Académique Documents
Professionnel Documents
Culture Documents
RECEIVED
MOLLY C. OWYEH, CLERK
U.S. COURT OF APPEALS
.. r.1
Au\.~,., _ 9. LUL.J
FILED ___________ _
DOCKETED
----
v.
YELLOWSTONE MOUNTAIN CLUB, LLC, et al.
Appellees,
Robert R. Bell
MULLIN HOARD & BROWN, LLP
Amarillo National Plaza Two, Suite 800
500 South Taylor, Lobby Box #213
Amarillo, Texas 79101-2445
rbell@mhba.com
Phone: 806-372-5050
Facsimile: 806-3 72-5086
EXHIBIT
{5290\00\00736430.DOC I I}
I. INTRODUCTION
Timothy Blixseth ("Blixseth") seeks an order from this Court that
would stay a September 10, 2013 hearing on his Rule 9024 Motion currently
pending in the bankruptcy court. Blixseth also seeks an order preventing
YCL T from enforcing the $40 million judgment that the bankruptcy court
rendered in its favor on December 5, 2012. 1 (Exh. A).
In other words,
{5290\00\00736430.DOC 11}
Blixseth has accused of conspiring or being biased against him are federal
judges and law clerks, attorneys and law firms involved in the YCL T
bankruptcy proceedings, and political figures and institutions, including the
Governor of Montana.
{5290\00\00736430.DOC 11}
Not
coincidentally, that motion was filed shortly after Judge Kirscher found in a
135-page memorandum decision that Blixseth had misappropriated millions
of dollars of loan proceeds from Credit Suisse. Judge Kirscher, in fact, had
found that:
The evidence shows that, as a threshold matter, Blixseth
removed funds from the Debtor entities and attempted to
disguise the removal of such funds as a loan when in fact, the
money was a distribution to BGI and then Blixseth. Blixseth's
removal of funds from the Debtors was the primary, and
perhaps sole reason the Debtors are in bankruptcy today.
Blixseth v. Marc S. Kirschner, Trustee of the Yellowstone Club Liquidating
Trust, 436 B.R. 598, 606 (Bankr. D. Mont. 2010). The Bankruptcy Court
{5290\00\00736430.DOC I I}
Id. at 651.
{5290\00\00736430.DOC I l}
What motivates this man? Simply this. Blixseth looted over $200
million from the Yellowstone Club entities. Blixseth v. Kirscher, 436 B.R.
at 606. This act of greed was the primary, if not sole, cause of the ensuing
bankruptcies of each entity. YCLT brought suit against Blixseth seeking to
hold him responsible for this looting. After affording Blixseth an extra nine
months to prepare for trial, after listening to nine days of testimony from 24
different witnesses, and after reviewing numerous exhibits offered into
evidence,
Judge
Kirscher
issued
lengthy
op1mon
detailing
the
Blixseth looted over $200 million from the debtors, Judge Kirscher reduced
the judgment amount to $40 million, on an application of the in pari delicto
doctrine. 2 The fact that Judge Kirscher did not enter judgment in the full
amount of the looting is certainly not indicative of a Judge who is biased and
"out to get" Blixseth. Moreover, in a stunning display of lack of awareness,
in the Motion to Stay, Blixseth maintains that the alleged conspiracy, of
which Judge Kirscher is allegedly a member, "called for Judge Kirscher to
enter hundreds of millions of dollars in judgments against Blixseth for the
plan to be successful." (Motion to Stay at p. 10). Obviously, Judge Kirscher
Respectfully, YCLT submits that the applications of in pari delicto was
improper.
{5290\00\00736430.DOC I I}
has done no such thing, having entered a judgment for "only" $40 million.
This bluster, however, is typical of Blixseth's "say-anything" approach.
Nevertheless, Blixseth now has decided he wants to endeavor to
undermine Judge Kirscher's integrity to escape the judgment. Blixseth's
desire has nothing to do with Judge Kirscher's conduct; it instead has
everything to do with Judge Kirscher' s rulings. It has nothing to do with
viewing the "evidence" from an objective standpoint; rather, it has to do
with viewing the "evidence" from the jaundiced viewpoint of a guilty man
struggling to escape the consequences of his own actions. It has nothing to
do with new evidence; rather, it has to do with the same tired, old arguments
Blixseth repeatedly makes and leaks to the press to smear Judge Kirscher arguments that not only Judge Kirscher has dispelled, but arguments District
Court Judge Haddon categorically rejected and arguments YCLT has shown
in its brief in 12-35986 to be totally lacking and without merit.
Court on appeal.
misrepresentations set forth in the Motion to Stay are too numerous to refute
{5290\00\00736430.DOC I I}
herein, but have been addressed in detail in YCLT's appellate briefing in this
case, and will be further addressed in briefs filed in other pending appeals.
Blixseth's entitlement to even seek "emergency" relief under Ninth
Circuit Rule 27-3 is highly suspect given that he has made no showing of
irreparable harm as required under the Rule.
Nevertheless, as specific
grounds for seeking "emergency" relief, Blixseth claims that since his
disqualification motion was denied, he became aware of additional
"evidence" that supports his efforts to disqualify Judge Kirscher.
The
{5290\00\00736430.DOC I I}
Court for Idaho wherein Messrs. Flynn, Conant and Stillman were
sanctioned on March 29, 2013 for improperly relying on certain evidence
without revealing other existing relevant evidence to the Court. Next they
rely on "evidence" from the internet.
Simply stated,
{5290100100736430.DOC I I}
frankly sanctionable) because Blixseth and his counsel are fully aware of the
serious authenticity issues with this "evidence." Specifically, this issue was
brought to their attention in connection with a recent challenge to the Marital
Settlement Agreement in the divorce proceedings between Blixseth and
Edra.
In response to that
Motion for Sanctions, Edra and her counsel filed affidavits and supporting
documents that conclusively demonstrate that the "evidence" is forged.
(Exh. E). On January 31, 2013, the Motions for Sanctions in the divorce
court was "taken off calendar without prejudice." (Exh. F). Blixseth has not
re-filed the motion.
Exhibit T is allegedly an eight-page memo from Edra to her lawyer
regarding a Marital Settlement Agreement (the "MSA memo").
In that
{5290\00\00736430.DOC I I}
this point they could not get a decent ruling in their favor from the Judge if
they tried. Either way SB and BS have things in place in that courtroom to
help us." In the Response to the Motion for Sanctions, however, compelling
evidence is presented that this portion of the document has been altered, is
fraudulent and a forgery. (Exh. E).
Specifically, Edra's lawyer provides a September 20, 2009 e-mail
from Edra wherein she attaches the original MSA memo. (Exh. E). The
original MSA memo at first glance appears identical to the exhibit submitted
and relied on by Blixseth.
MSA memo provided by Edra to her lawyer does NOT contain the
statement set forth above. (Id.) Additionally, Edra's lawyer at the time the
original memo was drafted, asked Edra to cut and paste the MSA memo into
an e-mail so that he could read it on his Blackberry. (Id.) Significantly, that
contemporaneous copy of the memo in the Blackberry e-mail (which is also
attached to the affidavit) does NOT contain the statement set forth above.
(Id.) Simply stated, it is abundantly clear that the evidence submitted to this
Court is not authentic and has indeed been altered. 3 Nevertheless, Blixseth
10
never mentions even the hint of a problem with authenticity. He has thus
failed in his duty of candor to this Court and clearly has not advanced any
basis for the extraordinary relief he requests and his wholly unfounded
attack on a highly respected federal judge.
Nor does the affidavit from Blixseth's so-called computer expert
advance his cause. The YCLT, to date, has not had access to the hard drive
so it has not been able to conduct its own forensic examination, nor has the
YCLT had the opportunity to cross-examine Mr. Blixseth's so-called expert.
However, the affidavit does confirm that this document was accessed and
altered after Ms. Blixseth forwarded it to her lawyer on September 20, 2009.
With respect to Exhibit V (the "MSA Bullet Points Memo"), Blixseth
again points to alleged statements reflecting some type of a belief that Judge
Kirscher has been improperly influenced.
11
serious allegations against a sitting federal judge that such allegations would
be confirmed and that Blixseth and his counsel could do better than simply
setting forth their belief. This stands in stark contrast to the specific denials
set forth in the affidavits of Edra and her counsel. (Exh. E).
Making matters even worse, Blixseth and his counsel allegedly
received, and rely in the entirety on, this information from Dennis
Montgomery, a former business partner of Edra. (Exh. G). As such, the
credibility of Montgomery is critical to the resolution of this matter.
However, according to one litigant who brought suit against Montgomery to
block his discharge in bankruptcy, Montgomery has a pattern of "lying
under oath" and has "a long history of fraud and perjury." (Exh. Hat pp. 56). Further, according to this litigant, "Montgomery's modus operandi is to
conceal documents and money." (Exh. Hat p. 5). This litigant is none other
than Michael Flynn, one of the attorneys representing Blixseth in connection
with this motion. Mr. Flynn is represented in that action by Christopher J.
Conant, another one of Blixseth's attorneys herein.
{5290\00\00736430.DOC I I}
12
(Exh. I).
In the
Amendment rights over 200 times in the deposition that was taken in that
case by Mr. Conant on Mr. Flynn's behalf.
(Exh. J).
In this same
IS
of no concern.
IS
{5290\00\00736430.DOC I I}
13
YCL T
feared retaliation.
In
The Idaho District Court stayed the deadlines relating to recovery of costs
and fees and for making payments pending resolution of a motion to reconsider the sanctions order. (Exh. M). On August 15, 2013, the pending
motion for re-consideration was denied, however, the Court indicated that it
was still considering relief requested by Mr. Stillman with respect to the
imposition of sanctions. (Exh. Y). Counsel also have pending an Objection
to the District Judge with respect to the sanctions entered by the Magistrate
Judge.
{5290\00\00736430DOC I I}
14
Blixseth)).
{5290\00\00736430.DOC /I}
15
a web page from some website called "data.com." This web page does list
Judge Kirscher as "vice-president" of the firm. (Exh. N). However, if one
clicks on the name of the firm and then clicks on the firm's web address on
the next page one will see that Judge Kirscher is not listed as one of the
attorneys on the firm's website.
(Exh. 0).
{5290\00\00736430.DOC I I}
16
{5290\00\00736430.DOC I I}
17
of Worden Thane's partners, Ronald Bender. (Exh. S). This email shows
that Worden Thane has adopted a new e-mail address (wordenthane.com as
opposed to wthlaw.net). More specifically, Mr. Bender's email address is
rbender@wordenthane.com, not rbender@wthlaw.net. (Exh. S).
Finally, Blixseth's citation to an article in the Sacramento Bee is
quintessential Blixseth. It is readily apparent from a reading of the article
that the source for the information concerning the Complaint of Judicial
Misconduct against Judge Kirscher is Blixseth or one of his legion of
lawyers. In other words, Blixseth feeds scandalous information to the press
and then cites the article from the press as support for the information he
provided.
IV. CONCLUSION
As the Court can undoubtedly ascertain from the tone of the briefing
herein the YCLT has grown exceedingly weary of Mr. Blixseth's constant
efforts to divert attention away from his own wrongful conduct and
increasingly desperate attempts to avoid the day of reckoning and his
constant abuse of a fair and highly respected federal court judge.
Candidly, it is impossible to tell the depths to which Mr. Blixseth and
his counsel will go to avoid the consequences of Blixseth's wrongful
conduct. The attack on Judge Kirscher is simply inexcusable, and wholly
{5290\00\00736430.DOC I I}
18
Recently, the
should summarily reject Blixseth's Motion to Stay and sanction him and his
lawyers for failing to be candid with the Court about the doubtful
provenance of the evidence on which they relied in bringing this emergency
request before this Court.
{5290\00\00736430.DOC I I}
19
{5290\00\00736430.DOC I I}
20
CERTIFICATE OF SERVICE
I hereby certify that on the 16th of August, 2013, 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 counsel of record for Blixseth:
Christopher Conant
Conant Law LLC
730 17th Street, Suite 200
Denver, CO 80202
cconant@conantlawyers.com
Patrick Fox
Doubek Pyfer & Fox LLP
P.O. Box 236
Helena, MT 59624
patrickfox@doubekpyfer.com
Robert R. Bell
{5290\00\00736430.DOC I I}
21
ATTORNEYS AT LAW
ROBERT
R.
BELL, PARTNER
Amarillo Office
RECEIVED
DOCKE~T~E~D~~~~~~
DATE
INITIAL
Motion Under Circuit Rules 27-3 and 27-13 to File Opposition to Emergency
Motion to Stay Under Seal;
2.
3.
4.
If you have any questions or comments concerning the filing of these documents in paper
format, please do not hesitate to contact me. If the Notification of Filing Under Seal is required
to be filed via ECF, please let me know immediately as I will do so.
(})/+fu (I
Ro~~;
PO
BOX
31656,
79120
AMARILLO
LUBBOCK
DALLAS
WWW.MULLIN HOARD.COM
IDATAIDOCS\LEGALl5290100100736423
DOC
TEXAS
79101
';t tR*
*
Q
*
'
V
V
P
L
tz
m
s
:
.
'
Yk
.
u
A1'
*j2k11
E xh ib it
UNITEDSTATESBANKRUPTCY COURT
FORTHEDISTRICTOFMONTANA
lnre
YELLOWSTONEMOUNTAIN CLUB,
LLC,
CaseNo.08-61570-11
Debtor.
TIMOTHYLBLIXSETH,
Plaintiff.
AdvNo.09-00014
MARCSM RSCHNER,TRUSTEEOF
THEYELLOWSTONE CLUB
LIQUIDATINGTRUST,
Defendant.
TrusteeoftheYellowstoneClubLiquidatingTnzstisawardedajudgmentagainstTimothyL.
1
- -/''' ..
7
f
r
'
.-
,
.
.
''
t ,
!UQ t
'
.
q zu'
-zk.
,,zv....
HON. ALPHB.KIRSCHER
U.S.BankruptcyJudge
UnitedStatesBankruptcyCourt
DistrictofMontana
E xh ib it
B
1 StevenL.Hoard(TexasBarNo.09736600)
2s
hoard@mhba.com
MULLIN HOARD & BROWN,L.L.P.
3 P.0.Box31656
Amarillo,Texas79120-1656
4 Te1:(806)372-50501ax:(806)372-5086
5 BrianGlasser
6B
Glasser@baileyglasser.com
Bailey& Glasser,LLP
7 209CapitolStreet
Charleston,WV 25301
8 Te1:(304)340-2282Tax:(304)342-1110
9 StevenJayKatzman,StateBarNo.132755
10 s
katzman@bmkattorneys.com
BIENERT,MILLER & KATZMAN,PLC
11 903CalleAmanecqr,Suite350
SanClemente,Callfornia92673
12 Tel:(949)369-3700/17ax:(949)369-3701
13 AttorneysforPlaintiff
14 MARCS.KIRSCHNER,asTrusteeoftheYellowstone
ClubLiquidatingTnzst
15
16
UNITED STATESDISTRICTCOURT
j'
y
CENTRALDISTRICTOFCALIFORNIA
18 OF
MAR
CS.KIRSCIINER,ASTRUSTEE
THEYELLOW STONECLUB
19 LIQUIDATINGTRUST,
CaseNo.CV11-08283GAF(SPx)
NOTICEOFMOTIONANDMOTION
23 TIMOTHYL.BLIXSETH
(RequestforJudicialNoticefiled
concurrentyherewithj
20
Plaintiff,
21
v.
22
24
Defendant.
25 TIMOTHY L.BLIXSETH,
26
Counterclaimant,
27 v.
28 MARCS.KIRSCHNER,DOES1-100,
Date: May21,2012
Time: 9:30a.m.
Ctrm: 740
Location:RoybalFed.Bldg.
255E.TempleSt.
LosAngeles,CA
Judge: Hon.Gary.A Fees
'
1 TO THEPARTIESAND THEIRATTORNEYSOFRECORD:
2
PLEASETAKENOTICEthatonMay21,2012,at9:30a.m.,Orassoonthereafter
3 asthemattermaybeheardbeforetheHonorableGaryA. Fees,United StatesDistrict
4 Judge,in Courtroom 740 ofthe United States DistrictCourt, CentralDistrict of
5 California,locatedattheEdwardR. RoybalFederalBuildingandCourthouseat255E.
6 TempleStreet,LosAngeles, California,PlaintiffandCounterclaim DefendantMarcS.
7 Kirschner(sd
Kirschner''),ascourt-appointedTrustee(theSfrt
zstee''
)oftheYellowstone
8 ClubLiquidatingTrust(tYCLT''
),willandherebydoesrespectfullymovethisCourtto
9 enteranorderforsanctionsagainstTimothy L. Bl
ixseth's(sBlixseth'')pursuanttothe
10 inherentpowerofthisCourtand28U.S.
C.j1927.
11
TheTrusteemovesforsuchreliefonthefollowinggrounds:
12
l. Blixseth's Counterclaim should be dismissed, and sanctions should be
13 imposed,becauseBlixsethintentionallyandimproperlyfiledhisCounterclaim againstthe
14 TrusteepersonallyincontraventionofFed.R.Civ.P.13.
15
2. Blixseth'sCounterclaim intentionallyignorestheBartonDoctrine.
16
3. Blixseth'sCounterclaim has no basis in 1aw orfact, and was filed for
17 improperpurposestoharassandintimidatetheTrustee. SanctionsagainstBlixsethand
18 hiscounselarewarrantedunder28U.S.
C.j1927andthisCourt'sinherentauthorityfor
19 theirwillfulabuseofjudicialprocessandunreasonablevexatiouslitigation.
20
ThisMotionisbeingmadefollowingtheconferenceofcounselpursuanttoL.R.721 3,which tookplaceon March 27,2012,and March 29,2012,viathetelephonecall,
22 voicemailand correspondenceby Plaintiff'scounselto and from ChristopherConant,
23 counselforBlixseth.
24 //
25 //
26 //
27 //
28 //
1
NOTICEOFMOTIONANDMOTIONFORSANCTIONS;DECLARATION OF
BRIANA.GLASSER
'
1
This Motion is supported by the accompanying Memorandum ofPointsand
2 Authorities, thedeclaration ofBrian A.Glasser, theRequestforJudicialNoticefiled
3 concurrentlyherewith,aswellasa1lpleadingsandpapersonfilewiththeCourtinthis
4 case,al
1otherfactsandmattersofwhichthisCourtmaytakejudicialnotice,andsuch
5 otheroralandwrittenargumentsorevidencethatmaybepresentedatanyhearingonthe
6 Motion.
7
BIENERT,MILLER& KATZMAN,PLC
8 Dated:April11,2012
9
By:& StevenJavKatzman
10
StevenJayKatzman
AttomeysforPlaintiff
11
MARC S.KIRSCHNER,asTnzsteeofthe
12
YellowstoneClubLiquidatingTrust
13
BAILEY & GLASSER,LLP
BrianA.Glasser
14
AttorlleysforPlaintiff
MARC S.KIRSCHNER,asTrusteeofthe
15
YellowstoneClubLiquidatingTrust
16
AdmittedProHacVice
17
MULLIN HOARD & BROWN,LLP
StevenL.Hoard
18
JohnG.Turner
19
AttorneysforPlaintiff
MARC s.KIRSCHNER,asTrusteeofthe
20
YellowstoneClubLiquidatingTrust
AdmittedProHacVice
21
22
23
24
25
26
27
28
z
NOTICEOFMOTIONAND MOTIONFORSANCTIONS;DECLAM TIONOF
BRIANA.GLASSER
1
2
3
zl
5
6
7
8
9
10
11
12
13
14
l'
u F
.
1%
r..
s
k
e.
.
E S
Pagets)
liltsk:tl1's ttftlllcs()lztllkr(2(ltlrts.....................................................................3
li)(s()tl1's ttftcks()rllwJt ersandlwt
s!/171
- s..-.........................,.................5
.
r.
a.
. .
u.,
s
.
x
11
.
.t1
.C1
.a11S....................................................................8
1
5
I1I
IXSC'
t.
!
'
IS ttacl
k..
s011.
Lx'611
Blixseth asFiledaI-egallyFrivolousCounterclail'
n................................,.12
.xseth,sCounseIshouldbeSanctioned nder28 .S.
B. Bll
C.j1927.............14
C. Blixseth ontinuesto elitigateIssuesthat ave lreadyBeen
ecided
15
.
15
16
17
18
19
20
21
22
23
24
25
26
27
28
,
l
3 Anheuser-Busch.Inc.v.NaturalBeverageDistribs.,69F.3d337(9thCir.1995)..........11
4 Benderv.Wl
-lll
-amspol.
AreaSch.Ilist,475'
U.S.534(1986).....................................2,12
5 Blixsethv.Brown,etal.
, F.Supp.2d -- ,2012WL691598;at*1(D.Mont.Mar.
77 (zllristianA?.Islttel.111c.,:!8617.3(11118(9th(z1
-r.:!()():!)...........................-.......................11
8 Edwardsv.GeneralMotorscor-p.
,153F.
3d242(9thcir.1998).....................................14
9a
,
.
.
.
111reJqk
,.
a1n
-v
zthk
n.
l
l
D
(
)
)
(
.
1
1
1
C
.
,
L
i
r
3
(
D
1
)
$
N
-lr.150()1!).............................................................(!y1:!
10
11 11)re13ankersl-llzst(2o.,65817.2(1103(3(1(2ir.1981).........................................................1
12 lnreYellowstone ountainClub.LLC,436B.R.598(D.Mont.2010)............3,7,10,16
13 1we()llA?.1lT)JiL;),s.(r()1)n.,zltsz
l17.
3(16)51(6)tll(2ir.:!()()t;)...............................................11,1zl
14 OvernightTransp.Co.v.Chi
cagolnd.Tire.Co.,697F.2d789(7thCir.1983)..............14
15 Prl
-musAuto.Fl
-n.Servs.lnc.v.13atarse,11517.3(1t
;zlzl(6)tl)(zir.19Tr7)...........................11
16 Ouachv.Cross,No.CV-03-09627,2004WL2860346,at*4(C.
D.Cal.June10,2004)13
17
18 Slllltfll
-A,.I3rl
-tl
-slzzpk1
-1wayss17Iw(2,8317.3(1566(2(1(2ir.1996)......................-......................1zl
16) Slt1
-(1r11()re1!r1ergy-Ir1c.5?.142171$4(J,215517.3(1564(5tll(2ir.:!006)......................................11
:!() -ro()r11)sA?-lweone,q
.r.16
!17q!17.
2(12165(6)th(21
)85)....................................................1:4,121,15
21 WestCoastTheaterCorp.v.Cit.yofPort
land,897F.2d1519(9thCir.1990).................14
22 Statutes
23
24
25 Rules
26
28
.
ii
NOTICEOFMOTION ANDMOTION FOR SANCTIONS;DECLA TIONOF
BRIANA.GLASSER
1 1. INTRODUCTION
2
PlaintiffandCounterclaim DefendantMarcS.Kirschner,asTrusteet
dfrustee''lof
3 theYellowstoneClubLiquidatingTrust($k
YCLT''),respectfullysubmitsthisMotionfor
4 Sanctions(dMotion for Sanctions'')againstDefendantand Counterclaim Plaintiff
5 TimothyL.Blixseth(C
Blixseth'').TheYCLTwasformedaspartofConfirmedPlanina
6 bankruptcycaselongpendingbeforetheBankruptcyCourtinMontana.
7
ThisMotion forSanctionsisbeing filedcontemporaneously with theTrustee's
8 MotiontoDismiss(ti
MotiontoDismiss'')allcountsofBlixseth'sCounterclaim,which
9 seeks,withoutbasis,damagesintheamountofSixBillionDollars($6,000,000,000.00).1
10
InsupportofthisMotionforSanctions,theTrusteerespectfullystatesthat:
11
1. Blixseth's Counterclaim should be dismissed, and sanctions should be
12 imposed,becauseBlixsethfiledhisCounterclaim againsttheTrusteepersonallywhenthe
13 Trusteepersonallyisnottheplaintiffinthismatter.Mr.Kirschnerhasappearedinhisrole
14 astheTrusteeoftheYCLTpursuanttoacourt-approvedConfirmationOrderapproving
15 thePlan orReorganization oftheYellowstoneClub, andpursuantto court-approved
16 assignmentofthisspecificlawsuit;hehasnotappearedinanyindividualcapacity. The
17 Trusteesuessolely asrepresentativeoftheTmst.ThebeneficiariesoftheYCLT are
18 numerousformercreditorsoftheYellowstoneClubDebtors. SeeRequestforJudicial
19 Notice($RJN''),Exs.H (ThirdAmendedJointPlanofReorganization)andl(Order
20 ConfirmingPlan).
21
TheNinthCircuithasexplainedthattsga)counterclaim underRule 13mustbe
22
23
24
25
26
1Blixseth'soutrageousrequestfordamagesintheamountofsixbilliondollarsisnot
basedin1aw orfact,andissounreasonableastoamounttobadfaith. SeeInreBankers
:7 TrustCo.,658F.2d103,109(3dCir.1981)(holdingthatSslelvenif(theparty'sqoriginal
claim of$35millionisnotconsidered,theevidencesupportsaconclusionthatgtheparty's
28 pretrialestimatesofitsdamagesweresounreasonableastoamounttobadfaith'')
j
'.
NOTICEOFMOTION AND MOTION FORSANCTIONS;DECLAM TION OF
BRIAN A.GLASSER
1 notsubjecttocounterclaimsagainsthim inhisindi
vidualcapacity.''InreAdbox.lnc.,
2 488F.
3d836,840(9thCir.2007)(citationsomittedl;Benderv.WilliamsportAreaSch.
3 Dist.
,475U.S.534,543n.6(1986)(sd
Actsperformedbythesamepersonintwodifferent
4 capacitiesaregenerallytreatedasthetransactionsoftwodifferentlegalpersonages.'').
5
2. Sanctionsare alsowarranted because Blixseth intentionally ienored the
6 Barton Doctrine,a known and clearprecedentin the Ninth Circuit.By filing his
7 Counterclaim,BlixsethknowinglyviolatedtheBartonDoctrinejustthreedaysafterthe
8 UnitedStatesDistrictCourtfortheDistrictofMontanadismissedBlixseth'sclaim there
9 on Barton grounds.SeeBlixsethv.Brown,eta1.,
F.Supp.2d
, 2012WL
10 691598,at#1(D.Mont.Mar.5.2012)(dismissingBlixseth'sconspiracyandstate-law
11 claimsagainst10 bankruptcy-relatedprofessionalsand theirlaw firmsl(publication
12 fort
hcoming)(tc
DismissedLawsuitAgainstProfessionals'').
13
14
15
16
17
18
19
20
21
Blixsethraisesthesamefrivolousconspiracy-basedclaimsagainsttheTrusteein
theCounterclaim thathehasraisedagainstpracticallyeveryprofessionaladversetohim
intheYellowstonebankruptcyproceedings.Blixsethhasevenfalselv.accusedafederal
court of destruction of evidence and improper political influence.Blixseth's
misconductmustbe halted.So too should the conductofhis attorneysbe halted,
especiallywhere,ashere,theseattorneysareessentiallyttinhouse''attorneysorwhohave
littletonoprofessionalindependenceandarebeholdentoBlixseth.
Blixseth'sCounterclaim hasnoreasonablebasisinlaw orfact.TheCounterclaim is
designedsimplytoforcetheTrustee- andthisCourt- towastetime,money, and
22 judicialresources. ltisalsoseekstointimidatetheTrustee.Permittingthiskindof
23 litigation willhave a chilling effecton bankruptcy trustees and professionals who
24 routinelyworkonsuchmatters.Accordingly,thisCourtshouldbothdismissBlixseth's
25 Counterclaim and imposesubstantialsanctionsonhim andhiscounselpursuanttothe
26 inherentauthorityofthisCourtand28U.S.C.j1927.
27 //
28 //
2
NOTICEOFMOTIONANDMOTIONFORSANCTIONS;DECLARATION OF
BRIANA.GLASSER
1
2
3
4
5
II. BACKGROUND
TheTrustee isthe latestin a long,ever-growing line oftargetsofBlixseth's
outrageousconspiracy theories.Thoseconspiracy theoriesdateback to atleast2005,
whentheCreditSuisseloan wasexecuted,longbeforetheTrustee'sappointmentas
TrusteeoftheYCLTin2009.
6
AmongthoseBlixsethhasaccusedofconspiringagainsthim are:(1)judgesand
7 1aw clerksinvolvedinthebankruptcyproceedings;(2)attorneysand1aw firmsinvolved
8 in the bankruptcy proceedings,
'(3)politicalfigures and institutions,including the
9 GovernorofMontanaandtheMontanaDepartmentofRevenue(t(
MDOR'').
10
11
A. Blixseth'sAttacksontheCourts
Blixseth'sattackson theCourtsbegan afterTheHonorableRalph B. Kirscher,
12 presidingjudgefortheUnitedStatesBankruptcyCourt,DistrictofMontana,issuedan
13 adverseopinionagainstBlixsethfollowingatwo-weektrialthatspannedmonth.Hefound
14 thatddltlherecordisriddledwithinstanceswhereBlixsethbreachedhisfiduciaryduties.''
15 lnreYellowstoneMountainClub.LLC,436B.
R.598,670(D.Mont.2010)($$
AP-14').
16
Sincethattime,BlixsethhasconsistentlyattackedJudgeKirscherandhisstaff.For
17 instance,onNovember18,2010,BlixsethtiledaproseMotiontoDisqualifyBankruptcy
20
21
22
23
24
25
26
zy
28
bankruptcypetitionwasfiledandplanwasproposedingoodfaith'
,
Judge Kirscherhas invited and entertained ex parte advocacy
againstMr. Blixseth'scounselandMr.Blixseth.JudgeKirscher
hadexpartecommunicationsinahotelwithCrossHarborCapital
Partners LLC concerning Cross Harbor's agenda for the
Yellowstone Club bankruptcy, which depends upon successful
litigation againstMr.Blixseth;Judge Kirscher's law clerk has
engaged in expartecommunicationswith oneofMr.Blixseth's
adversaries,urginghisadversarytofinalizeasettlementwithMr.
BlixsethbeforeMr.Blixsethcouldrenege'
,NumeroustimesJudge
Kirscherruledon importantmotionsagainstMr.Blixsethbefore
Mr. Blixseth had anyopportunity to file a response
NOTICEOFMOTION AND MOTION FORSANCTIONS;DECLARATIONOF
BRIANA.GLASSER
1
2
permittedundertherules;Judge Kirscherentereda$40million
judgment against Mr.Blixseth before Mr.Blixseth had an
opportunitytorespondtothemotiontoreconsider....
3 ld.at1-2.
4
Morerecently,duringaMarch6,2012hearingbeforeJudgeKirscher,Blixseth's
5 counselalleged improperpoliticalinnuenceon theCourt.TheCourtresponded as
6 follows:
7
THECOURT:Butthenyou'retryingtoinsinuatethat,because
8
9
10
11
12
13
14
somehow impactsthiscourtoraffectsthiscourt?Thatistotally
incorrect.
MR.FLYNN:YourHonor,onlytheCourtknowswhetherhe's
b
eensubjectedtooutsideinfluence.Theinference-THE COURT:Letmesettherecordstraight.Ithasnot.1have
nothadadiscussionwithagovernoraboutthismatter.Itwould
betotallyinappropriate.Itaketheserulesveryseriously.Ifeel
rather insulted by some ofthe innuendo, inferences,and
innuendosthatyouarestating.
15 SeeRJN,Ex.B(TranscriptofHearingofMarch6,2012),at19-20.
16
Finally,Blixseth'scounselsuggestedatthesamehearingthatJudgeKirscherhad
17 destrovedevidence:
18
MR.FLYNN:....forexample,duringAP-14,thiscourtsaid
19
therewerefourCDsonthe400-pageprivilegelogwith Mr.
Brown and thesevariousindividuals. Yeton July 25tll,this
20
courtsaidtherewasonlyoneCD....
21
THE COURT:Now,theotherpointIwanttoraise:Youraised
22
this,thisCD andthee-mails.1haveinmypossessionwhatwas
giventomeatthecourqa11thatwasgiventome.AndItake
23
offenseatyousuggestingthatthiscourtorthisclerk'soffice
24
haslostanything.Thatwastheinsinuation.Now,ifyouhavea
factualbasistomakethatkindofstatement,bringiton.
25
MR.FLYNN:Yes,yourHonor,1do....
26 Seeid.
27
JudgeKirscherexitedthecourtroom andsubsequentlyreturnedwiththefourCDs,
28 once again proving that Mr. Blixseths4insinuationswereblatantlyfalse,towit:
NOTICEOFMOTIONAND MOTION FORSANCTIONS;DECLARATIONOF
BRIANA.GLASSER
'
1
2
3
4
THECOURT:....1justwanttoclearupsomethingthatMr.
5 Seeid.at19,61-62(emphasisadded).
6
Blixseth'si1lmotiveandconductconcerningthecourtsisalsoapparentfrom his
7 textstohisex-wife,EdraBlixseth.Forexample,hesentatextstating:
8
9
10
11
12
13
14
15
16
17
OK,soyou...byrne...andthecorruptjudgeareallgoing
'
youshould.Thequestionnow iswhowillrate(jcjoutwho
andmakethefirstdeal.Youthoughtyouwerecoveredwitha
corruptjudge....guesswhat,therearefederalemployeesalot
higherRjc)thanhim whogetit.Thebestisabouttocomeand
youarefirstonthelist...enjoytheride.
18 SeeRJN,Ex.JatEx.5(Textmessagefrom BlixsethtoEdraBlixseth(Sept.14,2010
19 9:46PM).Blixseth'sconductdemonstrateshisconsistentintenttointimidate,threaten,
20 andperpetuatevexatiouslitigation.
21
B. Blixseth'sAttacksonLawyersandLaw Firms
22
OnJune8,2011,Blixsethbroughtawide-ranging andfrivolouslawsuitagainst
23 nearlyal1theattorneysandlaw firmsadversetohim inthebankruptcyproceedingsinthe
24 form oftheDismissedLawsuitAgainstProfessionals. Blixseth'swide-rangi
ngclaims
25 includedlegalmalpractice,breachoffiduciaryduty,fraud,breachofcontract,equitable
26 indemnification,comparativeindemnity, contributionmalpracticeforfailingtodisclose
27 contlictofinterest,conspiracy,and aiding and abettingcommissionoftorts. Blixseth
28 accusedanumberofindividuals,including5the following bankruptcy-related
NOTICEOFMOTIONANDMOTIONFORSANCTIONS;DECLARATIONOF
BRIANA.GLASSER
*.
1 profejsionalsandentitiesintheYellowstonecase:
2
StephenBrown,Es9.:ChairmanoftheUnsecuredCreditorsCommittee;
3
Garlington,Lohn& Robinson,PPLP:a1aw f11711basedinMissoula,Montanaand
4 affiliatedwiththeChairmanoftheUnsecuredCreditorsCommittee'
,
5
JamesA.Patten.Esq.:Debtor'sCounsel;
6
PattensPeterman,Bekkedahl& Green,PLLC:a law firm based in Billings,
7 MontanaandaftiliatedwithDebtor'sCounsel;
8
J.ThomasBeckett,Esq.:CounseltotheUnsecuredCreditorsCommittee;
9
ParsonsBehle& Latimer:alaw firm basedinSaltLakeCity,Utah,andaffiliated
10 withCounseltotheUnsecuredCreditorsCommittee;
11
ThomasL.Hutchinson.Esq.:Debtor'sCounsel;
12
BullivantsHouser.Bailey.P.C.:a 1aw firm based in Seattle, Washington and
13 affiliatedwithDebtor'sCounsel;
14
SamuelT.Byrne:aPrincipaloftheCrossllarborCapitalPartners;
15
Crossl-larborCapitalPartners:aninvestmentfirm basedinBoston,Massachusetts
16 andaffiliatedwiththeReorganizedDebtor;and
17
JohnDoes1-100:whoeverorwhatevertheymaybe,justforgoodmeasure.
18 (SeeRJN,Ex.C(ComplaintfiledbyBlixsethl.
)
19
lnshort,BlixsethaccusedattorneyStevenBrownofbreachinghisfiduciaryduties
20 to Blixseth and ofEcooperating with Mr.Blixseth'sopponentsto concealhis own
21 malpracticeand asrequested by said opponentsthen lied underoath to assistthose
22 OpponentsgainajudgmentagainstMr.Blixseth.''ld.at!3.
23
BankruptcyJudgeKirscher'sflatlyrejectedsimilarclaimsbyBlixsethinAP-14.
24 SeeRJN,Ex.D (Memorandum ofDecision).InhisAugust2010Order,JudgeKirscher
25
26
27
28
concludedthat:
//
//
//
6
NOTICEOFMOTIONAND MOTIONFOR SANCTIONS;DECLARATION OF
BRIANA.GLASSER
1
2
3
4
5
6
7
8
Blixseth claimsthatBrown'sallegedviolationsofBlixseth's
attorney-clientprivilegehastaintedeveryaspectofthetrialin
thismatter.Giventheseriousnessoftheallegation,theCourt
instructedtheCommitteeto initially producecopiesofthose
emailscommunications ...thatoriginatedfrom Brown.The
CommitteecompliedwiththeCourt'srequest....TheCourt
carefullyreviewedeachoftheemailsandfound...absolutely
no evidence that Brown violated Blixseth,s attorney-client
privilege.Insum,Blixsethfailedtoshow anyactualdisclosure
ofattorney-clientcommunication. Blixseth'sareumentson
thispointwerenothinebutbaselessalleeationsintendedto
<sderailtheseproceedines.''
9 lnreYellowstoneMountainClub.LLC,436B.R.at636-37(emphasisadded).
10
Morerecently,asmentioned above,theMontanaDistrictCourtconcludedthat
11 $(a)1lofBlixseth'sclaimsaresubjecttotheBartondoctrine,andnoexceptionsapply.
12 SinceBlixseth didnotfirstseek leavefrom theBankruptcy Courtbeforehefiledhis
13 complainti
nthedistrictcourt,theCourtdoesnothavesubjectmatterjurisdictionoverhis
14
15
16
17
18
19
20
21
22
23
24
25
claims''intheDismissedLawsuitAgainstProfessionals.Brown, F.Supp.2d. ,
2012WL691598,at*22.
Throughoutthesefrivolousandvexatiouslitigationproceedings,Blixseth andhis
attorneyshavesentasteady stream ofintimidating emailsand letters. Forexample,
Blixseth'scounsel,ChristopherJ.ConantandPhilip H.Stillman,madethefollowing
statementsto thelawyerforthebanltruptcy trustee ofMr.Blixseth'sex-wife, Edra
Blixseth:
lfyouhavesimplytakengEdra'sjrepresentationsatfacevalue
then1questionyourfulfillmentofdutiesasalawyerunderthe
MontanaRulesofProfessionalConduct. . . . 1willnotethat
you have not denied Mr. Samson has had ex parte
communicationswithJudgeKirscherandhisstaffconcerning
theBlixsethsortheYellowstoneMountain Club. We look
forward to receiving these documentsthrough thediscovery
processandquestioningMr.Samsonathisdeposition(ifthe
26
caseevergetsthatfar).
27 SeeRJN,Ex.K atExhibitA (Emailfrom PhilipH.Stillman,Esq.
,Blixseth'sattorney,to
28 DaveCotner,theLawyerforhisex-wife'sbankruptcy trustee, an Attorney at
7
NOTICEOFMOTIONANDMOTION FORSANCTIONS;DECLARATION OF
BRIANA.GLASSER
5
6
11(or7011asthecasemaybe)againsteverysinglepersonand
lawyerthatcontinuesto assertthesefrivolousclaimsagainst
him.
7 Seeid.
,(Emailfrom PhilipH.Stillman,Esq.toDaveCotner,Oct.22,20116:
27p.m.).
8
C. Blixseth'sAttacltsonPoliticians
9
Inanotherproceeding,BlixsethaccusedtheGovernorofMontanaandhisstaffof
10 influencinglegalmattersagainsthim throughtheMDOR. Hiscounselopinedduringa
11 hearingthat,tltqogainsupportforhisplansfortheClub,Mr.Byrne(ofCrossHarbor)met
12 withtheGovernorofMontanaandhisstaff....Notsurprisingly,duringtheYellowstone
13 Clubbankruptcy,theGovernormadepublicstatementscriticalofMr.Blixseth,'' See
14 RJN,Ex.E(OppositiontoMotiontoQuashSubpoenas),at7-8.
15
Blixseth's counsel added during that same hearing that the Govemor was
16 essentially misusing the MDOR,and thatthe IGMDOR doesnotexistin avacuum,
17 independentfrom otherareasofMontana'sExecutiveBranch. Itisofcoursepal4ofa
18 much largerorganization:theadministrativebranch ofthegovernmentoftheStateof
19 Montana. Mr.BlixsethbelievesthattheMovantshadnumerousdiscussionswith high
20 rankingofficialsfrom theStateofMontanaoutsideofMDOR,relatingtoMovants'and
21 Montana'scommonadversary.Mr.Blixsethfurtherbelievesthatthesediscussionsplayed
22 aroleinMDOR'Sunprecedentedfilingofaninvoluntarybankruptcypetition.''ld.at1223 13.
24 //
25 #
26 //
27 //
28 //
8
NOTICEOFMOTIONANDMOTION FORSANCTIONS;DECLAM TIONOF
BRIANA.GLASSER
D. Blixseth'sCurrentAttackontheTrustee
OnMarch9,2012- nearl
yseken(7)yearsaflerBlixsethclaimsthatvarious
3
4
5
6
7
8
9
10
11
12
13
14
15 BlixsethintheAmendedJointPretrialOrder(pretrialOrder'')filedonFebruary 17,
16 2010.SeeRTN,Ex.F(PretrialOrder).ThePretrialOrderwasapprovedbytheCourtthe
17 nextday,onFebruary18,2010.SeeRJN,Ex.G(Order).Amongtheitemsapprovedfor
18 trialwerethefollowing:
19
(1)SsWhethertheTrust'scounterclaimsagainstBlixsethare
2()
barredbytheTrust'slackofstandingbecauseitiscontrolled
bvapartvwhoparticipatedinthealleaedlvbadbehavior'';
21
and
22
23 2Blixsethhas,however,madeahabitofthreateningbankruptcytrustees. See,e.g.slUN,
Ex.K,atExhibitA (Emailfrom ChristopherJ.Conant,Blixseth,sCounsel,toDavid
24 Cotner,CounselforRichardSamson,Blixseth'sex-wife'sbankruptcyattorney,Oct.22,
2 2011at4:32p.
m.)(tkf'
heonlyreasontheTrusteeisseekingtokeepitintheMontana
5 bankruptcycourtisbecauseheandhisattorneysknow thatthejudgethereisopenly
26 biasedagainstMr.Blixseth....'');seej.
s(Emailfrom PhilipH.Stillman,Esq.toDavid
cotner,CounselforRichardSamson,Blixseth'sex-wife'sbankruptcyattorney,Oct. 25,
gy 2
0115:59p.m.
)(Mr.Blixsethintendstoholdyouandyourfil'
m andtheTrusteeliable
forallcosts,attorney'sfeesandotherdamages...throughsanctionsandamalicious
28 prosecutionmotion.D
').
9
NOTICEOFMOTION ANDMOTIONFORSANCTIONS;DECLAM TION OF
BRIAN A.GLASSER
1
2
3
4
(2)(CWhethertheTrust'scounterclaimsagainstBlixseth are
5 SeeRJN,Ex.F,SectionsII(C)(14)andV1I(26and29)(emphasisadded).
6
TheBankruptcyCoul
'
tconsidereda11oftheseclaims,andunambiguouslyrejected
7 them.Toquotefrom thedispositivepassagefrom theBankruptcyCourt'mainopinion,
8 which waspublishedaftertheBankruptcy Courtconducted atwo-weektrialoverthe
9 courseofseveralmonths:
10
11
Sinceitsinception,thelargestcreditorinthiscasehasbeenCredit
12
SuisseandthePrepetitionLenders.YCLT isonlvasuccessorof
theDebtors.Blixseth hasshown no evidenceto sueeestanv
13
wrone doin: bv the Debtors. Similarlv. YCLT is not a
14
successorin interesttoEdra and theCourt.todate.hasnot
aereed with Blixseth's erand conspiracv theorv reeardine
15
BvrneandEdra.Thus.theCourtisnotconvincedthatYCLT
16
hasuncleanhandsinthismatter.Moreover,whileCreditSuisse
waspermittedtoappointfourofthesevenmemberstotheTrust
17
AdvisoryBoard,theCourtisnotconvincedthatCreditSuisse
18
controlsYCLT.The Courtalso aereeswith YCLT thatno
basisexistswhatsoeveruponwhichanymisconductthatmav
19
havebeeneneaaedinbvCreditSuisseshouldbeimputedupon
20
YCLT.
21
22 lnreYellowstoneMountainClub.LLC,436B.
R.at674-75(emphasisadded).
23
Despitetheserulings,anddespitetheadverseMemorandum ofDecisionentered
24 againsthim,BlixsethhasattackedthisdulyappointedTrusteepersonallyforconspiracy.
25 AndBlixsethadditionallyincludesaclaim underRICO forSixBillionDollars.Thisis
26 thefirsttimethattheTrusteehasbeennamedasaconspirator,andhehasbeennamedin
27
28
10
NOTICEOFMOTIONANDMOTION FORSANCTIONS;DECLARATION OF
BRIANA.GLASSER
m'
1 hispersonalcapacity.3
2 111. LEGALSTANDARDS
3
SsFiling a complaintin federalcourtisno tritling undertaking.An attomey's
4 signatureonacomplaintistantamounttoawarrantythatthecomplaintiswellgrounded
5 infactand(existinglaw'(orproposesagoodfaithextensionoftheexistinglaw)andthat
6 isnotfiledforanimproperpurpose.''Christianv.Mattel.lnc.,286F.
3d1118,1127(9th
7 Cir.2002).Whereallegationsinacomplaintarefacmallygroundless,itisappropriateto
8 sanctiontheclientaswellastheattorneywhosignsandtilesthecomplaint.SeeSkidmore
9 Energy,Inc.v.KPMG,455F.3d564,568(5thCir.2006)(affirmingsanctionsagainsta
10 clientforthenumerousfactuallygroundlessallegationsintheirComplainf'
).
11
tkGgcjourtshaveinherentpowertodismissanactionwhenapartyhaswillfully
12 deceived the court and engaged in conduct utterly inconsistent with the orderly
13 administrationofjustice.'''Leonv.lDX Sys.Corp.,464F.
3d951,958(9thCir.2006)
14 (quotingAnheuser-Busch.Inc.v.NaturalBeverageDistribs.,69F.
3d337,348(9thCir.
15 1995). A findingof(tcwillfulness,fault,orbadfaith'isrequiredfordismissaltobe
16 proper.''ld.ddunderitsCinherentpowers,'adistrictcourtmayalsoawardsanctionsinthe
17 form ofattorneys'feesagainstaparty orcounselwho acts$inbad faith,vexatiously,
18 wantonly,orforoppressivereasons.' 1d.at961(citingPrimusAuto.Fin.Servs.Inc.v.
19 Batarse,115F.3d644,648(9thCir.1977).
20
28U.S.C.j1927provides,C
Anyattomeyorotherpersonadmittedtoconduct
21 casesinanycourtoftheUnitedStates...whosomultiplestheproceedingsinanycase
22 unreasonably and vexatiously may berequired by thecourtto satisfypersonally the
23
24 3Blixsethhas,however,madeitahabitofthreatingMr.Kirschner.See.e.g.,Declaration
'
25 ofBrianA.Glasser(tGGlasserDec1.''),Ex.1(Letterfrom PhilipH.Stillman,Blixseth's
attorney,toMr.KirschnerofSept.20,2011)(statingthat,(uifyouintendtofilethisaction,
26 pleasegivenoticetoyourinsurancecarriersofMr.Blixseth'sintendedclaim againstyou,
27 yourfirm,and a11attorneyscooperating in thefiling ofyourfrivolousandbad faith
28
complaint.,,).
11
NOTICEOFMOTIONANDMOTION FORSANCTIONS;DECLARATIONOF
BRIANA.GLASSER
*.
1 excesscosts,expenses,andattorneys'feesreasonablyincurredbecauseofsuchconduct.''
2
3
4
5
ld.Anawardofsanctionsunder28U.S.C.j1927orthedistrictcourt'sinherentauthority
arewithinacourt'spowerswhen(
counselhasCwillfullgy)abusegdqjudicialprocesses'or
othenviseconductedlitigationinbadfaith.''Toombsv.Leone,777F.
2d465,471(9th
Cir.1985)(quotationomitted).
6
7
8
9
10
11
12
13
IV. ARGUMENT
A. BlixsethHasFiledaLeeallvFrivolousCounterclaim
EveryaspectofBlixseth'sCounterclaim is,onitsface,broughtinbadfaith.First,
Blixseth'sCounterclaim isfrivolousbecauseBlixsethfiledhisCounterclaim againstthe
TrusteepersonallywhentheTrusteepersonally isnottheplaintiffinthismatter.Mr.
Kirschnerhasappeared,andwillcontinuetoappearinanycourt-approvedongoingcase,
inhisroleastheTrusteeoftheYCLT pursuanttoacourt-approvedappointmentand
specificassignmentofthisunderlyinglawsuit'
,hehasnotappeared in any individual
'
14 capacity.TheNinthCircuithasexplainedthat$(a)counterclaim underRule13mustbe
15 againstan topposingparty.'Thusaparty suedby atrusteemay assertacounterclaim
16 againstthetrustee,butonly ifthetrusteeisanopposingparty'withinthemeaningof
17 Rule13.ltiswell-establishedthatwhenapartysuesinhisrepresentativecapacity,heis
18 notsubjecttocounterclaimsagainsthim inhisindividualcapacity.
''lnreAdboxsInc.
,
19 488F.3d836,840(9thCir.2007)(citationsomittedl;seealsoBenderv.Williamsport
20 AreaSch.Dist.,475U.S.534,543n.
6(1986)(GtActsperformedbythesamepersonin
21 two differentcapacitiesaregenerally treatedasthetransactionsoftwodifferentlegal
22 personages.'').
23
Moreover,theunderpinningsofBlixseth'sallegationsagainsttheTrusteearenot
24 warrantedby existinglaw,oragood faithargumentforan extension,modificationor
25 reversalofthesame.Ontop ofhisgroundlessdecisiontosuetheTrusteepersonally,
26 Blixseth totally ignored the seminalholding ofthe Barton Doctrine. Hisbrazen
27 Counterclaim seekingatleast$6,000,000,000(SixBillionDollars)indamagesagainstthe
28 Trusteepersonallywasfiledjustthreedays12afterhissimilarconspiracy-basedclaims
NOTICEOFMOTIONANDMOTIONFORSANCTIONS;DECLARATION OF
BRIAN A.GLASSER
1
2
3
4
5
6
againstotherbankruptcy-relatedofficialsandappointeesweredismissedinaBlixsethv.
Brown,etal., - F.Supp.2d- ,2012WL 691598,at*1(D.Mont.Mar.5,2012).
Moreover,there-filingoftheCounterclaim - aftertheinitialfilingwasdismissedona
technicality- gaveBlixsethnumerousmoredaystoretlectontheBartonDoctrine.
AspartofhisCounterclaim,BlixsethfrivolouslybroughtacivilRICO conspiracy
count,whichisthettlitigationequivalentofathermonucleardevice.'Ouachv.Cross,No.
'
7 CV-03-09627,2004WL2860346,at*4(C.D.Cal.June10,2004).Hedidthisdespite
8 blatantly failing to meetbasicpleadingrequirements,such asproperly alleging each
9 elementoftheRICO counterclaim andsatisfyingtheheightenedrequirementsofRule
10 9(b).Instead,Blixsethallegesinjurythatheallegedlysufferedin2005,longbeforeMr.
11
12
13
14
15
KirschnerbecameaTrusteein2009.ThefailingoftheCounterclaim isnotduetomere
pleading deficiencies,however;even a cursory investigation of that facts would
demonstratethatthereisnobasisfortheclaim,giventheelementsoftheclaim versusthe
actualfactsinthiscase.
Blixseth didnotallegeanyfactstoestablishthattheTrusteeeverenteredintoan
16 agreementwithany otherallegedco-conspiratortoachieveanyunlawfulobjectivein
17 general,ortoparticipatein any RICO enterprisein particular,''whicharekeyRICO
B. Blixseth'sCounselShouldbeSanctionedUnder28U.S.C.j1927
6
A section 1927 sanction requires(Cevidenceofbad faith,impropermotive,or
7 recklessdisregardofthedutyowedtothecourt.''Edwardsv.GeneralMotorsCorp.,153
8 F.3d242,246(9th Cir.1998)(lGwillfulcontinuationofasuitknowntobemeritless''
9 satisfiessection1927).Ssvexatious''isdefinedasGtlackingjustificationandintendedto
10 harass.''OvernightTransp.Co.v.Chicagolnd.Tire.Co.,697F.2d789,795(7thCir.
11 1983).
12
S$A party (demonstratesbad faith by delaying or disrupting the litigation or
13 hamperingenforcementofacourtorder.'''Leonv.IDX Sys.Corp.,464F.3d951,961
14 (9thCir.2006)(quotationomitted).Cd
Badfaithispresentwhenanattorneyknowinglyor
15 recklesslyraisesafrivolousargument,orarguesameritoriousclaim forthepurposeof
16 harassinganopponenti''WestCoastTheaterCom.v.CityofPortland,897F.2d 1519,
17 1528(9thCir.1990),
.seealsoToombsv.Leone,777F.
2d465,471(9thCir.1985)(court
18 neednotmakeexpressfindingsastocounsel'sstateofmindbecauserecordcontained
19 suffcientevidencetosupportadecisionl;Shafiiv.BritishAimays.PLC,83F.3d566,
20 571(2dCir.1996)($;Thefilingofrepetitiveandfrivoloussuitsconstitutesthetypeof
21 abuseforwhich an injunction forbidding furtherlitigationmay bean appropriate
22 sanction.'').
23
Blixseth and hiscounselflagrantly ignored a known and clearNinth Circuit
24 precedent,theBartonDoctrine,byfilingtheinstantCounterclaim withoutobtainingleave
25 oftheBankruptcyCourt,despitehavingextratimetoretlectduetoafailuretocomply
26 withtheLocalRulesandre-filing.Thisaloneconstitutessufficientevidenceofbadfaith
27 asdescribedbytheNinthCircuitinLeon,464F.3dat961(tdemonstratesbadfaithby
28 delaying or disnzpting the litigation or14hamperingenforcementofacourtorder)
NOTICEOFMOTION AND MOTIONFORSANCTIONS;DECLARATIONOF
BRIANA.GLASSER
'
1 towarrantsanctions.
2
Blixseth and hisattorneyshave concocted conspiracy theory afterconspiracy
3 theory,refusedtoacceptfindingsagainsthim,accusedjudges,l
aw clerks,andlawfirms
4 ofconspiring againsthim,and perpetuated proceedingsby filing repetitive lawsuits
5 throughoutthecountrywastingjudicialresources.Accordingl
y,Blixsethandhisattorneys
6 shouldbesanctionedandpreventedfrom perpetuatingthesedilatoryandabusivetactics.
7
C. BlixsethContinuestoRelitieateIssuesthatHaveAlreadvBeenDecided
8
Asreferenced,anawardofsanctionsunder28U.S.
C.j1927orthedistrictcourt's
9 inherentauthorityarewithinacourt'spowerswhendlcounselhasiwillfullly)abuseld)
10 judicialprocesses'orotherwiseconductedli
tigationinbadfaith.''Toombsv.Leone,777
11 F.2d465,471(9thCir.1985)(quotationomitted).
12
InhisCounterclaim,Blixsethisinbadfaithforattemptingtorelitigateissuesthat
13 havealreadybeendecidedagainsthim,demonstratingbothanabuseofprocessandbad
14 faith.Forinstance,Blixsethandhiscounselltnowingly andfalsely allegethatCredit
15 SuissecontrolstheTrustandtheTrusteeisaSpawn.'
'Counterclaim 11
57,50(e),100,103
16 n.2,121-23,137-38,141(1),142-44,159,163-64.Blixsethallegesthat:
17
18
19
20
21
22
23
CreditSuisseandCrossllarbor. .. appointedfiveoftheseven
members ofthe YCLT Advisory Board,from which Mr.
Kirsclmertakeshisdirectionandforwhom heactsonbehalfof.
Mr.Kirschner,atalltimesrelevant,knowsthatinhiscapacity
astrusteefortheYCLT anditsillegitimatecollectionsefforts
againstMr.Blixseth,thathe is acting asthe toolofand
committee overacts for CreditSuisse and CrossHarborto
implementandexecutetheiron-goingRICO enterpriseagainst
Mr.Blixseth.
24 Counterclaim !7.lnsimilarbadfaith,BlixsethoutrageouslyassertsthatMr.Kirschner
25 ttisandhasbeenfullyawarethatheisbeingusedby (CreditSuisse)to continueto
26 perpetuatecontinued effortsto collectthe gcreditSuisseqdebt''andaddsthat$&Mr.
27 KirschnerknowinglyperpetuatesCreditSuisse'sfraudulentschemeagainstMr.Blixseth
28 becauseMr.Kirschnerstandstoearnavery15generouscontingencyfeeforamountsthat
NOTICEOFMOTIONANDMOTIONFORSANCTIONS;DECLAM TION OF
BRIANA.GLASSER
'
uncleanhandsinthismatter. ...g'
TqheCourtisnotconvinced
thatCreditSuissecontrolsYCLT.TheCourtalsoagreeswith
9
YCLT that no basis exists whatsoever upon which any
10
misconductthatmay havebeen engagedin by CreditSuisse
shouldbeimputeduponYCLT.
11
12 InreYellowstoneMountainClub.LLC,436B.R.at674-75.Despitethisruling,Blixseth
13 continuestoattacktheTrusteepersonallyandclaim thatheisapawnofCreditSuisse.
14
Mr.Blixsethadds,inbadfaith,thatheisaGdirectvictim oftheRICO enterprise..
15 .''Counterclaim at!15(emphasisinoriginal).Infact,theBankruptcyCourthasstated
16
17
18
19
20
clearly,-l-heCourtisnotpersuadedbyBlixseth'sattemptstopainthimselfasavictim in
theseproceedings,particularlywhereBlixsethwasatthecenteroftheDebtor'sfinancial
woes.''lnreYellowstoneMountainClub,LLC,415B.R.at790.
Blixseth also spendspages alleging factsthatpredate any involvementofthe
Trusteein 2009.Forexample,Blixseth describesthat,CBeginning in2003 and2004,
21 CreditSuisseFirstBostondevisedafinancingplan....''Counterclaim at!16.The
22
23
24
25
26
27
28
Counterclaim containsnofactualallegationsthatsupportimputationofconductallegedly
occurringin2003totheTrustee,whowasonlyappointedin2009.
Theseandotherattemptstorelitigateissuesalreadydecidedagainsthim warrant
sanctionsagainstBlixseth.
//
//
//
16
NOTICEOFMOTIONANDMOTIONFORSANCTIONS;DECLARATIONOF
BRIANA.GLASSER
*1
1 V. CONCLUSION
2
Basedontheforegoing,andtheargumentssetforth in theTrustee'sMotionto
7 andhiscounsel,(3)counselfortheTrusteeshallhavetwoweekstosubmitfeeandcost
8 petitions.
9
Dated:April11,2012
BIENERT,MILLER& KATZMAN,PLC
10
By: S/StevenJavKatzman
StevenJayKatzman
11
AttorneysforPlaintiff
MARCS.KIRSCHNER,asTrusteeofthe
12
YellowstoneClubLiquidatingTrust
13
BAILEY & GLASSER LLP
,
14
BrianA.Glasser
AttorneysforPlaintiff
15
MARC S.KIRSCHNER,asTrusteeofthe
16
YellowstoneClubLiquidatingTrust
AdmittedProHacVice
17
MULLIN HOARD & BROWN,LLP
18
StevenL.Hoard
JohnG.Turner
19
AttorneysforPlaintiff
20
MARC S.KIRSCHNER,asTrusteeofthe
YellowstoneClubLiquidatingTrust
21
AdmittedProHacVice
22
23
24
25
26
27
28
l7
NOTICEOFMOTIONANDMOTIONFORSANCTIONS;DECLARATION OF
BRIAN A.GLASSER
1
CERTIFICATEOFSERVICE
2
1,ColeenGrogan,declare,
3
4
Thatlam acitizenoftheUnitedStatesandam aresidentoremployedinOrange
County,Califomia;thatmy businessaddressis903CalleAmanecer,Suite350,San
5 Clemente,Califomia92673;thatIam overtheageof18andnotapartytotheabove6 entitledaction.
7
ThatIam employedbyamemberoftheUnitedStatesDistrictCourtfortheCentral
8 DistrictofCaliforniaandatwhosedirection1causedserviceof:NOTICEOFMOTION
AND MOTION FOR SANCTIONY' MEMOM NDUM OF POINTS AND
9 AUTHORITIESIN SUPPORT THEREOF;DECLAM TION OFBRIAN A.GLASSER
ontheinterestedpartiesasfollows:
10
BY ELECTRONIC MAIL:byelectronicallyfilingtheforegoingwiththeClerkofthe
11 DistrictCourtusingitsECF System pursuanttotheElectronicCaseFilingprovisionof
12 theUnitedStatesDistrictCourtGeneralOrderandtheE-GovernmentActof2002,which
electronicallynotifiessaidpartiesinthiscase:
13 ChristopherJ.Conant
14 cconant@conantlawyers.
com
15 thefo1
celifyunderpenaltyofperjuryunderthelawsoftheUnitedStatesofAmericathat
regoingistrueandcorrect.
16
17 ThiscertificatewasexecutedonApril11,2012,atSanClemente,California.
18
/S/C0IeenGrogan/s/
ColeenGrogan
19
20
21
22
23
24
25
26
27
28
18
1 StevenJayKatzman(CaliforniaBarNo.132755)
2s
ka
zmanT@b
mk
attorn&eyKATZMAN,
s.com
Bl
st
xsR
,MI
LLER
pLc
3 903CalleAmanecqr,Spite350
SanClementeCallfornla92673
4 Tel:(949)36#-3700+ax:(949)369-3701
5 BrianGlasser
6b
glaLEY
sser@b
iley
gla
sser.c
om
BAI
&a
GL
AS
SER,
LLP
7 209CapitolStreet
Charleston,WV 25301
8 Tel:(304)340-2282/17ax:(304)342-1110
9 stevenL.Hoard
1() s
hoard@mhba.com
MULLIN HOARD & BROWN,LLP
11 P.0.Box31656
Amarillo,Texas79120-1656
12 Tel:(806)372-5050+ax:(806)372-5086
13 AttorneysforPlaintiffMARCS.KIRSCHNER,asrjwstee
14 oftheYellowstoneClubLiquidatingTrust
15
IN THEUNITED STATESDISTRICTCOURT
16
FORTHECENTRALDISTRICTOFCALIFORNIA
17 MARCS.KIRSCHNERO.ASTRUSTEE
CaseNo.cv-11-08283GAFSPx
OFTHEYELLOWSTONECLUB
DECLARATION OFBRIAN A
18 LIQUIDATINGTRUST,
ctwssEltINSIJPPORTOFYCL
. T'S
19
Plaintiff,
20 V.
21 TIMOTHY L.BLIXSETH,
22
Defendant.
23 TIMOTHY L.BLIXSETH,
24
25
counterclaimant,
.
26 v
MARC S.KIRSCHNER,DOES1-100,
27
28
Counterclaim Defendant.
L
'
XoticeOfMotion,MotionforSanctions
ooncurrentlyherewithq
andRequestforJudicialNoticefiled
Date: uay2j,::12
Time: 9230a.m.
Ctrm: 740
Location:RoybalFed.Bldg.
2
5E.TempleSt.
Iw5
osAngeles,CA
Judge: Hon.Gary.A Fees
'
havebec-ol-nepersonallyfalhhiliarwitl)ahostof
'docul'
nentsconcel-lhi11gYelloNvstoneClubl-elatcdJitigation:inclLiclillgcol-l-espolltlencerroll-ttllccotllseloI
'
-''
f-ilnothyI-.l:.
rIixset11
l2
(t1
E
)liysetl
l'')totl
le-l
-rustee.
l3
.
AI-nongthe('-l(
.
)c.t1Inentswithw17iclllannpersona!ly('
a!!1ilial-isE,x1)ibit
l4
attacl
tedlel
eto.(See.Ex.(.)ExI
'
)ibit1isatrt
leal
7dcol
-rectcopyof
'aIetter1
1
()lllBIixset1
1's
l5
,
,.
.
coullsel,I'l
ni1ipH.Stil1I'
nan,tothel'l-usteedatedSept.20,20Il.(1(
.
1.)
l6
Ideclal-eundet-penalty()l
-pellut-yttlatthe(.
oregoingis(l-ue0.1ndcot
-t-cct.
..
l7
l8
.
c7
l7.
1ted.
-A.priII1,2O12
l)y:
-
I9
20
21
22
23
24
25
26
27
28
sl
-janA.Glassel
.
EX H IB IT
((j11
PTHYI
LDIP
,S
STILLMAN
A
l
NRH
MI
A
AD
NM
DI
CAE
LI
FO
N
ASAGHUSETTS
A
z
l
I
N
cos
uppeuc
El
xL
Ll
I
Tl
i
Gc
AI
'
I
ON
as4
r
ROA
.S9U
T0E
CoAMRA
DNIFCFH,E
CSA'
LE
IF
RVNEI
A
2I
0
7B
September20,2011
P'
lz4EMAIL
MarcS.Kirschner
TrusteeoftheYellowstoneClubLiquidatingTrust
18East94111Street,SuiteIA
NewYork,NewYorkl0l28
Re: Kirschner#.Blxseth
CaseNo.: Unfiled
DearMr.Kirschner:
IhavereceivedyourSeptember12,2011lettertomyclient,TimothyL.Blixseth,
regardingnotesthathadoriginallybeenexecutedbyhim infavorofBlixsethGroup,lnc.
(
d<
BGl''
).AsyouareclearlyawarethatMr.Blixsethi
srepresentedbycounsel,donot
communicatedirectlywithmyclientagain.
Turningtothesubstanceofyourletter,asyouunquestionablyknow,thenotesthatyou
refertoinyourSeptember12,2011letterhavebcencancelledbyBG1asofAugust13,2008,
pursuanttotheAmendmenttotheMaritalSettlelnentAgreementandtheAssumptionAgreement
signedbyBG1.ThecancellationofbothnoteswasnotonlyapprovedbyBG1andreplacedby
notesexecutcdbyEdraBlixseth,butthecancellationofthenoteswasapprovedbytheCalifornia
SuperiorCourtinanOrderdatedJuly3,2008,andmergedintoafinaljudgmentdatedOctober7,
2003.Inaddition,asyouarealsoawaresincetheYellowstoneClubLiquidating'
rlustwasthe
plaintiffinAdversaryProceeding09-0014,thebankruptcycourtruledinthatcasethatthefunds
receivedbyMr.BlixseththroughthepromissorynotesonwhichyounowseektopersecuteMr.
Blixseth,weredistributionstoBG1'andMr.Blixseth.'Yourthreatsthereforehavenolegalor
factualbasisandyouhavenogoodfaithbasisforsendingyourdemandlettertomyclient.
TheProvisionsInTheMSABarAnyActionOnTheNotes.
TheAmendlnenttotheMSA,113(i)providedthat
PetitionerandRespondentshallenterintoanassumption
agreementbywhichPetitionershallagreetoassumeallofthe
BGIJndebtednessandsaveandholdRespondentcompletely
Releases,!(4(b),
Finally,BGlexecutedanAssumptionAgreementthatbothexpresslycancelledtheNotes
andreleasedMr,BlixsethfromanyclaimsbasedupontheNotes,AssetforthintheAssumption
Agreement,114,''BGIherebyreleasesRespondentfromanyanda11claims,obligationsor
liabilitiesassociatedwiththeBGIIndebtedness.Simultaneouslyherewith,BGlis
deliveringtheoriginalRespondentNotestoPetitionertobemarked'Supercededby
ReplacementNote'''
A1loftheprovisions()ftheMSA,thevariousamendluentsandtheWaiversandReleases
werespecificallyapprovedbythcCaliforniaSuperiorCourtafteranevidentiaryhearingonJuly
3,2008andthatapprovalwasmergedintoaf'
inaljudgmentonOctober7,2008.ThoseGndings
arethereforebothresjudicataandcollateralestoppelonyou,astheassigneeofBLX'Srights(01'
lackthereogintheNotes.
ThenotesaregovernedbyCalifornialaw.CalitbrniaCommercialCodej3604(a)states'
.
Apersonentitledtoenforceaninstrument,withorwithoutconsideration,may
dischargetheobligationofapartytopaythe,instrument(1)byanintentional
voluntaryact,suchassurrenderoftheinstrumenttotheparty,destruction,
mutilation,orcancellationoftheinstrument,canctllationorstrikingoutofthe
party'ssignature,ortheadditionofwordstotheinstrumentindicatingdischarge,
or(2)byagreeingnottosueorotherwiserenouncingrightsagainstthepartybya
signedwriting.
Asshownbythef
5nalversionoftheNotesasattachedhereto,andunliketheNotesthatyou
ffaudulentlyattachedtoyourlettertomyclient,theNoteshaveclearlybeenmutilatedand
cancelledasprovidedforinsubsection(1,),Inaddition,pursuanttotheAssumptionAgreement
txecutedbyBGI,BGlexpresslyreleasedMr.Blixsethfromanyresponsibilityfol'repaymentof
theNotes.TotheextentthatyoudonotbelievethattheNotesarecancelledundersubsection
(l),theyarealsocl
earlycancelledpursuantt
osubsection(2)bythewrittenAssumption
AgreementwhereinBG1agreesnottosueMr.Blixsethandclearlyrenouncesanyrightsagainst
Mr,Blixseth.
Moreover,itissettledlawthatonlytheholderoftheoriginalnotescanbringanactionon
them,Youareclearlynotevena'tholder''oftheNotes)aswhateverNotesyouclaimtopossess
arenotthecancelledoriginalnotes.Therefore,yourIetterseekingcollectiononthesecancelled
notesiswithoutanylegalfoundationwhatsoever. Seee.
g.CaliforniaCommercialCodej3604.
TheJudqmentlnAP 14BalsYourPurportedClaim.
Inaddition)asyoualsoknowsinceyouweretheplaintiffinAP-14,thebankruptcycourt
hasalreadyruledinfnreFc/lr?w.
s'lt??7cClubcfal,AdversaryProceeding09-00l4thatthemoney
receivedbyMl-.Blixsethffom YellowstoneClubthroughBGIwerenotispromissorynotesy''but
werenstead,S'distributions.''InitsAugust16,2010MemorandumofDecision,thebankruptcy
courtheld-asarguedbyyou-that$'FheevidencecearlyshowsthattheBGInoteswerenothing
butasham todisguiseBlixseth'sdistributions''AP14MemorandumofDecision,p,77.The
bankruptcycourtrepeatedlycollapsedthenotesfromBGItoYellowstoneClubandfromMr.
BlixsethtoBG1asnothingmorethanawayofdisguisingtheallegeddistributiolls.YCLTwas
notboundbythejudgnlentinAP14?Ifso,letmeknowi
mmediately,sot
hatIcaninformthe
Distri
ctCourtthatitisnowyourposi
tionthatAPl4isnotaGnaljudgnlent.
YCLTlsDefraudingTheB1,XBankruptcyEstateAndBLX'SUnsecuredCreditors.
GiventheUniforlnCommercialCodedefenses,yourknowledgethattbeNoteshavebeen
cancelled,andthebankruptcycourt'sfindinginAPl4thatthemoneytakenbyMr.Blixsethwas
adistributionratherthanaloannegatesanyargumentthatYCLTisa'dl-lolder''pursuanttothe
assgnment.Moreover,the,bankruptcycourtfouodthattheNotesmerelyreflectedmoneythal
EdraBlixsethowedtoherselfandthercforedidnotneedtoevenbelistedonherbankruptcy
schedules.Sinceyouknowthatyourclaimsareatbestfi-ivolous,youareknowingly
participatinginaschemetodefraudBLXcreditors. First,youarefalselyrepresentingthatthel-e
arebonafdeclaimsagainstMr.BlixsethbasedontheNotesthatwouldgotopaythegeneral
unsecuredcreditors,whcnyouknowthattheoppositeistrue, Second,byactingonbehalfofthe
BLXestate,youareafiduciaryforthegeneralunsecuredcreditors.Byfailingtodisclosethat
youractionssubjecttheBLXestatetonotonlyanawardofattorney'sfees,a1lcosts,andexpert
witnessfees,butalsoa11otherdamagesproximatelysufferedbyMr'Blixsethcausedbyyour
assertionofthesefrivolousclaimsandthereforegreatlydiminishanyfundsavailabletothe
unsecuredcreditors,youarebreachingyourfiducial
-ydutiesandcommittingfraud.
E. NpsieOfPrpperJurisdictippAndVenue'
PleasebeadvisedthatMr.BlixsethhascommencedanactionagainstEdraBlixsethinthe
RiversidcCountySuperiorCourtonSeptemberl5,20l1,CaseNo.R1C l115247,relati
ngto
tlleNotesandherfailuretocomplywiththetermsoftheNotesassetfbrthinth:Assumption
Agreement.lnaddition,asyouknow fromthebankruptcycourt'srulinginAdversalyProceeding
10-0088,t
hebankruptcycourtdoesnothavesubjectmaterjurisdictionoveranyfrivolousact
ion
thatyoumightcommenceagainstMr,Blixseth. Thus,pleasebeadvisedthatapartfrolnany
sanctionssoughtasaresultofyourfilingthefrivolouscomplaintingeneral,Mr.Blixsethwill
seekhiscostsandattorney'sfeesfromyouforanyattempttoknowinglyfileyourfrivolous
complaintinthebankruptcycourtinMontanaoranyotherimpropercourtorvenue.
F. AdvisementOfMr.Blixsetly'sIntentionToSeekSanctionsAaainstYouPersonallv,And
Al1OtherPotential-l.yResponsiblePau
yties.
PleasebefurtheradvisedthattheforegoingisnottheentirtdiscussionofM,r.Blixseth's
legalpositionsandrights.However,1believethattheaboveissufGcienttoshowthatyourclaim
isfrivolous,bothlegallyandfactually,vexatious,andmadei
ecti
f
t
ho
frivolous,thisproposedlawsuithasalreadycausedMnBlixsn
eto
hb
ej
mo
tv
ioenb
aa
ld
di
sa
ti
rt
eh
s.
sA
anl
d
hu
asgh
forcedhimtospelldsignificantlegalfeesinconnectionwithyourbaselessthreats. He
faith'Thispatternofvexatiouslitigat
ionseparatelysubjectsyoutosanctionspursuantto28
U.S.C.j1927.
AlthoughboththeNotesandtheAssumptionAgreementhaveaprovisionforanawardof
attorney'sfees,notwithstandingthatprovisionforanawardofattorney'sfees)Mr.Blixsethis
treatingyourletterasaninunediatethreattofileafrivolousactionagainsthimbasedonthe
Notes.Shouldyoufollowthroughonyourthreats,hewill,ataminimum,havethecase
transferredtoacourtwithpropervenueandjurisdiction,andfileaMotionforSanctionspursuant
toRule11,28U.S.C,1927andtheCourt'sinherentsanctioningpowel'againstyou,your1aw
firmjanylawyersthatfiletheaction,andifappropriate,theBLXTrusteeandhislawyers.Upon
thesuccessfuldismissaloftheaction,hewillthensuea1Ipotentiallyresponsiblepartiesfor
maliciousprosecutiontorecoverhisfullmeasureofdamagesaboveandbeycndtheattorney's
feestllathewillrecovcr.
Therefore,ifyouintendtofilethisaction)pleasegivenoticetoyourinsurancecarriersof
Mr,Blixseth'sintendedclaimagainstyou,yourfirm,andal
lattorneyscooperatinginthefiling
ofyourfrivolousandbadfaithcomplaint.
dGovernyourselfaccordinglyl''
Verytrulyyours,
STILLMAN&ASSOCIATES
r v y/..,,/r:-77By;
PHS:np
cc; CharlesIlingle,Esq-(viae-lnail),
JohnTurner(viae-l
nail
)
PhilipH.Stillman,Esq.
Exhibit1
panell
:Manns
From:
Sent:
To:
Sutb
t:nts:
At
aj
cehcme
Mi
ch
el
Daoyy,
le
oye
per@b
g2i
-0
le0g8al
c
We
da
ne
sd
S(
em
pw
ted
mb
O3,
1.
;2o6m)
PM
j
m
a
n
n
s
@b
g
i
l
e
g
a
l
,
c
o
m
FW:
l
ysr-l
ogo.jpg;Document,pdf'
,Document.pdf
Pleaseprfntoutforfile
From:G,FrankGlabachgmai
lto:fglabach@linerl
aw,comj
Sent:Wednesday?September03,200812:03PM
To:mwdoyle@bgi-l
egal,com
Cc)Sandl'aMendell
Subject:
Pursuanttoyourrequest,attachedarecopiesofTim'sNotesinfavorofBGImarked'SupersededbyReplacementNcte'
asofthedateofthecl
osing.
Pl
easecontactmeifyouhaveanyquestlons.
'
;. (.'.!.'.k:
L''.INERYANKELEVITZSUN:HINE®ENSTREIFLLP
,
'
t
'
'
r
(
'
.
$
k
.
'
t
j
'
t
f
.
,
:
'
.
.
'
.
z
'
1I0()(1lelTdol)A.venuelI4thr.looli
:
'
r
y
i
.
,
;
t
?.'
;
.
.
.
'
$
.
,
>
1
:
'
i
.
.
i
L
:
y
7
f
k
'
r
:
.
'
7
.
a
r
l
-osA.ngeles,(.
NA90024.3503
J
!
,
i
:
3
:
'
1
.
.
?
,
?
.
j
3
.
'
.
6'
.
.
.
.J
f
i
$;
:
k
'
t
1
'
?
.
'
'
:
'
?
'
;
'
;
1
.I.
1
)1:i)
qk::
1
9J(
!
p.t5(q
1
.
:
z
t
,
;
i
r
y
i
:
h(
)-:
'
!4.
f
5(
:)t
:
l
.
.
.
j
k)
.
,
.
b
i'
't:it
.
1
*:3l0.500,:
)5O9
.
fdi
fax:31(
J.500,350l
fcul4-bah(
Qlinerlaw.cqm
.l
inerlaw.com
Noticeof-l3l
'ivilege/colpsdelltialityPrivilegedandConfidentialsnfornhationnlaybecolltailledinthislnessage.1fyollal'
enotl'
he
addrcsseeindicated5)1thislnessage(0,
.Itesponsiblefordeliveryofthelnessagetosuchpt
sl
-solll,youlnaynotcopyordelivertl3is
lnessage('
)anyone.Insucllcase,yot,shthulddestroythisnlessageandkindlynotifythesendf
zrbyl'eplyttlmail.Pleltseatlvise
ilmlmediatelyifyouol
'yourenlployerdoesnot'consell!tolllterlle,
tenlaiIftlrn-lessagesof-thisl
tind.Opinions,collclusionsantlolhe1'
ilhfblmlatfonfnthisI'
nessagel1)aldollotrelatelotheofficialbusiaessoflmy1'
11.
,
1)shallbeunclersfoodaslheitllcl
.givennorendorsedby
it.
11tSCircular230fnisclosure:Toensll
recolnpliancewithTreasuryDepartl
mentRegulations,weatviseyotlthat,ulllessothervse
expresslyilldicatedsanyfedel'
altaxadviceconlainttdin('
hisconpn'
tullicatioltwasnotintel3dtt
d01
-M'
fittentobeuse.
d:andcannotbe
used,fol'theptlrpnseof(i
)avoidfngtax-relatedpenaltiesulldel-theInternalRevenueCodeoI-applicablcstaluorIocall
'axIayv
provisionsor(i)pronlotiilg,Illarketingorreconpfnendingtoanotlerpartyanytax-l
'
elatedlllatteratdressedllerein,
Duplicate/.
,
)1/://1:1/
PROMISSORYNOTE
$58-305,)47.60
December3l,2006
1F'()R'
VAf
wlJE-RE.Cr'
-tV1:'I.
). tl1bcrsi'
!e(I,individtlallyandcf'lIec!ively(''Pay()r'')
prolnisestopaytotheol'
derf-11.LIX,-- IGR()l.I1'.INC..,at7l-53:1SalkaraRoad,Rancllo
h./liragt'
t.
,C.A9.2270:()ratsuchothe?placeasthu'
thol o lhisNote(''Payce'')n1ayfrt
m-nl.ilzlc
totilncdesigllal.
ei)1uzritil'
lg',th sun:01-FiftyEig !$'nThrceHundredFiveTllousancl
()lhe1.
1tlntlrcdFtlrtySevenand6 00D()llars($ 5.147,60)inlaq
wftl11'
noney(
71-tl'
.
lc
(.JnitedStategsu'ithinterestthej'/6*1.
1 ()1
'
1,
1lhut'
#lty( hisNoteuntilpaidattlqeratesetl.ol-tl'
)
belowacoluputcd('f'
N
1lmontl
hlyb-. Lcs,Intcrcst eachf'
ullcrilclldarnnonthduringtlletcrllt
ofthisNoteshallbecalctt1ate ontl
'
leLasis - .65or366-d1:
$),
.ycaral'
dtheactualnl.
llmbel
'
ofdaysiJ)(111)tlnontl.
f
Interestlt 'I'
1
peperanl
'
1ul
nintet
'
estraltheretlnde,
r('
f
Nt
7teI
tate')shallbeat
theAFRBlcndedR
'ate,
2. .
54.
'
z11-- .'I-l'
1epaylnent()f-princips-1. 1
4
.1accl-ucdinterestsl'
lalIbct'
nade
uptlnlvrittende1 .
),
1 fPayee.
3.
plicationofPay 'ts.Paylm.sshallbeapplicd'
flrsttothepayllentof
accrtledilqteres.
,secondsatthc..4 ',,
1ofP''
*' t()thepayll:enl()f-anylate.cllt
lrgesdlle
llereulldel' (l)ird,to(.
hcrc cl(Jnofrlnc'1
)1ofthisNote.
1*repaylnen qyol'l'
aay '
)ayitgobligati()11undel'
'l)iShl('
)teinftIIlori1
,
1part
atallvtiln 1-fh
rtln)ti11. o.ilmehvi I rel'
niu'
norpcnalty.
5. Iaatc-. ge.If-anyannountpayableheretlndel-ispaidn:orethanten(1(
))ttays
a *rthcduedkat1)u ()f,Payorpronpisestopayalatechargeof'Gvepercent(50.
,
6)ofthe
( inquentanlotull 1it)uidateddanlageglbrthccxtraexpenscil'
lhal'
ldIingpastdLlc
p
a
y
n
n
e
n
t
s
.
'
A. ? ?.efalllt;Rernedies.I1xdcf.aultisInadeint'
hepaylnelltol.anyanlotlntpl
r
tyablc
her'Ml). .xndue.thcjlsattheoplion(31*Payee,theelttireindeltednesscvidcncedllereby
sl'
j'
'lbu l
neil
nntedialel
ydueandpayablc-andaLIsuchanaountsnincltldingallaccrtledbut
unaidintercst,slpal1therealt.
el
-bcarinteresta.Lthurateof15vepel-ccn'
t(5>$)perltllntlll')above
tlpeNoteItatc.FaiIuretoexerciscthisoptionshalll'
l()tqvaivetl'
lel-igl
nttoexercisethutsalmein
thceventofftnystlbsequent(lelault..
7- AttorneyFces.lt-suit,actionqor('
)thel
-proceeding()f-allyllatureu'lllttsoever
(includinganyproceedingundcrthetl.S.Bankrt,I
ltcyCodelisinstitutetlil'
lctlnnecli(.
)1vvith
1-PR()Ml,
h1S()RYNOTU
anycontrovel-syarisingout()1-thisagrcclllel
'
ltortointel-pret01-cl'
!f
lprccanyrightsllereullder,
thcprcvaiIingpartysllallbeentitlcdt()rccoveritsatlorneyfk.es,)7aI-aIegaIs,accotlntants.and
lltllcl-cxperts'fees,andalIotherfees,ctlsts,1!.I
!(iexpensesactu:llyincurrcdundrcasollahly
ncecssaryinconnectionthel'evit.
h,asdutenmincdbytllecotll-tattria1oronanyappealor
revieuz.inadditionttJalIothe.
ralnountsprovidedbylaAv.
8, 51*iscelIaneous.
2.l Evelypcrstlnorentityalanytilneliablef-()1-thcpayl
mentoftlpe
indei
ntednessevidencedhereby%vaivcspresentl'
nentforpayluent,dcl
mandal'
ldl'
lotice01nonpaylmentoftl)5sNoe.F-verysuel'
lpersonorentitylurlherherebyconscntstoany
extensitln(7
.1-thetilne('
jf-paynlelpthereol-01-other1'
1)()c1ificatfonoftlleten-nso1-paynlelltof'
this
h'
tltc.thereleaseofaI1(.
)1
-anyl7altoftl
jesectlritl'lle.
l
-efttl--()rthcreleaseofanyparty1ilhblcf'
br
1httpaynnentoflheindebfednesscvidenceclhereby1.11anytilneandfrotmtilnetotinlc,al.thc
requcstof-anyol)enovorllerealtcrIiablcthertfor. Anystlchextensitlno?relcasel
-naybe
lnitt'
leyvitl'
lfll:tlloticetoanyofstlchpcrstlns(11
-entitiesal'
l(Iu/italw
ltlutdiscl
nargingtheir1iability.
El,2 Thcheadilhgstclthevari()Llssectionshavebeeninsel
-tcdfbrconvenience
of'reference(:11)Iyanddon()t'define,Iilmitsl'
ntl(.
!ifysorvxpanlltheexprussprtlvisionsoI'this
1Q()tc.
8.3 'l'1ir;NoteisI-ladchvitll-eferellctt()alldisto!)econstrtlediI1tlccordallce
kviththt:lavvs()fthestateo1-Ca1ifbrlliavee. '%yl
.
)'
1)I*
- ---H,..**-2
Ozz--''0-..--l--.,-/,,.
/
k
()
j!
.
...
'I-IN'
1()Tl-lY .BI-I k
fqW'.I'H
'
.
t-1:
'R(3MISS(*
)11'INOTE
Dnplitatc4.
:-/,
.#,//7/
PROMISSORYNOTE
$I40.819,333.28
Decwnbel-31.2006
FORVALLJ
ER'
RC,1
7
u'IVRD-(Lhetlndrsig.IIeJ,individuallyandcollcctivcly('Puy(hr'')
pronlise.
qtopayt()theorderof-BLlXSI
YI'H(.'
)R(,'
)tJP,lNC,.at71-534SallaraRuittl,l
kancllo
Ndiragc.CA92270.oratsttclhothel-placeasthcholdcr(.)
1-thi
sNcl
tt(-,
'
Payee')l
'
nayfl
'
on)til
ne
totilnedsignftteinNvritil
pg,thcstln-i01-()neHundredFortyNl'iIlionl'
-iglt1IundrcdNinctecll
el-hotlsandThrccIIundredThirty'l*hre qnd28/1()()
I)G1lars(&l40,8l9,333.28)itlIawful
l'
nolheyof'thetlnitf
zdStates,wi in
ereon,-ol,hedateofthisNtlteuntilpaidatthc
ratesetforthbelosv,col
mputedol 1 thlyba - nterestforenchf'
u11calcndarlntlntll
duringt
.lletel-l'
nof'thisNotsha11be-alculaledo thebasisofa365or36'6'-dayycarandtl'
lc
acttlalnulnbcrofdaysinthatInonth-
lnterestRate '
lej
leran '
n-tesestrateherett
nder('NotcRate')shaIJbeat
tllesanlerateI'aye,
eisreqll'e t)payYclI()st.()))cMtlulltftillClub.LLCunderparagl-arh
23AoftheCrcdi'
tAkrccnnentenl.
crcdintobetvveenYelloqvsttlnerZountai)'
1Olub.1.1-C&
YclIowpstoneDevelo
-.L
.CandBigS1
(yRiclge,I-!-(T.
*asBol-rovversaanclCreditStIissc
I'
7irstBostol),datedS Ai'
.'
llne.
r3()x- .,
2- lklat i .Thepayn, f
--'1ipalf
lldal1accltl
cdintel
estshallt
,enlade
t.
1p()l)Nvrttelld- - .o1-Payee.) % op:
'r
7!
c ''
3- pplicationof-' nlents. evlnentsslnal1bcllppliedfirstt()1hcpaylmcnt()f
accruedict s.
,second,at , option 'Payt,t()thcpaynent()f-anylatuchargcsdue
hereunders
' third,tot.!
.
1
.
t
:
'
t
l
c
t
i
o
l
'
)
o
f
c
i
p
a
l
0
1
,
!
i
7
i
s
No
le,
?
.
Prepay e.
t.l'ay -Ina repayitsobligationunderthisNoteinfullorinpart
atan tiIeorfrolnt.
lne ()tilme ,,
1 tprelniu))1t)rpenalty,
5. Late large.Ifanyalntluntpayablehcrcundcrispaidl'
norcthantcll(10)days
alt thedued- tereoflPayorprolnise,stopayI.:
tltttecllargeofI5veperecnt(504)oftlle
delinquenta unt,
.. I
iquidatecldaf
nagesfbrtlhe-extraexpenseinhandlingpasldlle
1312
t)?17-1C . .
;.'
j
f
((
3, Dcfault;Rerrledies.If-tlefatll
ti
sl
nndei1
1lhepayl
nentofalyal
notl
ntpayable
IpereuntlerAvhel'
lgue.tilen.altllet'
jlntitln('
)fPaycextheelltireindebtedlleAsevidelhcedl'
lereby
shallbecolneJlnl'
nediately(luealldpayable.andalIstlclpalnoullls.illcluding1:
113accruedbtl!.
tlnpaidinlerest.halltherelfterbearilltcrestp.ttheratc(
)ft-ivepercent(50/0)pe:
-annul'
nablyvc
thcNottllatt.l7aiItll-ct()exclc.i8(.:t!)isolti(
.
,11shal1nolsvtliVcthcl-ighltotxel-cisethttsanlein
theeve:itof-anysubseqtlel'
htdefault.
l.
-l'lt(3hdlSSI.
3RYN(.)7-E
7. AttorneyFecs.l1-stlitsactio).01
-(ltllel'proceedingof11
:11)/natureSvhittsovver
(incltldingfulyproceedingtlndertheU.S.flankruptcyUode)isinstitutcdincollnectionw'ith
anycontroversyarisi12.out('
hf-thisag.rccnlento!-tointerpreto1.enfklrceanyrightshereundel-,
tbcprvailil'
)gpartyshallbeentitle,
dt(1rectlveritsattorneyfecs:paralegals,accountants.and
othel-experts'fees,andit1kother'
fbesscostsaI
'
:
tl'
ttlexpensesactuallyinctu-seidandleasonably
necessaryi1)connectitlntheresvith,asdctcnuinedbythe(
-:0t111.atf'
.
l-ilsl()1-onalhyappeaI(?1
revievv.inadditiontottl1othel-al
motlntsprovidedbylaw.
MiscelIaneous.
8,1 Everypersonorentilyalalpytin'
le1iablcf-()l
'tllepaynpentofthc
indebtedllesgevidef)cedhcrebyAvaivespl'ese:htlltcl'
ltfbrpayroenl-del-nan(1andntltice()f
llonpaylnentofthis'
Note.ITlvcr,ysucl
lpel-sonorentityl
-tlrtherlhcrebyconsentst()any
cxtcnsi()1.
1O1-tlletijme()fpnylplcllt.hereofOrofherl
'
nodificationoI-thetennsofpaylllel)t01-tl'
lis
Note,thcrcleaseofaIIoranypart()1-thesecurityherefilr,t)rthereleascofanypal-tyliablttI-or
thcpaylmentoftlheindcbtcdllcssevidenceclherebyatanytil
-neandfron'
ttin3ct(?tilmesatthe
reqtlestofanyonenllhv01
-hereaftel'liabletherufkll'. Allysuchextensionorrelcascl'
nztybe
luadeNvitlloutnoticctt)nyofguchpersons()rcntiticsandNvithoutdischargingtheirliability8.2 Thelleadingstothcvarioussectiolpshavehccninserted1b1-collveoience
()12relertllceo)'
lIyandcl()l)()tdeline,Jillit,lnodify,orcxpantltlleexpressprovisiolps()f-this
Note,
8.3 TllisNtlleisIlladeyvithrefb.rellcet()andist.obecollstrllediJ1accoldanckl
vvitllthelaws()ftllcstiltvo1-Califorllia.
1
)).
,.
,
v'
.4
T1N'
lOl-l-l I..13.1.IXk
'1'
F11
2-PR(3M1SSIIRYN(.
ITE
1
2
3
4
5
6
7
8
UNITED STATESDISTRICTCOURT
9
CENTM LDISTRICTOFCALIFORNIA
10
11 MARCS.KIRSCHNER,ASTRUSTEE
CaseNo.cv-11-08283GAFSPx
12 OFTHEYELLOW STONECLUB
LIQUIDATINGTRUST,
14
Plaintift
13
15
16
17
18
19
20
21
22
23
24
25
26
27
28
v.
TIMOTHY L.BLIXSETH,
Defendant.
TIMOTHY L.BLIXSETH,
Counterclaimant,
IPROPOSEDJORDERGRANTING
V.
MARC S.KIRSCHNER,DOES1-100,
counterclaim Defendant.
1
TheMotionforSanctions(CdsanctionsMotion'')filedbyPlaintiffandCounterclaim
2 DefendantMarcS.Kirschner(tkloirschner''),ascourt-appointedTrustee(thes
frustee'')of
3 theYellowstoneClubLiquidatingTrust(CCYCLT'')cameonforhearinginCourtroom740
4
5
6
7
8
9
10
11
12
13
ofthisCourtonMay21,2012at9:
30a.m.
appearedonbehalfof
the Trustee and
appeared on behalfofTimothy L. Blixseth,
DefendantandCounterclaimantherein.
UponconsiderationoftheSanctionMotion,oppositionandreplypapers,review of
theentirerecordherein,andargumentofcounsel,andforgoodcauseappearing,
ITISHEREBY ORDERED THAT:
1. TheTrustee'sMotionforSanctionsisGRANTED initsentirety.
2. SanctionsshallbeimposedagainstBlixsethandhisattorfleysofrecordinthe
amountoftheattorneys'feesandcostsoftheTrusteeincurredinconnectionwithfiling
thisMotionforSanctionsandthesimultaneouslyfiledandrelatedMotiontoDismiss.
14
3. TheTrusteehasfourteen(14)daysfrom thedateofthisOrdertosubmita
15 recordoftheattorneys'feesandcostsasstatedherein.
16
17
SO ORDERED.
18
19
20 DATE:
Hon.Gal h.Fees
21
22
23
24
25
26
27
28
1
t/koposEb)ORDERGRANTINGMorloxFtjkjANCTIONj
1 Respectfullysubmittedby,
2 S
tevenJayKatzman(CaliforniaBarNo.132755)
3 skatzman@bmkattorneys.com
4 BIENERT,MILLER& KATZMAN,PLC
903CalleAmanecer,Suite350
5 SanClemente,California92673
6 Tel:(949)369-3700/17ax:(949)369-3701
7 BrianGlasser
8 bglasser@baileyglasser.com
9
10
11
12
13
14
Tel:(304)340-2282+ax:(304)342-1110
StevenL.Hoard
shoard@mh
ba.com& BROwN
MULLI
N HoARo
,LLp
P.0.Box31656
Amarillo,Texas79120-1656
15 Tel:(806)372-5050/17ax:(806)372-5086
16
17
18
19
20
21
22
23
24
25
26
27
28
(PROPOSED)ORDERGRANTINGMOTIONFORSANCTIONS
E xh ib it
MichaelJ.Flynn,Esq.
POBox690
RanchoSantaFe,
CA92067
tel:8587757624
PhilipStillman,Esq.
l00SouthPointDr.
UnhTH l5
MiamiBeach,FL33139
tel:8882354279
CJConant,Esq.
730SeventeenthSt.
Suite200
Denver,CO 80202
tel:9162303841
RobertHuntley,Esq.
JamesSabalos,Esq.
815WestWashingtonSt. 2ViaRavello
POBox2188
Henderson,NV89011
Boise,Idaho83702
tel:9493556084
tel:2083881230
May29,2013
JackSmith,Esq.
Chief,PublicIntegritySection
U.S.DepartmentofJustice
CriminalDivision
950PennsylvaniaAvenue,NW
Washington,D.C.20530
RE:
l.LetterandMemorandum DatedMay4.20l2ReguestingInvestigationof
MontanaPoliticalandJudicialConamtion'
.Appoi
ntmentoflndependent
Counsel.
'RequestingSubpoenaforRecordsofFederalTaskForceCareer
InvestiaativeAcents.
2.ThisStlpplementRenuestinglnvesticationintothe'tTarzetina''ofTimothvL.
BlixsethbyStateandFederalAgencies.IncludinRtheIRS;Andthe
PreservationofallIRSandDOJFilesRelatingtoMr.Blixseth.
RenuestforlmmunitvforWhistleblower.
DearMr.Smith:
Pleaseconsiderthisletterandthedocumentsattachedheretotobeasupplementalrequest
totheLetterandMemorandum weprovidedtoyourofticeapproximatelyoneyearago
onMay4,2012.Thosedocumentsareherewithattachedagainforyourconvenience.
Withthebroad scalerevelationsofS'
targeting''bythe1RS now supportedby the
lnspectorGeneral,thePublicIntegritySection'sinvestigationintoMontanapoliticaland
judicialcolquption,specificallyinvolvingthef4targeting''ofMr.Blixsethbystateand
federalagencies,includingtheIRS,asdemonstratedherein,isbothtimelyandrequired
bylaw.
Thepreviouslysubmittedevidence,andthefollowingfactsinthecontextofachronology
supportedby thedocumentary evidence atlachedhereto, mandatesthatthePublic
lntegritySectiondemand,subpoenaandrequestfrom thelRSandalldeparuentswithin
RequestforInvestigationofMontanaBankruptcyCourtandCreditSuissebyDepartmentofJustice,
PubliclntegritySection
theDepartmentofJustice,andallrelevantstateandfederalagencies,allfilesand
documentsrelatingtothetttargeting''ofMr.BlixsethbytheHolder/Breuercontrolled
DepartmentofJusticeandbytheIRS.AlthoughMr.BreuerresignedinFebruarya20l3
astheheadoftheCriminalDivision,andhasnowretumedtothelawt51
-113Covingtonand
Burling,whichhasrepresentedCreditSuissethroughouta11relevantperiodsinvolvedin
thesematters,hispreviousmisconductrelatingtotheissuesinvolvedhereinhasnotbeen
remediedbytheDOJ.
ThisSupplementalletteralsoseeksimmunityforthewhistleblowernamedinparagraph
25hereto.Todate,AttolmeyGeneralHolderandMr.Breuer,haveblockedimmunityin
ordertoconcealtheirparticipationinthemattersrecitedhereinandrecitedintheMay4,
20l2LetterandMemorandum.
CHRONOLOGICALSTATEMENTOFFACTS
September30,2005: CreditSuisseloaned$375milliontotheYellowstoneClub
('$YC'')aspal4ofanSsEquityRecapitalization''loanschemetoviolateFIRREA
andUSPAPwhichwaspartofalarger,fraudulentschemeinvolvingatleast
fifteen(masterplannedcommunities.''Theschemeitselfisaderivativeofthe
securitizedmortgagebtlndlingschemesthenravagingtheU.S.economymostly
predicated on fraudulentappraisalswithoutdirectconnectionsbetween the
securitizingbanksandtheappraisers;buttheCreditSuisseloansinvolvedirect
collusionbyandbetweenCreditSuisseanditsdirectlycommissionedappraiser,
Cushman & Wakefield,to inflateappraisalson thesixteen masterplalmed
commtmitiesinviolationofFIRREA andUSPAP.CreditSuisseattemptedto
circumventFIRREA byissuingtheloansthroughitsltcaymanIslandsBranch,''
butthispartoftheschemefailedbecausetheloandocumentsmadetheloans
purchasablebyfederallyregulatedbanks.SeegenerallyMay4,2012Letterand
Memorandumattachedhereto,(ExhibitsOmitted).
TheCreditSuissecreatedYC loandocumentsexplicitlyauthorizedYCtoloan
$209millionofthe$375millionloanproceedstoitsownerBlixsethGroup,Inc.
(12G1'')zwithoutrecourse''toMr.Blixseth,theownerofBGI.Forthenextthree
years,tmtilSeptember,2008,BG1paid over$40million in interesttoYC
pursuanttodulyauthorizednotes,quarterlyKPMGauditedf'
inancialstatements,
andadherencetoallcorporateprotocols.TheYCloanandtheBG1loanwere
approvedbytheYClawyersinwriting.
OnMarch13,2008,Mr.Blixsethcull
uinatedatwoyeardivorcebattlewithEdra
BlixsethpursuanttoacomprehensiveStMaritalSetllementAgreement''($1MSA'')
EdrareceivedtheYC($500millionl;andPorcupineCreek($200million);and
otherassets,($100million+/-),inappraisedassets.UllknowntoTim,Edrahad
InJuly-November,2008justbeforeandaherthedivorceclosing,unknownto
Mr.Blixseth,aspartofherdealwith Byrne,Bymepartnered with Ron
Burkle(YucaipaCapitalcontrollingabilliondollarsofCaiifolmiaCALPERSand
CALSTRSPensionfunds)intheirschemetoputtheYCintobankruptcypursuant
totheirt'brilliantbutevil,''<ibilliondollar''conspiracytousespoliticalpressure''
involvingnumerousmeetingsandlargedonationstoSchweitzer.Edrastatedin
onedocument:
(a)totargetMr.BlixsethwiththeCreditSuisseloan(notwithstandingthatitisa
(non-recourse''loanl'
(b) eliminateEdra'sdivorceobligationstoMr.BlixsethundertheMSA (approx$23millionl;
(c)usetheHolder/BreuercontrolledDOJtoconcealEdra'sfake''Targetletters''
andbankfrauds'
,tenninateaFedTaskForceinvestigationintotheirscheme;and
ttarget''Mr.Blixsethwithfabricatedcivilandcriminalclaimsbystateandfederal
agencies,includingtheIRS,theBreuercontrolledCriminalDivision,andthe
MontanaDepartmentofRevenue.Thiscabalofprivateactorsandpublicofficials
acconplisheda11oftheaboveundertheprotectionofHolder,BreuerandKirscher
whilehackingintoMr.Blixseth'sandhislawyers'attorneyclientprivileged
emails,inconnectionwithwhichtheundersignedvictimsoftheemailhackingare
requestingimmunityforthehackerinordertoexposethemisconductofJudge
Kirscherandthecriminalconductofothersparticipatinginthescheme.See
Paragraph25below.SeeExhibit3heretotBynneemailreSdbrilliantbutevil''
Sbilliondollar''planl;Exhibit4(Jan14,2009meetingbetweenBurkle,Byrneand
Schweitzerl;Exhibit5(Byme'Gpoliticalpressure''emaill'
,Seeexhibitspreviously
RequestforInvestigationofMontanaBanknzptcyCourtandCreditSuissebyDepartmentofJustice,
PubliclntegritySection
(a)BetweenJuly 10,2008(fourdaysafterEdraannouncedtoYC
melnbersonJuly6,2008shewastakingovertheYC outofthe
divorce),andSeptember23,2008,Burkle,BymeandSchweitzer
funneledthrouglntheDemocraticGovenlor'sAssociation,($$DGA''SchweitzerwasthenChairman)totheMontanaDemocraticPm-ty,
$1,245,000byhavingByrneandBurkleandtheirfriendsandcronies
intheYCscheme,donatesaidsum totheDGA.TheDGA thengave
themoneytotheMontanaDemocraticPal-tywhouseditinthe
Schweitzerl'eelectioncampaign.Seedocumentsunderseparate''cover
identifyingtheBurkleandByrnefriendsandcroniest'donations.
(
-b)OnAugust1,2008,EdraandByrneagreedonthe$35millionloanto
gain control of the YC.See Exhibits to the May 4,2012
Memorandum.
(c)Thenextday)onAugust2,2008,ByrneandEdrametwithSchweitzer
attheYC todiscusstheirtakeoveroftheYC.Exhibit6attached
hereto.
(d)Thenextday,onAugust3,2008,theDGAreceived$750,000from
theBurklecabaltogivetotheMontanaDelnocraticParty.Allofthese
financialtransactionsweredoneinthecontextoftheBurkle/Byrne
schemetoloan$35milliontoEdratosecurecontroloftheYCand
thentoputtheYC intobankruptcytttoensuretheygettheright
outcomefromtheMontanabankruptcyjudge.''Forthe$750,000
transactionseedocumentsunderseparatecover.
Thismoneylaunderingscheme-havingBurkle/Byrneandtheirfriendsdonate
totheDGA andthentotheMTDem Party,andthentoSchweitzer-appears
RequestforInvestigationofMontanaBankruptcyCourtandCreditSuissebyDepartmentofJustice,
PublicIntegrit
ySection
designedtoconcealBurkleandByrne'sfinancialrelationshipwithSchweitzer
whileatthesametilneBurkleandBylmeweretakingovertheYCandusingtheir
relationshipandispoliticalcapital''andS'politicalfavors''withSchweitzertodoit.
Theillegalpuposeoftheschemewastomakepoliticaldonationstocorruptthe
bankl
uptcyjudi
cialprocessand't
st
eal'theYC,acol
aptionmechanismroutinel
y
usedbyByrneandBurlde-byBymeinbanknaptcyproceedingsandbyBurkleto
obtain controloverpublicftmds,SeeArticle G<ruckyYucaipa''andrelated
publications.
6.Afterhisreelection,in2009,Schweitzercreatedtwoslushtkndsfrom theBurkle
/Bylmemoney,St
rf'heCouncilforaSustainableAmerica''andTheAmerican
SustainabilityProjectandftmneledover$335,000oftheBurkle/Byrnemoneyto
theslushfunds.TheAmericanSustainabilityProject,a50l(c)(4)organization
wasquicklyapprovedbythelRSwithoutexaminationnotwithstandingovert
illegalitiesintheuseofthemoneyandinspecifictransfers.Duringthesametime
period,inMay,2009,KirscherissuedaseriesofnllingsultimatelygivingByrne
andBurkleover$800MILLION ofBlixsethmaritalcommunityassetsforless
than$10MILLION'
,alldtheIRS,asrecitedbelow,beganacampaigntotarget
Mr.Blixseth.Fordocumentationoftheslushfunds,seedocumentssentunder
separatecoverletter. Thecluonologyofbankruptcycolquptionisrecitedand
documentedindetailintheMay4,2012Memorandum andissupplementedas
follows.
0nNov.4,2008Schweitzerwasreelected.OnNovember8,2008,Byrne)Edra
andBurkleputtheYC intobankl-uptcybeforeKirscher'
,andhiredKirscher's
sbestfriend,''Attonxey Patten,whoused hisrelationship to gainaccessto
Ki
rscherbeforethebankruptcywasfi
led,andtobriefKhscheronthefiling.See
emailexhibitsto Motion to Disqualify Kirscherattached to May 4,2012
Memorandum.OnNovember9,2008,thedayafterthebanklnptcypetitionwas
tiledbyPatten,Byrnesentanemailtohiscolleaguesstatingthattheyneededto
startusingpoliticalpressure''toinsuretlattlReir(tDIP''(DebtorinPossession'')
planwouldbeapprovedbyKirscher.SeeExhibit5hereto. TheD1Pplangave
BtlrkleandBylmecontroloverthebanlu-uptcy. OnJanuary14,2009,Burkle,
BpneandSchweitzermettoimplementtheirtdpoliticalfavors''schemeusing
Judge Kirscher'sconnectionsto theMontanaDemocraticcabal:and moye
specifically hisconnectionswith specific lawyersand a specific1aw finm
representingwealthymembersoftheYC whowereseekingover$20million
ffom theproceedingsbeforehim.SeeExhibit4.SeeImmunityProffer.After
January14,2009,allofKirscher'srulingsfavoredBurkle,ByrneandEdraand
blatantlyviolatedMr.Blixseth'ssubstantiveandproceduraldueprocessrights,
andtherightsofotherpartiesinvolvedintheMontanabankruptcyproceedings.
SeeMay4,2012Memorandum.
On May l8,2009,Kirscher approved a ttback room deal''afterpersonally
engaginginillegalexpmemeetingsinahotelwithByrne,inwhichByrneand
BurkleobtainedtheYCandotherassetsforultimatelylessthan$IOM.Onthat
RequestforInvestigationofMontanaBankruptcyCourtandCreditSuissebyDepartmentofJustice,
PubliclntegritySection
date,KirscherapprovedanoverllyillegalbankruptcyplancreatingaStLiquidating
Trust''controlledbyCreditSuisse,whoseprimarypurposewastotargetMr.
Blixsethforthe'tnon-recourse''CreditSuisseloanwhilettexculpating''Edra,
Bpme,Burkle,CreditSuissefrom anyliabilitytoMr.Blixseth,ortotheYCfor
lightstosueandlitigatetheentireschemeagainstBurkle,ByrneandCredit
Suisse,withnorightstobeheardandintotalabrogationoftheFederalrulesof
CivilProcedure.SuchrecklessabuseofjudicialpowerhasnoplaceinAmerica,
anditismoreakintoacountl'
yruledbydespotsthanbyarepublic. Credit
Suisse,withJudgeKirscher'sapprovalthenappointedMarcKirschqerasTrustee
ofthe LiquidatingTrtzstto sueTim, Thesnancialconnectionsbetween
Kirschner,Burkleand Burkle'sCaliforniaboughtpoliticiansto controlthe
CaliforniapensionfundsmoneytopullofftheYCtheftwithJudgeKirscherare
directandprovable.KirschnerwasontheBoardofDirectorsofSpectmmBrands,
59% ofwhichisownedbyHarbingerGroupInc.TheStateofCalifonliahasover
$330millioninvestedwithHarbinzer-andabilliondollarsinvestedwithBurkle.
andover$l00millioninvestedwithBwne,allasaresultoft'noliticaldonations,''
Seedocumentsunderseparatecover.OnApril5,201l,Californiaschemedwith
KirschnerandtheMontanaDepartmentofRevenue('$MDOR''),toputMr.
Blixsethintoan involuntarybankrtptcy in ordertoprecludehisappealsof
Kirscher's rulings. The scheme wasdeterred when an impartialNevada
banknlptcyjudgesawthroughit,dismisscdthepetitiononvenuegrounds,which
theNinthCircuitreversed. Now,thatsamejudgeishearingMr.Blixseth's
lnJune,2009,justaftertheKirscherrulingsandblatantviolationsofMr.
Blixseth'sdueprocessrights,Mr.BlixsdhformallyreqtlestedanFBl/Treasury
and1RSFedTaskForceinvestigationoftheentiremattertobeconductedby
care'
eragentsnotunderthecontroloftheMontanaDemocraticPartyandthe
Holder/BreuerDemocraticallycontrolledDOJ.SeeMay24,20l2Memorandum
andExhibits.
10,AtsometimeaftertheSeptember,2005CreditSuisseloan,thelRShadinitiated
anauditofBGlfortheyears2005,2006relatingtotheloan;butinOctober,
2009,beforetheKirscherrulingso/1August16,20l0rcfarfngtoMnBlixseth'
s
allegedDk:;W/.)?to#7eCreditSuissecontrolledLiquidatingTrustandtoseveral
Fnfntprf/
.
'
pshareholdersofFC,(seeMay4,2012Memorandumandexhibits),the
lRSwascompelledbytheevidencetoconcludethatthe$209millionBGliloan''
wasinfactaloanwith''NoChange''tothefiledtaxretums.TheIRS'decision
nottoissueanychangeswithrespecttoBGI's2005returnwasinitiallymadeon
RequestforInvestigationofMontanaBankruptcyCourtandCreditSuissebyDepartmentofJustice,
PublicIntegritySection
November2,2009,agreedtoandsignedoffbyMr.BlixsethonDecember8,
2009andfinalizedbythe1RSonJanuary4,20l0,SeeExhibit7attachedhereto,
(IRSJanuary4,20lOnotificationofd(NoCl'
1ange''l.However,atthebehestof
KirschqerandtheLiquidatingTrust,notwithstandingtheIRSauditresultsandits
t$NoChange''January4,2010ruling,onAugustl6,2010,andwhileconcealing
hisrelationshipswith theattonpeysand partiesbenefittingfrom hisnllings,
Kirscherissuedmoreabsurdlmlings.SeeMay4,2012letterandMemorandum
andexhibits.SeelmmunityProfferofthewhistleblowersentunderseparate
cover,specifically regarding the misconduct of Judge Kirscher and his
relationshipswith attomeysandtheirclientsfinanciallybenefittingfrom his
illegalrulingsinamountsover$20MILLION!
ll.Inearly2010,theMontanapoliticalmacl:ineryoperatedbySchweitzerunderthe
financialinfluenceofBurkleandByrnethentumeddirectlytotheHolder/
Breuer DOJ to directly ''target''Mr.Blixseth with a baseless criminal
investigation,andderailtheMontanafederalcareeragentinvestigationofEdra.
