blix v ymc app # 78 | 12-35986 | flynn osc response w exhibits

8/20/2019 Blix v YMC App # 78 | 12-35986 | Flynn OSC Response w Exhibits

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IN THE UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

NO. 12-35986

TIMOTHY L. BLIXSETH

Appellant,

v.

YELLOWSTONE MOUNTAIN CLUB, LLC

YELLOWSTONE DEVEOPMENT, LLCBIG SKY RIDGE, LLC

YELLOWSTONE CLUB CONSTRUCTION CO., LLC

Appellees.

MICHAEL J. FLYNN’S RESPONSE TO ORDER TO SHOW CAUSE

Appeal from the United States District Court for the District of Montana

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

Michael J. Flynn

Suite 240

One Center Plaza

Boston, MA 02108

[email protected]

Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-1, Page 1 of 23

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Attorney Michael Flynn herewith responds to this Court’s order to show

cause why Appellant and his attorneys should not be sanctioned for filing the

appeal in this matter. Mr. Flynn herewith adopts the arguments and briefing of his

co-counsel, and incorporates their positions herein as if fully stated. Mr. Flynn

also invokes F.R.A.P. 46(c) and Circuit Rule 46-2(d),(e) and requests a hearing.

The purpose of this Response is to present the facts and the law as the undersigned

analyzed it as an advocate for Mr. Blixseth as trial counsel in AP 14 having

actually observed Judge Kirscher during the AP 14 trial.

1.

RELEVANT PROCEDURAL HISTORY

The underlying motion to disqualify Montana bankruptcy Judge Ralph

Kirscher “for appearance of bias” was filed pursuant to 28 U.S.C. § 455(a) after

scrupulous examination of the facts and the law. It was not filed with any intent to

“smear” Judge Kirscher, but rather to safeguard the rights of our client Tim

Blixseth in the face of the most substantial departure of the federal rules and

constitutional protections that I have ever experienced in 44 years of litigation.

Both at the time of filing and now, pursuant to our sworn duty as advocates in our

adversarial system of jurisprudence, all counsel held a good faith belief in the

merits of this appeal. Advocacy within the rules, the statutes and the Constitution

is a duty and a sacred trust that the undersigned has held and practiced in the


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utmost good faith for 44 years in hundreds of American courtroom appearances

throughout the United States.

As recited in the attached Declaration, the facts and the law supported

counsels’ good faith advocacy in this matter. After extreme due diligence in the

collection and assessment of facts, and our observations of Judge Kirscher, we

reasoned that at the time of filing the disqualification motion and this appeal, that

our client, Mr. Blixseth, had been denied fundamental due process by a judge

exhibiting partiality. We applied the applicable legal standard of “appearance of

bias.” The phone call of Judge Kirscher’s law clerk, Terry Healow, to Ross

Richardson advising him to get his money from Mr. Blixseth in a separate case,

also then pending before Judge Kirscher, because Judge Kirscher’s ruling against

Blixseth was imminent in AP 14, coupled with another law clerk giving her home

and cell phone numbers to attorney Patten to discuss the Blixseth cases, and where

Mr. Patten had also been provided case authority to be used against Mr. Blixseth

by the senior Montana bankruptcy judge, these facts in and of themselves justified

our good faith belief that the disqualification motion and subsequent appeals were

well founded and should have been granted. See order of Kirscher, J at ER 71

denying responsibility; Healow conversations at ER 579-580,594; record of senior

judge sending case authority at ER 590; law clerk home and phone exchange at ER

597, 588, 592; and see post hearing response on these issues at Dkt 67-1 .


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When Judge Kirscher in his order on disqualification did not deny that the

Healow conversation took place, but denied responsibility, and considering the 16

additional grounds for disqualification, all before additional and more damning

evidence was discovered and provided to the Judicial Council , it was the

undersigned’s professional opinion as trial counsel in AP 14, that it was our sworn

duty to continue to obtain appellate relief outside the state of Montana in this

Court. Experienced appellate counsel agreed. The Byrne emails during the heart

of the bankruptcy proceedings referencing the use of “political pressure” and the

Burkle / Byrne meeting on January 15, 2009 with Montana’s Governor, coupled

with our observations of Judge Kirscher and the legal foundation for his rulings

between January and June, 2009, provided evidence of potential political

intrusion into the judicial process. (Flynn Dec. ¶ 9). As this type of evidence

increased, as recited herein, the attorneys felt duty bound to submit it to the

Judicial Council.

As we discovered the following additional compelling evidence of “political

influence” in the judicial process, stated as admissions by Edra Blixseth, the

primary beneficiary of Judge Kirscher’s erroneous or abnormal rulings, and

effectively represented by Mr. Patten, who engaged in the improper ex parte

emails, we submitted it to the Judicial Council:

1. Edra Blixseth said to her attorney: “We need this case [the divorce


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case] moved back to Montana at all costs. SB [Sam Byrne] and BS [Brian

Schweitzer] have spent enormous capital and political favors to ensure they

get the right outcome from the Montana bankruptcy judge. I suspect TB

[Tim Blixseth] and MF [Mike Flynn] have known this for some time, and gave

up fighting that battle.” (Flynn Dec. ¶10, Ex. 2). Edra Blixseth was correct

about our suspicions having observed Judge Kirscher, but incorrect about Mr.

Blixseth’s continued investigation.

2.

Edra Blixseth said to her attorney: “I think this helps us to justify

why we are filing our motions on the MSA in the BK courts in Montana, don't

you? Remember we have added help there from the BK Judge who loves us,

and hates Tim and Mike Flynn. At this point they could not get a decent

ruling in their favor from that Judge if they tried. Either way, SB and BS

have things in place in that courtroom to help us. We need to make sure the

validity of the MSA never ends up being decided by Judge Waters. That

would be a nightmare for all of us.” (Flynn Dec. ¶ 11, Ex. 3, p. 7).

3. Documentary evidence of Judge Kirscher’s private email account with

his former law firm to whom he awarded a $22 million judgment with no trial,

including a Sacramento Bee article reciting one of the emails between Judge

Kirscher and Mr. Patten about Mr. Blixseth (Flynn Dec. ¶ 13).

4. Documentary evidence of approximately $1.5 million in “donations”


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between August and September, 2008, by the new owners of the Yellowstone Club

to then Governor Schweitzer, right at the time of the implementation of the scheme

to put the Club into an unnecessary bankruptcy in November, 2008. This

documentary evidence confirmed the reliability of the Edra Blixseth admissions.

(Flynn Dec. ¶ 12).

5. The foregoing evidence, the disqualification evidence in the appellate

record, and the law, supported all of the lawyers good faith reasoning that

investigation by the Council and the continuance of this appeal were not only

warranted but the lawyers’ duty under the Rules of Professional Conduct. My

conscience, the law and facts dictated my decisions in this matter as they have for

44 years in my litigation practice. I continue to hold an unwavering belief based

on incontrovertible evidence that my client has been the subject of improper

judicial conduct and serious deviations from due process.

The per curiam opinion of the panel, including the imposition of punitive

sanctions, is incomprehensible to me, particularly considering the foregoing facts

and law, the Chief Judge’s prior opinions in analogous cases. (Flynn Dec. ¶ 17 ).

The letter to the Judicial Conference that I sent to afford Mr. Blixseth all of his

rights at all levels of appeal, appeared to me to explain the imposition of sanctions

as retaliation for my advocacy for my client. (Flynn Dec. ¶ 15). The later

dismissal of that judicial misconduct complaint, notwithstanding the apparent non


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reappointment of Judge Kirscher, and the blanket sanctioning of myself and three

young lawyers with young children who prepared the appellate briefs, along with

experienced appellate counsel, while awarding fees to the attorneys for the

billionaires and Credit Suisse who repeatedly violated the law, has shocked me and

lead me to question everything I have believed about our system for the past 44

years. It has forever chilled my ability to represent clients under the rules. (Flynn

Dec. ¶ 16).

