimentofPlaiafsf'Eq.

89. TM Blixsel wasnotandia

snotjustifadtointerferewi1 Berscontractlls:
obligations.
90. AsadirctandprorimateconsequenceofTM Blirnei'saconsandoHssions,
.
Plaino'fqareentledtodamagesinanamounttobedeterminedattt
ial.
COTJNI'2

(AidiugindAbeeingl
91. Plaino sincorporatebyreferencealltepziorallegationsoftlzisComplaint.
:2, B(E owedeackoftlle(Nain'
df'
sScluciazydues. M setfqrtkhereic,BG'!
breackeditsfduciarydudestoPlainflfR.
93, TM BlirnethHowhglypH cipatedillBcls'sbreaclesoffduciarjrduty.
94. TM BlixsethencowagedRnrlnYrmatvelyassisteBGl's'breackesoffzuciary
duty.

95. TM BlixsetkhelpeBeltoconcealitabreackesofEcludazyd'
aty.
TimblixsetaidedandabettedBGl'sbreaohesofSduciazydut'
ydescribedJlereic97. Asadirectacdprorimateconsequenc:ofTimBlixsetk'sactionsandomissions,
Plainlif;qaroenftledtcdamages:
inauamouuttobedetermsmedattziat
COUNT3

CfimBlixsetllisLiablfortheAcdonsofBc
(465350020154454.
10C/IJ

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98. Plat
intiff,
sincozporatebyrefereacealltepriorVegationsoftbisComplaint,
99. Dllrlngallrelev=tirnes,BC'
lwasthealteregoofTH Blixsei,acdTH
BlixsetllwasthealtegoofBeI.TM BlixnethandBe1areonoatdtb.es= e.
100. TisCoudshouldpircethecozporateveilofBGIandoldTH Blixsetkliable
forB'sconductanddebts.
.

101. Plaizdfisentitledtojudgmez.
tagasmqtTimBlixsetkonallamoau.
tsandcoan.
ts
owedbyBol.
C0UNT4

mreachOfFidudarjrDutjrl
102. Plainosincoporatebyreferencea'
I
ltepriorGegatlonsofthisComplaint.

102. Asthemajoritjrowns'
roftlwYeDowstoneLLCSt'
hroughlzisownezslzi.
pofBeI
andasanooceroft:eYellowstoneLLCGTM BliynetowedfduciarydudestoPlaintissto
protectKaino s'HghtsandhtestsintheYezowstoneLbcs,inclue gPiaizdfs'zightsto
theirproratashareofdistrz
-butionsmadebytb.
eYellowstoneLLCS.
104. Jnpe cular,TM BliraethbreachedtllosdckesinconnecfonWt.
IItheCredit
SzzisseLoacbypatdoipaegintkelo= representinghioowninteres/only,byintentionslly
fsllingtodisclosetkeCreditSuisseLoanandnxm'ngimproperdisMbudonsmadetoBIEforhis
ownpersonalinterest,witkacompletedigregal.
clforPlaintifcq'zights.
:05. T:
Lm Blixsel alsobreachedbisSduoia!yclutlsbycommitfingtlleotheractsof
selfdenlingdescrlbe:lherein.
106. .
&saOeotandprorimateconsequ=ceofTH Blixse'sbreaohesofSdaciary

duty,TlaizdffsrespectfuliyrequestthatthisCourtenterajudgmeattilatordersTH Blixsefhto
aan amounttobedetermbmedattriaaadozder
compensatoPlai.nlisqfortiteirdamageai'
4455320/01541.
54.
1701/1)

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eqaitablereliefasdesczibe;hereic.
COVNT5

(Corversion)
107. Flaintiffsincozpozatebyreferenceallt:epdorallegationsofihisComplsint.
TH BlixseiMproperlyconvezteddistrl
'bufom gomtileYellowstoneLLCSthat
belongedtotimBMembers.HealsocoavertedassetsofYellowstoaeDevelopmenttitroug,
klzis
vaziousactsofself-desb-ng.
:09. JnadditbnloTim BlixseirefurningtoPlaictiffsthetlzeftportionoftb.efbnds
improperlyconverted,Plaino szequestapoOonofanyfuturelostincomeandprofts'
Plaintlf'fh
suferedomTimBlixsetlpsconvsion.
COUNT6

(UnjastEnrichment)
110, Plainiilqincozporatebyreferenoealltkepriorallegatbnsoft'
hisComple t.
M aresultoftAeizabove-describedactbnsandomissions,TknBllxnetllasbeen

unjcstlyemiched,acdPlaintifshavebeenunjustlyiqjuredai.
ztanamountto%eprovenattrial.
112. Taadditionrasaresvaltoftlleabove-descdbe:
lactbnsandoMssions,TimBlixseth

wouldbeuajustlyenriclledattheexpenseofPlaintiGqazdtoPlainfifcq'defrinnentifTH
Blixsethwereallowedtocontkmetousetkeeconomicbenestsoftb.
edistribuons1atsould
havebcenmadetoPiaintiffk,azdtbaeconomicbenestsofhisactsofself-dealsmg.
113: Plaiatiffsrequest1atfheCo=4accordhglyimposeacons%ctive%stoverallof

TH Bliyneth'srealandpersonfpropeo tkathasbenefteorprostedom,orhasbe=
acqule:lormaintaluedwith,theaclawfuldistlibuuonsaadactsofself-denlimg.

(46530000154454.:
1
7047/1)

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COUNT7

(AccnunegaudCoxstmzctiveTrust)
114. (KainoshcomoratebyreferenceatliepriorallegafonsoftlnisComplaint.
115. Piainttffsareenftledtoadetailedaccountingv/ithregpectto any and.a11
ctistzibutionslatwereunlawfuzymade.

Plajnti
/sareenti
tledtoaconstracdvetrustwititrespecttoanyand a11
cliskibufonsandactsofself-dealingfhatwereunlawfdlymacle.Plaicfiffqareeatitlednotonlyto
what1eylostbymotreceie gtlleirpropoMonateshareofsuchdistrl
'butioztsbutallofthegains
rpceivedbyTimBlixsetllfromtkeunlawfaldinfribudonsa'
adaotsofself-deslimg,
Underieseoirc= stances,theCourthastheautholityaadequiVblepowerto
imposeaoonstruotivekustoverallTH Blixsetipsrealandpersonalpropeltytbathasbeneted
orproftedgom,orhasbeenacquiredfrmab
'mfailledwith,tb.
eualawfuldistribufons,andactsof
self-denlinginoluding,butnotlp
'=b
'ted.to,ForctzpineC'reekzChateaudeFrceville,Tamsrimdo,
tb.
eislao'.
dinTrrk'
q&CdcosaadthepropertyinSt.Andrews,Scotland.
COUNT8

g.
nju.
ueilveYqGtableReliefl
118. Plaintiff.
sincorporatebyrefereacea't
lthepriorallegadom ofthisComplaiat.

119. Plai
nosareendt
ledtotcmporaryandpm anentinjuncfvereliefa'
adot
her
apmopriateeqlzitablezeliefpuzsnlnnttoMontanastatatory andcornmonlaw.Jnpacticular,
Piaino saroenutletltoequitablsliensona11zoalpropertytkathasbeenacquireormaintaiaed
witll,theuzklawfuldistzibuions,andactsofself-denllngincluding,butnotll
'=:
'tedto,Porcupina
Creek,ChateaudeFarchevitle,Tamnvindo,titeisland5nT.ICS&CalcosaEdtkepropertyiaSt
Anndrews,Scotland.
(4653h.
0000154454.
:
f
2)
0C/1)

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COUNT9

(Conspiraey)
12,0. Plainfifsiucomoratebyreforencea1lthepriorallegationsoftlkisComple t.
121. Byteirabove-desoribedaction,
saudomiasions,Defendantshavslowinglyor
tacitlyconspiredtogethertodeprivePlaintiffsoftheirzightsundertheOperntingAgreementw
anclMonta'aastatutesao.
dcomrnonlaw.
122. AsadirectandpzoximateconsequenceofDefendants'actionsazd onnl
'nsions,
Flaintiffshaveiccuu'eddamagesina!lamounttobedetecmimedattzial.P:sintiffsazeenutledto

judn entagsinqtTM Blr

'xnetlzfort:eamountoflesedamages.
COUNTI
(nmithreDamages)
123. Plaino sincoporatebyreferznceatlthepriorallegatonsoftikisComple t.

1.
24. ParsuanttoMont.Codej27-1-22141),reasonablepunitivedamagesmaybe
awarde;whenthedefendanthasbeenfoundgailtyofacenn:aucloractaalmalice.H suautto
/

MontCodej27-1-2214
2),adefendrtisP'
I
iITofactaalmaliaeiftb.
odefendanthasHowledg:
offacf
.
sorictenionallydisregardsfactsthatcreatealz
ighmobabilityofi'
aj'
arytotheplaiu.
o
and:(a)deliberatelymoceedstoacti'
aconsoiousorintentlonalcl
isregardoftb.
eJ
ligtprobabili
ty
ofinjury'totheplaiuli
f'
f;or(b)delt
beratelyproceedstoactwiG i
nc
lifferenoetotlleEg,
I
A
probabltyofinjuzytotheplaiatift
l
125. hsallegedhereic,Mr.Blixsetisg2.
111ofaotnalmalicebeoausehekas,anclhad,

Howledgeoffaotsand/orintentionilydisregardedfacts1atcreatedaMF,
IIprobabilityofinjm.
y
toPlaintifamd:(a)deliberatelymooeededtoactazdconti
nuetoact:
i
nconsciou orintendonal
disregardoftheYF,
'
Npzobabilt ofi
njuzytoPlainti
rs;aad/or@)deHberatelyproceede;toaot
(4653*0001541.
54.
D0C/1)

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andconeuetoactwithindifersncetotlleidghprobabltyofinjul'ytoPlainiiffs.
126. M Oegedherein,bccause* .Blixsei,wit6111HowledgeofPiaictiffs'dghts

antlhtorestintkeYeliowstoneLLCS,actedindirectderogafonoftoserilts,azdt
brougitlzis
zmlawfulazdmaliciousactstookasset.
sandfhmdsbolongingtoPlaintiss,audhehasdeliberately
andwillfhllyactedaudconeuestoad witllconsdousorintentionaldeegardoftheitiglk

probabltyofiqjut
'
ytoPlainffsand/ordelberatel
yproceededtoactM4'
L
IIindserencetothe
lzigkpzobabilityoficjurytoPlainiiWq.
PRAYBRFORRXLVF

WM REFOM ,PlaintiffsprayGattbisCourt=terjudgalentuponitsComplaint
joi
r.
tl
yandsevcally,againgtDefendantsasfozows:
Anawa:dofaot'ualrlarnagesagsslutTH Blixsetinacamounttobedetermlne;
attri&19

2. Ajudr entreq:p:
AngTimBlixsetktopaytoPlaintifstiteirmoportionateshareof
thuclistrlbutionsthatDefendantswrongfuzydivertedom Plaiutes,plushterest,
andanyandallprotsorga:inhcreceive:lomteuseofPlaino s'clisu-buoas;

Ajudrentorderi
mgTi
mBlixsethtopaytoPlainiifkGeirpropoMonateBhareof
ieproftsTimBlixsetkreceivedfromhisactsofself-denpimg,plusHterest
Acaccountins constructivetnlntaadzecoupmentfrom TM Blixsetllonatlt:e
distu-bctbnsthatTiczBlixsethimproperlydivezted9om Plaintiffs,andona11the
prostsb.
emade9om bisself-dsaling,plusinterest,includingacons%otivet'
ust
overPorcupineCreek,ChateaudeFarokeville,Tamnrlmdo,t'Neislardr
inTurks&
CicosaadepropertyinSt.Andzews,Scotland;

Temporazyao.
dpermaaeatequitableaadiajunciverel
iefasdesmedappropriate
(4&53/000151454.170C/2)

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RonaldA.BenderIMT#100
Ma
eewJ.Cafe(MT/4448)
WOKDBNTFTANRP.C.
AttomeysatLaw
P.O.80x4747
MissoulwMoatma59806

(4.
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1)

26

(107 of 364)
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ID:
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(4653h0(
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CharlesW.Hingle(BarNo.1947)
RobertL.Stenl
p(BarNo.3533)
ShaneP.Coleman(BarNo.3417)
HOLLA'
ND&HARTLLP
401North31stStreet,Suite1500
P.O.Box639
Billings,Montana59103-0639

Tel
eghone:(406)252-2166

Facslmile:(406)252-1669
chinglerzz
hollandhart-com

l-stel-tlprzhollalltll
Aalt-coln
spcoleluan:khollandlaal-t.coln
ATTORNEYSFORMARCS.KIRSCHNER ASTRUSTEE

OFTHEYELLOWSTONECLUBLIQUIDVTFNGTRUST

UNITED STATESBANKRUPTCYCOURT
FORTHEDISTRICTOFMONTANA
lnre:

Ye
l
oneMotl
ntainClub,LLC,
etal
lo
.,rst
Debtors.
MARCS.KIRSCHNER,ASTRUSTEE
OFTHEYELLOWSTONECLUB

LIQUIDATINGTRUST

Chapter11
CaseNo.08-61570-11

AdversaryNo.

Plaintiff,
COMPLAINT
DESERTRANCHLLLP,aNevadalimited
liabilitylimitedpartnership;DESERTRANCH
MANAGEMENTLLC,aNevadalimited
liabilitycompany;TIMOTHYBLIXSETH,an
individual;BEAUBLFXSETH,anindividtlal;
THORNTONBYRON LLP,anldaholimited
liabilitypartnership;GEORGEMACK,an
individual;JOHN DOES1-100;andXYZ
CORPS.1-100'
,
Defendants.
1 The Debtors are the following entities:Yellowstone Mountain Club, LLC,Yellowstone
DevelopmentClub,LLC andBigSkyRidge,LLC,whichentitiesaresubstantivelyconsolidated,and

YellowstoneClubConstructionCo.,LLC,whichisjointlyadministeredwiththeotherDebtors.

(109 of 364)
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COMESNOW MarcS.Kirschner,asTrusteefortheYellowstoneClubLiquidatingTnzst

(theEt
Tnzst'l,byandtl
zroughcounsclofrecord,andhereinstateshiscausesofactionandclaims
forreliefagainstDesertRanch,LLLP,DesertRanchManagement,LLC,TimothyBlixseth,
BeauBlixseth,ThorntonByronLLP,GeorgeMack,JohnDoes1-100andXYZComs.1-100.
1.INTRODUCTION
ThisactionpertainstontlmeroustransfersofassetsbyTimothyBlixsethandhis
affiliatedentitiestoDesertRanchLLLPanditsaffiliatesandsubsidiaries. Thisisanactionto
setasidethosefraudulenttransfers.TimothyBlixsethmadethesetransfersinanefforttoavoid
hisobligationtohislawfulcreditors,includingtheTrust. Currently,theTrustandTimothy
BlixsethareinvolvedinlitigationinA.P09-00014(herei
nafter&K
AP145
'
),wherei
ntheTrustseeks
tosetasidecertainfraudulenttransfersmadebyTimothyBlixseth. TheTrustalsoseeksa

moneyjudgmentagainstTimothyBlixsethforhisbreachesofhisfiducialyduti
estotheDebtors.
ThetrialofA.
P 14isscheduledtocontinueonFebruary24,2010.Aftertrial,theTnlstexpects

torecei
vejudgmentforatleast$286.4million.lndeed,thejudgmentwillcomeasnosuprise
toTimothyBlixsetheither.Hefull
yanticipatedthislargejudgmentbecause,aswillbeshown,
heengagedinafraudulentschemetoattempttoremovehisassetsfromthereachofhiscreditors.
EachoftheDefendantsnamedandcertaintrustsidentifiedhereinparticipatedinthisschemeto
degaud.Forthemostpart,thefactsallegedinthisComplaintaretakenfrom thedepositionof
TimothyBlixsethtakenbytheTnlstonJanuary26,2010.
Il.PARTIES
PlaintiffMarcS.KirsclmerisTtatsteeoftheTrust.PursuanttotheConfirmed

PlanofReorganization(thett
confirmedP1an'
*)(caseno.08-61570,dkt.#947)andAssignments
ofClaims,theTnzstsucceedstoiallCatlsesofActionthattheDebtorsortheirEstatescould
(46530000152392.
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2,

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assertimmediatelypriortotheEffectiveDate,''exceptcertainclaimsreleasedbytheConfirmed
PlanofReorganization.ThecausesofactiontowhichtheTnlstsucceedsincltldethefraudulent
transferandrelatedclaimsstatedinthisComplaint.

DefendantDesertRanch,LLLP(tDesertRa1
&ch''
)isaNevadali
mi
tedliability
limitedpartnership.DesertRanchisat
'ransfereeoftheassetsforwhichavoidanceissoughtby
thisComplaint. DesertRanch maybe servedwithprocessby serving itsregisteredagent
ResidentAgentsofNevada,lnc.,711S.CarsonStreet,Suite4,CarsonCity,Nevada,89701.As
willbedescribedmorefullyherein,DesertRanchparticipatedinafraudulentschemetodefraud
theDebtors,whoareMontanaresidents.Furthennore,thefratldulentschemecausedharm that
DesertRanchknewwouldbesufferedinMontana.

4. DefendantDesertRanchManagement,LLC(toesertRanchManazemenf')isa
Nevadalimitedliabilitycompany.DesertRanchManagementisthegeneralpartnerofDesert
Ranchandassuchhasaninterestintheassetstransferred.DesertRanchManageluentmaybe
servedwithprocessbyservingitsregisteredagentResidentAgentsofNevada,lnc.,711S.
CarsonStreet,Suite4,CarsonCity,Nevada,89701.Aswillbedescribedmorefullyherein,
DesertRanchManagementpal-ticipatedinafraudulentschemetodefraudtheDebtors,whoare
Montana residents. Furthermore,the fraudulentscheme caused harm thatDesertRanch
Managementknew wouldbesufferedinMontana.

DefendantTimothyBlixseth(tt
Blixseth''
)isacitizenoftheUnitedStatesanda
residentoftheStateofWashington. Blixsetlzownsaminority interestin DesertRanch
ManagementandassuchhasaninterestintheassetstransferredtoDesertRanch.Hemaybe
servedwithprocessat1000SecondAvenue,30tllFloor,Seattle,WA 98104.Blixsethatone
timeownedYellowstoneMountainClubwhichislocatedinMontana.HehasfiledaProofof
Claim inthisCourtagainstDebtorYellowstoneMountainClub,LLC.Furthermore,aswillbe
(4653h0000152392.
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describedmorefullyherein,Blixsethpal-ticipatedinafraudulentschemetodefraudtheDebtors,
whoareMontanaresidents.Furthermore,thefraudtllentschemecausedhalnuthatBlixsethknew
wouldbesufferedinMontana.
DefendantBeauBlixseth,thesonofBlixseth,isacitizenoftheUnitedStatesand
aresidentoftheStateofWashington.BeauBlixsethownsaminorityinterestinDesertRanch
Managementandassuchhasaninterestintheassetstransfen'
edtoDesel'tRanch.Hehasfileda
ProofofClaim inthisCourtagainstDebtorYellowstoneMotlntainClub,LLC.Furthermore,as
willbedescribedmorefullyherein,BeauBlixsethparticipatedinafraudulentschemetodefraud
theDebtors,whoareMontanaresidents.Furthenuore,thefraudulentschemecausedharm that
BeauBlixsethknewwouldbesufferedinMontana.

DefendantGeorgeMack(ti
Mack')isaci
tizenoftheUnitedStatesandaresident
oftheStateofOregon. Mackastrusteeoftwotl-ustsownsaminorityinterestinDesertRanch
Managementandassuchhasaninterestintheassetstransfen'edtoDesel'tRanch.Hemaybe
senredwithprocessat111SW ColtlmbiaStreet,Suite700,Portland,OR 97201.Furthermore,
aswillbedescribedmorefullyherein,Mackparticipatedinafraudtllentschemetodefraudthe
Debtors,who areMontanaresidents. Furthermore,thefraudulentschemecausedharm that
Mackknew wouldbesufferedinMontana.Finally,Mackworkedextensively inMontana,
controlledactionsofemployeesofMackinMontanaandhadregularcontactwiththeStateof
Montana.

DefendantThorntonByronLLP(
lhoznztonByron')isanIdaholimitedliability
paM ershipandhasfiledaProofofClaim inthisCourtagainstDebtorYellowstoneMountain
Club,LLC.Furthenuore,aswillbedescribedmorefullyherein,ThorntonByronparticipatedin
afraudulentschemeto defraud theDebtors,whoareMontanaresidents. Furthermore,the
fraudulentschemecausedharm thatThorntonByronknew wouldbesufferedinMontana.
(46530000152392.170C/l)

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9. John Does1-100 and XYZ Corp.1-100 and Unidentified Trusts 1-100 are,
respectively trusts,unknown individuals,comorations,orotherbtlsinessentities,who are
transfereesorwhofacilitatedthetransfersoftheassetsdesclibedherein,andwhowillbenamed
inanamendedpleadingwhentheyareidentified.
111.JURISDICTION& VENUE

10. ThisCourthasjurisdictionoverthesubjectmatt
erofthisComplaintpursuantto
28U.S.C.jj157(a)-(b)and1334,Standi
ngOrder12(Revised),U.S.Dist.Ct.,D.Mont.,and
Section10.1.4oftheConfinnedPlanofReorganization.

ll. Thisisacoreproceedi
ngunder28U.S.C.j157(b)(2).TheTrustherebyconsents
toentlyoffinalordersandjudgmentbytheBankruptcyCotlrt.
Inthealternative,Counts11-IVarerelatedtothecoreproceedingstatedinCount
lforavoidanceandrecoveryoffraudulenttransferstoDesertRanch,ascontemplatedby28

U.S.C.jj157(a)and1334.
Venueisproperpursuantto28U.S.C.j1409.
lV. RELEVANTFACTS
BlixsethfraudulentlvtransfersassetstoDesertRanch
14. lnthesummerof2008,Blixseth andhiswife,EdraBlixseth,entered intoa

MaritalSettl
ementAgreement(1t
MSA''
),pursuanttowhichthepartiesdividedthei
rmarital
estate. lmmediately upon consummation oftheMSA,Blixseth implemented aschemeto
degaud his creditors,including the Debtors. Specifically,beginning in August 2008,
approximatelythreemonthspriortothefilingofthisbankruptcy,Blixsethpersonallytransferred
orcausedtobetransferredvirttzallyal1ofhisassetstoDesel'
tRanchforlessthanreasonably
equivalentvalue. Atthetimehemadethesetransfers,Blixsethknew thattheDebtorshad
(4653y00h00152392.170C/1)
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substantialclaimsagainsthim relatingtotheCreditStlisseloanandheknew thattheDebtors

werein seriousfinancialtrouble.AtthetimeoftheDesertRanchTransfers,Blixsethwas
insolventorbecameinsolventasarestlltofthetralzsfcrs.Blixseth waseitherinsolventor
renderedinsolventbythetransfers.
Desel'
tRanchwascrcatedaspartofagroupofentitiesspecificallydesignedas
vehiclestoassistBlixsethinhisatteluptstoshieldassetsfrom hiscreditors.DefendantsBeau
Blixseth,ThorntonByron,andMackeachparticipated inBlixseth'sschemeto defraudhis
creditors.BeauBlixsethandMackparticipatedbyacceptingownershipinterestsinandcontrol
overthefraudulentlytransfen-edassets.ThonztonByrontookal1oftheactiondescribedintheir
billingrecordsassetforthbelow.
DesertRanchisaNevadalimitedliabilitylimitedpartnership.Blixsethownsa
98% limitedpartnershipinterestinDesertRanch.Inotherwords,Blixsethhasa98% economic
interestinDesertRanch,butallegedlyhasnocontrol.Blixsethhasadmitted,however,that
despiteofthecorporatestructurethathecontrolsDesertRanch. The2% generalpartnerof
DesertRanch isDesertRanch Management,which isaNevadalimited liability company.
Blixsethowns40% ofDesertRanchManagementandBeauBlixsethowns30% ofthisentity.
Theremaining30% ownershipinDesel'
tRanchManagementisownedbytwotrustswitlzMack
servingasTnlsteeofthosetrusts.MackisalongtimefriendandbusinessassociateofBlixseth.
Theforegoingstructureisagardenvarietyassetprotectionplan.Itseekstoremoveassetsfrom
&icontrol''ofthedebtor,Blixseth,sothatcreditorscannotattachthoseassets,yetthedebtor

continuestoenjoytheeconomicbenefitofthoseassets.
UponinfonnationandbelietlthefollowingassetshavebeentransferredtoDesert
Ranch:
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a.

One-thirdownershipinterestinWestelm PacificTimber,LLC.Themost

currentvaltlationfromBlixseth'sexpertsinAP-14valuesthisassetat$40million;
A11ownershipinterestand/ortheassetsofCasa18,LLC,Casal9,LLC,
andCasa20,LLC.ThesethreeentitiesownstockinaMexicancompanythenameof
whichisnotcurrentlyknown,whichint'
tlrnownsresidentialpropeliesinTamarindo,
Mexico.Blixsethreportedthattheacquisitioncostsoftheseresidentialpropertieswere

approximately$2million;
50% ownershipina640-acreparceloflandinBozeman,Montanareferred
toassection5'1.
5
A11ownershipinterestinand/ortheassetsoftheBuffaloBillRanchin
Cody,Wyoming.Themostcurrentvaluationfrom Blixseth'sexpertsinAP-14values

thisassetat$3.5million;
Allownership interestin and/ortheassetsofWestenzAir& Water

(formerlyknownasWestel
m Aviation& Marine).Themostcurrentval
uationfrom
Blixseth'sexpel'
tsinAP-l4valuesthisassetat$25million;
f A1lownershipinterestinand/ortheassetsofEmeraldCay,Ltd,which
ownsaprivateislandintheTurks& Caicos.Themostcun-entvaluationavailabletothe
Tnzstvaluesthisassetat$35million;
h.Allownershipinterestinand/ortheassetsofDesertRanch,LLC,whichowns
3,000acresofland,whichweretransferredintothatcompanybyBlixseth.Themost

currentvaluationfromBlixseth'sexpertsinAP-14valuesthisassetat$100million;
A resortinMexicoknownasTamarindo.Theacquisitioncostofthisasset

was$40million;
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A1lownershipinterestinand/ortheassetsofthefollowingentitieslocatedin
theUnitedStates:BlixsethGroupofWashington,LLC;FridayRecords,LLC,Hole13
Partners,LLC,Kawish,LLC,LaPaz,LLC,LittleBearDevelopment,LLC,LoneMoose
Meadows, LLC, Mexican Moon Investluents,
Overlook Partners,
Renaissance Development,LLC,ResortAcqtlisition,LLC,Tamarindo,LLC,TWJ
Holdings,LLC,YSCollection,LLC,Yellowstone123,LLC,andYellowstoneL30,
LLC,CodyRanch,LLC,BlixsethResorts,LLCandOasisEstateL.P.;
k.Al1ownershipinterestinand/ortheassetsofthefollowingentitieslocated
Casa20,S.DeR.L.DeC.V.,LaPazConselwatoly SRL,aMexican Entity,LaPaz
PartnersConselwancy,S.C.,LaPazDevelopmentSlkL,a Mexican Entity,LaPaz
PaMnersSRL,aMexicanEntity,LaPazPal-tnersDevelopment,S.DeR.L.DeC.V.,
OperadoTamarindo SRL,aMexicanEntity,OperindoE1Tamerindo,S.DeR.L.De
Worldwide CommercialProperties,
aTurksand CaicosIslands Entity,
YellowstoneClubWorldTamarindo,S.DeR.L.DcC.V.,andYellowstoneHoldings
Mexico,S.De.R.L.DeC.V.
ThetransfersofassetsdescribedabovewillbereferredtocollectivelyasthetresertRanch
Transfer''ortheEtl-ransfenedAssets.''
18. Asdescribedinparagraph14above,theDesel'
tRanchTransfersoccurredwithin
tllreemonthsoftheDebtorsfilingtheirrespectivepetitionsforbankruptcy.
Blixseth receivedan ownership interestinDesel'tRanchin exchangeforthe
TransferredAssets. Specifically,hereceived alimitedpartnership in DesertRanch and a
minorityownershipinterestinDesertRanchManagement,thegeneralpartnerofDesertRanch.
(465300y00152392.
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However,theseinterestsdo notconstitutereasonably equivalentvaluefortheTransferred

Assets.
20. BlixsethcausedtheDesertRanchTransferstobemadewiththeacttzalintentto

hinder,delay,ordefraudcreditors.Assetforthbel
ow,justpriortotheDesertRanchTransfers,
BlixsethreceivedlegaladvicewithrespecttohispotentialliabilitytotheDebtorsandwaysin
whichhecouldattempttore-structurehisassetstoavoidexposureforthoseliabilities.
DefendantsBlixseth,Beau Blixseth and Mack,as personswith ownership
interestsinDesertRanch,andthetrustsforwhichMackisthetrusteeareindividualsorentities
forwhosebenefittheDesertRanchTransfersweremade,orweremediateorintennediate
transfereesoftheTransferredAssets.
TheTrustisacreditorofBlixsethandhasa1loftherightsofacreditortobring
avoidanceclaimstmderapplicablestatelaw.
B. ThorntonBvron'sroleinthefraudulenttransferscheme.

23. Thisactionalsopertainstofraudulenttransfersofatleast$207,597.09paidto
DefendantThonAtonByron. Thornton Byron isaBoiselaw finu thatperformedwork for
Blixsethpersonallyinconnectionwithhisdivorce,yetitsbillswerepaidbyoneormoreofthe
Debtors.Thisworkincludednotonlyadviceastohow tostnzcturethedivorcetomaximizethe
taxbenefittoBlixseth,butalsohowtottisolate''Blixseth'sassetsfrom theimminentbankruptcy
thatwouldresultfromtheassetandliabilitydivisionsetfol'
thintheMSA.
Thornton Byron'sinvoicesindicatethatitswork ilwolved discussionswith
Blixseth'sadvisorsttregardingTimothyBlixseth'spossibleliabilitytocreditorsofMrs.Blixseth,

BlixsethGroup,lnc.ortheYellowstoneClubenti
tiesgifjMrs.Blixsethweretoassumeliabilities
ofbusiness entities and the maritalcommunity on which Timothy Blixseth iscurrently
obligated.''ThorntonByronalsoaddressedthespecificproblemscreatedifBlixseth'sttpersonal
(46531.
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debttoBG1andfrom BGItoYellowstoneentitiesisnotrepaidaspa14ofsaleofYellowstone
Club assets.'' ThonztonByron'sworkcontemplatedtheYellowstoneClubbanknzptcy,and
analyzedtitheproperapproachtotherestrtlcttlreofTimothyBlixseth'snoteinordertoprotect
him f.
1-0111potentialforgivenessofdebtandthusapotentialbanknlptcy.''Amongotherwork,
ThorntonByronassistedBlixsethwith&thepotentialexposurevis--visabankruptcybyBGl
and/orMrs.Blixseth to providemaximum protection forTimothy Blixseth.'' Thiswork
culminatedinthetransferofBlixseth'ssignificantassetstoDesertRanchinordertottisolate''
theseassetsfrom creditors.
25. TheseprofessionalservicesbenefitedBlixsethpersonallyanddidnotbenefitthe
Debtors.Yet,BlixsethandhisadvisorscausedtheDebtorstopayThorntonByron'sinvoicesfor
thiswork,andtheThorntonByronfirm filedaProofofClaim intheConsolidatedCasesforthe
amountofitsunpaidinvoice.Thepaymentoftheseinvoicesforthepersonalassetplanning
servicesprovidedtoBlixsethisrecoverableasfraudulenttransfersasdescribedherein.
26. DuringthefouryearspriortothePetitionDate,theDebtorspaidThorntonByron
forprofessionalservicesthatwererenderedforthebenefitofBlixsethandothernon-debtor
individualsandentities.Forexample,ThorntonByronbilledDebtorsforatleastthefollowing
services,whichwerenotfortheDebtors'principalbenefit:

(46530000152392.170C/1l

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ageof11
Of22

June17-08

B. June-10-08

June-09-08 DJT

June-06-08 DJT

(4653$0000152392.D0C/1)

AnalysisofClosingAgreementreceived from Steve

Kolodny'sofficetorefineinitialanalysisoftaxand
economic concel'
ns presented by same; draft
correspondence to Mr.Blixseth and representatives
regardingconcernsraisedbyClosingAgreementfrom
taxliabilityperspective;discussionwithGeorgeMack
regarding partictllarconcern regarding Mr.Blixseth's
possibleliabilitytocreditorsofMrs.Blixseth,Blixseth
Gr
oup,Inc.ortheYellowstoneClubentitiesisgsicj
Mrs.Blixseth wereto assumeliabilitiesofbusiness
entitiesand the maritalcommunity on which Mr.
Blixsethiscurrentlyobligated'
,revisecorrespondenceto
clientandrepresentativesregardingsame;analysisof
documentation and transactionalstepsto limitMr.
Blixseth'sexpostlre on subsequentcollection efforts
withrespecttoliabilitiesasstlmedbyMrs.Blixseth;
discussion to analyze same; draft correspondence
regardingrecomlnendationsforlimitingMr.Blixseth's
liabilityafterMrs.Blixseth'sassumptionofdebt;draft
multiplecorrespondenceresponding to questionsand
concerns raised by Mr.Blixseth and other
representativesregardingsame.
NOCHARGE.Finalizememorandum regardingCode
1031like-kindexchangeandplanningtoisolateDesert
ranchpropertyreceivedwithrespecttosameinseparate
holding company to limitpotentialliability;translnit
sametoclientandco-counsel;draftcorrespondenceto
co-counselsummarizingsameandrespondingtovarious
issuesraised with respectto prospectsforlike-kind
exchange versus global settlement of a11 property
divisionissuesbetweentheBlixseths.
AddressthepriorfactualanalysisoftheBGl1031
exchangeandsplittofinalizeineventthatsuchresultis
reversed;assesspossibleissuesofMrs.Blixsethisto
p
urchaseMr.Blixseth'sinterestinBGI;focusonmajor
issuesrelatingtothehandlingofincomeand/orlosson
thesubchapterSreturnfortheperiodoftimeuptothe
division ofstock'
,evaluate the cancellation ofdebt
considerationsand potentialissueswith respectto a
bankruptcy.
Follow up onthestatusoftherevisedproposaland
addresstheissuesrethepotentialexpostlrevis--visa
balzkruptcy by BG1 and/orMrs.Blixseth to provide
maximumprotectionforMr.Blixseth.

(119 of 364)
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Pageof12
Of22

June-02-08 JCJ

May-29-08 JCJ

Map25-08 DJT

H. May-19-08

(4653h00h00152392.
1(
)0C/1)

DiscussiontoanalyzeconcernsraisedbypossibleCode
1031like-kindexchangeofPorcupineCreekforDesert
Ranch properties in lightof Blixseth Group lnc.'s
substantialliabilities and planning options to limit
potentialadverse consequences ofsame;analysisof
transactionalstepsinvolvedintransfeningDesertRanch
propertyreceivedinlike-kindexchangetonew entityto
isolatepropertyfrom BGl'sliabilitiesandpotentialtax
issuespresentedbysame!
'draftchartsoutliningstepsin
transaction to accompllsh like-kind exchange and
isolationofDesertranchpropertyfrom BG1'sliabilities
and summarizing expectedtax consequencesofeach
stepinthetransaction;technicalanalysisunderrelated
partylike-kindexchangenllestodetennineeffectof
subseqtlenttransaction on triggering gain recognition
nlles.
Discussion to analyze latest correspondence from
Mrs.Blixseth's attorney regarding Porcupine Creek
property and intentto seek order thatproperty be
distributed in a taxabletransaction and appropriate
contentofdeclarationrequestedbyStephenKolodnyin
oppositiontothatplan;discussionwithGeorgeMack
regarding content of declaration in opposition to
Mrs.Blixseth'sattempttoforcetaxabledistributionof
Porcupine Creek property from BG1 and tax
consequencesofsame;draftstatementsfordeclaration
opposing taxable distribution of Porcupine Creek
property from BG1 and transmitsame to Stephen
Kolodny's office; draft correspondence to client
addressingquestionsraisedwithrespecttoadversetax
consequencesassociatedwithrelatedpartyCode1031
like-kindexchanges.
Addressthe revised proposalfrom Edra'sattorney,
particularly the approach to the next phase of
negotiationsonthevaluation anddebtassumption as
affected by a purchase by Mr.Blixseth based on
Mrs.Blixseth'stax analysis,debtanalysisand fair
market value analysis; analyze post divorce
opportunitiespurstlantto 1041and1031scenariosto
avoidtwo-yearsalepenaltyonapropertysale.
Analysisofcorrespondencefrom KolodneyandAnteau
regardingstlddenchangeinpositionofMrs.Blixseth's
attonzeys with respectto liabilities associated with
CSFB loantoYellowstoneentities;draftspreadsheet
a
nalyzingknowntinancialinformationformajorassets
involvedinBlixsethdivorcesettlementnegotiationsfor
useinmediationproceedingswithrespecttosame.

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May-16-08

May-14-08

K. May-12-08

May-09-08

M. May-07-08

Apr-29-08

Apr-29-08

(4653h0000152392.
170C/l)

FollowuponmeetingwithMessrs.Blixseth,Mackand
Kolodnytoprepareforthemediationandtoestablish
alternate game plans for Mr.Blixseth to purchase
Mrs.Blixseth'sinterestin BGI;consideropportunities
tolninimizeincometaxconseqtlencesondistributionof
thePalmDesertresidencefromBGI.
DJT MeetinganddiscussionswithGeorgeMackregarding
ourmemo andpositionpaperon thestructureofthe
buyoutbyMrs.Blixseth'
,preparationofmaterialsfor
meetingwithMessrs.Koldony,MackandBlixsethto
update strategy and to provide infonuation forthe
SanFranciscomediationregardingaglobalsettlement.
DJT Continuedplanningtofinalizethetaxapproach and
handleissuesforthebuyoutofMr.Blixsethvis--vis
BG1basedonapotentialspinofftoavoidincometax
liabilityandbasisallocation;prepareformeetingwith
Messrs.Mack,KolodnyandBlixsethregardingthenext
phaseofnegotiations.
DJT Review offnancialstatementandYellowstoneClub
valuation forwarded by Mr.Mack;consider counter
proposalsandvaluationforMr.BlixsethtoretainBGI;
considerincometaxissuesforMr.Blixsethregarding
BGlfor2008basedonwhoultilnatelyisawardedBG1
andtimingoftaxallocations.
DJT ContinuedplanningandtaxanalysisforBGIandMr.
andMrs.Blixseth'
,assessmentofthemosttaxeffective
meansofapotentialspinoffbasedontheproposalby
Mrs.Blixseth'
,consideralternativessuch asa direct
purchaseofaspecifiedasset,anexerciseofanoptionor
transferofanoption;review oftaxbasistomaximize
benetitsforMr.Blixsethvis--visexistingbasisand
liabilityassunption forSt.Andrewsatthecorporate
level.
GAB Review technicalissuesrelating to thepurchase of
Mr.Blixseth'ssharesofBG1byMrs.Blixsethandthe
distributionofcertainassetsheldintheYellowstone
Clubentities,includingvaluationandincometaxissues
associated with the distribution of the assets,
qualiticationforCodej355andlimitationsonthe
recognitionoflossondistributionsofcoporateassets.
DJT DiscussionswithGeorgeMackregardingpursuitofa
new optiontoincludethepurchaseofBGlbyEdra
Blixseth'
,analysisofvariousoptionsto accommodate
the revised structure and to allow forminimaltax
consequences atthe BGl level as wellas to Mr.
Blixseth'
,analysisoffinancialdataandprepareoutline
ofadditionalissuesrequiringinputpriortoseparation.

(121 of 364)
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ID:
DktEntry:
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Apr-28-08

Apr-25-08

DJT Di
scussionsrelativetothedi
visionofasset
s;analysisof
o
p
t
i
o
n
s
r
e
g
a
r
d
i
n
g
ma
j
o
r
a
s
s
e
t
s
o
f
B
G1
vis--vlsthe
Desertpropel
-tiesaswellasanalysisoftheYellowstone
Clublimitedliabilitycompaniesinadditiontorelated
debt for borrowing from BGl and Mr.Blixseth
regardingthedebtincurredattheYellowstoneClub;
prepare for discussions with Mrs.Blixseth's tax
attorneys.
RMW Review issuesrelated to thepreliminal transferof
sharesbyTim toEdra;considerationofissuesrelatedto
the form and illustration ofthe corporate division;
considerationofissuesrelatedtobasisanddebtissues

raisedbyj368(a)(1)(D),
'analysisofrequirelnentsunder
j355.
,analysis ofissuesrelated to continuity of

btlsiness enterprise with presentation of

recommendationsforconductpost-distribution;review
issuesrelatedtoreportingrequirementsforthe355and
factorstobeconsideredinpresentingFonzz1120Sfor
2007and2008.
Apr-25-08 DJT Preliminalyreview andanalysisofissuessurrounding
theincometaxretulms;scrutinizetheBG1assetsand
restructuringrelativetothetransfersofvariousassets
intoentitiestominimizepotential331gainissuesatthe
corporatelevelupondistribution.
Apr-24-08 GAB Detailed analysis of the technical issues and the
implementationofalike-kindexchangeorj355spin
offforBGI,lnc.,includingtaxconsequencesoffailed
j355distlibtltion,impacttothecontinuingshareholders
andexitingshareholders,valuationissuesandimpactof
inclusion of nonoperating assets or boot in the
transaction.
Apr-23-08 GAB Outlineissuesrelatingto2007incometaxreportingfor
BGI,lnc.in the contextofthe alternatives forthe
PorcupineCreek assetsand operations,including the
reporting of the income and expenses and the
descriptionofthebusinessactivitiesofthecorporation;
review 2005and2006incometaxreturnsandtrial
balancesfortheassetsandoperationsofBGI.
Apr-23-08 DJT Considerationandanalysisoftheinformationprovided
by Messrs.Blixseth and Mark regarding the assets
allocatedtoeachpartyaswellasassetswhichareyetto
be divided vis--vis the dissolution proceedings;
consideroptionsforseparationofassetsandinformation
toprovidetoMrs.Blixseth'sattolmey.
Apr-22-08 MKF Review,organization and consolidation ofdocuments
relating to property atissue in divorcenegotiations;
consultationwithattorneysontaxreturnsandfnancial
statementstoprovideopposingcounsel.
(4653h00h00152392.
170C/1)

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W. Mar-26-08 JCJ

Teclmicalanalysisoftaxconsequencesassociatedwith
alternateplan fordivorcepropertysettlementunder
which Mr.Blixseth would receive family estate,
TamarindoandSt.AndrewsandMrs.Blixsethwould
retainal1otherassetsinBlixsethGroup,lnc.;prepare
spreadsheettocalculatetaxcostsofalternateproperty
settlementplan;analysistocompareandcontrastresults
underassetsaleandredemptionofMr.Blixseth'sshares
inBG1withalternativepropertysettlementplan.
Mar-25-08 JCJ Revise memorandum detailing tax consequences in
proposedstepsforsaleofYellowstoneClubassetsand
redemptionofTim Blixseth'sinterestinBGI;technical
analysis of tax consequences under applicable
partnershipandcorporatetaxstatmesofalternateplan
foraccomplishingpropel'tydivisioninwhichlimited
assetsaretransfen'edtoMr.Blixsethimmediatelyand
Mrs.Blixsethbearsbusinessandtaxburdensassociated
withthesaleoftheYellowstoneClub assets;revise
memoranduln regarding sale and stock redemption
proposalto retlectunverified nattlre of financial
informationusedinanalysisandtoclarifyownershipof
BG1stockattimeofcompleteredemption.
Mar-l1-08 RMW Considerationofissuesrelatedtoliabilityoftheowner
ofseparatepropertyfortaxrelatedtothespouse'sshare
ofcommunityincomeunder1RSguidanceandcourt
cases'
,analysis of issues related to treatment of
communityincomeliabilityifthespousetowhom the
communitysharebelongsfailstopay.
Z. Mar-05-08 JCJ Discussionto anal
yzetax consequencesofrepaying
personaldebtsaspal4ofsaleofYellowstoneClubassets
versusretaining debts and paying atlaterdateto
improvecashflow;technicalanalysisofCode752and
theRegulationstheretlnderto determine appropriate
treatmentofliabilitiesultimatelysatistiedorassumedas
part of sale of Yellowstone Club assets; revise
spreadslzeetanalyzingtaxandfinancialconsequencesof
Yellowstone Club Assetsale,repaymentofpersonal
debtstoBGIandfrom BGItoYellowstoneentities'
,
repayment of Yellowstone Entities'liabilities and
redemption of Mr.Blixseth's interest in BG1 for
interests in LLC holding keeper assets; prepare
spreadsheetanalyzingtaxandtinancialconsequencesof
proposedtransactionifpersonaldebttoBGIandfrom
BGItoYellowstoneentitiesisnotrepaidaspartofsale
ofYellowstoneClubassets'
,discussionregardingcause
ofhighertaxconsequenceforredemptionofBGIshares
afterrepaymentofdebtversussametransactionwithout
repaymentofdebtstemming from basisreduction
restlltingform(sicjdistributionofamountssufficientto
satisfy outstanding obligationsowed to BG1by the
BlixsethsandtotheYellowstoneClubentitiesbyBGI.
(46530000152392.170C/1)

(123 of 364)
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AA. Mar-03-08 DJT

BB. Feb-06-08

Feb-O5-08

JCJ

Feb-05-08

EE. Dec-17-07

(46531
.
0000152392.170C/l)

JCJ

Followupondiscussionsrelativetothepositionstaken
bytheotherattorneysforMrs.Blixsethandthedivision
oftheYellowstoneClub;providedataastothelackof
feasibilitytosuccessfullycompletinga1031exchange
and/orataxfreedivisionandreorganizationofassets.
FinalpreparationformeetingwithMr.Blixsethandhis
taxadvisorsconcerningthehandlingofvariotlsaspects
ofdivision ofassetsandsaleofassets;meetingto
disctlssaltel-natives;addressissuesandrequirementsto
meet capital opportunity versus ordinary income;
analysisofmostrecentfinancialdataandprojectionsas
tothetaxconseqtlencesofvarioustransactions.
Discussion with Chad Herman regarding basis
infol-mation forkeeperassetsfrom YellowstoneClub
sale and Porcupine Creek property; draft
correspondenceregardingsame;discussionwithGeorge
Mack regarding inherentgain in Yellowstone Club
keeperassetsandbasisinfonnationforPorcupineCreek
propertyandequipment;discussiontoanalyzemeritand
resultofCode l031exclzange ofPorcupineCreek
propertyforone-halfinterestinRoyalLand.
Review,analysisand consideration ofa1ltaxissues
arisingfrom theYellowstoneClubsale,distributionand
separation from Mrs.Blixseth relative to the
PalmDesert complex'
, consider using valuation
discountstominimizeissuesconcerningtheCode311
g
aini
ntherealpropel
t
yandthepersonalpropert
y;fi
nal
review ofMr.Mack'stinancialdataandpreparatlonfor
meetinginPortland.
Reviselettertoclientregardingqualifyingexchangeof
Porcupine Creek property for undivided,one-half
interestinRoyalLanePropel'
tyasatax-freeexchange
underCode1031;revisememorandumregardingissues
presentedbyproposed Code 1031exchangeincluding
issuesrelatedtouseofmasterresidenceonPorcupine
Creekproperty.

(124 of 364)
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Dec-10-07 JCJ

TechnicalanalysisofCode Regulationsandcase1aw
authorityregardingapplicatlonofrelatedpartynllesin
likekind exchangesofrealproperty toverify that
divorced couples are no longer related parties for
purposesofapplyingtwoyear,post-exchangeholding
requirelnent and to analyze tax consequences of
proposed likekindexchange ofinterestinproperties
between Mrs.Blixseth and Blixseth Group Inc.,
'
discussion to analyze same and potential that
Mrs.Blixseth would it gsicjqualify for like kind
exchangetreatmentonreceiptofproperty;discussion
withGeorgeMackregardinggaincharacterizationand
cashflowproblemsassociatedwithofferforpurchaseof
Yellowstone Club property by third part.y for
combinationofcashandassumeddebt.

Uponinformationandbelief,similarserviceswereperformedbyThorntonByron
forBlixsetllandothernon-Debtorindividualsandentities,butpaidforbyDebtors,inthefour
yearsprecedingthePetitionDate
ThorntonByron'stimeentriesintheirinvoicesmakeclearthatthiswork,and
otherwork,wasperformedforthebenefitofBlixsethandothernon-Debtorentitiesandin
furtheranceofthefraudulentschemetoattelupttoreluoveassetsfrom thereachofBlixseth's
creditors,includingtheTl-ustassuccessorininteresttotheDebtors.lndeed,thevel-ypurposeof
thiswork wasto ttisolate''Blixseth'spersonalassetsfrom the Debtors'liabilities,in the
expectation thattheDebtorswould be forced into banknzptcy. Debtorsdid notreceive
reasonably equivalentvaluefortheamountspaidto Thornton Byronfortheseprofessional
services.
29. WhenDebtorspaidTholmtonByronfortheseprofessionalservicesrenderedfor
Blixseth and othernon-Debtorindividualsandentities,theDebtors'remainingassetswere
unreasonablysmall,andtheDebtorsandtheirprincipalsshouldhavereasonablybelievedthat
theDebtorswouldbeunabletopaytheirdebtsastheycamedue.
(46530000152392.
170C/1)

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30. WhenDebtorspaidThorntonByronfortheseprofessionalselwicesrenderedfor
Blixseth and othernon-Debtorindividualsand entities,Debtorswereinsolventorbecame
insolventasaresultofthepayments.
WhenDebtorspaidThorntonByronfortheseprofessionalservicesrenderedfor
Blixsethandothernon-Debtorindividualsandentities,Defendantswereengagedorwereabout
toengageinabusinessortransactionforwhichtheirremainingassetswereunreasonablysmall
inrelationtothepaymentsfortheseprofessionalservices.
ThepaymentsweredirectedtobemadebyBlixseth,whowasactingwiththe
intenttohinder,delay,ordefraudcreditorsoftheDebtors.
Thornton ByronhasfiledProofofClaim No.734in theConsolidatedCases.
ThonztonByron'sproofofclaim includesclaimsforprofessionalservicesthatwererenderedfor
Blixsethandothernon-Debtorindividualsandentities.
34. TheTnzsthasal1oftherightsofacreditortobringavoidanceclaimsunder
applicablestatelaw.
CAUSESOFACTION
COUNTI-AVOIDANCEOFFRAUDULENTTRANSFERSTO DESERTRANCH

(AgainstAIlDefendantsExceptThorntonByron)

TheTrusteeherebyrestateseachandeveryprecedingparagraph,asifspecifically
statedherein.
36. ThetransfersdescribedhereinconstitutefraudulenttransfersunderSections31-2-

333and31-2-334oftheMontanaCodeAnnotatedandSection548(a)(1)oftheU.S.Bankruptcy
Code,andcanbeavoidedpursuanttoSection550oftheU.S.BanknlptcyCode(the<
Code''
)and
Section31-2-339(1)(a)oftheMontanaCodeAnnotated.Thetransferscanbeavoidedasto
(46530000152392.170C/1)

18

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every person or entity having an ownership interestin DesertRanch orDesel'

tRanch
Management.
Thetransfersweremadewith theactualintenttohinder,delay,ordefraud
creditors.Likewise,Blixsethdidnotreceivereasonablyequivalentvalueinexchangeforthe

transfers.BlixsethwasinsolventwithinthemeaningofSection31-2-329(a)oftheMontana
CodeAnnotatedandwithinthemeaningofSection548(a)(l)(B)oftheCodeatthetimethe
transferweremadeorthetransfersrenderedhim insolvent.