Atthattime,JudgeKirscherwasconcludingtheAP14trialinFebruary,2010and
preparinghisdecision.Meanwhile,theseniorjudgewhowasawareofthe
involvementoftheSchweitzer/Bttrklepoliticalinfluence,recommendedthe
continuation oftheEdraBlixseth criminalinvestigation. (SeeMay4,2012
Memorandum).BeginninginMay,20l0,atthesametimeKirscherwaselevated
to theBAP - theMontanaDemocratswere tlexingtheirmuscle-Breuer
appointedoneofhisappointedDOJattonxeystoopenacriminalinvestigationof
Mr.BlixsethallegedlybasedonatransactioninvolvingpropertyintheTurksand
CaicoswhichMr.Blixsethwassellingtoftmdthecontinuationofhislegal
defense.Mr.Blixsethf'
ullycooperatedwiththeDOJknowingthatBreuerwas
behindthiswitchhuntandintimidationcampaigmtomakehim drophislegal
defensesinMontana.TheinternalMontanaGenormouspoliticalcapital''peddling
intheoverallschemebecamesoovert,remarkably,Breuerevenappearedin2011
onnationwideTV totargetTim'sforeignpurchaseroftheTurkspropertyforthe
purposeofkillingtheTurkssaletherebydeprivingMr.Blixsethofthefundsto
defendhimself,lnOctober,20l1,BreuerevenhadtheDOJfilesuitandplacea
lispendensonthebuyer'spropm'
tyinMalibutoassistinkillingthesale. After
achievingthispurposetokillthesaleanddepriveMr.Blixsethoffunds,the
investigationwasabandoned.ButBreuer'suseoffederalagenciestothreatenand
intimidateMr.Blixsethcontinued.
l2.OnOctober19,2010,FederalImmigrations,CustomsandEnforcementagents
drovefrom LosAngelesandinterceptedTim'splaneattheairportinThermal,
California whileMr.Blixseth waspreparing to depal
-t, (apparentlyhavi
ng
wiretappedhisphones)andwithhispennission,searchedtheplane.Ofcourse,
therewasnobasiswhatsoeverforthesearchanditwasfruitless;butBreuer
succeededindeliveringhismessageofintimidation. SeeExhibit8,emailfrom
Tim'scounselto,interalia,theDOJlawyerappointedbyBreuertoconductthe
Turkscriminalinvestigation.No soonerhadMr. Blixseth respondedtothis
RequestforInvestigationofMontanaBankruptcyCourtandCreditSuissebyDepartmentofJustice,
PubliclntegritySection
frieildsandattorneysinaseparatecase(''TW.P18'r
Jinwhichhehadnoteven
ayordedMr.Bli
xsethatrial,whileknowingthatthecareeragentsinMontana
wereinvestigatingEdra(asrecomlnendedbyaseniorjudge)andwhilein
possessionofthedocumentsevidencingbankfraud,bankruptcyfraud,destruction
o
fevidence,obst
l
-t
lctionofjusticeandpetury.SeeMay4,2012Memorandum
andexhibits;SeelmmunityProffer.lnablatantlyabsurdruling,andwithout
admittingtheevidenceusedbythelRStoapprovetheiloan''Kirscherruledthat
$209Million oftheC'
reditSuisseloan proceedswasataxableshareholder
Csdistribution''notwithstandingtheT40M plusininterestpaidbyBGI,andthe
KPMG approved atldited financialstatements.KirscherIGNORED the1RS
approvalofthetransactionanda1lofthedocumentaryevidencemakingitaloan!
Kirscheralsoignoredhtlndredsofdocumentsandrejectedevidenceoftheentire
fraudulentscheme.Atthesametime,theMontanaDemocraticPa14ysucceededin
gettingKirschel'elevatedtotheBal'
tklnzptcyAppellatePanel.
l4.InconnectionwiththerequestedImmunityProfferunderseparatecover,Judge
Kirscher'srelationshipswithseveralMontanaattorneysandwealthyMontana
businessmenwhostandtoreceiveovcr$20millionfrom hisblatantlyen'oneous
rulingsinAP18,whichtheSjudge''enteredwithoutevenconductingatrialand
hearingevidenceonthecase,theundersignedrespectfullyrequestanexpeditious
responsetothisletter,lntheeventthePublicIntegritySectiongivesimmunityto
aspecificwitnessasrequestedbelow,itisexpectedthatadditionalspecificfacts
involvingJudgeKirscher'sandMr.Breuer'smisconductwillbeexposed.See
ImmunityProffer.
15.AftertheKirscherr'uling,and underthe influenceoftheHolder/Breuer
controlledDOJandtheMontanaDemocraticParty,andaspartoftheBreueruse
oftheDOJinitsintimidationcampaign,inOctober, 2010,whileBreuerwas
having ICE interceptTim'splane, and pursue the bogus Turks'criminal
investigation:inadramatic'flipflop''the lRSreopenedtheBGIaudit,and
expanded itsaudittoMr.Blixseth'stax rettlnAs,afterMr.Blixseth and his
attomeyssenttheOctober,19,20l0email-an intimidation tacticBreuer
consistentlypursuedasMr.Blixsethresistedtherapidlygrowingpoliticaland
judicialcon'uptionenvelopinghiscases.Exhibit9(IRSnotifications).The
undersignedrespectfully requestthatthePublicIntegritySectionspecifically
RequestforInvestigationofMontanaBankruptcyCourtandCreditSuissebyDepartmentofJustice,
PublicIntegritySection
obtaininternalDOJ/IR.
Scommunicationsinthecontextofachronologyreciting
theBreuerintimidationtacticsinresponsetoMr.Blixseth'seffortstoobtain
jtlst
iceintheMontanajudi
cialproceedings.
16.OnMarch23,2011,Mr.Blixsethandhiscounselmetwiththe1RSanditslead
auditor,PaulDoen'.Mr.Blixseth's counsel stated thatthe facts proved,
particularlyinlightofthedemonstrableMontanacorruptionandtheinvolvement
ofBurkleandByrne,andBurkle'sconnectiontoBreuer,thatthereopenedaudit
wasapoliticallymotivatedattackfrom Holder,BreuerandBurkleinorderto
clazshMr.Blixsethtinancially,andtousethelRStoseizeTim'sassets,thereby
preventingMr.Blixsethfrom challengingonappealtheMTnzlings,Counsel
infonredMr.Doel-rthattheMontanaDepartmentofRevenuewasinvolvedinthe
samescheme.Mr.Doerracknowledgedthatthe'tMontanadecision''wasinvolved
inthereopenedauditbutwouldnotdiscloseanyfactsinvolvedintheinternalIRS
processes,contactsanddecisionmalcingtotstarget''Mr.Biixseth.
17.InAug,2011,thecareeragentdominatedFedTaskForcesentaTargetLetterto
Edra Blixseth. Breuerand Burklethen immediately used theirfinancially
obtaincdfpoliticalcapital''toquaslztheinvestigationwith thecomplicityof
Breuer.
l8.lnSept,20l1,theFedTaskForcewasdisbandedbyBreuerandHolder;theEdra
BlixsethTargetLetterwaswithdrawnandtheYCwasdeclared''OffLimits''by
theDOJ.SeeMay4,2012LetterandMemorandum.
l9.lnSeptember,20l1,atthesametimeasBreuerquashedtheinvestigationinto
Edra,JudgeKirschel'blatantlydefiedtheappellaterulingwhichhadoverturned
theplantotargetMr.Blixsethandexculpatetheothers;andre-confirmedthe
plantotargetMr.Blixseth.SeeMay4,2012LetterandMemorandum.
20.In Oct.2011,the1RS ftu'
therexpandedtheaudit. Exhibitl0attached.Tle
Democraticcabalhadtakencontrol.
2l.OnNov.l5,2011,t'
iveofTim'srepresentativesmetwith six iRS ofcials
includingleadauditorPaulDoen'
,hisboss,HugoRamirez,andIRScounsel
SusanSexton.Tim'scounsel explainedindetailthe factsestablishingthe
legitimacyoftheloan, includingover$40millionininterestpayments,and
KPMG quarterlyauditedfnancialstatementsdocumentingtheloan;andthat
evidenceestablisl
nedthattheIRS flip tlopy''waspoliticallymotivatedand
pursuedbasedontheBreuer/Burkle/Schweitzerpoliticalmachinerydrivingthe
audit.SomeoftheBretlerintimidationtacticswerecited. Privatelytocounsel,
Doerr,apologetically stated wordstotheeffect:''IfMTgoesaway,thisaudit
goesaWay.
22.OnMay4,20l2,multipleattorneysandvictimsoftheKirscher/Burklecabal
filedthe PubliclntegrityReportattachedhereto. Fourmonthslater,wereceived
RequestforInvestigationofMontanaBalakruptcyCourtandCreditSuissebyDepartmentofJustice,
PublicIntegritySection
aletterstatingthatithadbeenfoundinthe'MailRoom.''ThismailingStmishap''
occurredduringtheheightoftheObamareelectioncampaign.Exhibit11attached
hereto.
23.OnMay22,2012,the1RSrevokeditsprevious''NoChange''decisionregarding
whethertaxeswereowedfortaxyear2005,whichturnedentirelyuponthe
charactelizationoftheproceedsfrom theCreditSuisseloanasaloanversusa
distribution.Exhibit12attachedhereto,
24.OnJuly2,2012,the IRSsenta''NoticeofDeficiency''ofapproximately$24
Millionforatdloan''ithadpreviouslyapprovedasatloan,''notatshareholder
distribution.''TheIRSrulingdirectlyresultedfrom theMontanapoliticaland
j
udicialconmptionwhichspawnedt
heKirscherruli
ngs;andfrom theHolder/
BreuercontrolledDOJuseoffederalagenciestostarget''Mr.Blixseth.Exhibit13
attachedhereto.AlthoughtheJuly2,2012NoticeofDeficiencydoesnotcontain
any directcitationsto Judge Kirscher's findingsathe Notice ofProposed
AdjustmentissuedonMarchl6,2012citesextensivelyfrom JudgeKirscher's
lmlingandreliesheavilyuponthatcourt'sfindings.Atrueandcompletecopyof
theMarchl6,2012NoticeofProposedAdjustmentisattachedasExhibit14.
Signifcantly,throughoutthetimeperiodthatBurkleandByrneschemedtoobtain
theYCthroughMontanabankruptcyproceedingsfrom March,2008throughthe
completionoftheschemeinSeptember,2011whenJudgeKirscherdefiedthe
appellatelallingvacatingtheillegalbanknptcyplangivingtheYCtoBurkleand
Bynae,theywerehackingintoMr,Blixseth'semailedattorneyclientprivileged
commtmications. Theextenttowhichtheinfonmation obtainedfrom these
feloniously procured communications was transmitted to public officials,
includingKirscher,Breuer,theDOJ,theMontanaDepartmentofRevenue,and
theIRS,isasubstantialbasisforgrantingimmunity inconnectionwiththe
lmmunityProffersubmittedherewith.Thepoliticallydriventtfliptlop''bythe
IRS,inthecontextofthecircumstancesherein,includingthedirectinvolvel
nent
ofMr.Breuer,mandatesthatthePubliclntegritySectiongrantimmunitywithout
seekingapprovalfrom theHoldercontrolledDOJ.
25.Throughoutrelevanttimeperiodsinthismatter,aWhistleBloweronbehalfofy
andpaidbyEdraBlixsethhackedintothecomputersofMr.Blixsethandhis
counsel.ThehackedinforlnationwasprovidedtoalaundrylistofMr.Blixseth's
Ssenemies''inalistcreatedbyEdraBlixseth.lnJune,2012,theWhistleBlower
severedtheirrelationship.TheWhistleBlowerinfonnedMr.Blixseththatheand
theDOJhadbeenhackingintoTim'sandTim'scounsel'semails,
'andheandthe
governmentwerewiretappingtheirphonecallsonbehalfofEdraandBurkle.
EdrahadpaidtheWhistleBlowerover$6,0M toconductherrequestedhacking,
attherateof$100,000permonthfrom April,2006throughJanuary,2009plus
millionsinbonuses.TheWhistleBlowerandMr.Blixseth'scounselhavebeen
attemptingtosecureimmunityfortheWhistleBlowerforthepastyeartoblow
thewhistleonthisentirematter,buttheHoldercontrolledDOJhasthwarteditat
theriskof exposingtheirownconazptconduct.(SeelmmunityProfferand
RequestforInvestigationofMontanaBankruptcyCourtandCreditSuissebyDepalqmentofJustice,
PublicIntegritySection
documentssenttmderseparatecover.)lntheeventThePubliclntegritySection
givesimmunitytotheWhistleBlowerwillexposetheentireYC scheme)the
misconductofJudge Kirscherin connection with vel'y specific electronic
evidence,andthecriminalconductofBurkle,ByrneandSchweitzerintheir
schemetousetheMontanaBankruptcyCourttopepetratetheSsbrilliantbutevil
billiondollarplan.''
,
VeryTrulyYours,
h/MichaelJFlvnn /.VfW,'
JfpStillmctn /s/C.JConant
MichaelJ.Flynn PhilipStillmi
m
CJConant
As/RobertAifnf/dp Js/lamesSabalos
Robej-tHuntley JamesSabalos
RequestforInvestigationofMontanaBankruptcyCotlrtandCreditSuissebyDepartmentofJustice
PublicIntegritySection
,
E xh ib it
D
CIVIL MINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
Present:TheHonorable
GARY ALLEN FEESS
ReneeFisher
None
N/A
DeputyClerk
CourtReporter/Recorder
TapeNo.
AttorneysPresentforPlaintiff:
AttorneysPresentforDefendants:
None
None
Proceedings:
(InChambers)
promissorynotes(the($
Notes''),totalingapproximately$200million,executedbyBlixsethin
favorofhisformerbusinessentityandtheformermajorityowneroftheClub,BLXGroup
(1
&BLX'
').ThefundswerereceivedbyBLXfromtheClubfromtheproceedsofa$375million
loanmadebyThirdPartyDefendants,variousCreditSuisseentities(GcreditSuisse'').The
NotesexecutedbyBlixsethinfavorofBLX havebeenassignedtotheClub,BLX'Screditor,for
collection.lnearlierproceedingsinthisCourt,Blixsethtmsuccessfullysoughtdismissalofthe
pendingaction.(SeeDocketNo.1(Comp1.1;DocketNo.18(2/24/12Orderl.)
Whenthattacticfailed,BlixsethfiledaCotmterclaim andThirdPartyComplaintinwhich
hecontendsthatCreditSuisseandrelatedentities,Blixseth'sex-wife,EdraBlixseth,andnow
KirschnerhaveparticipatedinaRICOconspiracywiththeobjectofgainingcontroloftheCl
ub
anditsassetsthroughpredatorylendingpractices,thetransferofownershipoftheClubtoEdra
dttringtheBlixseths'divorceproceedings,andthependingbankruptcyproceedingsagainstthe
cv-go(06/04)
clklMlxuTck-GixekktpageIor39
CIVILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
MarcSKirsclmerv.TimothyLBlixseth
Date November1,2012
Club.Blixsethalsomakesthreecontract-basedcounterclaimsagainstKirsclmerrelatedtohis
attempttocollectontheNotes.(DocketNo.26(Countercl.l.)lntheThirdPart
yComplaint,
Blixsethseeksrecoveryfrom fiveCreditSuisseentities,intheeventthatheisfoundliableon
theNotes,ontheoriesofcontributionandunjustenrichment.(DocketNo.27(ThirdParty
Compl.
j)
PresentlybeforetheCoul'tareaseriesofmotions.Kirschnerseekstodismissthe
Counterclaim,arguingthat,underFederalRuleofCivilProcedure13,theCounterclaim was
improperlyfiledagainsthim inhispersonalcapacity,andthat,becauseBlixsethdidnotseek
leaveoftheBankruptcyCourt,pursuanttoBartonv.Barbottr,104U.S.126(1881),thisCourt
lackssubjectmatterjurisdictionoveranyclaimsassertedagainsthiminhisoft
kialcapacity.
KirschneralsoarguesthattheColmterclaim failstostateaclaim againsthim. (DocketNo.29
gKirsclmerMem.Dismissl.
)Inaseparatemotion,KirschnerseekssanctionsagainstBlixseth
andhiscounsel,intheamountofhisreasonablefeesandcostsincurredinmovingtodismissthe
Counterclaim,onthebasesthattheCounterclaim islegallyandfactuallyfrivolousandwasfiled
withrecklessdisregardfortherequirementsofRule13andtheBartondoctrine. (DocketNo.30
gMem.Sanctionsl.
)Meanwhile,havingfailedtotimelyamendtheCounterclaimasofright
followingthefilingofthemotiontodismissortoobtainKirsclmer'sconsenttoamendment,see
Fed.R.Civ.P.15(a)(1)(B),15(a)(2),BlixsethmovestheCourtforleavetoamendthe
Counterclaim tonameKirsclmerinhisrepresentativecapacityandtoremovetheRICO claim.
(DocketNos.41,43gMem.Amendl.
)TheCreditSuisseentitiesmovetodismisstheThird
PartyComplaint.(DocketNo.57(CreditSuisseMem.Dismissl.
)
A briefdiscussionofthefactualandproceduralbackgroundassistsinanunderstandingof
theissuesanddemonstratesthat,althoughthisisacomplexcase,resolutionofthepending
motionsinthiscaseturnsouttoberelativelysimpleandstraightforward.lnsum,theCourt
agreeswithKirschnerthattheCounterclaim wasimproperlyfiledagainsthim inhispersonal
capacity,andthatBlixseth'sfailuretoseekleaveoftheMontanaBanknzptcyCourtdeprivesthis
Courtofsubjectmatterjurisdictionoverclai
msassertedagainsthiminhisofficialcapacity.
Kirschner'smotiontodismissisthereforeGRANTED,andBlixseth'smotiontoamendis
DENIED,onthebasisthatamendmentwouldbefutile.TheCourtalsoagreeswithKirsclmer
thattheCounterclaim,whichseeks$9billionindamagesfrom Kirsclmerforactionstakeninthe
performanceofhisdutiesintheadministrationoftheClub'sbanknzptcyestate,wasfiledinbad
faithandinknowingdisregardofRule13andtheBartonrule.Themotionforsanctionsis
thereforeGRANTED.TheCourtconcludesthattheclaimsintheThirdPartyComplaintare
fatallyflawed;theCreditSuisseentities'motiontodismissisthereforeGRANTED.The
Court'sreasoningisexplainedingreaterdetailbelow.
CV-90(06/04)
CIVILMINUTES-GENERAL
Page2of39
CIVILMINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
l1.
BACKGROUND
A.THEMONTANABANKRUPTCYPROCEEDINGSANDTHEPRESENTCOMPLAINT
1.THECREDITSUISSELOANTOTHECLUB,ANDTHEDISTRIBUTIONOFTHE
PROCEEDSTOBLIXSETH
ln1997,DefendantTimothyBlixsethconceivedanideaforanexclusivemembership
resortinMontanaknownastheYellowstoneMountainClub(C
theClub'').Togetherwithhis
then-wife,Edra,BlixsethdevelopedandoperatedtheClubthroughhisbusinessentity,BGI
(whichbecameBLX),the8g-percentowneroftheClub.lnSeptemberof2005,throughthese
entities,Blixsethborrowed$375millionfromCreditSuisseandwithrepaymentsecuredbythe
Clubandotherassets.AllegedlywiththeknowledgeofCreditSuisse,approximately$200
millionoftheloanproceedsweredistributedtoBLX,whichwasownedandcontrolledby
Blixseth.MostofthatmoneywasinmrndistributedtoBlixsethwhoin2006executedtwo
promissorynotes,payableondemand,infavorofBLX inexchangeforthefunds.ln2008,
pursuanttoaMarriageSettlementAgreement(t
MSA'')thatfinalizedtheBlixseths'divorce,
BlixsethtransferredownershipoftheClubandofBLX toEdraandcausedBLX torelease
BlixsethfromanyliabilityontheNotes.(See2/24/12Order'
,Countercl.!!8-14,85-91.
)
2.THECLUB'SBANKRUPTCYPROCEEDINGS
Notlongafterthesetransactionswereconsummated,boththeClubandBLX wereplaced
intobankruptcyinMontana.A Chapter11planwascontinnedfortheClubandthe
YellowstoneClubLiquidatingTrust($YCLT''
)wasformedwithKirschnerappointedbythe
courtastrustee.IntheClub'sbankruptcyproceedings,thetrusteeprosecutedcounterclaimsin
anadversaryproceedingagainstBlixsethseekingdamagesand/ordisgorgementofa11funds
receivedbyBlixsethfrom theCreditSuisseloanproceeds,onthetheorythatBlixsethhad
breachedhisfiduciarydutiestothedebtorsandthatthereleaseofhisliabilityontheNotes
constitutedafraudulenttransfer.SeelnreYellowstoneMountainClub.LLC,436B.R.598,
641-42(Banl
tr.D.Mont.2010)($t
AP-14''
).OnAugust16,2010,TheHonorableRalphB.
KirscherissuedanadverseMemorandum ofDecisionagainstBlixsethfollowingatwo-week
trial.TheMontanaBankruptcyCourtfound,interalia,thatBlixseth'sremovalof$209million
from thedebtorswasadistribution,notaloan;Blixseth'smisappropriationoftheloanproceeds
wasconstructivelyfraudulentunderMontana'sUniformFraudulentTransferActISI
MUFTA''
I
andtheBanlcruptcyCode;thereleaseintheBlixsethMSA wasactuallyandconstructively
fraudulentundertheMUFTA;andBlixsethbreachedhisfiduciarydutiesofloyaltyandcareto
CV-90(06/04)
CIVILMINUTES-GENERAL
Page3of39
CW ILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
thedebtors.ThecourtstatedthatitwouldenterajudgmentawardagainstBlixsethi
nthe
amountofmoneyYCLTwasrequiredtopaytosatisfycertainclaims,aswellasthefeesand
costsal
readyincurredandtobei
ncurredbyYCLTinobjectingtoandliquidatingthoseclaims.
Id.at644-49,655-671,679.
However,Blixsethdidachievesomesuccessinthatproceeding.TheBankruptcyCourt
foundthatCreditSuisse,forthepurposeofgeneratingsignificantloanfeestoitself,hadloaned
the$375milliontotheClubbasedonanoverinflatedvaluationofitsassetsandhadinfact
encouragedBlixsethtotakealargepersonaldistributionfrom theloanproceeds.Basedonthose
findings,theBankruptcyCourtfoundthatCreditSuissewasjustasculpableintheClub's
bankruptcyasBlixsethandappliedtheinparidelictodoctrinetoprecludeanyrecoverybythe
YCLTthatwouldbenefitCreditSuisse.17-.at673-78.Thecourtobservedthat,(
tgijnaclever
legalmaneuver,counselforCreditSuissenegotiatedtoinsulateCreditSuissefrom claimsbythe
PrepetitionLenders(whohadactuallyadvancedtheloanfundstothedebtorsundertheloan
agreementlandalsonegotiatedapositionthatallowedYCLTtostepinandseekpaymenton
behalfofCreditSuisseonanonrecourseloan.
''L(
1.at677-78.Thecourtexplainedthatitwas
StprecludingCreditSuisseandthePrepetitionLendersfrom benetmingfrom theirparticipation
intheYellowstoneClubloan,''andsprohibitingCreditSuisseandthePrepetitionLendersfrom
convertinganonrecourseloanintoarecourseloanthroughcraftylegalnegotiationswiththe
DebtorsandtheCommittee.''ld.at678.
Blixsethhasalsosucceeded,thusfar,inpreventingafinaljudgmentfrombei
ngentered
ontheAugust16,2010Memorandum ofDecision.OnAugust27,2010,theYCLTmovedfor
reconsiderationandclarification,seeking,interalia,fortheBankruptcyCourttoaftixdamages
againstBlixsethinanamountcertain.(DocketNo.49gconantDecl.)!1l(b),Ex.3.)The
opposition,whichwasduebySeptember10.IJI
L!!11(c),(d).)Thecourtstatedthat,Slilf
BankruptcyCourtgrantedthemotiononSeptember7,apparentlywithoutwaitingforBlixseth's
$40,067,962.42istheamotmtthattheDebtorsowedtoa1lcreditors,saveCreditSuisse,Cayman
IslandsBranch,ontheirpetitiondate,''assetforthinanaffidavitfiledbytheYCLT,theCourt
willgrantYCLT'SrequestbyamendingtheJudgmenttoretlectanexactdollaramount.
''(L1
la!
11(d),Ex.4at4,8-9.)TheBankruptcyCourtenteredanamendedjudgmentintheamountof
$40,067,962.
42,inaddi
tiontothefeesandoostsincurredandtobeinourredinobjedingtoand
liquidatingtheclaims.(Seeidu!11(9,Ex.5at3.
)
OnSeptember23,2010,pursuanttotheYCLT'Smotion,theBankruptcyCourtcertified
thejudgmentforappealdirectlytotheNinthCircuit,but,onJanuary11,2011,theNinthCircuit
deniedthecertification.(Id.!11(e),Exs.28,29.
)Meanwhile,boththeYCLTandBlixseth
appealedtheSeptember7,2010ordertotheMontanaDistrictCourt.(Id.!11(e).
)OnMarch8,
CV-90(06/04)
CIVILMINUTES-GENEML
Page4of39
CIVIL MINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
2011,BlixsethmovedtodismissthoseappealsonthebasisthattheSeptember7,2010orderwas
notafinalappealablejudgment.TheMontanaDistrictCourtgrantedBli
xseth'smotionon
October11,2011.(1d.!!1149,(g),Exs.5,6).
)
OnOctober26,2011,theYCLTfiledasecondmotiontoamendtheMemorandum of
Decision,askingtheBankruptcyCourttoreconsidersomeofitsearlierlegalandfacttzal
findings,or,atminimum,toenterafinalandappealablejudgmentintheamountof
$40,992,210.81.Thisgreateramountretlectedadditionalclaimsthathadbeenallowedsincethe
YCLT'Spreviousaffidavithadbeensubmitted,buttheYCLTnolongersoughtfeesandcosts
incurredinresolvingtheclaims.(JA !11(h),Ex.7at7-8.)Blixsethopposedthemotion,and,
onMarch6,2012,theBankruptcyCourtheldanevidentiaryhearing,admittingintoevidence50
newexhibitsfrombothpart
ies.(Li!!11(i),U),(k),Exs.8-10.
)Thecourtalsopermittedthe
partiestosubmitpost-hearingbriefing.Inadditiontochallengingthepropercategoriesof
damagesthatmaybeawarded,Blixsethargued,interalia,thattheU.S.SupremeCourt's
decisioninSternv.Marshall,13lS.Ct.2594(2011),preventstheBanknz
ptcyCourtbothfrom
makingproposedfindingsoffactandconclusionsoflawandfromenteringafinaljudgmentin
anactiontoavoidafraudulentconveyance,suchasAP-14. (
Id.!!11(m),((9,Ex.11.
)Asof
thefilingofthemotionsthatarepresentlybeforethisCourt,theBanknzptcyCoul'thadnot
enteredfinaljudgmentontheAugust16,2010MemorandumofDecision.(LIt.!!11(n),12.
)
3.COLLECTIONONTHENOTESISASSIGNEDFROM BLXTOYCLT,ANDTHEYCLT
INSTITUTESTHISLAWSUIT
OnAugust30,2011,JudgeKirscher,whilepresidingovertheBLX proceedings,
approvedtheassignmentofBLX'SclaimsagainstBlixsethontheNotestoYCLTforpurposes
ofcollection.(DocketNo.59(CreditSuisseReq.JudicialNot.(ttCSRJN''
III!1,Ex.A.)The
assignmentprovidedthattheYCLTshallbeentitledto58percentofanyrecovery,andthatthe
BLX estateshallbeentitledto42percentofanyrecovery,basedontheirrespectivesharesofthe
claimsagainstBlixseth.(Id.jrB(iii).
)Inthepresentlawsuit,YCLTseekstosetasidethe
releaseofBlixseth'sliabilityontheNotesasafraudulenttransferunderl1U.S.
C.j548(a)and
CaliforniaCivilCodej3439.
04,andtocollectontheNotesunderabreachofcontracttheory.
(DocketNo.1gCompl.
).
)TheCourtdeniedBlixseth'smotiontodismisstheseclaimsearlier
thisyear.(See2/24/12Order.
)
lTheCourttakesjudicialnotice,pursuanttoFederalRuleofEvidence201,ofthedocumentsrequested
668,689(9thCir.2001)(ftunderFed.R.Evid.201,acourtmaytakejudicialnoticeof'mattersofpublic
record''')*
...
byThirdPartyDefendantsbecauseal1aremattersofpublicrecord. SeeLeev.CityofLosAnaeles,250F.3d
CV-90(06/04)
CIVILMINUTES-GENEML
Page5of31
CIVILMIM JTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
MarcSKirschnerv.TimothyLBlixseth
Date November1,2012
B.THECOUNTERCLAIM ANDTHIRDPARTYCOMPLAINT
Blixsethisapparentlyoftheview thatthebestdefenseisagoodoffense.Toexecutea
strategybasedonthatphilosophy,BlixsethansweredthependingComplaintandattacked
Kirsclmerinan8o-pageCounterclaim thatallegesconspiracyunderthecivilRacketeer
InfluencedCorruptOrganizations($R.
1CO''
)Act,18U.S.
C.j1961etseq.
,twoseparateclaims
forbreachofthedutyofgoodfaithandfairdealing,andbreachofcontract.(SeeCountercl.
)
AlthoughKirschnerfiledthisactioninhiscapacityastrusteeoftheYCLT,theCounterclaim
nameshim asCounterdefendantinhisindividualcapacity.Itseeks$6billionintrebledamages
undertheRICO statuteonthetheorythatKirsclmer'sattempttocollectontheNotesconstitutes
participationinaRICOconspiracyconcoctedandcarriedoutbyCreditSuisse,itsinside
noteholder,CrossllarborCapitalPartners,LLC(t
crossllarbor''
),andEdraBlixseth,todefraud
BlixsethoftheClubandotherassets.AccordingtoBlixseth,theseco-conspiratorsseekto1ay
theblamefortheClub'sbankruptcyatBlixseth'sfeet,andcollectonthefraudulentCredit
Suisseloan.TheCounterclaimalsoseeks$1billionindamagesforeachofBlixseth'sthzee
contract-basedclaims,onthetheoriesthat(1)KirsclmerseekstocollectontheCreditSuisse
loan,forthatentity'sbenefit,incontraventionoftheloan'snon-recourseprovisionsagainsthim,
andinspiteofthefactthattheMontanaBankruptcyCourtinAP-14alreadypreventedCredit
Suissefromdoingso,and(2)KirschnerseekstocollectontheNotesforBLX'Sbenefitin
contraventionofthatentity'sreleaseofBlixsethfrom liabilityontheNotes.Theunderlying
facttzalallegationsareexplainedingreaterdetailbelow,andareSsubstantiallysimilar''tothose
assertedinalawsuitfiledbyBlixsethagainstCreditSuisse,Crossl-larbor,andothersintheU.S.
DistrictCourtfortheDistrictofColorado.(ld.!129n.5),
.seeCSRTN!4,Ex.D(Blixsethv.
Cushman&WakefieldofColorado.Inc.
,CaseNo.1:12-cv-00393-PAB-KLM (D.Colo.Feb.
14,20121.
)
BlixsethalsoattacksfiveCreditSuisseentities CreditSuisseAG,CreditSuisse
Sectlrities(USA),LLC,Credi
tSuisse(USA)lnc.
,CreditSuisseHoldings(USA)Inc.,andCredit
SuisseCaymanlslandsBranch(together,tt
creditSuisse''
l-inaseparateThirdPartyComplaint.
(DocketNo.27g'
ThirdPartyCompl.
).
)TheThi
rdPartyComplaintincorporatestheunderlying
allegationsassertedintheCounterclaim,andassertsclaimsagainsttheCreditSuisseentitiesfor
contributionandtmjusterlrichment,intheeventthatBlixsethisfoundliableunderthe
ComplaintforpaymentontheNotes.(1d.!!13-14,16,22.
)
1.THEALLEGEDCREDITSUISSEGLOAN-TO-OWNMSCHEME
Blixsethallegesthat,begizmingin2003,CreditSuissedevisedanaggressivemarketing
scheme,thepurportedtEquityRecapitalizationLoanPrograms''aimedathigh-endresorts.
Throughthisprogram,theb..
ankofferedma
ssiveloansb.a
sedont
fotalNetValue'(&C
TNV'')
.
..-..
CW ILMINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
non-traditional,undiscountedprojectedcash-flowappraisalsthatdidnotcomplywithapplicable
federalandstatelaw,namelytheFinanciallnstitutionsReform,RecoveryandEnforcementAct
of1989(tTlRREA'
'),12U.S.C.j3331etseq.andtheUniformStandardsofProfessional
AppraisalPractice(SL
USPAP''
),adoptedbyMontanaunderMontanaCode537-54-403.To
induceresortdevelopersandownerstomaketheseloans,CreditSuisseallowedthem totake
personaldistributionsfrom theproceeds,a11thewhilemisrepresentingthelegalityoftheloans
andfailingtodisclosetheriskinvolved.CreditSuisseearnedlargeloanoriginationfees,andit
insulateditselffrom riskbysyndicatingandsecuritizingtheloansforsaleonthesecondary
market-againrelyingonthefalseappraisalstoinduceinvestorstopurchasethesyndicated
product.Throughtheillegalappraisals,CreditSuisseinducedthedevelopersintoafiduciary
Etlendingadvisor''relationship,andcausedthem todiscloseconfidentialfinancialandproprietary
informationtoCreditSuisseanditsco-conspirators,usedt
oattractinvestors,(Id.!!16-19,
22-25,31,36-37,40-43,45,50-52,58,63,104-08,110(a)-(e),147.
)However,througha
seriesofdisclaimersinthelendingdocuments,CreditSuissetransformedtherelationshipintoa
tradi
tionallender-borrowerrelationship.(Id.!109.
)
CreditSuisseevadedFIRREA andUSPAP,whichweredesignedtopreventagainst
exactlytheseabuses,byrtmningtheloanstluoughitsCaymanIslandsCcbranchy''whichconsists
ofaddlonelypostoffice,''whilecommunicatingwithBlixsethandcontrollingthetransaction
throughitsNewYorkandBostonoffices.(ld.!!28,62,110(a).
)lnperformingthe'
1NV
appraisals,Cushman& Wakefieldignoredtheirowninternaldocumentationcreatedin
connectionwithearlier,FIRREA-andUspAp-compliantappraisalsofthesamepropertiesand
preventedtheiremployeesfrom questioningthenew methodologies. (1d.!(
!64-82,96.)
InternalcommtmicationsreflectitsappraisersremarkingthattheywereSd
notinjailyetandstill
continuingtowritetheseappraisals.''(Id.!77.)BlixsethallegesthatCreditSuissecarriedout
thisschemewithatleast14high-endresortdevelopments.(Id.!!65,145-46.)
CreditSuissetargetedtheClubforsuchaloanviaacoldcallandsalespitchin2004. (
Id.
!!92-94.)AlthoughBlixsethinitiallyrejectedCreditSuisse'sofferof$150million,hewas
evenmallyconvinced,and,afterheagreedtoborrow thisamount,CreditSuissecontinuedto
solicithimtoborrowgreatersums.Blixsethwaseventuallybaitedintobonowing$375million
fortheClub,andwaspersuadedbyCreditSuissetotakea$209millionpersonaldistributionto
StexpandtheYellowstoneClubbrandworldwideinordertopaybacktheloan.'(Id.!J
!21,94,
96-97(originalemphasisl).Blixsethallegesthatheagreedtotheloaninrelianceonthefacts
thatotherresortswereparticipatingintheprogram,andthatCushman& Wakefieldhad
appraisedtheClubatavalueof$1.165billion.(1d.!!95,97-98.)Thisappraisalwaspresented
toBlixsethasanupdate''ofCushman& Wakefield's2004appraisalvaluingtheClubat$420
CV-90(06/04)
CIVILMINUTES-GENERAL
Page7of39
CIVIL MINUTES-GENERAL
CaseNo. CV l1-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
million.(Id.!l10(e)).EvenaftertheClubobtainedthe$375millionloan,CreditSuisseurged
ittoborrowanadditional$75million,whichBlixsethrejected.(Id.!!55,99,111.)
Blixsethallegesthat,whenoriginatingtheloan,CreditSuisseanticipatedthatitsterms
woulddrivetheClubintobanknzptcy;indeed,itemployedaSRiskManagementTeam ...
whosejobitwastoplanforandprofitfromtheeventualdefaultofitsloan.''(Id.!!57-61.
)In
Blixseth'scase,CreditSuisseplannedtouseCrossl-larbor,anoteholder,totakeovertheClubin
asham bankruptcyandtocreateareorganizationplanthatexculpatedthemselvesfrom liability
butmadeBlixsethpersonallyliablefortheloan,despiteitsnon-recourseterms.Thisplan
ensuredthatCreditSuisseandCrossl-larborwouldnotonlygainownershipofthepropertyfor
tdpenniesonthedollar,''butcouldpursueBlixsethtocollectmuchoftheoriginalloanamount,
byclaiminghismalfeasanceinacceptingtheloanandinusingittomakeapersonaldistribution.
(1d.!!26,34,38-39,52-54.)
Blixsethallegesthat,asafirst-timedeveloperwiththeClub,hewasunfamiliarwith
FIRREA andTNV,reliedontheinternationalreputationsofCreditSuisseandCushman&
Wakefield,reliedontheadviceofhisownlawyers,andexpectedthatallapplicableregulations
wouldbefollowed.(1d.!29.
)HedidnotrecognizethatthetruevalueoftheClubwasonl
y
$420million,asithadbeenappraisedin2004,andthatthecombinationofthe$375millionloan
andthe$209personaldistributionresultedinanegativecapitalizationoftheClub.(1d.!99.
)
Indeed,hedidnotbecomeawareoftheextensiveviolationsbyCreditSuisseandCushman&
WakefielduntilApril2009,inthecontextoftheClub'sbankruptc,
yproceedings.(1d.!46.
)
2.THEALLEGEDPARTICIPATIONOFCROSSHARBOR,SAMBYRNE,ANDEDRA
BLIXSETH
BlixsethallegesthatCrossl-larbor,itsprincipal,Sam Byrne,andBlixseth'sex-wife,Edra
Blixseth,wereco-participantsinCreditSuisse'sRICO conspiracy.
TheBlixsethsfileddivorceproceedingsinDecemberof2006.(1d.!90.)In2008,
Crossl-larborenteredintoacontracttopurchasemostoftheClub'sassetsfor$455million.
However,ByrnedesiredaSbetterdeal''ontheClub,andcontactedCreditSuisseinordertod'set
up''Blixseththroughabankruptcyproceeding.AfterBlixsethrejectedByrne'sproposaltoplace
theClubintoapre-packagedbankruptcyunderthepretextthatitwouldsolvecertainissueswith
thesale,ByrnehadEdraBlixsethfabricateandforgefederalgrandjurytargetlettersagainst
Blixseth,andByrneterminatedthesalebythreateningtodisclosetheletterstoinvestors.
Crossl-larboralsopurchasedaportionoftheClub'sdebtinordertobecomeaninside
noteholder,andByrnemetwiththeGovernorofMontanatoworkoutthepoliticalaspectsofthe
CV-90(06/04)
CIVILMINUTES-GENERAL
Page8of39
CIVIL MINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
bankruptcy.(ld.!119.
)
TheEdraBlixseth/crossl-larborschemeculminatedinCrossllarbor'smakinga$35
millionshort-term loantoEdrainordertoenablehertoreceivetheClub,andotherBlixseth
maritalassetswithanetvalueof$515million,aspartoftheBlixseths'MSA.Crossllarbor
promisedEdrathatitwouldinject$100millioninnewfinancingintotheCl
ubandthatshe
wouldprofithandsomelybydevelopingtheClubwithCrossllarbor.WhenEdracouldnotrepay
theloanduetoherownprecariousfinancialposition-aneventualitythatCrossHarborhad
anticipatedandplannedfor-crossllarborasstlmedoperatingcontroloftheClub,causeditto
becomedelinquentonitsdebts,and,onNovember10,2008,placedtheClubintobankruptcy.
Asdetailedbelow,BlixsethallegesthatthebankruptcyproceedingshavepermittedCrossl-larbor
toacquireownershipoftheClubataheavily-discountedprice,whileCreditSuissehasusedthe
proceedingstoseekrepaymentonitsloantotheClubdirectlyfrom Blixseth.Blixsethalleges
thatal1oftheseplansandschemeswereunknowntohim atthetimethathetransferred
ownershipoftheClubtoEdra,thathedesiredonlytobringanendtoacontentiousand
expensivedivorce,thathereasonablybelievedthatEdrahadsufficientfinancingtooperatethe
entitiesthatshereceivedaspartoftheMSA,andthathewasreleasedfrom liabilityontheNotes
inafairexchangefortheassetsthatEdrareceived.(1d.)
3.THEBANKRUPTCYSCHEME
BlixsethallegesthattheRICO co-conspiratorshavecontinuedtoperpetratetheirscheme
tluoughtheYCLTandthebankruptcyproceedings.Asoneexample,heobservesthatthe
reorganizationplancalledforCreditSuissetoappointfourofthesevenmembersoftheYCLT
advisoryboard.(ld.!!49.
)Crossl-larborhasappointedafifthmember.(1d.!119(z).
)Credit
SuisseandCrossllarborarethusthelargestbeneficiarieswithintheYCLT.(ld.!119(aa).
)The
ultimateplanofreorganizationcalledforCrossHarborandByrnetoowntheClubassetsfora
mere$115million,andforCreditSuissetohavethebalanceofitsremaining$375millionloan
satisfiedbyajudgmentagainstBlixsethinAP-14.(ld.!119(w).)TheCounterclaimalleges
that,thus,theYCLTwasdesigned(dtoactasastraw-manforthepurposeofcollectingfrom Mr.
Bli
xsethindirectlywhatgcreditSuisselcouldnotcollectfromMr.Blixsethdirectly.''(ld.!
1l9(y).
)
Blixsethcomplainsthat,ateverystageofthebankruptcyproceedings,hisdueprocess
rightshavebeendenied.Asoneexample,theMontanaBankruptcyCourt,withoutproper
notice,approvedasettlementfollowedbyareorganizationplanthatexculpatedCreditSuisse,
CrossHarbor,Byrne,andEdraBlixsethfrom allliability.Theseexculpationclausesandnotice
defectswerereversedbytheMontanaDistrictCourtfortplainerror.
''(1d.!47.)Asanother
cv-go(o6/c4)
clklitQikv-rEs-GENERAI-
page9of39
CIVILMINUTES-GENEM L
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
example,Blixsethallegesthat,throughoutthecourseofthebankruptcyproceedings,Credit
SuisseandCushman& Wakefieldhavefailedtoproducetheirinternalcommunicationsand
havedeliberatelyconcealedtheidentityofmaterialwitnesses.(Id.!!83-84,141U).
)Blixseth
allegesthatEdraBlixsethhasalsoconcealedanddestroyedevidencerelatedtoherdealingswith
Crossllarbor,Byrne,andCreditSuisse.(ld.!119(cc).
)
Blixsethallegesthat,inaddition,ByrneandEdrawereabletousetheirpolitical
connectionstoquashatwo-yearfederalcriminalinvestigationintoloanfraudbyEdraand
bankruptcyfraudinconnectionwiththeClub.Specifically,BlixsethallegesthatByrne
partneredwithbillionairefinancierRonBurkle,whohastsextensiveanddeeppersonal
relationships''withtheClintonsandthecurrentAssistantU.S.AttorneyGeneral,todevelopand
owntheClub,andthatBurkleusedhisconnectionsattheU.S.DepartmentofJusticetobring
theinvestigationtoahal
t.(ld.!119(x).)
4.KIRSCHNER'SALLEGEDROLEINTHERICO CONSPIRACY
AccordingtoBlixseth,KirschnerparticipatesintheRICO conspiracyasaknowingpawn
ofCreditSuisseandCrossHarbor,whoareattemptingtocollectonanillegaldebt.Thatis,
Mr.Kirschner,atalltimesrelevant,knowsthatinhiscapacityastrusteefortheYCLT
anditsillegitimatecollectioneffortsagainstMr.Blixseth,thatheisactingasthetool
ofandcommittingovergtjactsforCreditSuisseandCrossHarbortoimplementand
executetheiron-goingRICO entemriseagainstMr.Blixseth.AssuchMr.Kirsclmer
isaIUCO conspiratorandliablefortheactsoftheenterprise.
(Id.!7,
'seealsoj
l.a!!103,137.)AlthoughtheBankruptcyCourti
nAP-14hasalreadyrefused
topermittheYCLTtocollectanymoneyonCreditSuisse'sbehalf,Kirsclmerremains
undaunted,andseekstocollectontheNotesintheseproceedings,takingdirectionfrom the
YCLTboard,whichisdominatedbyCredi
tSuisseandCrossllarbor.(ld.!!7,103&n.2.
)
AccordingtoBlixseth,notonlyarethesecollectioneffortsinviolationofthenon-recourse
provisionsoftheCreditSuisseloan,buttheyalsoseektoextractfrom Kirsclmerhundredsof
millionsofdollarsworthofassetsthathereceivedpursuanttotheMSA.(1d.!121.)Bli
xseth
allegesthatKirsclmeristlnowtheprimaryinstrllmentality...inimplementing(theCredit
SuisseandCrossllarbor)scheme...todefraudMr.Bli
xseth.''(Id.
)
AccordingtoBlixseth,Kirsclmerhasalsocommittedhisownindependentpredicateacts.
First,hehasaidedtheMontanaDepartmentofRevenue(
IMDOR'')infilinganinvoluntary
bankruptcypetitionagainstBlixsethinNevada,SsbecauseMr.Kirsclmerhadinsideconnections
CV-90(06/04)
CIVILMINUTES-GENEML
Page10of39
CIVILMINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
withthebankruptcytrusteesthereand(itlwouldprovideaneasyvenueforMr.Kirsclmerto
collectonillegitimatedebtsonbehalfofCreditSuisse.''(1d.!103.
)Hehasalsol'engagedi
na
systematicefforttointerferewithMr.Blixseth'slegitimatebusinesstransactionsthrough
defamingMr.Blixseth'sbusinessreputationtothirdpartiesandinthepublicmedia.'
'(ld.
)
TheseeffortshaveincludedpublicallegationsofBlixseth'sSilooting''theClubforhisown
personalbenefit.(Id
-.!115(a).)Finally,hehasmadeunspecifiedfalsestatementstmderoathin
thebankruptcyproceedingsregardingthenattzreandextentofCreditSuisse'scontrolofthe
YCLTandhisownactionsastheYCLTtrustee.(1d.!122.)
5.THETHIRDPARTYCOMPLAINT
BlixsethadoptsandincorporatestheseallegationsinhisThirdPartyComplaint,which
assertsclaimsforcontributionandunjustenrichmentagainsttheCreditSuisseentities.The
ThirdPartyComplaintallegesthatCreditSuisseisatortfeasorjointlyresponsibleforthe
allegedl
yfraudulenttransfers.(ThirdPartyCompl.!14.)BlixsethallegesthattheYCLTseeks
torecoverthe$200milliondistributionfrom BlixsethforthebenefitofCreditSuisse,buthe
contendsthatitwouldbeunjusttopermi
tthatentitytoenjoythebenefitofajudgmentagainst
Blixseth.AccordingtoBlixseththisisbecauseinacceptingtheCreditSuisseloanontheClub's
behalf,hereliedonthefactthatitwasnon-recourseloan,andbecauseCreditSuissehasalready
benefittedfrom peddlingthepredatoryloantotheClubbyeamingmillionsofdollarsinfeesfor
originatingtheloanandobtaininganownershipinterestintheClub. (1d.!!17-21.
)
6.THEPROPOSEDFIRSTAMENDEDCOUNTERCLAIM
Theproposedfirstamendedcounterclaim namesKirsclmerinhisrepresentativecapacity,'
isconsiderablyshorter;removestheRICO allegationsandclaim'
,andremovestheallegationthat
KirsclmerisCscontrolled''byCreditSuisse,alleginginsteadthatheisactingonbehalfofandfor
thebenefitofCreditSuisseandBLX,asanassigneetotheirpurportedclaimsagainsthim. (See
DocketNo.42-1(ProposedFirstAmend.Countercl.jj5.)However,itcontainsmanyofthe
samefactualallegationsregarding(1)thegenerationoftheCreditSuisseloantransactionand
theconductofCreditSuissetoinduceBlixseth'sagreementtoenterintotheloanand totakea
distributionfromitsproceeds;(2)thecollusionbetweenEdraBlixsethandCrossHarborto
defraudBlixsethofhisassets;and(3)theformationoftheYCLTtocollectontheCreditSuisse
loan.(ld.!!14-69.
)Theproposedfirstamendedcounterclaimseeks$500millionindamages
foreachofthecontract-basedclaims.
111.
DISCUSSION
CV-90(06/04)
CIVILMINUTES-GENEML
Pagel1of39
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
A.MOTIONSTODISMISSANDFORLEAVETOAMENDCOUNTERCLAIM
1.LEGALSTANDARDS
a.Rule12(b)(1)LegalStandard
FederalRuleofCivilProcedtlre12(b)(1)permitsadefendanttomovetodismissa
complaintoverwhichthecourtlackssubjectmatterjurisdiction.Fed.R.Civ.P.12(b)(1).
Federalcourtsarecourtsoflimitedjurisdictionthat(spossessonlythatpowerauthorizedby
Consti
tutionandstatute,whichisnottobeexpandedbyjudicialdecree.
''Kokkonenv.Guardian
Lifelns.Co.ofAm.
,511U.S.375,377(1994)(citationsomitted).Accordingly,acourtwithout
jurisdictionovercertainclai
mshasnochoicebuttodismissthemregardlessoftheirgravityor
potentialvalidity.Sd
r
f'
heburdenofestablishingfederaljurisdictionisonthepartyinvoking
federaljurisdiction.
''UnitedStatesv.Marks,530F.
3d799,810(9thCir.2008).
b.AmendmentunderRule15
FederalRuleofCivilProcedure15pennitsapartytoamenditspleadingonce(Casa
matterofcourse''within21daysafterservingitor21daysafterserviceofamotionunderRule
12(b).Fed.R.Civ.P.15(a)(1).Subsequentl
y,apartymayamenditspleadingt
sonlywiththe
opposingparty'swrittenconsentorthecourt'sleave.''Fed.R.Ci
v.P.15(a)(2).TheRule
directsthatthecourttshouldfreelygiveleavewhenjusticesorequires.''ld.Circuit1awteaches
thatthispolicyshouldbeStappliedwithextremeliberality.''MorongoBandofMissionlndians
v.Rose,893F.
2d1074,1079(9thCir.1990).Federalcourtsconsideranon-exhaustivelistof
factorsindeterminingwhethertograntleavetoamend,includingCsunduedelay,badfaithor
dilatorymotiveonthepartofthemovant,repeatedfailuretocuredetkienciesbyamendments
previouslyallowed,undueprejudicetotheopposingpartybyvirtueofallowanceofthe
amendment,futili'
tyofamendment,etc.''Fomanv.Davis,371U.S.178,182(1962).
2.APPLICATION
Kisclmermovestodismissthecounterclaim onthegroundthatthisCourtdoesnothave
subjectmatterjurisdictionovertheclaim.Kirschnerclaimsthatheisnotaproper'
Copposi
ng
party''withinthemeaningofRule13,whichgovernscounterclaims.
a.TheBartonDoctrine
TheNinthCircuithasheldthatSlajcounterclaimunderRule13mustbeagainstan
CV-90(06/04)
CIVILMINUTES-GENERAL
Page12of39
CIVILMINUTES-GENEM L
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
topposingparty.'''lnreAdbox.lnc.,488F.
3d836,840(9thCir.2007)(quotingFed.R.Civ.P.
13(a),(b)).Ss
fhus,apartysuedbyatrusteemayassertacounterclaimagainstthattrustee,but
onlyifthetrusteeisantopposingparty'withinthemeaningofRule13.5
'Id.Moreover,tgiltis
well-establishedthatwhenapartysuesinhisrepresentativecapacity,heisnotsubjectto
counterclaimsagainsthim inhisindividualcapacity.''Id.;seealsolnreCasale,62B.R.899,
900(E.D.N.
Y.1986)(inacticmbroughtbybanknzptcytnzsteeforturnoverofpropertytothe
estate,dismissingcounterclaim againsttrusteeinpersonalcapacityfornegligenceandfalse
representations,becausetsgiltisfundamentalthatinanactionbroughtbyapartyina
representativecapacity,acounterclaim cannotbeassertedagainsttheplaintiffinhisindividual
capacity').
HerebecauseKirschner,astrusteeinbanltruptcy,hasactedinarepresentativecapacity,
hecontendsthatBlixsethmaynotpursuethependingcotmterclaim,whichisbroughtagainst
him asanindividual.Thisargumentimplicatestheso-calledBartondoctrine. Whenaparty
seekstopursueclaimsagainstabankruptcytrustee,theNinthCircuithasheldthat$$apartymust
firstobtainleaveofthebankruptcycourtbeforeitinitiatesanactioninanotherforum againsta
bankruptcytrusteeorotherofficerappointedbythebankruptcycourtforactsdoneinthe
officer'sofficialcapacity.''lnreCrownVantage.lnc.,421F.
3d963,970(9thCir.2005).Thq
CircuitexplainedthatigtlhisholdingisfirmlygroundedintheBartondoctrine,establishedby
theSupremeCourtoveracenturyago,whichprovidesthat,beforesuitcanbebroughtagainsta
court-appointedreceiver,leaveofthecourtbywhichhewasappointedmustbeobtained.'''Id.
at970-71(quotingBartonv.Barbour,104U.
S.126,127(1881)),
.seealsoCun'
yv.Castillo,297
F.3d940,945(9thCir.2002)($$GAcourtotherthantheappointingcourthasnojurisdictionto
entert
ainanactionagainstthegbankruptcy)trusteeforactswithinthetrustee'sauthorityasan
officerofthecourtwithoutleaveoftheappointingcourt.'...Therequirementofobtaining
leavefrom theappointingcourttosueatrusteeislong-standing.')(quoti
ng3Collieron
Bankruptcy!323.03g3j15thed.rev.2001).TheBartondoctrineisequall
yapplicableto
liquidatingtrustees,whichareSttheSfunctionalequivalent'ofthebankruptcytrustee.''Crown
Vantage,421F.3dat973.
TheFourthCircuithasexplainedthatallegationsofintentionalmisconductdonot
precludeapplicationofBarton,becauselcbankzuptcytrusteesandtheircounselrequireprotection
againstsuitsthatarebasedonunfoundedallegationsregardlessofwhetherthereisaclaim that
theallegedwrongdoingwasintentional,''andbecausetherequirementthatleavebesoughtfrom
thebankruptcycourtfulfillsEtheneedforbankruptcycourtstobeSkeptintheloop'sothatthey
makeappropriateappointmentsinthefuture.''McDanielv.Blust,668F.
3d153,158(4thCir.
2012)(Bartondoctrinebarredsuitagainst1awfirmretainedbytrusteetoprosecuteadversary
proceeding,wheresuitallegedcivilobstructionofjustice,conversion,i
nvasionofprivacy,
CV-90(06/04)
CIVILMINUTES-GENERAL
Page13of39
CW ILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
breachoffiduciaryduty,andcivilconspiracy).Similarly,theSeventhCircui
thasexplainedthat
Justlikeanequityreceiver,atrusteeinbanknptcyisworkingineffed forthecourt
thatappointedorapprovedhim,administeringpropertythathascomeunderthe
court'scontrolbyvirtueoftheBankruptcyCode.Ifheisburdenedwithhavingto
defendagainstsuitsbylitigantsdisappointedbyhisactionsonthecourt'sbehalf,his
workforthecourtwillbeimpeded.
MatterofLinton,136F.3d544,545(7thCir.1998).Accordingl
y,Stlbleforeleaveisgivenby
thebankruptcycourt,theclaimantmustdemonstratethathehasaprimafaciecaseagainstthe
trustee.
''InreMessina,BankruptcyNo.99B29371,2003WL22271522,at*10tBanl
t1'
.N.
D.
111.Sept.29,2003).
TherearetworecognizedexceptionstotheBartondoctrine.First,thedoctrinedoesnot
barsuitsagainstabankruptcyorliquidatingtrusteeforultraviresactions-actionsforwhichthe
trusteeisltwithoutauthoritytoperform ...inanycircumstancesorforanypurpose''--orfor
actionsotherwisetakeninthetnzstee'sunofficialorindividualcapacity.However,ultraviresis
anarrowlydefinedconceptthatappliesonlytoactionswhicharecompletelyoutsidetheseope
ofthetrustee'sdutiesandresponsibilities.SeeLuriev.Blackwell,285Mont.404,408(1997)
(holdingthatBartondoctrinebarredabuseofprocessactionbecausethetrusteedidnotact
outsideofhisofficialcapacityinseekingtoenforceaforeignjudgmentheobtainedin
bankruptcycourtbyfilingnoticeofthejudgmentinhisownnamebecausetheclearlywas
performinghisofficialdutiesintheadministrationoftheestate'l;seealsolnreDavis,312B.R.
681,686-87tBank.
r.D.Nev.2004)(althoughCleaveofcourtneednotbesoughtifthetrustee
(orothercourtappointedpart
y)isactinginexcessofhisorherauthorityorinanunofficial
capacity,''courtwaswithoutsubjectmatterjurisdictiontoadjudicateclaimthattnzsteeandhis
attorneyhadperformedtheirdutiesnegligentlyandwithbiastowarddebtors).
Second,under28U.S.C.j959(a),
Trustees,receiversormanagersofanyproperty,includingdebtorsinpossession,may
besued,withoutleaveofthecourtappointingthem,withrespecttoanyoftheiractsor
transactionsincarryingonbusinessconnectedwithsuchproperty.Suchactionsshall
besubjecttothegeneralequitypowerofsuchcourtsofarasthesamemaybe
necessarytotheendsofjustice,butthisshallnotdeprivealitigantofhisrighttotrial
byjul
'
y.
CV-90(06/04)
CIVILMINUTES-GENERAL
Page)4of39
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
28U.
S.C.j9594$(addedemphasis).
b.Discussion
becausetheamendedcounterclaimwouldalsobesubjecttodismissalforlackofsubjectmatt
er
jurisdictionunderBarton.
Here,theCounterclaim arisesfrom andrelatestoKirsclmer'sallegedconductwhile
servingastheliquidatingtrusteeoftheClub'sbankruptcyestate.lndeed,thetheoryofthe
Counterclaim isthat,byfulfillinghisdutiesastrustee,Kirsclmerisactingasapawninthe
CreditSuisse-crossllarbor-EdraBlixsethRICO conspiracy.However,theBankruptcyCourt
hasretainedjurisdiction(
ltoadjudicatecontroversiesarisingoutoftheadministrationofthe
Estates,theimplementationofthisPlan,ortheadministrationoftheLiquidationTrust.''
(DocketNo.32gKirschner'sReq.JudicialNot.(&KRJN''
)j2j8,Ex.H(ThirdAmendedJoint
PlanofReorganizationProposedbytheDebtors),Art.X!10.1.8,p.44.)Thus,theCourtlacks
subjectmatterjurisdictionoverthecounterclaimsintheabsenceoftheBankruptcyCourt's
permissionforBlixsethtofilethem inthisCourt.Particularlyinlightoftheseriousallegations
leviedagainstKirschnerandtheastronomicalamountofdamagessought,applicationofthe
Bartondoctrinehereservesitsexactpurposes:toprotectthetnzsteesothathecanfocuson
carryingouthisduties,andtoprotecttheassetsoftheestate.
BlixsethproffersanumberofargumentsastowhyBartondoesnotbarhisassertionof
thecounterclaimsagainstKirsclmerinhisofficialcapacityhere.Noneispersuasive.
2TheCourttakesjudicialnotice,pursuanttoFederalRuleofEvidence201,ofthisdocument,becauseit
isamatterofpublicrecord.SeeLee,250F.3dat689.Blixsethmakesobjectionstonumerousofthedocuments
forwhichKirschnerrequestsjudicialnotice,butdoesnotobjecttotheCourt'stakingofjudicialnoticeofthis
d
ocument.(SeeDocketNo.48(Blixseth'sOb
jectionstoKRJNJ.
.
I
CV-90(06/04)
CIVILMINUTES-GENEML
Page15of39
CIVILMINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
(1)Estoppel
First,BlixsetharguesthatKirschnerisestoppedfrom seekingdismissalbasedonthe
BartondoctrinebecausehehaspreviouslyarguedtothisCourtthat,inprosecutingthisaction,
hewasnotactingasabankruptcytrustee,butsimplyasacreditorseekingtoenforcea
promissorynoteassignedtohim. TheargumenttowhichBlixsethreferswasmadein
oppositiontoBlixseth'scontetionthatKirschnerlackedstandingtocollectonthecancelled
Notes,whichrepresentedmoneyBlixsethowedBLX.Kirschnerarguedthat
BlixsethalsomovestodismisstheComplaintunderFRCP12(b)(1)onthebasisthat
MarcKirschnerlacksstandingtobringtheclaimsassertedintheComplaint. This
argumentisbasedonafundamentalmischaracterizationofthecapacityinwhich
Kirschnerhasfiledsuit.AsnotedintheComplaint,Kirschnerisindeedthetrusteeof
theYCLT,whichisaliquidatingtrustcreatedinconjunctionwiththeconfirmedplan
ofreorganizationoftheYellowstoneClubdebtors.YCLTisthelargestcreditorinthe
BLX bankruptcy,andithasavestedinterestintryingtomaximizetheassetsofthe
BLX bankruptcyestate.TheclaimsassertedintheComplaint,however,arebeing
broughtbyYCLTonbehalfoftheBLX bankruptcyestate.
(DocketNo.16at13(addedemphasisl.
)AccordingtoBlixseth,Kirschnermadethisargument
inordertoavoidtheapplicationoftherule,from Caplinv.MarineMidlandGraceTrustCo.,
406U.S.416(1972)andWilliamsy-,California1stBank,859F.
2d664(9thCir.1988),thata
banknlptcytrusteelacksstandingtocollectmoniesnotowedtothebankruptcyestate. Further,
accordingtoBlixseth,theCourtacceptedthisargumentinits2/24/12Order;thus,thetlogical
conclusion...isthat(KirschnerlisattemptingtoenforcetheBLXnotesinsomeother,
iunofficial'capacity,''andisnotprotectedbyBarton.(DocketNo.51gopp.Dismiss
Countercl.
jat1-2,
.seealsoMem.Amendat6-7.
)Blixsetharguesthat,hadtheCourtnot
acceptedKirsclmer'spriorposition,itwouldhavedismissedKirsclmer'sComplaintforlackof
standing,andnocounterclaim wouldhavebeenrequired.Kirschneristhusisunequivocally
attemptingtogainatadicaladvantage''overBlixseth,bybringingthesuitandforcinghim to
filecounterclaims,thenthreateninghimwithsanctions.(Opp.DismissCountercl.at3-4.)
AccordingtoBlixseth,hefiledthecounterclaimsagainstKirschnerinhispersonalcapacity
because,basedonKirschner'sargumentthatCaplinandWillinmswereinapplicable,helswas
tmderthegoodfaithimpressionthatinfactMr.Kirsclmerwasnotfilingthissuitasabanknzptcy
trusteeandthereforeinhisunofficialorpersonalcapacity.
''(ld.at7(originalemphasisl.
)
TheestoppelargumentfailsbecauseKirsclmerneverarguedthathehasstandinginthis
suitinsomecapacityotherthanastnzsteefortheYCLT,andtheCourtmostcertainlydidnot
CV-90(06/04)
CIVILMINUTES-GENERAL
Page16of39
CIVILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
acceptsuchapositioninthe2/24/12Order.Rather,theCourtdeterminedthatCaplinand
Williamswereinapplicablebecause,inthisaction,Kirscuerindeedseeksmoniesowedtothe
YCLTestate.(See2/24/12Orderat9-11.)TheCourtclearlyexplainedthat
Here,becauseYCLTisBLX'Slargestcreditor,anymoniesowedbyBlixsethtothe
BLX estateare,inaveryrealsense,moniesowedtoYCLT.Moreover,pursuantto
theassignment,anyclaimsofBLX againstBlixsethhavevalidlybecomeYCLT'S
claims,andBLX maynolongerassertthem.TheCourtthereforehasnoconcernsthat
Kirschner,g.j.trusteefortheYCLT,lacksstandingtoavoidtheReleaseandtocollect
ontheNotes.
(ld.at10(addedemphasisl.)BecauseKirsclmertookandtheCourtacceptednoprior
inconsistentpositionastothecapacityinwhichhebringsthissuit,thereisnobasisforapplying
judicialestoppelhere,andBartonisfullyapplicable.
(l1TJlt1959(a)Argument
Second,Blixsethcontendsthat,totheextentthatKirschnernow claimstoprosecutethis
actionasabanlcruptcytrustee,becauseKirsclmeriss
purportingtocarryglonthebusinessof
BLXinenforcingthoseNotes,
''tmder28U.S.
C.j959(a),Blixsethwasnotrequiredtoobtain
leavebeforeassertingthecontractualcounterclaimsarisingfrom hisattempttoenforcethe
Notes.(1d.at2.
)
Precedentteachesthatthej9594a)exceptiontoBartondoesnotapplyhere.TheNinth
Circuithasexplainedthat,t
lblyitsterms,thislimitedexceptionappliesonl
yifthetrusteeor
otherofficerisactuallyoperatingthebusiness,andonlytolactsortransactionsinconductingthe
debtor'sbusinessintheordinarysenseofthewordsorinpursuingthatbusinessasanoperating
entemrise.'''CrownVantage,421F.
3dat971-72(citationomitted).However,$$$(slection
9594a)doesnotapplytosuitsagainsttrusteesforadministeringorliquidatingthebankruptcy
estate.''Id.at972(citationomi
tted).Here,byalemptingtocollectsumsowedtotheClubfor
thebenefitofthebankruptcyestate,KirschnerisplainlynotcarryingontheClub'sordinary
businessorpursuingitasanoperatingenterprise.lndeed,BlixsethdoesnotarguethatKirsclmer
ispursuingtheClub'sbusiness'
,rather,hearguesthatKirschnerispursuingthebusinessof
BLX.KirsclmerisnotthetrusteefortheBLX estate,norishetakinganyactiontopursuethe
businessofthatentity,whichisinChapter11liquidation,asanoperatingenterprise.
(3)TheRule13(a)Argument
CV-90(06/04)
CIVILMINUTES-GENEML
PageT7of39
CIVILMIM JTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
Third,Blixsethinsiststhathemustbeabletoassertthecontractualcounterclaims,which
hedeemstobecompulsoryunderFederalRuleofCivilProcedure13(a),withoutseekingleave
oftheBankruptcyCourtbecausetheComplaintseekstocollectonadebtowedtotheClub,and,
under11U.S.C.j541(a)(1),claimsassertedbythebanknzptcytrusteearesubjecttothesame
claimsanddefensesascouldbeassertedagainstthedebtor. Thatis,thecontractual
cotmterclaimsarenotsubjecttoBartonbecausetheydonotinvolveall
egationsofS
swrongful
conduct,''butariseonlyoutofStlkirsclmer'sfailuretoactappropriatelyasapurportedcreditorof
Mr.Blixseth'sinpurported(possession)oftheBLXNotes.''(ld.at7-9;seealsoMem.Amend
8-9;DocketNo.53gReplyAmend)at2-3.
)
Relatedly,BlixsethsuggeststhattheapplicationoftheBartondoctrineservesnopurpose
inthismatterbecauseKirschnerhasvoluntarilysubmittedhimselftotheCourt'sjurisdiction,
andthattheCourtisobligedtoexercisejurisdictionovertheCountercl
aims.Accordingto
Blixseth,thisisbecausetheBart
ondoctri
neisajudicially-createdlimitonsubjectmatter
jurisdiction,andtheCourthasdiversityjurisdictionoverthisactionpursuantto28U.S.C.j
1332(a),whichmustbeexercised.(Opp.DismissCountercl.at5-6.)
BlixsethcitesnopersuasiveauthorityinsupportofhiscontentionthattheBartondoctrine
doesnotapplytocounterclaims,whethercompulsoryornot,orthatitrequiresallegationsof
Swrongfulconduct''bythetrusteeforitsapplication. Forexample,hisrelianceoflnreMerrick,
175B.
R.333(9thCir.BAP)ismisplaced.lnthatcase,thedebtorssuedcertaindefendantsin
statecourtonafraudclaim,andthedefendantsmovedforsummaryjudgmentandforcosts.
Thedebtorsthenfiledforbankruptcy,listingthestatecourtactionasanassetoftheirestates,
andthestatecourtenteredsummaryjudgmentinfavorofthedefendantsandawardedcosts.The
Chapter7trusteesubsequentlyfiledacomplaintinthebankruptcycourtforwillfulviolationof
theautomaticstayonthebasisofthedefendants'postpetitionpursuitofdismissalofthestate
courtactionandcosts.However,theNinthCircuitheldthatthedefendantshadnotviolatedthe
automaticstay,whichdidnotpreventthem from continuingtodefendagainstapre-bankruptcy
lawsuit.Thecourtreasonedthatthetrusteewasnotpreventedfrom continuingtoprosecutethe
pre-bankruptcylawsuitinstimtedbythedebtor,andthat,
Giventhisfreedom forthedebtororthetrusteetoprosecutethedebtor'sclaims,an
equitableprincipleoffairnessrequiresadefendanttobeallowedtodefendhimself
from theattackwithoutimposingonhim agratuitousimpedimentindealingwithan
adversarywhosuffersnocorrelativeconstraint. Theautomaticstayshouldnottiethe
handsofadefendantwhiletheplaintiffdebtorisgivenfreereintolitigate.
1d.at338.However,thiscasedoesnotsuggestthatBlixsethshouldbefreetoprosecutehis
CV-90(06/04)
CIVILMINUTXS-GENEML
Page18ofj9
CIVILMIM JTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
counterclaimsagainstKirschnerwithouttheconstraintsofBarton. Itdoesnotinvol
vethe
assertionofclaimsagainstabankruptcytnzstee,anditdoesnotaddressorcitetoBarton.
Blixsethalsoignorescase1awthatsupportsKirschner'sassertionofBarton. For
example,CrownVantageappliedBartonincircumstancesresemblingthosehere. Inthatcase,
theliquidatingtrusteeappointedpursuanttoaconfirmedChapter11planmovedforan
injunctionrestrainingthedebtor'scorporateparent,itscounsel,andotherentitiesfrom
prosecutingaDelawareactioninwhichtheysoughtdeclaratoryreliefagainstthetrustee.
Plaintiffscontendedthatthetrusteehadfiledfraudulentconveyance,conversionsandother
relatedclaimsinlawsuitsinCaliforniathatviolatedthetermsandconditionsofasettlement
agreementexecutedbythedebtoranditscorporateparent.TheNinthCircuitconcludedthat
BartonbarredtheDelawaredeclaratoryreliefaction,andaffirmedtheinjunctionagainstthat
suit.See421F.3dat967-971,977.LikethecontractualcounterclaimsthatBlixsethseeksto
asserthere,theallegationsleviedagainstthetrusteeinCrownVantagedidnotinvolve
Iwrongfulconduct,''andwereassertedinresponsetoaffinuativeclaimsprosecutedbythe
trustee.Still,theentitiesseekingtopresstheseclaimsagainstthetrusteeinanotherforum were
requiredtoseekthebankruptcycourt'sleave. Thatconclusionmakessensebecausethe
objectiveoftheruleistoprotectthetrusteefrombeingforcedtodefendhimselfagainstclaims
madearisingoutofhisworkastrustee,nomattertheproceduraldeviceusedtoassertthose
claims.
Fi
nally,theCourteasilyrejectsBlixseth'sargumentthatitisobligedtoexercisesubject
matterjurisdictionoverthecounterclaimspursuantto28U.S.C.j1332(a).Bydefinition,
BartonwillbeappliedtoclaimsforwhichtheCourtotherwisehassubjectmatterjurisdiction.
(4)TheStRepresentativeCapacity''Argument
Blixsethhasonefinaltheoryastohow Bartonmaybeavoided:KirsclmerSlcanbenamed
inhisrepresentativecapacitywithoutbeingnamedasthebankruptcytrustee,''becausethe
YCLTiscreatedunderMontanalaw,and,tmderMontanalaw,Kirsclmerl
sisthetrusteeofthat
trusti
ndependentoftheBankruptcyCode.
''(Opp.DismissCountercl.at7,
'seeConantDecl.!
24,Ex.12gLiquidationTrustAgreementlj1.1(formingtheYCLTunderMontanalaw).)Thus,
accordingtoBlixseth,Kirsclmermaybenamedasadefendantinanamendedcounterclaim in
hiscapacityasatrusteeofatrtzstcreatedtmderMontanalaw. Blixsethoffersnofurther
explanationandnotasinglecasecitationforthepropositionthatthisapproachwouldavoidthe
Bartonconstraint,andtheCourtcannotconcludethatitdoes. Rather,Kirschnerprosecutesthe
ComplaintinhiscapacityastheliquidatingtrusteeoftheYCLT,appointedbytheBanknlptcy
Court,inordertocollectassetsthatareallegedtobeowedtothebankruptcyestate. The
CV-90(06/04)
CIVILMINUTES-GENEML
Page19of39
CIVILMIM JTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
Accordingly,becausetheCourtlackssubjectmatterjurisdictionoverthecounterclaims,
theCourtDISMISSEStheCounterclaim andDENIESBlixseth'smotionforleavetoamend.
TheCourtdoesnotreachKirshner'sremainingargumentsfordismissalunderRule12(b)(6)for
failuretostateaclaim.
B.MOTIONFORSANCTIONS
KirschnermovesfortheimpositionofsanctionsagainstBlixsethandhisattorneys,
pursuantto28U.S.C.j1927andtheCourt'sinherentpowers,intheamountoftheattorneyfees
andcostsheincurredinmovingtodismisstheCounterclaim,onthebasest
hat:(1)the
Counterclaim wasintentionallyandimproperlyfiledagainstKirschnerpersonallyin
contraventionofRule13.
,(2)BlixsethandhiscounselrecklesslyfiledtheCounterclaimwithout
seekingleaveoftheBankruptcyCourtwithknowledgeoftheBartondoctrine,'and(3)the
Counterclaim hasnobasisinfactorlaw andwasfiledfortheimproperpurposetoharassand
intimidateKirschnerastrusteeoftheYCLT.(Mem.Sandionsat1-2.)
1.RELEVANTBACKGROUND
TheParties,andparticularlyBlixseth,haveproducedtomesofevidencethattheyaskthe
Courttoconsi
derincormectionwiththesanctionsmotion.Thevastmajorityofthisevidence
pertainstotheconductofBlixsethandnumerousotherpersonswhoarenotpartiestothisaction.
Kirsclmerseekstoprovethat,invariousotherfora,Blixsethhasarguedandallegedthatevery
personadversetohim,from CreditSuisse,Crossl-larbor,andEdraBlixseth,totheBankruptcy
Judge,theMontanaGovernor,andofficialsattheU.S.DepartmentofJustice,areinvolvedina
vastconspiracyagainsthim,andthattheCounterclaim ismerelyBlixseth'sfrivolousattemptto
addtothislistthelastpersonthathecouldthinkof:thebanknzptcytrustee. lnopposition,
BlixsethseekstoprovethatCreditSuisse,Crossl-larbor,andEdraBlixsethreallydidconspireto
defraudhim ofhisassets;thattheMontanaBankruptcyCourtreallyhasactedunfairlyagainst
him;andthathisCotmterclaim againstKirschnerreallywasmadeingoodfaith.
TheCourthasreviewedthisevidencecarefully,anddescribesitinsomedetailbelow.
However,theissueultimatelyfortheCourt'sdeterminationisfarsimplerthanthePartieshave
madeit.ThequestionbeforetheCourtiswhether,byfilingtheCounterclaim againstKirschner
inhispersonalcapacityandwithoutseekingleaveoftheBankruptcyCourt,Blixsethandhis
counselintentionallyignoredRule13andBarton,therebyunreasonablyandvexatiously
cv-go(06/04)
clvll-kfkvus-GENEIiAL
page200:39
CIVILMIM JTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
multiplyingthisproceedinganddemonstratingbadfaith.Asexplainedingreaterdetailbelow,
theCourtfindsthat,infilingtheCounterclaim,Defendantandhiscounseldidignoreapplicable
legalnzlesofwhichtheywereaware,unreasonablyandvexatiouslymultiplyingthese
proceedings.AlthoughtheconductofBlixsethandhiscounseloutsidethisproceedingis
relevanttothequestionoftheirbadfaith,theCourtdoesnotfindittobedeterminative.
a.Blixseth'sApproacl'totheBankruptcyProceedings
AsdescribedintheBackgroundsectiontothepresentorder,KirsclmerandBlixsethhave
ahistoryofadversityintheMontanaBankruptcyCourt.lntheClub'sbankrtzptcyproceedings,
eachhasexperiencedbothsuccessandsetbacks.Ontheevidenceproducedinconnectionwith
thepresentsanctionsmotion,andasisplainfrom theallegationsmadeintheCounterclaim,
Blixsethisoftheview thatthevariousbankruptcyproceedingspendingbeforeJudgeKirscherin
Montana-includingthebankruptcyproceedingsfortheClub,BLX,andEdraBlixseth-are
riggedagainsthim.Forexample,inaSeptember14,2010textmessagetoEdraBlixseth,
BlixsethwrotethatCi
you...(Sam)gBlyrne...andthecornzptjudgearea11goingdown..You
thoughtyouwerecoveredwithacorruptjudge.. ''(KRJN,Ex.Jat24.
)3OnNovember18,
2010,hefiledaprosemotionintheClub'sbankrtzptcyproceedingstodisqualifyJudge
Kirscher,arguingthathehadpre-judgedtheproceedings,invitedandentertainedexparte
advocacyagainsthim,ruledonimportantmotionsagainsthim beforehecouldopposethem,and
enteredthe$40millionjudgmentagainsthimbeforehecouldrespondtothemotionto
reconsider.IRJN,Ex.Aat1-2.)4Kirscherdeniedthemotion,lnreYellowstoneMountain
3BlixsethobjectstotheCourt'stakingjudicialnoticeofthedocumentcontainingthetextmessage,which
proceedingsto,interalia,setasidetheMSA.Blixsetharguesthatjudicialnoticeisimproper,becauseKirschner
isStaskingthisCourttoacceptthetruthandtheapparentinnuendoassociatedwiththistextmessagegl'';Kirschner
hasnotprovidedacompleterecordtoplacethemessageincontext;themessageisnotrelevanttothesanctions
motion;andthemessageisimpropercharacterevidence.(Blixseth'sObjectionstoKRJNat6-7.)These
objectionsareOVERRULED.UnderFederalRuleofEvidence201,theCourtmaytakejudicialnoticeofthe
existenceofpublicandcourtrecords,butmaynotcreditdisnutedfactsfoundinthem.Lee,250F.3dat689-90.
Here,theCourttakesjudicialnoticeofthefactthat,inatextmessagetoEdra,BlixsethreferredtoJudgeKirscher
asaSscorruptjudge.''Blixsethdoesnotdisputetheauthenticityofthedocument,orthefactthathemadethis
wasattachedasanexhibittoacomplaintfiledbyEdraBlixseth'sbankruptcytrusteeinherChapter7bankruptcy
statement.AlthoughBlixsethcomplainsthatKirschnerhasnotproducedtheotherexhibitstothecomplaint,he
doesnotexplainwhyfairnessrequiresthatthesealsobeproduced.SeeFed.R.Evid.106.Blixseth'sremaining
objectionsconcerningrelevanceunderFederalRulesofEvidence40land403andimpropercharacterevidence
underRule404arewithoutmerit.
4BlixsethobjectstotheCourt'stakingjudicialnoticeofthefactthathefiledthemotiontodisqualifyand
madethestatementsinit.HealsoarguesthatitisimpermissiblecharacterevidenceunderRule404(a)andis
CV-90(06/04)
CIVILMINUTES-GENEML
Page21of39
CIVILMINUTES-GENEIU L
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
Cl
ub.LLC,No.08-61570-11,2011WL766979tBanl
tr.D.Mont.Feb.25,2011),andBlixseth's
appealofthisdenialispendingbeforetheMontanaDistrictCourt.Inhisappeal,Blixseth
contendsthatthemotiontodisqualifyisbasedonadmittedexpartecontactsbetweenJudge
Kirscher,hislaw clerks,andvariousofBlixseth'sadversariesinAP-14,andheattachesthe
evidenceonwhichhereliesforthisCourt'sbenefit.(ConantDecl.!!33-34,Ex.31(Appeal
BriefRe:Disqualicationq,Ex.34,Ex.36!!4-8&Ex.A,Ex.37.
)lnahearingbeforeJudge
KirscherintheClub'sbanknlptcyproceedingsonMarch6,2012,Blixseth'sattorneyMichael
Flynn,whodoesnotrepresentBlixsethhere,accusedJudgeKirscherofdiscussingthe
proceedingswiththeGovernorofMontanaandofmisplacingevidence. JudgeKirscher
adamantlydeniedbothaccusations,andretumedtothebenchwiththeallegedlymissing
evidence.(KRJN,Ex.B(3/6/2012Transcri
ptofProceedingslat19-20,61-62.)5
lnOctoberof2011,Blixseth'slawyerinthisandotherproceedings,ChristopherConant,
sente-mailstothelawyerforEdraBlixseth'sbankruptcytrustee,DavidCotner,assertingthathe
hadviolatedtheMontanaRulesofProfessionalConductbyfilingabaselessadversary
proceedingagainstBlixsethinEdraBlixseth'sbankruptcyproceedingstosetasidetheMSA.
ConantwrotethatEdra'sbankrtlptcytrusteehadfiledthecomplaintintheMontanaBankruptcy
Court,ratherthaninCaliforniastatecourqonlybecauseJudgeKirscherissopenlybiased
againstMr.Blixseth,''andheaskedCotnertoconfirm whetherEdra'sbankruptcytrusteehad
hadexpartecommunicationswithJudgeKirscher.IKRJN,Ex.KatEx.Aat1,3.)6Conant
now statesthathemadethisinquirybecauseEdra'strusteehadtoldBlixseththathehadaclose
irrelevantunderRules401and403,andthat,underRule106sKirschnerisrequiredtofprovideal1oftheexhibits,
documents,transcriptsandproceedingsassociatedtherewithv''(Blixseth'sObjectionstoKRm at4.)These
objectionsareOVERRULED.ThefactthatBlixsethfiledthemotiontodisqualifyandmadethestatementsinit
arepropersubjectsofjudicialnoticeunderRule201,andBlixseth'sevidentiaryobjectionsarewithoutmerit.The
motionisplainlyrelevant,andtheCourtconsidersthatitsprobativevalueoutweighsanyprejudicetoBlixseth.
TheCourtdoesnotconsiderthemotionasevidenceofBlixseth'sfcharacter,''ortoprovethathehasactedin
accordancewithsuchcharacter.
5BlixsethobjectstotheCourt'stakingjudicialnoticeofthefactthattheseeventsoccurredinthe
BankruptcyCourt,onthegroundsthatthetranscriptofproceedingsisimpropercharacterevidenceandirrelevant,
andthatonlyalimitedportionhasbeenproduced.(Blixseth'sObjectionstoKRJNat4-5.)Theseobjectionsare
OVERRULED,asabove.
6BlixsethobjectstotheCourt'stakingjudicialnoticeofthefactofthesecommunications,whichwere
hisobjectionsunderFederalRulesofEvidence106,401,403,and404.(Blixseth'sObjectionstoKRJNat7.)
TheseobjectionsareOVERRULED,asabove.Moreover,neitherBlixsethnorhiscounseldisputethe
attachedasanexhibittoaresponsetoamotiontiledinEdraBlixseth'sbankruptcyproceedings.Blixsethrepeats
authenticityofthedocument,ordenythatthecommunicationsoccurred.
CV-90(06/04)
CIVILMINUTES-GENERAL
Page22ofjj
CIVILMINUTES-GENEM L
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
relationshipwithKirscherandcouldcommunicatewithorsendmessagestohim,andthatthis
statementbyEdra'strusteewasconsistentwithevidenceinConant'spossessionshowing
somethingofaScozy''relationshipbetweenKirscherandotherMontanabankruptcycounsel,
namel
ycounselfortheClub.(ConantDecl.!35,Ex.35(November2009e-mailfromClub's
counsel,AndyPatten,toKirscher'slawclerk,askingwhether,ifhe(sgivegs)thecourtaheadsup
aboutanewcase...it(canjbekeptconfidentialuntiltheactualfiling,'andreceivinga
responseofs
AbsolutelyAndy''
).
)Blixseth'sotherlawyerinthisandotherproceedings,Philip
Stillman,addedinane-mailtoCotnerthatBlixsethSsintendstofileaMotionforSanctions
pursuanttoRule11...againsteverysinglepersonandlawyerthatcontinuestoassertthese
frivolousclaimsagainsthim,''andwillGsholdyouandyourfirm andtheTrusteeliableforall
costs,attorney'sfeesandotherdamages...throughsanctionsandamaliciousprosecution
motion.''(KRJN,Ex.Kat2-3.
)ConantevenmallyservedonCotner,butdidnotfile,an
F.R.
B.
P.9011motionforsanctions.(ConantDecl.!32,Ex.30.
)
Blixseth'sownbankruptcyproceedinginNevadawasinitiatedbythefilingofan
involuntarypetitionbytheMDOR in2011.Blixsethstated,inhisoppositiontoamotionto
quashsubpoenasinthatproceeding,thatByrnemetwiththeGovernorofMontanainorderto
gainsupportforhisbankruptcyplansfortheClub,andthat,C
slnlotsurprisingly,duringthe
YellowstoneClubbanlcruptcy,theGovernormadepublicstatementscriticalofMr.Blixseth.''
( ,Ex.Eat7-8.
)7Blixsethalsostatedhisbeli
efthatthemovingparties-crossllarbor,
Byrne,andothers-shadnumerousdiscussionswithhighrankingofficialsfrom theStateof
MontanaoutsideofMDOR,relatingtoMovants'andMontana'scommonadversary,''andthat
StthesediscussionsplayedaroleinMDOR'Sunprecedentedfilingofaninvoluntarybankruptcy
petition.''1d.at12-13.
lnanaffidavitexecutedbyBlixsethonFebrtzary27,2012andsubmittedtotheU.S.
HouseofRepresentativesCommitteeontheJudiciary-producedbyBlixsethinthis
proceeding-hestatesthat,in2011,hespokewithaseniorstatusBankruptcyJudge''in
Montana-notJudgeKirscher-whoagreedthatbarlkruptc,
yfraudhadbeencommittedbyEdra
BlixsethandothersincozmectionwiththeClub'sbankruptcy,andwhomadeacriminalreferral
totheMontanaOfficeoftheU.S.DepartmentofJustice.(ConantDecl.!14,Ex.15(Blixseth
Affidavitj!3.)AFederalTaskForcewasassignedtothecase,andthroughoutthecourseofthe
investigation,Blixsethwasincommunicationwiththeinvestigatorsastheltvictim''ofthe
criminalconduct.(1d.!2.)Blixsethstatesthatheaskedtheinvestigatorstolookintothe
conductofJudgeKirscherduetoScvariousinconsistentrulingsand...oddbehavior.'
'(LI
L!5.)
?BlixsethsimilarlyobjectstotheCourt'stakingjudicialnoticeofthestatementsmadeinthisfilingunder
F
ederalRulesofEvidencel06,401,403,andC4
04.TheseobjectionsareOVERRULED,asabove. Page230C39
CV-90(06/04)
IVILMINUTES-GENEML
CIVIL MINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
Atsomepoint,helearnedthatEdrawasthesubjectofaDepart
mentofJusticetargetletter,and
statesthathewastoldbytheinvestigatorsthatdstheJudgeistheBigCatchhere.'
'(1d.!6.)
Ultimately,however,theDepartmentofJusticedeelinedtoprosecuteEdra--despitetheFederal
TaskForce'srecommendationthatshebeprosecutedforloanfraud. (Id.!!6,8.
)Blixseth
statesthathebelievesthatRonBurkle,whowastheClub'scontrollingowneratthetimeof
Blixseth'saffidavit,tusedhiscontactsattheverytopoftheDepartmentofJusticeto
immediatel
ystoptheinvestigation.''(1d.!!9-10.
)Blixsethstatesthat,sincethen,thetmultiple
crimesperpetratedagainstrhim)andcountlessothers...havegoneunanswered.
''(Id.!11.)
lnAP-14,BlixsethhadalsoarguedthatStephenBrown,alawyerwhohadrepresented
him intheloantransactionwithCreditSuisseandinthedivorceproceedings,andwho
subsequentlybecameChairmanoftheUnsecuredCreditorsCommittee,hadviolatedBlixseth's
attorney-clientprivilege,andthattheseviolationsChadtaintedeveryaspectofthetrialinthis
matter.''436B.R.at636.ThecommitteecompliedwiththeBankruptcyCourt'srequestto
producecopiesofe-mailcommunications;thecourtttcarefullyreviewedeachoftheemailsand
found...absolutelynoevidencethatBrownviolatedBlixseth'sattorney-clientprivilege.''Id.at
637.ThecourtalsofoundthattlBlixseth'sargumentsonthepointwerenothingbutbaseless
allegationsintendedtoderailtheproceedings.''1d.
b.Blseth'sTheoriesRegardingKirschner'sRoleintheAllegedConspiracy
AgainstHim
Blixseth'stheorythatKirschnerhimselfhasbeenapawnoraplayerinthevast
conspiracyagainsthim wasairedinAP-14.lntheFinalPretrialOrder,Blixsethsetoutfortrial
thefollowingtwoissues,amongothers:
WhethertheTnzst'scounterclaimsagainstBlixsetharebarredbytheTnzst'slackof
standingbecauseitiscontrolledbyapartywhoparticipatedintheallegedlybad
behavior;
WhethertheTrust'scounterclaimsagainstBlixsetharebarredasaresultofproximate
causationbytheconductofotherparties,includingbutnotlimitedto,thecollusionof
EdraBlixseth,Sam BynzeandCrossl-larborCapitaltothwartapurchaseoftheDebtors
byfilingaChapter11petitioninbadfaith.
CV-90(06/04)
CIVILMINUTES-GENERAL
Page24of39
CWILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
IKRJN,Ex.F,jj1I(C)(14),VII1(26),(29)).8Asnotedabove,CreditSuisseisthelargest
beneficiaryoftheYCLTandhasappointedfourofthesevenmembersoftheYCLT'SAdvisory
Board,seelnreYellowstoneMountainClub.LLC,436B.R.at675n.58,whichexiststo
ttadviseanddirect''Kirsclmer.(ConantDecl.!13(b);LiquidationTrustAgreementatj2.13.)
P
ursuanttotheTrustAgreement,Kirschner
shallconsultregularlywiththeTrtzstAdvisoryBoardwhencarryingoutthepurposes
oftheTrustandshallobtainapprovalsfromtheTrustAdvisoryBoardasrequired
underthgejTrustAgreementandshallfollowthedirectionsoftheTrt
lstAdvisory
Boardtotheextentnotinconsistentwiththle)TrustAgreement.
(J
4.j5.13.
)AlsopursuanttotheTrt
zstAgreement,YCLTwasrequiredtoberepresentedinthe
b
a
n
k
r
u
p
t
c
y
p
r
o
c
e
e
d
i
n
g
s
b
y
t
h
e
s
a
me
l
ocalcounselthatrepresentedCreditSuisse. (J
lnreYellowstoneMountainClub-LLC
#=.j5.
4).
,see
436B.R.at674.Nonetheless
ngBlixseth's
,
,addressi
contentionthathewasnotgettingaCtfairshake''intheClub'sbankruptcyproceedingsbecause
YCLTwascontrolledbyCreditSuisse,JudgeKirscherfoundthat
YCLTisonlyasuccessoroftheDebtors. Bli
xsethhasshownnoevidencetosuggest
anywrongdoingbytheDebtors.Similarly,YCLTisnotasuccessorininterestto
EdraandtheCourt,todate,hasnotagreedwithBlixseth'sgrandconspiracytheory
regardingByrneandEdra.Thus,theCourtisnotconvincedthatYCLThasunclean
handsinthismatter.Moreover,whileCreditSuissewaspermittedtoappointfourof
thesevenmemberstotheTrustAdvisoryBoard,theCourtisnotconvincedthat
CreditSuissecontrolsYCLT. TheCourtalsoagreeswithYCLTthatnobasisexists
whatsoeveruponwhichanymisconductthatmayhavebeenengagedinbyCredit
SuisseshouldbeimputeduponYCLT.
ld.at675.
lnsupportoftheallegationinBlixseth'sCounterclaim thatKirschnerprovidedassistance
totheMDOR'SfilingofaninvoluntarybankruptcypetitionagainstBlixsethinNevadainpursuit
ofhiscollectioneffortsonbehalfofCreditSuisse,BlixsethhasproducedaninternalMDOR
email,composedpriortothefilingofthepetition,inwhichtheMDOR'Scounselexplainsthat
shehadattlongconversation''withKirschner,andthat
8BlixsethobjectstotheCourt'stakingjudicialnoticeofthisdocumentitoestablishthefactofwhatwas
andwhatwasnotactuallylitigatedinAP-14.''(Bli
xseth'sObjectionstoKRm at5-6.)BecausetheCourtdoes
nottake-iudi
cialnoticeofthedocumentforthispurpose,thisobjectionisOVERRULED.
cv-90(06/04)
clvll-MINIJTES-GENERAL
Page250:39
CIVIL MINUTES-GENERA.L
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
HeandhiscounselhavebeenchasingBlixsethforawhile. Further,andwhatI
didn'tknow,thetnzsteehasalreadyfiledavoidanceactionsagainst(Blixseth)forall
oftheassettransfersthatoccurredin2007and2008. Thetrusteehasalreadytaken
anassetdepositionof(Blixsethl.Heand1agreedthatanybankruptcyofBlixseth
wouldinherithisavoidanceaction,whichisgreatbecauseitalleviatesmylimitations
concerns.Healsohadalottosayaboutthevenue. HebelievesthatNevadawould
bethebestvenueforacoupleofreasons-1.thelargestknowncorporateholdings
perBlixseth'sdepoisaNevadacompany.2.thetrusteehashadseverallargecases
inNevadaandhadgoodexperienceswiththeNV trusteechoices.
(ConantDecl.!14n.
3,Ex.16at2.
)
Inoppositiontothesanctionsmotioninthisproceeding,Blixsethhasproducedhundreds
ofpagesofevidenceinsupportoftheallegationsintheCounterclaim thatCrossl-larborandEdra
Blixsethconspiredtodefraudhim ofhisassets. (Seei
d.!!14,32n.
6,Exs.13-15,33.
)Much
ofthisevidencewasapparentlyexcludedfrom AP-14asirrelevant,butwasadmittedonMarch
6,2012.(Seej;.
a!15,Exs.18-25.)AlthoughtheCourthasreviewedthisevidence,itisnot
discussedindetailhere.ThisisbecauseBlixsethhasnotdrawntheCourt'sattentiontoasingle
pageofthisevidencereferringtoactionstakenbyKirschnerorsupportinganallegationthathe
participatedinanywayintheallegedEdraBlixseth/crossl-larborscheme.
PriortothefilingoftheComplaintinthislawsuit,onSeptember20,2011,Stillmanwrote
toKirsclmer,assertingvarioustheoriesastowhytheComplaintwasfrivolousandinbadfaith.
(DocketNo.30-2rGlasserDecl.
,Ex.1)at1-4.) StillmanwarnedthatCd
ifyouintendtofilethis
action,pleasegivenoticetoyourinsurancecarriersofM.1-.Blixseth'sintendedclaim against
you,yourfirm,anda11attorneyscooperatinginthefilingofyourfrivolousandbadfaith
complaint.
''(ld.at4-5.
)9
9Blixsethcontendsthatthisletterisabsolutelyprivilegedundersection47(b)oftheCaliforniaCivilCode
andmaynotberelieduponbytheCourt.(DocketNo.50gopp.Sanctionslat3,9.)Theprivilegeundersection
47(b)tappliestoCanycommunication(1)madeinjudicialorquasi-judicialproceedings;(2)bylitigantsorother
participantsauthorizedbylaw;(3)toachievetheobjectsofthelitigation;and(4)thathavesomeconnectionor
logicalrelationtotheaction.'''Aronsonv.Ki
nsella,68Cal.Rptr.2d305,309-310(Ct.App.1997)(quoting
Silbercv.Anderson,50Cal.3d205,212(1990)).YetBlixsethalsoreliesonthecontentsoftheletterinhisown
oppositiontothesanctionsmotion.(SeeOpp.Sanctionsat5($Mr.Stillman'sletter,attachedtotheGlasserDecl.
gajsExhibit1,describesindetailwhyYCLT'SComplaintisfrivolousandinbadfaith.'').)Accordingly,the
Courtconsidersthattheprivilegehasbeenwaived.
CV-90(06/04)
CIVILMINUTES-GENERAL
Page260/39
CIVILMIM JTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
c.ThePriorDismissalunderBartonofBlseth'
xSuitagainsttheChairmanof
theUnsecuredCreditorsCommittee
OnJune8,2011,Blixsethsuednearlyal1theattorneysandthelaw finnsadversetohim
intheClub'sbankruptcyproceedings,andprimarilyBrownforallegedmisconductwhilehesat
asChairoftheUnsecuredCreditorsCommittee,aswellasByrneandCrossl-larbor,inthe
MontahaDistrictCourt,seekingindemnificationforthejudgmentinAP-14.Conant,withtwo
otherlawyers,servedasBlixseth'scounselinthatoase.Blixseth'sclaimsincludedlegal
malpractice,breachoffiduciaryduty,fraud,breachofcontract,equitableindemnification,
comparativeindemnity,contributorymalpracticeforfailingtodiscloseconflictsofinterest,
conspiracy,andaidingandabettingthecommissionoftorts.TheMontanaDistrictCourt
summarizedtheallegationsasfollows:
Thethrustof(Blixseth'sqcomplaintisthatAttorneyBrownwrongfullysatasChairof
theUnsecuredCreditorsCommitteeandengagedinmisconductwhilehewasChair.
BrownrepresentedBlixsethinvariouspre-petitionmatters,includingaloan
transactionwithCreditSuisseandBlixseth'sdivorcenegotiationswithhiswife,Edra.
Blixsethclaimsthat,asChairoftheCommittee,Browntookpositionsthatconflicted
withtheadvicethathehadpreviouslygivenBlixsethinthesemattersandthatheused
confidentialclientinformationtoBlixseth'sdetriment.Forexample,Blixsethclaims
thatBrowninitiallyapprovedtheuseoftheCreditSuisseloanproceedsandthe
inclusionofareleaseinthemaritalsetllementagreementbutthenrenegedonthose
positionsoncehebecameChairoftheCommittee.Healsoclaimsthatoneresultof
Brown'sconductwasthatCrossllarborCapitalPartners whichBlixsethclaims
aidedandabettedBrown wasabletopurchasetheYellowstoneClubata
substantiallydiscountedcostbecauseofthebreach.
Aspartofthebankruptcyproceedings,theBankruptcyCourtaddressedtheCredit
Suisseloanandthemaritalsettlementagreementandconcludedthat(1)M.
1.Blixseth
fraudulentlymisappropriatedtheproceedsfromtheCreditSuisseloanand(2)the
releaseinthemaritalsettlementagreementwasfraudulent.YellowstoneMt.Club,
436B.R.598.Blixsethnow claimsthatBrown,onaccountofhisbadlegaladvice,
shouldindemnifyhimfortheBankruptcyCourt'sjudgment.
Blixsethv.Brown,470B.
R.562,565-66(D.Mont.Mar.5,2012).
OnMarch5,2012,theMontanaDistrictCourtfoundthatitlackedsubjectmatter
jurisdictionoverthecomplaint,becauseal1claimsweresubjecttotheBartondoctrine.The
CV-90(06/04)
CIVILMINUTES-GENERAL
Page27of3'I
CIVIL MINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
CourtreasonedthatBlixsethhadinitiatedlitigationinaforum outsidetheBankruptcyCourt
againstacourt-approvedofficer-Brown-foractionsandpositionshetookasChairmanofthe
UnsecuredCreditorsCommittee,forexample,usinginformationfrom hisprevious
representationofBlixsethagainsthim.J
A at565-68.ThecourtfoundthatBartonapplied
equallytoBrown'sco-defendants,becauseSlthenatureofBlixseth'sclaimsagainstthem isbased
solelyontheirallegedconspiracywithBrownortheiraidingandabettinghim whilehewas
ChairoftheUnsecuredCreditorsCommittee.''Id.at567. Thecourtalsofoundthatthe
exceptiontoBartonunder28U.S.
C.j9594a)wasinapplicable,becauseS'
thethrustofBlixseth's
claimsarebasedonLawyerBrown'sconductasChairoftheUnsecuredCreditors
Committee-andnottheongoingoperationofanyofBlixseth'sbusinesses.''J.
Zat572.
BlixsethfiledthepresentCounterclaim fourdaysaftertheMontanaDistrictCourt
dismissedBlixsethv.BrownpursuanttoBarton,onMarch9,2012.(SeeDocketNo.19.
)This
filingwasstrickenfortechnicaldeficiencies;Blixsethre-filedtheCounterclaim onMarch26,
2012.Conant,whorepresentedBlixsethinBrown,waslistedasBlixseth'sattorneyofrecordon
thecaptionpageoftheCounterclaim,andtheCounterclaim wassignedbyhim. (DocketNo.
26.)OnApril11,2012,KirsclmermovedtodismisstheCounterclaimandfortheimpositionof
sanctions,settingthehearingforthesemotionsonJune4. (DocketNo.29.
)OnApril27,2012,
Blixseth'scounsel,Conant,soughtKirschner'sagreementtothefilingofanamended
counterclaim,removingtheRICO claim andnamingKirschnerasCounterdefendantinhis
capacityastrusteeoftheYCLT.(ConantDecl.!5,Ex.2.
)Conantstatesthat,inasubsequent
phoneconversation,Kirsclmer'scounselagreedtowithdraw thesanctionsmotiononlyif
BlixsethwouldstipulatetothedismissaloftheCounterclaimwithprejudice.(Id.!5.)OnMay
4,2012,Bli
xsethmovedtheCourttoamendtheCounterclaim.(DocketNo.41.
)Healso
appliedtotheCourtexpartetocontinuethehearingonKirschner'smotionstodismissandfor
sanctions,sothathismotionforleavetoamendcouldbeheardfirst;theCourtdeniedtheex
parteapplication.(DocketNo.44.
,DocketNo.47g5/10/12Orderl.
)
Blixseth'sattorney,Conant,hasfiledadeclarationthatincludesalengthyexplanationas
towhy,althoughheconsideredtheBartondoctrinepriortofilingtheCounterclaim,hecontinues
tobelievethatitdoesnotapply.Thisexplanationlargelyrehashestheargumentsdiscussed
aboveandattemptstoattesttoConant'sgoodfaithinmakingthesearguments. First,Conant
professesthathewassincerelymisledbyKirsclmer'spumortedpreviousposition,andthe
Court'sacceptanceofit,that,inprosecutingtheComplaint,Kirscbnerwasnotactinginhis
officialcapacityasabankruptcytrusteefortheYCLT,butwasinsteadactingasanordinary
creditor.HecontinuestobelievethatKirschnerwasabletoavoidtheapplicationoftherule
from Caplin,406U.S.416,andWilliams,859F.2d664,onlybytakingthisposition,andhe
findsittmfairthatKirsclmernow takestheoppositepositionandseekstoimposesanctions
CV-90(06/04)
CIVILMINUTES-GENERAL
Page28of39
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
againsthim.(ConantDecl.!!17-19,22-23.)ConantstatesthathebelievedthatKirschner
wouldbejudiciallyestoppedfromseekingBart
onprotection,basedonhispriorinconsistent
position.(Id.!21.)Second,Conantstatesthat,totheextentthatKirsclmernowvalidlyasserts
hisstatusasabankruptcytnzstee,hecontinuestobelieveingoodfaiththathewasnotrequired
toseekleaveoftheBankruptcyCourttofiletheCounterclaimbecause(1)under28U.S.
C.j
959(a),Kirsclmerispurport
ingtocarryonthebusinessofBLXinatt
emptingtoenforcethe
notes,insulatingthecontracmalcotmterclaimsfromBarton;and(2)becausetheRICOclaim
allegesknowingunlawfulconductagainstKirschner,Bartonprotectiondoesnotapply.(L4=.!
20.)Third,ConantatteststohisbeliefthatBartonmaybeavoidedaltogetherbynaming
KirschnerasCounterdefendantinhiscapacityastrusteeofatrustcreatedunderMontanalaw,
ratherthanasbanltruptcytrustee,asBlixsethhassoughttodointheproposedfirstamended
counterclaim.(ld.!24.
)
2.LEGALSTANDARDS
Under28U.
S.C.j1927,anattorneytt
whosomultipliestheproceedi
ngsinanycase
expenses,andattorneys'feesreasonablyincurredbecauseofsuchconduct.''28U.S.C.j1927.
t
'
f'
obesanctionableunderj1927,therefore,counsel'sconductmustmultiplytheproceedingsin
bothanfunreasonableandvexatiousmanner.'''lnreGirardi,611F.3d1027,1060-61(9thCir,
2010)(quotingB.K.B.v.MauiPoliceDep't,276F.3d1091,1107(9thCir.2002)).TheNinth
Circuithasalternativelystatedthatsanctionsunderthisprovisionrequireashowingof
subjectivebadfaith,seeNewAlaskaDev.Corp.v.Guetschow,869F.2d1298,1306(9thCir.
1989),andthatafindingofmererecklessnessalonesuffices,seeB.K.
B.,276F.3dat1107,
.Fink
v.Gomez,239F.
3d989,993(9thCir.2001).Althoughthesestandardsseeminconsistent,case
lawmakesclearthat(&afindingthattheattomeysrecklesslyraisedafrivolousargumentwhich
resultsinthemultiplicationoftheproceedingsis...sufficienttoimposesanctionsunderj
1927.
''lnreGirardi,611F.3dat1062(originalemphasisl;seealsoInreKeeganManagement
Co.
,78F.3dat436(
tBadfaithispresentwhenanattorneyknowinglyorrecklesslyraisesa
frivolousargumentorarguesameritoriousclaim forthepurposeofharassinganopponent.'
'
)$(..
.g
llnthecontextsofj1927,frivolousnessshouldbeunderstoodasreferringtolegalorfactual
contentionssoweakastoconstituteobjectiveevidenceofimproperpurpose.''lnreGirardi,611
unreasonablyandvexatiouslymayberequiredbythecourttosatisfypersonallytheexcesscosts,
F.3dat1062.
Federalcourtsalsohaveinherentpowertoimposesanctionsagainstattorneysandparties
forbadfaithconductinlitigation.Chnmbersv.NASCO,501U.
S.32,43(1991).Thecourt's
inherentpowersilaregovernednotbyruleorstatutebutbythecontrolnecessarilyvestedin
courtstomanagetheirownaffairssoastoachievetheorderlyandexpeditiousdispositionof
CV-90(06/04)
CIVILMINUTES-GENEML
Page29of39
CW ILMINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
MarcSKirschnerv.TimothyLBlixseth
Date November1,2012
cases.''Id.Buttheinherentpowerttisnotabroadreservoirofpower,readyatanimperialhand,
butalimitedsource;animpliedpower,squeezedfromtheneedtomakethecourtfunctionv''Id.
at42.SBecauseinherentpowersareshieldedfrom directdemocraticcontrols,theymustbe
exercisedwithrestraintanddiscretion.''RoadwayExpress.lnc.v.Piper,447U.S.753,764
(1980).Thecourtmayawardattorneyfeesassanctionsunderitsinherentpoweragainstaparty
whohasactedinbadfaith,vexatiously,wantonlyorforoppressivereasons. Chnmbers,501
U.S.at45-46.Althoughiecklessnessbyitselfdoesnotjustifysanctionsunderthecourt's
inherentpower,recklessnessincombinationwithotherfactors,suchasknowledgeofthe
applicablelegalrule,maymakesuchsanctionsappropriate. Fink,239F.3dat994*
,B.K.B.,276
F.3dat1106.A courtmaynotinvokeitsinherentpowerstosanctionapartyoritscounsel
withoutaspecificfindingofbadfaithorconducttantamounttobadfaith. lnreK-ee-ga
-n,78F.3d
at436.
SanctionsunderSection1927andtheCourt'sirlherentpowersaddressissuespertaining
totheconductofthelitigationandnotthemeritsofthecase,Bryantv.MilitaryDept.of
Mississippi,597F.3d678,694(5thCir.2010)(Section1927).
,Fink,239F.3dat991-92
(inherentpowers),andimpositionofsuchsanctionsrequiresevidencethattheatt
orneyorpazty
actedwithanC
timpropermotive,orgwithlrecklessdisregardofthedutyowedtothecourt.
''
Proctor& GambleCo.v.AmwayCorp.,280F.3d519,525-26(5t
hCir.2002).Ingeneral,
ttgulnlikesanctionsunderRule11,thefocusunderj1927isontheentirecourseofconduct,
ratherthanonanyparticularpapers.''Mon
.t
-BellCo.Ltdv.MountainHardwear.lnc.,No.C-961644-FMS,1998WL101741,at*1(N.
D.Cal.Feb.23,1998).
3.APPLICATION
a.Section1927SanctionsMaybeAppliedtoaCounterclaim
Blixsethfirstarguesthatsanctionsmaynotbeimposedptl
rsuanttoj1927forthefiling
S
tmultiplytheproceedings,''asrequiredunderj1927.(Opp.Sanctionsat7-8.)Thisargument
ofacounterclaim,becauseacounterclaim isantinitialpleading.''1tsfilingcannot,therefore,
iswithoutmerit.
TheNinthCircuitinInreKeeganManagementCo.SecuritiesLitigationstatedthat,
becauseSection1927tsauthorizessanctionsonlyfortheSmultiplilcationotqproceedingsy'it
appliesonlytoulmecessaryfilingsandtacticsoncealawsuithasbegun'';accordingly,the
Circuithasd
twiceexpresslyheldthatj1927cnnnotbeappliedtoaninitialpleading.''78F.
3d
at435(discussingsanctionsimposedfortherecklessfilingofacomplaint).Thus,dcltlhefiling
ofacomplaintmaybesanctionedpursuanttoRule11oracourt'sinherentpower,butitmaynot
CV-90(06/04)
CIVILMINUTES-GENERAL
Page300?Y9
CIVILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
besanctionedpursuanttoj1927.''1d.Al
thoughacounterclaimmaybecharacterizedasan
initialpleading,seePortofStocktonv.W.BulkCarrierKS,371F.
3d1119,1120-21(9thCir.
2004)(counterclaim isaninitialpleadingl;C.
D.Cal.R.3-2(counterclaimisaS
claim-ini
tiating
documenf'),theNinthCircuithasnotprecludedtheapplicationofj1927tocotmterclaimsthat
unreasonablyandvexatiouslymultiplythepleadings.SeeMirchv.Frarlk,266Fed.Appx.586,
588(9thCir.2008)(i
athird-partycomplaint'' alsocharacterizedbytheLocalRulesasa
Ctclaim-initiatihgdocument'' tsisnotaninitialpleadingbecauseitcannotariseabsentan
underlyingcase'';vexatiousthird-partycomplaintinthatactiont'multipliedtheproceedingsby
precipitatingthemotiontodismissand(withdrawalofthedefendant'scounsell'l;Mont-Bell,
1998WL101741,at*1(imposingj1927sanctionsforalitanyofconduct&s
indicatgingqa
recklessdisregardof(theattorney'sldutytothisCourq'includingtt
filingandunreasonably
pursuingcertaindefensesandcounterclaims''
l;seealsoRiddle&Assoc.-P.C.v.Kelly,414F.3d
832,837(7thCir.2005)(districtcourtabuseddiscretioninnotimposingj1927sanctionsfor
thefilingofafrivolouscollnterclaim thatactedtotdcomplicatethisalreadyfartoocomplicated
andabsurdl
yprotractedlitigationtothecostof''plaintiffanditscounsel)(internalquotation
marksandci
tationomittedl;butseeNystromv.TREXCo..Inc.,424F.
3d1136,1l50(Fed.Cir.
2005)(statingthattheFourthCircuithasfoundasamatteroflawthatthefilingofasingle
complaintcannotsupporttheimpositionofj1927sanctions,andrefusingtoimposesanctions
forthefilingofanoriginalandamendedcounterclaim).
Thus,underNinthCircuitlaw,thisCourtisnotprecludedfromimposingj1927
sanctionsforthevexatiousorbadfaithfilingofacounterclaim.
b.SanctionsareWarrantedagainstBlsethandJzgCounsel
(1)Blixseth'sArguments
BlixsetharguesthatsanctionsarenotwarrantedbecausetheCounterclaim wasnotfiled
inbadfaithorwithrecklessdisregardforapplicablelegalnzles. Blixsethcontendsthateach
counterclaim statesalegalclaim,iswell-groundedinfactsalreadyinhispossession,andismade
notforanimproperpurpose,butonlytoobtaincompensationfordamageshehassufferedandto
avoidpotentialwaiverofcompulsorycounterclaims. (Opp.Sancti
onsat6,17-18.)Hedenies
thatheimproperlynnmedKirschnerasCounterdefendantinhisindividualcapacity,arguingthat
atrusteemaybesuedinhispersonalcapacityforult'raviresactions,andtheCounterclaim
allegesthatKirschnerparticipatedinaR-ICO conspiracy;causedBLX tobreachitscontractwith
BlixsethandinterferewithBlixseth'scontractwithEdraBlixseth,'andhasimproperlyattempted
tohelpCreditSuissecollectontheloantotheClubandtocircumventtheBankruptcyCourt's
applicationofBlixseth'sinparidelictodefense.(Opp.Sanctionsat13.)
cv-go(o6/o4j
clvll-MlxuTEs-GENERAI-
page3J0?j'
j
CIVILMINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
Blixsethalsodeniesthatheissomehowprecludedfrom assertingthecounterclaimsby
JudgeKirscher'sfindingsintheMemorandum ofDecisioninAp-l4-thattheYCLThadnot
engagedinwrongdoing,andthereisnoevidenceofaconspiracyagainstBlixsethbetween
CrossllarborandEdraBlixseth-becausethesefindingshavenotbeen,andwilllikelyneverbe,
enteredintoafinaljudgment.Blixsethcontendsthat,moreover,JudgeKirscher'sfindingthat
CreditSuisseimproperlysoughttocolled ontheClub'sloanagainstBlixsethviatheYCLT
supportshisclaimsthatKirschnerisactingimproperlybyattemptingtocollectontheNotesin
thisaction.(1d.at15-17.