Counsel utilized an objective standard in evaluating the facts without regard

to any personal animus toward Judge Kirscher. In fact, as the record demonstrates,

oral argument before him and Judge Haddon reflected only respect, while

requesting application of this Court’s strong admonitions in In re Manoa Finance

Co., Inc., 781 F.2d 1370, 1373 (9th Cir. 1986). Based on Manoa, we believed that

Judge Kirscher’s multiple roles in these cases stemming from the “hotel deal”

raised significant issues relating to “appearance of bias” that compelled appeal to

this Court. The Judge not only oversaw the administration of the Yellowstone

Mountain Club, LLC’s (“YMC”) bankruptcy, and all of its numerous adversary

proceedings which targeted Mr. Blixseth, he administered Edra Blixseth

bankruptcy.

While Manoa admonished against such multiple roles, Judge Kirscher was

faced with surrendering all of the Tim Blixseth targeted cases when the Supreme


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Court issued its epochal decision in Stern v. Marshall , 131 S.Ct. 2594 (2011)

mandating an Article III judge for state common law claims. He refused and then

issued rulings which circumvent the letter and spirit of Stern. These circumstances

further directed the lawyers to seek appellate review and our request for a jury trial

in the District Court. The cases and the articles support our reasoning. See Skelton

and Harris, “Bankruptcy Jurisdiction and Jury Trials: The Constitutional

Nightmare Continues.” 8 Bank Dev. J. 469 (1991).

Significantly, Edra Blixseth’s personal bankruptcy and the bankruptcies of

companies she owned, and the Yellowstone Club bankruptcy all arose out of the

recent Blixseth divorce pursuant to a complex Marital Settlement Agreement in

which she obtained the Yellowstone Club by means of a $35 million loan from Mr.

Byrne. As advocates for Mr. Blixseth, we viewed this Agreement and her secret

“side deal” with Mr. Byrne (SER 2758) as a premeditated scheme to put the

Yellowstone Club into a fraudulent bankruptcy. Established precedent held such a

scheme to be fraudulent. Nevertheless, Judge Kirscher approved it and refused to

remove himself from the Tim Blixseth matters, notwithstanding Manoa and Stern.

As the myriad of motions, hearings, and discovery proceeded before Judge

Kirscher, and his rulings, opinions and orders followed, we viewed the targeting of

Mr. Blixseth arising out of a clandestine meeting at a hotel – not the court house -

with Judge Kirscher present and Mr. Blixseth and his attorneys not present,


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mandating Judge Kirscher’s recusal. As advocates, these facts alone also

mandated judicial review of disqualification outside Montana. (See SER 2758, par

56(g); also see 9th Cir Case No. 13-35246, ER 1523, 1542).

This is reportedly the largest bankruptcy in Montana history. Millions have

been awarded in fees by Judge Kirscher to members of the local bar, with Tim

Blixseth as the sole target to pay for a fraudulently bankruptcy petition filed by his

ex-wife, who was effectively represented by Mr. Patten in the Yellowstone Club

bankruptcy, who had the ex parte communications. Mr. Patten engaged in the

email exchanges with the law clerks. All of the above facts evidenced plain

violations of the bankruptcy process, and the evidence increased as this appeal

proceeded. See Lopucki, “Courting Failure: How Competition for Big Cases Is

Corrupting the Bankruptcy Courts, 97-122. (2005).

In his multiple roles, Judge Kirscher has exonerated and improperly

exculpated Edra Blixseth and the owners of the Yellowstone Club, contrary to 9th

Circuit precedent and Judge Haddon’s order. Their ostensible motive was to

leverage the Credit Suisse loan. Due to the improper Montana bankruptcy rulings,

Ms. Blixseth has so far escaped all responsibility notwithstanding overwhelming

evidence of criminal conduct and bankruptcy fraud. (SER 2740-2787 ). Thus, to

a 40 year seasoned trial lawyer, the hard core facts demonstrated the “appearance


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of bias” in the Montana Bankruptcy Court and compelled appellate review outside

Montana.

In my litigation experience and everything I have been taught since being a

law clerk to the justices of the Massachusetts Supreme Judicial Court, and

everything I understood under the rules and the case law, all held sacred the

absolute prohibition of the ex parte communications at issue in this matter. In the

context of the undisputed facts in this case, the appeal was not only meritorious, I

believed it could only be successful. (Flynn Dec. ¶ 2-8).

This appeal has outpaced the appeals of others related, including the appeals

of the YMC’s reorganization plan and AP-14, which is still pending in the District

Court for the District of Montana. Therefore, the aim of this appeal was not

retribution for decisions made in cases currently on appeal, but whether Judge

Kirscher’s ruling on the disqualification motion was proper; and whether Judge

Kirscher should have continued to preside over the pending cases and issue orders

that ultimately, in my professional opinion based upon controlling precedent,

further established a pattern of improper partiality.

The fundamental unfairness of the ex parte communications at issue here in

a close knit rural bankruptcy bar before the sole bankruptcy judge, coupled with

Edra Blixseth’s admissions, compels appellate review for disqualification outside

Montana. The fact that Judge Kirscher refused to step aside, declared himself


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unbiased, and ruled himself on these issues, compelled appellate review. His

multiple roles in the context of state common law claims when Stern essentially

told him to step aside, thereby exceeding his constitutional authority, all justified

counsel’s good faith belief that the totality of the facts and circumstances,

including facts not nearly as egregious as those here, supported our decision

making throughout this process. In re Manoa Finance Co., Inc., 781 F.2d 1370,

1373 (9th Cir. 1986) In re Bearingpoint, Inc., 453 B.R. 486, 492-493 (S.D.N.Y.

2011); see also In re Martinez-Catala, 129 F3d 213,221 (1st Cir 1997) (as the 1st

Circuit recognized, “the whole is sometimes greater than the sum of the parts. The

cumulative effect of a judge’s individual actions, comments and past associations

could raise some question about impartiality, even though none (taken alone)

would require recusal.”).

The present appeal was first reviewed by Judge Haddon who affirmed Judge

Kirscher’s February 25, 2011 order on November 16, 2012. However, despite

Judge Haddon ruling against Mr. Blixseth, the District Court for the District of

Montana, which is charged with oversight of its Bankruptcy Court, did not

sanction the Appellant or his lawyers nor find his appeal---however unpleasant---

meritless. Significantly, Judge Haddon did not have the judicial misconduct

complaint and the compelling facts therein before him, but this court did. Yet, this

Court has imposed sanctions and fees. A compelling inference is that these


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punitive sanctions have been improperly imposed because of the judicial conduct

complaint---not the merits of this appeal.

The arguments submitted to this Court were substantially similar to the

issues raised in Judge Haddon’s court. The legal issues presented in this appeal,

especially given the ex parte communications and other circuits view of potential

pitfalls unique to bankruptcy courts, were proper for this Circuit to consider.

2. ARGUMENT

Attorney’s Duty of Zealous Advocacy

All lawyers have the ethical and professional duty to be zealous advocates

for their clients. See ABA MODEL R ULES OF PROFESSIONAL CONDUCT, PREAMBLE

(“As advocate, a lawyer zealously asserts the client's position under the rules of the

adversary system.”). A lawyer also has the duty to challenge official actions while

upholding the legal process. Id. (“While it is a lawyer's duty, when necessary, to

challenge the rectitude of official action, it is also a lawyer's duty to uphold legal

process”). Lawyers’ arguments are required to be based in law and fact and may

include arguments for an extension, modification or reversal of existing law. See

Rule 3.1, ABA MODEL R ULES OF PROFESSIONAL CONDUCT.

