Court rules in favor of Yellowstone Club trust

A court has struck down an appeal to a $40 million judgment against Yellowstone Club founder Tim Blixseth, saying a lower court erred in reducing the claim filed against him by creditors and ordered it back to district court for a recalculation and award of damages, according to court documents.

An attorney representing the Yellowstone Club Liquidating Trust said Monday it could mean as much as $286 million in damages against the multimillionaire who recently got out of jail on a civil contempt charge.

“I think it should be the terminal blow,” Brian Glasser, of Bailey & Glasser LLP, said about Friday’s decision by the U.S. 9th Circuit Court of Appeals. “I don’t think there is any case he has left.”

Blixseth, however, on Monday said he has 90 days to consider an appeal and added the court has sent the matter back to a lower court to reassess.

“You can read (the judgment) as going back up, but it hasn’t yet,” he said.

Glasser said this latest ruling by 9th Circuit judges Alex Koszinksi, Richard Paez and Marsha L. Berzon brings the issue to “finality.”

“At some level (Blixseth) should quit saying there is a giant conspiracy against him,” he said, adding many courts have rejected that claim.

Courts previously ruled that Blixseth fraudulently transferred a $286 million loan to the club for his personal use. The Yellowstone Club’s creditors are seeking more than $250 million from Blixseth. The Big Sky private ski and golf resort, whose members include Bill Gates and former Vice President Dan Quayle, emerged from bankruptcy under new ownership in 2009.

Blixseth, 66, was released from jail earlier in July after spending 15 months at the Cascade County Detention Center for civil contempt of court.

U.S. District Court Judge Sam Haddon jailed the Medina, Wash., resident for not revealing what happened to millions of dollars from the sale of the Tamarindo resort in Mexico, which was made during the Montana mountain resort’s bankruptcy proceedings.

Blixseth’s attorneys reached a $3 million settlement with the club’s creditors in April that closed the Mexican resort case.

Glasser said there was little hope the trust would recover the whole $286 million.

“Obviously, he spent last year dissipating his assets,” he said. “I don’t think this changes the difficulty of collecting from a person.”

Glasser said bankruptcy judge U.S. Bankruptcy Judge Ralph Kirscher had earlier reduced $286 million sought against Blixseth to $40 million and that Blixseth had appealed that judgment. He said the court of appeals reinstated it to $268 million, saying Kirscher did not use appropriate legal doctrine in reaching his decision. Kirscher had found parties involved were equally at fault to reduce charges.

“The lenders may have been reckless in issuing their loans,” the 9th Circuit found, “but such wrongdoing is not comparable in degree or kind to Blixseth’s wrongdoing. Blixseth defrauded the club entities and their minority members, massively enriching himself; breached fudiciary duties and then constructed barriers to recovery of his ill-gotten gains but subsequent fraudulent transfer in MSA (marital settlement agreement) transfers.”

The court found Blixseth could not shield himself of liabilities with the club because of his 2008 divorce of wife Edra.

The court, in its ruling, found fault to share.

“The lenders, in contrast, took inadequate precautions in their efforts to enrich themselves,” the judges wrote. “Credit Suisse’s behavior is somewhat more blameworthy than that of the other lenders, as it sold most of its interests in the loan to other lenders and obtained a substantial origination fee, those raising the possibility that it intended to profit from a bad loan.

“Even so, Credit Suisse’s behavior does not compare to Blixseth’s intentional and prolonged flouting of the law.”

“We affirm the judgment in favor of YCLT and reverse the reduction in damages,” the court wrote.

Glasser said the trust likely would not have appealed the decision had Blixseth not appealed.

He said the ruling could be appealed to the U.S. Supreme Court, but doubted the justices would accept the case.

The trust will continue collection actions to get some assets through the account of Blixseth’s current wife, Jessica, Glasser said.