)Hearguesthat,inanyevent,tsinashowofgoodfai
th,
''hehas
attemptedtoamendtheCounterclaimtonameKirschnerasCounterdefendantinhisofficial
capacityastrtzsteeoftheYCLT,toavoidtheRule13problem,andtowithdraw theRICO
counterclaim,inordernottotsexpandthescopeofthiscasenow.'
'(J7.
-.at3n.6;seealsoil
..
uat
13,18-19.)However,hecomplainsthathisefforttomaketheseamendmentswasunreasonably
rebuffedbyKirsclmer,whorefusedtowithdrawthesanctionsmotionsunlesshestipulatedto
dismissalofthecounterclaimswithprejudiee.(Id.at19.
)
BlixsethdeniesthatheandhiscounselshouldhaveknownthatthisCourtwouldlack
subjectmatterjurisdictionunderBarton,basedontheMontanaDistrictCourt'sdecisionin
Blixsethv.Brown,becauseBrownentailedSscompletelydifferentfactsy''involvingBlixseth's
formerattorneywhothenbecameChairmanoftheUnsecuredCreditorsCommitteeandsued
Blixsethontransactionsthathehadpreviouslyworkedon. (Id.at14&n.12.
)Blixsethalso
insiststhathereasonablybelievedthatBartonwasinapplicable,onthebasisthatKirscimer
arguedtothisCourtthat,inprosecutingtheComplaint,hewasnotactingasabankruptcy
trustee,butmerelyasacreditor.lJ.
Z.at14.)
Blixsetharguesthat,inanyevent,sanctionsarenotwarrantedagainsthiscounselinthis
proceeding,ConantandStillman,becausetheonlyevidenceofferedagainstthem isthatthey
threatenedamaliciousprosecutionactionagainstEdraBlixseth'sbankruptcytnzsteeinthe
contextofherseparatebankruptcyproceedings-towhichYCLTisnotevenapao-andthat
StillmanstatedthatBlixsethwouldsueKirschnerifhedidnotwithdraw theComplaintinthis
action.AllotherevidenceconcernsactionstakenbyBlixsethhimselforhisotherattorneysin
otherproceedings.(Opp.Sanctionsat3,9-10.
)BlixsethcontendsthatKirschnerhas
improperlyfiledthesanctionsmotionforthepurposeofharassinghim andhiscounsel,by
seekinganunspecifiedamountofattorneyfeesandselectivelyproducingtothisCourt
documentsfrom andstatementsmadeinotherproceedings. (ld.at3-4.
)
Finally,Conantcomplainsthat,duetovariouspersonalcircumstances,hecarmotafford
topayanysanctionsimposedagainsthim.(ConantDecl.!g36.)
CV-90(06/04)
CIVILMINUTES-GENEML
Page32of39
CIVILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
(2)Discussion
TheCourtispersuadedthatsanctionsarewarrantedagainstBlixsethandConant,forthe
followingreasons.First,theCounterclaim,whichwassignedbyConant,wasimproperlyfiled
againstKirschnerinhispersonalcapacity,notwithstandingthecleardictatesofRule13that,
whereapartysuesinarepresentativecapacity,counterclaimsmaynotbefiledagainsthim inhis
personalcapacity.Thus,hadBlixsethlegitimatelydesiredtosueKirschnerinhispersonal
capacity,hewasrequiredtobringtheclaimsinaseparatelawsuit.Second,Blixsethnow seeks
toassertcertainofthecounterclaimsagainstKirschnerinhisofficialcapacity-and,by
extension,againsttheClub'sbanknzptcyestate-withouthavingsoughtleaveoftheMontana
BankruptcyCourt,exhibitingblatantdisregardfortheBartondoctrine.Indeed,amerefourdays
beforeConantfiledtheCounterclaim inthisactiononBlixseth'sbehalf,anotherlawsuitby
Blixseth,inwhichConantrepresentedhim,wasdismissedbytheMontanaDistrictCourton
Bartongrounds.
TheCourtfindsBlixseth'sandConant'sargumentsthattheydidnotintentionallyignore
Rule13andBartonutterlyunpersuasive.First,theargtzmentthattheyweresomehow misled
intonamingKirschnerinhispersonalcapacityandbelievingBartontobeinapplicableis
frivolous,andrestsonacontinuedattempttodistorttheholdingsofCaplinandWilliamsthat
thisCourthasalreadyrejected,aswellasadistol
-tionoftheholdingofthisCourt's2/24/12
Order.KirsclmerplainlyfiledtheComplaintinthisactionastrusteefortheYCLT,asindicated
ontheComplaint'scaptionpage.Moreover,asexplainedabove,Kirsclmerneverarguedtothis
Court,andthisCourtneveraccepted,thathewassuing,notasthetrusteefortheYCLT,butasa
personalcreditortoBlixseth,orinsomeOther,unspecifiedunofficialcapacity.Rather,theCourt
concludedthatKirschner,actingasYCLTtrustee,hasstandingtoseektocollectontheNotes
becausetheserepresentmoniesallegedlyowedtothebankruptcyestate.(See2/24/12Orderat
9-11.
)TheCourtexplicitlystatedthatBlixseth'sCaplin/WilliamsargumentCt
reliesona
misunderstandingofbankruptcylaw.'(1d.at9.
)However,notwithstandingtheclearholdingof
the2/24/12Order,BlixsethcontinuestoinsistthatKirschnerlacksstandingtoseektocollecton
theNotesastrusteefortheYCLT,andthattheCourtnecessarilyconcludedthathewasactingin
someothercapacity.Thisargumentisabsurd,andfindsnobasisinthe2/24/12Order.
NorcantheCourtagreethatBlixsethandhiscounselcouldnothaveanticipated,from the
dismissalofBrownv.Blixseth,thatBartonwouldapplyhere.Ashere,Browninvolvedthe
assertionofclaimsagainstacourt-approvedofficerforactionstakenwithinhisofficialcapacity.
TheBrowncourt'sexplicationoftheBartondoctrine-andtheinapplicabilityoftheexception
providedforunder28U.S.C.j959(a) parallelthoserequiredhere.lfanything,theinstant
actionpresentsamorestraightforwardapplicationofBarton,inthatallallegationsmadeagainst
CV-90(06/04)
CIVILMINUTES-GENERAL
Page33of31
CW ILMIN-UTES-GENEIU L
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
Kirsclmerinvolveactionstakeninhisofficialcapacity,whereasinBrown,Blixseth'sclaims
alsoinvolvedactionsBrownhadtakenasBlixseth'spersonalattorney,priortohisapprovalas
ChainnanoftheUnsecuredCreditors'Commitlee,Accordingly,thedismissalofBrownshould
haveplacedBlixsethandConantonnoticethattheclaimsagainstKirschnerweresubjectto
Barton.Yettheyproceeded,undaunted,tofiletheCounterclaim,withoutseekingleaveofthe
BanknzptcyCourt,fourdaysafterthedismissalofBrown.Whentheinitialfilingwasrejected
forteclmicaldeficiencies,theyre-filedittwoweekslater.Itisdifficulttoinferanythingother
thananintenttovex,annoyandharassfrom thisconduct.
TheCourtmustalsorejectthecontentionthatBlixsethandConantbelievedthatBarton
wasinapplicablebecausetheclaimsagainstKirschnerareforultraviresactions.Notably,
BlixsethdoesnotopposetheapplicationofBartonbyclaimingthatKirsclmer'sactionswere
ultravires,eventhoughthatisoneofthelimitedexceptionstotherule.Buthecouldnothave
madetheargumentthen,andtheargumentserveshim nobetterinthiscontext.The
counterclaimsagainstKirsclmerdonotallegethatheactedbeyondthescopeofresponsibilities,
butrather,thatincarryingouthisdutiesofadministeringtheestateheactedasthepawnofother
purportedco-conspirators.SeelnreMarkosGurneePartnership,182B.
R.at224(explaining
that,inordertodeterminewhethertrustee'sactswereultravires,thecourtmustSsexaminewhat
thegeneralscopeofthetrustee'sdutywas,andwhethertheconductallegedtoviolatestatelaw
fitswithinthatscope''
).Moreover,asalreadynoted,Rule13wouldrequirethatBlixsethbring
anytrueultraviresactionagainstKirsclmerinhispersonalcapacityinaseparatelawsuit.
Accordingly,theCourtmustconcludethatBlixsethandConantfrivolouslyfiledthe
Counterclaim againstKirschnerinhispersonalcapacity,andwithoutseekingleaveofthe
BankruptcyCourttopursuetheclaimsagainstKirschnerinhisofficialcapacity.Indoingso,
theyactedwithknowledgeofandwithrecklessdisregardforthestricturesofRule13andthe
Bartondoctrine.
However,thereismore:thevoluminousevidenceproducedbythePartiesregarding
conductbyBlixsethandhiscounselinotherproceedingsprovidesfurthersupportforthe
conclusionthattheCotmterclaim wasfiledwithimpropermotive.ItisapparenttotheCourtthat
BlixsethisinvolvedinnumerouscontentiouslegalbattlesinvariousforawithKirschneranda
hostofotherentitiesandpersons.tntheseotherproceedings,hehasachievedsomesuccess,and
hassufferedsignificantdefeats.ltisalsoapparent,however,thatBlixsethviewsa1lofthese
proceedingsaspartofavastconspiracyinwhichhisopponents,thecourts,andpersonsholding
politicalofficearealignedagainsthim.Hisresponsehasbeentoengageinscorchedearth
tacticsinwhichhehaslaunchedattacksagainsteveryperceivedadversary.
CV-90(06/04)
CIVILMINUTES-GENERAY
Page34of39
CIVILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
Blixseth'sviewthatKirschner,asYCLTliquidatingtnzstee,isStin''ontheconspiracywas
airedinAP-14andwassoundlyrejectedbyJudgeKirscher.AlthoughthisCourtmaynotafford
preclusiveeffecttotheBankruptcyCourt'sfinding,whichhasnotbeenenteredintoafinal
judgment,thatcaseprovidescontextfortheconductnowunderassessmentbythisCourt.And
thatcontextsuggeststhatthepursuitoftheconspiracyclaim hereisbroughtnotbecauseitis
meritoriousbutforthepurposeofvexationandharassment.TheCourtfindsitnoteworthythat,
eventhoughBlixsethistheindividualtowhom $200,
000,000inloanproceedswasdistributed
asanallegedelementoftheconspiracy,evenhisreceiptofthesefundsisnowpresentedasan
elementofanelaborateschemeinvolvingCreditSuisse,Crossl-larbor,andEdraBlixsethtotrick
him intocausingtheClubtoenterintoanunconscionableloantodrivetheClubintobankruptcy
andfoisttherepaymentobligationonhim.Blixsethgoestogreatlengthstodemonstratethathis
allegationsagainsttheseentitiesandpersonsarebasedinfact. Buttheseeffortsarelargely
besidethepointanddolittletopersuadetheCourtthatthe$6billionmCOcounterclaim against
Kirschnerwasbroughtingoodfaith.lndeed,Kirschnerismentionedinonlyafewparagraphs
intheCounterclaim,andhisroleislimitedtoperforminghisdutiesastrusteetopursue
collectionoftheestate'sassets,withallegedltnowledgeoftheillegitimacyofhisactions. The
allegedindependentpredicateactsbyKirsclmer-aidingtheMDORinitseffortstofilean
involuntarybankruptcypetitionagainstBlixsethinNevada,makingpublicstatementsagainst
Blixseth,andgivingtestimonyagainstBlixsethinthebankruptcyproceedings-aremerely
actionstakenintheperformanceofhisduties.Thus,inviewof(1)therecklessdisregardby
BlixsethandConantforapplicablelegalrulesinfilingtheCounterclaim;(2)themagnitudeof
thecounterclaims improperlyassertedagainstKirsclmerinhispersonalcapacity-andthe
paucityoftheallegationsandevidenceagainstKirsclmer;and(3)thetscorchedearth''approach
demonstratedbyBlixsethinthebankruptcyandotherproceedings,theCourtcanonlyconclude
thattheCounterclaim wasfiledinbadfaith.
NoristheCourtpersuadedthatConant'spersonalfinancialcircumstancespreventthe
impositionofsanctionsagainsthim.AlthoughtheNinthCircuithasexplainedthatthe
sanctionedparty'sabilitytopayisSsanotherfactorrelevantindeterminingreasonableness''ofa
specificfeeaward,MatterofYagman,796F.2d1165,1185(9thCir.1986),here,sanctionsare
limitedtoKirschner'sreasonablefeesandcostsincurredinrespondingtothebadfaithfilingof
theCounterclaim.
Accordingly,Kirschner'smotionforsanctionsisGRANTED,andsanctionsareimposed
againstBlixsethandConantintheamountofPlaintiff'sreasonablefeesandcostsincurredin
movingtodismisstheCounterclaim,movingforsanctions,andopposingBlixseth'smotionfor
leavetoamendtheCounterclaim.BecauseConantapparentlyfacesfinancialconstraints,the
CourtORDERSthatheisresponsibleforone-thirdoffees,andBlixsethisresponsiblefortwoCV-90(06/04)
CIVILMINUTES-GENERAL
Page35of39
CIVILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
thirds.NosanctionsareimposedagainstStillman,becausehedidnotsigntheCounterclaim or
representBlixsethinBrown,andbecausenosanctionsarespecificallysoughtagainsthim.
PlaintiffisORDEREDtofileafeerequest,settingforththespecificamountsoughttobe
recoveredandsupportedbyrelevantbillingrecordsandotherappropriatedocumentation,p
..
.
q
IaterthanMonday.November19,2012.TheCourtwillreview thisrequestandthereafter
enteranappropriateorder.
C.MOTIONTODISMISSTHIRDPARTYCOMPLAINT
TheCreditSuisseentitiesmovetodismisstheclaimsforcontributionandunjust
enricl
unent,assertedagainsttheminBlixseth'sThirdPartyComplaint,underRule12(b)(6).
CreditSuissearguesthat(1)theclaimsarenotripebecausenojudgmenthasbeenentered
againstBlixseth;(2)Blixseth'sallegationsdonotstateacognizableclaimforcontribution
becauseKirschner'sComplaintdoesnotseekajudgmentagainstjointtortfeasors;(3)Bli
xseth's
allegationsdonotsGteaclaimforunjustenrichment,becausethisisnotarecognizedclaim
underCalifornialaw,and,moreover,CreditSuissewouldnotbeunjustlyemichedbyreceiving
anydistributionunderthePlanofReorganizationconfirmedbytheBankruptcyCourt;(4)the
claimforunjustenrichmentisbarredbythedoctrineofbankruptcypreemption,becauseit
improperlyattemptstoattackthecontirmedPlanofReorganization'
,a
nd(5)Blixsethlacks
standingtoassertclaimsbasedontheloanagreementbetweenCreditSuisseandthe
YellowstoneClub,andanyclaimsundertheloanagreementwerepreviouslyreleasedinthePlan
ofOrganization.CreditSuisseargues,additionally,thatvenueisimproperinCalifomiaforany
claimsarisingoutoftheloanagreement,becausetheagreementcontainsaforum selection
clauseinfavorofNewYork;thus,theThirdPartyComplaintmustalsobedismissedunderRule
12(b)(3).(DocketNo.57gcreditSuisseMem.Dismissl.
)
1.RULE12(B)(6)LEGALSTANDARD
A complaintmaybedismissedifitfailstostateaclaim uponwhichreliefcanbegranted.
SeeFed.R.Civ.P.12(b)(6).OnamotiontodismissunderFederalRuleofCivilProcedure
12(b)(6),acourtmustacceptastnzeallfactt
zalallegationspleadedinthecomplaint,and
construethem Ciinthelightmostfavorabletothenonmovingparty.''Cahillv.Liberty
.Ins.
. Mut
Co.,80F.3d336,337-38(9thCir.1996);seealsoStonerv.SantaClaraCount
'
yOfficeofEducs
,
502F.
3d1116,1120-21(9thCir.2007).DismissalunderRule12(b)(6)maybebasedonei
ther
(1)alackofacognizablelegaltheory,or(2)insufficientfactsunderacognizablelegaltheory.
SmilecareDentalGrp.v.DeltaDentalPlanofCal..lnc.,88F.3d780,783(9thCir.1996)
(citingRobertsonv.DeanWitterReynolds.lnc.,749F.
2d530,534(9thCir.1984)).
CV-9O(06/04)
CIVILMINUTES-GENERAL
Page36of39
CIVILMINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirsclmerv.TimothyLBlixseth
2.APPLICATION
a.Contribution
Therightofcontributionarisesundersection875oftheCalifomiaCodeofCivil
Procedure.SeeAm.MotorcycleAssn.v.SuperiorCourt,20Cal
.3d578,601(1978),
.CocaColaBottlingCo.v.LuckyStores..lnc.,14Cal.Rpt
r
.
2
d
6
7
3
,
6
7
7
n
.
6
(
C
t
.
Ap
p
.
1
9
9
2
).Under
thatprovision,
(a)Whereamoneyjudgmenthasbeenrenderedjointlyagainsttwoormoredefendants
inatortactionthereshallbearightofcontributionamongthem ashereinafter
provided.
(b)Suchrightofcontributionshallbeadministeredinaccordancewiththeprinciples
ofequity.
(c)SuchrightofcontributionmaybeenforcedonlyafterOnetort
feasorhas,by
payment,dischargedthejointjudgmentorhaspaidmorethanhisproratashare
thereof.ltshallbelimitedtotheexcesssopaidovertheproratashareofthepersonso
payingandinnoeventshallanytortfeasorbecompelledtomakecontributionbeyond
hisownproratashareoftheentirejudgment.
Cal.Civ.Codej875.
NotwithstandingCreditSuisse'snumerousargumentsfordismissal,Blixseth'sclaim for
contributionfailsatabasiclevel:thereisnojudgmententeredonKirschner'sComplaintagainst
twoormorejointtort
feasors,andnosuchjudgmentispresentlyprospective.Thisisbecausethe
Complaintseekstosetasideanallegedlyfraudulentreleaseandtocollectontwopromissory
notesfromBlixsethalone.California1awdoesnotrecognizearightofonejointtort
feasorto
bringothersintoanactioninordertoassertastattztoryclaim forcontributionagainstthem.
Gen.Elec.Co.v.StateofCal.exrelDept.Pub.Works,108Cal.Rpt
r.543,548(Ct.App.1973)
(tscross-complainants'argument,thatsection875iseonsistentwiththeirrighttonowbringthe
stateandcountycross-defendantsintotheaction,withtherightofcontributiontobeperfected
afterjudgmentisalsoinvalid.Thereisnosuchrightinonejointtortfeasortohimselfbringin
theothers.'l;lnreWorldcom-lnc.,372B.R.159,167(Bankr.S.D.
N.
Y.2007)(interpreti
ng
section875,andstatingthat,Gtl-lere,Worldcom,adefendant,isattemptingtobringinacrossdefendantforcontribution,whichisnotpermittedaccordingtoCalifomiacaselaw.''
)Thus,
tmlessanduntilKirschnernamestheCreditSuisseentitiesasco-defendants
CV-90(06/04)
CIVILMINUTES-GENEML
ixsethhasno
,Bl
Page37ofW
CIVILMINUTES-GENERAL
CaseNo. CV 11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
b.UnjustEnrichment
(
tfhereisasplitofauthorityinCalifomiawhetherunjustenrichmentisacauseofaction.
''
DahonN.Am..Inc.v.Hon,No.2:11-cv-05835ODW (JCGx),2012WL1413681,at*12(C.D.
Cal.Apr.24,2012).Accordi
ngtoonelineofcases,unjustenrichmentisanindependentcause
ofactionwithtwoelements:(1)receiptofabenefitand(2)unjustretentionofthebenefitatthe
expenseofanother.See-e.g.,Lectrodryerv.SeoulBank,91Cal.Rpt
r.2d881,883(Ct.App.
2000).Theotherlineofcasesmaintainsthatisunjustemichmentisnotacauseofaction,'o
reven
aremedy,butratherageneralprinciple,underlyingvariouslegaldoctrinesandremedies.'
Manantanv.Nat'lCitvMortc.,No.C-11-00216,2011WL3267706,at*6(
N.
D.Cal.July28,
2011).
However,evenassumingthatunjustenrichmentmaybeassert
edasanindependentcause
ofaction,theThirdPart.yComplaintfailstostatesuchaclaim underthestandardarticulatedby
Californiacourts.tS
Toprovethatreceiptwasunjust,itusuallymustbeshownthatSthebenefits
wereconferredbymistake,fraud,coercionorrequest'
,otherwise,thoughthereisenrichment,it
isnotunjust.'''Anoyov.AuroraBarl
ksFSB,No.EDCV 11-2063DOC(JEMx),2012WL
628205,at*8(C.
D.Cal.Feb.24,2012)(quotingDinosaurDevelopment-lnc.v.White,265Cal.
Rptr.525,528(Ct.App.1989)).BlixsetharguesthatscreditSuissereceivedahugebenefit
throughpeddlingapredatoryloanuponM.1-.Blixsethtluoughobtainingenormousfeesaswellas
ultimatelyobtainingownershipandcontroloftheYellowstoneClubthroughanon-recourseloan
totheprinciplesofYellowstone,M.1
-.Bli
xseth,''andthat,tlblyallowingtheYCLTtoseek
paymentoftheNotes,whicharedirectlyrelatedtotheCreditSuisseLoantoYellowstoneClub,
thisCourtwillbeallowinggcreditSuisseltoreceiveanunjustbenefitattheexpenseofM.
1'
.
Blixseth.''(DocketNo.66gopp.DismissThirdPartyCompl.jat13.)Here,however,should
theYCLTcollectontheNotes,anydistributiontotheCreditSuisseentitieswillbemade
pursuanttothePlanofReorganization,whichhasbeenconfirmedbytheMontanaBankruptcy
Court.ltsretentionwillthusnotbeunjust.Blixseth'sclaimforunjustenrichmentistherefore
DISMISSEDwithprejudice.
IV.
CONCLUSION
Forthereasonssetforthabove,themotionstodismissareGRANTED. Blixseth's
motionforleavetoamendtheCotmterclaimisDENIED.Kirschner'smotionforsanctionsis
GIU NTED againstBlixsethandConant,withBlixsethresponsiblefortwo-thirdsofthetotal
CV-90(06/04)
CIVILMINUTES-GENEML
Page38of39
CIVIL MINUTES-GENERAL
CaseNo. CV11-08283GAF(SPx)
Title
Date November1,2012
MarcSKirschnerv.TimothyLBlixseth
awardandConantresponsibleforone-third.KirschnerisORDERED tofileaspecificrequest
forfeesandcostsincurredinmovingtodismisstheCounterclaim,movingforsanctions,and
opposingBlixseth'smotionforleavetoamendtheCounterclaim,supportedbybillingrecords
andotherappropriatedocumentation,nolaterthanMonday.November19.2012.
ITISSO ORDERED.
CV-90(06/04)
CIVILMINUTES-GENERA.
L
Page39(1/39
E xh ib it
E
ATTOREYoRpu'
rywl
TffourArroas>(Na1
??
e.sw.saravrnt'en.nd.&k.u):
DemmlsHolahan
awOfficeofDcnnisHolahan
20
S
e8
n0turyParkEast
u4
lt9
eC
31
LosAng
elcs,CA 94067
TELEpHoNENo.:707-623-9116
rubto.toptbmok:707-586-2983
sml
u
A
o
o
a
s
s
s
(
o
p
t
l
o
n
q
l
)
:
d
h
o
l
a
h
a
n
@h
o
l
a
h
a
n
l
a
w
.
c
o
m
ArroascvFoR(Na,pe);EdraBlixseth
SUPERIORCOURTOFCALIFORNIA,COUNTYOFRivcrside
smEETAnoREss:4050MailStreet
uxuxoAooaEss:4050MainStrcct
r*2touRrDSEFONLY
FL-320
cl
wAuozl
pconE:RiversldeCA 92501-3703
sancssAve Maincourtouse
pcvlzloucn/ptxxrlFF:EdraBlixseth
Yk REsposoEspoEF
zsoAxy:'
timotl
vBlixseth
*
N
%
Q
fr''
Vx
OTHERPARW:
RESPONSIVEDECLARATI
ONTOREQUEW FRORDER
HEARINGDATE:
TI
ME:
DEPARTMENTORROOM:
CMENUMBER
:
RIDIND91
152
January14,2013
8:30A.M.
10
1.r--lCHILDCUSTODY
a.f---IIbnsenttotheorderrequested.
b.r--lIdonotconsenttotheorderrequested,butlconsenttothefolowingorder:
2.r--lCHILDVISITATION(PARENTINGTIME)
a.I
---IIconsentlothorderrequested.
b.f
--lIdonotconsenttotheorderrequested.butIconserittothefolowingorder:
3.r--iCHILDSUPPORT
a.I
---IIconsehttothebrderrequested,
b.r--1lconsenttogui
detinesupport.
c.F--lldonottonsenttotheorderrequested,butIconsenttothefoll
owingorder:
(1)ITT'
-IGuldellne
(2)r.
'
--lOther(specifyl:
4.C-RSPOUSALOkPARTNERSUPPORT
a.I---IIconsenltotheorderrequested.
b.I---Ildonotconsenttotheorderrequested.
c.I---IIconsenttothefollwingorder;
FormMoptedforMandad
oryUse
JF
v:
d
4
l
2
a:
l
c
(
R
oe
u
#
n
c
l
j
f
lf
m
g
J
uo
l
y
1a
.2
0o
1
2i
1
al
RESPONSIVEDECLARATIONTOREQUESTFORORDER soAuL'
n
pj
us
s-
Pa;1pf2
PETITIONER/PLAINTIFF:EdraBlixscth
RESPONDENT/DEFENDANT:TimothyBlixscth
CMBNUMBER:
R1D1ND9ll52
FL-320
OTHERPARTY:
5.F--IATTORNEY'
SFEEShNDCOSTS
a.U--llconsenttotheorderrequested.
b.U--IIdonotconsenttotheorderrequested.
c.r-'
Q lconsenttothefollowi
ngorder:
6.r--'lPROPERTYRESTRAINT
a.I
---IIconsenttotheorderrequested.
b.r--lIdonotconsenttotheorderrequested,
c.1---1Iconsenttothefollowingorder:
7.I---IPROPERR CONTROL
a.F--I1cpnsenttotheorderrequested.
b,F'
--Ildotldtc6npnttotheorderrequested.
c.U-'R lbonsenttpthefoll
owlngorder:
8.I
-x-'
lOTHERRELIEF
a.I
---IIcond.ntlotheorderrequested.
b.FV-IIdonotcopsenttotheorderrequested.
c.U-'-Ilconsenttothefollowingordec
9.U'
X-ISUPPORTINGINFORMATION
Fx-lContainedlnthqattacheddeclaration.(YoumayuseAttachedDeclaraton(formMC-031)forthispurpose).
MelporandumofPointsandAuthoritiesinOppositipntoMotionforSanctionsandContcmpt;
DcclarationofEdraBlixscthinUppositiontoMotionforSanctions;
DeclarationofDcnnisHolahaninOppositiontoMotionforSanctions
NOTE:Torespondtodomesticvipl
enerestraingngordersrequestedintheRequqstforOer(DomesticWo/ancePrevention)
(formDW100),youmustusetheAnswertoTemporaryRestrainingOrder(DomesticViolencePrevention)(formDV-120).
ldeclareunderpenltyofperjufyunderthelawsoftheStateofCaliforniathattheforegolngandaIIattachmentsaretrueandcorrect.
Date:
&7 e zk
Edl.aBlixscth /
(
TYPEQRPRI
NTNAME)
FL.3201Rev.JuI
#1.20121
(SI
GNATUREOFDEGLARANT)
RESPONSIVEDECLARATIONTOREQUESTFORORDER
Pagezd2
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 100 of 295
1L
De
nnis
hamUF
Es
q.
(CS
:0
5732AHAN
4)
Aw
OHo
FFl
Ia
CE
DE
NNB
IS
HOL
2 Lo
204
9CenturyParkEalt,Suite3180
sAngelesjCalifornla90067
3 Tel:(310)286-3344
4 Fax:(310)286-2299
5 AttorneysforPetitioner
EdraBlixseth
6
7
8
SUPERIORCOURT0FTHESTATEOFCALIFORNIA
9
FORTHECOUNTYOFRIVERSIDE
10
11 lnretheMarriageof
CaseNo.RlDIND9I152
12
BySpecialAssignment
Dcp.10-JudgeSharonJ,Waters
13 Petitioner: EdraBlixseth
PETITIONEREDRABLIXSETH'S
14
and
MEMORANDUM OFPOINTSAND
AUTHORITIESINOPPOSITIONTO
15
MOTIONOFRESPONDENTTIMOTHY
Respondent:TimothyL.Blixseth
BLIXSETHFORSANCTIONSANDTO
16
SHOW CAUSE1tECONTXMPT
17
Judge: SharnnJ.Waters
Date:
January14,2013
18
Time:
8:30a.m.
Dept:
10
19
(DECLARATIONSOFEDRA
20
BLIXSETH AND DENNISHOLAHAN
FILEDCONCURRENTLYHEREWITHI
21
22
23
24
PetitionerEdraBlixsethlereinafterf
petitibner'')herebypresentsherMemopndumof
25 PointsandAuthoritiesinOppositionCopposi
tion'')toRespondentTimothyBlixseth's
26 Ct
ftespopdent''
) MotionforSanctionsandtoShowCausereContempt.
27 ///
28 ///
*.
opposmoxToMtmosFoRskxc'
rldk'
jkkToslloWucoxriupi
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 101 of 295
1 1. INTRODUCTION-BACKGROUND
2
Thi
nstantMotionforSanctionsandContemptCs
Motion''
)filedbyMr.Conant(an
3 attorneywhoisnotofrecordforResponbentinthiscase)isthelatestchapterinwhatmustbe
4 thelongestandmostpreposterousattemptbyanx-husbandtoharassandhumiliatehisex-
5 wife.AjudgementofdivorcewasenteredinthiscaseinOctober2008,twoyearsPetitioner
6 ledtheactio.PetitionefandmostofthecompaniesshertceivedinthegtipulatedMarital
7 Sett
lementAgrement(C
MSA''
)weresooninbankruptcy.RespondentTimBlixsethxonthe
8 otherhand,madeoffwithover$100millionincashandotherassets.Thatwasn'tenoughfor
9 Respondeny,however.
10
Petitionerreceivedherdischargefrom bankruptcyinFebnzary2011.Shewasleftwith
l1 virtuallynothingbutthegoodwillofherfriendsandformerbusi
nessassociates.She+asjust
12 starting'
togetbackonhcrfeetwhen,inJuly2011,Respondenthitherwithamotioninthis
13 caseforentryota$20millionjudgmentforpaymentsdueundertheMSA.ButPetitioner's
14 bankruptcyTrgsteehadalreadyfiledanactioninMontanaBankruptcyCourtt:setasidethat
l5 MSAhasedonmistake,fraud,andfraudulentconveyance.PetitionerthereforefiledaMotion
16 toStaya11activityinthiscase'
pendingtheoutcomeoftheMontanacase.OnNovemberl6,
17 2011,thisCoul
'
tproperlystayedthisaction(the
sta/'
)pendingtheoutcomeoftheadversary
18 proceeding('
AdversaryProceedinf'
)inMontanaBankruptcyCourttosetasidetheMSA
19 enteredinthiscase.lThatAdversaryProceedingisgoingforwardandwillcometotrialin
20 June2013.ThereshouldbenoactivityatallinthiscaseuntilresolutionoftheAdversary
21 Proceeding.
22
Now,kespondenthassled,throughanattomeynotofrecordinthiscase,theinstant
23
24
25
26
MotionclaimingthatPetitionrandheraqorneyliedtothisCourtwhentheyappliedforthe
StayinAugusy2011whentheyclaimedshehadnomoney.Theybasethisassertiononmany
pagesofpurloinedattorney-clientcommunicationsbetweenPetitionerEdraBlixsethandher
currentattorney,Mr.Holahan,andbetwednPetitionerandoneofhtrformerattorneys,
27
l v
A1lpmceedingsinconnectionwiththemari
talsettlementagrecmentandjudgmentin
28 thiscaseshallbestayedpendingrtsolutionoftheadversaryproceedinginstitutedby4heTrusteeinthe
MontanaBankzuptcy,actiontosetasidethemaritalsettlementagreement.''MinuteOrderinthiscase
datedNnvcmber16,2011.
1
OPPQSITIONTOMOTIONFOlkSANCTIONSANDTOSIIOWRECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 102 of 295
'
l DeborahKlar.Ms.BlixsethnevergaveDennisMontgomerypermissiontocopythese
2 documentsoffofhercomputerwhenhewasworkingforherin2012,anddidnotknowthathe
3 haddonesountilshesawthisMotion.Mr,Conant,whoisreputedtobeamemberofthe
4 CaliforniaBar,shouldknowbetterthanto;leasexhibitsstolenattornepclient
5 communications.
6
Also,inanewlowcvenforthisgroup,Mr.MontgomeryhasstolenandMr.Conanthas
7 ledaletterfrom EdraBlixsethtoJackScalia,amanshewashavingarelationshipwithafter
8 shestparatedfromRespondentitlDecember2006.Thereisnoreasontodothisexceptto
9 humiliayeandembarrassMs,Blixseth.Mr.Mbntgomeryapparentlyalsotookmanyphotosof
10 theinteriorsofMs.Blixseth'newhouseonDecember9,2011andthosearealsofiledwiththe
11 Motion.lnadditiontoanintentionalbreachoftheattorney-clientprivilege,thisconluctis,at
12 theveryleast,aninvasionofprivacyandtheftofpersonalproperty.
13
Thepm-poseofallthisistoshowthat-/barmonthsaperMs.Bl
ixsethfiledaMotionto
14 StayThisActionandobjectedtoMikeFlyna'srr/hacviceapplication,shewasdoi
nwellin
15 startingnewbusinessesandlivinginBeverlyHills,andthereforesheandherattorneymust
16 havebeenlyihgwbentfourpJtvl/.
earllenshestatedthatshehadnomoneytosatisfythe$20
17 millionjudgmentrequestedbyRespondent.Thereissimplynologictothisreasoning.Evenif
18 onetenthofthestatementsaboutMs.Blixseth'sreputedwealthinDecember2011aretrue,this
19 hasnothingtodowithherfinancialconditioninJulyandAugustof2011whensherepresented
20 tothiscourtthatshehadveryliRle.Thosesttementsweretz'uewhenmade,Andnothinginthe
21 Motionshowsthecontrary.
22
ThisofcoursetotallyignoresthefactthatthisCourtissuedtheStayinthiscase,not
23 basedonthestatusofMs.Blixseth'swealthorlackthereof,butbecausethere/,
$'anotlter
24 acdonpettdlltginMontaltatosetasidetltqMSAw/l/c/lmustbedecldedjlrst.
25
Lastly,andmostdisturbingly,thedocumentsMr.MontgomerystolefromMs.Blixseth's
26 computerhavebeensignificantlyaltered,andinatleastonecase,manufacturedoutofthinair..
27 KnowinglyfilingafalsifieddocumentwiththeCourtis,ofcourse,afelonyunderCalifornia
28 PenalCodej115(t
procuringorofferingfalseorforgedinstrumentforrecord;violations;
oP#osITION'
rMOTIONFOFSANCTIONSANDTOSHOWRECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 103 of 295
1 punishment');Peoplev.Swann213Ca1.App.2d447,28Cal.lkptr.830(1963)E$'
adefendant
l wasconvictedofeightfelonycountsofviolatingsection115ofthePenalCodeforknowingly
3 filingfalsedocuments').
4
Whyarethesepeoplebehavingsobadly?Whoispayingthem tobehavelikethis?
5 ApparentlythehewbusinessMs.BlixsethwasattemptingtostartwithMr.Montgomeryin
6 January-June2012didnotgowell,inspiteofpromisingprototypes,andMs.Blixsethstopped
7 raisingmoneyforit.Mr.Montgomery(widelyreputedtobeaconartistandafraud,and
8 accusedofsuchbyMikeFlynnandthepcoplehenowisaiding)nowseeksrevengeforthis
9 businessfailurebyprovidingstolenandaltereddocumentsandwildlyimaginativetestimony
10 onbehalfofhisformeremployer'sex-husbahd.
11
Tobeclear,Ms.BlixsethynevergaveMr.Montgomerya<%thumbdrivei'withthese
12 documentsonit,shenevergavehimpelnnissiontocopydocumentsoremailsfromher
13 computer,shenevefgavehim permissiontoalterandforgesuchdocuments,andshecertainly
14 nevergav:himpel-missiontotakephotogpphsoftheinteriorsofherhomeandgivethemto
15 herexphusband'sattorneys.
16
AsforMr.Conant'steceiptandcseofthesedocuments,Califomia1awisclear.
17 Studyingorusing6bviouslyprivilegeddocumentsthatbelongtoannthermayconstitutean
18 ethicalviolationandsubjectanattomeytosanctionsordisqualification.Gomezv.Vernon(9th
19 Cir-2001)256F3d11l8,1132(applyingfederallaw);StateComp.Ins.Fundv.WP$Inc.
20 (1999)70Ca1,
App.
4th644,652-654,82CalAptnzd799,805-806(applyingCaliforl
iialaw).
21 SadlythisisnotthefirsttimeMr.Blixseth'sattorneyshaveusedtheiropponent'sattbrney22 tlientprivilegedcommunicationswithoutpermission.
23
PetitipnerajksthisCovrtt:seetluroughthisshamofaMotionanddenytheRegpondent
24 anyreliefatall.
25 II. FXLSESTATEMENTSINTHtMUNTGOMERYDECLARATION.
26
TheaccompanyingDeclartionsofEdraBlixseth(tEdrabecl.''
)andDennisHolahan
27 C
llolahanDeg1.')setforthindetailthemKyfalsestatementsintheDelarationofDenni
s
28 Montgpmery('fMontgomeryDecl.')whichisthebasisforthisMotion.Theleveloftmtruthis
3
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSHOW RECONTEMPT
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 104 of 295
1 fairlywideandblatant.
2
Briefly,Petitionerhasneverreceived$50to$100millionforanytechnologydeveloped
3 byDennisMontgomel
y SeeEdraDecl.attachedhereto,!9.Norwasshefunnelinghundreds
4 ofthousandsofdollarsthroughothercompaniesintoPCI,lnc.toavoidthe1RSandCalifornia
5 taxes.EdraDecl.,119.Nordidsheeverhave$250,000incashinherhouse.EdraDecl.,!9.
6
7
8
9
10
11
12
NordidEdraBlixsethevergiveDennisMontgomerypermissiontodownloaddocumentsfrom
hercomputer.Nordidshe''kite''proceedsftom furnituresales,orsellantiquestwjce,orhave
asecretdealwithCrossllarborforsecretpayments,oraskDennisMontgomerytofalsify
documents,orgivehim pelnnissiontophotographherhomeandthtngivethephotostoherexhusband'sattorneyj.1d.
.
111. THETRUTH
Tothecontrary,thetruthisthatEdraBlixsethfiledaPetitionforDissolutionofher23-
13 yearmarriagtoTimothyBlixsethonDecember5,2006.EdraDecl.,!2.Elraacquiredan
14 interejtincertvinhightechinlellectualpropm'tyinearly2006,andincorporatedthecompany
15 OpspringLLCinMarch2006asavehicletnownandmarketsaidtechnology.1d.,113.Edra
14 hiredDennijMontgomerysanemplpyeeofthenewlyformedOpspring.f#.,!3.Hewas
17 oneofthdevelopersofthisteclmology.A disputearosebetweene'rrppidTechnologies,on
18 theonehand,andDennisMontgomery,ontheotherhand,overthefightstothistechpology,
19 r:sultinginlitigationtitledMontgomelyv.eTreppidTechnologies,UnitedStatesDistrictCourt
20 fortheDistrictofNevada,CaseNo.06-cv-00056(PMPVPC)(theS
eTreppidCase').The
21
22
23
24
e'rreppidCasewasfiledinJanuary2006,,shortlybeforeEdrametDermisMontgomeryand
MichaelFlynninFibruary2006.Infact,Opspringwasformedtoadvancetheteclmologiesof
MontgomeryincludinganemploymentcontractbetweenMontgomeryandOpspring,which
MikeFlynnhelpedtodraft.AllfeesandcostofMikeFlpm'slegalworkwem thenth>
25 responsibilityofOpspring/EdraBlixseth.f#.,!3.
26
AlthoughEdrawasnotanamedpartyinthee'rreppidCaseatthattime,sheundertook
27 theresponsibilityofpayingFlynnandhisCaliforniapartner,PhilipH.Stillman,startingin
28 March2006.Vlynn& StillmanhadbeenretainedbyEdra'semployeeDennisMontgomeryas
4
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSHOWRECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 105 of 295
1 hisattorneysinthatcase.Id.,!4.EdrapaidlegalfeestoFlpm&Stillmantotlingover$1.
2
2 millionbetweenMarch2006andJune200#.1d.EdrafiledasExhibitAtoherOppositionto
3 Flpm'sProHacViceApplicationinthiscasetruecopiesofstatementsofFlynn& Stillman
4 fromJanuary2006throughJuly2007submittedtoEdraBlixscthandtoDennisMontgomery
5 andOpspring,LLC.ThestatementdatedApril-May2007clearlystates:Q<TOTAL
6 PAYMENTS(ThankYou):$1,230,000'
1onthelastpageofthatExhibitA.f#.
,!4.
7
ItistruethatEdralaterstatedthatMikeFlynnwasneverherlawyer.1J.
,115.Thatwas
8 herunderstandingthenbecauseshewasnotapartytotheeTreppidCaseatthattime.Edra
9 doesnotknowthespecificsfwhen,underCalifomiaIaw,anattorneyclientrelationshipis
10 created.1d.,!5.Shehassincelearnedthat,whenshepaidMikeFlynna11thtmoneyandhe
11 gaveherlegaladviceonherdivorce,eventhoughshedidnotaskforit,anattorneyclient
12 relationshipwascreatedunderCalifol
mialaw.f#.,!5.
13
AfterEdrawasdischargedfrombankruptcyinFebruary2011,oneofthebusinessesshe
14 triedtostartwasanewteclmologycompanywithDennisMontgomery.1d.
,!6.Edrathought
15 hehadsomegoodnewsoftware.ButDennisMontgomel
yishisownworstenemy.Hehasnot
16 alwaysbeenhpnstwithpeopleandhehasbeensanctionedincourtseveraltimesfornot
17 tellingthetruth.Healsohasagamblingproblem andheisalwaysinneedofcash.
18 NeverthelessEdratriedtohelphim.HewasinbankruptcyatthetimebutheformedPacific
19 CoastInnovatipns,lnc.(
TCl'')toownandmarketthetechnologywithotherpartnerswho
20 paidhim hundredsofthousandsofdollarsandpromisedtopayoveramilliondllarsfor
21 developmentofaspecificdevice.Id.,116.Vdraraisedabout$200,000frominvestorsshe
22 knew'
tofundotherneedsofDennis,hisfamily,PC1anddevelopprototmes,andlnarketing
23 plans.EdratriedveryhardtomakethisasuccessfromDecember2011throughJune2102,but
24 thebusinessfailed.1d.,!6.WhenEdrastoppedfundingthePCIinJune2012jDermjs
25 Montgomerybecamedesperate.Hisbankruptcywasdismissedformisconductonhispart
26 aroundthistime,andMikeFlynn,oneofTimBlixseth'sattorneys,hadsuedhimforhundreds
27 ofthousandsofdollarsforunpaidfeesfromthee'
TreppidCase.f#.
,!6.
28
DuringthistimeDennisMontgomerystartedtocallEdratotellherabouttextmessages
5
OPPOSITIONT0MOTIONFORSANCTIONSANDTOSHOWRECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 106 of 295
1 andcallshewasgettingfromEdra'sex,TimBlixseth.1d.,!7.Timwasapparentlyoffering
2 DennisMontgomerymoneytocomeovertohissideandgiveTim evidencetoCupportTim's
3 favoriteconspiracytheoryaboutEdra-thatSamBpmeandEdrahadconspiredtosell
4 YellowstoneCluboutofbankruptcytoSamforonefourthofitstruevalue,andtlzatEdrawas
5 somehowgejtingpaidsecretkickbacksfromSaminhernewlife.Id.,117.Thisofcourseis
6 sheerfantasyandhasbeenadjudicatedassuchseveraltimesintheMontanaBankruplcycases.
7 1d.
8
PartpftheconspiracytheorypositsthatSamByrneandotherwealthyorprominent
9 individualshavebribedJudgeRalphKirschefandGovernorBrianSchweitzerinMontanato
10 getfavorablerlingsinal1courtproceedings.Id.,!7.WhenEdraaskedDennisMontgomery
11 whyTim wouldthinkthatDennisMontgomerywoulddosuchthings,DennisMontgomerytold
12 EdrathathehaddonethisinthepastfotTim duringatimewhenDennisMontgomeryandEdra
13 werenotincontact.f#.DennisMontgomerytoldEdrathathehadbrokenintoihe
14 CrossHarbor(SamByrne'scompany)websitetoallowTimtogainaccess.1d.
15
16
17
18
19
20
21
lnthesnewtextmessagestoMontgomery,Timwasspecificallyaskingfori
nformation
thatwouldhelphim inhiscourtcasesinMontanay.IdahoandCalifornia.Hestatedthathe
neededDennisMontgomely'stypeofskillsanddidnotcarehowDennisgotorcreatedthe
information.1d.Tim askedforinfol-mationthatwouldhurtavarietyofpeppleincludingbut
notlimitcdtoSamByrne,GovernorSchweitzerandJudgeKirscherorhisson.Id.Timtold
DennisMontgomeryhewouldhelpDennisandhisfamilyfinanciallyandwouldstojthe
attacksofMikeFlynnagainstDennisMontgomeryifhewouldhelpTim.NowEdrais
22 informedthtMikeFlym,oneofTim'sattorneys,hasboughtDennisMontgomery'shomeout
23 ofbankruptcyandgivenitbqcktohim.SeeExhibitsBtlzroughFtothisOpposition.
24 IV. FORGEDANDALTEREDDOCUMENTS
25
ThmosttroublingprolemwiththeMotionisthatRespondentandhisattorneysand
26 DennisMontgomeryhaveknowinglyflledaltereddocuments,Thesedocumentsarelistedin
27 paragraph22bf-theMontgomeryDeclaration.Theyareattorneyclientprivilegedorprivate
28 ZldPCFSOZV.TheyWereStolenWithoutEdra'skncwledgeorpermissionoffofherfrozen
'
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSHOWRECUNTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 107 of 295
l computerphichshegavetoDennisMontgomerytofix.Thesedocumentshavebeenalteredby
2 DennisMontgomery,TimBlixsethortheiragcnts.AttachedheretoasExhibitA-1isthe
3 originaldocumenttitledsNotesontheMSA''withtransmittalemailwhichEdrasenttoher
4 attorneysDennisHolahanandGal
'
yDeschenesonSeptember20,2009.EdraDecl.,!9(i
n
5 responsetoparagraph22ofVontgomeryDec1.
) Edracreatedthisdocumentforherattorneys'
6
7
8
9
10
11
eyesonlyinSeptember2009,Shecreateditonhero1ddesktopcomputer,thesameoneshe
latergavetoDennisMontgomerytofixin2012.1d.AttachedasExhjbitA-2isthallegd
cpyofthisdocumentattachedtotheMotionasExhibitDM -Exhibit11.Whenonecompares
thelastpageofbothdocuments,itisapparentthatDelmisMontgomeryandhisattorneyshave
addedthefollowinglanguage:
t'l
tememberwehaveaddedhelptherefromtheBKJudgewho
12
lpvesus,andhatesTim andmikeFlynn.Atthispointtheycould
13
notgdadecentrulingintheirfavorform thatJudgeiftheytried.
14
Eitherway,SB'
andBShavethingsinplaceinthatcourtroomto
15
helpus.WeneedtomakesurethatthevalidityoftheMSAnever
16
endsupbeingdecidedbyJudgeWaters.Thatwouldbeanightmare
17
fora11ofus.''
18 ''
f'
heabovelanguagt,iftrue,wouldclearlysubstantiateTim'sassertionsthatEdrahasarranged
19 forJudgeKirschertobebribed.ButEdrneverwrotethatlanguage.1d.Ithasbeenadded.
20 Thereisfurtherproof.EdracutandpastedthetextofthisWorddocumentintoanenlilonthe
21 sameday,September20,2009,andsentittoDennisHolahanwhowasinNewYorkthatday
22 withoutacbmputersothathecouldrcadthetextonllisBlackberry.f#.Atruecopyofthat
23 emailisattachedhreasExhibitA-3.Itisclearlookingatthelastpageofthetextintheemail
24 thattheabove'quotedlanguagewasnotintheoriginaldocument.Inaddition,languagehas
25 beenaddedtotheletterEdrawrotetoJackScalia-1d.Andthethirddocument?t'HolahanMSA
26 BullettIsic)Ppints''
,iscompletelymanufactured.Edradidn'ttypeitandhasneverseenit
27 before.Id.ThesubmissiontothisCourtofclearlyal
teredandforgeddocumentsshouldbe
28 enoughbasist4gonofurtheranddenytheMotionasfraudulent.
7
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSHOW RECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 108 of 295
1 V. MR.CONANTANDMR.FLYNN'SGIFTTODENNISMONTGOMERY.
2
Upuntilthismonth,December2012,Tim BlixsethandhisattorneysMikeFlynandC.
3 J.ConantperiodicallyreviledDennisMontgomeryincourtfilingsinLosAnjelesand
4 Montana,desctibinghimasaliar,aconvictedperjurerandafraud.Thosefilingsinclude:
5
TranscriptofProceedings,January18,2011:InthishearinginButte,Montana,Tim
6 Blixseth'sattorneyMikeFlynn(withMr.Conantalsopresent)repeatedlyaccusedDennis
7 Montgomeryoffraud:G.,.falsedeclarationsofMontgomery,which,twomonthslater,his
8 lawyerhadtostandupandadmitwerefalse''andreferringtoMontgomery'stechnologyttthe
9 technologydidn'texistandisacompletefraud''.ExhibitBtothisOpposition.
10
AtlversaryComplaintfiledbyMikeFlynnagainstDennisMontgomryonSeptember
11 28,2009:'IMontgomerypel
juredhimselfinconnectionwithmultiplefalsestatementsinthe
12 Nevadacases.,''.ExhibitCtothisOpposition.
13
DepositionefDennisMontgemerytakenbyMr.Conantasattorneyfo#MikeFlynnon
'
14 November1,,2010:
15
16
17
18
19
20
21
22
23
24
25
26
27
22
Q.(Mr.Flynn): t
l's
ti
tnru
,oMr
.Mp
pt
t
otme
th
ar
tet
hcis
qnuolit
ee
,u2n
psoate
dn
e'
ctoi
d
ges
ftwa
re'
hga
yor
uy,
re
fe
n
e,o
n
2ql
complstefraud?
A.(Montgomery): 1'mgolngtoassertmyrightundertheFifthAmendment.
DepositionTmnscriptofDennisMontgomely,excerpts,ExhibitDtothisOpposition.
NoticefMotionf0rSaleinMpntgomerybankruptcy.AfteryearsofaccusingDennis
Montgomel
'
yoffraudandpmjury,allofasuddenMikeFlynnistryingtobuyDemni
Montgomery's$2millionhouseinYarrowPoint,Washingtonforacreditbidplus$20,000out
ofbankltptcyandisgivingthehousebcktoMr.Montgomely ExhibitEtothisOpposition.
DeclarationinRespansetoMotienforSale:ScottHill,someoneelsewhomadeabid
ontheYarrowPointhousefor$1,400,
000inAugust2012isobjectingtotheMotionforSale:
4. OntheafternoonofDeceniber14,2012,IdrovebytheYarrowPointHouseand
saw thehedgesweretrimmed,thatthereWerevehiclesinthedn'vewaywithCalifornia
licenseplates,andpeoplemovingintothehouse.Bothgarageswereopenwithfurniture
andotheritemsvislblebeingunpacked.A manwhoidentifiedhimselfasDennis
Montgomeryintroducedhimselftomeandtoldmethathewasmovingbackintothe
house.
dpposlaxoxToMoTloxFoRsANce
rloxsANoTosuowi
tlcoxuMp'
r
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 109 of 295
1 DeclaratioilofScottD.Hill,ledinMontgomeryBankruptcycaseonDecember19,2012in
2 ResponsetpMotionforSale,ExhibitFtothisOpposition,
3
Theabovedocumentsseriouslycallintoquestionanystatementsmadeiltthiscaseby
4 DennisMontgomery.
5 VI. ARGUMENT.
6
A. TheDncumentsSubmittedlnSuppartnfThisMotianHaveBeenAlteredOr
7 AreCompleteForgeries-theMotionShouldBeDeniedOnrrhisBasisAlonc.
8
I1
)thcaseofPeoplev.Wood,161Cal.App.2d24,325P.2d1014(1958),adefendant
9 wasconvictedofeightfelonycountsofviolatingsection115oftheCaliforniaVenalCodefor
10 knowinglyfilingfalsedocumentswiththeDepar%entofMotorVehicles,Anattorneyor
11 'unrepresentedpartywhopresentsapleading,motionorsimilarpapertothecourtmkesan
12 implledd
tcertification''ast:itslegalandfactualmerit;andissubjecttosanctionsforviolation
13 nfthisceftifkation.CCPj128.
7;seeMurphyv,YaleMaterialsHandlingCorp.(1997)54
14 Cal.App.4th619,623,62Cal.lkptrazd865,867.Thepersonpresentingthepapertothecourt
15 impliedlycertifiesthatfirf'heallegationsandotherfactualcontentionshaveevidentiarysupport
16 or,ifspecificallysoidentified,arelikelytohaveevidentiarysupportafterareasonabl
17 opportt
mityforfurtherinvtstigationordiscovery.'CCPj128.
7(b)(3);andtr
fhdenialsof
18 factualcontentionsarewarrahtedontheevidenceor,ifspecificallysoidentified,arereasonably
19 basedonalackofinformationandbelief.''CCPj128.7(b)(4).Violationofanyofthese
20 certificationsmaygiverisetosanctions.Eichenbaumv.Alon(2003)106Ca1.
App.
4th967,976,
21 131Ca1.Rp1.2d296,302.
22
Thiscei-ticationisdesignedtocreateanafirmativedutyofinvestigationastoboth1aw
23 andfat,apdthustodeterfrivolousactionsandcostlymeritlessmaneuvers.ButinessGuides,
24 Inc.vkChromatl
'
cComtnunicationsEntelprises,Inc.(1991)498US533,550,111S.Ct.922,
25 929 interpretingFederalRul
e11).
26
B. EvenIfTrue,theDocumentsSubmittedToTheCourtD0NotProveThat
27 PetitionerMadeAnyFalseStatementsinAugust2011.
28
TheMotionallegesthatPetitionerliedtotheCourtwhenshestatedthatshedidnothave
9
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSHOW RECONTEMPT
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 110 of 295
1 anymoneytopaya$20millibnjudgmentrequestedbyRespondent.Butalloftheevidencein
2 theMotin-thephotographs,themoneykansferstoPCI,thecashdeliveries-tookplace
3 betweenDecember2011andzune2012,starting-parl
tonthsJ'ertlteS/ae#er//fln
4 quesdon.Soevenifa11thesestatementsintheMotionaretrue,theyareirrelevanttotheissue
5 ofwhetherPetitionerhadepoughmoneyinAugust2011topaya$20nlillionjudgment.
6
7
C. AttrneyClientPrivilege.
lnadvertentdisclosureduringdiscoverynotconsent:Byitsverynature,discoveryis
8 coercion,i.e.,d'
ttlheforceoflawisbeingbroughtuponapersontomrnovercel
tain
9 documents.''OMalyv.MitsubisbiElectronicsAmerica.fnc.(1997)59Cal.App.4th563,577,
10 69Cal.lkptnzd389,398.Thus,theinadvertentdisclosureofconfidentialinformatiodtu-ing
11 discoverydoesnotconstituteconsenttodisclosure,anddoesnotresultinwaiverofthe
12 privilege.Rtgentsofuniv.ofcalifv.Syp.ct.(AquilaMerchantSendces,Inc.
),supra,165
13 Cal.App.4that678-680,81Ca1.
Rptr.3dat190-192;OMaryv.Mitsubis'
hiElettronks
14 Amerl
'
ca,Incv,supra,59CaI,App.
4that577,69Cal.
Rptr.
zdat398-399(d
lnadvertent
15 disclosurduringdiscoverybynostretchoftheimaginationshowsconsenttothedisclosure''
);
16 SfateComp.Ins.Fundv.WPXInc.(1999)70Ca1.App.
4th644,654,82Cal.
Rptnzd799,
17 805-8069seealsoABAModelRule4.4(b),Commnt(2).
18
Studyingorusingobviouslyprivilegeddocumentsthatbelongtoanothermayconstitute
19 anethicalviblatibnandsubjectyoutosqnctlonsordisqualification.Gomezv,Vernon(jthCir.
20 2001)255F3d1118,1132(applyingfederallaW);StateComp.Ins.Fz/a#v.WPS,In.(1999)
21 70Cal.
App.
4th644,652-654,82Cal-Rpt
T.
zd799,805-806(applyingCaliforhialaw).
22
Theaboveauthoritiesareclear.NodocumentsobtainedbyDennisMontgomeryfrom
23 EdraBlixseth'scomputershpuldhavebeensubmittedtothisCourt.
24
PetitionerrequeststhatExhibitsA-1,A-2andA-3,whichareattorneyclient
25 communiations(albeitwi
thA-2alteredbyRespondent)besubmittedforperusalbytheCourt
26 withoutwaivingtheattorneyclientprivilege,whichPetitionerwishestopreserve.
27 ///
28 ///
10
opPosITI0NTOMOTIONFOltSAYCTIOXSANDTOSIIUWRECUNTEMPT
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 111 of 295
l VlI. CONCLUSION.
Fora11theabovereasons,PditionerrcqueststhatthisMotionforSanctionsand
3 Contemptbedeniedititsentirety.
4
Dated:December27,2012
5
6
7
O I S DE IS L AN
y
.X
Attorne
ny1ssfoorP
aea
p?
sqr.EdraBlixsetll.
tl
tione
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
11
opposl
aqosToMoe
noNFoRsAx
cnowsAxoat
suowkk.c
bxuMp'
r
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 112 of 295
DECLARATION OF
EDRA BLIXSETH
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 113 of 295
1
DECLAM TION OFEDRA BLIXSETH
2 1,EdraBlixseth,declareandsay:
1. 1amthePetitioherinthisadionforPetiti
onerEdraBlixseth(tfpetitionerq
'),and
4 amfamiliarwiththefactsandpleadingsinthiscase.ImakethisDeclarationinconnection
5 withPetitioner'sOppositiontoRespondent'sMotionforSanctionsandforContempt.Ifcalled
6 asawitness,Icouldandwouldtestifytothematterssetforthhereinbaseduponmypersonal
7 knowledge.
8
2. 1filedaPetitionforDissolutionofmy23yearmaniagetoTimolyBlixsethon
9 December$,2006.
10
3. 1acquiredaninterestincertainhightechintellectualpropertyinearly2006,and
11 incprpotatedthecompanyOpspringLLCinMarch2006asavehicletoownandmarketsaid
12 technology.1hiredDennisMontgomeryasanemployeeofthenewlyformedOpspring. He
13 wasoheofthedevelopersofthistechnology.A disputearosebetweene'rreppidTechnologies,
14 ohtheoneand,andDennisMontgomel
y ontheotherhand,overtherightstothistechnology,
15 resultinginlitigationtitledMontgomelyv.eTrepptdTechnologies,UnitedStatesDistfictCourt
16 fortheDistrictofNevada,CaseNo.06-cv-00056(PMPVPC)(theNr
rteppidCase''
).The
17 eTreppibCasewasfiledinJanuary2006,short
lybefore1metDennisMontgomeryandMichael
18 FlynninFebrualy2006.Infat,Opspringwasformedtoadvancethetedlmolbgiesof
19 MontgomeryincludinganemploymentcontractbetweenMontgomeryandOpspring,which
20 MikeFlynnhelpedtodraft.Al1feesandcostofMikeFlynn'slegalworkwerethenthe
21 responsibilityofOpspring/EdraBlixseth.
22
4. Although1wajnotanamedpl'tyintheeTreppidCaseatthattime,lundcrtook
23 theresponsibilityofpayingFlynnandhisCaliforniapartner,PhilipH.Stillmn,startl
ngin
24 March2006.Flynn& StillmanhadbeenretainedbymyemployeeDennisMbntgomeryashis
25 attornysinthaycase.IpaidlegalfeestoFlynn& Stillmantotalingover$1,2millionbetween
26 March2006andpune2007.1filedasExhi
bitAtomyOppositiontoFl
ynn'gProHacVice
27 ApplicationinthiscasetruecopiesofstatementsofFlynn& StillmanfromJArwal'
y2006
28 throughJuly2007submittedtome,EdraBlixseth,andtoDennisMontgomeryandOpspring,
1
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSHOW RECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 114 of 295
1 LLC.ThestatementdatedApril-May2007clearlystates:<TOTALPAYMENTS(Thank
2 You):$1,230,000''onthelastpageofthatExhibitA.
3
5. ItistruethatIlaterstatedthAtMikeFlynnwasnevermylawyer.Thatwasmy
4 understandingthenbecause1wasnotapal-tytotheeTreppidCaseatthattime.Iam nota
5 lawyer.1donotknow thespecificsofwhen,underCalifornialaw,anattorneyclient
6 relationshi
yiscreated.1hay:sincelearnedthat,whenlpaidMikeFlynnallthatmoneyandhe
7 gavemelegqladviceonmydivorce,eventhoughIdidnotaskforitvanattolmeyclieljt
8 relationshipwascreatedundel
-Californialaw.Thatiswhy1objectedtohisProHacVice
9 Applicl
gioninthiscase.Iwouldobjecttoitagainonthesamegroundsifhetriesitagain.
10
6'
. AfterIwasdischargedfrombanlmzptcyinFebl
uary2011,oneofthebusinesses1
l1 triedtostartwasanewtechnologycompanywithDennisMontgomery.lthbughthehadsome
12 goodnewsoftware.ButDetmisMontgomeryishisownworstenemy.Hehasnotalwaysbeen
13 honestwithpeopleandhehasbeensanctionedincourtseveraltimcsfornottllingthetl-uth.
14 Healsohasagamblingproblem andheisalwaysinneedofcash.NeverthelessItriedtohelp
15 him.Hewasinbankaptcyattheti
mebutheformedPacificCoastlnhovatidnsjInc.(<TC1'')
16 toowandmafkettheteclmologywithotherpartnerswhopaidhimhundredsfthousandsof
17 dollarsandpromisedtopayoveramillionfordevelopmentofaspecificdevice.1ruisedabout
18 $200,
000frominvestorsIknewtof'
undothetneedsofDennis,hisfamily,PCtanddvelop
19 prototypes?andmarketingjlans.ItriedveryhardtomakethisasuccessfromDecembrr2011
20 throghJune2102,btjtthebusinessfailed.When1stoppedfundingthePCIinJune2012,
21 DermisMontgomerybecamedesperate.Hisbankruptc#wasdismijsedformisconductonhis
22 pal4aroundthistime,andMikeFlynn,neofTim Blixseth'sattorneys,hadsuedhimfot
23 hundredsofthousandsofdollarsforunpaidfeesfrom theeTreppidCase.
24
7. DqfingthistimeDennisMontgomerystal-tedtocallmetotdlmeabouttext
25 messagesandcallshewasgeqingfrommyex,TimBlixseth.Tim wasapparentlyoffering
26 DennisMontgomerymoneytocomeovertohissideandgiveTimevidencetosupportTim's
27 favoriyeconspiracytheoryaboutme-thatSam Byrneand1hadconspiredtosellYellowstone
28 CluboutofbankruptcytoSam foronefourthofitstruevalue,andthat1wassomehowgetting
z
opposlrloNToMOTIONFORSANCTIONSANDTOSHOW RECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 115 of 295
1 paidsecfetkickbacksfromSam inmynewlife.Thisofcourseissheerfantaqyandhasbeen
2 adjudicatedassuchseveraltimesinth:MfmtanaBankruptcycases.Nevertheless,Timcal
mot
3 letgoofit.UntiltheselatestfilingsfromTim,Ithoughthemustreallybelievewhathewas
4 asserti
ng.Nowafterseeingtl
ieblatantliesandfalse/modifieddocuments,lknowthatTimjust
5
6
7
8
9
10
wantstoharmmeandothersatallcost.PartoftheconspiracytheorypositsthatSamBpme
andotherwealthyorprominentindividualshavebribedJudgeRalphKirscherndGovefnor
BrianSchweitzerinMontanatogetfavorablerulingsinal1courtproceedings.WhenIasked
DennisMontgmerywhyTimwouldthikthatDennisMontgomerywoulddosuchthings,
DennisMontgomerytoldmethathehaddnethisinthepastforTim duringtimewhtn
DennisMontgomeryand1werenotinconuct.DennisMontgomerytoldmethatheh:dbroken
11 itotheCrossHarbor(SamBpme'scompany)websitetoallowTimtogainaccess.Inthese
12
13
14
15
16
newtexts,Tim wasjpcifikallyaskihgfor.informationthatwouldhblphiminhiscou14tasesin
Montana,ldahoandCalifornia.HestatedthatheneededDelmisMontgomery'stypeofskills
anddidnotcarehowDennisgotorcreatedtheinformation.Tim askedforihfonnationthat
wouldhurtavarietyofpeopleincludingbutnotlimitedtoSamByrne,GovelmorSchweitzer
andJudgeKirscherorhisson.Timtold,DennisMtmsgomeryhewouldhelpDennisandhis
17 fanltlyfinanciallyandwouldstoptheattacksofMikeFlyrmagainstDennisMontgomeryifhe
18 wouldhelpTim.Now1am informedthatMikeFlynn,oneofTim'sattorneys,hasbought
19
20
21
22
23
24
25
26
27
28
DermisMontgomely'shomeoutofbankruptcyandgivenitbacktohim.
8. Sonow,sixmonthsafter1stoppedfundinghisteclmology,DnnisMontgomery
hasfiltdadeclarationagainstmeinthisMotionforSanctions.ltisironicthatTimBlixseth
andhislapyerMikeFlynnhaveaccuse/DennisMontgomeryofforgingFBItargetletters
againstTiminihepast,andnow theyareusinghiminthiscase,andhehas,finallyand
irrefutably,filedaforgedandaltereddocumentinthiscase.
9. MyresponsetoDennlsMontgpmery'sdeclarationisasfollows:
Paragraph1: Thesestatementsaretnze.
Paragraph2: Thesestatementsaretrue.
3
OPPOSITIONTOMOTION1?9RSANCTIONSANDTOSHOWRECONTEMPT
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 116 of 295
1
Paragraph3: Thesestatementsarepal-tlytrueandpartlyfalse.Wewerenot
2 'Iookingforalargeinitialpayment''becauseofpastinvestmentintotechnology.Infact,the
3 Grstprojectt'
heywer:interestedi
ndoingwasnotalargeamount.Therewasneveratalkof50
4 to100millinndollars,and1beverreceivedanysuchamountsforanyofthetechnology,ever.
5 ThosenumberswerewhatDennisMontgomel
'
yandMikeFlynntoldmeDennishadinpndi
ng
6 contractswhen1firstmetthem inFebrualyof2006.Wedidtalkabouthavinganycontractwe
7 mightbeabletosecure,tobewithathirdparty,butnotforthereasonsthatDennisstates.That
8 istheonlywayanyonewithinanydepallpientofthegovernmentwouldworkwithusbecause
9 cfDennisMontgomery'sownreputationfrompastdealings.Theystatedtomeandpthersthat
10 DennisMpntgombrywasconsideredblacklisted.ItisironicthatIwasoneofthefewpople
11 thatbelievedinDennisMontgomeryandstillwaswilligtotryandpromotehiswork.Ispent
12 muchof1nytimehavingtoargueanddefendDennisMontgomeryandhiswork.But,whenI
13 wasunabltogetanyofhis'
workplacedwithacontract,getaninvestororpcrsonallysupport
14 him,hethntqmedonmelikesomanyhadwarnedmeabout,butIsadlydidnotbelievethem.
15 ThecustomersthatDennisMontgomeryreferstoinhisstatementsimplystopjed
16 communicationswithbothDennisandme.1toldDennisMontgomeryIWouldtotbringin
17 anotherinvstlp-andwouldonlyworktotrytoplacetheteclmologyinactiveu
companies.1did
18 notstopcommunicationswithDennisMontgomeryuntilhis.commtmicationstomechanged
19 anditwasclearhewasworkingwithTimBlixsethandMikeFlynn.
20
Paragraph4: Thesestatementsarecompletelyfalse.Ihaveneveraskedanybody,
21 orpaidanfbody,tbhackintoanyone'scomputer.DennisMontgomeryhasoffiredtodothat
22
23
24
25
26
27
28
forme,becauseheclaimsheknowshowyohackintocomputers,butIrefusedthoseillegal
activities.HedidtellmethathehaddonethatforTim inthepastandthetextsbetwenthem
ddressthis.
Paragraph5: Thesestatementsaretruecompletelyfalse.AfterIwasdischarged
formbankruptcyinFebruary2011,l%dwentunderground''totheextentthatIdidnotwantto
openabankaccountinmynamebecauseIbelievedthatmyex,TimBlixseth,wouldtryto
seizemymoneybecause1owedhimpymentsundertheMSAthatcouldnotbedischargedin
4
OPPUSITIONTOMOTIONFoltSANCTIONSANDTOSHOW RECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 117 of 295
1 bankruptcy.AndinfactthatiswhathetriedtodinJuly2011.Ihavealsowantedtoprotect
2 othersfromTim'swrath.Anyonethathasinvolvementwithme,becomesatargettohim.
3 Becauseofmybackgroundandhistory,DiscoveryLand,employedmeattimesandSam
4 Byrne'scompanypaidmeacommissionforantiques1helpedthemmarketatlheRed.Baron
5 auctionhouseinAtlanta.1wasthemostqualifiedtohandlethisbecauseofmyknowledgein
6 purchasingal1ofthtm.ThesewereantiquesthatIusedtoownwhtn1livedAtPorcupineCreek
7 which1lostthroughbankruptcy.Sometimeslinstluctedthesepeopletopaythemonqythey
8 owedmetoDelmisHolahanforhisservicesrendered.1wasnottryingtoavoidthe1RSand
9 theStateofCalifornia.IamincommunicationswiththelRSandhavepersonallymetwith
10 thelnonmorethenoneoccasion.1recentlyfiledtaxreturnsfor2011,andIplaptof1ltx
11 retul'
nsfor2012,declaringa11thisincome.
12
Paratraph6: Thesestatementsarecompletelyfalse.lneverownedFF&E
13 Liquidators.Itwasnotaxsfront''tomovemoneytrue.DennisHolahandidnqtoperateFF&E
14 andnevermadecashdepcsitsintoFF&E.
15
aragraph7: Thisstatementisfalse.SinceIdidnothaveabankaccount,Dennis
16 Holahancashedchecksform,usuallyforalittleover$5000amonth,from SharedStaffing
17 Services,LLC.lwasalsoreimbursedforOliviaScalia'ssalarywhileshewashelpinjwiththe
18 disposal4fPorcupineCreekinventory.
19
Pargraph8: lnNovemberof2011,theinvestorthatDennisMontgomeryhad
20 obtainedWhowasfundingPCIstoppedpqyi
ng.DennisMontgomerytoldmetwajjusta
21 confusionthatwouldbeclearedupbetweenthem.Heshowedmethcontracthehadwith
22 themapdit.seenjedreal.TheyhadalreadygivenDennisMontgomeryagreatdealofmoney
23 and1hadnoreaqsontobelievethattheywouldnotcontinuetodosooncetheissueswere
24 resolved.InDecemberof2011,theinvestorsthatlh&dbroughtincouldnotcohtinuttoinvtst.
25 Wehadstartedtalkswithathirdpartythatappearedwouldbrlnginacontractthatwould
26 includefundstoatleastsupporttheoverhead.lpersonallyhadsomefundssetasideformy
27 Ii
vingexpenses.InDecember2011DennisMontgomerysaidthatheandhisfamilyhadno
28 moneyforChristmasandIgavethemwhat1couldbutIhadtohaveitrightbackwhnhegot
5
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSIIOWRECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 118 of 295
1 thePCIfunds.1toldDenpisMontgomelythat1couldcoversomeoftheneedsrightthen,butI
2 hadtohavethefundsback,asitwasa111hadtoliveon.Heassuredmehewpuldpayitright
3 backandseeminglycontinuedtoworktoresolvetheissueshewashavingwiththePC1
4 investor.1seemedtobemakipggreatprogresswiththisnewcompanyandeteryonefeltwe
5 wouldbegettipgacontractinashorttime.Asmoreandmoreweekswentbyandmyfunds
6 weredowntoalmostnothing,welaideveryoneoffandthenclosedtheoffice.Therewtre
7 timesthat1gaveDennisMontgomeryallthemoneylhad.Hewouldtellmethatheor
8 someoneinhisfamilywasillal
tdcouldnofjethismedications.Onseveraloccasionshis
9 daughterorson-in-lawwouldtextmeaskingforhelpaswell.Ononeoccasi,1gavethem
10 around$5U0.0,whichwasa11themoney1had,sotheirsoncouldgetintoaschooltheywanted
11 himin.A1lofthistim,wewerea11simptytryingtogetbyuntilaconlactcamethroughorthe
12 PC1invejtorwasback.ByJne2012itwasclearthatneitherweregoingtohappen.
13
Paragraph9: Thesestatementsarepgrtlytrue.Icertainlypaid/orPC1'selectric
14 billanywaythatlcould.IgenerallypaidforPCI'sexpensesbecausethatwajwhy1raised
15 moneytooperatethecompany,inhopesofgeneratingsales.Thiswasanofficespacethat
16 Dennis'sinvestprhdheenpayingforandlwastoldwouldcontinueagain.ldidnotruany
17 businessoutofthePCIofficeotherthenmeetingsforthetechnology.
18
Parpgraph10: Thsestatemntsarefalse,andthisisthecoverforDennis
19 Montgomerystealingmydocumehts.lneversharedofflcespacewithDennisMontgomery.1
20 havealwaysjustcom:andgonefrommlyofficeWherehehasdonebusiness.lhaveleftmy1ap
21 topintheconferenceroom,whichiswhere1wouldsetupatthatoffice,whil:goingtolunch,
22 butNEVERtoldanyonethattheycouldtkeinformationoffofmycomputer.1nevergave
23 DennisMbntgmeryanythumbdrives.Igavehim onedesk-topcomputertoseeifhecouldx
24 it,becauseitwasfrozen,butlnevcrauthrizedhim tocopy,printdownloadorrepmducein
25 anywayanyofthedocumentsonthatcomputer.
26
Paragraph11: Thesestatementsarepartlymzeandpartlyfalse.BothT1mBli
xseth
27 andMikeFlynnhadbeenresponsiblefofmuchpress,legaleffortsandheartachetobothDcnnis
28 Montgomeryandmyself.Thereweretimesthatweboth1eteachotherknowwhatwasgoing
6
opposl-rloxToMontm FoR:ANCTION:ANo'
I.bsllowRsCONTEMP.I-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 119 of 295
1 oninourlegalcasessoweknewwhatTim andMikewereuptoregardingtheirattacksonboth
2 DennisMontgomeryandmyself.
3
Paragraph12: Thesestatementsaretl-ue.
4
Paragraph13: ThestatenwntistruethatDennisMontgomerywasatthe
5 townhouse1waslivinginformeetingswiththeinvestorsortoprepAreformeetings,ButI
6 neverauthorizedhimtotakepicturesnorgavehimpermissiontothenpublishthephotographs.
7 Besidestheviolatiohotmyprivacy,heiswrongabouthisassumptionsregardingownershi
pof
8 itemsandwhytheywerethere.Asanexample,theCluistmasdecorwasusedoutofthe
9 warehouseforthatyearasmydaughterapdherfamilyweretravelingfrom Swedentospendthe
10 holiday'swithme.1wasexcitedtohavethem andhadaskedifIcouldusesomofthedecorto
11 maketheirvisitmorefestive.Aftertheyleft,thedecorwasreturnedtothewarehouse.There
12 weremanyitemstherethat1wastl-yingtosellaspartofmyagreementforattemptingtogetthe
13 bestprices.
14
Paragraph14: Thesestatetnentsarecomplttelyfalst.1neverhad$250,000in
15 cashinlhyhomebranywhereels,andIcertainlynevergavethreeenvelopesof$15,
000each
16 toDennis'
Montgomery.
17
Patagraph15: Thesestatementsarecompletelyfalse.
18
Pargraph16; Thescstatementsarecompletelyfalse19
Paragraph17: Thesestatementsarecompletelyfalse.
20
Paragraph18: Thesestatementsaretrueandfalse.OliviaScaliaandMatthew
21 Cfodkerhavehelpedmewiththeinventorysells.InevermadethestatementsqboutO'Neils
22 storagen'
tbelnginmynameforthreaonshestates.CrossHarborfoundO'Neilsgtorage
23 wellbeforehavi
ngmeinvolvedwiththeproject.Itistheirinventory,notmin;TheGrsttimeI
24 evensawthewarehouse,everythinghadbeenthereformonths.Imetwith#employeeof
25 Crossldarboratthewarehousetodeterminewhatwouldneedtobedoneinordertosellthe
26 inventoly
27
Paragraph19: Thesestatementsarecompletelyfalse.Further,Dennis
28 MontgomeryisthefirstonewhoevertoldmethatMikeFlyrm'sinvoicestomewonldinfact
7
OPPOSITIONTOMOTIONFURSANCTIONSANDTOSHOW RECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 120 of 295
1 legallymakehim mylawyer,regardlessofwhat1hadsaid.Ithencontactedn:y:wnlawyer
2 andaskedtheiropinion.DennisMontgomeryistheonethatputtogetherawebsitethathadall
3
4
5
6
7
ofMikcFlynn'sbillingsonitformylawyertoaccessandreview.Montgomerywrotea
chronologicllistofa1lofMikeFlynn'sactivitiesoverthepastyearsfrom whenDennis
MontgomeryintroducedmetoMikeFlynnuptothepresent,
Paragraph20: Thesestatementsaretrue.Isenttheseemails.Btlt1nevergave
Montgomerypermissiontodownloadthem orcopythem.lnaddition,theyareattorneyclient
8 comnmnicationsandprivileged,whichMr.Conantmusthaveknownwheniesawthem.Itis
9 tructhat1statedthatMikeFlynnwasnevermylawyer.Thatwasmyunderstandingthen
10 becauseIwasnotapartytotheeTreppidCajeatthattime.Iamnotalawytr.Idonotknow
11 thespecifcsofwhen,underCalifornialaw,anattorneyclientrelationshipiscreated.1have
12 sincelearnedthatiwhen1paidMikeFlyfma11thatmoneyandhegavemelegaladvicetmmy
13 divorce,evenihoughIdidnotaskforit?anattorneyclientrelationshipwmscreatedudyr
14 Californialaw.
15
Paragraph21: 1havenoideaifthisistrueornot.
16
Paragraph22: Thesedocumentsareattomeyclientorprivateandpersonal.They
17 wrest4lenwithoutmyltnowledgeorpermissionoffofmyfrozencomputerwhichIgaveto
18 DennisMontgomerytofix.ThesedocttmntshavebeenalteredbyDennisMontgomery,Tim
19 Blixsethortheiragents.AttachedheretoasExhibitA-1istheoriginaldocnenttitldS'
Notes
20 ontheMSA''withtransmittalemailwhich1senttomyattorneysDennisHolahanandGary
21 DeschencsbnSeptember20,2009.Icreatedthisdocumentformyattorneys'eyesonlyin
22 September2099.lcreatedisonmyo1ddesktopcomputer,thesameone1latetgvetoDennis
23 Montgumerytofixin2012.AttachedasExhibitA-2istheallegedcopyofthisdocument
24 attachetotheMotionasExhibitDM -Exhibit11.Whenyoucomparethelastpageofboth
25 documents,itisapparentthatDennisMontgomeryandhisattomeyshaveaddedthefollowing
26 language:
27
dftememberwehaveaddedhelptherefromtheBK Judgewho
22
lovesus,andhatesTimandmikeFlynn.Atthispointtheycould
oppslanoxToMoe
noxFoqsAkcTloxskxn'
rosllowRscokikup'
r
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 121 of 295
1
notgetadecentrulingintheirfavorform thatludgiftheykied.
2
Eitherway,SBandBShavethingsinplaceinthatcourtroomto
3
helpus.WeneedtomakesurethatthevalidityoftheMSAnever
4
endsupbeingdecidedbypudgeWaters.Thatwouldbeanightmare
5
forallofusa''
6 1neverwrptethatlanguage.Ithasbeenadded.Inproofofthis,Icutandpastedthetextofthis
7 Worddocumentintoanemailonthesameday,September20,2009,andsentittoDennis
8 HolahanwhowasinNewYorkthatdaywithoutacomputersothathecouldreadthetexton
9 hisBlackbn'
y,AtruecopyftheemailisattachedhereasExhibitA-3.Itisclearlookingat
10 thelastpageofthetextintheemailthattheabovequotedlanguagewasnotintheoriginal
11 document.lnaddition,languagehasbeenaddedtotheletter1wrotetoJackScalia.Andthe
12 thirddocument,<
llolahanMSABullet(sic)Points',iscompletelymanufactured.ldidn'ttype
13 itand1haveneverseenitbefore.
14
Patagraph23: Thesestatementsarefals.Thestatementatthetopwasnotwritten
15 myme.ThehandwritingbelowMBRismine.
16
Paragraph24: Thesestatementsarecompletelyfalse.
17
18
10, MyresponsetoTimBlixseth'sdeclarationisasfollows:
19
Paragraph1: Ihavenowayofknowingifthisistl-ue.
20
Parajraph2:
Thisisfalse.
21
22
Paragraph3:
Paragraph4:
Thisisfalse.
Thisisfalse.
23
Paratraph5:
Thisisfalse.
24
Paragraph6:
Tiisisfalse.
25
Paragraph7: Thisispartlyjrueandpartlyfalse.Timwouldhavesome
26 knowledgeofitemsthatwereatPorcupineCreek.HemightevenrecallsoMebfthepurchase
27 prices.Thosarenotthesame%tvalue'intoday'smarketandwhenyouaresellingitems.
28 Therehasbeennothingrecently'soldwithavalueof4
thundredsofthousands,ifnotmillionsof
9
OPPOSITIONTOMOTIONFORSANCTIONSANDTOSHOW RECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 122 of 295
6 onmyjewelryandthatTimrecognizedthejewelryintheadsfortheauction.Theyattempted
7 totrytostopthesale.Buttheywerewrbng.Ihadnojewelryatthesaleforeithermyself
8 personallynorCrossHarbor,
9
10
Paragraph:
Paragraph9:
Ihavenowayoflcnowingifthisistrue.
Thisisfalse.
11
12
1declafeunderpenaltyofper
juryundrthelawsofCaliforniathattheforegoingistrtze
13 andcon-ect,andthatthisdeclarationwasexecutedonDecember26,2012inLosAngeles,
14 Californi.
15
raB lxset
16
17
18
19
24
21
22
23
24
25
26
27
28
1:
opposl'
noxTOMOTIONFottSANCTIUNSANDTOSIIOWRECONTEMPT
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 123 of 295
DECLAR ATION OF
D ENNIS H OLAH AN
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 124 of 295
1
DECLARATIONOFDENNISHOLAHAN
2 1,DennisHolahan,declareandsay:
3
1, Iam theattorneyofrecordinthisactionforPetitionerEdraBlixseth
4 Ct
petitioner''
),altdamfamiliarwiththefactsandpleadingsinthiscase.1makethis
5 DeclarationinconnectionwithPetitioner'sOppositiontoRespondent'sMotionforSanctions
6 andforContempt.lfcalledasawitness,1couldandwouldtcstifytothemasterssetforth
7 hereinbaseduponmypersonalknowledge.
8
2. VyresponsetoDennisMontgolnely'sdeclarationisasfollows:
9
Paragraph5: Thesestatementsaboutmearefalse.Inevertffunneled''moneyto
10 EdraBlixsejlii;
'
lordertoavoidthelRSorCaliforniataxauthorities.Uponoccasionlcashed
11 chedksforherbecausethehadnobahkaccounts.
12
Paragrpph6: Thesestatementsboutmear:false.1didincolyorateFF&E
13 Liquidators,lnc.forMs.Blixseth,but1neverhadanythingtodowithitsoperations,and1
14 neverlpqdeanycashdepositsintoitsaccounts.
15
Paragraph7: Thesestatementsaboutmearefalse.IcashedonecheckforMs.
16 Blixsethforapproximately$9,000onSeptember2,2011fortwomonthsofsecretarialservices
17 forhersdcretary.
18
Paragraph8: Thesestatementsaboutmearefalse.Ioncewircd$4,000from
19 moneyinmytlalstaccounttoPC1onFtbruary2,2012tocoverstartupcosts.
20
Paragraph14: Thesestatementsaboutmearefalse,lnevergaveMs,Blixseth
21 envelopeswith$250,000incash,oranyamountclosetothat.
22
Paragraph17: Thesestatementsaboutmearefalse.
23
Paragraph22: Thedocumentsattachedareeitherforgedoraltered.
24
3. Attachedheretoretruecopiesofthefollowingdocuments:
25
26
27
28
Exh.A-1; 1receivedthisemai)andtheattached'WotesontheMSA'?fromEdra
BlixsethonSeptember30,2009;
Exh.A-2 ThisistheallegedcopyofthetNotesontheMSA''attachedtotheMotion
asExhibitDM -Exhibit11.
1
OPPQSITION3'
0MOTIONFORSANCTIONSANDTOSTIOWRECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 125 of 295
1
2
3
4
5
6
7
8
9
10
11
Exh.A-3: IreceivedthisemailonSeptember20,2009,fromEdraBlixseth.Shehad
cutandpastedthetextoftfNotesontheMSA''intoanemailonthesame
day,September20,2009,andsentittomeinNewYorkthatdaywhere1
waswithoutacomputersothatIcouldreadthetextonmyBlackbeny
NOTE: PetitionerrequeststhatExhibitsA-1,A-2andA-3,whichareattorney
clientcommunications(albeitwithA-2alteredbyRespondent)be
submittedforperusalbytheCourtwithoutwaivingtheattorneyclient
privilege,whichPetitionerwishestopreserve.
ExhibitB: TranscriptofProcccdings,January18,2011:InthisharinginButte,
Montana,TimBlixseth'sattorneyMikeFlynn(withMr.Conantalso
present)repeatedlyaccttsedDennisMontgomeryoffraud:<...false
12
13
14
15
declarationsofMontgomery,which,twomonthslater,hislawyerhadto
standupandadmitwerefalse''andreferringtoMontgomqry'stechnology
%thetechnologydidn'texistandisacompletefraud''..
ExhibitC: AdversaryComplaintfiledbyMikeFlynnagainstDennisMontgomery
16
onSeptenber28,2009:tMontgomeryprjuredhimselfinonnectionwith
17
18
19
20
21
multiplefalsestatementsintheNevadacases..''.
ExhibitD: DepositiolofDennlsMgntgomerytakenbyMr.Conanyasattorneyfor
MikeFlynnonNovember18,2010:
22
Q.(Mr.Flyhn): 4
l%
s
ru
,pMr
.Mo
go
me
y
at
hc
is
qn
uo
e,
te
dne'
ctoit
dt
in
ge
ftwa
re'n
't
th
at
yol
urt
eh
fe
ret
n
dyo
lt
in
eu2n
2qu
isoa
ompletefryud?
A.(Montgomery): 1'mgoingtbassrtmyrightundertheFifthAmel
tdmetAt.
23
ExhibitE: NoticeofMotionforSaleinMontgomerybahkruptcy.Afteryearsof
24
accusingDennisMontgomeryoffraudandperjury,allofasuddenMike
25
26
27
28
FlynnistryingtobuyDennisMontgomery's$2millionhouseilYarrow
Point,Washingtonforacreditbidplus$20,000outofbankrqptcyandis
givingthehousebacktoMr.Montgomery.WhoisMikeFlynn'slawyer
2
OPPOSITIONTOMOTION#ORSANCTIONSANDTOSHOWRECONTEMPT
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 126 of 295
1
2
3
4
forthisdeal?Mr.Conant.TheUnilateralStatusReportfiledbyM.
r.
ConantisattachedaspartofthisExhibitE.
ExhibitF: DeclarationinResponsetnMotionforSale:ScottHill,someoneelse
whomadeabidontheYarrow Pointhousefor$1,400,009inAugust2012
isobjectingtotheMotionforSale:
YarrowPoi
ntHopseandsawthehedggsFerekimmed.,thattherewere
yehlclesinthedpvwAywithCalifprmallcepseplates,andpeoplemoving
lpt?thehpuse.Bothgarageswereolynwithfurhimreandotheritems
vlslblebelngtmpackd.A manwholdentifiedhimselfasDennis
Mo
ntgomerylntroducedhimselftomeandtoldmethathewasmovi
ng
backlntothehouse.
7
8
9
10
11
4. OntheaftemoonofDecember14,2012,1drovebythe
1declareunderpenaltyofperjuryunderthelawsof aliforniathattheforegoingistrue
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 127 of 295
EX H IBIT A -1
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 128 of 295
pennisHolahan
From:
Sent:
To:
Sutb
t:nts:
At
al
cehcme
L
.e
o
mer20,20092:29PM
Se
ua
pr
dG
az
y@a
,Seo
pl
t
mb
gsd@dslawoffices.net;gary@dslawoffics.net;dhol
ahan@holahanlaw.com
mynotesonthemsa
NotesontheMSA.doc
GaryandDennis-AsDaverquested,lamsendingthi
stoyoufirst.ltoldthemIwoul
dhaveittoyout6day!spthatI
hopedyoucouldreadandthenforwardtothembytbmortbWmorning.Okay,rememberthat1hadtotypethlsin
fhyself............sooverI
opktypp'sandwordsthtyouknowwhatImean,okay?Letmeknowifyouhaveanyquestions.I
wasthinkingofsendingtoTfpy,sincetheywerepartoftheothrtrailandhadbeenIookingattheMSA.Edra
T
hp
l
sy,
mse
sr
sea,
gd
el
af
n
d
ate
nyoa
t
tc
hth
ed
dI
of
c
u
ma
el
nl
ti
t
n
aa
y5b
wca
oy
n.
fd
el
nu
tr
i
a
l'
prc
i
volm
l
eg
eydwoi
rhbl
ohil
hs.n
Sf
y
ocu
amre
nb
oe
tta
he
I
nl
ta
eb
p
dn
ed
re
c
l
pl
i
e
n
t
,l
yoI
u
as
teco
nn
ot
te
ar
urf
thnngri
z
e:dre
toce
oi
p
a
n
,
r
el
a
d
,foni
c
o
t
o
<
i
b
u
r
t
s
e
l
s
n
o
r
m
o
n
i
n
y
F
a
e
l
p
l
t
o
t
i
e
a
y
v
i
o
o
o
f
a
p
p
i
c
a
b
e
a
w
t
h
p
t
'
o
f
e
e
d
mail
.lfmuhavereceivedthl
stransmi
syl
oninertr,pl
asenotifytbesenderimmediatelybyreplyingtothise-mallandthendel
etthismessage.Thankyou. c
Novlrusfoundinthismessage.
CheckedbyAVG -www.am.com
Version:2012.0,1901/VirusDatabase:2637/5475-ReleaseDate:12/20/12
Novirusfoyridinthisincomingmqysage.
CheckedbyAVG-www.vo.om
Version:8.5.409IVirusDatabase:270,13,112/2392-ReleaseDate:09/24/0905:52:00
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 129 of 295
NotjontheMSA,includlngamendmentsandtheminisettlements
(E(Ira'scomnlentsinGreen)
FullMSA-Paaes1-42-CaseNo.RIDlND91152intheRiversideCountv.CA
* 1ofPage1says,tt-rhisStipulationiscnteredintoforthepurposcof
compromisilv andsettlingcontestedissuesbetweentheparties.Ifforanyreason
thewaiversandmleasesinthisStipvlationarenotacceptedbytheCourtandjhis
Stipulationbeconzesnullandvoid,orthisStipulationfailsforanyotherreason
whatsoever,nothingcontaindhereinshallbeanadmissionoffactorastatement
againstinterest.Eachpal4yhasrefraindfrommakingcontentiousstatements,or
assertingpositions,whichmightcausetheothertobeupset,sothatcolppromise
andsettlementcouldbepromotedndachieved-''
Doesnit'
thisrightheregiveustheGbout''togoqfteranythingwewantantltohavethe
cntire'
MSAnull111!(:
1void?
v
Also,reluelnbei-t'
llat1Nvasconlpletelyli-ozeilotltof:111thecolnpaniesandany
int
bnnationl
iol
nshol
tlyafter.
1151edfordivorce(Dec06)tl
ntiljtl
statbeforetheclosilg
ofthel'illal.1)SzK 4ofPage2-ReadaIIofitandA-C
Thcycotlldtlsethisasa1)arguluelltthat'
wcagrecdnottogobacktothevaltlesofthe
assetssvcagreqdtotake-Iwillgointothcdillklentassetsass'
Megothroughthis,butone
thingtllatslloilldbep.ointedotltIlere,isTiln-sveryoAvntestilmonyinthcfalnilycotlrt.
I-lenlatlelnany.Ilsestatenzents.'
WllellIvotlltlpointthatouttotheJudgeWaters,ller
response'
wqsalwaysthatTil-n.1
einggiventhcCalltionofthcShiptitl'eforourassetstby
.n
llel,hadafidtlciaryresponsibilitytolne,i1-itwasfoundthathe'
wasnottellingthetruth.
A-l'
bNvcxalnplcsofthisNvoultlbe'
l-ilnstatillgtllattheirAvas11oconllnunitycashllosv,
NvhelheNvastakingftl
nds1
1
01
.
nI
3i
gSpringslcality(notpayi
llgcol
ml
nissionst
othesales
leople),Sunri
scIlidge(notpayingthepartnel
stheirshareu'
hel'
lhet
ookfunds),selling
con'
uuullityassetsandtlsilhgtheItuldssvithotltadivisiongivelltol'
ne,andtherearenaorc
CX811117lCS.
Tinlalsoliedinahearillgw1)el1.Iwas'
tryingtostopCH (kolnbuyingthe.golfcourselbts.
First,pel
padasalcspcrson,'
flricLadd,lottl
'
l
eV11ofSales,Nvhichwouldbenlorelstated
stantlard,sublnitana'flidavitsgpportingTiln'sclain)oftllevaltleoftheLots.Tin'
thatno.c'olnluissionswercbeingpaid101-thesalcofthescLotstoCl1.Yct,latcrAycl'
ind
outtllatnolleotherthenE-ricLaddxvasl'
lrol'
ltisecl500k',ofwhich2501:Nvaspaidtohiln-
E'
ri
cl
ater'
I
sled1
.
1suitandgotajudglncntagllilstl
neIb1
-grcaterthent
hisarnotl
nt.
K 8ofPage4alIofpagc5-Canyotlreadalldtell1neifyouthinkthisisbintlingor
itgoestothefi'audthatwetalkcdabotlt'?
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 130 of 295
* 16ofPage6andaIlreterencestoBGIstockbelow
Thisiswherethingscouldgetalittlegrcytt)'
whatisNvrittcn,whatwassaidandwllatwas
illtendcd.MetaltingtheBGIstockwasthewaytotsnallygetPCalldCasaCaptivainto
mylegalownershipafterbcillgawardeditinthesecondnliniscttlelnent.Ifyouwillge
backalpdreadtllose,youwilll5ndthatTinAi
llldIlisaccoulltantswereto15ndawaytoge1
both()ftheseasstsiptolnynalnewitlloutcrtatingtaxissues.TakingthcBG1stocltpow,
inthe15ljalNISA,1wastoldwouldresolvetllis.Also,sinceIwasalsotakingtheYC
entities,itseen:edlik'eanaturaltosilnplytake'filn'soqvnershipoftllestock.
(Remcmbcr,ifthotlgha1lofthestockwasiI)Tiln'snalue,itwasstillacolnnaunity
propertyasset-)
1.NventintothisagreelnelltstillwiththeunderstandingthatbothTilnandGeorgeklack
hadtoldl
ncthattheBG1notestoYD1asN
vcllastheTinaBlixset
llnotest
oBGI(Nvhich1
endedtl
pwithaswel.
)Mvouldhavcawayofvvorki
ngthcl
notl
tasyearswkmtalolgas
islbrgiven''B'henweneededthctaxsvritcoflk.Tilnhadalqvayssaidthat.1willgo-illto
thisinn-iol-edetailAvhellItalkabouttheTliluerendotranslkr,butTilualsosaidthatabout
tlle40111114Ibrtllat.
lftheabovewotl
dhavcbeenasit.wastoldtome,thentheYC's'
wouldhavepaitltlheCS
.l
Ioallofl-withtheproceedsl'
iol
nLotsales.
UpontlleclosingoftlleNISA-,.tIaeballkaccountshadbeelldrainedlllld/orwere
overdravvnPatcangointonloredetailsofthataswell.I'
,ofcoursc,wasnotcoullting0!1
this.BothA-luericanBankandPallnDesertaecountswerelikethis.
Inaddition,t.hqbook.sandrecol-dsthatwcrct
nedovercannotbcrecollcilcd.Thetrail
.ur
balanccstlonotjave.A.gain,Patcangointo'
l
noredetailonthis.
Therc.
werccontractsandpayablesthatTilnclltcrcdintoafterknowing.weNvercgoingto
beclosingtheMSA.BobStllnpterelnploymentcontractforone.
* (a)ofPagc7
CBSunrisellll'vtl
'
1
ers,LLCistleonethatNloses'
Nfoore(YC'scontroler)toltll
nethat
'
rilnhadtakent
eftlndsxvhenthingssoltlalpdlladnotpaidthepartnersinthis.
.h
'
l-il'
nhatlalsosignedagreenpentsliosolnenlanagelnent1brSt..
Alldrevvsaltcroursigning
ofknoAving1vvasgettillgtllis.I-ledidthisbothin'
Y171andin'
YCW.
* (c)ofPage7-'
rhisdidnothappcl
)andsh'ehadisstlestryingt
omakeithappen.
> (e)ofPage7-Talk
't()AlldyPattenaboutthis.ItwasbloughtupintheU.
CCvs.
CSand.'1-ilnBlixsethNvithhowTin'
lbotlghtandsoldthistohinnsclt-Bythc'
timc1
gotit,hehadtakenthevalueoutofitduringthetilneIwasliozenoutllt-'
tlle
busincsses.YClladancxperttestify'
u?ithllowthiswashandled.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 131 of 295
K B.ofPage9-YCW wasinsolventwllellIreccivedit.Thewaythisiswrittcn,I
lav
'enowayof'
knoqvillgthat.
Nvotll
(II
* CofPage10and(1)-(3)
.
Agaill,zNndyI
yattel
.
)vvillbehclpl
ulhere-rl-ilndidllotdisclosethathehadtakenluillions
otltofBigSprings.ltealitybeforethisandhadllotpaidcolllnzissiolls.Tlpcrehasbeen
solllethingfiledagaillsthil'
t'
lonthis.Andyu'illhavethedetails.'I'hisisalsowhere1
.l
c
statesthatEricLakldxvaspaidacolulnission1brtheGolfCourse'
LotsaletoCH-11:
falnilycourthetestilledthatthcreNvasnoconll
missionstobepaid,buthcalreadyhadthe
dealNvithE'ric,which.
1believeishosvhegotErictogivetllestlltenlcntofvalue.TbcVP
()l
'S111cssllotlldhavedolletllat,ifitAvcretobedoneyb'tlthecouldnotbe's
bougllt'',.AN
D
.
. 500I
tAvasnotllcarlyw-hatwasowedtt)thesales.people.lknowthatCharliewouldbe
happytotalku'ithyouaboutthccxactm'
nounts,butthissllouldalsobeinwhatwasfiled.
AtthetilneTilndidllotpaythelu)M/hichNva
smuchlongerthen6130-60daysinarrelirs''
'
l
)
e
t
o
l
d
t
l
l
c
l
l
:
t
h
a
t
t
l
l
e
I
n
o
n
e
y
N
v
a
s
n
e
e
d
e
d
t
o
Y'
perations.TheylaterliAundouttllat.
tl'
le
. Co
'
lkndsvvereusedforboatslipsandotherthingsforTiln.Thiswasalsoduringthet'(-rozen
out''part101-lne,butBigSprillgswasinTiln'snaltleandtherelbreacohnluunitypropelly
asset-At
lpetinpeheSvastakingfuntlsoutofBigSpringsforhisuse,hewasalsostating
.t
il'
klilnpilycourttllatthcreyvasnoconlnzunitycaslz(1ow.
.
K D ofPage101alreadygddressedl3igSkyRidge,above.PlcasenotethatBigSky
RitlgeAvaspal-toftlleYCChapterll.
* EofPagt11AgainthislvasalreatlyadklressedregardingStlllriseRitlgeand
N?toseskloorestatillgthatTil'
ntoldlhelundsas'-hisosvnpersonalpiggyballl
t''
:117(1ditlnotpaythepartners.T
'iln(1id.notdisclosethis.Thisxvasalsoconllntllity
casllIlovv.
* GofPage11Thisis:1godonefor'
tlle'
Westerllclailns.
K l'
1f'PAgc1'
1Thisdidllothappelzalldendedupbcingparto'
fthcYCBK.
K A1loftheassetslistedthatTimgot,startingon1.ofpage12,hadthevalue
tllatwajperccivedandnounforcsccnliabilitp
* 17.ofPage14
Attllctilueofsigllillgtllis.'
rilntolt
lllletllttlleLe'
51ol
1(Igrupo/
oultldothi
s,jll
st
tol)erillofIliln,bygcttillg1.0to2.0111111ol1closlllg.lcndcdupllavingtopaytlltln)
8n1lnofthc3.5111111IgotfronlC11,togcttllcnltosign011.IAvastogetthi:backfroln
YC.asthcyAveregoingtobetllttoAvncrsofthtlse1%sharesantlnotnlepersonall
.y.Of
courseyoul
tnosvtllatdidnotlappen.(lkcl
nt
ll
nberassvell,ldidnotrcall
yget
3511111111-0111Cl-l,butollly22111111.'
TilnI1a(Iborrohvtd13n1ln1-1.
0111tllclnin2007111(1
Itool
toverthatprol
nissol
yllotcAvhcnIgottlleFanlil
yColnpoundbacltl
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 132 of 295
* 20.ofPage14Thisisnotabigdeal,btltTilntooklnost.ofthisout.Solnethings
SverebrotlglltbackbytheYCelnply.esthatrelnoveditperhisdirectiononce
theyknewthat.
hesvasnottotakett,btttnotnearl
yall.(Maybethisisu'
herehe
gottleideathatlNvotlldtakel
norcout01-l76?)
K (3)ofPage15including(a)-(d)
Thisiswherc'I-ilntransl
krred'l-alnarintlotolliluscltlbelbrethel5naldivorcedecree..
He
statetltolnetllat
orgecouldhelpn1et1othesal
neonthispronzissorynote'
toYDlas
.Ge
thcylla(1intendedtodowiththcothcrnotcsl
brthclnoneythatNvastakenfrol'
nthcCS
l()all.I-lcvvelltotlt0t-hisNvaytonlakethisclear,ashealsostatedtllat.l1edidnotvvantto
llavcanytaxisstles1i0111gettingTalnarilldoil:hisnalncTvhenthef'
untlsthatpur
hasedit
.c
werelr01ntheCSloan.0ftotlrsenotaxeswerepaid()11anyoftlultlnoney,208
1,
111:
n,asit
wasbookeilasaloal)alldnot11dividcll..Thisxi'
stllepointoftheUCCfslingagainst'l-im.
ThatsuitcontintlesinFeb20t0.AndyPattcnftndTroyGreenfieltlcanbehclpfulhere.
K CofPage16
TurksandCaiscospropertyqvasalsopurchltsetlNvithCSloanfknds,yetTilmAvas
asvarded'thissvitllouthavingtopayback'tl'
!efuntlslbrthep'
urchaseprice.Ithinkthis,
Taluenzdoandtlleotlzerthingsgotoshowthat,llavinglnetakeol'
ltheentireprolnissory
ndteslbr'al1thefundstakenoutbyBG1antlthenTiln,vvouldnotbealkirdivisionof
property,ti
..
l1..
fact,1IutdtopaybackthosenotesandTilngota1lofthoseproperties..ln
othervprds,just'
furksandTal
nerendoal
ort
e.
accountforover70l
nmo'
fthe2081
4111
takenout,plllstheotllerthingsthathegotilAtllelinalA/ISAandthetn'onzinisettlelnents.
Ifhehadnotto'
ldlnethatthosenotescoultlbeNvorkedoutanothervvayandtheywere
neverintendedtobepaidback,wouldIhavethoughttaking.tllatonANDgivinghin:
theseassetsli-ec.all(IclearwasaI
'
airdivisiolf?NO.
* 0.ofPage18
llklterlbtlntlotltthatxvho'
thatTvastransferredtolvasJilnD'011:
11.
1.Tllcrearesevcralthings
thatsverctrallsferredtollilndtlringthetilneo1
:
-nlyt'frozen()ut''-JilnDolanisalsoathird
pal-tnerof'l-in)'sinWestelnPacif'
icTirnberColupally.l-lei.
salso'
who'
ril'
nsold,kvell
undervalueda,otll-pel-sollalintercstinthe17.
130 il).Bozelman.JilnDolanisalsotheone
thatproalisedtobepayillgtheBF1noteontinpe.,yctadlnittedt()I'
neandotherstbathc
wastalkingTvithTilnatthcsalnetilneaboutthepaynaent.TilnNvastellingotherslllat
JinnTvasnotgoing'
tobelnakingtllepaylnelltto'kcepnaeoutoflnoney.
ldon'tkllow
vhelcthisI5tsinsbtltlhcrcisltot.allypartofInyassetsthatINvasaumrdcd
.A
thatTin'
ldidnotcallpeopleandinterlbrevithnlebeingabletodothingsforthegood
andbenef
it.oflnysclf.l-lecontacteclAlanltyeabout1nyloans,NvhichputAlallinfearof
hiscollateralinTl'
lyshareof1)F1.'l-im hadnocytn-entbusillesswithAlanandhisbank.
Llccolltactcd'
q/arrcnTrcppregardingBlxw'
aleandcausedal1kindsofissuethercvvllcrc
&vecotlldnot.
lnovel'
brvard.1-1ehiredhlil
ce171)/1111,NvhoNvasDennisN1.lavvyera1,(I
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 133 of 295
handledtllingsforBlxsvare,Heand(
Mikc1t
-1y,,1)startedapresscanlpaignagainstnle.
a
v
e
c
o
n
f
i
n
n
e
t
l
l
l
l
a
t
Ti
l
n
o
'
t
Flynnwouldcalllhcl'
nalldtelltbem Nvllereto
Nfanyrcporters.
h
.
goand1()okthillgsupthatNvel'
cl51edintheRenocourts.Thesewcrel5ledbyF1y1111.
.
ManytiluesJtldgcCookwoultlIlotIetthel'
l)stalld,btltthetlanlagewasdoneasthe
reportinghadalreadyhappened.
l-ledoesstillhavcbusillcsswitiPallnDesertNatiollalBank,btltcontintletltogivcthen'
l
nnisinlbrlnatiol'
tatpoutn4ybusillcssesalldlne.
* 25.ofPage20
rrhisisalpolllerareathatAndyPattencan11t!11)youunderstand.Xherelpasbeen
solnetllingi'
lledagaillstTilni11regardtothchl.llklling
.y
ofntohti
sLot.
Ilehttdjustbeforel
1e
itsoldittohiluselfAvitllnocashdo'
wnandaproluissoleof2,
1m1n:5hadplacedayalue
oI'3.4n:lnonit.YChast'
iledthisagainsthill'
l.PaulMoolelnightalsohaveadditiollal
inlbrlnatioll.
AltertlleclosiTlgoftheMSA,.1lbundouttltatTilnelldedupsolnehoqvgcttingthisLotto
thenpanthat11eptlrchased'l-anlerndoffoln.Ibe1ievetllatTilnncverintelxledtopaytllis
2lu1
ntoYC,jtl
stlikealltheotlcrprol
nissoryl
zt
ltchchadsigl
pedwithYC/YDI.
K C.ofPge22ltcada11(Itelll'
neNvllttyouthinkofthisone.
K E./F.(;.ofPages22/23
Wenevcrreceivedproperbooks1
.
)lldrccords,l'
nilltltcsandotherthings.Patcal)gointo
thislnore.q/eytill,ayear'
Iater,'
havenotbeel)abletot'
igurelnuchofthisoutwithhoyv
thcyttlnlectsvllat'
tlleydidover.
K J.ofPagc23
lt'
statesherethatas01-Junel,2008lsvastotcccivea1lcashetc..-...,..,...again,l'atcal)
tellyoullosvtllillgswel-ettll-netlover'
tous,'l-il'
l)alsoenteredintoseveralcontractstllatI
twoofu/llich1havelnentionedalrcady.-rilnalsotoldnAethat'
I'
lehadpaid1111ofYC
lnayablesctlrrel'
ltNvithadeatl
'
ledidNvithNvay.llePriln(theothcrthirdownerot'WP'r)
'l-hts'
turnetloutnottotnetrlle.lnJudge-l-uclturscourtroonA,BobSulnpter,on'riln's
bellalf,inAprilorl
klayof2008,statednsl'
nucltaswell.
K Pages24/25/26/27inreferencetotaxcsIwanttotalkaboutinourmeeting.as
itisttiohardtoputinal1inthisovcrvicw.
K (a)ofPagc27
Illterestillgtllattheyadnaithcretllattherewastiolnlnunitycash.4
f
'owfronABigSprillgs,
BigSkyRidgeLLCandSunriscltidgeLLCalld'thatTim tookallofthatnlotley.This
'
wasdtlringthctilnethathtlwasstatingthattllcrcNvasnoconununitycashllow.Ihatlto
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 134 of 295
bonovvl
noleytojtl
stlivedtlring'
thistinle,as1tlidnotgetapelnyoftel:poraryspoll
sal
stlpport1101-lollgtennaften 1didnotcatchthisbcfbrc.
w 33.otpage29
'
l-llisisNvhere'l-royGreelllseldhadaHlseld'-daydurillgtheUCCvsCSandTinaBlixsetll,
'l-i'
lnstatetl01)thestandthatthctcornerstonco'
ftlle(
MISA forhinf'vasnnetakingovell
1islldtl
.
ciaryrespollsibilityl
bl
'anyanda1lofl
tisactionsinthebusincssthatheI
la(
1'
rtll
)
and1got.I'
twoultlbeAvorthapllollecalltolliln011.thisolle.ztndyPattenNvastheleas
Tvcll,TroytcildluetllathedidllotthnkthatthisareaofthcNISAu'ouldstandupasl
couldnot1101(1'I-ilnharl'
nless),.
01-takeonhisactiollsif'
thereur
erefraudandothertllillgs
involvcd.1,ofcourse,tllltilR-ilnstalctlthatiincotlrt,didnotthinltinanyvaythatthe
'-cornerstone''o17tl'
leN/ISA.1.
01-'
FilnNvasthis.
* 35.ofPage30
l-lereiswhel'
e1think'
vvehavc11I'
-IUG'Eupsidcil'
-youcanfindinthelavvwherethis
svaivercanlpotstalld.As1.toldyou,NvhenJaffbputtogctherthefilingf01-spousalstlpport,
itpenciledotltatover2.01mn1l)el-nlonthTilnrepeatedlysaidatsollleIloilltthatt'
lpercNvasl'
lolnorecoluluunitycashllow.yVe
havcsincclbtlndoutthatthish
vasnottl
al
c.(
'
lejustkepta11thenloneyf.
01
-hinlself.
Becatlsehzwassayingtherewasnocashllow,1IladtoborrowlnoneytoIiveon,Nvhcn
thereM'asinl'
actfundslbrtheconumullity.
lftllcassctsNvotlldhavebeenvvhatIsvasleatltobelicvetheyNvereA-N.
Di1'Tin:hatlnot
startedhiscal
npaigntoS
%crushanddestroyllel
''.....-.(itthenturncdintovt
keepal
t
erher
tlntilsleiscrtlshcdordead'
)........
1svouldnothavencedcdtlpespousalsupport.