Encompassed within upholding the legal process, lawyers must respect our

system of justice so dearly that he or she is willing to challenge its integrity

without risk of punitive sanctions. The Supreme Court has held that there is a

strong presumption of open access to all levels of the judicial system as well as a


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strong presumption against the imposition of sanctions for invoking the process of

law, even if the claim is unmeritorious. See Talamini v. All-State Insurance Co.,

470 U.S. 1067, 1071, (1985) (Stevens, J., joined by Brennan, Marshall and

Blackman, concurring) (“There is, and should be, the strongest presumption of

open access to all levels of the judicial system. Creating a risk that the invocation

of the judicial process may give rise to punitive sanctions simply because the

litigant's claim is unmeritorious could only deter the legitimate exercise of the right

to seek a peaceful redress of grievances through judicial means.... [T]he strong

presumption is against the imposition of sanctions for invoking the processes of the

law.”) (Emphasis added).

Equally relevant, sanctions are known to have a chilling effect upon lawyers.

Regarding other type of sanctions found within the Federal Rules of Civil

Procedure (i.e., Rule 11 sanctions), the law of this Circuit is that such sanctions

have a chilling effect on lawyering and are reserved “for the rare and exceptional

case where the action is clearly frivolous, legally unreasonable or without legal

foundation, or brought for an improper purpose. Operating Engineers Pension

Trust v. A-C Co., 859 F.2d 1336, 1344 (9th Cir 1988). The appeal here does not

meet this standard. Indeed, the opposite is true.

Significantly, the per curiam opinion of this panel follows Judge Berzon’s

expressed concern about at least one of the ex parte communications relating to


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Terry Healow, which the Chief Judge said at oral argument “never occurred.”

However, that is not what the appellate record shows. Rather, it shows that Judge

Kirscher never denied that the ex parte communication of Terry Healow occurred;

he denied responsibility for it. See ER 71. That communication alone legitimizes

Mr. Blixseth’s right to have this appeal heard and to have his appeal granted.

There is an undercurrent of facts involving Judge Kirscher relating to the

complaint for judicial misconduct, just recently dismissed after Mr. Blixeth sent a

letter to the Judicial Conference, some of which are not in the appellate record on

the disqualification issues, which may also explain the Chief Judge’s reference and

repeated use of a “judicial misconduct” standard at oral argument, and the

reference to “smearing” in the Court’s decision. But all these submissions to the

Judicial Council have been made under the rules backed up by substantial,

documented evidence. Counsel specifically refrained from citing those facts in

their briefing, or supplementing the record on this appeal knowing such facts were

before the Judicial Council, although many of those facts are now being further

explicated in an on-going investigation, particularly Judge Kirscher’s ex parte

communications on an email account at his former law firm, Worden Thane,

whose clients received a $22 million judgment against Mr. Blixseth from Judge

Kirscher with no trial.


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The Chief Judge has previously recognized that such “niceties” of due

process may support judicial misconduct. If so, then clearly such “niceties”

support an “appearance of bias” in connection with this appeal. Although penned

in a dissent, Chief Judge Kozinski opined that the “niceties” of due process “lend

legitimacy” by showing judicial action is based on the law, not a judge’s whim. In

re Complaint of Judicial Misconduct , 425 F.3d 1179, 1185 (9th Cir. 2005)

(Kozinski, J., dissenting) (“it is wrong and highly abusive for a judge to exercise

his power without the normal procedures and trappings of the adversary system-a

motion, an opportunity for the other side to respond, a statement of reasons for the

decision, reliance on legal authority. These niceties of orderly procedure are not

designed merely to ensure fairness to the litigants and a correct application of the

law, though they surely serve those purposes as well. More fundamentally, they

lend legitimacy to the judicial process by ensuring that judicial action is-and is

seen to be-based on law, not the judge's caprice.”). Such a strong position

regarding due process should be adopted by this Circuit. Instead, the Court looks

to now impose sanctions upon counsel for advocating this very position that was

advanced in the foregoing dissent.

Such sanctions will only serve as a potent deterrent to any lawyer to ever

challenge a potentially biased judge, all of which will erode the constitutional

safeguards of our adversarial system of justice.


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All told, the due process violation argument presented in the briefing was

firmly grounded upon sound law and facts and therefore the appeal was

meritorious. Appellant and his lawyers, after reviewing the facts in their entirety

coupled with the policy implications unique to bankruptcy courts and the

misapplication of the recusal standard by Judge Kirscher, justified this appeal.

Some of the following arguments, which were contained in the briefing and not

considered by the Court in its opinion, further support the position that sanctions

should not be issued.

1

The Policy implications of In re Manoa, In re Bearingpoint

and Frates v. Weinshienk had merit

Appellant’s argument substantially involved policy implications found in In

re Manoa Finance Co., Inc., 781 F.2d 1370, 1373 (9th Cir. 1986) and In re

Bearingpoint , 453 B.R. 486 (Bankr. S.D.N.Y. 2011). The rule of this Circuit is

that “judges sitting in bankruptcy be especially solicitous in maintaining both the

appearance and reality of impartiality when adjudicating matter with which they

have had close involvement, erring of the side of recusal.” In re Manoa Finance

Co., Inc., 781 F.2d 1370, 1373 (9th Cir. 1986). In re Bearingpoint appeared to

unpack Manoa’s holding of “especially solicitous” in practical ways. In

Bearingpoint , the South District of New York, one of the most prominent

bankruptcy courts in the country, held that it is “manifestly improper” for a judge

to adjudicate a matter based upon evidence outside of the record.


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Given these two cases, the Appellant’s argument that Judge Kirscher’s use

of information obtained in administrative proceedings to inform him in other

proceedings to such a large degree that the impartiality of Judge Kirscher was

rightfully questioned was worthy of appellate review. For example:

• Judge Kirscher allowed the administrative resolution of YMC’sreorganization plan to dictate the timetable for the resolution ofAP-14. Opening Br., pp. 53-54.

• Judge Kirscher helped in a “global resolution” between certain parties within the context of administrative tasks (“YMC’s bidding

procedures”), without Mr. Blixseth’s involvement. A few daysafter the “global resolution” talks take place, a global settlement isreached between the parties who spoke with Judge Kirscher. Theglobal settlement made Mr. Blixseth the sole litigation target andexculpated Credit Suisse at the same time. Opening Br., pp.35-36.

According to the Tenth Circuit, an appearance of partiality can arise where

“the judge appears “boxed in” by prior rulings such that he is forced to reach a

certain result in an adversary proceeding regardless of the merits.” Frates v.

Weinshienk , 882 F.2d 1502, 1504 (10th Cir. 1989) (emphasis added). The degree

by which Judge Kirscher went outside of the record, including facts in different

bankruptcy cases, in ruling against Mr. Blixseth, rightfully questioned Judge

Kirscher’s partiality under Frates. Mr. Blixseth’s position that a case should rise

and fall on its record and not the record established in other proceedings is

meritorious, except for matters on judicial notice which is not applicable. Here,

the record demonstrates that Judge Kirscher went outside the record, including:


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• Using evidence from an adversary proceeding in the YellowstoneMountain Club, LLC’s (“YMC”) bankruptcy to rule on the meritsof an adversary in Edra Blixseth’s personal bankruptcy. SeeOpening Br., pp. 28-29.

• Rejecting BLX’s reorganization plan because it may conflict withAP-14 ruling in the YMC case. See Opening Br., pp. 29.

• Taking “judicial notice” in AP-14 from “related bankruptcy casesand adversary proceedings” but did not distinguish what case orfacts. Opening Br., pp. 22-23.

Thus, given the clear dictates under Frates, Appellant’s argument that Judge

Kirscher appeared “boxed in” was supported by the record and a good faith

extension of Ninth Circuit law is not only warranted, but meritorious. At the very

least, the questions concerning the practical effects of a Judge Kirscher presiding

over both administrative and adversary proceedings, particularly in the context of

recusal, are important questions that should not be chilled via sanction awards.