Furt
hermore,pursuanttosection544(1
7)oftheBankruptcyCode,thetransfers
wereconstructivelyfraudulenttransferunderMont.Code.Ann.31-2-333(1)(b),andcanbe
avoidedpursuanttosection550oftheBankruptcyCodeandMont.Code.Ann.31-2-339(1)(a).
ThetransfersweremadeforlessthanreasonablyequivalentvalueatatimethatBlixsethwas
insolventorthet'ransfersrenderedhim insolvent.
Upon avoidance,the DefendantsDesertRanch,Desel'tRanch Management,

Blixseth,BeauBlixseth,MackandthetnlstsforwhichMackistheTrusteearejoi
ntlyand
severallyliabletoconveytheTransferredAssetstotheTnlstortopaytheTrustthevalueof
Transfen-edAssetsdescribedherein.
COUNT11-AVOIDANCEOFFRAUDULENTTRANSFERSTO THORNTONBYRON

(DefendantThorntonByron)

40. TheTnlstherebyrestateseachandevel'
yprecedingparagraph,asifspecifically
statedherein.
TheDebtorshadunpaidcreditorswhoseclailuswereinexistencewhenDebtors
paidTholmonByronfortheseprofessionalservicesrenderedtoorforthebenefitofBlixsethand
othernon-Debtorindividualsandentities,whichclaimsaretobepaidthroughdistribtltionsfrom
theTrust.
(465300h00152392.170C/1)

(127 of 364)
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ID:
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42. Pursuantto11U.S.
C.j544(b),thepaymentstoThorntonByronforprofessional
servicesrenderedforBlixsethandothernon-Debtorindividualsandentities,werefratldulent

transfersunderMont.CodeAnn.jj31-2-333,-334.
ThepaylnentstoThorntonByrollforprofessionalservicesrenderedtoorforthe
benefitofBlixsethandothernon-Debtorindividualsandentitieswerefratldulenttransfersunder

1lU.S.C.j548.
44. Accordingly,thepaymentstoThorntonByronforprofessionalservicesrendered
toorforthebenefitofBlixsethandothernon-Debtorindividualsandentitiesmaybeavoided

pursuantto11U.S.
C.j550.
45. Uponavoidance,ThorntonByronmustpaytheTrusttheamountofthepayments
to Thornton Byron forprofessionalselwicesrendered forBlixsetlland othernon-Debtor

individualsandentities.Theseamountstotalatleast$207,597.09.
COUNT111-CLAIM OBJECTION

(DefendantThorntonByron)

46. TheTnzstherebyrestateseachandevelyprecedingparagraph,asifspecitkally
statedherein.
47. Forthe reasonsstated above and the otherreasonsstated in the Trustee's

Objection (caseno.08-61570,dkt.#1382),Thornton Byron'sproofofclaim should be

disallowed.
COIJNTIV-PRELIMINARYINJUNCTION

(AllDefendants)

48. TheTnzstherebyrestateseachandeveryprecedingparagraph,asifspecifically
statedherein.
(465300h00152392.
170C/1)

20

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49. TheTnlstrequiresi
njunctiverelieftomai
ntainthestatusquoandpreventany
furthertransferordissipationofassets.
50. TheTrtlsthasallegedseveralcausesofactionagainsttheDefendants,andas
indicatedinthisComplainttheTrusthasshownaprobablerightofrecoveryandlikelihoodof
successonthemerits,theTrustwillsufferimminent,irrcparableharm withoutCourt
intervention,andthereisnoadequateremedyatlaw.
AsadirectandproximateresultofthcDefendants'wrongfulactionsasallcgedin

thispeti
tion,theTrustwillsufferimminentinjurythatwillbeineparableandforwhichno
remedyatl
awexistswithouttheprotectionsofinjunctiverelief.
Theonlyadequate,effective,andcompleterelieftotheTl-tlstistorestrainthe
Defendantsfrom f'urtherengagingincertainproscribedactivities,assetforthbelow.Ptlrsuantto

Fed.R.Civ.P.65(a)andBankruptcyRule7065andinordertopresel
wethestatusquodtl
ring
thependencyofthisaction,theTrustseeksuponhearing,apreliminaryinjunction,orderingand
immediatelyrestrainingtheDefendants,includingtheDefendants'agents,servants,employees,
independentcontractors,attorneys,representatives,andthosepersonsorentitiesinactiveconcel't
orparticipationwiththem from transfelning,concealingorotherwisedissipatinganyofthe
TransferredAssetsoranyassetcun-entlyheldbyDesel'tRanch.
WHEREFOREPlaintiffprays:
ForanOrderofthisCourtthattheDesel'tRanch Transfersbesetasideand
avoided;

B. ForjudgmentagainstDesel
'
tRanchandallil
nmediateandmediatetransfereesof
theDesertRanchTransfers,includingBlixseth,BeauBlixseth,Mack,DesertRanchManagelnent
andthetrustsforwhichMackisTnlsteerequiringtheconveyanceoftheTransferredAssetstothe
TrustorforthevalueoftheTransferredAssets;
(4653h00h00152392.
170C/1)
2,j

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C. Forjudgmentagai
nstDesertRanch,DesertRanchManagement,Blixseth,Beau
BlixsethandMack,aspartiesforwhosebenefittheDesertRanchTransfersweremade,forthe
valueoftheTransferredAssets;

D. Forjudgmentagai
nstthe ThorntonByron in an amountofnotlessthan
$207,597.09forthef'
raudulenttransfersoftheprofessionalpaymentsdescribedherein;
E. ForanorderagainstBlixseth,DesertRanch,DesertRanch Management,Beau

Blixseth,MackandthetrustsforwhichMackisTnzsteeenjoini
ngthesale,transfer,orencumbering
ofal1assetscurrentlyheldbyDesertRanchandallpersonalandrealpropertyassociatedwith
DesertRanch'smembershiporshareholderinterestsinanyotherentityrelatedtotheTransferred
Assets;

Forprejudgmentinterest;
Forattolmeys'feesandcosts;and
ForsuchotherandfurtherreliefthattheCotu'tdeemsproper.

Dated:Febrtzary19,2010.
/s/ShaneP.Coleman
CharlesW.Hingle
ShaneP.Coleman
RobeML.Stertlp
HOLLAND&HARTLLP
401North31stStreet,Suite1500
P.O.Box639
Billings,Montana59103-0639
ATTORNEYSFORMARCS.KIRSCHNER,
TRUSTEEOFTHEYELLOWSTONECLUB

LIQUIDATINGTRUST
4737355l.DOC

(46530000152392.
170C/1)

22

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Charlcsqf.Ilingle(BarNo.1947)
RobcrtL.Stcrup(BarNo.3533)
ShaneP.Coleman(BarNo.34I7)

l1()l.l-AND&HARTI.I.P
401North31stStrect,Stlitcl500
P.O.Box639
1'
3illings,Montana59103-0639

Telcphone'
.(406)252-2166
Facsimilc:(406)252-!669
chiqg-l
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rsterunr

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A'ITORNEYSFORMARCS.KIRSCIINER,ASTRUSTEE

OFTI.
IEYELLOWSTONI!CLUBLIQUIDATINGTRUST

UNITEDSTATESBANKRUPTCYCOURT
FORTIIEDISTRICTOl2MON-I'ANA
Yellows
1 toncMountainCltlb,Ll-C,

Chaptcrll
CascNo.08-6I570-11

Dcbtors.
MARCS.KIRSCIINER.ASTRUSTEE
OFTHEYELLOWSTONECLIJB

AdversaryNo.09-00064

#1p1.,

I.IQUIDATING'INRUST
Plaintiff

FIRSTAMENDEDCOMPLAINT

TIMOTIIYBIZIXSETH;CASA20LLC;
TAMARINDO,l-1-.
ClJohnDocs1-100;and
XYZCorp.1-100)
Defendants.

TheDebtorsartthtfollowing entities:Yellowstonc Mountain Club.LLC,Ycllowstonc

D
velopmentClub.LI-CandBigSkyRidge,LLC,whichcntitiesarcsubstantivclyconsolidated.and
Ye
ellowstoneClubConstructionCo.sLLC,whi
chisjointlyadministercdwiththeotherDebtors.

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COMESNOW MarcS.Kirschncr,asTrttstceforthcYe1IosvstoneClubLiquidatingTrtlst

(thcbtYCLT''
),byandthrotlghcounselofrccord,hcrcinstatcshiscauscsofactionandclaimsfor
relief-againstTimothyBlixscth,Casa20,LLC,andTamarindo,LI-C.

INTRODUCTION
-l-hisactionpertainstotvvodiscrctetransfcrsofpropcrtytkomYellowstone
DevclopmcntsLI.C(itYD*')torlnilnothyBlixsethantlhisaffiliatdentitics. '
I-hepropcrtiesarc
commonlyknownas'tlwot90'9inthcYcllowstoncClubandtheii-ramarindo''rcsortinMcxico.
ThetransfbrsatissueoccurredlessthanayearbcfbreYD filedbankruptcy.
2. l-hisactionalsopertainstomcmbcrdistributionsfromBigSkyRitlge,LLC
(tBSR'')toTimothyBlixsethorhisaffiliatcdentitics.'Fhesedistributionssclatetothcproceeds
ofthesalcsorlotsinthcYellowstoneCltlbthatwereownedbyBSRandincltldedistributions
paidlessthanoneyearbetbrcBSRfiledbankruptcy.
PARTIES
Plaintit-fMarcS.KirschncristhetrustccortheYCI-T.
4. YCLTwasformcdtlndcrthcPlanofRcorganizationfsledMay22,2009.inCase

No.02-6I570(dkt.//947)(theb'BankruptcvCase''),rcfiledMay29.2009(dkt.//955),and
contirmedbythisCourt'sNlemorandum ofDecisiondatedJnne2,2009(dkt.//l025)
(hereinaf
ter,theet
confirmedPlanofReorganizati
on').
5. YDisaMontanalimitedliabilitycompanyandisoneofthedcbtotsin
BankrtlptcyCasc.
BSRisaNlontanalimitedlabilitycompanyandisoncofthedebtorsin
BnkruptcyCase.
PursuanttotheConfirmedPlanofReorganizationandAssignmentsorclaims

(ExhibitlheretolsMr.Kirschner,asTrustccortheYCLT,succecdsto:%aIlCauscsofActionthat

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theDebtorst)rtheirEstatescouldassertimmediatelypriortotheEfrectiveDatc,'-exceptcertain
claimsreleascdbytheConfirmcdPlanofRcorganization.lnparticularsPlaintif'
rsucceedstothe
interestsofthcIitigationclailnsofYDandBSR,andthcirrespcctiveestates.
'rimothyBlixsethisacitizcnol-theUnitedStatcsandarcsidentoftheStatcoflvashington.TimothyBlixsctllisatransferecoftheassctsandcashdistributions#brwhich

avoidanceissonghtandistheobligorontheLot90Notc(defincdbelow)fbrwhichcollectionis
sought.
Casa20,I.LCisaqvashingtonlimitcdIiabilitycompanycontrolledbyTimothy
Blixsethandisatransferecofassctsfo
'rw'hichavoidanccissotlght.''
I-imothyBlixsethisthesole
memberof-Casa20sI.I.-C.
10. ''
ramarindo,L1.-Cisasvashington1imitedIiabilitycompanycontrolledby
TimothyBlixscthandisatransfkrccof-assctsfbrNvhichavoidanccissought.
JohnDoesl-l00andXYZCorp.1-100are,respcctively,unknownindividuals
andcorporationsorotherbusinesscntities.whoaretransfkreesorwhofacilitatcdthetransfcrsofthcassetsorcashdistributionsdescribedherein,andwllowillbenamcdinanamcndedpleading
whentheyarcidentificd.

JURISDICTIONAN1)VENIJE
12. ThisCourthasjtlri
sdi
ctionoverthisl
natterpursuantto28(J.S.C.j1334,
StandingOrder12(Revised),IJ.S.Dist.Ct.sD.Nlont..andScction10.1.4oftheConsrmedPlan
ol-Reorganization.
13. Venuclspropcrptlrstlantto28U.S.
C.j1409.
14. ThisisaK'corc''proceeding. YCLThcrebyconscntstoentryofflnalordcrsand

judgmentbytheBankruptcyCourt.

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COIJNT1. AVOIDANCEOFTHECCLI)T9093TRANSFER
l5. Plaintiffherebyrestatescachandeveryprecedingparagraph,asil-specifically
statedherein.
OnDccembcr29,2006,YDptlrchascdrealpropertylocatedMadisonCounty
describedasfollows:
Lot90,YellowstoneMountainClubStlbdivision,Phaseland2,
MadisonCotlnty,Montana,accordingtotheoftscialplatthcrcofon
fileandofrecordinthcofflceofthcCountyClcrkandRccorder
MadisonCounty,Montana.
,
Thispropertyiscommonlyknownastilwot90.9'
l7. OnFcbruary12,2008,lessthanoneyearpriortothefilingofthisbankrtlptcy,
YDtransferredLot90to'I-imothyBlixsethinacashlcsstransactionatastlbstantialloss.

TimothyBlixsethreceivcdLot90inexchangefor(i)a$2millionpromissory'notefromTimothy
BlixsethtoYD(thetlzot90Note'%),and(ii)$500,000intiprcviouslypaidconsidcration.''
TimothyBlixsethsignedthettltealEstatePtlrchaseandSaleAgrecment''bothonbehalfo1himselfastiBuycr''andonbehalfofYDasitscller.''
18. Oninforlnationandbelief,Lot90hasbccntransfcrrcd,eithcrasaparlofthe
initialtransfcrorinoncormorcsubsequcnttransfers,toDefcndantCasa20,LLCand/orto
BahiaDoradaS.A.deC.V.,aMexicanentity.0nnl
brmationandbclierBahiaDoradaS.A.de
C.V.isthcpresentownerofrecordof-Iaot90.
YDreceivcdnopaymentsundcrthel.ot90Notc.
20. YDdidnotreceivcreasonablycquivalentvalucfbrthetransfbrofLot90.
Atthetimeofthel-ot90Translbr,YD'sremainingassctswercunrcasonably
small,andYDandTilnothyBlixsethshouldhavcreasonablybelievedthatYDwouldbcunablc
topayitsdebtsastheycamcdue.

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22. AtthetimcofthcI-ot90'
l-ranstkr,YDNvasinsolvcntorbccanleinsolventasa
restlltofthetransf'
erorobligation.
23. AtthctimeofthcI-ot90'l-ransfbr,YDwasengagedorwasabouttoengagcina
businessortransactionforwhichitsremainingassctswereunrcasonablysmallinrelationtothc
btlsinessortransaction.
24. Atthetimcofthcl-ot90'I-ransfkr.YDintcndedtoincursorbclievedOr
rcasonablyshouldhavebclievedthatitwotlldincur,debtsbcyonditsabilitytopayasthcy
becamedue.
ThcI-ot90Transferwasmadcwiththcintcntttahinder,dclay,ordcfrand
crtditorsOCYD.
TheYCL'
T'hasa1Iofthcrightsof-creditorstobringavoidanccclaimstlnder
applicablestatelaNv.
YDlladunpaidcrcditorswhoscclaimswereincxistenceonthedatcof-the
l.ot90Translkr,AvhichclailnsaretobepaidthrottghdistribtltionsfromtheYCI.z'
1-,
2s. Pursuantto11U.S.C.j544(b),theLot90Transfbrvvasafraudtll
enttransf'
er

tlndcrMont.CodeAnn.9931-2-333,-334.
29. TheLot90Transfcrwasafratldulenttransfertlnder1lU.S.
C.j548.
3. Accordingly,theLot90Transfermaybcavoidedpursuantto11U.S.
C.j550.
31. Uponavoidancc,TimBlixscthandCasa20,LLCmtlstpaytheYCLTthevaluc
oflwot90.

COUNTll. ECLO.
1*9099PROMISSORYNOTE
Plaintiffherebyrcstateseachandcvcryprecedingparagraph,asifspccilcally
statedherein.

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33. 'l-hisCount11isbroughtinthealternativetoCount1,inthecvcntthatthcLot90
Transfcrisfoundtonotbeanavoidabletransl
kr.
34. TheYCI-TistheovvnerofapromissorynotefromTinnothyBlixscth.datcd

February12.2008(thcttl-ot90Note'*).Atrue,correct,andcompletecopyoftheLot90Notcis
attachcdheretoasExhibit2.
Pursuanttothetermsof1hcI-ot90Note,paymentw'
asducinfullbyMarchof
2009.
36. TimothyBlixsethhasfaiIedorrcfusedtomakepaymentsdtleunderthcLot90
Notc.

TheYCLTisentitlcdtojtldgmentagainstTimothyBlixsethfbr1hcprincipal
amountof$2,000p000dtletlndertheNotc,plusinterestattheanntlalrateof6.25% andattorncys
Ibes.
TothecxtentthatDefcndantsmayassertthattheLot90Notcwascancclcdor
paidpurstkanttoTimothyBlixscth's(livorceproccedings,anystlchcancellationwotlldbcinvalid
asavoidablctransfer,becauseYDwasinsolvcntatthctimcofTimothyBlixscth'sdivorce
proceedingsacouldnotpayitsdebtsastheycamcdue,anddidnotreccivercasonablycqtlivalent
valtlefortheLot9()Note.

COtJNT111. AVOIDANCEOFTHESVTAMARINDO''TRANSFER
39. Plaintiffherebyrcstateseachandcvcryprccctlingparagraph,asif-specifically
statedherein.
40v Inearly2008andvvithinayearpriortoYD'sbankruptcy,YDovvnedccrtain
inlerestsinMcxicancorporateentitiesrclatcdtothct-ramarindo-'beachresortTvorthatleast$40
million.Inparticular:

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YDow'ned99.99%ofYelloqvstoneClubW'orldTamarindo,S.de1t.I,.de

CV (%GYCV-l-'*)aNlcxicancntity;
YDalsoowned99
..9
9%eofYellowr
stoneIloldingsMcxicoS.dcR.l..de

C.V(%1YlIM'-),aMcxicanentity;
'

YH&1,inttlrn,owncdthercmaining.0l% ofYCW/-l-#
'and
d. BlixsethGrouplnc.(%'BGl''),anOregoncorporation,owncdthe
rclnaining0.l% ofYHM,havillgaparvalueofIpeso.
YCW.?T'sprincipalassetisaresortinMcxicoknownas:t-ramarindo,'*which
kvasvaltledbyTimothyBlixsethandEdraBlixscthat$40million.
42. Inearly2008.di
vorceproceedingsvverependingbetwecnTimothyBlixsethand
EdraBlixseth.ThoscdivorceproceedingsconcltldedwithanagreemcntbetwccnthcBlixscths

knownastheMaritalScttlemcntAgrecnnent($eMSA'').TheMSAhasastatcd-iclosingDatc''ofJtlly3,2008,butoninformation1:ndbcliefactuallyclosedonoraboutAugustl3,2008.
43. Amongothcrmattcrs.thc51SAreqtliredEdraBlixsethtotransfcrtoTimothy
BlixseththeihcqtlivalentofSixtyMillionDollars.'''
l'hc$60millionpaymentincludcd
mcmbershipinterestsinforeignentitiesthatheldidtheTamarindo,Mcxicoresortpropcrtyin
whichYellowstoneDcvelopmcnt,LLCholdsaninterest,''u'hichthcBlixscthsvaluedat

$40million(the'YTamarindoTransfbr*').
44. ToeftkcttheTamarindoTranslkrundcrthcMSA,thcfbllowingtransactions
occurred:
YDtransfcrrcdaIlofitsinterestinYCW''
1-andYHM toEdraBlixsethin

exchangcfor(i)arccitalthat$5,000cashwaspaidtoYD,vvhichwasneveractuallyrcceivcd,
and(ii)a$39,995,000notefromEdraBlixsethtoYD, Atruc,corrcct.andcompletecopyofthe
undated%Assignmentol-companylntercstsAgrccment''isattachcdhcrctoasExhibit3.Atrtle,

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correct,andcomplctecopyofthcundatcdk'PromissoryNotc''fiomEdraBlixscthisattachcd
hcretoasExhibit4.EdraBlixscthsigncdthcAssignmentdocumentbothindividtlallyas
transferecandonbchall-ofYDastranst
kror.
BGItransferrcdits.0l% interestinYHM to%tTamarindo,I.l-C'*pursuant
toanundatedtiAssignmentorc-ompanyIntercst''agreemcnt,atruc,correct,andcomplctccopy
ofwhichisattachcdleretoasExhibit5.TimotlyBlixsethisnamedasthc'imanager''of
DcfcndantTamarindo,LI..C,aWashingtonentity.
c. EdraBlixsethimmediatcly'tdonatcd''hernewly-acqtlircdintcrestsin
YCq?-I-andYHM toTimBlixseth,byanundatcd%llAonationofcompanylnttrcsts'lagreemcnt,a
true,corrcct.andcompletecopyofvhichisattachedhcrctoasExhibit6,
45. Insummary.priortothcTamarindoTransfer,YDowneda99.999999% interest
inresortproperlyvaluedat$40mlllion. lncxchangefbrthisintcrcst,YDrcccivedanotcfrom
EdraBlixsethfbr$39,995,000andarecited,btltunpaidscashcomponcntof-$5,000.
46. YDdidnotreceivereasonablyeqtlivalcntvalucIiomthetrnnsfcrofitsintcrests
inYCSVTandY1'IN1.ThenotefromEdraBlixscthTvasworthmatcriallylessthanthcvalueof
thctransferrcdpropertybccauseshcdidnothavcthefinancialB'herewitllaltomakepaymentson
thcnotewhcnshesigncdthenote,shedi
dnotevcrintendtorepaythcnoteandshc5led

personalbankruptcyjustmonthslater.Further,EdraBlixsethdi
dnotevenpayYDthercci
tcd
$5,000incash.
47. AtthctimeofthcTamarindo'l-ranslbr,YD'Sremainingassetswcre
unreasonablysmallandthcpartiestothattransaction,inclttdingTimothyBIixscth,shotlldhave
reasonablybclievedthalYDwouldbetlnablctopayitsdebtsastheycamcdue.
48. YDw'asinsolventatthctimeofthc'IamarindoTransfcrorbecamcinsolventas
arcsultofthcTamarindotranslkr.

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49. 'I-heTamarindo'
l-ransfbr,aseffcctcdb)zthcMSAandthcrclatcddocumcnts,
wasintendedtohinder,delayordefrattdcreditors,incltldingcrcditorsofYD.
50. AtthetimcoftheTamarindoTransfer,YDw'asengagcdorwasabouttoengage
inabusinessortransactionforNvhichitsremainingassetswercunrcasonablysmallinrelationto
thebusinessortransaction,
AtthetimeoftheGl-amarindo-l-ransfbr,YDintcndedtoinctlr,orbelievcdor
reasonablyshotlldhavcbelicvcdthatitwouldincur,dcbtsbeyonditsabilitytopayasthey
bccamedue.
'l-heYC1--I-hasa11ortherightsofcrcditorstobringavoidanccclaimsunder
applicablcstatclaw.
Yl
3hadunpaidcrcditorswhoscclaimswcreincxistencconthedatcof-the
TamarindoTransferswhichclaimsaretobepaidthroughdistribtltionsfiomthcYCLT.
TheTamarindoTransfkr,ascffcctedbytheMSAandthcrclateddoctlments,isa
fraudulenttransfcrunder11U.S.
C.j544andMont.CodcAnn,jj31-2-333,-334.
ThcTamarindoTransfkr,ascffectedbytheMSAandtherclateddocumcnts,isa
l
-raudulenttransferundcrl1U.S.
C.j548.
56. Accordingly,theTamarindoTransfbrmaybeavoidedptlrsuantto1IU.S.C.

j550.
TheTamarindoTransfersascffectcdb).
'theMSAandtherelatcddocutncnts,
waslnadefbrthcbcnefitofTimothyBlixsethandTamarindo,LLC.TimothyBlixscthisliablc
totheYCLTfbrthevalueofthcassettransrerred,vvlichisatIcast$40million,oralternativcly,
forthcreturnofthetransferredinterests.
58. Tamarindo,LLCisliablctoBGIforthercturnofitstransferrcd.0l% intcrestin
YI-IM.

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COUNT1V.AVOIDANCEOFBSRDISTRIBUTIONS
59. Plaintiffhercbyrestateseachandcvcryprecedingparagraph,asifspeciscally
statedherein.
Belween2005and2008,BSRownedccrtainrealpropertyinMadisonCotlnty,
Montana.
61. Duringthistimcperiod,BSRwasowncd50% by'I'imothyBlixscthand50% by
57D
62. Oninfbrmationandbclicf'
,whcnl3SRsoldcertainlots,BSRpaidthcsales
proceedsasdividcndstoTimothyBlixsethandYD.
'
rhescdistribtltionsincludevvithoutlilnitation,thcfbllowzing(1istribtltionslnade
NvithinoncycarofthcfiIingofBSR'Sbankrtlptcy,asB'ellasothcrpriortransactions.a11ofwhicharecollcctively'refcrrcdtoasthe*tBSRDistributions'':

a. $1.65nlillionpaidtoTimothylllixsethonorabotltDccclmbcr13,2007.in
connectionwziththesalcofI-ots499,450,and4579
b. $l.65InillionpaidtoTimothyBlixscthonorabotltDeccnAber20,2007,
inconncctionwilhthesalcol-Lots459,463,and465,
.and
$500,000paidtorl-imothyBlixscthonoraboutFebruary14,2008.
connectionwiththcsalcofLot436.
64. BSRdidnotreceivcanyconsidcration,Imtlchlcssrcasonablycqtlvalentvaltlc,
l
brtheBSRDistributions.
65. AtthctimeofthcBSRDistributions,BSR'Sremainingassctswere
unreasonablysmallandBSRshotlldllavercasonablybe1icvcdthatBSRwotlldbetlnablctopay
itsdebtsastheycanpedue.

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66. AtthctimeofthcBSRDistributions,BSRwasinsolvent01
.becameinsolvcntas
aresultof-thedistribtltions.
67. AtthctimeofthcBSRDistributions,BSRwascngagcdorwasabouttoengagc
inabusinessorlransactionforwhichitsremainingassctsweretlnrcttsonablysmallinrelationto
thedistributions.
68. AtthctimeoftheBSRDistributions,BSR intcndedtoincur,orbclicvedor
rcasonablyshotlldhavebclievedthatitNvottldincur,dcbtsbeyonditsabilityt()payasthcy
bccamedue.
69. -lAl
1eBSRDistributionsB'eremadewiththcintenttohinder,dclay,ordefi-atld
crcdltorsandothersharcholdcrsof-l3SRanditsaffiliatcdentitics.
70. ThcYCLThas1111ot-thcrightsofcrcditorstobringavoidanccclailnsttndcr
applicablestatelaw.
BSRhadunpaidcrcditorswhoseclaimswereincxistcnceonthcdateofthc
BSRDistrlbutions,Nvhichclailnsarctobepaidthroughdistribtltionsfron:theYCl-.T.

PursuanttolIU.S.C.j544(b),thcBSRDistributionswercfraudulenttransl
krs
unclcrMont.CodeAnn.jj3l-2-333,-334.
73. ThcBSRDistributionsNvcrefraudulenttransfkrsunderIlU.S.C.j548.
Accordingly,theBSRDistributionsmaybeavoidcdpursuanttolIU.S.C.

j550.
75. Uponavoidancc,Tim BlixscthmustpaythcYCLTtheamountofthcBSR
Distributionstobcprovenattrial,whichinnocvcntislessthan$3.8million.

COUNTV.WRONGFLILDISTRIBUTIONSUNDERSTATELAW
76. Plaintiffherebyrestatescachandcvcrypreccdingparagraph.asifspecifically
statedherein.

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77. ThcBSRDistributionsdescribedabovcweremadcwhileBSRwasunable,or
bccametlnable,topayitsdcbtsastheycanwdueintheusualcourseofbusincss.
78- BSRwasinsolventNvhenitmadethcBSRDistributions.
ThcBSRDistribtltionsarew'rongfuldistributionsunderNlont.ClodeAnn.j358-604.
80. TimothyBlixsethispcrsonallyliablc,asmembcrandmanagerofBSRwho
causcdtheBSRDistributionstooccur,forthercturn01'
-thcBSRDistributionstotheYCL'I-s

ptlrsuanttoNlont-CodeAnn-j35-8-605.
81. TheYCI-Tisenti
tl
edtojudgmentagainsllil
nothyBli
xscthintheamotlntof-the
BSRDistributions,tobcprovenattrial,B'l
licllinnocventisIcssthan$3-8million.
W'HEREFOREPlaintiffprays:

ForjudgmentagainstTi
mothyBli
xscth,Casa20,Ll-C',andal!othcrtransfereesof
Lot90forthevaltlcorl-ot90;

Altcrnatively,forjudgnnentagainst'l-imothyBlixscthfbramountsowcdunderthe
Lot90Note,plusintcrcstandattorncysfccs;
3. ForanOrdcrofthisCourtthatthetransfcrorthemembcrshipinterestsinthc
businessentitiesholdingtheTamarindoproptrty,includingYCNVTandYHM,from
YellowstoneDevelopment,LLCandBGItoEdraBlixseth,TimothyBlixseth,Tamarindo.I.LC.
and/oranyothertransfereesbcsctasideandvoidcd'
,

ForjudgmcntagainstTimothy'Blixseth,'
ramari
ndo,LLC,andallothertransf
brees
oftheTamarindopropertyorofoNvncrshipintercstsincntitiesowningorcontrollingtheTamarindo
propertyforthcvalueofthetransferredmcmbcrshipintercsts'
,

(142 of 364)
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O9-00O64-RBK Doc#:22 Filed:11/25/09 Entered:11/25/0915:57:59 Page13of13

Foranorderenjoiningthesale.transfbr,orcnctlmbering.oftheTamarindopropcrty,
aIlassetsassociatedwithsuchproperties,andanyentitiesthatownorcontrolsuchpropertiesor
asscts;

6. Foranordcrot
-thisOourtthattheBSRDistribtltionsto'I-imothyBlixsethbeset
asideandvoidedx
'

ForjtldgmentagainstTimothyBlixsethfbrtheamountofthcBSRDistribtltions;
8. Forprc
judgmenti
nt
erest;
9. Forattorneysfcesandcosts;and

10. ForsuchotherandfurtherreliefthatthcCotlrtdccmsproper.
Dated:November25,2009.
/s/ShancI7.Coleman
Charles%%'.Hinglc
ShaneP.Coleman
RobertL.Stertlp
1'I()1,l-ANDt
k,HAR-I
''1-!-1:
40!North31stStreet,Suitel500
P.O.Box639
Billings,Montana59l03-0639
ATTORNEYSFORMARCS.KIRSCHNERJ
TRUSTEEOFT1'
1EYELLOWSTONECLUB

IJIQUIDATINGTRUST
46040953DOC

(143 of 364)
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1 stevenL.Hoard(TexasBarNo.09731600)
2 Mt
shoialr
d@mhbmcom
-tlxl-loxR.
o & BRowN,L.L.P:

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U

3 P.o.Box3l656
Amanl
'lo,Texas79120-1656

4 Te1:(86)372-5050/Fax:(806)372-5%6
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5 BrianGlasser
6 BGlasserobaileyglasser.com
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StreetSER,LLP
7 Charleston,WV 2530l

g Tel:(304)340-228247>:(304)342-1i
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9 StevenJayKatzman,StateBarNo.132755

10 B
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11 903CalleAmanecer,Suite350
SanClemente,Califomia92673

12 TeI:(949)369-3700+ax:(949)369-3791
13 AttomeysforPlaintiff
14 MARC S.KIRSCHNER, asTrusteeoftheYellowstone
clubLiquidatingTrust
15
16
IN THE UNITED STATESDISTW CT COURT
17
FOR THE CENTRAL DISTRICT OF CALIFORNIA
18
EASTERNDIW SION

19

h
*p ,1 -' ng:.: Q F SFx

20 MARCS.KIRSCHNEK ASTRUSTEE

CaseNo.

2l OFTI-IEYELLOWSTONE CLIJB
LIQUIDATINGTRUST,
22
23
Plaintiff,

COMPLAINT FOR:

24 v.
25
TIMOTIW L.BLIXSETH
26

(1)FraudulentTransfer(StateLawll
(2)FraudulentTransfer(Federal
BankruptcyLaw);and
(3)BreachofContraet(Unpaid
PromissoryNotesl.

27
28

Defendant.

c;MPLAINT

'

(144 of 364)
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Marc S. Kirschner, as Trustee of the Yellowstone Club Liquidating Trust

2 (($YCLT''),pursuanttoanassignmentforpurposesofcollectionbyCarlA.Eklundas
3 TrusteeofthebankruptestateofBLX Group,lnc.(i
%LX''),makesthefollowingOriginal
4 ComplaintagainstTimothyL.Blixseth.
5
1. INTRODUCTION
6
1. Thiscaseinvolvesasuitontwopromissorynotes,thelootingofabusiness

7 bythedefendant,TimBlixseth(<s
Blixseth''),andBlixseth'sattemptstoabsolvehimselfof
8
9
10
11
12

anyliabilitythroughtheexecutionofafraudulentrelease. Atonetime,Blixsethwasthe
President,CEO andsoleshareholderofBLX. Heusedthesepositionstotransferover
$199milliontovariousaccountsthatheownedand/orcontrolledsothatthefundscould
beusedforhisownpersonalbenefit.Tomemorializethesetransfers,Blixsethexecuted
twopromissorynotesdatedDecember31,2006-onefor$58,305,147.60andtheother

13 for$140,819,333.28(i
theNotes'').ThenjonoraboutAugustJ3,2005,asapartofhis
l4 divorceproceedingfrom hisformerwife,EdraBlixseth,BlixsethcausedBLX,whichwas

15 notapartytothedivoroe,toexecuteaMutualWaiverandReleaseAgreement(fthe
16 Release'').TheReleaseostensiblyreleasedBlixsethfrom liabilityontheNotes.While
17
18
19
20

notdealingdirectlywiththeNotes,asexplainedbelow,anothercourthasalreadyfound
thatthis very same Release constitutesboth an actualand a constructive fraudulent
transferandisthereforeunenforceable.BlixsethcontrolledBLX andcausedittoexecute
theReleasewiththeactualintenttohinder,delayordefkauditscreditors. lnaddition,

21 BLX wasinsolvent(01'wasrenderedinsolvent)whenitgaveBlixseththeRelease,and
22 BLX didnotreceivereasonablyequivalentvaluefortheRelease. lnfact,BLX didnot
23 receiveanythingofvalueinexchangefortheRelease.TheReleaseshouldbesetasideas

24 afraudulenttransfer,andjudgmentshouldbeenteredagainstBlixsethforthefullamount
25 ofprincipalandinterestdueontheNotes.
26
2. Thebackdrop ofallthisrelatesto thespectacularfailure ofYellowstone

27 MountainClub(itheClub''),aluxuryresortlocatedinMontana.TheClubbecamethe
28 subiectofabankruptcytiledonNovember10,2008inBankruptcyNo.08-61570(the
2

oMptAik'
r

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1 tsYellowstoneBankruptcyCase'')intheUnitedStatesBankruptcyCourtfortheDistrictof
2 Montana(theiGBankruptcyCou1'
t'').TheDebtorsintheYellowstoneBankruptcyCaseare
3 the following entities: Yellowstone Mountain Club, LLC C<
YC''),Yellowstone
4 DevelopmentClub,LLC ((YD'')andBigSkyRidge,LLC (iiBSR''),whichentitiesare
5 substantivelyconsolidated,andYellowstoneClubConstructionCo.,L1
wC,whichisjointly
6 administeredwiththeotherDebtors. Thegenesisofthosebankruptciescanbetracedtoa

7 $375millionloanmadebyCreditSuisse,CaymanlslandsBranch(dicreditSuisse'')tothe
8
9
10
11
12

Club on Septel
nber30,2005. During the bankruptcy, theDebtorsand the Official
Committeeof'
UnsecuredCreditorsi
sledAdversaryProceedingNo. 09-00014(t
t
AP-14'')
toequitablysubordinatetheclaim ofCreditSuissebaseduponitsallegedcomplicityin
facilitatingBlixseth'sbreachoffiduciarydutytotheclubinconnection withhislooting
oftheCreditSuisseloanproceeds. BlixsethvoluntarilyintervenedinAP-I4seekinga

13 declaratoryjudgmentthathehadnotbreachedhisfiduciarydutytotheClub. '
rhe
14
15
16
17
18
19

DebtorsandtheCommitteestlbsequentlyfiledathird-pallycounterclaim againstBlixseth
forbreachoftiduciarydutyand forfraudulenttransfers. Following contirmationofa
Chapter11planintheYellowstoneBankruptcyCase,theYellowstoneClubLiquidating
TrustwasformedunderthelawsoftheStateofMontanatobecomethesuccessortothe
Debtors'andtheCommittee'sclaimsandtocontinueprosecutionofAP-14aftertheClub
was sold. After a nine-day bench trial,the Bankruptcy Courtissued a 135 page

20 Memorandum ofDecision CMOD'')datedAugust16,2010,finding thatBlixseth

21 breached his fiduoial'
y duties to the Debtors and received constructive and actual

22 fraudulenttransfers. A judgmentinexcessof$40millionwassubsequentlyentered
23 againstBlixsethonSeptember7,2010.ThejudgmentiscurrentlyunderappealinCase
24 Nos.CV-1O-49-SEH andCV-10-10-51-SEH in theUnitedStatesDistrictCourtforthe
25 DistrictofMontana,ButteDivision,

26

3. TheverysameReleasethatisthesubjectofthefi'
audulenttransferclaimsin

27 the instantaction wasalso assex'

ted asa defenseto the claimsofYCLT in AP-14.
28 BlixsethclaimedinAP-14thatthisreleaseextendedto theYellowstoneClubDebtor's
3

couff,AlkY

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1 claimsforbreach oftiduciary duty and fraudulenttransferwith respecttotheCredit

2 Suisseloanproceeds. ThebankruptcycourtrejectedBlixseth'sdefense,concluding
3 instead thatthe release itselfconstituted both an actualand aconstructive fraudulent

4 transferandwasthereforeunenforceable.ThejudgmententeredinAP-14isonappeal.
5 TheclaimsassertedhereinontheNotesareindependentoftheclaimsassertedbyYCLT
6 inAP-14.
7
II. PARTIES

4. PlaintiffMarcS.Kirschner(aNewYorkresident)isthetrusteeofYCLTthat

9 wasformedunderDebtors'ThirdAmendedPlanofReorganizationfiledMay22,2009,in
10 theYellowstoneBankruptcyCaseandconfirmedbytheBankruptcyCourtinMontanaon

l1 June2,2009. BLX Group,lnc.($$

BLX'')(f/k/aBlixsethGroup,1nc.)isacorporation
12
13
14
15
16
17

organizedundertheJawsofthestateofOregon.DefendantTimothyBlixsethservedas
PresidentandCEO ofBLX from 1999tomid-August2008.Blixsethwasalsothesole
shareholderofBLX.BLX wastheownerandholderoftheNotesexecutedbyBlixseth.
On September21,2009,aninvoluntarypetitionforreliefagainstBLX wasfiledunder
chapter11oftitle 11oftheUnited StatesCodeintheBankruptcyCourt. AnOrderfor
ReliefwassubsequentlyenteredeffectiveOctober9,2011.OnOctober29,2009,CarlA.

18 Eklund(theEtBLXTrustee'')wasappointedTrusteepursuantto1lU.S.C.j1104(d).
19
20
21
22
23
24

5. By order dated August30,2011,the Bankruptcy Coul'tapproved an

assignmentofclaimsfrom theestateofBLX toYCLT forpulposesofcollection.The
claimsinciudedclaimsBLX hadagainstBlixseth,includingwithoutlimitationclaimsfor
fraudulenttransferandclaimsforcollectionoftheNotes.Accordingly,YCLT standsin
theshoesoftheBLX banknl
ptcyestateandistheholderandowneroftheclaimsasserted
hereinagainstBlixseth.

25

6. TimothyL.Blixseth(ii
Blixseth''),defendantherein,isaresidentoftheState

26 ofWashington.
27
28
4

coMpl-Aik'
r

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1
111. JURISDICTION AND VENUE
2
7. ThisCourthasjurisdictionoverthisproceedingpursuantto28U.
S.C,j
3 1332.YCLT isaliquidatingtrustestablishedbythebankruptcycourtinMontana,witha
4 trusteewhoisaresidentofNew York.Additionally, YCLT isactingasassigneeofan
5 Oregon corporation, which is in bankruptcy in Montana. Blixseth is a residentof
6 Washington.Thus,plaintiffanddefendantarecitizensofdifferentstates. Furthermore,

7 theamountincontroversyexceeds$75,000.Blixsethissubjecttopersonaljurisdictionin
8 Californiabecause(1)boththepromissorynotesatissueinthiscaseweremadepayable
9 inRanchoMirage,California;(2)uponinformationandbeliefBlixsethwasaresidentof
10 theStateofCaliforniaatthetimethepromissorynoteswereexecuted;and(3)theRelease
11 thatisthesubjectofthetkaudulenttransferactionsassel-tedhereinwasexecutedpursuant
12 totheMaritalSettlementAgreementinBlixseth'sCalifomiadivorceproceeding Case
13 NumberR1DlND91152intheSuperiorCoul
'
tofCalifornia,CountyofRiverside.
14
8. VenueisproperinthisCourtpursuantto28U.S.C.j1391(a).Thenotesat

l5 issueinthiscasearepayablewithinthisjudioialdistrict,asubstantialportionofthefunds
16 advancedpursuanttothepromissorynoteswasdepositedintoBlixseth'sbankaccountsin

17 bankslocatedwithinthisjudicialdistrict,andtheReleasethatisthesubjectofthe
18 fraudulentconveyanceactionsaroseoutofBlixseth'sdivorceproceeding,whichwasfiled

19 withinthisjudicialdistlict.
20
21
22
23
24
25
26
27
28

IV. GENERALALLEGATIONS
A. TheClubandtheCreditSuisseLoanTransaction.
9. Blixseth and histhen-wife,EdraBlixseth,conceivedofand developedthe
Club.
10. TheClub isa13,500acreexclusivemembershipresortcomprising,among
otherthings,a2,200acreprivateskiresort,achampionshipgolfcoursessecondhomes,
lotsawaitingdevelopment,plattedandunplattedinventoryandopenspaceland,andthe
125,000squarefootWarrenMillerLodge.
5
COMPLAINT

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11. OnSeptember30,2005,CreditSuissepurpol
-tedtoloan$375milliontoYC,

2 YD andBSR inaloantransaction(thetlvoanTransaction'')pursuanttowhichCredit
3 Suisse obtained mortgages,liens and security interests in nearly a1lthese entities'
4 propmlies.
5
12. TheLoanTransactionwasnotmadeforthebenefitoftheClub. lnstead,the

6 creditagreementevidencingtheLoanTransaction(thetscreditAgreement'')providedthat
7 nearlyal1theproceedsoftheloanwereintendedtobeusedSGforpulposesunrelated''to
8 theClub.ThefirstrecitaloftheCreditAgreementprovides:
9
I
CWHEREAS,theBorrowerdesiresthattheLendersextend certain senior
10
term loanstotheBon'
owerhereunder,theproceedsofwhichwillbeused:

11
12
l3
14
15
16
17
18

(i) fordistribution orloansup to $209,000,000 to (BLXjfor

purposesunrelatedtotheYellowstonegclubj,
(ii) for investments up to $142,000,000 into Unrestricted
SubsidialiesforpurposesunrelatedtotheYellowstone(Club1
',
(iii) topaytheTransactionCosts,
(iv) torefinancetheExistinglndebtedness,and
(v) tofinanceaportionofthedevelopmentandconstructioncosts
associatedwiththeYellowstone(Clubqinaccordancewiththe

19
FinancialPlan.''
20 B. LoanTransadionProceedsDistributedtoBLX.

21
13. Paragraph2.6(i)oftheCreditAgreementprovidedthatupto$209millionof
22 theLoanTransactionproceedswererequiredtobetddistributedorloanedto(BLXjfor
23 puposesunrelated''totheClub.
24
14. Pursuanttothatprovision,YC immediatelydistributed$208,831,158.45of
25 theLoanTransactionproceedsforiGpurposesunrelatedto''theClub,asfollows:
26
a. $25,000,000certificateofdepositatFirstBankinBLX'Sname;
27
b. $11,939,495payofftoFirstBankforBlixseth'sthenprimary
28
residenceatPorcupineCreekinRanchoMirage,Califolmia;
6
COMPLAINT

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$17,000,000certificateofdepositatPalm NationalBankinthe
Blixseths'name;
d. $14,016,227.87 depositintoamoney-marketaccountatPalm
C.

DesertNationalBankinBlixseth'sname;
e. $4,133,623.50 payoffto Palm DesertNationalBank forthe
followingdebts:

(1) $3,169,)18.75 forchargesrelated to dt

Desel
-tRanch,''
Blixseth's personal housing development near Palm
Springs,Califolmia;

(2) $79,629.54payoffofGEdra'sCondo,''acondoownedby
EdraBlixsethinPalm Desel'
t,California;

(3) $402,546.02 payoffofTimothy and Edra Blixseth's

personallineofcredit;and

(4) $482,329.19payoffofEdraBlixseth'spersonallineof
credit.
$15,000,000 cel-tificate ofdepositatJackson State Bank in
Blixseth'sname;
g. $3,068,749.
99payofftoAmericanBankforunknownpurposes;

h. $975,908.57payofftoAmericanBankforunknownpurposes;
$1,515,250payofftoAmericanBankforunknownpurposes;
$896,423.28payofftoAmericanBankforunknownpurposes;
k. $977,894.
92payofftoAmericanBankforunknownpulposes;
$100,000,000 certificate of deposit at U.S. Bank the
Blixseths'name,from which$28,000,000wasusedtopurchase
aprivateislandinTurksandCaicos;
m. $5,000,000certificateofdepositatPacificWesternBankinthe
Blixseth'sname;
7
COMPLAINT

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1
2
3
4

n.

p. $175,376.23payofftoUnionBankforarentalhomeownedby

o.

$2,971,443.02 payoffofa personalnoteto Pacit

ic Western
Bank;
$160,765.83payofftoUnionBankforarentalhomeownedby
Blixseth;

Blixseth;

q. $2,007,930.55 payoff to Commercial Bank for unrelated

8
9
10

purposes;
r. $1,403,547 payoff to GECC for an airplane owned by a
Blixseth-ownedcompany;

11

s. $2,484,774 payoffto GECC foran airplane owned by a

12

13
14
15

Blixseth-ownedcompany;and

t.

$272,590payofftoWorldSavingsforarentalhomeownedby
TimothyandEdraBlixseth.

15. Notsurprisingly,Blixseth'sIootingtookitstollonboththeClubandBLX.

16 ByNovember,2008(immediatelyaftertheBlixsethdivorceproceeding),theClubwas
17 unabletomaketheinterestpaymentsrequiredbytheCreditAgreement.Butfornumerous
18 Kibail-out''Iandpurchasesmadebyinterestedpaltiespriortothattime,theClubwould
19 have been unable to meet their interest expense obligations long before. As a
20 consequenceoftheLoanTransactionandthelootingoftheloanproceedsbyBlixseth,the
21 Clubwasrequiredtoseekbankruptcyprotection.
22 C. BlixsethExecutesPromissoryNotesinFavorofBLX.
23
16. Ascanbeseen from theforegoing,Blixsethpersonallybenefited from the
24 Loan Transaction by virtue ofhis receiptofmillionsofdollars, Consequently,on

25 December31,2006,BlixsethexecutedtwopromissorynotespayabletoBLX (previously
26 definedasthett
Notes'').Onepromissorynoteisintheamountof$58,305,147.60,andthe
27 other is in the amountof$140,819,333.
28. The totalamountof both Notes is
28 $199,124,480.88. Theseftmdswere,infact,actuallyreceivedbyBlixseth. Trueand
8
COMPLAINT

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1 correctcopiesoftheNotesare attached heretoasExhibitsA and B and incorporated

2 hereinbyreference. TheNotesthemselvesdonotrepresentlegitimate<6loans.'' They
3 werepartofBlixseth'sffaudulentschemetoloottheCreditSuissloanproceedsfrom the
4 ClubthroughBLX.Blixseth'sownfraud,howevex,isnotadefensetoenforceabilityof
5 theNotes.
6
17. BothNotesprovidethats
gtlhepaymentofprincipalanda1laccruedinterest
7 shallbe made upon written demand ofPayee.'' Likewise,the Notesprovide forthe
8 paymentofattorneys'feesandvariouscostsifasuitisbroughttoenforcetheNotes.
9
18. On September21,2009,aninvoluntarypetitionforl'
eliefagainstBLX was
10 filedunderchapter11oftitle1loftheUnitedStatesBankruptcyCodeintheBankruptcy
11 Court. An OrderforReliefwassubsequently entered effectiveOctober9, 2009. On
12 October29,2009, the BLX Trustee wasappointed trusteepursuantto 11 U.S.
C.j

13 1104(d).
14
15
16
17
18
19

l9. The BLX Trustee filed a Motion for Order Authorizing Assignmentof
ClaimsforPurposesofCollectiononAugust12,2011.Bythismotion,theBLX Trustee
soughtcourtapprovalfrom the Bankruptcy Courtforthe assignmentofthe <tEstate
BlixsethClaims''toYCLT. Themotiondefinesthe tt
EstateBlixsethClaims''asitclaims
andcausesofaction...againstTim Blixsethoranentityorentitiesdirectlyorindirectly
ownedorcontrolledbyTim Blixseth. ..includingwithoutlimitation,claimsorcausesof

20 actionarisingoutoforinconnectiongwith)thepromissorynotespayabletotheDebtor
2l madebyTim Blixsethinconnectionwithorresponsetotheloanmadebycertainlenders,
22 withCreditSuisse,CaymanlslandsBranch,...''TheEstateBlixsethClaimswereassets
23 ofBLX'SbankruptcyestateandincludetheNotes.
24
20. By order dated August 30, 2011,the Bankruptcy Courtapproved the
25 assignmentoftheEstateBlixsethClaimsfrom theestateofBLX toYCLT. A trueand
26 con'
ectcopyoftheAugust30,2011orderenteredbytheBankruptcyCourtisattached
27 heretoasExhibitC andincorporatedhereinbyreference. TheBLX Trusteeexecutedan
28 AssignmentofClaimsforPurposesofCollectionasofthesamedatewherebyitassigned
9
COMPLAINT

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1 theNotestoYCLTaswellasa1JotherEstateBlixsethClaims. A trueandcorrectcopyof
2 theAssignmentofClaimsforPurposesofCollectionisattachedheretoasExhibitD and
3 incorporated herein by reference. Accordingly,YCLT istheownerand holderofthe
4 NotesandastheassigneeofBLX,YCLTstandsintheshoesofBLX andhasa1lrightsto
5 the collection ofthe Notes and/orthe recovery ofmoniesBLX paid to Blixseth in
6 connectionwith theNotes. YCLT succeeded toalltheavoidancepowersoftheBLX
7 Trusteeandisdeemedtobeagoodfaithpurchaserforvalue.
8
21. Asstated,theNotesaredemandnotes.ByletterdatedSeptember12,2011,
9 YCLTmadewrittendemandonBlixsethrequiringhim topaythefullamountofprincipal
10 owed on theNotesby September 16, 2011. A true and correctcopy ofthisletteris
11 attachedheretoasExhibitE andincorporatedhereinbyreference. Blixsethhasfailedto
12 paytheamountsdueontheNotesand,therefore,hasdefaultedontheNotes.
13
22. In addition,Blixseth owesYCLT through September16,2011,theinterest
14 thatisdue on the Notesassetforth in paragraph one ofeach oftheNotes. After
15 September16, 2011,the interestBlixseth owesYCLT accruesattherate setfol'
th in
16 paragraphsixofeach oftheNotes. Paragraph7oftheNotesalsoprovidesthatinthe
17 eventsuitisbroughton theseNotesthattheprevailing party isentitledtorecoverits
18 attorneyfeesandallothercostandexpensesincurredandreasonablynecessalytherewith.
19 D. Blixseth'sFraudulentAttempttoAbsolveHimselfFrom theConsequencesof
20
HisActions.
21
23. No doubtunderstandingthatheowedBLX approximately $181million,
22 Blixsethattemptedtoabsolvehimselfofthisdebtthrough theexecutionofafraudulent
23 releasethatwasdonewithin the contextofhisdivorce, ln Decemberof2006,Edra
24 Blixsethfiledfordivorce. OnoraboutJune26,2008,Tim andEdraBlixsethenteredinto

25 aMaritalSettlementAgreement(t<MSA''),wherebytheyagreedtoadivisionofmarital
26 assets.Later,onAugust13,2008,Tim andEdraBlixsethexecutedaseparatedocument

27 entitledMutualWaiverandReleaseAgreement(previouslydefinedasthe'Aelease''),a
28 trueandcorrectcopyofwhichisattachedheretoasExhibitFandincorporatedhereinby
l0

coMptA-fk-'
i

(153 of 364)
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1 reference.PursuanttothetermsoftheRelease,BLX purportedlyreleasedclaimsagainst
2 Blixseth,includingitsclaimsundertheNotes. Aspartofthemaritaldissolutionandthe
3 executionoftheRelease,EdraBlixsethexecutedan<WmendedandRestatedPromissory
4 Note''intheamountof$199,134,480.88,whichallegedlysupersedestheNotes,andthe
5 NotesweremarkedtsupersededbyReplacementNote.''A trueandcorrectcopyofthe
6 AmendedandRestatedPromissoryNoteisattachedheretoasExhibitG.Trueandcorrect
7 copiesofthemarked-upNotesareattachedhereto asExhibitsH and 1. Finally,BLX
8 executed an Assumption Agreementthatostensibly cancelled the Notesand released
9 Blixseth from any clailnsundertheNotes. A trueandcorrectcopyoftheAssul
nption
10 AgreementisattachedheretoasExhibitJ.WheneverYCLT allegesthattheReleaseisa
1l fraudulenttransfer,the same allegationsaremade with respectto the Amended and
12 RestatedPromissoryNote,theAssumptionAgreement,and,totheextentnecessary,the
13 markingoftheNotes'withthelegendtsupersededbyReplacementNote.''A1lofthese
14 actions,which occurred contemporaneously,werepartofthesametransaction and are
15 unenforceableasafraudulenttransfer.

