HELENA – In the latest setback against Yellowstone Club co-founder Tim Blixseth, a federal bankruptcy judge has rejected an effort by Blixseth to unravel the sale of the exclusive club to new owners and overturn a $40 million fraud judgment against him.
Blixseth filed an appeal with U.S. District Judge Sam Haddon arguing that the club’s original bankruptcy filing was made in bad faith, that U.S. Bankruptcy Judge Ralph Kirscher approved the settlement without appropriate notice and that it wrongly exempted Credit Suisse and others from liability.
Last November, Haddon sent the case to Kirscher to address the notice and liability exemption issues.
Kirscher’s ruling, filed Friday, listed the court orders that gave notice of the July settlement approval hearing. He also wrote that Credit Suisse, buyer CrossHarbor Capital Partners and others are only exempted from liability for actions connected to the Chapter 11 bankruptcy case and nothing before it was filed in November 2008.
Blixseth asserted Sunday that Haddon sent the case back to Kirscher for reversal of the bankruptcy.
“Judge Kirscher ignored and failed to follow judge Haddon’s remand and reversal of the Yellowstone Club bankruptcy and we will be seeking a writ of mandate to compel judge Kirscher to obey judge Haddon,” Blixseth wrote in an email to The Associated Press.
In 2005, Credit Suisse made a $385 million loan to the club, most of which was diverted to Tim and Edra Blixseth’s personal use. A civil fraud case over the diversion was the foundation of the judgment against Blixseth.
Blixseth filed a lawsuit in June arguing that he was betrayed by his former attorney Stephen Brown of Missoula in the civil fraud case. The lawsuit alleges Brown signed off on the Credit Suisse loan as legitimate and later served as chairman of the unsecured creditors committee that filed the complaint over the $286 million.
“While the Court cannot anticipate every claim Blixseth may have against the parties involved in this case, the specific claims discussed during testimony are outside the scope of the release provision at issue,” Kirscher wrote.
“For instance, any claim Blixseth may have stemming from Brown’s advice with respect to Blixseth’s marital settlement agreement or the Credit Suisse loan transaction is clearly outside the scope of exculpation clause,” he wrote.
Kirscher has already ruled that the bankruptcy settlement was negotiated in good faith.