2 Entering a $40 million judgment by attorney affidavit

without the opportunity to respond

The record is clear Judge Kirscher did not allow Mr. Blixseth the

opportunity to respond the YCLT’s motion to reconsider prior to entering $40M+

that was requested. Opening Br., pp 19-20. The law also recognizes ruling

without allowing both sides the opportunity to present their sides can lead to the

appearance of bias. See Webbe v. McGhie Land Title Ins., 549 F.2d 1358, 1361

(10th Cir. 1977). By granting the motion prior to allowing Mr. Blixseth the

opportunity to respond, the Bankruptcy Court entered judgment for damages that


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are highly disputed and should never have been included. While those arguments

are currently being appealed in a different matter, Judge Kirscher’s conduct would

lead a reasonable person to question the partiality of the judge.

3

Applying the wrong standards to the record

While not articulated in oral argument, but raised in Mr. Blixseth’s briefing,

was whether the bankruptcy judge applied the wrong legal standard to the facts.

Given the standard under 28 U.S.C. § 455, whether a reasonable person would

find the appearance of bias given the totality of circumstances, that the trial judge

did not dispute some evidence, and some of his statements, establish an appearance

of bias. Opening Br, pp. 5-6.

Judge Kirscher, despite reciting the standard within 28 U.S.C. § 455, did not

analyze the arguments from that of a reasonable person, nor from the totality of

circumstances. Most notably:

• Regarding the emails raised by Mr. Blixseth, Judge Kirscher stated “[he]certainly [did] not find any bias or prejudice . . . the emails, in and ofthemselves, do not establish bias or prejudice.” (No objective standardanalysis, just the Court’s subjective conclusion based upon the emails, notthe totality of the circumstances).

• Concluding the recusal is unnecessary because Blixseth failed to establish

actual bias nor an appearance of impartiality. See ER 93. (No mention ofreasonable person nor from the totality of circumstances).

Applying the wrong legal standard is an abuse of discretion and an appeal of a

Judge’s decision who did not apply the correct standard is meritorious.


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4

Ex parte emails between counsel that were ignored by both

the Bankruptcy Court and the District Court.

The November 7th and 10th between Andy Patten and the court’s clerk were

disregarded by Judge Kirscher entirely. Although this Court did not mention these

emails in its written opinion, these emails cannot be characterized as harmless or

merely administrative. These emails are highly personal in nature (i.e, calling Mr.

Patten, “Andy”) and allowing weekend access or personal contact information.

Generally administrative tasks occur during normal administrative hours (i.e., 9:00

a.m.-5:00 p.m.) through typical administrative channels. Not only do those emails

not fall under a reasonable concept of day-to-day managerial tasks of a court, but

they were completely disregarded by Judge Kirscher when he ruled that he was not

biased, which allowed him to retain control of this high-profile bankruptcy case.

Reviewing the evidence of those emails, the court’s historic rebuff of ex parte

communication and Judge Kirscher’s failure to address these emails, a good faith

basis existed to appeal, based in part on these emails.

3. CONCLUSION

The sanctions imposed on this appeal are manifestly unjust, deviate from

standards upholding appellate advocacy, and chill Mr. Blixsth’s due process rights.

These punitive sanctions are being imposed on two young sole practitioners with

young children who fought zealously for their client within the law, another young

lawyer serving as local counsel who respectfully argued this matter before Judge


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Haddon, an experienced appellate lawyer with successful appeals to this Court, and

a 69 year old, 44 year trial lawyer and sole practitioner ---the undersigned---who is

on the verge of retirement after fighting his entire career for justice, including

justice in the Montana bankruptcy court for the last 5 years. None of Mr.

Blixseth’s counsel can afford to pay these fees. The fees are being awarded to

billionaires, who acquired through Judge Kirscher approximately $800 million in

Blixseth community assets for less than $10 million plus an $80 million note based

on two “deals,” one of which occurred in a hotel with Judge Kirscher present that

targeted Mr. Blixseth and exonerated those present, and the other between Mr.

Byrne and Edra Blixseth to unlawfully obtain the Yellowstone Club through a

premeditated bankruptcy. In short, these punitive sanctions are unjust and they

will hurt the legal community. They send a strong message to all lawyers to never

challenge a judge. That should never be the message from any court.

Dated: March 18, 2014

/s/ Michael J. Flynn

Michael J. Flynn

Counsel for Mr. Blixseth


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CERTIFICATE OF COMPLIANCE

Pursuant to this Court’s Order to Show Cause, I certify that this Response is proportionally spaced in serif font (Century style), has a typeface of 14 points, and

contains 4,734 words, excluding the parts of the brief exempted by Fed. R. App. P.

32. This Brief was prepared using Microsoft Word and the word court was

determined using the Microsoft Word word count application.

March 18, 2014 /s/ Michael J. Flynn

Michael J. Flynn


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PROOF OF SERVICE

I hereby certify that I electronically filed the foregoing with the Clerk of the Court

for the United States Court of Appeals for the Ninth Circuit by using the appellate

CM/ECF system on March 18, 2014.

Participants in the case who are registered CM/ECF users will be served by the

appellate CM/ECF system.

I further certify that the following individuals are not participants in this appeal but

will receive service of the foregoing as they are interested parties to this appeal. I

have mailed the foregoing document by First-Class Mail, postage prepaid, or have

dispatched it to a third party commercial carrier for delivery within 3 calendar days

to the following non-CM/ECF participants:

Evan R. Levy

George A. Zimmerman

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036

March 18, 2014 /s/ Michael J. Flynn

Michael J. Flynn


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Exhibit 1


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rom [email protected]

Sent

Saturday, August 2, 2008 6:12 PM

To: [email protected]; SamByrne

^ Subject Re: What is the plan for tonight?

Jack and I

an d

we h op e you an d others, ar e going to go down to th e BBQ to have a presence

an d

meet

and greet

yada yada then around 8:00ish, we

will

all head upthe Sunrise Ridge model for dinner withthe Gov and his wife

Ann . Franklin

Hall

sounded sort of likemaybe his chief of staff?) Casey, you guys and us are all thatwill be there.

John

of

course

as

well. He

said

VERY

Montana casual.

Hans

has

offered to

help

if

anything

goes

sideways

with a

quick

phone call. That s all I know Chris.

See

you tonight. Areyou going to stop by the BBQ? Hoping Todd and others that

might not be

as

friendly, ifyou know what I mean, might also be at the BBQ. Idid let Hans know that we plan to close on

Monday

an d

thanked him for how he

ha s

handled this difficultweek. Edra

Looking for a

ca r

that s sporty, fun

an d

fits in your budget?

Read

reviews

on

AOL Autos.

http://autos.aol.com/cars-BMW-128-2008/expert-review?ncid=aolaut00050000000017)

Subject

to

rotective

rder

CHE 2 5


(35 of


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From: ^

Matthew

Kidd

Sent: Wednesday, January 14, 2009 6:38 PM

To: SamByrne

ubject R cell

phones

Iam at home. Didyou tryto calL.my cell phone may have been off, but you can try now ifyou want.

We are doing our best to fund...I have

been

asking for a budget since the weekend and have yet to

see

one, so that ball is

in their court. I have sent the subordination agreements (you were on the email yesterday), but acknowledged the may

change

depending on

the

budget. I can just make it 5

MM

though ifthat's

what

you

want

to do.

Disappointing about Yankhauer...l was hoping you cut a deal

so

we could all

just take

a vacation, j/k. How

were

your

meetings with the Gov and Burkle?

I

am

surprised there ar e direct flights from MSP to C-ville. Are you meeting with th e VRS in Charlottesville, not

Richmond?

Mat thew

E. Kidd

CrossHarbor

Capital Partners

LLC

(617)624-8326

PR IV IL EGED AND CONF IDEN T IA L COMMUN ICAT ION

This communication is

intended only

for the use of

the

individual or

entity named

as

the

addressee. It contains information

which is privileged and/or confidential under applicable law.