16
24. TheReleasewasmadeatatimewhenBLX wasinsolvent(01'wasrendered
17 insolventbythetransferoftheRelease).lnaddition,BLX didnotreceivereasonably
18 equivalentvalueinexchangeforthetransfer.BlixsethconcededthatbothBLX andEdra
19 BlixsethwereinsolventasofAugustl3,2008,in an expertreportfiled on Blixseth's
20 behalfin Adversary Proceeding No.09-00018 in the U.S.Banltruptcy Courtforthe

21 DistrictofMontana,styledSnowv.BLXGroup,Inc.,etal.(CC
AP18'5).
22
23
24
25
26
27
28

ThisreportconcludedthatBLX andEdraBlixsethwereinsolventunderthebalancesheet
test,the debtservicetest,andthecapitaladequacy test. TheAmended and Restated
PromissoryNotethatBLX receivedffom EdraBlixsethinexchangeforreleasingBlixseth
hadnovalueduetoEdraBlixseth'sinsolvency.A replacementnotethatisworthlessis
notreasonably equivalentinvalueto Blixseth'sobligation to pay BLX approximately
$181million.
11
COMPLAINT

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25. Asstated in theMOD in AP 14, ifBlixseth dominated and controlledthe

2 affairsofBG1(n/k/aBLXItosuchanextentthatBG1hadnoseparatecolporateidentity
3 apalfrom Blixseth. BlixsethandBGlwereoneandthesame.... BGIwasclearly
4 Blixseth'salterego.'' MOD at95. TheReleasewasnotan armslength transaotion
5 becauseBlixsethwasnegotiatingtheReleasewhilehewasincontrolofBLX. BLX was
6 notapartytothedivorceproceedingandhadno opportunitytocontestorlitigatethe
7 Release.Nothingthatoccun'
edintheBlixsethdivorceproceedingisbindinguponBLX.
8
26. TheReleasewasobtainedwiththeactualintenttohinder,delayanddeikaud.
9 Atthe timeBlixseth obtained theRelease,hewaswellawareofthe seriousfinancial
10 problemsfacedbytheClub.Heknew therehadbeenmaterialnegativemarketchanges
11 andthattt
priceshavestoppedescalatingandbuyershavedriedup.''Inpleadingsfiledin
12 connectionwiththedivorce,Blixsethrecognizedthattherehadbeendramaticchangein
13 theeconomyandstockmarketsintheUnited Statesandtheworldand therehadbeen
14 <tchangeand uncertainty inthefinancialand lending markets.'' Ful-ther,according to

15 Blixseth,'dgbjecause ofthe overallslow-down in the realestatemarket,salesat

16 Yellowstone Club,which have been the primary source ofcash funding ...have
17 diminisheddramatically.''
18
27. Inlate2007andearly2008,BlixsethwasattemptingtoselltheClubtoCross

19 HarborCapitalPartners,LLCtsdcl'
ossHal
'
bor''),anentityownedbySam Byrne.Blixseth
20
21
22
23
24
25
26
27
28

hasmaintainedthatBymepulledoutofthesalesothathecouldenterintoaconspiracy
withEdraBlixsethandotherstobankrupttheClubsothatByrnecouldpurchasetheClub
for a much cheaperprice. This so-called sconspiracy''is a tigmentofBlixseth's
imagination. lnstead,BlixsethdidnotwanttoconsummatethisproposedsaletoByrne
becauseherecognizedthattheproceedsfrom thesalewouldnothavebeensufficientto
payofftheCreditSuissedebtandthetaxesthatwouldbeowed asaresultofthesale.
BlixsethtestifiedataMarch21,2008hearinginthedivorceproceedingthatheestimated
thatheandEdrawouldowebetween$50to$100millionintaxesasaresultoftheCross
Harborsaleandthattd
theproceedsmaynothavebeensuffioienttopayeverythingandall
l2

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1 ofthetaxes.''Blixseth thusunderstood that,iftheCrossHarbortransaction hadbeen

2 consummated,hewouldnothavereceivedanymoneyfrom thesaleand,infact,would
3 havehadtocomeupwithadditionalfundstoensurethatthesaleclosed. Fivedaysafter
4 thistestimonybyBlixseth,theCrossHarbordealwasterminated.
5
28. BlixsethhastestifedthatitwasCrossHarborthatwantedtoterminatethe
6 sale;however,Blixseth'sowne-mailsshow otherwise. OnMarch26,2008at10:10p.m.,
7 Blixsethe-mailedhislawyer,MikeDoyle,indicatingthathewasin 100% opinionNOT
8 toextend''theclosingdateforthetransaction.Sixteenminuteslater,MikeDoylesends
9 ane-mailindicatingthat'twewillbesendingatenuinationnoticeshortly.''Subsequently,
10 CrossHarborsentitstermination letterin ordertopreserveitsrightto arefund ofits
11 deposit.However,uponinformationandbelief,itwasBlixseththatwantedtoterminate
12 thedeal. AfterthesaletoCrossHarborfellthrough, Blixsethagreed to transferthe
13 DebtorstoEdraBlixsethaspal'
toftheMSA.Bydoingso,Blixsethavoidedthis$50to
14 $100milliontaxliability,insteadfoistingthispotentialtaxliabilityuponhisex-wife.
15
29. Blixsethandthefinancialandlegalprofessionalsheretainedwereconcerned
16 aboutEdraBlixsethand/ortheCluborBLX tilingbankruptcyandtheeffectthatmight
17 haveonBlixseth.lnaJune17,2008e-mailbetweenBlixsethandeightofhislegaland
18 financialadvisors,the tipotentialforatax liabilily arising ifYellowstone Club,BLX

19 and/orMrs.Blixsethdeclaredbankruptcyanddefaultedonthe(CreditSuissejloanafter
20
21
22
23

thepropertysettlementanddivorcewerefinal''wasdiscussed.Duringthecourseofhis
divorceproceedings,Blixsethsoughtlegaladvicefrom thelaw firm ofThorntonByron
LLP foralleged estateplanning purposes,butthe invoicesfrom thatt'
irm indicatehe
actuallysoughtameanstoavoidanyliability.

24
30. The invoices from Thornton Byron (Blixseth's ii
wealth preservation''
25 lawyers)arerepletewithreferencestoanalyzingwaystoshieldBlixsethfrom potential
26 liabilityto theClub andBLX. Forexample,oneentl'
yontheThorntonByroninvoice
27 provides:
28
13

POMPI-SINT

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IDliscussion with George Mack regarding particular concern

regarding M r.Blixseth's possible liability to creditors ofM rs.

Blixseth,BlixsethGroup,Inc.ortheYellowstoneClubentitiesilf)

4
5
6
7
8
9
10
1l
12

M rs.Blixsethweretoassumeliabilitiesofbusinessentitiesandthe
maritalcommunityonwhich Mr.Blixseth iscurrently obligated;
revise correspondence to clientand representativesregarding same;
analysis ofdocumentation and transactionalsteps to limitMr.
Blixseth'sexposureonsubsequenteffortswithrespecttoIiabilities
assumed by Mrs.Blixseth; discussion to analyze same; draft
correspondence regarding recommendation for limiting M r.
Blixseth'sIiability afterM rs.Blixseth'sassumption ofdebt;draft
multiplecorrespondencerespondingtoquestionsand concernsraised

13
14

byMr.Blixsethandotherrepresentativesregardingsame.(Emphasis
added).

15
31. TheforegoingillustratesthatBlixsethandhisadvisorsknew aboutthelikely
16 bankruptciesoftheClub,BLX andEdraandthattheydevelopedaplaninanattemptto
17 allow Blixsethtowalkawayfrolntheobligationshecreatedwithoutreturningonepenny.
18 Thisplannotonly involvedobtainingreleasesfrom BLX andtheClub,itinvolvedthe
19 creation ofDesertRanch LLLP,astructurereferred to by hisattorney asattpersonal
20 Berkshire Hathaway''thatprovided tdgeneralcreditor protectionx'' As admitted by
21 Blixseth'sownlawyer,oneofthepumosesofthisstructureistoremoveassetsfrom the
22 reach ofcreditors. Virtually allofBlixseth'sassetsweretransferredintothisvehiole.
23 Revealingly,Desertltanch LP wasconvertedtoDesel'tRanch LLLP on November12,
24 2009,ameretwodaysaftertheClubfiledbankl
-uptcy.
25
32. TheDesertRanchstructurewastheculminationofBlixseth'splantoshield
26 himselffrom theconsequencesofhisactions.Thebegizmingoftheplanwastoobtainthe
27 Release.Indeed,Blixsethtestitiedunequivocallythatgettingareleasefrom anyclaims
28 forbreach offiduciary duty orfraudulenttransferwastheit
cornerstone''oftheMSA.
14

coApl-AiN'
r

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1 Blixseth obtained theRelease with the actualintentto hinder,delay and defraud his
2 creditols,includingBLX.Underthefactsandcircumstancesasfoundherein,itwouldnot
3 beappropriatetoallow BlixsethtorelyontheReleaseasadefensetotheclaimsasserted
4 by YCLT,and the Releaseshould besetaside asboth an actualand a constructive
5 fraudulenttransfer.
6
33. Indeed,in thecontextoftheYellowstoneClubbankruptcy,theBankruptcy
7 Com'
thasalreadydeterminedthattheReleaseshouldbesetasideasbothanactualanda
8 constructive fraudulenttransfer. ln determining to setaside the Releaseasactually
9 fraudulent,theBanklrptcyCourtconcludedthattiBlixseth'sfraudulentintentcouldnotbe
10 moreclear''andthattheReleasehadbeenobtainedtt
withtheactualintenttohinder,delay
11 anddefraudhiscreditors.''MOD at109.
12
V.FIRST CAUSE OFACTION

13

SettingAsideReleaseasFraudulentTransferUndcrN/s/cLaw

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

34. YCLTincorporatesbyreferencea11priorallegationsintheComplaint.
35. TheReleasewasobtainedfrom BLX withinfouryearspriortothefilingof
theBLX banltruptcy.
36. PlaintiffisinformedandbelievesandthereuponallegesthatcreditorsofBLX
existed atthetimeoftheReleasewhoremainedunpaid asofthedatethatBLX was
placedintoaChapter11bankruptcy,andcreditorsofBLX existedfollowingtheRelease
whoremainedunpaidasofthedatethatBLX wasplacedinChaptet'11bankruptcy.
37. Assetforthabove,theReleaseobtainedbyBlixsethaspal4oftheMSA was
obtainedwiththeactualintenttohinder,delayand/ordefraudthecreditorsofBLX.
38. Fullhermore,BLX didnotreceivereasonablyequivalentvalueinexchange
fortheRelease,andBLX wasatthetimeoftheReleaseengagedorwasabouttoengage
inabusinessoratransactionforwhichtheremainingassetsofBLX wereum'
easonably
smallinrelation to thebusinessortransaction,and/oratthetimeoftheReleaseBLX
intendedtoincur,orbelievedorreasonably shouldhavebelieved itwouldincur,debts
beyonditsabilitytopayastheybecausedue.
15
COMPLAmT

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39. Therefore,theI
teleaseconstitutesafraudulenttransferunderCal.Civ.Code.

2 j3439.04(a)(1)and(2)andj3439.05:andshouldbeavoidedpursuanttoCal.Civ.Code
3 j3439.
07(a)(1).YCLTassertsthisclaim pursuantto11U.S.
C.j544.
4
40. YCLTisentitledtoajudgmentagainstTimothyBlixsethsettingasidethe
5 ReleaseasafraudulenttransferunderCalifornialaw.
6
vI.SECOND CAUSEOFACTION

SettingAsideReleaseasFraudulentTranferUnderFederalLaw

8
41. YCIVTincorporatesbyreferencea11priorallegationsintheComplaint.
9
42. Assetforthabove,theReleaseobtainedbyBlixsethaspartoftheMSA was
l0 obtainedwiththeactualintenttohinder,delayand/ordefraudthecreditorsofBLX.
11
43. Ful
-thermore,BLX didnotreceivereasonably equivalentvalueinexchange

12 fortheRelease,andBLX (i)wasinsolventatthetimeoftheReleaseorwasrendered
13 insolventasaresultoftheRelease;(ii)wasengagedorwasabouttoengageinabusiness
14 oratransactionforwhichanypropertyremainingwithBLX wasanunreasonablyslnall

15 capital;and/or(iii)intendedtoincur,orbelieveditwouldincur,dx
ebtsbeyonditsabilityto
16 payassuchdebtsmatured.
17
44. Forthereasonssetforthabove,theReleasealsoconstitutesasafraudulent

18 transferunderSections548(a)(1)(A)and(B)oftheUnitedStatesBankruptcyCodeand
19 shouldbeavoidedpursuanttoSection550oftheUnitedStatesBankruptcyCode.

20

45. YCLTisentitledtoajudgmentagainstTimothyBlixsethsettingasidethe

21 Releaseasafraudulenttransferunderfederalbankruptcylaw.
22
v.THIRD CAUSE OFACTION

23

Breachofcontract(PromissoryNotes)

24
46. YCLTincorporatesbyreferenceallpriorallegationsinthisComplaint.
25
47. BecausetheReleasemustbe setasideasa fraudulenttransfer,YCLT is
26 entitledtorecoveryontheNotes.
27
48. OnDecember31,2006,BlixsethmadethenotespayabletoBLX.Onenote

28 isintheamountof$58,305,147.60andtheotherisintheamountof$140,819,333.
28.
16
COMPLAINT

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1 Thesefundswere,infact,actuallyreceivedbyBlixseth.
2
49. TheNotesaredemandnotes.Blixsethhasnotmadepaymentoneitherofthe
3 Notes.A1lconditionsprecedentforthecollectionoftheNoteshavebeensatisfied.
4
50. ByletterdatedSeptelnber12,2011,YCLT madewrittendemandonBlixseth
5 requiring him to pay the fullamountofprincipaland interestowed on theNotesby
6 Septemberl6,2011. Blixseth hasfailed to pay the amountsdue on theNotesand,
7 therefore,isin default. Paragraph7oftheNotesalsoprovidesthatintheeventsuitis
8 broughtontheseNotesthattheprevailingpallyisentitledtorecoveritsattolmeyfeesand
9 allothercostandexpensesincurredandreasonablynecessarytherewith.
10
51, Blixseth also owesYCLT interestthatisdue undertheNotes. Through
11 Septemberl6,2011,theinterestonbothNotesaccruedattheKt
NoteRate''assetforthin
12 paragraph 1oftheNotes.AfterSeptember16,2011,theinterestaccruesattherateof5%
13 perannum abovethetGNoteRate.''
14
52. BecauseYCLT hasbeen forced to bringsuitontheNotes,YCLT isalso
15 entitledtorecoveritsreasonableandnecessaryattorneys'feesandothercostsassetforth
16 inparagraph7oftheNotes.
17 1lI
18 ///
19 ///
20 ///
21 ///
22 ///
23 #/
24 ///
25 ///
26 ///
27 ///
28 ///
17
COMPLAINT

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PM YER FORRELIEF

WHEREFORE,theYCLTpraysthatthisCourtenterjudgmentuponitsclaim
againstBlixsethasfollows:
1. An ordersetting aside the Release as a fraudulenttransfer underboth
California1aw andfederalbankruptcylaw;
2. Anawardofactualdamagesinanamounttobedeterminedattrial;
3. Anawardofcosts,disbursements,attorneys'feesandprejudgmentinterestas
8
permittedbyCalifolmiaandfederalstatutol'
yandcommonlaw;and
9
4. Suchotherandfurtherreli
efastheCourtdeemsjustandequitable.
10

october6*,2011

BIENERT,MILLER
& KATZMAN,PLC
>
By:

21

S enJayKatzman
SusannK.Narholm
AttorneysforPlaintiff
MARC S.KIRSCHNER,asTrusteeofthe
YellowstoneClubLiquidatingTrust
MULLIN HOARD & BROWN,L.L.P
StevenL.Hoard
JohnG.Turner,Ill
AttorneysforPlaintiff
MARC
.nKI
AE
ust
he
YellowsS
to
eRS
CluC
bI
LlquK
idaa
ts
inT
gr
Tr
ue
se
toft
BAILEY & GLASSER,LLP
BrianGlasser
ThanosBasdekis
AttorneysforPlaintiff
MARC S.KIRSCHNER?asTrusteeofthe
YellowstoneClubLiquidating

18
COMPLAINT

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E X H IB IT

iiyjk55

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DupllcateOr/g/rl'
fr/
PROMISSORYNOTE

$58,305.147.60

Decem/r3l.2006

FORVALUERECEIVED,(theundersigned,individuallyandcolloctively(''Pay0P')

promisestopaytetheorderofBLIXSETHGROUP,INC..at71-534SabaraRoad'Rancho
Mirage,CA92270,oratsuchotherplaceastheNolderofthisNote(''Payee'')mayfromtime
totimedosignateinwriting,lhtsumorFiftyEi
ghtMillionThreeHundredFivenousmld
OneHlmdrcdFortySevenand60/100Dollat'
s($j8.305x147.60)inlawrulmoneyofthe
UniyedStvtes,withinterestthereonfromthedateofthi
sNoteuntilpaidattheratesotforth
below,computedonrnonthlybaluces.Interestfol'eachtkllcalendarmonthduringtheterrn
cfthisNoteshallbecalculatedontheb%isofa365or.
Jti6-dayyearandtljeactualnumbcr
'
ofdaysinthalmonth.

1- IntercstRate.'f'
hcpectmnuminterestratehereunder('NoteRatc'')shallbcat

lLeAFRBlcndcdRate.
2. Maturlty.Thepaymentofpringipalandal1accruedinterestshallb:made
tlponwritteadcmandofPayce.
3. ApplicatlonofPayments.PaymclltssllallbcappliedfirsltothepaymentQfaccruedinterest;secondvattheoptionosPayee,tolhepaymentofanylattchargesdue
hereunder;andrhird,tothereductionofprincipaloftllisNotc,
4. Prepaymeut-Payormayprepayit,
sobligationundtrthsNoteinfullorinpart
atanytlmeorfromtimctotimewithoutpremiumorpenalty.

5. LateCharge.Ifltnyamountpayableheretmdtsrispaidmoret17111:tCJI(10)days
afterLheduedatethereotPayorpromisestopayalatechargeoffiveperoent(5%)ofthe
delinqucnlamountasliquidateddarnagu forthcextraexpersscinhandlingpaxdue
payments.
6, Derault;Remedies.lfdefaultismadeinthepaymentofanyaznountpayablc
hereunddrwhendue,lben,atthcoptionof'payee.theentirelndebtcdneasevidenccdhereby
shallbecomemmcdiatelydueandpayable,anda11suchmnounts,includlga11accrucdbut
unpaidin:erest,shalltiereafterbearinterestattherateofGvepercent(5%)prsnnumabove
tbeNotcRate,Failuretoexercisethi:optionshallnotwaivctherighttoexercisethesamein
tbeeventofanysubsequentdefault.
7. AttorneyFeed.Ifsuit,action,oromerproceedjngofanynatktrewhaloevtr

(includinganyproceedingundcrtheU.S.BaltkruptcyCode)isinstittzrcdirhcormecdonwith
1-PROMISSORYNOTE

EXHIBIT
*

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anycntroversyarisingoutol-thisagreementortointepretorenforccanyrigiushereunder,
theprevallingpartyshallbeentitledtorecoveritsauorneyfces.garalegals,accotmtants.and
othertxperts'feos,anda1lotherfeesvcosts,andexpensosactuallyincurredandreasonably
necessaryinconnectiontherewith,asdetermincdbythecourtattrlaloronanyappealor
review.inddditiontoal1otheramonn:sprovidcdbyIaw.
8. Miscellaneous.
8.1 Everypeuonorentityatanylimeliablefortl)epaymentofthe
indebtednessevidencedborebywaivespresntmentfbrpaymcnt,demandandnoticof
nonpaymentofthfsNotc.Everysuchpcsonorentityfurthtrhercbyconscntstoany
extensionoffhetimeofpaylnenthcreoforothermoditlcationof(hetermsofpaymentofthis
Note.thereltaseofa1lormypartofthesccurityhtrelbryortlserclemseofanypartyiiabietor
thepaymentoftheindcbtcdnessevidencedherebyatJmylimandfromtimetotimc,atth:
requestot-anyonenoworhcreatterIiablcthrrefor.Anysuchextensiotlorrelemsemayl;c
madewithoutnotlcetoanyofsuchpersonsortnlitle.sandwiloutdischargingtbeirliability.
8.2 Theheadlnptothevarioussectionshavebeeninsertedforconvenience
ot-retbrcncconlyanddonotdefine,limit,modifyyorexpandthceypreassprovisionsorthis
Notc.
8.3 ThisNoteismadow'ithrefbrencetoandistobecons-uedinaccordana
withthelawsofthestateofCalitbroia.
By:

'

TlMo'
niv .BL '
rH

2.PROMISSORYNOTE

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E X H IB IT
iiB 55

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DuplicateOrl
kinal
PROMISSORYNOTE
$140.819.333.28

Dccember31%2006

FORVALUERECEIVED,(theundersigned.individuallyandcollectively('Payor'')

promisestopaytotheorderofBLIXSE'
I-HGROUP,lNC.xat71-534SaharaRoad,Rancho
Mirage,CA92270.oratsucl)otherplacomstheholderoftbisNole(''Payee'')mayhomtime
lotimedesignaleinwriting,thcslzmofOneHundrodFortyMillionEightHundredNinetcen
A-housandnreeHtmdrednirtyThrect
md28/100Dollars($140.8t9,333.28)InIawful
moncyoftheUnitedStates.withinterestthcreonfromlhedatoofthisNoteuntilpaidatthe
cdtesetfortltbelow,computedonmonthlybalances.fnlerestforeachfullcalcndarmonth
duringthetzrmofthisNoteshallbecalcutaredonthebxsisofa365or36&dayyearandthe
acmalnumberofdaysintha!month.

InterestRntt.'
l'heplrmmumintercst
'
mchm-eunder('WoteRntcN)shallbea:

thtsamuratePaycei:requiredtopayYellowstontMounvinClub,LLCunderpm'
agraph
23AofthcCreditAgrefnen!enteredintobelweenYcllowstoneMountainClub,LLC,
YellowsloneDevelopment.LLCaadB1:8kyRioge.LLCasBorrowenmmldCreditSuissc
PirstBoston,datcdSeptember:10,2005.
2, Maturity.Thcpaymen:ofprincipalanda1laccruedintcrestshallbemadc
uponvvrittendemandof-Payec.
3. ApplicatiouofPayments.Paymentssllal)beappliedfirstothepaymentof
accnxdinteresqseond,attbeoptionofPayee,tothepaymentofanyiatecbargesdue
hereunder;andthird.tothcrcductionofprincipalortllisNote.
4. Prepayment PayormayprepayitsobligatlonunderthisKoT:infu11orinpart
atanytimeorfrom timctotmewithoutpremium orpenalty.

5. LateChargmlf'anymnountpayahlehereunderispatdmorethanten(10)days
aherthtduedatethcrvotlPayrpromisestopayIattchargeoffi'veptrcent(5%)oftht

delinquentamountasliquidateddamagtsfortheextn expensoinhandlingpas!due
Py
6. Default;Remediiu-ll-dcfhultismadeiI1thcpaymentofanyamonntpayable
bereunderwhendue,then,attheoptionofPayee,tlneentireindebtednessevidenccdhereby
shallbtcomeilnmediatelyducandpayable.andalIsuchamounts.includingallaccruedbut
unpaidlnte,restzshallthereafttrbeearinterestattlteratvof'fivepercent(5%)perannumabove
theNoteRate.Failuretoexercisethisoptionshallnotwaivqtherlghtlotxtrcisethesamein
theeven!ofanysubsequentdefault.

I-8ROMIdSORYNOTE

EXHIBIT

)
S

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7. AttotmeyFees.lfsuitaction,orothez'prceedingofanynaturcwhatsoever
aflycontroversyarisingoutoftkisagreementortointerpretoronrorceanyrlghtshcreunder,
theprevailingpartyshallbeentitledtorccovm-itsattorntyfees,paralegals,Rccountant:.Md
olherexperts'fees,anda)1otherfees.coscs,andexpensesactuallyiucurxdartdreasonably
necessaryinconneotiontkerewitkasdeterminedLy'
thecouztatkialoronanyappcior
review.lnadditiontoal1otberm'
nountsprovidcdbylaw.
8. Miycellaneous8.l EverypersonortntityatanytinwIiabl:fortl
:epaymentofthe
indebtednessevidcncedherebywaivespresentmentforpaymentdemandandnoticcof
ftonpaynlentoftttisNote.Everysuchpentmorenthyfurtherhtrebyconstmtstoany
extensionofthetimeofpaymentllereoforothcrmodiscatonOfthermsofpaymentOfthis
Note.thereleaseol-allorm!ypartofthesecuzityhcrefor.ortherel= eofanypartyllablefor
t
llcpaymentoftheindebtednessevidencedherebyatany*mtandfromtimetotime.Mthc
rcquestofanyonenoworhereafterIiabletherelbr.Anysuchextcnsionorreleasemaybe
fnadewithoutnoticetoJ
myofsucltpersonsorcntitie.
!andwithoutdischargingtheirliability.
8.2 neheadingsIothevarioussectionshavcbeeninsertedforconvenience
ofreferonceonlyanddonotdefine,limk,modify.orexpandtheexpressprovisionsoftbls
Notc.
8.3 ThisNotcislnadewithreferencctoandistobeconstrucdiuaccortlance
witbthelawsofthestateofCalifornia.

(includiaganyproceedingundertheU.S.BankrupycyCode)isinstitute'dinconneolionwith

By:
.TIMO'
I'IT L.BLI ETH

2-PROMISSORYNOTE

- -.

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E X H IB IT

iiC 55

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09-61893-R8K Doc#:769 Filed:08/30/11 Entered:08/30/1110:33:46 Page1of3

UNITEDSTATESBANKRUPTCYCOURT
FORTHEDISTRICTOFMONTANA
1
EI!k!-f)

BLXGROUPINC,
Debtor.

CaseNo.09-61893-11

O RDER
AtButteinsaidDistrictthis30:1
,dayofAugust,2011.

CarlA.Eklund.thedulyappointedchapterlltrusteehereintt'Trtlsteef'lforthe
bankruptcyestateofBLXGroup,lnc.(the''Debtol'''),filedaMotionforOrderAuthorizing
AssignmentofClaimsforPurposesofCollectiononAugust12,20l1(Dkt.#752,thettMotion'').
InaccordancewithMont.LBR9013-1,thcTrustecattacheda'Notice''tohismotionadvising

interestedpartiesthattheyhadfourteen(14)dayswithinwhichtorespondtotheTrustee's
motion.Intheabsenceofanyoutstandingoppositionafternotice
ITISORDERED:
TheTrustee'sMotionforOrderAuthorizingAssignmentofClaimsforPurposesof
CollectionfiledAugust12.201.atdocketentryno.754.isgranted.

B. Pursuantto11U.S.C.jjl05(a)and363,theTrusteeisauthorizedtoconsummate
thetransactionsdescribedintheMotioninaccordancewiththefollowingtermsandconditions.
whichareherebymadeanorderofthisCourt,andpursuan:tostlchothertermsandconditions
andsuchdocumentationasisconsistentherewithandotherwiseinform andsubstance

EXHIBIT

1
:

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09-61893-R8% Doc#:769 Filed:08/30/11 Entered:08/30/1110233:46 Page2of3

satisfactorytotheTrustee:

(i) TheYellowstoneClubLiquidatingTl'ust('IYCLT')andtheYCLTTrustee
shallhavestandingtoandshallberesponsibleforbringinganysuit,
proceedingsorcontestedmattertopursueanyclaimsand/orcausesof
actionthebankruptcyestateholdsorInayholdagainstTimothyL.
Blixsethoranentityorentitiesdirectlyorindirectlyownedorcontrolled
byTimothyL.Blixseth,including,withoutlimitation,filingand
adjudicationofanyproofofclaiminanybankraptcyofTimothyBlixseth
oravoidanceofanyofthepurportedtransfersbyTimothyBlixsethtoEdra
BlixsethofthepromissorynotespayabletotheDebtormadebyTimothy
BlixsethinconnectionwithorinresponsetotheCreditSuisse
Transacrion.
Aratableshareofanyout-of-pocketcostsincurredbyYCLTortheYCLT
TrtlsteeinpursuitoftheEstateBlixsethClaimsandtheYCLTBlixseth
Claims(basedupontheallocationsetforthbelowofanyrecoveriesfrom
TimBlixsethoranyTimBlixsethEntityinrespectofthcYCLTBlixseth
ClailnsandtheEstateBlixsethClaims)shallbepayabletotheYCLTout
ofanyrecoveriesontheEstateBlixsethClaimspriortoremittanceofsuch
recovericstotheEstate,

1701'purposesofallocatinganyaggregaterccoveries(netofcontingentfce
payments)ontheYCLTBlixsethClaimsandtheEstateBlixsethClaims
fromTimBlixsethortheTimBlixsethEntitiesbetweentheYCLT
BlixsethClaimsandtheEstateBlixsethClaims,theYCLTshallbe

deemedtobeentitledto58% thereof,andtheEstateshallbedecmedtobe
entitledto42% thereof.Thisallocationisintendedasaprorata
applicationofsuchrecoveries,basedontLeshareofthetotalclaims
assertedorassertableagainstTim BlixsethortbeTim BlixsethEntitiesby
theEstateandtheYCLT,respectively,

Thi
sCourtretainsjurisdictiontoenforceandimpl
ementthetermsandprovisionsof
thisOrderdnJdnyotherdocumentationexecutedwithregardtothetransaclion.
gdescribedherein
andintheMoion.ThisOrder,thetermsandconditionshereof.andtheassignmentoftheEstate
BlixsethClaimscontemplatedherebyshallremaininfullforceandeffectnotwjthstanding
confirmationofanyplanofreorganizationorliquidation,oranydismissalorconversionofthis
proceedingloaproceedingnndrrChapter7oftheBankruplcyCode.

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D. ThisCourtfindsthatthereisgoodcausetowaivethe14-daystayunderRule

6004(h)oftheFederalRulesofBankruptcyProcedure.Accordingly,thisOrdershallnotbe
dtayedfar14daysaftcr:heentryofthisOrderandshallbecffectiveandcnforccablcimmediatcly
uponcntry.
'

BYTHECOURT

)tz?c ;.
z Jq/3 .
1
:
,.'
.vk..
e
.
;
vz.u
jY
' .- .- .
!
,
$,

HON.lALPHB.KIRSCHER
U.S.BankruptcyJudge
UnitcdStatesBankruptcyCourt
DbstrictofMontana

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E X H IB IT
iiD 55

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ASSIGNMENTOFCLAIMSFORPURPOSESOFCOLLECTION
AsofAugust30,2011,CarlA.Eklund.asdulyappointedChapter1lTrusteeforthe
bankruptestaleofBlixsethGroup.lnc.(ltAssignor''),herebyassigns.conveys,transfersand
deliverstotheYellowstoneClubLiquidatingTrust,forpurposesofcollection,a1lofAssignr's
right,titl
eandnterestinandto:
1. thatcertainPlomissoryNotedatedDecember31.2006,intlleorigina)princigal
amountof$58,305,147,60madepayablebyBlixsethGroup,Inc.:
2. thatcertainPromissoryNotedatedDecember3l,2006,intheoriginalprincipal
amountof$140,819,333.28madepayablebyBlixsethGroup,Inc.;and

3. allotherEstateBlixsethClaimsassuchterm isdefinedintheOrder(desned
below).
ThisAssignmcntismaclepursuanttoandsubjecttothetcrmsoftheOrdcrAuthorizing
Assignmentof-ClaimsForPupose.
sot
-Collection(the''Order)datedAugust30.2O1l:granled

bytheUnitedStatesBankruptcyColzrtforheDistl'
ictofMontanainthecascentitledh:re
Blt
'
xsethGroup./n&.&CaseNo.09-61893.
,

w .

y-

CarlA.Eklund,asTrustee
52192521-1)0C

EXHIBIT

)
s

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E X H IB IT
iiE ',

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MARCS.KIRSCHNER
ASTRUSTEEf)FTHE
YELLOWSTONECLUBLIQUIDATINGTRUST
l8East94thStreet
SuiteIA
NewYork,NewYork 10128

(212)348-2803
lnskil'
schner@kirscuerconsulting.com
Septemberl2,20ll

TimotllyL,Blixseth

Re: $58,305,147.60PromissoryNote,December31.2006
$149,819,333.28PromissoryNote,Deccmber31,2006
DearMr.Blixseth:

1amtheTmstecoftheYellowstoneClabLiquidatingTrust(16YCLT'').YCLTisthe
ownerandholderofthetwopromisso:ynotesIistedaLoveexecutedbyyou(collectivcly,the
unotesn).Trueandcorrectcopiesofthenotesareattached,Pursuanttoparagraph2ofeachof
thenotes,dcmandisherebymadeforpaymentofeachofthenotesdescribedabove,infull,
togetherwithinterestatthet'NoteRate''(asthattermisdefinedinparagraph1of-eacbofthe
notes)nolaterthanSeptember16,2011.JfpaylnentisnotreceivedbySeptemberl6,2011,then

thereaftcrinterestwillaccrueattherateof5% pcrannumabovetheSlqoteRate''assctforthin
paragraph6ofeachofthenotes.YCLTalsoreservestherighttoseekitsattorneys'feesand
othercostsi
fsui
t,actionorothergroceedi
ngoranynaturewhatsoeverisinstitut
edinconnecti
on
witbcollectionoftheabove-descrlbednotes.
ThisdemandismadepursuanttotheOrderGrantingTrustee'sMotionforAuthorityto
AssignClaimsForPurposesofCollection,datedAugust3O,2011(docket$769),intlw
Banknzptcy CaseentitledInReS.!..YGroup,lnc.,CaseNo.09-61893,intheUnited States
BanknzptcyCourtfortheDistrictofMontana,andtheAssignmentofClaimsforPurposesof
Collectionmadeptu-suanttothcforcgoingasofthesnmedate.
Oovernyourselfaccordingly.
Sincerely,
.
2

4.%

'

arcS.Kirschner,Trustee
YellowstoneClubLiquidalingTrust

EXHIBIT

1
>
(.
J290t
)000.
*
$.
95474.1.
70CJl)

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Cc: Mi
e
y
Phik
li
pF
Sl
tlr
lm
lman

1$296
)f
)1
A0(83(
)471.1
700/l)

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E X H IB IT
iiF ''

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09-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page1of21

MUTUALWAIVERANDRELEASEAGREEMENT

'a'n%Zlhle
osogreement(refen'
edtomsthi
s'Ap'
ec-m-enlt'lmade
w sMuomlwaiveX
r'
s
BLGSE'
I'
Helimotlw.
l)andtheenutieslist
edonExhibitA(the'
TimothvBntit1
'es''
),ontheone
h
andvandEDRABLWSETH('Fdm'
'
)andtl
wentitiesli
stedonExhlbltB(the''
F.
fI
.
>Entiues''
).
ontheoierhsnd. A1lofthepartiestothisAm ementartrefeaedtocollec6velyasthe

andelecuveasor16I ,2:0:tthe'
tBtrtcliveDate''
),isenterodintobyTIMOTHYL.
parges''wheo appropriate.

RECITAI-S

A. TimothyandFzlrnareinvolvedinMaritalDissolutionProceedingspendinginthe
SuperiorCourtofCalifornlwRiverside,CaseNo.RIDINIHI152.
B. TimothyandEdrahaveenteredintoaMaritalSettlementAgrcementdatedJune

26,2008,aslmendedJuly2,2008(collecuvely,th:Otinulation'').

C. Pll-mnttoParagraph36oftheStipulation,TlmothyandIMm areeachrequireu

tocauseeachentit
y describedbelow hlParagaph36oftheSupttlati
on(colle vely,the
'tEntit4
'es''
ltoexecuteafulljcomplete,absoluteandunconditionalreleaseofallclaimse-nnhsucb
e
ntit
yhasagaimsttheotherpart
y(a)individuallyand/or(b)anyentitywhi
cht
heotherpart
y
receivesrreceivedntlrstlnnttotheSdpulationoranypHorStiptllafonandOrder.
D. n isAgreementisenteredintobytlmPartiesinconnectionVt.
IItheSettlement
Agc ment.
NOW,THEREFORE in considtration ofthe promises'covenanl and am ements
heminnfhrsetforthandtheexcbnngeofothergoodandvaluablecomsideration,thesumciency

ofwhichisherebyacknowledgc thePardesherebyagreeasfollows:
1. IncomorasionofReciols.Eachandeveryrccltalsetfo% aboveisincorpomted
bythisreferencemsthoughfullysetforlatlengthherein.
2. TimothyEnuties.TimothyhaslistedonBxhibitA attache,
dheatoandmadea
parthereofennboftheenutieswllich,tothebestofhisknowledge,he:

(a) ownsorwillreceivepurs',nnttot
heterrnqoftheStipulati
onoranyprior

StipulationandOrder;

(b) manngesorw1llmanageaierthei
mplemeutati
onoftheStipul
ationorany

priorStipulatlonandOrder;

(c) conkolsorwilcontrolaftertheimplementationoftheSti
pulationorany

priorStipulationandOrder;or

(d) hasorwi
llhaveamajorityint
erestaRertheimplementationoftl
ze

StipulationoranypriorStipulationandOrder.
0:39611/(*1/399205+

EXHIBIT
1
f
F'

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3. F/rnBnlities.EdrahasllstedonExhibitBattachedheretoandmadeapazlhereof
eachoftheentltleswhich,tothebestofherknowledgo,she:

(a) ownsorwillreceivepursuanttot
hetermsoftheStipulati
onoranyprior

StiplationandOrder;

(b) managesorwilmanagcaer'thelmplementationoftheStipulationorany

priorSipulationandOrder;

(c) conkolscrwillcontrolahertheimplementationoftheStipulatonorany

pHorStlpulationmldOrder;or

(d) IIJ
IAorwillhavea.majorit
ylntercstahertheimpl
ementationofthe

StlpulationAgromentoranypriorStipulationandOrder.
4. MutualReleasesandWaivers.

(a) By Timthv Bntitie:. Exceptwi

th xspectto tl
zertpresentati
ons,
warrandes,covenantsandaeomentsofTimot
hy(hmludingtheindemnl
Gcationandhotd
hnrml
ossprovisions)setforthiatheStipulati
onoranypriorSfl
ptllatl
onorOrder(tho'enmotlw
'ResewedObllcationr),eachoftheTi
mothyEnti
tiesherebylll
yandabsolutel
yrel
easesand
dischargesF'
draandeachoft
lleE&aEnt
ities(collectlvely,thets
Edm ReleasedParl
iesl
'l.9om
anychlm,rightordemandthatanysuchTimothyEntityhms,ormayhaveagninntanyofthe
EdraReleasedPartiesbaze,donconductom thebeginningoftimetmtiltheBFectiveDate
relatlngto.orbascdonanyfact,chcumstance,eventordocumentsignedbyEdraoranyoftlw

E&aReleasedPMies,including,butnotlimitedto,(a)breachoffiduciarydut
y,(b)breachof
corpmteorbusinessopporhlm'
tl
'
es,(c)anysimilartypeofpoteati
alliabilitybasedonfai
lureof
a
n
y
b
f
t
h
e
F
z
r
a
R
e
l
e
a
s
e
d
P
a
r
t
i
t
s
t
o
a
c
t
p
r
o
mr
l
y
o
n
b
e
h
a
l
f
o
f
a
n
y
s
a
i
d
I
M
m
E
n
t
i
t
y
o
r
(
d)any
doc= entsjgnedbyEdraoranyoftheFzraReleasedPartles.'I'lleFzlrnReleasedPnrtitsdonot

includepresenlandfonnerolcers,directors,shareholders,employees,parlrltrs,lnembers,
attomcys,associatts,managers,bushzessmnnngers,pmfeasionalrepresuntativesofanykind,
agent
wprcdecessors.successors,assigms,heirs,executorsandadminlstratozs,nmliates.parent
andsubsidiarycorporations,compmtiesanddivisionsofEdraortlzeEdm EntYes,asapplicable
tthe''!MmExclu
..
d-qdParties''l,andtheforegoingreleasesballinnowayrelea;eordischargeany
oftlmFzl-ExcludedPartiesom anyclnlm,rightordemandthatanysuchTimothyEntityhas,
ormayhaveagnlnAtaayofthel7.
drnExcludcdPmics.

(b) ByEdl
'
aEntities.Exxptw1t11respecttotherepresenKti
ons,warranues,
covvnnntsandagrezmentsofEII
m(includingtheindemnlscati
onaadholdhnrmlesspmvisions)
s
dfo% intheStipulatlonoranypHorSti
pul
ati
onorOrdertthe'
p/ra-ReservedObliqations'l,
eacboftheBdmEntltiesherebyfullyandabsolutelyreleasesanddischargesTimothyandeach
oftheTimothyBntiues(collectively,theG'
l-imotlzyReleasedParties'y),from anyclatmxrigbtor
dem=dtlmtanysuch17
-fl= Entityhas,ormayhaveagairlstmzyoftheTimothyReleasH Partios
bmsedonconductfrom thebeginnlngoftimeuntiltlwEflkctiveDaterelaegto,orbasedonany
factcircllmAtanco,eventordocumentsi>edbyTimothyoranyoftheTimothyReleucd

Pe es,including,butnotliml
'tdto,(M breachoffiduciaryduty,(b)breachofcorpomleor
businessopportmities,(c)anysi
znilart
ypeofpotentialliabil
itybasedonfailttreofanyofthe
0039&14/091/399265v:9

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TimothyReleasedParliestoactproperlyonbchalfofanysai
dTimothyEntityor(d)any

d
ocumentsi
gnedbyTimothyoranyoftheTimothyReleasedParti
es.TheTimothyRdeased
Palfesdonotincludepresentandformerocers,dlrectors,shareholdets,employees.pnrlners,
members,attorneys,associates,managelx businessmanagers,professionalrepresentativtsof

anykind,agents.gredecessorstsuccessors,a:signs,heirs,execmorsandadminiseators,nmliates,
parentandsubsi
thaqcorporatlons,companiesanddivi
sionsofTimot
hyortheTimothyEntities,
asajplicable(thc'T
-lmotl
wExcludedPartlesf
'
lIandtheforegoingreleaseshallinnowayrelease
ordlschargeanyoftbeTimothyExcludedPart
xs9omanyclal
m,rkhtordemandthatanysuch
17zlm Bntityhas,ormayhaveagainstanyoftheTimothyExcludedParties.

(c) newaiversandreleuesconfminedintl
tisApeementrelatetoany

conductforwhlchaclaim ofanynaturecouldbebasedagainstareleasedpartyorreleased
entity,whetherknownorllnknownmsofthetimeofthesignlngofthisAgreementwlkich
occurredpriortothcElectivcDatt.
5. EachofthePartestothisApeementherebydoeswaive,theprovisionsof

CalifomiaCivilCode91542whi
chprovides1
tsfollows:

<A OENEM LRELEASEDOESNOT EXTBND TO CLMMSWHICH T1IE

CREDITORDOESNOTKNOW ORSUSPECTTOEMSTINIUSORHBRFAVORATTHE
TIME OFBM CUTING THE RELEASESWHICH 1FKNOWN BY 11IM OR I'IER MUST
HAVEMATEIUALLYAFFBCTEDHISORIIERSEW LEMBNTWITHTHEDBBTOR.''
BFectiveuponexecutionofthisAgrcement,thePnrdeswaiveandrelinquishal1righ?
andbeneGtswhkhtheyhaveormayhaveunderSection1542ortlw law ofanyotherstateor

jtuisdictiontothest
uucorsimilareflecttotlefullexten!thatheymaylawfullywaiveand
ml
inqaisha11z
'
ightaandbenefitspert
iningtothesubjectmatt
erofthisAgreement(otherfIImI
withrespecttotheTimothyReservedObligationsandtheEdraReservedObligatlons).
EachofthePartiesreprcsents,warrantsandagreestotheotherasfollows:

(a) EachPartyhasrecei
vedindependentl
egaladvicefromhisoritaattomeys

withrespecttothcaddsabllityofenteringhltothewaiverandreleasesprovidedforhcrein;

(b) EachParlyhascareflzllyreadthisAgeement,tmdemtnndsthecontenB
andlegalefectsofeaohprovisionlmreoflincludingthereleascscontnlnedherein:
(c) nepersonsexecutingt
hisAgeementhavethefttllrightandauthorityto
enterintothisApeementonbehalfofthePartiesherctoandtofullybindsaidPardestothe
termnandobligationsofthisApeement;and

(d) EachPartyacknowledgestbatnootherParty,noragentorattomeyofany

o
therPart
y,hasmadeanypromi
se,represent
ationorwarrantywhatsoever,expressorimplied.
notconfpl
'nedherein,tomducethem toexecutetlisAgreementvandacknowledgesthatthey
llavenotexecnkdthisAreementinrelianceuponanysuchpromise,reprentationorwarranty
notcontained hereln. nePartieshave each had an adequate oppprttmity to make an
i
ndegendentlnvesti
gationofthesubjectmatterofthi
sAgreementandtheadvisabil
it
yofentering
intolt.havedoneso,andinenteringintothisAgreementarerelyingsolelyandexclusivelyon
003#&N/X1/JW205eJ

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suchindependenlinvestigationandn0tonanysuchunexpressedpromise,rtpresenVtionor
wan'antyintnteringintotlsAgreement.
(e) InenteHngintothisAgreemen:thePartie,srepresentthattheybaverelied
uponthelogaladviceofattomeysoftheirownchoice,andthatthetermsoftlzisAveementhave
beencompletelyexplainedtothem bytheirattomeys,andtbatthoseternmarefullytmderstood
andvoluntarilyacceptedbythem.

7. 11lsunuerstoodandapvethattll
isAgrecmentshalbebi
ndlnguponand1n. to

tlzebenentofeaohofthaPartiesandthekrespectivesuccessorsandassigns.
8. lfanyaction,atlaw orinequity,includlnganactionfordeolamtoryreliefkis
b
r
o
u
lt
toerdbrceorinterprettleprovisionsofthisAgreement,theprevaili
ngpmlysbnllbe
entitledtorecoveritsreasonabltattorneys'feesandcosts,inadditiontoanyotherrelieftowbich
itmaybeentitled9. TheParllesundersedandagreetlmtthisAgreemem isgiveninconncctionwith
thecompromiseofdisputedclaimsmldtlmtthetmdersignedPnrlleseachdenyliabilll toeach
other.TlsAveomentshallneveratanytimeorforanypurposebeconsideredmsanndml
'sskon
ofliabilityonthepartoftheundersignedPnrties.
10. n isAweementisalsosubjccttotlmfollowingmisoellaneousprovisions:

(a) ThisAgreementshallbeconstruedinaccordancew1
t.
1anda11disputes

heretmdersballbegovemedbythelawsoftheStateofCalifomia.

(b) nisAveementmaybeexecutedinoneormorecounterparts,butshallbe

hgerpretedandconstruedasifsignedinoncdocument.Additionally.sipmturestnmptnittedby
facsimileshallluavethesamefo= andelrectasoriginalsi>atures.

(c) Tl
tisA-ementand theStipulation constitutotheenti
reaveement

betweenthePartiesandallotherprioragreements,ammgemtntsoruaderstandings,oralor
writttw m'
cmergedintoandsupersededbythetermsoftbisAgrvementwhichmayno1be
altered,amended,modiedorotherwiseehangedexceptby awritingsignedby th:duly
authorizedrepresentativeofthePartiesoftlgsApeement.

(d) EachoftlzPartiesshall,fromtimetotimeattherequestofanotherPart
y,

executeanddelivertotheotherPartiessuchotherimstrmntnlasrnaybcroasonablyreques'tedto
morecompletelyoreFectivelycarryoutthetermsofthisApwment.

(Remai
nderofpageintentionallyl
e:blnnkj

*0396+* t12%2*5*

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IN WIINESS WHEREOF,the Pardcs hertto have executed and deliverod this

Agreomentasofthedateandytarsetforthoppositetheirrespectivesignatm'
esbelow.
T/M:

Ti yL.Blixseth

TIM ENTITIESPOMESTIC:
BCBroadbandPartuers,LLC,
aDelawa limite,dIiabilitycompOy
By:

- --.

TimothyL.Blixsel itsAuthozlze,dMember

BlixaethGroupofWasltingfon.LLC,
aWashingtonl'
lmitedliabilltycompany

By:

TimothyL.Blixsel 11Manager

--

Casa18,LLC,
aWashingtonlimitedliabflltyoompany
By:

Timo yL.Blixseth:1SoleMember

Casa19,LLCl
aWashingtonlmzitcdliabilitycompoy
By:
--- TimothyL.Blixseth,itsSoleMembcr

*39634M33/39925*

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Casa20,LLCt
aWashingtonhrnitedliabilitycompany
By:
.TimothyL.Blixseth,itsSoleMember

DesertRanch,LLC,
aWasltingtonlimitedliabilltycompany
li3k
21,:

.- ..-

TimothyL.Blixsel itsManager

FHdayReeordsyLLC.
aDelawarelimitedllabllitycompany
By;
-TimothyL.Blixsetlz,itsAuthorizedMembe-'

Hole13Partners,LLC,
aMontanalimite.dliabilitycompany
By:
'aTimothyL.Blixseth,it.
sAuthorizedMember
lfawi:h:LLC,
aWashlngtonImitedIiabllitycompany
By:

TimothyL.Blixsec its anager

LaPazlLLG
aWahmgtonlimitcdliabilitycompany
By;
- TimothyL.Blixsel.itsMemberN anager
0:39614/:01/399285v09

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L
ttle
earllD
ev
oly
t,cLoL
Gany
ai
Mo
nB
tMa
mi
tet
dl
lame
bgln
ity
mp
By:

t.
'wl

TimothyL.Blixsel itsAuthl
izedMember

LtmeMooseMeadowstIAC,
aMontanalimitedliabfhtycompany
B5
- -. .TimothyL.Bllxseth,itsAuthozizedMember

MexicanMqonInvestmeuts,LLG

aWashlngtonlimitedIiabilftycompany

By:

TimothyL.Blixsetln11AptlmzizedMember
OverlogkPartners,LLC,
awasllingtonlimitedIiabilitycompmzy
By:

-.

V
fimotlyL.Blixsethai
tsManager

ltvnabxancebevebpmen:LLC,
aCallforztialimitedliabilitycompany
By:
ThnoiyL.Blixsetlhit<Mnunger

RoortAcquidtion?LLC,
aMontanalimitedljabilitycompany

sy:

av.,r

TimothyL.Blixsetkil
.sManager

0439634/001/39*20#v*

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O9-00014-RBK Doc//:181 Filed:04/20/09 Entered;04/20/0922:36:35 Page8of21

SeatfleJetCenter,LLC,
aWashlngtonlimitedIiabilitycompany
By:
Timothy .Blixseth,itsManager

TgmadndwLLC,
aWashingtonIimitedliabilitycompany
By:
.
TimothyL.Bllxse ,itsManager

TWJHtjldlngs,LLC!
anIdaholimitedliabilltycompany
By:
.
TimothyL.Blixseth,itsManager

WesternAir& Wattr,LLC,
anOregonlimltedliabilitycompany
By:
TimothyL.Blixseth,itsSoleMember

WesternAviatlonandMarlneLLC,f/k/a
YellowstoneAviatjonandMqrihe,LLG f/l
f/a
YtllowsfoueAvlaenjLLC,
aMontanallmitedllabllityeompany
By:

--

TimotkyL.BlixsethyitsManager

WesternPaeincTlmber,LLC,f/k/aWestelm
PacificLand,LLC
603984/0:1/399205+

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09-00O14-RBK Doc#:181 Filed:04/20/09 Enteredr04/20/0922:36:35 Page9of21

aWashingonlimhedliabilitycnmpany
By:
TimothyL.Blgxseth,itsManager
YCCollmctloutLLC
aWashlngtonllmitedIiabilitycompany
By:
.
TimothyL.Blixseth,itsMmmger

Yellewstone1..3thLLC
a(Jlimitedliabilitycompany
By:
....
-.
-.-.-.
TimothyL.Blixseth,itsAuthoriztdMembcr
Yellowsfone123,LLC

at
)Iimitedliabilitycompmzy
By:
..
TimothyL.Blixseth,itsAuthorizedMember
T1M ENTITIESFOREIGN
CaspI8,S.DeR'L.DeC.V
By:
.
--. ....
TimothyL.BlixsetlvitsSoleManager

Casa19.S.beR-L.D.C.V.
By: . *''-TimothyL.Blixseth,itsSoleManager
*3984/01/3*205*

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09-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page10of21

Casa20,S.DeR.L.DeC.V.
By;
Timbthy .Blixseth,it:SoeManager

EmcmldCayLtd.
aTurksandCaicosIslandscompany

By:

Timot
hyE,
.Bl
ixsethitsDirector//resident

LaPazPartner:Couservancy,S.C
By:
-'t-.
TimothyL.Bllxsvth,itsPresident
LaPazPartnersDcvclopment,S.DcR.L.be
C.V.
By:-

TimothyL.Blixseth,itsPresident

LaPazPartners,S.DeR.L.DeC.V.
<)
By:- .TimothyL.Blixseth,itsSoleManager

OperadoElTamariudo,S.beWL.DeC.V,
By:
TimothyL.BlixsetlvitsSoleManager

0939:34/101/399205*97

10

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09-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page11of21

WorldwideCommvrdalPropertiewLfd.
aTurk.
s d 'cos landscompany
By:

Timo yL.Blixsel itsDirector

YellowstoneClubWorldTamarlndnyS.DeR.L.
DeC.V.
By:
Timo yL.Blixseth,11President
YelloWstoneHoldingsMexico,S.DeR.L.DeC.V.