ButtlpcIhctsarenosvclearthatthereSvascasl)Ilovvthatlslzoulclhavereceivcdattlpe
tilneIsvasf
'rozcl'
lottt.'rheassetsandllloreovertheliabilitiesthatlu'asnlisleadabout,
svcrestl
ch(01
-notsuchasfarasassctsgo)to.
tnaintainl
nyli
festyle,whichisthel
eltcr0l:
the'
IhlnilylaB',.'leta1()ne,anyIilkastyle.lal
nsittillghcreinaC-hapter7.
Lastycaratabouttllistilne,.J
-11stbeforesigllillgtheIISA,lhadlnanageableliabilities,no
lnoneyborroqved.agail1stPorcupineCreek'1.
1(rCasaCaptiva.Tl'
te.t
'kt'
:tistllatTilnknew
cxactlyNvl
patllc'
AvasdoillgandTvllat1wasgettillglnyselfinto,w'
hichiswhythe
cornerstolle01-tltcMS/V
.tollilll,NvasNvhatitAvas.
If1hadkhoyvnallyofthis,1Nvoultlnothavesettledi!1thcAvay1did.INvouldllavebccn
grantedl7otlltelnpandlong-terlnspousalstlppol-t.1Avouldllotha'
vehadtocontinlltbto
borrou?lnoneytolive.IwzouldIlotltavcborrovvcd35111111toge'
t'
theNT
ISAclosed.
llelnelnlsel-,oftlle351u11),1personallyonlygot-itl
stover1.omnofthat.Thercstsventto
TilnortoYC.'l-hepartthatAvellttoYCshouldhavcbeelzpaidbacktolllc,ifthingsthere
Nvel*
e11Sthoyl'
N.
'e1.(tPl*CSel1tCd.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 135 of 295
InCA falniIyIavv,a25yearnlarriagewiththeincolneandtaxreturnsthatNvehad,Nvotlld
llavegvenIueayel'yniceannualincolnefl'olllspousalsuppol-t.
* 36.-44.t)fPages30-34Youguysat
'egoingtohavetoreadandtellInewllat
youyhillk.
K Reallyfory0uguys.........it'salIthcrcpsandwarrantiesyouwillhavetotell
mewhatyouthink.
* 64.ofPage41
Ithinkthi
shelpsustojtlstil
y,if.
vveneedtosM'
hywearelilingourl
notions01theNISAil1ll'
leI.
3Kcotlrtsil1MolAtl.
lla,don'tyou?
Okay,IlnostIikelygaveyoun'
1orethenyotlwantetlandit'snotingreatorder.Sorry.
I-etT'
nekllowifsol
-nethingdoesnotmakescllse.IthinkJoeEnnightbeofsonlehclpherc
t()(),
YotlguysshotlldalsoreadtlleAssiglllnentOfConlpanyInterestsAgrecmentandthe
AssunpptionAgreenhent.Thel'careseveralllpillgsinthelminisettlelnellts,likeTilmSvasto
kecppayingthe'overhcatlt'
brPC,btltthatcntledashesaicltherewasnocomlnunitycash
Ilow.Wenowkllow therewussso1a1mnotsllrewherew'ecnI5tthatin.
Idopelllishelps.Edra
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 136 of 295
E X H IB IT A -2
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 137 of 295
NotesontheMSA,hcludingamendmentsandtheminisettlements
*(Edra'scommentsinGreen)
FullMSA-Pazes1-42-CaseNo.1411710 91152intheRiversideCountv.cA
K 1ofPage1says,trl-hisStipulationisenteredintoforthepurposeof
compromisingandsettlingcontestedissuesbetweentheparties.Ifforanyreason
thewai
versandreleasesinthisStiput
tinarenotaccejtedbytheCourtandthis
Stipulationbecomesnullandvoid,orthisStipulationfmlsforanyotherreason
whatsoever,nothingpntainedhereinshallbeanadmissionoffactorastatement
againstinterest.Eachpartyhasrefrainedfrommakingcontcntiousstatements,or
assertingppsitions,whichmightcausetheotheftobeupset,sothatcompromiie
andsettlementcouldbepromotedandachieved-''
Dosll'ttllisHghtheregiveusthe'out''togoafteranythingwewantandtohavethe
entireMSAnullandvoid?
Also,relnelllberthatIwascolnpletelyfrozcl)otltof-alltheconlpllniesandany
i
nt
brl
nation11t
71
nshortl
yafterIfiledfordivorcc(Dcc06)untiljustatbeforetheclosing
oftheI5nalNISA.
* 4ofPage2-ReadallofltandA-C
Theycotlldusethisasannrgtlmentthatwe.akreednottogobacktothevaluesofthe
assetsweagreedtotake.Iwillgointotbediflkrcntassetsaswegothroughthis,butone
thingthatshouldbepointedotlthere,isTinl'skerywntestilnonyinthelkluilycotlrt.
Helnadenlanyfalsestatements.'
A/hen1wouldpoillttltatouttotheJudge'
Waters,llt
f
ir
l
-esponsewasalwaystllat'rin,,beinggivel)ttlecaptionortlleshiptitle1-01-ourassetsby
her.:hadal
suciaryj
esponsibili
tyton,e,ifitNvasfoundthatheNvasnottellingthetruth'
.
A fewexamplesofthiswouldbeTin:statingthattheirwas.
i
'
tocommunitycttshflow,
qvhenhewastakingfundsIiolnBigSpringsIkeality(notpayingconllnissicu).
stothesales
people),Sulu-iseRidge(notpayingthepar'
tnerstheirsharewllenhetookfunds),sellillg
conununityassetsandusingtllefvndswitltotll11divisiongiventolne,andthcrearemore
CXft111j7jCS.
TilnalsoliedinahcaringwhenIwastryingtostopC11frolnbuyingthegolfcourseIots.
Izirst,hehadasalesperson,Iric.
Lad(l,nottlleVPofSttles.yvllichBzouldbelnore
standard,subnnitanal-litlavitstlppoltingTiln'sclail'
nofthevalueoftheLots.Tinlstated
tl1atnoeolnlnissionswertbeingpa
-idfbrthesalcoftheseLotstoCI4.Yet.latcrwe.fi11(I
outtllatnolleotllerthenEricLaddwasprcpnisecl500k,ofwhich250kwaspaidtohizn.
Ericlat
erfiledast
li
tandgotajudgmentagainstmeforgreaterthenthisamount.
K 8ofPage4allofpage5-Canyotlreadandtellnwifyouthinkthisisbindingor
itgoestothefkaudthatwetalkedabout?
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 138 of 295
* 16ofPage6andallzeferencestoBGIstockbelow
ThisiswheretllingscotlldgetaIittlegreytowhatiswritten,whatwassaidandwhatwas
intended.MetakingtheBG1stockwasthewaytotlnallygetPCandCasaCaptivainto
mylegalownershipafterbeingawardeditil)thesecondmillisettlcmcnt.Ifyouwillgo
backalltlreadthose,youwill1511(1thatTim1)1.
1(.
1hisaccountantsweretoIindawaytoget
bothofthesetlssetsintomynaluewithoutcreatillgtaxisstles.TakingtheBGIstocknow,
intheflnalMSA,1wastoldwouldrtsolvetllis.Also,sillceIwasalsotakingtheYC
entities,itseelnedlikeanaturaltosimplytakeTiln'sownersllipofthestock.
(Remember,ifthotlghil1ofthestocl
tMlasinx-fim'sname,itwasstillacomlnunity
propertyasset.l'
IwelltintothisagreelnentstillwitlltheuntlcrstandingthatbothTim andGeorgeMack
hadtol
dlnetlattheBGInotestoYD1asMr
elastheTilnBlixsethnot
estoBG1lw11
x
icl
.z1
eldedupwithaswe1I.
)wouldhaveawayot
-worki
ngthel
noutasyearswentalongas
d'forgiven''wl'
teliweneededthetaxwriteoffs.Timhadalwayssaidthat.1willgointo
thisin.nloredetailwhell1talkabouttheTamerendotransf
'er,butTilnalsosaidthatabotlt
the40111.
m forthat'
lftheabovewouldhavebeenasitwastoldtollle,thentheYC'swouldhavepaicltheCS
loanoffwiththeproceedsfrom Lotsales.
Upol)tlleclosingoftheMSA,thebankaccounthatlbcendrainedand/orwere
overdrawn.Patcangointomoredetailsofthatt'
tswell.1,ofcourse,wasnotcountingon
this.BotllAlhericanBankandPalmDesel-taccountswerelikethis.
Inaddition,thebooksandrecorclsthatwcreturnedovercallnotbereconciled.Thetrail
..
balancesdonotjave.Agai
n.Patcangointol
uoredetailonthi
s.
TherewerecontlmctsandpayablesthatTimentcredintoafterknowingweweregoingto
beclosingtheMSA.BobSumpteremploynlentcolltractlb
'rone.
* (a)ofPage7
CBSunrisePartners,LLCi
stheonethatMosesMoore(YC'scontroller)toldmetlat
Timlladtakenthefundswhenthingssoldandhadnotpaidthepartncrsinthis.
TilnhadIilsoslgnedagreemntstkosomeluanagel
nentforSt.Andrewsat
leroursigning
ofknowing1wasgettingthis.11edid'
thisbothi11YD1andinYCW.
* (c)ofPage7-Tlpisdidnothappenandwehadi
sstestryingtomakeithappel.
K (e)ofPage7-'
talktoAndyPattcnaboutthis.ltwasbrotlghtupi
ntheUCCvs.
CSallclTim BlixsethwithhowTilubotlghtandsoldthistohimselfBythetimeI
gotit,11ehatltakenthevaltleoutofitduringthetil
neIwasfrozenoutofthe
busnesses,YChadanexpelltestifywithhowthiswashandled.
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 139 of 295
* B,QfPage9-YCW wasinsolventwlzen1receivedit.Thewaythisiswritten,1
wouldhavenowayofknowingthat.
* CofPage10and(1)-(3)
Again,AndyPattenwillbehelpfulhere.'
rilurdidnotdisclosetllat11chadtakennxillions
outofBigSpringsRealitybeforethisandbadnotpaidcolnmissions. Thcrehasbetn
somethillgf'
iledagainsthilnonthis.Andywillllavethedetllils.Thisisalsowllerehe
statesthatEricLaddwaspaidacommjssiollIbljthcGolfCourseLotsalctoCI-I. In
familycotlrtl1etestifiedthattherewasnocolllmissionstobepaid.buthealreadyhadthe
dealwithEricy'whichIbelieveishowhegotErictogi'
vethestatemelltofvalue.TheVP
ofSalesshouldhavedonetlhat,ifitweret()bedone,buthecouldnotbetibought''.A'
ND
500kwasnotnearlywhat'
wasowedtothesalespeople.1kllowtilatCharliewouidbe
happy'
lotalkwithyouabouttheexactmuounts,'
btlttllisshouldalsobeil)whatwasfiled.
AtthetirneTimdidnotpaythem,whichwasmtlclllongerthelz::30-60daysinm-rearsa''
l1etoldthemthattheInoneywasneededt;Y.Coperations.Theylaterfoundoutthatthe
fundsweretlsedforboatslipsantlotllcrthillgsforTim.Thiswasalsoduringthet%rozen
out''partforlne,butBigSpringswasinTiln'ynalneandtheretbreacommunityproperty
asset.Attlletimehewastakingl-undsoutofBigSpringslbrhisuse,hewasalsostating.
infalrllycourtthattherewasnocolnmunitycashllow* DofPage101alreadyaddressedlligSkyRidge,above.PleasenotethatBigSl
ty
RltlgewaspartoftheYCChapterlI.
M EpfPage11AgainthiswasalreadyaddressedregardingStmriseRidgeand
MoscsMuorestatingthatTimtoldtilefundsastthisownpersonalpiggybank''
anddidnotpaythepartners.Tim(lidnotdisclosethis.Thiswasalsocommtlllity
casl'
flow.
> GofPage11ThisisagoodonefortlleWestel-nclailns.
* H ofPage11Thisdidnothappcnttllclentlcdupbcingpal-toftheYCBK.
* M1of$heassetslistedt
hatTimgot,starllngon1.ofpage12,hadthevalue
thatwasperceivd andnoMnforeseenliab11.
'
11.
K 17.pfPage14
A
tthetimeofsigaingthis,TM toldmethattheLeMondgroupwottl
ddothis,just
toberidofhim,bygetting1.0to2.0mm onclosing.1endedtlphae gtopaythem
YC,astheyweregoingtobeiheownersoftheseBsharesandnotmepersonallykOf
cott
rseyouknowthatdidnothappen.(Rememberaswell,1didnotreallygd
35mm 9om CH,butonly22mm.Thnhadborrowpd13mm fromthemin2007and
ItookoverthatpromissorynotewhenIgottheFamilyCompoundback.
)
DNI-Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 140 of 295
* 20.ofPage14Thisisnotabigdecl,btltTimtookmostofthisotlt, Solnethings
werebrougi
ltbackbytheYCemqloyeest
hatremoveditperhi
sditectiononce
theyknewthathewasnottotake1t,butnotnea-lyall. (Maybethisiswherchc
gottheideathatIwotlldtakemoreotltof176?)
* (3)ofPage15includzg(a)-(d)
ThisiswhereTiln1.1-ansferred'Tannarindotol
limself,befbrethe.inaldivorcedecree.I-le
statedj
ometlatGeorgccoulhelpmedothesameonthispronf
lissol
'
ynot
etoYDIas
theyhadintendedtoclowiththeothernotesfb1.thelnoneythatwastakenlkomthe.CS
loan.1-Iewcntoutofhiswaytomakethiscleal'
sI1ealsostatedthathedidnotwanttb
,a
haveanytaxissues5'omgettingTalnarindoinhisnalnewhenthefundsthatpurchasedit
weref'
romtheCSloan.Ofcoursenotaxeswerepaidcmanyofthatmoney 08111.
1n,asit
wasbookedasaloanandnotadividen.This.isthepointoftheUCCfiling,a2
gainstTin).
TllatsuitcontintlesinFeb2010.AndyPattenandTroyGrcenf
ieldcanbe'
helptitlhcrc.
* CofPage16
Ttu-ksandCaiscospropertywajalsopurchasedwithCSloanfundsyetTimwas
awardedthiswithoutInavingtopaybacktllefuntlsforthepurchase,price. lthinkthis.
Tamerndoa1:(Itheothel'thingsgotoshowthat.llavingmetakeontheentirepromissory
notes1brallthcftlndstakenotltbyBGIandtheaTim,wouldnotbeafairdivisionof
property,1infact,1s
hadtopaybackthosenotesalldTimgota11ofthoseproperties.In
othmbwords,jtlstTs
urksandTcmerendoalonetlccountforover70,111nofthe208mn4
takenput,pltlstheotllerthingsthathegotinthel'
inalMSA.
andthetwolninisettlelnents.
lfhe'
lladnottoldl'
nethattllosentitescotlldbe'workedoutanotherwayandtheywere
neverintendedtobepaidback,would1havetlloughttakingthatonANDgivinghim
theseassetsfrecandclearwasatkirdivision?NO.
* 0.ofPage18
IIaterfountt.otltthatwhothatwastranslkn-edtoNvasJilnDolan.Thereareseveral'
things
thatNveretranslkrrell.tohiludtlsil'
)gtlletnleof-lnyttfrozellouf'.JilnDolanisalsoa(Ilird
partnerof'filp'siaWestel
-llPacificTilnberColupally.I4eisalsowlloTilnsold,well
undcrvaltled,om.personalillterestil1theFBOinBozelnan.JinlDolanisalsotheone
thatprolnisedtobepayingthe3PInot'
eo11tilne.yetadlnlttedtomeandothersthathe
wastalkingwitl)Tilnatthesanletil'
neabouttlle'
paylnelll.TilnAvastellingothersthat
Jinlu'asllotgoillgtobelnakillgthepaynlel'
lttokeepn'
leoutoflnoney.
Idolt'tknoNvwherethis15tsil1.,butthereis11()tallypartofnyassetsthat1wasav'arded
thatTinad
dotcallpeopleand.interlkreNvitllnlebeingabletodothingsforthegood
.i
andbellefltoflnyself.HecontactedAlanltyeaboutlnyloans,whichputAlaninfear0fhiseollateralinlnyshalvofBFI.Tilnhadl1ocurrentbusillesswithAlanandhisbanlc.
I-lecontactedWarrenTreppregardingBlxwareandcatlseda11kindsofissuetherewhere
wecouldnotmoveforward.Ilehired(
MikeFlylln,4#110'wasDennis'
M lawycrand
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 141 of 295
handledthingsforBlxware.HeandMikeFlyllnstal-tedapresscampaignagainstme.
ManyreportershaveconfirmedthatTimorf'
-lynnwouldcallthemandtellthelnwllereto
goandlooktllingsupthatwerefiledintlleRenocourts.ThesewerefiledbyFlynn.
ManytimesJtldgeCookwouldnot1etthemstalld,butthedamagewasdoneasthe
report
injhadalreadyhappened.WemustknockMikeFlynnofftheMSAmatter.We
needtodowhateverittakes,normatterwhatwehavetofile.
HedoesstillhavebusillesswithPallnDesertNationalBallk,butcontinuedtogivetheln
Inisinfonnationaboutn4ybtlsinessesandlnc.
AsyotlguysN'
vellknosvIhadtoborrovvl'
lloneyl
-rolnl
'
nyfriendslikeBul
-tStlgannan(lnd
otherstostayaliveduringtllistil'
ne.
* 25.ofPage20
ThisisanotherareathatAndy'
Pattencanhelpyouullderstand-Thcrehasbeen
sol
nethingl
'l
edagahlstTim1
n.T
'
egardtotlTehandlingofthisLot.1
4ehadjtl
st'
bef
h
orel1e
t'soldittohlmselfwithnocashdownand11prolnissorynoteofzlnnz''had.placedavalue
of3.41nmol1it.YChasledthiasagainsthina.PaulMooremightalsohaveadditional
illformation.
AllcrtheclosingoftheNISA,IfoundotltthatTilnendedtlpsomehowgettingthisLotto
thcntanthat/heptlrchasedTamerndofronz.1believethatTilnneverintendedtopaytllis
2nan4t.oYC
. ,.
lustlikealltheotherpronfissorynotehehadsignedwithYC/YDI.
* C.ofPage22Readaadtelllnewllatytiathinkofthisolle.
* E./F.O.ofPages22/23
We.neverreceivedproperbooksandrecords,lninutesandothcrtllings.Patcangointo
thisInore.Vstilly'ayearlater,llavenotbeenabletofgtlrelnuchofthisoutwithhow
theyturnedwhattheydidovqr.
* J.ofPage23
ftstatesheretllat.asofJune1.,20081M'astorcceivca1Icaslzetc......-......again,Pat.
can
tellyoullowthingswereturnedovertous.TilnalsoenteredintoseveralcontractsthatI
twoofNvhich1havelpentionedalready.Tilnalsololdnxethathehadpaidal1ofYC
payablescurrentwithadeatl1edidNvitll%vayllePril
n(tlleotherthirdoqvnerOI-AVPT)
Thisttlrnedoutnottobetrue.ltalkedtohvaynenbotlttllis.lnJtldgeTuckers
courtrooln,Bo'bSulnpter,ol)'
l-iln'sbehalf,inAprilorNlayof2008,statedaslnuchas
well.
> Pages24/2526/27inreferenottotaxes1wanttotalkaboutinourmeeting,as
itistoohardtoputinallinthisoverview.
5
DM -Exllibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 142 of 295
* (a)ofPage27
lnterestingtlpttheyadlnitherethattherewascontn'
lunitycashf
'lowfromBigSprings,
BigSkyRidgeLLCandStlnriselkidgeLLCandthatTin:tookaIIofthatlnoney.This
wasdtlriagthctilucthathcwasstatingthattherewasnocommunitycashflow.Ihadto
b
orrownloneytojustliveduri
ngtl
is
time,as1didnotgetapennyoftemporaryspousal
support1101-longtennafter.IdidI'
m'
tcatchthisbefore.
K 33.ofPage29
ThisiswhereTroyGreenf'ieI(1hada'feltlg'daydtlringtheUCCvsCSalldTimBlixseth.
Timstatetlonthestandthattlle'tcornerstolleoftheMSA1:0.
!-hinl''wasmetakingovcr
hisIsduciaryresponsibility)br'
anyandallofllisactionsinthebusinessthathehadl'
ulj
andIgot.Itwouldbewol-thaphonecallt
o
h
i
l
n
o
n
t
h
i
s
o
n
e
.
An
d
y
P
a
t
t
e
n
wa
s
t
h
e
r
e
as
.
well.Troytoldl'
nethathedidnotthinkthatxthisareaoftheMSAwouldstandtlpas1
cotlldnotholdTilnharmlessnortakeonlpisactionsiftherewerefraudandothcrtllings
i
nvo-lved.1,'o'fcourse,untilTilnstatedthatincoull,tlidnotthinkinanywaythatthe
t$c
oiI
lerst
oneo?t.
l
'
teS4SA.btl
tIBr
asst
lrelyasyarethatitvvlsillportanttohinl.I
loyvean
Igetaroundthisissue??
* 35.ofPage30
l-lereiswhere1thinkwehaveaHUGEupsideif-youcanfindinthclawwherethis
wdivercnllnot.stand.As1toldyou,whenJa1'
1bputtogetherthelilingforsponsalsupport,
itpencilecloutato'
ver2.01n114perlnonth,butJlleverexpectedtogetthat.
Tiln'
repeatedlysaidatsonepointthatthere'
wasnomorecon'
uuunitycashf
.1ow.%le
havcsincefoundoutthatthiswasnottrue.HcJ-ustkepta1ltheluoneyforhimself
Becausehewassayingtherewasnocashtlow,1Iladtobon-oAvlnoneytoliveon,when
thereNvasi11factfundsforthecontmunity.
IftheassctsNvotlldhavebecllwhat1was'
lcadtobelievetheyn'ereANDifTilnhadnot
startedhiscalnpaigntoTtcrtlsll:121(1tlestroy11er''..,.....(itthelltnrnedintoWkeepafterl1eIuntilsheiscrtlshedorclead''l........1wouldnothaveneedecltllespotlsalsupport.
Buttllclllctsarenovvclear.thattherewascashflo%vthatIshouldhavereceivedatthc
tilncIwasfrozenout.Theassets1,11(1luoreovertheliabilitiesthatIwasnpisleadabout,
werestlch(ornotstl
cl
)asfarasassetsgo)tol
naintaill
nylifestyle,n'
hichist
heI
etterof
tlpef'
mnilylavv,letalone,allylitkstyle.IalnsittinghereinaChapter7.
.
Lastyeal
'atatottthisti
me,jtl
stbefo'
resiglingtheMSA,Ihadmanageableliabil
itics,no
lnoneyborrowedagainstPol.
ctlpineCreekIlorCasaCaptiva.ThefactisthatTimkllew
exactlywllathe'
wascloingandwhat1wasgcttingmyselfinto,whichiswhythe
conlerstoneol
'
-tlte'
MSAtohilu,waswhatitwas.
6
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 143 of 295
IfIhadknowaanyofthis,Iwouldnothavusettledinthewayldid.Iwouldhavebeen
grantedbothtempm1dlong-termspousalsupport.Iwouldnothavehadtocontinueto
borrowluoneytolive.lwouldnothiweborrowed35m1ntogettheMSAclosed.
Rel
nember.ofthe35lnm,Ipersonallyonlygotjustover1.0mmofthat.Thercstwentto
Tilno1.toYC.ThcpartthatwenttoYCsllotlldhavebeenpaidbacktome,ifyhingsthere
TVCI
Xt
IStheyNverePresented.
lnCAl'
tunilylaw,a25yearlnarriagewithtlleinconleandtaxretllrnsthatwehad,wotlld
havegivenn'
leaveryniceanntlalincoluefi-oluspousalsupport.
M 36.-44.ofPages34-34Youguysaregoillgtohavetoreadandtellmewhat
youthink.
* Reallyfo#you>ys......-.-it'sa1ltherepsandwarrantiesyouwillhavetotell
mewhatyouthhk.
K 64.ofPage41
Ithinkthishel
pstI
st
ojustif
'
ywhyweare'
f
51ilg.
ourl
noti
onsontheNI'
SAintheBKcotl
rts
inNlontana,don'tyou?Itenleluberu.eIltlveatldedIlelpthere1
-1
-0111theBlQJtldgeNvho
lovesussttlltlhatesTil'
nalltlslikeIllynn.Attllispoillttheycouldnotgetadccentrulillg
il1tlleil-lttvor11-0,11thatJtldgciftleytried.lz'itllcrway,SBandl3Shavethillgsinplacei11
thatcourtrool'
ntohelptls.'
WeneedtolmakcsurethevalidityoI-theN'ISA.nevercndsup
beingdecidetlbyJtldgeWl)l'
eI-s-ThatNvotlltlbeaniglltlnarc1braIloftls.
ObviotlslyIhavenotmentionedthecollapseoftlwUSeconolnyinthisdocument,and
doll'twanttogodownthatroad.Don't1etthatbecomeanissueintheMSAmatter.
Okay,1naostlikelygaveyoumorethenyouwantedandit'snotingreatorder.Sony.
Letmeknow ifsomethingdoesnotnlakesense.1thinkJoeEmightbeofsomehelpllere
too.
YouguysshouldalsoreadtheAssignlnentOfCompallylnterestsAgreekuentand'
the
AsstlmptionAgreement.Tlpereareseveralt'
hingsintheminisettleluents,likeTim.wasto
keeppayingtheoverheadforPC,butthatcllcletlashesaidtherewasnocol
nmunitycash
llow-Wenowknowtherewas,so1anlnotsurewherewecanfltthatin.
Hopethishelps.Edra
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 144 of 295
EX H IB IT A -3
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 145 of 295
DvnnisHolah#p
From:
Sent:
To:
Subject:
--
--
Le
.
co
mer20,20094:38PQ
S
ua
nr
dGaz
y@a
,Seo
pl
te
mb
d
holahn@mi
ndspring.com
hopethisbelps
NotejbntheMSA,includingamendmentsandtheminisettlements
(It
'
.d1-a'scolnIllent'sil'
lf'
lrt:cll)
FullMSA-Pazes1-42-CaseNo.RIDIND91152i11theRiversideCountv.CA
* 1ofPage1says,ie
rhisStipulationisenteredintoforthepurposeofcompromisingandsettlingcotested
issuesbetweenthepal-ties.lfforanyreasonthewaiversandreleasesinthisStipulationarenotacceptedbyth:
CourtandthisStipulati
onbecomesnullandvoid,orthisStipulati
onfailsforanyotherreasonwhatsoever,
nothingcontainedhereinsi
mllbeanadl
nissionoffactorastatementagainstinterest.Eachpartyhasr>frained
frommakingcontentiousstatemclts,orassertingpositions,whichmightcausethebthertobeupset,sothat
compromiseandsettlementcouldbepromotedandachieved.''
Doesn-tt11isrightllcl
-egivctIsthe-$4
.
)11159tog()aft'
eranythillgvewal'
)tankltoIlavuttl'
lcentircN/ISZX11u11al1(lvoid?
AlsoarclnelnberthatIvasconlllletelyfrozcl'
loutofalltllecollzpaniesandanyinttll-lllatiol'
t.
11-01n.shet
'tlyaltcl-1.
.
'
f
iled'
l
.
bl
-divorce(I
.
lce06)tll
itilitlstatbcf
klretl
tecl
'
osil
)gof
'tlel'
inalNZ
ISA-
* 4ofPage2-ReadallofitandA C
rl'
-ht)ycouldtls:t'
llisas.
a.1)ar
gunlenttllat'
yk'
eagreedno'
t1,()'
g()baektothevaJ'
ucs(.
)f-theassctsvvtlpg.I-cetlttltake.
.
vvillgoint'
otl.
lcdif-lbl
-elltassctsas'
vt)g()throtlgl'
tthis,t)lltolletllillgtllatshottldt)epointedout1
lcle.i
'
sT.
il11's
.
veryovvntestinlonyi1,tllel
'
hlnilycourt.I'lelnaklcl
'
nany111tsestatenlellts.'
5'
Vhenlsvouldpoinstllatouttothe
JudgeWtttcl-s,Ilcrl'
t.
tslltlllscNs/kksal&vJt).
'
stllktt
-'l-in'
l,beiI1ggivcl)thtCiaptiol)ofthcSl'
)a
ijltitleforo.l.l1.ttssctst)yhclz
hadafiducitlf-y
r
t
l
s
f
p
o
l
l
s
i
b
i
l
i
t
b
,
t
o
.
n
l
c
.
i
f
i
t
u
z
a
s
#
b
u
n
d
t
h
a
t
h
t
t
l
v
a
s
l
'
l
(
)
t
t
'
e
l
l
i
n
g
.
t
l
l
c
t
r
t
l
t
h
.
1%fcvvexalnpIest)'
1
.
-t
'll'
i$5v()'
t1Idbc-I-i11-tstatingthatthei1-B'asnocolnl
nlullitycasl,
tlf)Av,Nvhell
'I)cvvastal
til'
lgftlnds
p'
lc.).Sunri
sc'
lyidg.e(tlot.ptlyingthepalttllers
frol
'
rtBigSpringsI
lcal
'
itytl()tj
nayingtt
xllnpissionst(
)tllesalcsp.
e()
.
tlleirsllareN'
vllel,ltetookfuntls).sellil'
lgetlnllntlnityassetsalldtlsingt'
Ilef.tlntlslvitllout.adivisiollgil.
.
cllt()lne,
l:.
l'
t(.
1tlterealelntll
-tlt:xal'
nld.
les.
'ril
maIsolicdi1)allkutl-ing'
s'
vllclllNvastsying1()sttll:(.
-I1
'
'.
17
1tbn.
1buyingthegolfeotlrscIots.l-iI-s1.shellatlasalcs
)'s
petsons'
li
sriclwadtl,Il(.
)t'tl'
lcN'1
701-Sales,svhicl!Ns.
zoulx
t1l)cnlllrestalltlard.F
iubnlitanarlidavtstllllltll-l'
ing-filj
.'
f
t
l
l
c
l
'
o
t
s
.
Ti
r
n
s
l
a
t
e
t
l
t
h
f
t
t
1
1
4
.
)
c
o
l
u
l
n
i
s
s
i
o
n
s
l
'
v
e
r
e
b
t
t
i
u
g
l
'
l
a
i
d
1
0
1
t
l
l
e
s
t
l
c
t
)
1
'
t
l
l
e
s
c
L
'
o
t
s
t
o
clai!1.
1.ofthcvaltleo.
iI
ltlout.tltatnollcotllttrtllenE'
fr
a
l
-i
.
cl-aklklhzaspton)iscd50()k.
,ofAvllich2501('
qzaspaitl(()hin'
1.
.
CI.1.Yct,latcrTvc. f
lriclat
crC'
lledasuilaldg'
ot
'ajudglnelt
'8
tgailstTllc.
1
01
-grealcrtlcl
)thisal
'
nount.
w8ofPage4all.ofpag'
e5-(.
-'
-:11)yotlreatlaldtelllne.i17yotlthinkthisisbindingoritgocstotllefratltlthat%vt
talkedaboutt'
K16nfPage6ailda1lreferencestoBGlstockbelow
ThisisNvllcrethillgseotfldgetC.
tlittlegrcyto'
wzha1ish&?riltcn.Nvhatvvassaidallclvvhat'
h,llsinlcllcled-N?I
)takin.g
.
.(
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 146 of 295
the.
BG'
IstockAvas1l)eu'ayt()'
1.
inallyget'I'C%111.
'
3.
(.
1fxasat'
laptivaintonlylegalovvnelship.a'
lterbeingav.
't
.
tl'
tleditin
thesccondl'
ninisetllttnlellt..
11-yotlvvillgobackalld1-u.lllltllose,you$!?i
.l1'
sndtllat-I-'
ilnandhisatkcoulltantsvvere
lo'
f.
indaNvaytogctbot11()1-tllcseassetsikltk'
)1-1
-1
.
),
.oall'
lcvvitllotltcreatil)gthlxisstles.''
lxakingtl).
eB.C;lstockllow',
il'
ltllc'l
snalSZISA.I'
vvastoltlAvollldlcsolvctllis.Also,sillceINvasalsotakingtl'
lcN'Ccntities,itseelmetllikca
Itaturalt()silnplytakc-l-ill'
1esosvllersllipoft'
llcstock'.(l
kenlelnbersif1'
.
h()tlgha11(1f-thestock'NvasinTil'
n'sl'
lkllne,
itNvasstillacolnlntlIpityplol
httrtyasset.)
1vclltintotllisagreenlelllsti11Avitll1110tllld
-crstandingtllatb(.
)th'l-ill'
l:111(1(.
1et.
lrg()h/lacklladttlldInctllat'll)eB(11.
notesto'
N'(
Dlaslvel1asthe'l
'
-i1
))B
'lixsethI
ltltt!
stt
'
)BCI'
I(AvI
'
1icl
).1endedupAvitl
.
lasNvell.
)s
'
voul(
IIlavet
vayof
qzorkillgthclllotlt.asycarshvcntttlongas'.forgivcl1.
'-h'
vllellNvcnccdcdtllctttxNvriteoflL-.R-il'
nl)a(lttlNvfsyssaid
that'
-1%vi1'
lg()illlo'
t1)1
'si11n'
loredctai1TN.
-lltal
tItalkabou1.l1.
1t'
y'
Fall:el-clldtlt'
raIlsfersbufrriI
Malsosai(1tll:l.
tabouttI
lc
401n1nl
ol-tllat'
.
IftlleabovttB,
'oul(.
lhavebcenasitBztlstoldl
'
t)ntc,thel,tlleb'C'
,fsNvotlltlhavcpaitltllcC'SIoan0117Nvitll
'the
pl-occeds1'
i()l)'
11.
-()1'sales-.
'
Upojltheclosil'
lgo1:lhcNz1SA..thcballkaccoulptslladbttclldraiaedancl/orNvereovcwrdrayvll.I'lltcikl)goi11lo
nloretletftilsof'thpt.
asNvel1.1,ofetltlrse,vasnotcotlntillgonhis.B11th.
'
Xlnel-ick
lnBltllkandIlallnI
iesel
-t
accotlntsNverelikctl1is.
Int
ld
-diti
.
t
'
lll,'
t
'
lebooks:
1l
.
'
1
tll
ecortlst
hat&N.
-cl
ctttnlcdovcl
-qlll
)l
po'
tbel
econciIed-'
rletrailbalantesdon(
)tjJ
lvc-
Agail
a,'
Patcal'
lgl)intonloredelaiIontlqis.
ThereNverecolptl'
aqt
'salldpt
lyablt'sthtlt'ri11)cl
ptcredintt1isftcrknokvingAvtlv'
velegoingtr.
lbedlosiltgtlle.
NIS.
Z
.
.
jntractfbronc.
BobSulnptcrclup.loylnentcl
K(a)ofPage7
Cl)Sunrise'
Partllels,1-..
1.-.(.
:
'istIlcoI
lcthats/
losesN1(
)oy
c(h'C'
.
'scont/
llller)toldl
mctlat'
Pinlh'
adtakcntlclunds
Nvhenlhingss()ldan'
dlladntltpaitlthell:
.
tlt'llel-siathis.
'rilnhadals()signcdagrcel?.
1e1)tsfl-0sonlt.lllallagcI'
nelltforSt-A-ndreu-saftt!r()uI
-sigl
ping(1.
1
.
-kl'
tovi
'
ngINvas
gcttingthis.l'
1t!ditll1isbothi11hi
-D.
1andinb/C,
N$#/'.
*(c)ofPage7 '
Flistlit
.
l1
.t
)lhaj
hpcn:
1
.
:
,(
15
veht(
1'
.
isstlestl
'
yingtolul
keithappcn.
*
(e)ofPage7-7
I
.aIktoh-ndy'
'
Pattcl'
lallt
luttllis.1.
tvf
tsbl
qltlghtupintllc'
(.
JC'
k-vs.CSand
Til
n.
Blixsc
tl
t'
vvitl
hovvrl-illlboughtal'
tds()1(Itllis'tol)inlselfBythetinle1.gf'tit,hchadtakenthevalueouto6
7itdtll.ingtltetilne.
1'
wi
ls'
lkozen()ut01'
.tllebusillcsses.YC-hadanexperttesti1yAvithhoxvtI)isAvas1::1ndled.
tisis!N,
.ritten,Iu'otlldhavcTlovvay().
1KB.ofPage9-YCB/'
!A.
'asinsolvcntv.
N.
allclllreceivedil'
..7-heNvay'tlknow'ingthat.
*CofPage10and(1)-(3)
Agail),AndyPa.tten&/illbehcl'pfulhere.Tiand.
idl'
lottlisclosetllathtt'
hftdtakeln1iIlionson'
t(lfIligSprillgs
Itealitybeforetllis(:
t1.
1(.
1hadIlotpaidconll'
nissiolls.'rllcrclnasbcensolmefhing'
lslcdagaillstllirno!1tbis.A.tldy
Nvi11.havethcdctails.-1.1
.1.
isisalsovvl
zercl1estatcsthat1'ric'
LaddNkaspaid1,colulnission1701
-t11eflolf'(zlltlrseL()t
saletoC1-1.1.
11fal'
nilyct3urt'
1.
)p
.testitiedtllalthcrcvvas1)oconllnissiollstobepajd,btltlle.alreatlyhadtl'
)cdcal
b
c
l
i
c
v
e
i
s
h
o
B
'
1
)
c
g
o
t
E
.
r
i
c
t
o
g
i
v
c
t
h
e
s
t
a
t
c
l
l
l
c
n
t
o
f
v
a
l
l
l
e
.
'
l
h
e
X
/
P
o
f
'
S
t
d
l
c
s
s
h
e
u
l
d
h
a
vctlt
al'
l
.
fl
AvitllE-ric,$.
:.1)iclt1
.
b
t
l
t
h
e
c
o
u
l
d
1
)
(
)
t
b
c
i
t
b
o
u
g
h
t
'
'
.
A
N
1
7
5
0
(
)
k
y
v
a
s
n
o
t
n
e
t
l
r
l
y
v
v
h
a
t
'
B
r
t
l
s
f
n
v
e
d
t
o
t
h
e
s
a
l
e
s
that,ifitv'
s.
'
cl-uhtobe(Iollc,.
2
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 147 of 295
pcoplc.Ikllovvtllat('
'harlievotlltlbellallpyt1)talk'
u,ltl'
lJ?fltlabouttheexact'anlotlI3ts,bulthiss11()t.
11(1alsobeil'
l
N
vhat'
wzas15lcd.Attl)etiln
lleTin'
ldidnotpaythttln-s.
'l,lclAd.
'aslnucl)lollgel'tllen:3()--6()daysi1)arrt-ttr.s''1le
'
-operatiolls.Tllcylatcrfotlndtltlttlllttthefuntlsh'ercuscdf'orbtlat
tolclthelnthatthel'
rtollcysvaslleeadcdtoYCN
s'
lipsandothertllillgsforTiln..'I-llissvasalsodtlringtllet-fl-llzttnout''partforlne,t7lltIligSpl-illgss'
vasil!'l-iln's
lla,neandtllcreforeacolnllltlllitypropertyassct'.At11,ct'inlehc'
w'astak'ingftlnllsotttofB
-i.
gSprillgsl'
ol-hisuses
I1csvasalsostatingi1
.
1liklni1j'
.cotutth(tttllel
'euzasnocolunltlntycash11
.()uz.
*DofPage10.
1alrcadyaddressedI)
.igSkyRidge,allove,lAlcasenottttllatBigS'ky.
lkidgeu'aspltl-t'()f'thc'
Y(7
.
Chapter11.
KEofPage11AgainthisNvasaI
eadyJlddrcssetll'eg.artlingStlllrisc11idg.ttandh/
loscsNlll()restatillgtllllt'lain'
l
.r
toldtllefulltlsastthis(lu'nllcrsoltalpiggyllallI(''and(lidn()tpaytllepartipel's.''
I-illldidno1disclose1I)is.'l-l'
)i.s
vvasalsocotntntlnitycasl)l1t)yv*(;.ofPage11-1-1)isisagoodollcfort'
llcW/csl(11-11eIailns.
K11efPage11'I'his(1idI
lt'
)thappel'
lJ,1)(1clltlc(1tl1)beillgl'
):tl'tt)1-tlltkYC.
'B-It.
MAIloffheassetslistdthatTim got,startingon1.ofpage12,hadthevaluethatwasperceivedandno
unforeseenliability.
*17.ofPage14
Atthetiluetl
.
f
'sigli
ngtlis,'I
it
ntolt
lnlcllattht
.Leh/
b
l()lltlgroupNvot
ll
ddotlis-justt
ol
)eridof1)il
pl
.
,bygctti
ng
1.0to2.0nzInonclosing.1elldcd'
uplla.
'ingl()pay'
tht-nl817)11)of-tlle351:
11114lgotfl-olnC-I1,t:
ogetthel
'
ntosign
0ff.I'
vvast4)gctthisback'
I'
I
-oln5''
k',astlleyB/eregoilg1.
()betllco'
svllcl'
softhcseB'shares:!11(.
1llotrllc
pcrsonally.()fcoursc)?ot1.knou?thatdidllotl
-l
.
alr
llnell.(ltelllelnberasB?ell.Ididnotreallyget351,
1117)fn)l
)1C,
:11,
btltonly221171,1.'Filn'
11(1t1tlorroNved.17n)111'
lktln1tI)e'
I)'
.
1i112007al)dltook'
.ovcrthlt'
tpronlissoryl)()tt'
lu'llcnlgot
theFal
nilyCol
npc
jkl
ndback.
)
*20.ofPage14'
)a-llisis.notabi
gdca1,bt1t-'
1*iI1'
).tookl
-lltlst()#-tll'
isotlt.S()In.
etl'
.
)ingsxverebrotlgl)tbackl)ytlle
A'(?eluploycc'
sthtttrclnovedi.tpcrhis(1ircclionollctr(l'
leyknuB'tIltltl'
kt'
yvitstl()ttotakei1sbutllotnclirlya1'
l.
(Nlaybethi
sisNvllereheg(
)ttllei
tlcatlat1'
B?t
)t
lldtakel
rl
ol
eou'
t()f-176f
?)
M(3)ofPateISil
icluding(g)-(d)
'I-hisisNvhttpe'Filntl-allsfel-l-etl'Fatnari11(1()tol'
linpself,befi.
)lt>tle1'
inaldivol-cedccrce.1.
Iestattxlt()rnr.l'
llat'
kleorgecotlldhe11)n)et1()tllesttlne(.
)1-1tl1isprt)l'
n'
issot-yIltltktt()N'.
t)1
.ftsthel
ylladintelldedtot'
lo'
Avit1)the()tI)cr
notcstbl-tI)entoncl,thatvastake1.
f'
l-o1'
f)thc(7eSloal'
l.IIe,
yvcl
'
ltoutofhisNl
vaytolnakethisclca1-'
,ashe:
11s()
stat'
edthatlledid1101Tvanttoll:i'
!.
'e:.
1nytaxisstlcsfi-olngt-tlil'
lg-1-al)1ll1'i'
t1tl('
)in1)isnalne$vheatlleluntlst11:11
purellascdilAvel-efitll11tl
!ttC'
.S1oa1
A.(*
)fc()l.lrsonolaxeqyvcrepnitI01.
1any0f'
tllatlnoncy,208n'
)11)-astB'as
bookedasalklanand.
'
lota(1ividen.7111isislhe'
p
o
i
n
t
o
1
l
1
,
1
(
?
1
1
C
'
t
'
;
l
i
'
.
l
i
n
g
a
g
a
i
I
l
s
t
'
r
i
t
n
.
l
a
h
a
t
s
t
1
i
t
.
ctjlltiI'
iucsinFcb
'I
.
2010-Al'
l(1yPattellal1(l-l%l.
('
)j,
-tl
ib
lccl'
l,
f
'
ie.
'
ltlcan'
be*;l'
telpftllhcl-c.
* CofPage16
TtkrksandCaiscllspropcl-tyB.
'asalsoptlrclpaseclMvithC2Slolinfunds,yet-'
Pinlvvasavvardcdtl'
lisvvithoulIlaving
topayback'tbeftllldsf'
()I-tllcptll.
cllaseprice.1thinktbi'
s-'l-alnerndoatl(l
t
'
I
'
t
e
o
t
h
e
r
t
h
i
l
l
g
s
g
o
tosllobvt'
Ilat,having
.
Inetake(711theentil'
eprornissorynotes.
fklJ-a11theftlnkls1akenoutbyBGIand.then'1-il.
nv
,yvoult'
l
.l'
1()tbcalai1divisionofpropcrty,lin'
l'
pct,1hadtopaybactkthoscIlotcsilndTin-lgotiI11ofthoseproperties.l1tltllcru'lrds,
just'
ltlrk'
sandrj
-arnercltloaloncaccoultforo'
ver7()1
.
n1
2
'
nol
-tlo2081
m1
rtakeno'
uqplustlhcoti
lcl
-tli
ngsthat
'l
)c
3
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 148 of 295
gotintlle15n:.
tl.
N'
'
lSA.al1(1'
tlletyvonainisetllclnct
lls.lf11e11:
1(.
1nott()Idl'
nethattthosel'
jlltescoultll)c.
sltll.k-etlout
anotherSvayfllldtlleyyvel'
enevc-ilttendtlllt()bcpaidtlltck,kvtltlldIhavetllotlgh'
ttakingthat0JAA'
N.t)giving
hilntheseasscts'
ft
-ectlll(lcletlrBzasafkti1.tlivision?iN().
* 0.ofPage18
l'
Iatel-l7tl'
tllld()t1ttllatAvl1olllatNvastI
-lllls'
lttl-rc(.
ltovvas-1i11.
tI)()IaI).'
Tllel-oIlicsevera1tllillgsthats',
rcl
-ct'
l-al)slr
tzrrctl
tollillldstringthetillleofnly-l'
i-tlzcl)ttu1.
''.1ill)flolanis11ls()atllirdpartller01*
-'
l-ilzl'si11q'
Vesttu-nl'atiilic'I-ill
nbetCrolnpany.I'
leisItlso!.
,
-l
)0'l-in)s()1(l,u'cllklntltlrvaltlctl,fx
1t11-jlt.l'st7tll
.
llinteresti1)tlleI7B()inI)()/eJ)1lll'
1..1ilT1
'
Elolallisalsotllcolletlltliplolnisetlt()l?cjpttyingthc131*1l'
llltc()11til-ne.yctadlnittcdtol'
neatldQthcl-stllat'llts'
sv
.lh.
talkinglN.
-it'
ll'Fin'
latt'
Ilc'
sal'
llt,
'
rtinle.al
)lltltthcpaylncnl.1-i11.
1'lvastel1ingotlAersthat-1in)'
Nvas1,
101g.t)il)gt'
obc
nlakinglllepaynleylttt'
)kecl)i'
neotltttfl
nollcy.
ldt.
)'
ll't'knoA'AvlleretI)isl.
i(sin-buttllercisnotanl
yIh:trLo'
f-.
Inyassctstllatlvvasasy-altlcdthat
:'l-i111didl'
l(.
ltc'Il1
petlpleand.intcrlbreNvit1111)i)bcil1gal71ctodothiligsfkl1-'
tI'
lk'
Jg()o(Ialldbenefi1(nf11)yself.IIec()l1lactcd/,
k.1a1,l
kyc
abotltInyloal'
1s,Nvhicl1lltrt.
A'
Ia11ilt.
1'
b.a1-o'
f'Iliscollatera'
li11I11ysllareof.
BF.I.-l%it
rlhad.
1,0eurrcnt
.lhtlsiIlcssu.
'itl)
ztlanalldllisbank.
'
I1.
kcontactedJval
-l-cll',
l.
-1eI))'
trcgardingBIxvvarealltltllltlstxl.1.
11lk.iiltlsofisstlel'
llereNvherevvecollld)1f1t''
1,
1-1ovc
forvard-IlelliredNl.ik-t'
lFlynll,Nvholvas.
I)t!n1)is:1.
lllhxsycl-and1
.laTldlcdthir
ngsforBlxsvare..
I.Ical3d.
'
5,
1ikc1J1ynI)
r
e
p
o
r
t
c
l
'
s
h
t
t
v
c
c
(
)
l
l
l
.
i
n
n
c
d
t
'
l
l
t
l
t
'
r
i
n
'
l
o
r
F
l
y
n
l
l
N
s
r
t
l
t
l
'
l
t
l
c
a
l
l
t
h
c
lnandtcI'
1
.
startcd1.
1prcsscllnppaigl1klgtkillstl1'
1c-l
%lalq
ly
,
lhcl
'
nNvheret()goalld.
1tno11tlpillgstll'tl
'
lat'yver(lfilcdil1t'
IlcRenoctlurts.'I-htsse'
B.'()I'
tlfi1edby171yI
)l)..Nlanytilnes
JudgeC--ookyvotllclnotlctthcnlstand.1'
1(1t'thcdalnltges.
'
psdoneastllereporting1
..
11
,(
11:
1lreadyllnllpelpcd.
l-1cdoesstillhavcbtlsincssqvitl)17aln'
)13escl-lN'ationalBklllk',btl'
tcontinuedt()givetllel-n'
nlisin'
lt.
ll
nnatilllltlbout
naybusinessesal'
)tl1,
1.
:e.
*25.ofPage20
'
'Fhisisanotbcl-alea'11)a1/l1(ly.lAattcacanllcll'
lyoatllltlcrstaTld.'l-lpe.
l'
cIlasbecl'
lsolnchillgfi)c(.IagainstT-illli11
ilg.
0,
1
.
-t1
3isl-ot.1
:
1ellatljustbej
orttl)e%1s(
).
1ditto1
)inaselfNvi
th.n(
)casbtl
t
'
)qvllaldaprol
nisst
ll
y
rcgarfltol'
d.1
noteof-2I
n.hnel'h
-.a
I
1n:
,
1
(
1y'
)I
accdilvalueof3.
4l
'
nIut
'
)1i
t.'
N'
f.
'las1l
cdthlst
lg.iti
1
)sl1i
l
4'
l.I
laulhltllrcn.
1igl
'
l
tais()I
)ave
.
pdclitiollaIi11I'
T
t
Arrl1lltit)l1,
A.,1fotlndottttllatTi114endcdtlj7sonlcllta.
zgcttil'
tg11)is'
.
f-()ttotl
-tt.1.
11a1
.
1thatl'
tc
/t:
iel
-thcclosingo1%tl1eh4.S,
.
lpurchascdXal
netndt/f
?()l
n.1*bclievetl
x
l
ate
l-irnnevcl
'iltel
l
dedtopaytt
lis2111
7
nto5fC'
.jtlst1ikc1I1theo!ler
pronlissoryt1(1tel1e11atlsigllcdwzitl)YQ*Ij'
.Dl.
M(?.ofPage22Ilclk(1andlcl'
lTllevvllat'yotltlliilkoftllisolltt.
KEJF.G.ofPages22/23
'
$VeI
lcvcr'
rcccivcdprojhel
-books(11t(1rccllrds,nlinutesal1(lotllcrthings.Ptttc'
angoi-llto'
ti
hisnlore.NVcstiI1.a
ycarlater,havellotbcel)abletofqgurenlllchofthisotltvvitl)hoNvtheyturnedhvhatt'
llkydidovcl-.
KJ.ofPage23
Itstatesherethatltsof-Jtll'
le1,2008Ihvas1t)rcceivea11cashetc...-...-,....again:Patcantellybuhovvtllillgs
hveretunletl()vel-totls,'I-it.
nalsoclptel
'ed.intosevcralctlntractsthatIth'oofNvllich.(1
)haveI'
uelltiflnedalready
..
er
rrinlalsotoldlnetllttt:1,
1t'
t11:,(.
1p:tid'8111o1-N'Cpayablcscurrdl'
tNvitl'
ladcalhedidNvithsqraylleI'rinlttheot
.h
thirdovvncr()I'%rP7-)7.
-1)igturncdotltIlott()
'btltl-uc.1.
17
1llyltlgcTuckcl'scourtl'tloln,BobSulnptcj-,onrrilm's
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 149 of 295
behalf.i11,N:
p1
-i1or'
Nzlayo1-2()08,si'
atetlasnlucllasvelI.
*Pages24/25/26/27inreferencetotaxesIwanttotalkaboutinourmeeting,asitist0ohardtoputinall
inthiseverview.
*(a)ofPage27
1llterestingtIlatthcy1
)dll1illlerct'
Ilatlll0rcvascolnlllul)itycasllflt'
pw.
-Ii-()l.n13
*igSprings,lligSkyl'
tidgeL1..C'and
Suflristtl
.
ti.
l
l<t
.
t
e
Ll
.
(
)
a
l
d
t
l
l
a
t
'
l
n
i
l
n
t
o
o
k
1
1
1
1
(
)
1
t
l
l
a
t
l
n
t
r
l
l
'
l
e
l
'
.
Tl
l
i
s
M
v
a
s
d
t
l
r
i
l
l
g
l
l
e
t
i
n
l
e
t
h
a
t
h
e
'
s
v
a
s
s
t
a
t
i
n
g
t
l
a
t
t
hcl'
e
'
u/as14.
0conllnunityckdsl).11(
)%v.1ha
dton
boarfr
oy
vlnoncyt(
'
)j'
tlst
ilivedtlringthistiI
ne,asIdidnotgc1apcnnyof
telnporal
'
yspotlsllsupl7ol-t'Iltlr1(111gteln'
ier.IditlI1()tciltcl)11)isbeforc.
K 33.ofPage29
-1-1)isisvvhcl-c''
rroyCircc1)15eldl'
IadatCf'
ct1d-'day(.
1tlringtl1(.
)tJCr(*vsC.
'Stlnd'-1'in-l1:
)Iixsetll.-I-irl'
lstatetl()1)tl1k:
stalldt
llattIle<'cornclslollct)f-11leA1S,A.1171-)).
iln''vasnleta14i1
,
1govcl-hisfidtlciaryrcsponsibi)it)
.'f
()rany:l1l(1alI
ofhis(lctiolls'
inthebtlsillcsstlpathc1'
1:d(lrtl1)tl
1ll'
.
1g.ot.1lsvot.
tldbtNvortlltlphtlllec:,11tohilu()1)tallis('
)llt)./
4ndy
PltttensvastllcreasSvttl1..1'
.r
oyloklInetl3at'hetlidnott'llill1(t'
llat11)sal
-e:l()fthe*
5/JS.
Avvoultls1.
l11)t1upaslcould
.
not130.
1(.
1''
I-ill)harnlless1.401
-take()1.
1hisaclio.
nsifthcreyvel-cI
katldandothel-t'
llingsinvolved-I.,(.
)(
.
-colllsc.(1l'
ltil
'rinlslatedtllllti'
l)clltll-t,(1i(
'
.
lnotthinki'
ntlllyvajzthat'
the--cllrnerstonc''ofthcN'
I'S.
'kfor''
l-i.1)1vvasthis,
M35.ofPage30
1L
.
)kl.
eisTvhcre1t,
ll.
ill'
k'Nvehavca'
l.ItJC;1(upsideifytlucanl.
.
i11(1i.
ntllc.
l1)hvyA,
/x
'
lerethisvaivercaanotstantl.?Xs1
loldyou,v!'llcn.1aff'
cptlt.togcthcl
-tIle'
filing1
.k)rspousa'
lsupport,itpenc.
iltx'
loutat
-ovel-2.0lnlt'
1pcrnlopth.
'
Ti'
l'
nrepeatcdIysaidatsonlepoillt'thatthereAvasn0I'
1ltllectlnllntltpitycasll11
'oNv.$vehavesitlcef
.'
btl11()
1otltthat
tl
)isvasno'
t
-trtl
e..
LIe11
stkcptallthenloncy'
fbf1
1
il
nsclf.Bccallsc1)csvassayingthcrcB?
asn(
)casl
'
t'
Oow'
%I1(
!
d
tobon-ovvn'
1()I1t'
i)'to1ive(.
)11,vvhellt
'llcrcvasinfactluntls.
1'
kh1-('
.
I1eellrnlllllnity.
IftheassetsNvt.
)'
tlllll'
laveb
cj'
tvvllct1,h'asIeadtobclicvctlleyyvereA-NT)ifTin)l.
la(1nl'
)tsttlrted.1.
1isctdl)lllaigl)to
.c
'fcrushanddcstroyhcl
'' ..
(ittlclltl
rlcdiltot%kccpaItcrhcrunti.
'
lsleiscl
-t
lshtt
dort.
leadf'
lk......1
.B'
oul
dnot
llavenccded11'
1cspotlsa1stlI
'
)p(.
ll1.
1)uttllefactsarenoh'clcal-tltatll'
lt*l-c'
u?ascftsl)flosvt111.
1tIshouldllktvereceivedlttt'
lletinlclNvtlsI.
l-oztvllotktT
1)z.assctsandl
no1
ct'
nrve'
.
1l
)t%1iabi1i
tiesthatJ.vv:l
sl
ni
sIett
d8
1bout.xveresltcl
'
t(ot
-l
'
totsucl
)l$
sfarastt
ssct
sgo)to
ln1)intainrny1ifestlzle,N.
liich.isl1'
1clettel-fl.
INthefalrlily1(lu.,ltltalonc.anylifkstyle..
1k
llq
nsittinghel-cit,aCz
'
llhlplt.r
.
7.
Last'yearat'abouttlnist'
il'
ne,jt
ls'
tbefol
esigning
.the*.
/
15
.
1A,111
.
1
(1n'
lal
pagcable1iabilities,noI
nol
pcytllll
rllu,
'
cd
againstPorcurlineClrcekt'
lt)l-ClasaCalltiva.-x
rl
n.
efhctisthat'rin'
lk'llesvexftctlyNvllathf
zvvasdoiylgal1(Ih&'hat1
Nvasgcttiaglli
l)?selfinto,u?llicl)ish&/llytllccorncrsttlncofthcN,
ISAtohil'
tn.vasxvhat'
itvas.
11:
-Ihad.k1:()B'I1anyoft11is,1vvouldllotIlavt
zscttlcdil'
l.111evayldid.lwzouldlpavebcengrantutl.170111'
!'
dnlll:11.
1(1
long-tclnn.spouslllsupport;1.Nvotlltlllotllavellatl'
toclllltix
llttetotnol-roNvI'
nooeytolive.INvoultl1101.have
borrobvctl.
3s1
zuntogettlleN
'1SA.closcd.R.
el
nel
nber,(
)f
.
-the3511n.
1,lpersonally(
)lllygotjtls'
toverI.0
'1.
k,
11
1.of
that.TllercstB'cntto'
-l'in'
t()rto5/C,
5
.-Tllcpartthatvvclytt,
()h.
7.(7sllouItIhavebeenpaidback1t)lne,ifthillgsthcrt.
t
wereasthcywercprcsellted.
lnC'
A faluilylav,a.25yearlnarriagcvviththcillcolnet:l'
1(ltlkxrcttlrnsthat'
w'chad,Nvouldhnvcgivenn'
lc11
.vcry
nicealllltlalinconlc11-0111spousalsupptlrt.
.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 150 of 295
K36.-44.ofPag'es30-34Yotlguysalu.going:t)havet'
ol'
cadaldtelltmeNvhatyou(1-)illk.
KReallyforyouguys.........it'saIItherepsandwarrantiesyouwillhavetotellmewhatyouthink.
K64.ofPage41
1th.
inkth.
ishclpst
.l
stojusliI
y.ifh
vcnctdto,ys'
hyhve:
1I
'
cfiIil1gourI
.
'
nllti
l
'
)lson.theN'
lS>&i
l)t
'
le1
31
4cotl
rtsl
1)
N'
lolltalla.(1011'ty1)11.
/
(lkay
llostlikclj.
-gavcyotlnlolcthcnyol.
lN.
-allledalltlit's1ytltiagrcatortlt
rr.SN()l'l-y.I-etl'
ncltnou,i17,1l
stllllc
tllingdocsllo*tIl'
l:.
1k(,scnsc.ltllillk'-1(.
)cl.5:.
1
*1iglltbtlt)'
1-solne1'
1clpIlcl-tht(.
)tl.
N-ouguyssl'
llltl1t'
lalsolcadthcA.ssignlncl
'
ltf)f(lolnpallyInterestszhgl-eclnentandtl'
lezNssulllptiollA.grccllycnt''
l-helearesevcra1'thingsil'
)l'
Ile131i1)iscltlclllcnts,1ikc-I.
'i1.
11svaslokeeppayi1)g1'l)ellvcrl
'
letltl'
jo1-1)('
,.l
juttl'
lal
e
n
d
e
d
a
s
h
c
s
a
i
d
t
l
l
e
r
e
u
/
l
t
s
1
1
(
)
t
'
;
(
)
)
)
)
r
1
1
u
:
1
i
t
y
c
a
s
l
l
l
l
o
v
v
.
I
.
V
c
l
x
l
o
s
N
.
'
k
.
1
1
(
)
N
v
t
h
e
l
c
s
v
'
a
s
,
s
(
'
)
1
:
1
1
1
.
7
l
h
o
t
s
u
r
t
l
v
h
c
r
e
u
'ccan
'
titthati'
n.
I-I(Jl'
)e'
tl)ishelI'
ls.l.i(,
ll-a
Thi
smessageahdanyattacheddocumentsmaybeconfidential,pri
vi
legedorboth.lfyquarenotthe
intendedrecipient,ypuarehotauthorizedtoopen,read,copy,store,distributeorusethisinfbrmation
inanywqy.Fai
luretocomplywi
ththi
snpti
cemaybeaviolati
pnofajpl
i
cableIawsconcerni
hgthe
recei
ptofeletrdni
cmail.I
fyouhaverecei
vedthi
strnsmi
ssi
oninerror,pl
easenoti
fythesendet
immeditelybyseplyingtpthise-mailandthendeletethismessage.Thankyou.
Novirusfoundinthismssage.
CheckedbyAVG -www.avo.com
Version:2012.0.1901/VirusDatabase:2637/5475-ReleaseDate:12/20/12
Novirusfoutldinthi:incominjtnessage.
CheckedbyAVG-wwl.avg.pm
Version:8.5.
409lVirusDatabase:270.13.112/2392-ReleaseDate:09/24/0905:52200
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 151 of 295
E xh ib it
F
Z
Case: 12-35986, 08/19/2013, ID:%8748363, DktEntry: 55-2, Page 152 of 295
K4ka
y-uu < o
=
stmph'zw/asl' .
*'V-wtvzc
r'
Eq-422
%
!.H>Il
R
l scott11Klopert,CFLS-SB#192904
D
eb
R
av
enkcayvt.
sE-xsBL
#c2
Kl
ora
pE
'
rda
o
p11453
16
qlo
va
te1280
E
n1
c3
in3
own
,Cat
ly
lfr
oa
rn
au
9u14
3r
6,sui
P
hone:(818)380-1300
Fax:(218)380-1301
AttomeysforPetitioner,
EDRABLIXSETH
SUPERIORCOURTOFTHESTATEOFCALIFORNIA
FORTHECOUNTY0FRIVERSIDE
InreMarriageof:
EDRABLIXSETH,
CASENO.RIDIND9I152
Petitioneq
and
TIMOTHYBLIXSETH,
Respondent.
IAssigaedtoJudgeSlaronJ.Waters;Dept.11
ORDERAFTERHEARING
DATE:
TIME:
DEPT.
January14,2013
8:30a.m.
l
Respondent'sRequtstforOrdersledDecemberl4,2012cameonforhearingonJanuary
14,2013at10:00a.m.inDepartment1oftheabove-entitledcourt,theHonoobleSharonJ.
Waters,JudgePresiding.Petitionerwaspresentandwasrepresentedbyhercounselofrecord,
Kloptrt& Ravden,LLPbyScottM.KlopertandtheLawOfliceofDermisHolahanbyDennis
Holahan,viaCourfall.Respondentwaspresentandwasrepresentedbyhiscounselofrecord,
i'latchRayOlsenSandbergLLPbyChristopherJ.ConantandKolodny&AnteaubyStephenA.
Kolodny.
TheCourt,havingreadthepleadingsandhearingargumentofcotmsel,madethe
followingorders:
//
//
nALIf!/'
l1Alzarl
12-35986,
J1)
t'21/2g13/TCase:
i
lI
J22:0
3?51 08/19/2013, ID:*8748363,jDktEntry:
.. 55-2, Page 153 of 295
,
a1/23
/
7
0
1
3
1
5
:
2
4
S
1
2
2
i
1
t
2
1
V
L
D
F
E
R
T
I
R
A
Q
D
E
N
PAGE 24/84
.
.
,
.
saGnoffcakndr
1. ResmndenfsReque,forOrderledDeccbcr14,2012f
wiioutprejudic:toRespon/entre-slipgamotloncrotherrtque cnnqcltqt:tmattenlAlMd
inlli,RequestfQrdeelnth awropriat:fcrm=d1complieceV+appllablemocedutes
andforms.
APPRWEDASTOCONFORMINGWIV '
rM COURTWORD:R:
Dated:1- W 2013
AemeF
DM0
ondeM,
B=
tz
!
i
Datz:
A S
-2.
OO ERzWM
ORCOURT
Aaxj,wg
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 154 of 295
E xh ib it
l
2
3
CHRISTOPC RJ.CONANT
Cal.B/No.244597
73017mStreetSuite200
Denver,Colorado80202
Telephone:(303)298-1800
4 Facsimile;(303)298-1804
Em
ame
il:c
oonraTi
ntmo
@ct
ohnyan
la
y
5 A
tto
ycf
Lt
.
Bw
li
xe
sr
es
tx
hom
6
7
8
SUPERIORCOURTOFCALIFORNIAFORTHECOUNTYOFRIVERSDE
9 lnretheMarriageof:
CaseNo.1:1171N1791152
1: Petitioner;PlaintiF
(Reassi>edtoDept10omDeptF501)
11
DE
,AR
ATIO
NOF
DE
NN
S'
Loy
.
and
MOCI
NT
ooMy
xy
INs
up
poIR
r
12
ItEspor ENq''sMOTIONFOR
Respondent:TimothyL.Blixseth
swxcr
noxsANllTOSHOW CAUSE
13
14
15
16
17
1:
19
20
21
22
23
24
25
26
27
28
JIWC:SharonJ.Waters
Heating:
Time:
Dept.10
DKLARATIONOFDENNISL.MONTGOC RY
1,DennisL.Montgomerydoherebydecl
areunderpenaltyofper
jul
yofthel
awsofthe
2 StateofWashingtonasfollows:
3
Inappmxlmntely2006.1beganworkingwithEdraD.Blixsethtodevelopsoftware
4 lechnologyforherandhercompanies.Iworkedforherinnumerouscapaciies.AttimesIwas
5 anemployeeofoneofhercompaniesBlxwareLLCorOpspringLLC.Iwasinvolve invarious
6 i
pnrtmership''activitiesw1t11herovertlwlast6years.
7
AsMs.Blixsei'semployeeandusociateIwasresponsiblefordeveloping
8 softwaretechnology.Ms.Blixseth'sroleinottrpsrtnersbipwastoprovidefundingforour
9 opemtionsandtobringincustomerstopurchmse/licensethesoftwarethatthptwasbeing
10 developedforherbtlsiness.BecauseofMs.Blixseth'senormouswealth,Ms.Blixsethhad
11 contact.
satthehigbestlevelsofbusinessandtbeU.S.Governmenttowhom Ms.Blixsethcould
12 sell/licensemysoftwaretechnology-Ms.BlixsethhasbeentryingtoselltheBlxwm'etecbnology
13 before,during,andaRerherbsna ptcy.
14
FromapproximatelyDecember,201ltllroughJuneof2012.1andotbersworked
15 feverishlyforMs.BlivKethtbroughacompanycalledPC1todevelopthesoftwarefortheneedsof
16 tbecustomersthatMs.Blixsethhadproctuvd.Ms.Blixsethhadrepresentatives&omtheUS
17 GovemmentcometoourbuildinginMarchandAprilof2012.AtthatmeetingtheUS
18 GovernmenttoldMs.Blixseththeycouldmovequicklyintocontzactnegotiatioxzs.Ms.Blixseth
19 toldtlwUSgovemmentshehadinvestedover$15millionintotlwteclmologyandwaslooking
20 foralargeinitialpaymentandfeltitwasbesttocontractwithathirdpartyforthelicensingof
21 theteclmology-Finslly,inApriIof2012,lddiveredmuch,butnotallyoftltesourcecodethatI
22 hadupdatedanddevelopedforMs.Blixseitoherandhercustomersastlleyhaddemanded
23 accesstothesourcecodesothattbeycouldNalidate''itandenstlrethatitperformedas
24 remesented.Although1wasreluctanttodeliverthesourcecodetoiesecustomersduetomy
25 concernthattheycouldthenabscondw1t11itonctitwasintheirmssession,Ms.Blixsethhad
26 convincd methatIcould% stherandthesecttstomers.Morvcr,becauseMs.Blixsethhad
27 promisedtoshareequallyinallproceedsfromthesourcecodewithmt,andbecausetbatpayout
28 wasrepresentedtobeapproximately$50-100milliolIYlievedthepayoutoutweighedanyrisk.
1
DECLARG ONOFDENNISL.MONTGOMERY
295
CasCase:
e:12-312-35986,
5986 08/08/19/2013,
12/2013 ID:ID8748363,
:8739867DktEntry:
DktEntry55-2,
:52-2PagePa157
ge:2of6O
f13154of364)
1 Unfortunatelymyfearswereconfmned,ShortlyafterIdeliveredpartof(butnotal1)thesource
2 codetoMs.Blixseth'scustomers;lstopNdreceivingNymentsandregularcomme cations
3 fromMs.Blixsethandhercustomers.
4
4. Besidesthesebusinessdealings,IhavepersonalknowledgethatMs.Blixsethpaid
5 individua!stohackorotllereseinterccpttheemailcommunicationofTM BlixsethandEis
6 lawyers.lhavepersonalhmwledgethatMs.BlixsethprovidedMr.Blixseth'sandhislawyers'
7 emailcommunicationstoPaulMoore,MarcKirsclmer,whoistheTrusteefortheYellowstone
8 ClubLiquidaliagTrustaaudlawyersTepresentingCredhSuisse.
9
Ms.Blixsethalsoinfonnedmeoverthelast3years,onmanyoccasiom thatSsshe
10 hadtoliveandworktmderround''.Ms.Blixsethtoldmethatshedidn'twanttheIRS,Montmnn
11 orCaliforaiataxingauthorities,orTM Blixsethtofmdouthowsheisbeingcommnsated.Ms.
12 Blixsethtoldmethatmoneywasbeingftmneledtoherthroug,hSamBm e,MikeMeldman,
13 DenniqHolaban,PatYarborough,FF&ELiquidators,andBobBrownRRedBaron''auctionhouse
14 andotherstoavoidlRSandsutetaxauthoritydetectionofherassetsandincome.
15
Ms.BlixnetlztoldmeshewmstheownerandmanagerofFF&ELiquidatorsylnc.
16 Ms.Bl
ixsdhtoldmethatFF&Ew%justaf
zontcompanytbatsheusedtomovemoneythrough
I7
18
19
20
21
22
23
24
somstobdterconcealitfromnumerousparties.Ms.BlixsethalsotoldmeFF&Ewasownedand
managedbyher,butwa oN atedbyPatYareroughandherattorneyDennisHolnbnn.Ms.
BlixxthloldmelbatDenm'sHolnhi
mwouldmakecasbdeposits9omhisattomeyclientaccotmt
intotheFF&Eaocolmtordelivercmshdirectlytoher.
lhaveseenMs.BEXXIIIreceiveenvelopescontnining$9,000incashfromDennis
Holnhnnonseveraloccasionsinb0t.
112011and2012.
8. IandotherswerecompenRntzw
./byMs.Blixsethforworkin2011and2012inthe
followhgmlmner:
25
26
(a) Ms.Blixsethorheragents(which1understandtobeDennisHolahan,Pat
YarboroughorOliviaScalia)wouldpaymeorothersbydepositingcashor
27
28
checksintoourmrsormlaccounts.
@) Ms.Blixse orheragentswouldpaymeorothersthrollghanother
DECLm TIONOFDENNISL.MONTGOMBRY
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 158 of 295
Case:12-35986 08/12/2013
companybydepositingcasborchecksintoPC1brmkaccount.
3
4
meorothersbydemsitingcasborbywihngmoneyfromhisDennis
HolahanlawoKceaccotmtdirectlyintoPC1'scompanybnnkaccount.
(d) Ms.Blixsethorheragentswouldpaymeorothersbydemsitingcashor
6
7
checkswrittenbyhercompemycalledFF&ELiqaidators,Inc.,hItOPC1's
bsnkaccount.
(e) Ms.BlixsethorheragentsWouldpaymeorothersbydemsitingcashor
10
1l
12
checkswrittenbyherson
(9 MathewCrockerorhisgirMendBeckyBarnettintoPClorourpersonal
bankaccounts.
(g) Ms.Blixsethorheragentswouldpaymeorothersbyendorsingchecksby
13
SharedS'nmngServices,LLC,anddepositingthenintoPCI'sbnnk
14
account.
15
9. TopayforPCI'srentandelectricbill,Ms.Blixsethonatleasttwooocasionwired
16 fundsdirectlyintotlleaccotmtofPCI'slandlordortheelectriccompany. 'Ihisisreiectedinan
17 emailexchangebe-eenmeandMs.Blixseth,atnzeandcorrectcopyofwhichisattachedhereto
18 asExhibit1.FortheCourt'
sreference,myemailaddmssisdemist
e coder.
netandMs.
19 Blixseth'semai
laddressesarel
ecgz@aol.comandedrablxool.com.Ms.Blixsdhpaidfor
20
21
22
23
24
25
26
27
2:
PCI*ScommercialleasebecauseitwasthroughPC1'somcethatIwoulddevelopsoftwareforher
andbecause* .BlixselranherownbusinessopmeonsoutofPCI'somce.
10. Dllringtlwsixyearsinwhich1haveworkedwithandforMs.Bliueth,weshared
omcespaceandMs.Blixsethwouldconducthermrsonalandnon-softwarebasinessiuour
sharedoffke.BecauseIhadsoftwareandtecM calexmise'hnlMs.Blix-thlackedand
becatlselwasreadilyacce/sibletoMs.Blixsethsshehadmeestablishnndmnintm'nwritten
dotmments,nllmerouscomputers,networkserversandhardddveswhichnotonlycontm'nedthe
flesassociatedw1t14herbushwsses,butalsoMs.Blixse 'spersonalSlesandomails.Ms.
Blixsethorherassistantwouldprovidemeonoccasionswithremovableelectcnicstomge
3
DBcn-AavloxoFosxxl
suMoxrcvomRv
---1
1 devices(i.e..thumbdrives)whicbcontainedherpersonaltsles,andonoccasionMs.Blixseth
2
3
4
5
6
7
8
9
10
11
12
wouldgivemeaccesstoheremailaccotmts.
Forreasonsrelatingtomyvadolksactivitiesonherbelmlf,Ms.Blixsethwould
ohenfonvardtomeemailcommunicationsbdweenherandotherattomeys.Ms.Blixsethwould
wantmetoreadthecomme cationsandgivehermythoughtsrege ingthem.
AltachedheretoasExhibit2axetrueandcormctcopiesofbnnkrecordsthatI
downloadedfromtheonlinebnnkingfeatureofPCI'sbnnkaccountatBnnbofAmerica- These
recordsreflectnumeromschecksandotherdepositstoPCI9omFF&ELiquidators,IncandEdra
Blixseth.
13. OnDecember9andl5,2011Ms.Blixsethinvitedmeandotherstoherapnrrment
inBeverlyHills.Iacceptedtheinvitation.Ms.Blixseth'sapnrtmentlslocatedat202N.
CrescentDrive,Unit1,Beverlyl'lills,CA,whichplacesherresidenceinoneofthemorettony''
13 neighborhoodsofBeverlyHillsyjustblocksawayfromRodeoDrive.WhileIwasatMs.
14 Blixseth'sapnrfmenkIobservedaplethoraoffmeart,antkues,andfltrniture.Iwassoamazed
15
16
17
18
19
20
21
22
23
24
25
26
27
2#
bythelavishnessofherfumishings,thatItooknumerotlspicturesoftheintedorofherapartment.
AttachedhextoasExhibit3isacollectionoftraeandcorrectcopiesofthepicturesthat1took
onDecember9and15,2011.
While1wasthereatMs.Blixseth'sapntmentinDecember211,Ms.Blixsdb
tookmeupstnirsandshowedmeover$250,000ilzcashinenvelopes.Ms.Blixseltoldmeshe
hadreceivedthemfromDermisHolahan.InJanuary2012,Ms.Blixsethgavemethreeofthose
envelopeswithcontained$15kincash.
15. Ms.Blixsethtoldmeshereceivedmillionsofdollarsinfllrniturevartworkoatzd
andquesfromSamByrneandorhiscompanywhileshewasinbnnkrllptcymswellasaRerher
dischargefrombnnkvnptcy.Ms.Blixsethtoldmetheitemsbeingsoldwerefrom htrwarehouses
inCaliforniaandtheauctionswerebeiugNtaged.''Ms.Blixsethtoldmetlmtshereceivedan
interestintheseassetsinrz
efl'rnfoThertthelping''Mr.Byme.Ms.Blixsetbtoldmethatthese
<staged''auctionstookplacein2010-2012atRedBaronauctionhouseinAtlantwGeorgiaand
KingOalleries.Inplrtictllar,Ms.Blixsethinformedmethatbecauseshewasinbanknlptcyand
4
DECLARATIONOFDENNISI,.MONTGOX RY
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 160 of 295
Case:12-35986 08/12/2013
1 becauseshewasattemptingtobideherpnrtnershiprelationshipwithCrossHarborCapital
2 Pn-ersLLC9()n1Mr.Blixsetkherbnnknlptcytrusteeandthebnnknlptcycoultshehadto
3 deviseamyofhavingCrossHarbor(SamByrne)andDiscoveryLandCompany(Mike
4 Meldman)payhermillionsofdollarswitholztthetmnqactionsbeingtraceabletothem.Ms.
5
6
7
8
9
10
11
12
13
14
15
16
17
Blixsethtoldmethatdothis,CrossHarbortookpossessionofa1lthe611r1
:1t11re.artandfumishings
locatedinPorcupineCreekthroughitspurportedforeclosureofitssecurityinterestsinthat
peDonalproperty,thenafterCrossllarborforeclosed,ituconsulted''withEA Blixsethtosellthat
fixrnitureforitoritsagents.ltappearsthisconsultanf'relationshipwassimplyachmdefora
S
kifng''schemewherebyFzlm BlixsethwouldsellthePorcupineCreekpersonalpropertyat
auctionforCrossHarbororitsagentsbutthenCrossllarbor,throughstrawbtryers,wouldoverbid
atthatauctionandpurchaseitsownassetsforamotmtsabovetheirauctionmarketvalue.Asa
resultofCrossHarborespurchaesattheseaucuons,itsmoneywouldflowtoEdraBlixsethorher
entities,therebyprovidingEdraBlixsetbwithsigrocantamountsofmoneyinfurtheranceofits
partnershipwithher,whichpartnershipshewmsattemptingtohideandthisikiting''schemeis
howsheconcealedthatrelationship.Moreover.onceitptzrchaseditsownPorcupineCreek
mrsonalpropertythroughtlleauctionsthatEdrawouldarrange.itwouldt11% givethatpersonal
promrtybacktoMs.Blixseitoeithercyclethroughtheikiting''schemeagainorforhertokeep
18 forherselfSeelphase2''inExhibit4(1receivedExhibit4fromOliviaScalia'scomputerwhile
19 repaizinghermatlhineunderherinstnzction.Theharddriverepairworkrequiredmetocopyher
20 machinetoensttrenoinformalionwaslostincasetherepairfailedandthehardddvecrmshed).
21
* ,BlixRethtoldmeonseveraloccasionsshewouldcontmqtitemstllatshe
22 receivcd9omSamBm etobesoldwithMr.BobBrown(theownerofRedBaron).Ms.
23
24
25
26
27
28
BlixsethtoldmeMr.Byrneandorhisagentswouldpurchaetheverysameitemsthathegaveto
hertosellandthathispurchnKepricefortheseitemsweresoldathigherthannormalprices,cd
thatthemoneywouldbefnnnelbacktoMs.Blixseth.Ms.Blixsethtoldmethataftertheauctions
Mr.Bm eandorlzisagentswouldretllrnsomeoftheveryKsmeassetsthatitboughtatthese
auctionstohersothatshecouldkeeptheseitemsortrjrtosellthemagain.Inthelastauctionin
thesllmmerof2012,RM BaronsoldmanyofMs.Blixseth'svalllnbleutiquesandar>orkthatI
5
DECLMMIONOFDENNISL.MONTGOMERY
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 161 of 295
Case:12-35986 08/12/2013
l
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
haveobservedinthepast.SomeoftheseitemsMs.Blixsethhadtoldmeshehadalreadysoldto
Mr.Byrneinpreviousauctionsandtbathehadgiventhembacktoherandthatshewasreselling
them.'
l'
heitemsthatSamBymehadgiventoEdraBlixsethtosellintheschemedescribedabove
c-qmefromherformerpersonalresidenceknownasPorcupineCreek.
lnthepast,Ms.Blixsethtoldmethemajodtyofthosefhmdswereeitherflmneled
throughFF&EortbroughMr.Holahan'sattomeyclienttlnlqtaccotmtandultimatelytobackto
Ms.Blixseth.
18. Ms.BlixsethemployedOiiviaScaliaandhersonMathewCrockertomanageand
helpsellmanyoftheseassetsalsothatwerestoredatO'NeilstoragelocatedinSantaAnn,
California.Ms.BlixsethtoldmethatO'Neilstomgewmsnotinhernanm butinCrossHarbor
Capital'snametoavoidanycNanceofasubpoenaorasearchwarrantissuedonthosestorage
tmits.
19. Ms.Blixsdhaskedmetofalsifydoctzmentsthatwouldsubstantiateherclaimsthat
MikeJ.Flynnhadactedasherattorney,1refusedtodosobecauseIhadinmypossessionmany
emailsthathadbeencopicdtomeandwrittenbyMs.Blixselthatcontradictedthosestatements.
20. n eemailsth1conkadictMs.Blixsel'sclaimsthatMnFlyzmwasherattomey
areasfollows:
18
19
20
21
22
23
(a) AttachedheretoasExbibit5isamleandcorrectcopyofaJuly9,2007
emailt1:*Ms.Blixsethsenttome,amongothers(includingherattomey
Deboe K1ar),concerningMichaelJ.Flynn.
(b) AflnchedheretoasExbibi:6isatrueandcorrectcopyofaJuly23,2007
emailthatMs.Blixsethsenttome,amongothers(includingherattorney
DeborahKlarlxconcemingMichaolJ.Flynn.
24
AlfnchedheretoasEoibit7isatrueandcorrectcopyofaxlAugust18,
25
26
27
2#
2007emln'lthatMs.Blixsethsenttome,amongothers(includingher
atlonwyDeborahKlarlaconcemingMicbnelJ.Flynn.
(d) Aenr'hedheretoasExhibit8isatrtzeandcorrectcopyofanOctober20.
2007emailthatMs.Blixsethsenttome,amongother:(i
ncludingher
6
DECLARATIONOFDENNISL.MONTGOMERY
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 162 of 295
Case:12-35986 08/12/2013
attomeyDeborahK1ar),concemingMichaelJ.Flynn.
2
IwsservedwithasubpoenabyattorneyMikeJ.Flynntoproduceanyanda11
3 documentsandcomputerrecordsrelatingtoMs.Blixsti.Iturnedoverdocuments,computers
4 andharddivestoathirdpartyexpertasdirectedtodoso.
5
22. Thefollowingaretrtzeandcorrectcopicsofsomeoftlwdocumentscontawdon
6 thecomputersarldharddrivesthat1producedinresponsetoMr.Flynn'ssubpoena.
(a) AttachedheretoasExhibit9isatrueandcocctcopyofadocumenttitled
8
9
10
11
12
13
14
eMyDearestJack''tbatIfoundonMs.Blixseth'sMaccomputerthatshe
leftinmycustodyandconkolin2011.
AttachedheretoasEoibit10isaAeandcorrectcopyofatbullets
point''memothatMs.Blixsetllprepm'
edforherattorneyMr.Holahaninor
arotmdJuly20ll. Ms.Blixsethstoredtbisdocmnentinelecdonicformat
onathumbdrive'thatshetbenprovidedtomew1t.1
:noresMctionson
access.
15
(c) AttachedheretoasExhibit11isamzeandcorrectcopyofadocmnent
16
titledtWotesontheMSA''tbat1foundonMs.Blixseth'sMaccomputer
17
fhztsheleAinmycustodyandcontrolin2011.
18
23. AttachedasExbibit12heretoxisatruoandcorrectcopyoftbepicture1tookofa
19 diap'
nrnonawhiteboardlocatedwithinPcllsoocesonJanuary25,2012.Mongthetopoftbis
20 emailarethewordsttellthetruthaslongasu(sic)carf'.lpersonallyobservedMs.Blixseth
21 writethosewordsontbewhiteboard.
22
24. IntbesixyearsIwasinvolvedw1t11EdraBlixsethilzOpspling,Blxware,oranyof
23 theteclmologycommniesyF-d=insistcdonkeepingTimBlixgelinthedarkandisolatedfrom
24 anyknowledge,cost,valueorpotentialincomefromthosecompanies.
25
26
27
28
7
DECLARATION0FDENNISL.MONTGOMERY
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 163 of 295
Case:12-35986 08/12/2013
1declaretmdermnaltyofperjuryofthelawsoftheStat
eofWashingt
ont
hatthe
2
foregoingistrueandcorrect.
3
4 Dated: December13,2012
5
6
7
8
9
10
11
12
13
14
15
16
oenisL.M to ery
18
19
20
21
22
23
24
25
26
27
2:
8
DECLm TIONOFDENNISL.MONTGOGRY
'
V
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 164 of 295
E xh ib it
H
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 165 of 295
15 I
NRE:
16
17 DENNI
SMONTGOMERYandBRENDA
M
ON
T
G
OMERY
18
19
Debtors.
20
21 MICHAELJ.FLYNN,anindi
vi
dual
,
22
pl
ainti
ff,
V
.
23
24 DENNISMONTGOMERY,BRENDA
MONTGOMERY
25
26
Defendants.
27
28
) CASENO.:09-24322-88
)
) AdversaryProc.No.
)
)
)
OD
MP
AI
N
TBTTO:
)C
1.
ENLY
DE
ORS'DISCHARGE
) PURSUANTTO11U.S.C.1727(A)(2);
)2.DENYDEBTOR,
SDISCHARGE
) BURSUANTTo11U.s.c.j727(A)(3)d5);
) 3.DETERMI
NENONDI
SCHARGEABI
LI
TYOF
) DEBTFoRACTUALFRAUDPURSUANTTO
) 11U.S.c.j523(A)(2);
) 4 oevERxjxsXONDISCHARGEABILIR oF
)
) DEBTPURSUANTTo11U.s.
c.1523(A)(6)
)
)
)
)
)
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 166 of 295
13
2. Thi
sCourthasjurisdi
cti
onoverthi
sproceedi
ngpursuantto28U.
S.C.j1334.and28
14 U.S.C.9157(a).
15
3. Thisadversaryproceedingisacoreproceedingunderpursuantto28U.S.C.157
16 (b)(2)(j).
17
18
4.
VenueoftheChapter7Caseandofthisadversaryproceedingisproperinthisdistrict
19 puouantt
o28U.
S.C.jg1408and1409.
5. ThisadversaryproceedingiscommencedpursuanttoFed.R.Bank.P.7001(6)to
20
21 determinethedischargeabilityofDebtorsandofdebtsowedtoFlynnandothercreditoo.
22
ll.
23
eARyjEs
24
6.
Mi
chaelJ.Flynni
sani
ndivi
dualandjudgementcredi
torofthedefendantswi
tha
25
26 CalifomiaaddressofPOBox690,6125ElTordo,RanchoSantaFe,CA92067.
7. DefendantDebtorsarenaturalpersonsresidingat6ToscanaWayvRanchoMirage,
27
28 CA92270.
2-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 167 of 295
111FACTUALBACKGROUND
8. Mi
chaelFl
ynni
sanatt
omeyI
i
censedi
nMassachusett
sandajudgmentcredi
torofthe
6 debtorsbyvirtueofthebreachoftheDebtors'contractualobligationtopayattorney'sfeesinexcess
7 of$628.000duepre-petition,aswellasover$200,000insanctionsimposedonDennisMontgomery
8 andhislawyersforwillfulandmaliciousmisconductinNevadaIitigationinwhichMr.Flynnhad
9 previouslyrepresentedtheDebtorsDennisMontgomeryandBrendaMontgomery.SeeMontgomery
10
veTreppi
dTechnol
ogies,2009U.
S.Di
st.LEXI
S35543,(D.Nev.2009,theKsancti
onsOrder').
11
PursuanttosaidSanctionsOrder,MontgomeryhasbeenreferredtotheU.S.Attorney
12
13 inNevadaforpejury.TheSancti
onsOrderi
snowunderappealtotheDi
stri
ctJudge.Montgomery
14 per
juredhi
msel
finconnecti
onwi
thmul
ti
pl
efal
sestatementsunderoathi
ntheNevadacases,
15 includingbutnotIimitedtothemattersrecitedintheSanctionsOrder.Mr.Flynnwithdrewfromthe
16 Nevadacasesi
nJune-August,2007whenhedi
scoveredMontgomery'
smul
tipl
epeturi
esand
17
frauds.
18
10. Thereafter,theLosAngeleslawfirmofLiner,Yankelevitz,Sunshine&Regenstreif,
19
20 al
sothenrepresenti
ngEdraBl
ixseth,Montgomer/spartnerrepl
acedFlynn.TheLinerI
awfi
rmt
ook
21 overtherepresentationofMontgomeryknowingandinfullpossessionofconclusiveevidencethat
22 Montgomelwasanhabi
tualper
jurer.ld.Montgomerycontinuedhispatt
ernoflyi
ngunderoath
23 thr
oughouthi
stwoyearsofrepresentati
onbytheLi
nersrm;andagai
nathi
srecentj341(a)
24
25
26
27
28
Meeti
ngofCreditorsonSeptember16,2009.
TheinstantChapter7petitionwasfiledonJune26,2009,thedayonwhichDennis
MontgomerywasorderedtoappearintheNevadaFederalDistrictCourtforhisDebtor's
Examinationinnnectionwiththeabovestatedcase,Montgomeq veTreppidTechnologies,
3-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 168 of 295
5 Montgomer/sfail
uretocompl
ywi
thprevi
ouscourtordersrequi
ri
ngtheproducti
onofhi
ssnanci
al
6 records.Montgomeryhad intentionallyandwillfullyconcealedhisinancialrecordsby,amongother
7 things,intentionallydeletingspecificpagesofspeciscbankrecordsreflectingcancelledchecks,
8 whichwouldestablish wheremillionsofdollarsofmoneypaidtohim byEdraBlixsethhadbeen
9 hidden,i
ncludingpaymentstohischildren.Id.TheincompleterecordsMontgomerydidproduce
10 werecont
ainedonanelectronicdiscconsistingofapproximately900pagesinhispossessionatthat
11
meandatthepresentti
me.Inhi
sj341(a)Meeti
ngofCredi
tors,Montgomer
ydeni
edpossessionof
12 ti
13 hisfinancialrecords.
14
13. TherecordsproducedintheNevadacases,coupledwithFlynn'sexperi
enceswith
15 Montgomeryashisformerattorneyestabiishanintenttohideorconcealassets.Therecordsreveal
16 thatMontgomerypurchasedmillionsofdoll
arsinbankchecksbetweenAp:landDecember,2006
17 from moniespaidtohim byEdraBlixseth,hispadnerinaschemetodefraudtheU.S.government
18
basedonMontgomer/sfraudul
entsoftwaretechnol
ogy,whil
eMontgomerywasthesubjectofa
19
tigationinwhichhe
20 federalcriminalinvestigation,andalsoadefendantintheeTreppidNevadali
21 subsequentl
yconfesseda$26.5mili
ondolarjudgments.Theconceal
edcanceledchecksand
22
23
24
25
26
27
28
othercourtordereddocumentswouldhaveestablishedwherethesaidmillionsofdollarshavebeen
hidden.
14 Todate,Montgomeryhasnotproducedsaidrecords,andaRule2004exam motioni
s
nowpendi
ng.Athisj341(a)Meeti
ngofCredi
tor
sonSeptember16.2009,Montgomeryfalsel
y
statedthathedidnothavepossessionofhisrecords.Thisisfalse.TheemailssenttoFlynnby
Montgomery's lawyersinJune,2009relatingtotheMotionforContemptpjainlyrevealthat
-4-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 169 of 295
5 testi
fyi
ngathisj341(a)Meeti
ngofCredi
torsheari
ng.Thattesti
monyispartofapatt
ernof
6 Montgomerylyingunderoath.Additionally,baseduponFlynn'sexperiencewithMontgomery,
7 Montgomer/smodusopemndfi
stoconcealdocumentsandmoney.
8
15. TheNevadaMotionforContemptandtoCompel,andfortheDebtorExaminationwas
9 stayedonthemomingofJune26,2009asaresultofMontgomee'sfilinghisChapter7Case.The
10 filingofsaidChapter7petitionnsti
tutedanintentionalfraudtoconcealassetsandavoid
11
oducti
onoftheconceal
edsnanci
alrexrdsi
nvi
ol
ati
onof11U.
S.C.j727.I
twasal
sodesi
gnedto
12 pr
13 staythependingSanctionsOrderappealastoMontgomel.Inaddition,Montgomery'sclaims
j4 againsthisattorney,DeborahKlarandtheLinerf1% andtheIocationofhisassetsareintermingled
15 andinterrelatedinconnectionwithhisrelationshipwithEdraBlixsethwhopurchasedhiscopyrights,
16 financedhisdefensebytheLinerIaw5rm inmultiplecasesincludingtheNevadaIitigation.andpaid
17 Montgomeryapproxi
mately$5.7millionbetweenApril,2006andthepresent.Montgomerynow
18
claimsthatsaidcopyrightsbelongtohimandnottoBlixsethandconstitutea$10millionassetin
19
20 hisestate.Blixsethclaimssheownsthedisputedtechnoly.TheLinerlaw5% hashadthroughout
21 thedualrepresentationofMontgomel andBlixsethanirreconcilableconflictbetweenthem.That
22 confli
ctwasconclusi
velyadjudi
catedwhentheLiner5% suborned,i
nduced,and/oraidedand
23 abett
edMontgomer
y'
spetury.SeeSancti
onsOrder,atzpra.
24
25
26
27
28
j6 TheownershipofMontgomel'scopyrightassetsthathecontendsarevaluedat$10
million,aswellashisclaimsagainsttheUnitedStatesareriddledwithfraud.EdraBlixseth
pumodedlypurchasedaIIofMontgomery'scopyrightsinApril,2006,inconsiderationofthepayment
tohimof$3.3millionandasajaryof$100,000permonth.Thissalewaslaternfirmedbythe
5-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 170 of 295
Case2:1O-ap-013O5-BB DMa
oqln1DoF
l
eme
d0
0a
9geE6no
te
e5d09/28/0911:58:50 Desc
ci
u
n9
t/28/P
fr
1
1 Liner5rm againin2007whenFlynnwithdrewfromtherepresentationofMontgomery;andwhilethe
2 Liner;rmwasrepresentingbothMontgomeryandBlixseth.U
3
17. poninforationandbelief,EdraBlixsethhasaidedandabettedMontgomeryinthe
4
onoffederaltaxes,inanattemptedfraudontheUnitedStatesgovemment,andinthepotential
5 evasi
6 concealmentofassetsinthisbankruptcy.MontgomeryiscumentlyunderindictmentinNevadafor
7 criminalfratldinconnectionwithobtainingcreditfrom casinosandcashingbadchecks. Asrecited
8 herein,Montgomery'sschemesoffraudincludeathreeyearpatternofobtainingcashbyvarious
9 fraudulentmeansandconcealingit.
10
18. Mont
gomeryfraudubentlyprocuredtheservicesofFlynnandotherlawyersbymeans
11
ofthefollowingmisrepresentationsinthespeci
ficcontextofthefollowingfacts.
12
19. OnoraboutSeptember,2005 -March,2006,EdraBlixseth,MichaelSandovaland
13
14 Denni
sMontgomerydiscussedandthenagreedtotakesoftwaretechnologythatthenbelonged
15 toeTreppidTechnologiesinReno,Nevada,whereMontgomerythenworked. Montgomery
16 claimedthatthe technologypurpodedtointerceptal-oaedacommunications.
17
20. TheevidencereportedbytheFBIandunsealedonSeptember,172007bythe
18
NevadaDistrictCourtstronglysuggestsfraudbyMontgomeryinhisimplementati
onoffake
19
20 testingproceduresforhispurpodedtechnologyinanattempttovalidatefraudulentlyrepresented
21 technologytotheU.S.government.MontgomeryandSandovalthensoldthefraudulently
22 representedtechnologytoEdraBlixseth.
23
21. AlthoughMs.Bli
xsethhadknowledgeofthefraudbyJanuafy-April,2007,she
24 continuedtotrytosellittothegovemmentafterknowi
ngthatthetechnologyitsel
fwasfraudulent
25 andthatMontgomeryhadaI
onghistoryoffraudandperjury.
26
22. AsofSeptember-December,2005, Montgomel wasapadownerandempl
oyee
27
28 ofeTreppid:butwasthenintheprocessofbeinginvestigatedandexposedbyeTreppid
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 171 of 295
1
2
3
4
5
employees, softwareengineers,andtheFBlinconnectionwiththecreationoffraudul
ent
software,andthepotentialdefraudingoftheU.S.Government.ThesefactsarecontainedinFBI
repodspreparedinconnectionwithasearchandseizureofMontgomery'shouseandstorage
unitsonfileintheNevadaDistrictCourt.SeeUnitedStatesDistrictCourtfortheDistrictof
6 Nevada,searchandsei
zureproceedi
ngsi
nthecaseoflnReBuckt
hom,3:
06-cv-263(PMP,
7 VPC).
8
23. BetweenSeptember,2005andJanuary18,2006,Montgomerywasthenplanning
9 andactivelyengagedintaking eTreppid'stechnologywithhimtosellittoSandovalandEdra
10 Blixseth.HavingbeenexposedinNovember,2005forfraudul
entconductinvolvingfaketesting
11
dinaschemetodefraudtheU.S.government,onoraboutJanuary18,
12 proceduresateTreppi
13 2006,MontgomerydepartedeTreppid.MontgomeryandSandovalconvincedMs,Blixseththat
j4 thetechnologywasIegitimate.andthattheGovernmenthadappropriated$100MillionDollarsin
15
16
17
18
19
20
aMblackbudget'tobuyit.Duringthesametimeframe,Sandoval'schiefscientisthadadvised
SandovalthatMontgomerywasmisrepresentinghistechnology;andthatitdidn'texist.
Etrepped.ssoftwarecreatorshaddevelopedsomemediacompressionsoftwarewhich
Montgomeryhadtaken;butthepurportedal-oaedainterceptswere,infact,fraudulent.
24. WhileknowingthatMontgomeryandSandovalwereschemingtotakewhatever
21 technologyeTreppidthenpossessedwhichwouldresultinthepurportedpaymentof$100Million
22 Dollars,Ms.BlixsethagreedwithMontgomeryandSandovaltofinancenewcompanies,first
23 Azimyth,LLC,andX-pattemsLLC, then-opspring,LLC,IaterBlm are.Ms.Blixseth
24 representedtoMontgomery,SandovalandothersthatherYonnections'totheBush
25 Admi
nistrationwouldresultinthepaymentofthe$100MillionDollarstothem.Sandovalfalsely
26
ff,thathehad
27 representedtothegovernmentduringthesearchproceedingsandIatertoplainti
28 ,90%ofthetechnol
ogW beforeMontgomerybecameanemployeeofOpspri
ngsi
nearl
yApri
l,
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 172 of 295
7 andrequestedaprel
imi
naryinjuncti
ontopreventMontgomelfromusi
ng,conveyi
ng,borrowi
ng
8 against,orevendiscussingthetechnology.OnJanuary23,2006,plaintiffmetandspokewith
9 Montgomeryforthefirsttime.Shortlythereafter,Montgomeryretainedplaintiff.Fortheensuing
10 18months,MontgomeryspunthesamewebofIiesandfraudtoplaintiffthathespuntothe
11
UnitedStatesgovernmentandtothecouds.
12
13
27. OnFebruary7,2006,theRenoSuperiorCourtconducteda12hourevidentiary
14 hearinginwhichMontgomerytestifiedunderoaththathedidn'ttakeanytechnologywithhim
15 whenheleft;thatthetechnologyself-destructedpursuanttogovernmentrequestedsecurity
16 protocols'
,t
hatthetechnologyderivedfrom hiscopyrightswhichhadneverbeenconveyedto
17 eTreppidi.,andthatitwasusedin..
top-secret,,governmentprograms.
18
28. Vi
rtualyeveyhi
ngMontgomerysai
dunderoathwasfal
se.Montgomerymadethe
19
20 samefalserepresentationstoFlynnandhisotherfourlawyers. Thecasewasremovedtothe
21 NevadaFederalCourt.Thetechnologynowclaimedonhisscheduleshavingavalueof$10
22 mi
lli
ondolars,andthepurported'sourcecodes'forthetechnol
ogyi
sthesubjectofthe
23 foregoingfalsetestimony'
,andwast
hesubjectofi
ntensi
vel
i
tigati
oni
ntheNevadacases.
24 MontgomeryconveyedthefaketechnologytoBlxwareinApril,2006,inconsiderationofover
25 $3.3milliondollarswhichheimmediatelytumedintocash.
26
29. TheNevadaFederalCoudenteredmultipleordersforMontgomerytoproducethe
27
28 wsourcecodes.*HeandBlixsethdesedtheorders.Montgomerydefiedtheordee becausethe
8-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 173 of 295
Case2:10-ap-01305-BB DMa
oqln1DoF
l
eme
d0n9t/28/P
0a
9geE9no
te
e5d09/28/0911:
58:50 Desc
ci
u
fr
1
1
2
3
4
5
Msourcecodes''woulddemonstratehisfraud.Aftermonthsofevidenti
alhearingsforcontempt,
theNevadaDistrictCoudimposedsanctionsagainstMontgomery,Blixseth,andBlxwareatthe
rateof$2500perdayinJuly,2008untilMontgomelproducedthei'sourcecodes.'Henever
did.
30. MontgomeryandEdraBl
ixseththenconfessed$26.5mili
oni
njudgmentst
othe
7 Trepppadiesinordertocircumventthecontemptsanctionsandtoconcealthefraud.
8 Montgomeryhadinfacttakenfrom eTreppidwhatevertechnologydidexist. InaSeptember5,
9 2008heari
nginvol
vingMontgomer/sfaj
seaccusati
onsagai
nsttheFBI,theLinerfirmwas
10 compelledtoadmitthatMontgomerymadefalsestatementsunderoath-theyusedtheterm
11
Mmistaken./InthesubsequentsettlementwitheTreppidonoraboutSeptember17,2008,
12
13 Montgomeryadmitted tootherfalsehoods,includinghisfabricationofemailsimplicatingTrepp
14 andtheGovernorofNevadaina briberyschemetoobtaingovernmentcontracts.Montgomery
15 madenumerousper
juredstatementsi
nfal
sedecl
arati
onsi
nordertodefeatthesearchbythe
16
IZ
18
19
20
21
22 Montgomer/sstoragefacil
i
ti
essei
zingextensi
veel
ectroni
cmedi
a,incl
udingharddri
ves,dvd'
s
23 andcd's.Butthebulkofthetechnologyandothermaterialtakenfrom eTreppidMontgomeryhad
24 conceaI
edwithafri
endofhi
sdaughterandfuture(nowpresent)son-in-l
aw,IstvanBurgyan.
25 Burgyanandhiswifeare criticalwitnessesinthesebankruptcyproceedings.
26
32. ThroughouttheremainderofMarch,2006,Sandovalnegotiatedandconcludeda
27
28 dealwithMontgomeryandEdraBlixseth,resultinginthecreationofOpspring'
,andMontgomery's
-9-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 174 of 295
1 agreementtoconveyaIIofhistechnol
ogytoOpspringfor$3.3Millionin''
Ioans'and$100,000
2 permonthinsalary.AsMontgomeryrecei
vedthepumorted'Ioan*monieshepurchasedbank
3 checksforthepurposeofbreakingthechainofbanktransfersandcheckswhichwouldreveal
4
5 whereheultimatelydepositedthemoney.Montgomerythencashedthebankchecksinvarious
6 casinosandpurchasedchlpsI
aterconvededtocashwith*streetbrokers*,aIIaspadofhis
7 schemetoconcealassets.
8
33. BetweenJanuary,2006andApril,2007,when Sandoval,Montgomeryand
9 Blixsethattemptedtoobtainthe$100millionublackbudgef',Flynnwasrepresenting
10 MontgomerybutdidNOTknowthatthetechnologywasfraudulent,thatMontgomerywasa
11
pathologicalIiar,thatMontgomeryhadinfacttakenthetechnologyfrom eTreppid, thatboth
12
13 MontgomeryandSandovalhadahistoryoftryingtomarketandsellfraudulentsoftware
14 technology,andthatMontgomerywasIyingabouthowmuchmoneyhehadreceivedfrom
15 Blixsethandwhathewasdoingwithit.ThesefactsbecameexposedinJune,2007whenMr.
16 Flynnwithdrew.JustasMontgomeryhadcontinuouslyliedtovariousagenciesofthefederal
17 governmentandconvincedthem oftheI
egitimacyofhistechnology,hesimilarlyconvincedhis
18 Iawyers.Buttherepresentationswerefraudulent.
19
34. BetweenJanuary,2006andJune,2007,MontgomerycontinuouslyrequestedFlynn
20
21 andotherlawyerstoprovidehimwithIegalservicesbasedonthefraudulentrepresentati
ons
22 involvingthepumodedsoftware;andfraudulentrepresentationsregardinghisabilitytopayfor
23 theservices;andMontgomel repeatedlymade fraudulent representationsrelatingtohis
24 conceaImentofmonieshereceivedfrom EdraBlixseth.
25
35. BetweenAprll,2006andDecember,2006inRanchoMirage,California,inReno,
26
Nevada,inperson,indocuments,indeclarationsandemails,Montgomeryvigorously
27
28 represented,claimed,andstatedtoFlynnthefollowingfacts:thattheOBlackBudget'alQaeda
-l
0-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 175 of 295
j4 Montgomeryunderthepenal
tiesofper
jury;andmanyofthemwerefi
rsttesti
fi
edtounderoathby
15 MontgomeryonoraboutFebruary7,2006inReno,Nevadai
naprel
imi
naryi
njuncti
onhearing,
16 whichwasthenissuedagainstMontgomery. Montgomerymadethesemisrepresentationsunder
17 oath,andinsworndeclarations,andtonumerousindividuals
si
ncludingFlynn,forthepurposeof
18
inducinghimandIawyersworkingforhim toprovideIegalservices.
19
38. lntruth,althoughMontgomeryhadconveyedwhatevertechnologyhedidpossess
20
21 toOpspringandBlixseth,includinghiscopyrights,heneverconveyedanyunoisefiltering''al
22 Qaeda interceptingtechnologybecauseitdoesn'texist.AsofOctober-November,2005,
23 Sandovalknewfrom hischiefscientistthatitdidn'texist, butumadeanicestoryforinvestors.''
24 AsofJanuary,2007,whenMs.BlixsethmetwithSandoval'sscientist,'whotoldherthatthe
25
technologydidn,texistandwasnotasrepresented,andthatMontgomerydidnotappeartohave
26
anysof-aredevelopmentskills, MontgomeryandBlixsethcontinuedtodeceiveFl
ynnandthe
27
28 otherIawyers.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 176 of 295
FIRSTCLAIM FORRELIEF
(ObjectlontoDischargepursuantto11U.S.C.j727(a)(2)and(3))
3
39. Plainti
ffrestatesallpreviousallegationscontainedherein.
4
5
40. Thedebtorswithintenttohinder,delay,concealandordefraudplaintiffandother
6 creditors,havetransferredorconcealedorhavepermittedtobetransferredorconcealed,propedy
7 ofoneormoreofthejointdebtorswi
thi
noneyearbeforethedat
eofthesli
ngofthispeti
ti
on.
8
41. Thedebtoe haveconcealedandfal
sisedrecordedinformationregardingthepropedy
9 fromwhichthedebtor'sfinancialconditionandbusinesstransactionsmightbeascedained.
10
42. Thedi
schargeofthedebtor
sshoul
dbedeni
edpursuantto11U.
S.
C.j727(a)(2)and
11
12 (31.
13
43. Wherefore,plaintiffdemandsjudgmentdenyingthedebtor'sdischargeandforsuch
14 otherreli
efasthi
sCouddeemsjust,i
ncl
udinganawardofcostsandreasonabl
eattomey'
sfees.
15
16
17
18
19
SECONDCLAIM FORRELIEF
schargepursuanttoj727(a)(3),(4)and(5))
(objectiontoDi
44. PlaintiffrestatesalIpreviousallegationscontainedherein.
45. Thedebtorshaveknowinglyandfraudulentlymadeafalseoathinconnectionwiththis
20 case.I
nparti
cul
ar,thedebtorscedi
fiedunderpenal
tyofperjurythattheschedul
esherei
nweretrue
21 andxrrect,whenintruthandfact,asthedebtorsknew,thescheduleswerefalseinmaterial
22 matters,includingthefadthatdebtorshavepursuedaschemetoconcealassetsbypurchasing
23 bankchecksandcashingthem incasinostoobtaincashwhichtheyhavehidden,'andaschemeto
24 transferassetswi
thoutdisclosureontheirschedul
es.
25
46. Thedebtorshaveconcealed,destroyed,orfailedtokeeporpresewerecorded
26
27 informationfromwhichthedebtors'financialconditionorbusinesstransactionsmightbe
28 ascedained.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 177 of 295
13 fudherreli
efasthi
sCourtdeemsjust,i
ncludinganawardofreasonabl
eattomey'
sfees.
j4
THIRDCLAIM FORRELIEF
15
(ObjectiontoDi
schargepursuantto5523(a)(2):Non-Dischargeabl
e Debt
obtainedbyFalsePretense:AFalserepresentationorActualFraud)
16
17
18
50. PlaintiffrestatesaIIpreviousallegationscontainedherein.
19
51. Pl
ainti
ffi
st
hehol
derofa$628,*0judgment,anda$200,
000Sancti
onsaward
20 enteredintheNevadaFederalDi
stri
ctCourt.ThejudgmentandtheSancti
onsawardareforwork
2j andservicesperformedbyplaintiffwhichwereprocuredbydebtoeorarisingoutofthedebtors'
22 fraud,misrepresentationandfalsepretenses.Themisrepresentat#ionswerecontinuouslymadeby
23 debtorsaspadofaschemetocommitactualfraudagainstplaintiffandothers.
24
52. Bothdebtsshouldbedeterminedtobenon-dischargeablepursuantto11U
S.C.j
25
523(a)(2)(A).
26
27
53. Wherefore,pl
ai
nti
ffdemandsjudgmentdetermi
ni
ngdebtor'
sdebtstobenon28 '
di
schargeabl
eandforsuchotherreli
efasthisCourtdeemsjust,i
ncludi
nganawardofatt
omeys
-l3-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 178 of 295
Case2:10-ap-01305-BB Ma
Dol
qn1DocFui
l
ed0
9/28/
nt
efre1d
me
nt
P0a9geE
14
o
509/28/0911:58:50 Desc
1 fees.
2
FOURTHCLAIM FORRELIEF
3
(11U.
S.C.j523(a)(6)-ForWill
fulandMalicl
ousInjury)
4
54. PlaintiffrestatesaIIpriorallegationscontainedherein.
5
6
55. AsrecitedintheSanctionsOrder,debtorsengagedinacomprehensiveschemeand
7 pattemofoutrageousconduct,incl
udi
ngpetury,toucrushMr.Fl
ynni
ntosubmi
ssi
on'byfabri
cati
ng
8 andfiIingfalseaccusationsandclaimsinvenuesfrom MassachusettstoNevadaandtoCaliforniain
9 ordertodefeatthepaymentof$628,000inattorneysfees.Thevariousproceedingswereentirely
10
fabri
cated,basedondebtor'
sperjuredstatementsanddecl
arati
onal
Idesi
gnedtowilfulyand
11
12 mal
ici
ousl
yharass,i
njureandcauseharmtopl
ainti
ff.
13
56. ThejudgmentandtheSancti
onsawardshoul
dbedetermi
nedtobenon-di
schargeabl
e
14 pursuantto11U.S.C.j523(a)(6).
15
57. Wherefore,plai
nti
ffdemandsjudgmentdetermini
ngdebtors'debtsforthejudgment
16 andSanctionsawardtobenon-dischargeable,andforsuchotherrel
i
efasthi
sCouddeemsjust,
17 includingattorney,sfees.
18
PRAYERFORRELIEF
19
20
WHEREFORE,plaintilonbehalfofhimsel
fandaIlcreditors,requeststhattheBankruptcy
21 CoudenteranOrderprovidingforthefollowingrelief:
22
(i)
Determinati
onthatthedebtsofalIcredi
torsarenon-dischargeabl
eunderj727of
23 theBankruptcyCode;and/or
24
(ii) Determi
nationthatthedebtsowedtopl
ai
nti
;arenon-di
schargeabl
eunderj523of
25
theBankruptcyCode;and/or
26
27
(ii)
ForaI
lcostsi
ncurredher
ei
n,i
ncludingattorneysfeesandcosts;
28
-1
4-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 179 of 295
(i
v) Forsuchotherandequi
tabl
erel
iefasthi
sCouddeemsjustandequi
tabl
e.