If

you are not the

intended

recipient or

such

recipient s

employee or agent, you are hereby notified that any dissemination, copy or disclosure of this communication is strictly

prohibited. If you are

the intended

recipient

of

this communication, you are hereby notified that any dissemination of this

communication to others, or

any

disclosure of the information

that

is contained

within

it, is strictly prohibited. If you have

received this

communication

in

error

please

immediately notify

me at 617) 624-8326 or

via return

Internet e-mail to

[email protected] and expunge this communication

without making

any copies. Unintended transmission shall

not constitute waiver

of the

attorney-client or any other privilege. Thank you for

your

cooperation.

From: Sam Byrne

Sent:

Wednesday, January 14, 2009 6:29

PM

To:

Matthew Kidd

Subject:

RE: cell phones

Where are you? Ithought wewere

working

towards

funding

tomorrowof Friday under the new loan? Is itjust inher court

to

getthe subordinations now?

Do

they have them?

Have you agreed to th e budget?

Why cant we get them to subordinate to a big number and get that done; a) so that they can go focus on something and

makeittheirissue, and ; b)so thatwe can use any number smallerthan that? Make itfor 5mand make her go get

t hem

Today was surreal - Yankauer is impossible. Sitting inMSPwaitingon a 3 hour puddle jumper to Charlottsville. Where

are you?

From: Matthew Kidd

Sent:

Wednesday,

January

14, 2009 6:17 PM

To: Sam Byrne

Subject to

Protective

Order

CHE67398


(36 of


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Subject R

cell phones.

She

is being crazy. She also had Jory send me

an

email simply asking ifI could wire funds for payroll tomorrow, as

everyone thinks they ar e getting paid.

I

have

explicitly told both

her and

Jory

that th e

only thing we

were

able to pay as a

protective

advance

were

th e utilities

(which were paid today) and that everything else would have to wait until

we

had executed subordination agreements

from the junior lienholders. I have been clearwith Jory that the next steps

are

as follows:

1)

Put

together full budget for

payment

of relevant payables and operations for next 120

days

(not to exceed 3 MM) - he

is telling

me

he

is

done

with this,

but

waiting for

Edra s approval

to

send

2) Iwillreview th e budgetwith him in great detail and confirm

that

3 MMis the right number (nothing more)

3) Once we

have approved

the budget, we will remove

the brackets

on th e subordination

agreements

and

they

will need

to

be executed.

4) Then we can fund

assuming

I have internal approval and all

other

relevant loan

docs are executed.

As to the cell phones,

we can pay them

for

the

reduced staff

once the new

loan is in place. How

was

today?

Mat thew

E.

Kidd

CrossHarbor

Capital

Partners LLC

(617)624-8326

PRIVILEGED

AND CONF IDENT IAL COMMUN ICAT ION

This

communication is intended only

for

th e

use of

the

individual

or entity named as

th e

addressee. It

contains

information

which is privileged

and/or

confidential

under

applicable law. If

you

are not the

intended

recipient

or

such recipient s

employee or agent,you are

hereby

notified

that

any dissemination, copy or disclosure

of

this communication is strictly

prohibited.

If

you are the intended recipient

of

this communication, you are hereby notified

that

any dissemination

of

this

communication to

others or any

disclosure of

the

information

that

is contained

within it

is strictly prohibited.

If you

have

received this

communication

in

error

please

immediately notify

me at 617) 624-8326

or via return Internet

e-mail to

[email protected] and expunge this communication withoutmaking any copies. Unintended transmission shall

no t

constitute

waiver of the

attorney client

or any other privilege.

Thank

you for your

cooperation.

From:

Sam Byrne

Sent:

Wednesday,

January

14, 2009

6:03

PM

To: Matthew Kidd

Subject:

Fw: cell phones

From:

[email protected]

To: Sam

Byrne; [email protected]

Sen t : Wed a n 1 4 1 6 :1 4: 49 2 00 9

Subject: cell phones

Sam -1 am told thai Joe and Matt are saying that the cell phonesfor PC Resources, you guys do not determine as needed for

operations. Youhave seenPC and knowhowspreadout thingsare. Canyoupleasehave themreconsiderthis. As I toldyou, the

phoneshave been cut off since Monday. This will add labor to us as employees can't communicate. Please reconsider. Edra

This

message

and any attached documents maybe confidential privileged or

both

If you

are

notthe intended recipient youare notauthorized toopen

read

copy,

store

distribute

orusethisinformation inanyway.Failure to complywiththis

notice

maybeaviolation of applicable laws concerning thereceipt of

electronic

mail.If youhave

received

this

Subject to

Protective

Order

CHE 7 99


(37 of


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transmission in error

please

notify the senderimmediatelyby replyingto thise-mailandthendeletethismessage.Thankyou.

A Good Credit Score is 700 or Above. See

yours

in just 2 easy

steps

(http://pr.atwola.eom/promoclk/100000075x1215855013x1201028747/aol?

redir=http://www.freecreditreport.com/pm/default.aspx?sc=668072%26hmpglD=62%

26bcd=DecemailfooterN062)

Subject to

Protective

Order

C HE67400


(38 of


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tr«>n.. Sam Byrne

Sent: Sunday,

November

9,2008 9:12 AM

To:

[email protected]; Matthew Kidd

Subject: FW: YC

/

Call with Mo and his team

We need to

start

working the

all

hands

in

favor ofthe CrossHarbor DiP

program

and PR around CS and the

membership.

From:

Sam Byrne

Sent:

Sunday, November 09, 2008 9:10

AM

To: Scott Prince ; Jim Davidson

Subject:

RE: YC /

Call

with Mo and his team

I like the idea ofthemembers supporting the

alternative

toCSand also

putting

some political

pressure

on CS. Ithink this

could be effective.

Everyone

agreedyesterday to press forward

with

ourDiP anditis being redrafted

now

to

reflect

a

mechanism to fundthe remainder ofthe ski season (assuming Edra can borrowanother 8m inthe bankruptcyon

Farcheville) ifa

plan

is

not

confirmed

by February 13th.

I

think

it

would

be

helpful

to

have

a

call with Bingham this afternoon

aswesee the

filing progress.

I

would suggest around

3 pm our time ifthat works.

rom Scott Prince [mailto:[email protected]]

Sent: Sunday, November09, 2008 8:46

AM

To :

Jim Davidson; Sam Byrne

Subject: FW: YC

/

Call

with

Mo

and his team

Iam

worried

that the judge

might

approve a CS

plan

that

could

be bad

for

usso I

think

we

might

needto be

more

aggressive

with

CS

togetthem toback down.

Here

are

some

ofmy initial

thoughts

on the

message that

should be

delivered to CS and possibly the judge inVirginia City...

Members were sold a constructwherebythe memberdeposits and realestate sales were the important providers of

capital used

to

fund

the

club s development

and theoperating deficits

that

were

required until the

club

reached

critical

mass. The members have been shocked to learn that even withsuccessful growthin membership to over 300 members

and an additional 375mmraised inthe debt market,the clubis out ofcapital,the member s deposits are clearlyat risk

and there is discussion bythe lenderofincreasing memberdues. The membersshouldn t be asked to pay

twice-

members

prepaid the

additional

dues

with

their

deposits

andare

now

being

asked

to

pay again with increased

dues. This

is particularly egregious given the emerging facts that point tothe

lender s complicity

in

allowing

funds

to bediverted from

the club. We understand that a significant

portion

ofthe proceeds fromthe bond raise never even hitthe club s account

and were immediately diverted for non-club use.

Memberswont agree to payinghigher dues and can live with a missed ski season. Members are comfortable skiingBig

Skyand Moonlight Basinand could live with a scenariowhere developmentof the clubceased as oftoday. Ourcurrent

member

dues

could easily fund security, snow-plowing and other essential services enabling access to our homes. The

real losers in that scenario

are the

equity and debt holders who

will

see the value oftheir 500 plus undeveloped lots

disappear.

CS thinks 10k is a small price for the members to pay for

access

to skiingand Ithink we need to play hardball right back.

Iwould be inclined to let them know this right away and also bring up the fraudulent conveyance issue

as

well.