By:
Timo yL.Blixseth,itsPresident

EdtaD-Blixseth

EDFAENHTIFADDMKSVC:
mgSkymdge,LLC,
aMontanalimitedliabilitycompany
RY:
-- ..... .EdraD.Slixseth,igVallager

.-

B1gSprinp Realts LLC,

aMontanaIimlte,dIiabilitycompOy
By: -- ..-- . -EdraD.Bllxsetla,itsMnnsger

0:3M54201/39F205*9

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09-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page12of21

OperadoElnmarlndo,S.DeR.L.m C.V.
By
TimothyL.Blixsetll,itsSoleManager

Wcrltlwid:CommarclalProptreewLtd:
a-lbrb andCalcoslelrtlscompany
By
Mmothyt,.Blixseth,itsDiredor
Yellowston:ClubWorldTamarindo,S.DeR.L.
DeC.V.
Byi
TimothyL.Blixseth,itsPrcsidont
YellowstoneHoldlngsMexleo,S.DeRL DeC.V.

Ryl
TimothyLBBXSCtII,itsPresidcnt
EMRA:

raD.Blixseth

XNRAENITNES-O MXSTXCJ

BigSITmdghLLC,

aMlmtan:limite Iiabflitycomp-y
By) Ef'
I-D.Blixseth,itsManager

(k0:9514*11)1/399218702

BIgSprlumRealty,LLC,
aMontanalimltedliabllitycompany
11

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09-00O14-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page13of21

BF
EraD.Blixseth,itsManager

BlixyethFamllyluvestments,LLC,
aMontanalimltedliabilitycompany
.

lixstth,itaManager

BllxdethGroup,Ium,
anOxgontorporatlon
B

Edt ,Blixseth,1t.sP=ident

BhwarwLLC)
aDelawarelimltedliabilitycnmpany
B.

D.Blixseth.itsManager

I
IBHaldlngsMauapementyLLC,
aDelawa limitedhabilitycompany
BF
17.
:1- .Blixse ,itsManager

EBPhotnlxtLLC,
aDelawr lnnite,dliabilityoompany
PzlrnD.Blixseth,itsMoager

*396M*01/:9+5*!

12

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09-O0014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page14of21

J
du
aE
CF
qlr
ifr
oo
mi
acy y .
By:
JoryRmsse,ts e

MonarchDesln LLCt
aMontanalimitd liabilltycompany
By:

'.

lixsethitsManager

MqasrchhwstmeutwLLC,
aMontanalimittdliabllitycompany
B.

PBlixsetlbitsManager

Opgprhg,LLC.
aWashingtongmie liabilityoampaay
By:
Pzlm . lixset%,itsManager

P
Rlae
xou
rc
piL
aC
De
wa
re
lmz
teLC
li,
abilitycolnpany
PZm .lixsG itsManaggr
PcrcupiueCrephLLC,
aDelawareIfmftedllabilltycompany
BF
. .
FlrlD.BlixsetllvitsMenager
13
QtB9611*1/1#72Wv0,

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09-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page15of21

NauphleCreekHoldgngGLLC.
aDelawm'elimite liabilltycompany
By
Edra .Blixseth,11Manager

SunrkemdgeatYellowstoneClub,LZC,
aMontnnnlhpltedliabllitycompany
B

Ed .Blixseth11Manager

YellowstoneClubCowstructionCompany,LLC,
aMonfzmnlimitedljabllitycompany
BF YellowstoneDavelopmen:LLCt
aMontanalimitedliabilltycompany,1t.
sNfanager
By:BlixsetltCztoup,1110..
anOregoncorporation,itsManager
B.

EdraD.Blixseth1+Presjdent

YellnwstoneCltxbWorld,LLC,
aWas' o 'itM llsbilitycompany

P,dr .Blive ,itcManager

Yellow4toueDevelopmeuqLLc,
aMontanallmitedliabllitycompany

By:BlixsethGrouphm.,

anOregouo m 'n,itsMmmger
BF
raD.BlxsetlnPredent

t0)9634&Bl/39#20Sv9l

l4

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09-00014-RBK Doc#:181 Filedz04/20/09 Entered:04/20/0922:36:35 Page16of21

Yellowx
doneHomebullder:,LLC,
aMontana1-' illlitycompany
By
'

FzraD.BlixaethitsManager

YellowstoneHotelMauagemen%LLC,
aMontanali' liabilitycompany
By:
. EH D.Bllxsetll,11MmIVG

---

YellowstnneX arkltula,LLC,
aMonbmalimitedllabilit.ycompany
BF Ydlow:toneHomebuildez'
s)LEC,

aMontanaljmlte liabllitycompany,itsManager
By'

EH .Blixseth,itaManagor

YellowstoneMountalnClub,LLC,

aMontanalimie lia:ilitycompany
By:BlixsethGoup,lnc.,
anOregoncomoratlon,1t6Manager

B.
- F'dm D.Blixseth,itsPresident

YellowgtoneUmltlesjLLC,
aMonfnmnIlmitedliabllitycompany
BF YollowstoneDevolopmea:LLC.
aMontanalimitedliabintytompany,itsManager
BF BlixsethGroup,Inc.,
anOregoaOrporatmm
' itsManagc
By:
6439434::1t/399205v::

15

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09-00O14-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page17of21

PzraD.Blixsel itsPresident

N BDTOCOG MSIGBLOCKI

IDRAKNTFNE-SD .RKIG-N;
CoabornInvedtments,B.V..
aNetherlandsentlty
YZ
NRmC:
Title:

(NEEDTOCONFIRM S1GBLOCK)

.- -

...

..

DanlkabwpsfmenlLlnuted,
anMshcompany
By;-- -.Namc:
Title:

(NBBDTOCONFIRM SIGBLOCK)

--

--

JaroupInveseeutsB.V.,
aNetherlandscompany
By:
Na e'
.
Title:

..-

St-Audrew:IuternatloualGolfClubLimited,
ascotu
y
B;
-- -

FulrsD.Blixsethif.
sS

0139631*:1/397245+

16

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O9-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page18of21

EXHIBITA
TimothyEntitieg
Domeslie:

BCBroadbandPnrfners.LLC(aDelawarelimltedliabilitycompany)
Bl
ixsethGroupofW%hington,LLC(aWashingtonIimitedI
iabilitycompany)
Casa18,LLC(aWmshingtonlimitedliabilitycompany)
Casa19.LLC(aWasllingt
onlimltedliabilitycompany)
Casa20,LLC(aWashingtonlhnitcdliabili
tycompany)
DesertNnnch,LLC(aWashlngt
onli
mitcdliabili
tycompany)
FridayRecords,LLC(aDelawarelimltedliabilitycompmzy)
Hole13Partl
wrs,LLC(aMon>allmltedIiabili
tycompanyj
Kawish,IIC(aWaslli
ngtonlimitedliabil
itycompany)
LaPaz,LLC(aWmshi
ngtt
mlims
tedIiabili
tycompaay)
LitleBezDevelopment,LLC(aMontanalimitedliabilitycompany)
EoneMooseMeadows,LLC(aMontan;limitedIiabilitycompany)

MexicauMoonInvestments,LLC(aWashingt
onlimitedliabilitycompal
ty)
OverlookPaAers,LEC(aWmshingtonl
imitedliabi
litycompany)
RenaissanceDevelopmentvLLC(aCalifomialimitedliabilitycompany)
ResortAcquisition,LLC(aMont
nnnIimitedliabilitycompany)
Seatl
eJetCenter,LLC(aWashingt
onl
imitedliabil
itycompany)
Tamnrlt
ado,LLC(aWmshlngtonlimitedIiabilitycompany)
TWJHoldings,LLCtanIdaholimit
edli
abilitycompany)
WestemAir&Water,LLCtanOregonlhnitcdliabilitycompany)
We
stemAviaEouandMnHnc,LLC(aMontanalimi
tedli
abilitycompany).f/k/aYell
owstone
AviationandMmine,LLC,f/k/aYellowstoneAviation,LLC
039634/*1/3*2:5:*

17

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09-O0O14-RBK Doc//l181 Filed:04/20/09 Entered:04/20/0922:36:35 Page19of21

WesternPaciscTimber,LLC,anOregonlimi
tedliabilitycompany),f/k/aWesternPaciscLand,

LLC

YccollectiomLLC(aWasbingtonl
imi
tedliabilt company)
Yellwst
oneL30,LLC(aeorgialfnzitedliabflitycompany)
Yellowst
one123,LLC(aFloridalimitedliabilit
ycompany)
Foreia :

Caaal8SRL(aMexicanentity)
Casa19SRL(aMexicanenti
ty)
Casa20SRt,(aMexicanentity)
BmeraldCay,Ltd(f$Tm'
ks&CaicosIslandsentit
y)
LaPazConsewatorySRL(aMexicanenity)
LaPazDevelopmentSRL(aMexicanentity)
LaPazParmersSRL(aMezcanentity)
OpemdoTammindoSRL(aMexicmzentity)
WorldedeConunemialProperdcs,Ltd.(aTnrks&CaltosIslandsentity)
YellowstoneClubWorldTamndndoSRL(aMexgmanendty)
YellowstoneHoldingsMexicoSADelU-DeCV(aMexioanenti
ty)

003904/01/399205v*

18

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09-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page20of21

EMM ITB
EdraEutities
Domestlc:

BigslcyRidge,LLC(aMontanalim
tedliabill
tycompany)
BlgSpringsRealty,LLC(aMontnnnlimitedli
abilit
ycompany)
Bl
ixsethFamilyhwes%ents,LLC(aMontanalimitedliabi
li
tycompany)
Bli
xsethGroup,Inc.(anOrcgoncorpomtion)
Blxware,LLC(aDelawm'
elimitedIfabilltyccmpauy)
EBHoldhl
gsManagemmlLLC(aDelawareIimi
tcdliabilitycompany)
EBPhoeni
x,LLC(aDelawarellmitM liabilit
ycompany)
JEFProductions,lnc.(aCaliromiacomorati
on)
MonarchDesir,LLC(aMontanali
mite
adIi
abili
tycompany)
Monm'
chInvesnents,LLC(aMontanalmi
tedlabil
itycompany)
Opspring,LLC(aWmshingtonlimitedliabili
tycompany)
PCRtsources.ELC(aDelawazeIimltedliabilit
ycompany)
PorcupineCreekLLC(aDelawarellmltcdliabilitycompey)
PomupineCrcckHoldlngs,LLC(aDelawarelimltodliabilitycompany)
SllnriseRidggatYellowstoneClub,LLC(aMontanaIlmlt
edIiabilitycompany)
YellowstonoClubCons%ctlonCompany,LLC(aMontanalimitM llabil
itycompany)
YellowstoneClubWorld,LLC(aWashi
ngtonllmitedEabilitycompany)
Yell
owstoneDevelopmentLLC(aMontanaIimitedliabilitycompany)
YellowstoaeHomeBuilders,LLC(aMoneaIi
rnitvdliabi
li
tycompany)
YellowstoneHot
clMnnngementxLLC(aMontanaIimitedIiabi
li
tycompany)
YellowstoneNarkkulwLLC(aMontanalimltedliabilitycompany)
0439614/001/39920:v09

A-l

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09-00014-RBK Doc#:181 Filed:04/20/09 Entered:04/20/0922:36:35 Page21of21

YellowstoneMountminClub,LLC(aMontanalimitedliabilitycompany)
Yellowston:Utilities,LLC(aMont
mlali
mitedIiabili
tycompany)
Foreia:

CosbomInvesMentsB.
V.(aNetherlandsentity)
DnnlkalavestmentsLimited(anIrishccmpany)
JaroupInvestmentsB.V.(aNelerlandsentity)
St.MdrewsInternationalGolfClubLimited(aScotti
shcompany)

(%396M/Ol?399205+

A-2

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E X H IB IT

iijki's

(199 of 364)
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AG O EDANDREdTATED
PRONHSSORYNOTE

Ori- NoteAmount:$199,124,480.88
Pn'MipalAmoutztasofDateofAmendcd

a!zdRestatedPromissoryNote:$

DateofOHgM NOtO:DOIX'mI)G31,2006

'
fie AmrzzdedandRestatedPzomissozyNot
ztthis'
r
No*'3am:nds,restae and
supergedes(l)Otc- 1
'nPDe socNote%eD=> 3l,ze ofr
fimothyL.Bsmqdhln
favorofBl
ixsA Group.Inc.('
%OF3intheprinci
palamountof$58.
305,147.60and(ii
)that
e.ertml
'nPromtqqoryNototlatezDe.e- hY3l,2006ofTimothyL.Blixsethinfavorooolintlle
p
ri
noipalamotmtof$140,819733.
28(colecti
vel
y,h
tl
eGorim'nnlNoteB
-D.TheOri#
lalNotc
andallobligatiom th- dc1114fallyslxqfedwl.
y
thisAmmd/ apd.
p-tatedPmmimqozy

Note,andtho0:81
*
na1Noteaqarenolongcenforceable.

FORVALUBRBCBM D,ttheundezsl
gnc iudi
viduallyandcollGvel
y('Payor')
prozniseslopaytotbeorderofBG1at71-534SabavaRo< RnnchoMirage,CA92270.0rat
suchot
herplaceaatheholderofthi
aNote('PayeeX)mayfromtimetotimed>ignatein
writ'
tug,them>mofOneHtmdredEightOneMillionBlevenThousandNineHtmdre.dHghty
F
iveaadNo/l00Dollm ($181,
011,925)i
nl
awfnlmoneyoft
heUnite,
dSt
ates,wit
bhltez
wt
tllmvoaomthedateofthiaNotetmtilpaidattheratesdfortbbelow,compuu onmontbly
balances.IuterestforeachfullcalendarmonthduzingthetermofthisNoteshallbe
calculatdonthebasisofa365or366-* yearaudtheactaalnumberofdaysiut
hatmontb.

1. Intere:tRa4e.'
l
'
heper=umhl
terestratehermmder('
NoteRateNlshalll)
oat

theAPRBlendodltate.
2. Matxritp 'l'hepam emtofprincipalandaEnccruedinterestshazbemade
upunwrittend-nndofPayoe.
3. ApplicatiouofPaymcnts.Paymenlshalll)eappliedf1- tothepaymerttof
ac,ovued11te1< secondaattheopNouofPayee,tothepaymentefanylatccharge,sdue
hermmdeqandtilirdztotherductionofprinipalQfthisNote.
4. Prepam elm PayormayprbwyilobllgadonundcrtllisNotcinfullorinpalt
alaytimeorfromtimetotimewithoutpremiumorpenalty.

5. LateClmrge.lfanyamot
mtpaygblche
m mde
,
rispaldmomfhnntea(10)days
a
f
t
e
r
t
h
o
d
u
e
(
1
a
1
t
h
q
r
e
o
f
v
P
a
y
o
r
p
r
o
z
n
i
s
c
s
t
o
p
a
y
a
h
t
e
c
h
a
r
g
e
oflvepercent(5%)ofthe
delinquentamotmtasliqaidateddamagesfortheexlzaexpenseinhandlingpastdue
PBYIRCEO'

I-PRONHSSORYNOTE

EXHIBIT
a

(200 of 364)
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6. DpfaalqRemedl- IfdefauRigmadelntlwpammtofanymolmtpayme
dhanY'
,nmelmmeatelydueandpapblwm:da11suqhammml,Kolude aqS- Mbut
u
idlnR-ate.tMshaEo
e
krb
t
mpwt
a*
f5vv
poramtl
mz
lo
o
Oea
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urol
t
ore
ea
xf
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se
ea
tr
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kz
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Gonat
gt
hl
zelr
n
pto
wd
e:tp
hm
ee
rlght
tt
fs
o%el
xe
lt
=al
Gvi
n
th:oventofahysubsequentdtfault'
7. AttorngyFees.Ifsai:aioworerproceedlngofanynat= whatsttlncludizganypnxee gunt
lcrthou.s.BanhuptcycAliinot
at
edfnconr
v*zloawii
anymmtmvexgye hcdoflhb- mdcvtG
' Morme mvHghphexnn&v,
O
e a - e ae oM*a vci- f-p> t> yrrvl
n- 'e
0t1< - 'f- ,aB4G othcrfa,c* ,xzdoxpe- aotuallyinmmwland-vmnNly
nev- o jncoanu outh- itt
n=dezerml
nndbyt
he*1
u1attri
alorouauye c
h= ze whendue,thewatleopEonofpayN t:eemtlreindebtemexqs'WdmzoMhmvby

xvvieelinaddldontoanotAorammmtsproWdedbyhw.
8. Mlscdlaueoug.
3,1 BvelypelwaorGtdtyatmzytitnoliablefortlzopam =tofl1le
indmzvln- evidoncedherebywalvomev tmeatforpaymentdemandandnouc*of
noapxym=tofthbNoto.Eve:yynchpmontzent'
ltyftzrtherhabycona=tatoa.

extmaionofthetimeofpa- teteoforotbvmodisca:onoft:ot= ofpo ratof0)ls

N
Gt
lzereleaseofa:ozaaypartofth5sece hmefor,ortbemlea:eofaaypartylhblefor
(1mpapxentoftbeiadebtodae evidoae hmvbyataqytimeandfzozhtlmetotlmw<tbr
roquY ofanmnonoworhomalterliablothfe r.Anymchextenm'onorale tnaybe
madee outnodcet:Myofguchperm orenduesaudMdloutdl:oharglng*eirlsabity.
8.2 Theheadingstvthevarlouzsecuoshavob= lne ezforoonv=imloe
ofmftmucooniyasddorotd/snq11G molfy,orexpandtboexpre pzoe = oftbig
Note.
8.3 ThlsNOteIsmadowlthzefx cetoandltobecme inacooxxhnfe
+11thtlawsofthestataofCe rnh.

Ba

BDRAD.BIJXSBTH

Z-FROMBSORYNoTg

--%

-- - -- ----.-..-.

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E X H IB IT
iijjj's

(202 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 202 of 228

Duplicatet.
h/##'
lt)/
PROMISSORYNO'rE

$58.305,147.60

Decelnbcr31s2()0(t

FORVAL1JERECf'
,lVl:
.
:
'I7s qtIjlcrsit
ed.itldividtlallyltndcollectively(''P1ty()I-'')
-l
prtllnisest()paytotheol-dej-ofBLIX--'-IGR(7l..
I1.
'sINfJ..at71-534SaharcRoad,Rlulcllo
Mil-age.CA92270.()1-atsuchotherplacenstllehold o lli.
sNot,
e(''Paycc'')ntayfl-ol'
ntilnc
totinlcdcsignatei1)uzritingatl1 -tliA4()fFiftyEig
tnTlll'ee1-lundredFive-'
I-hotlsand
()l:efltlndretlFtlrll'Seazenand6 00Dollars($ - 5.147.60)inlavfbln'
loneyofthe
tlllitedStal
-es,AvithnterestthefA'
f1'
n 01
.
)1thcedlt,jt( ,hisNotetlntilpaidattlle.ratesetI-tlrtll
bclow.colnputcd()1)l'
nontlllybf- 'es.Illtcrcst' each1
-ullclelldal-nnollthdul-ingtl:eterll.
l
of-tllisNoteshllllbcealctllatc onf
'
httbasis * .65or366-dayycarandtheacttlalntllnbclofdaysi11tllt'
ttnlonth.
.
I:,
1terqst.lt 1'
hepel-ltnltll
nilltelestratehcrctllldel-(''NoteIt1
)Lc''.
)sl
3a11L
7eat
tlleA.
FIkBlcndedRate.
..
.
wb
2- lkliu-- -'l-hepk
lylnent()fprillcip 'l t
'C1accrtlcdintel-estshal1bell,ade
tlponvvI-itten(1el nl t-Payee. '
1
sshaIIbeHppliedflrstlo(hepaylllentof
3. lplicaflonofPay nts-Payln '
gesdue
accrtledinteresl:second.atthc:1 mo1-P.- tothepayluent()1-1,nyIatecllal'
llcrtttlllda-' (l'
1ir(I&tothcrc tlItlao1-rlnc-alofthisNote.
. Prepaylneni
l <.yorluay %1
ntlllderthisNoteinf'
ul1ol'i1)part
.
1).
3itgobligatit).
arallvtit'
n -rl-r()1uti11 c.ilne5vi l rel'
nitll'
norpcnlllty.
5. Latc.. ge-I1-anyanxlltll
'
ltpayllblellerettndcl-ispaidnlorethalltel)(10)(lays
a vrthcduedt 1ht.()(,Payorprjnisc:t()paystlatecharge01.
-fivepercent(5$$)oftlle
t inquentalzloujlt liquidaleddalnageslbrthccxtraexpenseil1hal3dlingpast(lLlc
paynlqnts. .
,
efault;Renledies.l1-deliltlltislnadeinthepayltlento1-anyalhlotlntpayablc
herf
l:l). x1Rdue,tllcll.nttheopliollol-payee.tlleelllircindebtednesscvidellcetlhereby

sl
)'11l
'
t
ul
neil
'
nlnetliil
tel
ydueandpayablc.anda11stlchal
nounts.incltdt
lilga11accrtl
edbut

ul'
laidiltterest,sllal1tllereaftcrbeal-interestattherateofl5veperccn'
t(504)peranntll'
nabove

theNoteRatc.FaiIthretoexereiscthisoplionshftll1)()txvaivethel-ighttoexercisethcsalnein
theeventofallysubscquentdelatlll.
7. AttorneyFces.lfsuit.action-ortltherproceedillg(11-allynatul-evvllatsoever

(includingnnyp/oceedllgundcrl'heLJ.S.BankrulltcyCo(Ie)isillstitutedil)connection&.itll
I-f'R0MlSSORYNOTl.
f

$
1

EXHI:IT
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(203 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 203 of 228

anycontroversyal-isingotlt()1-thisagrccn-lel'tortointelpret01
-ellibrceanyrightsllel-etllldcr,
thcplcvailingpartyshallbeentitlcdt()rccoveritsattonleyIkes,pnrulegals,aecotjntantsqal'
1d
(ltlle!'expells'fbes,andallotherIbeg.ctlsts,al'
1dcxpnsesactuallyinctlrrcdalldrcasonably
neecssaryinconlqectiontllerevvith,asdeterlmincdbythecflurlattrialf
nronsnyappealor
review-inaddititlntoallothel-alnountspllyvitledbyIaNv.
8. lWiscellaneous.
8.1 Everypcrstlnorentityata11ylnle1iablelkl.
1-tilcpaynleltoftlle
indebtednessevidencedIlercbyvvaivcspl-esenlnlentfol'plylucnt,delmandandltoticeo1nonptlynient()1.
-thisNo-te.Iqverystchpergonorelltityfurtherllek
-ebyconscntstoany
extellsiolpofthefilne(1f-payll'
)enlhereoforththern-ltldificationof(1)etennsofpayl
mentofthis
Notcfthereleaseo1-a1!orunypal
4oftllesectll-gtyllerefbl'
s()rl'llcl
-eleaseofanypartyliablefbllhcpayl-nentof'theilldebtedllcsscvidencedherebyp
ltallytirncandfi-olntllnetotilnc,atthc
retluust()f-anyollenou?orhereaftci-liablctherefor.A-14'suol'
iextcnsillnorreletlselnaybtt
ynntleNvitllou!l'
ltlticetoalpyofstlchpcrsllns(JrentitfesaltdtvithtltltttischargingIheirlability.
8.2 -'
1-11tthcltdillgsl,
othevariotlsscctionshavebeetlinsctlcdfbl-convellience
ofrefbl-enceonlyal1(1d()l1()tdefine.lilnitqInodify,orexpandtheexpressprtlvisiol'
lsoftllis
Ntlte.
8-3 'l'hi!
kNoteisluadcAvilhl'
eferellcetoaot.
listobeconstruedinacctlrdanee
hviththelllu's()ftllcstateof(-.
Aa1ilbl
-nia.
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*

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.--'- vo fg,
p'1-IM(JT11'
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f.
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2-PROMISSOIIYNOTI:
.

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Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 204 of 228

E X H IB IT
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(205 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 205 of 228

Dupliz-ttteOz'/*i/z/
PROMISSORYNOTE

$l40.8l9,333.28

Decelllber31.2006

FOl
tVALUERI
R
-CIRIVRD.(t
helndersiglled.individuallyandcollcctivcl
y('Pl
.
t
yt1r')

pl-olmisegtopaytotheorder()1-BLIXSI
YI-H(.
'
)R(.
'
)tJP.IN()-,at7l-534SallaraRoad.Rancllo
MilagcsCA92270.oI.ftstcbotlerplaceasthcholdcro1-thisNote('Payee')l
nay9t
)n7tfme
totilnedesignateinbvriting.thcstllno1-OneHtllldredForty51ilIionEightIItlndrcdNinctcell
'I-hcqlsandThrecIIundl-etlR-hirtyThr etlld2:/1()0Ilollars($I40.8l9.333.28)inlawzlbl
Illoneyofthetll
AitetlStatcs.>vi in
ereoll-on hedal'
eofthisN()leuntilpailll'tthc
latescrforthbeltnvsctllnplltetl()1 ( thlyba ..nterestforenchfblIcalcndarnl(h11(h
durillgtlletel-l
'
nofthisNotcshall1.
)cvalculatedo thebasist)fa365orEstit'
'
i-dayycarandthc
acttlalnunlbcrof-daysinthat1u011th.
*
z,

lnterestRate '
l
e1
7er11
'
1 n'eretratcI
leretl
nder('NoteRate')slallbeat

thesalnernteI'ilyeeisI-equ.c
)pllyYell(tsf.
tlncMllulytail)CIttb,LLCtlnderpilragrapll
. (
23Aof'theC't-cditA rcelncntcnl.
crcllilltf
.
lbelveellYelltlu/stoneNdotlntail)(J.
,
*It:b.l-1,(*.
Ycllou?stoneflevelo
-.1.-(.
1
.andBigSltyRidge-I-i-C.
*
.nsBorrovvers.andC$
,1-editSuissc
It
-irstBoston.datedSl'
i'
i'
.ber300 .
z
-.
y'
2- lWat i .
T
h
e
p
a
y
l
,
o
f
'
k
'
l
1
ipalathdalIaccrtledintel-estshallbelnade
.
.

t1
p()l
1vvritteld - (,1Payee- -S

'-.t'. '.

3. pplieationof nlents. .vlnentsshal1bcappliutdfirstl()thcpaylmcllt(Jf

accruedint s;secondsat.* option -Paye,tothcpaylncntof'anylatcchargcsduc
heretlnderz
- third,tot1, I-i
uluotionof7-cipaloftlisNote.
.
Prepay)e.
t.l'ay -lna repayitsob1igatiolltlnderthisNoteinIul1orinIlart
atan tileorli-olnt-lme olilme 1 tpl-eluitll'
norpenalty.

5. Late I1arge.1fanyalnountpayabIellclvundcrispaidln()rcthantcn(10)days
ft1t the(1tped- tereo2Payorpron:isestopayalatechargto1-I5vepcret!nt(5f,
%)()('tlltt
delinquen!a untr.Iiquidaeddal
magesfortlheextraexpenseinhandlillgpastdtle
pltylnc .
6. DefauIt1Remedies.lfdcfi
-tlltisnlndcinthepaynhelltofatlyi
tlllotlntpayable
heretlndervhellduc.thcn.1lttllcoptitynof'Payce-theelltil
-eindebtednessevidellcedhereby
sllallbecGlnellnluedialzlydt-teandpayablexandallsuchalmotlnts,including.aI1accruedbut

tllppaidinlerest,shallLllereftI-terbearilttekcstntthcl
-atcoft-ivepercelt(5$1)peraullul
nabtlvc
theNtlttRhltc-I-k
liltll'
ctot:xcl-cist:l.
I)is()1)ti()nshalino!vaivcthcrighttthexercisethesanlein
theeventofanysttbsequentdefault.

l-lIlOMISS(.
'
IRYN(.
)-I-1:
!

EXHIBIT
1
:
I

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7- AttorneyFccs.lfstlil-aciollx(.
)1-(ltllerIlroceeding()fanyllltttllevhatsoevel(incltdding1111yproceedingtlnllertheU.S.BallkruptcyCode)isillstittltedi1lconllectioaw'ith
anycontl-oversyarisil'
lgotll()1-thisagreclllent01-t()illterprtto1-enfklrccanyriglltsheretlnder.
thcprvaiIingpartyshallbeentitledtorccovcritsattorneyt'
ees.paralegalssaccountants,Jtnd
othcl'experts'fbcsxant.
lalloherfees.cthstsadndexpensesactullllyillctlrl-edandreasonably
necessaryil)donnectiontherelvithsasdetenuinetlhythecotlllatrrialol-onallyappealor
I-evieuz.iI)additiontoallotheral
motlntsprovidedbyIaw'.
8 Misccllaneous'.
8.l Evelypersoll('rtlntityalanytil'
neliablcforthepaylnentofthc
illdebtednessevidencedhcrcbyuzaivespl'eselltlnt
zl'
ltfbrpayment.delmalldandntlticco1lltlllpaylnelttoftllisloote.12,verysucllpersonorentityfurtlcrlyerebyconsentst.
()any
extensillno1-thetinhe0f-payl-ncllthereoforothern'
ltldit-icatonoI*theten'
nsofpaylntltofthis
Note.thcrcleaset5faIloralllzpart(11-thesccurityheref
ill-.(31
-thereleaseof-allypal-tylablcfbr
!l)cpaylmlll
-()ftheilldcbtcdllcsscvitlencedIlelebyttanytfl'
neall,
dl
-l-t
nl
'
l'
1tilnc1.
4)1iTntts1tttlle
reqtlestof-anyonenttuz()1'l'
lereal-terliablel
'l'
ke'ef'
tlr.Allysuclhexrellsionol
-relcaselnaybe
ltladevvithoutnoticcl()nnyol
-sucl)lnersonsorcntitiesandu/ithoutdischargillgtleirliabilify.
8.2 -'
l7lelleadingstotilcvariotlsseclionshavebccninscrled1*
01.collvenielnce
()1-l-el-elwellceolllyal'
lddonotdel-ille,lill'
lit.Illodlfyq(
71
-cxpllnt)tlleexpl-esspl-ovisions()f-this
Note.
8.3 TllisNoteist
madehvitlll-etb.rej
lcetottlldistobttonstl-uetlinaceordance
vvitl)1.helawst'ftI1cstJlt.
e(lf-(.
-aliI*
t'
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2.PRIIMISSORYNIJTE

,
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(207 of 364)
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E X H IB IT

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(208 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 208 of 228

w/xzrv.vzw.uvo x.tl.r..
t.r?AA

e)01

ASSIM PTIONAGIGRIWKNT
PARTIR :

BLIXSFTHClkotn3,mC,

(:<
n(E
jt'.
)

O ItAZUICS)$rH
czjd
TN OTIW /,,BIJXSBTA!

(.d
1?1!qrl+
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1!1t')
I'%ISSPOND&1T''
I

RIICITAT,S:
A. Peiitioner;ndReapondmutm itwolvoplMMqzlfalDksoluiionProoewsng
pendlngintheSuperiorCourtofCalifvrzzaaItivtlolde,CasrN().1* 1ND91152.

B. B(31fsanOregon$Cpootitm.K>poudqntisthQsoleshhrelloldej'of
BG,subjeettoaconmmtyproml'
tyi
ntcrvsfdaiml
zgFedti
ty
xer.
C. Dtitlonet m:d Rezlxmdenthavo entercr
l inlo a MadtrlSottlement
Agvm>t
odAtedJtme26,700B,asameme Jllt
y% 2008(thel
'
MaritzlSettlezntt
Aqrdrmenf3.
D. Peoone,
r%4Rewpr
mdlmtaekuowlodgeGattl
'
hzgthef
rrnarzjasethe
Rcpond'entmd/orth:Petluorernnd/orbothofthtmybormwetlmoe frozriEmetotime
fi'
tauBGI.zndtbatmesebrzpwho llavobeendocttm=tedincerfliprromissolyNot::
expcutedbyRemonlvniiqfayorofBQj(coleeval
y,RBGIlr
adpl
ztadzlegn'
),wll
i:hBGl
lqdebtodtl
esBisovldrmce by(l)t
11:Proe xtyNot
ldaty'
lDecam'
tr 31,2006of
Rcs'
ptme t.
iafavorofBG1m
'tlwprlrtcipalathnuz:of$5$.305,147.60attacledIw*
V
amof
l
n
c
o
r
p
-t
e
l

t
r
e
i
n
a
:
F
xblbitACxvgpsdentN A''
)ntt
l
d(R)thePalnlsory
fedatatlDectmty'
;r:
#1,z006orlkesjxmdontiuhwrvfB*iin'
lmprlnvlpalamourztf
*14t,,
81*,0:3.
28aachedlmrotoaadincorpomtedherelrlasExi
r
i
lbltBCxemponrlfmtNot
e
B'')(colletivply,f'
Respozzd=t'sNotvx'hl.
E. ne MazlY @ellcmorltAgtcement contemplar resnqulFhmms by
Respondoatbfv1loflli:lghtclasma:14iateresliatheBCIIclyltalstQ:.
ktoPbtldon<raud
Peltlonm'aassumpdo ofztoft'
hernrtritalcoynmtmity'slisbilltles;I:Ifobljgation:to
BGlasrofloctedntbeB(1Ihdebteednea
M8
IM QJONAGRBUMDIT
Aage1of7

EXHIBIT
:
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Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 209 of 228

Q002

AO1tM MK
'NT$':
1. Fecltpls.Theabov;leoitalsazedeemed* bolmeandareiuoorpomted
b*e .
2. ke:pe.
udenlNlyt:s.Ropoudcatrep=en/audv'qrlmot.
sfl/atasoftttidato
hereGf,tlteoufcfamdingbalocq1t
461u21
% RcmM *4unpddlnft
eskoftheB
Tftdebfedposaleleossfhon:190,00x000. Resmndwttdlm1lly:ovldePtitlotv 1t.
1)aa
ogts-tatllagbalancooftheB0llndplrtodnepcofJva:18,2002,tpgethe,rwithbackup

documeitl.
3. j'etltbur'sAsramldonpfBG1Tndebltdnesg,fnoonnzcuo:witht
lm
MarlulSettleaue/tAgxoraentlmdaspartofthenmtodbywhiihthef'ett
'tloztrmzd
Reapontmltaro(Iividinguplhe1$41andllabiliti- oftliei
'rmalifaleatute.Fotioner
hgrebyassumesalttyftlkeBCI!hdobtednegaaudagrdv:tosaveahdholdkmpcldent
comploto freoandhatml&omf
lt
eB01Neht
cduess.Jrct-ecsondmzewlt
lyatd
slmnltemousylwzpwsfhztlzeResphd-tNotum btitlgeendoliOdzestmfstoreflet
Petlflrer'gayatlmpuon thexrYfpursuqatto111
erktaad fhcstbtitutbx f

Fvqtlo> forRelpoztdext> obllgurtherepuderptrxuarltfotlleAmeqdcd:114Rotated

homksnryNoteatlahe,dftzExhiltChtato,
4. Slth4dtvtozt:1,4RdegvevJncon:ldomyionof1beay:umplsorcfdteBG1
lndebtedncdsI)yPoddoser,andlttrrr
cognitie 4fPelilioner'l
)fumremanagemw)taud

eoutm)ol-DGlant
ltheadccf
sandenti
ttr.
zovm.wll
ihlt11
%l
hedltofowieol
zlppnd/r
m
ange
t,
BG
obly
ole
-Ben
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rl
teMm
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ya
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tx
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q,
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1
11$
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wi
hr
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lw
up
do
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bd
fee
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lu
tad
rtxl
ll
yl
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e
reo
wb
ll
ti
bg
.at
Bb
(
l

deliver;e flzeoriyiualReapoudentNoftsf.
oPetitine,r* b*,rnm> evsupercedd by
RoplacementNofea.
5. nrthetAs:txojkees. PAcofthcpmiossitall,upm thT4azoaablf
m,quegtoftheo*rpaxtyantlat1homxpertseofthozequedt*
vwpety,execttt:anddeliver
sucliatklfooztt!ldocum:htzihAmvybet'
eacoaablyzlete:gazyfortheptupos.eufvldeztoiy
o4.xrfectirtgyuyrlghtsorittzreslesnghrundcr.
6. SucteAor;andAepls. A11oflm ttrms.Jltovlvlonsm44cMdition:
ll
ce
mfa!
lanbebinf
.
W upcnaad1
:t
1> totl
zebtvetoft
lt
elleirsast
vcce-reandassigng
oftlmDsmctlvoparlles.
7. Atttx-y I?aA. Iftuityacliow orotheryaoee-cllzxg d gqy xmtam
w
hatdo4vortbll8l
u(1insanyproxadi
ngluldertl
znUS.BMkr.dptoyCode)iei
n,
stt
'tat
el
li
I

oonneofionwifhuaycozltro#zlvyqzislngoatofthl:AvmjtnptiollAwrme.nlor* kifea'
pre,t
ASCUMPWOHAGRKL?MHI.
IT
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(210 of 364)
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I
ioco

oronfomeanyrigktshemtmdrr,tllepzw#llngpartyslwllboehtte,d* recovc )ts

remso>bleout-ofmcdktatt
ntys'fe
u:expo'feeaanflAtl
othorroaaoonbl
zpufcyfpxketfbo,cosl,andexprmsenace lymclzrmdaudreamnnhl
ynxtssaryineoauepkhn
tlwmw3l agdetermlnpdbyflzotlrttfrlaloronanyappealorreview.jnxdflititmtoa11
othervmoun'lpznvfdedbylaw.
.
8. ChoieeefVsw.Tll
1:AotlmpqonAgamn
.ht,yov:medbythelawsof
the.wtoofCalifoYakwithoutregvdfofloclmic.eof1awmle:
9. lyntir:Agreement '
J'lzliAriauuptlorjAyexr
montjt4gbt.
llz'wi* all
Exhibigtlaoh:;hnmtoandtheMadi:VdtlempmtAgteomlmt,constituto a&1aud
ftnjtlyxpmsnionbytll:paliaaIIIIMpezvexfas21prlprora:orwrittennegodadonsaud

agraememtsrgardingt
lpGubjectmxtiqrf
yrt
hi:AcsumpdonAgl
r
ewxent

10. Counterpatt,. '

f> Agroommx may bo eAecuttxlltkone ()xmor:
coutztgzparl.eaehofwMchshnlll):ffl
r- e,
dacorlgicalybutq11pfwhichtak- togefhet
:1w11conmtituteoucaudilm:itttelnstrumeat

glteraasndrofpageint
ent
fonall
y1d1bl/zc)

MgllMFrIflNAGRE z

.
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1.101

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Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-1, Page 225 of 228

Case11-15O10-bam Doc528 Entered07/10/1316:59:52 Page1Of17

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July19,2013
4
5
NOTFORPUBLICATION
6
UNITED STATESBANKRUPTCY COURT
7
DISTRICT OFNEVADA
8
******
9

Inre:
10
TIMOTHYL.BLIXSETH,
l1
AllegedDebtor.
12
13
14
15
16
17
18
19
20
21
22
23
24

)
)
)
)
)
)
)
)

CaseNo.:BK-S-I1-15010-BAM
Chapter7
Involuntal
y
Dates: July5,2013
Times: 1:30p-m.

ORDER GRANTING MOTION TO DISMISSINVOLUNTARY CASEI

1.Introduction

OnApril5,2011(theE
ipetitionDate'),petitioningcreditorsMontanaDepal
-t
mentofRevenue
(tt
Montana'),ldaho StateTax Commission (Idaho''
),andCaliforniaFranchise TaxBoard
(ti
california''
)(collectively,tpetitioni
ngCreditors''
)filedaninvoltlntaabanGlptcypetitioninunited
StatesBankruptcyCoul'
t,DistrictofNevada,againstallegeddebtorTimothyL.Blixseth(&
iBlixseth''
).
(Dkt#1).

tunlessotherwisespecied,a11lsection''referencesaretotheBankruptcyCode,11U.S.C.

25 jj101-1532,
.a11E
&FRCP''andi
tcivilRule''referencesaretotheFederalRulesofCivilProcedure;al1
ttyRBp''andtltule''referencesaretotheFederalRulesofBanknlptcyProcedure;aIIETRE''references
26 aretotheFederalRulesofEvidence.
Al1referencesto61Dkt#''aretotheECFnumberasassignedonthedocketfordocumentsfiled
electronicallythroughCM/ECFintheabovereferencedbanknlptcycase.

(226 of 364)
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Case11-15OlO-bam D0c528 Entered07/10/1316:59:52 Page2of17

Thepetitionsetforththeamountandnatureoftheclaim heldbyeachentity:Montana,tax

2 claim,$219,
258.00;ldaho,taxclaim,$1,117,914.
00;andCalifornia,taxclaim,$986,
957.95.(Dkt#1).
3 PetitioningCreditors'claimstotaled$2,
324,129.
95.(Dkt#1).
4

OnApril19,2011,ldahoenteredintoasettlementagreementwithBlixsethwherebyBlixseth

5 wouldpayIdaho$925,
000tincompletesettlementofallincometaxes,penalty,andinterestfor(tax
6 years2005,2007,2008j''
-thetaxyearsforwhichldahoassert
edBlixsethowedataxdebtinthe
7 amountof$1,117,914.00.(Dkt#32,p.9)VeealsoTrialEx.BC).Inexchange,ldahowouldwithdraw
8 itsparticipationasapetitioningcredi
torintheBankruptcyntmcprotunc.(Id.
4.ldaho'sWithdrawal
9 ofPaMicipationNuncProTtlncenteredondocketApril20,2011.(Dkt#20).
10

OnApril20,2011,CaliforniaenteredintoasettlementagreementwithBlixsethwhereby

11 BlixsethwouldpayCalifornia$992,
300.
99(plus$108.75foreachdayafterApril18,2011)-the
12 amotmtCalifol
miaassel
tedBlixsethowedasataxdebtarisi
ngfromtaxyear2007.(Dkt#32,pp.4-7)
13 (seealsoTrialEx.AH).lnexchange,Californiawotlldwithdrawitsparticipationasapetitioning
14 credi
tori
ntheBankruptcynuncpro/lf?
7c.Vd.4.California'sWithdrawalofParticipationenteredon
15 docketApril20,20l1.(Dkt#26).
16

Afterthecoul'
tinitiallydismissedthecaseforimpropervenue,theBankruptcyAppellatePanel

17 foundthiscourttobeapropervenue.(1nreBli
xseth,484B.
R.690(B.
A.P.9thCi
r.2012))(seealso
18 Dkt#250).OnJanuary7,2013,theNinthCircuitBankruptcyAppellatePanel(ttBAP''
)issueda
19 mandaterestoringthisCotu-t'sjurisdictionovertheBanknlptcy.(SeeDocketinBAPCaseNo.
20 NV-I1-1305-PaJuH,DocumentNo.37).
21

BeforethecourtareBlixseth'spleadings,theRenewedMotiontoDismissInvoluntaryCase

22 (Dkt#261)andtheAmendedMotiontoDismissInvoluntaryCaseandMemorandtlmofPointsand
23 Authori
tieslnSupportThereof(Dkt#309)(collectively,theEt
l
MbtiontoDismiss'). Montana's
24 pleadings,PetitioningCreditorMontanaDepartmentofRevenue'sOppositiontoMr.Blixseth's

25 AmendedMotiontoDismiss(Dkt#437)andEl
ratatoPetitioningCreditorMontanaDepadmentof
26
2

(227 of 364)
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Case11-15O10-bam Doc528 Entered07/10/1316:59:52 Page3of17

1 Revenue'sOppositiontoMr.Blixseth'sAmendedMotiontoDismiss(Dkt#438)(collectively,the
2 t
oppositiontoMotiontoDismiss''
),arealsobeforetheCourt,asisBlixseth'sReplytoPeti
tioning
3 CreditorMontanaDepart
mentofRevenue'sOppositiontoAmendedMotiontoDismiss(E
tlteplyto
4 MotiontoDismiss''
)(Dkt#470).
5
OnMay8,2013,theYellowstoneClubLiquidatingTrtlst(Et
YCLT')submitteditsNoticeof
6 JoinderinInvoluntalyPetition(tI
YCLT Joinder'').(Dkt#359).Blixseth'scounselsubmittedits
7 MemorandumRe:YellowstoneClubLiquidatingTnlstNoticeofJoi
nder(Dkt#402)anditsAmended
8 Memorandum Re:YellowstoneClubLiquidatingTrustNoticeofJoindergsicl(Dkt#404),
'both
9 documentsenteredondocketMay20,2013(collectively,thett
Memoranda''
).CounselforBlixseth
10 latersubmitteditsOppositiontoYellowstoneClubLiquidatingTrust'sNoticeofJoinder(Dkt#453),
11 enteredondocketJune3,2013,aswellasitsErratatoOppositiontoYellowstoneClubLiquidating

12
13
14
l5

Tnlst'sNoticeofJoinder(Dkt#459),whichalsoenteredondocketJune3,2013(collectivelywiththe
Memoranda,the
oppositiontoYCLTJoinder').YCLT'SMemoranduminSupportofYellowstone
ClubLiquidatingTrust'sJoinderUnderSection303(c)oftheBankruptcyCode(t
Memorandum in
Suppol
'
tofJoi
nder''
)(Dkt#467),enteredondocketJtme5,2013.

16
TrialonthematterssetforthintheMotiontoDismiss,theOppositiontoMotiontoDismiss,
l7 theReplytoMotiontoDismiss,theYCLT Joinder,theOppositiontoYCLT Joinder,andthe

l8 Memorandum i
nSuppol
tofJoindertookplaceonJunel3,2013,andJune14,2013(
Tria1').The
19 Court'sOmnibusRulingsonEvidentiaryObjectionstherepresentedthenfollowed.(Dkt#512).
20 ClosingargumentsforTrialtookplaceonJuly5,2013,withYCLTZandpartiesBlixseth3and
21
22
23
24
2post-t
rialggpmompt
ljp?
iInskpporjoftheJpvt
p/tf
n/tzryPetitionUnderSection303oft
he
25 Stzn/lrtwfc.pCode(Dkt#511).

26

3Post-trialClosingBrie
finSupportofAmendedMotiontoDismiss(Dkt#515).
3

(228 of 364)
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Case11-15O10-bam Doc528 Entered07/10/1316:59:52 Page4of17

1 Montana4havingsubmittedpost-trialbriefsinadvanceoftheirappearancesonJulytifth.Againstthis
2 background,thecourtgrantsthemotiontodismissforthereasonsstatedinthisorder.