Datedthis2#bdayofSeptember,2009
MICHAELJ.FLYNN
/s/Y '
-WAA?J.V
By:
15-
MichaelJ.Flynn,InProPer
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 180 of 295
E xh ib it
l
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 181 of 295
1 Christo.pherJ.Conant.CalBarNo.244597
95017=StreetSuite1700
DenverqCO80202
Telephne:(303)298-1800
3 Fax:(303 298-f804
cconant@conantlawyers.
com
4
AttorneyforPlaintiffMichaelJ.Flynn
6
7
8
UNITEDSTATESBANKRUPTCYCOURT
CENTRALDISTRICTOFCALIFORNIA
11
12
13
14
LOSANGELESDIVISION
Inre:
CASENO,:2:10-bk-18510bb
DENNISLEEMONTGOMERY,and Chapter7
BRENDAKATHLEEN
MONTGOMERY
AdversaryNo.2:10-AP-01305BB
Debtors
AMENDED COMPLAINTTO:
15
.
j
1.DenyDebtors,DischargePursuanl t
16
j;
2. t
o1
US
.CMo
jn7
7charpeabilityof
De
te1rml
ne
d2is
DebtPumuantto1lU.S.C.jH3
18 MICHAELJ.FLYNN,anindividual,
19
20 v.
Plaintiff
2
1jjx
sxo
lSAMVOONX
VOOMARX,
22
23
24
25
26
27
28
Defendants.
QE
se
NN
DoP
.2:
C
1O-A
MP-kjgl
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 182 of 295
l 1. JURISDICTIONANDVENUE
2
l. OnoraboutJune26,2009(thett
petitionDate'')thedefendantsDennis
3 MontgomeryandBrendaMontgomeryfiledavoluntarypetitionforrelief(the
4 Sfhapter7Case'')lmderChapter7,Titlel1oftheUnitedStatesBsnknlptcyCode
5 (thettBankruptcyCode'')intheUnitedStatesBankaptcyCourtfortheCentral
6 DistrictofCalifomia,RiversideBranch.
7
2, ThisCourthasjurisdictionoverthisproceedingpursuantto28U.S.C.
8 j1334,and28U.S.C.j157(a).
9
3. Thisadversaryproceedingisacoreproceedingunderpursuantto28
10 U.S.C.9157(b)(2)(I).
Il
4. VenueoftheChapter7Caseandofthisadversaryproceedingis
12 properinthisdistrictpursuantto28U.S.
C.jj1408and1409.
13
ThisadversaryproceedingiscommencedpursuanttoFed.R.Bank.P.
14 700146)todeterminethedischargeabilityofDebtomandofdebtsowedtoFlynn
l5 andothercreditors.
16 2. PARTIES
I7
18
19
20
21
22
23
MichaelJ.Flynnisanindividualandjudpnentcreditorofthe
defendantswithaCalifomiaaddressofPOBox690,6125ElTordo,RanchoSanta
Fe,CA 92067.
7. DefendantDebtorsarenaturalpersonsresidingat6ToscanaWay,
RanchoMirage,CA92270.
3. FACTUALBACKGROUND
8. PlaintiffMichaelJ.FlynnisanattomeylicensedinMassachusettsand
24 ajudgmentcreditoroftheDefendants.
25
9. PlaintiffformerlyrepresentedMr.MontgomeryintheNevada
26 Litigation(definedbelow)butwithdrewashiscounselinJune-August,2007when
27 hediscoveredMr.Montgomery'smultipleper
juriesandfraudsandwhenMr.
28 MontgomeryceasedpayingMr.Flynnhi-sattomeys'fees.
1ACMaE
NDEDCOMPLAINY
seNo.2;l0-AP-0l305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 183 of 295
1. Plaintiffisajudgmentcredi
toroftheDefendantsbyviltueoftwo
separatejudgmentsenteredagainsttheDefendantsintheU.
S.DistrictCourtforthe
3 DistrictofNevadainCaseNo.3:06-cv-00056(the<'
NevadaLitigation'),
4
ThesrstjudgmentwasenteredagainsttheDefendantsonDecember
5 16,2008intheamountof$628,812.15(the$$
600kJudgment'')byvirtucofthe
6 breachoftheDebtors'contracmalobligationtopayattomey'sfees.SeeExhibit1
7 attachedhereto,whichisatrueandcorrectcopyofthe600kJudgment.
8
l2. ThesecondjudgpentwasenteredagainstDennisL.Montgomeryon
9 July8,2010intheamountof$204,411.00(the$
:200kJudgment'')byvirtueofan
10 awardofsanctionsagainstMr.MontgomeryandinfavorofMr.Flynn.
11
13. TheU.S.DistrictCourtfortheDistrictofNevadaimposedthese
12 monetarysanctionsagainstMr.MontgomeryahertindingthatMr.Montgomery
l3 committedperjuryintheNevadaLitigationwhenheengagedinlitigationtactics
14 againstMr.Flynnin'badfaith,vexatiously,wantonly,andforoppressivereasons.''
15 SeethetrueandcoaectcopyMagistrateJudgeCooke'sGsanctionsOrder''p.
16 49:11-13,atDocketNo.985intheNevadaLitigation,attachedheretoasExhibit2;
17 atrueandcorrectcopyofthe$204,411.
00judgmentisattachedheretoasExhibit
l8 3.
19
IntheSanctionsOrder,theNevadafederalcourtorderedthisawardof
20 sanctionsagainstMr.MontgomeryaAerGndingthatMr.Montgomeryandhis
21 attorneysengagedinascorchedearthlitigationstrategytoensurethathewould
22 neverbepaidonthe600kJudgment.Exhibit2atp.45:21-24Ctnecourt
23 concludesthattheanimosityMr.MontgomeryandMs.BlixsethharboredforMr.
24 Flynnwasacatalystforthelitigationstrategytoinsure-throughanymeans
25 possible-thatMr.Flynnwouldneverbepaidandtocrushhim intosubmissionin
26 theprocess,').
27
Fudher,theSanctionsOrderagainstMr.Montgomerywasthe
28 inevitableresultofMr.Montgomerycommi
ttingperjuryinconnectionwith
-2
AMENDEDCOMPLMNT
CaseNo.2:10-*-01305
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 184 of 295
1 multiplefalsestatementshemadeunderoathintheNevadaLitigation,including
2 butnotlimitedtothemattersrecitedintheSanctionsOrder.
3
16. TheSanctionsOrderagainstMr.Montgomeryhasbeenapprovedby
4 DistrictCourtJudgeProandhhsaccordinglybeenreducedtoajudgment.See
5 Exhibit4,whichisatrueandcorrectcopyoftheorderfrom DistrictCourtJudge
6 ProapprovingMagistrateJudgeCooke'sSanctionsOrderasagainstthe
7 Defendants.
8
Pursuanttosai
dSancti
onsOrder,Montgomeryhasbeenreferredtothej
9 U.S.AttomeyinNevadaforperjury.
'
10
18. TheMontgomels'Chapter7CasewasfiledonJune26,2009,theday
1l onwhichDennisL.MontgomerywasorderedtoappearbeforetheU.S.District
12 CourtfortheDistrictofNevadaforhisDebtor'sExaminationinconnectionwith
13 theabovestatedjudgmentsintheNevadaLitigation.
14
19. Onthatdate,amotionforcontemptandtocompelproductionof
15 previouslyordereddocumentswaspendingbeforetheNevadaFederalCourt(See
16 DocketNos.1061,1075and1076intheNevadaLitigation)asaresultofMr.
17 Montgomery'sfailuretocomplywithpreviouscourtordersrequiringthe
l8 productionofhisfinancialrecords.
19
20. Mr.Montgomeryhadintentionallyandwillfullyconcealedhis
20 snancialrecordsintheNevadaLitigationby,amongotherthings,intentionally I
1
21
22
23
24
25
26
27
28
deletingspecificpagesofhisbankrecordscontainingimagesofhiscancelled
checks,whichwouldestablishwheremillionsofdollamofmoneypaidtohim by
EdraD.Blixsethhadbeenhidden.
21. Plaintiffisintbrmedandbelievesthatmuchofthemillionsofdollars
theDefendantsreceivedfrom Ms.BlixsethhavebeenHudulentlytransferredto
theDefendants'childrenandotherlocations.
22. TheincompleterecordsMontgomerydidproduceintheNevada
Litigationwerecontainedonanelectroni
cdiscconsistingofapproximately900
3-
AMENDEDCOMPLAINT
CaseNo.2:10-&-01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 185 of 295
l pagesinhispossessionatthattimeandatthepresenttime.
23. lnhis341MeetingofCreditorsintheChapter7Case.Mr.
3 MontgomerydeniedpossessionoftheseGnancialrecords.
4
24. TherecordsproducedintheNevadaLitigation,coupledwithFlynn's
5 experienceswithMontgomeryashisformerattorneyestablishanintenttohideor
6 concealassetsintheChapter7case.
7
25. Uponinformationandbelief,basedonsomeofthefnancialrecords
8 thatMontgomeryproducedintheNevadaLitigation,Montgomerypurchased
9 millionsofdollarsinbankchecksfrom moniespaidtohim byEdraD.Blixseth.his
10 partnerinaschemetodeHudtheU.S.Govemment.
1l
26. Mr.MontgomeryandMs.Blixsethwereengagedinaschemeto
12 defraudtheU.S.governmentbypeddlingtotheU.S.Govemmentfraudulent
13 sohwaretechnologypurportedlycreatedbyMr.Montgomerythatcouldallegedly
14 decodesecretAl-oaedatransmissionsbroadcastedovertheAluazeeratelevision
15 network.
l6
Mr.Montgomerypurchasedthesemillionsofdollarsinbankchecksto
17 concealhismoneyandassetsashewasasubjectofafederalcriminalinvestigation
18 andalsoadefendantintheNevadaLitigationtowhichheconfessedto$26.5
19 milliondollarsinjudgmentstothirdparties.
20
21
22
23
24
25
26
27
28
28. TheconcealedcancelledchecksandotherdocumentswhichMr.
MontgomerywasorderedtoproduceintheNevadaLitigationwouldhave
establishedwherethesaidmillionsofdollarshavebeenhiddenbutMr.
MontgomeryinitiatedtheChapter7Caseonthesamedaythathewasorderedto
producethesedocumentssothathecouldcontinueinhispatternandpracticeof
concealingthewhereaboutsofhisassets.
29. Todate,Montgomeryhasnotproducedsaidrecords.Athis341
MeetingofCreditorsonSeptember16,2009,Montgomerystatedthathedidnot
havepossessionofhisrecords.Thisisfa-lse.TheemailssenttoFlynnby
4-
ACME
NDEDCOMPLMNT
ascNo.2:10-&-01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 186 of 295
1 Montgomery'slawyersatthelaw517T1ofLosAngeleslaw517nofLiner,
Yankelevitz,Sunshine& RegenstreifinJune,2009relatingtoapendingmotionfor
contemptagainstMr.MontgomeryplainlyrevealthatMontgomerywasin
4 possessionofhisfnancialrecordsandhadpreparedtheelectronicdiscthathe
5 producedintheNevadaLitigation.
FIQSTCLMM FORRELIEF
(ExceptiontoDischargeabilityofDebtpursuantto1lU.S.C.j523(a)(6))
8
30. Plaintiffrestatesa11previousallegationscontainedherein.
9
31. 0nitsface,theSanctionsOrderwhichwasreducedtothe200k
10 Judpnentestablishesconclusivelythatthe$204,411.00sanctionsawardagainst
l1 Mr.MontgomeryandinfavorofPlaintiffwasadebtincurredbyMr.Montgomery
I2 toPlaintiffasaresultofwillfulandmaliciousinjurypemetratedbyMr.
l3 MontgomeryagainstPlaintiff.
14
32. AsMagistrateJudgeCookestatedandasratifiedbyDistrictCourt
15 JudgePro,ltlhecourtconcludesthattheanimosityMr.MontgomeryandMs.
16
17
18
19
20
BlixsethharboredforMr.Flynnwasacatalystforthelitigationstmtegytoinsurethroughanymeanspossible-thatMr.Flynnwouldneverbepaidandtocrushhim
intosubmissionintheprocess.''
33. AssetforthintheSanctionsOrder,thelitigationstrategyagainst
PlaintiffemployedbyMr.Montgomerytotcrush''PlaintiffintoSsubmission''
21 involvedMr.Montgomerysubmittingperjureddeclarations,initiatingIitigationin
22
23
24
25
26
27
28
CaliforniatocircumventadversemlingsintheNevadaLitigation,slingafrivolous
complaintagainstPlaintiffwiththeStateBarofM%sachusetts,andinitiatinga
frivolousfeearbitrationdisputewiththeSanDiegoCountyBarAssociation,allfor
thepurposeofimpugningPlaintifpsprofessionalreputationandcollaterally
attackingthe600kJudgment.
34. AsaresultofthisstrategyonthepartofMr.Montgomeryto'tcrush''
Plaintiffintosubmission,MagistrateJudg
eCookeproperlyfoundthattherewas
5-
CascNo.2:10-AP-0l305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 187 of 295
tsclearandconvincingevidencethatMr.Montgomerycommittedperjuvwhenhe
2 signedtheSeptemberl0,2007declamtion,andthathesignedthedeclarationinbad
3 faith,vexatiously,wantonly,andforoppressivereasons.Ms.KlarandMs.Pham
4 (Mr.Montgomery'sattomeys)filedthisperjureddeclarationinthecourtandin
CalifomiaSuperiorCourt.Theyalsousedtheallegationscontainedthereininthe
6 SanDiegofeearbitrationpetitionandtheMassachusettsBarcomplaint.Thisnot
7 onlyresultedinthedelayanddisruptionofthisproceeding;itwasmotivatedby
8 vindictivenessandbadfaithanddemonstratescontemptofthiscourt.''Exhibit2at
9 49:11-17.
10
35. HavingfoundthatMr.Montgomeryengagedinthisdtvindictive''1
11 oppressive'',S'vexatious''andmaliciousconducttheU.S.DistrictCourtforthe
12 DistrictofNevadaawardedthe200kJudgmenttoPlaintifffortheinjuryhesuffered
13 indefendinghimselfagainstMr.Montgomery'smaliciousness.
14
36. Wherefore,becausethedebtowedtoPlaintiffbyMr.Montgomeryas
15 representedbythe200kJudgmentwasobtainedthroughwillfulandmalicious
16 conductbyMr.Montgomery,thedebtowedunderthe200kJudgmentshouldbe
l7 exceptedfrom dischargepursuantto11U.S.
C.j523(a)(6).
I8
19
20
(ExceptiontoDischargeabilityofDebtpursuantto11U.S.C.j523(a)(2)(A)) '
Plaintiffrestatesallprcviousallegationscontainedherein.
2
1
3
8
.
T
h
e
6
0
0
k
J
u
d
g
m
e
n
t
a
g
a
i
n
s
t
t
h
e
D
e
f
e
n
d
a
n
t
s
w
a
s
a
w
a
r
d
e
d
t
o
P
l
a
i
n
t
i
f
f
i
n
j
22 theNevadalitigationforunpaidlegalfeesthatDefendantsowedtoPlaintiffforthe
1
23
24
25
26
27
legalservicesheprovidedtotheDefendantsintheNevadaLitigationpriortohis
withdrawalofhisrepresentationofthem.
39. DefendantsretainedPlaintifpslegalservicesintheNevadaLitigation
underfalsepretensesandfalserepresentationsregardingthevalidityandownership
ofcertainsowarethatMr.Montgomerypumonedlydevelopedandowned,and I
28 whichallegedlycoulddecodesecretAl-o
a-edamessagesembeddedinbroadcast l
-6
ACME
NbEDcouptxN'r
aseNo.2:l0-AP.01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 188 of 295
I transmissionsoftheAl-lazeeranetwork.
2
40. AsofSeptember-December,2005,Montgomerywasapartowner I
3 andemployeeofe'
rreppidTechnologiesinReno,Nevada;butwastheninthe
4 processofbeinginvestigatedandexposedbye'rreppidemployees,software
5 engineers,andtheFBIinconnectionwiththecreationandpeddlingofhis
l
l
I
1
6 fraudulentAl-oaedadecodingsohware,andthepotentialdefraudingoftheU.S.
7 Government.ThesefactsarecontainedinFBIreportspreparedinconntionwith
8 asearchandseinlreofMontgomery'shouseandstorageunitsonfileintheNevada
9 DistrictCourt.SeeUnitedStatesDistrictCourtfortheDistrictofNevada,search
10 andseizureproceedingsinthecaseoflnReBuckthom,3:06-cv-263(PMP,VPC).
l1
41. EvidencedisclosedbytheFBIandunsealedonSeptember,172007in
12 theNevadaLitigationstronglysuggeststhatMr.Montgomeryduringhis
13 employmentateTreppidrepresentedtotheU.S.Govemmentbymeansoffake
14 testingandvalidationproceduresthathissohwarecouldinfactdecodesecretA1-
15 QaedatransmissionsembeddedinAl-lazeerabroadcasts.
16
18
19
20
21
22
42. HavingpurportedlyvalidatedthissohwaretotheU.S.Government
dudnghisemploymentate'
Treppid,Mr.Montgomeryandnon-partyMichael
Sandovalthensoldthefraudulentlyrepresentedtechnologytonon-partyEdraD.
Blixsethwhotheybelievedcouldgetlucrativegovemmentcontractsforthe
softwarethroughherpoliticalconnectionsintheBushAdministration,
43. Speciflcally,betweenSeptember,2005andJanuary18,2006,Mr.
Montgomerywasthenplanningandactivelyengagedintakinge'rreppid's
23 technologywithhimtosellittoMichaelSandovalandEdraD.Blixseth.
24
44. HavingbeenexposedinNovember.2005forfraudulentconduct
25 involvingfaketestingproceduresate'
rreppidinaschemetodefraudtheU.S.
26 govemment,onoraboutJanuaryl8,2006,Montgomerydepadede'rreppid.
27
45. Mr.MontgomeryandMichaelSandovalconvincedMs.Blixseththat
28 theAl-oaedadecodingsohwarewhichMr
.Montgomerypumortedlydeveloped
-7XckE
NDEDCOMPLAINT
aseNo.2:10-U-01305
I
i
!
l
I
l
I
:
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 189 of 295
andwhichMr.Sandovalclaimedtohaveowned90% of,waslegitimate,andthat
2 theU.S.governmenthadappropriated$l00millioninaHblackbudget''tobuyit.
46. Duringthesametimeframe,Mr.Sandoval'schiefscientisthad
4 advisedSandovalthatMr.Montgomerywasmisrepresentinghistechnology;and
5 thatitdidn'tinfactdecodeAl-oaedamessagesbutwasacompletesham.
6
7
8
9
10
11
47. WhileknowingthatMontgomeryandSandovalwereschemingtotake
whatevertechnologyeTreppidthenpossessedwhichwouldresultinthepumoded
paymentofS100milliondollarsfromtheU.S.Govemment,Ms.Blixsethagreed
withMontgomeryandSandovaltosnancenewcompaniestoacquirethissoftwarek
srstAzimyth,LLC,andX-pattemsLLC,thenOpspring,LLC,andlaterBlxware
LLC.
12
48. lncreatingthesenewentitiestoobtainownershipoftheAl-oaeda
thesenewcompaniesownedtheAl-oaedadecodingsoftware,thather
l8 tsconnections''totheBushAdministrationwouldguarantythattheyreceivedthe
19 paymentofthe$100milliondollarsthattheU.S.Govemmenthadpuportedly
20 allocatedforthatsoftware.
50. SandovalfalselyrepresentedtothegovemmentduringtheFBIsearch
22 proceedingsinNevadaandlatertoPlaintiff,thathehad$$90% ofthetechnology''
23 beforeMontgomerybecameanemployeeofOpspringLLCinearlyApril,2006.
24 Ms.BlixsethconsrmedthesefalsefactstotheBushadministration.
25
51. OnJanuary18,2006,Montgomerydepartede'rreppidandtookthe
26 fraudulentsohwarewithhim.
27
52. OnJanuary18,2006,e'FreppidsuedMontgomeryintheReno
28 SuperiorCourtclaimingMontgomerysto-lethetechnology,deletedordestroyedit
8-
ACME
NDEDCOMP.I
AINT
ascNo.2:I0-&.
01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 190 of 295
offalle'
rreppidcomputers,andrequestedapreliminaryinjunctiontopreventMr.
2
3
4
5
6
Montgomeryfromusing,conveying,borrowingagainst,orevendiscussingthe
technology.
53. OnJanuary23,2006,PlaintiffmetandspokewithMr.Montgomery
forthefirsttime.Shortlythereaher,MontgomeryretainedPlaintiff.Forthe
ensuing18months,Mr.Montgomeryspunthesamewebofliesandfraudto
7 PlaintiffregardingtheownershipandvalidityofthepurportedAl-oaedadecoding
8
9
10
l1
12
13
14
15
16
17
l8
19
soqwarethathespuntotheU.S.governmentandtothecourts.
54. OnFebnlary7,2006,theRenoSuperiorCourtconducteda12hour
evidentiaryhearinginwhichMr.Montgomerytestifiedunderoaththathedidnot
takeanytechnologywithhim whenbele;thatthetechnologyself-destmcted
pursuanttogovemmentrequestedsecurityprotocols;thatthetechnologyderived
from hiscopyrightswhichhadneverbeenconveyedtoerrreppid;andthatitwas
usedinttop-secret''govemmentprograms.
55. VirtuallyeverythingMontgomerysaidunderoathwasfalse.
MontgomerymadethesamefalserepresentationstoPlaintiffandhisotherfour
lawyersduringtheirrepresentationofhim.ThecasewasremovedtotheNevada
FederalCourt.ThetechnologynowclaimedonhisbankruptcySchedulesinthe
Chapter7Casehavingavalueof$10milliondollars,andthepumortedS
source
20 codes'fortheteclmologyisthesubjectoftheforegoingfalsetestimony;andwas
21 thesubjectofintensivelitigationintheNevadaLitigation.
22
56. TheNevadaFederalCourtenteredmultipleordersagainstMr.
23 MontgomerytoproducetheSt
sourcecodes'forhispurportedAl-oaedadecoding
24 sohware.HeandMs.Blixsethdefiedtheorders.
25
57. MontgomerydeGedtheordersbecausethettsourcecodes''would
2
6demonst
ratehi
sfr
aud.Ahermont
hsofevi
dentiaryhearingsforcontempt,the j
27 NevadaDistrictCourtimposedsanctionsagainstMontgomery,Blixseth.and
I
I
28 Blxwareattherateof$2,500perdayinJuly,2008untilMontgomeryproducedthe .1
9j
ACMas
EeNNDoE
D
C
O
M
P
L
A
I
N
T
j
.2:l0-A.
P-01305
j
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 191 of 295
l tsourcecodes.''Heneverdid.
2
58. MontgomeryandEdraBlixseththenconfessed$26.5millionin
3 judgmentstotheeTreppidpartiesinordertocircumventthecontemptsanctions
4
5
6
7
8
9
l0
11
andtoconcealthefraud.
59. Montgome? hadinfacttakenfrom e'rreppidwhatevertechnologydid
exist.InaSeptember5,2008hearinginvolvingMontgomery'sfalseaccusations
againsttheFBI,theLinerf117nwascompelledtoadmitthatMontgomerymade
falsestatementsunderoath-theyusedtheterm tmistaken.''Inthesubsequent
settlementwitheTreppidonoraboutSeptember17,2008,Montgomeryadmittedto
otherfalsehoods,includinghisfabricationofemailsimplicatingeTreppidandthe
GovernorofNevadainabriberyschemetoobtaingovemmentcontmcts.
12
60. Montgomerymadenumerousperjuredstatementsinfalsedeclarations
13
14
l5
16
17
18
l9
inordertodefeatthesearchbytheFBIandtoobstructdiscove? intheNevada
Litigation.TheFBIinvolvementaroseoutofMontgomery'sall
egedthehofthe l
i
softwarefrom eTreppid.
61. OnMarch1,2006,theFBlraidedMontgomery'shomeseekingthe
sohwaretnkenfrom eTreppid,includingthesourcecodesi''andt%classitsed
information''Montgomerytookwithhim whenhelefte'rreppid.Theyseizedhis
computersandothermaterials.
i
20
62. OnMarch3,2006,theFBlraidedMontgomery'sstoragefacilities I
l
21 seizingextensiveelectronicmedia,includingharddrives,DVD'SandCD's.But '
l
22 thebulkofthetechnologyandothermaterialtakenfrom e'Treppid,Montgomery
23 hadconcealedwithafriendofhi
sdaughterandfuture(nowpresent)son-in-law,
24 IstvanBurgyan.
25
63. BetweenJanuary,2006andApril.2007,whenSandoval,MontgomeryI
26 andBlixsethattemptedtoobtainthe$100millionblackbudget'',Flynnwas
27 representingMontgomerybutdidNOTknow thatthetechnologywmsfraudulent.
28 thatMontgome? wasapathologicalliar,thatMontgome? hadinfacttaken
10-
AMENDEDCOMPLAN
C- No.2:11M-01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 192 of 295
1 technologyfrom e'Treppid,thatbothMontgomeryandSandovalhadahistoryof
2 tryingtomarketandsellfraudulentsoftwaretechnology,andthatMontgomerywas
lyingabouthowmuchmoneyhehadreceivedfromBlixsethandwhathewasdoingI
4 withit.
5
64. Morespeciscally,betweenApril,2006andDecember,2006in
6 RanchoMirage,California,inReno,Nevada,inperson,indocuments,in
declarationsandemails,Montgomeryvigorouslyrepresented,claimed,andstated
8 toPlaintiffthefollowingfacts:thatthet
blackbudget'Al-oaezntechnologywas
9 exclusivelycreated,developed,ownedanduse solelybyhimateTreppid;thatthe
10 Al-oaedainterceptsanddecodingwerevitaltonationalsecuri
ty;thate'
Treppid
ll neverhadanyownershiporproprietaryinterestinthesourcecodesforthe
12 purportedAl-oaedasoftware;thathehadnevertakenanyofthee'
Freppidsource l
!
13 codesfrom itspremises;andthatasaco-ownerofe'rreppid,hispossessionof
14 certainharddrivescontainingemailsandothermaterialsinvolvingthebriberyof
15 GovernorGibbonscopiedttovertheyears''belongedtohim.Montgomerymade
16 t
heserepresentati
onsandotherstotheNevadaFederalCourti
nordert
odef
eatt
hei)
17
18
19
20
21
22
23
FBIsearchandseizureeffortsandtodefeattheclaimsofe'rreppid.These
representationswereal1false,buttheirfalsitywasnotknowntoPlaintiffduringhis
representationofDefendants.
65. TheseconstimtedcriticalrepresentationsrelieduponbyPlaintiffand
otherlawyersworkingfortheDefendantsthroughout2006untilJune,2007,when
theywithdrew.
66, Therepresentationsabovewereplacedinsworndeclarationsexecuted
24 byMontgomeryunderthepenaltiesofperjury;andmanyofthemweresrst
25 testifiedtounderoathbyMontgomeryonoraboutFebruary7,2006inReno,
I
I
26 Nevadainapreliminaryinjunctionhearing,whichwasthenissuedagainst
J
27 Montgomery.Correspondingly,Mr.Montgomerymadethesemisrepresentations I
i
28 underoath,andinsworndeclarations,an-dtoPlaintiffforthepumoseofinducing
l1!
ausxoEocoMpualx'r
l
CaseNo.2:l0-AP-01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 193 of 295
him andlawyersworkingforhimtoprovidelegalservices.
2
67. lntruth,althoughMontgomeryhadconveyedwhatevertechnologyhe
3 didpossesstoOpspringLLCandBlixseth,includinghiscopyrights.henever
4 conveyedanyAl-oaedadecodingsohwarebecauseitdoesnotandneverexisted.
5
6
7
8
9
10
11
12
13
68. AsaresultofMr.Montgomeryintentionallymakingthesefalse
representationstoPlaintiff,forthepumoseofinducingPlaintifftoperform legal
servicesforhim,PlaintiffinfactperformedlegalservicesfortheDefendantsbut
hasnotbeenpaidbyMr.Montgomeryforthesese>ices,andthisoutstanding
paymentowedtoPlaintiffhasbeenreducedtothe600kJudgment.
69. Wherefore,becausethe600kJudgmentrepresentsadebtowedto
PlaintiffbyDefendantswhichwasobtainedthroughintentionallyfalsestatements
andpretensesuponwhichPlaintiffreasonablyrelied,thesmountsowedtoPlaintiff
underthe600kJudgmentshouldbeexceptedfromdischargepursuanttollU.S.C.
14 j523(a)(2)(A).
15
16
(ObjectiontoDischargePursuanttol1U.S.C.j727(a)(4)(A),(D))
17
18
70. Plaintiffrestatesa1lpreviousallegationscontainedherein.
71. TheDefendantsfalselylistontheirbankruptcyschedulesthatthe
19 fraudulentAl-oaedadecodingsoftwareisworth$l0million.
20
72. Infact,theDefendantsknowt
hat.theAl-oaedadecodingsoftware
21 listedbytheDefendantsontheirbankmptcyschedulesasanassetisfraudulentand
22 thereforeworthzero.
23
73. Defendantshavethereforemadeafalseoathinconnectionwiththe
24 Chapter7Caseandtheirdischargeshouldthereforebedeniedpursuantto11U.SC.
25 j727(a)(4).
26
74. TheDefendants'representationintheirSchedulesthattheyown
27 copyrightassetsvaluedat$10millionintheirSchedules,isriddledwithfraud.
28 EdraD.BlixseththroughOpspringLLC-purportedlypurchasedal1of
12-
AMENDEDCOMPLAINT
CaseNo.2:10-H-01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 194 of 295
Montgomery'ssohwareintellectualpropertyinApril,2006,inconsiderationofthe
2
3
4
5
6
7
paymenttohimof$3.3millionandasalaryof$100,000permonth.Thissalewas
laterconfrmedbytheLiner51711againin2007whenPlaintiffwithdrewfrom
representingMontgomery;andwhiletheLinerfrmwasrepresentingboth
MontgomeryandBlixseth.
75. Inaddition,andasdiscussedabove,Mr.Montgomerysubmitteda
falseoathinthesebankruptcyproceedingsduringhis34lMeetingofCreditors
8 whenhestatedthathedidnothavepossessionofhisfinancialrecords,wheninfactj
9
l0
1l
12
13
14
15
16
17
hedidhavepossessionofhissnancialrecordsbutrefusedtoacknowledgethis
becauseofhison-goingdesiretoconcealhisassetsfromhiscreditors.
76. PlaintifisfurtherinformedandbelievesthatDefendantshave
submittedafalseoathintheChapter7Casebyintentionallyfailingtodisclosethe
existenceandlocationofcertainassetsthattheyhaveconcealedasdiscussedbelow
andspeciscallythemoniesthatDefendantshavereceivedfrom the$3.3million
and$100,000monthlysalarytheyreceivedfrom Ms.Blixseth'sentitiesfromApril
of2006untilMarchof2009.
Wherefore,totheextentthattheDefendantsincludethefraudulentAl-
18 QaedadecodingsohwareintheirbankruptcySchedulesasanasset,submitteda
19 falseoathbyden/ngpossessionofhissnancialrecordsathis341Meetingof
20
21
22
23
Creditors,andsubmittingafalseoathbynotdisclosingtheexistenceandlocation
ofconcealedassets,Defendantshaveintentionallysubmittedfalseoathsin
connectionwiththeChapter7Case,andhavewithheldfinancialinformationfrom
theirChapter7Trusteeandmustthereforehavetheirdischargedeniedpursuantto t
l
a
4 ,27(a)(4)(A),(o). FOURTHCLAIM FORRELIEF
l
25
1
'
26
(ObjectiontoDischargePursuanttollU.S.C.j727(a)(4)(A)(B)) l
l
27
78
11Previousallegationscontainedherein.
1
Plaintifrestatesa
l
28
79. PlaintiffisinformedandbelievesthattheDefendantshavepresented 1
.
.
l3
AC
Mas
E:
NNqo
E
O-L1A3mT
.D
2:C
II
AM
PP
-0
05
)
i
:
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 195 of 295
l anintentionallyfalseclaim intheChapter7Casebylistingalegalmalpractice
2 claim againsttheLinerlaw51113intheamountof$26.5million.
3
80. Asdiscussedabove,theLinerlawfirm representedtheDefendantsin
4 theNevadaLitigationandinthatLitigationMr.Montgomerywassubjectedtoa
5 contemptorderinJulyof2008requiringhimandMs.Blixsethtopay$2,500per
6 dayuntilheproducedthesourcecodesforhisfraudulentAl-oaedadecoding
7
8
9
10
11
12
software.
81. BecauseMr.MontgomeryknewthatthesoAwaredidnotexist,he
couldnotproducethatsohwareandberelievedofthecontemptorderagainsthim
andMs.Blixseth.
82. Thus,toescapethecontemptorderthattheyknewtheycouldnot
complywith,theDefendantsandMs.Blixsethdecidedshortlythereahertosettle
13 withthePlaintiffsinthatcasebyconfessingjointlyandseverallyto$26.5million
14 injudgments.
83. TheLiner1aw5rf11representedboththeDefendantsandMs.Blixseth
16 innegotiatingandexecutingthesettlementthatresultedinthe$26.5millionin
17 judgmentsbeingconfessedto.
18
84. TheDefendantsconfessedtothesejudgmentsbelievingthatthey
19 wouldnothavetoactuallysatisfythejudgmentsbecausetheyhadsuccessfully
20 concealedtheirassetsasdescribedhereinandbecausetheybelievedMs.Blixseth,
21 whowasallegedlyworthatleast$500millionatthetime,wouldsatisfythe
22 judgmentswithherassets.Thus,theDefendnntsknowthatthe$26.
5millionlegal
23 malpmcticeclaim againsttheLiner1aw t1n11aslistedintheirschedulesinthe
24 Chapter7Caseisafalseclaimbecauseitstemsfrom theDefendantsown
25 intentionallyfalserepresentationstotheNevadafederalcourtandnumerousthird j
26 partiesregardingtheexistenceandvalidityoftheAl-oaedadecodingsoftware.
27
85. Wherefore,theDefendants'dischargeshouldbedenivdpursuantto11
28 US,C.9727(a)(4)(A),(B)becausetheyh
a
veintentionallylistedafalseclaim
-1
4AMENDEDCOMPLAINT
CaseNo.2:10-AP-01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 196 of 295
1 againsttheLinerlawllrm intheirbanknlptcyschedules.
2
FIFFH CLM M FOR RELIEF
(ObjectiontoDischargePursuantto1lU.S.C.#727(a)(2))
4
86. Plaintiffrestatesallpreviousallegationscontainedherein.
5
87. WithinoneyearpriortotheChapter7Case,Mr.Montgomeryhas
6 intentionallyconcealed,transferredorcausedtobetransferred,propertyofthe
estateandthereforehisdischargeshouldbedeniedpursuantto11U.S.C.j
8 727(a)(2).
9
88. Asdiscussedabove,beginninginAprilof2006,Mr,Montgomery
10 received$3.
3millionfrom OpsringLLCandreceiveda$l00,000permonthsalary
from Ms.Blixseth'sentities.
12
89. Uponinformationandbelief,thissalarycontinueduntilatleastMarch
13 of2009,
14
90. AsMontgomeryreceivedhissalary,heusedthosefundstopnrchase
15 bankchecksforthepurposeofbreakingthechainofbanktransfersandtraceable
16 checkswhichwouldrevealwhereheultimatelydisposedofhiscash.
l7
91. Montgomerythencashedthebankchecksinvariouscasinosand
l8 purchasedchipslaterconvertedtocashbyttstreetbrokers'',allaspartofhisscheme!
1
19 toconc
ealasset
sfromhi
scredi
torsandl
eavenomeanstot
racethef
lowofhi
scash.j
92. Withrespecttothe$3.3millionthatMr.Montgomeryreceivedfrom 1
l
20
21
22
23
24
25
26
27
OpspringLLC,PlaintiffisinformedandbelievesthatMr.Montgomerysimilarly 1
,
concealedandtransferredthesefundsthroughhisschemeofpurchasingbank
checksandcashingthem atcasinosinLasVegasforchipsandthenconverting
thosechipstocashthroughstreetbrokeD.
93. Plaintiffisfurtherinformedandbelievesthatwiththemoneyhe
receivedfrom Ms.Blixsethandherentities,Mr.Montgomerypurchaseda
condominium forhisdaughterandherspouse,lstvanBurgyanfornoconsideration j
f
28 toMr.Montgomeryandindoingso,reta
nedasecretownershipinterestinthe I
-i
ACME
NDED1
c5
kil-Afs'r
aseNo.2:l0-AP-0!305
j
l
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 197 of 295
1
2
3
4
5
condominium forthepurposeofhidingsuchassetsfromhiscreditors.
94. PlaintiffisfurtherinfonnedandbelievesthattheDefendantsdebtors
haveusedIstvanBurgyanasanaccomplicetoconcealassetsbyhavinghim either
openbankaccountswiththeconcealedcash,and/orhavinghimconcealthecashin
hiddenlocations.UponinformationandbeliefsIstvanBurgyanproducedover
6 $100,000ofthisconcealedcashtobailDennisMontgomeryoutofjailaher
7
8
9
10
ll
12
13
Montgomerywasarrestedonafugitivewarrantfordefraudingcasinos.
95. PlaintiffisinformedandbelievesthatMr.Montgomery'sintentional
actstotransferandconcealmssetsasdiscussedaboveweredonetohinderanddelay
Mr.Montgomery'screditorsandbeganinAprilof2006andcontinueduntilatleast
Marchof2009.
96. PlaintiffisfurtherinformedandbelievesthattheDefendants'scheme
tohide%setsfromtheircreditorsalsomanifesteditselfthroughthemechanismof
14 obtainingequitylineofcreditloanssecuredbyhisrealestateassetsandsiphoning l
15
16
17
18
19
20
21
22
23
thecashadvancesfrom thoseequitylineofcreditloansintothesamebankcheck
schemedescribedabove.
97. Plaintiffisfurtherinformedandbelievesthatthroughthedoctrineof
continuingconcealment,theDefendantshaveretainedanownershiporsecret
interestintheassetstheyhavetransferredandconcealedasdescribedhereinsince
Aprilof2006untilatleastMarchof2009.
I
98. Plaintiffisfurtherinformedandbelievesthatfrom atleastAprilof
2006toatleastMarchof2009,Defendantsengagedintheircontinuing
I
concealmentandtransferofassetsbecausetheyknewthewholetimethattheAI-
24 QaedadecodingsoftwareMr.MontgomerywaspeddlingwmsacompleteshamandI
25 thateventuallytheirfraudwouldberevealedandwouldhavesignificantliabilitytoI
26 paythepartiestheydefraudedalongtheway.
27
99. Theirintentionalconcealmentandtransferofassetsfrom atleastApril
28 of2006untilatleastMarchof2009was-theirmechanism foravoidingtheir
16-
C>eNo.2:10-&-01305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 198 of 295
inevitableliabilityfortheirfraudasdescribedherein.
2
100. Further,andasdiscussedabove,intheNevadaLitigationMagistrate
3 JudgeCookespeciscallyfoundthatMr.Montgomeryhadintentionallycommitted
4 perjuryandengagedinvexatiousandobstmctivebehaviorforthegoalof
5
6
7
8
9
10
11 theirdischargeshouldthereforebedeniedpumuanttol1U.
S.
C.j727(a)(2).
12
13
(ObjectiontoDischargePursuantto1lU.S.
C.j727(a)(3))
14
l5
16
17
18
19
20
21
22
23
24
25
102. Plaintiffrestatesal1previousallegationscontainedherein.
103. Asdiscussedabove,intheNevadaLitigationMr.Montgomerywas
orderedbytheU.S.DistrictCourtfortheDistrictofNevadatoproducehis
financialrecordssothatPlaintiffcouldascelainthelocationofhisassetsCorthe
pumoseofcolltingonthe600kJudgment.
104. Mr.Montgomeryfailedtocomplywiththisorderbyomittingfromthe
financialdocumentsthatheproduced,thespeciscpagesofthosefinancial
documentswhichwouldreflecthiscancelledchecksandtransfers,whichwould
establishwheremillionsofdollarsofmoneypaidtohimbyEdraD.Blixsethhad
beenhidden.
105, WhentheseomissionswerebroughttotheattentionoftheNevada
federalcourt,thecourtorderedMr.Montgomerytopersonallyappearbeforeitfora
26 judgmentdebtor'sexambutonthedayofthatexam,theDefendantsfiledthe
27 Chapter7Case,therebypemetuatingtheircontinuingconcealmentofassetsand
28 recordsfrom theircreditors.
17-
cascNo.2:!t
wAp(
)13c5
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 199 of 295
Mal
nDocumentPage19of21
1
106. Todateanduponinformationandbelief,theDefendantshave
2 intentionallyfailedtoproduceandhaveconcealedthefinancialdocumentsthatthey
3 refusedtoproduceintheNevadaLitigationtotheirChapter7Trusteeinthe
4 Chapter7Case
5
107. Wherefore,DefendantshaveintentionallyconcealedtheirGnancial
6 documentsandtheirdischargeshouldthereforebedeniedpursuanttollU.S.
C.j
7 727(a)(3).
8
PRAYERFORRELIEF
9
WHEREFORE,plaintiffonbehalfofhimselfandal1creditors,requeststhat
10 theBnnkruptcyCouMenteranOrderprovidingforthefollowingrelief:
11
(a) Determinationthatthedebtsofallcreditorsarenon-
l2
l3
dischargeableunderj727oftheBankruptcyCode;and/or
(b) Determinationthatthedebtsowedtoplaintiffarenon-
14
dischargeableunderj523oftheBankruptcyCode;and/or
15
(c) Forallcostsincurredherein,includingattomeysfeesandcosts;
16
(d) ForsuchotherandequitablereliefasthisCourtdeemsjustand 1
l7
18
equitable.
Datedthis16thdayofJuly,2009
2
10
9
2l
22
CONANTLAW LLC-.
23
By:/s/Christo herJ.Conant
chnstoplwrJ.cpnantEs.
24
25
26
27
28
'N-
AttomeysforMlchaefJ.lynn
-1
8-
W ENDEDCOMPLAINT
CaseNo.2:IINAP-OI305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 200 of 295
Case2:10-ap-01305-BB DMa
oqln54
l
edn0
1g
0e2E0nt
e1
d07/16/1013:
40:06 Desc
DocF
ui
me
t7/16P/a
oe
fr
2
Inre:lnre;
D
ENNISLEEMONTGOMERY.andBRENDAKATHLEENMONTGOMERY'
De
btors
CHAPTER 7
CASENUMBER10-18510;Mv.No.1141305
MICBAELJ,FLYNN,anIndi
vi
dual,
Pl
ai
nti
ff
V.
DENNISMONTGOMERY,
BRENDAXNTGOMERY,
Defendanl.
NOTE:Whenusingthlsformtoi
ndi
cateserviceofaproposedorder,DONOTli
stanypersonorenti
tyinCategory1.
Proposedordersdond generateanNEFbecauseonlyordersthathave
beenenteredareplacedontheCM/ECFdock
et.
PROOFOFSERVICEOFDOCUMENT
lamovertheageof18andnotapartytothisbankruptcycaseoradversaryprMAeding. Mybusinessaddressis:
AtrueandcorredcopyoftheforegoingdumentsdescribedasAmendedComplaintwithexhibitswi
llbeservedorwas
s
er
vw:
ed(a)onthejudgeincbambersintheformandmannerrmuiredbyLBR5005-2(d);and(b)inthemannerindi
cated
be
l
o
1.TOBESERVEDBYTHECOURTVlANOTICEOFELECTRONICFILING(''NEF'I-PursuanttocontrolingGeneral
O
rderts)andLocalBankruptcyRulets)OLBR/),theforegoingdocumentwillbeservedbythecoud#iaNEFandhyperlink
tothedocument.OnJune15,2010,IcheckedtheCM/ECFdocketforthisbankruptcycaseoradversaryproedingand
determinedthatthefollowingpersonls)areontheElectronicMailNoticeListtoreceiveNEFtransmissionattheemail
addresstes)indicatedbelow:
ThomasMGeher tmg@jmbm.
com
JasonMRund trustee@srlawyers.com,jrund@ectepiqsystems.com
UnitedStatesTrustee(LA) ustpregionl6.la.ecf@usdoj.gov
Z Servi
ceinformationconti
nuedonattachedpage
II.SERVEDBYU.S.MAILOROVERNIGHTM-All-tindicatemethodforeachnersonorentitvservedk
O
nJuly7.2Q10,$se-edthef
olsowingpeoonls)and/orentitylkes)atthelastknownao
dp
de
rei
snst
es)int
hisbankruplcycase
oradversaryproceedingbypl
acingatrueandcorreclcopythereofinasealedenvel
theUni
tedStatesMail,first
c
s
eaqla
d
anth
d/
ruw
ite
hw
an
ov
rn
ght
lns
r
ic
ssh
eodua
ote
llo
Loi
scti
h
ei
gd
e.hereconstitutesa
dl
eacsl
a,
rap
to
ios
nta
tg
he
atp
mr
ini
g,to
eoj
dg
illb
eec
ol
mp
l
em
tea
di
oel
avt
ee
rta
hd
ad
nre
24
rssaf
f
rw
ths
e.d
unmget
nt
sju
fd
i
le
StevenRSkirvinandWi
lliam E.Crockett
Di
on-Kindem&Crockett
21271BurbankBlvdSte100
Woodl
andHills,CA91367
CounselforDefendants
Raphael0.Gomez
U.S.DepartmentofJustte
20MassachusettsAvNW/POBox883
Washington,DC20044
CounselforInterestedPady,U.S.Government
Thi
sformi
smandatory.Ithasbnapprovedf
orusebyttUnitedStat eankruptoyCouftforth@Cent
ralDl
sbidofCali
fomi
a.
J.nuaryzoog
F9013-3.1
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 201 of 295
Case2:1O-ap-013O5-BB DMa
oqln54
l
edn0
10
te
ed
DocF
ui
me
t7/16
P/a
ge2E1no
fr
2
107/16/1013:40:06 Desc
lnre:Inre:
DENNISLEEMONTGOMERY,andBRENDAOTHLEENMONTGOMERY,
Debt
ors
CHAPTER 7
CASENUMBER10-18510:Adv.No.10-01305
MICHAELJ.FLYNN,anindMdkl
al,
Pl
ainti
;
v.
DENNISMONTGOMERY,
BRENOAMONTGOMERY,
Defeeants.
IZIServiceinformationconti
nuedonatlachedpage
111.SERVEDBYPERSONALDELIVERY.FACSIMILETRANSMISSIONOREMAIL(ind-ic.atemethodforeachDersonor
enti
tvserved):PursuanttoF.R.Civ,P.5and/orcontrollingLBR,on
I served the followi
ng
personts)and/orentityti
es)bypersonaldelivery!or(forthosewhoconsentedinwritingtosuchservicemethod),by
facsimiletransmissionand/oremailasfollows.Llstingthejudgehereconstitutesadeclarati
onthatpersonaldeli
veryon
thejudgewillbecompletednoIaterthan24hoursafterthedocumentisfiled.
EIservi
ceinformationcontinuedonattachedpage
Ideclareundq naltyofperjuryundertheIawsoftheUnitedStatesofAmericathattheforegoi
ngistrueandcorrect.
-11
$' 'CJ
Dat
ame
k*' 1:n
p
s/gnature
Thlsformi
smandatory.IthasbeenapprovedforklsebytheUni
teuStatesBankruplyCourtfortheCentralDistri
ctQfCal
ifornia.
January2x:
F9013-3.1
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 202 of 295
E xh ib it
J
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 203 of 295
Montgomery
)
)
MichaelJ.Flynn,
)
)
Plaintiff,
)
)
)case No.:2:10-bk-18510-bb
)
DennisLeeMontgomery and )
Brenda KathleenMontgomery, )
)
Defendants.
)
)
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 204 of 295
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
(303) 298-1800
For the Defendants:
DION-KINDEM & CROCKEIT
Attorneys at Law
BY: WILLIAM E.CROCKETT, ESQ.
LNR Warner Center
21271 Burbank Boulevard
Suite 100
Woodland Hills,California 91367-6667
(818) 883-4400
YATES COURT REPORTERS
800.669.1866
Paqe 2
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 205 of 295
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
(202) 514-4522
Also Present:
Michael J.Flynn, Esq.
Sharon Raya, Paralegal to Ms.Wells
Page 3
YATES COURT REPORTERS
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 206 of 295
09:43:32 1
2
3
4
09243:37 5
6
7
8
9
09:43:51 10
11
12
13
14
09:44:03 15
16
17
18
19
09:44:16 20
21
22
23
24
09:44:30 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 207 of 295
09:44:30 1
2 surewecantakeitupwithajudge.
3
4
09:44:36 5
6
7
8
9
09:44:44 10
11
12
13
14
09:44:53 15
16
17
18
19
09:45:00 20
21
22
23
24
09:45:14 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 208 of 295
09-O0O
14-RBK Doc#:724-6 Filed:12/21/12 Entered:12/21/1216:53:38 Page39of176
08-61570-R8K Doo#:2115-5 Filed:01/14/11 Entered:01/14/1114:22:06 Page39of
Dennis Lee Mon3
t4g5omery
November 18,2010
09:45:16 1
2
3
4
09:45:21 5
6
7
8
9
09:45:28 10
11
12
13
14
09:45:33 15
16
17
18
19
09:45:55 20
21
22
23
24
09:46:16 25
800.669.1866
Page 38
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 209 of 295
09:46:30
09:46:42
09:46:50
09:46:57
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
rephrase it.
MR.FLYNN: Within 300 yards of here.
BY MR.CONANT:
Q. Within 300 yards of here,Mr.Montgomery,
you've maintained an office, have you not?
A. I'm asserting my right under the Fifth
Amendment.
Q. What happened with the equipment that was
stored in that office?
A. I1m asserting my right under the Fifth
Amendment.
Q. That was computer equipment,was it not,
Mr.Montgomery,that youmaintained in that office?
A. I'm asserting my right under the Fifth
Amendment.
Q. Wasn't that computer equipment that you
obtained from Edra Blixseth,Mr.Montgomery?
A. I'm asserting my right under the Fifth
Amendment.
Q. Wasn't that equipment you obtained from a
Page 39
YATES COURT REPORTERS 800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 210 of 295
09:47:13 10
11
12
13
14
09:47:21 15
16
17
18
19
09:47:44 20
21
22
800.669.1866
Page 40
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 211 of 295
09:50:01 1
2
3
4
09:50:12 5
6
7
8
9
09:50:33 10
11
12
13
14
09:50:44 15
16
17
18
19
09:51:00 20
21
22
23
24
09:51:12 25
property,Mr,Montgomery?
A. Yes.
Q. Okay. Now flip with me to what is
identified down at the bottom right-hand corner as
22-8. I'm looking at line 20 or Entry No.22.
It's identified as Patents,Copyright and
other Intellectual Property. Do you see that,
Mr.Montgomery?
A. Yes.
Q. Look over at the right-hand column there,
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 212 of 295
09-OOO
14-RBK DOc#:724-6 Filed:12/21/12 Entered:12/21/1216:53:38 Page46of176
08-61570-RBK Doc#:2115-5 Filed:01/14/11 Entered:01/14/1114:22:06 Page46of
Dennis Lee Mon3
t4
g5omery - November 18,2010
09:52:27 1
2
3
4
09:52:36 5
6
8
9
09:52:47 10
11
12
13
14
09:52:53 15
800.669.1866
Page 45
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 213 of 295
09:53:21 1 BY MR.CONANT:
2
Q. Mr-Montgomery,you signed these -- you
3 signedyourschedulesunderpenaltyofperjury,did
4 you not?
09:53:27 5
A. Yes.
6
Q. So is it your testimony,Mr.Montgomery,
7 thatyouhavenopersonalpropertythatissubject
8 to -- I'm sorry, strike that.
9
Is it your testimony,Mr.Montgomery,that
09:53:49 10 you have no personal property that falls within the
11 description of this paragraph here on page 22-9?
12
13
14
09:53:58 15
16
17
18
19
09:54:05 20
21
22
23
24
09:54:13 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 214 of 295
3
09:55:16
09:55:32
09:55:38
09:56:04
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
09:57:36 25
(Recess takena)
Rage 48
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 215 of 295
09-0OO
14-RBK DOc#:724-6 Filed:12/21/12 Entered:12/21/1216:53:38 Page58of176
08-61570-R8K Doc#:2115-5 Filed:01/14/11 Entered:01/14/1114:22:06 Page58of
Dennis Lee Mon3
t4g5omery November 18, 2010
10:10:26 1
2
3
4
10:10:34 5
6
7
8
9
10:10:44 10
11
12
13
14
10:11:03 15
16
17
18
19
l:11:30 20
21
22
23
24
10:11:41 25
2006.
BY MR.CONANT:
Q. Mr.Montgomery,is that a truthful
statement on your part?
MR. CROCKETT: At What point in time,
Counsel? The question is vague and ambiguous.
BY MR.CONANT:
Q. When you wrote it,Mr.Montgomery.
MR.CROCKETT: That also assumes facts not
in evidence.
MR.CONANT: I'm Sorry,1et me back up.
Q. When you signed this document,was this a
truthful statement on your part?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Mr.Montgomery,describe what this decoding
program is and what you -- sorcy.
Describe what you mean on this line 1 by
''decoding programs.''
A. I'm going to assert my right under the
Fifth Amendment.
Q. Mr.Montgomery,describewhat you meanon
line 2,starting with the first full sentence on
line 2,quote, ''My source codes.''
Please describe to me what ''my source
YATES COURT REPORTERS
800.669.1866
Page 57
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 216 of 295
BY MR.CONANT:
Q. And please follow along.Mr. Montgomery.
''I have provided the 'output'from my
decoding programs without compensation to our
government in order to stop terrorist attacks and
save American lives. My source codes for this
decodipg technology which derives from my 'oDs'are
what Trepp and several government officials were
attempting to steal from me when they raided my
home.
MR.FLYNN: Did you ever Create any source
code that was used to stop terrorist attacks?
BY MR.CONANT:
Q. Mr.Montgomery,have you ever created any
source code that was used to stop terrorist attacks?
A. I'm going to assert my right under the
Fifth Amendment.
MR.FLYNN: A11 right.
MR.CONANT: I'm going to keep going.
Q. A11 right. Mr.Montgomery,turn with me
back to Plaintiff's Exhibit No. 2.
A11 right. We'11 go look at Request for
Production No.1 where you are requested to produce
the source codes. I'm going to hand you what will
be marked as Plaintiff's Exhibit No. --
800.669.1866
Page 60
10:42:38 1
MR.FLYNN: Did you do that.
2 BY MR.CONANT:
Q. Did you give -- did you give the
Government this -- this very specific intelligence
10:42:46 5 that you're referring to here?
6
A. I'm going to assert my right under the
7 Fifth Amendment.
8
Q. Isn't it trne,Mr.Montgomery,that this,
9 quote,unquote,''decoding software''that you
800.669.1866
Page 81
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 218 of 295
11:20:49 1
2
3
4 BY MR.CONANT:
11:20:55 5
6
7
8
9
11:21:03 10
11
12
13
14
11:21:14 15
16
17
18
19
11:21:20 20
21
22
23
24
11:21:35 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 219 of 295
11:21:39 1 FifthAmendment.
2
Q. Mr.Montgomery,have you ever had a
3 discussion with Mr. Blixseth regarding any form of
4 targetletterbythegrandjuryofthe
11:21:49 5
6
7
8
9
11:21:55 10
11
12
13
14
11:22:06 15
16
17
18
19
11:22:16 20
21
22
23
24
11:22:38 25
United States?
A. I'm going to assert my right under the
FifthAmendment.
MR. FLYNN: Did he prepare it.
BY MR. CONANT:
Q. Mr.Montgomery,did you prepare this target
letter that we're looking at?
A. I'm going to assert my right under the
FifthAmendment.
Q. Did you ever give a copy of this target
letter to Edra Blixseth,Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Can you explain your involvement,
Mr.Montgomery,with this target letter?
A. I'm going to assert my right under the
Fifth Amendment.
MR.CONANT: A11 right. I'm going to hand
to youwhat'sgoing to be marked as Plaintiff's
Exhibit No. 7.
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 220 of 295
MR.CONANT: Mr.Crockett,No.7.
Q. Mr.Montgomery,can you please review this
document.
A. I did.
MR.CONANT: Okay. For the record,
Plaintiff's Exhibit No. 7 is a purported letter from
the U.S.Department of Justice Criminal Division
dated December 12, 2007,addressed to Mr.Timothy
Blixseth,and signed -- purportedly signed by a
Mr. Ronald Sharpe.
Q. Mr.Montgomery,do you recognize this
document?
A. I'm going to assert my right under the
Fifth Amendment.
Q. HoW do you recognize this document
Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Isn't it true,Mr.Montgomery,you provided
a copy of this document to Edra Blixseth?
A. I'm goqng to assert my right under the
Fifth Amendment.
Q. Isn't it true,Mr.Montgomery,that you
prepared this letter?
A. I'm going to assert my right underthe
Page 117
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 221 of 295
11:23:35 1
2
3
4
11:23:40 5
6
7
8
9
11:23:47 10
11
12
13
14
11:23:51 15
16
17
18
19
11:24:08 20
21
22
23
24
11:24:24 25
Fifth Amendment.
MR. FLYNN: Forged the signature.
BY MR.CONANT:
Q. Mr.Montgomery, isn't it true that you
forged the signature of Ronald Sharpe?
A. I'm going to assert my right under the
FifthAmendment.
MR. FLYNN: Describe a11 the circumstances
under which you prepared the document.
BY MR.CONANT:
Q. Can you describe a11 the facts and
circumstances concerning your preparation of this
document,Mr.Montgomery?
800.669.1866
Page 118
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 222 of 295
11:28:45 1 BY MR.CONANT:
2
Q. Can you please answer the question.
3
A. His question?
4
Q. My --
11:28:49 5
6
7
8
9
11:28:59 10
11
12
13
14
11:29:06 15
16
17
18
19
11:29:24 20
21
22
23
800.669.1866
Page 124
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 223 of 295
11:29:37 1
2
3
4
11:29:45 5
11
12
13
14
11:30:16 15
16
17
18
19
11:30:27 20
21
22
23
24
11:30:41 25
800.669.1866
Page 125
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 224 of 295
11:30:55
11:31:04
11:31:11
11:31:20
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
A. Myattorneyjustansweredthequestion.
Q. No. I need your answer,Mr.Montgomery.
A. To what? I can't even remember now.
What's the question?
Q. Were you involved with Ms.Blixseth to help
her kill the sale of the Yellowstone club to
CrossHarbor?
A. I invoke my right under the Fifth
Amendment.
Q. And for the record,there's nothing
established on the record,to be clear,that I
represent Tim Blixseth.
A. Well,there's
Q. Secondly -A. Yeah,there is. There's plenty of PACER
documents where you're his attorney. Youfre Western
Capital's attorney,Mr. Flynn -MR.CROCKETT: It's such a silly statement
it doesn't deserve an answer.
Page 126
YATES COURT REPORTERS 800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 225 of 295
11:32:10 l
2
3
4
11:32:14 5
6
7
8
9
11:32:26 10
11
12
13
14
11:32:34 15
16
17
18
19
11:32:44 20
21
22
23
24
25 ///
page 128
YATES COURT REPORTERS
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 226 of 295
11:32:51 1
2
3
4
11:33:04 5
6
7
8
9
11:33:13 10
11
12
13
14
11:33:22 15
16
17
18
19
11:33:36 20
21
22
23
24
11:33:42 25
BY MR.CONANT:
Q. Isn't it true that Ms.Blixseth's
entities -- and when I refer to Ms. Blixseth's
entities,it's either Blxware,LLC,Opspring,LLC
well,Opspring,LLC,or Blxware, LLC.
Isn't it true they began paying you a
hundred thousand dollars a month in April of 2006?
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 227 of 295
22
month for?
A. I invoke my right under the Fifth
Amendment.
MR. FLYNN: How much in total -BY MR.CONANT:
Q. How much in total have you received I'm
sorry. Let me back up. Strike that.
How much money,total,have you received
from Ms.Blixseth through her entities?
23 instruction.
24
THE WITNESS: I'm invoking my right under
11:34:27 25 the Fifth Amendment.
Page 130
YATES COURT REPORTERS 800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 228 of 295
4
11:34:37 5
6
7
8
9
11:34:43 10
11
12
13
14
11:34:56 15
16
17
18
19
11:35:02 20
21
22
23
24
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 229 of 295
11:38:14 1
2
3
4
11:38:21 5
6
7
8
9
11:38:33 10
11
12
13
14
11:38:48 15
16
17
18
19
11:39:06 20
21
22
23
24
11:39:15 25
A. Yes.
Q. Did you receive that $12,500 from
Demaratech?
A. I'm going to invoke my right under the
Fifth Amendment.
Q. Mr.Montgomery,can you explain to me what
you did at Demaratech,LLC?
A. I'm going to invoke my right under the
Fifth Amendment.
Q. When I deposed Mr.Burgyan,I asked him
about the source codes -- or intellectual property
listed on your bankruptcy schedules and I asked him
if Demaratech was using in its business any of that
intellectual property that you listed on your
bankruptcy schedules.
Now, he said no, but he said something
curious. He said that the it was derived. The
software that Demaratech was using was derived from
your intellectual property.
Does that sound accurate to you,
Mr. Montgomery?
A. I'm going to invoke my right under the
Fifth Amendment.
Q. In what way is the software that Demaratech
is using different than the intellectual property
YATES COURT REPORTERS
800.669.1866
Page 134
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 230 of 295
11:39:19 1
2
3
4
11:39:26 5
6
7
8
9
11:39:44 10
11
12
13
14
11:40:00 15
16
17
18
19
11:40:15 20
21
22
23
24
11:40:45 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 231 of 295
A. Yes.
Q. It's made out to Dennis Montgomery.
Is that you,Mr.Montgomery?
A. I presume so.
Q. It'smade out inthe amountof $12,500.
Do you see that?
A. Yes.
Q. Did you receive that $12,500?
A. I'm going to invoke my right under the
Fifth Amendment.
Q. What did you do with that $12,500?
A. I'm going to invoke my right under the
Fifth Amendment.
Q. Isn't that $12,500 money you ceceived
compensation for use by Demaratech of the
intellectual property you listed on your bankruptcy
schedule,Mr.Montgomery?
A. I'm going to invoke my right under the
Fifth Amendment.
Q. Mr.Montgomery, are you aware of any
effortsby anyone at Demaratech to sell software
technology to Israel?
A. I'm going to invoke my right under the
FifthAmendment.
MR. CONANT: I'm going to introduce what's
YATES COURT REPORTERS
800.669.1866
Page 136
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 232 of 295
11:45:36
11:45:48
11:46:00
11:46:21
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 233 of 295
BY MR.CONANT:
Q. About selling have you ever talked to
anyone at any point in time about selling your
decoding or decrypting software to the Israeli
government?
A. I'm going to assert my right under the
Fifth Amendment.
MR. FLYNN: Did he possess during these
dates -THE WITNESS: Speak up. If you're going
to I mean I can't hear him.
MR. FLYNN: Did he have any of this in his
possession. This is a fraud.
THE WITNESS: ''This is a fraud.''
BY MR.CONANT:
Q. Mr.Montgomery,during themonth of May did
you have in your possession any form of decoding
software?
MR.CROCKEIT: Youvre talking about May of
this year? May of what?
YATES COURT REPORTERS
800.669.1866
Page 143
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 234 of 295
16
17
18
19
11:51:03 20
21
22
23
24
11:51:07 25
BY MR.CONANT:
Q. May of this year,2010.
A. You said May.
I'm going to assert my right under the
Fifth Amendment.
Q. Okay. Do you know who Leo Josh Kennedy is,
Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Is Mr.Kennedy the current CEO and
financial backerof Demaratech?
MR.CROCKETT: Calls for speculation.
THE WITNESS: Going to assert my right
under the Fifth Amendment.
MR. FLYNN: Did you defraud him.
'
*
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 235 of 295
11:54:14 1
2
3
4
11:54:20 5
6
7
8
9
11:54:31 10
11
12
13
14
11:54:53 15
16
17
18
19
11:55:03 20
21
22
23
24
11:55:17 25
aircraft.''
Do you see that those paragraphs,
Mr.Montgomery?
A. I heard it.
Q. IS any of that true? Did you ever contact
anyone to walk them through demonstrations regarding
this type of technology?
A. I assert my right under the Fifth
Amendment.
Q. Did -- Mr.Montgomery. during President
Obama's inauguration in January of 2009,were you
the cause of any form of terror heightened terror
alert in the Washington,D.c.,area?
MR.CROCKETT: Question clearly calls for
speculation,unless you're are you asking him if
he invoked -MR. FLYNN: Did he create.
THE WITNESS: Did I What? Speak up,
Mr. Flynn. What did you say?
MR. CROCKETT: I'm going t0 instruct him
not to answer the question on the grounds it's
without foundation. It's argumentative. Lacks any
factual basis.
Well, I understand
And -- yeah.
Page 148
YATES COURT REPORTERS 800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 236 of 295
12:09:15
12:09:24
12:09:31
12:09:35
THEWITNESS: Youjustkeepaskingthesame
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
800.669.1866
Page 165
.
-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 237 of 295
12:09:38 1
2
3
4
12:09:46 5
6
7
8
9
12:09:54 10
11
12
13
14
12:10:07 15
16 mejustfinishthislastone.
17
I'm going to hand Mr.Montgomery what's
18 going to be marked as Plaintiff's Exhibit No. 11.
19
12:10:23 20
21
22
23
24
12:10:46 25
800.669.1866
Page 166
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 238 of 295
12:10:48 1
2
3
4
12:11:02 5
6
7
8
9
12:11:14 10
11
12
13
14
12:11:20 15
16
17
18
19
12:11:29 20
21
22
23
24
12:11:39 25
800.669.1866
Page 167
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 239 of 295
(Luncheon recess.)
8
THE VIDEOGRAPHER: The time is 1:17 p.m.
9 We're back on the record.
13:17:19 10
MR.CONANT: A11 right. Mr.Montgomery.
11
12
13
14
13:17:28 15
16
17
18
19
13:17:35 20
21
22
23
24
13:17:47 25
Page 168
YATES COURT REPORTERS
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 240 of 295
13:23:03
13:23:15
13:23:42
13:23:57
13:23:59
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21 BY MR. CONANT:
22
Q. And has Ron Burkle had any involvement in
23 you getting connected with the Israeli govecnment in
24 an attempt to sell your software to the government?
I don't even know who that is.
25
Page 174
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 241 of 295
19
13:32:53 20
21
22
23
24 Four ''work''?
13:33:08 25
A. I thought it said ''our.''
800.669.1866
Page 182
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 242 of 295
13:38:47 1
2
3
4
13:38:52 5
6
7
8
9
13:39:05 10
11
12
13
14
13:39:25 15
16
17
18
19
13:39:36 20
21
22
23
24
13:39:43 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 243 of 295
13:39:45 1
2
3
4
13:39:52 5
6
7
8
9
13:40:04 10
11
12
13
14
13:40:18 15
16
17
18
19
13:40:35 20
21
22
23 email?
24
MR.CONANT: If you can hand it back -MR.CROCKETT: Well,it's Short and sweet.
MR.CONANT: Are you still looking at the
MR. FLYNN: Try to get me to --
25 ///
YATES COURT REPORTERS
800.669.1866
Page 189
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 244 of 295
13:42:34 1
2
3
4
13:42:38 5
6
7
8
9
13:42:47 10
11
12
13
14
13:42:54 15
16
17
18
19
13:43:01 20
21
22
23
24
800.669.1866
Page 191
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 245 of 295
800.669.1866
Page 192
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 246 of 295
13:44:13 1
2
3
4
13:44:17 5
6
7
8
9
13:44:26 10
11
12
13
14
13:44:41 15
16
800.669.1866
Page 193
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 247 of 295
13:45:15 l
2
3
4
13:45:23 5
6
7
8
13:45:30
13:45:39
13:45:40
13:45:48
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Q. Isn'tittrueit'sjustacompletefraudon
the United States Government,Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. How many terrorist attacks have yoe helped
thwart?
A. I'm going to assert my right under the
Fifth Amendment.
Q. How many American lives do you believe
you've saved through your softwace?
A. I'm going to assert my right under the
Fifth Amendment.
Q. How many times have you contacted the
government to alert them to some form of terrorist
attack?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Isn't it true,Mr.Montgomery,that you
YATES COURT REPORTERS
800.669.1866
Page 194
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 248 of 295
2
3
4
13:56:41 5
6
7
8
9
13:56:53 10
11
12
13
14
13:57:09 15
16
17
18
19
13:57:18 20
21
22
23
24
13:57:32 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 249 of 295
11
12
13
14
13:58:09 15
16
17
18
19
13:58:21 20
21
22
A. Uh-huh.
Q. -- ''Additionally,the company has agreed to
YATES COURT REPORTERS
800.669.1866
Page 205
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 250 of 295
3 amountatthefollowingtimesubjecttoyou
4
13:58:42 5
6
7
8
9
13:58:50 10
11
12
13
14
A. I'm sorry.
13:58:59 15
Q. -- under this -- under this first bullet
16 point?
17
A. I thought you were done.
18
Assert my right under the Fifth.
19
Q. Where did that $500,000 go?
13:59:07 20
A. I assert my right under the Fifth.
21
Q. In fact, backing up,where did the
22 $1 million go that you got that's referenced under
23 that first paragraph?
24
A. I'm confused. I'm trying to I'm
13:59:19 25 confused. I don't know if the first sentence refers
Page 206
YATES COURT REPORTERS 800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 251 of 295
13:59:24 1
2
3
4
13:59:38 5
6
7
8
9
14:00:03 10
11
12
13
14
14:00:22 15
16
17
18
19
14:00:38 20
21
22
23
24
14:00:58 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 252 of 295
14:03:50 1
2
3
4
14:03:56 5
6
7
8
9
14:04:07 10
11
12
13
14
14:04:17 15
16
17
18
19
14:04:25 20
21
22
23
24
25 ///
Rage 211
YATES COURT REPORTERS
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 253 of 295
14:04:34
14:04:44
14:04:53
14:05:00
14:05:13
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
BY MR.CONANT:
Q. $300,000 uponthe company's receipt of at
least $1million compensation inthe aggregate from
one or more independent third parties,did you ever
get that?
A. I don't recall.
Q. Do you recall Blxware getting paid -- I'm
sorry.
If I say Blxware,I mean I alternatively
mean Opspring, LLC,since
A. Well,you've been saying Blxware for the
last five -- I think for the last bunch of
questions.
Q. Well, a11 right. Well,for purposes of the
deposition,1'11 refer to them interchangeably,
because my understanding they were operating
interchangeably.
Now do you recall at any time when Blxware
orOpspring was paid approximately $2.5million from
the United States Government?
A. I'm not going to answer the question. 1'11
take the Fifth.
MR. FLYNN: A11 the monies they've got on
the contract --
25 ///
Page 212
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 254 of 295
BY MR.CONANT:
Q. Now a11 this money that you received on
this employment agreement,did you ever report those
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 255 of 295
14:16:37 1
2
3
4
14:16:41 5
6
7
8
9
14:16:48 10
11
12
13
14
14:17:00 15
16
2006.
Do you see that?
A. Yes.
Q. Do you see the name of it,Montgomery
Family Trust,Dennis Montgomery,Trustee,Brenda
Montgomery,Trustee?
Do you see that?
A. Yes.
Q. Do you recognize these bank statements,
Mr. Montgomery?
A. I'm going to assert my right under the
Fifth.
Q. Now,for the record, these are bank
statements that Mr.Flynn received in connection
with the Nevada litigation when -- when he was to
take your debtor's exam of you in connection wth
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 256 of 295
14:20:44 5
6
7
8
9
14:20:54 10
11
12
13
14
14:21:05 15
16
17
BY MR.CONANT:
Q. Do you know if ''WTI''the description ''WT''
in here, refers to wire transfer,Mr.Montgomery?
A. I have no idea.
Q. Do you know if this was a wire transfer
into your bank account,Mr.Montgomery?
A. I have no idea.
Q. Do you recall receiving a million dollar
deposit in April of 2006?
A. I'm going to assert my right under the
Fifth.
Q. Mr.Montgomery, isn't this million dollars
that was deposited here deposited in connection with
24
14:21:57 25
800.669.1866
Page 221
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 257 of 295
question.
MR.CROCKETT: No.
THE WITNESS: NO.
MR.CROCKETT: It's called colloquy.
BY MR.CONANT:
Q. A11 right. Mr.Montgomery -Right.
A11 right. If you go -- if you look down
at the next deposit entry for April 6,there's a
similarly described deposit only this one is for a
hundred thousand dollars.
Do you know what -- what was the hundred
thousand dollars deposit for?
A. I'm going to assert my right under the
Fifth.
Q. Wasn't that for -- wasn't this in
800.669.1866
Page 222
.
-
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 258 of 295
14:22:51 1
2
3
4
14:22:57 5
6
7
8
9
14:23:08 10
11
12
13
14
14:23:31 15
16
17
$300,000?
A. I'm going to assert my right under the
Fifth.
Q. Whatwasthe source of the $20,000 deposit
immediately below that one dated April 11?
A. I'm gojng to assert my right under the
Fifth.
Q. Wasn't this a1l -- these deposits a11 in
connection with your employment or purported
empqoyment with Opspring,Mr.Montgomery?
A. I'm going to assert my right under the
Fifth.
Q. A11 right. Now flip with me to page 4 of 6
where we have withdrawals. See there's a withdrawal
dated April 6,online transfer to -- references an
account numberin the amount of $800,000.
Do you see that Mr.Montgomery?
18
19
14:23:46 20
21
22
23
24
14:23:55 25
A. Yes.
MR. FLYNN: Where did you transfer and
where did it go.
BY MR.CONANT:
Q. Mr.Montgomery, I see that you got
million dollar deposit on April 6;now on April 6
I'm seeing an outflow of $800,000.
Where did that $800,000 go?
800.669.1866
Page 223
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 259 of 295
14:23:57 l
2
3
4
14:24:02 5
6
7
8
9
14:24:09 10
11
12
13
14
14:24:21 15
16
17
18
19
14:24:34 20
21
22
23
24
14:24:48 25
800.669.1866
Page 224
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 260 of 295
14:24:50 1
2
3
4
14:24:59 5
6
7
8
9
14:25:04 10
11
12
13
14
14:25:13 15
16
17
18
19
14:25:22 20
21
22
23 $200,000.
24 BY MR. CONANT:
14:25:27 25
*1
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 261 of 295
800.669.1866
Page 226
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 262 of 295
14:29:23 1
2
3
4
14:29:29 5
6
7
8
9
14:29:37 10
11
12
13
14
14:29:48 15
16
17
18
19
14:30:07 20
800.669.1866
Page 230
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 263 of 295
15:09:03 1
2
3
4
15:09:15 5
6
7
8
9
15:09:27 10
11
12
13
14
15:09:38 15
16
17
18
19
15:10:01 20
21
22
23
24
15:10:12 25
800.669.1866
Page 267
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 264 of 295
Q. Now thesourcecodethatwe'vejustbeen
7
8
9
15:10:43 10
11
12
13
14
15:10:45 15
16
800.669.1866
Page 268
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 265 of 295
16:06:46 1
2
3
8 BY MR.CONANT:
9
16:07:22 10
11
12
13
14
16:07:31 15
16
17
18
19
16:07:42 20
21
22
23
24
16:07:55 25
800.669.1866
Page 303
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 266 of 295
16:07:57 1
2
3
4
16:08:07 5
6
7
8
9
16:08:15 10
11
12
13
14
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 267 of 295
16:09:11 l
2
3
4
16:09:22 5
6
7
8
9
16:09:35 10
11
12
13
14
16:09:52 15
16
17
18
19
16:10:02 20
21
22
23
24
16:10:16 25
Cardiac Network,Inc.
Do you see that,Mr.Montgomery?
A. Yes.
Q. Do you know why Cardiac Network,Inc.,
would be depositing $200,000 into Istvan Burgyan's
account?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Isn't it true that Demaratech was well,
strike that.
Isn't it true that Cardiac Network entered
into some arrangement with Istvan Burgyan in
exchange for technology that you were you had
created?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Isn't that same technology the same
technology lsted in your bankruptcy schedule,
Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Isn't it true that for a number of years
you were funneling money to Mr.Burgyan to conceal
cash from your creditors,Mr. Burgyan -- I mean
Mr, Montgomery?
YATES COURT REPORTERS
800.669.1866
Page 305
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 268 of 295
16:10:17 1
A. I'm going to assert my right under the
2 Fifth Amendment.
3
Q. Okay. A11 right. Let's -- 1et me go
4 let's put that one away for now. That's fine.
16:10:31 5
Let's go to -- I'm going to hand you
6 Plaintiff's Exhibit 21.
8 BY MR.CONANT:
9
Q. A11 right.
16:11:06 10
A11 right. Mr. Montgomery,if you look at
11 Bates stamp No. 558 on Plaintiff's Exhibit 21
12
A. 558,okay.
13
MS.WELLS: For the record,are these more
14 bank records?
16:11:30 15
MR.CONANT: Yeah,for the record.
16
Q. -- I see a deposit 12/14 into Istvan
17 Burgyan's bank account in the amount of $130,000
18
19
16:11:46 20
21
22
23
24
16:11:53 25
800.669.1866
Page 306
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 269 of 295
18
Fifth Amendment.
Q. And isn't Josh Kennedy a funder of
Demaratech, LLc?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Wasn't -- didn't Josh Kennedy invest this
money in Demaratech based on representations by you
that you had software that you could -- you could
sell to a government agency?
A. I'm going to assert my right under the
Fifth Amendment.
He's very distracting talking on the phone
over there.
I guess it doesn't matter.
Q. A11 right. Mr.Montgomery,can you turn to
Bates stamp No. 559.
A. Yeah,okay.
800.669.1866
Page 307
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 270 of 295
16:12:52 1
2
3
4
16:13:03 5
6
7
8
9
16:13:06 10
11
12
16:13:32 25
extension for?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Did he give you an extension to arrange
some sort of financing to pay off the DA,
Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Mr.Montgomery,you've paid the DA
$450,000
We've asked this question. 1'11 move on.
800.669.1866
Page 308
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 271 of 295
16:13:36 1
2
3
4
16:13:48 5
6
7
8
9
16:13:57 10
11
12
13
14
16:14:38 15
16
17
18
19
16:14:49 20
21
22
23
24
A. No. Auroca Home Loans,I don't know the
16:15:03 25 name of the bank but --
Page 309
YATES COURT REPORTERS
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 272 of 295
7 cut 9ouoff.
8
9
16:15:25 10
11
12
13
14
16:15:46 15
16
17
18
19
16:15:59 20
21
22
23
24
16:16:11 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 273 of 295
16:16:12 1
2
3
4
16:16:18 5
6
7
8
9
16:16:29 10
11
12
13
14
16:16:39 15
16
17
18
19
16:16:48 20
21
22
23
24
16:17:00 25
800.669.1866
Page 311
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 274 of 295
16:17:05 1
2
3
4
16:17:14 5
6
7
8
16:17:46 10
11
12
13
14
16:18:06 15
16
17
18
19
16:18:21 20
21
22
23
24
16:18:38 25
BY MR.CONANT;
Q. A11 right. If you look here at the
statement Bates stamp No. 934, again this is a
checking account of Istvan Burgyan. Now a11 of
these -- Mr.Burgyan laid the foundation for a11
these statements in his exam -- or deposition.
Could you look at the do you see,
Mr.Montgomery,a withdrawal in the amount of
$30,000 datedAugust August 3?
A. Yes.
Q. Now I see here that it's again in the
descriptionwe have another reference to David z.
Chesnoff and then,again,the last word in this
description is Dennis.
What was that $30,000 paid for?
A. I'm going to assert my right nnder the
YATES COURT REPORTERS
800.669.1866
Page 312
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 275 of 295
16:18:40 1
2
3
4
16:18:48 5
6
7
8
9
16:19:01 10
11
12
13
14
16:19:13 15
16
Fifth Amendment.
Q. Isn't it those were funds paid to your
criminal counsel,are they not,Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Isn't that,in fact,your money,
Mr.Montgomery, that's going to Mr.Chesnoff?
A. I'm going to assert my right under the
Fifth Amendment.
We need to stop. I need to go to the rest
room.
MR.CONANT: Okay.
THE VIDEOGRAPHER: This marks the end of
Media No.3. The time is 4:19 p.m. We're off the
record.
(Recess taken.)
17
18
19
16:23:04 20
21
22
23
24 BY MR.CONANT:
16:23:20 25
Q. A11 right. Mr.Montgomery,take a second
Page 313
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 276 of 295
800.669.1866
Page 314
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 277 of 295
08-61s7o-RBK D0cg:21
15-5 Fi
l
ed:01/143/4JY
gEntered:01/14/1114:22:06page316of
D
5
ennis Lee Montgomery - November 18, 2010
16:24:22 1
2
3
4
16:24:28 5
6
7
8
9
16:24:38 10
11
12
13
14
16:25:15 15
16
17
18
19
16:25:30 20
21
22
23
24
16:25:42 25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 278 of 295
08-61570-RBK Doc#:2115-5 Fi
l
ed:01/143/'4Mg
Entered:01/14/1114:
22:06Page317of
5
Dennis Lee Montgomery - November 18, 2010
16:25:44 1
2
3
4
16:25:54 5
6
7
8
9
16:26:04 10
11
12
13
14
16:26:11 15
16
17
18
19
16:26:21 20
21
22
23
24
16:26:32 25
800.669.1866
Page 316
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 279 of 295
16:26:33 1
2
3
4
16:26:38 5
6
7
8
9
16:26:49 10
11
12
13
14
16:26:57 15
16
17
18
19
16:27:13 20
21
22
23
24
16:27:24 25
800.669.1866
Page 317
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 280 of 295
08-61570-R8K Doo#:2115-5Fil
ed:01/143/i
lgEnt
ered:01/14/1114:22:06Page319of
45
Dennis Lee Montgomery - November 18, 2010
16:27:25 1
2
3
4
16:27:42 5
6
7
8
9
16:28:35 10
11
12
13
14
16:28:42 15
16
17
18
19
16:28:54 20
21
800.669.1866
Page 318
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 281 of 295
16:31:18 1
2
3
4
16:31:41 5
6
7
8
9
16:31:54 10
11
12
13
14
16:32:05 15
16
17
18
19
16:32:16 20
21
22
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 282 of 295
08-61570-RBKDoc#:2115-5Fi
l
ed:01/143/4?1
69Entered:01/14/1114:22:06Page322of
5
Dennis Lee Montgomery
3 It'sjustannoying.
16:32:44
16:32:52
16:33:05
16:33:22
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22 off a11 your markers with a11 the monky you were
23 receiving from Edra's entities?
24
A. I'm going to assert my right under the
16:33:36 25 Fifth Amendment.
Page 321
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 283 of 295
16:33:42 1
MR. FLYNN: He's hired an accountant to go
2 through a11 of his records to determine what his
3 wins and losses were at the casinos.
4 BY MR.CONANT:
16:33:52 5
Q. Now,Mr.Montgomery,you said you haven't
6 yet filed your tax returns for '08 oc '09. Have you
16:34:06
16:34:16
16:34:50
16:34:57
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 284 of 295
19 youseefromcasinos
16:36:33 20
21
22
23
24
16:37:51 25
one pointjustabsolutely
800.669.1866
Page 323
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 285 of 295
o8-6157o-R:KDoc#:2115-5Fi
l
ed:01/143/4l
'
YsgEntered:01/14/1114:22:06page326of
Dennis Lee Montgomery
16:39:07 1
2
3
4
16:39:14 5
6
7
8
9
16:39:31 10
11
12
13
14
16:39:45 15
16
17
18
19
16:39:50 20
21
22
23
24
16:40:28 25
November 18,2010
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 286 of 295
08-61570-R8K Doc#:2115-5Fil
ed:01/143/1
y9Entered:01/14/1114:22:
06Page327of
45
16:40:35 1
2
3
4
16:40:45 5
6
7
8
14
16:41:10 15
16
17
18
19
16:41:17 20
21
22
23
'
24 resort,Mr. Montgomery?
16:41:28 25
A. I'm going to assert my right under the
800.669.1866
Page 326
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 287 of 295
800.669.1866
Page 327
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 288 of 295
16:42:29 1
A. Same answer.
2
MR.CONANT: A11 right.
3
A11 right. Okay. Mr.Montgomery,I'm
4 going to hand you what's going to be marked as
16:43:32 5 Plaintiff's Exhibit 27, I believe.
16:44:14
16:44:46
16:45:08
16:45:20
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
800.669.1866
Page 328
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 289 of 295
16:45:25 1
2
3
4
16:45:32 5
6
7
8
9
16:45:40 10
11
12
13
14
16:45:53 15
16
17
18
19
16:46:04 20
21
22
23
24 Mr.Montgomery?
16:46:15 25
A. I assert my right under the Fifth
800.669.1866
Page 329
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 290 of 295
16:46:17 1
2
3
4
16:46:23 5
6
7
8
9
16:46:55 10
11
12
Amendment.
Q. Aren't these aren't these pre funds that
you stored away prior to filing for bankruptcy,
Mr.Montgomery?
A. I assert my right under the Fifth
Amendment.
Q. Okay.
MR. FLYNN: Ask him about the money he got
from Edra.
MR.CONANT: Mr.Montgomery,I'm going to
hand you what's been marked as Plaintiff's
Exhibit 28.
13
14
MR.CROCKETT: Do you have extra copies of
16:47:04 15 these?
16
MR. CONANT: I do of this one.
17
MR. CROCKETT: I'd like a copy of this
18 before we leave.
19
THE WITNESS: Well,actually
16:47:11 20
MR.CROCKETT: There's only one 27 and I'd
21 like a copy of it.
22
THE WITNESS: Okay.
2j BY MR.CONANT:
24
Q. Mr.Mpntgomery, I ask you to flip to the -16:47:32 25 one, two,three I believe the third
Page 330
800.669.1866
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 291 of 295
08-61570-R8K Doc#:2115-5 Fi
led:01/143/4i'519Entered:01/14/1114:
22:
06Page334of
Dennis Lee Montgomery - November 18, 2010
8
9
16:50:29 10
11
12
13
14
16:50:35 15
16
17
18
19
16:50:46 20
21
22
23
24
16:50:54 25
Fifth Amendment.
Q. Were you in Europe trying to sell software?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Was that software that was listed in your
bankruptcy schedule,Mr.Montgomery?
A- I'm going to assert my right under the
Fifth Amendment.
Q. Is this the same software that we saw
referred to everywhere in Plaintiff's Exhibit 3, the
source code that could detect terrorist attacks,
Mr.Montgomery?
A. I'm going to assert my right under the
Fifth Amendment.
Q. Is this when you were meeting with Israel
to try and sell them software?
A. I'm going to assert my right under the
Fifth Amendment.
YATES COURT REPORTERS
800.669.1866
Page 333
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 292 of 295
16:50:54 1
2
3
4
16:51:02 5
6
7
8
9
16:51:15 10
11
12
13
14
16:51:20 15
16
17
18
19
16:51:31 20
21
22
23
24
16:51:45 25
800.669.1866
Page 334
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 293 of 295
16:51:45 1
2
3
4
16:51:53 5
6
7
8
9
16:52:10 10
11
12
13
14
16:52:39 15
16
17
18
19
16:52:52 20
21
22
23
24
16:53:10 25
800.669.1866
Page 335
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 294 of 295
08-61570-RBK DoY:21
15-5Fi
l
ed:01/143/l
19Entered:01/14/1114:22:06Page337of
D
45
16:53:11 1
2
3
4
16:53:23 5
6
7
8
9
16:53:32 10
11
12
13
14
16:54:11 15
16
17
18
19
16:54:26 20
21
22
23
24
16:54:54 25
800.669.1866
Page 336
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-2, Page 295 of 295
17
18
19
16:59:34 20
21
22
23
24
16:59:56 25
800.669.1866
Page 341
E xh ib it
K
UNITEDSTATESDISTWCTCOURT
DISTRICTOFNEVADA
DENNISMONTGOMERY,etal.,
) 3:06-CV-0056-PMP(VPC)
)
5
puintiffs,
)
)
RQCT
E:I
MO
6
vs.
) OR
FORDE
SAN
ONTI
S(ON
#545)
)
7 ETREPPIDTECHNOLOGIES,LLC,etaI..)
)
8
Defendants.
)
)
9
BcforethecourtisMichaelFlynn's($Mr.Flynn9*)motionforsanctionsagainstDennis
l0
gomery ($Mr.Montgome
y Trustand Brenda Montgomery
l1 Mont
'ryn),the Montgomery Famil
CMontgomerypanies''),theircounselofrecord,DeborahKlar,andberfirm,LinerYankelevitz
SunshineRegenstreiftLLPCtinerf117T1'')1pursuantto28U.S.C.1927and/orpursuanttothccourl's
inherentpower(CaseNo.06-56.#545).Thepalies5ledthefollowingpapersinregardSothismotion:
Docket#s545,546,547,566,567,568,571,574.589,593,595,596,597,598,599,600,60I,602.603.
610.613,614.620-25,632,633.635-38.649,66l.664,667,674,680,683,69l,698,714.and735.
nismotionconcernsMr.Flyrm'swithdrawalascotmselfortheMontgomerypartiesinJuly
2007.twodeclnmtionsMr.Montgomeryfledwi
ththiscourjandtheliti
gationconductofDeborahKl
ar
CMs.Klar*')andTeriPhamCMs.Pham'')oftheLinerf11'
11:asitconcernseventsinthisactioninthc
Iatesummerandfallof2007.Afterextcnsivebriesng,thiscourthcldaday-longcvidcntiaryhearing
/826).necounconcludesthattheconductoftheLiner517)1anditsaltorncys,Ms.
21 (CaseNo.06-56./
KlarandMs.Pbam.waswillfullyreckless,intendcdtoharass,doncforanimpropcrpurposc,andwas
22
suffusedwithbadfaith,ThecourtalsoconcludesthatMs.KlarandMs.Phamunreasonablyand
23
vexayiouslymultipliedtheseproceedings,whichresultedinanincreasedcosttoMr.Flynn,andthattheir
24
conductwasincontemptofthiscourpsorders.Finally,1hecourtconcludesthatMr.Montgomery's
25
Septembcr2007declarationconuineduntwestatcmcnts,whichhekncwwcrcuntluc,andthatthis
26
27
28
l-f'heLinerfirmhassincechangeditsnametoLinerGrodeStcinYankelevitzRegenstreif&
TaylorLLP.
l
8IT
1 EXHI
case3:06-cvm0056-PMP-xji
bD
ito2cumPe
a#e9jsofj4
ja:iajajj
ts page2of54
l declarationwasGledinbadfaithandfortheimproperpumosesofattemptingtomanipulatethcsc
2 proccedings.togainatacticaladvantage,toharassMr.Flyrm,hisformercounsel.andtosubvertordcrs
3 ofthiscoun.Themfore,Mr.Flynn'motionforsanctionspursuantto28U.S.
C.j1927and/orpursuan!
4 toth:inherentpowerofthecourt(CaseNo.06-56.#545)isGRANTED.
5
1.FINDINGSOFFACT
6 A. TheS/f#eDlstrictC'
tmr'Proceeding-US.DlstrictCourtCaseNo.0F145
7
OnJanuaryl9,2006,e'Freppidfiledacomplaintinthestatedistrictcourtagainstthe
8
Montgomerypartits,alleginginpartthatMr.MontgomtrymisappropriatedeTreppid's
9
tradesecrctswhenhedepmedfromthecompanyinJanuary2006(CaseNo.06-145.
10
#16).
l1
l2
14
ThiscasewasremovedtothiscourtonMarch20,2006(CaseNo.06-l45.#l).
Priortotheremoval.thestatedistrictcourtheldahearingonFebruary7,2006
concerninge'Freppid'smotionforpreliminaryinjanction.SeeEx.l0,August21,2008
sealedevidentiaryhearinginCaseNo.06-56(s
escaledhearing'').
15
4. AppearingatthepreliminaryinjunctionhearingonbehalfoftheMontgomeryparties
16
l7
18
werelocalcounsel,RonaldLgarandEricPulver,aswellasMichaell.FlynnandPhilip
Stillman.1d.Mr.Montgomerywasalsopresentandtestisedatthebearing.ld,
Atthcbeginningofthathearing,Mr.Logaradviscdthccounasfollows:
13
19
20
21
22
23
24
25
26
27
28
Mr.FlpnisamemberoftheMassachusettsBar.The
7. ThcstatedistrictcourtallowedMr.Flynntoappearbaseduponthoserepresentations.
Ex,10.scaledhearing.Thatsamcday,Mr.Logarfilcdthemotiontoassociatecounscl
andprovidedMr.Flynn'sapplication,aswellashiscenificateofgoodstandingwiththc
StateBarofMassachusctl.Ex.1l,sealedhearing.
8. nedaybeforethestatecoulpreliminaryinjunctionhearing,Mr.Montgomerymetwith
6
7
8
9
10
hislocalandout-of-sutecounsel,Mr.Flynn,Mr.Stillman,andMr.Logar,atMr.
Logar'slawofficesinReno.Tr,130:23-25:13l:1-4,sealcdhcming.Mr.Montgomery
testifiedthathcdidnotrecalltbeexactnatureoftheproblem,butremembercdthcrewas
K*aproblem abouttheprohacviceapplicationorthemcchanism orwhatcvcr,''Tr.
131:5-12.sealedhearing.
11
9. Thedayaftcrthepreliminaryinjunctionhearing,Mr.Montgomery'scounsclprovided
l2
13
14
15
16
himwithafeeapeement,whichMr.Montgomeryneversigned.Tr.1l8:5-25'
,Ex.l4.
sealedheazing.
Messrs.Flynn,Logar,Stillman,andPulverwerepresentatthemeeting.andMr.
MontgomerytestiiedthatitwasMr.Logarwhoactuallygavehimtheapeement.Tr.
116:5-12,sealedhearing.
17
l8
ll. Pagetwoofthefeeaveementprovides:i'Seniorpanners(MichaelFlynn,onlyIiccnscd
inMA.RonLogar)$200/hour(reg.$400).'9Ex.14.sealedhearing.
19
12. Theunsi>edfeeapeementalsoprovidesthefollowinginformation:
20
21
a) aCalifomiaaddressforFlylm&Stillman;
b) Flylm&StillmanaretobeadlnittldProhacviceinNevada;and
c) anyfeedisputeissubjecttojunsdlctlonoftheStateBarofCalifomia.
22
23
24
25
26
1d.
13. Mr.Montgomerytcstitiedatthesealedhearingthathedidnotunderstandwhat
l*licenseda>'or*ladmitted''meansinthecontextofthepracticeoflaw.Tr.121:5-9k
148:4-5,sealedhearing.
14. OnMarch20,2006,thcUnitedStatcsDepmmentofDefenscremovedthisactiontothc
27
28
UnitcdStatesDistrictCourt(CaseNo.06-145.#1).
l5. Messrs.FlynnandStillmanappliedforprohacwkeadmission.whichthiscoun
2
3
4
approved(CaseNo.06-145,#s9and14).Mr.Flynnstatedinhisapplicationheis
licensedtopractice1awinMassachusettsandresidesinCalifomia(CaseNo.06-145.
#9).
5
6
l6. Pursuanttot5eDistrictCourt'sorderofMarch15.2007.CaseNo.06-l45was
consolidatedwithacompanioncaseoriginallyfiledwiththiscourt.CaseNo.06-56
(CaseNo.06-56.#l23).
8 B. TheU.S.Districtf'
/l/r/TradeSecretsProceeding-CaseNo.06-56
9
17. OnJanuary31,2006,theMontgomerypartiesfiledaparallelactioninthiscounalleging
l0
1l
copyrightinfringementandrelatedclaimsagainste'
rreppidandWarrenTrepp(CaseNo.
06-56.//1).
12
18. Onceagain,Messrs.FlynnandStillmanfiledapplicationsforrrohacviceadmission,
l3
whichthiscourtapproved(CaseNo.06-56.#s9,l0,20).AswithMr.Flynn'spiorpro
14
hacviceapplicationinCascNo.06-145,heattestedthatheislicensedtopracticelaw
15
inMassachusettsandresidesinCalifornia(CaseNo.06-56,#9).
16
l7
l8
l9
l9. Mr.FlynnservedasIeadeounselfortheMontgomerypaniesinlheseconsolidated
actionsandallotherproceedingspendinginthiscourtforapproximatelynineteen
monthsuntilSeptember4,2007,whenthcDistrictCourtgrantedMr.Flynn'smotionto
withdmwascotmsel(CaseNo.06-56,#256).
20
20. Justasthesecivilactionswereunderway,theUnitedStatessoughtandobtainedasearch
21
warranttosearchMr.Montgomery'shomeandstorageunits.Thccounnowtrnstothat
22
proceeding.
23 C: TheSearchWarrantProceeding-CqseNo.06-263.
24
2l. OnFcbruary28,2006andonMarch3,2006,thiscourtissuedsearchwarrantsforthe
25
26
27
28
seamhofMr.Montgomery'shomeandstorageunits(CaseNo.06-263,#s2.5,7,9.ll.
and12).
4
Case3;06-cv-00056-PMP-?i
b
'
to
2cumPeaye9jsofjj
ledca/ajmgpagesof54
l
2
22. OnMarchl0,2006,Mr.Flynn,asleadcotmselforMr.Montgomery,filedamotionto
unsealsea'
rchwarrantamdavits,fortheretum ofthcproperty.andforthestgregation
3
4
andsealingofa1lattorney-clientandeadesecretsmaterialsseized(CascNo.06-263.
#21).
5
6
7
thesearcllwa>nts(CaseNo.06-263,#86).
9
10
24. Throughoutthisperiod.Mr.FlynnservcdaslcadcounsclforMr.Montgomeryinthe
searchwarrantproceeding.
1l
25. TheUnitedStatesfileditsobjectiontothiscourt'sNovember28,2006ordcr,andthc
12
DistrictCounaflirmedthatorderonMarch19,2007(CaseNo.06-263,#122).
13
14
l5
l6
17
18
19
20
21
22
23
24
25
26
27
Montgomery,andEdraBlixseth(%Ms.Blixseth*')indicatethatthesepersonsdiscussed
28
Case3:06-cv-00056-PMP-VE
Px
ChibDi
t
o2
cumPeanje
98
65of5
F4
i
l
ed03/31/09Page6of54
l
2
3
thedrahingoftheselettersandtbatMr.FlynnscntfinalcopiesofthelcttcrstoMr,
Montgomeryviacmail.ld.Theleterheadonthesclettersstated,S'MichaclJ.Flynn.
admittedonlyinMassachusetts.''Exs.28& 30.scalcdhcaling.
31. OnFebruary13.2007,justdaysafterthelettcrswercscnt,theUnitedStatesGleda
motiontostrikepleadingsfiledbyMr.Flylmandtoprecludehisrrohacviceadmission
6
7
tothiscourtinthesearchwarrantproceeding.Ex.6.sealedhearing;(CaseNo.06-263,
#110).
8
9
10
11
12
32. TheUnitedStateschallengedMr.Flynn'srepresentationofMr.Montgomeryinthe
searchwarrantproceedingbecausealthoughMr.Flynnhadbeenadmittedprohacvice
inthecivilactions,hehadnotbeenadmittedtoappearinthesearchwarrantproceeding.
Ex.6,sealedhearing.ThcUnitcdSutesalsodirectlychallengedMr.Flynn'sstatcments
in hisotherpro hacvice applicationsthat:(1)hcrcgularlypracyiccs1aw In
I3
Massachusetts;(2)hehasalawoffceinBoston;(3)heacmallyresidesinCalifornia;(4)
14
hchasconiictingaddressesforlawofsccsinbothCaliforniaandMassacbusetts;and
15
(5)althoughhisletterbeadstates,KsadmittedonlyinMassachusetts,''itappearedthatMr.
16
l7
I8
FlyrmwaspracticinglawinCalifomia.ld.
33. lnresponse.Mr.Flynnfiledanoppositionmcmorandum(CascNo.06-263,#113),and
b0thMr.FlynnandMr.Montgome? fileddeuileddcclarationsinsupponofthe
19
opposition(CaseNo.06-263,#s114&ll5))Exs.3&4.sealedhearing.
20
34. InboththeoppositionmemorandumandMr.Flynn'sdeclaration,Mr.Flynnrecitedthat
21
heisonlylicensedinMassauhusetts,thathehasappearedinjurisdictionsthroughoutthe
22
23
24
25
26
27
28
UnitcdStates,thatbemaintainsaBostonomceaddressandapcrsonalresidencein
Massachusetts.andthathealsohasaresidenceinCalifornia.Ex.4.sealedhearing.ln
addition,Mr.FlynnstatedthathehaslitigatedcasesinMassachuset?since199I./#.
35. Mr.Flynn asserted in hisopposition memorandum thatthechallengc tohis
reprcsentationofMr.Montgomcrywasinretaliationforhissucccssinthcscarchwarrant
procecdingandforexposingallegedpoliticalcorruption.1d.
6
24
aration.eightpagesinlength,recountedingreatdetailhiswork
36. Mr.Montgomery'sdecl
onnationalsccnritymatters,meetingswithgovcmmcn!omcialsatthchighcstlcvcls,
Mr.Negropontc'sdeclarationinsupponofinvocationonthemilitaryandstatesccrets
privilcgeintheconsolidatcdcivilactions,andhisconcernsforthesafetyofUnitedStatcs
militarypersonnel.Ex.3,sealedhearing.
37. Attachedtohisdeclarationweretwoexhibits:aMarchl,2006letterloSecmtaryof
DefenscDonaldRumsfeld.SecretaryofHomelandSccurityMichaclChenoffvand
AttomcyGeneralAlbertoGonzales,aswellasseveralpagesofwrittcnquestionsdircctcd
toMr.Negroponte.ld.
edthisIetter,thatitwentthroughseveraldrafts.
38. Mr.Montgomerytestifiedthatherecall
butstatedhedidnotrecallseeingMr.Flynn'sletterhead,whichstatesMr.Flyrmisonly
admittedin Musachusetts. Tr.56:5-25,
.57:1,sealedhearing. However.Mr.
MontgomerythenconcededthatitwasnothistestimonythathcncvcrreceivedMr,
Flpm'sIettcrhead,butthathecouldnotrecallifhesawthetinaldraftofthisletteron
Mr.Flynn'sletterhead.Tr.57:2-9,sealedhearing.Mr.Montgomcrytbenstatcdhccould
notrecallwhetherhckncwMr.FlynnwasonlylicensedinMassachusettsasofthe
March1,2006dateoftheIettcr.Tr.57;l0-12,sealedhearing.
39. Mr.Montgomerymadtthefollowingimpolantattestationsinhisdeclaration:
a) t
hathehadpersonalknowledgeofthemattersstatedinhisdeclaration.
Ex.3,sealedhe-qring;
b) thathehadreadthemotiontodisqualifyhisattorney,aswellasthelettersMr.
FlynnsenttogovemmeptofcialsonMr.Montgomery'sbehalfconcemingthc
sh
ea
at
rcth
wa
re
rc
ae
nn
tt
pr
ott
ceemp
edmg
,1d
di.
a
tu!al4
;ymyattorneywouldgravelydamagcmy
c) t
h
e
H
r
a
t
t
o
s
q
i
f
constimtionalproections.ItisborneoutofignoranceofthefacksbytheUSAO,
anagendatoattackme,anddisregardfornotonlymyrights,butthesecurityof
ourCountry''1d.at!13;and
d)
Gi
vsee
nlo
(Mr
.oFic
lyen,n
's
erbieenliceev,tih
nt
griltlys,uannddulpitt
ig
oncoenxupp
et
ritn
isgel
:nhtl
cuc
isnc
mey
ci
o
un
fch
Is
eloe
nxgply
eewi
oatt
hie
s
ofWarrenTrepp,vigorouslyprotectingmyrights,andachievejusticeinthis
matter.''ld.at!14.
40. Atthesealcdhearing.Mr.MontgomerytestifiedthathisFebmary2007declarationwas
,:.
t1thft)1whenhesignedit.Tr,at24:8-10,sealedhearing.However,whenaskedabout
spccificsutcmcntsinhisowndeclamtionorthemotiontodisqualify.Mr.Montgomery
repeatedlytestisedhecouldnotrecallwhetherhehadreadthcentiremotion,thatMr.
Flynnmayhavereadportionsofthemotiontohim.andthathereallydidn'trecall
whetherthegovemment'smotionconcemedthcquestionwhetherMr.Flynnwas
licenscdtopracticelawonlyinMassachugetts.andwaspracticinglawinCalifornia.Tr.
25:3-7;27:6-10;31:4-22,sealedhearing.
41. Whenaskedspecificallywhetherthecontentsofparapaphfourofthedeclamtionwere
true.Mr.Montgomerytestifiedthatthdsestatcmentswerctme.Tr.53:l3-25,
.54:l-14.
sealedhearing.
42. WhcnaskedwhcthcrhckncwalthetimethatMr.FlynnwaslicensedlopractjceIaw
onlyinMassachusete,Mr,Montgomcrytcstified,GWhat'sthatmeantome?natdidn't
meantomethatyoucouldn'tpracticeinCalifornia.''Tr.29:10-13.42:8-13,sealed
hearing.
43. Mr,Montgomery also reviewed Mr.Flylm'sdeclaration in oppositionofthc
l5
govcmmcnt'smotiontodisqualify,whichstates:BothMr.Stillmanand(Mr.Flynn)arc
l6
licensedattorneysinMassachusettgwherethefirmwasoriginallybased.Mr.Stillman
l7
islicensedtnpracticeinCalifomiwMr.Sherdian,andTab(phonetic).myformer
l8
19
20
2l
22
partnersthrough2002,wereonlylicensedinMassachusetts.''Ex.4,sealedhcaring.At
thehearing,Mr.Flynnaskedhim.xDidyoureadthatatthetimethegovemmentwas
tryingtothrow yourlawyeroutanddisqualifyhim inthemiddleofthcscarch
proceedings?''andMr.Montgomcryreplied,ttprobably,''Tr.26:7-10.sealedhearing,
44. neentirebasisforMr.Flynn'sdisqualificationinthesearchwanntproceedingshinged
23
onMr.Flynn'sbarlicensureandtheletterssenttohigbgovernmentomcialsjustprior
24
25
26
27
28
tothefilingofthemotion.Mr.Montgomeryeitherreadthesecriticalpapcrs.orhedid
not.
l D. Aewzllrff/zloftheClvllProceedingsInMarch2007andtheLinerFirm'sfa/r.pasCounsel
fortheMontgomeryPardes1
-aJu#2007
2
3
4
5
6
7
8
9
l0
11
l2
I3
l4
15
16
17
l8
19
20
21
22
23
24
25
26
27
28
45. InSeptember2006,thiscourtissueditsorderstayingproceedingsinthetwocivilcages
pcndingdispositionofthcsearchwarrantproceedings(CaseNo.06-56,#84).ltwasnot
untilMarch2007,thatthecivilcaseswereconsolidatedandthecaseprocccded(Case
No.06-56,#123).
46. OnJuly9,2007,Mr.Flynnandhisco-counsel.Ms.DiMare,movedtowithdrawas
counselfortheMontgomerypmiesbaseduponnonpaymentoflegalfeesandthe
assertion thatMT.Montgomery had engaged in conductthatmadecontinucd
representationunusuallydiftkult(CaseNo.06-56,#s205&206).
47. SincetheUnitedStateshadinvokedthemilitaryandstatesecretsprivjlcgi,thc
withdrawalofcounselwasnotaroutinemotion,anditdrewaresponsefromtheUnitcd
Stateswhosoughttoimposeconditionsontbewithdrawalofformercounselconceming
documentsintheclientfilesubjecttothcstatesecre?privilegc(CaseNo.06-56.#209).
48. WhenthcLincrt1m1steppedintorepresenttheMontgomeryparties,Ms.Klarwas
designatedasleadcounsel,andsheactedinthatcapacityuntilAugustl8.2008.when
RandallSunghineandEllynGarofaloassumedtherolesofleadcounsel(CaseNo.06-56.
#815).
49. Ms.PhnmalsoinitiallyrepresentedtheMontgomeryparties,butonlydidsofromJuly
throughNovember2007,asshewentonfamilyleave(CaseNo.06-56.#599),
Thcreafter,Ms.Pham madenoappearancesinthecase,apanfrom thesanction
proceedings.
50. AttheinccptionoftheirrepresenmtionoftheMontgomeryparties,Ms.KlarandMs.
Phxm knewtbattheUnitedStateshadinvokedthestatesxretsprivilegeandthatit
grtatlyaffcctedthedisseminationofdocumentsrelatingtothisproceeding,whichmight
limitorpreventtheLinertirm'saccesstoMr.Flynn'sclientfiles(CaseNo.06-56.
#213).neLinertirmstrenuouslyobjectedtothegovemmcnt'spotentlalaccesstoclicnt
7
8
9
l0
I1
12
I3
14
l5
16
17
18
l9
files,andtheyalsoaskedthatMr.FlynnandMs.DiMarcbeorderedtosurrenderthc
clientfilestonewcounseluponentryoftheordergrantingthemotiontowithdraw.Id.
ltwasinthisfilingonJuly26,2007thattheLinerfirmGrstraiscdaquestionaboutMr.
Flynn'sresidenceinCaliforniaandcommunicationswiththeclicntsfromCalifornia.
ld.
51. OnJuly31,2007.tbeDistrictCourtsetahearingonthemotiontowithdrawforAugust
l7,2007(CaseNo.06-56.#223).
52. AlthoughneitherthiscourtnortheDistrictCourthadanyreasontoknow of'thc
escalatingdisputesamongMr.Montgomely Mr.Flyfm,andtheLinerfirm,tbecoun
now understandsmorefullywhattranspired.
53. Mr.Flynnwishedtobepaidpastdueattomcy'sfeesandcostsincxccssof$635,000,and
theMontgomerypartiesdidnotwishtopayhim.Asnewcounsel,theLinert1m1wantcd
Mr.Flynn'sclientfiles,butonitstermsandinaforumofitschoosing.
54. necourtnowtumstotheeven?thatoccurredinthisactioninNevada,Califomiaand
Massachusetts.
55. lnJulyandAugust2007,theLinerfirmandMr.Flyrmcommunicatedabouttransferring
representationoftheMontgomerypartiestotheLincrfirm,aroutinepracticeamong
counsel;however,theycouldnotagreconsurrenderoftheclientlilesorthcfeedisputc
(CaseNo.06-56,#s599&600).
20
21
Flyrm'swithdrawalascounsel(CaseNo.06-56.#240).CounseldiscussedMr.Flynn's
22
23
24
25
26
27
28
claim toaretainingIienunderNevadaIaw,aswellastbegovemment'sposition
concemingtheproprietyofanytransferofclienttilesuntilredactionissueswere
resolved./#,Mr.FlynnattcststhatMs.Phamwouldnotacknowledgetheeffectofthe
retaininglienorthegovernment'spositionconcerningtheclientfilesvizm-visthestate
secretsprivilege.ld.Baseduponthiscommunication.Ms.PhamandMs.Klarhadnoticc
oftheNcvadaretaininglien.
)()
57. Presumably,Ms.KlarandMs.PhnmimmediatclyresearchedNevadalawanddiscovercd
thatunlikemanyjurisdictions,includingCalifomia,Nevada1awallowsattomeystofile
3
aretaininglienoverclientfilesuntiltheclienteitherpaystheoutsundingfeesorposts
4
abondtoobtainthetiles.
5 E. August2007-UnltedSflfezDistrlctCourtand1*:AngelesSuperiorf'
fzllr/
6
58. August1,10:7-TheMontgomerypartiesterminatedMr.Flyrmascounsel./#.
7
59. August3.zoo7-erheLosAngelescountySuperiorCourtComplaint:Ms.Klarand
Ms.PhamfiledacomplaintforpreliminaryandinjunctivereliefinLosAngclesSupcrior
9
l0
l1
CourtonbehalfoftheMontgomerypanies.Ex.l6,sealedhcarng.Thccomplaint
allegcdinrelevantpart:
a) T
heplaintiffsmetwithMr.FlynnonJanuary26,2006,butdonotstatewherethe
meetingoccurred;
b) hMar
Fl
y
mf
l
e
hn
ela
ar
jf
e
beli
evet
hathewasaCalifomialawyerandthathe
(j
a
I
arw
i
rdmti
l
osmtoia;
tj
j,
oaungdjyt
ohuay
cF
ol
uyrnsn
el
oif
hei
c) rMr
.eFsl
ynntn
pel
i
mas
lf
p
asswe
aCra
i
epr
e
-mo
nd
l'h
't
h
te
in
vo
ot
l
ce
el
sf
eo
nm
tfi
ra
ol
maw
Cy
ae
lr
lfq
o
ry
nji
ay.
toq
Mr.
st
ds
aCalifomiaaddressona11pleadipgsfiledwiththiscoun;
l2
13
I4
l5
16
17
18
l9
20
2l
22
23
24
25
26
27
28
d) Atn?timcdidMr.Flynneyeradvlsetheplaintiffshewasnotlicensedtopractice
law.F
lnly
Crm
ali
rnei
adpdla
ei
dn)t
;iFswithawrittenfeeagreement.
e) Mr
nfo
ev
rap(
re
omp
vldhea
dsl
ts
he
60. Plaintiffsallegedthatnotwithstsndingtheirdemandtomrnoverclientfiles.Mr.Flynn
refusedtodosoinviolationoftheCalifomiaRulesofProfessionalConduct.1d.