Thoughts?

Sco t t Pr ince

Managing

Partner

Sky ridge apital

7 Madison Avenue

16th

Floor

New York NY 10022

Subject

to

Protective Order

CHE 43 4


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2 t? §5 0122 (p)

212.485.3139(f)

[email protected]

Securities offered through Hastings Capital Group LLC member

o

FINRA

and SIPC

From: Sam

Byrne [mailto:[email protected]]

Sent:

Saturday, November 08, 2008 7:59 PM

To: Scott Prince; [email protected]

Subject:

Fw:

YC

/ Call with Moand his

team

From: Schuyler Joyner

To: SamByrne;

[email protected]

; Matthew Kidd

Cc: Michael Meldman ; Joey

Arenson

Sent: Sa t

Nov 08 19:53:30 2008

Subject: FW:

YC

/ Callwith Mo and his team

fyi

From:

Schuyler Joyner

Sent: Saturday, November 08, 2008 5:53

PM

To:

Michael Meldman;

Joey Arenson;

[email protected]

Subject:

YC / Call with Mo

and

his team

Mo asked me togeton a

conf call

to

day

todiscuss the

short

term

cash worksheet.

He

said

that the lender group

had

offered a term

sheet

for 4wks

and

wanted

to

revisit the short term

cf worksheet

to defer

andI

minimize

costs dunng that period. He said

using

the priorworksheet

and

the fact thatY ^^S^£^t

on Friday, CS thinks

the

4wk number is about

$4.3M

plus $200K for their DIP loan fee (Total about $4 5M) PV

They gave

a

few

examples

of things

they

thought might be deferrable

or being spent too

quickly

(inventory utilities DLC

initatives) When

I

asked if their

version

of the budget was really intended to get the club

openTl^S*

Mo answered

yes weakly and mentioned successful outcome of discussions post-filing, etc answered

Mo

said

3-4 times that the lender

wanted the

4

wks to get

everyone to

sit

down and come up with the a reasonable soln to

the

issues

everyone

has

and

to workout

a

way

to

get

the

ski

hill

open

to

make

the

members

happy Itc.reaSOnaWe

S0,n

to

Sa w

K8t*D, l?0V7y

W.°.U,d

be 3S helpful as P0ssib,e

for the

next

few davs but that*wasn t

clear very

soon that

there

would

be

funding for

at

least

13

wks

and in an ami

similar

to

last years budget, that Discovery would

tow

ou to orotect its

St^g

?^ece'ntT6^00'

*

**

DISC Ve^ aP >eared

to

be

h ng andTaKng aK£

nftnein^^hether ^ Wf sti focused

on

»n er

dues

as their

one big issue and Mo said

not really but then went

on to explain how important it

was to

some in the

lender

group. y

I

told Mo

that Iwould update

the

CF sheet

tonight to

advance it

another

week and look for items that are

deferrable or

there is no time

left spend pre-season.

I

just finished

speaking

with

Hans and am

updating thecash

flow

now

My

takeaway

is

that

it

seems like CS is

preparing

to

hold

the

ski season

hostage

for

the members

to

qet

an extra

$10k+

Permember in dues during the 4wks period, not open for

ski season

if

there s

adispute, and

pa?

{Janta^Sn^

-Sky

Subject

to

Protective Order

CHF 4 95


(40 of


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Exhibit 2


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(42 of


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Exhibit 3


(43 of


44/92

Notes on the MSA, including amendments and the mini settlements

(Edra s

comments in Green)

Full

MSA-

Pages 1 4 Case No. RIDIND91152

n the

Riverside

County.

CA

• 1

of

Page

1 says, This Stipulation is entered into for the purpose

of

compromising and settling contested issues between the parties.

If

for any reason

the waivers and releases in this Stipulation are not accepted by the Court and this

Stipulation becomes null and void, or this Stipulation fails for any other reason

whatsoever, nothing contained herein shall be an admission

of

fact or a statement

against interest. Each party has refrained from making contentious statements, or

asserting positions, which might cause the other to be upset, so that compromise

and settlement could be promoted and achieved.

Doesn' t this right here give us the out to go after anything we want and to have the

entire MSA null and void?

Also, remember that I was completely frozen out

of

all the companies and any

information from shortly after I filed for divorce (Dec 06) until just at before the closing

of the final MSA.

• 4 of Page Read all of it

and

A C

They could use this as an argument that we agreed not to go back to the values of the

assets we agreed to take. I will go into the different assets as we go through this, but one

thing that should be pointed out here, is Tim s very own testimony in the family court.

He made many false statements. When I would point that out to the Judge Waters, her

response was always that Tim, being given the Caption

of the Ship title for our assets by

her, had a fiduciary responsibility to me, if it was found that he was not telling the truth.

A few examples of this would be Tim stating that their was no community cash flow,

when he was taking funds from Big Springs Reality (not paying commissions to the sales

people), Sunrise Ridge (not paying the partners their share when he took funds), selling

community assets and using the funds without a division given to me, and there are more

examples.

Tim also lied in a hearing when I was trying to stop CH from buying the golf course lots.

First, he had a sales person, Eric Ladd, not the VP of Sales, which would be more

standard, submit an affidavit supporting

Tim s

claim of the value ofthe Lots. Tim stated

that no commissions were being paid for the sale

of

these Lots to CH. Yet, later we fmd

out that none other then Eric Ladd was promised 500k, of which 250k was paid to him.

Eric later filed a suit and got a judgment against me for greater then this amount.

• 8 ofPage 4 all ofpage Can you read and tell me

if

you think this is binding or

it goes to the fraud that we talked about?


(44 of


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•

6 ofPage 6 and all references to BGI stock below

This is where things could get a little grey to what is written, what was said and what was

intended. Me taking the BGI stock was the way to finally get PC and Casa Captiva into

my legal ownership after being awarded it in the second mini settlement. If you will go

back and read those, you will find that Tim and his accountants were to find a way to get

both of these assets into my name without creating tax issues. Taking the BGI stock now,

in the final MSA, I was told would resolve this. Also, since I was also taking the YC

entities, it seemed like a natural to simply take

Tim s

ownership of the stock.

(Remember, if though all of the stock was in

Tim s

name, it was still a community

property asset.)

I went into this agreement still with the understanding that both Tim and George Mack

had told me that the BGI notes to YDI as well as the Tim Blixseth notes to BGI (which I

ended up with as well.) would have a way of working them out as years went along as

forgiven when we needed the tax write offs. Tim had always said that. I will go into

this in more detail when I talk about the Tamerendo transfer, but Tim also said that about

the 40mm for that.

If the above would have been as it was told to me, then the

YC s

would have paid the CS

loan

off

with the proceeds from Lot sales.

Upon the closing

of

the MSA, the bank accounts had been drained and/or were

overdrawn. Pat can go into more details of that as well. I of course, was not counting on

this. Both American Bank and Palm Desert accounts were like this.

In addition, the books and records that were turned over cannot be reconciled. The trail

balances do notjave. Again, Pat can go into more detail on this.

There were contracts and payables that Tim entered into after knowing we were going to

be closing the MSA. Bob Sumpter employment contract for one.

•

a)

of

Page 7

CB Sunrise Partners, LLC is the one that Moses Moore (YC s controller) told me that

Tim had taken the funds when things sold and had not paid the partners in this.

Tim had also signed agreements fro some management for St. Andrews after our signing

of knowing I was getting this. He did this both in YDI and in YCW.

• (c)

of Page 7 -

This did not happen and we had issues trying to make i t happen.

• (e) of age 7 - Talk to Andy Patten about this. t was brought up in the UCC vs.

CS and Tim Blixseth with how Tim bought and sold this to himself By the time I

got it, he had taken the value out of it during the time I was frozen out of the

businesses. YC had an expert testify with how this was handled.

2


(45 of


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• B.

of

Page 9 - YCW was insolvent when I received

it

The way this is written, I

would have no way

of

knowing that.