3
BlixsethbroughttheMotiontoDismissunderCivilRule12(b)(6),incorporatedbyRule
4 1011(c).A1lpart
iesimmediatelyconducteddiscoveryandconsentedtoatwo-dayhearingonthe
5 MotiontoDismiss,atwhichtimetestimonialanddocumentaryevidencewastaken(thesame
Trial''
).
6 ThisconveltedtheMotiontoDismissunderCivilRule12(b)(6)intoapartialsummal
'
yjudgment
7 motion(theMotion').(CivilRule12(d)).Asa1lpartieshad
areasonableopporttmitytopresental1
8 thematerialthatispertinenttothemotion,''theCourthasconsideredthisMotionunderCivilRule56,s

9 standardthatBli
xsethmustl
showgjthatthereisnogenuinedisputeastoanymaterialfactandEhe)
10 isentitledtojudgmentasamatteroflaw.''(CivilRule56(a),incorporatedbyRtlles1018and7056)
11 (seeal
soFtlcz/
.
yMedia,Inc.v.Nat'
lBroad.Co.(InreFocttsMedia,1nc.
),378F.
3d916(9thCi
r.2004)
12 (determiningqualificationsofpetitioningcreditorsonsummal
yjudgmentl).
13
ll.Merits
14
Blixseth'sargumentisrelativelysimple.Heclaimsthattherelevantstandardrequiresthree
15 qualifyingpetitioningcreditors,andthatofthefourcandidates,nonequalify.Asamatteroflaw,

16 therefore,hecontendsthatthereisnomaterialdisputeoffact(albeitheacknowledgesthatthereare
17 significantdisputesastothelaw),andheisthusentitledtojudgmentasamatteroflaw.
18

ThelegalstandardforBlixseth'sMotiontoDismissisrelativelyeasytoarticulate.Section

19 303(b)requiresthataqualifyi
ngpetitioningcreditormustbe&(
aholderofaclaimagainstsuchperson
20 thatisnotcontingentastoliabili
tyorthesubjectofabonafidedisputeastoliabilityoramotmt....
''
21 11U.
S.
C.j303(b)(1).Theremustbeatleastthreepetitioningcredi
torsholdingsuchqualifying
22 claimsunlesstitherearefewerthan12suchholders,excluding...anyt'ransfereeofatransferthatis

23 voidable....''f#.atj303(b)(2).lnthislattercase,thereneedbeonlyonequalifiedpetitionil
zg
24
25

4Pet
itioningCreditorMontanaDepartmentofRevenue'sclosi
ngArgument
sinf/
yc

26 EvidentiaryHearingonMr.Bli
xseth'
sAmendedMotiontoDi
smiss(Dkt.1309)(Dkt#516).
4

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1
2
3
4
5
6
7

creditor.fJ.Regardlessoftherequirednumberofpetitioningcreditors,however,theaggregate
amountofclaimsheldbya1lpetitioningcreditorsnotsecuredbythedebtor'sproperty-generally
referredtoasunsecuredclaims-musttotalatleast$14,475.5f#.
NopartyconteststhatthePetitioningCreditors'collectivelyholdunsecuredclaimsthatexceed
theminimumamount.NopartyseriouslyconteststhatthePetitioningCreditorsclaimsarecontingent;
thatis,dependentonsomethird-partyorextelmalactionotherthanlitigationbetweentheparties.
WhatiscontestediswhetherBlixsethhasmorethanelevencreditors,andwhethertheclaimsofthe

8 Peti
tioningCreditorsaretl
thesubjectofabonafi
dedisputeastoliabi
lityoramount.''
9
A.DidBlixsethHaveMorethanElevenCreditors?
10
A criticalpointisthenumberoftheallegeddebtor'screditors.lfelevenorless,thereneedbe
11 onlyonequalifyingpetitioningcreditor.lftwelveormore,thereneedstobethree.Nonmally,ifthe

12 numberofcreditorsiscontested,theallegeddebtorfilesananswertothepetition,andtgijftheanswer
13 toaninvoluntarypetitionfiledbyfewerthanthreecreditorsaverstheexistenceof12ormore

14 creditors,thedebtorshallfilewiththeansweralistofa11creditorswiththeiraddresses....
''(Rule
15 1003(b)).Here,however,Blixsethdidnotfileananswer,takingadvantageofRulel0llincorporation
16 ofCivilRule12,filingamotiontodismissbeforefilingananswer.Thus,thisCourtpreviouslynlled

17 thatRule1003(b)didnotappl
y-therebyobviatinganyobligationtofilesuchastatement.
18
WhatBlixsethdiddo,however,wastorespondindiscoverywithanon-exhaustivelistof18
19 creditorsheclaimedhehadonthePetitionDate.Montana,onbehalfofthePetitioningCreditors,then
20
21
22
5
Althoughthethresholdamountlistedin11U.S.C.j303(b)(1)is$10,000,Congress

23 providedthatthisthresholdistobeadjustedforinflationatthreeyearintervals.See11U.S.C.
j104.Therequirementineffectwhenthisproceedi
ngcommencedwas$14,
425.SeeRevisionof
24 CertainDollarAmountsintheBankruptcyCodePrescribedUnderSection104(a)oftheCode,75
25 Fed.Re.8747(Feb.1(i,2010).ltisnow$15,325.Revisionofcertai
nDollarAmount
sinthe
BankruptcyCodePrescribedUnderSectionl04(a)oftheCode,78Fed.Re.12,089(Feb.21,
26 2013).
5

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1 engagedinextensivecrossexaminationonthisissue.Despitethis,theCourtisunpersuadedthatmore
2 thansixofthesecreditorsshouldbcdisqualified.
3
Asastartingpoint,itisthePetitioningCreditors'burdentoshowthattheyhavemetallofthe

4 requi
rementsofSection303(b).Thisincludesshowingthattheycollectivelyhaveasufficientnumber
5
6
7
8
9
10
11
12
13
14
15
16
17
l8
19
20
21
22
23
24
25
26

ofpetitioningcreditors.
ThecreditorslistedbyBlixsethwere:
CreditCard
NeimanMarcus
USBank
Utilities
CityofMedina
PugetSoundEnergy
Comcast
Qwest
OtherUnsecuredCreditors
MedinaGardeningandLandscape,lnc.
BigHornGolfClub
LewisCellars
TransAmericaLifeInsurance
ADT
PrudentialLifelnsurance
ChubbCasualty
Professionals
Mack,Roberts& Co.
MikeFlynn
Stillman& Associates
RosenLaw
Hagen& O'
Connell
Atthehearing,Blixsethreiteratedllisdiscovelyresponsesandatlthenticateddocumentsrelated
toeachofthesecreditors.Inmanycases,thedocumentsprovidedindicatedbalancesdueandowing
beforeApril5.lndeed,insomecases-NeimanMarcus,andmostoftheutilities-itislikelythatthe
billswerepaidbeforethePetitionDate.
Butthatisnotfatal.Thebillsthemselveswereevidenceofongoing,recuningdebts,suchas
cableandelectricalservice,anditbegscommonsensetobelievethattheseentitiesdidnotprovide
servicesafterpayment,thuspossessingaccruedbutunbilledbalancesonthePetitionDate.When
6

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1 thereisaperiodic,recurringdebtthattheallegeddebtordoesnotdispute,evidenceofarecent
2 liquidationofthatdebtsuchasabillorinvoice,andnoevidencethatsuchrelationshiptenuinatedafter

3 thepetitiondatefornonpayment,thereisadebtforpuposesofSection303(b)(2).See2COLLIERON
4 BANKRUPTCY!303.14g4j(AlanN.Resnick&HenryJ.Sommer,eds.,16thed.
).Indeed,astoNeiman
5 Marcus,PugetSoundEnergy,Comcast,andQwest,theCourtsofi
nds.
6
7
8
9
10
11

ThePetitioningCreditorsalsonotethatBlixseth'shabitofpayingearlyhisUSBankcredit
card-whichseemedtoaveragemorethan$30,000permonth-meantthatthatcreditcardbillhadbeen
paidasofApril5.Blixsethdeniedthis,butevenifthisbillhadbeenpaid,itisreasonabletoassume,
fromthesheeramountofmonthlycharges,thatsomenewchargeswouldhavebeenincun'edandwere
thusowingasofthePetitionDate.f
Blixseth'sassertionofdebtsowingtoBigHornGolfClub,TransAmericaLifelnsurance,

12 MedinaGardeni
ngandLandscape,lnc.
,PnzdentialLifelnsurance,ChubbCaskl
alty(anditsvariotls
13 insurers),andADTaresimilar.Eachisaperiodic,recurringdebtthatBlixsethtestifiedwasowed,
14 undisputedandgenerallypaidintheordinarycourse.Again,ifonlytheaccrualofdebtexistedon

l5 April5,itwasstilldebtwhichcountsforSection303(b)(2).
16

Thisleavesthefiveprofessionals.Again,Blixsethauthenticatedthesedebtstothecourt's

17 satisfaction.Hetestifiedandwassubjecttocrossexaminationastotheexistenceandvalidityofthese
18 debts,andthecourtcreditshistestimony.?Whencombinedwiththeotherrecurringdebts,thismeans
l9
20
6Thissamelogicdoesnot,however,applytothedebttoLewisCellars,aregularcreditor
21 ofBlixseth's,butbynomeansasregularandperiodicasBlixseth'sutilityprovidersorhiscredit
cardcompanies.So,too,astothedebtowedtotheCityofMedina.Neitherofthcsedebtshave
22 theregularityofoccurrencethatwouldjustifyfindingthattherewasanaccrualofdebtstothese
entitiesasofthePetitionDate.Asaconsequence,thecourtfindsthatanydebtsowedLewis

23 CellarsortheCityofMedinadonotcountforpuposesofSection303(b)(2).
24

7ThePetitioningCreditorscrythattheystonewalledastofurtherinformationonthese

25 debtsanddidn'tfollowupbeforetheTrialbecausetheyranoutoftime.(Seenote2inClosing
Arguments).Hogwash.AlthoughtheMotiontoDismisswasheldonasomewhataccelerated

26 schedule,noneofthePetitioningCreditorseverbroughtamotiontocompel,orevermadeaformal
7

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1 Blixsethhasestablishedthattherewereatleast16creditorsasofApril5,2011.Andthisisbeforethe
2 CourtconsiderstheclaimsoftheeightmembersofYellowstoneClubWorldwithwhom Blixsethhad

3 settledsomeoutstandingclaims(E
CYCW Members'').TheYCW Membershadfiledarequestfor
4
5
6
7
8

noticeinthiscase-indicatingthattheystillconsiderthemselvescreditors-andtheYCW Members
providedevidencefrom whichitcouldbeinferredthatBlixsethhaddirect,althoughshared,liability
tothem.lnanyevent,thePetitioningCreditorsfailedtoestablishthatBlixsethhadlessthantwelve
creditorsasofthePetitionDate.
ThePetitioningCreditorsmakemuchofthefactthatmanyofthecreditorslistedbyBlixseth

9 receivedpaymentsafterthePetitionDate.CitingInreTeledataCorp.,12B.
R.879(Bankr.D.Nev.
10 1981)(George,J.
),thePetitioningCreditorscontendthateachofthosecreditorsreceivingpayment
l1 onaprepetitionclai
mareineligiblebecauseSectio1303(b)(2)rendersineligiblethosecredi
torswhose
12
13
14
l5
16

post-petitiontransferwouldbeavoidableunderSection549.Theburdenofestablishingavoidability,
however,restsonthePetitioningCreditors.Whilesomeoftheentitiesmayhavereceivedavoidable
transfers,theCourtislef4toguesswhatwaspaid,from whatsource,andforwhatconsideration.lt
couldbe,forexample,thatpaymentcamefrom non-estatepropel'
tysuchaspostpetitionearnings,or
itcouldhavecomefromanaffiliatedentity.Insuchacase,withoutatransferofestateproperty,there

17 couldbenoSection549avoidance.SeeCOLLIER,supra,at!303.14g3).Altenzatively,paymentscould
18 havebeenstructtlredinsuchawaythatnecessaryservices,suchasutilities,wouldcontintletobe

19 providedpost-petition,therebyprovidingaSection549(b)defense.Withoutmoreorcredibleevidence
20 ofavoidability,theCourtdoesnotdisqualifyanyofthe16creditorsselectedabovefrom thecount

21 requi
redbySection303(b)(2).
22
23

24 objectionatthepretrialofthesematters.Evenifthecourtdidnotfindthatthesefi
veprofessionals
25 wereeachcreditorsonthepetitiondate,whichitdoes,theinactionofthePetitioningCreditors
estopsthem from complainingnowaboutopportunitiestodevelopevidencethattheyconsciously
26 electednottopursue.
8

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1
Assuch,anyinvoluntarypetitionagainstBlixsethmusthavehadatleastthreepetitioning
2 creditors.

3
#.Standardforplfc/#.
/zl
gPetitioningCreditors
4
Section303(b)(1)requiresthateachqualifyingpetitioningcredi
tormustholdaclaimthatis
5 notthesubjectofabonafidedisputeastoliabili
tyoramount.'Astothestandardforwhethera
6 disputeisbonafide,theNinthCircuitisclear.InLibert
yTooltfManufacturingv.VortexFishing
7 Systems,Inc.(InreVortexFishingSystems,1nc.
),277F.3d1057,1064-65(9thCir.2001),thecour'
t
8 stated:

9
10
11
12
13
14

(Aq1lothercircuitcourtsthathaveconsideredthequestionhaveadopted
somevariationofL
Inrefsf
fc/
c's(831F.2d745(7thCir.1987)))tobjective
test''firstsetoutinInreLough?57B.R.993,996-97tBkrtcy.E.D.Mich.
1986)(Igljfthereiseitheragenulneissueofmaterialfactthatbearsupon'the
debtor'sliability,orameritoriouscontentionastotheapplicationoflaw to
undisputedfacts,thenthepetitionmustbedismissed.
''
).

We
joinoursistercircuitsinadoptingtheobjectivetestfordisputes
regardingliabilityoramount.

l5 Butthereisawrinklehere.Section303(b)(1)wasamendedin2005toaddthewordsf
astoliability
16 oramount.''Thisraisesthequestionofwhether,aswasthepriorpractice,petitioningcreditorsmay
17 stillqualifyassuchifonlypal4oftheirclaim isdispute,inessencerelyingonthatpal4oftheclaim
18 which,forvariousreasonsisnotdisputed.

19
Thequestionofwhetheranypa1
4ofadisputedclaim couldserveasaclaimjustifyingan
20 involuntaryballkruptcyhaslongbeenasubjectofdiscussion.In1984,Congressattemptedtoaddress
21 thisissuedefini
tivelybyamendingSection303(b)tospecificallyaddressthisissue.TheBanknzptcy
22 AmendmentsandFederalJudgeshipActof1984,Pub.L.No.98-353,98Stat.333,amended

23 subsections(b)(1)and(h)(1)ofsection303toaddthewordsEt
orthesubjectofabonafidedispute'
24 tofurtherconditionthetypesofclaimsthatcouldqualifyforpurposesofaninvoluntalypetition.
25
26
9

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Bynarrowingthetypeofqualifyingclaim,Congressrecognizedandremediedtheproblemof

2
3
4
5

creditorsholdingdisputedclaimsbeingabletoforceadebtorintobankruptcy.(See130Cong.Rec.
S.7618(dailyed.June19,1984)(FloorStatementofSenatorMaxBaucus)(:1believethisamendment
althoughasimply(sic)oneisnecessarytoprotecttherightsofdebtorsandtopreventmisuseofthe
bankruptcysystemasatoolofcoercion.'l).

6
Thenew language,however,didnotspecifythekindofbonafidedisputecontemplatedby
7 Congress.Inotherwords,thenew languagedidnotindicateexpresslywhetherabonafidedispute
8 regardingtheamountofadebtwassufficienttodisqualifyapetitioner'sclaim,whenthedebtordid

9 notdisputethattherewassomeliability.SeeCOLLIER,stpra,at!303.11(21(Ei
fhel
'
ewasconsiderable
10 questionbeforethe2005amendmentswhetherdisptltesastoamountalonewereenoughtomakea

11 petitioningcreditor'sclaiminvalidforpurposesoffilinganinvoluntarycase.').
12
TheNinthCirctlitCourtofAppealsandothercotlrtsansweredthatquestionbyholdingthat
13 adisptlteastoamotlntcoulddisqtlalifyaclaim,butonlyifthedisptltewouldredtlcethetotalamotlnt
14 ofthepetitioners'claimsbelowtherequireddollaramount.FocusMedia,Inc.v.Nat'lBroadcasting

l5 Co.Inc.rfnreFt
pcz
fu
Media,Inc.
),378F.3d916,924-25(9thCir.2004)*
,ChicagoTitlefnzfrt
/nccCo.
16 v.SekoInvestlnent,Inc.(1nreu
vc/
ft
pInvestment,1nc.
),156F.3d1005,1008(9thCir.1998).
17

lnInreFocusMedia,W7c.,sevenpetitioningcreditorsforcedthedebtorintoaninvoluntaly

18 bankl
-uptcy.(378F.3dat921).Shortlythereafter,thebankl
t
zptcycoul'
tgrantedthepetitioning
19 creditors'motionforsummaryjudgmentontheinvoluntalypetition,findi
ngnogenuineissuefort
'
rial
20 astothepetitioners'showingthattheclaimswerenotsubjecttoabonafidedispute,amongother
21 issues.(fJ.at921-22).Onappeal,FocusMediaarguedthatthepetitioningcreditors'claimswere
22 subjecttobonafidedisputebecausetheyweresubjecttopotentialadjustmentsthatcouldnotthenbe
23 ascertainedwithanycel
-titude.(f#.at924-25).FocusMediafurtherarguedthatEf
anyuncertaintyor
24 disputeastotheamountofadebtisabonafidedisputeunlessthedisputearisesfrom atransaction

25 thatiswhollyseparatefromthedebtitself.
''(1d.at925).TheNinthCircuitrejectedtheseargtlments,
26
10

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1 concludingthatevenassumingtherewasanactual,non-theoreticaldisputeastothepreciseamounts
2 Focusowedthepetitioningcreditors...suchadisputeisrelevantonlyifittakesthetotaldebtbelow

3
4
5
6
7

(thestat
morythresholdl.
''tf#.at925-26).
lnresponsetoFocusMediaandcaseslikeit,in2005CongressagainamendedSection303(b).
lnparticular,Congressaddedthewordstt
astoliabilityoramount''tosubsections(b)(l)and(h)(l).
(BankruptcyAbtlsePreventionandConsumerprotectionActof2005,Pub.L.No.109-8,119Stat.23,
enactedApril20,2005(Et
BAPCPA'I).Accordingly,asofApril20,2005,8Section303(b)(1)provided

8 asfollows:

9
10

(b)Aninvol
untarycaseagainstapersoniscommencedbythefilingwiththe
(1)bythreeormoreentities,eachofwhichiseitheraholderofaclaim
ag
oent
isn
clo
n
inog
asut
lia
i
y
th
b
oa
ni
anst
tis
du
ech
dp
ise
pr
us
t
ah
sat
to
lio
at
bi
it
yt
ren
at
mo
not:
ob
ril
at
no
ir
nd
ee
nts
uu
rb
ejetc
nt
zo
stf
ea
e
bankruptcycourtofapetitionunderchapter7or11ofthistitle-

11

representing such aholder,ifsuch noncontlngent,undisputed claims

aggregateatleast$10,000morethanthevalueofanylienonpropertyofthe
debtorsecuringsuchclaimsheldbytheholdel-sofsuchclaims;

12
l3

14 11U.S.
C.j303(b)(2006)(emphasisadded).Withtheexceptionofanadjustl
uenttothethreshold
15 dollaramount,thiswastheversionofsection303(b)ineffectonApril5,2011,thePetitionDate.See
16 11U.S.C.j303(b).
17
InlightofFocusMediaandsimilarcasesthatprecededBAPCPA,coul'tshaveinterpretedthe
18 2005amendmenttoexpresstheintentofCongressthatabonafidedisputeastoanyamountis

19 sufficientunderScction303(b)todisqualifytheclaimofapetitioningcreditor.Forexample,inlnre
20 Excavation,Etc.,LLC,2009Ballkr.LEXIS1905tBankl.D.Or.June24,2009),oneofthree
21
22
23
24
25
26

petitioningcreditorsarguedthataslongasthetundisputedportion''ofitsclaim wasabovethe
statutorythreshold,adisputeregardingtheamountofitsclaimswasinsufficienttodisqualifythe

8MostoftheprovisionsofBAPCPAweremadeeffectiveasofOctober17,2005.The

changestosection303(b),however,weremadeeffectiveimmediatelyonenactmentonApril20,
2005.

11

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1 credi
torsunderSection303(b). Thecourtrejectedthisargument,holdingthattheBAPCPA
2 amendmentstoSection303(b)ovenuledFocusMediaL
3
4
5

6
7
8
9
10
11

12
13
14
15

ThereisalsoabonatidedisputewithrespecttoHiltonOi1Company,
oneofthethreeoriginalpetitioners.Thepartiesacknowledgethattheir
understandingoftheamountowedbyHiltonaretensofthousandsofdollars
a
part.Hilton,relyingonI
nFocusMedia,378F.3d916,926(9thCir.2004),
arguesthatthisdoesn'
tmatter,becauseatleastpartofthe debtis
acknowledged bytheallegeddebtor.InFt/csf.
,followingIn reSeko

Investment,Inc.,156F.
3d1005(9thCir.1998),providesthatat
disputeas
totheamountoftheclaimgivesrisetoabonafidedisputeonlywhen(1)it
d
oae
nootfar
etofr
ho
yestehpear
tir
ns
i
,ia
t
utt
cl
is
ms
di
es
b
ro
sm
'ca
ouwld
tl
al
k
pat
ee
tit
oan
ina
gct
co
rn
ed
tn
od
rs(2
b)
elf
on
wet
ti
hnegao
mo
uh
ne
t
threshol
d
o
f
j
3
0
3
.
'
TheBAPCPAamendmentsof2005addedtoj303aprovisionthat
a
c
l
a
i
m
wouldbeexcludedifstlbjecttoabonafidedisptlteastoliabilityor
amount.ThisovezrulesSekoandInFocus.IfthefnFocusnzlewereto
remainineffect,the<fandamount''languagewouldbesuperfluous,since
underfnFocustheonlydisputeastoamountisadisputeovertheentire
claim,oratleastabigenoughdisputethatnettingoutwouldtaketheclaim
below themonetalythreshold.Itisabasiccanonofstatmol'yconstruction

thatlanguagebegivcnitsf
'
ulleffect.See,e.
g.,U.S.v.Churchofscientology
WesternULS.,973F.
2d715,717(9thCir.1992);U(S.v.Allen,341F.
3d870,
878(9thClr.2003).ThatwouldnotoccurifInFocusisapplied.Becausethe
d
eb
Hi
t
onmp
Oi
mp
u
d
sputeastoamount,
Hi
ltt
oo
nfOi
1l
Co
a1
nC
yoi
sna
on
ty
ai
vs
as
li
dbj
pe
ec
tt
itt
io
ona
inbgon
ca
ref
di
ite
ord
.i

16 (f#.at*3-*5;seeal
soInreEuro-AmericanLodgingCorp.,357B.
R.700,712,n.8(Bankr.S.D.
N.
Y.
17 2007)(priorto2005Amendments,adisputeastoamotmtgaverisetoabonafidedisputewhenit,
18 amongotherthings,reducedthepetitioningcreditors'claimbelowthemonetarythresholdofSection

19 303(b);the2005Amendmentsit
presumablyeli
minated''thatpartofthetestjkReg'
lAnesthesi
aAssocs.
20 PCv.PHNphysicianu
onw.(InreReg'
lAnesthesiaAssocs.PC),360B.
R.466,470tBankl.W.
D.Pa.
21 2007)(tt
Asaresultoftheamendment,anydisputeregardingtheamountthatarisesfromthesame
22 transactionandisdirectl
yrelatedtothetl
ndcrlyingclaimshouldrendertheclaimsubjecttoabonafide
23 dispute.
''
)(citationomittedl).
24
fnreHent
ges,351B.
R.758tBanl
u'.N.
D.Okla.2006)reachedthesameconclusion.Afterthe
25 2005Amendmentshadbecomeeffective,threepetitioningcreditorsfiledaninvoluntarypetition
26
12

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1 agai
nsttheallegeddebtor,Hentges.(Id.at762).Hentgesadmitt
edliabilitywithrespecttotwoofthe
2 threepetitioningcreditors,butdeniedliabilitywithrespecttothethirdcreditor,TulsaNationalBank

3 (:
Tu1sa''
).f#.lntheinvoluntalypetition,Tulsahadassertedaclaimagainstthedebtorfor$39,
253.15
4 basedonanoteandguaranty.(f#.at763).Followi
ngatrialonthemeritsofthepetition,thecourt
5 determinedthattheamountofTulsa'sclaimwasinbonafidedispute.(f#.).Althoughtherewasno
6 bonafidedisputethatHentgesowed$29,400.00asguarantorofthepromissorynote,Tulsafailedto
7 demonstrateitsentitlemellttoanadditional$8,500inattonzeyfeesandexpensesthatwereincluded

8 initsclaim.(f#.).Basedonthisdispute,andnotwithstandingthefactthatthei
undisputedportion'
9 oftheclai
mwasovertheminimtl
mamotlntestablishedbySection303(b)(1),thecourtconcltldedthat
10 Tulsadidnotqualifyasapetitioningcreditor,anddismissedtheinvoluntalypetition.(f#.at763).9
11
Againstthisbackgrokmd,andgiventhehistoryandpurposesofSection303(b)andthe2005
12 changestoit,Section303(b)(1)shouldnowbeconstruedtodisqtlalifypetitioningclaimsbasedonany
l3 bonafidedisputeastoamotlnt,evenifsome(tportion''oftheclaimisundisputed.Thisinterpretation

14 notonlyisconsistentwiththelegislativehistoryofSection303(b),butwiththelegislativehistoryof
15 thepreviousBankl-uptcyAct.In 1962,Congressdeletedlanguagerelatedtotherequirementof

16 liquidatedclaimsbecauseitwasconcmmedthatthislangtlagett
foreclosegdjacreditorwithalarge
17 unliqui
datedclaim...fromjoini
nginapetition,althoughitcanbemadeabundantlyclearthathis
18 claim exceedsthestatutolyminimum.lndeed,thebankrupt,byurgingcounterclaimsagainstthe
19 apparentlyliquidatedclaimsofthepetitioningcreditors,mayremovethemfromthecategoryofclaims
20 Kliquidatedastoamount'alldprocureadismissalofthepetition.''SeeH.R.Rep.No.1208,87thCong.,

21 1stSess.j7(1961).Thereinsertionin2005oflanguagesimilartothatwhichwasdeletedin1962
22
23
9NoteverycourthasconstruedBAPCPA aschangingthebonafidedisptlte''analysis.See
24 InrcDemircoHoldingsInc.,2006Bankr.LEXIS113l,*8-*10tBank1
-.C.
D.111.June9,2006)

25 (evenaft
er2005Amendments,abonafidedisputeastoamotmtonlydisqualifiesapetitioning
creditorifithasthepotentialtoreducetotalamountofpetitioningclaimsbelowthestatutory
26 threshold).
13

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1 mustbeunderstoodtomeanthatCongressintendedtodisqualifytheveryclaimsthatCongresssought
2 toqualifyin1962forptlrposesofaninvoluntarypetition.

C.ClaimsofcalforniaandIdaho

4
Aftertheinvoluntarypetitionwasfiled,bothCalifonliaandIdahoindependentlyagreedto
5 settletheamountsowedthem.Althoughpaymentofdebtsowedtopetitioningcreditorsdonot

6 disqualifythemforcotlntingpul
posestmderSection303(b)(1),thesesettlementsdocallintoquestion
7 astowhetherthedebtssosettledweresubjecttoabonafidedispute.
8
9
10
11
12
13
14
15
16
17
18
19
20

Thefactsclearlyshowthattheydo.Idaho'ssettlementreflectedadiscountfrom theclaimed
liability.ThewillingnesstotakeadiscountinlightofBlixseth'sdenialsofliabilityprovidesstrong
evidencethatadisputeexisted;otherwise,whysettle?Montanacontendsthatthesettlementwasfor
nuisancevalueandthusshouldnotprovideevidenceofadispute.Thefactremains,however,thata
petitioningcreditortookadiscountedsettlementwhenithadpreviouslyfiledaninvoluntal'
ypetition,
andthiscourtisinnoposition-becausetherewasnoevidencepresentedinsupport-todetel-minehow
muchofthediscountwastrtzlynuisanceandhowmuchwasacalculatedmovedesignedtofendoff
liabilitydisputesdowntheroad.
Californiapresentsasomewhatdifferentproblem.1tssettlementagreementdoesnotdiscount
theamountithadcontendeditwasowed.Butitssettlementagreementdoesacknowledgethat
Blixsethdisputedtheclaim-again,strongevidenceofadispute:whysignanagreementthatcontains
knownlies?lndeed,theevidenceofthedisputewasnecessalytoeffectthesettlement.Adebtcannot
betsettled''foritsfullamountbecausethereisnoconsiderationexchanged.See,e.g.,RESTATEMENT

21 (SECOND)OFCONTRACTSj74,com.c(1981)(fs
paymentofanobligationwhichisliquidatedand
22 undisputedisnotconsiderationforapromisetosurrenderanunliquidatedclaim whichiswholly

23 distinct.
''
).CaliforniaapparentlywishedtoavoidpotentialliabilityunderSection303(i).Toobtain
24 anenforceablepromisefromBlixsethtothateffect,ithadtoacknowledgeagoodfaithdispute,which
25 iswhatitrelayedinthesettlementagreement'sRecital.Tosuggestotherwise,asMontanadoes,isto
26
14

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1 suggestthatCalifolmiasettledinbadfaith-creatingabogusdisputetovalidateashieldagainst
2 liability-andthereisnoevidenceofthatlevelofbadfaith.Asaconseqtlence,byCalifornia'sown

3 actions,itsclaimwassubjecttoabonafidedispute.
4
ThedisqualificationofIdahoandCaliforniameansthatthenumberofpetitioningcreditorsis
5 insufficienttosustaintheinvoluntarypetition.Toavoidconfusionshouldtherebeanappealandany
6 remand,thecourtwillalsoassessYCLT'SandMontana'squalitkations.
7
D.YCLT

8
YCLTclaimsqualifyingpeti
tioningcreditorstatusonthebasisofanunstayedjudgmentarising
9 fromthebanknlptcycourtintheDistrictofMontana.lthascross-appealedthatjtldgment,seekinga
10 judgmentapproximatelyfourtimestheamountoftheorigilaljudgment.
11
YCLTisajoi
ningpetitioningcredi
torunderSection303(c).Assuch,itclaimsthatthe
12 reqtlirementsoftlndisputeddebtdonotapplytoit.1tsargtlmentisbasedonthelanguageofSection

13 303(c),whichstates:
14
15

16
17

Afterthefiling ofapetitionunderthissectionbutbeforethecaseis
dismissedorreliefisordered,acreditorholdinganunsecuredclaim thatis

notcontingent,otherthanacreditorfilingundersubsection(b)ofthis
section,mayjoininthepetitionwiththesameeffectasifsuchjoining
creditorwereapetitioni
ngcreditortlndersubsection(b)ofthissection.

l8 Thissectiondoesnotcontainlestrictionsonthetypeofdebtthatmayjoin.Underitstext,creditors
19 withcontingentclaimsordisputedclaimsmayjointhepetitionandi
Ewiththesameeffectasifsuch
20 joi
ningcreditorwereapetitiollingcreditor.
''
21

Thisseeminglyanomalyhasexistedformanyyearswithrespecttocontingentcreditors-they

22 wereneverexcludedfrom Section303(c)-butsince2005thisanomalyhasbeenextendedtodebts
23 disputedastoliabilityandamountaswell.COLLI
ERVupra,at!303.19(15)statesthatthedisputed
24 testshouldapplytoSection303(c)creditors.Thereexistssomecaseauthorityforthisproposition.
25
26
15

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1 (Inl.
eKtjawa,112B.R.968tBankr.E.
D.Mo.1990)(disputedclaiml;c/InreBraten,86B.
R.340,
2 343(Bankr.S.
D.
N.
Y.1988)(contingentclaiml).
3

Butthesecasespredatethe2005amendments.Whenaknownanomalyisnotaddressedin

4
5
6
7

subsequentlegislation,thepresumptionisthatCongressdidnotintendtochangeit.CfZlf
?7J
'Public
SchoolDist.No.89v.Dep'
tofEduc.,550U.S.8l(2007)(incontextofagencyinterpretationsl;
Chi
som v.Roemer,501U.S.380(1991)(same).Asaconsequence,sinceYCLT'Sclaim isnot
contingent,itmayjointhepetitionG
withthesameeffectasifsuchjoiningcredi
torwereapetitioning

8 creditor.''
9
E.Montana
10
Montanacontendsitshasover$50millioninclaimsagainstBlixseth.Mostoftheseare

11 disputed,anddisputedintensely.Montana'sclaim here(termedi
AuditIssue4'bytheparties),
12
13
14
15

however,amotlntstoapproximately$219,000andarisesfromthedenialofadeductiontakenbyone
ofBlixseth'sentities-oneresultofMontana'sauditofBlixseth'si
ncomei
ntaxyears2002-2006(the
<:
Audit''
).Thatdenialeffectivelyincreasedtheentity'sincomebyapproximately$1.
5millionfortax
year2004.Withrespecttotaxyear2004,however,Blixsethishotlycontestingotheraspectsofthe

16 Audit.ThisraisestheissueofwhatMontana'sclaimis,andwhetheritisnottrt
zlysubjecttobonafide
17 disputeastoliabilityoramotlnt.
l8
Foranaturalperson,ataxingentitygenerallyhasbutoneclaim foreachcalendaryearofa

19 taxpayer'
slife.AsstatedinInz'
cBlueCoalCorp.,166B.
R.816(Bankr.M.
D.Pa.1993):
20
21
22

Therelationshipoftaxpayertotaxrecipientissuchthatthecl'editor-debtorrelatiolAship
accrtzesonanannualbasisratherthanonsomesortofopenaccount.Eachtaxyear
representsaseparateclaim.Klncometaxesareleviedonanannualbasis.Eachyearis
theoriginofanew liabilityandofaseparatecauseofaction.'

23 1d.at822(quotingInzcHart
manMaterialHandlingSystems,Inc,14lB.R.802,810(Ba1kr.
24 S.
D.
N.
Y.1992),intul
'
nci
tingCommissionerv.Sunnen,333U.S.591(1948)).SeealsoMONT.CODE
25 ANN.j15-30-2604(2013),
.C/MONT.CODEANN.j15-30-2629(2013).Thatisnodifferenthere.
26
16

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1 Withtheotherauditissuesstilllive,itisbeyondcavilthatMontana'sclaim fortaxdebtarisingfrom
2 taxyear2004isdisputed.Montanahasnotshownsufficientlythatitwaseitherauthorizedtocreate

3 aseparateliabilityorclaimrelatedtoAuditIssue4-suchasajeopardyassessment-orthat,if
4 authorized,ittooktheproperstepstoseparatelycreateandpresentitsclaim.Andthatwasitsburden.
5
Nevel-theless,MontanacontendsthattheassertedtaxdebtarisingfromAuditIssue4isbeyond
6 dispute.ItisMontana'sbeliefthatBlixsethhasconcededheowesatleasttheamountinAuditlssue
7 4.Theproblemwiththisview istwofold:First,Blixsethhasnotconcededaminimumamountoftax

8 dueandowingfortaxyear2004(evenifheconcededliabilityrelatedtothedisallowanceofthe
9 deductionthatgaverisetoAuditlssue4,heallegesotherchangestohisincomeanddeductionsfor

10 taxyear2004).Second,evenifBlixsethhad,thiscourt'sanalysis,supra,regardingtheimplicit
l1 overrulingofFocttsMediabythe2005BAPCPAlegislationdemonstl
-atesthat,solongaspartofa

12 claimisdisputed,thecreditormaynotqualifyasapetitioni
ngcreditorforpurposesofSection303(b).
13

111.Conclusion

14

ThiscourtfindsthatBlixsethhadatleast12creditorswhoqualifytmderSection303(b)(2).

15
16
17
18
19
20
21
22
23
24
25
26

Consequently,theinvoluntarypetitionrequiredthreeormorepetitioningcreditors.Theinvoluntary
petitiondoesnothavctherequiredamount.Therefore,theMotionisGRANTED,andtheBankruptcy
isDISMISSED.
Copiessentto:
CM/ECFELECTRONICNOTICING
BNCMAILINGMATRIX
###

17

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Q9-00014-RBK Doc#:734 Filed:07/17/13 Entered:07/17/1316:17:43 Page1of2

UNITEDSTATESBANKRUPTCY COURT
FORTHEDISTRICTOFMONTANA
Inre

YELLOWSTONEMOUNTAIN
CLUB,LLC,
Debtor.

CaseNo.08-61570-11

TIMOTHYLBLIXSETH,
Plaintiff.
-VS-

MARCSKIRSCHNER,TRUSTEEOF
THEYELLOWSTONECLUB

AdvNo.09-00014

LIQUIDATINGTRUST,

Defendant.

O RD ER
AtButteinsaidDistrictthis17thdayofJuly,2013.

UponreviewofYellowstoneClubLiquidatingTrust's(CEYCLT'')responsetoTimothy
Blixseth's(diBlixseth'')motionpursuanttoFederalRuleofBankruptcyProcedure9024,filed
December21,2012(DocketNo.724),togetherwithYCLT'SNoticeofDismissalofInvoluntary
BankruptcyFiledAgainstTimothyBlixsethfiledJulyl7,2013,
ITISORDERED andNOTICEISHEREBYGIVEN thatanevidentiaryhearingwill
beheldonTUESDAY,September10,2013,at9:00o'clocka.m.,orassoonthereafteras
counselcanbeheard,inthe2* FLOOR COURTROOM,FEDERALBUILDING,400N.

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MAIN,BUTTE,MONTANA,onBlixseth'smotionpursuanttoFederalRuleofBankruptcy

Procedure9024,t'
iledDecember19,2012(Dkt.714)andYCLT'Sresponsethereto(Dkt.724);
andthepartiesshallfileandexchangelistsofwitnessesandexhibits,dulymarked,notlessthan

five(5)businessdaysbeforethehearing,thefailureofwhichmayresultindenialofadmission
ofexhibitsandwitnesstestimonyforfailuretocomply.
BYTllECOURT
;
.
- #
;
. ''
'
-

L
.
,

/J r .s-..

- ..,

HON. HB.KIRSCHER
U.S.BankruptcyJudge
UnitedStatesBankruptcyCourt
DistrictofMontana

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09-OO014-RBK Doc#:714 Filed:12/19/12 Entered:12/19/1216:32:42 Page1of8

PatrickT.Fox(#8071)

DOUBEKPYFER& FOXLLP
POBox236
HelenaMT59624
4064427830ph
4064427839fax
patrickfox@doubekpyfer.
com
AttorneysforTimothyL.Blixseth
UNITEDSTATESBANKRUPTCYCOURT
FORTHEDISTRICTOFMONTANA
CaseNo.08-61570-1I-RBK
lnRe:
JointlyAdministeredwith08-61571and
YELLOWSTONEMOUNTAINCLUB,LLC, 08-61572,08-61573
eta1.,
Debtors.
TIMOTHYL.BLIXSETH
V.

Adv.No.09-00014

MARC SKIRSCHNER,TRUSTEEOFTHE MOT

ION P
URS
TOEFDURE
EDERAL
OFBAMC
RUP
TUANT
CYPROC
902RUL
4 E
YELLOWSTONECLUBLIQUIDATING
TRUST

PursuanttoFederalRuleofBanknzptcyProcedttre9024andFederalRuleofCivil

Procedure60(b)(6),Mr.Blixsethherebyrequestsrelieffromthepurportedjudgmententeredon
December5,2012.RuleofBankruptcyProcedure9024incorporatesRuleofCivilProcedure60

intobankruptcypracticeandprocedure.Rule60(b)(6)allowsrelieffromajudgmentfortany
otherreasonthatjustifiesrelief.
''Newlydiscoveredandauthenticatedevidencedemonstratesthat
reliefisappropriateunderRule60(b)(6).
1

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AttachedheretoasExhibit1isanexecuteddeclarationofDennisL.Montgomery

('
Montgomeryv
Decl''
)signedunderpenaltyofperjuryonDecember13,2012andfiledwiththe
CaliforniaSuperiorCourt,RiversideCountyonDecember14,2012.RelevanttothisMotion,
Mr.MontgomeryauthenticatesinhisDeclarationtwodocumentsthatMr.Blixsethbelieves

justifyreconsiderationofthisCourt'sfinaljudgment,whichareauthenticatedinandattachedto
Mr.Montgomery'sDeclarationasExhibits10and11.SeeMontgomeryDecl.!22(
b),(c).Mr.
BlixsethisattachingExhibit10toMr.Montgomery'sDeclarationtothisMotionasExhibit2,
foreaseofreference,however,Exhibit10toMr.Montgomery'sDeclarationwillbereferredto
astIMSABulletPoints.''
Mr.BlixsethisattachingExhibit11toMr.Montgomery'sDeclarationtothisMotionas
Exhibit3,foreaseofreference,however,Exhibit10toMr.Montgomery'sDeclarationwillbe
referredtoasItNotesontheMSA''.Thesetwodocument
sindependentlyjustifyMr.Blixseth's

relieffromthepurportedlyfinaljudgmentinthiscase.
First,theNotesontheMSAdocumentwaspreparedbyEdraD.Blixsethandin
connectionwithfonuulatingabasistosetasidetheMaritalSettlementAgreementbetweenher

andMr.Blixseth.RoughTranscri
ptsomDecember14,2012depositionofEdraD.Bli
xseth,pp.
264-272,attachedheretoasExhibit4.HerattorneyMr.Holahan,claimstohavecraftedthis
documentwithorforMs.Blixseth.1d.Onpage7ofitNotesontheMSA''Ms.Blixsethstates4tl

thinkthishel
psustojustifywhywearefilingourmotionsontheMSAintheBKcourt
sin
Montana,don'tyou?RememberwehaveaddedhelptherefromtheBKJudgewholovesus,and
hatesTim andMikeFlvxm.Atthispointtheycouldnotgetadecentrulingintheirfavorfrom
thatJudaeiftheytried.Eitherwav.SBandBShavethingsinplaceinthatcourtroom tohelp

!!
.
''NotesontheMSA,p.7(emphasisadded);MontgomeryDecl.!22(c).Ms.Blixseth

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testifiedatherdepositionthatKESB'referstoSamByrne.SeeRoughTranscri
pth'
omDecember
14,2012depositionofEdraD.Bli
xseth,pp.264-272,attachedheretoasExhibit4.Ms.Blixseth
didnottestifyastowhom EIBS''referstobutinlightofotherevidenceintherecordconcerning
Mr.Byrne'srelationshipandmeetingswiththeGovernorofMontana,itisreasonabletoinfer

that(C
BS''referstoGovernorBrianSchweitzer.SeeDocketNo.686-1,!!27,
.DocketNo.6864,BatesStamppagesl161-1166(MatthewKiddofCrossHarboraski
ngSamByrneE
llowwere
meetingswiththeGovandBurk1e''
),
'DocketNo.686-3:BatesStamppage741-742,transcript
pages50:
23-53:
2,BatesStamppages780-781,transcri
ptpages208:1-209:
4(Matt
hewKidd
acknowledgingMr.Byrne'srelationshipwiththeGovernorofMontanaandthatMr.Byrnemet

withhimonseveraloccasionsabouttheYellowstoneClub).WhileMr.Montgomeryvalidly
authenticatedthisdocumentinhisDeclaratioll,Ms.Blixsethalsoauthenticatedthisdocumentat
herdepositiononDecember14,2012.
Second,andperhapsmostdirectlyindicativeoftheneedforthisCourttovacatethe

purportedlyfi
naljudgmentitenteredonDecember5,2012isMs.Bli
xseth'sstatementinher
&&MSABulletPoints''memo.Inthisdocument,Ms.Blixsethstates,iiWeneedthiscasemoved
backtoMontanaata1lcosts,SBandBShavespentenonnouscapitalandpoliticalfavorsto
ensuretheygettherigs-htoutcomefromtheMontanabanknzptcyiudge.1suspectTBandMF
haveknownthisforsometime,andgaveupfightingthatbattle.''SeeMSA BulletPoints

(emphasisadded);MontgometyDecl.!22(b).
ThesedocumentsrepresentnewlydiscoveredevidencethatMr.Blixsethcouldnot
previouslyhaveobtainedwithreasonablediligence.Thesedoctuuentswerecontainedin
electronicallystoredmediathatwereinMs.Blixseth'spossessionandwhichsheleftinMr.

Montgomel
y'custodyandcontrolin2011.MontgomeryDecl.!22,Mr.Montgomeryturned

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overtheseelectronicdatastoragedevicesandotherdocumentstoathirdpartycomputerexpert
inresponsetoasubpoenaducestecumthatwasrecentlyservedonhimbyMichaelJ.Flynnin

anothercase.MontgomeryDecl.!21.OnlyonDecember13,2012,didMr.Montgomery
authenticatethesedocumentsandonlyonDecember14,2012didMs.Blixsethauthenticatethe
NotesontheMSA document.1RoughTranscriptfrom December14,2012depositionofEdraD.
Blixseth,pp.264-272,attachedheretoasExhibit4.
TheauthenticatedstatementsofMs.BlixseththatEtSBandBShavethingsinplaceinthat

courtroom (referringtotheMontanabanknzptcycourtjtohelpus''andthattESBandBShave
spentenormouscapitalandpoliticalfavorstoensuretheygettherightoutcomefrom the

Montanabanknlptcyjudge''isataminimum,strongevidencefromthirdpartiesofimproper
judicialinfluenceandthereforeisevidenceoftt
extraordinarycircumstalces''thatexistedatthe
timethatthisCourtentereditsfinaljudgmentinthiscasewhichjustifyrelieftmderRule60(b).
MontgomeryDecl.!!I22(b)(c)(explainingthatthesedocumentsexistedin2011,althoughthey
mayhavebeencreatedmuchbeforethen);fil
jebergv.HealthServicesAcquisitionCorp.,486
U.S.847,864-869(1998)(findingextraordinarycircumstancesunderRule60(b)(6)tovacate
judgmentwhentheriskofinjusticetoparties,theriskthatdenialwillproducei
njusticeinother
casesandtheriskofunderminingthepublic'sconfidenceinjudicialprocesswerehighinlightof
factsdemonstratingthatthetrialjudgewasnotimpartial).

1Paragraph4ofMr.Montgomery'sdeclarationindicatesthatMs.Blixsethwasgaining
unauthozizedaccesstoMr.Blixseth'semailandtheemailsofhisattomeysduringthe
banknzptcylitigationagainsthim andthatshewasprovidingtheseemailstoMr.Blixseth's
litigationopponents.Thesefactsaregroundsforterminatingsanctionsinalladversarycases
beingpursuedagainstMr.BlixsethbutMr.Blixsethwillnotbefilingsuchamotionuntil
additionalevidenceofMs.BlixsethobtainingunauthorizedaccesstoMr.Blixseth'sandhis
attorneys'emailscanbedeveloped.
4

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Moreover,evenifthestatementsinMs.Blixseth'sowndocumentsareuntrue,thefact
thatthisevidenceissufficientlyauthenticatedcreates,ataminimum,areasonablequestionasto
whetherJudgeKirscherisimpartialconcemingmattersinvolvingMr.Blixsethandthatis

sufficienttovacatethefinaljudgmentinthiscase.Prestonv.US.,923F.
2d731,734-735(9th
Cir.1991).
Finally,whileneitherMs.BlixsethnorSam ByrneofCrossHarborarepartiestothis
case,theirrelationshiptotheseproceedingsandpartiesisundoubtedlycloseenoughtotriggera
sufficientappearanceofbiasbasedonMs.Blixseth'sauthenticatedstatements.SeePreston,923

F.2dat735($<
TheSupremeCourthasneverlimitedrecusalrequirementstocasesinwhichthe
judge'sconflictwaswiththepartiesnamedinthesuit.Rather,thefocushasconsistentl
ybeen
onthequestionwhethertherelationshi
pbetweenthejudgeandaninterestedpartywassuchasto
presentariskthatthejudge'simpart
ialityinthecaseatbarmightreasonablybequestionedby
thepublic.')(internalcitationomitted).Ms.BlixsethwasmanageroftheDlPduri
ngthe
YellowstoneMountainClubbankruptcyproceedings,sheapprovedtheClub'splanof
reorganizationonbehalfoftheDlPandshewasanintegralplayerandwitnesstltrougha1lthe
YellowstoneClubbanknzptcyproceedingsandadversarycases.SheisalsoaDebtorbeforethis
CourtinInreEdraBlixseth,CaseNo.09-60452.Forhispart,Mr.Byrneistheownerof
CrossHarborCapitalPartnersLLC,whichthroughitsaffiliatesandsubsidiarieshadthisCourt

approve:(1)its$35millionD1Ploan;(2)theClub'splanofreorganizationthroughwhich
CrossHarborpurchasedtheClub'sassetsforonly$115millionzwhichwasanearly75%

discountfromthe$455millionpurchasepriceithadcontractedforonlyeightmonthsbeforethe

2AsPointedoutinyriorfilingsinthiscase,CrossHarbor's$115millionpurchasepriceis

misleading.$80mlllionofthis$115millionconsistedofrestructureddebtowedtoCredit
Suisse.Oftheremaining$35million,$22.5millionwenttorepayaCrossHarboraffiliate'sDlP
loan.Inshort,Crossl-larboradvancedverylittlenewcashaspartofits$115millionpurchase.

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Clubfileditspetition.,
3and(3)isasignificantbeneficiaryofandholdsanAdvisoryBoard
positionontheYellowstoneClubLiquidatingTrustandwillobtainmillions(ifnottensof
millions)ofdollarsfromtheYCLTshoulditeversucceedinlitigationagainstMr.Blixseth.
Moreover,overandabovetheminorinvestmentofnew cashforthepurchaseoftheClub,
CrossHarboralsoobtainedveryvaluableassetsofEclraBlixsethandhercompaniessuchasthe
FamilyCompoundandPorcupineCreek.Whenthevalueofthoseassetsisconsidered,
CrossllarborpaidlessthannothingfortheClub.
ThesefactsinconnectionwithMs.Blixseth'sstatementsconcerningMr.Byrnehaving
Ssthingsinplaceinthatcourtroom tohelpus''andhavingKlspentenormouscapitalandpolitical

favorstoensuretheygettherightoutcomefromtheMontanabanknzptcyjudge'aresuft
icientto
create,ataminimum,areasonablequestionconcerningJudgeKirscher'simpartialityina1l
mattersinvolvingMr.Blixseth.Id.
Thisevidence,anda11theevidencepreviouslyintroducedbyMr.Blixsethincomlection
withthepriorrecusalmotion,warrantJudgeKirscher'srecusalfrom a11casesinvolvingMr.

Blixsethandvacatingthett
inaljudgment''inthiscaseunderRule60.Lilieberg,486U.S.at
864-869.
DATEDthis19thdayofDecember,2012.

/s/PatrickT.Fox

PatrickT.Fox
DOUBEKPYFER& FOXLLP

Att
orneysforTimothyL.Bli
xseth

3New1ydiscoveredevidenceshowsthatCrossllarbor'sattonleyspreparedtheClub's
bankruptcypetitionfilings.SeeExhibit5attachedhereto.

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/s/MichaelJ.Flynn
MichaelJ.Flynn
OneCenterPlaza,Suite240
Boston,MA02018
Telephone:858-775-7624
Facsimile: 858-759-0711

mike@mjfesq.
com
NOTICE OF OPPORTUNIW TO RESPOND

ANDREQUESTAHEARING
Ifyouobjecttothemotion,youmustfileawrittenresponsivepleading
andrequestahearingfourteen(14)daysofthedateofthemotion.The
respondingpartyshallschedulethehearingonthemotionatleast
twenty-one(21)daysafterthedateoftheresponseandrequestfor

hearingandshallincludeinthecaptionoftheresponsivepleadingin
boldandconspicuousprintthedate,timeandlocationofthehearingby
insertinginthecaptionthefollowing:

NOTICE OF HEARING
Date:
Time:
Locations:

Ifnoobjectionsaretimelyfiled,theCourtmaygranttherelief

requestedasafailuretorespondbyanyentityshallbedeemedan
admissionthatthereliefrequestedshouldbegranted.

(251 of 364)
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CERTIFICATEOFSERVICE

1>PatrickJ.Fox,herebycertifyunderpenaltyofper
jmy thatonthe19t
hdayof

December,2012,copiesoftheabovedocumentwereservedelectronicallybyECFnoticetoa1l
persons/entitiesrequestingspecialnoticeorothelwiseentitledtosameandthatinaddition,I
herebycertifythatIhavemailedorservedthedocumenttothefollowingnon-ECFparticipants
inthemannerindicatedbythenon-participant'sname:
Nomanualrecipients.
By/s/PatrickJFox

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1
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CHRISTOPM RJ.CONANT
Cal.B/No.244597
73017mStreetSuite200
Denver,Colorado80202

Telephone:(303)298-1800
Facsimile:(303)298-1804
E
mtoame
il:c
la
y
com
At
yco
fonran
Tt
i@c
moo
thn
yan
Lt
.
Bwli
xe
sr
es
t.
h

6
7
8
supEroRcotm'roFCALIFORNIAFOR1uEcolm'
rvoFmvEltsmE
9 InretheMarriageof:
CaseNo.RIDmD91152
10 Petitioner:Pjaintjg
(Reassi>edtoDept10fromDeptF5011
11
a
DECI,ARATIONOFDENNISL.
Mu
MONTGOG RYIN SUPPORTOF
12 Respondent:TimothyL.Blixseth
RE
SPONDE
NT'
SMOT
FOC
RAUSE
sAxcT
loxs
AND
TOI
SON
HOW
13
14
Judge:SharonJ.Waters
Hearing:
15
Time:
Dept.10
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DECLM ATIONOFDENNISL.MONTGOMERY

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1,DennisL.Montgomerydoherebydeclareundermnaltyofperjuryoft
hel
awsofthe
StateofWashingtonasfollows:
1. lnappmxlmately2006,lbeganworkingwithEdraD.Blixsethtodevelopsoftware
technologyfozherandhercompanies.Iworkedforherinnumerouscapaciies.AtumesIwas
anemployeeofoneofhercompaniesBlxwareLLCorOpspringLLC.1waqhwolvedinvarious
tpsrtnersMp''activitieswithheroverthelast6years.
2. AsMs.Blixseth'semployeeandmssociateIwasresponsiblefordeveloping
soRwaretechnology.Ms.Blixseth'sroleinourpsgtneohipwastoprovidefundingforolr
operationsandtobringincustomerstopurchase/licensethesoH arethatthAwasbeing
develomdforherblzsiness.BecauseofMs.Blixsetlfsenormouswealth,Ms.Blixsethhad
contactsatthehighestlevelsofbusinessandtheU.S.Governmenttowhom Ms.Blixsethcould
sell/licensemysoftwareteclmology.Ms.BlixsethhasbeentryingtoselltheBlxwaretechnology
before,dun-ng,andaierherbnntmlptcy.
3. From approximatelyDecember,2011throughJuneof2012,1andothersworked
feverishlyforMs.BlixqethtbroughacompanycalledPC1todevelopthesowarefortheneedsof
thecustomersthatMs.BlixsethhadprocuM .Ms.Blixsethhadrepresentadves&omtheUS
GovemmentcometoourbuildinginMarchandAprilof2012.AtthatmeetingtheUS
GovemmenttoldMs.Blixseththeycouldmovequicklyintoconkactnegotiations.Ms.Blixseth
toldtheUSgovemmentshehadinvestedover$15millionintothctechnologyandwaslooking
foralcgeinitialpayment,andfeltitwasbesttocontractwithathirdpartyforthelicensingof
thetecbnology.Finnlly,illAp111of2012,ldeliveredmuch,butnotall,ofthesourcecodtthatI
hadupdatedanddevelopedforMs.Blixsethtoherandhercustomersmstheyhaddemanded
accesstothesourcecodesothattbeycouldNalidate''itandensmethatitperformedas
represented.Althouglz1wasreluctanttodeliverthesourcecodetothesecustomersduetomy
concernthattheycouldthenabscondw1111itonceitwasintheirmssession,Ms.Blixsethhad
convincedmethatIcouldmzstherandthesecustomers.Moreover,becauseMs.Blixsethhad
promisedtoshareequallyinallproceedsfromtlwsourcecodewithme,andbecausethatpayout

28 wasrepresentedtobeapprovimstely$50-100milliowlbelievedthepamutoutweighedanyrisk.
l
DECLAMTIONOFDENNISL.MONTGOMERY

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1 Unforhmatelymyfearswereconfmned.ShortlyaherIdeliveredpartof(butnotall)thesource
2
3
4
5
6

8
9
10
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12
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14
15

codetoMs.Blixseth'scustomers;lstopmdreceivingpaymentsandregularcommunications
fromMs.Blixsethandhercustomtrs.
4. Besidesthesebusinessdealings,IhavepersonalknowledgethatMs.Blixsethpaid
individualstohackorotherwiseinterccpttheemailcommunicationofTim Blixsethandhis
lawyers.IhavepersonaluowledgethatMs.BlixsethprovidedMr.Blixsetlpsandhislawyers'
emailcommtmicationstoPaulMoore,MarcKirschner,whoistheTrusteefortheYellowstone
ClubLiquidaingTrustyandlawyersrepresentingCreditSuisse.
Ms.Blixselalsoinformedmeoverthelast3years,onmanyoccasionsthat'sshe
hadtoliveandworkunderground'g.Ms.Blixsethtoldmethatshedidn'twanttheIRS,Montana
orCaliforniataxingauthorities,orTM Blixsethtofmdouthowsheisbeingcompennted.Ms.
BlixsethtoldmethatmoneywasbeingftmneledtoherthroughSamByrne,MikeMeldman,
DenniKHolaban,PatYarborough,FFAELiquidators,andBobBrownRRedBaron''auctionhouse
andotherstoavoidIRSandstatetaxauthoritydetectionofherassetsandincome.
6. Ms.BlixKethtoldmeshewastlleownerandmanagerofFF&ELiquidators.lnc,

16 Ms.BlixsethtoldmethatFF&Ew%justafrontcompany1atsheusedtomovemontythrough
17
18
19
20

soastobdterconcealitfromnumerousparties.Ms.BlixsethalsotoldmeFF&Ewasownedand
managedbyher,butwasomratedbyPatYarYroughandherattomeyDennisHolnbnn.Ms.
BlixsethtoldmethatDennisHolnhnnwouldmakecashdeposits9omhisattomeyclientaccotmt
intotheFF&Eaccountordelivercashdirectlytoher.