61. However,whenMs.KlarandMs.Phamsledthiscomplainttheyknewthefollowing:
l)thattheturnoveroftheclientfilesandmattersconcerningthestatcsccrctsprivilcgc
werependingbeforethiscoun;2)thattheDistrictCourthadsetMr.Flynn'smotionto
withdrawforheazingonAugust17.2007.atwhichtimetheCounwouldconsiderthe
clientfiledisputeinlightofthestatcsecretsprivilege(CaseNo.06-56.#223);and.3)
Mr.FlyrmclaimedareuininglienunderNevadalaw(CaseNo.06-56.#240).
62. Mr.Montgomerytestifiedthathereviewedthiscomplaintbeforeilwasfiled,butcould
notrecallwhethcrheconductedanyinvestigationconcemingtheallegationsinthe
complaint.Tr.l1l:l9-25.112:l-12,sealedhearing.
jl
63. However,Mr.Montgomerydidacknowledgeheknewbeforethccomplaintwasfiled
thatMr.Flynn'sletterheadstated,ttadmittedonlyinMassachusctts.''Tr.lll:l5-18,
sealedhearing.
64. Mr.MontgomeryalsotestifiedthatMr.FlynnwasreprcsentinghiminNevadaandlhat
hekncwofnolegalproccedingsinwhichMr.FlynnrcpresentedhiminCalifomia.Tr.
40:7-12,scaledhearing.
65, WithregardtotheallegationinthecomplaintthatMr.FlynnneverinformedMr.
MontgomerythathewasnotalicensedtopracticelawinCalifomia,Mr.Montgomery
couldnotrecallwhcthcrheeveractuallyaskedMr.FlynnwhetherhewasaCalifomia
lawyer.Tr.113:l5-25;ll4:l-4.sealcdhearing.
66. August8,2007-Mr.FlynnFilesNoticeBfLodgement: Mr.Flynnremovcdthc
CalifomiaSuperiorCourtactiontotheUnitedStatesDislrictCounforthcCentral
DistrictofCalifomiaaaccompaniedbyanoticeoflodgmentofexhibits.Ex.7.sealed
heming.nisfilingprovidedtheLinerfirmwithextensivcdocumentationaboutMr.
Flynn'sadmissiontothcStattBarofMassachusetts,andrelatedpapersconccrninghis
relationshipwithMr.Montgomeryduringtheirattorney-clientrelationship.ld.
67. Ms.PhamtestifiedthatshereviewedthcmaterialsMr.Flynnprovided.Tr.217:7-13,
sealedhearing,
68. August17,2:07-DistrictCoMrtHearingonMr.FlynnawdMs.DiMare's
Motl
-ontoWithdraw:
neDistrictCourtheard Mr.Flynn'smotiontowithdraw andconsidcrcdtbc
govemment'sconcemsabouttheUnitedStatesprotectiveorder.nishearingwasthc
coun'ssrstrealinklingofthedisputeoverfeesandtheclientfile(CaseNo.06-56,
#247).Ms.KlaroftbeLinerfirmadvisedthecourtthatshehadfiledsuitagainstMr.
FlynninCalifomiaonbebalfoftheMontgomeryparties,butneithcrthcDistrictCour!
northiscourthadanunderstandingofcxactlyhowthatprocecdingrclatedtcthecvenls
unfoldinginthisaction.Giventhecomplexityofthemattcrsbeforethccourt-the
12
DistrictCourtwasunclearwhetheritshouldbecomccmbroiledinthisdisputc.or
whetherthematteroughttobeaddressedbyaCalifomiacoun(CaseNo.06-56,
TranscriptofAugust17.2007hcaring,pages25-28(#267).ThvDistrictCountookMr.
4
5
Flynn'smotiontowithdrawundersubmission.AttheAugust17*hearing,Mr.Flynn
toldtheCourtandcounselthatheandMr.Montgomerycommunicatedveryextensively
6
7
viaemailcorrespondenceoverthenineteenmonthsofhisreprcscntation(CaseNo.0656.#267,TranscriptofAugust17.2007hearing.p.20:19-25,p.21-23).Mr.Flynn
8
9
l0
11
12
13
cstimatedthattheyexchangedinexcessofonethousandemailsandthatapanfromvcry
feworiginaldxuments,theytransmittedallotherdocumentsinthisfashion.ld.The
CourtaskedMs.KlarwhethersbehadaccesstoMr.Montgomery'semails,andshc
repliedthatshedid.1d.at23:24-25;24:1-3.
69. August17,2007-Mr.FlynnandMs.DiMareFileLienNotices:
Mr,FlmnandMs.DiMarefiledts
noticesoflienand/orretaininglienpursuanttoN.R.S.
l4
15
9l8.015andeqResoverthepapersandpropertyoftheMontgomerypmiesforunpaid
feesandcosts''tcascNo.06-56,#s243,245&246),
16
17
18
19
20
70. August21,2007-Mr.FlynnFilesMotionforAttorney'sFeesandCosts:
Mr.Flyfm filedamotionforattomey*sfccs(CascNo.06-56.//248).anditisMr.
Montgomcry'sdeclarationsledinpppositiontothismotion(CaseNo.06-56.#261),
whichis,inpart,thesubjectofMr.Flynn'smotionforsanctions.
71. Augast29,2007-DistrictCourtIssuesUnitedStatesProtectiveOrder:
21
TheDistrictcounissuedtheUnitedStatesprotectiveorder(CnqnNo.06-56,#252).The
22
23
UnitcdStatessupponeditsmotionunderthemilitaryandstatesecrctsprivilegewiththe
declamtionofJohnNevoponte,formerlyDirectorofNationalIntclligence,anda
24
25
26
classifieddeclaration,whichtheDistric!Coun reviewedincamera(#252). A
companionorderconcemedprotocolstbrinfonnationsubjecttodisclosurtordiscovery
intheaction(CaseNo.06-56,#253).
27
28
13
1
2
3
4
72. August31,2007-LinerFirmFilesNoKceofObjectiontoRetainingLiens:
Ms.KlarandMs.Phamtiledanoticeofobjectiontothcretaininglien(CaseNo.06-56,
#254)andobjectedtothelienonthcgroundthattheCaliforniaSuperiorCounhad
jurisdictionoverthematterbecausetheyhadalrcadyfilethecomplaint.
5 F. September7*7
6
73. September4,2007-DistridCourtGrant'sMr.FlynnandMs.DiMare's
MotiontoWithdraw:
7
HavingconsideredtheargumentsofthepartiesonAugustl7.2007.thcDistrictCourt
8
grantcdMr.FlynnandMs.DiMarc'smotiontowithdrawandfurtherordcrcd:
9
thattotheextenttbeMontgomeryPlaintiffsseekto
10
l1
12
l3
I4
15
16
l7
18
19
20
21
22
23
24
25
26
27
28
conditionthewitbdrawalofFlynnandDiMaleonFlmn
a
n
d
Dco
i
Myn
as
re
so
ur
re
ncdoerr
i
nf
g
thP
ei
ric
o
m
p
le
t
eol
l
cl#e2
nt
fi
les
'mlo
n
e
w
e
l
f
r
q
d
o
r
l
a
n
t
i
f
f
s
(
D
c
1
3
)
d
Precondlt
lonisrelectedbytheCourt
.Inthisregar,t
he
recordbefoletheCourtdoesnotsupportthefindingthat
F
yn
nanntdgf
Ma
h
No
leurnotafrK/a'a
co
folr
Mo
oh
me
ryre
Ph
la
my
netFi
lfst
,d
Inra
twn
heMa
tt
us
fm
au
nn
,s
9e3l
Nev.452,567P.2d857(1977,nordoesitappearonthe
recordbeforetheCourtthatFlynnandDiMareshouldbe
c
ocmorpdc.ll
cidMlit
o
h
i
r
es
o
wvc.o3u3n8se
o0f
re
F
tlzs
zu
ir
vre
.n
Fd
ec
dr
.Dt
le
st
.Cfi
ol
u
rt.t
1ln
1e
Nc
,l
89
P.2d798(1995).
(CaseNo,06-56.#256,p.4:12-20).
74. Atthesealedhearing.Ms.PhamtestifiedthatshehadnotactuallyreadKaufmanor
FigliuzziatthetimetheDistrictCourtissucditsorder,butsheagreedthatthesecases
standforthepropositionthatwherealawyerhasnotwithdrawnvoluntarily,Nevada!aw
providesthatthelawyerisnotcompelledtosurrendertheclienttile.Tr.l95:24-25)
196:1-25;l97:1-19,sealedhearing.
75. Ms.PhamalsoameedthatattheAugust17,2007hearing.theDisuictCourtwasvery
concemedaboutthedisputedclientfilesinsofarasitconcemedtheUnitedSutes
ProtectiveOrder.Tr.l98:l8-25;199:1-3,sealedhearing.
j4
September7,2007-LinerFirmSubmitsApplkationforArbitrationof
FeeDisputewithSanDiegoCoqntyBarAssoeiation:
Ms.KlarandMs.Phamsubmitdanapplicationforarbitrationofafeedisputetothe
SanDicgoCountyBarAssociationandstatedtheamountindisputeas$1,838,959.50
(CaseNo.06-56,#597-6,Ex,1l).Ms.PhamandMs.Klar'sstatementoftlxfactsallcgc
thatMr.FlynnheldhimselfoutasaCalifomiaIawyer.assetforthintheirCalifornta
SuperiorCourtcomplaint,buttheydisclosednoinformationwhatsoeverconcemingthe
pendingproceedingsinthiscourt1d.
Mr.MontgomeryknewMs.KlarandMs.Phamfiledthisapplicationforarbitrationof
thefcedispute.Tr.140:16-18,sealedhearing.
78. nreemonthslater.onDecember3.2007,theSanDiegoBarAssociationrespondedthat
16
ithadnojurisdictionandstated:
Bn-donthqCounOrdersoftheUnitcdStatesDistrict
CourqDismctofNevadaandtheSuperiorCourtof
C
li
fgmi
forvLao
sA
nsgc
lk
es
oo
un
nt
ty
an
rtt
th
Da
is
mc
toafNe
da
ha
tn
enCc
ro.lit
ofis
thcelee
ih
reat
ca
se
e
Gledbytheapplicants...includingtheissueofattomcy
feesandcosts.neSuperiorCpurtfortheCountyofLos
Angclcshasdeclinedjunsdictlon.
17
a
ome
ytsfe
nedyc
sp
et
weslnetehe
pnpoliq
ht
et
r
or1
ae
tts
oa
rn
,o
th
lsb
co
mml
haas
Ja
ut
ri
io
sn
dia
cn
tid
onhi
ts
o,
15
I8
19
20
21
22
23
24
25
26
27
28
Inamatterwherethereisacourtdeterminationof
f
ho
er
ar
t
he
p
a
t
t
et
ro
..
-eI
nat
h
is
msa
t
car
,l
t
hq
U
S
D
i
st
r
i
c
t
o
t!
r
t
t
h
e
D
l
s
t
r
i
c
f
N
v
d
a
h
a
c
l
c
y
m
d
j
c
a
t
e
d
t
h
a
t
l
t
w
l
l
makethatdetermination.nematterisdlsmissedwithoul
t
prejudice.
(CaseNo.06-56.#597-6,footnotesomitted).
79. AhersubmittingtheSeptemberarbi%tionapplication,Ms.PhamdidnotnotifytheSan
DiegoBarAssociationofthiscourt'sOctober12,2007order(CaseNo.06-56,#296),
nordidshenotifythemoftheLosAngelesSuperiorCourt'sNovember2I,2007order
(CaseNo.06-56,#597-6),asshebelievedMr.Flyfmhaddoneso.Tr.218:l3-23;220:312,sealcdhearing.Whenaskedwhyshedidnotwithdrawthefeearbitrationapplicatlon
aftertheseorderswereissued,Ms.Pham responded thalshebelievedshehada
convcrsationwithsomeoncattheBarAssociation.shcwasundcrthcimprcssionthc
applicationwouldbedenied,andMr.Flynnhadalreadysubmittcdtheorders,Tr.
219:l8-25.220:1-12,sealedhcaring.
80. September10,2007-Mr.Montgomery'sSeptember10,2*7Declaration
TheLinerfirmfiledanoppositiontoMr.Flynn'smotionforattomey'sfeesandattached
Mr.Montgomery'sdeclaration.whicbattestedinrelevantpanasfollows;
a) c
InouJnas
neula
ry2006,IwasintroducedtoattorneyMichaelJ.Flynnbymylocal
,RonaldLogar;
8
9
10
11
I2
13
l4
l5
l6
17
18
19
20
21
22
23
24
25
26
27
28
b) Mr
yn
e
m
ema
lob
e
veya
hdatIti
mee
neddithro
usth
is
t
i
o
n
haat
he.
wF
al
s
an
Cl
ad
lif
or
ae
ttl
oi
me
,tat
n
b
liea
v
au
tg
1h
woa
en
gr
ae
gp
ir
ne
gse
ant
Caa
l
if
ot
mi
lawyertorepresgntme.Speciscally:hetoldmethathehada1awfirm,F1>n&
Stillman,lnCahfomia,andImetwlthhimathisofficesinCardiftCalifomia;
c) Allpfhislnvoicesweresent9omCalifomiwandallpaymcntswereremittedto
Callfomia;
d) Al1ofthepapersMr.FlynntiledwiththecourtlistedaCalifomiaaddrcss:and
e) p
At
nt
oicte
ime
1d
y
mCa
evl
e
roi
nfoarmorme
ha
wa
ns
oe
td
antd
not
c
nn
sc
di
ln
o
rac
indth
eMr
Sta.tF
el
or
f
if
mi
thatt
htehe
l
b'
Iicsen
oi
psmc
nl
ci
eco
lv
Massachusetts.IonlyIeamedofthiswhenIretainednewcounsel. '
(CaseNo.06-56.#261)(emphasisadded).
81. Atthesealedhearing,Mr.MontgomerytestifedthatalthoughheinitiallymetMr.Flynn
inRenoinJanuary2006,hebelievedMr.FlynnwasaCalifomialawyerbecausehehad
officesinCalifomia.Tr.17:23-25;18:l,sealedheming.Althoughhetestifiedhewent
intoa1awofficeinCardiff,California.Mr.Montgomerycouldnotrccallonwhatfloor
theomcewaslocatcd,whcthertheomcehadanydesks,andhecouldnotrecal!whoclsc
wasintheoffice.Tr.l8:2-9&14-18,sealedhearing.Whenpressedaboutthedetailsof
thisofficevisit,Mr.Montgomerystated,1Ididn'tsayImetyouintheoflice,''butcould
notrecallwhowasintheofliceMr.Montgomeryvisited,Tr.l8:24-25;l9:!,scalcd
hearing(emphasisadded),Whenaskedtoexplainadditionaldetailsofthisvisit,Mr.
Montgomery'srespondedsixtimesthathecouldnotrememberorrccall.Tr.l9:9-20;
20:1-2.sealedbearing.Later,Mr.MontgomerytestisedherecalledmeetingMr.Flynn
inanofficc,butcouldnotrecallwhethcritwasltinside''ort'outsidc''tbcoffice.Tr.21:714,sealedhearing,
16
82. ThecourtfindsthatpnrnraphsevenofMr.Montgomery'sdeclarationisparticularly
imponantbecauseheattcsted4$(a)tnotimedidMr.Flynneverinformmethathewasnot
licensedandisnotlicensedtopracticeintheStateofCalifornia.orthatheisliccnsed
topracticconlyinMassachusetts.''Ex.I,sealedhearing(emphasisadded).
5
6
7
8
9
10
l1
12
l3
I4
l5
l6
l7
l8
l9
preliminaryinjunctionproceedingprovidcdtohisncwcounsel,orwhetherhcdid
20
2l
22
23
24
25
26
27
28
anythingtoconfirmthatMr.FlyrmwasadmittedtopracticeIawonlyinMassachusctts.
Tr.106:18-259107:1;l07:20-25;l08:1-25;109:1-5.,14-25;l10;1-23;l32:4-25,sealed
hearing.However,heconcededthathe''musthaveseen''thetitlepagesofpapers5lcd
withthiscourqwhichidentifyMr.FlynnashavingaMassachuscttsbarnumber. Tr
l28:20-25)130:1-8.Ex.9,sealedhearing.
86. Mr.Montgomery'stestimonyabouthisunderstandingofthewordsladmitted''and
Hlicensed''astheyconcem baradmissionisinconsistentandnotcredible. Mr.
Montgomerytestiiedthathedidnotknowwhattheterm Gadmitted*'ordliccnsed''
ase3:O6-cv-00056-PMP-VE
Px
Chi
bDi
t
o2
cumPea
n?e
9815
8of
F5
il
e
4d03/31/09Page18of54
1
2
3
4
5
6
7
8
9
l0
11
12
l3
14
l5
l6
l7
18
19
20
21
22
23
24
25
26
27
28
mcant,andthatalthoughhesawMr.Flynn'sletterheadwhichstatedSt
onlyadmittedin
Massachusetts,''Mr.Flynnncvertold him hewasonlylicensedtopracticein
Massachusetts,andtheyncverdiscussedwhalitmcant.Tr.148:4-23.
,153:25,
.l54:I
However.Mr.MontgomerycouldnotrecallifheaskedMr.Flynnwhetherhewas
licensedinCalifomia.Tr.152:15-19,sealedhearing.Heonlyleamedaherheretained
newcounselthatalawyeradmittedinonestatehadtobeapprovedbyanothers:atcto
appearinapmicularcase.Tr.148:24-25'
,149:1-7,sealedhearing.
87. WhenpressedtorecallthetimeframcinwhichMr.Montgomerysrstunderstoodthe
meaningofl'admitted''andtelicensed,''hccouldnotrecallwhethcrhelearncdthisfrom
Ms.KlarorMs.PhambeforeorafterhesignedhisSeptcmbcrI0.2007declaration.and
hethentestifiedthathedidnotunderstandthescwordswhenhesignedhisdcclaration.
Tr.149:15-25;l50:1-19;15l:23-25;152:1-14,sealedhearing,
88. necourtsndsthatthereisaverysimplereasonthatMr.FlmnandMr.Montgomery
ncverdiscusscdwhetherMr.FlynnwaslicensedtopracticelawinCalifornia:Mr.
MontgomeryhiredMr.Flynntorepresenthiminthcscarchwarrantproceedingsandthe
tradesccrctlitigationpendingintheDistrictofNevada.Thercwasnorcasontodlscuss
Mr.Flynn'sadmissiontopracticelawinCalifomia,Florida,NewYork.oranyother
stateyaslongasMr.Flynnwasproperlyadmittedtopractice1awbeforethiscourl.which
hewmq.
89. ThecourtsndsthatasofSeptembcrl0,2007.Mr.MontgomerylzewthatMr.Flynnhad
beenadmittedtopracticeintheDistrictofNevadabecauschewasinthccourtroomin
Februa?2006whenJudgePcrryallowedMr.Flynntoproceed.and/elE>w.orreasonably
shouldhaveknownathatMr.FlynnwasadmittedtopracticelawinMassachusetls.
becauseitwasdiscussedinopcncourtandappearedinlettersandcounslings.Evenif
Mr.MontgomerymaynothavcappreciatedthcimportanceofMr.Flynn'sadmissionto
practiceinthestatecourtandhisstatusasaMassachusettslawyeratthattimc.hesurcly
1g
90.
91.
11
92.
13
15
93.
undcrstoodthesignifkanceofthisissueinFcbruary2007.whenthcUnitcdStatestricd
todisqualifyMr.Flynnashiscounselinthescarchwarrantproceeding.
Ms.PhamalsotestifiedaboutMr.Momgomery'sSeptemberl0,2007dtclaratlon.Shc
toldthecourtthatshedrahedthedeclamtionbasedonherdiscussionswithMr.
Montgomtryandbelievedlhatshehadcompletedproperduediligcncctodraftit.Tr.
I65:4-23.sealedhearing.
AlthoughMs.Pham acknowledgedMr.Flynn'sMassachusettsbarnumbcronpapcrs
routinelyfiledinal1proceedingsinthiscourtandhisttadmittedonlyinMassachusetts''
letterhead,sheconcludedthatMr.Montgomeryhadnotunderstoodwhatitmeanttobe
Sadmitted''ordliccnsed''inastate,norhadheunderstoodthatMr.Flynnwasnot
IkensedtopmcticelawinCalifomia.1d.
BasedonherdiscussionswithMr.Montgomery,Ms.PhambelievedthatsinceMr.
MontgomerythoughlMr.FlynnwasaCalifomialawyer.CalifomiaIawgovcrncdthe
attornepclientrelationship.Tr.166:2-20.sealedhearing.
IndrahingparagraphsevenofMr.Momgomezy'sdeclaration,Ms.Phambelicvcdi!was
tmthfulbecauseMr.Montgomerydidnotclearlyunderstandwhatbeinglicensed.
admittedorauthorizedtopracticeIawinajurisdictionactuallymeant.Tr.l76:6-l7,
21
sealedhearing.
94. AlthoughMs.PhamsawMr.Flynn*sbadmittedonlyinMassachusetts''letterhead,shc
believedthatsinceitdidnotsayQslicensedonly,''andMr.Flynnncvcraffirmativelytold
Mr.MontgomeryhewasnotliccnsedtopracticelawinCalifomia.thiscreatedconfusion
inthemindofalaypersonlikeMr.Montgomery.Tr.167:19-25;l68:1-9,sealedhcaring.
95. Ms.Phnmtestifiedthatshebelievedparapaphseventobeaccurate,notwithsfqndingthat
shereviewedMr.Flynn'spapersfiledwiththecourtandMr.Flynn*sttadmittedonlyin
Massachusctts''IcttcrheadformorethanayearandahalfTr.l8I:25:l82:l-24.scaled
hearing.
19
96. September12,2:07-LinerFirm'sexparteApplicationforWritofPossession:
TwodaysahertheyfiledtheoppositiontoMr.Flynn'smotionforattomey'sfccs,Ms.
KlarandMs.Pham filedane..
xparteapplicationforwritofpossessionintheLos
AngclesSuperiorCoun proccedings(CaseNo.06-56.#597-2,Ex.
5
6
Montgomery'sScptembcr10j2007declarationwasalsoattacbedtotheapplication.ld.
Theapplicationstates:
Mr.
F
ytonrnt'smo
sonlc
pufrrp
tain
in
gme
thors
cl
nst,lt
ei
sc,hishte
o
exl
ey
oo
mseti
hnere
Mo
nt
go
yep(a
ri
te
ie
wsl
h
claimsheisowedundersomeallegedfeeagreement.
C
alifomiadoesnotallowattomeyslrformingfunctions
inthisstatetook'esuchabusiveposltlons,andthisCourt
8
9
l0
1l
12
13
shouldenteranimmediateroutineorderandWritof
Possessionunderthesecircumstsnces.
ld.atp.2.
98. Theapplicationfurtherstatesthatgoodcausccxistsforanexparteordcror,
alternatively.anordershorteningtime,becausethiscounordercdpartiesLoprcparea
14
jointcasemanagementreportinthetradesecre?action,CascNo.06-56.ld.Ms.Pham
15
16
17
18
19
20
21
22
23
24
25
26
27
28
notedthatMr.Flyrm claimedarighttoaretaininglientmderNevadaIawandalludedto
theDistrictCourt'sorderpantingaretaininglienovertlwfilesandtbeUnitedStates
protectiveorderinfootnotes.1d.atp.3.n.l&2.Ms.Phamadded,l'Accordingly.itis
nowcrucialthattheMontgomeryPartiesobtainaIloftheirclientfilesimmediatelyin
ordertocomplywiththeNevadaDistrictCourt'sOrder.''ld.atp.4.Themajori
tyof
theapplicationisdevotedtoadiscussionofCalifornialawandtheCaliforniaRulcsof
ProtbssionalConduct.1d.
99. Ms.PhamtestisedthatsincetheLiner511nGledthcCalifomiaactioninearlyAugust.
andshebdievednothinghadoccurredinDistrictCounhereinNevadainsofarasthe
clientfileswcreconcerned.shefiledtheexparteapplicationforwritofpossession.gave
Mr.Flynnpropernotice,andappeared thenextmorningbeforeCommissioner
Greenberg.Tr.168:16-25:l69:1-7.sealedbcaring.
atl
100. Ms.PhamhadattachedtheDistrictCourt'sSeptember4,2007ordertoherexparte
application.butshenevenhelessbelievedthatshehadarighttoseekaturnoverofthc
slesfromaCaliforniacoun.Tr.169:18-25:170:l-1-2,sealedhearing.
101. Ms.Phamsoughtthewritofpossessiononanexpartebasisbecauscshewasconccrncd
thatheLinerflrm wouldnothavcthcclientfilesintimetomcclcascmanagcmcnl
deadlinesinthisaction.Tr.!70:1-10,sealedhearing.Ms.Pham'stestimonyandthe
representationsmadeinthee.xparteapplicationareinconsistentwithMs.Klar's
admissiontotheDistrictCourtinNevadaonAugust17,2007.thatshehadaccesstoMr.
Montgomery'sfiles.
l02. Ms.PhamtestiGedthatexparteapplicationsforwritsofpossessionareroutinelyheld
inchsmbers,andsheoutlinedthebasisforherapplicationwithCommissioncrGrcenberg
whodecidedanemcrgencydidnotexisttowarrantissuanceofawritofpossesslon.
Rather,hesuggestedMs.Phamfiletheapplicationasafullynoticedmotion,whichshe
did.Tr.169:18-20;170:10-20,sealedhearing.
103. September18,2007-LinerFirm':emergencyexparteapplicatlonforclariication
oforderremotiontowithdraw byMichaelFlynn:
Ms.KlarandMs.PhamsougbtclmificationoftheDistrictCourt'sSeptembcr4.2007
order,andmadetwoimportantstatements(CaseNo.06-56,#274).First,thcycontcnded
thatnospecificmotionhadbeenmadetothiscounconcemingtheclienttilcs.andthe
issuehadnotbeenfullybrietkd.1d.Speciiically,noargumentorbriesngwasprovided
ontheissueofchoiceoflawandwhetherCalifomia,Nevada,orMassachusetts1aw
applied.1d.Second.theyassertedthatifthecourtintendedtoadjudicatetheseissues,
theLinerf1= requestedleavetofileabriefandpresentoralargument.ld.
104. Thetenorofthismotionwasclear:totheextenttheLinerfsrmsoughtclariGcationabout
theseissues,itimplichlyaskedthiscourttoconsidertheissue.notanotherforum./J
lnfact,theyevenaskedtosubmitbriefsonthechoiceof1aw issuetothiscourt.id.
--- --
105. Inresponse,tbcDistrictCourtissueditsOctober4,2007orderanddcniedthtmotion
forclmiscation.ThcCourtfounditspriororderclearandunambiguousandfurthcr
stated,iMontgomeryhasnotmovedin//,f.
Courtforareturnofhiaclient#/eJunder
NevadaoranyotherapplicableIaw.neCourt'sdenialofMontgomery'sMotion
thereforeiswithoutprejudiceto5leafullybriefedmotionforretumofthcfile,including
argumentthatlawotherthanNevada'sapplicstosuchaninquiry''(CaseNo.06-56.
#29I)(emphasisadded).
11
106. NotwithstandingtheDistrictCourt'sinvitationtofileamotioninthisct)lzz'/conceming
thcchoiceoflawissue.theLinertirmneverdidso.
107. Ms.PhamtcstifiedthattheDistrictCourt'sOctober4,2007orderdenyingthemotion
forclariicationmadeitclearthateventhoughtheDistrictCourthadearlierstatcdthat
Nevadalaw(KaufmanandFigliuzzt
)didnotrcquireformercounseltosurrenderthe
13
clicntfilestonewcounsel.theLinerfirmcouldactuallytakepossessionoftheclientfilcs
pursuanttothismostrecentorder.Tr.199:I6-25,
.200:1-1j.sealedhearing.
108. lnaddition,Ms.Pham tcstifiedthattheOctober4,2007orderindicatedthatno
determinationhadbeenmadeastowhatlawapplied,sosheconstaedthistomeanthat
anylawcouldapplytothematterofthcclientfiles,includingNevada,California,or
Massachusetts.Tr.200:16-25.
,201:1-25;202:1-4,seale,dhearing.
l09. TheDistrictCoun'sSeptembcr4,2007ordergrantedMr.FlynnandMs.DiMarca
retaininglienontheclientt'ilesunderNevadalaw,andtheDistrictCourtmadeits
21
conclusionabundantlyclearbyitscitationtoKaufmanandFigliuzzi.Asaresult.Mr.
FlynnreainedpossessionoftheslesuntilsuchtimeastbeMontgomerypanieseither
paidtheattomey'sfeesorpostedabond.Ms.KlarandMs.Phamdidneither.
1l0. neOctober4.2007orderdidnotalterthestatusquo:rather,theDistrictCounstated
thatifthcMontgomerypartieswishedtocontestwhatstate'slawapplicdtothcclien!
Gleq,theycouldfileamotionin/Jlf.
court.Ms.KlarandMs.Phamncverdidso.
22
15
16
l7
l8
l9
20
21
22
23
24
25
26
27
28
necourttindsthatMs.PhamandMs.Klardidnotdosobccausethcyalreadyknewthat
Mr.FlynnhadaretaininglienundcrNevadaIaw,andtheydidnotwanttolitigatethe
choiceof1awissueinaforum thatmightruleagainsttheircausc,namcly.togetthe
clientfileswithoutpostingabondorpayingMr.Flynn.Ms.PhamandMs.Klaralso
apparentlydidnotwishtobehamperM bytheUnitcdStatesprotectivcorderandthe
DistrictCourt'simpositionofconditionsforthetumoveroftheclientGles.sothey
continuedtopursuetheirlitigationstrategyfortheclientfilesinCalifomia.
September25,2007-RequestforInvestigationtoOfficeofBarCounselforthe
CommonweaIthofMassachussetts(CaseNo.06-56,#597-6,Ex,13):
InadditiontotheproceedingsnowpendinginthiscourqLosAngelesCountySuperior
CourqandtheSanDiegoCotmtBarAssociationsMs.Phamnextsubmittedarequestfor
investigationofMr.FlynnwiththeMassachusettsBarCounsel.1d.Mosttellingabout
thisrequestiswhatMs.phamfailedtoincludeinthisrequest.Tbestatementoffacs
summarizesMr.Flynn'sfailurctosurrenderclientfiles,theallegationthatMr.Flynn
improperlyheldhimselfoutasaCalifomialawyer,andattachedaretheMontgomery
parties'terminationlettertoformercounselandtheLosAngelesCountySuperiorCourt
complaint.Id.However,thereisnodisclosurewhatsoeverconceminganyordersthat
thiscounissued.ld.
AlthoughMr.MontgomeryauthorizedtheLinerfirmtofilcthisbarcomplaint-hccould
notrecallthebasisforthecomplaintsnordidheknowwhetherBarCounsclwasnotitied
ofthiscourt'sordersconcemingtheclientfiles.Tr.139:20-25:140:4-9,sealedhearing,
114. Ms.Pham testified thatthetimingofthesubmissionofthebarcomplaintin
Massachusettshadnothingtodowiththiscourt'sordersconccmingthcclientfilesal
aboutthesametime;rathcr,itwassimplyafunctionofthetimeittooktoobtainthcform
andsubmitthecomplaint.Tr.l72:l3-25;l73:l-11,scalcdhearing.
.-
115. Mr.Flmnwasadmittedrrohacvicetopracticebeforethiscourqandthcclientfilesand
feedisputeconcemedcasespendinginthiscourt;howcvcr,Ms.Phamnevcrfiledany
complaintwiththeNevadaStateBarbecauseshebelievedthatthconlytribunalthal
coulddisciplineMr.FlynnwasMassachusetts.Tr.2l5:14-25;216:1-25.
,217:l-6vsealed
hearing.
116. ThecourtsndsthatMs.KlarandMs.Phamdidnotavailthemselvesofprocedures
affbrdedattorneysadmittedprohacviceinthiscourtbecauseitwasinconsistentwith
theirlitigationstratcgytoremovethcissuesconcerningpossessionofclientslesand
attorneygsfeesfromthiscourt'sjurisdiction.
l0
OnOctober31,2007,theAssistantMassachusettsBarCounselrespondcdtotLebar
I1
12
complaint(CaseNo.06-56,#597-5,Ex.14).ltsmtes,
YoudidnotmentioniqyourcomplaintthattheUnited
StatesDistrictCourqDlstrictofNevada,entereddetailed
l3
l4
15
16
17
l8
l9
20
21
22
23
24
25
26
27
28
1d.
l18. TheAssistantBarCotmselalsonotedthathehadIeamedthefilemaycontainmilitary
orstatessccrets,makingthiscourttheproperforum Stodetermineproceduresand
restridionswithrespectto%nsferofthefilesinthesecircumstnnces,anditappearsthey
havemaintainedjurisdictionoverthatpreciseissue.''1d.(emphasisadded).
119. TheletterconcludesbystatingthathconlycormectionMassachusettshadtothematter
isthatMr.Flyrmislicensedinthatstate;bowever.itwasforothercourtstosortout.
especiallyinIightofnationalsecurityissucs.andAssistantBarCounscldcclinedto
intcrfcrcinpendinglitigation.1d.AsforclaimsthatMr.Flynnhcldhimselfoulasa
24
Californialawycr,theproperfommloaddrcsssuchconcemswastheCalifol
miaState
Bar.1d.2Thefiledwasclosed./#.
3
4
120. Ms.Phnmtestifiedthatuponrcceiptofthiscourt'sOctober12.2007order(CaseNo.0656,#296),tbeLiner517nSscommenced''nofurtheractionsvbutdidnotnotify
5
6
7
MassachusettsBarcounselofthiscoun'sordcr,asshebelievedMr.Flynnhaddoncso.
Tr.222:10-25.223:1.
121. WhcnaskedwhyMs.Phamdidallofthis.sheofferedthjsexplanation:
8
9
a) BecausetheclientfileswerelocatedinCalifomia,shcthoughtitwasproperto
filetheAugust2007complaintinCalifomia;
b) Threeweekslater,Mr.Flynnsledalnoonforattomey'sfeesinthiscourt,and
Ms
.PhapzbeligvedthatnotwithstnndmgtheDistrictCourt'sorders.shecould
procccdlnCallfomia;and
c) Itwasnotuntilthiscourt'sOctober12,2007orderthatMs.Phamunderstood
thattheDistrictCourtinNevadahadjurisdictionovertheseissues.andshc
lscommenced''nofurtherproceedings.
I0
lI
I2
13
14
15
16
17
18
l9
20
2I
22
23
24
25
26
Tr.223:2-20.gealedhearing.
122. October12,2007-OrderonMotionbyMr.FlynnforAttorney'sFeesandCosts:
HavinginmindthcDistrictCourt'sAugust29.2007ordersgrantingtheUnitcdStatcs'
motionforprotectiveordergovemingmilitaryandstatesccrcts(CascNo.06-56.#s252
&253),itsScptember4.2007orderrantingMr.Flynn'smotiontowithdraw.andits
October4,2007orderden/ngtheMontgomeryparties'motionforclariication(Case
No.06-56,#s252,253.256&291),tbiscourtissuedanorderconcemingMr.Flynn's
mouonforattorncy'sfeesandcosts(CaseNo.06-56,#296).
123. Bythistime,thiscourtwaskccnlyawareoftheLinerfirm'slitigationstrategy,which
includedtheCalifomiaSuperiorcounaction,anapplicationforfcearbitrationwiththe
SanDiegoCountyBarAssociation,andtheMasachusettsStateBarcomplaint.Intct,
thiscourtnotedinitsorder:
'
z'
rhereisnothinginthcrecordindicatinythatMs.PhamandMs.Klarreferredthismattertothc
al
fo
nt
ii
a
ysoughtarbitratlonofthefkcdisputewiththeSanDiegoCountyBar
27 C
As
si
o
cr
ia
onS.tateBar;theyonl
28
25
2
3
4
5
6
7
8
9
l0
11
l2
l3
l4
15
16
l7
18
19
20
21
22
23
24
25
26
27
28
ThecourtobservesthatinthefaceoftheDistrictCourt's
September4,2007orderthatFlpnandDiMarewould
notbccompelledtosurrenderthelrfilestqnewcounselof
record,see#256,Montgomeryhascontlquedtopursue
anaoli
tf
hoerrnif
to
ateathScupfe
er
eiod
po
uu
ter,tnaa
ly,
C
ao.mm
Inh
isad
Cj
auld
ifi
ocmi
rlsC
gme
tion
MontgomeryseeksreliefthatiscontrarytotheDlstrict
Court'sorder.
1d.atp,3,n.3.
124. Thiscourttookjurisdictionofthefeedisputeandobservedthatbccausethcfeedisputc
implicatedMr.Flynn'sconductastheMontgomeryparties'counselasalawyeradmiucd
pro/;rzf'Wcc,thiscourtwas44theobviousandproperforum''forrcsolutionofthisfee
disputc.ld.atp,5.Furthermorc,thccourtreiteratedthattheDistrictCourthadcarlicr
concludedthatMr.Flynn'swithdrawalwasnotvoluntaryanddidnotrcvisitthatissue.
Id.at3.n.4.Thiscourtnoted-justincmsetheLiner51-n3stilldidnotunderstand,-that
thiscourttookjurisdictionofboththeattomey'sfeedisputeandtheclicnt5ledispute.
Id.at5,n.5.
l25. BecausetheLinerfirmhadinitiatedthisflurryofproceedingsconcemingthcclicntfiles
andthefeedispute,thecourtwenttogreatlengthstodiscussNevadalawinsofaras
charginglicnsandrctainingliensareconcemed,anditdiscussedindetailthctwo
NevadacasescitedintheDistrictCourt'sSeptember4,2007order:Figliuzziv.Eighth
JudicialDistn'ctCourt11lNev.338(l995)andInreKaufman,93Nev.452(1977).
1d.ThesearethetwopivotalcasesthatMs.Phamlatcrtcstifiedshehadnotreadatthe
time.
126. Thiscourtdidsoforthesimplereasonthatdespiteseveralordersofthiscourt.Ms.Klar
andMs.Pham cithcrdidnotappeartounderstandtheimporloftescorders,orLhcy
electedtoignorethemandshopforafriendlierforum,
127. Thecourtsuspcctcdthelatterwastrue,anditknewthatthewritofpossessionwas
schedulcdforhearingonOctobcrl8,2007.Therefore,ittooktheunusualstepof
orderingtbeLiner51111todeliverofcopyofitsordertothepresidingjudgcinthe
26
16
l7
l8
l9
20
21
22
23
24
25
26
27
28
CalifomiaSuperiorCounaction.ld.Unfazedandundaunted,Mr.KlarandMs.Pham
pressedonwiththeOctober18,2007hearing.
128. October18y2007HearingonWritofPossessioninLosAngelesCounty
SuperiorCourt(CaseNo.:6-56.#597-5,Ex.8):
OnOctober18,2007,Ms.PhamandMs.KlarappcaredbeforeCommissioncrViclor
Grecnberg,Ms.DiMareappearedonbehalfofMr.Flynnandherself,andMs.Wclls
appearedonbehalfoftheUnitedStates.Id.ThecourtrecountsMs.PhamandMs'
Klar'sstatementsverbatimbecausetheirownwordsmostaptlydemonstmtewhytheir
conductwarrantssanctions.
129. CommissionerGreenbergstatedattheoutsetofthehearingthatitwashisinclination
denythewritofpossessionbaseduponhisunderstandingthattheDistrictCourtforthe
DistrictofNevadahadalreadydctcrminedthatMr.Flynnwasnotrequiredtoturnover
hisfile.andthatithadalsoenteredprotectiveordcrsrclatingtotheclientfiles./#.atp
2:17-28.
130. Ms.Pham toldthecoO:
lunderstnndthatyourHonor'splingisprobablybased
ontllislateorderthatwasjustlssuedlastFridaybythe
m
agma
i
smt
jued:
edig
neYlnevNe
ada
th
l
res
toto
the
pse
%t
Ju
v,
na
dn
nd
,tw
hei
issa
u1
ed
ou
fe
wh
ep
the
ec
r
r
notthefilesshouldgetturncdovertotheclientvthe
Montgomerypartyw)
asnotaddressedtothatNevadaeourt
a
n
d
t
h
e
Nc
v
a
d
a
ma
g
l
stratedidjcknowledgcinherorder,
thatnomotionhasbeenmadclntheNevadacourt.
Asn
q
hdt
heeth
Neer
v
ad
adm
ag
ra
te
jc
ua
dtg
et
ahnadtn
th
cu
mea
l
pre
iddinbgol
u
g
ea
Ju
ge
Pi
rs
ot,
ip
di
ed
oc
reaq
st
hasbeenmldeandnodeterminatlonhasbeenmadeasto
whichstate'slawshouldapply.That'ssquarelybefore
thei
ceou
rte
at
nhderthois
ht
ehe
onfl
Ih
Mouwi
jt
urti
dnle
ct
nvt
d
csid
wh
ri
nsot
t
iy
leC
sOs
ldthge
usr
dioo
co
r
becausetbeGlesarelocatedhereinCalifornia.Andthe
courtinNevadahasnotdetermincdwhichlawshould
a
pply.Thathasnotbeenaddressled)todayhcreandthat
motionhasnotbeenmadeinNevada.
Id.atp.32l-19.
27
13l. Inrcsponse.theCommissionerremarkedthattheNcvadacoundiddiscussthatundcr
NcvadalawMr.Flynnwasentitledtokeeptheclientfilessubjccttobeingpaid.andMs.
Phamreplied:
4
5
6
7
8
9
l0
IfNevadalawwcretoapplythatwouldbecorrectbut
thcrehasbeennodetermmationastowhetherornot
Nevadalawappliesornotandthatwasmadeclearby
JudgcPro'srecentorderwithrespecttoourrequestfor
claritscation.JudgeProindicatedthatnomotionhasbeen
ma
i
otd
eter
mi
neati
nnih
ad
ni
dceha
ndj
lce
ata
en
ddthna
we
we
r
doe
em
dqwbe
ite
hn
oum
tapdre
eju
td
o
makingthatmotionaswellasargumentsastowhich
state's1awjhouldapply:Andthepropercourttomake
thatdeyermlnatipnwouldbethiscourtwheretheGlesare
located.Onlythlscourtcouldorderthetilest?getmmed
overbecausetbeGlesaltIocatedhereinCallfornia.
11
l2
MMr
ly
b0
h
h
aw
hcej
s
c
ti
e
r!.
FF
ly
nn
nn,
iu
snp
lmer
en
set
dt
ae
ndl
whet
r
hu
eri
pdri
ac
to
icn
ew
sh
ae
nr
d
m
locaai
n
t
a
i
n
s
h
i
s
o
f
f
l
c
e
a
n
d
r
e
s
i
d
e
s
a
n
d
w
h
e
r
e
t
h
e
5
l
e
s
a
r
e
tedareinCallfomia,andMassachusettsIawrequires
l3
14
l5
neseargumentshavencveybesnadd-ssedtothe
NevadacourtsoJudgeCook's(s1c)-themagistratc
j
sap
oprd
plm
otpa
rmi
nantt
io
natoif
whvij
cdha1
la
aw
w
su
hd
og
ue
ld*
lyer
itw
wa
as
ss
lyd
ae
st
uet
eme
th
fNq
weretoapplytheninfacthewouldhavcarctalnlnyIicn
b
ecaqsetheonlyotherissuebeforethemagistrateJudge
atthlstimcisafeedisputeastohow muchwouldbe
o
wedtoMr.Flynnundertheparty's(sic)attomey-client
relationshipandfeearrangement!Andinthateventthe
16
17
l8
19
20
21
22
23
24
25
26
27
28
thefilestobeturnedover,theNevadalawcarmotapply.
feesaredeterminedandNevadaIawweretoapplythen
Mr.Flyrm would have a retaining lien but no
determinationhasbeenmadeandtowhatlaw should
applyatthispoint.ThatissueisonlybeforeyourHonor.
ld.atp.3:25-28;4:1-27.
132. Ms.DiMareargaedthattheCommissioner'sundersundingofthiscourt*spriorordea
wascorrect:underNevadalaw,Mr.Flynncouldretainthesle.andthatifthe
Montgomerypartieswishedtochallengethatorderbasedonachoiceoflawargument,
theyhadlcavetodoso.Otherwise,theorderstood.ShealsonotedthatlheNevada
federalcounrequiredMs.PhamandMs.KlartodclivertheOctoberl2,2007ordcrto
theCalifomiacoun becausetheNevadacourtknew thattheywereattemptingto
circumvcntordersissuedbytheNevadafedel'
alcouns.1d.at5:2-26.
a8
3
4
5
6
7
8
9
10
11
12
13
14
15
l6
l7
l8
19
20
2l
22
23
24
25
26
27
28
l33. Inreply,Ms.PhamquotedtheconclusionoftheDistrictCoul'sOctobcr4,2007order,
andthenstated:
h
tiame
hisa(hDi
zc
taCdy
oubreteonrdfe
re)dwa
il
edttihoins
actA
iot
nt
ineC
lifot
mi
ads
alre
il
.Ts
hif
s
mo
wasalreadypendingbeforethecoM.JudgeProwas
awareofthat.JudgePr0syecificallydidnotnrderthatwe
mu
slt
i
l
eNi
n
ev
.t
eas
m
p
dhth
tif
etewro
ul
i
ke
tofi
ef
in
evNad
aa
hd
eaw
ll
ll
dl
dr
el
sy
ss
aa
ni
d
ca
wi
llw
de
mi
nd
el
t
h
e
issueofwhichlawshouldapply.Heconsistentlyrcfrained
frommakinganyrderwithrespecttothetumoverofthe
f
bneu
qaau
ngin
Cil
ae
ls
ifo
.sehcknewtherewasanactionpendi
*
Whatthemagistratejudgedidwassimply-basedon,
Ihavetosaymisrepresentationls)aboutwhatthese
proceedingtodaycntail,Ibelievethemagistratejudge
wa
unp
dlearcethbee(
mi
ahpepc
ro
ehue
o
ncdofonwh
ame
tcxs
at
cattle
yme
wa
t
aks
ing
fo
resl
t
rn
ts
bi
as
so
ns
t
madebyMr.Flyfmwhichwewerenotallowedtorespond
to.nosestatementsseem tqsygyestthatwewere
somehowcircumventingthejupsdlctlonorgoipgaround
t
hecoyrtintermsofthemotlonorattorney'sfeesor
protectlveorderthatarealreadyinplacelntheNevada
court.
f#.atp.7:5-l5.Ms.PhamwentontosaythattheonlyissuebeforctheNevadaDistrict
Counwastheissueofattomey'sfees.andtherchadbeennodccisioninthiscourt
concemingtumoveroftheclientfiles.1d.at7:20-28.
I34. ARerhearingfromMs.PhamandMs.DiMare,thcCommissionernotedthatcounsclfor
theUnitcdStates,Ms.CarlottaWells,wmsalsopresent,andhcinquircdwhethcrhv
oughttohearfromher.Ms.Klarthenstated:
YourHonor.onbehalfoftheMontgomerypartieswcdo
o
!s
Ou
rdpobsy
itio
neisc
th
err
etii
snapNrc
ov
teac
iv.eOof
rde
ru
thra
s
bb
cj
ee
ncti
jue
th
ou
dta
co
st
eha
in
c
onnndeact
ti
l
ntwi
th
ny
rhdeerfit
hs
a,
twe
thiswo
couuld
ncwoo
uld
ssyth
e
ma
nog
ran
sfa
er
ofot
le
mp
lyi
wl
thatorder.Webelievethatthegovemmentisheretotnke
y
hre
eattt
h
eda
ean
crli
m
en
tt
af
t
ce
ot
ua
rn
t'o
st
o
dreb
ri
.t
na
or
ep
rp
,l
Fe
bd
ell
lo
evtr
ey
!it
socm
ler
a
nv
te
rm
sho
Whatwearerequiredtodomcfmnectionwiththetransfer
o
fethreafi
le
s
.a
ap
nd
dI
ths
inok
..
.Iatt
hl
ln
k
kml
tlydyat
ae
reyhoeurr
et
oomu
ddty
t
h
t
s
r
s
t
o
me
wh
n
t
l
H
n
o
r
o
refrmnlnglvingustherellefthatwcbelieveMr.
29
6
7
8
9
10
11
12
l3
l4
l5
l6
l7
18
19
20
21
22
23
24
25
26
27
28
MontgomeryandMrs.MontgomeryandtheMontgomery
Trustis(sic)entitledto.
ld.at8:3-22.Ms.WellsrespondedthattheUnitedStatestooknopositiononthemcrits
ofthcapplicationforwritofpossession'
,rather,thegovemment'sintcrcstbtisthatthe
informationthat'scontainedinthosefilesthat'ssubjecttothemilitaryandstatesecrets,
presentandintact,beprotected.''ld.at8:28910:l-7.
135. TheCommissionerdenkdthewritofpossession.Id.atl3:17-24.
136. ThecourtfindsthatatleastbyOctoberl2.2007.Ms.KlarandMs.Phamkncwor
remsonablyshouldhaveknownthatthiscourtnotonlyrcaffirmeditsjurisdictionovcrthc
clientsles,butalsoformallyretainedjurisdictionoverthefetdisputc.
137. Ms,Pham madesevemlintentionalmisrepresentationstolheCommissioneratthc
October18,2007hearing.ShetoldthecounthattheCaliforniaSupcriorCourtwasthe
onlycourtthathadjurisdictiontodecidcwhetherthetilesshouldbeturnedovcrtothc
Linerfinn.Thisisnottrue.ShetoldthecourtthattheMontgomcrypartieshadnothad
anopponkmitytoarguewhichstatc'slawshouldapplyasitconcernstheclientsles.
Thisisnottrue. See.e.g.,CaseNo.06-56,#s254,261. Ms.Pham toldthc
CommissionertbatthisCourthadnottakenjurisdictionoverthematteroftheclientfiles.
Thisisnottnle.SeeCaseNo.06-56,courtordtr#s256,29l.&296,n.5($Bythis
order,thiscourtonlytakesjurisdictionovertheattomey'sfeesandclientfiledispute.'').
Ms.PhnmtoldtheCommissionerthatthiscourtmisapprehendedthenatureofthewrit
ofpossessionproceedingsbeforetheCommissioner.Thisisnottrue.necourtmost
assuredlykncwexactlywhatMs.PhamandMs.Klarwereupto.whichiswhythiscourt
orderedthcLineriirmtodeliveritsOctoberl2.2007ordertotheCaliforniacourt.This
courtfindsthatMs.KlarandMs.PhamintentionallyfailedtoGletheirehoiceoflaw
motioninthiscourtbecausetheyknewthcymightlose,ndinsteadattemptedtoarguc
-a
lbeitimproperlyandunsuccessfully-inCalifomia,thatsincetheydtclinedthis
DistrictCoun*sinvitationto5lesuchamotion.theycoulddosolnL'allfornia.
30
138. Ms.Klar'sstatemen?totheCommissioncrthatcounselfortheUnitedSmteswasprescnt
atthchcaringtotstakeanotherbiteattheapple.'ltotcircumvcntthatcourt'sordcrs''
tf
muddythewaters,''andtolsintimidatcyourHonor''aremisrepresentationsofwhatMs.
Klarknewhadtranspiredinthiscourt.
139. 80thMs.PhamandMs.KlarknewthattheUnitedStateshadacompellinginterestin
insuringthatdocumen?intbeclientslesthatweresubjecttothestatesecretsprivilege
7
8
9
beprotected,yetbytheirconductsattemptedtounderminetheefrectoftheUnitedStatcs
protectiveorder.
140. Ms.PhamlatcrtcstifiedthatoncethiscourtissueditsOctoberl2,2007orderbywhich
10
ittookjurisdictionovcrtheclientslesandatlorney'sfees,shedidnots'commence''any
1l
12
l3
14
l5
16
l7
l8
19
20
2l
22
23
24
25
26
27
28
fttrtherproceedings.Tr.p.223:17-20.sealedhearing.Thecounfindsthattestimony
disingenuous.Inthefaceofnolessthanthreeordersofthiscourt.Ms.KlarandMs.
PhamcontinuedtoengageinaIitigationstrategyinviolationofthoseordersandmade
misrcpresentationstotheCommissioneronOctober18,2007.HadMs.KlarandMs.
Phamintendedtoactingoodfaith,thcywouldhaveterminatedthewritofpossession
proceedingsassoonastheyreceivedthiscoun'sOctober12.2007ordcr,attLevery
le>qt.
141. November21,2007-LosAngelesCountySuperiorCourt'sOrderofDismissalon
theBasisofForumNonConveniens:
Undauntedbythiscourt'sorders.thewritcommissioncr'sordcrdenyingawrit()f
possession,andtheMassachusettsBarCounsel'sdismissalofthebarcomplaint,the
Liner51.
113pressedonwithitsCaliforniaSuperiorCourtcomplainttoobtaintheclient
filesandobuininjunctivereliefagainstMr.Flyrm.OnNovember21,2007,theSuperior
CourtheardoralargumentonMr.Flyrm'smotiontoquashserviceofjummonsand
motiontodismiss/suy(CascNo.06-56.#548.Ex.1'
,#597-9.Ex.8).
142. Atthehearing,anothcrlawyerfrom theLincrfirm,continuedtomakethcidentical
argumentstheLinerfirm hadmadebeforethiscourt.thewritcommissioner,theSan
31
DiegoBarAssociation.andtheMassachuscttsBarcounscl.SeetranscriplofNovcmbcr
2
3
21,2007hearing,p.9:20-28;10:1-22:11:1-23,(CaseNo.06-56.#597-5,Ex.l0).
143. necourtFantedMr.Flynn'smotiontodismissonthebasisoforumnonconvenens
4
5
6
7
8
9
l0
l1
12
13
14
andstated:
Califomiaisonlyinvolvedinthismatterduetoan
u
n
s
u
bpsr
te
ns
neti
eddta
eI
ymatio
yefp
ladin
f
hsatlid
fe
dai
nnt
misre
na
tt
e
oll
h
tbnalbd
en
at
ni
tfwt
a
ceen
sn
ed
California.ThecaseisbeforeaCalforniacourtforthe
transparentpurposeofhavingI/115.courtcountermandthe
onrtdee
rs
ft
he
Nges
va
strictCourt.Calfornia/;J.
no
i
re
sto
i
nd
oin
od
.aDi
Nevadwontheotherhand,hasagreatpublicinlerestin
a
d
ju
ch
atuin
i
deis
e
D,ewfehnodaanptpeaFrleydnnproishaa
Ma
sd
sai
c
sg
ettsth
li
csens
dpu
lat
w.
ycr
c
viccinNcvadaonbehalfofplaintiffs,solelyinNevada
cmses.beforeNevadacourts.applyingNevadalaw.The
NcvadaDislictcourthasalreadymadesubjtantialorders
ce
of
necn
ed
rn
i
ntgathGe
s
uin
bj
eg
ctlma
t
teorve
or
ft
th
he
is*a
c
te
,o
ntG
by
g'ivth
inagt
d
a
n
r
e
t
a
i
n
i
e
p
'
c
l
i
n
l
e
s
plaintiffseeks,bythisactlon,tohavereturnedtohim.
TheNcvadaDisqrictcourtcaseconccmsallegationsof
wrongdoingagmnstthecyrrcntNevadaGovemorand
alle
geapti
snta
tltly
pv
laal
nati
n thiscase made
mi
sr
ro
en
se
lot
nsth
ineNe
d
.Fs i
l5
CaseNo.06-56,#548,Ex.1(emphasisadded).
l6
II.LEGALDISCUSSION
l7
A. SaneMonsPursuanttotheCourt'sInherentAuthority
18
Afederalcourthasinherentpowertolevysanctions.includingattorney*sfees,fortswillful
19
disobedienceofacourtorder...orwhenthelosingpmyhasactedinbadfaith,vexatiosuly,wantonly.
20
orforoppressivereasons..,.'*RoadwayExpress.Inc.v.Pi
per,447U.S,752,766(l9,80)(intemal
2l
quotationsandcitationsomitted).AcourtS'certainlymayassess(sanctions)againstcounselwho
22
lfullyabustjudicialprocesses.''Id.InChambersv.NASCO.lnc..50lU.S.32(I980).theCourt
23 wil
reaffirmedthe/bzl#wtp
yprinciplesandtsleftnoquestionthatacourtmaylevyfee-basedsanctjonswhcn
24
apartyhasactedinbadfaith,vexatiously,wantonly,orforoppressiveremsons.delayingordisrupting
25
litigation.orhastakenactionsinthclitigationforanimproperpumose.''Finkv'
.Gomez.239F3d989.
26
992(9'
bCir.2001)(citingChambers.50lU.S.at45-46,n.10).lnFfal,theNinthCircuitmadeclear
27
28
32
8
lnlnreltelSecwritiesLitigation,79lF.2d672(9*Cir.1986),thecourtexaminedthecourt's
9 inherentauthoritytoimposesanctionsforbadfaithwheretheattomeyfiledobjectionsinonecaseto
10 obtainfeeconcessionsinanactionpendingbefox anothercourt.Althoughthecounfoundthe
11 objectionswemn0tfrivolousormeritless,theattorney'sgoalwastogainanadvantageinanothercasc,
12 whichthecourtconcludedwassumcienttosupponafindingofbadfaith.ld.at675.wtltorpurposes
13 ofimposingsanctionsundcrtheinherentpowerofthecourqafindingofbadfaithtdoesnotrequirethat
14 theIegalandfactualbasisfortheactionprovetotallyfrivolous;whereaIitgantissubstantially
15 motivatedbyvindictiveness,obduracy.ormalafdes,theassertionofacolombleclaimwillnolbar
16 assessmentofattomey'sfeesv'''1d.(quotingLi
psigv.Nat'1StudentMktg,Com.,663F.2d178,182
17 (D.C.Cir.1980).InFink,thccouncitedhelfbrthepromsiionthat'ssanclionsarejnslitcdwhena
l8 partyactsforanimproperpuvose-evenifthatactcomsistsofmakingatruthfulsutementoranon19 frivolousargumentorobjection.''Fink,239F.3dat992(emphasisinoriginal).
20
neburdenofproofisclearandconvincingevidence(RoadwayExpress.447U.S.at764)9
21 however,afindingofbadfaithmaynotberequiredwhenansattorneyacBrecklessly...Lwith)an
22 improperpumose.m*Finks239F.3dat993.
23
24
25
26
27
28
B. SanctionsPursuantto28U.S.C.j1927
28U.S.C.91927states:
Anyattomcyorotherpersonadmittedtoconductcasesinanycounofthe
UnitedStatcsoranyTerritorythereofwhosomultipliestheproceedings
inanytuReunreasonablyandvexatiouslymayberequiredbythecounto
s
aati
sofn
yabpleyrjlo
al
heecaeuxsceeosf
ssc
edxupcetn.ses.andaltorneys'fees
re
s
nn
cu
rl
ry
cdt
b
uo
cs
hts
c,
on
33
excesscostsductothtirmisconduct.''GEORGENEM,VAIRO,RULE1lSANCTIONS765(3ded.2003).
5 citi
ngRoadwayExpress,447U.S.at759-62(notingtheimpo-nceofSection1927sanctionsinthat
tlawyerswhomultiplylegalproceedings(are)tnxedwiththeextratcosts'theygenerate.n)
TowarrantsanctionspursuanttoSection1927,acourtmust5ndtheattorneyactedwith
askaDev.Corp.v.Guetachow,869F.2d1298,I306(9t5Cir.
8 recklessnessorsubjcctivebadfaith.NewAl
l989).EstateofBlasexre.Chargualafv.Winkler.792F.2d858,860(9'
bCir.1986);UnitedStatesv.
10 Bl
odgett,709F.2d608,610(9tbCir.1983).tBadfaithispresentwhenanattorneyknowinglyor
volousargumem,orarguesameritoriousclaimforthepumoseofharassingan
11 recklesslyraisesafri
''K CoastTheaterCorp.v.Cityofportland,897F.2d1519.1528(9*Cir.l990).Section
12 opponent.
v.lnternalRevenues'
em/.'
13 1927sanctionsmayonlybeimposedonattorneysandrmselitigants.Ftzge.
14 9l5F.
2d1230,1235-36(9tbCir.l990).However,Section1927t*cannotrcachconductofapanywho
nvolvedinanactionbcforethesanctioningcourtatthetimeoftheconduct.g'GridsystemsCorp.
15 isnoti
16 v.JohnFl
ukeMfg.Co..lnc..41F.3d1318,1319(9Q'Cir.l994).BecauseimpositionofSectionsl927
onsispenalinnature,itrequiresthecourttomakespecifksndingsoffact.Trulisv.Barton.107
17 sancti
18 F.
3d685.692(9*Cir.1995).Sltpriortosanctioninganattomey,acourtmustprovidethepartytobe
19 sanctionedwithnoticeandsomereasonableopponunitytorcspondtothecharges'inordertosatisfy
20 tberequi
rementsofdueprocess.''InreDevf/le,361F.3d539.548(9tbCir.2004),quotingJonesv.
21 Pit
tsburghNat1Corp.,899F.2d1350,1357(3dCir.1990).
22
C. LqcalRuleIA10-7(a)
LocalRule(ttLR'')IAl0-7(a)oftheLocalRulesofPracticeforthiscourtprovidesthatan
23
24 at
torncyaclmittedtopracticebeforethiscourtissubjecttothestandardsofconductprescribedbythc
25 ModelRulesofProfessionalConductasadoptcdbythcNevadaSupremeCourt.LRIA 10-7further
Amyattorneywboviolatesthesestandardsmaybedisbarredmsuspendedfrompracticebeforethis
26 states.sf27
28
34
counforadefinitetimc.rcprimandedorsubjectedtosuchotherdisciplineasthecourtdeemsproper.
Thissubsectiondoesno!restrictthccourt'scontemptpower.''
D. NevadaRule:ofProfessionalConduct
7
Rule8.4
5
NevadaRuleofProfessionalConduct8.4reads:&tltisprofessionalmisconductfora
lawyerto:(a)violateorattempttoviolatetheRulesofProfcssionalConduct,knowinglyassistorinducc
7 anot
hcrtodoso.ordosothroughtheactsofanotheri...tc)Engageinconductinvolvingdishoncsty,
8 fraud,deceitormisrepresentation.''
2. Rule3.l
10
NcvadaRulcofProfcssionalConduct3.1reads:&tA Iawyershallnotbringordefcnda
proceeding,orassenorcontrovcnanissuetherein.unlessthereisabasisinlawandfaetfordoingso
12 thatisnotfrivolous.--.''
3. Rule3.3
13
l4
NevadaRuleofProfessionalConduct3.3reads:
15
(a)A(1
la
wy
ek
reshaaf
ll
nso
tsktn
oewi
nn
gtlyo:ffactorlawtoatribunalorfailto
)
Ma
a
l
e
a
t
me
16
correctafalsestatementofmatcrialfactorlawpreviouslymade
tothetribunalbythelawyer;
17
(2)Failtodisclosetothetribunallegalauthorityinthecontrolling
j
iistd
icntio
of
nthkeno
toanth
latwy
ecrloto
re
ysinagdvceorusc
hre
pu
ors
io
cwn
lient
de
no
dis
seb
de
bd
yi
o
pc
pt
ol
nst
eol;t
o
18
(
3)OlerevidencethattheIawyerknowstobefalse.Ifalawyer.
19
theIawyer'sclientorawitntsscalledbythelawyer,hasoffered
materialevidenceandtheIawyercomestoknowofthcitsfalsity,
20
thelawycrshalltnkereasonableremedialmeasures.including.if
ncccssary,disclosuretothetribunal.AIawyermayrefusetooffer
21
evidence,otherth= thetestimonyofadcfendantinacriminal
matter,thatthelawyerreasonablybelievssijfalse.
22
(b)Alawyerwhorepresentsaclientlnanadludlcativeproceedingand
rh
oknowsthatapersonintendstoengage,isengagingorhasengaged
lncriminalorfraudulentconductrelatcdtotheproceedingshalltake
23
reasonableremedialmeasures,including.ifnecessary.disclosuretothe
24
tribunal...
25
26
27
28
35
3
4
5
6
7
8
9
l0
l1
l2
4. Rules5.land5.2
NevadaRuleofProfessionalConduct5.lreads:
...(b)Alawyerhavingdirectsupervisoryauthorityoveranotherlawyer
shallmakereasonableeflbrtstoensurethattheotherlawyerconformsto
theRulcsofProfessionalConduct.
(
)lA
wPyre
ss
hsail
sn
pdu
ncst
ip1f
le
oranotherl
awyer'svi
ol
ationofthe
Rcu
csl
oa
f
or
fc
ol
nb
ae
lr
Ce
o
:f
(l)Thelaryerorders,orFithknowlcdgeofthcspecific
conduct.ratlsestheconductlnvlved;or
(
hie
a
yeer
pame
rio
h
mrp
ra
e
a
a2
u)
thT
or
tyl
i
nwth
1ai
wsfa
irm
mwh
cr
ht
ha
csoc
tho
c
laa
w
yb
el
rpm
raa
cn
ti
cg
ee
sr
si
oal
r
hn
as
dsiroef
ctthseup
e
r
vdiu
so
r
y
aaut
p
o
rity
oevner
thceonost
hqer
l
acwqy
ccr
,nan
d
k
o
w
c
o
n
c
t
a
t
t
l
me
w
h
i
t
s
e
u
e
n
s
a
b
e
avoidedormitigatedbutfailstotmk'ereasonableremedlalaction.
NevadaRuleofProfessionalConduct5.2reads:
13
5. ImpositionofSanctionsforaViolationofaRuleofProfessionalConduct
l4
TheABAhasadoptedstandszdsthatcounsshouldconsiderfortheimpositionofsanctions.
15 AMERI
CANBARAsS'N,JOINTCOMMITTEEONPROFESSIONALSANCTIONS,STANDARDSFORIMPOSING
16
LAwYERSANCTIONS(1992).UndertheABAstsndards.thecourtmayconsiderfourfactors:
l7
1.Whetherthedutyviolatedwastoaclient,thepublic,thelegalsystem,ortheprofession;
18
2.Whetherthelawyeractedintentionally,knowingly,ornegligently;
19
3.Whetherthelawyer'smisconductcausedaseriousorpotentiallyseriousinjury;
20
4.Whctherthereareaggravatingand/ormitigatingcircumstances.
21
111.SANCTIONSANALYSIS
22
a4. Ms
.A'
krandMs.Pham
23
1. neLitiaationStrateMv
24
Trialcounscloweanundividedallegiancetothcirclients,buttheyalsooweimponantduticsof
25 candorandhonesytoopposi
ngcounselandtoanycourtortribunalbcforewhom theyappear.lfa
26 Iawyerdi
sagrceswithanorderofthecoun,thatIawyerdoesnothavcleavttovlolatc,disregard.or
27
28
36
8 Phamwillfullyabusedthejudicialprocessesinthiscourtandelsewberc.andtheydidsotodelayor
9 disruptthislitigationtogainatacticaladvantage.Fink,239F.3dat993.Asaresultoftheirconduct,
10 Ms.KlarandMs.Phnmmultipliedtheseproceeings.andtheydidsounreasonablyandvexatiously,
11 resultinginanincrmseinthecostoftheproceedingstoMr.Flynnandatremendousbqrdenonthecourt
l2 tosortthroughthisbyzantinewebofmisconduct.28U.S.C.jl927.EvenifMs.KlarandMs.Pham's
13 conductwasnottoullyfrivolous,thecourtfindstheyweremotivatedbyvindictivenessandbadfaith.
14 TbereisclearandconvincingevidencethatMs.KlarandMs.Pham actedrccklesslyandwithan
l5 improperintent.Fink.239F.3dat993;28U.S.C.1927.
16
ThecourtalsofindsthatMs.Klar'sconductconstimtesviolationsofRules8.4,3.l,3.3,and5.l
17 oftheNevadaRulesofProfessionalConduct.Astheseniorattorneyandleadcounse!inthiscasc.Ms.
18 Klarabdicatedherduticstothecourtandtheattomeysshesupervisedbycngaginginaconsistentpattem
19 ofgamesmanship,misrepresentations,andoutrightcontemptofthiscourtanditsorders.Shewas
20 unrelentinginhercampaigntoachieveherdesiredend-towrestjurisdictionfromthiscourtoverthc
21 fecdisputeandclienttiles-andshewaswillingtodosoatanycosttoherclient,toherjuniorpartncr,
22 tothcLinerfirm.toMr.Flynn,andtothecoun.
23
ThecourtfindsthatMs.Pham*sconductviolatesRules8.4,3.l.3.3,and5.2oftheNevadaRules
24 ofProfessionalConduct.tFollowingorders''doesnotexcuseherown,independentethicaldutiestoher
25 clientandthecolm.
26
FromtheinceptionoftheLinerfirm'srepresenutionoftheMontgomerypartiesinAugust2007
27 untilshcwasreplacedoncycarIatcr.Ms.Klaractedasleadcounscl.Ms.Klardircctedthelitigation
28
:!7
Ms.pham'
srepresentati
onoftheMontgomerypartieswasgencrallyl
imitedtotheeventsgivi
ng
6 risetoMr.Flynn'smotionforKanctions,asshewasonleavefromOctober22s2007untilFcbruary25,
7 2008(CaseNo.06-56.#599).AlthetimeMs,KlarandMs,PhambecametheMontgomcrypmies'
8 counselofrecord,%thwereparmerswithfheLinerfirm:Ms.KlarwasadmittcdtothcCaliforniaBar
9 in1986,andMs.PbamwasadmittedtotheCaliforniaBarin1997(CascNo.06-56,#s233&234).
l0
ItwasMs.PhamwhomtheLinerfirmcalledtotestifyatthcsealedhearinginthismattcr.Bascd
lI uponMs.Pham'stestimonyandthecourt'sunderstandingofthiscase.thecourtconcludesthatalthough
12 Ms.Pham ismostcertainlyresponsiblcforherconductinthisaction.Ms.Klarwasthcullimatc
l3 dccision-makerandchiefstrategist.However,alawyerisnotexcusedfromherethicaldutiesbccausc
14 sheispracticingunderthedirectionofaseniorattorney.TheNevadaRulesofProfessionalConduct
l5 rcquirethatalawyerabidebytheRulesofProfessionalConductGnotwithstandingthatthelawyeractls)
16 attbedirectionofanotberperson.''NEv.RulsOFPROF'LCONDUCTR.5.2(a);seealsoInreHector
17 Martin=,393B.R.27,40-41(Bnnkr.D.Nev.2008).
18
WhenMs.KlarandMs.PhamundertookrepresenutionoftheMontgomeryparties,theydidnot
l9 havtMr.Flynn'scliemfilcs.However.theydidhavcaccesstoMr.Montgomery'ssles,andMs.Klar
20 soadvisedtheDistrictCourtattheAugust17,2007hearing(CaseNo.06-56,#247(minutes),#267,p.
21 23-24(transcriptl).Ms.Klar'sadmissioncontinnsMr.Flynn'scontentionthattheLinerlrmhadaccess
22 tovirtuallyallcommunicationsbetweenMr.MontgomeryandMr.Flynn. Mr.FlynnandMr.
23 Montgomerycommunicatedveryextensivelyviaemail.andthisincludeddiscussionsofdraft
24 documems.lelters,courtpapers.andMr.Momgomery'sFebruary28,2007declaration(CaseNo.0625 263,#115).Thcrcforc,cvcnthoughMs.KlarmadcrcpresentationstothiscounandtheCaligornia
26 SuperiorCourtthatsheneededMr.Flynn'sclientfilcstopmperlyrepresentherclients.shehadacccss
27
28
38
9 keeptheclientfilesuntilthelienwasadjudicated.FacedwiththeprospectofaNevadareuininglien
l0 thatpreventedthcm from obtainingtheclienttilcsandalsorequiredtheirclientseithertopaythc
ll disputedfeesorpostabond.Ms.Klardevisedadifferentstrategy,Shesoughtanewforumwhcrcshe
12 andherclientswouldnotbesoencumbered.
13
Ms.KlarandMs.Phamknew,oruponremsonableinquiryshouldhaveknown.thatduringMr.
14 Flyrm'srepresentationofMr.MontgomeryandtheMontgomtryparties,therewasnoreasonwhawoever
15 forMr,MontgomerytoconcernhimsclfwiththestateinwhichMr.FlynnwasadmittedtopracticcIaw.
16 Mr.FlynnandMs.DiMarewerebothdulyadmittcdpm hacvicetoreprcscnttheMontgomcrypanics
17 inthesecasesbeforethiscouM.3AsMs.KlarandMs.Phamwellknow.thisisaroutinepracticcfor
l8 lawyerswhoappearinfederalcourtsthroughoutthecoun>.Lawyersaretypicallyadmittedtothebar
19 inoneortwostates,buttheyareexcusedfrom statebaradmissionrequirementsbytheprohacvice
20 application.ThisissuewmsaredherringandonlybecnmeanissuewhenthoseinoppositiontoMr.
21 Flynn-firsttheUnitedStates,andthenMs.Klar-seizeduponitasameanstodisqualifyordiscredit
22 Mr.Flynnfordifferentmotives.Thepapers51edbytheUnitedStatestodisqualifyMr.Flynninthe
23 searchwarrantproceedinginFebruary2007,andthepaperssledbyMs.KlarandMs.Phamsixmonths
24
25
3sinccaIlofthcscIawyerswereadmittcdproacvicebeforethiscourtinthcseprocccdings.
includingMs.KlarandMs.PhamyitiscufiousthatMs.KlarandMs.Phamfilcdnocomplaintagainst
26 Mr.Fl
yu
nl
ndwi
tv
hethbete
Nnev
doanSst
te
enBtawr.
LRthe
IAirs
l0
poecaiv
tka
ye
av
ua
thdoari
z
ta
hr
cm
ohe
ds
ocKma
o.tH
thiswo
ha
inac
ia
st
ith
tra7t(
ea
g)
yst
oidll
N
i
nc
sd
of
ast
t
teorwe
swvee
rr
e,
27 concerned.
28
39
16 removeboththeclientGleandfeedisputcfromthiscourt'sjurisdiction,denyMr.Flyrmthcdigputed
17 attorney'sfccs,andforcehimtoexpendsignificantattorney'sfeesdefendinghisintcrcstsinthreeothcr
l8 forums.Evenmoredisturbing,aseventsunfolddandthiscourtissuedordersthatwerecontrarytoMs.
19 Klar'slitigations>tegy,sheandMs.Phamengagedinacontinuouspatternofcontemptofthiscourt.
20
Ms.PhnmdraftedMr.Montgomery'sSeptemberzooideclamtionstheCaliforniaSuperiorcoun
21 complaint,thee.xparteapplicationforwritofpossession,anditwasshcwhometwiththewrit
22 commissionerincbambersonSeptembcrl2,2007.Ms.Phamalsomadetheprincipalargumcntatthe
23 Octoberl8,2007hearingonthewritofpossession.Ms.Klarappearedascounselofrccordonthc
24 CalifomiaSuperiorCouncomplaint,theexparteapplicationforwritofpossession,thepapersGledin
25 supportofthewritofpossession,andsheattendedthcOctober18&2007hcaringandmadearguments
26 concemingthcJusticeDepartment'spresenceatthathearing.
27
28
40
8 faithbeliefthattheywerejustifiedinseekingdispositionoftheclientfilesandfeedisputeinCalifornia,
9 Mr.Flyrm'snoticcoflodgcmentdatedAugust6.2007,gavenoticetoMs.KlarandMs.Phamthatthey
I0 shouldreconsidertheirstrategy.Theydidnot.
11
EventhoughtbeDistrictCourtrecognizedMr.Flynn'sre>ininglienunderNcvadalawon
12 September4,2007,Ms.KlarandMs.Phamweretmdauntedandfilee
dtheirexpartewritofpossession
13 oftheclientfilesintheCaliforniaSuperiorcourqclaimingMr.Flytmwasattemptingtostcxtonmoney''
14 fromtheMontgomeryparties.neyalsomadetheoddasseniontbatMr.FlynnStclaimed''aretaining
15 lieneventhough'thewasneverlicensedtopracticeinNevada...''(CaseNo.06-56,#597-2.Ex.2).
16 Mr.Flynnnevermadesuchaclaim.Then,onSeptember25,2007,Ms.Phamfiledabarcomplaintin
17 Massachusetts,addingathirdforumwhereMr,Flynnwasrequiredtodefendhimscltthistimefor
18 misconduct.
19
AsMs.KlarandMs.Phampursuedtheirstategytoremovetbeclient5leandfeedisputesfrom
20 thiscourt'sjurisdictiontoavoidtheretaininglien,thiscourtbegantoundcrsundwhatwasafoot.The
21 DistrictCourtissuedasecondorderonOctober4,2007,anddeclinedtoclarifyitspriororder,but
22 suggestedthatifMs.KlarandMs.Phamwishedtoadjudicateachoiceoflawquestionontheseissues
23 tof/7b.
court.theycoulddoso.Theyneverdid.ThiscourthastenedtoissueitsOctober12,2007ordcr
24 tostme,onccandforall.thattheDistrictofNevadahadretainedjurisdictionovertheclientfilesand
25 thefeedispute.IteventooktheunusualstepofrequiringMs.KlarandMs.Phamtodelivcritsorder
26 totheCalifomiaSuperiorcourt.ThecourthopeditsmessageloMs.KlarandMs.Phamwasclear:Stop
27 forumshopping.neydidnot.
28
4j
7 hadjurisdictionovertheclientfiles.Shefurthersuggestedthatthiscourtmisapprehended'exactlywbat
8 wastakingplace.*'Tothecontraly thiscourtunderstoodverywellwhatMs.KlarandMs.Phamwere
9 attemptingtodo,whichiswhyitunequivocallystatcdthatthcDistrictofNevadahadjurisdictionof
l0 theseissuesandordcrcdthemtoprovideitgOctober12,2007ordertotheCaliforniacourt.
Il
Ms.Klar'sKmarkstothee tcommissioneraboutthepresenceofDepanmentoflusticecounsel
12 atthewrithearingwereacompletedistortion.Ms.KlaraccusedJugticeDepanmcntcotmselof
13 attemptingto'muddythewaters,'TtoSstakeyetanothcrbiteattheappletotrytocircumventgtheDistrict
14 Court's)order,''andtointimidatethecourtwhenMs.KlarknewverywellthatJusticcDepartmen!
l5 counselwaspresenttoprotecttlleinterestsoftheunitedStatcsconcerningtheprotectiveorder.Thewrit
l6 commissionerdeniedthewrit.(CaseNo.06-56,#597-5,Ex.8).
17
Despitetheseevents,Ms.KlarandMs.PhamdidnotvoluntmilydismisstheCalifomiaSuperior
l8 Courtaction.nordidtheydismissthefeerbitration. Ms.Pham testifiedthattheLinerfirm
l9 %commenced''nofurtheractionsuponreceiptoftheOctober12,2007order.andshebelievedMr.Flynn
20 hadnotifiedlxoththeSanDicgoandMassachusettsBarofwhathadoccurred;therefore.prcsumably
21 neithershenorMs.Klarhadanamrmativedutytodoanythingmore.'l'
heirviewappearstobethatthey
22 wereentitledtocreatehavocforMr.Flyrminthreedifferentforums,andiftheydidnotsucceed,itwas
23 forMr.Flynnandthiscourttocleanupthemess.TheirdisdainfortheIegalprocessandfortheirduties
24 asofficersofthecounisdisheancningandsanctionablc.
25
Atthcsealedhcaring,Ms.Phamwasunwavcringinherbelicfthatshe.andpresumablyMs,Klar,
26 ataIltimesactedethically,ingoodfaith,andinnowaymisconsmadthiscoun'sorders.Havingheard
27 Ms.Pham'stestimony,thecourtconcludesthatMs.Phamwassofocusedonherassigncdtasks to
28
42
l removcthcfccdisputcandturnoverofclient5lcsfromthiscoun'sjurisdiction-lhatshesuspcndcdhcr
2 owni
ndepcndentjudgmcntandfail
edtocriticall
yconsideranylegal,factual
.orethicalimpedi
mentsl
o
3 herassiRments.WhatMs.Phamdidwas,inessence,onlyhalfofhertaskasalawyerandofficerof
4 thecourt.Sheuncoveredeverypieceofinformationandadvancedeverylegalargumcntshecould
5 mustertoadvanceherposition;however.shefailedtoconsideranydefectsorweaknessesinher
6 analysis.Asaresult,Ms.Pham,undcrthesapervisionofMs.Klar.engagcdinaconsistentpattcmof
7 materialmisreprcsentationsandtheomissionsofmaterialfactsfromhercourtpapers.oralargumcnts.
8 andbarcomplaints.Conve/nghalftruthsandonlypm oftherecordinmattcrsisamisrepresentation
9 andabreachofherethicaldutiesasalawyer.Inaddition.whenpresentedwiththiscourt'sordersthat
l0 werecontmzytoherassiredgoals,sheengagedintorturcdanalysesoftheplainmcaningofthose
1l orderstojustifyherconductandtopresson,undeterred.Evenaerthiscourt'sdefinitiveOctober12.
12 2007order,Ms.PhamwentintoCalifomiaSuperiorCourtandintentionallymisreprcsentedthcimpon
13 ofthiscourt'sorders.
14
EverysinglecourtorbarentitythatultimatelyconsideredMs.KlarandMs.Pham'scampaign
15 todivcstthiscourtofjurisdictionoverthesemattersandtoforccMr.Flynntodefendhisinlcrcsts
16 concludedtheywerewrong.TheCaliforniaSuperiorCounWritCommissioncrstated,SbEvidentlythc
17 FederalDistrictCourtinNevadahasalreadydeterminedthalbaseduponthcNevadalawsMr.Flynnis
18 notrequiredtotumoverthe5leatthistime.AndtheDistrictCourtinNevadahasalsomadeprotective
19 ordearegardingtheinformationinthematerialsandthatcourtcoulddealwithanyissuesarisingfrom
20 anyfurtherrequestsforpossessionfromtheEMoctgomerypartiesl''(CaseNo.06-56,#597-5,Ex.8).
21 IndismissingthecomplaintagainstMs.FlynninMassachusetts,BarCounselnotcd,*'Youdidnot
22 mentioninyourcomplaintthattheUnitedStatesDistrictcourt,DistrictofNevada,entereddetailedand
23 comprehensiveorderswithrespecttothetransmissionoftheIclient)sle.AttomeyFlyrmwasadmitted
24 prohacWceinthcNevaclacourtandassuch.inconnectionwiththatproceeding,issubjecttothe
25 standardsofprofessionalconductasadoptcdbythcNcvadaSuprcmcCounntcaseNo.06-56.#597-5,
26 Ex.14).ThcSanDiegoBarAssociationalgodismissedthepetitionandsaid.*%(I)tisclcartatthc
27 DistrictofNevadahastakencontrolofthisentirecasctilcdbytheapplicants...includingtheissueof
28
43
1 attomeyfeesandcosts''(CaseNo.06-56,#597-6,Ex.12) MosttellingistheCaliforniaSuperior
2 Court'sorderdismissingthatcase:tThecascisbeforethiscourtforthetmnsparentpurposeofhaving
3 thiscourtcountcrmandtheordersoftheNevadaDistrictCoun.Califomiahasnointerestindoings0'
*
4 (CaseNo.06-56,#548,Ex.1).
5
Ms.Klardidnott%tifyatthesealedhearing.butthcmisconductdiscussedhcrcindidnotoccur
6 inavacuum;instead,itwasapartofavexingpatternofconductthroughouthertenurcasleadcounscl
7 untilshewmsreplacedinJuly2008.InitsMarch2008ordergrantinginpanMr.Flynn'sandMs.
8 DiMare'smotionforattorneyslfees.thiscourtnoted:
(TlheinitialstrategyoftheMontgmerypapiesandthe
l0
11
l2
j
i
n
er
f
11
.
1
r
1rw
a
sbto
cth
l
l
l
e
n
g
e
fo
ntn
ecr
c
oun
se
l
s
'fer
ecdoi
sp
u
te
l
n
e
v
e
r
y
f
o
u
m
u
t
h
l
s
o
n
e
a
n
d
o
o
mp
e
l
f
o
r
mp
u
n
s
e
l
to expend subsxntialtimeand attomeys'feesin
d
efendingtherpselves,eveninthefaceofclearorders
issucdbytheDlstrictCourtandthiscourttothecontrary.
Thisconductresulted in the expenditureofmany
l3
jnust
s
lntie
gr
ater
d
a
ysryI
npt
s
t
opnlaotf
l
Ama
nl
to
Po
ov
ne
.n
Th
ee
Mo
nt
ge
ol
me
ah
re
tied
si
hp
ao
vs
ei
rl
e
et
dh
le
y
14
l5
thousandjofdollarsinattomeyj'feesforalIcpncemed,
complmnedtothiscourtthattheyhavebeqnpreludiced
becausetlleydonothaveformercounsels'clienttiles.
j
Hua
d
tp
ety
n
of
t
pm
urs
ue
dct
h
e
s
e
p
r
o
tr
ac
t
eudrt
awtt
e
m
p
t
s
t
o
wbr
e
s
t
r
i
s
d
l
c
i
o
n
r
o
l
h
i
s
o
u
r
t
,
.
.
.
t
h
e
c
o
o
u
l
d
h
a
v
e
e
e
n
inafarbcttcrposltiontodecidcthismotionsoonerrather
l6
thanlater.
l7
(CaseNo.06-56,#502,pagel7).4
l8
Asthecaseproyessed.Ms.Klarcontinuedtoinvitesanctionsagainsthcrclientsandherself.
19
necourtissuedaMay7,2008orderthatstated:(T)hecourpspatienceforabusive,badfaithdiscovery
20 gnmesmanshipiscnded.ThecourttindsthattheMontgomerypartieshavedelibcratelyviolatedthis
21
court'sFebruary21.2008orderbyfailingtoproducethedocumentsasordered,andsanctionsforthis
22
misconductarewarranted...''tcaseNo.06-56,#582).OnMay21,2008.thiscounissuedthjsminutc
23 ordcr:$tMs.KlarisadmonishedthatattorneysappearinginhisCourtshallnotunilaterallyscthcarings
24
andthatthisCounwillmanageitsdocket.Ms.Klarisfurtheradmonishcdthatsheshallabideby!he
25
26
27 motion4
Trhseac
pondsid
lomeys'feesinconnectionwiththis
fo
no
cu
tl
.1n
do
.tawardMr.FlynnandMs.DiMarcanyat
28
44
2 betolerated''(CaseNo.06-56,#620.OnMay29,2*8,thiscounissuedanordertoshowcauscwhy
3 theMontgomerypaniesshouldnotbeheldincontemptofcourtforthcirfailuretoabidebythiscourt's
4 May21.2008ordcr(CascNo.06-56,#646).On2u1y24.2008,thiscounissuedanothcrordert()show
5 causewhytheMontgomcrypartiesandMs,Klarshouldnotbeheldincontemptofthiscourlforfailurc
6 tocomplywithapriororderconcemingdiscoverytcaseNo.06-56,#769).0nAugustl8,2008.the
7 DistrictCourtimposedamonetarysanctionagainstMr.Montgomeryintheamotmtof$2,500.00per
8 dayuntilhecompliedwithapriordiscoveryorder(CaseNo.06-56,#815),andthiscourtconveneda
9 two-dayhearingonitsordertoshowcauseissuedatzainstMs.KlarandMr.Montgomcry(CaseNo.06l0 56,#s816&817).ItwasonlyafterrepeatedsanctionordersandordeatoshowcauscthattheLiner
11 firmsubstitutedinnewleadcotmselfortheMontgomerypalies.Thereafter.thecourtpresidedovcr
12 asettlementconferenccinSeptember2008,andmattersbelweentheMontgomerypartiesande'Freppid
13 weresettled(CastNo.06-56,#s854.855,&8561.
14
Ms.Klarneedlesslymultipliedandmanipulatedtheseproceedingsforthetacticaladvantages
15 describedhercin.andincrcasedthecostandcomplexityofthisactioncxponentially.Apartfrom the
16 litigationmisconductandcontemptofthiscoundescribedabove.thereisanothervcrydisturbingsubtext
17 aboutwhatoccurred.ltisevidentthatwhenMr.FlynnandMr.MontgomerypartedcompanyinJuly
18 2007,therewastremendousanimositybetweenthetwo.ThecourtknowsthatMs.Blixseth-although
19 notyetapartytotheactionatthattime-wasintimatelyinvolvedbehindthescenesinthesecases,as
20 theevidcncepresentedinsupportofthismotionforsanctionssoplainlyreveals?WhenMr.Flynnfcll
2l outofaccordwithMr.Montgomery,hcalsofelloutofaccordwithMs.Blixscth.'l'
hecourtconcludes
22 thattheanimosityMr.MontgomeryandMs.BlixsethharborcdforMr.Flynnwasacatalystforthe
23 litigationseategytoinsure-throughanymeanspossible-thatMr.Flynnwouldneverbcpaidandto
24 crushhimintosubmissionintheprocess.Byherconductasleadcounselintheseproceedings,Ms.Klar
25 allowedherclientstoinvolvetheLinerfirm.Ms.Phamandhcrselfinaschemetoexploitlegilimate
26
5ThecounalsonotesthatMs.KlarwasnotunacquaintedwithMs.Blixsethin2007.Shc
21 represenledMs.Blixselhinanunrclatedmatler(CaseNo,06-56.#600).
28
45
5 Nev.2006)(citationsomitted).SeealsolnreTClLtd..769F,2d44l,446(7QICir.1985)(rejecting
6 argumentthatsanctionscouldnotbeimposedbecauseattomcyacledattheinsistenceoftheclientl;
7 Steinlev.Warren,765F.2d95,10l(7'
bCir.1985)(imposingsanctionsonattomey,cventhoughactcd
8 atclient'sinsistence);Blairv.ShenandoahWomen'
sCtr,lnc..757F.2d1435.1438(4*Cir.1985)
9 (atomeydoesnotescapcsanctionsjustbecausehiscli
ent'sbchaviorwascvenworse'thananomey'
s
10 behavior).
11
2. Mr.Montaomea'sSeptember10.2007Dxlnmtion
l2
Mr.Montgomery'sFebruary28,2007declarationinthesearchwarrantproceedingdirectly
l3 coniictswithhisSeptemberl0,2007declaration.ncattestationintheSeptember10,2007declaration,
!4 Gledb0thinthiscourtandintheCalifomiacourt,wasanessentialpieceofevidenceinsupponofMs.
15 KlarandMs.Pham'sassertionthatthtrewasafacmalbasistofiletheCalifomiaSuperiorCounaction,
l6 theSahDiegofeearbitration.andtheMassachusettsBarcomplaint.
l7
OnAugust1,2007,Mr.Montgomery'slocalcounsel5lednoticeofterminalionofMr.Flynn
18 andMs.DiMare,andMs.Klarsubsequentlysignedthestipulationtodismisstheaction(CascNo.06l9 263,#sl30& l34);therefore,Ms.Klarknew,oruponreasonableinquiry,shouldhavcknown.the
20 detailscfthatprocecding,whicbmostpanicularlyincludcdtheUnitedSutes'unsuccessfulattcmptlo
21 disqualifyMr.FlynnonlyGvcmonthscarlier.Althoughthecourt'stileinthescarchwarrantprocecding
22 wasnotunsealeduntilSeptember17,2007(CaseNo.06-263,#13l),Mr.Montgomerywouldhavchad
23 acopyofhisFebruary2007declnmtioninhisownsles.Ms.KlartoldtheDistrictCourtonAugust17,
24 2007thatshehadaccesstotheseGles.
25
Throughapparentinadvelence,Mr.Montgomery'sdcclarationwasnotunsealedpursuanttothc
26 DistrictCourt'sScptember17.2007ordcr(CaseNo.06-56,#270).ltiscuriousthalwhcntheUnited
27 Statesrcquestedthatthedcclarationbcunscalcd,itdrcwMs.Klar'sobjection(CaseNo.06-56.#33l).
28
46
4
0nNovember9,2007,thecourtheldabriefhearingandnotedMs.Klar'sobjcction;howcver,
5 shedidnotappear(CaseNo.06-56,#331).lnstead.Iocalcounselappeared,andhewasundersundably
unabletoarticulatcabasisforkeepingthisdeclarationsealcd,necoununscaledMr.Monlgomcry's
dcclaration.andithasbecomeacentemieccofthissanctionlitigation.Thecounreasonablyinfkrsthat
Ms.KlarobjectedtotheunsealingofMr.Montgomery'sFebruary28.2007declarationbtcausehtso
clearlycontradictedtheSeptember10,2097dcclaration.whichwasdrahedforthepumoscsoutlined
herein.
l1
Ms.KlarandMs.Phamknew,oruponrcasonableinquiry.shouldhaveknownthatinFebruary
2007,Mr.MontgomeryattestedunderpenaltyofpeturythathehadrcadcourtGlings,whichdiscloscd
(1)thatMr.Flynnisonlylicensedtopractice1awinMassachusetts,(2)thathemaintainsaBostonlaw
officeaddryss,(3)thathehasresidencesinMassachusettsandCalifomia,(4)thatMr.FlynnandMr,
Stillmanwerepnrtners,andMr.StillmanopenedaWestCoutomceofthe1111:1inl992,and(5)that
Mr.FlynnregularlypracticeslawinMassachusetls.butalsomaintainsamulti-statcpractice.Ms.Klar
andMs.Phamknew,oruponreasonableinquiry,shouldhaveknownthatinhisowndeclaration.Mr.
Montgomcryattcstedthatthet'rcccntattempttodisqualifymyattorneywouldgravelydamagcmy
constimtionalprotections.ItisborneoutofignoranceofthefactsbytheUSAO,anagendatoattackme.
anddisregardfornotonlymyrights,butthesecurityofourCountry.''
21
Mr.Montgomery'sSeptember10,2007declarationisdirectlycontrarytothcseattestations.and
thecounconcludesthattheSeptember10,2007declarationisperjured.Itisthemostdamaging
documcntbccausewithoutit,Ms.Klarwouldhavehadnobasistoremovetheclientfilcandfeedisputes
from theDistrictofNevada,Mr.MontgomcryeithvrliedtohisIawyerstoassistincffectuatingMs.
Klar'slitigationplan,orMs.Pham,thcdcclaration'sauthor.orchestratedthesubornationofperjury,
HavingheardthetestimonyofbothMr.MontgomeryandMs.Phamandconsideredthcircrcdibility.the
coundoesnotbelieveMs.Phamintentionallysubomedpeljury;rather,itfindsthatMr.Montgomery
47
.
g
4 undcrminecitizens'confidcnceinourcounsandoursystemofjustice.necouncannotallowattorneys
5 whopracticcbeforcittooperateashiredbountyhunterswho-armedwithextensiveresourccs-take
6 ituponthemselvestomanipulatethelegalsystemwithimpunity.Ms.KlarandMs.Phamaresanctioned
7 asmorefullysetforthbelow.
8
B. TheLinerFfr9
TheLinerf1111:alsobcarsresponsibilityforwhatoccurredinthisproceeding.Ms.Klarutilizcd
10 theLinertirm'ssubstnntialresourccstoengageinthclitigationmisconductdescribedherein,andshe
l1 wasnottheonlyattorneywhosignedmisleadingplcadingsandignoredrepeatedordcrsofthiscoun.
12 Ms.Klarce>inlyutilizedMs.Phamtocarryoutherstmtegy,butalsoagsignedtaskstootherjunjor
l3
I4
l5
l6
17
attorncysinthe6>.6Ms.KlarwasallowedtooperateintheLiner517nuncheckedandunquestioncd,
andthisconclusionissuppoledbyherpattcrnofsanctionableconductthatcnsuedlongafterthefall
of2007.Itwasnotuntilmatterscametoaheadinthesummerof2008thatseniorpartnersfinally
steppedintothiscase.ThecountindsthattheLiner51711acquiescedtoorwillinglycarricdoutMs.
Klar'slitigationstrategy;therefore,sanctionsagainsttheLinert11111arewanantedpursuantto28U.S.C.
l8 91927.Jee,c.g.,Moserv.BretHarteUnionHighSchoolDistrict,366F.Supp.2d944(E.D.Cal.
19 2005);Avirganv.Hull,125F.R.D.189(S.D.Fla.1989).
20
C. Mr.Mozlrg/-er.p
21
Mr.Montgomery'sroleinthismatterrevolvesaroundhistwodcclarations.Thecounconsiders
22 Mr.Montgomery'sconductandcredibilityinlightofhistestimonyatthesealedhearingandatothcr
23 hearingsinthisaction.Mr.Montgomerywasnobyslandertothcseevcnts;hchadapivotalrolcn60th
24 thcscarchwarrantproceedingandthetradcsecrctslitigation.TheevjdenceisclcarthatMr.Flynnand
25 Mr.Montgomcrywereinconstantcontactconcemingeveryaspectoftheseproceedings.anditis
a6
Ene
cd
ou
ntd
oessmi
nonti
ima
denltifytheseattorneysinthisorderbecauseitconcludesthcirpanicipation
27 inthemi
scon
uc
wa
.
28
4g
l obviousthatMr.Montgomery'spanicipationwasessentialtohiscffcctiverepresentation.The
2 chnmcterizationofMr.Montgomeryasanunsophisticatedclientwhocouldnotapprcciatethe
3 imporl%nceofthesetwodeclarationsisnotintheleastcredible.
4
Mr.MontgomeryknewinJanuary2005thatMr.FlynnwasaMassachuscttslawycr.buth,s
5 concem atthttimewaswhetherMr.FlynncouldappcarbeforecounsinNevada.Mr.Flynnwas
6 admittedprohacviceinstatecourtandinthiscourt,andthiswastheextentofMr.Montgomery's
7 interestinthematter.Mr.Montgomery'sallegedconfusionovernineteenmonthslateraboutwhatit
8 meanttobefiadmittedv''aS
member.'gorStlicensed''inaparticularjurisdictionisachimera.Mr
9 MontgomeryknewverywcllthatMr.Flynn'sadmissiontoastatebarmtantnothingtohimuntilhe
10 cithcrwantedMr.Flynnashiscounsel(Fcbruary28,2007dcclaration),orhedidnot(September1O.
11 2007declaration).ThecourtfindsthereisclearandconvincingevidencethatMr.Montgomery
12 committedperjurywhenhesignedtheSeptember10,2007declaration.andthathtsignedthe
I3 declnmtioninbadfaitkvexatiously,wantonly,andforoppressivcreasons.Ms.KlarandMs.Phamfiled
l4 thisperjureddeclarationinthecounandinCaliforniaSuperiorCoun.Theyalsoustdthcallegations
15 containcdthereinintheSanDicgofecarbitrationpetitionandthcMassachusettsBarcomplaint.This
l6 notonlyresultedinthedelayanddisruptionofthisproceeding;itwasmotivatcdbyvindictivcncssand
17 badfaithanddemonstatescontemptofthiscoun.
18
IV.SANCTIONS
19
ThiscounhmqconsideredtheAmericanBarAssociation'sst>ndards,supruatp.36.forthe
20 impositionofsanctionsagainstMs.Klar,Ms.Pham,andtheLinerfinm.
21
Ms.Klar:Ms.Klarviolatedherdutiestothcpublic.thelegalsystcm andthelegalprofcssion
22 byherconduct. Sheactedintentionallyand knowingly. Theaggravatingcircumszncesofhcr
23 misconductaresetforthherein,andtheco> willonlynotethatMs.Klarisaseasonedtziallawyerwho
24 haspracticedinstateandfederalcou>.Ms.Klardidnottestifyatthesealedhearinginthismatter,and
25 therearenofactorsinmitigationofsanctions.
26
Ms.Pham:Ms.PhamisajuniorpartnerinaIargemetropolitanlawfirm.andshehadbeen
27 admittedtopracticelawfortcnyearsatthetimeofthcsccvents.Inthefallof2007.Ms.Phamwas
28
49
2 toMs.Klar'sdirections.ltmayhavebeenpartofthe*'large5m1:'culturcattheLinert5:511thatjunior
3 partnerswereunaccustomedtochallen/ngseniorlitigatorsaboutmattersofstrategy,andshemayalso
4 nothavehadMs.Klar'sIevelofunderstandingaboutthecomplcxityoftheseproceedings.Duringher
5 tenureasleadcotmsel.thiscourtobservedMs.Klar'sdemeanortowardthecourtandopposingcounsel.
6 whichwasfrequentlyuncivilandlackingincollegiality.ThccourtimaginesthatthoscjuniortoMs.
7 Klarmighlwel!suffcrintimidationandtrepidationifcompelledtochallengeherIegalstratcgy.Ms.
8 Phammayhavebeennoexception.Thesefactorsweighinmitigationofsanctions.
9
However.Ms.Phamdidtestifyatthesealedhearingandwasquiteadamantthatthccourscof
10 conductoutlinedhereinwasproper.notdoncinbadfaith.andsheinsistedthatshehadaproperlegal
ll basisforheractionsthroughoutaIloftheproceedings.nisfactorweighsinfavorofsanctions.
l2
TheLinerFirm:AsnotedabovestheLiner517nisalargeLosAngeles1awtirmandemploys
13 manyattomeys.neLinerfirmfailedtheirclienl,thelegalsystem,andthelegalprofessionbyallowing
14 Ms.Klartoengageuncheckedinscorchedeartblitigationtactics.Evenseniorpnrtnersmustbeheld
15 accountablefortheirconduct,anditisthelawfirm'sresponsibilitytoinsurethisoccurs.Ms.Phamand
16 otherlawyersjuniortoMs.Klarshouldhavebeenabletorelyonthetirm'sseniormanagemen!to
17 intercedewhentheGrmknew,orreasonablyshouldhaveknown.thatMs.Klarwasfollowingsucha
18 course.Itisalsothe1awGrm'sresponsibilitytoinsurethatitsjuniorlawyersarctminedtoconsider
19 theirassignmentsfrombothethicalandlegalperspectives.ltappearstothecourtthattheLinerfirmdid
20 notmeettheseobligationsandthisfailurecontributedtowhatoccurredherc.Thesefactorsweighin
21 favorofsanctions.
22
lnJuly2008.seniorpmnersintheLinerfirmfinallysteppedjntothiscasc,butthiswasonly
23 afterseveralsanctionordershadbeenissued,andbothMs.KlarandMr.Montgomerywcrefacingvcry
24 seriotlsallegationsunrelatedtothcissuescurrentlybeforethiscourt.ItwasalsomanymonthsafterMs.
25 Klar'sunsuccessfulcampaigntodivestthiscourtofjurisdictionandtodefeatMr.Flynnatanycost.
26 Thisfactorweighsinmitigationofsanctions.sinceitultimatelyrcsultedinsettlementofthcunderlying
27 casesbetweentheMontgomerypartiesandcTreppid.
28
5:
5 forhisfailtlretocomplywithothercoulordersinthisaction.See,supraat1I
!44-45.nesefactors
6 weighinfavorofsanctions.
Basedupontheforegoing,thecounsndsthatpursuanttoitsinherentpowersand28U.S.C.j
8 1927,thefollowingsanctionsshallissue:
9
A. MonetarySanctions
10
PursuanttoLR54-16,Mr.Flynnsubmittedadeclaration,asummarydescriptionofhiswork
l1 associatedwiththemotionforsanctions,andanitemizedstatementofhisandMs.DiMare'slegal
l2 services(CaseNo.06-56.#s547&552,Exs.11-A&Il-B).Mr.FlynnandMs.DiMareseekatotalof
l3 $36l,275.00inattorney'sfeesand$3,303.00incosts.
14
ThecourthasreviewedalIofthesepapersandhasmadecertainadjustments.First.Mr.Flynn
15 andMs.DiMare'srequestthecourtadoptrespectivehourlyratesof$450and$350;however,their
16 hourlyratesfortheirpriorfeeapplicationwere$400and$300,respectively.Thecourtbelievesthese
17 hourlyratesareproperfortbisfeeapplicationaswell.Second,thecourthasnotonlyreviewedthcusk
18 summarics,butithasreviewed,line-by-linc.eachofthetimeentries.Thccourtwillnotaward
19 attorney'sfeesforworkpedormedonthefeeapplicationthatresultedinanawardofattorney'sfeesand
20 costsinMarch2008.SeeCaseNo.06-56,#502.Norwillthecourtawardsattorney'sfeesforthe
2l motiontowithdmwascounsel,thefilingoftheretaininglien.andsimilarmatters.Thccourthasalso
22 reducedsomeofthetimeallocatcdtopreparationofMr.Flynn'sdeclaration.thctimclinc,andcntries
23 thatmaybe,inpart.attributabletoMr.Flynn'sRule3.3motion.Finally,thecounhasdeductcdtimc
24 forentriesthatarevagueandduplicative.ThecourtawardsMr.Flynnattorney'sfeesintheamountof
25 $159,840andMr.DiMarethesumof$42,I50.foratotalof$201,990.00.
26
27
28
Mr.FlynnandMs.DiMareitemizccostsinthcamountof$3,303.00.Thecourtexcludesthc
2 monthlycostofLEXISforseptemberzoo;toApril2008($882.00),mqthisisanattomey'snormalcost
3 ofdoingbusiness.necounawardscostsinteamountof$2,421.00.
4
Basedupontheforegoing,themonctarysanctionsimposcduponMs.Klar.Ms.Pham.thcLincr
5 firm,andMr.Montgomcrytotal$204,41l.00.Mr.Montgomeryissanctionedpursuanttothccourt's
6 inherentpower.andMs.Klar,Ms.Pham.andtheLincr111711aresanctionedpursuanttothecourt's
7 inherentpowerand28U.S.C.jI927asfollows:
8
1. Ms.Klar
$102705.50
9
10
11
12
Mr.Montgomery $61,323.30
3. Ms.Pham
$20,441.10
4. TbeLinerFirm $20.441.10
50%
30%
l0%
l0%
Thosesanctionedarejointlyandseverallyliableforthesesanctions.
13
B. BarDiscipline-Ms.KlarandMs.Pllam
l4
ThecourtbelitvesthatMr.KlarandMs.PhamviolatedthcRulesofProfessionalConductand
15 refersthismattertotheNcvadaSuteBarandCalifomiaStateBar.TheClerkofCourtisdircctcdto
l6 sendthisordertoBarCounselforbothNevadaandCalifomia.
I7
C. PoSlt'VlceAppearancesintheUnftedStatesDistrictCourt,DistrictofNevada
18
LocalRuleIA l0-2authorizesattorneyswhoarenotmembersofthiscourttoapplyfor
19 admissiontopracticeinapmicularcaseatthecourt'sdiscretion.Inlightoftheirmisconductinthis
20 proceeding,Ms.KlarandMs.PhamshallbeprohibitedfromapplyingfoprohacWceadmissiontothis
21 counforaperiodoffiveyears.Attheexpimtionoffiveyem.theymayapplyforadmissionpursuanl
22 toLoclRules.butshallattachacopyofthecoun'sorder,andtheyshallprovideadeclaration
23 identif/ngaIlconmestheyhavecompletedonlegalcthicsduringtheinterimperiod.Thecounshall
24 retainitsdiscretionwhethertheyshallbeadmittedprohacvice.
25
D. PublicationofthisOpinion
26
Thecourtbclievestbemaximumdeterrencewillresultfrompublicationofthisorder.whichwill
27 constituteapublicreprimandofMs.Klar,Ms.Pham,andtheLinerfinmintheformofanopinionln
28
52
l1 Phamasenseoftheirresponsibilitiesasofficersoftbecotlrtinoursystemofjusticc.Ms.KlarandMs.
l2 Phamshallperformrm bonoIegalservicesvof200hoursand100hours,respectively,tobenefitthose
13 whoareindigentandotherwiseunabletoaffordlegalservices.
l4
Withintendaysofentryoftheiinalorderinthismatter.Ms.KlarandMs.Phamshallsubmit
l5 tothiscourtforitsapprovaltheirproposedplansforcompletionofrrobonolegalserviccs,whichshall
l6 becompletedwithintwoyearsofthcdatcofentryofthefinalorder.Onthefirstanniversaryofthetinal
l7 order,Ms.KlarandMs.Pham shallsubmitdeclnmtionstothiscourtattestingtothenumberofhours
18 ofprobonoservicecompleted,andadescriptionofthoseservices.Onthcsecondanniversaryofthe
19 snalorder,Ms.KlarandMs.Phamshallsubmitafinaldeclarationcontainingthesameinformation.
20
F. Mr.Montgomery
2l
AcopyofthisordershallbesenttothcOfficeoftheUnitedSmtesAttorney.
22
V.CONCLUSION
23
Apartfromdeprivingacitizenofhisorherlifc.libertyorproperty,thereisnomoredimculttask
24 forajudgethansanctioninganattomeyformisconduct.necounhasdevotedmany.manyhoursof
25 timeinreviewingthcpapersfiled,readingtranscriptsofrelevanthearings,listeningtorecordingsof
26 hearings,andconsideringcarefullythefactsandlawbeforeit.ltisthiscourt'ssincerchopcthatthosc
27 subjccttothcsanctionsissuedhereinwillneverrepeatthismisconductandthatthcywillrencwtheir
28
53
3 pursuanttotheinherentpowerofthccourttcaseNo.06-56,#545)isGRANTED.PursuanttoLRIB
4 3-1(a),apartymayfileanobjectiontotheDistrictCourtofthisorderwithintendaysofserviceofthis
5 order.Therefore,thisorderisSTAYEDuntilFriday.Aprill0,2009.Ifobjectionsaresled,thisstay
6 shallremaininefectuntiltheDistrictCourtissuesitstlnalorder.Ifnoobjectionsareflled,thecfcctive
7 dateofthisordershallbeAprill0.2009.
8
ITISSOORDERED.
9
l0
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
z/u.z'
a- F.
DATED:March3l,2009.
UNITEDSTATESMAGISTRATEJUDGE
54
E xh ib it
L
(DocketNo.246)
CREDITSUISSEAG,aSwisscorporation;
CREDITSUISSE'SMOTIONFOR
ORDERTO SHOW CAUSE
CREDITSUISSESECURITIES(USA),LLC,a
Delawarelimitedliabilitycompany,CREDIT
(DocketNo.253)
SUISSEFIRSTBOSTON,aDelawarelimited
liabilitycorporation;CREDITSUISSECAYMAN
ISLANDBM NCH,anentityofunknowntype;
CUSHMAN & WAKEFIELD,INC.,aDelaware
corporationandDOES1through100inclusive,
Defendants.
PLAINTIFFS'MOTIONFOR
AWARDOFATTORNEYS'FEESRE:
MOTIONSBYDEFENDANTS
(DocketNo.302)
Currentl
ypendingbeforetheCourtarethefollowingrel
atedmotions:(1)Cushman&
Wakefield'sMotionforSanctions(DocketNo.246);(2)CreditSuisse'sMotionforOrderto
ShowCause(DocketNo.253);and(3)Plaintiffs'MotionforAwardofAtt
orneys'FeesRe:
MotionsbyDefendants(DocketNo.302).Havingcarefullyconsideredtherecord(i
ncludingthe
parties'supplementalbriefingatDocketNos.315,32l,and322),parti
cipatedi
noralargument
onJanuary5,2012,andotherwisebeingfullyadvised,theCourtentersthefollowing
MemorandumDecisionandOrder:
MEMORANDUM DECISION AND ORDER-1
1.BACKGROUND
l. PlaintiffsinitiatedthisactiononJanuary3,2010and,onJanuary25,2010and
January28,2010,filedtheirFirstandSecondAmendedComplaintsrespectively.SeeCompl.,
FirstAm.Compl.
,andSecondAm.Compl.(DocketNos.1,l2,& 18).
OnMarch29,2010,DefendantsCushman& Wakefield,Inc.($
C&W''
)and
CreditSui
sseAG,CreditSui
sseSecurities(USA),LLC,Credi
tSuisseFi
rstBoston,andCredit
SuisseCaymanlslandBranch(collectivel
yt
creditSui
sse')movedtodismissPlai
nti
ffs'Second
AmendedComplaint.SeeC&W &Credi
tSuisseMots.toDismiss(DocketNos.48&51).
OnMayl1,20l0,thisCourtstaytddiscoveryuntilDefendants'motionsto
dismisswereresolved.See5/11/10MDO,pp.7-8(DocketNo.73).
4. OnFebruary17,201l,theundersignedissuedaReportandRecommendation
relatingtoDefendants'motionstodismiss.See2/17/11Rpt.&Recomm.(DocketNo.106).
OnMarch25,2011,whiletheparties'respectiveobjectionstotheundersigned's
ReportandReoommendationwerependingbeforeUnitedStatesDistrictJudgeEdwardJ.Lodge,
Plaintiffsfiledamotionforanorderauthorizingtheemergency/expeditedissuanceoftwo
subpoenasducestecum,includingoneforMichaelMiller.SeeMot.forOrder(DocketNo.118).
PlaintiffsrepresentedtotheCourtthatMr.MillerhadbeenemployedbyC& W for17years,
includingthetimeperiodoftheappraisalsthatareoneofthecentralpiecesofPlaintiffs'liability
theoriesinthiscase.Plaintiffs'March25,20l1motionstatedthatMr.Miller'stestimonytdis
highlycriticalandcentraltotheissuesinthiscaseandmustbeimmediatelypreservedforthe
benetitoftheclassmembersintheirprosecutionofthiscase.''Seeid.atp.2.