• C of Page 10

and

(1)- (3)

Again, Andy Patten will be helpful here. Tim did not disclose that he had taken millions

out

of

Big Springs Reality before this and had not paid commissions. There has been

something filed against him on this. Andy will have the details. This is also where he

states that Eric Ladd was paid a commission for the Golf Course Lot sale to

CH

In

family court he testified that there was

no

commissions

to

be paid, but he already had the

deal with Eric, which I believe is how he got Eric to give the statement

of

value. The VP

of Sales should have done that,

if

it were to be done, but he could not be bought . AND

500k was not nearly what was owed to the sales people. I know that Charlie would be

happy to talk with you about the exact amounts, but this should also be in what was filed.

At the time Tim did not pay them, which was much longer then

30-

60 days in arrears

he told them that the money was needed to

YC

operations. They later found out that the

funds were used for boat slips and other things for Tim. This was also during the frozen

out part for me, but Big Springs was in Tim's name and therefore a community property

asset. At the time he was taking funds out

of

Big Springs for his use, he was also stating

in family court that there was no community cash flow.

• D

of

Page 10 I already addressed Big Sky Ridge, above. Please note that Big Sky

Ridge was part of the YC Chapter 11

• E

of

Page 11 Again this was already addressed regarding Sunrise Ridge and

Moses Moore stating that Tim told the funds as his own personal piggy bank

and did not pay the partners. Tim did not disclose this. This was also community

cash flow.

• G of Page 11 This is a good one for the Western claims.

• H ofPage 11 This did not happen and ended up being part of the YC BK.

• All of the assets listed that Tim got,

starting

on I of

page

12, had the value

that was perceived

and no

unforeseen liability.

• 17.

ofPage

14

At the

time

of signing this,

Tim

told

me

that the LeMond group would do this, just

to be

rid

of

him,

by

getting 1.0

to

2.0mm

on

closing. I ended

up

having

to pay them

8mm of

he

35mm I got from CH, to get them to sign off. I was to get this back from

YC, as they were going to be the owners ofthese B shares

and not

me personally. Of

course you know that did not happen. (Remember as well, I did not really get

35mm from CH, but only 22mm.

Tim

had

borrowed 13mm from them in 2007 and

I took over that promissory note when I got the Family

Compound

back.)

3


(46 of


47/92

• 20. ofPage 4

This is not a big deal, but

Tim

took most ofthis out. Somethings

were brought back

by

the YC employees that removed it per his direction once

they knew that he was not to take it, but not nearly all. (Maybe this is where he

got the idea that I would take more out of 176?)

• (3)

of

Page

5

including a)- d)

This is where Tim transferred Tamarindo to himself, before the final divorce decree. He

stated to me that George could help me do the same on this promissory note to YDI as

they had intended to do with the other notes for the money that was taken from the CS

loan. He went out of his way to make this clear, as he also stated that he did not want to

have any tax issues from getting Tamarindo in his name when the funds that purchased it

were from the CS loan.

Of

course no taxes were paid on any of that money, 208mm, as it

was booked as a loan and not a dividen. This is the point

of

the UCC filing against Tim.

That suit continues

in

Feb 2010. Andy Patten and Troy Greenfield can be helpful here.

• C ofPage 6

Turks and Caiscos property was also purchased with CS loan funds, yet Tim was

awarded this without having to pay back the funds for the purchase price. I think this,

Tamemdo and the other things go to show that, having me take on the entire promissory

notes for all the funds taken out

by

BGI and then Tim, would not be a fair division of

property, I in fact, I had to pay back those notes and Tim got all of those properties.

In

other words, just Turks and Tamerendo alone account for over 70mm of the 208mm

taken out, plus the other things that he got in the final

MSA

and the two mini settlements.

If he had not told

me

that those notes could be worked out another

way

and they were

never intended to be paid back, would I have thought taking that on AND giving him

these assets free and clear was a fair division?

NO.

0

ofPage

8

I later found out that who that was transferred to was Jim Dolan. There are several things

that were transferred to him during the time of my frozen out . Jim Dolan is also a third

partner of

Tim s

in Western Pacific Timber Company. He is also who

Tim

sold, well

under valued, our personal interest in the FBO in Bozeman. Jim Dolan is also the one

that promised to be paying the BFI note on time, yet admitted to me and others that he

was talking with Tim at the same time about the payment. Tim was telling others that

Jim was

not

going to be making the payment to keep me out

of

money.

I

don t

know where this fits in, but there is not any part

of

my

assets that I was awarded

that Tim did not call people and interfere with

me

being able to do things for the good

and benefit of myself.

He

contacted Alan Rye about my loans, which put Alan in fear of

his collateral in my share ofBFI. Tim had no current business with Alan and his bank.

He contacted Warren Trepp regarding Blxware and caused all kinds

of

issue there where

we could not move forward. He hired Mike Flynn, who was Dennis M lawyer and

4


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handled things for Blxware. He and Mike Flynn started a press campaign against me.

Many reporters have confirmed that Tim or Flynn would call them and tell them where to

go and look things up that were filed in the Reno courts. These were filed by Flynn.

Many times Judge Cook would not let them stand, but the damage was done as the

reporting had already happened. We must knock Mike Flynn

off

the MSA matter. We

need to do whatever it takes, nor matter what we have to file.

He does still have business with Palm Desert National Bank, but continued to give them

misinformation about my businesses and me.

As you guys well know I had to borrow money from

my

friends like Burt Sugarman and

others to stay alive during this time.

• 25.

of Page 20

This is another area that Andy Patten can help you understand. There has been

something filed against Tim in regard to the handling of this Lot. He had just before he

sold it to himself with no cash down and a promissory note of 2mm had placed a value

of3.4mm on it. YC has filed this against him. Paul Moore might also have additional

information.

After the closing of the MSA, I found out that Tim ended up somehow getting this Lot to

the man that he purchased Tamerndo from. I believe that Tim never intended to pay this

2mm

to YC,

just

like all the other promissory note he had signed with YC/YDI.

•

C. ofPage 22

Read and tell me what you think of this one.

• E./F G.

of

Pages 22/23

We never received proper books and records, minutes and other things. Pat can go into

this more.

We

still, a year later, have not been able to figure much

of

this out with how

they turned what they did over.

•

J.ofPage23

It states here that as

of

June 1 2008 I was to receive all cash etc

.............

again, Pat can

tell you

how

things were turned over to us. Tim also entered into several contracts that I

two of which I have mentioned already. Tim also told me that he had paid all ofYC

payables current with a deal he did with Wayne Prim (the other third owner ofWPT)

This turned out not to be true. I talked to Wayne about this. In Judge Tuckers

courtroom, Bob Sumpter,

on

Tim s behalf, in April or May

of2008,

stated as much as

well.

•

Pages

24/25/26/27

in

reference to taxes I want

to

talk

about in our

meeting,

as

it is too hard to put

in

all in

this

overview.


(48 of


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• a) of Page 27

Interesting that they admit here that there was community cash flow from Big Springs,

Big Sky Ridge LLC and Sunrise Ridge LLC and that Tim took all of that money. This

was during the time that he was stating that there was no community cash flow. I had to

borrow money to

just

live during this time, as I did not get a penny

of

temporary spousal

support nor long term after. I did not catch this before.

• 33. ofPage 29

This is where Troy Greenfield had a field day during the UCC vs CS and Tim Blixseth.

Tim stated on the stand that the cornerstone of the MSA for him was me taking over

his fiduciary responsibility for any and all

of

his actions in the business that he had run

and I got. t would be worth a phone call to him on this one. Andy Patten was there as

well. Troy told me that he did not think that this area of the MSA would stand up as I

could not hold Tim harmless nor take on his actions if there were fraud and other things

involved. I, of course, until Tim stated that in court, did not think in anyway that the

cornerstone

of

the MSA, but I was surely aware that it was important to him. How can

I get around this issue ??