21
7. lhaveseenMs.BIKXIreceiveenvelopescontaining$9,000incash9omDennis
22 Holnhnnonseveralcmsionsinboth2011and2012.
23
8. Iandotherswerecommnute-dbyMs.Blixsethforworkin2011and2012inthe
24 followingmanner:

25
26
27

28

(a) Ms.Blixsethorheragents(which1understandtobeDennisHolahan,Pat
YarboroughorOliviaScalia)wouldpaymeorothersbydepositingcashor
checksintoourpersonalacco=ts.

(b) Ms.Blixsethorheragentswouldpaymeorothersthroughanot
her
2
DECLARATIONOFDENMSL.MONTGOMERY

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2
3
4

companybydepositingcmsllorchecksintoPC1bankaccount.

(c) Ms.Blixsethorherattorney,DermisHol
ahm orhisofficeKtaff,wouldpay
meorothersbydemsitingcashorbywiringmoneyfromltisDennis
HolahanlawomceaccotmtdirectlyintoPCI'scompanybnnkaccotmt.

(d) Ms.Blixsethorheragentswouldpaymeorothersbydemsiegcashor

6
7

checkswrittenbyhercomp'mycalledFF&ELiquidators,Inc.,ItOPCI's
bnnkaccount.

(e) Ms.BlixsethorheragentsWouldpaymeorothersbydemsitingcshor

10
11

12

checkswrittenbyherson

(9 MathewCrockerorhisgirlfriendBeckyBarnetti
ntoPC1orourpersonal
bankaccotmts.

(g) Ms.Blixsethorheragentswouldpaymeorothersbyendorsingchecksby

13
SharedSlxmngServices,LLC,anddepositingthenintoPCI'sbank
14
account.
15
9. TopayforPC1'srentandelecicbill,Ms.Blixsethonatleasttwooccasionwired
16 fundsdirectlyintotheaccotmtofPCl'slandlordortheelectriccompany.'Ihisisreflectedinan
17 emailexchangebetweenmeandMs.Blixseth,atrueandcoaectcopyofwhichisattachedhereto

18 asEolblt1.FortheCourt'sreference,myemailaddressisdennis@vncodenndandMs.
19 Blixseth'semailaddressesareleargz@aol.comandeHblx@aol.
com.Ms.Blixsdhpaidfor
20
21
22
23
24

PC1'scommercialleasebecauseitwasOoughPCI'somcethatIwoulddevelopsoRwareforher
andbecauseMs.BlixselranherownbusinessoperauonsoutofPC1'somce.
10. Dllringtllcsixyearsinwhich1haveworkedwithandforMs.Blixseth,weshared
omcespaceandMs.Blixsdhwouldconducthermrsonalandnon-softwarebwinessinour
shredoflke.BecauseIbsdsoH areandteclmicalexpe sethstMs.Blixsethlackedand

25 becauselwasreadilyaccejsibletoMs.Blixsethshehadmeestablishnndmaintninmitten
26 domlments,nlzmerouscomputers,ndworkserversandhardOveswhichnotonlycontnlnedthe
27 flesassociatedw1t11herbusinesses,butalsoMs.Blixsdh'spersonal5lesandemails.Ms.
2: Blixsethorherusistantwouldprovidemeonoccasionswithremovableeleckonicstomge
3
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devices(i.
e.
,thumbddves)whichcontainedherpersonalfiles,andonoccasionMs.Blixstth
2
3
4
5
6
7
8
9
10

wouldgivemeaccesstoheremailaccotmts.
11. Forreasonsrelatingtomyvariousactivitiesonherbehalf,Ms.Blixsethwould
oRenfo-ardtomeemailcommunicationsbetweenherandotherattomeys.Ms.Blixsethwould
wantmetoreadthecommunicationsandgivehermythoughtsregardingthem.
12. AttachedheretoasExhibit2aretrueandcorrectcopiesofbnnkrecordsthatI
downloadedfromtheonlinebnnkingfeatureofPCI'sbnnkaccountatBnnkofAmerica-These
recordsreflectnumerouschecksandodlerdepositstoPCIfromFFAELiquidators,IncandEdra
Blixseth.
13. OnDecember9and15,2011Ms.Blixsethinvitedmeandotherstoherapsument
inBeverlyHills.Iacceptedtheinvitation.Ms,Blixseth'sapnrtmentislocatedat202N.
12 CrescentDrive,Unit1,BeverlyHills,CA,whichplacesherresidenceinoneofthemore%ttony''

13 neighborhoodsofBeverlyHillsyjustblocksawayfromRodeoDrive.WhileIwasatMs.
14
15
16
17
18
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20
21

Blixseth'sapartmenklobservedaplethoraoffmeart,antiques,andmrniture.lwassoamazed
bythelavishnessofherfurnishings,thatltooknumerotzspicturesoftheinteriorofherapartment.
AttachedhemtoasExhibit3isacollectionoftnzeandcorrectcopiesofthepicturesthatltook
onDecember9and15,2011.
14. While1wasthereatMs.Blixsdh'sapnrtmentinDecember2011,Ms.Blixsdh
tookmeupstairsandshowedmeover$250,000incashinenvelopes.Ms.Blixsethtoldmeshe
hadreceivedthemfromDennisHolaban.lnJanuary2012,Ms.Blixsethgavemethreeofthose
envelopeswitizcontahwd$15kinc%h.

22
15. Ms.Bl
ixsethtoldmeshereceivcdmili
onsofdoll
arsi
nfurniture,artworkand
23 antkuesfromSamBymeandorMscompanywhileshewasinbsnkrnptcyaswellasaft
erher
24
25
26
27
28

dischargefrombnnkrnptcy.Ms.Blixsethtoldmetheitemsbeingsoldwerefrom herwarehouses
inCalifomiaandtheauctionswerebeingt'staged.''Ms.Blixsethtoldmethatshereceivedan
interestintheseassetsinreturnforherRhelping''Mr.Bm e.Ms.Blixsethloldmethatthese
ttstaged''auctionstookplacein2010-2012atRedBaronauctionhouseinAtlantwGeorgiaand
KingOalleries.Inmttictllar,Ms.Blixsethinformedmethatbecauseshewasinbnnknlptcyand
4
DECLARATIONOFDENNISL.MONTGOW RY

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1 becauseshewasattemptingtohideherpadnersltiprelationshipw1t11CrossHarborCapital

2 Pn-ersLLCfromMr.Bli
xseA herbnnknl
ptcytrusteeandthebnnknl
ptcycouGshehadto
3 deviseamyofhavingCxssllarbor(SamByrne)andDiscoveryLandCompany(Mike
4 Meldman)payhermilliomsofdoll
arswithoutthetranqactionsbeing%ceabletothem.Ms.
5
6
7
8
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11
12
13
14
15
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17

Blixsethtoldmethatdothis,CrossHarYrtookpossessionofa11thefurniture,artandfnmishings
locatedinPorcupineCreektbroughitspurportedforeclosureofitssecurityinterestsinthat
personalproperty,thenafterCrossllarborforeclosed,it%tconsulted''withEH Blixsethtosellthat
Glnu'tureforitoritsagents.ltappearsthisRconsultant''relationshipwassimplyacharadefora
skiting''schemewherebyFzlgaBlixsethwouldsellthePorcupineCreekpersonalpropertyat
auctionforCrossl-larbororitsagentsbutthenCrossllarbor,throughstrawbuyers,wouldoverbid
attbataudionaadpurchaseitsownasetsforamountsabovetheirauctionmarketvalue.Asa
resultofCrossHarbor'sptlrchasesattheseaucions,itsmoneywollldflowtoEdraBlixsethorher
cntities,therebyprovidingEdraBlixsetbw1t1:significmltamountsofmoneyinfurtheranceofits
partnershipwithher.whichpartnershipshewmsattemptingtoEdeandthistkiting''schemeis
howsheconcealedthatrelationship.MoreoveryonceitpurchaseditsownPorcupineCreek
mrsonalmopertythroughtheauctionsthatEawolzldarrange,itwotzldthengivethatN sonal
promrtybacktoMs.BlixsethtoeithercycletlzroughtheY ting''schemeagainorforhertokeep

18 forherselfSee<tphase2''inEoibit4(1receivedExhibit4fromOliviaScalia'scomputerwhile
19 repaizinghermachine=derherins% ction.neharddriverepairworkrequiredmetocopyher

20 machinetoensurenoinfonnationwasl
ostincasetherepairfail
edandtheharddrivecrashed).
21

16. Ms.BlixKethtoldmeonseveraloccasionsshewouldcontractitemsthatshe

22 received9omSamB> etobesoldwithMr.BobBrown(theownerofRedBaron).Ms.
23
24
25
26
27
28

BlixsethtoldmeMr.Bymeandorhisagentswouldpurchasetheverysameitemsthathegaveto
bertosellandthatMspurchqsepricefortheseitemsweresoldathigherthannormalprices,alzd
thatthemoneywouldbefnnnelbacktoMs.Blixseth.Ms.Blixsethtoldmethataftertheauctions
M.
r.Bm eandorlzisagentswouldrrtllrnsomeoftheveryOmeassetsthatitDughtatthese
auctionstohersothatshecouldkeeptheseitemsortrytosellthem again.Inthelastauctionin
thesllmmerof2012,RM BaronsoldmanyofMs.Blixseth'svallmbleMtiquesandartworkthat1
5
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haveobservedinthepast.SomeoftheseitemsMs.Blixsethhadtoldmeshehadalzeadysoldto
2 Mr.Bymeinpreviousauctionsandthathehadgiventhembacktoherandthatshewasreselling
3 them.TheitemsthatSamBymehadgiventoEdraBlixsethtosellintheschemedescribedabove
4 cmmefromherformerpersonalresidenceknownasPorcupineCreek.

17. lnthepastyMs.Blixsethtoldmethemalori
tyofthoseft
mdswereeitherfl
mneled

6 throughFF&EortbroughMr.Holahan'sattomeyclienttrustaccotmtandultimatelytobackto
Ms.Blixseth.
8
18. Ms.BlixsethemployedOliviaScaliaandhersonMathewCrockertomanageand

9 helpsellmanyoftheseassetslsotllatwerestoredatO'
NeilstoragelocatedinSantaAna,
10
11
12
13
14
15
16
17

18
19
20
21
22
23
24
25
26
27
2:

Califomia.Ms.Blixsel toldmethatO'Neilstoragewmsnotinhernanm butinCrossllarbor

Capital'snametoavoidanychanceofasubpoenaorasearchwarrantissuedonthosestorage
tmits.
19. Ms.Blixsdhaskedmetofalsifydocumentsthatwouldsubstantiateherclaimsthat
MikeJ.Flynnhadactedasherattomey,1refusedtodosobecauseIhadinmypossessionmany
emailsthathadbeencopicdtomeandwrittenbyMs.Blixsethtbatcon%dictedthosestatements.
20. neemailstIZMconkadictMs.Blixseth'sclaimsthatMr.Flynnwasherattorney
areasfollows:

(a) AttachedheretoasEeibit5isatnl
eandcorrectcopyofaJuly9,2007
emailth1Ms.Blixsethsenttome,amongothers(incl
udingheratt
omey
DeborahKlarl,concerningMichaelJ.Flynn.
(b) Af
lnrt
hedheretoasExhibit6isatrueandcorrectcopyofaJuly23,2007
emailthatMs.Blixsethsenttome,amongothers(includingherattorney
DeborA K1r)mconccmingMichaelJ.Flynn.
(c) AdnchedheretoasEeibit7isatrueandcorredcopyofanAugus
'
tIK
2007emm'
lthatMs.Blixsethsenttome,amongothers(incl
udingher
att
omeyDeborahK1arl,concemi
ngMichnelJ.Flynn.
(d) AenrthedheretomsExhibit8isaAeandcorrectcopyofanOctober20s
2007emailthatMs.Blixgethsenttome,amongothers(includi
ngher
6
DECLARATIONOFDENNISL.MONTGOMERY

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I

attomeyDeborahK1ar),concemingMichaelJ.Fl
ynm

2
21. IwmsservedwithasubpoenabyattomeyMikeJ.Flynntoproduceanymldal1
3 documentsandcomputerrecordsrelatingtoMs.Blixseth.1turnedoverdocuments,computers
4 andharddrivestoathirdpartyexpertasdirectedtodoso.
5
22. Thefollowingaremzeandcorrectcopiesofsomeoftlledocumentscontainedon
6 thecomputersandharddrivesthatIproducedinresponsetoMr.Flymfssubpoena.

7
8
9

10
11
12
13
14

15

(a) AttachedheretoasExhibit9isamzeandcorrectcopyofadocumenttitled
ltMyDearestJack''that1foundonMs.Blixseth'sMaccomputerthatshe
leftinmycustodyandconkolin2011.

(b) AttachedheretoasExhibit10isatrueandcorrectcopyofat

bullets
point''memothatMs.BlixsethpreparedforherattorneyMr.Holahaninor
aroundJuly20l1.Ms.Blixsethstoredthisdocumentineleckonicformat
onathumbdrive+atshethenprovidedtomew1t.
*noresMctionson
access.

(c) AttnchedheretoasExhiblt11isatrt
zeandcorrectcopyofadocument

16
titledRNotesontheMSA''that1foundonMs.Blixseth'sMaccomputer
17
thntsheleRinmycustodyandconlolin2011.
18
23. AttachedasExhibit12heretoaisatnzeandcorrectcopyoftlwpictureltookofa
19 diavam onawhiteboardlocatedwithinPcllsofficesonJanuary25,2012.Alongthetopoftbis

20 emailarethewordstttellthetruthaslongasu(sicjcmf'.1personallyobservedMs.Blixseth
21 writclosewordsontbewhiteboard.
22
24. InthesixyearsIwasinvolvedw1t11EdraBlixsethinOpspring,Blxware,oranyof
23 theteclmologycompanies,FzlznlnsistedonkeepingTimBlixseiinthedrk,andisolatedfrom
24 anyknowledge,cost,valueorpotentialincomefromthosecompanies.
25
26
27
28
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1declareundermnaltyofper
juryofthelawsoftheStateofWashingtonthatthe

2
fomgoingistrueandcorrect.
3
4 Dated: December13,2012
5
6

oennisL.M to ery

8
9
10
11
12
13
14
15
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2:
DECLARATIONOFDENNISL.MONTGOMERY

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1
2

PROOFOFSERWCE
1,ChristopherJ.Conant,declare:

3 apartytothewh
lm
parejidentoftheStateofColoradoandpvertheageofeighteenyears,andnot
blnactlon.Mybusincssaddressls73017u'Street,Suhe200,Denver,CO
4 80202.Onl # ,2012,lservedthewithindocumentts):
5
6

DECLAM TIONOFDENNISL.MONTGOMERYINSUPPORTOF
RESPONDENT'SMOTIONFORSANCTIONSANDT0SHOW CAUSE

b
yrt
abnesm
ifli
milethedocumentts)listedabovetothefaxnumberts)set
fo
thr
low
on
ngtv
hi
ia
sf
da
ac
ts
ei
.

IN

byplacingthedocumentts)listedaboveinantuledenvelomwi
thpostagethereon

1
0
11

I
Z

I
causedsuchenvelopetobedeliveredviaoveznightdeliveryaddressedas
indicatedontheattachedservicelist.Suchenvelom wasdepositedfordeliveryby

1
12
3

14
15
16

fullyprepaid,intheUnitedStatesmailatDenver,Colomdoaddressedmssetforth
above.
UPSfollowingtheflrm,sordinaryjjusuwsspractices.

voia
leacdkdorn
mla
l
rvice.nedocumentts)listedabovewerescrvedviae-mail
t
the
e
ei
sc
s/
ee
es
isi
tes
de
.
DennisJ.Holallan
2
Ce
ParkE#3180
L0
o4
s9An
gn
et
lu
er
sy
,CA90067
AttonwyforEdraD.Blixsdh

17

Imnreadilyfamiliarwiththelsrm'spracticeofcollectionandprocessing
18 c
spto
o
rcma
l
nfg
Upnd
h
r
ac
ic
taw
f
pb
ousi
ed
mt
onrt
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es
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do
ar
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gef
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reoi
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ree
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et
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dii
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ub
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ed
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(262 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 34 of 136

O9-O0014-RBK Doc#:714-2 Filed:12/19/12 Enlered:12/19/1216:32:42 Page1of1

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DM Exhibit10

(263 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 35 of 136

O9-00014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page1of7

NotesontheMSA,includhgamendmentsandtheminisettlements

(Edra'scommentsinGreen)
FullMSA-Paaes1-42-CaseNo.111D10 91152intheRiversideCountv.CA
* 1ofPage1says,G'ThisStiptllationisenteredintofortheptlrposeof
compromisingandsettlingcontestedisstlesbetweentheparties.Ifforanyreason
thewaiversandreleasesinthisStipulationarenotacceptedbytheCou14andthis
Stiptllationbecomesnullandvoid,o1.thisStiptllationfailsforanyotherreason
whatsoever,nothingcontainedhereinshallbeanadmissionoffactorastatement
againstinterest.Eachpal-tyhasrefrainedfrom makingcontentiousstatements,or
assel-tingpositions,whichmightcatlsetheotheftobeupset,sothatcolupromise
andsettlementcouldbepromotedandacllieved.''

as
Ylso,renlelnbertlzatIu.rasconlpletelyfrozenouto1
7a1lthecolupaniesandany

infonmationfron:shol-tlvafter1171l0dfordiArorce(Dec06)tlntilitlstatbeforetheclosing

ofthel5nal5'lsz4..
* 4ofPage2-ReadallofitandA-C
Theycouldusethisasanargtlnnentthat'
B'eagreednottogobacl
ctothevaluesofthe
assetssveagreedtotake.Isvillgointothedillkrentassctsasv,egothrotlghthis,btltone
thingthatshouldbepointedotltbere.is7-iln-sverv'ovvmtestin-lony1
-1
4thefal
-nilycourt.
l4elnadeluanyfalsestatentents.VrhenIurouldpointtllatouttotheJudgevaters,her
response'
wasalNva.ysthatTinn-beinggiventheCaptionoftheShiptitlef0l-ourassetsby
her,hadaflduciat
-yresponsibilitytonne,1fitsvasfoundthatheNvasnottellingthetruth.
kfeNvexamplesofthissvouldbeTil'nsta.tingthattheirwasnoconiluunitycash1100-,
z'

NvhenheNvastakingftlndsfronlBigSpringsReality(notpayingconnluissionstothesales
people),SunriseRidge(notpayingthepartnerstheirshare'
whenhctookfundsloselling
colnlntlnityassetsandusingthefundsNvithoutadivisiongiventome,andtherearelnore

exalnples.
Til'
nalsoliedinahearingwhenlwastryingtostopCH ffon'
lbklyingthegolfcourselots.
First,hehadasalesperson,EricLadd,nottheVPofSales.whichwoulclbel'
nore
standard,stlbnaitanaft-idavitsuppol-tingTim'sclailnofthcvalueoftheLots.Tim stated
thatnoconllnissions'
werebeingpaidforthesaleoftheseLotstoCl-l.Yet.laterwe'
Iind
outthatnoneotherthenEricLadd'
waspronAised500k,ofwhich25011waspaidtohinA.
EriclaterfiledasuitandgotaJ'tlclglzel-ttagainstnAeforgreaterthenthismnount.
* 8ofPage4allofpage5-Canyoureadandtellmeifyouthilzkthisisbindingor
itgoestothefratldthatwetalkedabotlt?

DM -Exhibit11

(264 of 364)
12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 36 of 136
09-00Case:
014-RBK
Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page2of7

K 16ofPage6andal1referencestoBGIstockbelow
ThisisvvherethingscoklldgetalittlegreytouqllatisNvritten.Nvhatv/assaidandNvhat'
was

intendecl.N'
letakingthe1)GIstockAva
.stlzesvaytofinallygetPCandCasaCaptivainto
n'
1).-lcgalonmershipafterbeingaNvaldediti11tltesect
nncllminisettlclnent. 11,
-youu'illgo
backalldl-eadthose,l'oturilll5ndthatTil'
nandhisaccotlntantsNveretofindauraytoget
bothoftheseassetsinton3),..'nanaeu'
itlloutcreatingtaxissues.TakingthcBGlstock'novvinthi
al5nal:4Sz&,lNvastoldvvotlldrcsolv'
cthis. Alsk
'
)-sincc1'
wasalsotakingtheN-C
entities.itscelnedlikeanaturaltosinlplytaltcTilu'sovvnershipofthestock.
t'Reluenlber,ifthougha'1lofthestocku'asinTil'
n-snalne,it'
wasstillaconlnxunity

propel-tyasset-)

lvvelltilltothisagreelnentsti11sviththeunderstandingtllatbothTin'
1andGeorgel
klaclk

hadtoldlnethattheBGInotestoYDIasu,ellastheTinBlixsethnotestoBGltlvhiclll
endedupsvithas'
s
i
sr
ell.
)wouldhavea'
wayofvvorkingthel
uoutasyearsNventalongas

cfol-given''w-henureneededthetaxsvi-iteoffs. Til
-nhadalvvuyssaidthat.lu'
-illgoillto
thisinnaoredetailu'
henltalkabokltthel'aluerendotransfer,butTinlalsosaidthatabout
the4
'Onxl
'
n.forthat.
lftheaboveurotlldhavebeenasitNvastoldtone,thentheYC'sNvouldhavepaidthcCS
loanoffuiththeproceeclsfrol'
nl-otsales.
llpontlleclosingofthe1
h&1.S.A.,tlnebankaccountshadbeendrainedantl/orsvere
overdraurn.Pateango1ntonnoredetai!soflhatasvv'
ell.I7ofeourse,vz'
asnotcoklntingon
this.BothAluericanBanltandPalnADesertaecountsnereliketllis.
Inaddition,thebooksandrecordsthatNveretulmedovercannotbereconciled.Tlietrail

balancesdonotjave.Again,Patcangointol
uoredetailonthis.

TherewerecontractsanclpayablesthatTim enteredintoatterknowingn'ew'
eregoingto
bcclosingtheIWSA.BobSumpteremploylnentcontractforone.

K (a)ofPage7
CBSul
uiseIAal
4lers,LLCistheonethatA,
losesl
kloore(YC'scontroller)toldlnethat
Til'
nhadtakenthefundswhcnthingssoldandhadnotpaidthepartnersinthis.

Til'nhadalsosignedagrcelnentsfrosoluenlanagenlentforSt.Anclre'
wsafteroursigning
ofknoNving1Nvasgettingthis.HedidthisbothinYDlandinYCW.

* (c)ofPage7-Thisdidnothappenandwehadissuestryingtomakeithappen.
M (e)ofPage7-TalktoAndyPattenaboutthis.ltwasbroughtupintheUCCvs.
CSandTim BlixsethwithhowTimbouglztandsoldthistohimselfBythetime1
gotit,hehadtakenthevalueoutofitcluringthetimelwasfrozenoutofthe
businesses.YChadanexpel'
ttestifywithhowthiswashandled.

DM -Exhibit11

(265 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 37 of 136

09-00014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page3of7

* B.ofPagt9-'
YC'
.%Y'Nvasillsolvellts'
vllel)
.
.lr
eceivcdit.'
FheNvay'thisisNvritten.l
vvouldhavellosvayofknosvingtllat.

* CofPage10and(1)-(3)
zX
'gain,z
/
knclyPattenw'illbehelpftllhere. Tilndidnotdisclosethathehadtakenluillions

otltofBigSpringsRenlitybeforethisandhadnotpaidconnluissions. -lherehasbeen
soluethil'
lgl'
5ledagainsthiluonthis. pr
tlRtlyAvillhavethedetails.Tllisisalsox
a-herehe
statesthatITl-icLaddvvaspaid:4eol
yluissioll101-theGolfCourseLotsaletoCH. ln
fl
annilycourthetestitscdthatthereNvasnocoluluissionstobepaid,buthealreadyhadthe
deal'
withEric,nrhich1believeishon,hegotErictogivethestateluentofvalue. TheVP
ofSalesshouldhavedonethat.ifitsveretobedone-buthecotlldnotbekbought''.A-ND
500Itvva
.snotnea
.rlysvha
.t'
kvasovvcdtothesalespeople. Iknon
wtllatCharliew-ouldbe
happytotalkNvithyotlabouttheexactalnounts.btltthisshoulclalsobeinw'lia
.tAvasf'
iled.
Atthetinle-rinAdidnot17:1.)/thena.svhichAvaslntlchlongerthel'
l::30-60daysinarrears-'
l&etoldthennthattheluoneysvasneededtoN-Coperations. Theylaterfbundotltthatthe
fundsw-eretlsedforboatslips:
111:1otherthingsf0l-Tin. ThisNvasalsocluringthe-tfl-ozen
out''partforl'
ne-butBigSpringsurasin7-il'
n'snanneandthereforeaconnaunityproperty
asset.AtthetilnehenrastakingftlndsoutofBigSpringsforhisuseahew-asalsostating
infaluilycourtthatthere'
wasnocolunaunitycashtlonr.
K D ofPage101alread),
'addressed.BigSk)'Ridge,above.PieasenolethatBigSky
R-idgeuraspartofthe'
N'
-CChapterll.
K E ofPage11/&gaintl
nisNvasalreadl'addresseclregardingSunriseRidgeand
hzloscsN'
IoorestatingthatTinntoldtheftlndsastlhisou'npersona.1piggybank-anddidnotpaythepa
.rtners.Tinndiclnotdisclosethis. Thisurasalsocolnnaunity
cashtlow.
K G ofPage11ThisisagoodonefortheM/esternclaims.
* H ofPage11ThisdidnothappenandendedupbeingpartoftheYCBK.
K A11oftheassetslis.tedthatTim got,startingon1.ofpage12,hadthevalue
thatwasperceivd andnounforeseenliability.
K 17.ofPage14

Atthetimeofsigningthis,Timtol
dmethattheLeMondgroupwoulddothis,just

toberidofhim,bygetting1.0to2.0mm onclosing.Iendeduphavingtopaythem
8mm ofthe35mm 1gotfrom CH,togetthem tosig'
noff.Iwastogetthisback9om
YC,astheyweregoingtobetheownersoftheseBsharesandnotmepersonally.()f
comseyouknowthatdidnothappen.(Rememberaswell,Ididnotreallygd
35mm from CH,butonly22mm.Thnhadborrowed13mm 9om them in2007and

Itookoverthatpromissorynotewhen1gottheFamilyCompotmdback.)

DM -Exhibit11

(266 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 38 of 136

O9-0O014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page4of7

* 20.ofPage14-l-hisisnotabigdeal.btltTilntookluostofthisotlt. Soluethings
Nverebroughtbackbythe'
YCelnp.loyeesthatrelnov'editperhisdirectiononce
tlleykneu-thathe'
hs'
.
'
asnott(
ntakcit.btltl'
lotlleal'll'a11.('

'.
z
lal'bethisisnrllere11e
.
gottheicleathat1Nvouldtakennorcotlt0fl76f
.
))

* (3)ofPage15including(a)-(d)
Thisisu-here7-il'
utranslkrredTanlarinclotohiluself,tneforethetinald1vol-ceclecrce. I-1e
statedton'
letllatGeorgecotlltlllel'
pinledothesalueonthispronaissorynotetoA'DIas
theyhadintendedtodou.-iththeothernotesforthenloneythatNvastakenfronltheC.S
l0alz.HevvrentotltofhisNvay.toInakethisclear,ashcalsostatedt'
nathedidnoturantto
haveanytax1
-ssklesfrolngettingTal
-narindoinhisnalnen'
llenthefundsthatptlrchasedit
N'
verefroluthe(?Sloan.01'
-cotlrsent)taxes'
w.rercpaidonanyofthatluoneys20k
81nn1.-asit
'
a-asbookcdas1
4.1oa.nandnotadihriden. rl-l'
1isisthe1)ointofthel.-TCCt'
il1
-ngagainst-1-1n)..
Thatstll
-tcontinuesinFeb20l0. znclyPattenandTroyGl-eenlr
leldcanbchelpftllhere.
* CofPage16
TurksandC'aiscosl:)ropel4l,qvasalsopurclasedvvithCSloanfunds-yetTilnsvas
aNvardedthisuritllouthavingtopayxbaclx
:thefunclsforthepurchaseprice.1thinktlliss
Talnerndoandtheotherthingsgotoshovthat-Ilavingl%etakeonthcentireprolnissoi-y
notesforallthefundstakenoutbyBGlandtlcel4Tinn-'
wouldnotbcafairdivisionof
property-linfact-1hacltopaybael
kthosenotesandTilngot8111of-thoseploperties. Ij1
otherwordssjkl
stTtlrksandTal
uereldoaloneaecountf
ol
-over70$
1
11
%ofthe2081
911
1
1
takenout-plustheotherthingsthatIlegotinthctil4alIVISAalulthetw'
ol'
uinisettlelments.
lfhehadnottoldl'
nethatthosenoteseoulclben'
orkedoutanother4
.va).
,andtheyNvere
neverintendedtobepaidback,'
wotlld1llavethotlghttakingthatonZYNDgivinghil-n
theseassetsfreeandclear'
wasafairdivision'
?NO.
K 0.ofPage18
llaterfouncloutthatwhothat'
wastransfen-edto'
wasJil'
nDolan.'l'
hel-eareseveralthings
thatNveretransferredtohinzdtlringthetinleof14ayckfrozenotlt-'.JilnDolanisalsoathird
partnerofTinn'sin%j
4estelmPacifscTinlberConapany.Heisalso'
whoTilusold.Nvell
undervaltled,ourpersonalinterestintheFBOinBozeluan..
1
.iluDolanisalsotheone
thatprol-nisedtobepayingtheBFInoteontilnc,yetadluittedtonleandothersthathe
nrastalkingnzithTil'
natthesalnetilneabotltthepayluent.TilnNvastellingothersthat
Jil'
nvvasnotgoingtobenlakingthepaynxenttokeeplueoutofnnoney.
lclon'tknowsvherethisfstsin,butthereisnotanypal4oflnyassetsthatlwasawarclecl
thatTil'
ndidnotcallpeopleandinterferew'
ithl'
n.ebeingabletodothingsforthegood
andbenefitofn'
lyself.HecontactedAlanRyeaboutmlrloans-whichptltAlaninfearof
hiscollateralinnyshareofBFI-Tim hadnocurrentbusinesswithAlanandhisbank.
HecontactedA'
Van'
enTreppregardingBlxwareandcatlsedallkindsofissuetherewhere
wecouldnotmoveforward.HehiredMikeFlynn,whowasDelmis1$4laxvyerand

DM -Exhibit11

(267 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 39 of 136

O9-0O014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page5of7

handledtlkingsforBlxv/are.IrlealzdNzlikeFlynnstartedapress'
zatnpaiguaga.instlue.
l
klal-tl?reportcrshavccol-itsrluedtllat'
'
Film01-.FlynnAvotlldcallthenandtcllthel'
nAvhereto
goandlookthingsttpthatNveref'
iledintheRenocourts.TheseurercfiledbyFlynn.
,
N1an),tinzesJ'tldgeCookurotlldI'
lotletthelnstand-butthedalnagesvasdoneasthe
reportinghadalreadyhappeled.'
A'eluustknockhlilke1'l).J'
1nk
nl7fthe?S.
IS'
&l-natter.V/e
needtodoNvhatcverittakes-1101-luatti
crNvha
.tu'ehaveto1'
i1e.
l-ledoessti11ha'
$'ebusinessurithPalyuDesertNationalBank.butcontinued
'togivethelu
naisinfolnnationabotltluybtlsinessesandl'
ne.

* 25.ofPage20
'
Fhisisanol'
lterareatllat/kndyPattencanhelp).
'
0t.lunderstand.Thcrehasbeen
iledagail'
lst-Fin-)
.111regardtotl'
le'
nandlinu
t'
r
--tl21
,s*
t.-ot.I-lel'
Sonlethingl'
latl.jtlstbelorehe
,o1
ktsoldittohilnselfvvithnoca.shdosvnandapl-olnissor),notec,f
-'
-z1nln-'hadplacedavalue
o
f.
1/
.
1luluonit.'
YChasflledthisacainst1'
11
-l
'
n.'
Patll1
A'
looren1ichtalsohaveadditi011:.
11
..
l11qOl.
13.
1atj
.(jj.
y.
yh.
'
l
'
tl
tlrtl
heclosinw.
coftlle54S
k'/5s5l'
l:
tltlndt7tltthat7-in1elll
-cdtt!
7solnello'
hvq
ttint
tthisL.
otto
z
<.e
w'
thei'
nanthatheptlrchasodl-alnernt'
lofirolu.J'
oeliel
v'etllat-1-1n'
).i'
lev'cl-intelltledtopavtlzis
2n:lntoYC-!
-t1stlikeallthcotherprol-n1
-ssoi-vnotehellaclsicneduith%
fC.
Ih'
-Dl.
K C.ofPage22Readandtelll'
nehvhatA'
otltl'
k1
-nko'
fthisone.
K E. .G.ofPages22/23
hTencverreceivcdpropcrbooksandrecords,luinutesandotherthings.17atcangointo
thisnlore-1,
$T
.
,estill,a.yearla.tcr,havenotbeenabletoflg.urelnuchofthisoutwithhosv
theyturnedNvhattheydidover.
K J.ofPage23
ItstatesherethatasofJtlnelr20081wastol'
eceivea1lcashetc............-again,Patcan
tellyouhow thingsw-ereturnedovertous.Tim alsoenteredintoseveralcontractsthatl
tsvoofwhichIhavenlentionedalready.'l-im alsotoldnzethat1zehadpaida1lofYC
payablesctlrrent'
withadealhedid'
withM/aynePrinl(theotlerthirdownerofIVPT)
Thisturnedoutnottobetrtle.1talkedtosvayneaboutthis.InJudgeTuckers
courtrooln,BobSunnpter.onTim'sbehalf,inAprilorlklayof2008,statedasmuchas
well.
* Pages24/25/26/27inreferencetotaxesIwanttotalkaboutinourmeeting,as
itistoohardtoputinallinthisoverview.

DM -Exhibit11

(268 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 40 of 136

09-O0014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page6of7

* (a)ofPage27
lnterestingtltattlley-adnlitllerethatthel
-eNvasconllmtlllitycashllovvfrolnBigSpringsBigSkyRidgeLL.
C.alldSulpriseRidgeI-LCandthatTilutookall(.Afthatlnoney.This
vvasduringthctinlcthathe'
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Igetaroundthisissue??
* 35.ofPage30
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whichisthelctterof
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exactlywhathewasdoingandwhatIwasgettingmyselfinto,whichiswhythe
colmerstoneoftheNISA tohim,waswhatitwas.

DM -Exhibit11

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mewhatyouthink.
K 64.ofPage41

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ingourl
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lovestls.andhates-l-il'
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intheirfavorfronathatJuclgeiftheytried.f--itheru-ay,SBanclBShavethingsinplacein
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beingdecicledb),.
JtldgeXv
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neknosvifsolnethingdoesnotnlakesense.ItlzinkJoeEl'
nightbeofsolnehelphere
too.

YouguysshouldalsoreadtheAssignluentOfCompanylnterestsAgreementandthe
AssulnptionAgreenzent.Thereareseveralthingsintheminisettlements,likeTim wasto
keeppayingtheoverheadforPC,butthatendedasl1esaidtherewasnocolnmtlnitycash
flow'.$Venow knowtherewas,so1anAnotstlrewherem'ecant-itthatin.
I-lopethishelps.Edra

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF MONTANA
IN RE

EDRA D. BLIXSETH,

Debtor.

Case No.09-60452-7

RICHARD J.SAMSON,as Chapter7Trustee )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.

Deposition of:
volume I:
Date:
Reported by:

EDRA D. BLIXSETH
Pages 1 through 300
December 14, 2012
James Matthews,CSR NO. 7916

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Deposition of EDRA D. BLIXETH,Volume taken on
2 behalf of the Plaintiff, before James Matthews,a Certified
3 Shorthand Reporter,commencing at the hour of 9:18 a.m., on
4 Friday, December 14, 2012, at 131-A Stony Circle,Suite 500,
Santa Rosa,California.
6
APPEARANCES

8
9 For the Plaintiff and the witness:
FEDERATED INDIANS OF GRATON RANCHERIA
11
BY: DENNIS HOLAHAN
In-House Legal Counsel
13
6400 Redwood Drive, Suite 300
Rohnert Park,California 94928
15
707.566.2288
17 For Defendant Timothy Blixseth:
STILLMAN & ASSOCIATES
19
BY: Philip Stillman
20
Attorney at Law
21
300 Southpoint Drive, Suite 4206
Miami Beach, Florida 33139
23
For Defendant Timothy Blixseth
25
HATCH,RAY,OLSEN & SANBERG, LLC

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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

4
5
6
7
8
9 FortheTrustee Richard Samson (Appearing by telephone)
10
DATSOPOULOS, MACDONALD & LIND, P.C.
11
BY: David B.Cotner
12
Attorney at Law
13
201 W.Main Street,Sutie 201
14
Missoula,Montana 59802
15
406.728.0810
16
17 Forthe Trustee Richard Samson
DAVIS,WRIGHT & TREMAINE, LLP
18
19
BY: Bradley R. Duncan
20
Attorney at Law
21
1201 Third Avenue,Suite 2200
22
Seattle,Washington 98101
23
206.622.3150
24
25

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1

INDEX

Deposition of EDRA D.BLIXSETH,Volume

3 Taken on Friday,December 14,2012
4
5 Examination by:
Page
MR. STILLMAN

Afternoon Session
8
9 Exhibits:
10
11
13
15
16
17
18
19
20
21

23
24
25
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2
3
4
5
6
7
8
9
10

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.
14
MR.HOLAHAN: You've gOt 50 minutes. Next exhibit.
15 (Whereupon Exhibit 11wasmarked for
16
identification.)
17
MR. STILLMAN: Q. I'm going to put Exhibit 11 in

18 front of you. You've seen this document before.

19
A. Um-hum.
20
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?
24
Edra's comments.
Q. Yes, Edra's comments in green, correct?

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1

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.
5
6
MR.HOLAHAN: I just need aminute.
3

MR. STILLMAN: Sure.

8
9
10
11
12
13
14
15
16
17
18
19
20
21

(Pause.).
MR.HOLAHAN: Yeargoing to Object to thisexhibit
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 --waswork product. I'm going to objectto 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.
23
MR.HOLAHAN: Okay,this exhibit,to be to be
24 accurate,this exhibit which is called notes on the MSA
25 including amendments and mini-settlements Edra's comments

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1 greenwas prepared in conjunctionwith herattorneys,and so

assuch it iswork product. And subject to the work product
privilege. Soweobjecttoitbeingmadeanexhibitand
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'sit. But

16 you remember the context,Edra,

17
MR.HOLAHAN: She's not going to anticipates any.
18
MR.STILLMAN: Q.DO yOu rememberWhy 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 rememberWhy that was
24 created.
A. Not exactly.

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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

MR.COTNER: EXCUSe me,bill I Couldn't marry quite

Dennis'sobjection.
MR.HOLAHAN: My Objection,Dave, thatthis
document did you hearmy full objection?
MR.COTNER: I did but didnlt yOu in your
explanation you described communications between lawyer and

client which Itrust you meanyou're also objecting on a

privilege basis is that right and I'm nut sure if you

indicated that inyourobjection.

MR.HOLAHAN: 1'11 objecting to it Onthe 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 thisexhibit beingmade --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 bework product the all.
MR.HOLAHAN: I don't have have to.
MR.STILLMAN: Sure,what makes this -- this
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1 Exhibit 11 and there's now a11 in green is Edra's
acknowledged is her comments and then there's
3 there's I'm
only see -- and maybe you can help me
4 out -- because I'm trying to understand why this would be
work product but a11 I see is Edra's comments about each
6 each one.

MR.HOLAHAN: Andwe'vemadeOurObjections.
8
MR.STILLMAN: Wait a minute, Dennis,please. A1l
9 I see is Edra's comments and I don't see anything at al1
10 this document other than Edra's comments.
MR. HOLAHAN: Y0u don't have to see anything.
12
MR. STILLMAN: Perhaps yOu Can
me where iti
13 on this document that you believe to be a work product.
14
MR. HOLAHAN: This document was prepared pursuant
15 to communications between Edra and her attorneys.
also
16 work product. It came out of my office. It's work product.
And it was prepared pursuant to communications between Edra
18 and her attorneys. So it's work product.
19
MR. STILLMAN: What attorneys? You?
20
MR. HOLAHAN: Me.
MR. STILLMAN: Okay. Edra and you.
22
MR. HOLAHAN: Work product and attorney Client
23 privilege.

MR.STILLMAN: Let me justmake sure I gOt it.

25 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?
4
MR.HOLAHAN: I'm nOt going to go into how Or how
the document ws 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 towrite
9 something down it didn't moan that that becomes protected
in any way. She's got she's writing her analysis there.
11
MR.HOLAHAN: She Was communicating her analysis
me. I'm her attorney. It can't be simpler than that.
13
MR.CONANT: don't need it raise your voice Mr.
Who will.
15
MR. STILLMAN: Don't worry about 2.
MR.HOLAHAN: That's the communication 20 Edra and
17 her attorneys,it's privileged and it's work product.
18
MR. STILLMAN: Well I guess we'll flag that for
19 another day.
20
right let's get onto the next paragraph,then.
21
MR.COTNER: Before We move 0n, Phil,what's the
status of that exhibit with regard to making it part of the
23 record?
24
MR.STILLMAN: Weli it's in the record. It's
25 Exhibit 11. And Dennis isobjecting to it being in the

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1
2
3
4
5
6
7
8
10

13
14
16
17
18
19
20
21

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

seqiousmatter.

23
MR.STILLMAN: agree,and I am -- and So is this
24 lawsuit.
MR.HOLAHAN: When waS it waived? It's a simple

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4
6

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

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?

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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.

3
4
5
6
7
8 Let's just go right to let's say paragraph 24.
9
Have you had a chance to read 24?
A. Three lines.
11
Q. Okay.

A. Do you want me to read the whole thing or do you

13 want to just start asking questions.
Q.
ask questions unless you feel the need to read
15 the whoie paragraph.

(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 financial problems with the Yellowstone Club,correct?
21
A. Correct.
Q. And so what representations were he relying on that
23 were regarding BGI the Yellowstone Club and other assets and
24 liabilities under his control when negotiating the MSA?
25
There -- even though I knew that there was a lot of

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Redacted

Fom:Chehi,MarkS(mailto:Mark.
chehi@skadden.comq
Ant)Fri
day,January09,20095:20PM
To:AndyPatten;LARRY.RMM@BULUVANT-COM;rickbirinyi@Bullivant,com;Greenspan,Ron;Fosler,Brad;
LearGz@aol.com
Cc:Levy,EvanR(NYC);ChuckHingl
e;OcketkJ.Thomas;Stephen.Yanluer@credit-sui
sse.com;Saunders,Rober'tS
(WIL);Greenspan,Ron;Foster,Brad;IparGzlaol-com;ShaneColeman
Sublect:RE:OrdertoShowCauseHearing
LetusknowwhenEdraandRonwlllbearri
vlnginMontana.Perhapswecandoi
tMondayaiernoonorevening.

From:AndyPattengmail
to:Apaten@ppbgl
aw.comq
Rnt:Friday,January09,20097:16PM
To:Chehi,MarkS(WIL);LARRY.REAM@BULLIVANT.COM;rick.bi
rinyilBullivant.com;Greenspan,Ron;Fter,Brad;
LearGz@aol.com
Cc:Levy,EvanR(NYC);ChuckHingl
e;Ockett,J.Thmas;Slphen.Yankauer@credi
t-sui
sse.com;Satlnders,RobertS
(WIL);Greenspan,Ron;Foster,Brad;IparGz@aol-com;ShaneCol
eman
Subjed:RE:OrdertShcwCauseHearing
Mark-Iguesswewiljusthavetoagreetodisagree.Idon'tknowhowwewoul
ddodepositionsbetweennowand

Tuesday.Iwilinquireaboutsomeinformalprocedurebuttryingtoestablishsomethingat5:15OnaFridaynightmakesi
t
kindofdiffi
cul
t.

F
om:Chehi,MarkS(mail
to:Mark,chehi@skadden.comq
Rnt:Friday,January09,20095:08PM
To:AndyPatlen;LARRY,REAM@BULUVAINT-COM;rick.birinyi@Bullivant.com
Cc:Levy,EvanR(NYC);ChuckHingle;Yckett,J,Thcmas;Slphen.Yankauer@credit-sui
sse.com;Saunders,RobertS
(WIL);Greenspan,Ron;Foster,Brad;lparGz@aol-com;ShaneCol
eman
Subjed:RE:OrdertoShowCatlseHearing
Andy,
Fortherecord,theLenderssimplyagreedthatRonwasanacceptableCROcandidate.Itgoesto0fartosaythat
theDebtofs''
appointedRonGreenspanatCS'
sinsisten.'
Actuall
y,R0nGreenspanwasnamedinthefirstinstanceandpromotedbyEdraBli
xseth'
sperscnalcounsel.
Edra'scounselurgedtheLenderstoagreetoRonGreenspanevenafterbeingtolditwasinthebestinterestsofal
I
padiestofi
ndaCROthatwasnthadpi
ckedbyEdraBlixseth.lfRonwasnotselededbyEdra,whoselededhim?
WhenitbecameclearthattheCompany'
ssnancialconditionwasevenworsethandire,andtheCompanywasnot
movingtowaMsemployinganyotherCRO,theLenderseventuall
yagreedthatRonGreenspanwasacceptabl
etothe
Lenders.
Atthattime,theLenderswereveryccncenedaboutabcutfi
duciaryi
ssues,andtheircncernswerenotmi
splaced.
TheCompanyhadnomoneyandwasrequestingsignificantdeblor-in-possesionnancingfromtheLenders;the
Companyi
tselfhadnoIndependentbankruptcycounselorothercounselasfarasweknow;I
thadnomanagement
experiencedinbankruptcy'
,andwereceivedacallfromCrossHarbor'scounselsayingCrossHafbor'
scounselwas

5A0001455

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preparing1heCimpany'sbankruptcyfilingswhentheCompanyhadnecunselOfi
tsown.
TheLenderswerealsoconcernedabnutfiduciaryccnfl
ictsrelatedtoEdra'
sowndi
#i
cul
tfinancialcircumstances,her
e
n
o
r
m
o
u
s
N
n
a
n
c
i
a
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o
b
l
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g
a
t
i
o
n
s
t
o
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r
o
s
s
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r
b
o
q
a
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d
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r
o
s
s
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r
b
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r
'
s
s
e
l
f
i
n
t
e
r
e
s
t
e
d
o
b
j
e
c
tivesandcontrolovertheDebtors!
entryintobankruptcy.
Formanyofthesamereasonsandnfli
ds,theLendershavecontinuingconcerns. Theyareelevatedby
yourreludancetngiveupcontrolovertheclaic againsttheinsiderobligol.

T
he
De
bt
sh'aptro
s
o
sasnh
u
d
fnacu
m
z
nq
h
emme
entem
i
s
l
u
cdfeth
eyb
shaonudldpdrc
ets
be
ing
su
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er
t
af
nes
es
ff
ei
ctn
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el
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al
irb
se
ale
ns
de
/cd
ro
pn
lam
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px
roi
cei
si
s
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cn
ncr
e
dewva
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th
ce
ut
la
.u
Tsi
hn
ee
yss
ep
ve
or
tt
ei
h,
ea
irnd
Iimdedresources--andIimltedtlmeremainingunderthehairtri
ggerCrossHarborfinanclng--tothechamer11

process.IassureyouthatcounselfortheCommi
tteeandCredi
tSui
ssewillmanagethecoll
ecti
onadionmoreelectively
thanEL'
TlandDebtors'counselhavebeenmanagingthereorgani
zationprocesstodate.
ItisinthebestinterestsoftheestateandaIpartiesfortheDebtorstoconsenltotheStipulationanddirecttheir
professional
stofocusonmaximi
zingvaluefortheircreditol
'sinthereorganizationprocess,nottheIitigationoverthe
Notes.
LetusandtheCommi
tteekncwassoonaspossiblewhatpathyouwilltake,sothatwecanpossiblyavoidunnecesssary
Iegalcostspreparingfortheevi
dentia hearing.
PleasealsonfirmwhetherRonGreenspanandEdraBlixsethwillmakethemselvesavailablefordepostionsand/or

informalquestioninginadvanceofthehearing(assumingtheDebtorsdonotconsenttotheStipulation).

Also,wewanttogetacandidreportandupdateinMontanaonwheretheDebtorsareintheplan/sale/marketing
process.Timeisrunningotzt.

Fom:AndyPatten(mailto:eatten@ppbgl
amcomj
Ant:Friday,January09,20095:57PM
To:Chehi,MarkS(WlL);LARRKREAM@BULLIVANT.COM;rick.bi
rinyi@llivant.com
Cc:Levy,EvanR(NYC);ChuckHingl
e;Rckett,J.Thomas;Saunders,RobertS(WlL);Stephen.Yankauer@credi
tsui
sse.com;Saundels,RobertS(WIL);Greenspan,Ron;Foster,Brad;Leafz@aol,com
SuWed:RE:OrdertoShowCauseHearing
MarkIthinkCreditSuissehaspotentialconflidswithlhecclledionofthesenotes.Theclaimthatthedebtorsandtheirlegal
p
o
e
nMo
alsra
e
i
ne
t
l
y,c
f
i
ct
d
g
re
ro
Ger
w
saadpdpio
i
te
tnCsS
srei
nnsci
s
e
eei
n
thr
i
sf
cs
as
si
eo.
er
imp
ov
rti
aa
nb
tl
y
go
ivn
i
nl
g
1e
hd
eb
dy
eE
bt
or
ra
si
t
hn
eos
as
mt
ehe
ri
gch
ts,R
ason
Cr
de
ie
tn
Ss
uq
lsa
sn
e,w
prh
oo
vi
dea
s
ti
onn
ad
lta
ra
p'
a
yt
innc
th
process.Freezingthedebtoroulofthecollectionofasubstanli
alestateasset,andoneinwhichfromaIIappearancesand
evidencehassubtantialvaluototheeslate,iGn0tinthebestinterestsoftheestte.RememberCreditSuisse'sclaim
appearstobesecuredtotheetentof$310milli
onbyitsrealestatecollateral'
,thetotalremainingunsecuredclaimsare
Iessthan50%ofthefaceamotlntofthenotes.Thedebtor'sinterestintheassetisobvious.Plainl
ythedebtorhasamore
substantialinterestinccllcdionofthenotesthandcesCreditStlisse.
lcan'tmakeCreditSuisseagreetotheproposal.lthotlghtitwasareasonableaccomodation.Ifnotacceptableto
creditSui
sse,sobeh.
PleasebeassuredthatnoneoftheprofessionalarekowtwingtoeitherEdraorCrssHarbor.IndeedEdrahasmade
no
ema
dc,r
ugxgie
st
o
r
uecrh
n
o
i
thet
eteBG
In
e
sc.lP
l
e
s
ead
d
ebd
to
risn
fo
ue
sg
lnu
ges
ot
n,s
ma
mi
zi
inn
go
it
sa
rn
ey
cosv
iet
shi
fn
og
rti
heco
bn
en
ne
ed
fiti
on
ftw
he
sh
ta
wh
ico
ht
in
ud
ea
sseaa
IIl
co
reb
de
itoa
rs
ss
,u
'
tr
h
tt
ih
na
ct
lut
dh
ees
recoveryoftheBGInotesandclaimsagainstanysubsequenttransferees.
O ydon'tyoureconsiderandallowthedebtortcparticipateinthecollectionofthenotes?Shouldthedebtorengagein
anyinappropriatecondudyouwillQbviouslyknow.lfthedebtorviolatesi1sfiduciafydutiestctheestatetherewillbea
remedyf0ryou.
Andy
Redaded

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PatrickT.Fox(#8071)

DOUBEKPYFER& FOXLLP
POBox236
HelenaMT59624
4064427830ph
4064427839fax

patrickfox@doubekpyfer.com
AttorneysforTimothyL.Blixseth
UNITED STATESBANKRUPTCY COURT
FORTHEDISTRICTOFMONTANA
CaseNo.08-61570-1I-RBK
InRe:
JointlyAdministeredwith08-61571and
YELLOWSTONEMOUNTAIN CLUB,LLC, 08-61572,08-61573
eta1.,
Debtors.
TIMOTHYL.BLIXSETH
M.