MEMORANDUM DECISIONANDORDER -2
6. InsupportofPlaintiffs'March25,20llmotion,Plaintiffs'counsel,RobertC.
Huntley,submittedhisaffidavit,identifyingMr.Millerasa(dkeydwhistleblower-type'witness,''
whilemakingthefollowing,relatedrepresentations:
Mr.MillerSdwaswillingtocomeforwardwithtestimonywhichincriminatesboth
(C& WjandCreditSuisseofknowinglyandintentionallydevelopingand
utilizingthemisleading,andlikelyill
egal,TotalNetValue(TNV)andTotalNet
Proceeds (TNP)appraisalmethodologies forthe I
oansto be made to
approximatelytwentptwo(22)developmentsintheUnitedStates(i
ncludingLake
LasVegas,YellowstoneClub,Tamarack,andGinnSurMer,locatedinthe
Bahamasl.
''
Mr.Millerfwasandisoftheopinionthatthappraisalmethodologieswere
unique,unacceptedintheindustry,andwereviolativeofbothFIRREA and
USPAP.''
Mr.MillerprovidedtestimonyinpersontoMr.HuntleyandChristopherConant,
anotherofPlaintiffs'multipleattorneys,inafour-hour-longmeetinginDenver,
ColoradoonMarch19,2011.(Mr.Millerdictatedhisaffidavit''andMr.Conant
S
s
transcribed(Mr.Miller'sltesti
monyi
ntohisl
aptopasbothmenviewedthe
monitorandeditedhistestimony.AcopyofgMr.Miller's)transcribedtestimony
isattachedheretoasAppendixA.''
((Mr.Millerdidnotsigntheaffidavitatthattimebecausehewasconcernedthat
hisdoingsomightresul
tinsubjectinghimsel
ftoretaliati
onorlitigationagainst
himbyC&W.Therefore,heisunwillingtosignhisaffidavit,butwillrespond
toasubpoenaforadeposition.''
SeeHuntleyAff.at51-5(DocketNo.1l8,Att.2).Asreferencedabove,Mr.Huntleyattachedto
hisownaffidavittheunsignedMarch19,2011tDeclarationofMichaelL.Miller,MAl''as
Appendi
xAtohisaffidavi
t.Seeid.at!4.lnessence,then,PlaintiffsrequestedthattheMayl1,
20l0discoverystaybeliftedtoaocommodattMr.Miller'stesti
mony.Seeid.at!6.
OnMarch3l,2011,JudgeLodgeadoptedinpartandrejectedinpartthe
undersigned'sFebruary17,20l1ReportandRecommendation.See3/31/11Order(DocketNo.
MEMORANDUM DECISIONAND ORDER -3
126).AstothoseclaimsthatJudgeLodgedismissedwi
thoutprejudice,theCourtafforded
PlaintiffsanoppoltunitytoamendtheircomplaintbyApril21,2011.Seeid.atpp.29-30.
8. OnApril4,201l,theundersigneddeniedPlaintiffs'March25,2011motion.See
4/4/11Order,pp.2-3(DocketNo.128)(tc
plai
nti
ffsoffernocompellingreasonsupporti
ngthe
needtoimmediatelyproceedwithMr.Miller'sdeposition...-thereisnourgency...,when
recognizingtheactionremainsstubbornlypositionedatthemotiontodismissstageand,thus,is
notparticularlydependentuponanydiscovery,letalonetherequesteddiscovery. Further,thre
isnoindicationthatMr.Miller'sdeposition...willnotbeavailableoncetheboundariesofthe
parties'claimsanddefensesareunderstoodafterthepleadingsareonce-and-for-allfiledandthe
stayislifted-''
).
9. OnApril21,2011,PlaintiffsfiledtheirThirdAmendedComplaint.SeeThird
Am.Compl.(DocketNo.l29& 131).Plaintiffs'SecondAmendedCompl
ai
ntmadenomention
ofMr.Miller;however,Plaintiffs'ThirdAmendedComplaintrepeatedlyreferencedMr.Miller's
allegedinvolvementinmatterscontributingtoPlaintiffs'claimsagainstDefendants. Compare
SecondAm.Compl.(DocketNo.1s)withThi
rdAm.Compl.at!!60-74,91-93,&190(Docket
No.l29& 131).
10. AlsoonApril21,2011,Plaintiffssoughttoamendtheirpleadingstoresuscitatea
breachoffiduciarydutyclaim againstC&W,despiteJudgeLodge'sApril4,201ldismissalof
thatclaim,wi
thprejudice.SeeMot.forLeavetoAm.ThirdCauseofAotion(DooketNo.l30).
lnsupportoftheirattempttodoso(andconsistentwi
thPlaintiffs'March25,201lmotionand
Plai
ntiffs'ThirdAmendedComplai
nt),Plaintiffsstatedthati
tisappropriatetorevivethatclai
m
atthisearlystageinthecaseonthebasisoftheevidencewhichhascomeforwardfrom former
MEMORANDUM DECISIONAND ORDER-4
(C&Wqemployee,MichaelMill
er.
''Seeid.atp.2'
,seealsoMem.i
nSupp.ofMot.toAm.,p.2
(DocketNo.130,Att.1)(
cveryclearly,unknowntoPl
aintiffsuntilthispastMarchof201l,
werethedetailsof(C&W'sjknowingandintentionalparticipation...withCreditSuisseto
plan,agreetoimplement,andimplementtheappraisalandlendingschemeperpetratedagainst
thePlaintiffsandothers.''
).
ApparentlyunbeknownsttoeitherCreditSuisseorC&W (andunbeknownstto
thisCourt
),onoraroundMay4,201l,Mr.MiltrfaxtdtoMr.Huntleyacopyofanundated
ddAffidavitofMichaelL.Miller,MAl.''SeeEx.2toMorrow Decl.inSupp.ofC& W'sMot.for
Recons.(DocketNo,227,Att.2).1Thisaffidavitwassignedbeforeanotarypubl
iclicensedin
Missouri.DefendantscontendthatthesignedaffidavitissubstantivelydifferentfromMr.
Miller'sunsignedMarchl9,2011declaration.Seeid.andcomparewithAppx.AtoHuntley
Aff.(DocketNo.1l8,Att.2);seealsoEx.4toMorrowDecl.inSupp.ofC&W'sMot.for
Recons.(DocketNo.227,Att.2)(containingred-linedcomparisonofMr.Mill
er'ssigned,May
2011affidavitwi
thMr.Miller'sunsignedMarch19,20lldeclaration).
AlsounbeknownsttoeitherCreditSuisseorC& W,Mr.Millersoonthereafter
deliveredasecondsigneddAffidavitofMichaelL.Miller,MA1''tohisbossDougHaney,whois
alsoanexpertretainedbyPlaintiffs.SeeExs.1& 3toMorrowDecl.inSupp.ofC& W'sMot.
forRecons.(DocketNo.227,At
4.2).Mr.Haneythenforwardedthissecondsignedversionto
Betweenthetimethat(1)Mr.HuntleyfiledMr.Miller'sunsignedMarch19,2011
declaration,and(2)Mr.MillerfaxedhisundatedaffidavittoMr.HuntleyonoraroundMay4,
20l1,Mr.MillertestifiedthatPlaintiffs'attorneys-includingMr.Huntley,JamesC.Sabalos,
andMichaelJ.Flynn-werecallingoften(afewtimesaweek),urgingMr.Millertosignthe
unsignedMarch19,20l1declarationasquicklyaspossible.See5l?1/12MillerDep.at249:13250:9,attachedasEx.AtoAbdollahiDecl.inSupp.ofC& W'sMot.forRecons.(DocketNo.
245).
MEMORANDUM DECISION AND ORDER-5
Plaintiffs'counsel.Seeid.Thissubsequentaffidavitwassignedbeforeanotarypubliclicensed
inTexasandisdatedMay9,2011;however,itappearstobeidenticalincontenttotheearlier
affidavitfaxedtoMr.HuntleyonMay4,2011.ForthepurposesofthisMemorandumDecision
andOrder,theCourtconsidersMr.Miller'stwosignedaffidavitstobeoneandthesamevz
OnMay5,20l1,DefendantsC& W andCreditSuissemovedtodismiss
Plaintiffs'ThirdAmendedComplaint.SeeC&W &Credi
tSuisseMots.toDismiss(Docket
Nos.134-139).
14. OnMay25,2011,Plaintiffs,inresponsetoC& W'semergencymotiontostrike
Plaintiffs'May13,201lmotionforpartialsummaryjudgment(DocketNos.140& 145),relied
uponMr.Miller'sunsignedMarch19,2011declarationintheseparticulars:
dcli'orexample,duringtheMontanaBankruptcyproceedingsinInreYellowstone
MountainClub,CreditSuisseand(C&W)werewellawareofthecomplaints,
concernsandobjectionstothelendi
ngandappraisalschemeraisedbyMichael
Miller,aseniorappraiserwith(C&W).Millerraisedhisconcernsandobjections
regardingtheSc-fbtalNetValue''appraisalmethodtohissuperiorsinNewYork
....Mi
lleralsoraisedthesameobjectiondirectlywi
thseveralmembersofthe
CreditSuisseteam inLosAngeleswhoparticipatedinthecreationofthescheme
describedinthe(ThirdAmendedComplai
ntl.
''
ldenti
fyingMr.MillerasC
thepersonwhodirectl
ylinksCreditSuisseand(C&
W)toboththeplanni
ngandi
mplementationoftheschemea
''
(trhecurrentmotionsbeforethisCourtarethereforenotmerelyprocedurally
improper,butaconcertedefforttopreventanycourtfrom learningwhatelse
MillerwilltellthisCourt(andthereismore),andadetermi
nedefforttomake
surenocoul'teverconcludesthattheDefendantsviolatedthelawsoftheUnited
StatesICTIRREA''
IandthelawsofthestatesofIdaho,Montana,Nevada,and
Florida(CI
USPAP''
)whichtheydid.
''
2AlthoughbothofthesigneddocumentsarelabeledasCtaffidavitsn''neithercontainsa
notarypublic'sjurat.Rather,b0thuseanacknowledgmentform.However,bothcontain
penultimatelanguageattheendofthedocumentthatisinsufficientformtomeetthe
requirementsofadeclarationunderl8U.S.
C.j1746.
MEMORANDUM DECISIONANDORDER-6
ilnconnectionwiththeillegallendingandappraisalschemeinldahoandat
Yellowstone,Cushman& Wakefield'sappraiser,DeanPaauw,toldMiller:C..
Jf'
m.
lnotinjailyetandstillconti
nuingtowritetheseapprai
sals...''
SeePls.'Opp.toEmergencyMot.toStrike,pp.7-8(DocketNo.148)(citingThirdAm.Compl.
at!!57-59&70(DocketNos.129& 131)(emphasisinoriginall).
.
OnMay31,2011,PlaintiffsopposedDefendants'renewedmotionstodismiss.
SeePIs.'Opp.toMots.toDismiss(DocketNos.152-153).lndoingso,Plai
ntiffsrelied,i
npart,
ontheallegationsraisedintheirThirdAmendedComplaintrelatingtothetestimonygivenin
Mr.Miller'sunsignedMarch19,20l1declaration.Seee.g.,Pls.'Opp.toCreditSuisseMot.to
Dismiss,pp.24-26(DocketNo.152).
,Pls.'Opp.toC&W Mot.toDismiss,pp.8,10-12,2l-24
(DocketNo.153).
DuringtheJanuary12,2012oralargumentonPlaintiffs'April21,2011motionto
amendandDefendants'renewedmotionstodismiss,Plaintiffs'counsel,Messrs.Huntleyand
Sabalos,madethefollowingargumentsvisvisMr.MillerandhisunsignedMarch19,20l1
declaration'
.
c-f'heissuepresentedbythismotioniswhetherthe-withtheadventofthenew
informationwehavethroughthewhistleblowerandothernewallegationsinthat
ThirdAmendedComplaint,thisCourtshouldreinstatethePlaintiffs'causeof
actionagainst(C&Wqforabreachoffiduciaryduty....
''
l-f'
heThirdAmendedComplaintaddsinformationprovidedbythewhistleblower,
MichaelMiller.And1won't-lmentiononlyacoupleofhighlightshere.....''
(
tAtparagraph57(oftheThirdAmendedComplaintl,andlwanttotalkjusta
littlebitaboutwhatwasn'there.Whatwasn'therebeforeintheIastproceeding.
WeknewnothingaboutMr.Miller.Weknew nothingabouttheconversations
thattookplaceandthemeetingsandagreements.Thisisal1unique.Andoneof
theproblemswi
thconspiracywehadlasttimewith(C&WJwas,i
nfact,we
didn'tknowaboutMillerandwedidn'thaveallthedetails.''
MEMORANDUM DECISION AND ORDER -7
timethatPlaintiffs(originall
ylconcededtheclaim ....,
''Pl
aintiffs'counsel
responded:vhatandthewhistleblower.AndalsotheaffidavitofMikeHaney,
andtheaffidavitsofMillerthattheycanbeconsideredinconnectionwiththis
motion.''
tdparagraph61.Millerbeginstoraiseredflagsregardingthesenew intlated
appraisals.Milleristheseniorvice-presidentorseniorexecutiveinchargeofthe
developmentsfor(C&W1outofHouston,andht'sgotmanypeoplethatwork
forhi
m.Henowisraisingredt
lags.(C&W)i
sraisi
ngredt
lagsbecausetheyare
theiremployees,they'reauthorizedagents.''
Cdparagraph62,allthethingswedidn'tknowbeforewhenJudgeLodgeandYour
HonorhadusbeforethisCourt,Miller,onlyfivemonthsorsoafterhehad
previouslyappraisedLakeLasVegas,pursuanttoUSPAPandFIRREA,through
thediscountedmarketvaluethatljusttoldyouabout,learnsofwhatisgoi
ngon,
wantstoknow why....''
At65through69undertheconspiracy,whichwedidn'tknowaboutbefore,even
(C& WJchangesi
tsTNV tototalnetproceeds,thinkinggeez,thiscouldbe
allegedtobemisleading.''
Sd
Andljustwantto-1'11justrepresent,youknow,Judge,lknowyouknow
conspiracy.I'mnotgoingtosithereandtellyou,butwerepresentthatifitwere
conspiracyalone,notjusttheothermaterialswehave,conspiracyalonewewould
haveenoughtohold(C&W1inhere,iftheCourtletsuscomebackbecausewe
didn'tknow aboutMiller.Wedidn'tknow aboutDeanPaauw sayingI'm still
doingtheseappraisals,notyetinjail,tellingthattohisexecutive,senior
executive,Mr.Miller,who'sreportedtous,who'scomingtothiscourtsooneror
later-''
See1/12/12Tr.at10,l4,22-23,70-73,78(DocketNo.194).
OnFebruaryl7,2012,theundersignedissueda(1)MemorandumDecisionand
OrderrelatingtoPlaintiffs'April2l,201lmotiontoamend,and(2)Reportand
RecommendationrelatingtoDefendants'renewedmotionstodismiss.See2/17/12MDO&Rpt.
&Recomm.(DocketNos.197& 198).WithintheFebruary17,2012MemorandumDecision
andOrder,theundersignedgrantedPlaintiffs'April21,20l1motiontoamend,statingin
relevantpart:
MEMORANDUM DECISION AND ORDER -8
and(C&W)tosupportabreachoffiduciarydutyclai
magainstnotonlyCredi
t
Suisse,butalso(C&Wj.
''
@
CcFinally,Plaintiffs'counselrepresentasofficersofthecourtthatMr.Millerhas
insiderknowledgeofLC& W'slallegedcoordinationwi
thCreditSuissethat
presentsanew,different,factualbackdroptoPlaintiff'scurrentbreach of
fi
duciarydutyclaimagainst(C&WJ.
''
See2/17/12MDO,pp.10& 13(DocketNo.197).Additionally,withintheFebruary17,2012
ReportandRecommendation,theundersignedrecommendedthatPlaintiffs'breachoffiduciary
dutyclaimagainstC&W notbedismi
ssed.See2/17/12Rpt.&Recomm.
,pp.32-33(Docket
No.198).
OnMarch30,2012,JudgeLodgeadoptedi
npartandrejectedi
npartthe
undersi
gned'sFbruary17,2012ReportandRecommendation.See3/30/12Order(DocketNo.
210).Ofsomenotehere,al
thoughJudgeLodgefoundthatPlainti
ffs'Thi
rdAmendedCompl
aint
allegedtheexistenceofaconspiracybetweenCreditSuisseandC& W,henonetheless
dismissedwithprejudicePlai
ntiffs'breachoffi
duciarydutyclaimsagainstbothCreditSuisse
andC& W.Seeid.atpp.l5-16&23.
OnApril27,2012,C& W firstreceivedacopyofthesigned,May2011Miller
affidavi
t.SeeEx.1toMorrowDecl.inSupp.ofC&W'sMot,forRecons.(DocketNo.227,
Att.2).ThecopywasobtainedfromMr.Miller'spersonalatt
orney,notfromcounselfor
Plaintiffs.Seeid.
20. AlsoonoraroundApril27,2012,CreditSuisseandC& W answeredPlaintiffs'
Thi
rdAmendedComplaint.SeeCredi
tSuisseandC&W Ans.toThirdAm.Compl.(Docket
Nos.218,219,222&235).
MEMORANDUM DECISIONANDORDER-9
2012Order.SeeC&W'sMot.forRecons.(DocketNo.227).lnsupportofi
tsmotionto
reconsider,C& W statedthatdplaintiffs'counselforafullyearhavebeeninpossessionofa
signedaffidavitfrom supposedCwhistleblower'MichaelMillerthatismateriallydifferentfrom
theunsigneddeclaration'Plaintiffs'counseldraftedandsubmitledtotheCourtonMaroh25,
2011.5'SeeMem.inSupp.ofC& W'sMot.forRecons.,p.l(
DocketNo.227,Att.l).
AccordingtoC&W,SshadtheCourtknownthetruthaboutwhatgMr.
1Milleractuall
yhad
signed,itwouldhavegrantedC& W'smotiontodismissinitsentirety....''Seeid.atp.3.
ThusC& W soughtreconsiderationofthatportionofJudgeLodge'sOrderregardingC& W's
renewedmotiontodismisstheThirdAmendedComplaintthatallowedcertainclaimstoproceed
againstit.Seeid.
OnJune4,2012,C& W filedamotionforsanctions,arguingthatPlaintiffs
shoul
dbesanctionedduetotheir(and/ortheircounsel's)tmisconductinfaili
ngtodisclosefor
morethanoneyeartheexistenceofasignedaffidavitfrom MichaelMiller,whileatthesame
timesubmittingtotheCourtandrelyingonadifferent,unsigneddeclaration.''SeeC& W's
Mot.forSanctions,p.2(DocketNo.246).
23. OnJunel5,2012,CreditSuissealsomovedforreconsiderationofJudgeLodge's
March30,2012Order.SeeCreditSuisse'sMot.forRecons.(DocketNo.253)-Insupportofi
ts
motiontoreconsider,CreditSuissealsohighlightedPlaintiffs'counsel'srelianceuponMr.
Miller'sunsignedMarch19,201ldeclarationuptothatpointintheIitigationwhen,infact,they
wereinpossessionofalater-in-time,signedaffidavitfromMr.Millerthatwassubstantively
differentfrom Mr.Miller'searlierdeclaration. SeeMem.inSupp.ofCreditSuisse'sMot.for
MEMORANDUM DECISION ANDORDER-10
Recons.
,pp.1-2(DooketNo.253,Att.1)(t
dWhatPlaintiffsdidnotrevealtotheCourt,even
whilerelyi
ngrepeatedlyonthesupposedtestimonyofMr.Millerintheguqnsignedgdeclarati
on),
wasthatMillerhadactuall
ysi
gnedan(alffi
davit...-amodificationofthe(ulnsigned
gdeclarationldraftedforhimbyPlaintiffs'counsel-i
nwhichhedeletedkeyparagraphs,
sentences,andphrasesthatsupposedlysupportedPlaintiffs'claims,andsubstitutedmaterially
di
fferentlanguage.
''
)(emphasisinori
gi
nal
).lnturn,CreditSuissemovedtheCourtto(l)
reconsideritsdenialofCreditSuisse'srentwedmotiontodismissPlaintiffs'negligenceclaim in
Iightofthe(d
Millerrevelationss''and(2)orderPlai
ntiffstoshowcauseastowhytheyshouldnot
besanctionedtformisleadingtheCourtinviolationoftheirdutyofcandor.''Seeid.atp.3.
24. OnOctober26,2012,JudgeLodgegrantedDefendants'respectivemotionsfor
reconsideration,reconsidereditsMarch30,2012Order,butthendeterminedthattheCoul't
Stcorrectlydecidedthematterinitspriororder...whichremainsthedecisionofthisCourton
themotionsdecidedtherein.
''See10/26/12Order,pp.14-15(DocketNo.297).However,in
reachi
ngthisconclusion,JudgeLodgeneitherlt
condoneldlnormagdejanyrulingonewayor
anotherconcerningtheactionsofcounsel''regardingthestatedbasesforseekingreconsideration.
Seeid.atp.13.lnotherwords,thequestionofwhetheranysanctionsarewarrantedinrelation
toPlaintiffs'counsel'shandlingofMr.Miller'sdeclaration/affidavitwasreferredtothe
undersignedfordecision.
25. OnNovember19,2012,Plaintiffsmovedforanawardofattorneys'feesrelating
tounnecessarilyhavingtorespondtoC& W'sJune4,2012motionforsanctionsandCredit
Suisse'sJunel5,2012motionforordertoshowcause.SeePls.'Mot.forAwardofAtt'ysFees
&Expenses(DocketNo.302).
MEMORANDUM DECISION AND ORDER-11
26. OnDecember5,2012,theundersignedheardoralargumenton(1)C&W'sJune
4,2012motionforsancti
ons,(2)CreditSuisse'sJune15,2012motionforordertoshowcause,
and(3)Plaintiffs'motionforawardofattorneys'feesandexpenses.See12/5/12MinuteEntry
(DocketNo.309).
OnDecember6,2012,PlaintiffstsledamotionforleavetoGleexpeditedGve-
pagebri
efregardingtheordertoshowcausehearing,arguingthatltg
tlhei
ssuebeforetheCourt
hasseriousconsequences,particularlytotheintegrityandreputationofPlaintiffs'attorneysas
wellastheotheroonsiderationsarti
culatedincourts''thatSdgnlopre-hearingbriefswererequested
byeithertheCourtorthepartiesandtheissuesarenowfocusedforameaningfulbrief,''andthat
S
sgtjherewereissuespropoundedatthehearingwhichdeserveameaning11andthoughtfulinput
fromcounsel.
''SeePls.'Mot.forLeave,pp.1-2(DocketNo.308).
28. OnDecember6,2012,theundersignedgrantedPlaintiffs'motionforleave,
reasoning:
TheCourtstruggleswithanyassessmentofthependingmotionsforsanctionsthat
doesnotimmediatelyraisesignificantissuesforPlaintiffsrequiringathoroughand
carefulresponse.However,itispossiblethattheseriousnessoftheissueraisedby
themotionsforsanctions,andthesanctionsrequestedbyDefendants,werenot
apprehendedbyPlaintiffs'counseltotheappropriatedegree.Giventheimplications
ofthependingmotionsforallofPlaintiffs'counsel,andfortheclaimsmadeinthe
lawsuit,theCourtwillgranttheMotion.
See12/6/12MDO,p.2(DocketNo.311).
29. OnDecemberl0,2012,Plaintiffsfiledtheirpost-hearingbriefregardingtheorder
toshowcausehearing,arguingthatsanctionsshouldnotbeimposed.SeePls.'Post-llearing
Brief(DocketNo.315).
MEMORANDUM DECISIONAND ORDER -12
30. OnDecember13,2012,DefendantsrespondedtoPlaintiffs'post-hearingbrietl
arguingthatsanctionsshouldbeimposedagainstPlaintiffs.SeeCreditSuisse& C& W Resps.
(DocketNos.321&322).
II.DISCUSSION
ThemotionsdecidedinthisMemorandum DecisionandOrderconcernanettlesomeand
troublingdisputebetweenthepartiesregardingstatementsmadebyMichaelMiller-awitness
describedbyPlaintiffs'counselasaCdwhistleblower''-andadecisionmadebyPlaintiffs'
counselnottofileMr.Miller'ssignedMay201laffidavitwiththeCourt.Whenthataffidavit
wassignedbyMr.Miller,Plaintiffs'counselhadalreadypresented,reliedupon,andfiledwith
theCourtMr.Miller'sprevious,unsigned,andarguablysubstantivelydifferentMarchl9,2011
declaration.DefendantscontendthatbynotfilingwiththeCourtMr.Miller'ssignedMay2011
affidavi
t(whileconsistentl
yrelyinguponMr.Miller'searli
er,unsignedMarch20l1declaration),
Plaintiffsandtheircounselbreacheddutiesrequiredofthem byCourtrules,federalstatutes,and
ethicalstandards.
A. lmposingSanctions:ApplicableStandards
FederalRuleofCivilProcedureNo.11
lnpresentingtothecourtapleading,writtenmotion,orotherpaper-whetherbysigning,
filing,submitting,orlateradvocatingit-anattorneycertifiesthatSsitisnotbeingpresentedfor
anyimproperpurpose,suchastoharass,causeunnecessarydelay,orneedlesslyincreasethecost
oflitigation''andthat(tthefactualcontentionshaveevidentiarysupportor,ifspecificallyso
identified,willlikelyhaveevidentiarysupportaherareasonableopportunityforfurther
investigationordiscovery.
''Fed.R.Ci
v.P.1l(b)(1)&(3).
MEMORANDUM DECISION ANDORDER-13
Ingeneral
,ifthecourtdetermi
nesthatFRCP1l(b)hasbeenviolated,thecourtmay
imposeanappropriatesanction.SeeFed.R.Civ.P.1l(c)(1).
3Sancti
onsunderFRCP11Sd
must
belimitedtowhatsufficestodeterrepetitionoftheconductorcomparableconductbyothers
simi
larl
ysituated''andmayinclude$$(41))nonmonetarydirectives,
'4g(2))anordertopaya
penaltyintocourt;org3)ifimposedonmotionandwarrantedforeffectivedeterrence,anorder
directingpaymenttothemovantofpartorallofthereasonableattorney'sfeesandother
expensesdirectlyresul
tingfromtheviolation.'Fed.R.Civ.P.l1(c)(4).
FRCP11doesnotenumeratethefactorsacourtshouldconsiderindecidingwhetherto
imposeasanctionorwhatsanctionswouldbeappropriateinanygivencircumstance. Still,the
3However,FRCP11requiresthatapartyfilingamotionforsanctionsmustservethe
motionontheopposingparty21daysbeforefilingthemotionwiththecourt.SeeFed.R.Civ.P.
1l(c)(1)($$
Themotion(forsanctionslmustbeservedunderRule5,buti
tmustnotbefiledorbe
presentedtothecourtifthechallengedpaper...iswithdrawnorappropriatelycorrectedwithin
21daysaft
erserviceorwi
thi
nanothertimethecourtsets.
').ThisisFRCP11'
sSsafeharbor''
provision.TheNinthCircui
thasheldthattheproceduralrequi
rementsofFRCPll(c)(1)are
mandatoryandthatthesafeharborprovisionmustbestrictlyenforced.SeeHolgatev.Baldwins
425F.3d6671,677(9t
bCi
r.2005).lti
snotclearwhetherFRCP1l'
ssafeharborprovision
applies(or,ifitdid,whetherthepartiescompliedwi
thi
tsproceduralprotocols)-C&W does
notcitetoFRCPl1insupportofitsmotionforsanctionsand,whileCreditSuissereferences
FRCP1lts'
ccCredi
tSuisse'sMot.forOrdertoShowCause,pp.14-15(DocketNo.253,Att.1:,
itsmotionisnotforsanctionspersebut,rather,amotionforordertoshowcausewhyPlaintiffs
shouldnotbesanctioned.
4Anon-monetarysanctionofdismissal(tisanavailablesanctionwhenSapartyhas
engageddeli
beratel
yindecepti
vepracticesthatunderminetheintegri
tyofjudicialproceedings'
becausecourtshaveinherentpowertodismissanactionwhenapartyhaswillfullydeceivedthe
courtandengagedinconductutt
erl
yinconsistentwi
ththeorderlyadministrationofjustice.'''
feonv.IDxsystemsCorp.,464F.3d951,958(9t
hCir.2006)(quotingAnheuser-Busch,Inc.v.
NaturalBeverageDi
stribs.
,69F.3d337,348(9!
1
'Ci
r.1995)).(
sBeforei
mposi
ngtheiharsh
sanction'ofdismi
ssal
,however,thedistrictcourtshouldconsiderthefolowingfactors:(1)the
public'sinterestinexpeditiousresolutionoflitigation;(2)thecourt'sneedtomanageitsdockets;
(3)theri
skofprejudicetothepartyseeki
ngsanctions;(4)thepubli
cpolicyfavori
ngdisposi
tion
ofcasesontheirmeri
ts;and(5)theavailabilityoflessdrasticsanctions.'''Seeid.
MEMORANDUM DECISIONANDORDER-14
AdvisoryCommitteeNotestoFRCPl1providethatcourtshavetsignificantdiscretion''insuch
respects,andmayconsi
derCdlwlhetherthei
mproperconductwaswillful,ornegligent;whetheri
t
waspartofapatternofactivity,oranisolatedevent;whetheritinfectedtheentirepleading,or
onlyoneparticularcountordefense;whetherthepersonhasengagedinsimilarconductinother
li
tigation,
'whetheri
twasintendedtoi
njure'
,whateffectithadontheli
tigationprocessintimeor
expense;whethertheresponsiblepersonistrainedinthelaw;whatamount,giventhefinancial
resourcesoftheresponsibleperson,isneededtodeterthatpersonfromrepetiiioninthesame
case;gandlwhatamountisneededtodetersimilaractivitybyotherIitigantsg.
l'Fed.R.Civ.P.
ll,Adv.Comm.Notes(1993).
28U.S.C.i1927
Under28U.
S.
C.j1927,tgalnyattorney...whosomulti
pliestheprooeedi
ngsinany
caseunreasonablyandvexatiouslymayberequiredbythecourttosatisfypersonallytheexcess
costs,expenses,andattorneys'feesreasonablyincurredbecauseofsuchconduct.''28U.S.C.
jl927.Theuseofthewordtmay''-ratherthanCshall
''ort
must''-givesdistrictcoul
'
tsthe
discretionaryauthorityctoholdattorneyspersonallyliableforexcessivecostsforunreasonably
multiplyingproceedings.
''Gaddav.Ashcroh,377F.
3d934,943n.
4(9t
hCir.2(j04).Whilethe
NinthCircuithas(ttbeenlessthanamodelofclarityregardingwhetherafindingofmere
recklessnessalonemaysufticetoimposeasanctionforattorneys'fees'''under28U.S.C.jl927,
orwhethertheremustbeat
indingofsubjecti
vebadfai
th,whatisclearfromthecaselawisthat
$tatindingthattheattorneyrecklesslyorintentionallymisledthecourtissufficienttoimpose
sanctionsunderg28U.S.
C.Jjl927....
''InreGirardi,611F.3d1027,106l(9t
hCi
r.20l0)
MEMORANDUM DECISION AND ORDER -15
(quotingB.KB.v.MauiPoli
ceDep'
t,276F.3d1091,ll07(9t
hCir.2002)andcitingInre
KeeganMgmt.Co.Sec.Liti
g.,78F.
3d43l,436(9t
hCi
r.l996)).
IdahoRuleofProfessionalConduct3.35
lslnadditiontocaselawandapplicablecourtrules,courtsmayconsidercodesof
professionalconductindeterminingwhetheranattorney'sconductfallsbelowthestandardsof
theprofessionandissanctionable.SeeGirardi,611F.3dat1035.IdahoRuleofProfessional
Conduct3.3(a)(1)providesthatalawyershallnotknowingly
makeafalsestatementoffactor
lawtoatribunalorfailtocorrectafalsestatementofmaterialfactorlawpreviouslymadetothe
tribunalbythelawyer.
''IRPC3.3(a)(l);butcomparewithIRCP3.
3(a)(3)&cmt.8Cd
rhe
prohibitionagainstofferingfalsetvidenceonlyappliesifthelawyerknowsthattheevidenceis
false.Alawyer'sreasonablebeliefthatevidenceisfalsedoesnotprecludeitspresentationtothe
trieroffact.
''
).Consistentwi
ththis,al
awyer'sfailuretomakeadiscl
osurecanbetheequi
valent
ofanaffirmativemisrepresentation.SeeIRCP3.3,cmt.3.Moreover,givena(slawyer's
obligationasanofticerofthecourttopreventthetrieroffactfrombeingmisledbyfalse
evidence''(seeIRCP3.3,cmt.5),whenpreviously-offeredmaterial
sturnouttobe
false/misleading,alawyer's(Cdutyofcandortothetribunal''warrantsltreasonableremedial
measures''(seeIRCP3.
3,cmt.10).
5UndertheLocalCivilRulesoftheDistrictofIdaho,$
d(a1Ilmembersofthebarofthe
DistrictCourt...fortheDistrictofIdaho(hereafterthe
(Court''
)andallattorneyspermitt
edto
practiceinthisCourtmustfamiliarizethemselveswithandcomplywiththeldahoRulesof
ProfessionalConductoftheIdahoStateBaranddecisionsofanycourtinterpretingsuchrules.
TheseprovisionsareadoptedasthestandardsofprofessionalconductforthisCourtbutmustnot
beinterpretedtobeexhaustiveofthestandardsofprofessionalconduct.''Dist.ldahoLoc.Civ.
R.83.5.
MEMORANDUM DECISION ANDORDER-16
SfDistrictcourtshavetheinherentpowertosanctionalawyerforadfullrangeoflitigation
abuses.'''Evonv.LcwOff
cesofsi
dneyMickell,688F.
3d1015,1035(9t
hcir.2012)(quoti
ng
Chambersv.NASCO,Inc.,501U.
S.32,55(1991)).Whileadistrictcourt'sauthoritytoimpose
sanctionsunderitsinherentpowersisbroad,itisnotlimitless.t<Beforeawardingsanctions
underitsinherentpowers...thecourtmustmakeanexplicitfindingthatcounsel'sconduct
(constitutedorwastantamounttobadfaith.'''PrimusAuto.Fin.Servs.,Inc.v.Batarse,115F,3d
644,648(9t
hCir.1997)(quotingRoadwayExpress,Inc.v.Pi
per,447U.
S.752,767(1980).A
findingofbadfaithmaybeappropriatewhen,amongotherthings,apart.yengagesinbehavior
thathastheeffectofSsdelayingordisruptingthelitigationorhamperingenforcementofacourt
order.'1d.at649(internalquotationmarksomi
tted).
B. Analysis
Thereare,perhaps,somecourtsinthecountrywheremotionsofthisnaturearean
unremarkableoccurrence,andwherethereisnoparticularnoteworthinessatlachedtoeitherthe
bringingofsuchmotions,ortothedefenseofsuchmotions,orperhapseventothedecidingof
suchmotions.Thatisnottrueinthisfederaldistrictcourt,norinanyIdahostatecourtwith
whichtheundersignedhasbeenassociated.Themotionspresentmattersofgreatseriousness,
andtheCourthasgivenitsfullattentiontotheissuesraised,astheyimplicatethreatstothe
integrityoftheadversarialprocess,andquestionsabouttheproperconductoflawyerswhoserve
asofticersofthecourtinseeki
ngafairandjustadjudicationofthei
rcli
ents'disputes.
TheCourtisconvinced,afterconsideringthewrittenandoralargumentofcounsel,that
therehasbeenamaterialfailureonthepartofPlaintiffs'counselintheirresponsibilitiestothis
MEMORANDUM DECISIONAND ORDER-17
boxofevidenceinfrontoftheCourt,theyalsohadanabsoluteresponsibilitytoinform theCourt
andopposingcounselwhentheshapeofthatevidenceboxchanged.Havingmadeexplicit
representationsaboutthenatureofdgoodassworn''testimonytotheCourt,andhavingmade
explicitrepresentationsaboutsuchtestimonynotbeingmadeunderoathbecauseofMr.Miller's
allegedwhistleblowerfears,Plaintiffs'counselhadaresponsibilitytoinform theCourtand
opposingcounselwhenMr.Millerplacedhistestimonyunderoath.
TheargumentofPlaintiffs'counselthattheactualsworntestimonywasnotsubstantively
differentthantheCtwouldbesworn,butfor''testimonyisunavailinghere.Thedutiesof
Plaintiffs'counselweretocorrectthemisshapenrecordbeforetheCourt,havingoncemadethat
record.IfPlaintiffs'counselhadneverpresentedanyunsignedandunsworndeclarationtothe
Courtasifitwasasgoodasswornupon,asifitcarriedthesameevidentiaryreliabilityasa
swornaffidavitorsigneddeclaration,andifPlaintiffs'counselhadnotrepeatedlyand
vociferouslyarguedthatsuchevidenceshouldpersuadetheCourtoftherightnessofPlaintiffs'
claims,thenthisissuecouldbeeasilydispensed.Plaintiffs'counselcouldhavekeptsilent(in
thelimitedcircumstancesatplayhere,andassumingthattherewerenodiscoveryrequeststhat
otherwi
semighthaverequiredtheproductionofsuchastatement),aboutthefactoftheunsigned
declaration,aswellasthefactofthelatersigneddocuments.ButPlaintiffs'counselmadethe
unsigneddeclaration,andtheirrepresentationsabouttheintegrityandsignificanceofsuch
evidence,akeypartoftherecord.Oncethatwasdone,theyalsohadtheimmediateand
unmistakableresponsibilitytomakethelater-signedaffidavitapartoftherecord,whentheyfirst
becameawareofitsexistence.
MEMORANDUM DECISIONANDORDER-19
Plaintiffs'counselalsoarguesthattheywerejustifiedindecidingnottofilethesworn
testimonywiththeCourt,eventhoughtheypreviouslyhadfiledtheunsworntestimonywhile
emphasizingthatthesworntestimonywasunavailablebecauseMr.Millerfearedretaliation.
Theyarguethattheswornttstimonyisnotsubstantivelydiffertntthantheunsworntestimony,a
conclusionthatis,ofcourse,unilaterallydrawn.NeithertheCourtnoropposingcounselwere
madeawareof,orprovidedwithacopyofthesworntestimony.Further,therepresentationthat
sworntestimonycouldnotbeobtainedforfearofretaliationwasnoIongertrueatthemoment
Mr.Millersignedhisaffidavi
t.Whateverrationalizationsmayhavejusti
fiedthatdecisioninthe
mindsofPlaintiffs'counsel,theplainfactisthatthedecisionwasmistakenandwrong.
Similarly,theargumentthatPlaintiffswereprohibitedfromfilinganyaffidavitsbecause
oftheproceduralpostureofthecase(dealingwi
thpendi
ngmotionstodismi
ssandastayupon
discoverywhilesuchmotions-andmoti
onstoamend-wereconsideredanddecided)isalso
unavailing.Plaintiffsdidnotfollowsuchacloselinewhentheunsigneddeclarationwas
submittedtotheCourtinthecontextofamotionseekingrelieffromthediscoverystay. The
natureofthemannerinwhichtheunsigneddeclaration,andtheaftidavitofcounselsubmitted
withit,andthenthelaterwrittenandoralargumentbaseduponit,makeclearthatthePlaintiffs
intendedforthepurportedtestimonyofMr.MillertobepartofwhattheCourtwouldconsiderin
decidingthenpendingmotions,andlaterfiled,motions.lnfact,asthisMemorandum Decision
andOrderdescribesattheoutsetandasalsosetforthinDefendants'motions,theCourtdid
considersuchevidenceandhrgumentinmakingcertainofitsrulings.Havingoncemuddiedthat
water,Plaintiffs'counselcannotreasonablyarguethattheCourt'sorderstayingdiscoveryand
MEMORANDUM DECISIONAe ORDER.20
thecivilrules'prohibitionsuponconsiderationofevidencefrom outsidethepleadingson
motionstodismissconstitutedaclearbarriertofilingMr.Miller'ssignedaffidavit.
Accordingly,theCourtmakesthefollowingspecificfindingsinregardtothefailureof
Plaintiffs'counseltot5lethesignedstatementofMr.Milleratthetimeitcameintotheir
possession'
.
SuchafailureisanabuseofthedutiesowedtotheCourt,andconstitutedorwas
tantamounttobadfaith.Suchafailuredelayedandhamperedthelitigationprocessbypresenting
atlawedandarguablyfalserecordbeforetheCourt,whileatthesametimeaskingtheCourtto
focusupontheflawedportionofthatsamerecordasabasisfordecidingcriticalmotionsinthe
case.TheCourtproperlycansanctionsuchfailtlresbyPlaintiffs'counselunderitsinherent
POWCI'
S.
Plai
ntiffs'counselhadadutyunderldahoRuleofProfessionalConduct3.
3(a)(l)
nottoknowinglyismakeafalsestatementoffactorlawtoatribunalorfailtocorrectafalse
statementofmaterialfactorlawpreviouslymadetothetribunalbytheIawyer.''Plaintiffs'
counsel'sfailuretot5lethesignedstatementofMr.Miller,onceitwasreceivedandinthe
contextofrepresentationsinwritingandorallyaboutthefactsandcircumstancesofMr.Miller's
unsworntestimony,constitutedtheequivalentofanaffirmativemisrepresentation.SeeIRCP
3.3,cmt.3.Thesigneddsaffidavit''wasnotthesamedocumentastheunsigneddeclaration.The
statementoffactthatthewitness,Mr.Miller,wouldnotsignastatementunderoathbecauseof
fearofretaliationwasnolongertrue,eveniftrueattheoutset,atthemomenthedidsignthe
aftidavit.Further,Plaintiffs'counsel'sfailuretoremedysuchmattersisabreachofalawyer's
MEMORANDUM DECISIONANDORDER -21
dutyidutyofcandortothetribunal''whichwarrantsSdreasonableremedialmeasures.''SeeIRCP
3.3,cmt.10.
Plaintiffs'counsel'sfailuretofilethesignedstatementwhenitcameintotheir
possessionhadtheinevitable,andintended,effectofunreasonablymultiplyingtheproceedings
inthiscasepertainingtobriefing,argument,considerationanddecisionuponmotionstodismiss,
andmotionstoamend.WhetherornotJudgeLodgeultimatelychangedanyofhisdecisionupon
objections(orreconsiderationofhisdecision)totheundersigned'sReportandRecommendation
datedFebruary17,2012doesnotchangethisanalysisorthefindingmadehere.Thefailureto
filethesignedaffidavitnecessarilymeantthatthenatureofthebriefingandtheargument,and
thecourt'sconsiderationoftheevidenceanddecisionuponthesame,wasdifferentthanitwould
havebeenwiththeadditionofsuchevidencetotherecord.TheCourtacknoFledgesthat
Plaintiffs'counselwouldhavebeenfreetoargue,andnodoubtwouldhaveargued,thatthe
signedstatementwasofnodifferentevidentiaryimportancethantheunsignedaffidavit.But,
defensecounselwouldalsohavetheargumentthatthesignedstatementwassubstantively
different,thatthecharacterizationofawhistleblowerwitnessworriedaboutretaliationwas
unfounded,andtheCourtwouldhavehadthatfullpanoplyofevidenceandargumentto
consider.Whenthesignedstatementcametolight,anew roundofmotionpracticeensuedand
eventheveryfactofthisMemorandum DecisionandOrderisevidencethatproceedingshave
beenmultipliedandadditionalresourcesofthepartiesandthecourthavebeendrawnupon.
4. TheCourtfindsthatthefailureofPlaintiffs'counseltofilethesigned,sworn
affidavitinthecircumstancesdescribedinthisDecisionwasdonerecklesslyataminimum,and
MEMORANDUM DECISIONAND ORDER -22
thatsuchrecklessconductonthepartofl
awyerstothiscase,asofficersofthecourt,justi
fiesa
findingthattheattorneysarepersonallyliableforexcessivecostsassociatedwithsuchconduct.
ThereisnoquestionbutthatPlaintiffs'counselwereawareofthesigned,swornaffidavit.
Indeed,thereoordindicatesthattheywereinrepeatedcontactwithMr.Millerrequestinghim to
maketheswornstatement,sothatitcouldbesubmittedtotheCourt.Yet,aftersubmittingan
unsworndeclaration,andrepresentingthataswornstatementcouldnotbeobtainedbecauseof
thewitness'sfearofretaliation,theyfailedtofiletheactualswornaffidavitwhenitcameinto
theirpossession.Suchconductisrecklessataminimum.Therefore,theCourtfindsthatan
awardofsanctionsagainstPlaintiffs'counselisalsoappropriateunder28U.
S.
C.j1297.
5. TheCourtmakesnofindingastowhethersanctionsareappropriateunderFRCP
HavingdeterminedthatanawardofsanctionsagainstPlaintiffs'counselis
justifiedundertheinherentpowersoftheCourt,ldahoRul
eofProfessionalConduct3.
3,and28
U.S.
C.j1297,theCourtordersasfollows:
(A) Plaintiffs'counselmaynotusethetestimonialevidenoeofMichaelMiller
inthiscaseforanypurpose,otherthanasobtainedindepositionorcourtroomtestimony.The
CourthasconsideredbarringtheuseofMichaelMiller'stestimonyinanyfonn,butconcludes
thattodosowoulddisproportionatelyaffeottheindividualPlaintiffsforthefailingsoftheir
counsel.However,giventhedecisionsandconductofPlaintiffs'counselinregardtoMr.
Miller'spriortestimonialevidence,theCourtwillrequirethatanyevidencetobeobtainedor
otherwiseusedinthisIawsuitmayonlybeelicitedinadepositionsettingorcourtroom
testimony,wheretheDefendantswillhavethefulladversarialprocessavailabletothem.
MEMORANDUM DECISIONANDORDER-23
(B) Withrespecttomonetarysancti
onsimposeduponPlai
ntiffs'counsel
i
ndividuall
y(seeinfra),theundersignedherebyidentifiesatt
orneysHuntley,Conant,Sabalos,
andFlynnasbeingabsolutelysubjecttothi
sMemorandumDecisi
onandOrder.Totheextent
anyoneofPlai
ntiffs'remainingcounselbelievesthatheshouldnotbesubjecttothis
Memorandum DecisionandOrder,heistofileamotionseekingrelieffrom thesameonor
beforeApril12,2013,detailingthegoodcauseforsai
drelief.Defendantsarepermi
tted(butnot
required)tofilearesponseonorbeforeApril19,2013.Soonthereafter(inanyevent,before
PlaintiffsaretorespondtoanyrequestbyDefendants'forrecoveryoffeesandcosts(seeinfraj),
theCourtintendstoissueasubsequentordersettingoutthoseadditionalattorneyswhoare(and
whoarenot,ifany)subjecttothesancti
onssetoutinthisMemorandumDeci
sionandOrder.
(C) Subjecttothetermsofsubparagraph6(B),Plaintiffs'counsel,jointlyand
severally,shallpayasum toeachDefendant-CreditSuisseandC& W -tobedeterminedupon
considerationofappropriateevidence,torecompensesaidDefendantsfortheattorneys'feesand
costsnecessitatedbythemotionsfiledseekingsanctionsasaresultofthefailuretofilethesworn
affidavitofMr.Mi1ler.6IfaDefendantseekstorecoversuchexpenses,byAprill9,2013,itisto
seekrecoveryofsuchcostsinthesamemannerasiftheDefendantwereseekingtorecovercosts
6TheCourtconsideredarulingthatwouldallow forDefendantstoseekrecoveryofany
attorneys'feesandcostsexpendedasaresultofthefactofthefailuretofilethesignedaffidavit
ofMr.Miller,inthecontextofadditionalordifferentbriefingandmotionpracticethatwouldnot
havebeendonebutforthefactofthefilingoftheunsigneddeclarationandargumentmadeupon
thesame.Ultimately,theCourtconcludedthatthedifficultandtime-consumingexerciseof
tryingtoextractsuchthreadsfromthemuchmoreextensiveweaveofthebriefingandargument
tliatwassubmittedbyDefendantswouldbeextraordinarilydifficultandnotworththepriceof
admissionforthepartiestopursueordefend,orfortheCourttodecide.Whetherornotany
partywillhaveanindependentrighttoseekrecoveryofsuchfeesandcostsatafuturedatewill
havetoawaitthedenouementofthelawsuit.
MEMORANDUM DECISIONANDORDER-24
ofsui
t,i
ncludingattorneyfees,asamatterofrightunderFRCP54(d).Anysuchrequestshall
carrysufficientdetailandexplanationsoastoallow theCourttotind,byapreponderanceofthe
evidencesubmittedtoit,thattherequestedcostsaredirectlyconnectedtothemotionfor
sanctions,andtothefollow-upworkinresponsetothisruling.lfthereisanydoubtleftbythe
evidenceinthatregard,theCourtwillnotawardanycostsrepresentedbythedoubtfulevidence.
Plaintiffsshallhavetherighttorespondandopposetherequestforcosts,ifanyisfiled,inthe
ordinarymannerinresponsetoanFRCP54(d)motion.
(D) Subjecttothetermsidentifi
edinsubparagraph6(B),Pl
aintiffs'counsel
areeachindividuallysanctionedinthesumof$6,000.00.TheCourtarrivesatthatsumby
consideringtheveryseriousnatureofthedecisionnottofiletheswornaffidavitofMr.Miller,or
toadviseopposingcounseloftheexistenceofthatswornaftidavit,allasfurtherpreviously
discussedinthisDecision.Suchfailureunnecessarilymultipliedtheproceedingsinthislawsuit,
causedanunnecessaryandunjustifiableuseoftheresourcesoftheparti
esandtheCourt,
constitutedamaterialmisrepresentationoftheevidentiaryrecord,andviolatedanattorney'sduty
ofcandortotheCourt.Anysanctionforthoseseriousprofessionalfailingsmustservebothas
sanctionforthefactoftheimproperconductandasadeterrenttotheIawyer,andotherlawyers,
whomightconsidertakingsuchactionsinthefuture.Astotheamountoftheindividual
sanction,theCourtconsidersthefollowingfacts:
Thateachlawyerisestablishedinhispractice,andeachIawyer
willinglycameintotherepresentationoftheplaintiffsinthiscase(thisisnotasituationwherea
lawyerhasbeenappointedattheorderoftheCourttorepresentaparticularparty,norareanyof
theatt
orneysinvolvedinthiscaseonaprobonobasisl;
MEMORANDUM DECISIONAND ORDER-25
ThatotherthanMr.HuntleyandBenjaminSchwartzman,eachof
Plaintiffs'counselhascometotheDistrictofldahoaskingtobeadmittedtothisCoul'
tonapro
hacvicebasis,inordertobeoneofthemanycounselrepresentingPlaintiffsinthiscase,andby
doingso,theyhaveagreedtobegovernedbythesameprofessionalrulesofconductasapplyto
lawyersadmittedtothepracticeofthisCourti?
ThatPlaintiffs'counselhaverepresentedtotheCourtintheir
pleadingsandfilingsinthiscase,thatPlaintiffs'claimscarrymillionsofdollarsofalleged
damages,involvingtransactionsoccurringathigh-endresortpropertiesinmultiplegeographic
locations,andwithclaimsthatconceivablycouldhavebeenbroughtincourtsotherthanthe
Districtofldaho;
Thatinorderforasanctiontohaveadeterrenteffect,itshould
carlyasignificantenougheconomicimpactupontheindividualreceivingthesanctionsoasto
causethatindividual,andotherswhomaylearnofthesanction,tomakedecisionsinthefuture
thatarenotlikelytoexposeonetothepossibilityofreceivingsuchasanction'
,
ThattheCourtconsidersasanctionwhichhastheeffectof
deprivinganattorneyofaweek'sworthofearnedfeeincome,ashavingasufficienteconomic
deterrenteffecttohavetheintendedimpactuponanatlorney'sfuturedecision-makingabouthis
responsibilitiesasalicensedprofessionalandasanofficeroftheCourt.
(6) That,assuminganaveragebilli
ngrateof$300anhourforthe
plaintiffs'attorneys,whichtheCourtbelievesisaconservativeestimate,a40hourworkweek
willyieldagrossearnedincomeof$12,000.00.
7TheCourtconsidered,butultimatelydecidedagainst,revokingtheprohacvicestatus
ofthosecounselwhohavebeenadmittedtopracticebeforethisCourtonthatbasis.
MEMOM NDUM DECISIONAe ORDER-26
(8) That,afterconsideringthosefactorsdescri
bedinparagraph
6(D)(7),theCourtconcl
udesthati
tismoreappropriatetolessenthesanctionasbecauseitmay
haveadisproportionateimpaduponcertainofplaintiffs'counselincomparisontoothers,even
thoughtodosomaylessenthedeterrenteffectuponthosecounselofgreaterincomes;
That,therefore,theCourtwillreducethe$12,000amountbyonehalf,soastomakethesanction$6,000foreaohofPlaintiffs'counsel.lndoingso,theCourt
recognizesthatforsomeofPlaintiffs'counseltheamountmayseemofsmallconsequence'
,
however,theCourtalsopointsoutthatforthosecounsel,theyalsohavethedeterrent
consequenceofknowingthatanyoneofthem couldhavesteppedintoinsistuponadifferent
decisioninthesecircumstances,thatcouldhaveprotectednotonlythemselves,butalsotheircocounselwhomightbeoflessermeans,fromtheriskofthesanctionsthattheCourtimposesin
thisOrder.Further,totheextentthattherearedisproportionateimpactsupontherelative
economicresourcesofPlaintiffs'counsel,theyhavetheopportunitytoequalizesuchimpactsin
thecontextofsatisfyingtheirjointandseveralliabili
tiesforanyawardofcoststhattheCourt
maymakeinfavoroftheDefendants,aspal'tofthefollow-uptothisdecision.
AstoattorneysHuntley,Conant,Sabaios,andFlynn,such
paymentsshallbemadeintotheRegistryoftheCourtonorbeforeAprill2,2013.lf,pursuant
tothesubsequentorderreferencedinsubparagraph6(B),addi
tionalPl
ai
ntiffs'att
orneysarealso
MEMORANDUM DECISIONANDORDER-27
determinedtobethepropersubjectsofthisMemorandumDecisionandOrder,thoseattorneys
shallmaketheir$6,000paymenttotheRegistryoftheCourtwithin14daysofthatsubsequent
Order.
111.ORDER
Fortheforegoingreasons,ITISHEREBYORDEREDthat(1)Cushman&Wakefield's
MotionforSanctions(DocketNo.246)and(2)Credi
tSuisse'sMotionforOrdertoShowCause
(DocketNo.253)areGRANTED.Theanal
ysiscontainedwi
thinthisMemorandumDecision
andOrderwithrespecttograntingthesemotions,likewiseoperatesasthesupportfordenying
Plaintiffs'MotionforAwardofAtt
orneys'FeesRe:MotionsbyDefendants(DocketNo.302).
Therefore,Plai
ntiffs'MotionforAwardofAttorneys'FeesRe:MotionsbyDefendants(Docket
No.302)isDENIED.
s.'I
-h3-VYC.
#o
V
$
7
'
:
.e
,
4
rZ
.
N Z
-.'M'
X
#
l
'
t
r
'
'
Q
,
.
G
'
y
.
y.
*. o
x
'
$N
<
g'
e'
G. x
k;
'k
%
e
.
#Ab
>.
>.
.
r
4,,C
o
bv' t)v#s
DATED:March29,2013
i
HonorableRonaldE.Bush
U.S.MagistrateJudge
E xh ib it
M
Plaintiffs,
(DOCKETNo.358)
VS.
CREDITSUISSEAG,aSwisscorporation;
CREDITSUISSESECURITIES(USA),LLC,a
DelawareIimitedliabilitycompany,CREDIT
SUISSEFIRSTBOSTON,aDelawarelimited
Iiabilitycorporation;CREDITSUISSECAYMAN
ISLANDBRANCH,anentityofunknowntype;
CUSHMAN& WAKEFIELD,INC.,aDelaware
corporationandDOES1through100inclusive,
Defendants.
CurrentlypendingbeforetheCourtisPlaintiffs'unopposed'dtMotionforStayof
SanctionsMemorandum DecisionandOrderECF352,PendingResolutionofRule72
Objections'(d
fMoti
ontoStay''
)(DocketNo.358).Havingcarefullyconsi
deredtherecordand
otherwisebeingfullyadvised,theCourtHEREBYGRANTS Plaintiffs'MotionforStay,
1DefendantCushman& WakefieldStakesnoposition''onPlaintiffs'MotiontoStay,
respondingtoitfonlytoaddresscertainoftheoutrageousstatementscontained''therein.See
C
&W Resp.toMot.toStay,p.1(DocketNo.371).DefendantCreditSui
ssefilesnoresponseto
Plaintiffs'MotiontoStay.
ORDER-1
pendingresolutionofPlaintiffs'April12,2013SsoppositiontoSanctionsOrderECF352''
(DocketNo.367).Therefore,theCoul
'
tstaysthosedeadli
nesrel
atingto(1)Defendants'
recoveryofcostsandfeesasreferencedi
nParagraph6(C)oftheCourt'sMarch29,2013
MemorandumDecisionandOrderatpages24-25(DocketNo.352)(amendedatDocketNos.
381and382),and(2)thedeadlineforsanctionspaymentsasreferencedinParagraphs6(D)(1l0)oftheCourt'sMarch29,2013MemorandumDecisionandOrderatpages25-27(Docket
No.352)(amendedatDocketNo.360).
ITISSOORDERED.
k'
r1%scwG
9i;xz
&
k
'
Np t4.e'.'.'-.'.'.. L.
+J%
<w'
>
't
'?
C.'
ehdk
qz w'
!
>
6
.v
',
.
.
'rhs
w
t
J.
x.
p.
ee.C'
k
#
x
o
..
z. oj
.
ORDER-2
DATED:April22,2013
i
HonorableRonaldE.Bush
U.S.MagistrateJudge
E xh ib it
l
ndQm
act
sorCorrpani
es
k.Fl
.t
MvancedSearch
Youhavesavedthi
ssearchas''ki
rscher',Youcanaccessthissavedsearchanyti
mebyusi
ngthesavedsearchesmenuont
hispageorbygoi
ngtoMySaved
SearchesunderMyecounti
nthenavigati
onbar.
SavedSearches IHelp
ContactResults CompanyResul
ts
SearchOpti
ons
17contactsfoundfor''Worden,Thane&Haines,...''Reusesearchh
)
't
' -- --.-.
Q Hi
deMyOwnedContacts '
avethisSearch
Show:50N'1-17of17 Page1 of1
. ., S
FR ShowOnlyDirectDi
als S1
Name
Company
City
State Country Updated
Z ShowInacti
veContacts r()
Bender.Ronal
dW
o.
rden.Thane&hbines. Atorney
Mssoul
a
Unit
edStates05/07713
Showonlycontactsupdated: (
P.C
Angi
me
v E3
W
or
den,Thane&Hai
nes, Att
orney
Mssoul
a
Uni
tedStates05/07/13
P.
C
.
j
rj
Cuffe,ot
tl
new P
W.C
o.
rden.Thane&Haines. Atorney
Mssoul
a
Uni
t
edStates 10/01/08
RetineYourResults
Industry
Dayt
on,OterSWor
den,Rane4
%Haines. Atorney
P.
C.
(((j
Dool
weedn
all
,
C
Frank.Patri
ck
G
H
ne
rg.
La
ac
i
nn
db
au
Department
Level
Title
(7J
E71
(rI
CompanyName
Employees
Revenue
FortuneI
kank
Ownership
;
.L t(
Mssoul
a
Unit
edStates 05/06/13
W.Co,
rden,Thane&I
-l
ai
nes.
Mssoul
a
P
Worden.Thane&idai
nes,
Mssoul
a
P.
CL
W.CoLrden.Thane&I
-l
ai
nes, Paral
egal
/l
-egalAssist
ant Mssoul
a
P
Uni
tedStates 05/09/13
w.C
o.
rden,Tl
hane&Hai
nes.
P
Ki
rscl
7er.Dl
phP
W.C
o.
rden,Thane&i
-l
aines,
vkicartjs, wor
der).Thane&Haines.
Wi
li
am
P.
C.
Gn
denhal.b
N.Worden.Thane&Elaines.
Caj
.!
p(;.
N*rri
s.Sean Worden,Thane&Hailes
&jchael P.C.
Srith,Arny Wofden.Thanc&Hai
nes,
P.
C.
Srith,Al
w Worden.Thane&Hai
nes.
P.
C.
T
ar
zt
as, Wo
rden,Thane&Gi
nes.
Re
or
br
e
P.C.
V
aa
nn
ne
aA
tal P
Wo
rdenlTlafle&hl
ai
nes,
Sb
.
C.
Wi
li
al
m' Worden.Thane&Gi
nes,
Benjarrin P.C.
ethisSearch
. Sav
Vi
ceResi
dent
Uni
tedStat
es 12/14/09
Uni
tedStates 03/08/11
Mssoul
a
Uni
tedStat
es12/17/09
Mssoul
a Mr Uni
t
edSt
ates 09/19/12
Mssoul
a
Uni
t
edStates 02/
24/07
Hssoula
Mssoul
a
Uni
tedStates 05/
0T/13
Uni
t
edSt
ates 11/28/
05
SecondYearAssoci
at
e Mssoul
a
Uni
tedStates 06/13/12
Associ
at
e
Atorney
Mssoul
a Mf Uni
tedStates 10/19/12
Vi
ceResi
dent
Mssoul
a Mf Uni
tedStates 08/30/12
Attorney
Fi
rstyearAssoci
ate
Mssoul
a Mr Uni
tedSt
ates 05/
06/13
Mssoul
a
Uni
tedStates 08/10/12
Page4
Comnpunit
yp
k'
eYouinData.
com? Developers Enterpri
seSolutions
Emailorketing Privacy TermsofUse Si
teM'
ap Contact
Copyri
ght@2013data.com.AI!Ri
gltsReserved.Patent
sandi
ag.
Dat
a.comisasal
esforce.
con/'conpany.
h:ps:
//connKt.
eta.
coesorc* g
/o3Dsorchresulto/o3Bo/o3Bto/o3Dcontactso
/o3Bo
/o3Bsso
/o3Dquerwearcho/o3Bg/oteq%3D9
/o7B0
/oMIters9
/o%0/o3A0/o7B0
/nDcoo... 1/2
E xh ib it
11IM ERITASJ
406/721-3400Local
800/337-35677-t)ll-Free
406/721-6985Fax
* Home
* PracticeAreas
o AccessDisputes& Faasements
Admintstativetaaw
Arbbation
o Banking
Bankruptcy& CreditorRights
Btksiness&TransactiomlLaw
Collectiorls
CommerclLaw
o Collsuz'
nerProtection
o ContractLaw
o CopyrightLaw
o ElderLaw
o ElxploylantLaw
o Environmenul&NattlralResources
o EstatePlannm
'g.Probate& Tnzsts
o Foreclosures
o Hospital& Healthcarelxaw
o IrsuranceDeferseIwaw
o LaborLaw
o Medltion
o Medical& ProfessionalMalpractice
o PersonalInjury
o ProductsLiability
o RealEstateLaw
o SchoolLaw
-.
vrdenthane.cH pxes/si
trap.
php
111N.Higgi
as,Suite600
'
!
'
POBox4747
h4souh,A4ontna59806
t
'
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 92 of 186
o Taxation
TradermrkLaw
WaterLaw
o Workers'Compensation
* Attorneys
o Rona-l
-dA-B
-e
nde
-r
o PatrickGFrank
o MartinSKZg
o PatrickDougherty
o W CarlMendenhall
o GailM Haviland
o ShaneA Vannatta
o PeterSDayton
o SeanM Monis
o ReidJPerkins
WilliamEMccarthy
MatthewJCtee
JaneECowley
CozeenM Dowdall
AmyM ScottSmith
JeremyGThane.Retked
JoriL.Qllm
'1
nn
* WhyChooseUs
* ContactUs
@ Home
@ Practi
ceAreas
o AccessDisputes& Easements
o AdministrativeLaw
o Arbitration
o Banking
o Bnnkruptcy& CreditorRights
o Business& TransactionalLaw
o Collections
o CommercialLaw
o ConsumerProtection
o ContractLaw
o CopyrightLaw
o ElderLaw
o EmploymentLaw
o Environoental& NaturalResources
o EstatePlalming.Probate& Trusts
o Forecloslzres
o Hospital& HealthcareLaw
InsuranceDefenseLaw
LaborLaw
-.
ordenthane.coApages/site>p.php
o Mediation
Medical& ProfessionalMalpractice
oPersonalInjury
o Pro-d
sLiability
-uct
o RealEstateLaw
o SchoolLaw
o Tuation
o TrademarkLaw
o WaterLaw
o Workers'Compensation
* Attorneys
o RonaldABender
o PatrickG Frank
o MartinSKing
o PatrickDougherty
o W CarlMendellhall
GailM Haviland
ShaneA Varmatta
o PeterSDayton
SeanM Morris
ReidJPerkins
William EMccarthy
Matthew JCuffe
JaneECowley
ColleenM Dowdall
AmyM ScottSmith
o JeremyG Thane.Retired
oJoriL.Quinlan
* WhyChooseUs
* ContactUs
* Copyright& Disclaimer
* Sitemap
r
YE
l
H
-.. ARC
... .....
...
* Copvight& Dtschiner
. skenxtp
Qcopylight2011-2013,WordenThaneP.C.,AIIRightsReserved
WBICREWN
-.
erdenthane.
coepages/sitemap.php
.
:
E xh ib it
P
406-541-2550
TerrazasLaw Ox ce
-/y'
http://- .tenazaslaw.coeAboutUs.aspx
TerrazasLaw Officesemploysafulls
Iegalinterns,andthreeattorneys.W
Iegalassistantsandinternspursuehi
interestsinordertobetterserveour
alsoremaincurrentwithcontinuing1,
investinourcommunitythroughoffit
includingDestinationMissoula,Leadi
LeadershipHighSchool,andnumero
andserviceactivities.
8/15/2013
AW OX
RobertTerrnzas,(P.C.)
i
f:
i r..i;t,qf
.
l
-.f
c:, ,
.i
..t
.,..
vk.i;,
,
)
j1
9)
:.y
'
5
$
;k
-
'
i
:
.
'
.?t.:)
'
!
.<''..'.
>
-7 '
'
(s!
JJ
,
.
;
'
.. k
.
'
)
i)
'
.
'
,
E
'
i.
..
:
.
*
Practice Areas)
CiviITriaIs;Insurance;PersonaIInjury;Employment;R(
Property;DomesticRelationsandFamilyLaw;Wills;Prc
Formatiorls?*
3tioRs
.Adol
E-mail:rterrazas@terrazaslaw.com
Admitted:
1980,MontanaandU.S.DistrictCourt
College:
SantaClaraUnlversity,B,A.,1973.
Law School:
SantaClaraUniversity,J.D.,1978.
Member:
WesternMontanaandAmericanBarAssociations(Sectionson:Tol
4andIn6
Li
tigation,RealProperty,Probate,Trusts);StateBarofMontana;Montana
Association;TheAmericanAssociationforJustice
Biography:
Deputy MissoulaCountyAttorney,1980-1986.
Born:
ElPaso,Texas
M dre Gurr
JulieD.Gooakind
Practice Areas:
Practice Areas:
Personallnjury;Empl
oymentLaw;Landlord- PersonalInjury,InsuranceL
Tenant;RealEstate;WaterLaw;Adoptions; Employment,FamilyLaw,Rt
Wills;FamilyLaw
hup://- .teaazaslaw.oom/AboutUs.aspx
8/15/2013
:
.:
q
;
:
!
;,
;
'?
i 'q
9.
.
j
yb(
i
.
.
',v4J
/l'
t.
Admitted:
2004;Montanaand U.S.
DistrictCourt,Di
strictOf
Montana
Law School:
UniversityofMontana
SchoolofLaw,J.D.,with
honors,May2004.
College:
UniversityofNevadaatReno,B.A.,with
honors,1998,
Member:
StateBarofMontana
Born:
Kirkland,Washington
E-mail:agurr@terrazastaw-com
Admitt:
.,*
'.k,:.2008i!Mc
'
.
Districtc
+
..
.:
.
r
4
.
.
'
.
,
t-.,. y
Montana
)..
o
Law Scl
Universit
School,J
College
UniversityofVermont,May
Mem ber:
MontanaState Bar,America
Justice,MontanaTrialLawyt
Born:
Birmingham,Alabama
E-mail:jgoodkind@terrazi
EliznhethA.Clark
'
.
y.
.
)
t
.'
:
.
f'
))
j,:
/;
a
'
.
'
- r
;
,.,
Montana
'
;
.2
PracticeAreas:
PersonalInjury,
Employment,Real
Estate,Famjjyuaw,
Probate,Collections
Adm itted:
2012,MontanaandU.S.
DistrictCourt,Districtof
Law School:
UniversityofMontanaSchoolofLaw,J.D,
withHonors,May2012
httpr//- .teaazaslaw.coeAboutUs.aspx
8/15/2013
College:
WilmingtonUniversity,B.S.,MagnaCum
Laude,January2007
Member:
StateBarofMontana,WesternMontanaBar
Association,MontanaTrialLawyers
Association
Born:
Quarryville,Pennsyl
vania
Em aiI:
bclark@terrazaslaw.com
PO
GM
JenniferAllen-Parnlegnl
'
;
.
. t.7
;
g.
'
,.
,,..
:
.
.k
#;:
<.
f
.
,
.
:
.
,.:' l
.
:
.
,
hi
.
y
:
y
t
j
tk
;
.
,
;
)
. .
Lt(
'
'
.
'.'
'
;
!y
'
'
;
?
f4.,
'
'
f
'.''
,,
f;
Education:
WesternMontanaCollege- B.S.,ElementaryEducation,
UniversityofGreatFalls- B.S.,ParalegalStudies,gradb
certified2002
EmployedwithTerrazasLaw Officessince2010
Born:
Forsyth,Montana
E-mail:jallen@terrazaslaw-com
hup://- .teaazaslaw.com/AboutUs.aspx
8/15/2013
SUPPORT STU
, ''
.
%'
.'.
.,
,
.
f/
k
r
,,
;
.
'
i
p
.
q
g
:
('
M Cole-Om ce
M nnager
Jennih
,
t
W ade
:)
e '
r(
cojjeg
coIIege:
):
'i11
r),
rc.
UnjversityOfMOntana,
.
Universi'
.
x r
.,
y
-,;
,
'
,
.
)(
l
.
:
;
k
:
j
:
C
o
j
l
e
g
e
O
f
T
e
c
h
n
O
l
O
g
y
.
.
');)
InPsych
..t
i
k
t
y
r
'
)
.' ,
;
0
LegalSecretaryProgram,
rj,
jjuman(
graduated 1998
oevelop
..
1999.
EmployedwithTerrazas
Law Officessince 1999 EmployedwithTerrazasLa1
UniversityofMontana,CollegeofTechnology Born:
-L
egalAssistantProgram,graduated 2003 Killeen,Texas
j,. .
Born:
Missoula,Montana
E-mail:jene@terrazasl:
E-mail:mcole@terrazaslawxcom
1923SouthHigginsAve. Mi
ssousaMontana59801 406.541.
255 ContactUs
hup://- .tenazaslaw.coeAboutUs.aspx
8/15/2013
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 100 of 186
http://- .teaazaslaw.coeAboutUs.aspx
8/15/2013
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 101 of 186
E xh ib it
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 102 of 186
> '
)IIIMERI
TAS'
.
.
406/721-3400Local
800/337-3567Toll-l7ree
406/721-6985Fax
111N.Higgins,Suite600
POBox4747
Missoula,Montana59806
*Home
@PracticeAreas
oAccessDisputes& Easements
oAdministrativeLaw
oArbitration
oBankin:
oBnnkruptcy& CreditorRichts
oBusiness& TransactionalLaw
oCollections
oCommercialLaw
oConsumerProtection
oContractLaw
oCopyrightLaw
oElderLaw
oEmploymentLaw
oEnvironmental& NaturalResources
EstatePlanning.Probate& Tnlsts
Foreclosures
oHospital& HealthcareLaw
oInsuranceDefenseLaw
LaborLaw
oMediation
oMedical& ProfessionalMalpractice
PersonalInitlry
ProductsLiability
oRealEstateLaw
oSchoolLaw
oTaxation
oTrademarkLaw
oWaterLaw
oWorkers'Compensation
http://- .wordenthane.com/pages/alorneys/amy-m-scol-smith.php
8/15/2013
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 103 of 186
.Attorneys
o Ronal
dA Bender
o Pat
rickG Frank
oMartinSKinc
oPatrickDougherty
W CarlMendenhall
GailM Haviland
o ShaneA Vannat
ta
PeterSDayton
SeanM Morris
o Rei
dJPerkins
William EMccarthy
Matthew JCuffe
oJaneECowlev
oColleenM Dowdall
oAmyM ScottSmith
o JeremyG Thane.Ret
ired
oJoriL.Ouinlan
. WhvChoos
eUs
*ContactUs
A m y M .ScottSm ith
Associate
Contact
LegalAffiliations:
StateBarofMontana
WesternMontanaBarAssociation
MontanaDefenseTrialLawyers
CivicActivities:
UnitedWayofMissoulaCounty
ChildCareResources
PracticeAreas:
EstatePlanning
http://- .wordenthane.coHpages/attorneys/amy-m-scol-smith.php
8/15/2013
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 104 of 186
Probate
CommercialTransactions
BusinessLaw
ContractLaw
RealEstateTransactions
FamilyLaw
GeneralandCivilLitigation
BarAdmissions:
StateofMontana(2008)
U.
S.DistrictCourt,DistrictofMontana(2008)
AmyScottSmithjoinedWordenThaneP.
C.in2008afterinterningwiththefinnthrough1awschool.
AmyearnedherJ.D.from theUniversityofMontanain2008.Whilein1aw schoolsheservedas
EditorinChiefofthePublicLandandResourcesLaw Review andpresidentoftheMontanaPublic
lnterestLawCoalition.Priorto1awschool,AmyreceivedaMastersinPublicAdministration(2005)
andaB.A.inAntitropology(2003),bothfromtheUniversityofMontana.
Amyhasadiversepracticewithaprimaryfocusonestateplarming,probate,businessplnnning,
formation,operationanddissolution,commercialtransactionsandrealestatematters.Shealsohas
experiencewithcollectionsandfamily1aw matters.
Whennotworking,Amyenjoysplayinghockeyandsoftball,andcampingwithherfamily.Amy,her
husband,Mattanddaughter,Morganareavidsportsfans,andareoftenfoundwatchingGrizzly
football,LadyGrizbasketballandMissoulaOspreybaseball.
SEARCH
1Submi
tQuery
@ Copyri
ght& Disclaimer
8/15/2013
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 105 of 186
@Sitemap
Qcopyright2011-2013,WordenThaneP.C.,Al1RightsReserved
WBICREVIN
http://- .wordenthane.com/pages/attorneys/amy-m-scott-smith.php
8/15/2013
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 106 of 186
E xh ib it
R
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 107 of 186
Case:12-35986 08/12/2013
InstantEmailLookupReportforRalphKirscher
Hereistheordernumberassociatedwithyourpurcbase-Yourcredit/debitcardstatement
willreflectthechargeshown,
lnst
antEmai
lLookupOr
der472507046INO*tNWLI
US.COWRT
Quesli
onsa&wll
hesecharges?Callb'
sal(888)+5*
1727.
-- !
'
.-..'
.
>
.
'
.
'
j
*
<
.
F
U
.
.
,
:
e
:
.
r
k
t
(
7
.
'
.
,
.
:
.
.
.
.
'
**
q
..Q
.C'
.
x
':'
1
'
1
7
:
2
.
7
:
1i
'
---
-Y
.
''
''k'.1
!
k
.
v
1
:
!6
'
i
A
!
t
'
(
6
9
.
:
'
i
'
t
i
?
t.
:#'#-'
'
!
i
'--.- .'.'--'
-''.
17
,.
'
1
-.
u
'
N
7
(xt.xt
6
,
t
'
.
j.>:
?
-.,.GJ
'
'
:
:
1
i
!
;
1K
.
.
!
'
d
r
5
r
;
d
#
'
.
-'
';
'
k
'*
'
$
J
t
'
-..-T
.$
.
.
.
'
-.
.
.
r
.
.
.
.
,
.
.
.
.
.
.
.
.k2
:
*
e
.
h
*
.
'
.
!
l
L
'
G
?
R
*
*
*
@.4
*
4
*%
.
4
'
2
=
1
WhalisanEmailLookup?
Thi
ssect
i
onI
islscafrentandhi
st
ori
calrecordsthatsharethesameemai
laddress.neEmailAddressReportcanbe
h
e
l
p
l
u
l
i
n
p
r
o
v
i
d
i
n
g
a
c
o
n
s
o
l
i
d
a
e
d
v
i
e
w
o
f
m
a
t
c
h
i
n
g
r
e
c
o
r
d
s
f
o
r
y
o
u
r
s
u
b
j
cy
t
'
s
a
la
e
cr
mn
ul
t
ph
l
e
p
bo
li
cI
a
publi
clyavai
l
abl
esources.TNename,addressandphonenumberdat
amea
pe
r
om
vi
di
e
ud
sd
ef
f
us
ls
ina
f
o
ro
ms
ast
i
o
t
oi
el
puy
u
on
cd
ale
anindi
vi
dual
.
Whati
sacurrentphoneandaddresscheck?
Wre
eo
cn
he
k
e
db
th
e
ns
t
l
m
br
e
sc
au
nfd
ed
ss
net
hi
s
e
rlwi
lbut
il
i
tycompanies.Addressesandphonenumberslhat
ia
tc
lt
il
i
ly
i
l
sp
ah
ro
en
ceon
i
de
er
d
fea
nd
td
ar
n
mes
ari
k
d
i
nr
r
ep
do
.NO
t
a
l
I
p
h
o
nenumbersandaddressescanbecheckedbutthey
maystilbecarrent.
Record1of1
RALPHKI
RSCHER
'-M
At
t
ofneysAt.
Law
i
ssoul
a,M159806
PropertyReport
rki
rscher@ehl
aw.
net
.
J
7
.
C.
.
j
..
t
:(q
.(.
:
.
.
.
.
t
..
.
j
7
7
:..
.
.
l
,
&
.
;o
i'L
j
)
j
d
j
q
..n
.7
1.
7
r.
1,
,
.
rj
j
y
.
j
;
2
j
j
.
'
,
k
2
.
(q
,
.
;
:
;
'
(
g
y
t
,
r
T
t
k
t
y
t
.
4
J
)
y
.
q
t
.
(
j
y
j
r
l
q
:
r
lr.
t
r
:
;
i
!
(
.
.
>'
%
wq.
,
S
k
:
!J
-.
=!
v
1;
)1
r
t
d
r?.
.
'
;
!
:;
.
X'
:.
1
t
.
(
.
tJ
,.:..-...
z
..,
.
.
.
.
;
..:
..,
.
uL
:
.
L
'
...
;
L
!
.
zg
.
y
.
:
...
z
x
.
.
.
.
j
.
,
n
.
,
.j
.
j
.
6
v
.
L
:
.
*j
..
.
..
.
..
,
.
.
!:
.'
s
,.
L
.y
,
:
:.
.
>
b.;
,.
j
,
r
,
.r
:
.
%
.
q
.:
...
...,?
.,
.
.
...
.
-.
.
.
.
.
2
.
p
t
.
.
.
.
3
t
,
:
t
.
k
#
.
.
3
.
w
.
.a
,
.
.
.
z
.
:
.
'
(
WhatisaBusinessProfileSummary?
nissecionl
i
slscurrentandhist
ori
Galbus
nesspeopl
eprofi
l
efecof
dslhalshar
e1hesamenameandst
atemsyoursearch
subi
ect
.TheBusi
nessProf
il
eSummarycanbehelpfulinpr
ovi
dingaconsoli
datedviewofmalchi
ngcurr
entandhistofical
r
oc
rd
s
of
sm
ub
ec
mmeaay
cr
m
i
pe
l
e
l
i
c
d
pa
ub
i
c
av
l
e
or
d
oi
u
s.Theti
tl
eempl
oymenthisl
ory.
ee
dcu
at
i
of
n
ay
no
dur
co
pj
a
nr
ys
dn
aa
ta
pors
os
vi
deul
ut
s
fup
lu
pb
ro
f
ea
sn
si
on
lil
n
fl
oy
r
m
aa
t
il
oa
nbf
orre
tbc
e
i
nds
i
v
dr
uc
ael
.
Whatisacurrentphoneandaddresscheck?
E
W
e
c
h
e
c
k
e
d
l
h
e
p
h
o
n
e
n
u
m
b
e
r
s
a
n
d
a
d
d
r
e
s
s
e
s
i
n
l
h
i
s
r
e
p
o
r
t
w
i
h
u
t
i
l
k
y
c
o
m
p
a
n
i
e
s
.
A
d
d
r
e
s
s
e
s
a
n
d
p
h
o
n
e
n
u
m
b
e
r
s
l
h
a
l
'
areoni
u
lb
i
l
i
t
ycb
i
l
s
a
r
econsi
deredcurrenlandmafkedinfed.NolaIphonenumbefsandaddfessescaa@
1
>
e
c
h
e
c
k
e
d
b
u
!
t
h
e
y
$
!
I
1
a
u
r
r
e
n
t
;maySt
.
;
.
-k
*'-.*>.-e..C
l
h
?
d
'
r
7
:
k
j
t
d
l
t.e*
r,o
l
.
3i
:',rz...-tl
'
'
l
N$.
z
.
T
T.
.7
'
1
,
K
,
:
S
1
t
S
;
,
:
f
t.
x'
..:;A
:
z
i
b
'
'
w
.
V
.
.
T
f
y.j
D
.
k
w
h#
s
'
?
Ft.
,..*
'
i
'
7
.
7
f
Q
J
;
$
:
%
:
Q
l.51-1tr
.-=
*r
v2t.'
*-.s.'
r
l
.
1
t
;
(
1
?
;
!.
'
4
;
.
!
.
;
'
e
'
j
t
i
'..'
.
4
.
.
.
z
.
q
;
j
.;
..
6.
1
..
:
.g
4
.
:
.
k
,t
;
,
;
$
.
;
a
w
wf
k
i
,
r
4*
.
x
.,
z
'.
,
c..
.
:
q
r
k
j
.
;
k
!
.
j
'
r
2
,
f
,
'
:
t
.
6
.
.
:
J
.
j
,
,
s
a
,
u
.
..
Profilelnfo
J
Gc
Ea
Bt
A
LP
EIJ
dDu
io
nHBKIRSJHER
.Unl
versl
tyofMontanaSchoolOfLaw
LawDegree
wUnlversityOfMontanamMlssout
a
UndergradualeDegr
ee
Ex.2
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 108 of 186
E xh ib it
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 109 of 186
RobertBell
From: RonaldA.Bender(rbender@wordenthane.com)
Sent: Thursday,August15,201312:06PM
To: RobertBell
Subject:testingtesting
RonaldA.Bender
V ?k g-.
g
y
..!r.ly. T
'
hNEl.'oC..
y
''
.H
',
,/
jz
j.j
(
j
,
' .s
jj
tyy,(j.
j.
jy(.a
jjj
y
Phone:(406)721-3400
rbender@wordenthane.com
8/15/2013
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 110 of 186
E xh ib it
T
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 111 of 186
Case:12-35986 08/12/2013
NotesontheMSA,includingamendmentsandtheminisettlements
ldra'scommentsinGreen)
FullMSA-Paaes1-42-CaseNo.R1171M791152intheRiversideCountv.CA
* 1ofPage1says,'ThisStipulationisenteredintofortheptlrposeof
compromisingandseulingcontestedisstlesbetweentheparties.lfforanyreason
thewaiversandreleasesinthisStipulationarenotacceptedbytheCom-tandthis
Stiptllationbecomesnullandvoid,orthisStiptllationfailsforanyotherreason
whatsoever,nothingcontainedhereinshallbeanadmissionoffactorastatement
againstinterest.Eachpal-tyhasrefrainedfrommakingcontentiousstatements,or
assel-tingpositions,whichmightcausetheothertobeupset,sothatcompromise
andsettlementcouldbepromotedandachieved.''
Doesn'tthisri
'chtherecivektsthe--out--togoafterany'thing'
s&.
-eAvantandtohavethe
entire'
t
N/lS.
A
'11ullandvoid<?
Jtlso,renRelnbertllatIvvascolnpletelyfrozenouto1'
-a1lthecolnpaniesanclany
infornnationfron,shol
-tlyaftcr.
111Ied'
fordivorce(Dec06)'
tlntil'
Justatbeforetlneclosing
ot-thel5nalN'
lsz4..
K 4ofPage2-ReadallofitandA-C
Theycouldusethisasanargulnel!tthatv'
eagreednottogobaclttothevaluesofthe
assetsNveagreedtotake.lvvillgointothecliffcrentassetsasNvegothrotlghthisabtltone
thingtllatshoulclbepointedoutbere.isTinn'svervoumtestinnonyinthefannilycourt.
l4ennadeIuanyfalsestatenlents.hvhenIur
ouldpointtllatouttotheJudgevaters,ller
response'
wasalNvaysthatTinnpbeinggiventheCaptionoftheShiptitle1.
01-ourassetsby
her,hadafidttciat
-yresponsibilitytol'
ne,ifitvvasfoundthatheNvasnottellingthetruth.
'
kfew'exannplesofthisvvoulclbeTinAstatingthattheirNvasnoconlnnunitycashf
'
low'
,
z
uzhenheNvastakingfundsfronlBigSpringsReality(notpayingconnlnissionstothesales
people),SunriseRidge(notpayingthepartnerstheirsharenrllelzhctookfundslaselling
con-lnntlnityassetsandusingthefblndsNvithoutadivisiongiventome,andtherearelnore
exalnples.
Tim alsoliedinallearingwhenIwastryingtostopCHffom bklyingthegolfcotlrselots.
First,hehadasalesperson,EricLadd,nottheS1?ofSalesawhichw'
oulclbemore
standardssubnnitanaffidavitsuppol-tingTim'sclaim ofthcvalueoftheLots.Tim stt
lted
thatnoconlmissionswerebeingpaidforthesaleoftheseLotstoCl4.Yet,laterwe'
find
outthatnoneotherthenEricLaddwaspromised500k,ofwhich250:waspaidtohim.
Ericlaterfileda,suitandgotajuclgmentagainstmeforgreatert
henthisamount.
* 8ofPage4allofpage5-Canyoureadandtellmeifyouthil'
lkthisisbindingor
itgoestothefraudthatwetalkedabotlt?
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 112 of 186
C0
a9s-e
:0
12
0c
8#
/1
13Fi
89
7/
3
k:
tE
226:
a2
ge:
Of
00
1k3-5R9B8K6 Do
:2
7/
1240-3
l
ed:I
1D:
2/1
19286E7nterD
ed
1n
2t
/r
1y9:/5
12
1
32P:
4
P3a6ge
21o3f/6
7 4of364)
* 16ofPage6andal1referencestoBGlstockbelow
Thisisnrllerethingscotlldgetalittlcgleytow.
llatisNvritten,w-hat'
kvassaidand'
what'
was
intendecl.5,
letakingtheBGIstockAva
.stllesvaytoflnallygetPCandCasaCaptivainto
nyIegalovvnershipaterbeingaqvardeditinthesecondnniniseltlelnent. lfyouu'illgo
backaldreadthose,youNvi11flndthatTirnanclhisaccountants'
werctof'
indavvaytoget
bothofthescassetsintonl)/nanlevvithotttcreatingtaxissues. Takit
lgthcBGlstock'ntavinthe15na1i
h.z
lsA
.a1svasttlldNvouldl-i
asolvcthis. >&ls().since1svasalsotakingthe'
YC
cntities,itscelnedlikeanaturaltosinaplytakcl'-ilu'sosvnershipofthestock.
t'Rel'
l'
l.
en'
1ber,ifthoughalIofthestocku'asinTil'
n-snanle,ituassti11aconlnltlnity
propertyttsset-)
Jvventintothisagreelnentsti11vviththeunderstalldinglllatbotl'
lTin'
1andGeorgeNlack
hadtoldn'
),
etltattheBGlnotestoYDIasu.
,
ellastheTinlBlixsethnotestoBGItlvhiclll
endedupNvithas'
well.)urouldhaveauayofvkr
orkingthenaoutasyearsvventalongas
cfolgiven''AvhenNveneededtl'
letax'
kvriteoffs.Tilnhadalv/ayssaidthat. lsvillgoillto
thisinnlorecletailu4len1talkabotlttheX'
alnerendotransfer,butTiiualsosaidthatabout
tl).
e4onllo,fol-that.
Ii'
-theaboveNvouldhavebeenasitvvastoldtol'
ne,thentheYCDsvvouldI
navepaidthcCS
loanoffuiththeproccedsti-olnl-otsales.
UpontltelosingoftheSIS'.
/&.tl
lebankaccountshaclbeendrainedankl/orv/ere
overdravvn.Patcangointonnoredetailsoftilctasv.'
eI1.1.ofcourse,v/asnotcotlntingon
tllis.BothAlnericanBanltandPalnlDesertaecountsvvereliketllis.
Inaddition,thebooksandrecordsthat'
wereturnetlovercannotbereconciled.Thetrail
balancesdonot.iave.Again,Patcangoi
ntolnoredetailonthis.
Therew'erecontractsanclpayablesthatTimenteredintoatterknowingm'zvveregoingto
beclosingthe1$4SA.BobSunnpterenpploylnentcontractforone.
* (a)ofPage7
CBSumisePal-tners,LLCistheonethat(
Moses(
Moore(YC'scontroller)toldmethat
Tim hadtakenthefundswhenthingssoldandhadnotpaidthepartnersinthis.
Til'
nhadalsosignedagrcenlentsfrosomenlanagementforSt.Anclrewsafteroursigning
ofknouingIwasgettingthis.HedidthisbothinYD1andinYCW.
* (c)ofPage7-Thisdidnothappenandwehadissuestryingtomakeithappen.
K(
e)ofPage7-'
l'
alktoAndyPattenaboutthis.ItwasbroughtupintheUCCvs.
CSandTimBlixsethwithhow TimboughtandsoldthistohimselfBythetimeI
gotit,hehadtakenthevalueoutofitcltu-il'
tgthetimelwasfrozenoutofthe
btlsinesses.YChadanexpel'ttestifywithhowthiswashandled.
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 113 of 186
C0a
eO:O1124-3RB
59K
86Do0c8
20313Filed:1I2
D/:
7132986
E2n/t
y/:15221
-2
:a3g7eO3f1
9s
-0
#/
:1721/4
18
9/
E7
ntereDdk
:t1
1r
9
6:32P
:4a
2geP
o3
f16
7 5Of364)
* B.ofPage9-YCV/vvasinsalventN.
vllep1.Ireceivcdit.ThexvaythisisNvrittel
-t.I
vvol
IIdhcveno'
wayofknolvingtllat,
* CofPage10and(1)-(3)
Again,AndyPattenw'illbehelpftllhere. Til
'
nclidnotdisclou
seistshia
tl'
lehadtakeni'
nillions
outofBigSpringsRealitybeforetl'
lisandhadnotpaidcolnL
ons. l'llel'
ehasbeen
solnethillgf-iledagainsthilnonthis, Andyhvillhavcthedctails. Tllisisalsovvherelle
statesthatEl-icLaddvvaspitidacor
lnissionfbr1heGolfCourseLotsaletoCH. In
-p
fannilycourthetestitsedtlnattllerevvasnoconnlnissionstobepaid-btlti
readyhadthe
deal'
withEric,NvhichIbelieveishouzhegotEl-ictogivethestatenlent4
oefa
vla
lue.TlleVP
ofSalesshouldhavedonethat,ifitw'
eretobedone,btlthecouldnotbetkbought''. A-ND
500ltNvasnotnearlyvvhatvvasovvcdtothesalespeople. lknovvtllatCharliewotlldbe
happytotalk'
writhyouabouttheexactaluotlnts,butthisshouldalsobeinvvlpatw-asfsled.
tk
.tthetinl.
eTin4didnotpaythenn,wrhichxvasl'
nuchlongerthen**30-69ctaysinanears''
hetoldthenlthattheInoneyvvasneededtoh''
?operations. Theylaterfbundoutthatthe
fundsqrereusedforboatslipsanclothcrthingsforTilu.Thisu'asalsodtlringthe-zfrozen
out''partfornne,butBigSpringsuzasinTil-n'snanaeandthereforeaconllnkmityproperty
asset.Atthetilnehenr
astakingfundsoutofBigSpringsforhistlse,hevvasalsostating
l1tfanlilycourtthattherenzasnocol
nn)unitycashtlosv.
* D ofPage10lalreadt,acldressedlligSk).
,Ridge,above.PleasenotethatBigSky
RidgevvaspartoftheYCChapterIl.
M EofPage11/tgaintl
.
'
lisNvasalreadyaddresseclregardingStlnriseRidgeand
lloseskloorestatingthatTinntoldtheftmdsaszlhison'
npersonalpiggybank-andditlnotpaytllepartners.Tinndictnot(
:
liselosethis- Thisnrasalsocolmnnunhy
cash1l
,0n.
* G'ofPage11ThisisagoodonefortheM/esternclaims.
* H ofPage11ThisdidnothappenandencledtlpbeingpartoftheYCBK.
> M1oftheassetslistedthatTH gotmstartiagon1.ofpage12,hadGevalue
thatwasperceivH andnonnforeseenliab111
*1.
* 17.ofPage14
Atthetimeofsigningthis,Tim toldmethattheLeMondgroupwoulddothis,just
toberidofhim,bygetting1.0to2.0mm onclosiug.1endeduphavingtopaythem
1tookoverthatpromissorynotewhen1gottheFamil
yCompoundback.)
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 114 of 186
case:12-35986 08/12/2013
K (3)ofPage15inoluding(a)-(d)
Thisisu-here7-i1'
ntrans'
ferredTanlarillclotohiluself,beforethes
inaldivol-cedeci-ee.He
statedtonlethatGeorgecOtlltlhelpn'
ledothesan4eonthispl
-onlissorynotetoYDIas
theyhadintendedtodou.iththeothernotes1
:
01-tllenaoleytlla
.t'
vvastakenfronltheCS
10:'11..Hevventotltofhis.
wa),
'tonyal
kethisclear,as1nealsosta:edthathedidnot'
vvantto
ha
.veanytaxisstlesfrol'
ngettingTanlarindoinhisnaneu'llentllefundsthatpurchasedit
NverefrolutheCSloan.OfcotlrscnotaxesB.rercpaidonal
1l'ofthatl'
noney,208n)1u.asit
Nvasbookcdasaloanandnotftdi'
'idej).-l'
ltis1
-sthepointoftlcIJCClilingagainstTi1:)..
ThatsuitcontinuesinFeb20l0.zll,
slyP.attenandTroyGreenlseldcanbchelpftllhere.
K CofPage16
TurksandCaiscospropel-tyvasalsoptlrcl)asedu'ithCSloanfunds.yetTilu'
wras
avvardedthisNr
vitllouthavingtopay.bacli
:thefunclsforthepttrchaseprice.lthinktlliss
Tanaerndoandtheotherthingsgotosht
'
)u.
'that-havillg1netakeonthcentirepronnissory
notes1-01
-a1!thefundstakenotltbyBG!andtlaenTinl-Nvouldnotbeafairdivisionoj'
propcrty.linfact.IhadtopaybackthoscnotesalldTilugotalloI
-thoseproperties.ln
otherhvordssjustTtlrksnndTanlerelldoaloneaccount
-ol-ovel
'70n)n)oftlc2081111
11
takenout.plustleothcrthingstllatl1egotinthctinalDISQ:
4ndthctyvoluil'
lisettlelnents.
Ifl1ehadnottoldniethattllosenotescoulclbexvorkedoutanotherFa'ayandthey'
Arere
neverintendedtobepaidbackr'
bvoulcl1llavethoughttakingthaton.
ANDgivinghint
theseassetsfreeanclclear'
wasafilirclivision?NO.
* 0.ofPage18
1laterfoundouttllatn.
-120thatwastranslbrredtou.
asJiI'
nDolan.l'
lnereal'
eseveralthings
thalNveretransferredtohin-icltllillgthetinleof1-n3,zf'
fiozenotlt-'.JilnDolanisalsoathird
partnerofTinn'sinNvestel-nPacifscTinaberCol
upany.I-leisalsowhoTin)sold.vvell
undervalued,ourpersonalinterestintheFBOinBozennan.JilnDolanisalsotheone
thatp'
roluisedtobepayingtheBFInoteontinle,yetadlnittedtolneandothersthathe
uzastalkingnzithTilnatthesal
netil
neaboutthepaynaent.Tin'
lNvastellingothersthat
Jim wasnotgoingtoben'
lakingthepaynxenttokeeplueoutofnRoney.
1clon'tknowwherethisfstsin,btltthereisnotanypal'
tofmyassetsthat1wasawarcled
thatTim didnotcallpeopleandinterferewitl)mebeingabletodothingsforthegood
andbenefitofn'
lyself.HecontactedAlanRyeaboutmyloans-whichptltAlaninfearof
hiscollateralinmyshareofBF1.TimhadnocurrentbusinesswithAlanandhisbank.
HecontactedMran'
enTreppregardingBlxwareandcausedai1kindsofisstletherewhere
m'zcouldnotmovefomvard.HehiredMikeFlynn,whowasDelmis54law-yerand
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 115 of 186
C
ase:12-35986 08/12/2013 ID:8739867 DktEntry:52-2 Page:39Of13167of364)
09-O0014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page5of7
l'
talldledthingsJ'
br13Ixvzare.LleandklikeFlynnstartedaprcsscalnpaignagainstnle.
Jklanyreportersha'
v'ccolltil'
nledtllat'
rinnorI7lynnlvotlldcalIthelnandtellthen'
lvvhereto
goandl00k'
thingsupthatNvereGledintheRenocourts.TheseAverefiledbyFlynn.
NlanytilnesJudgeCooku-ouldilotlettllelnstand-butthedanlagevvasdoneasthe
reportinghadalreadyhappelet
'
l.blel'
nustknocklh.
'
likeFl).J'
lno1
-:
ftheN4St
Xl
natter.%.
i%'
t
needtodoAvhatcverittakes-norluattel-n'ha
.tAvehavetof'
ile.
I-ledoesstillhavebtlsincssvvithPalluDescrtNationalBank-butcoltillkledtogih.
'etheln
luisinfotmlationabout117),businessesandnte.
z
tts),()tlgul'sAvellknou'Illadtoborrosvllloilel'fi'
olulu).friendslilkeBttrtStlgannanand
othel-stostayalivedtlrillgthistinne.
K 25.ofPage20
'
Thisisanol'herareathat/sndyPatteneanhelp).
,
ouunclerstand.Therehasbeen
son-tething'
liledagainst'Filninregardtotllehandlingol
'tlzisLot-I-lehad4tlstbel
-orele
tsolclittohilnselfxvithnoca.shdovvnalndaprolnissorynoteof21
11111-7hadplacedavalue
of3.4l'
n1uonit.'
YChas'
Illedthisagainstllinl.PaulN/looreI'
nightalsohaveadditional
inforl
-nation.
Aftcrtheclosing0f'theh/Iszt,Ifoundouttha
.tTinnclltlddtlpsolnt
ahosvg.ettingthisLotto
lhen-tanthathepurchased'
Taluerndottol'
n.3believetllat-l
''
ii'
nlles.
'el-intelldedtopaytlzis
zn'
llntoYC,.itlstlikca11thcotherprol
'
nissorynotehehadsignedNvithA
IC.
l'
YbI.
* C.ofPage22Reada.ndtellluchvhatl'outllinkoflhisone.
* E./F.G.ofPages22/23
RVencverreceivedpropcrbooksandrecorcls,luillutesandotherthings.17atcangointo
thisyuore-'
W''
estill,ayearla.tcr,have3'
lotbeenablctoGgurenltlchofthisoutwithhosv
tlleyturnedNvhattheydidover.
* J.ofPage23
ItstatesherethatasofJunelr2008l'
wastorcceivca1lcashetc............-again,Patcan
tellyouhov'thingsw-ereturnedovertous.Timalsoenteredintoseveralcontractsthatxl
tw.tlof'
whichlhavelnentiolledalready.'
l-imalsotoldmethathehadpaida11ofYC
payablescurrentAvithadealhedid'
withMz
YaynePril'n(theotherthirdownerofSFPTI
Thisturnedoutnottobetrue.Italkedto%vayneaboutthis.JnJudgeTuckers
courtrooln,BobSumpter.onTinn'sbehalfvil'
lAprilorh4ayof2008-statedasmuchas
'
well.
* Pages24/25/26/27inreferencetotaxesIwanttotalkaboutinourmeethg,as
itistoohardtoputinallinthisoverview.
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 116 of 186
COa
se:12-35986 08/12/2013 lD:8739867 DktEntry:52-2 Page:40Of13168of364)
9-00014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page6of7
* (a)ofPage27
IlterestingtllattheyadnlitheretllatthereNvasconll'
ntlllitycashl'
losvfronlBigSprings.
BigSkyRidgeLLCal)
.
dSullriseRidgeI-LCandthatTinltookallofth:ttlnoney. This
vvasduringthctilucthttthcsvasstatingtl
3atherksvvasnocolpllntlnit)'casl:tloq'
.I
hadto
borrt'
J
Nvl
noneytojtsttivcduringtl
qistil
ue,asIdidnotget8
4penny0ftni
pol
afyspotl
sal
support110,-longtenna.fter.ldidllotcatchthisbetbre,
* 33.ofPage29
1-11isisvvllereTroyGreenf'ieldhada-ifieldndayduringtheUCCvsC'
.Sa
nclTilnBlixseth.
1-ilnstatedontllestandtllatthe--cornerstoneoftheS/ISA17
01-1Rilu--uasnletakingo'
ver
hislsduciary,responsibilityforanyandal1ofhisactionsinthebusinessthathehadrun
andIgot.It'
wrouldbe'
kvorthapllonecalIlohinlonthisone. xkndyPatten'
w-asthercas
'
well-TroytoldnnethathedidnotthinkthattllisareaoftheNISZQLvouldstandtlpasl
cotlldnothold'l-ij'
nhannlessnortakeonllisactionsif'therevel-efratldandothcrthings
involved.1,ofcourse,untiJ-l-ilnstatedthatincourt,didnotthinkinanysvaythattbe
ttcornerstone''oftheMSA,butlvvasstll'
elyavvarethatitvvasilnportantt('
)hinl.I-loucan
Igetaroundthisissue??
K 35.ofPage30
i.
iereisNvhere1think'
bs'ehnveal.
jl.JGEupsideit-yotlcanl
'
indinthe1av.
,
.svherethis
Nvaivercanl'
lotstand.AsIt01:1yotl.vN'llcllJatlkpu'
:togctherthefiling.f'
brspousalstlpportitpencilecloutatover2.0lnnAperinonth-butll'
teNrel-expectedtogetthat.
Ti1lrepeatedlysaidatsol'
nepointthattheresvasnonloreconanlklnitycashflow'.sk,
1e
havesincefoundoutthatthiswrasnottrue.I-lej1.
1stkeptal1theluoneyforhiluself.
Becatlsel1e'
w-assayingthereA
evasnocashflosv.Ihadtoborron,lnoneyto1iveonrM/ljen
thcre-orasinfact'
lknclsfortheconnnnunity.
IftheassetsNvouldhavebeenNvhat1'
n-asleadtobelievetheyw-ere,'
&N
'DifTil'
nhadnot
stal-tedhiscannpaigntocrushanddestroyher''........(itthenturnedintoLkeepa'
fterher
untilsheiscrushedordead'')........1'
wouldnothaveneededthespousalsupport.
Butthefactsarenowclearthatthere'
wascash.
110wthatIshouldhavereceivedatthe
timeIvvasfrozenout.Theassetsalldmoreovertheliabilitiesthat1Nvaslnisleadabout,
vveresuch(0rnotsuchasfarasassetsgo)tolnaintainlnjzlitkstyleewhichisthelettcrof
thefanlilylaAv,letalone,anylifestyle.1amsittinghereinaChapter7.
Lastyearataboutthistime,justbeforesignilgtheMSA,1hadmanageableIi
abilities,no
moneyborrowedagainstPorcupineCreeknorCasaCaptiva. ThefactisthatTimknew
exactlywhathewasdoingandwhatIwasgettingmyselfinto.whichiswhythe
cornerstoneofthe(
MSAtohim,waswhatitwas.
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 117 of 186
Case:12-35986 08/12/2013
I
t
hki
lkthishelpstlstojustify'
wr
hyvr
eare'
l
ilingourl
'
notionsonthe51SAil
'
ltheBKcourts
ini
lontana,donetyou?Relmelnber'
wehaveaddedhelptherefronxtheBKJudgevvho
lovestls,andhateslilnal'
ldh/
likeFlynn.Atthispointtheycouldnotgetadecentruling
i11tlleirfavorfronnthatJllclgciftheytried.f--ither'
way,SBandBShavethingsinplacein
thatetltlrtroon'
ltohelpus.%%'zneedtomakesurethevalidityofthe54SAneverendsup
beingdecidedb),
'.1udge'
$.
'Faters.'
Tllatsvouldbeanightlnareforal1of.us.
Obviouslyfha-venotnaentionedthecollapseoftheUSeconoquyinthisdocunqent,and
don'tvvanttogodon-nthatroad.Don'tletthatbeconneanissueintheNISAnlatter.
Okay.1l'
nostlikelygaveyotlmorethenyotlwanteclandit'snotingreatorder.Sorry.
Letl-neknovvifsolnethingdoesnotmakesense.ItllinkJoeEmightbeof-somehelphere
too.
YouguysshouldalsoreadtheAssignnlent()f'CompanylntcrestsAgreementandthe
AssumptionAgreenlent.Therearesevel'
althingsintheminisettlements,likeTimwasto
keeppayingtheoverheadfbrPC&butthatendedashesaidtherewasnocolnmunitycash
flow.Veno'
wknowtherewas,soIanlnotsurewhere%%'
ecanl'itthatin.
Hopethishelps.Edra
DM -Exhibit11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 118 of 186
E xh ib it
U
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 119 of 186
UNITED STATESBANKRUPTCYCOURT
FORTHEDISTRICTOFMONTANA
lnre
YELLOWSTONEMOUNTAINCLUB,
LLC,
CaseNo.08-61570-11
Debtor.
But
'
teonTi
mothyL.Blixseth's(
&Mr.Bli
xseth''
)AmendedMotiontoDisqualifyBankruptcy
JudgeKirscher(WithExhibits)filedNovember30,2010,atdocketentryno.2042.Mr.
Blixseth'sMotionisaccompaniedbyanAmendedAffidavitofTimothyL.BlixsethinSupport
ofMotiontoDisqualify.Seedocketentryno.2043.Mr.BlixsethfiledaSupplementalAffidavit
onJanuary17,20l1,atdocketentryno.21l7.Mr.BlixsethalsofiledhisAmendedMotionand
AmendedaffidavitonDecember14,2010,inAdversaryProceedingNos.09-00014,09-00018,
09-00064.10-00015,and10-00088.Mr.BlixsethwasrepresentedattheJanuary18,2011,
heari
ngbyMichaelJ.Flynn(
Mr.Flylm'
')ofBoston,Massachuset
ls,ChristopherJ.Conantof
Denver,ColoradoandPatrickT.FoxofHelena,Montana.Mr.Blixseth'sothercounselof
recordintheseproceedingsincl
udeBenjaminA.Schwartzman,BrentBastian,WadeL.
l
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 120 of 186
ofBillings,Montana,PhilipH.StillmanofEncinitas,Califomia,andDanielD.Mansonand
GregoryC.BlackofButte,Montana.AttheconclusionofMr.Flyrm'soralargument,theCou!'
t
tookthematterunderadvisement.
BACKGROUND
Mr.Blixsethandhisformerspouse,EdraBlixseth(&
Ms.Blixseth'),werethefoundersof
YellowstoneMountainClub,LLC((
YMC')YellowstoneDevelopment,LLC(:;
YD''
)BigSky
Ridge,LLC,andYellowstoneClubConstructionCompany,LLC.Thefouraforementioned
limitedliabilitycompaniescomprisetheYellowstoneClubandwillbereferredtogenerallyas
theDebtorsortheYellowstoneClubentities.ThroughtheYellowstoneClubentities,Mr.
BlixsethandMs.Blixsethbegandevelopmentinthelate1990'softheYellowstoneClub;an
exclusiveandprivateskiandgolfcommunitylocatedinBigSky,Montana.
Mr.BlixsethwasthesolemanagingmemberofBigSkyRidge,LLCfrom itsinceptionto
Augustl2,2008.From theirinceptiontoAugust12,2008,YMCandYDwerecontrolledby
Mr.Blixseththroughhisholdingcompany,BlixsethGroup,lnc.('BG1').SinceAugustof2001,
BGIowned82.6532percentoftheClassA stockinYMCandYD,andBlixsethFamily
lnvestments,LLCowned5.1020percentofClassAstock.TheClassBMembers,orClassB
Shareholders--consistingoftwelveindividualsorentitiesunrelatedtoMr.BlixsethorMs.
Blixseth--collectivelyownedtheremaining12.25percentofYMCandYD.
BGI,anOregonsub-scorporation,wasownedsolelybyMr.BlixsethasPresidentand
CEOfrom 1999toAugust12,2008.Mr.BlixsethandMs.BlixsethseparatedinDecemberof
2006,andeffectiveAugust12,2008,Ms.BlixsethandMr.Blixsethagreed,pursuanttoaJune
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 121 of 186
26,2008,confidentialMaritalSettlementAgreement(<$
MSA''
),thatMs.Blixsethwouldreceive
BG1andtheYellowstoneClubentities.
TonalizetheMSA,Ms.BlixsethwasrequiredtomakeacashpaymenttoMr.Blixseth.
Ms.Blixsethoriginallysecuredacommitmentforftmdingbutthatcommitmentwouldnotallow
Ms.BlixsethtoconsummgtetheMSAinmid-Augustof2008.Ms.Blixseththusapproached
SamuelT.Byrne(<
By1
'
ne''
),thefounderandmanagingpartnerofCrossllarborCapitalPartners,
LLC(t
lcrossl
larbor')andC1PYellowstoneAcquisitionLLC(
C1P')7askingforals-dayloan
soshecouldfinaiizetheMSA.Ms.BlixsethandByrnereachedanagreementwherebyCP
wouldloanMs.Blixseth$35million(CCIPLoan').TheClPLoanwasi
ntendedtobea
short-termbridgeloanthatwouldprovideMs.Blixsethtimetosecurelonger-termfinancing.
Ms.Blixsethwasnotabletosecurelong-tennfinancinganddefaultedontheCIPLoan.
Subsequently,Ms.BlixsethcausedtheYellowstoneClubentitiestoseekprotectionunder
Chapter11oftheBanknlptcyCodeonNovember10,2008.Variouscreditorsfiledan
involuntaryChapter11banknzptcypetitiononbehalfofBLX onSeptember21,2009.See
BankruptcyCaseNo.09-61893.Ms.BlixsethfiledavoluntaryChapter11banknzptcypetition
onMarch26,2009.SeeBankruptcyCaseNo.09-60452.Ms.Blixseth'scasewasconvertedto
Chapter7oftheBanknzptcyCodeonMay29,2009.
Mr.BlixsethandMs.BlixsethwerealsothefotmdersofBigSpringsRealty,LLCand
YellowstoneClubWorld,LLC,bothofwhichwereawardedtoMs.BlixsethinAugustof2008
underthecouple'sJune26,2008,MSA.Ms.BlixsethcausedBigSpringsRealty,LLCtofilea
voluntaryChapter7bankruptcypetitiononJune5,2009.SeeBankruptcyCaseNo.09-61079.
AninvoluntaryChapter7bankruptcypetitionwasfiledagainstYellowstoneClubWorld,LLC
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 122 of 186
aforementionedbanknzptciesastheYellowstoneClubrelatedbankrtzptcies.
Mr.BlixsethmadehisfirstappearanceintheseproceedingsonNovember12or13,2010,
whenoneofMr.Blixseth'scounselofrecord,JoelE.GuthalsofBillings,Montana,appearedat
ahearingontheDebtors'requestforjointadministrationandontheDebtors'requestforan
interim orderapprovingdebtor-in-possessionfinancing.However,Mr.Blixsethdidnottakean
activeroleintheDebtors'banknzptciesuntilFebrt
zary2009whenhefiledanobjectiontothe
Debtors'proposedbiddingandsolicitationproceduresregardingthesaleof100% oftheequity
interestsintheDebtors.Subsequently,Mr.BlixsethsoughttointerveneinAdversaryProceeding
09-14inMarchof2009.
TheremainderofthefactsaresetforthfairlyextensivelyintheCourt'sMemorandum of
DecisiondatedAugust16,2010,foundatdocketentryno.575inAdversaryProceeding09-14.
Ratherthanrecitethefactsonceagain,theCourtinsteadincorporatesbyreferencethat
MemorandumofDecision.
MR.BLIXSETH'SCONTENTIONS
lntheAmendedMotionfiledNovember30,2010,andforthefollowingreasons,Mr.