• 35.

of age

30

Here is where I think we have a HUGE upside if you can find in the law where this

waiver cannot stand. As I told you, when Jaffe put together the filing for spousal support,

it penciled out at over 2.0mm per month, but I never expected to get that.

Tim repeatedly said at some point that there was no more community cash flow. We

have since found out that this was not true. He just kept all the money for himself.

Because he was saying there was no cash flow, I had to borrow money to live on, when

there was in fact funds for the community.

If

the assets would have been what I was lead to believe they were AND

if

Tim had not

started his campaign to crush and destroy her (it then turned into keep after her

until she is crushed or dead ) I would not have needed the spousal support.

But the facts are now clear that there was cash flow that I should have received at the

time I was frozen out. The assets and more over the liabilities that I was mislead about,

were such (or not such as far as assets go) to maintain my lifestyle, which is the letter of

the family law, let alone, any lifestyle. I am sitting here in a Chapter 7.

Last year at about this time,

just

before signing the MSA, I had manageable liabilities, no

money borrowed against Porcupine Creek nor Casa Captiva. The fact is that Tim knew

exactly what he was doing and what I was getting myself into, which is why the

cornerstone of the MSA to him, was what it was.

6


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If

I had known any

of

this I would not have settled in the way I did. I would have been

granted both temp and long-term spousal support. I would not have had to continue to

borrow money to live. I would not have borrowed 35mm to get the MSA closed.

Remember

of

the 35mm I personally only got just over l.Omm

of

that. The rest went to

Tim or to YC. The part that went to YC should have been paid back to me

if

things there

were as they were presented.

In CA family law a

25

year marriage with the income and tax returns that we had would

have given me a very nice annual income from spousal support.

• 36. 44. of Pages 30 - 34

You guys are going to have to read and tell me what

you think.

• Really

or

you guys....... . .it s all the reps and warranties you w ll have to tell

me what you think.

• 64.

ofPage 4

I think this helps us to justify why we are filing our motions on the MSA in the BK courts

in Montana

don t

you? Remember we have added help there from the BK Judge who

loves us and hates Tim and Mike Flynn. At this point they could not get a decent ruling

in their favor from that Judge

if

they tried. Either way SB and BS have things in place in

that courtroom to help us. We need to make sure the validity

of

the MSA never ends up

being decided by Judge Waters. That would be a nightmare for all of us.

Obviously I have not mentioned the collapse

of

the US economy in this document and

don t

want to go down that road.

Don t

let that become an issue in the MSA matter.

Okay I most likely gave you more then you wanted and

it s

not in great order. Sorry.

Let me know

if

something does not make sense. I think Joe E might be of some help here

too.

You guys should also read the Assignment

Of

Company Interests Agreement and the

Assumption Agreement. There are several things in the mini settlements like Tim was to

keep paying the overhead for PC but that ended as he said there was no community cash

flow. We now know there was so I am not sure where we can fit that in.

Hope this helps. Edra

7


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Exhibit 4


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Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,Public Integrity Section

1

Michael J. Flynn, Esq. Philip Stillman, Esq. CJ Conant, Esq.PO Box 690 100 South Point Dr. 730 Seventeenth St.Rancho Santa Fe, Unit TH 15 Suite 200CA 92067 Miami Beach, FL 33139 Denver, CO 80202tel: 858 775 7624 tel: 888 235 4279 tel: 916 230 3841

Robert Huntley, Esq. James Sabalos, Esq.815 West Washington St. 2 Via RavelloPO Box 2188 Henderson, NV 89011Boise, Idaho 83702 tel: 949 355 6084tel: 208 388 1230

May 29, 2013

Jack Smith, Esq.Chief, Public Integrity Section

U.S. Department of JusticeCriminal Division950 Pennsylvania Avenue, NWWashington, D.C. 20530

RE:1. Letter and Memorandum Dated May 4, 2012 Requesting Investigation of

Montana Political and Judicial Corruption; Appointment of IndependentCounsel; Requesting Subpoena for Records of Federal Task Force CareerInvestigative Agents.

2.

This Supplement Requesting Investigation into the “Targeting” of Timothy L.

Blixseth by State and Federal Agencies, Including the IRS; And thePreservation of all IRS and DOJ Files Relating to Mr. Blixseth.

3. Request for Immunity for Whistleblower.

Dear Mr. Smith:

Please consider this letter and the documents attached hereto to be a supplemental requestto the Letter and Memorandum we provided to your office approximately one year agoon May 4, 2012. Those documents are herewith attached again for your convenience.

With the broad scale revelations of “targeting” by the IRS now supported by the

Inspector General, the Public Integrity Section’s investigation into Montana political and judicial corruption, specifically involving the “targeting” of Mr. Blixseth by state andfederal agencies, including the IRS, as demonstrated herein, is both timely and required by law.

The previously submitted evidence, and the following facts in the context of a chronologysupported by the documentary evidence attached hereto, mandates that the PublicIntegrity Section demand, subpoena and request from the IRS and all departments within


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Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,Public Integrity Section

2

the Department of Justice, and all relevant state and federal agencies, all files anddocuments relating to the “targeting” of Mr. Blixseth by the Holder / Breuer controlledDepartment of Justice and by the IRS. Although Mr. Breuer resigned in February, 2013as the head of the Criminal Division, and has now returned to the law firm Covington andBurling, which has represented Credit Suisse throughout all relevant periods involved in

these matters, his previous misconduct relating to the issues involved herein has not beenremedied by the DOJ.

This Supplemental letter also seeks immunity for the whistleblower named in paragraph25 hereto. To date, Attorney General Holder and Mr. Breuer, have blocked immunity inorder to conceal their participation in the matters recited herein and recited in the May 4,2012 Letter and Memorandum.

CHRONOLOGICAL STATEMENT OF FACTS

1. September 30, 2005: Credit Suisse loaned $375 million to the Yellowstone Club

(“YC”) as part of an “Equity Recapitalization” loan scheme to violate FIRREAand USPAP which was part of a larger, fraudulent scheme involving at leastfifteen “master planned communities.” The scheme itself is a derivative of thesecuritized mortgage bundling schemes then ravaging the U.S. economy mostly predicated on fraudulent appraisals without direct connections between thesecuritizing banks and the appraisers; but the Credit Suisse loans involve directcollusion by and between Credit Suisse and its directly commissioned appraiser,Cushman & Wakefield, to inflate appraisals on the sixteen master plannedcommunities in violation of FIRREA and USPAP. Credit Suisse attempted tocircumvent FIRREA by issuing the loans through its “Cayman Islands Branch,” but this part of the scheme failed because the loan documents made the loans purchasable by federally regulated banks. See generally May 4, 2012 Letter andMemorandum attached hereto, (Exhibits Omitted).

2. The Credit Suisse created YC loan documents explicitly authorized YC to loan$209 million of the $375 million loan proceeds to its owner Blixseth Group, Inc.(“BGI”) “without recourse” to Mr. Blixseth, the owner of BGI. For the next threeyears, until September, 2008, BGI paid over $40 million in interest to YC pursuant to duly authorized notes, quarterly KPMG audited financial statements,and adherence to all corporate protocols. The YC loan and the BGI loan wereapproved by the YC lawyers in writing.

3. On March 13, 2008, Mr. Blixseth culminated a two year divorce battle with EdraBlixseth pursuant to a comprehensive “Marital Settlement Agreement,” (“MSA”).Edra received the YC ($500 million); and Porcupine Creek ($200 million); andother assets, ($100 million +/-), in appraised assets. Unknown to Tim, Edra haddefrauded banks and lenders of about $50 million during the divorce whileconspiring with Samuel Byrne / Cross Harbor Capital Partners to kill Tim's sale ofYC. Edra gave fabricated Department of Justice “Target Letters” to Byrne to giveto his investors to kill the sale; and then she “borrowed” $35 million from Byrne


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Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,P

blix v ymc app # 78 | 12-35986 | flynn osc response w exhibits

Documents