Adv.No.09-00014

MARCSKIRSCHNER,TRUSTEEOFTHE RE
PLY
BRIETFOINFESDE
UPP
OFE
MOT
PURS
UANT
MORT
LRUL
OFION
YELLOWSTONECLUBLIQUIDATING BANKRUPTCYPROCEDIX 9024
TRUST

Mr.BlixsethherebyfilesthisreplyinsupportofMr.Blixseth'sMotionpursuantto

FederalRuleofBanknzptcyProcedure9024(herei
nafterE
<Motion').
TheYCLT'SrequestthatthisCourtdenyMr.Blixseth'sMotionwithoutahearing
mustbedenied.First,giventheCourt'slong-standingpracticetotryfactsbaseduponlive
testimonyversusaffidavittestimony,ahearingisrequired.SeeTranscriptofDecember2,2010

Hearing,p.18:22-25('ETHECOURT:Well,Iguessl'mnotsocert
ai
nthatthecaselaw

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supports--asyouknow from priorappearances,wedon'ttr.ythi

ngsinthiscourtbyaffidavit.''
).

Second,Mr.Bli
xsethassert
sthatanevidentiaryhearingshouldbeheldbeforeadifferentjudge.
lnlightoftherecentlydiscoveredevidenceandthecompleterecordbeforethisCotu't,including
therecordsubmittedwithMr.Blixseth'srecusalmotion,Mr.Blixsethrespectfullyassertsthatit
wouldbeimproperforJudgeKirschertopresideoveranevidentiaryhearingonthepending
Motion.Accordingly,Mr.BlixsethrespectfullyrequeststhatJudgeKirscherrecusehimselffrom

hearingthisMotionandinsteadassignthemattertoanotherjudgewithintheDistrictof
Montana.

TheYCLTarguesthatahearingisunnecessarybecauseMr.Blixseth'sMotion
reliesonadeclarationofDennisMontgomery.Mr.Montgomely'sdeclarationsolely

authenticatesdocumentsthatcamefromEdraBlixseth's(herein,1
Edra''
)computer.
Accordingly,Mr.BlixsethreliessolelyonMr.Montgomely'slawfulprodtlctionandsubsequent
authenticationofdocuments.ThesubstantiveevidencetheCourtmustconsiderisEdra's
statements.YCLT'SreferencetoMontgomery'scredibilityisirrelevant.
Atahearingontheseissues,Mr.Blixsethwillpresentdocumentsandwitnesses
thatwillestablishthefollowing:Since2006,EdrapartneredwithMr.Montgomeryandrelied
uponhim forthesuccessofhertechnologycompany,Blxware,LLC.EdracametoMr.

Montgomery'sdefensewhenheopposedMr.Fl
ynn'smotionforsummaryjudgmentseekingto
denyhisbankruptcydischarge.SeeExhibit1hereto.Inlate-luly2012,Mr.FlynnservedMr.
MontgomezywithavalidandenforceablesubpoenaducestecumunderFed.R.Civ.P.69inan
unrelatedlawsuit.In compliancewiththesubpoena,Mr.MontgomelyproducedEdraBlixseth's
MacBookcomputerandaithumbdrive''thatEdraBlixsethaskedMr.Montgomerytostorefor
her.Mr.Montgomerydeliveredtheseelectronicmediadirectlytoanindependentcomputer
expertRobertWhiteford,tocreateforensicimagesofthesedatafiles,analyzewhenthefiles
werecreatcdandmodified,andtomaintaintheoriginalsinhispossession.OnceMr.Whiteford
createdforensicimagesoftheseelectronicmedia,hemadethem availableforreviewin
November2012.AccordingtoMr.Whitefordandbaseduponananalysisofthedocuments'

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metadata,thedocumentswerecreatedandlastmodifiedbyEdra.SeeWhitefordDeclaration,
attachedasExhibit2.OnDecember14,2012,Mr.BlixsethtookEdra'sdepositioninAP-88,the
caseinwhichEclra'sbanknzptcytnlsteeistryingtoset-asidetheMaritalSettlementAgreement.
ThefulldepositiontranscriptrevealsthatitwasnecessaryforMr.Blixsethtoelicitsubstantial
andtime-consumingtestimonyregardingAP-88.Attheendofthedeposition,Ms.Blixsethand
herattorney,Mr.Holahan,authenticatedthet&NotesontheMSA''andthedepositionwas
promptlyterminatedbyMr.Holahan.
4. WhiletheYCLTfocusesonMr.Montgomery'scredibility,itdoesnotaddressthe
statementsmadebyEdra.ThefailuretoaddressthesubstantivestatementsbyEdraregarding

judicialint
luenceistellingandinitselfanacknowledgmentthatanevidentiaryhearingbeforea
differentjudgeisappropriate.
EdraconsistentlyhasbeenfotlndcrediblebythisCourtlnitsAugust16,2010

MemorandumofDecisioninthiscase(andinotheropinionsissuedbythisCourtinotherrelated
cases),thisCourtfoundEdra'stestimonycredibleoverthatofMr.Blixseth(othercitationstothe
Court'scredibilityfindingsregardingEdraarecontainedinMr.Blixseth'srecusalmotionand

supportingdocuments).Thus,tothelimitedextent(i.e.,theatlthenticationofdocuments)Mr.
BlixsethreliesonMr.Montgomery'stestimony,theunderlyingfactsregardingtherelationship
betweenEdraandMr.Montgomerysupporttheveracityofhisauthentication.Similarly,Mr.
BlixsethlzrgestheCourttoconsiderthatthelimitedpurposeofMr.Montgomely'stestimonyat
theveryleastdoesnotimpactanymaterialcredibilityissuesbutonlyreinforcesthepartnership
associationbetweenMr.MontgomeryandEdraandEdra'sapparentwillingnesstoshare
infonuationwithMr.Montgomeryforthelastsixyears.
6. TheYCLT'ScontentionthattheevidencepresentedbyMr.BlixsethisnotKinewly
discovered''isuntenable.First,assetfol'thabove,theevidencewasnotpreviouslyavailableto
Mr.Blixsethandonlyrecentlybecameavailabletohim.TheonlyevidencethatMr.Blixseth
receivedfrom Edrawasinthesummerof2009whenEdraattemptedtoconcealevidence,asset
fol'thinthedocumentsfiledatDocketNos.473etseq.inthiscaseandforwhichthisCourtdid
3

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notholdanevidentiaryhearing.EdrahaswithheldandneverproducedthetNotesontheMSA''
and&IMSABulletPoint''documentsfrom Mr.Blixseth.Mr.Blixseth'spresentationofthenew

evidencetothisCoul
'
tisnotjustarehashoftheE
grandconspiracytheory'astheYCLTasserts.
Thisisnewevidencethatwhenconstruedbyitsplainlanguagestronglysuggestsinappropriate

actionsby4C
SB''andII
BS'anddirectinferenceofimproperjudiciali
nfluence.
TheYCLT'Sargumentthataetnewlydiscoveredevidence''analysisisirrelevant

becausesuchinquiriesareonlyrelevantunderRule60(b)(2)isalsowithoutmerit.Mr.
Blixseth'smotionwasnotbasedonRule60(b)(2)butonRule60(b)(6).TheSupremeCourtin
Liliebergv.HealthServicesAcqui
sitionCorp.,486U.S.847,864-869(1998),madeclearthat
theelementsandconsiderationsthatgointotheanyotherreasonthatjustifiesrelief'standard
ofRule60(b)(6)aremutuallyexclusiveofthegroundsforreliefunderRule60(b)(1)-(5).Edra's
statementsthat'
&SB''(i.e.,SamByrne)hadensuredtherightresultforherintheMontana
batlknlptcycourtundoubtedlysatisfiesthetextraordinat'ycircumstances''standardofRule

60(b)(6)assetfort
hinfiljeberg.
Finally,BankruptcyLocalRule9013-149requiresthatahearingonanymotion
besetnoearlierthan21daysaftertheResponseisfiled.GiventhenatureofthisMotion,the

Courtmustappl
ythisRuleinthisinstance.Accordingly,Mr.BlixsethobjectstotheJanuary8,
2012hearingdatesetbytheYCLTasitviolatesL.
B.
R.9013-1(9.
DATEDthis28thdayofDecember,2012.
/s/PatrickT.Fox

PatrickT.Fox
DOUBEKPYFER&FOX LLP
/s/MichaelJ.Flvnn
MichaelJ.Flylm
OneCenterPlaza,Suite240
Boston,MA02018
Telephone:858-775-7624
Facsimile: 858-759-0711

miker
/mifescl
.com
AttorneysforTimot
hyL.Blixseth

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CERTIFICATEOFSERVICE
1, Pat
rickT.Fox,herebycert
ifyunderpenalty ofperjtll
y thatonthe28thdayof'
December,2012,copiesoftheabovedocumentwereservedelectronicallybyECFnoticetoa1l
persons/entitiesrequestingspecialnoticeorothelwiseentitledtosameandthatinaddition,1
herebycertifythatIhavemailedorservedthedocumenttothefollowingnon-ECFparticipants
inthemannerindicatedbythenon-participant'sname:
Nomanualrecipients.
By/s/PatrickrFox

(290 of 364)
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C:d)
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l WILLIAM E.CROCU TT(SBN 129383)
STEVENR.SKIRVIN(SBN179946)
2 DION-KINDEM & CROCKETT
21271BurbankBoulevard,Suite100
3 WoodlandHills,CA 91367

Telephone:(818)883-4400
4 FacsV
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5 AttomeysforDefendants
DermisandBrendaMontgomery
6
7
8
UNITEDSTATESBANKRUPTCYCOURT
CENTRALDISTRICTOFCALIFORNIA
9
LOSANGELESDIVISION
10

lnre:
DENNISLEEMONTGOMERYand
12 BRENDA U THLEENMONTGOMERY,
13
Debtors.
14
15 MICHAELJOSEPHFLYNN,
Plainti
f,
16
17 v.
18 DENNISLEEMONTGOMERY,eta1.,
Defendants.
19
20
21
22
23
11

24
25
26
27
28

) CaseNo.
:2:10-bk-18510BB
)
) Chapter7
)
) Adv.No.2:10-AP-01305BB
)
)DECLAM TIONOFEDRABLIXSETH
)
INSUPPORTOFOPPOSITIONTO
) MOTIONFORSUMMARYJUDGMENT
) ORINTHEALTERNATIVEFOR
) SUMMARYADJUDICATION
)
)
)
)
) Date:December6,2011
) Time:2:00p.
m.
) Courtroom 1475
) 255E.TempleStreet
) LosAngeles,CA 90012
)
)
)
)
)
)
)

(291 of 364)
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DECLAM TIONOFEDRABLIXSETH
2 1,EdraBlixseth,herebydeclareasfollows:
3
1. Iam over18yearsofage.lhavepersonalknowledgeofthefactssetforth
4 belowand,ifcalledtotestify,1couldandwouldtestifycompetentlythereto.

5
6
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22

2. Iwasmajoritystockhol
derandCEOofOpspri
ng,LLCandBl
xware,LLC
duringthetimeDennisMontgomerywasanemployeeofthesecompanies.Dennis
Montgomerywasanemployeefrom2006to2009.
3. ThesoftwazetechnologydevelopedbyMr.MontgomeryforbothOpspringand
BlxwarewasofferedtotheU.S.Goveramentfortestingandfurtherdevelopment. The
companybecameacontractorforthistechnologyanditwastestedwithinthatcontract, Inever
receivedanycommunicationfromthegovemmentstatingthattheteclmologydidnotworkas
represented.Themembersinthegovermnentdepartmentwithwhichwewereworking,
includingthepeople1workedwithdirectly,neverexpressedanyconcemsoffraudorthatthe
teclmologywasashnm.
4. Tothebestofmyknowledge,theonlypersonwhohassaidthisteclmology
doesn'tworkisMr.Flyrm,thosewhowerequotingMr.Fl
ynnorthosesolicitedforsucfk
statementbyMr.Flyrm.ThestatementsandactionsofMr.Flynnseemedtostart
simultaneouslywithboththeterminationofhisson'semploymentwiththecompanyandMr.
Flynn'sterminationofhisservicesasourlawyer. Justpriortothis,Mr.Flynnwasattempting
topressurethecompanyintogivinghim pa14ownetshipofthecompanyandtheteclmology.

IdeclareunderpenaltyofperjuryunderthelawsoftheUnitedStatesofAmericathat

23 theforegoingistrueandcorrecttothebestofmyknowledge.
24
Executedthis14thdayofNovember,2011,at
* ,
25
26
27
EDRABLIXSETH
28
2

(292 of 364)
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Categery1.
ProposedordersdonotgenerateanNEFbecauseonlyordersthathavebeenenteredareplacedon
theCM/ECFdocket.

PROOFOFSERVICEOFDOCUMENT
lamovertheageof18andnotapadytothisbankruptcycaseoradversaryproceeding.Mybusiness
addressis:21271BurbankBlvd.Suite100,WoodlandHills,CA91367.

AtrueandcorrectcopyoftheforegoingdocumentdescribedasBeclatationofEdraBlixsethfn
slzpportofOppositlontoMotionforSummawJlzdpmentwillbeservedorwasserved(a)onthe
7 judgeinchambersintheformandmannerrequiredbyLBR5005-2(d);and(b)inthemannerindicated
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8 1.TOBESERVEDBYTHECOURTVlANOTICEOFELECTRONICFILING(t'NEF'')-Pursuantto
9 c
ontrollingGeneralOrderls)andLocalBankruptcyRulets)CLBR'),theforegoingdocumentwillbe
servedbythecourtviaNEFandhyperlinktothedocument.OnNovemberf5v2011,Icheckedthe
10 CWECFdocketforthisbankruptcycaseoradversaryproceedinganddeterminedthatthefollowing
personls)areontheElectronicMailNoticeListtorecei
veNEFtransmissionattheemailaddresstes)
11 indicatedbel
ow:
.
ThomasMGeher,tmg@jmbm.com,
ChristopherConant,cconant@conantlawyers.com
12 JasonMRund,trustee@srlawyers.com,jrund@ectepiqsystems.com
Uni
tedStatesTrustee(LA),ustpregionl6.la.ecf@usdoj.gov

13 Lservi
cei
nformat
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onconti
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achedpage
14 II.SERVEDBYU.S.MAILOROVERNIGHTMAIL(indicatemethodforeachpersonorentitvserved):

15 OnNovemberf5,2011.Iservedthefollowingpersonts)and/orentityli
es)attheIastknown
addresstes)inthisbankruptcycaseoradversaryproceedingbyplacingatrueandcorrectcopythereof
inasealedenvelopeintheUnitedStatesMail!firstclass,postageprepai
d,and/orwithanovernight
16 mailserviceaddressedasfollows.ListingtheJudgehereconstitutesadeclarationthatmailingtothe
judgewillbecompletednoIaterthan24hoursafterthedocumentisfiled.

17
18
19
20
21
22

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20MassachusettsAvNW/POBox883
Washjngton,DC20044
CounselforInterestedParty,U.S.Government

EdwardR.RoybalFederalBuilding
255E.TempleStreet,Suite1422
LosAngeles,CA90012

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cei
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nuedonatt
achedpage
111.SERVEDBYPERSONALDELIVERK FACSIMILETRANSMISSIONOREMAlLtindicatemethod
foreachpersonorentitvserved):PursuanttoF.R.CiV.P.5and/orcontrollingLBR,onNovember15.

20f#,Iservedthefoll
owingpersonls)and/orentityties)bypersonaldelivery,or(forthosewho
23 consentedinwritingtosuchservi
cemethod),byemailasfollows.Li
stingthejudgehereconsdtutesa
declarationthatpersonaldeli
veryonthejudgewillbecompletednoIaterthan24hoursafterthe
24 documentissled.
Zservi
cei
nformati
onconti
nuedonatt
achedpage
25
anrdecuonrdre
ecrtp
tyofperjuryundertheI
awsoftheUni
tedStatesofAmericathattheforegoingis
:6 l
trd
ue
ecal
.enal
zy November15,2011
Date
28

StevenR.Skirvin
TypeName

/WstevenR.Skirvin
Signature
3

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O9-00014-RBK Doc#:725-2'
.'
pi
l
d'
.12/28/1: Entered:12/2871216:29:04 Page1Of3
PatrickT.Fox(#8071)

DOUBEKPYFER& FOXLLP
POBox236 '
'
HelenaMT59624
4064427830ph
4064427839fax

patrickfox@doubekpyfer.
om

Attorney;forTimothy1=.Blirseth

UMITEDSTATESBANKRUPTCYCOURT
FORTHEDISTRICTOFMONTANA

'

CaseNo.08-61570.1I-RBK

InRc:

JOintlyA4ministeredwith08-61571and

YELLOWSTONEMOUNTAIN CLUB,LLC, 08-61572,08-61573

eta1.,
Debtors.
TIMOTHYL,BLIXSETH
Adv.No.09-00014

V.

MARCSKIRSCHNER,TRUSTEjopszus DECLARATIONOFROBERTWHITEFORD
YELLOWSTONECLUBLIQUIDXTING
TRUST

1,RobertWhiteford,doherebydeclareasfollows:

lamovereighteenyearsofageandhavepersonalknowledgeoftheVctstestified
toherein.
Withrespecttomyexperienceandknowledge,Iherebyincorporatebyreference
myswornstatementssetforthinmydeclaration,Paragraph2.
OnSeptember25,2012,DennisL.MontgomeryhadanApplePowerMac65

compttter(serialnumber685311IURUO)deliveredtomebyBrianCalhoun.Thiscomputer

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O9-OOOl4-RBK Doc#:725-2 Filed:12/28/12 Entered:12/28/1216:29:04 Page2of3

containedoneharddri
ve(ModelWD3200AAKS,SerialNumberWCAWFD924346).
OnSeptember25,2012,Mr.Montgomeryhadaharddrive(Model
WD3200AAKS,Seri
alNumberWCAWFD940504)deliveretbmeviaUPS(TrackingNumber
127174Y152468329746).ThisdriveisaSATAharddrivethatwasnotinstalledinacomputeror
externalenclosure.Thisiscommonlyknownasa(tbaredrive''.
Mr.MontgomeryinforpedmethatthesedeviceswereEdraBlixseth'sandthat
Ms.Blixsethleftthesedevicesinhiscustodyandcontrol.
6. Uponreceivingthesedevices,Imadeforensicimagecopiesofthefilescontained
thereon.TheprocessofmakingtheseforensicimagesensuredthattheCdmetadata''onthefiles
wasprestrvtdunaltertdsothatauserofthefilescouldreview thettmctadata''onthesefilesand
from thatismetadata''determinethedatethatthefileswerecreatedandtheIastthattheywere
modified.
FromthePowerMacharddriveIretrievedthefileknownasS'Notesonthe
MSA.doc''.Ireviewedthemetadataonthisf5leandfoundthatthisdocumentwascreatedon
09/20/200909:33:37andlastmodifiedon10/23/2009l5:31:49.
8. FromthebaredrivedrivelretrievedthedocumentknownasS'Dl-lpoints.pdf'.
Mr.MontgomeryreferstothisfileasS'MSA BulletPoints''.Ireviewedthemetadataonthisfile
andfoundthatthisdocumentwascreatedon07/17/201119:18:10andlastmodifiedon
07/17/201119:18:11.
9. lreviewedinformatipnonthePowerMactodetermineifthecomputerclockhad
beenalteredinsuchawaythatwouldallowausertomanipulatethemetadatacontainedonthe
filesthereon.Ifoundnoindicationofanysuchtampering.
k.w

IdeclareunderpenaltyofperjuryofthelawsoftheUnitedStatesthattheforegoingis
trueandcorrecttothebestofmyknowledge.

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O9-0OO14-RBK Doc#:725-2 Fi
led:12/28/12 Entered:12/28/1216:29:04 Page3Of3
DATEDthis27thdayofDecember,2012.

RobertWhiteford
CERTIFICATEOFSERVICE

1,PatrickJ.Fox,herebycertifz underpenal
tyofperjury thatonthe27t
hdayof

December,2012,copiesoftheabovedocumentwereservedelectronicallybyECFnoticetoa11
perspns/entitiesrequestingspecialnoticeorotherwiseentitledtosameandthatinaddition,I
herebycertifythatIhavemailedorservedthedocumenttothefollowingnon-ECFparticipants
inthemannerindicatedbythenon-participant'sname:
Nomanualrecipients.

By/s/Patricks
/Fox

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Edra D.Blixseth,Volume I - December 14,2012

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MONTANA

IN RE:
EDRA D.BLIXSETH,
Debtor.

)
)
) Case No.09-60452-7
)
RICHARD J.SAMSON,as Chapter 7Trustee )Adversary N0.10-88
of the Estate of Edra B1ixseth,

Plaintiff,

)
)
TIMOTHY BLIXSETH;DESERT RANCH LLLP; )
DESERT RANCHMANAGEMENT LLC;AND DOES )
1-5,
)
Defendants.
)

Deposition of:
Volume I:
Date:
Reported by:

EDRA D.BLIXSETH
Pages 1 through 305
December 14,2012
James Matthews,CSR No. 7916

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Deposition of EDRA D.BLIXSETH,Volume I,taken

on behalf of the Defendant Timothy Blixseth,before James
Matthews,a Certified Shorthand Reporter,commencing at
the hourof 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:

LAW OFFICES OF DENNIS HOLAHAN
BY: DENNIS HOLAHAN
Attorney at Law
3640 Ke1sey Knoils, Suite 832
Santa Rosa,Ca1ifornia 95403
707.623.9116
For Defendant Timothy B1ixseth:
STILLMAN & ASSOCIATES
BY: Philip Stiilman
Attorney at Law
300 Southpoint Drive,Suite 4206
Miami Beach, Florida 33139

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1 APPEARANCES (CONT'D)
2
3 For Defendant Timothy Blixseth
4
HATCH, RAY,OLSEN & SANDBERG, LLC
5
BY: Christopher 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 Richard Samson (Appearing telephonically)

12
DATSOPOULOS, MACDONALD & LIND, P.C.
13
BY: David B.Cotner
14
Attorney at Law
15
201 W.Main Street, Suite 201
16
Missoula,Montana 59802
17
406.728.0810
18
19 For the Trustee Richard Samson
20
DAVIS, WRIGHT & TREMAINE, LLP
21
BY: Bradley R.Duncan
22
Attorney at Law
23
1201 Third Avenue,Suite 2200
24
Seattle,Washington 98101
25
206.622.3150
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INDEX
Deposition of EDRA D. BLIXSETH,Volume I
Taken on Friday,December 14,2012

Examination by:
MR. STILLMAN
Afternoon Session

Page
6
139

Exhibits:
1 November 5,2008 e-mai1 from Dennis to Edra
B1ixseth and previous e-mail
2 Affidavit of E.Blixseth in Support of B1ixseth
Family Investments, LLC's Emergency MotiOn for a
Temporary Restraining Order and Order to Show

15

cause Regarding Preliminary Injunction and for

16
17
18
19
20
21
22
23
24

Expedited Discovery
Agreement between Tim and Edra B1ixseth dated
June 4, 2008
April 16, 2008 e-mai1 from Zemosv@aol.com to
Jory Russei1 and previous e-mails
Assumption Agreement
U.S.Department of Justice letters to Timothy
Blixseth dated November 8,2007 and December 12,
2007

3
4
5
6

Page
69
101

129
155
168
200

25 (Continued)
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December 14,2012

Exhibits:
Page
7 August 11,2008 e-mail from LearGz to dennis and 214
previous e-mail
8 OrderApproving Waivers and Releases
227
9 December 29,2008 e-mail from LearGz to Sam Byrne 245
10 Amended Complaint
250
11 Notes on the MSA,including amendments and the mini 268
settlements
12 TaX Analysis Memo
279
13 June 26,2008 letter from Timothy Blixseth to Edra 293
Blixseth signed by Edra Blixseth and copy signed
by Timothy Blixseth
14 June 1O,2008 letter from Jaffe to Edra Blixseth 294
15 November 2, 2011 letter from Holahan to Kolodny, 3O3
conant,Hatch and Flynn

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Q. Well,and you -- mean -- you often refer to

people by -- in,you know, initials and stuff like that in
your e-mails.
A. Oh, a11 the time.
Q. Right?
A. Yeah.
Q. So you know, I don't know Dennis,would he be a
DM?
A. I'm sure. His name is Dennis Montgomery. SO
Q. And of Course we're going to get into this a littie
bit later. But I know I've seen,you know,Sam Byrne was
referred to as SB. That was something that you normally did?
A. I'd have to see it because I know others that are
SB. But probably.
Q. And Tim I guess we've talked about is Toxic?
A. That's not the only thing I refer to him as but
Toxic is one of them.
Q. Okay. And Mike Flynn would be MF?
A. MF.
Q. Right?
A. Yeah.
Q. And I think and Burt Sugarman?
A. And that could be other things besides Mike Flynn
as weli.
Q. Depending on the context.

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EDRA D.BLIXSETH
having first stated that she would testify the truth,the
whole truth,and nothing but the truth,testified as follows:
EXAMINATION BY MR.STILLMAN
MR.STILLMAN: Q.A11 right. Good morning, Mrs.
Blixseth. We've agreed we're going to be a little bit
informal and call you Edra since there's obviously also Tim
Biixseth,so we'll refer to Tim as Tim and you as Edra if you
don't mind.
A. Perfect.
Q. Good. We've never met?
A. No.
Q. My name is Philip Stillman and I'm one of Tim
Blixseth's lawyers. We're here obviously for your deposition
in Adversary Proceeding Number 88 that's pending in Montana
Bankruptcy court in the bankruptcy case that you had fiied
personally.
So before we get started I know you've been deposed
and testified many times, so we'll kind of fast forward
through that. But you understand of course you're testifying

21 today underpenaltyof 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

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1 or Dennis says you said something,it is or isn't in the

2 transcript.
A. Okay.
3
4
Q. Do we have copies of this?
5
MR.CONANT: YeS.
6
MR. STILLMAN: Yeah.
THE WITNESS: Are we done with this?
8
MR.STILLMAN: Q.Oh, n0, nO. We've g0t plenty of
9 that.
10
MR.HOLAHAN: Youlve gOt 50 minutes. Next exhibit.
11 (Whereupon Exhibit 11wasmarked for
12
identification.)
13
MR.STILLMAN: Q. I'm going to put Exhibit 11 in
14 front of you. You've seen this document before?
15
A. Um-hum.
16
Q. And -- that's yes?
17
A. I have seen this document before,yes.
18
Q. And the green is as we've seen before your
19 customary way of commenting?
20
A. Edra's comments.
21
Q. Yes. Edra's comments in green,correct?
22
MR.HOLAHAN: Hold on One second.
23
(Pause.)
24
MR. STILLMAN: Why don't I ask a question while
25 your counsel is --

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2

MR.HOLAHAN: NOjhold on a second. Sorry.

MR.STILLMAN: I'm Sorry.

MR.HOLAHAN: I just need aminute.

MR.STILLMAN: Sure.

5
6

(Pausea)
MR.HOLAHAN: We're going to Object to this exhibit

7 as work product.
8
MR.STILLMAN: Okay.

MR.HOLAHAN: We're goingto Object to this exhibit

10 as work product. I helped the client prepare this document.

11 And it's waswork product. I'm going to Object to that.

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MR.STILLMAN: Okay.
MR.HOLAHAN: FOr 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: Hold it.
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 the mini settlements, Edra's

24 comments in greenwas prepared in conjunctionwith her

25 attorneys,and so as such it isworkproduct and subject to
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1 thework product privilege. So we objectto it beingmade an

2
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12

13

exhibit and 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.
MR. STILLMAN: Well it's going to be an exhibit.
Any work product to the extent it's even applicable has been
waived.
MR. HOLAHAN: HOW? Where is it waived?
MR. STILLMAN: It'S been -- I'm nOt even going to
get into it. It's going to be an exhibit. You have your
rights to make a motion if you want.
MR. HOLAHAN: Okay.

MR.STILLMAN: And that's just that'sit.

14
Q. But you remember the context, Edra?
15
MR. HOLAHAN: She's not going to answer any -16
MR. STILLMAN: Q. DO yOu rememberWhy 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 rememberwhy 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.
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1
MR.HOLAHAN: My Objection,Dave,isthatthis
2 document --did you hearmy full objection?
3
MR.COTNER: I did,but I didn't -- you,in your
4 explanation you described communications between lawyer and

5 clientwhichItrustyoumeanyou'realsoobjectingona
6 privilege basis;is that right? And I'm not sure if you

7 indicated that inyourobjection.

8
MR.HOLAHAN: Im 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

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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.
Holahan?
MR. HOLAHAN: You're nOt asking questions here.
MR. STILLMAN: YOu haven't laid any foundation f0r
why that would be work product at all.
MR.HOLAHAN: I don't have tO.
MR. STILLMAN: Sure,what makes this -- this is
Exhibit 11,and there's now a11 in green is Edra's
acknowledged is her comments -- and then -- there's -Page 271

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December 14,2012

there's -- I'm -- I 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
one.

MR.HOLAHAN: AndWe'vemadeOurObjections.
MR.STILLMAN: Wait a minute, Dennis, please. A11
I see is Edra's comments and I don't see anything at a11 in
this document other than Edra's comments.
MR.HOLAHAN; YOu don't have to see anything.
MR. STILLMAN: Perhaps y0u Can tell me where it is
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. It's 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: Letmejustmakesure IgOtit.

23 appreciate your help. So you -- you tell Edra to prepare -24

MR. HOLAHAN: NO.
25
MR.STILLMAN: -- Some analysis,and then she
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prepares it. Right?

MR.HOLAHAN: I'm nOt going to go into h0w -- or
how the document was prepared.
MR. STILLMAN: Well,the reason I go into it is
because it doesn't -- I'm looking at it. I don't see
anything at ai1 other than Edra's comments. So I'm not sure

7 just because you tell Edra towrite something down -- it

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doesn't mean that that becomes protected in any way. She's

got -- she's writing heranalysis there.
MR. HOLAHAN: She was Communicating her analysis to
me. I'm her attorney. It Can't be simpler than that.
MR.CONANT: Y0u don't need to raise yourVoice,
Mr.Holahan.
MR. STILLMAN: Don't worry about.
MR. HOLAHAN: That's the communication between Edra
and her attorneys. It's privileged and it's work product.
MR. STILLMAN: Well I guess we'll flag that for
another day.
A11 right, let's get onto the next paragraph then.
MR. COTNER: Before we move On, Phil,what's the
status of that exhibit with regard to making it part of the
record?
MR. STILLMAN: Well,it's in the record. It's

24 Exhibit 11. And Dennis isobjecting to it being in the

25 record.
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MR.HOLAHAN: I'm Objecting to 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 you're going to attach it as an
exhibit.
MR.STILLMAN: It iS going to be attached as an
exhibit.
MR.HOLAHAN: HOW is it waived? HOW iS the
privilege waived if this is the first time -MR.STILLMAN: Dennis, I'm nOt going to get into an
argument with you.
MR.HOLAHAN: Why not? This is a Serious matter.
MR. STILLMAN: I agree,and I am -- and SO is this
lawsuit.
MR. HOLAHAN: WhenwaS it waived? It'S a Simple

Page 274

YATES COURT REPORTERS

800.669.1866

(310 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 82 of 136

Edra D. Blixseth,Volume I
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

December 14,2012

question.
MR. STILLMAN: Dennis,I'm nOt answering your
questions. 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 y0u want to argue about it 1'11
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: Phil? Let me make a suggestion that
Exhibit 11 be placed under seal as part of the record at
least untii 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 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: I1m Sorry?
MR.HOLAHAN: D0 y0u have a copy of this for me?
MR.CONANT: Yeah,we have a copy.
MR.STILLMAN: We didn't give you a Copy?

Page 275

YATES COURT REPORTERS

800.669.1866

(311 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 83 of 136

Edra D. Blixseth,Volume I - December 14,2012

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
10
11
12

Have you had a chance to read 24?

A. Three lines.
Q. Okay.
A. Do you want me to read the whole thing ordo 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
17
18
19
20
21
22
23
24
25

(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
financiai problems with the Yellowstone club,correct?
A. Correct.
Q. And so what representations were you relying on
that were regarding BGI, the Yeliowstone club and other
assets and liabilities under his control when negotiating the
MSA?

Page 276
YATES COURT REPORTERS

800.669.1866

(312 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 84 of 136

NotesontheMSA,includingamendmentsandtheminisettlements

(E(Ira'sconllnentsinGreen)
FullMSA-Paaes1-42-CaseNo.111D1N1)91152intheRiversideCount'v,CA
M 1ofPage1says,tt-fhisStipulationisenteredintoforthepurposeof
compromisingandsettlingcontestedissuesbetweentheparties.Ifforanyreason
thewaiversandreleasesinthisStipulationarenotacceptedbytheCourtandthis
Stipulationbecomesnullandvoid,orthisStipulationfailsforanyotherreason
whatsoever,nothingoontainedhereinshallbeanadmissionoffactorastatement
againstinterest.Eachpartyhasrefrainedfrom makingcontentiousstatements,or
assertingpositions,whichmightcausetheothertobeupset,sothatcompromise
andsettlementcouldbepromotedandachieved.''

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UNITED STATESBANKRUPTCY COURT

DISTRICTOFNEVADA
CaseNo.: BK-S-I1-150l0-BAM

Chapter.: 7(Involuntary)

TIMOTHYL.BLIXSETH,

AllegedDebtor.

TRUS
TEEOF
THE
YELLOWS
TONE
CLUB
LIQUIDATINGTRUST'S
RESPONSESTO TIMOTHYL.
B
LIXS
ETI<'SFIRST
SETOF
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To: TimothyL.Blixseth(Lt
Blixsdh''
l,byandthroughhisattorneysofrecord,BrettA.
Axelrod,FoxRothschildLLP3800HowardHughesParkway,Suite500,LasVegas,Nevad
89169.

BrianGlasser,asTrusteeoftheYellowstoneClubLiquidating1rust(,
tvcu.
yj
,i,xspond

to -1-imothy L.Blixseth,sFirstSet of Interrogatories,First Requests for Production of

Documents,andFirstRequestsforAdmissionstoTrusteeoftheYellowstoneClubLiquidatin
1-rust(thet
voiscoveryRequests')asfoll
ows:

24
GENEIG LOBJECTIONS
25
EachoftheseGeneralObjectionsisincorporatedbyreferenceineachofthespecifi
26 object
ionsandresponsesbelowasiff
ullysetfort
htherein.
27
l. YCLTobjectstotheInstrtlctionsandDefsnitions(
ortheDiscoveryRequestst
28 theextenttheypurporttorequireproductionofinformationortheidentificationordescriptiono
-l
-

(320 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 92 of 136

1 documentsthatare subjectto any privil

ege,privacy ri
ght,immunit
y,orobli
gation o
2 confidentiality,including,withoutlimitation,theattonley-clientprivilege,theattorneywor
3 productdoctrine,the consulting expertprivilege and the common interestprivilcge. Thi

4 objectionincludesiy
lformationandmaterialspreparedinanticipationoflitigationthatcontai
5 mentalimpressions,conclusions,opinions,orlegaltlworiesofany attorney o'
rcthcrlegal

6 representativeofYCLTandthusarenotdiscoverable.Specificobjectionsonthegroundso
7 privilegeareprovidedforemphasisandclarityonly,andtheabsenceofaspeci
ficobjectio
8 shouldnotbeinterpretedasevidenceYCLTdoesnotobjecttoaparticularDiscoveryl
tequestol
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9 thcbasisofanapplicableprivilege.ByrespondingtotheseDiscoveryltequests,YCLTdoesno
1O waiveitsrighttoassertanyandal1privilegesatanytime.

11

2. YCL,
1-objectstotheInstructionsandDenitionsincltldedintleDiscover

12 Requeststotheextenttheyseektoimposerequirelnentsinconsistentwith,orbeyondthos
13 contemplatedby,theFederallkulesofBankruptcyProcedureandtheFederalRulesofCivi
14 ProceduremadcapplicabletothisproceedingbytheFederalRulesofBankruptcyProcedure.

Q
=
g)T 15 YCLTwillconstrueandrespondtotheDiscoveryRequestsinaccordancewiththerequirel
nent
< >i

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4 I6 oftheFederalRulesofBankruptcyProcedureandtheFederalRulesofCivilProceduremad

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w 17 applicabletothisproceedingbytheFederalRulesofBankruptcyProcedure.

2 18

3. YCLTobjectstotheInstructionsandDefinitionsfortheDiscoveryRequestst

l9
20
21
22

theextentthattheyarenotreasonablycalculatedtoleadtotl4ediscoveryofadmissibleevidenc
and/orpulyol'
ttorequiretheproductionofinformationortheidentificationorproductiono
documentsthatare notrelevantto the claimsordefensesin thisinvoluntary bankruptc
proceeding.

23

4. YCLTobjectstothedef
initionoft'You''intheDiscoveryRequestsinthatiti

24
25
26
27
28

overlybroadandseekstorequireYCLTtorespondonbehalfofindividualsandentitiesove
whichYCLT hasnocontrol.Specifically,Blixsethdefinest'You''toincludc'bentficiarieso
thetrust''and&AdvisoryBoardMembers.''YCLT doesnothavecontrolovertheseentitie
and/orindividualsandcannotberequiredtorespondtotheDiscoveryReqtlestsonbehalfo
eitherthe'tbeneticiariesofthetrust''ortAdvisol'yBoardMembers.''

-2
-

(321 of 364)
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l
5. Theproductionofanydocumentsorprovisionofacccsstoanydccumentst
2 BlixsethdoesnotconstituteanadmissionbyYCLT regardingtheauthenticity,relevance,ol

3 admissibility in evidenceofsuchdocuments.YCLT reservestherighttoobjectto th

o
t
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NT
mo
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4
5
6
7
8
9

introductionoforuseofsuchdocumentsinthisoranyotherproceeding.
6. Theseresponsesarebasedoncurrentknowledgeandfurtherinvestigationma
revealadditionalfactsorinformationthatcouldleadtothesupplementationormodiscationo
theseresponses.YCLT expresslyreselwestherighttosupplement,amend,correct,clarify,o
modifytlwresponsesasfurtherinformationbecomesavailable.
SPECIFICRESPONSESANDOBJECTIONS

10

Subjecttoandincorporatingthegeneralobjectionssetfort
habove,YCLTrespondst

11 Blixseth'sDiscoveryRequestsasfollows:
12
INTERROGATORY NO.1:TotheextentcolnmunicationsbetweentheYCLT an
13 MDOR arenotinwrittenform,describeaIlcommunicationsanddatesofsuchcommunication

14 theYCLTIiashadwithMDORanditsattorneystodateconcerningMr.Blixseth.
15
RESPONSE:TheYCLTsetsforthbelow thecommunicationsitcanrecallthatmayno

=
1
F
hv
o
.
S. 16
Q zD
:.
.

bememorialized.
1 < =a
=
BeforeMDOR initiated theseinvoluntaryproceedingson April5,201lsitscounse
Xo
x oU 17
k
Q;

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m

18 contactedtheYCLTtoascertainwhetherthcYCLTwouldbewillingtojoininaninvoluntar
19 bankruptcypetition.Theexactdatesofthoseconversationsaretmknown,butarebelievedtob
20 withinafewmonthsleadinguptoApril5,2011.Ultilnately,theYCLTstatedtotheMDORtha
21 itwouldnotbeapetitioningcreditor.
22
From December17,2O12toMay1,2013,therewereconversationsbetweencounselfol

23 YCLTandcounselforMDORaboutthepossibilityofYCLTioiningasacreditorpursuantt
24 Section303(c)oftheBankruptcyCode.OnoraboutApril15,2013,counselforYCLTals
25 discussedwithcounselforM17OR theupcomingdepositionofMr.BlixsethandtheMexica
26 propertyknou'nasStTamarindo.''
27
28
-3
-

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1
Duringthissametimeframe,counselforMDOR andcounselfbrtheYCLTalsoha
2 conversationsregardingapotentialmediationwithMr.Blixseth.Thcseconversationsconcerne
3 thelogisticsoflnediationandpotentialmediators.

OnMay1,2013,theYCLTdecidedtojoinasacreditorpursuanttoSection303(c)ofth

5 BankruptcyCode.TheYCLTbelievesthatallofitscommunicationswiththeMDORfrom an

6 aftertheYCLT'SdecisiononMay1,2013tobecomeajoiningcreditorunderSection3O3(c)ar.
7 protectedfrom disclosureonthebasisthattheYCLTandMDORhadacommonintercst/
join
8 defense such thattheir conversations afterthatdate are privileged underthe commo

9 interest/jointdefenseprivilege,andohiectionisherebymadetodisclosingtheconlentsofsuc
@
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10 conversationsonandafterMay1,2013.
11
INTERROGATORYNO.2:ExplainallfactsandcircumstancessurroundingwhyMar
12 KirschnerresignedasTrustee.
,3
RESPONSE:YCLT objectstothisIntenogatoryasoverbroad, undulyburdensome.
14 harassing,andnotreasonablycalculatedtoleadtothediscoveryofadmissibleevidence.Th
f

j
4>
t.
n&
T 15 reasonsorMr.Kirschner'sresignationhavenorelevancetoanyoftheissuesbeforethisCour
h
Q
;x
s
jz? 16 inthisinvoluntaryproceedi
ng.YCLTalsoobjectsonthebasisthatthisInterrogatoryseek
-1 g
QT

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w 1
7 infonnationthatisprotectcdfrom disclosurebytheattorney-clientprivilegeandthecommo

.
nterest/
jointdefenseprivilege.Notwithstandingtheforegoingobjections,andwithoutwaivin
m: 18 i
19 Same,YCLTdirectsBlixseth'sattentiontoYCI-T'SresponsestoRequestsforAdmissionNos.

20 and3.
21
INTERROGATORY NO.3:TotheextentconununicationsbyandbetweentheYCL-

22 andanyoncconcerningputtingMr,Blixsethintoaninvoluntarybankruptcyand/orjoiningina
23
24
25
26
27

involuntary petition against Mr. Blixseth are not in written fonn, describe al1 sucl
communications,thedateofsuchcommunications,andtheidentityoftl4epersonwithwhom th
YCLTcolnmunicated,
RESPONSE:TotheextentthisInterrogatoryseeksthedisclosur:ofcommunication
betweentheYCLT,itscounsel,andAdvisoryBoardmelnbersortheiragents/counsel,theYCL'I

28 Objectsongroundsofattorney-clientprivilegeandthecommoninterost/
jointdefenscdoctrine.
-4-

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l
OutsideofthecomlnunicationsdescribedintheanswertolnterrogatoryNo.1above,th
2 YCLT isnotawareofanyothercommunicationsithashad withanyoneaboutputtingMr.

3 Blixsethintoaninvoluntarybankruptcyorjoi
ninganinvoluntarypetiti
onunderSecti
on3O3(c
4 oftheBankruptcyCode.TheYCLTalsoobjectstotheform ofthislnterrogatorybecauseth
5 YCLTisnotcapabieofttputtingMr.Blixsethintoaninvoluntarybankruptcy'';thatisadecisio
6 reservedforaUnitedStatesBankruptcyCourtJudge.
7
INTERROGATORY NO.4:IdentifywhentheYCLTfirstcontemplatedputtingMr.
8 Blixsethinaninvoluntarybankruptcy.

9
RESPONSE:ThcYCL'
l-obiectstotheform ofthislnterrogatorybecatlsetheYCLTi
10 notcapableofi'
puttingMr.Blixsethintoani
nvoluntarybankruptc/';thatisadecisionresel
'
ve

4 11 foraUnitedStatesBankruptcyCourtJudge.Intennsofjoininganinvoluntarypeti
tion,th

@
m
aa8 X 12 YCL'I-firstconsideredthiswhencontactedbyMDOR,scounselasdescribedintheresponset
xmwg
x
E-'7
'
2- l3 InterrogatoryNo.1above.
cp
q-.
gq
:1
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:
i
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INTERROGATORY NO.5:Describehow muchmoneyinattorneytimeandcoststh
>
+ 14
W.
c
t
h
=6'
.
Yg
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,
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1
5
aw rmofBailey&OlasserhasincurredtodateinrepresentingtheYCLTinitscl
aimsagains
< >y
Q
m-1z 1
x
Q
.Blixseth.
- :
1G
;x 6 Mr
>L) k
g
w 1
7
RESPONSE:YCLTobjectstothisInterrogatol
'
yasoverbroad,undulyburdensome,
ng,andnotreasonablycalculatedtoleadtothediscoveryofadmissibleevidence.Withou
.
m: 18 harassi

19 waivi
ngtheseobjections,asdescribedingreaterdet
ailintheanswertolnterrogatoryNo:15.
20
21
22
23
24

Bailey & Glasserhasacontingency fcearrangelnentwiththeYCLT.Thetotalamounto

uncompensatedattorneytimeis5,293.94hours.Thetotalamountofunreimburscdexpensesi
$1,012,755.21.
INTERROGATORY NO.6:Describehow muchmoneytodatethelaw firm ofBaile
& GlasserhasbeenpaidinrepresentingtheYCLTinitsclaimsagalnstMr.Blixseth.

25

RESPONSE:YCLT objectstothisInterrogatoryasoverbroad,undulyburdensome,

26 harassing,andnotreasonablycalculatedtoleadtothediscoveryofadmissibleevidence.Withou

27 waivingtheseobjections,theYCLTbelievesthatBailey& Glasserhasreceivedreceipts(fee.
28 andexpenses)ofapproximately$856,
261.74.
..
.
5.

(324 of 364)
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INTERROGATORYNO.7:StatehowmuchthcYCLTbelievesitsijudgment''inAP

2 14shouldbeassumingitissuccessfulinitsoross-appealinAP-14.
3
RESPONSE:lftheYCLTdetenuinestopursueitscross-appealandissuccessful,thel

4 theYCLTwouldexpectthejudgmenttoincreaseto$286.
4million,plusinterest.
5
INTERROGATORY NO.8:Describeindetailwhatwasdiscussed and bywhol
6 duringanyandalldiscussionsinvolvingtheYCLT AdvisoryBoardconcerningplacingMr,

7 Blixsethintoanil
woluntarybankruptcyand/orjoiningtheinvoluntarypeti
tion.
8
RESPONSE:Thislnterrogatoryseeksthedisclosureofcolnmunicationsbetweenth
9 YCLT,itscounsel,andAdvisoryBoardmembersortheiragents/counsel,andthustheYCL

10 Objectsongroundsofattorney-clientprivilegeandtllecommoninterestjointdefensedoctrine.

Z
4 11
INTERROGA.IaORYNO.9:IdentifyallmembersoftheYCI.,-j-AgvjsoryBoardandth
m S m 12 constituentseachmemberrepresents.
=m9 a
;7710
RESPONSE:TheYCL'I-respondsasfollows:
x
E
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x
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.
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8
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2
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15 TrustAdvisoorBoard:
16
17
18
j9
20
21

22
23
24
25
26
27
28'

GrahamF'.Hunt,Chairl
nan
v
cLoeL
L
40o
5f
xi
nc
gtonAve.,Suite2637
xew york,NY 101
Constituentts):Pre-p7e4
titionLenders
clarkT.whitmore
MaslonEdelmanBorman& Brand,LLP3300
M/ellsFargoCenter
90SouthSeventhStreet
Minneapolis,MN 55042

constituentts):7B's
MatthewE.Kidd
Crossl-larborCapitalPartnersLLC
OneBostonPlace
Boston,MA 02108
Constituentts):CrossHarbor
Alternate:PaulD.Moore
Du
el
Mo
ris
4
70an
At
antr
ic
AL
3'LP
e.,Suite50O
Boston,MA 02210
-6
-

(325 of 364)
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(
1
2

3
4
5

2
T
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7$p
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Constituentls):Pre-l
xetitionLenders
Alternate:DevChodry
ScogginWorldwideFundLtd.
660MadisonAvenue,20thFloor

NewYorkNY 10021

7
8
9
10
l1
12
13
14

vom ucoonuell
BabsonCapitalManagement
20lSouthCollegeStreet
Charlotte,NC 28244
Constituentts):Pre-petitionIxnders
Alternate:MichaelJ.Fey
elln
eaMa
nha
BabsonCapMi
itac
lhMa
geme
ntLLC
201s.collegeStreet,Suite2400
KennethMcGloin
21Greenleafstreet

l5

R
ye
5)8
co
n,
sNY
tituen1
t0
ts
:0
pre-petitionLenders

Q g
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cx
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X
p
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.:

MikeRenoff
ScogginWorldwidcFundLtd.
660MadisonAvenue,20thl2loor
New York,NY 10021

I6
17
INTERROGATORYNO.10:Totheextentconununications,thattheYCLThasha
1:
m 19 wi
th the Pre-petition Lenders and/orrepresentatives ofthe Pre-petition Lenders(suc
representative may include,butisnotlimited to,Steven Yarlkauer,Evan Levy,Georg
20
Zimmerman,MarkMcDermott,thePre-petitionLenders'representativesontheYCI-a-I-Advisor)
21
Board)from Novemberof2010tothepresentconcerningMr.Blixsctlinanywayarenotil
22
written form,describeindetailthecommtlnicationsandtheidentityoftheindividualswit
23
whom theYCLTcommunicated.
24
RESPONSE:'F0theextentthisInterrogatoryseeksthedisclosureofcommunication
25
betweentheYCLT,itscounsel,andAdvisoryBoardmembersortheiragents/counsel,theYCL'I
26
27
28

objectsongroundsofattorney-clientprivilegeandthecommoninterestdoctrine.

MarcKirschner,theformerTrusteeoftheYCLT,ononeoccasionhadaconversatio
withEvanLevy,cotmselforCreditSuisse.Mr.KirschnerstatedtoMr.Levythatitwouldb
-7-

'

(326 of 364)
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m
=28 )
Qm
p@
$0
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8
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-'

l beneficialifMr.Levy'sclient,CreditSuisse,contributed ynoney to help fund an overal

2 settlementofBlixseth-relatedlitigation.Tl4eprecisedateofthisconversationisnotpresentl
3 known,butitisbelievedtohaveoccurredwithinthelasttwoyears.
4
Inaddition,overthecourseofthepasttwotothreeyears,counselfortheYCLT ha5 occasionallyhadcallswithMr.Levy.Inthesecalls,Mr.Levyrequestedinformationaboutth
6 progressofthecasesandadversary proceedingsinvolvingtheYLCT.Someanswerswer
7 provided,butcounselfortheYCLTatnotimedisclosedconfidentialorprivilegedinformatiol
8 orworkproducttoMr.Levy.
9
OnFebruary25,2013,counselfortheYCLT hadatelephoneconversationwithMr.
l0 LevyinwhichheaskedifMr.Levy'sclient,CreditSuisse,wouldbeparticipatinginapropose
l1 mediationwithMr.Blixseth.Mr.LevycommunicatedthatCreditSuissemightattendsuch
12 mediation.
counse1fortheYCLTandMr.Levyalsohadapproximatelythreeconversationsover
13
14 periodofmonthsconcerningtheproposedsaleoftheFarchevillefarmlandpropertyinFrance
d

QotaT l5 an thedistributionofproceedsfromsame.TheseFarchevilleconversationsoccurredin20l
$&>

=z=:
<
4k
'
Y 16 and2013,buttheexactdatesareunknownarethepresenttime.CreditSuissehasapriorit
IJ g
&
x g) w 17 underthePlanfordistributionsoutofFarcheville.

INTERROGATORY NO.11:Totheextentthatcommunications,thattheYCLTha
.
m: 18
19 hadwith Crossl-larborCapitalPal-tners,LLC and/orarepresentativeofCrossHarborCapital
20 Partners,LLCfrom Novelnberof2010tothepresentconcerningMr.Blixsethinanywayareno
21 inwrittenform,describeindetailthecommunicationsandtheidentityoftheindividualswitl
22 whom theYCLTcommunicated.

23

RESPONSE:CrossllarborCapitalPartners,LLCCs
crossl
-larbor''
)isamemberofth

24 AdvisoryBoardoftheYCLT,andhasbeensinceJune22,2010.Accordingly,thisInterrogator
25 seeksthedisclosureofcommunicationsbetweentheYCLT,itscounsel,andAdvisoryBoar

26 membersortheiragents/counsel,andtheYCL'
l-objectsongroundsofattorney-cli
entprivileg
27 andthecommoninterest/
jointdefensedoctrine.
22
-8
-

(327 of 364)
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INTERROGATORY NO.12:DescribealleffortstheYCLTundet4ooktoenforceth.