Blixsethrequeststhat1disqualifymyselff'
rom allmattersinwhichMr.Blixsethisalitigant:
1.Withoutconsideringtheevidence,JudgeKirscherhaspre-judgedthat
good(sic,
'j
theYellowstoneClubbankruptcypetitionwasfiledandplanwasproposedin
2.JudgeKirscherhasinvitedandentertainedexparteadvocacyagainst
Mr.Blixseth'scounselandMr.Mr.Blixsethl,
'
)
3.JudgeKirscherhadexpartecommunicationsinahotelwithCross
Harbor(sicjCapitalPartnersLLCconcerningCrossHarbor'sagendaforthe
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 123 of 186
6.JudgeKirscherentereda$40millionjudgmentagainstMr.Blixseth
uponwhichthe$40millionjudgmentwasbased;
beforeMr.Blixsethhadanopporttmitytorespondtothemotiontoreconsider
7.JudgeKirscherhasmadeimpermissibleanddisparagingcomments
aboutMr.Blixsethandhisattorneys,includingonecommentthatessentially
comparedMr.Blixseth'smeritorioussummaryjudgmentstogarbageand
unworthyoftheJudge'stime.Suchstatementsdonotupholdtheintegrityofthe
judiciaryoravoidtheappearanceofimpart
iality;
8.AfterlearningthatMr.BlixsethwouldbemovingthisCourttoreassign
him,JudgeKirscherappearstohaveretaliatedagainstoneofMr.(sicjl,
')
9.JudgeKirscherissoinvestedinthesuccessoftheYellowstoneClub
bankruptcycasethatheisiboxedin''torulingagainstMr.Blixsethnomatterthe
meritsoftheclaimsagainsthim;
10.JudgeKirscherhasdemonstrablypre-judgedadversaryproceedings
againstMr.Blixsethl,
')
11.JudgeKirschersittingasatrieroffactcannotreasonablybeexpected
toprovideMr.Blixsethafairtrial;hehasconsistentlymalignedMr.Blixseth's
credibilityandfoundMr.BlixsethculpableforthedemiseoftheYellowstone
Club.
AmendedMotiontoDisqualify,docketentryno.2042,pp2-3. lnsupportoftheforegoing
allegations,Mr.BlixsethfiledanAmendedAffidavitofTimothyL.Blixseth. Onlythefollowing
paragraphsfrom Mr.Blixseth'sAmendedAffidavitarguablypertaintome,myconductormy
nzlings:
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 124 of 186
Thebanl
fnzptcyauctionfortheYellowstoneClubassetsoccurredaroundMayl3th
15thof2009. TheauctionforthesaleoftheClubassetsoccurredattheBillings
CrownePlazaHotel.ThebiddersattheauctionwereCreditSuisseand
CrossHarbortByrne'scompany).However,alsopresentandpart
ici
patinginthe
auctionweretheDebtor(i.e.,theYellowstoneClubwhichwaseffectively
controlledbyByrnel,andtheUnsecuredCreditorsCommittee.JudgeKirscher
rentedaroom atthehoteltofacilitateexpartecommunicationsbetweenthe
bidders.Theauctionitselfwasnotpublic.Insteaditwasconductedinclosed
doornegotiationsbetweenCrossHarborandCreditSuisse,withtheUnsecured
CreditorsCommitteebeingallowedtoparticipatetosomelimitedextent.
AlthoughmylocalcounselJoelGuthals,waspresentatthehotel,hewasnot
allowedtoparticipateintheauction,hadnoparticipationinthebidders'exparte
communicationswithJudgeKirscher,andwasotherwiselockedoutfromthe
negotiations.Eventhoughthenegotiationsweretcloseddoor''7JudgeKirscher
neverthelessmetwiththeCrossl-larborandCreditSuisseatthehotelduringtheir
negotiationstoresolvebiddingissuesastheyarose.lmmediatelyfollowingthese
closeddoornegotiationswithCrossHarborandCreditSuisse,JudgeKirscher
approvedthePlanofReorganizationfortheYellowstoneClubandsaleofthe
Club'sassetstoCrossHarboronMayl8,2009withnoformalnoticetome,or
otherinterestedparties.ThealteredPlansubstantiallyaffectedcreditors'rights.
l8. DuringtheinitialphaseofAP-14,1raisedtheobviousproblemthatStephenR.
Brown,Esq.ofthe1aw51-111Garlington,Lohn&RobinsoninMissoula,Montana
wasatthetimeofthefilingoftheYellowstoneClubbankrtzptcy,mycounselin
Montana.Yet,Mr.Brownwasalsoavotingmemberandchairmanofthe
YellowstoneClubUnsecuredCreditorsCommittee,whichwassuingmeinAP-14
fortherecoveryof$209million.Further,Mr.Browninhiscapacityasamember
oftheUCChadturnedovertotheUCCanditscounselover400email
communicationsbetweenhisfirm andmeormyotherattorneyswhichcould
potentiallycontainattomey-clientprivilegeddiscussions.WhenMr.Brown
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 125 of 186
20. Despitethenewlawsuitagainstmeseekinghundredsofmillionsindamagest'iled
ontheeveoftrialimplicatingnumerousnewdefensesandrequireddiscovery,the
bankruptcycourtmerelycontinuedthetrialforoneweekthensubsequentlyand
scurrilouslyaccusedmeofdelayingtacticsbyinsistingonmydueprocessrights,
andmostsignificantlyrefusedtoacceptmypre-trialorderwiththenew defenses
totheoneweeko1d1awsuit.
23. ...Thecoul'thadpreviouslydeprivedusofcriticaldefensesbyexcludingthe
gMaritalSettlementAgreementjMSAandReleasesfrommyproposedPre-Trial
Order.Theotherside'slawyersarguedthatthereleaseswerenotintheirPreTrialOrderandJudgeIoirschercommentedthathespecificallyrecallednot
includingtheReleasesinthePTO.MyattorneydirectedJudgeKirschertowhere
theReleaseswereinadvertentlyleftintheUCC'SPre-TrialOrderasatrial
exhibit.JudgeKirscherpausedtothumbthroughhiscopyofthePTOandupon
discoveringthattheReleaseswereincluded,heleanedbackinhischair,gavea
glaringstareattheDebtor'sattorney,AndyPatten,andthenthrew thePTOacross
hisdeskwithgreatforcesayingtlYes,it'sstillin''asifhehadrelieduponthe
manipulationoftheUCCandtheDebtorkeepingmycriticalaffinnativedefenses
outofthePTO.ThemannerinwhichJudgeKirschershoweddisgustwithhaving
theReleasesincludedinthePTO inadvertently,gavetheappearancethathis
intentandtheintentoftheDebtor'sandtheUCCwastodeprivemeacritical
affinnativedefenseinalawsuitinwhich1wassuedliterallyonlyfewdaysbefore
trialcommenced.
Mr.Blixseth'sSupplementAffidavitliketheAmendedAffidavit,allegesthatthisCourt
deniedMr.BlixsethdueprocessandthattheCourtfailudtoaddresswhethertheYellowstone
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 126 of 186
Ms.Blixseth'sbankruptcyestateof$l00millionandthattheCourtusedastatessecretsprivilege
andaNevadaprotectiveordertoconcealMs.Blixseth'son-goingfraud.
APPLICABLELAW
TwoprovisionsoftheU.S.Codeaddressrecusal,28U.
S.C.j144and28U.S.
C.j455.
In1974,j455wasamendedtoreadinpertinentpart:
(a)Any...judge...shalldisqualify
himselfinanyproceedinginwhichhisimpartialitymightreasonabl
ybequestioned.(b)Heshall
alsodisqualifyhimselfinthefollowingcircumstances:(1)Wherehehasapersonalbiasor
prejudiceconcerningapart
y,orpersonalknowledgeordisputedevidentiaryfactsconcemingthe
proceedi
ng....
''Theotherprovisionsofj455,(b)(2)through(b)(5),objectivelyand
specificallysetforththeinterest''andt<relationship''groundsofrecusalcoveredbyj455prior
tothe1974amendment.Subsection(b)(1)duplicatedthegroundsoft
biasorprejudice'for
recusalcontainedinj144,withouttheproceduralrequirements.Subsection(a)isals
catchall'
provisioncovering
<
interestandrelationshi
p'andC
t
biasandprejudice'requiringanobjective
evaluation.Seegenerallyfafek.,vv.U.S.,510U.S.540,l14S.Ct.l147,1153-54,127L.Ed.2d
474(1994).Thetestfordisqualificationundereitherjj455(a)or455(b)(1)iswhethera
reasonablepersonwithknowl
edgeofal1thefactswouldconcludethat(hisjimpartialitymight
reasonablybequestioned.'lnreFocusMedia,Inc.,378F.
3d916,929(9t
hCir.2004),quoting
UnitedStatesv.Wilkerson,208F.3d794,797(9t
hCir.2000)4andfnreGoodwin,194B.
R.214,
222(9t
bCir.BAP1996).Giventhel974amendment,courtshaveconcl
udedthatj144only
appliestodistrictcourtjudges.Goodwin,l94B.
R.at221.SeealsoFED.R.BANKR.P.5004(a)
((
Abankruptcyjudgeshallbegovernedby28U.
S.
C.j455,...
''
).Theconsequenceofj144
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 127 of 186
notapplyingisthatts
thejudgeisnotrequiredtotal
tethefactualallegationsastrue.
''Goodwin,
194B.
R.at222.Theobligationtorecuse,ifwarranted,isjuxtaposedwiththecorrespondi
ng
obligationtonotrecuseandtoserveonassignedcaseswhennoreasontorecuseexists.Hinman
v.Rogers,831F.
2d937,339-40(10thCir.1987).Gi
ventheforegoing,lwillconsiderthecases
presentedbyMr.Blixsethanddiscusswhethertheyapplytothependingmotion.
Mr.Blixseth,inhisamendedmotion,seeksmydisqualitkationunder28U.
S.C.j455(a),
whichreads:dt
Anyjustice,judge,ormagistratejudgeoftheUnitedStatesshalldisqualifyhimself
inanyproceedinginwhichhisimpartialitymightreasonablybequestioned.''RelyingonUnited
Statesv.Furst,886F.2d558,582(3r
dCir.19894;UnitedSt
atesv.Bali
strieri,779F.
2d1191,
1199(7t
hCir.1985),ccrf.deniedsubnom.Disal
vov.UnitedStates,475U.S.1095,106S.
Ct.
1490,89L.
Ed.
2d892(1986);UnitedStatesv.Ritter,540F.
2d459,462(10t
hCir.l976),cert.
denied,429U.
S.951,97S.
Ct.370,50L.
Ed.2d319(1976);UnitedStatesv.Do#ge,538F.
2d
770(8thCir.1976),ccr/.denied,429U.S.l099,97S.Ct.11l9,51L.
Ed.2d547(1977),
.Parri
sh
v.Boardofcomm'
rs.ofAlabamaStat
eBar,524F.2d98(5t
hCir.1975),cerf.denied,425U.
S.
944,96S.
Ct.1685,48L.
Ed.
2d188(1976);andPeoplev.Julien,47P.3dl194,ll99(Colo.
2002),Mr.BlixsetharguesinhisAmendedMotionthatK
thefactt
zalallegationsmadeinsupport
ofthemotionaretnze(sicjareassumedastl
ue.
''AmendedMotion,p.7.Whiletheabove-cited
casesareinstructive,theyaredistingtzishable.
InFurst,thedefendantsoughtrecusalofthepresidingjudgeunderj455becauseofex
partecommunicationswithdefensecounsel.Thepresidingjudgedeniedthedefendant'srequest
forrecusal.Onappealandafternotingthatj455doesnotestablishanyformofprocedurefor
considerationofrecusalmotions,theThirdCircuitlookedfirsttotheproceduresestablished
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 128 of 186
under28U.
S.
C.j144:
28U.S.C.j1441setsfort
haprocedurebywhichapartymayseeka
judge'
srecusal.Thus,wewilllooktosection144andourcase1awunderthat
recusalprovisionforguidanceastoprocedure.Cf Johnsonv.Trueblood,629
F.2d287,290(3dCi
r.1980)($:
b0thstatt
ztesrequirethesametypeofbiasfor
recusal''
),cer/.denied,450U.S.999,l01S.
Ct.1704,68L.Ed.
2d200(1981),
*id.
(&
fj455(a)wasintendedonlytochangethestandardthedistrictjudgeistoapply
tohisorherconducf'l.
zThisseemspart
icularlyappropriateasFurst'
sattorney'
s
affidavitfiledwiththemotionfordisqualificationcompliedwiththeprocedureset
forthinsection144,andso,hadthemotionmerelyincludedareferencetosection
144,wewouldhaveanalyzedthemotiondirectlyunderthatsection.
Furst,886F.
2dat582.However,thepresidingjudgeinFurstacknowledgedhisexparte
communicationswithdefendant'scounselandthus,theThirdCircuitconcluded:
Asaresultoftheextenttowhichthedistrictcourtconfirmedthe
underlyingfactsuponwhichtherecusalmotionrelied,weneednotresolvethe
issueofwhetherajudgeneedacceptastnzetheallegationspresentedinamotion
fordisqualificationundersection455whichassertsabasisastowhichsection
144isapplicableandwhichincludesanaffidavitsufficientundersection144.Itis
1Sectionl44states:
Wheneverapartytoanyproceedinginadistrictcourtmakesandfilesa
timelyandsufficientaffidavitthatthejudgebeforewhomthematterispending
hasapersonalbiasorprejudiceei
theragainsthimori
nfavorofanadversepart
y,
suchjudgeshallproceednofurthertherein,butanotherjudgeshallbeassignedto
hearsuchproceeding.
Theaffidavitshallstatethefactsandthereasonsforthebeliefthatbiasor
prejudiceexists,andshallbefilednotlessthantendaysbeforethebeginni
ngof
thetermatwhichtheproceedingistobeheard,orgoodcauseshallbeshownfor
failuretofileitwithinsuchtime.A partymayfileonlyonesuchaffidavitinany
case.Itshallbeaccompaniedbyacelificateofcounselofrecordstatingthatitis
madeingoodfaith.
2Themajorbenefitthatapartyreceivesbyfilingamotionfordisqualificationunder
section455insteadofsection144isthatsection4554a)obviatestheneedtoassertactualbias-if
i
tisshownthatthejudge'
simpart
ialitymightreasonablybequestionedrecusalisrequired.To
theextentthatFurst'smotionassertedonlyactualbiasundersection455*)hewouldhave
receivednodiscernablebenefitfrom filingunderthissection.
l0
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 129 of 186
whethertheFurstCourtwouldapplythej144take-as-tnzerequi
rementtoMr.Bl
ixseth'sj
4554a)motion.
Thediscussionofjl44andj455bythecoulinBali
strieriismorerelevant.ln
addressingj144,thecourtinBal
istrierifirstnotedthatajudgeisallowedtopassonlyonthe
timelinessandsufficiencyofapart
y'saffidavit.Isgljnpassingonthelegalsufficiencyofthe
aft
idavit,thejudgemustassumethatthefactt
zalavermentsitcontainsaretrue,evenifheknows
them tobefalsea''779F.2datll99.However,thefactualaverments,tobeacceptedastnze,
mustbemorethan
mereconclusions,opinions,orrumors.UnitedStatesv.Haldeman,559F.
2d31,
134(D.
C.Cir.1976),ccrf.denied,431U.
S.933,97S.
Ct.2641,53L.Ed.
2d250
(1977).Theymustbestatedwithpart
icularity,i
d.at131,andmustbedefiniteas
totimes,places,persons,andcircumstances.1d.at134.Thefactualaverments
mustshowthatthebiasispersonalratherthanjudicial,UnitedStatesv.Patrick,
542F.
2d381,390(7thCir.1976),ccr/.JcnfcJ,430U.S.931,97S.Ct.1551,51
L.d.
2d775(1977),andthatitstemsfromanextrajudicialsource-somesource
otherthanwhatthejudgehasleamedthroughparticipationinthecase.United
Statesv.GrinnellCorp.,384U.S.563,583,86S.Ct.1698,1710,16L.Ed.2d778
(1966).
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 130 of 186
Id.TheBali
strieriCourtwentontoconcl
udethatthejudicialinterpretationsoftl
personalbiasor
prejudice''underj144wereequallyapplicabletoj455(b)(1),eventhoughj455(b)(1)isnota
reenactmentof#144.ThecourtinBali
strierispecit
kallyfoundthatajudgewasnotrequiredto
takeal1factualavermentsinanaffdavitastrueunderj455(b)(l),butrather,t
thejudgeisfreeto
makecredibilitydetenninations,assigntotheevidencewhathebelievestobeitsproperweight,
andtocontradicttheevidencewithfactsdrawnfrom hisownpersonalknowledge.''1d.atl202.
TheCourtinBalistrieriprovidedlittleguidancewithrespecttoj4554a)othert
hanits
holdingthatanapplicationforawritofmandamuswasaparty'ssoleavenueofrecoursewhena
judgedeniedamotionunderj455(a).779F.
2dat1205.Thecourtreasonedthatj455(a)was
<noti
ntendedtoprotectlitigantsfromacmalbiasintheirjudgebutrathertopromotepublic
confidencei
ntheimpartialityofthejudicialprocess.''1d.at1204.Thecoul'
ttherefore
concl
udedthatdenialofamotionunderj455(a)wasnotreviewableonappealbecausej4554a)
didnotaffectasubstantialrightoftheappellant.Id. Rather,<
tifajudgeproceedsinacasewhen
thereis(only)anappearanceofimproprietyinhisdoingso,theinjuryistothejudicialsystemas
awholeandnottothesubstantialrightsoftheparties.Thepartiesinfactreceiveafairtrial,even
thoughareasonablememberofthepublicmightbeindoubtaboutitsfaimess,becauseof
misleadingappearances.''1d.at1204-05.
lnRitter,thegovernmentappropriatelyfiledamandamuspetitionunderjj144and
455(a).540F.
2d459.ThecourtinRitterfi
rstnotedthatj144Et
allowsapart
ytorequest
disqualit
kationofadistri
ctjudgewhenhehasapersonalbiasorprejudiceei
theragainsthimor
infavorofanyadverseparty.ltalsoprescribesprocedure. Thefilingoftheaffidavitdoesnot
bringaboutthedisqualifkation.Thetrialcourtdeterminesitssufficiency.Thereviewis,
12
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 131 of 186
mustbefacts,however,toestablishpersonalbias.Section455(a)isbroader.Itapplielsqtoany
judgeandincludesthathetshalldisqualifyhimselfi
nanyproceedinginwhichhisimpartiali
ty
mightbereasonablyquestioned.'''Ritter,540F.2dat461-62.Thecoul'tcontinued:
UnderthebroaderstandardofrevisedSection455(a),disqualifkationis
appropriatenotonlywherethereisactualorapparentbiasorprejudice,butalso
whentheci
rcumstancesaresuchthatthejudge'
simpartialitymightbereasonably
questioned.''See13Wright,Miller&Cooper,FederalPracticeandProcedure:
Jurisdiction,Section3549.Thus,thegroundsfordisqualificationsetoutin
Section144KK
personalbiasorprejudiceeitheragainst(apart
y)orinfavorofany
adverseparty''areincludedinSection455.Moreover,thelanguageofSection
4554a)allowsagreatertlexibilityindeterminingwhetherdisqualificationis
warrantedinparticularsituations.l3Wright,Miller& Cooper,Section3542.
f#.at462.AlthoughtheTenthCircuitfoundthatthegovernmenthadfailedtoshowactualbias,
theTenthCircuitdidfindthatgi
venthebroadlanguageof#455(a),disqual
ificationofthe
presidingjudgewasappropriatebecausebaseduponallthefacts,itwasnotreasonablylikel
ythat
themattercouldbetriedwiththeimpartialitythatlitigantshavearighttoexpect.
U.S.v.Dodgedealti
npartwithatrialjudge'sdenialofarequesttorecusehimself.538
F.
2d770.ThecourtinDodgeconsideredtheappealunderbothjl44andj455.Without
providinganymeaningfuldiscussion,butinsteadcitingonlytotheapplicablelanguageofjjl44
and455,thecourtinDodgeacceptedthetrtzthofthefactsrecitedintheaffidavitsandconcluded
thatallegationsthatthetrialjudgehadrecusedhimselfi
nthetrialsoftwootherdefendants
arisingfromthesameincident,thatthejudgehadmadederogatorycommentsaboutcertain
Indianspectatorsatanearlierciviltrial,thatthejudgehadmadederogatorycommentsabout
certai
nmembersofagrouptowhichtheparticulardefendantbelonged,thatthejudgehadmade
allegedlyimpropernzlingsinotherprosecutionsarisingoutofthesameincident,andthatthe
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 132 of 186
judgehadfailedtogranttemporaryinjunctivereliefsoughtbyanIndianorganizationduringthe
timeoftheincident,didnotindicatethatthejudgepossessedapersonalbiasorprejudiceagainst
themovingdefendantsuffi
cienttorequirethejudgetorecusehimself.
ThefirsttopicofdiscussioninParri
shwasj144.Si
milartoeverycasethisCourthas
readon9144,thecourtinParrishrecognizedthat,
(tlhethresholdrequirementunderthejl44disqualificationprocedureisthata
part
yfileanaffidavitdemonstratingpersonalbiasorprejudiceonthepartofthe
districtjudgeagainstt
hatpart
yorinfavorofanadverseparty.Oncetheaffidavit
isfiled,f
'
urt
heractivityofthejudgeagainstwhomitisfiledisci
rcumscribed
exceptasallowedbythestatute.Intermsofthestatute,therearethreeissuestobe
determined:(1)wastheaffidavittimel
yfiled;(2)wasitaccompaniedbythe
necessarycertificateofcounselofrecord;and(3)istheafdavitsufficientin
statutoryterms?Seegenerallyl3Wright,Miller& Cooper,FederalPracticeand
Proceduress3541-53(1975).
Weareconcernedonlywiththethirdissue.AswesaidinDavisv.Board
ofschoolCommissionersofMobileCount
y,5Cir.
,l975,517F.2d1044:
G
foncethemotionisfiledunderj144,thejudgemustpassonthelegal
sufficiencyoftheaffidavit,butmaynotpassonthetruthofthematters
alleged.SeeBergerv.UnitedStates,1921,255U.S.22,41S.Ct.230,65
L.Ed.481,
'UnitedStatesv.Roca-Alvarez,5Cir.,1971,451F.2d843,
847-48,
.UnitedStatesv.Townsend,3Cir.,1973,478F.2d1072.''
517F.2dat1051.
Parrish,524F.2dat100.
Afterconcludingthatthefacttzalbasesallegedforrecusalwerelegallyinsufficientunder
j144,thecourtinParri
shproceededtoexaminej455.lndiscussingj455(a),thecourtwrote:
Therearenowseveralstandardsinj455.Somegotospecificconduct,
butone,setoutinj455(a),isgeneralanddoesnotrestonthepersonalbiasand
prejudicestrictt
zreofjjl44and455(b)(l).AswenotedinDavis,supra,517
F.
2dat1052,thelanguageofj4554a)wasintendedtodisplacethesubjectivei
n
theopinionofthejudge'testforrecusalundertheoldstat
me,andtheso-called
t
dutytositdecisions3'.Wealsonotedthatj455(a)wasintendedtosubstitutea
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 133 of 186
S
treasonablefactualbasisreasonablemantest'indetermi
ningwhetherthejudge
shoulddisqualifyhimself.See13Wright,Miller& Cooper,FederalPracticeand
Procedures3542(1975).Seeal
so,Frarlk,CommentaryonDisqualificationof
Judges-canon3c,1972,UtahL.ReV.377,379.Note,DisqualificationofJudges
andJusticesintheFederalCourts,86Harv.
L.
Rev.736,745-50(1973).
Parrish,524F.2dat103.Applyingthereasonablemantest,theParrishCourtconcludedthatta
reasonablemanwouldnotinferthat(
thepresidingjudgel'
slimpartialitymightreasonablybe
questioned'.''Id.
Finally,Mr.BlixsethreliesonPeoplev,Julientosupporthiscontentionthatthefactual
allegationsmadeinsupportofhismotionmustbeassumedastrue.TheissueinJulienwastwo-
fold.First,'
l
whetherthetrialjudge'
spreviousempl
oymentwiththedistrictattomey'
soffice
constitutedanappearanceofimproprietymandati
ngreversalofthedefendant'
sjudgmentof
convictionwherethejudgehadnoinvol
vementinthedefendant'
scasewhileemployedwiththe
districtatt
omey''andsecond,<d
kwqhether,assumingtherewasanappearanceofimpropriety,the
trialjudge'
sfailurebeforetrialtodisclosetothedefendanthispreviousemploymentwiththe
districtattorney'sofficeandtorecusehimselfwhenamotiontorecusewasfiledbefore
sentencingconstittztedharmlesserror.''ulien,47P.3dat1195.Resolutionoftheissue
involvingpriorgovernmentalassociationttzrnedinpartonthelanguageofCanon3ofColorado's
CodeofJudicialConduct,whichlanguagewasidenticaltotheAmericanBar'sAssociation's
ModelCodeofProfessionalResponsibilityandCodeofJudicialConduct.Inconstming
Colorado'sCodeofJudicialConduct,thecourtinJulienlookedtocasesinterpreti
ngj455(a)
and(b)(3).
Thesecondissuei
nJuliendealingwithdisqualit
kationwasgovernedbyC.
R.
S.
A.j166-201,whichread:
15
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 134 of 186
Amotionforchangeofjudgeonanygroundmustbeverifiedandsupportedby
theaffidavitsofatleasttwocrediblepersonsnotrelatedtothedefendant,stating
factsshowingtheexistenceofgroundsfordisqualification.lftheverifiedmotion
andsupportingaffidavitsstatefactsshowinggroundsfordisqualiscation,the
judgemustenteranorderdisqualifyinghimself.Afterdisqualifyinghimself,the
judgemayrequireafulhearingupontheissuesraisedbytheaffidavitsandshall
requestthatanotherjudgeconductthehearing.Theotherjudgeshallmake
findingsoffactwithregardthereto,andsuchfindingsshallbeincludedasapal4
ofthetrialcourtrecord.
Julien,47P.3dat1199.ThecourtinJuliennotedthat:lnrulingonthedisqualificationmotion,
ajudgemustacceptastrt
zethefactualstatementscontainedinthemotionandaffidavits.People
v.Botham,629P.
2d589,595(Co1o.198l).Thejudgemustdetermineasamatteroflawwhether
theyallegelegallysuft
kientfactsfordisqualification.S.
S.v.Wakeheld,764P.
2d70,73
(Co1o.1988).
''1d.AlthoughthepresidingjudgeinJulienhadbeenemployedbythedistrict
attorney'sofficefiveweeksbeforehisassignmenttothemovingparty'scase,thecourtinJulien
foundthattherecorddidnotsupportdisqualificationofthepresidingjudgewherethemoving
partydidnotcontendthatthepresidingjudgehadanyactt
zalbiasorprejudiceagainsthim orany
disqualifyinginterestinthecase.1d.at1200.C.R.S.A.j16-6-201requiresthatamotionfor
disqualificationbeverifiedandsupportedbytheaffidavitsofatleasttwocrediblepersonsnot
relatedtothedefendant.Section455,unl
ikeC.
R.S.
A.j16-6-201,doesnotrequirethatMr.
Blixsetht5leanyaffidavits,particularlyaffdavitsofumelatedpersons.lfanything,C.R.S.
A.j
16-6-201ismoresimilartoj144,whichrequiresthatamotionfordisqualificationbe
accompaniedbyacertificateofcounselstatingthatthemotionismadeingoodfaith.ThisCourt
failstoseeJulien'
srelevancetothiscase.
lnstead,thisCourtagreeswiththecourt'sobservationinUnitedStatesv.Eisenberg,734
F.supp.l137,1160(D.N.J.l990),thattheproceduralrequirementsofj144andj455differ.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 135 of 186
Thisissobecausej455doesnotcontainthesameproceduralsafeguardsasj144.Stateof
Idahov.Freeman,5Q7F.
supp.706,715(D.lda.1981)(1ndiscussi
ngj21oftheJudicialCode
of1911,whichwasthepredecessortoj144,thecourtnotedthatitappearedithatCongress
intendedtheperjurystat
meavailableagainstafalseaffidavi
tanddisci
plinaryproceedingsagainst
theat
lorneytobesufficienttodetertrivialandspeculativeallegations.
''
).Astheforegoing
discussionillustrates,thisCourtisnotrequiredtoacceptal1factsinMr.Blixseth'sAmendedand
SupplementalAftidavi
tsastme.fnreAmericanReadyMi
x,Inc.,14F.
3d1497(lot
bci
r.1994),
cert.denitd,513U.
S.818,l15S.Ct.77,l30L.
Ed.
2d31(1994)(Underj455,f
sfactt
zal
allegationsdonothavetobetakenastrt
zey'anddgtqhereisasmuchobligationforajudgenotto
recusewhenthereisnooccasion...todosoasthereis...to(
recuse)whenthereis.
''
);Goodwin,
194B.
R.at221(C
$
therequirementofsectionl44thatthejudgeassumethatthefactsassert
edi
n
theaffidavitaretrueandexaminethem onlytodeterminetheirlegalsufficiency''doesnotapply
tobanknzptcyjudges).However,eveniftheCourtdidaccepta1lallegationsastrue,whichi
t
doesnot,Mr.Blixseth'sallegedfactsarenotlegallysufficientforrecusalbecausetheapplicable
facmalavermentsinMr.Blixseth'sAmendedandSupplementAffdavitsareeitherbasedupon
heresayorreflectMr.Blixseth'spersonalconclusionsandopinions.
TheNinthCircuitCourtofAppealsnotesthatalthoughtsection455isstatedintermsof
aself-enforcingobligationuponthejudge,itmaybeinvokedbyapart
y.'Klenskev.Goo(
1nre
ManoaFinanceCo.
,Inc.
),781F.
2dl370,1373(9'
hCir.1986),cert.denied,479U.S.1064,107
S.
Ct.948,93L.Ed.
2d997(1987).Thetestfordeterminingwhetherajudgeshoul
drecuse
lt
himselfundersection455(a)is(whetheranobjecti
ve,disinterested,layobserverfullyinformed
ofthefactsunderlyingthegroundsonwhichrecusalwassoughtwouldentertainasignificant
17
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 136 of 186
doubtaboutthejudge'
simpart
iality.'''US.v.Torki
ngton,874F.2d1441,1446(1lt
hCir.1989),
quotingParkerv.ConnorsSteelCo.,855F.
2d1510,1524(11thCir.1988).TheTenthCircuit
CourtofAppealsinFratesv.Weinshienk,882F.
2d1502,1504(10t
hCir.1989)furt
herinstnzcts
that:
Abanl
cruptcyjudgemaypresideoverboththeadministrativeand
adversarialportionsofabarlkruptcycase.See28U.S.C.j157.Butrecusalis
necessaryifthereisevidenceofactualbias,ifthebanknzptcyjudgebywordsor
actionsreasonablyappearstohaveprejudgedadversarialproceedingsoverwhich
heistopreside,orifthejudgeappearsi
boxedin'bypriorrulingssuchthathe
willbeforcedtoreachacertainresultinanadversarialproceedingregardlessof
themerits.Wedonot,however,readourcasesoranyotherauthoritiestorequire
ajudgewhoapprovesaChapter11reorganizationplanautomaticallytodisqualify
himselffrompresidingoveradversarialproceedingsthatwillaffectthetotal
recoveryofthebanlfzupt'screditors.
TheCourtalsorecognizesthattfamiliaritywithdefendantsand/orthefactsofacasethat
arisesfromearlierpart
icipationinjudicialproceedingsisnotsufficienttodisqualifyajudgefrom
presidingatalatertrial.''SteeringCommitteev.MeadCorp.(
1nreCorrugatedContainer
Antit
rustLiti
gation),614F.2d958,965(5thCir.1980)(footnoteomitted),ccrf.deni
ed,449U.
S.
888,l0lS.
Ct.244,66L.
Ed.2d114(1980).lnmanyordinarylitigationsituationsjudgesmake
preliminarydecisionsonoffersofevidence,ormakedecisionsothemiseaffectingtheparties,
thatfamiliarizethejudgewiththefactsinthatcaseorinrelatedcasesinwhichthejudgemust
rule.TheBanknzptcyCodeand28U.S.C.j157,bypermitt
ingthepresidingjudgeina
reorganizationtopresideoveradversaryproceedingsaffectingtheassets,contemplatethat
bankruptcyjudgeswillencountersituationssimilartothecasesubjudicewithsomefrequency.
lnsuchsimations,theNinthCircuitCourtofAppealssuggeststthatjudgessittinginbankruptcy
beespeciallysolicitousinmaintainingboththeappearanceandrealityofimpartialitywhen
18
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 137 of 186
adjudicatingmatterswithwhichtheyhavehadcloseinvol
vement,erri
ngonthesideofrecusing
themselveswhenappropriate.''Manoa,781F.2dat1373.
TheforegoingcomportswiththeSupremeCourtoftheUnitedStates'decisioninLiteky,
510U.S.540,whereintheSupremeCourtaddressedthequestionofwhethertheso-called
extrajudicialsourcedoctrineappl
iedbylowercourtsunderj144al
soappliedtomotionsbrought
underj455(a).lnfitel
c
y,theSupremeCourtconcludedthatthett
extrajudicialsource''doctrine,
totheextentitexists,doesindeedapplytoj455(a).f#.510U.
S.at554.Inreachingits
decision,theSupremeCourtexplained:
Thefactthatanopi
nionheldbyajudgederivesfromasourceoutsidejudicial
proceedingsisnotanecessaryconditionfortbiasorprejudice'recusal,si
nce
predisposi
tionsdevelopedduringthecourseofatrialwillsometimes(al
beit
rarely)suffice.NorisitasufficientconditionforS
t
biasorprejudice'recusal,
sincesomeopinionsacquiredoutsidethecontextofjudicialproceedings(for
example,t
hejudge'
sviewofthelawacquiredinscholarl
yreading)willnot
suffice.Sinceneitherthepresenceofanextrajudicialsourcenecessarily
establishesbias,northeabsenceofanextrajudicialsourcenecessarilyprecludes
bias,itwouldbebettertospeakoftheexistenceofasignificant(andoften
determinative)S
extrajudicialsource''factor,thanofanls
extrajudicialsource''
doctrine,inrecusaljurispmdence.
Thefactsofthepresentcasedonotrequireustodescribethe
consequencesofthatfactorincompletedetail.ltisenoughforpresentpurposesto
saythefollowing:First,judicialnzlingsalonealmostneverconstituteavalidbasis
forabiasorpartialitymotion.SeeUnitedStatesv.GrinnellCorp.,384U.S.,at
583,86S.Ct.,at1710.Inandofthemselves(i.e.,apartfrom surrounding
commentsoraccompanyingopinion),theycannotpossiblyshowrelianceuponan
extrajudicialsource;andcanonlyintherarestcircumstancesevidencethedegree
offavoritism orantagonismrequired(asdiscussedbelow)whennoextrajudicial
sourceisinvolved.Almostinvariably,theyarepropergroundsforappeal,notfor
recusal.Second,opinionsfonnedbythejudgeonthebasisoffactsintroducedor
eventsoccurringinthecourseofthecurrentproceedings,orofpliorproceedings,
donotconstituteabasisforabiasorpartialitymotionunlesstheydisplaya
deep-seatedfavoritismorantagonismthatwouldmakefairjudgmentimpossible.
Thus,judicialremarksduringthecourseofatrialthatarecri
ticalordisapproving
of,orevenhostileto,counsel,theparties,ortheircases,ordinarilydonotsupport
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 138 of 186
derivesfromanextrajudicialsource;andtheywilldosoiftheyrevealsuchahigh
degreeoffavoritismorantagonismastomakefairjudgmentimpossible.An
exampleofthelatter(andperhapsoftheformeraswell)isthestatementthatwas
allegedtohavebeenmadebytheDistrictJudgeinBergerv.UnitedStates,255
U.S.22,41S.
Ct.230,65L.Ed.481(1921),aWorldWarIespionagecaseagainst
German-Americandefendants:lt
onemusthaveaveryjudicialmind,indeed,not
gtobe)prejudicedagainsttheGennanAmericans''becausetheir
fheartsare
reeki
ngwithdisloyalty.''1d.
,at28(internalquotationmarksomitted).Not
establishingbiasorpartiality,however,areexpressionsofimpatience,
dissatisfaction,annoyance,andevenanger,thatarewithintheboundsofwhat
imperfectmenandwomen,evenafterhavingbeenconfirmedasfederaljudges,
sometimesdisplay.Ajudge'
sordinaryeffortsatcourt
roomadministration-evena
sternandshort-temperedjudge'
sordinaryeffortsatcourtroom
administration-remainimmune.
510U.S.at554-56,114S.Ct.at1157.
Lastly,theNinthCircuitCourtofAppealsheldinUnitedStatesv.Studley,783F.2d934,
939(9thCir.1986),
thatagj144jmotionforrecusalfiledweeksaftertheconcl
usionofatrialis
presumptivelyuntimelyabsentashowingofgoodcauseforitstardiness.''Section455doesnot
containsuchtimelimitations.Furthermore,IdonotregardMr.Blixseth'sdelayasfatalbecause
arecusalmotionshouldbepermittedatanyti
meitbecomesapparentthatajudgeisbiasedor
suffersfromtheappearanceofbias.Mr.Blixseth'sdelay,though,suggeststhatMr.Blixsethdid
notregardmypriorrulingsasgreatlydebilitatingtohisposition.
Asnotedpreviously,afterreviewingtheapplicablelawunderj455(a),theCourt
disagreeswithMr.Blixseth'spositionthattheCourtmustaccepthisfacttzalavennentsastrue.
Rather,theCourtmayassigntotheevidencewhatitbelievestobeitsproperweight.1mayalso
contradicttheevidencewithfactsdrawnfrom myownpersonalknowledge.AfterreviewingMr.
Blixseth'sAmendedandSupplementalAffidavits,1concludethatrecusalisnotnecessaly.The
mattersaboutwhichMr.Blixsethcomplainsoccurredinthecourseoftheseproceedingsanddo
20
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 139 of 186
seatedandunequivocalantagonismthatwoul
drenderfairjudgmentimpossible.SeeLi
teky,510
U.S.at556,114S.Ct.at1158.
DISCUSSION
Mr.Blixseth'scomplaintsfalli
ntofourgeneralcategories:(l)expartecommunications;
(2)theStephenBrownemails;(3)favoritismtowardMs.BlixsethandByrne;and(4)denialof
Mr.Blixseth'sdueprocess.Mr.Blixseth'scomplaintsregardingexpartecommunicationsfall
intothreeseparatesub-categories:thatmylawclerk,TerryHealow,hadanexparte
communicationwithRossRichardson,andthatduringsuchcommunication,Mr.Healowuseda
wordthatshowsbiasagainstMr.Blixseth;thatlheldexpartemeetingswithpartiesinvolvedin
theYellowstoneClubbanknlpycy;andthatIandmystaffhavehadnumerousemail
communicationswithattorneysinvolvedinthiscasewhichshowthat1haveaclose,personal
relationshipwithsaidattorneys,whichrelationshipprecludesmefrom enteringfairandunbiased
decisions.
ExParteCommunications.
Mr.BlixsethfirstarguesthatonJune10,2010,hereceivedaphonecallfrom Mr.
AmsdenregardingMr.Blixseth'ssettlementwithhisclient,theChapter7Trusteeinthe
YellowstoneClubWorldbanknzptcy,RossRichardson.Duringthatphoneconversation,Mr.
AmsdenapparentlyrelayedtoMr.Blixseththefactthatmylawclerk,TelqyHealow,had
telephonedMr.RichardsoninquiringastowhetherMr.Richardsonhadfinalizedasettlement
withMr.Blixseth.Mr.BlixsethassertsthatMr.RichardsonadvisedMr.Healowthatthe
settlementwasalmostcompletebutthatafewmattersneededtobeaddressedbeforeitcouldbe
21
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 140 of 186
Thereareessentiallyt
'
ivebankruptcies(oneconsistingofthefourYellowstoneClub
entities;thesecondbeingBLXGroup,lnc.,
'thethirdbeingMs.Blixseth'spersonalbankruptcy;
thefourthbeingBigSpringsRealty,LLC;andthefifthbeingYell
owstoneClubWorld,LLC)
and28associatedAdversaryProceedings.lnanattempttorefreshmyrecollection,Ireviewed
theapplicablecasesanddonotseeanywhereintherecordswheretheCourtwouldhavebeen
anticipatingthereceiptofasettlementbetweenthetnuteeofYellowstoneClubWorld
bankruptcyandMr.BlixsethatoraroundJune12,2010,thedateMr.AmsdenandMr.Blixseth
wereexchangingtextmessages.WhiletheCourthasnotreviewedthedocketineachofthe36
separatecases,theCourthasreviewedthedocketsinYellowstoneMountainClub,LLCand
YellowstoneClubWorld,LLC,includingits3associatedadversaryproceedings.TheCourtsees
nothingintheYellowstoneMountainClubbankruptcythatwouldpromptmetoinquireabouta
stipulationbetweenMr.BlixsethandMr.Richardson.Twooftheadversaryproceedingstiedto
theYellowstoneClubWorldbankrtzptcydonotinvolveMr.Blixseth.lnthethirdadversary
proceeding,adversaryproceedingno.09-00086,itappearstheHonorableJolm L.Peterson
22
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 141 of 186
Blixset
h'smotiontodismissforlackofsubjectmatterjurisdictiontherebydismissingathird
partycomplaintfiledagainstMr.Blixseth.ltwasnotuntilJune29,2010,whenMr.Richardson
andMr.Blixsethfiledajointmotiontovacatedeadlines,t
hatthepartiesmentionedasettlement
inthatmatler.LearningofasettlementonJune29,2010,wouldnothavepromptedatelephone
callfrom theCourtonorbeforeJune12,20l0.
Finally,theCourtcanfindnothingin09-60061,themainYellowstoneClubWorld
barlkruptcycase,thatwouldhavepromptedatelephonecalltothepartiesinearlyJuneof2010.
TheCourtenteredanOrderonJune1,2010,settingatelephonicstatusconferenceforJune2,
20l0,onseveralmatters,includingMr.Richardson'sFebrualyl2,2010,motionfororder
approvingasettlementwithMr.Blixseth.lreviewedthetranscriptoftheJune2,2010,hearing
andseenothinginthattranscriptwhichwouldindicatethat1waswaitingforafurthersettlement
from Mr.RichardsonandMr.Blixseth.Tothecontrary,1orallyrtzledonthatdatethat
CrossHarbordidnotbavestandingtoobjecttoMr.Richardson'sproposedsettlementwithMr.
Blixseth.FollowingtheJune2,2010,hearingandinaccordancewithmyJune2,2010,oral
ruling,theCourtenteredaMemorandum ofDecisionandOrderonJune10,2010,overruling
Crossl
larborCapi
talPartners'objectiontoMr.Richardson'ssettlementwithMr.Bli
xseth,
grantingMr.Richardson'smotionfororderapprovingsettlement,andapprovingthe
SMemorandum ofUnderstanding''betweenMr.RichardsonandMr.Blixseth.
Furthermore,anotherlawclerkinmyChambers,KelliHarrington,hasassistedmealmost
23
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 142 of 186
tByrne'scompany).However,alsopresentandparticipatingintheauctionweretheDebtor(I
'
.
c.,
theYellowstoneClubwhichwaseffectivelycontrolledbyByrnel,andtheUnsecuredCreditors
Committee.JudgeKirscherrentedaroom atthehoteltofacilitateexpartecommunications
betweenthebidders.Theauctionitselfwasnotpublic.lnsteaditwasconductedincloseddoor
negotiationsbetweenCrossl-larborandCreditSuisse,withtheUnsecuredCreditorsCommittee
beingallowedtoparticipatetosomelimitedextent.AlthoughmylocalcounselJoelGuthals,
3Mr.Healow advisedmethatheplacedthetelephonecalltoMr.Richardsonfrom his
workphoneintheButteFederalbuilding.However,asaresultofthatonecall,Mr.Blixseth
subpoenaednotonlyMr.Healow'scallsfortheJanualy18,20l1,hearing,butalsorequested
thatMr.Healowproducehiscellphonerecordsandvariousemailcommunications.The
subpoenawasadministrativelydeniedasitwasnotincompliancewiththeSubpoena
RegulationsAdoptedbytheJudicialConference.
24
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 143 of 186
subsequentlyvaluedonMay12,2009,at$232million,couldcreditbidatanauctionofDebtors'
assets.
25
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 144 of 186
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 145 of 186
4ThehearingonconfirmationoftheDebtors'jointChapter11planwasscheduled
pursuanttoanOrderenteredApril7,2009.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 146 of 186
obstaclestosomeresol
ution.1inquiredontherecordiftherewasanyobjectiontometalking
withBymeandYankaueronalimitedbasisanda1lpaMiespresentatthehearingvoicedtheir
lackofobjection.ltwasapparentduringmybriefdiscussionwithByrneandYankauerthatthe
partieswereclosetoaresolution,butatthesametime,theywerestillveryfarapart.Court
reconvenedonlytotakeanotherrecesssothepartiescouldft
zrthernegotiateandtrytoreduceto
writinganyagreementinprinciple.WhentheCoul'tonceagainreconvened,theremainingissues
betweenCreditSuisseandCrossHarborrelatedtoone,CreditSuisseobtainingautborityfrom its
lendergroupstoreacharesolutionwithCrossHarborandtwo,thetermsofanotefrom
CrossilarbortoCreditSuisse.
Unforttmately,thepartiesdidnotcometoameetingofthemindsandfinally,lateon
Friday,May15,2009,atabout7:00pvm.ifmymemozyservesmecorrectly,andaherthepa/ies
hadgonebackandforthnumeroustimesinclearlyanadversarialprocessandtone,Iinstructed
allthepartiestogathertheirbelongingsandleavetheBillingscourthouse. Iimmediatelyleft
Billingstoret'urntoButte,fullyexpectingthatnothingwouldberesolvedbyMonday,May,18,
2009.
Duringthosefourlongdaysandbecausethepartieswereworkingalmostaroundthe
clock,itbecameclearthatthebiddingpartiesmightneedtheCourt'sassistanceoutsidenormal
businesshours.Ididnotwanttogivethepartiesinformationaboutwherelwasstayingorhow
28
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 147 of 186
process.Guentherv.CommissioneroflnternalRevenue,889F.
2d882,884(9th
Cir.1989).Proceduraldueprocessrequiresthatapartybeprovidednoticeandan
opportunitytorespond.Id.lfthepartyhasnorighttonoticeoranopporttmityto
respond,thenitfollowsthatthecommunicationisnotexparte.
29
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 148 of 186
communicationdonotestablishbiasorprejudicebytheundersignedtowardMr.Blixseth.Mr.
Blixseth'sapparentdispleasurewiththefactthattheDebtors,theOfficialCommitteeof
UnsecuredCreditors,theAdHocCommitteeofYellowstoneClubMembers,CreditSuisse,and
CrossllarborCapitalPartnersdidnotincludehim ina1laspectsoftheactualbiddingprocess
betweenCreditSuisseandCrossHarborCapitalPartners,doesnotnowbootstraptheparties'
requestforguidancefromtheCourtduringthebiddingprocessintoademonstrationofprejudice.
SuchallegationbyMr.Blixsethissimplyfalse.
Mr.BlixsethfiledaSupplementalAffidavitonJanuary17,20l1.lntheSupplemental
Affidavit,Mr.BlixsethonceagaintakesissuewiththisCourt'sallegedexpartecommunications
withvariouspart
es.lnsupportofhisclaimsofbiasandprejudice,Mr.Blixsethfiledahostof
emailcommunicationsbetweenmyselfandvariouspartiesandMs.Haningtonandvarious
parties.
ManyoftheemailsarewhollyunrelatedtotheYellowstoneClubbanknzptciesoranyof
therelatedproceedings.Forinstance,thefirststringofemailcommunicationsrelatetothestatus
oftwoadversaryproceedingsstemmingfromtheBrendaBurkhartsmeierbane ptcyandtwo
otherbarllcnzptcyproceedings.Theemailcommunicationisbetweena1lcounselinvolvedin
thosecasesandisnotexpartecommunication.Asstatedearlier,neithertheKuntznorthe
BurldlartsmeierbankaaptcieshaveanyconnectiontotheYellowstoneClubcases.
Thenextstringofemailswasinitiatedbytheindividualinchargeoforganizing
continuinglegaleducationseminarsfortheBankruptcyLaw SectionoftheStateBarofMontana.
30
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 149 of 186
otherbankruptcyjudgesparticipateintheCLE.Thenextemailcommunicationsarebetweenme
andAndyPattenregardinganarticlelwrotefortheBankmptcyLaw Section'snewsletler.
Nextareemailsbetweenmyself,AndyPattenandDougJamesconcemingthecaseof
LehmanCommercialPaper,lnc.v.MoonlightBasinRanch,LP,AdversaryProceedingNo.10-9.
Theemailcommunicationsareadministrativeinnamreandincludecounselfortheplaintiffand
thedefendantinthatmatter.Thecommunicationsarenotexparte. Furthennorethe
communicationshavenothingtodowiththeYellowstoneClubbankruptcies.
ThefollowingstringofemailsrelateonceagaintothepreparationoftheBankruptcyLaw
Sectionnewsletter,whichispreparedbyAndyPattenandothermembersofhisfinn. Thenext
emailisfrom AndyPattentoMs.Harrington.Theemailisadministrativeinnamreandmerely
transmitsaproposedorderconcerningamatterinthecaseofInreGlacierStoneSupply,Inc.,
CaseNo.10-61638.Itappearstheemailwassenttonotonlymylawclerk,butalsoother
interestedpartiesinthatcase.Thesameholdstnzefortheemailthatfollows.
Thenextemailwassentbymylaw clerk,KelliHarrington,toAndyPatten.Itappears
thatMr.Pattenwasinquiringaboutmyavailabilityforahearingregardinganewcase. Counsel,
includingMr.Blixseth'scounsel,havebeenknowntocallmylaw clerksinquiringastomy
availabilitytoholdexpeditedhearingsinvariousmatters.Thisemailappearstobearesponseto
suchaninquily.
Thenextemailsonceagainrelatetoeitherthe2009MontanaBanknzptcyCLEormy
submissionforthe2009bankruptcynewsletter.Thenextemailsareonceagainadministrative
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 150 of 186
9013-l(i).Whenmotionscontainuniquelangt
lage,suchaspropertydescriptions,mylawclerks
oftencalloremailcounselandrequestthataproposedorderbefiledinaccordancewithour
LocalRules.
Inthemidstoftheforegoingemailexchangeisanemailfrom Ms.Haningtontoaperson
inAndyPatten'soffice.AtthebeginningofthehearingonconfirmationofDebtors'Chapter11
planheldMay18,2009,theCourtwasadvisedthatbiddingpartieshad,overtheweekendandin
thehoursleadinguptothecontkmationhearing,reachedaglobalsettlement.Thepartieshada
singlecopyofanexecutedterm sheet,whichexecutedterm sheetthepartiespresentedtothe
Court.AttherequestofMr.Patten,theCourtemailedacopyofthesignedsettlementterm sheet
tohisoft
icesothatsomeoneotherthanjusttheCourthadacopyoftheexecutedtennsheet.
Thenextemailstringinvolvesmylawclerk'sinabilitytolocateadeposition. Theemail
wasnotexparteasitincludesmostifnota1lcounselinvolvedatthattimeinAdversary
Proceeding09-14,includingMr.Blixseth'scounselofrecord;MichaelFlynnat
mikertsmifesq.comandJoelE.Guthalsatie>tlAalsfilglzrtlawfnzl.collA.Thenextemailsare
betweenAndyPattenandJudgePeterson.lwasnotprivytothoseemailsuntilMr.Blixsethfiled
them onJanuary11,201l.
Asfortheremainingemails,they,likenumerousoftheearlieremails,involve
administrative,asopposedtosubstantivematters. lnmostinstances,itappearspartiesaretrying
toeitherscheduleemergencyheadngsormy1aw clerkistryingtoobtainproposedorders. None
oftheemailscontaininappropriateexpartecommunicationsandIcertainlydonotfindanybias
orprejudiceintheemails.
32
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 151 of 186
Asdiscussedabove,theemails,inandofthemselves,donotestablishbiasorprejudice.
However,theargumentattheJanuary18,2011,hearingshowsthatMr.Blixsethseekstoshow
that1favorin-statecounseltothedetrimentofout-of-statecounsel:
AndparticularlywithasmalllocalbankrtzptcybarhereinMontana,it's--that
basicallymakesitslivingoffthisCourt'sruling,itmakesthetaskevenmore
difficult,particularlyunderstandingthatthisCourthasunder--hashada
distinguishedreputation.Andtheparties,theattomeysthathavetoarguethisare
essentiallyattomeysfrom outsideMontana,exceptforMr.Fox,whodoesnot
practicebeforethisCourt.
Theproblem withsuchargumentisthatalmostal1partiesinvolvedinthiscasehaveorhadoutof-statecounsel,includingtheDebtors,theunsecuredcreditors'committee,CrossHarborand
CreditSuisse.Moreover,Mr.BlixsethhasMontanacounselwhohavebeenactiveinthiscase,
namely,JoelEGuthalsofBillings,MontanaandDanielD.MansonofButte,Montana.ln
addition,Mr.BlixsethhasproducedemailsbetweenmeandDebtors'localcounsel,Mr.Patten,
seemingtosuggestthatwehavesomerelationshipbeyondthatofjudgeandattomey.Ifone
weretoloolc,onecouldundoubtedlyfindemailsbetweenmyselfandMr.Blixseth'sattorney,
JoelE.Guthals,becauseinthepast,Mr.Guthals,likeMr.Patten,hasbeenanactiveparticipant
intheMontanaBanla ptcyCLE.MyrelationshipwithMr.Pattenisexactlythesameasmy
relationshipwithMr.Guthals'
,purelyprofessional.
TheStephenR.Brownemails.
Mr.BlixsethclaimsthatduringtheinitialphaseofAdversaryProceeding09-14,heraised
hisconcernthatStephenR.Brown,Esq.ofthe1aw finnGarlington,Lohn& Robinsonin
Missoula,Montana,wasatthetimeofthefilingoftheYellowstoneClubbarlkrtzptcy,Mr.
Blixseth'scounselinMontana.Yet,Mr.Brownwasalsoavotingmemberandchairmanofthe
33
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 152 of 186
extensivelythatthisCourt'sbiasandprejudiceisevidentbytheleniencythisCourthasshowed
towardMs.Blixseth.Mr.Blixseth'sargumentisinterestingbecausethisCourthasbasicallyhad
34
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 153 of 186
Blixseth'svigorousobjection,thisCourtdidinfactconvertMs.Blixseth'scasetoChapter7on
May29,2009.OverMs.Blixseth'sobjection,thisCourthasalsoenteredordersextendingthe
deadlinefortheChapter7trusteeinMs.Blixseth'sbanknzptcytoobjecttoentl
'
yofMs.
Blixseth'sdischarge.PursuanttoastipulationfiledJanuary5,20l1,Ms.Blixsethandthetnzstee
resolvedMs.Blixseth'sthenpendingobjection,agreeingthatthetrusteewouldhavethrough
January21,2011,tofileacomplai
ntobjectingtoMs.Blixseth'sdischarge.
Mr.BlixsethalsoarguesthatthisCourthastumedablindeyetothefactthatthe
YellowstoneClubbankruptcieswerefiledinbadfaith.lnsupportofsuchcontention,Mr.
BlixsethcitestothetranscriptofApril29,2009,fromAdversaryProceeding09-14,toa
statementofuncontrovertedfactst'
iledJuly2,2010,byMr.BlixsethinAdversaryProceeding
09-18,andamemorandum thatMr.BlixsethfiledinAdversaryProceeding09-18onJanuazy22,
2010.Mr.Blixseth,however,failstoacltnowledgethathecallednotasinglewitnesstorebutthe
witnesstestimonypresentedbytheDebtorsattheMayl8,2009,confirmationhearing.Also
notableisthatfactthatMr.BlixsethsoughtneitherthedismissalnorconversionofeitherMs.
Blixseth'sbanknlptcyortheYellowstoneClubbanknzptciesforbadfaith.
Mr.BlixsethnextmaintainsthatthisCourthasenteredrulingstoprotectMs.Blixseth,
eventhoughMs.BlixsethhascommittedmillionsofdollarsoffraudonnumerouspaMies. More
specifically,Mr.Flylm arguesthatMs.Blixsethcommittedover$50millionofbankfraudwhich
thisCourtignored.Asexamples,Mr.BlixsethreferredtoMs.Blixseth'sloanswithWestern
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 154 of 186
Marchof2008inviolationofaFederalprel
iminaryinjunction.
WhetherMs.Blixsethpledgednon-existenttechnologyorwhethershepledged
technologyinviolationofaninjunction,WachoviaBankfiledanadversarycomplaintagainst
Ms.BlixsethonJune10,2009,seeltingtoexcepttheWachoviaobligationfrom Ms.Blixseth's
dischargeunder11U.
S.C.j523(a)(2).SeeAdversaryProceedi
ng09-00034.WachoviaBank
andMs.BlixsetheventuallystipulatedtothedismissalofthatactiononNovemberl8,2009.
ThisCourtenteredthreeordersinthataction:anordersettingapretrialschedulingconference,
anordersettingtrialandanorderapprovingtheparties'stipulationfordismissal.
Beforeleavingthisparticularmatter,theCourtmustcommentonMr.Blixseth'sassertion
thatMs.Blixseth'sdepositiontestimonyfromthetrialinAdversaryProceeding09-14setsforth
thefactssurroundingthebogussoftware.AtthetrialinAdversaryProceeding09-14,Ms.
BlixsethtestifiedinpersononMay4,2009.Ms.Blixsethwasnotaskedanyquestionsaboutany
software,bogusorotherwise,andbecauseMs.Blixsethtestifiedinperson,theCoul'thadno
reasontoallowMs.Blixseth'sdepositiontestimonyintoevidence.
ContinuingwithMs.Blixseth'sfraud,WesternCapitalPartnersfiledanadversary
complaintagainstMs.BlixsethonNovember30,2009,seekingtoexceptitsdebtfromMs.
Blixseth'sdischargeunder11U.
S.C.j523(a)(2).SeeAdversaryProceedi
ng09-00100.Mr.
36
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 155 of 186
requestforsummazyjudgment.TheCourt'sdiscussiononthematterisasfollows;
Inthependingmatter,WCPhastwohurdlestoovercome:(1)a1
reasonabledoubtastotheexistenceofgenuineissuesofmaterialfactmustbe
resol
vedagainstWCP;and(2)exceptionstodischargeunderj523arenarrowly
construed.Additionally,theCourtdoesnotconsiderWCP'Smotioninavacuum,
butrather,undertakesthiscaseafterhavingover22monthsoftimeontaskwith
theYellowstoneClubandtheassociatedproceedings,includingDebtor's
banknptcycase.
TheCourthashearda1otoftestimonyoverthepast22monthsabout
Debtorandherex-spouse'slongandbitterdivorce.DebtorandTimothyL.
BlixsethseparatedinDecemberof2006andfollowingtheseparation,Debtor
claimsshewasS'frozenout''ofvariousbusinessaffairsforabouttwoyears,or
untilapproximatelymid-Augustof2008,whenDebtorwasawardedvarious
assets,includingBLXGroup,lnc.-whichownedtheultraexclusiveYellowstone
Club--underthetermsofaMaritalSettlementAgreement.
Debtorhastestifiedpreviouslythatshebelievedthathershareofthe
maritalassetswereworthwellinexcessof$100millionbetweenDecemberof
2006andAugustof2008.The2007LoanAgreementatissueinthisAdversary
ProceedingandamodificationoftheLoanAgreementmadeinJuneof2008were
al1doneduringaperiodoftimewhenDebtorwasfrozenoutofthemajorityofthe
maritalbusinessdealings.SuchfactprecludesthisCourtfrommakingasummazy
nzlingthatDebtorpossessedtherequisiteintenttodeceiveWCPunderei
therj
523(a)(2)(A)orj523(a)(2)(B).
Moreover,WCPcontendsthatitreliedoncelainrepresentationsmadeby
Debtor.However,DebtorcountersthatWCPhasnotfl
zllyrespondedtodiscovery
propoundedinJanuaryof2010.DebtorassertsthatWCPhasdelayedresponding
toal1Debtor'sdiscoveryrequestsongroundsWCPhasinfonnationshowingit
knewDebtor'struefnancialposition,butneverthelessproceededtomakethe
loanandmodificationatissue.Theforegoingallegationsraiseamaterialissueof
factastowhetherWCPreliedonanystatementsmadebyDebtor.Such
conclusionisbuttressedbythefactthatoneofWCP'Sattorneys,ChristopherJ.
Conant,alsoservesascounselforDebtor'sex-spouse.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 156 of 186
Finally,DebtorasseMsthatWCPhasreceivedpaymentsinexcessof$41
milliontowardthe$13millionLoanAgzeement.Undersuchscenario,WCPmay
alreadybefullycompensated,thusputtingWCP'Sdamagesatzero.
Insum,afterconstnlingj523(a)(2)narrowly,theCourtcannotdetermine
beyondareasonabledoubtthatDebtormadeanystatements,whetheroralorin
writing,withtheintenttodeceiveWCP.TheCourtsimilarlycannotconclude
thatWCPreliedonstatementsmadebyDebtor.Finally,WCPhasnotshownthat
anyofitsallegeddamagesweretheproximateresultofstatementsmadeby
Debtor.WCPhassimplyfailedtosatisfyitsburdenofproofatthisstageofthe
litigation.
ThisCourtdisputesMr.Blixseth'scontentionthatitmadeanycredibilityfindingintheabove
nzling.Insaidruling,thisCourtmerelydeniedWestem CapitalPartners'requestforsummary
judgment.TheCourtdidnotdismissWesternCapitalPartners'complaintnordiditenterany
typeofmlingthatprecludedWesternCapitalPartnersfrom pursuingitsclaim againstMs.
Blixseth.
TheWesternCapitalPartnersadversaryproceeding,however,nevermadeittotrial.
Rather,WesternCapitalPartnersfiledajointmotiontodismissitsactionagainstMs.Blixsethon
October26,2010,whichtheCourtgranted.Mr.Blixseth'scounsel,ChristopherJ.Conant,
shouldknow thatsaidactionwasdisnnissedbyagreementofthepartiesbecausehewasoneof
WesternCapitalPartners'counselofrecordinthatproceeding.
AttheJanuary18,2011,hearingMr.Flyzm alsoreferredtoanotheractioninvolving
WesternCapitalPartnersasaSscharade'':'tmostrecentlyonthetimelinessissue,occurredbefore
thisCourtonOctober12thwithMr.CotnerandMr.SamsonwherethisCourtunilaterally,
arbitrarily,withoutgivingMr.Cotnerormyselfanopporttmitytobeheard,pileddoublelayersof
hearsayandthenissuedfndingsthatMs.Mr.Blixsethiscredibleandbelievableontheissueof
thebankfraudsandthetechnologyfraudsandthatMr.Cotnerwasmisledbyme.''Mr.Flyrm
38
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 157 of 186
Similarly,Ms.Bli
xsethandtheYellowstoneClubWorldtrt
zsteejustrecentlyenteredintoa
stipulationfordismissalofAdversaryProceeding09-44.Theadversaryproceedingcommenced
byBeauandMorganBlixsethhasnotyetgonetotrial.Finally,bothMr.BlixsethandMr.Flynn
advisedthisCourtduringtherespectivepretrialschedulingconferencesthattheyintendedto
voluntarilydismisstheiractionsagainstMs.Blixseth.Truetotheirrepresentations,Mr.Blixseth
andMr.Flylm filedmotionstodismisstheiradversaryproceedingsagainstMs.Blixsethon
February24,2010.ThisCourtenteredordersgrantingthemotionstodismissonMarch16,
39
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 158 of 186
Ms.Blixseth'sdischargewas,subjecttoBeauandMorganBlixseths'stillpending
adversaryproceeding,enteredonFebnmry8,2011.Asthefactsdemonstrate,otherthanthe
UnitedStatesTrustee'smotiontoconvert,thisCoul'
thasnotbeenpresentedwithaninstance
whereithadtonzleeitherfororagainstMs.Blixseth.
Havingmadefew,ifanycredibilityfindingsastoMs.Blixseth,theCourtfailstoseehow
itdisruptedacriminalinvestigation,ofwhich1wouldhavenoknowledgenorshould1haveany
knowledge,asMr.Blixsethalleges.Similarly,thisCourtfailstounderstandhowitusedastates
secretsprivilegeoraNevadaprotectiveordertoconcealandglossoverMs.Blixseth'songoing
fraud.MyknowledgeoftheNevadasecrecyorderislimitedtothefactspresentedtotheCourt
bythepartiesinpreparationforandattheOctoberl2,2010,hearing.
DenialofMr.Blixseth'sdueprocess.
Finally,Mr.BlixsethcontendsthatthisCourthasdeniedhimdueprocess.Underthis
umbrellaMr.BlixsethassertsthatthisCourthasprecludedhim from presentingfactsrelatingto
Ms,Blixseth'sspoliationofevidence.TheCourt'sOrderofJanuary22,2010,enteredatdocltet
entryno.546inAdversaryProceeding09-14speaksforitself.TheCourtwouldsimplynotethat
inthatOrder,theCourtinstructedthatthematterneeded<tobebroughtbeforetheCourtinthe
correctproceedingwithserviceupontheappropriateparties.''TheCourtnotedthereinthatMr.
BlixsethhadG
whollyfailedtoshowanymisconductbyYCLTortheDebtorsinthgatjcase.This
CourtagreeswithYCLTthatafirstpartydefendantisnot,andshouldnotbe,responsibleforthe
actionsofathirdpartyspoliatorwhoisnotapartytothelitigationbeforetheCourt.''
Next,Mr.BlixsethclaimsthisCourtdeniedhim dueprocessinAdversaryProceeding0914becausehewasgivenonlyweekstodefendhimself.lnaMemorandum ofDecisionentered
40
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 159 of 186
discussed,theCourtfndsnobiasorprejudiceinMr.Blixseth'sstatementthatid
thebanknzptcy
courtmerelycontinuedthetrialforoneweekthensubsequentlyandscurrilouslyaccusedmeof
delayi
ngtacticsbyinsistingonmydueprocessrightsl.q''
Mr.Blixsethalsoaversthat:Gc-l-hecourthadpreviouslydeprivedusofcriticaldefensesby
excludingthe(MaritalSettlementAgreement)MSAandReleasesfrommyproposedPre-Trial
Order.Theotherside'slawyersarguedthatthereleaseswerenotintheirPre-TrialOrderand
JudgeKirschercommentedthathespecilcallyrecallednotincludingtheReleasesinthePTO.
MyattorneydirectedJudgeKirschertowheretheReleaseswereinadvertentlyleftintheUCC'S
Pre-TrialOrderasatrialexhibit.JudgeKirscherpausedtothumbthroughhiscopyofthePTO
andupondiscoveringthattheReleaseswereincluded,heleanedbackinhischair,gaveaglaring
stareattheDebtor'sattomey,AndyPatten,andthenthrewthePTOacrosshisdeskwithgreat
forcesayingKcYes,it'sstillin''asifhehadrelieduponthemanipulationoftheUCCandthe
DebtorkeepingmycriticalaffirmativedefensesoutofthePTO.ThemarmerinwhichJudge
41
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 160 of 186
weredirectedata11parties,notjustMr.Bl
ixseth,andtheydonotequatetobiasorprejudice.For
instance,theoriginalpartiesinAdversaryProceeding09-14consistingoftheDebtors,the
unsecuredcreditors'committeeandCreditSuissehadrequestedthattrialinthatmatterbeseton
anexpeditedbasisbecausetheDebtors'financingwasscheduledtomatureonApril30,2009.
TheCourt'scalendarwasquiteftzllandaftersomerearrangement,theCourtsetApril22,2009,
asthedatetrialwastocommenceinAdversaryProceeding09-14.However,afteralltheparties
wereseatedinthecourtroomonApril22,2009,theCourtwasadvisedthatnota1lthepartieshad
providedpapercopiesoftheirexhibitstoMr.Blixseth.sTheCourt'scalendarwasveryfullin
MayandJuneof2009andanycontinuanceofthetrialinAdversaryProceeding09-14leftthe
CourtwithverylitletimetoissueitsrulinginAdversaryProceeding09-14priortothe
scheduledMay18,2009,confirmationhearing. However,togivethepartiestimetoproduce
theirexhibitstoMr.Blixsethinhardcopyandwiththeunderstandingthatthedebtor-inpossessionfinancingwouldbeextendedforashortperiodoftime,theCourtcontinuedthef'
irst
phaseoftrialinAdversaryProceeding09-14toApril29,2009.Thus,theCourtwasupsetwhen
trialfinallystartedonApril29,2009,anditbecameapparentthatthepartiesdidnotknowwhat
5TheexhibitswereavailabletoMr.Blixsethbyelectronicmeans,butMr.Blixseth's
counselstatedtheywereunabletoretrievetheelectronicversionoftheexhibits.
42
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 161 of 186
approval.Butasnotedearlier,thatfrustrationdoesnotequatetobiasorprejudiceandit
cert
ainl
ydoesnotequatetobiasorprejudicetowardMr.Blixseth.
Mr.BlixseththenargtzesthatthisCoul'tentereditsAugust16,2010,nzlinginAdversary
Proceeding09-14ontheeveoftrialinAdversaryProceeding09-18,effectivelytlprecludingMr.
Blixsethfrom establishingattrialwhytheBshareholderclaim againsthim failedbothlegally
andfacmallyandthereforewhyheshouldnotberequiredtosatisfytheir$22millionclaim either
throughbeingi
ncl
udedwithinajudgmentinAP-14,ori
nAP-18.'Entryofmydecisioni
n
AdversaryProceeding09-14wasdrivensolelybymyworkload.Thesecondphaseofthetrialin
AdversaryProceeding09-14concludedonFebnzary26,2010.lgenerallystrivetoenterrulings
within60daysaftermattersaredeemedsubmittedandreadyfordecision.6Inthecaseof
AdversaryProceeding09-14,post-trialbriefsandproposedfindingsoffactandconclusionsof
1awweresubmittedonMarch19,20l0.Thus,1wouldhavegenerallytriedtohaveadecision
enteredbymid-Mayof2010.However,thepartieshadadvisedmethattheyplarmedto
participateinamediationinearlyMayof20l0.1thusturnedmyeffortstoothermatters,with
thehopesthatthemediationwouldresolvetheissuesinAdversaryProceeding09-14.
Ilaterlearnedfrom thepartiesatastatusconferenceheldJune2,20l0,thatthemediation
6The60-daypetiodisconsistentwithMont.LBR901-2,whichreads:
lntheeventaJudgehasunderadvisementanymatter,including,butnotlimited
to,amotionordecisi
oninabenchtrial,foraperiodofmorethansixty(60)days,each
partyaffectedbytheundecidedmattershallsendtotheJudgealetterparticularly
describingthematterunderadvisementandstatingthedatethematterwastakenunder
advisement.Aslongasthematterremainsunderadvisement,atintervalsofforty-five
(45)daysthereafter,eachaffectedpartyshallsendasimilarlettertotheJudge.
43
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 162 of 186
CourtamendeditsjudgmentagainstMr.Blixseth,withoutgivi
ngMr.Blixset
hanopportt
mityto
respond.TheCourtagreesthatMr.Blixsethdidnothaveanyoppormnitytorespondtothe
YellowstoneCl
ubLiquidatingTmst'smotiontoalteroramendthejudgmentandthattheCourt
enteredanjudgmentagainstMr.Bli
xsethforaspecif'
icdollaramount.TheYellowstoneCl
ub
LiquidatingTrt
zstwasseekingjudgmentagainstMr.Bli
xset
hi
ntheamountof$286.
4million.
TheCourtultimatelyenteredanamendedjudgmentintheamountof$40,067,962.
43.Such
amountisamovingtargetbecausetheYellowstoneClubLiquidatingTnzsteewasstillinthe
processofliquidatingclai
mswhenMr.Blixsethfiledhismotionforrecusal.Thejudgment
againstMr.Blixsethisnecessarilydecreasedasclaimsareeitherdisallowedorreduced.The
Courtconsideredtheamendedjudgmentasnothingmorethanamoredefiniti
veembodi
mentof
itsoriginaljudgmentwhereinMr.Blixsethwouldpayfthatamountofmoneyrequiredtopaya11
all
owed:(1)claimsofClass1(prioritynontaxclaims),Class2(othersecuredcl
aims),Class4
44
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 163 of 186
(generalunsecuredclaims,exceptclaimsattri
butabletotheFirstLienLender,ifany),Class5
(convenienceclaims),Class6(intercompanyclai
ms),Class9(pioneer/frontiermemberrejection
claims),Class10(Americanbal
zkclaims),Class11(allowedPrimsecuredclai
ms),Class12
(honorarymemberrejectionclaims),Classl3(founder'scirclememberrejectionclaims),Class
14(companymemberrejectionclaims)andthoseclaimsthatMr.Blixsethidenti
fiesas
not
classified''onExhibitAattachedtohisPost-TrialBrieffiledMarch19,20l0,atdocketentryno.
571,and(2)YCLTforthefeesandcostsithasincurred,andwillincur,objectingtoand
liquidatingsuchclaims.''
Moreover,entryofajudgmentinaspecificamountinAdversaryProceeding09-14paved
thewayfortheCourttoenteranOrderonOctober20,2010,inAdversaryProceeding10-15
denyingtheYellowstoneCl
ubLiquidatingTrust'srequestforapreliminaryinjunctionwherein
theYellowstoneClubLiquidatingTrustsoughtanorderenjoiningMr.Blixseth,andtwoofhis
entities,DesertRanch,LLLPandDesertRanchManagement,LLC,from transferringanyassets
inanamountorofavalueinexcessof$5,000.00.There,theCourtreasoned:
WhatthependingAdversaryProceedingsshowist
hat:(1)Plaintiffinthismatter
hasa$40,067,962.43judgmentagainstMr.Blixseth;and(2)Mr.Blixseth
stipulatedtotheentryofaninjunctionwhichprohibitsMr.Blixsethfromselling,
transferring,disposingof,encumberingorotherwiseliquidating,orcausingany
entityownedorcontrolledbyhim tosell,transfer,disposeof,encumberor
othelwiseliquidate,propertyvaluedat$40millionwithoutpriororderofthe
Court.
ThePl
aintiff'sjudgmentof$40,067,
962.
43is,asMr.Blixseth's
counselstated,inperfectcongnzitywi
ththestipul
atedi
njunctionalreadyinplace.
...
Mr.BlixsethnexttakesissuewithadecisionenteredbytheCourtonAugust4,20l0,in
AdversaryProceedi
ng09-18whereintheCourtdeniedfourmotionsforsummazyjudgmentfiled
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 164 of 186
factthatprecludedsummaryjudgment.
Inadditiontotheaboveallegations,Mr.Blixseth'scounselmadetheadditionalargtlment
att
heJanuary18,2011,hearingt
hat'dgtlhere'
saJanuary14or15e-mailfrom,lthinkitwas
MatthewKiddtoSam Byrnesaying:HowdidyourmeetingswithRonBurkle,thegovernor,and
Mr.Byrnego?There'sane-mailinAugustof2008whenMs.BlixsethandMr.Byrneknewthey
weretakingcontroloftheYellowstoneClubinvolvingameetingwith,withGovernor
Schweitzer.''Mr.FlynnclearlyimpliesthatRonBurkle,whom 1haveneverheardof,Governor
Schweitzer,whom 1havenevermet,andMr.Byrne,wholwouldrecognizeonlyfrom his
appearancesinmycourtroom,metandsomehow exertedpressureonme. ThisCourthasnotand
willnotsuccumbtoanypressure,politicalorotherwise.ThisCourtisanindependentand
unbiasedmemberoftheFederaljudiciary.Tothebestofmyability,1strivetoenterdecisions
thatarebasedsolelyonthefactspresentedandtheapplicablelaw.
Applyingtheapplicablelawtothefactspresentlybeforeme,lconcludethatmy
disqualificationinthiscaseisneitherrequirednorappropriatebecauseMr.Blixsethhasnot
establishedacmalbiasnorhasheshownanyfactswhichestablishanappearanceofsuch
impartialityastorequirerecusal.
ltappearsthatMr.Blixseth'sultimategoalistoupsetwhathasalreadybeendoneinthe
casesinwhichheisinvolved.Suchisnottheappropriateconsequenceofarecusalmotion,
particularlywhereMr.Blixseth'sremediesareadequatelyaddressedthroughtheappellate
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 165 of 186
JudgeKirscher(WithExhibits)t
'
iledNovember30,2010,atdocketentryno.2042,togetherwi
th
thesameAmendedMotionfiledDecember14,2010,inAdversalyProceedingNos.09-00014,
09-00018,09-00064.10-00015,and10-00088areDENIED.
BYTHECOURT
;
'j
:
q
y
't
,
/
'
'
L
cax.,
.a/
t,'
?.
z
-t
j
r
)
, -t-ecps u'
.
HON. ALPHB.KIRSCHER
U.S.BankruptcyJudge
UnitedStatesBankruptcyCourt
DistrictofMontana
47
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 166 of 186
E xh ib it
V
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 167 of 186
Case:12-35986 08/12/2013
*%l l
w! ::
.
.
'
kwz='
r:k
1l.
u
.:=.
,
l
t.:....
'
..q.L.l. y....,.
..
.4
-.
-.
..
.-
'
:
..
!u
cr
.
j:
f
.
u.
x.
a.
;.
r
..'
&
Fk
j)oc.t'
,
3
.
r
z
loff
t
'!:
!
'q
c
ac
oor
,
'
hes
.'g't
a.yorg
af)otl1el
'1P:o
.re:
f.
rc
.eGl:
,
7u
'-t.
tt71t
'
Dl)t'
J1))(,
)r$1
u
.
.
u
t
l
,
x
.
.
,
v
.
.
.
.
.
D
-'
n2J
.n'
J'
r
vit
-'rh
.'
t1
:1J!tn)1
*h
'
7f
')'
t'COf
3'
t1thU1CtC11%
'f)O11?
'f;
7rlG
tl)(
'
1tNSIFk'y'%
ztl
'l
-fN
lyt
2.G
'
/
u
or
o.
v'
.'!IJ
't
3
.!
)h h,
1I
T
'o
'h*
'Pr(.f
'
)4'
A
K
.
.n
w
j,
.!'
.
.
.
a5
tr
w'
y,. .v.K
.. I .
1
1
w
.
.
.
.
.
.
.
.
.
.
u
y
.
'
w)J
>
1
.
:6
.
.1
a
g
.jr
a
.
#
.
)u!j)k
e
'
.
/jn
r.
'
;j
a
(.
k;'j
1
k
.('
!
.g'
jtj'
)p.;
'
).
)to('
!
'
)t
'
N
..
k.
':
.
,.
R!
.*
.t
:.
1v.
.J
:
.:
rl)t)'
1jq
..l
I'
1P.j
.,
.(.
?t
aO('
i(
.
-r
.B
.:t
.!
v
.)w
t$
1.
i.
t
.p.o
-t
.j
(,j
Iq
,q
.
.jf
-.
v.
$n
,
zro
-:
.'
zt)'
'-'
?..et
L.a'tl'
:1t
;casen1ovedbi
3cktofkl()ntanat!tallcost.SF(af)dt
3q$1a'
v'e
's4
3.entf
.
3nc)r!
-)c)LI5(:ap.
it3l
c.o
.1It1ca1
.favorstoefRsuree
ql
,
a,evg!ett17cr1f!h1ot.
)tcon3efron3tf
')ef'
.,
1o;)t
%anabank.rut)tc%'1tld:?e.l
.
.
3
?
.
1
r
'
?
E;uc
.rn,
?clF;
.
3'F.a?.
1cl'
?v'
l2
.bavekI'
)ovv';'t)'
1iF.1
/ors.
:)r))et1I1)(?-a13dg.
'av'et1,t
:lf1u1
7
.
3l
klt
.
12
:
i
3i
)t1.
73tt10-.The'
q
'1'
t
7uF
;t
,
.i
u.t
-r
2
i'
s
,a'
v.p.k
.
lp<
-1.
cIek
.
!!.
otr'%
v.tI41sel
1df'l
.!I
't
m'.
J
w
!.
.
w
.I
<:
D
.z'
u
!
.
w!
kjk
.x
DM Exhibit10
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 168 of 186
E xh ib it
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 169 of 186
FORTHEDISTWCTOFMONTANAFILED
BUTTEDIWSION
wy j$pj1
M- usG- -
lnre:
YELLOWSTONEMOUNTAIN
CLUB,LLC,
Debtor.
No.CV-II-73-BU-SEH
TIMOTHY L.BLIXSETH,
Appellant,
VS.
YELLOWSTONEMOUNTAIN
CLUB,LLC;CRBDITSUISSE;AD
HOCGROUPOFCLASSB UNIT
HOLDERS;C1PSUNRISERIDGE
OWNERLLC;ROBERTSUMPTER;
NORMANDYHILLCAPITALLP;
MARC S.KIRSCHNER;C1P
YELLOWSTONELENDING LLC;
CROSSHARBOR CAPITAL
PARTNERSLLC,
Onappealfrom Bnnkruptcy
CaseNo.08-61570-11
Appellees.
INTRODUCTION
TimothyL.Blixseth(Blixseth)movedtodlsqualifytheHonorableRal
phB.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 170 of 186
Kirscher,UnitedStatesBankruptcyJudge,intheChapterl1banknlptcyInre
YellowstoneMountainClub.LLC,CauseNo.08-61570-11,andinfiverelated
adversaryproceedings.lAllwereopposed. JudgeKirscherdeniedthemotionson
February25,2011.Blixsethmovedforreconsideration.JudgeKirscherdenied
themotionsforreconsiderationonJuly26,2011.Thisappealfollowed.z
ISSUE
Thesinglesubstantiveissueraisedbytheappealiswhethertmder
28U.S.C.j455JudgeKirschershouldhavedisqualifiedhimselfasrequested.3
DISCUSSION
Thedisqualificationstatute,28U.
S,C,j455,provides,inpertinentpart:
sgajnyjustice,judge,ormagistrateoftheUnitedStatesshall
disqualifyhimselfinanyproceedinginwhichhisimpartiality
mightreasonablybequestioned.''
28U.S.
C.j455(a).
Disqualificationistobegrantedororderedonlywhentherecord,
appropriatelyassessed,sowaaants.Clemensv.U.S.-Dist.CourtfortheDist.of
1AdversaryProceedingNos. 09-00014,09-00018,09-00064,10-00015and10-00088.
2SimilarappealswerefiledinCauseNos.CV-I1-74-BU-SEH,CV-Il-75-BU-SEH,
CV-Il-76-BU-SEH,CV-77-BU-SEHandCV-I1-78-BU-SEH.
3TheseparatelysttedissueofwhetherJudgeKirschererredindenyingBlixseth's
motionforreconsiderationissubsumedbyresolutionofthesubstantiveappealissue.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 171 of 186
Cal.,428F.3d1175,l179(9'
bCir.2005)(ajudgehasastrongdutytositwhen
thereisnolegitimatereasontorecuse).Thetesttobeappliedist'
whethera
reasonabltpersonwithknowledgeofal1thefadswouldconcludethatthejudge's
impartialitymightreasonablybequestioned-''Pesnellv.Arsenault,543F.3d
1038,1043(9t
bCir.2008).Thereasonableperson,inthiscontext,meansa's
wellinfo=ed,thoultfulobserver,''andnotai
hypersensi
tiveorundulysuspicious
person.''Clemens,428F.3dat1178.4
JudgeKirscher'sFebruary25,2011,Memorandum ofDecisioncontainsan
exhaustiveanddetailedanalysisanddiscussionofBlixsdh'sinvolvementwiththe
YellowstoneMountainClubentities,
sthehistoryoftheYellowsloneClubrelated
bankruptcies,Blixseth'sparticipationinthoseproceedings,Blixseth'scontentions
inseekingdisqualiication,andtheIaw tobeappliedinaddressingthemotionfox
disqualitlcation.FactualmatterswithintheBankruptcyCourt'spersonal
knowledgearearticulatedindetail.
4BlixsetharguesthisCourtadoptasfnndardofreview poundedinthepropositionthat
thejudge'sactionsshouldbemssessedfromtheNerswctiveofare%onablepersonwhois
predisposedtosuspi
oionsabouttheinnerworki
ngsofthejudiciary.
''SeeBlixseth'sOpeni
ng
Briefat5-6,Thissuggestedsta
'ndazdisrejectedasitsndsnosupportinthelawofthisCircuit,
andissolackinginspecifcityastebeincapableofmeaningfulapplication.
5TheYenowstoneClubentitiesconsistof:YellowstoneMountainClub,LLC;
YcllowstoneDevelopment,LLC;BigSkyRidge,LLC;arzdYellowstoneClubConstruction
Compmm LLC.
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 172 of 186
Bycontrast,thefactualassedionsadvancedbyBlixseth,b0thbeforeJudge
Ki
rscherandinthisappeal,arepoundedinhisself-servi
ngafsdavitswhichhe
claimsmustbeacceptedastrue.Heismisfnken-TheCourtisnotobligedto
adopt,anddoesnotadopt,theassertionsoffactintheafidavitsastrue.Inre
Stasz,2911W.
L6934442*4(9*Cir.BM 2011);lnreAmericanReadyMix-lnc.,
14F@3d1497#1501(10t
bCir.1994).Moreover,manyoftheassertionsoft'fact''
recitedbyBlixsethsimptycannotbereoonoiledwi
thtberecord.Togiveweightto
suchunsupported,oroutrightcontradictedbytherecord,declarationswouldbe
entirelyunwm anted.
NodetailedpointbypointdiscussionofBlixseth'scharacterizationof
eventsoccuningintheunderlyingbankruptcyproceeding,orofthemanyand
frequentflalsinthosecharacterizations,isnecessary.Havingcarefully
consideredtherecordasawhole,includingtherulingsandGndingsmadeby
JudgeKirscherandthebasesforthoserulingsatldfndings,lconcludethatno
showingofbias,orprejudiceoranylackofimpartialitybyJudgeKirscherhas
beendemolutrated.Rather,dispassionateassessmentrcvealsthatextraordinary
considerationwasaccordedBlixsethandhispositionthroughouttheproceedings.
CONCLUSION
lfmdnobasisintherecorduponwhichtoconcludethatJudgeKirscher
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 173 of 186
erredinrefusingtodisqualifyhimself.
ORDER
TheFebruary25,2011,Memorandum ofDecision6oftheUnitedStates
BankruptcyCourtisAFFIR D.
DATEDthisZLdayofNovember,2012.
S M E.HADDON
UnitedStatesDistrictJudge
6CasvNo.08-61570-11
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 174 of 186
E xh ib it
X
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 175 of 186
UNITED STATESDISTRICTCOURT
CENTRALDISTRICTOFCALIFOM IA
CIVILMINUTES-GENEM L
CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
MarcSKirsclmerv.TimothyLBlixseth
Present:TheHonorable
GARY ALLEN FEESS
ReneeFisher
None
N/A
DeputyClerk
CourtReporter/Recorder
TapeNo.
AttorneysPresentforPlaintiffs:
AttorneysPresentforDefendants:
None
None
Proceedings:
(InChambers)
Trusteeinbankruptcy,MarcS.Kirsclmer,movesforanawardofattorney'sfeesafter
successfullyobtainingdismissalofthependingcounterclaims,defeatingamotiontoamendthe
counterclaim,andsucceedingonamotionforimpositionofsanctionsagainstTimothyBlixseth,
thefounderofthebanknzptYellowstoneMotmtainClub(i
theC1ub''
).Thepresentmotionfora
feeawardhasbeenbroughtinresponsetotheCourt'sorderissuedinitsrulingontheforegoing
tllreemotions.TheCourtconcludesthatafeeawardisappropriateandGRANTSthemotion.
TheCourt'sreasoningisdiscussedindetailbelow.
II.
BACKGROUND
ThislawsuitarisesoutofabankruptcyproceedingfiledintheDistrictofMontana.The
suitisbroughtbyMarcS.Kirschner,thetrusteeinbanknzptcy,againstTimothyBlixseth,the
founderofthebankruptYellowstoneMountainCl
ub(C
ttheClub''
).Duringitsoperations,the
Clubborrowed$375millionfromThirdPartyDefendants,variousCreditSuisseentities
(ts
creditSuissen),andthereaftertransferredapproximately$200milliontoBlixseththroughhis
formerbusinessenti
ty,BLXGroupCBLX''
).Inreturnforthefunds,Blixsethexecutedt
'
wo
promissorynotes(the
tNotes''
)infavorofBLX.BLXlaterpurportedl
ycancelledthenotesand
CV-90(06/04)
CIVILMINUTES-GENERAL
Page1oC7
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 176 of 186
UM TED STATESDISTRICTCOURT
CENTM LDISTIUCTOFCALIFO> IA
CIVILMIMJTES-GENERAL
CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
MarcSKirschnerv.TimothyLBlixseth
releasedBlixsethfrom anyliabilitytorepaythe$200million.Thosenoteswerelatertransferred
totheClub,whichwasBLX'Screditor,andtheClub'sbankruptcyestate,throughthepresent
lawsuit,seekstosetaside,underfederalandstatelaw,theallegedlyfraudulentreleaseandto
recoverthe$200million.
Blixsethunsuccessfullysoughtdismissalofthependingcomplaint.Whenthattactic
failed,BlixsethfiledaCounterclaim andThirdPartyComplaintinwhichhecontendedthat
CreditSuisseandrelatedentities,Blixseth'sex-wife,EdraBlixseth,andnow Kirschnerhave
participatedinaRICOconspiracywiththeobjectofgainingcontroloftheClubanditsassets
throughpredatorylendingpractices,thetransferofownershipoftheClubtoEdraduringthe
Blixseths'divorceproceedings,andthependingbanknzptcyproceedingsagainsttheClub.
Blixsethalsomadetllreecontract-basedcounterclaimsagainstKirschnerrelatedtohis
attempttocollectontheNotes.(DocketNo.26(Countercl.
l.)lntheThirdPartyComplaint,
Blixsethsoughtrecoveryfrom fiveCreditSuisseentities,intheeventthathewasfoundliable
ontheNotes,ontheoriesofcontributionandunjustenrichment.(DocketNo.27g'
ThirdParty
Compl.).)
KirschnerfiledaMotiontoDismissBli
xseth'sCounterclaim(thetMotiontoDismiss'),a
MotionforSanctions,andanOppositiontoDefendantandCounterclaimant'sMotiontoAmend
theCounterclaim.(DocketNos.29,30,52.
)OnNovember1,theCourtissuedanorder
grantingallthreeofthesemotionsandorderingKirsclmerGltofileaspecificrequestforfeesand
costsincurredinmovingtodismisstheCounterclaim,movingforsanctions,andopposing
Blixseth'smotionforleavetoamendtheCounterclaim,supportedbybillingrecordsandother
appropriatedocumentation.''(11/1/12Orderat38-39.)lnresponsetotheOrder,Kirsclmer
filedhispresentMotionforAttorneys'FeesandCosts.(DocketNo.73gMem.).)Kirschner
requests$85,014.75inattorneys'fees.(Mem.at6.
)Kirschner'srequestforatt
orneys'feesis
itemizedbyattorney,threeofwhomworkforBailey&Glasser,LLP(%&G''
),andthreeof
whomarewiththefirmofBienert,Miller&Katzman(t&BMK'').(1d.)Kirschneralsorequests
$5,167.96incosts,relatedtoonlinelegalresearchexpenses.(ld.at9.
)
BlixsethfiledalateOppositiontoKirschner'smotionforattorneys'fees,objectingto
Kirsclmer'srequestedfigureonanumberofgrounds:(1)Kirschnerneverproperlymetand
conferredwithBlixsethpriortofilingtheMotiontoDismissandMotionforSanctions,(2)the
attorneys'billing(scontainscountlessentriesthatareblock-billed,whichbringsthe
reasonablenessofeachblock-billedentryintoquestionv''(3)thebillingrecordsttcontai
n
significantentrieswherethedescri
ptionofworkrenderedispartiallyredacted,'(4)thebiling
recordsrevealduplicativebillingbyB&GandBMK,(5)B&GandBMK'shoursfortheMotion
cv-go(06/04)
cikii,ilkvus-cxEltat.
pagezor7
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 177 of 186
UNITED STATESDISTRICTCOURT
CENTM LDISTRICTOFCALIFOM IA
CIVIL MIM JTES-GENEM L
CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
MarcSKirschnerv.TimothyLBlixseth
toDismisstheCounterclaimandMotionforSanctionsaregrosslyexcessive,(6)Kirschner
improperlyseeksfeesforBMlt'spreparationofanOppositiontoBlixseth'sExParteMotionfor
Continuance,and(7)Kirsclmerrequestforcomputerresearchcostsisimproperbecausethe
billingrecordsareunclearandbecauseisthisCourt'slocalnzlesdonotspecifycomputerresearch
asataxablecost.''(DocketNo.75(Opp.
).
)UnderLocalRule7-12,S
sgtlhefailuretofileany
requireddocument,orthefailuretofileitwithinthedeadline,maybedeemedconsenttothe
grantingordenialofthemotion.''C.D.Cal.Rule7-12.BecausetheCourtfavorsdecisionson
themerits,theCourtneverthelessGRANTSBlixseth'sexparterequestforconsiderationofthe
belatedly-filedOpposition.
lnspiteoftheOpposition,however,andforreasonsdiscussedinfurtherdetailbelow,the
MotionforAttorneys'FeesandCostsisGRANTED.
111.
DISCUSSION
A.LEGALSTANDARD
ScReasonablenessisthebenchmarkforsanctionsbasedonattorneys'fees.''Mirchv.
Frank,266Fed.App'x.586(9thCir.2008)(citing28U.S.
C.j1927(authorizingfees
dreasonablyincurred'l).Atwo-stepapproachisemployedinassessingwhetheratt
orneys'fees
arereasonable.lntelCorp.v.Terabytelnt'l,6F.
3d614,622(9thCir.1993)(citingHensleyv.
Eckerhart,461U.S.424,433(1983)).First,thecourtcalculatesthelodestarfigureby
multiplyingthehoursreasonablyspentonthelitigationbyareasonablehourlyrate. Costav.
CommissionerofSocialSec.Admin.,690F.3d1132,1135(9thCir.2012)(quotationomitt
ed);
Moralesv.Cit'
yofSanRafael,96F.3d359,363(9thCir.1996).Second,aft
ercomputingthe
slodestary'thedistrictcourtmaythenadjustthefigureupwardordownwardtakinginto
considerationtwelvettreasonableness''factors:
(1)thetimeandlaborrequired,(2)thenoveltyanddifficultyofthequestions
involved,(3)theskillrequisitetoperformthelegalserviceproperly,(4)the
preclusionofotheremploymentbytheat-torneyduetotheacceptanceofthe
case,(5)thecustomaryfee,(6)whetherthefeeisfixedorcontingent,(7)time
limitationsimposedbytheclientorthecircumstances,(8)theamountinvolved
andtheresultsobtained,(9)theexperience,reputation,andabili
tyofthe
attorneys,(10)thetk
undesirability''ofthecase,(11)thenatureandlengthofthe
professionalrelationshipwiththeclient,and(12)awardsinsimilarcases.
CV-90(06/04)
CIVILMINUTES-GENEME
Page3of7
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 178 of 186
UMTED STATESDISTRICTCOURT
CENTRALDISTRICTOFCALIFOM IA
CW ILMIM JTES-GENERAL
CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
MarcSKirsclmerv.TimothyLBlixseth
Evonv.LawOfficesofSidneyMickell,688F.3d1015,1033(9thCir.2012)(quotingMorales,
96F.
3dat363n.8.)i
f'
hemostcriticalfactoristhedegreeofsuccessobtained.''Hensley,461
U.S.at436.Furthermore,itgtlhereexistsastrongprestzmption'thatthefeedeterminedby
multiplyingareasonablebillingratebythenumberofhoursjustifiablyexpendedonalitigation
constitutesanappropriatefeeaward.''Chandlerv.Koon,996F.2d1223,at*3(9thCir.1993)
(citi
ngUnitedSteelworkersofAmericav.PhelpsDodgeCorp.,896F.
2d403,406(9thCir.
1990)).And,finally,theNinthCircuithasmadeclearthatreasonablefeessaretobecalculated
accordingtotheprevailingmarketratesintherelevantcommunity.''VanSkikev.DirectorOft
keofWorkers'CompensationProcrams,557F.3d1041,1046(9thCir.2009)(quotingBlum
v.Stenson,465U.S.886,895(1984).
)tfherelevantcommtmityisgenerallydefinedasSthe
foruminwhichthedistrictcourtsi
ts.''Id.(quotingBarionv.Dalton,132F.3d496,500(9th
Cir.1997)).
B.APPLICATION
1.ATTORNEYS'FEES
Here,Kirschnerrequestsonlythelodestarfigureatissue-$85,014.75-withnoupward
adjustment,andtheCourtconcludesthatsuchanawardisappropriate,particularlyinlightof
Kirschner'ssuccesswithrespecttoeachofthetlu'eemotionsfiled.Kirsclmer'srequestsfor
attorneys'feesisasfollows:(1)$9,800.00for24.5hoursworkedbyBrianA.GlasserofB&Gat
$400/hour;(2)$30,920.
00for77.3hoursworkedbyJ.
B.PerrineofB&Gat$400/hour;
$24,333.75for108.15holzrsworkedbyLeonaGoldshawofB&Gat$225/110ur;(4)$7,371.00
for11.
7hoursworkedbyStevenJayKatzmanofBMKat$630/hour;(5)$3,750.00for10hours
workedbySusannK.Narholmat$375/130u1
-;and(6)$8,840.00for27.
2hotlrsworkedbyTony
Biscontiat$325/1
40ur.(Mem.at6.)
$$(1)nmostcases,(tlhelawyers'actualbillingratesret
lectmarketrates-theyprovidean
efficientandfairshortcutfordeterminingthemarketrate.''StudentPubliclnt.ResearchGrou
ofN.J.-Inc.v.AT&TBellLabs.,842F.2d1436,1445(3dCir.1988).Here,thebillingrates
listedforeachoftheseattorneysisreasonablegiventhemarketrateinLosAngeles,andthe
ampleexperienceofeachoftheattorneys,asdetailedbyKirsclmerinhisrequest.(SeeMem.at
6-8(describingqualificationsofeachoftheabove-referencedatt
orneys,includi
ng1awschool,
additionaleducation,andformeremploymentl.)TheCourtthusconcludesthatthe$85,014.
75
lodestarcalculationisbasedonareasonablebillingrate.
CV-90(06/04)
CIVILMINUTES-GENERAL
Page4ot#
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 179 of 186
UMTED STATESDISTIUCTCOURT
CENTM LDISTRICTOFCALIFORNIA
CIVILMINUTES-GENERAL
CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
MarcSKirschnerv.TimothyLBlixseth
Thetimespentdraftingthetllreemotionsinquestion 258.95hours-isalsoreasonable
especiallyconsideringthecomplexityoftheissuespresentedandthevexatiousconductofthe
opposition.(Mem.at6.
)AstheSupremeCourtnotedinHensley,indetermini
ngbotha
reasonablebillingrateandareasonablenumberofhours,ltlhereisnopreciseruleorformula..
..'
'Hensley,461U.S.at436.However,tlthemostcriticalfactoristhedegreeofsuccess
obtained.''1d.Here,KirschnerfiledthreemotionsandtheCourtgranteda1ltllree. (11/1/12
Order.
)Themotionswerecomplex,involvi
ng(
hundredsofpagesofpleadings,''Cc
thousandsof
pagesofexhibits,''andrequiringtheCourttoissueanordersparmingsomethirty-ninepagesto
disposeofthecase.(Mem.At2,
'11/1/12Order)Finally,Kirschnerhasvoluntarilyexcludedthe
dtimeoftwopartnersandtwoparalegalsatB&G''andMr.Glasser'stimeCiwasreducedfrom
47.70to24.50hottrs.
''(Mem.at7.)
Blixseth'sOppositiondoesnotaltertheCourt'sconclusionthatKirsclmer'srequestfor
attorneys'feesisreasonable.HisargtlmentthatKirschnerfailedtomeetandconferasrequired
byLocalRule7-3isutterlyunpersuasive.NotonlyisBlixsethraisingthisargumentnearly
eightmonthsafterthefilingofthemotionsinquestion,butKirsclmereffectivelyrebutsthese
allegationswithMr.Glasser'sbillingrecords,whichdemonstratethatthepartiesdid,infact,
meetandconfer.(Replyat2(citingGlasserDecl.
,Exhi
bitA,entryitemdatedMarch27,2012
(1$
CalltoConant(Blixseth'sattorneyl,leftmessagere:ourdesireforhimnottorefilethe
spuriouscounterclaim.
''l.
)
Furthermore,Blixseth'sargumentswithrespecttoblock-billing,redactions,duplicative
hours,anditgrosslyexcessive''hoursaretoovaguetobepersuasive.AstheNinthCircuit
recognizedinBeltranRosasv.Count.yofSanBernardi
no,objectionstoafeerequestshouldbe
specific.260F.Supp.2d990,996n.4(citingGates,39F.3d1439(9thCir.1994)(statingasa
reasonforrejectingthedefendants'contentionthatanattorney'sfeeawardwasinvalid,thatthe
defendantsfailedtomakeadequatespecificobjectionsl);seealsoLawyers'Mut.Ins.Co.v.
HomeIns.Co.,No.93-3839,1995WL150556,at*1(N.D.Ca1.,Mar.20,1995).Thepotential
pitfallsofblock-billedorredactedentriesisthattheywillpreventtheCourtfrom determining
preciselyhow attorneysspentparticularhours.Here,Blixsethfailstopointtoevenoneblockbilledorredactedentrythatwouldcausethispurportedconfusion.AndtheCourtdoesnotfind
thebillingrecordsunintelligibleoropaqueasaresultofKirsclmer'sminorredactionsandthe
block-billinginsomeoftheentries.
WithrespecttotheallegationthatBMK andB&Ghaveduplicativetimeentries,areview
ofthebillingrecordssubstantiatesKirschner'sexplanationthat
CV-90(06/04)
CIVILMINUTES-GENEML
Pagejoff
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 180 of 186
UNITED STATESDISTRICTCOURT
CENTRALDISTRICTOFCALIFORNIA
CIVIL MIN-UTES-GENEM L
CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
MarcSKirsclmerv.TimothyLBlixseth
gclontrarytotheOpponents'suggestion,BMKandB&Gwerenotsimply
reviewingeachother'sworkandcommunicatingwithoutanysubstantive
response.Rather,extensivestrategy,review,analysis,andcommunications
performedbybothBMK andB&G weresubstantiveinnatureand
necessary,addressingcomplexsubstantiveandproceduralissuesarisingin
thiscaseduetoseveralfactors,includingbutnotlimitedto:thenatureof
thespeciousclaimsassertedbyMr.Blixseth'
,thepreexistinglitigation
acrossseveralforums;andcomplexlegalquestionsofintersectingstate,
federal,andbankruptcylaw.
(Replyat7.
)Furthermore,theonecaseBlixsethcitesinsupportofthepropositionthatthe
numberofhoursatissuehereisexcessive-Maughanv.GoogleTech.-lnc.-involvedan
attorneywhobilledover200hoursforthepreparationofonemotion.143Cal.App.4th1242,
1251(2006).Here,Kirschner'scounselspent258.95hourspreparingthreemotions.(Mem.at
6.
)Thus,Blixseth'sOpposi
tiondoesnotaltertheCourt'sconclusionthatthesehoursare
reasonableinlightofthecomplexityofthecaseandthedegreeofsuccessKirschnerobtained.
Finally,Blixseth'sargumentthatthefeesrelatingtothepreparationofKirschner's
OppositiontoBlixseth'sExParteApplicationtocontinuethehearingontheMotiontoDismiss
andMotionforSanctionswasunnecessaryisalsounavailing.TheCourtagreeswith
Kirschner'sassessmentthatC
tltlhetimei
ncurredopposingtheExPart
eApplicationdirectly
relatestoboththeMotiontoDismissandtheMotionforSanctions,astheExParteApplication
wasfiledbyBlixsethinanattempttodelaytheCourt'srulingonthosemattersforthestrategic
purposeofhavingBlixseth'sMotiontoAmendheardfirstv''(Replyat8.)
2.COSTS
Inadditiontoattorneys'fees,Kirsclmerrequests$5,167.96incostslrelatedtoonline
legalresearchexpenses.'(Mem.at9(citingGlasserDecl.!7,
'ExhibitB).
)TheCourtfindsthis
figurereasonableandBlixseth'scontentionthatLocalRule54-4ts
doges)notspecifycomputer
researchasataxablecost''isinapposite.(Opp.at7.)Thetypeofcostrecoverypermittedor
prohibitedunderLocalRule54-4isnotdispositiveofthedeterminationofappropriatecosts
herebecausethesecostsarebeingimposedasaformofsanctionspursuantto28U.S.C.j1927.
CV-90(06/04)
CIVILMINUTES-GENERAL
Page6of7
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 181 of 186
UNITED STATESDISTRICTCOURT
CENTM LDISTRJCTOFCALIFO> IA
CIVILMINUTES-GENERAL
CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
MarcSKirschnerv.TimothyLBlixseth
111.CONCLUSION
Accordingly,theCourtGRANTSBlixseth'sMotionforExtensionofTimetoFile
ResponsetoPlaintiff'sMotionforAttomeys'Fees.NotwithstandingBlixseth'sOpposition,the
CourtGRANTSinitsentiretyKirsclmer'sMotionforAttorneys'FeesandCosts,awarding
Kirsclmeratotalof$90,182.71.AssetforthintheCourt'sNovember1Order,Blixsethis
ls
responsiblefortwo-thirdsofthetotalawardandConantl,Blixseth'sattorney,is)responsible
forone-thirdv
''(11/1/12Orderat39.
)
ThehearingsetforMonday,December17,2012isVACATED.
IT ISSO ORDERED.
cv-90(06/04)
CIVILMINUTES-GENERAL
Page7o(h
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 182 of 186
E xh ib it
Y
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 183 of 186
Plaintiffs,
(DocketNo.392)
CREDITSUISSEAG,aSwisscorporation;
CREDITSUISSESECURITIES(USA),LLC,a
DelawareIimitedliabilitycompany,CREDIT
SUISSEFIRSTBOSTON,aDelawarelimited
liabilitycorporation;CREDITSUISSECAYMAN
ISLANDBRANCH,anentityofunknowntype;
CUSHMAN & WAKEFIELD,INC.,aDelaware
corporationandDOESlthrough100inclusive,
Defendants.
NowpendingbeforetheCourtisPlaintiffs'MotiontoReconsider(DocketNo.392).
Havingcarefullyconsideredtherecordandotherwisebeingfullyadvised,theundersignedenters
thefollowingOrder:
1.BACKGROUND
OnMarch29,2013,theundersignedissuedaMemorandum DecisionandOrdergranting
Cushman&Wakefield'sMotionforSanctions(DocketNo.246)andCreditSuisse'sMotionfor
OrdertoShowCause(DocketNo.253).See3/29/13MDO(DocketNo.352).OnApril12,
2013,PlaintiffsopposedtheMarch29,2013Memorandum DecisionandOrder.SeePls.'Opp.
ORDER-I
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 184 of 186
toSancti
onsOrder(DocketNo.367).1OnApril24,2013,Plaintiffsfiledtheat-issueMotionto
Reconsider,pursuanttoFRCP59.SeePls.'Mot.toRecon.(DocketNo.392).Pl
aintiffs'
MotiontoReconsidermerelyattemptstosupplementtherecordvisvistheunderlyingmotion
forsanctionsandmotionforordertoshowcause,statinginfull(excludingafootnote):
Plaintiffs'counselareoftheopinionthatthisCourtwouldnothaveenteredits
OrderECF352re:Sanctionshaditbeenfullyinformedofthefacts,and
considerationsflowingtherefrom,hadtheCourtthenbeenapprisedofthe
informationcontainedinthefilingsofPlaintiffs'counselduringthelasttwo
weeks.
Plaintiffs'willnotbepresentingamemorandum andargumentinsupportof
thisrequest,butsimplyinvitetheCourttorevisititsdecisioninlightofthe
following:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
ECF367-Response(Objections)reMemorandumDecisionandOrder
ECF355-MotionforRelief-Schwartzman
ECF358-2-DouglasHaneyDeclaration
ECF358-3-RobertC.Huntl
eyFi
rstDeclaration
ECF358-4-MichaelJ.FlynnDeclaration
ECF364-MotionforRelieffromSanctionsbyChri
sandJohnFlood
ECF368-Moti
onforReliefbyPhilipH.Stillman(andrel
atedfilingsj
ECF383-SealedDecl
arationofJamesC.Sabal
os
ECF385-SecondDeclarationofRobertC.Huntley
ECF386-SecondDeclarationofBenjaminSchwart
zman
Seeid.atpp.1-2.BothCreditSuisseandCushman& WakefieldopposePlaintiffs'
reconsiderationefforts.SeeDefs.'Opps.toPls.'Mot.toRecon.(DocketNos.400&401).
II.DISCUSSION
Amotiontoreconsideraninterlocutoryrulingrequiresananalysisoft
'woimportant
principles:(1)errormustbecorrected,and(2)judi
cialefficiencydemandsforwardprogress.
'Plaintiffs'April12,2013OppositioncitestoFRCP72and,therefore,theundersigned
understandsthatitsconsiderationisforU.S.DistrictJudgeEdwardJ.Lodge.SeeFed.R.Civ.P.
72(a)('
$Thedistrictjudgeinthecasemustconsiderti
melyobjectionsandmodifyorsetasi
deany
partoftheorderthatisclearlyerroneousoriscontrarytolaw.'');28U.S.C.j636(b)(1)(A).
ORDER-2
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 185 of 186
Theformerprinciplehasledcourtstoholdthatadenialofamotiontodismissorforsummary
judgmentmaybereconsideredatanytimebeforefinaljudgment.SeePreaseauv.Prudenti
al
Ins.Co.,591F.2d74,79-80(9'
hCi
r.l979).Whileevenaninterlocutorydecisionbecomesthe
ltlawofthecase,''itisnotnecessarilycarvedinstone.
JusticeOliverWendellHolmesconcludedthatthettlawofthecase''doctrineimerely
expressesthepracticeofcourtsgenerallytorefusetoreopenwhathasbeendecided,notalimit
totheirpower.Messi
ngerv.Anderson,225U.
S.436,444(19l2).ld
f'
heonlysensiblethi
ngfora
trialcourttodoistosetitselfrightassoonaspossiblewhenconvincedthatthelawofthecaseis
erroneous.Thereisnoneedtoawaitreversal.''InreAirportCarRentalAntitrustLitigation,
52lF.Supp.568,572(N.D.Cal.1981)(Schwartzer,J.
).However,theneedtoberightmustcoexistwiththeneedforforwardprogress.Acourt'sopinionstsarenotintendedasmerefirst
draft
sssubjecttorevisionandreconsiderationatali
tigant'spleasure.
''QuakerAllowCasting
Co.v.GulfcoIndus.,Inc.,123F.R.
D.282,288(N.D.111.1988).
Reconsiderationofacourt'spriorrulingunderFRCP59(e)isappropriatetdi
f(l)the
districtcourtispresentedwithnewlydiscoveredevidence,(2)thedistrictcourtcommittedclear
erroyormadeani
niti
aldecisionthatwasmanifestlyunjust,or(3)thereisani
nterveningchange
i
ncontrollingl
aw.'S.E.C.v.PlaformsWirelessInt'
1Corp.,617F.3d1072,1100(9t
hCi
r.2010)
(ci
tationomitted).lfthemotiontoreconsi
derdoesnotfallwi
thinoneofthesethreecategories,
itmustbedenied.
Here,evenassumingthatPlaintiffs'MotiontoReconsideristimely(seeCushman&
Wakefield'sOpp.toPls.'Mot.toReconv
,pp.l-2(DocketNo.401)),theyhavenotmettheir
burden.First,Plaintiffsattempttoofferaltogethernewevidencebywayofaddingtothefactual
ORDER-3
Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-3, Page 186 of 186
recordtensubsequentfilings(seesupra),yethavenotshown(nordotheyargue)thatthe
evidencewasunavailableorcouldnothavebeendiscoveredatthetimetheyoriginallysubmitted
thei
rargumentstotheCourt.SeeLainez-ortizv.INS,96F.
3d393,400(9t
hCir.1996)(requiri
ng
newlydiscoveredevidencetohavebeenpreviouslyunavailable,inordertowarrantreopening
proceedings).Still,wherePlainti
ffsfleshoutsomeaddi
tionalfactsnototherwiseaddressedin
theCourt'sMarch29,2013MemorandumDecisionandOrder,theydonotchangethe
undersigned'sopiniononthematter,andtheCourtwillnotreconsideritsearlierdecision.z
Second,anyallegedCl
cl
earerror'-ormanifestinjusticeresultingfromtheMarch29,2013
MemorandumDecisionandOrder(totheextentnotconsi
deredjustai
secondbi
teattheappl
e''
)
isarguablypresentedwithinPlaintiffs'April12,2013Oppositiontothesame,currentlybefore
JudgeLodge.Seesupra.Third,Plaintiffsdonotidentifyanyinterveningchangeincontrolling
lawand,Iikewise,thisCourtawareofnone.Therefore,Plaintiffs'MotiontoReconsideris
denied.
111.ORDER
Fortheforegoingreasons,ITISHEREBYORDEREDthatPlaintiffs'Motionto
Reconsi
der(DocketNo.392)isDENIED.
9a-t
s
.ac.
'sn
*
$
7
MoG
.
<
. '
N
2.
'
.
k
..,-%'...&'.. ,
J.
:i
)
?
'
)
.
I
:
'
c.eht
?
'#
'4
.cc
'r
.
e
z
pz
kn
b
#zC
#
N
o
.'
z- t71
:
DATED:August15,2013
i
HonorableRonaldE.Bush
U.S.MagistrateJudge
2However,consistentwiththeMarch29,2013Memorandum DecisionandOrder,the
undersijnedwilconsiderthereliefsoughtwi
thi
nthemotionsforrelieftiledbyattorneys(l)
BenjamlnSchwartzmanandWadeWoodard(DocketNo.355);(2)ChrisFloodandJohnFlood
(DocketNo.364);and(3)Phi
li
pStillman(DocketNo.368).
ORDER-4