2 tjudgment'itobtainedagainstMr.BlixsethinAP-l4betweenDecember5,20l2andDecel
nbe
3 17,2012.
4
RESPONSE:7-0theextentthislnterrogatoryseeksthcdisclostlreofccmmtlnication
5 betwcentheYCLT,itscounsel,andAdvisoryBoardmembersortheiragents/counsel,theYCL'I

6 objectsongroundsofattomcy-clientprivilegeandthecommoninteresqjointdcfensedoctrine.I
7 termsofpubliclyfileddocuments,theYCLTdoesnotbelievethatitf'iledanyinsupportofth

8 enforcementofthejudgmentduri
ngthisperiodoftime.
9

INTERROGATORY NO.13:Describeal1effol'
tstheYCLT undertooktoenforceth

10 judgment''itobtainedagainstMr.Blixseth in AP-14 belween December17,2012 an

T I1 Decelnber31,2012.
m
x
m 12
RESPONSE:TotheextentthisInterrogatoryseeksthedisclosureofcommunication
= &
? la betweenthevcl-er,itscounsel,andAdvisoryBoardmembersortheiragents/counsel,thevcl.
s $
s:-

1>
=
m
o. 14 objectsongroundsofattorney-clientprivilegeandthecomnloninterest/jointdefensedoctrine.1
h
7 sg
Q >i
r
t
'
J
;
aT 15 termsofpubliclyfileddocuments,theYCLTfiledanoticeofcross-appealduringthisperiodo

<
:
fY 16 time.
Q =&
1
g 17
>1
L2) w
INTERROGATORY NO.14:12orany responsetoaRequestforAdmissionsmwe
8 concurrentlywiththeseinterrogatoriesthatyouanswcredwithadenialorqualifiedadmission
.
m.@ 1
19 explaininfullthebasisforsuchandidentifya11supportingdoculnents.
20
RESPONSE:WithrespecttoRequestforAdmissionNo.1,theYCLThasdeniedthi
21 RequestforAdmissionbecauseMr.Glasserdocsnotbelieveheluadesuchastatement.Witl
22 respecttoRequestsforAdmissionNos.2and3,thosehavebeendeniedbecausetheyareno

23 true.TheYCLTohi
ectstotheidentificationorproduct
ionofso-calledtt
supporti
ngdocuments''
24 onthebasisoftheattorney-clientprivilegeandattorneyworkproductdoctrine.
25
INTERROGATORY NO.15:Describethefeearrangelnentthelaw firm ofBailey
26 GlasserhaswiththeYCLT.

27

RESPONSE:YCLTobjectstothislnterrogatoryasoverbroad,undulyburdensome,

28 harassing,andnotreasonablycalculatedtoleadtotllediscoveryofadmissibleevidence.Withou
-9-

(328 of 364)
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1 waivingtheseobjections,Bail
ey&Glasser,alongwithMullinHoard& Brown(collectively,th
2 ''l
zi1
nls''
)havethefollowingfeeagreementwiththeYCLTI
3

TheFirmswillrepresenttheLiqtlidating'l-rustintheMattersandrelatedlitigationinth

4 UnitedStatesthroughfinalitldgmentandinanycoll
ectionactionsrelatedtosuchfinaljudgmen
5 onthefollowingtermsandconditions:

6
(1)A contingencyfeeof20% onallamountsactuallyreceivedincash1re1atedtoth
7 Mattersul
)tothelesserof(a)amaximumof$18.3millionor(b)al1amountsactuallyrequiredt
8 paytheTradeCreditorFund(asitmaybereducedbyvirt
ueofCrossHarborhavi
ngcease
9 purchasingordinarytradeclaims)andpaymentsfrom anysourceona1lallowedclaimsinth.
10 $10milliontrancheofClass4claims,whichamountisexpectedtobeapproximately$16.3
2
4 ll millionbutwhichamountwillnotinanyeventexceed$18.
3million..1-helesserof(a)and(b
R
<b
Threshold.''
QA
Qm
p 12 plusthcfundsnecessarytopaythecontingencyfeeof20% isthefi

F
-'
p
A
8 l3
(2) '
rhecontingencyfeeatlributabletol(a)or(b)aboveshallbepaidtothel
-irmsypar
x
c
4
3
1
<
o
>.
;,x
>;k
'- 14 passuat6.25% untiltheTltresholdisreached;afterthat,theFirmswillbeentitledtoacatchup
&z+
V
Q . #:

rzx
.
o
5t
'
l
15 ortrueup,tocollectthefull20%beforeanyadditionalmoniesaredistributed.Inotherwords,
i
.
QI
<
==
1
0a
.
5 16 thecontingencyfeecatchupon1(a)or(b)aboveshallbepaidbeforeadditionaldistri
'
buti
on
Q
2) g
>1
E
w 17 from thcTrust,includingwithoutlimitationwithrespeottotheremainingbalanceofthe'lrad
8 CreditorFund.
.: 1

19

(3) OncetheThresholdisreached,thenacontingencyfeeof25% onallamount

20 actuallyreceivedincashrelatedtotheMattersbytheLiquidating'rrustshallbepaidtoth.
21 Firms.

22
23

(4)Therewillbenocaponthecontingencyfee.
(5)lfacontingentfeeispaid,thentheLiquidatingTrustwillnotbegivenaset-offfo

24
25
26
27
28

allfeespreviouslypaidtotheFinnspriortoJanuary31,2010undertheSeptember22,200
retaineragreement.
lIftheLiquidatingTrustreceivesanasset,theFirnlsullderstandthatitwillbeconvcrtedtocashandtha
theFirms'paynzentwillbebasedonthecashreceivedatthetinleitisrceeivcd.lntlleunlikelyeventof-inkin
distributions,theLiquidatingTrustwilluscitsbcsteffortstopaytheFinnstheirshareincash,butifitcannot,th.
Finnswilltaketheinkjndpayl
nent.
-l
0-

(329 of 364)
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(6) Thel
7irmsunderstandtheLiquidatingTrustanditsTrtlstAdvisoryBoard

2 approveanyandallproposalstocompromisetheclaimscoveredhereby.

Ifl
ocalcotlnsel(includingbutnotlimitedtoHolland&I
-lart),orifforeign

4 and/orforeigncounsel,areneededforlitigationpurposesortoinvestigateandcollectassets,
5 suchexpenseswillbecoststotheLiquidatingTrust.Theselattercostswillbe
6 ExtraordinaryExpenses,willnotbeincurredwithouttheTrustee'sapproval,Al1

7 Expensesattribtl
tableexclusivelytoeffort
stoincreasetheamountofthejudgment
8 $40,067,
962.43million(whichincludesallexpensesforQuinnEmanuel)shallbepaidin
&
t
a'
h
l
D
V
O
N
&N
m
:
m
Q
Q2
mv
F-==:2o

9 immediatelyafterreachingtheThresholdamount,buta1lotherExtraordsnaryExpenseswill
10 paidbackt()theFirmst'
irstinpriority,beforeanypaymentstotheTradeCreditorFund
11 otherpaymentsaremade.Thedecisionastowhich ExtraordinaryExpensesare

12 exclusivel
ytoeffortstoincreasetheamountofthejudgment(withtheexceptionofexpenses
13 QuinnEl
nanuel,whichshalbedeemedtobeattributableexclusivelytoeffol
'
tstoincrease
14 amountofthejudgmentover$40,
067,962.
43)shallbemadeinthesoleandexclusive

M
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.
X
O
$
X
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zof
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15 ofChuckI-lingle.
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o
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t
=
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REOUESTSFORPRODUCTION
.4<'=g? 1
o
. o
xo
knq C, l7
REQUESTFORPRODUCTION NO.1:Producea11communicationsbetween
i;

=
m

18 andMDORanditsattorneysfrom December2009todate.
19
RESPONSE:TheYCLT believesthatal1ofitscommunicationswiththeMDOR

20 andaftertheYCL1-'SdecisiontojointheinvoluntarypetitiononMay1,2013areprotected
21 disclosureonthebasisthattheYCLTandMDORhadacommoninterest/
joi
ntdet
knse
22 suchthattheirconversatiunsinthisregardareprivileged,andobjectionisherebylnade
23 disclosingthecontentsofsuchconversationsonandafterMay1,2013.

24

Subjecttothisobjection,andwithoutwaivingsame,theYCL'
l-isproducingall

25 privilegedcommunicationsitcouldlocateresponsivetothisrequest.

26

REQUEST FOR PRODUCTION NO.2:Produceal1documentsrelatedtowhy

27 Kirsclmerresignedast'rustee.
28
-1
1-

(330 of 364)
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RESPONSE:YCLTobj
ectstothisRequestasbeingoverbroad,undtllyburdensome

2 harassing,andnotreasonablycalculatedtoIeadtothediscoveryofadmissibleevidence.Th
3 reasonsforMr.Kirschner'sresignationhavenorelevancetoanyoftheisstlesbeforethisCou:

4 inthisinvoluntaryproceeding.YCLTalsoobjectsonthebasisthatthisInterrogatoryseek
5 infonnationthatisprotectedfkom disclosurebytheattonley-olientprivilegeandthecommol

6 interesvjointdefenseprivilege.Subjecttotheseobjections,andwithoutwaivingsame,YCLTi
7 producingMr.Kirschner'sresignationletter.

REQUEST FolkPRODUCTION NO.3:Producea1lcoml

nunicationswithanyone

9 includingYCLT internalcolnmunications,concerningplacingMr.Blixsethintoaninvoluntar

1O bankruptcyand/orjoininginaninvoluntarypetitionagainstMr.Blixseth.
11
RESPONSE:TotheextentthisRequestseeksthedisclosureofcomlnunication
m
' )2 betweentheYCLT'itscounsel,andAdvisoryBoardmembersortheiragents/counsel,theYCL
Q2
Qm n

i&
zattorney-clientprivilegeandthecommoninterest/jointdefensedoctrine.
x
sc
'
8
q7
B1
- l3 objectsongroundsof
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2
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OutsideofthecolumunicationsbeingproducedinresponsetoRequestNo.1above,th
>
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1
5
snotawareofanyothercommunicationsithashadwithanyoneaboutputtingMr.
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)
g 16 BlixsethintoaninvoluntarybankruptcyorjoininganinvoluntarypetitionunderSection3O3(c
1 12 @

>T w 17 oftheBankruptcyCode.l-heYCL'
I-alsoobjectstotheform ofthisRequestbecausetheYCL
i 18 isnotcapableof$
1
ingMr.Blixsethintoaninvoluntarybankruptcf';thatisadecisiol
.
:
p
u
t
t
m
19 reservedforaUnitedStatesBankruptcyCourtJudge.

20

REQUEST FOR PRODUCTION NO.4:Producea1lminutesofmeetingsofth

21
22
23
24
25
26

AdvisoryB.oardfrom November2012tothepresent.
RESPONSE:SinceNovember2012,therehasbeenoneBoardMeeting,whichoccurre
onApril26,2013andwascontinuedtoMayl,2013.Noformalminutesfrom thatmeetinghav
beenprepared.ChuckHingletooknotesfrom themeetingwhichdonotconstituteminutes,an
which reflect his mental impressions and may contain the substance of privilege
connmunications,andthusareprivilegedundertheworkproductdoctrinestheattorney-clien

27 privilege,andthecommoninterest/
jointdefenseprivilege.
28
-1
2-

(331 of 364)
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REQIJEST FOR PRODUCTION NO.S:Producealldocuments,includingemail

2 communications,byandbetweentheAdvisoryBoardmembersandthe'l-rusteefrom Novembel
3 2012tothepresentconcerningMr.Blixsethinanyway.
4
RESPONSE:TbisRequestseeksthedisclosureofcommunicationsbetweentheYCLT

5 itscounsel,andAdvisoryBoardmembersortheiragents/counsel,andthustheYCLTobjectsol
6 groundsofattorney-clientprivilegeandthecommoninterest/
jointdefensedoctrine.
7
REQUEST FO1kPRODUCTION NO.6:Producealldocuments,includingemai
8 communications,thattheYCLThashadwiththePre-lletitionLendersand/orrepresentativeso

9 thePre-petition Lenders(such representativemay incl

ude,butisnotlimited to,Steve
&
<
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Sq
c
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10 Yankauer,Evan Levy,George Zimmerman,Mark Mcl7ermott,the Pre-petition Lenders'

1) representativesontheYCLTAdvisoryBoard)fromNovemberof2010tothcpresentconcemin

m:
12
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18

Mr.Blixsethinanyway.
RESPONSE:ThisRequestseeksthedisclosureofcommunicationsbetweentheYCLT

itscounsel,andAdvisoryBoardmembersortheiragents/counsel,andthustheYCLTobjectsol
groundsofattorney-clientpri
vilegeandthecommoninterest/
jointdefensedoctrine.Subjectt
theforegoingobjections,andwithoutwaivingsame,YCLThastodatebeenunabletolocateanj
non-privilegedresponsivedocumentsbutwillcontinueitssearchforsame.

REQUEST FOR PRODUCTION NO.7:Produceal1documents,includingemail

19 colnmunications,thattheYCLT hashadwith Crossl-larborCapitalPartners,LLC and/or

20 representative of Crossl-larborCapitalPartners,LLC fkom May of 2009 to the presen
21 concenpingMr.Blixsethinanyway,

22

RESPONSE:CrossHarborCapitalPartners,LLCCC
crossl
-larbor''
)isamemberof'th

23 AdvisoryBoardoftheYCLT,andhasbeensinceJune22,2010.Accordingly,thisRequestseek
24 thedisclosureofcommunicationsbetweentheYCLT,itscounsel,andAdvisoryBoardmember

25 ortheiragents/counsel,andtheYCLTobjectsongroundsofattorney-cli
entprivilegeandth
26 commoninterest/
jointdefensedoctrine.YCLTisproducingresponsiveemailsithaslocated
27 from priortoJune22,2010.
28
-I
3-

(332 of 364)
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REQUEST FOR PRODUCTION NO.8:Producealldocumcntspreparedbyth

2 YCLT)includingNvithclutlilnitationinternalnaenAorandaandennails,inconnection withit
3 decisiontofileitsShloticeofJoinder''inthiscase.
4
IUSSPONSE:ThisRequestseeksthedisclosureofconamunicationsbetweentheYCLT.

5
6
7
8
9

itscounsel,andAdvisoryBoardmembersortheiragents/counsel,andthustheYCLTobjectsol
groundsofattorney-clientprivilegeandthecommoninterest
/jointdefeusedoctrine.TheYCL
alsoobjectsonthebasi
softheattorneyworkproductdoctrine.
REQUEST FOR PRODUCTION NO. 10: Produce a1l documents reflectin
communicationsbetweentheYCLTandItichardJ.Samson(includinghisattorneysandagents

10 concerningMr.BlixsethfromJuneof2009tothepresent.
4 11
RESPONSE:TheYCLT isproducing allsuchcommunicationsithasbeen ablet
m
: Y jp
Q2
Qm a , locate.
#' 13
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REQUESTFORPRODIJCTION NO.11:l:'roducealIdocuments,includingbutno
<
'*
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2$
>;
J
' 14 limitedtoemailsandtextmessages,betweenyou,ononehand,andEdraBlixsethand/orhe
7o
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k,
n l5 employee,agentorreprtsentati
ve,ontheotherhand,
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16

RESPONSE:TheYCLTisproducinga1lsuchcommunicationsithasbeenablet

>/ wg 17 locate.

12

m:
.

REQUESTF()RPRODUCTIONNO.12:Alldocuments,includingbutnotlimitedt

19 emailsandtextmessagcs,betweenyou,oncmehand,andanyoneelse,ontheotherhand,related
20 toEdraBlixseth.
'
21
RESPONSE:ThisRequestsecksthedisclosureofcommunicationsbetweentheYCLT

22 itscounsel,andAdvisoryBoardmembersortheiragents/counsel,andthustheYCLTobjectso
23 groundsofattorney-clientpri
vilegeandthecommoninterest/
jointdefensedoctrine.Subiecttt
24 theseobjections,andwithoutwaivingsame,YCLTisproducingallresponsivedocumentsi
25 couldlocate.

26

REQUESTFORPRODUCTIONNO.13:Alldocuments,includingbutnotlimitedt

27 emailsandtextmessages,betweenyou,ononehand,andtheBShareholdersand/ortheiragents,
28 employeesorattorneys,ontheotherhand,relatedtoMr,Blixseth.
-1
4-

(333 of 364)
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RESPONSE:'
rhisRequestsecksthedisclosureofcommunicationsbetweentheYCLT

2 itscounsel,andAdvisol
'
yBoardmembersortheiragents/counsel,andthustheYCLTobjectso
3 groundsofatorney-clientprivilegeandthecommoni
nterest/
jointdefbnsedoctrine.Counselfb1
4
5
6
7
8

theB Shareholders,ClarkWhitmore,servesontheAdvisoryBoardoftheYCLT,whereh
representstheB Shareholderconstituency.Moreover,counselfortheYCLT alsoservesa
counselfortheB ShareholderspursuanttoanagreementbetweentheB Shareholdersandth
YCLT,andthusthisrequtstseeksthedisclosureofinforlnationprotectedbytheattorney-clien
privilege.Finally,onNovember23,2009,theYCLT andtheB Shareholdel'senteredinto

9 preli
minaryjointprosecutionagrcement,andthustheYCLTobiectsongroundsofthecommo
10 interest/
jointdefenseprivilegeaswell.
< 1l
REQUESTFORPRODUCTIONNO.13:Al1documents,includingbutnotlil
nit
edt
'
C$
N

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12 emailsandtextmessages,betwecnyou,on onehand,andMichaelSnow and/orhisagents

13 employeesorattorneys,ontheotherhand,relatedtoMr.Blixseth.
14
RESPONSE:ThisRequestseeksthedisclosureofcommunicationsbetweentheYCLT

15 itscounsel,andAdvisoryBoardl
nembersortheiragents/counsel,andthustheYCLTobjectso
l6 groundsofatt
onzey-clientprivilegeandthecommoninteresbjointdefensedoctri
ne.Counselfo

>p
tz U 17
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8
=
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19
20

Mr.Snow,ClarkWhitmore,servesontheAdvisoryBoardoftheYCLT,whereherepresentsth
B Shareholderconstituency,includingMr.Snow.Moreover,counselfortheYCLTalsoserve
ascounselforMr.Snow pursuanttoanagreementbetweenMr.Snow andtheYCLT,andthu
thisrequestseeksthedisclosureofinformationprotectedbytheattorney-clientprivilege.Finally,

21 (
7lNovember23,2009,theYCL'
1
-andMr.Snow entcredintoapreliminaryjointprosecutiol
22 agreelnent,andthustheYCLTobjectsongroundsofthecommoninterest/jointdefenseprivileg
23 aswell.

24

REQUESTFOR PRODUCTIONNO.13:Alldocul
nents,includingbutnotlimitedt

25 emailsandtextmessages,betweenyou,on onehand,andGregLemondand/orhisagents,
26 employeesorattorneys,ontheotherhand,relatedtoMr.Blixseth.
27
RESPONSE:TheYCI--I-isproducingal1such communicationsithasbeenablet
28 locate.
-1
5-

(334 of 364)
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REQUESTF()RPRODUCTION NO.14:Alldocuments,reflectingwhytheYC1a'l

2 hasnotpursuedclaimsagainstCrossl-larborCapitalPartners,LLCand/oritsafliates.

RESPONSE:YCLT objectstothisrequesttotheextentitseeksdiscl
osureo

4 informationthatisprotectedbytheattorney-clientprivilegeorattorneyworkproductdoctrine,

5 Subjecttothisobjection,andwi
thoutwaivingsamesYCLT isnotawareofanydocument
6 responsivetothisrequcst.

REQUEST FOR PRODUCTION NO.15:AIldocuments,reflectingwhytheYCI-J

8 hasnotpursuedclaimsagainstCreditSuisseand/oritsaffiliates.

9
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RESPONSE:YCL'
l
-objectsto thisrequestto theextentitseeksdisclosure o

10 informationthatisprotectedbytheattornty-clientprivilegeorattorneyworkproductdoctrine.

11 Subjecttothisobjection,andwithoutwaivingsame,YCLTisproducingtheSettlementTerl
12 Sheet.

13

REQUEST FOR PRODUCTIONNO.16:A11documents,ret

lectingcorrespondenc

14 withanyagentoftheU.S.governlnentconcerningMr.Blixseth.
15
RESPONSE:TheYCLThasnotlocatedanydocumentsresponsivctothisrequest.

l6
REQUEST FOR PRODUCTION NO.17:Al1documentsjref
lectingcorrespondenc
l7 withanypersoninthejudicialchambersoftheU.
S.BankruptcyCourtfortheDistricto
l8 MontanaconcerningMI..Blixseth.
19
RESPONSE:TheonlyresponsivedocumentstheYCLThaslocatedaredocumentstha
20 Mr.Blixsethattachedasanexhibittoafilinghemade.YCLT isproducingMr.Blixseth'
21 exhibitbacktohim.

22

REQUEST FOR PRODUCTION NO,18:Alldocuments,reflectingcorrespondenc

23 withJim ManleyconcerningMr.Blixseth.
24
RESPONSE:TheYCLThasnotlocatedanydocumentsresponsivetothisrequest.

25

REQUEST FOR PRODUCTION NO.19:Al1documents,reflectingcon-espondenc

26 withRonBurkleand/orhisagentsand/orentitiesconcerningMr.Blixseth.
27
RESPONSE:TheYCLThasnotIocatedanydocumentsresponsivetothisrcquest.
28
-j
6-

(335 of 364)
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IIEQUEST FOR PRODUCTION NO,20:AIldoctlments,recctingcorrespondenc

2 withanypersonpurportingtoactonbehalfoftheStateofMontanaconcerningMr,Blixseth.
3
RESPONSE:PleaseseedocumentsproducedinresponsetoRequestforProductionNo
4 1.

REQUEST FOR PRODUCTION NO.21:A11documents,ref

lectingcorrespondenc

6 withStevenFagelconcerningMr.Blixseth.
7
RESPONSE:TheYCLThasnotlocatedanydocumentsresponsivetothisrequest.

REQUEST FOR PRODUCTION NO.22:Alldocuments,ret

lcctingcon'
espondenc

9 withJohnGarlandconcerningMr.Blixseth.
l0
RESPONSE:TheYCLThasnotlocatedanydooumentsresponsivetothisrequest,
T 1l
ADMISSIONS
m
b Y
ADMISSION NO. 1: AdmitthatduringthetimeframeofMarch2012throughJun
=
..
mm
Q
ax 12
E-.ng$8
2012 BrianGlassertoldchristopherconantduringatelephoneconversationbetweenthetw
-

jcq
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x.!>m 14 thattheYcI.-T intendedtoobtainthreejudgmentsagainstMr.Blixsethandthenf5lea

7.c
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oluntarybankruptcypetitionagainsthim.
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RESPONSE:Denied.

xg) w l7
ADMISSIONNO.2:AdmitthattheYCLI
.-didnotjoinintheinvoluntarybankruptc

itionthatMDORfiledagainstMr.BlixsethinAprilof2011becausetheYCLTbelievedtha
.
m: 18 pet
19 thejudgmentitthenhadagainstMr.Blixsethwassubjectofabonafidedispute.
20
21

RESPONSE:Denied.
ADMISSIONNO.3:AdmitthatMarcS.KirschnerresignedasTrustee,atleastinpart,

22 becausehedidnotbelieveitwasappropriatefortheYCLTtojoi
nintheinvoluntarybankruptc
23 petition.
24
RESPONSE:Denied.

25
ADMISSIONNO.4:AdmitthattheYCL'
1-hascross-appeal
edthe'
judgment'inAP26 14forthepurposeofincreasingtheljudgment''award.
27
28

RESPONSE:Admit.

.17-

(336 of 364)
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1
ADMISSION NO.5: AdmitthatCrossHarborCapitalPart
nersLLC (oroneofit
2 affiliates)holdsapositionontheYCLTAdvisoryBoard.

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RESPONSE:Adlnit.
4
ADMISSIONNO.6:AdmitthatSamuelT.ByrneisaprincipalofCrossHarborCapita
5 Partners,LLC.
6
RESPONSE:TheYCLTadmitsthatSamuelT.ByrnepurportstobeaManagingPartnel
7 ofCrossHarborCapitalPartners,LLC,butiswithoutsufficientknowledgetoknow ifthismake
8 M'r.ByrneaStprincipal''ofcrossHarbor.
9
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-1
8-

(337 of 364)
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VERIFICATION
Thelanguageoftheforegoinginterrogatoryresponseswaspreparedinwholeorinpart
by counsel.Iam signing these responsesbased upon my personalknowledge and upon
informationsupplieddirectlyorindirectlytomebycounsel.Pursuantto28U.
S.
C.j1746,1

declareunderpenaltyofper
jurythattheforegoinginterrogatoryresponsesaretrueandaccurate
tothebestofmyknowledgeandbelief.

BrianA.Glasser

(338 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 110 of 136

SamuelByrne,VolumeI

UNITED STATES BANKRUPTCY COURT

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

USLEGALSUPPORT

(619)573-4883

(339 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 111 of 136

SamuelByrne,VolumeI
APPEAM NCES:

BAILEY & GLASSER, LLP

By Brian A. Glasser, Esquire

209 Capital Street

(304) 345-6555
8

counsel

the Plaintiffs

DUANE MORRIS, LLP

12

Paul D. Moore, Esquire

Atlantic

Suite 5O0
Boston, Massachusetts 02210
16

488-4200
Counsel
the Deponent
MICHAEL J. FLYNN, ATTORNEY AT LAW

20
21

6156 La Flecha
Box 69O
Ranchor Sante California 92067

(858) 775-7624
Counsel

Timothy Blixseth

24

USLEGALSUPPORT

(619)573-4883

(340 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 112 of 136

SamuelByrne,Volumel

EXAMINATION

SAMUEL BYRNE

PAGE

Direct Examination by Mr. Flynn

6
7

NO.

11

PAGE

E-mail dated 9/17/06

E-mail dated 12/27/06
E-mail dated 12/30/06
E-mail dated

15
16

19
20

E-mail dated 3/28/07

E-mail dated 4/18/07
E-mail dated 4/25/07
E-mail dated 4/26/07
E-mail dated 5/14/07
E-mail dated 5/16/07

86

E-mail dated
Verified complaint

E-mail dated 6/8/07

E-mail dated 6/13/07
3

USLEGALSUPPORT

(619)573-4883

(341 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 113 of 136

SamuelByrne,VolumeI
l
2

wouldnrt have because didn't have any

knowledge

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FLYNN:

Mr. Byrne -MR. GLASSER: Excuse me,

Boston, Massachusetts for two days

15

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B's lawsuit against Mr. Blixseth.

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MR. FLYNN: You're obstructing and

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24

USLEGALSUPPORT

(619)573-4883

(342 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 114 of 136

SamuelByrne,Volumel

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During January of '09, during the bankruptcy

proceedings, you meet with Ron Burkle?
believe met with Burkle during the
bankruptcy
him briefly sometime in

22

him briefly. I was introduced

briefly in
He came the club.

18

24

Who introduced you

Originally Goldman Sachs. And then I met
25

USLEGALSUPPORT

(619)573-4883

(343 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 115 of 136

SamuelByrne,Volumel

him. He was a guest of the Sugarman's at

Does
Burkle own any

Yellowstone Club?
He does. He does now, yes.

5
6

percentage
can't say exactly. Somewhere

percent
l0
12

30

percent range as a limited

Partner.
of many.
hundred limited partners.

memory

l3

Please
when

record what your best

first spoke Mr. Burkle.

Sometime in March or April

r09

introduced to him by Mr. Sugarman.

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Same question with regard Ron Burkle.
Please state the record what, anything,
Edra Blixseth about Ron Burkle's involvement in
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

15

to anyone regarding the

politicalpressure
proceedings

would

judicial

bankruptcy proceedings in Montana?

would have to see them

19

23

24

existed,
I
Q. Have you

everything
said and done, she will be paid by
in connection
proceedings
Montana?
A. Paid for
any form, Mr. Byrne.
27

USLEGALSUPPORT

(619)573-4883

(345 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 117 of 136

SamuelByrne,VolumeI

me today. didn't have

of them were a
Thank you.

before you made the agreement

in which she was going

5
6
7

make $600 million dated August

10
12

:08,

thought

crazy?
MR. GLASSER: Objection.
clearly when the deal got terminated,

8
9

state of mind. I thought

honest

was very angry and

about

existing

investments at the club.

Let me ask you further about Mr. Wilkie.
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

20
22

MR. GLASSER: Objection.

don't know.
MR. GLASSER: What does this have to
the B's lawsuit?
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Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 118 of 136

SamuelByrne,Volumel

'

A.

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I don't know.

z.
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donlt think I met him in

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introduced me

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money.

is not in an election

(
,
). when she

believe your testimony is the first 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

18

investigating Tim. Tim told us that. Kelly, Tim,

does not strike
when did you call your partners and your

20

don't know when talked

talked

23

24

them about

them. I'm sure

frequently. What does that

remotely have to do with anything here, my investors?

It's offensiver Mike.
With regard to the
fraud
believe
355

USLEGALSUPPORT

(619)573-4883

(347 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 119 of 136

From:
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LearGz@aol.
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Saturday,August2,20086:12PM
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Wright@pinntech.com;SamByrne<sbyrne@crossHarborcapi
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Re:Whatistheplanfortonight?

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CHE02051

(348 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 120 of 136

Fron!ve
Sent:

To:
/ Sublect:
.

MaeewKidd
Wednesday,January14,20096:38PM

SamByrne<sbyme@crossHrborapiti.coml
RE:oellphones......

lamathome.Didyoutrytocall...mycellphonemayhavebeenoff,butyoucantrynowifyouwant.
Wearedoingourbesttofund...lhavebeenaskingforabudgetsincetheweekendandhaveyettoseeone,sothatballis

intheircourt.lhavesentthesubordinationagreements(youwereontheemailyesterday).butacknowledgedthe#may
changedependingonthebudget.Icanjustmakeit$5MMthoughifthat'swhatyouwanttodo.

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MatthewE.Kidd
CrossHarborCapitalPadnersLLC

(61D624-8326

PRWILEGEDANDCONFIDENTIALCOMMUMCATION
Thiscommunicationisintendedonlyfortheuseoftheindividualorentitynnmedastheaddressem Itcontainsinformation
whichisprivilegedand/orconfidentialunderapplicablelam Ifyouarenottheintendedrecipientorsuchrecipient's
employeeoragenhyouareherebynotifiedthatanydissemination,copyordisclosureofthiscommunication1sstrictly
prohibited.Ifyouaretheintendedrecipientoffhiscommunication,youareherebynotmedthatauydisseminatbnofthis
$
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communicationtoothers,oranydisclosureoftheinformationthati:containedwithinit,isstrictlyprohibited.lfyouhave
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receivedthiscommunicationinerror,pleaseimmediatelynotifymeat(617)6244326orviareturnInternete-mailto

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makeittheirissue.and;b)sothatwecanuseanynumbersmallerthanthat?Makeitfor$5mandmakehergoget
them?
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,''
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From:MatthewKidd
nt: n day,Janua 14,20096*
.17PM
Top
. m Byrne

SubjecttoProtectiveOrder

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(349 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 121 of 136

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(350 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 122 of 136

l
2
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CHRISTOPHERJ.CONANT
ca
Ba
rNo
4597
730l.l
7tb
stre.e2t4
,sui
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Denver,Colorado80202 .

Telephone:(303)298-1800
4 Facsimile:(303)298-1804

5E
mail:cconant@conantlawyers.
com
AttorneyforTimothyL.Bllxseth

6
7
8
SIJPERIORCOURT017CALIFORNIA l7()RTHECOUNTYOFRIVERSIDE
9 InretheMarriageof:
CaseNo.ItjojxogIjjz
10 Petitioner:Plaintiff
LReassignedtoDept.10fromDept.F501)
11
DECLARATION OFROBERTWHITEFORD
and
12
Judge:SharonJ.Waters
Re
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:
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L.
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uearjng:Jan.14,2013
13
Time:8:30a.m.
' De
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pt.10
15
16
17
18
19
20
21
22
23
24
25
26
27
28

$'

DECLARATIONOFROBERTWHITEFORD

(351 of 364)
Case: 12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 123 of 136

1,RobertWhiteford,doherebydeclareunderpenaltyofperjuryofthelawsoftheStateof
Californiaasfollows:
3
Iam overeightenyearsofageandhavepersonalknowledgeofthefactstestified
4 toherein.
Withrespecttomyexperienceandknowledge,lherebyincorporatebyreference
myswornstatementssetforthinapriordeclarationthatIfiledintheMontanabankruptcycourt,
Paragraph2,whichisattachedheretoasExhibit1.
3. OnSeptember25,2012,DennisL.MontgomezyhadanApplePowerMac65

computer(serialnumber685311lURUO)deliveredtomebyBrianCalhoun.Thi
jcomputer
containedoneharddrive(ModelWD3200AAKS,SerialNumberWCAWFD924346),
OnSeptember25,2012,Mr.Montgomeryhadaharddri
ve(Model
12 WD3200AAKSsSerialNumberWCAWFD940504)del
iveredtomeviaUPS(TrackingNumber
13 1Z7F4Y152468329746).Thi
sdriveisaSATAharddrivethatwasnotinstall
edinacomputeror
externalenclosure.Thisiscommonlyknownasatbaredrive''
5. Mr.MontgomeryinformedmethatthesedeviceswereEdraBlixseth'sandthat
Ms.Blixsethleftthesedevicesinhiscustodyandcontrol.
6. Uponreceivingthesedevices,lmadeforensicimagecopiesofthefilescontained
thereon.Theprocessofmakingtheseforensicimagesensuredthatthemetadata''onthefiles
waspreservedunalteredsothatauserofthefilescouldreviewthettmetadata''onthesefilesand
fromthatttmetadata''determinethatdatethatthefilswerecreatedandthelastthattheywere
modified.
From thePowerMacharddrivelretrievedthefileknownasts
Notesonthe
MSA.doc''.lreviewedthemetadataonthisf5leandfoundthatthisdocumentwascreatedon
09/20/200909:33:37andlastmodifiedon10/23/200915:31:49.
8. FromthebaredriveIretrievedthedocumentknownas''Dl-lpoints,pdf''.1
reviewedthemetadataonthisfileandfoundthatthisdocumentwascrvatedon07/17/2011
19:18:10andlastmodifidon07/17/201119:18:11.
9. From thePowerMacharddrivelretrievedthefileknownasdMyDearest
28

14
15
16
17
18
19
20
21
22
23
24
25
26

DECLARATIONOFROBEFI'WHITEFORD
' .

'

(352 of 364)
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1
2
3
4
5
6

Jack.doc''.1reviewedthemetadataonthist5leandfoundthatthisdocumentwascreatedon
10/25/200915:59:42andlastmodifiedon10/25/200916:34:20,
IreviewedinformationonthePowerMactodetermineifthecomputerclockhad
beenalteredinsuchawaythatwouldallowausertomanipulatethemetadatacontainedonthe
filesthereon.Ifoundnoindicationofanysuchtampering.

ldecl
areunderpenaltyofperjuryofthelawsoftheUnitedStatesthattheforegoingistrue

8 andcorrecttothebestofmyknowledge.
9
DATEDthis3rddayofJanuary,2013.
10
11 Dated: January3,2013
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Robe

iteford

DECI-ARATIONOFROBERTWHITEFORD

'

(353 of 364)
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Exhibit1

(354 of 364)
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09-0O014-RBK Doc#:473-3 Fil

ed:01/16/10 Entered:01/16/1012:48:30 Page1of194

MichaelJ.Flylm,AdmittedProHacVice
OneCentralPlaza,Suite240
Boston,MA02108
Telephone:858-775-7624
Facsimile:858-759-0711

Email:mike@mifesg.com

AttorneyforPlaintiff-lntelwenor
TimothyL.Blixseth

UNITEDSTATESBANKRUPTCYCOURT
FORTHEDISTRICTOFMONTANA
lnre:
CaseNo.08-61570-1I-RBK
YELLOWSTONEMOUNTAW CLUB,LLC,
JointlyAdluinisteredwith08eta1.,
61571,08-61572,and08-61573
Debtors.
Chapter11
TIMOTHY BLIXSETH,anindividual,
Adv.Pro.No.09-00014and
Plaintiff-lntervenor,
consolidatedwithAdv.No.09-00017

MA
T
HERYE
CSL.L
KI
OR
WS
SCTHONE
RU
TRLUS
TEDEAT
OFING
NE
CYS
LUB
IQUI
TRUST,
DefendantandCounter-plaintiff.

AFFIDAVITOFROBERT
WHITEFORD IN SUPPORTOF
MOTIONFOR SANCTIONS

(355 of 364)
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09-00014-RBK Doc#:473-3 Filed:01/16/10 Entered:01/16/1012:48:30 Page2of194

1,RobertWhiteford,deposeandstate:
Iam overeighteenyearsofage.Ihavepersonalknowledgeofthefactsstated
herein,andifcalledasawitness,Icouldandwouldtestifycompetentlytothem.
Iam anITconsultantwithextensi
veexperienceintherecoveryofdatafrom

domputerstoragemediaandrecoveryofMicrosoftExchangeandMicrosoftOutlookdata.
Atrueandcorrectcopyofmycurriculum vitaeisattachedheretoasExhibit1.
3. IwasretainedbyTimothyBlixsethto,amongotherthings,conductaforensic
examinationofcertainharddrivesthatwereobtainedfrom JoryRussell,awi
tnessinthe
abovecase.
4. From August3,2009throughAugust22,2009,Iconductedanexaminationof
theharddrives,Iookingspecificallyforemailthathadbeendeletedandinaddition,
attemptedtorecoverfilesthathadbeendeleted.
Inthisregard,lreviewedandrelieduponthedeletedfileanalysisperformedby
GuidanceSoftware,anotherforensiccomputerexpert.GuidanceSoftwarereceivedthe
imagefilesfrom theJoryRusselldrivesand scannedthedrivesfordeletedfiles,those
folders/fileswhichcouldberecovered,anduseractivity.Thosefilesprovidedtpmeand
createdbyGuidanceSoftwareareattachedheretoasExhibits2-7.
AttachedheretoasExhibit2isthespreadsheet'SonyVAIO Laptop-Deleted
fileIisting,''whichdisplaysaIIactivefileswhichweremarkedasdeleted.
AttachedheretoasExhibit3isthespreadsheet'SonyDesktop-Deletedfile
Iisting,''whichdisplaysaIIactivefileswhichweremarkedasdeletedonthe'ddesktop''hard
drive.

(356 of 364)
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AttachedheretoasExhibit4isthespreadsheet''
SonyVAIO Laptop- Recovered
FoldersfileIisting'whichdisplaysthefolders/fileswhichwereabletoberecoveredonthe
drives.
AttachedheretoasExhibit5isthespreadsheetSonyDesktop- Recovered
FoldersfileIisting'thatdisplaysthefolders/fileswhichwereabletoberecoveredonthe
drives.
10. AttachedheretoasExhibit6isthespreadsheet''lnitiali
zeCase- sonyDesktop''
thatshowstheuserswhichhaveaccountsontheDesktopandtheassociated
dates/timesforeachuseraswellasthedate/timetheOperatingSystem wasinstalled.
AttachedheretoasExhibit7isthespreadsheet''InitializeCase-sonyLaptop.''
ThisdocumentshowstheuserswhichhaveaccountsontheDesktopandtheassociated
dates/timesforeachuseraswellasthedate/timetheOperatingSystem wasinstalled.
12. GuidancealsostatedinitstransmittalIetterthatitranat'datefilter'onthe
deleteddata,fortheLastAccesseddate/time,from June23,2009topresentand
exportedtheresultsintotwospreadsheets,''Sony-vAlo-Laptop-pel
etedFi
le
Listing- 062320O9-Present.xIs''and''Sony VAIO Desktop- DeletedFile
Listing-06232009-Present.xIs,''whichshowthefilesdeletedfrom thelaptopandthe
desktopafterJune23,2009,thedateonwhichIunderstandthebankruptcycourthad
orderedtheproductionofthedri
ves.TheseareattachedasExhibits8and9,
13. InadditiontoreviewingthefilesobtainedbyGuidanceSoftware,Iattemptedto
review andrecoveremailfrom JoryRussell'sdrives.IwasabletoIocateanollinedata
filecalledan.OSTfile,whichisaMicrosoftOutlookfilethatstoresemailsentand

(357 of 364)
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09-0OO14-RBK Doc#:473-3 Filed:01/16/10 Entered:01/16/1012:48:30 Page4of194

received,contacts,andotherinformationthatresidesonaMicrosoftExchangeserver-it
isessentiallyadatafileforMicrosoftOutlook.
14. TheIargestandmostcurrentsetofemailthatwasrecoveredfrom Jory
Russel'smachineswastheMicrosoftOutlookofflinefolderfileIocatedontheSonyVAIO
Laptop.ThedriveusedwasGuidanceSoftwareEvidence#110-00175.Emailswere
foundinafilenamed:
z64l46-EolAsony- vAlo- LaptopcDocumentsandSettingsuoryLocal

Setti
ngsWppli
cati
onDataMicrosoqoutlookyoutlooko.ost
InordertoviewthedataintheOSTfilethatIhadIocated,Iused'Advanced
ExchangeRecoveryv2.0'softwaretorecoveremailsfrom the.OSTfiletoa.PSTfilethat
hcanbeviewedusingMicrosoNftOutlook2003ornewer.Atotalof60,132itemswere
recoveredfrom thisOSTfile.Therecovereditemsincludeanyrecoverabledeleted
messages.
16. However,Itisnotpossibletodeterminethetotalnumberofemailsdeletedfrom
anOutlookPSTorOSTfile.AIIemailmessagesarestoredinadatabaseformat.When
oneormoremessagesaredeleted,itisonlypossibletorecoverthemessagesfora
Iimitedamountoftime.Theabilitytorecoverdeleteddataisgreatlyreducedovertimeas
thecomputerandOutlookisused.Ifthedatabaseiscompacteditisimpossibleto
recoverdeleteditems.
Inpadicular,everymonthitappearsthattherewerehundredsofemailssent
andreceivedbyMr.Russell.However,thenumberofsentmessagesfrom October1,
2008toOctober31,2008intherecoveredOSTfilediffersfrom thePSTfilesthatwere

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provided.Thereare71messagesthatareintherecoveredOSTthataremissingfrom
thePSTfilesontheevidenceharddrivesforOctober2008.

Ideclareunderthepenal
tyofperjuryundertheI
awsoftheUni
tedStatesandthe
StateofMontanathattheforgoingistrueandcorrect,this12thdayofJanuary2010.

/s/R& A#f
zeN
RobertWhiteford

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Exhibit1

(360 of 364)
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09-00014-RBK Doc#:473-3 Fil

ed:01/16/10 Entered:01/16/1012:48:30 Page7of194
ROBERTWHITEFORD
4202SorrentoValleyBlvd.,SuiteS
SanDiego,CA92121
(619)741-4579
E-mail:robert@bcsus.com

EDUCATION
CoastalCarolinaUniversity,Conway,SC
PursuedB.S.,ComputerScience,1998-2000
NorthlandCollege,Ashland,WI
PursuedB.S.,ComputerInformationSystems,1996-1998

PROFESSIONALEXPERIENCE
ITServicesCompanyOwner
BusinessComputerSolutions,SanDiego,CA
February2003-Present
ProvideITconsultingservicestobusinessesandindividuals.Suppol
'tcomputer
networksranginginsizefrom homeofficestocompanieswithover1000employees.
SupportIargeemailsystemsincludingMicrosoftExchange2000-2007.Perform data
recoveryandforensicwork.
SeniorNetworkTechnician
NetworkResourcesInc.,LaMesa,CA
February2002-February2003
ProvidedITconsultingservicesforcustomersandtrainednetworktechnicians.
Deployedandmaintainedfileservers,emailserversandworkstations.Performeddata
recoveryandforensicwork.
NetworkTechnician
TheAutomatedOffice,Fullerton,CA
June1996-February2002
ProvidedITconsultingservicesforcustomers.Deployedandmaintainedfileservers,
emailserversandworkstations.Pe/ormeddatarecoveryandcomputerrepair.

(361 of 364)
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1
2

PROOFOFSERVICE
1,ChristopherJ.Conant,declare:

lamaresidentoftheStateofColoradoandQvertheageofeighteenyears,andnot
apartytothewithinaction.Mybusinessaddressis73017*Street,Suite200,Denver,CO

4 80202.OnJanuary7,2013,lsel
wedthewithindocumentts):
5

6
7
8
9

10

DECLARATION OFROBERTWHITEFORD

I
Z bytransmittingviafacsimilet
hedocumentts)listedabovetothefaxnumberts)set
forthbelowonthisdate.
r-1 b
yplacingthedocumentts)listedaboveinasealedenvei
opewithpostagethereon
fullyprepaid,intheUnitedStatesmailatDenver,Coloradoaddressedassetforth
above.

IZ

11

12
13
14
15
16

17
18

I
causedsuchenvelopetobedeliveredviaovemightdeliveryaddressedas
indicatedontheattachedservicelist.Suchenvelopewasdepositedfordeliveryby
UPSfollowingthefirm'sordinarybusinesspracticcs.

r
z
I
W

v
iaelectronic/e-mailsel
vice.Thedocul
nentts)listedaboveweresel
wedviae-mail
totheaddressecslisted.
B
yhavingacopydeliveredpersonallytoMr.Holahan'soff
lceattheaddresslisted
below
DennisJ.Holahan
2049Centtu'yParkEast
Suite3180
LosAngeles,CA90067

Fax:(707)586.
2983
d
h
o
l
a
h
a
n
@h
o
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a
hanlaw.com
Attorneyfo
.ryzyao.slixseth

19
If
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lygfamiliarwiththefirm'spracticeofcollectionandprocessing
20 corresgondence
. Un
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21 motionofthepmyselwed,serviceispresumedinvalidifpostalcancellationdateorpostagen

22 meterdateismorethanonedayafterdateofdepositformailinginaffidavit.g
23
IdeclareunderpenaltyofperjuryunderthelawsoftheStateofColoradothatthe
fbregoingistrueandcorrect.
24
ExecutedonJanuary7,20'
1.3.#<tNDenver,Colorado.
25
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N ristopherJ.Conant
27
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POS

(362 of 364)
CSTRSCase:
invema
n
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Yt
a
n
g
l
d
i
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d
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12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 134 of 136

html

1-1I1(SAcI'
LAAIl(N-I()111(1(....-

CaISTRS investm ententangled in Iegal

dispute over playground for rich
cpiller@sacbee.com
PublishedWednesday,Jul.31,2013
TuckedawayinthevastinvestmentportfoliooftheCaliforniateacherspensionfundisa
IuxuryresortinMontanathatfeaturesIavishvillas,pristinegolfIinksandworld-classski
slopes.

TheCaliforniaStateTeachers'RetirementSystem classifiesits$100millioninvestmentin

thefundthatownsYellowstoneClubas''high-risk,highreward.''Whetheritsinvestment
turnsouttobeawinneroraIosermaydependontheoutcomeofaraftofIawsuitspending
inCaliforniaandMontana.
CrossharborCapitalPartners,usingmoneyfrom CaISTRSandotherinvestors,boughtthe

YellowstoneCIuboutofbankruptcyin2009for$115million.
Now theclub'sco-founder,TimothyBl
xs
,h
seeddfebd
rhaaltba
nnkr
Kirscherofmisconductinhishandlingi
o
fe
Iath
ws
ua
its
sa
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wn
yet
ba
ku
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ut
pc
ty
cyjudgeRalphB.
allegesthatKirscherfacilitatedabelow-marketsaleoftheclubtoCrossHarbor.'sBl
bix
es
ne
et
fh
it.He

alsoaccusedthejudgeofimpropercommunicationswi
thBlixseth'sIegaladversaries.

KirscherishearingIawsuitsovertheexclusiveresortcommunityinBigSky,Mont.,which
publishedreportshavesaidcountsMicrosoftCorp.co-founderBillGatesandentertainer
JustinTimberlakeasmembers.Itfeaturesmountainsidechaletsthatstartat$8million,
accordingtoasalesbrochure,
Blixseth'scomplaint,filedintheU.S.DistrictCourtofAppealsforthe9thCircuitinSan
Francisco,accusesKirscherofmisconductinnumerousIawsuitsinwhichinvestorsand
creditorsfortheupper-crustplaygroundareseekingmonetarydamagesfrom Blixseth.
Aself-madereal-estatetycoon,Blixsethonceranked322ontheForbesmagazineIistof
wealthiestAmericans.
Throughacourtclerk,Kirscherdeclinedtocomment,inkeepingwith9thCircuitrules.
The9thCircuitcoulddismissthemisconductclaim,censureKirscherorremovehim from

office.Oritcouldoptnottoreappointthejudge,whoseterm expiresinNovember.
Thevastmajorityofsuchmisconductclaimsaredismissedforlackofmerit.Butfew involve
majorcommercialcases,andclaimsfiledbyestablishedIawyersinhigh-stakescasesmight
betakenseriously,saidRobertWeisberg,anethicsscholaratStanfordUniversitySchoolof
Law.

fiIe:///C:/U= WC.J.%o20Con&VAppD#WLoY/T> p/Frr >or=CSTRS%20inv*mt... 8/1/2013

(363 of 364)
CSTRSCase:
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12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 135 of 136

CaISTRSspokesmanMichaelSiciliasaidthefund's$100millioncommitmenttoCrossHarbor
camein2005,beforeitsacquisitionofYellowstoneClub,from a$10bil
lion''opportunistic
investmentsportfolio,''partofCaISTRS'$22billioninrealestateholdings.
Aftertherealestatecrash,CaISTRS-IikeitsIargercounterpartforstateemployees,the
CaliforniaPublicEmployees'RetirementSystem -begantomovesomeofthoseholdingsout
ofriskierventures.

A
2012CaISTRSreportshowedthatCrossHarborhadusedabout$65millioninCaISTRS
fundsforYellowstoneClubandotherproperties

STRSconsistentlyhadshown
,andthatCaI
modestIossesontheinvestment.
CrossHarborrecentlyincreasedtheamountofCaISTRSfundsinitsinvestmentpool,and
resultshaveimproved,Siciliasaid,withoutprovidingdetails.CrossHarborhastherightto

investaII$100millioncommittedbyCaISTRS.

Blixseth'sattorney,MichaelFlynn,saidhisclientisseeking''massive''damages,intothe
hundredsofmillionsofdollars,from CrossHarborandothersinvolvedinthedispute.The
outcomeofthemanyIegalcasescoulddictatetheoutcomeofCaISTRS'CrossHarborbet.
SiciliadeclinedtocommentaboutthecourtfightsovertheYellowstoneClub.''Wetakea
Iong-term view onaIIourinvestments,andwethinkthatintheIongterm thingswillwork
out,''hesaid.
CrossHarborexecutivesdeclinedtobeinterviewed,butinawrittenstatementsaidthatthey
believenojudicialmisconductoccurred.''CrossHarborhasalwaysactedingoodfaith,and
willcontinuetodoso,''thestatementsaid,notingthat'conspiracyclaims''byBlixseth

previouslyhadbeenrejectedincourt.

TheBlixsethcomplaintalsoallegesthatKirschermaintainedanimproperrelationshipwith
MissoulaIaw firm WordenThanePC,whereheformerlywasapartner.Thefirm represents
formerminorityshareholdersinYellowstoneClub,whosaythatBlixsethowesthem millions

ofdollars.Kirscher'sawardof$22milliontothatgrouphasbeenappealed.

Blixseth,aWashingtonresident,andhisex-wife,EdraBlixseth,havebeenaccusedof
convertingmorethan$200millionIoanedtoYellowstoneClubtotheirpersonaluse,Ieading
totheclub'sfinancialcollapse.
lnaruling,KirschercalledBlixseth'sactions'selfdealings''thatcaused''substantialharm.''
Afteranacrimoniousdivorcein2008,EdraBlixsethendedupwithsolepossessionofthe
couple'smajorityclubownership.Afterthecreditandrealestatecollapse,sheand
YellowstoneCIubdeclaredbankruptcy.
AccordingtoBlixseth's9thCircuitcomplaint,in2009Kirscherapprovedasettlementinthe
YellowstoneClubbankruptcythatamountedtocollusionbetweenEdraBlixsethand
CrossHarbor,amongothers,toimproperlymakeTimothyBlixsethsoletargetfortheclub's
creditors,includingCrossHarbor.
BlixsethhadearlieraskedKirschertorecusehimselfbasedonthatclaim andothers.The

judgerejectedtherequestasgroundless,arulingaffirmedbyaseparatefederaljudge.

Thecomplainttothe9thCircuitaddsevidence,saidtocomefrom publicrecords,that
KirscherrecentlymaintainedanemaiIaddressatWordenThaneandservedasthefirm's

vicepresident,thenawardedthefirm'sclients$22million.

EmailsobtainedbyTheBeeshow correspondenceabouttheYellowstoneClubcasebetween
KirscherandWordenThanepartnerRonaldA.BenderviathatemaiIaddressjustpriortothe
bankruptcysettlement.

Ex.3
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12-35986, 08/12/2013, ID: 8739867, DktEntry: 52-2, Page 136 of 136

ThemessagescouldnotbeindependentlyverifiedbecauseKirscherdeclinedtocomment
andseveraleffortstoreachBenderabouttheemailswereunsuccessful.
Stanford'sWeisbergsaidthatifBlixseth'sallegationsaretrue,hiscomplaintwouldexpose''a

flagrantviolationofjudicialprocedure.''
Ca#TheBee'
sCharlesPiller,(916)321-1113.Followhim onTwitter@cpiller.
@ CopyrightTheSacramentoBee.AIIrightsreserved.
. Readmorear
ticlesbyCharlesPiller

OrderReprint

file:///C:/U> WC.J.%20Con&VAppD##Lo< /T> p/Frr >orWCSTRF/o20invGm&t... 8/1/2013