Blix V YMC App # 55 - 12-35986 - YCLT Opp W Exhibits

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 1 of 23
RECEIVED
MOLLY C. OWYEH, CLERK
U.S. COURT OF APPEALS
.. r.1
Au\.~,., _ 9. LUL.J
Case No. 12-35986
FILED ___________ _
DOCKETED
----
IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT
TIMOTHY L. BLIXSETH
Appellant,
v.
YELLOWSTONE MOUNTAIN CLUB, LLC, et al.
Appellees,
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF MONTANA, BUTTE DIVISION, CASE No. 2: l 1-cv-00073-BU-SEH
HONORABLE SAME. HADDON, DISTRICT JUDGE, PRESIDING
YCLT'S OPPOSITION TO TIMOTHY BLIXSETH'S EMERGENCY

MOTION TO STAY PROCEEDINGS
Charles W. Hingle (1947)
Shane P. Coleman (3417)
HOLLAND & HART LLP
401North31st Street, Suite 1500
P.O. Box 639
Billings, Montana 59103-0639
chingle@hollandhart.com
spcoleman@hollandhart.com
Phone:406-252-2166
Facsimile: 406-252-1669
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
Attorneys for YCLT
EXHIBIT
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Yellowstone Club Liquidating Trust ("YCL T") files this Opposition

to Timothy Blixseth's Emergency Motion Under Circuit Rule 27-3 to Stay
Proceedings ("Motion to Stay").
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,
Blixseth seeks a stay of enforcement without having to post a supersedeas

bond, which is clearly inappropriate. The basis for the relief now sought is
the alleged misconduct of the Honorable Ralph B. Kirscher ("Judge
Kirscher"). Currently pending before this Court is Blixseth's appeal with
respect to his efforts to disqualify Judge Kirscher from presiding over the
Yellowstone Club bankruptcy and its related proceedings, efforts which
Judge Kirscher, as well as the District Court on appeal, have flatly rejected.
Blixseth first moved to disqualify Judge Kirscher in 20 I 0, alleging
that he was part of some mythical "grand conspiracy." Predictably, these
accusations have not been made against Judge Kirscher alone. Among those
Blixseth further seeks to stay YCLT's pursuit of other lawsuits.
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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.
(Exh. B at pp. 3-9) Blixseth's grand conspiracy
theory now even reaches to Washington, D.C., where in a recent letter

Blixseth added Attorney General Eric Holder and his Deputy, Lanny Breuer,
to the ever-growing list of individuals allegedly out to get him. (Exh. C).
None of these accusations have ever been found to have merit. Indeed,
Blixseth and his counsel have been sanctioned in another federal court case
in which Blixseth filed a $9 billion counterclaim against the then YCL T
Trustee, Marc S. Kirschner, alleging that the YCLT Trustee was part of the
same "grand conspiracy" involving Judge Kirscher. (Exh. D) Blixseth's
counterclaims were dismissed on the YCL T's motion to dismiss, and
sanctions of $90, 182. 71 collectively were granted against Blixseth and Mr.
Conant because their counterclaim filing was made "in bad faith and in
knowing disregard of Rule 13 and the Barton rule." (Id.; see also Exh. X
(order granting sanctions, to be paid 1/3 by Conant and 2/3 by Blixseth)).
As the Honorable Gary A. Fees, United States District for the Central
District of California further aptly stated:
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However, there is more: the voluminous evidence produced

by the Parties regarding conduct by Blixseth and his
counsel in other proceedings provides further support for
the conclusion that the Counterclaim was filed with
improper motive. It is apparent to the Court that Blixseth is
involved in numerous contentious legal battles in various fora
with Kirschner and a host of other entities and persons. In these
other proceedings, he has achieved some success, and has
suffered significant defeats. It is also apparent, however, that
Blixseth views all of these proceedings as part of a vast
conspiracy in which his opponents, the courts, and persons
holding political office are aligned against him. His response
has been to engage in scorched earth tactics in which he has
launched attacks against every perceived adversary.
(Exh. D (emphasis added)).
Blixseth first moved to disqualify Judge Kirscher in 2010, claiming
Judge Kirscher was guilty of all kinds of nefarious conduct.
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
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further concluded concerning Blixseth, "[t]he overwhelming evidence shows

a pattern of deception as it relates to the use of the Credit Suisse loan
proceeds."
Id. at 651.
And finally, the Bankruptcy Court concluded,
"Blixseth's fraudulent intent could not be more clear." Id. at 664.

Less than three months after entry of those findings and conclusions,
Blixseth alleged for the first time that grounds existed for the
disqualification of Judge Kirscher. In an exhaustive 47-page memorandum,
Judge Kirscher painstakingly dispelled each of Blixseth's unfounded
allegations. (Exh. U). On appeal to the United States District Court for the
District of Montana, the Honorable Sam E. Haddon presiding ("Judge
Haddon"), concluded that "no showing of bias, or prejudice or any lack of
impartiality by Judge Kirscher has been demonstrated. Rather, dispassionate
assessment reveals that extraordinary consideration was accorded Blixseth
and his position throughout the proceedings." (Exh. W).
Undaunted by these rulings, Blixseth pressed on and filed six appeals
relating to the denial of his disqualification motion (12-35986, 13-35191,
13-35192, 13-35196, 13-35197 and 13-35198).
Apparently, he has also
recently filed under seal a Complaint of Judicial Misconduct against Judge

Kirscher, Case No. 13-90073.
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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
overwhelming evidence supporting YCLT's claims. Id. As a result, Judge

Kirscher entered a judgment against Blixseth.
Although he found that
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.
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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.
II. SUMMARY OF ARGUMENT

Although Blixseth sets forth a plethora of alleged grievances in this
Motion to Stay, the vast majority are simply regurgitations of issues that he
has raised in the past, which have been flatly rejected below, and which are
currently pending in this
Court on appeal.
Frankly, the older
misrepresentations set forth in the Motion to Stay are too numerous to refute
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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
remainder of this response will focus on this so-called new "evidence."

Specifically, Blixseth claims to have discovered (1) internal documents
allegedly retrieved from his ex-wife's computers; and (2) documents printed
off the internet that allegedly demonstrate that Judge Kirscher currently has
a relationship with the law firm he was associated with prior to becoming a
bankruptcy judge some 13 years ago.
As will be shown, there are senous issues with respect to the
authenticity of the "evidence" allegedly obtained from the computer of
Blixseth's ex-wife. Yet, Blixseth fails to inform this Court that there are
serious issues that have been raised as to authenticity of these documents.
This failure to be candid with the Court is strikingly similar to the actions of
some of Blixseth's counsel in a case pending in the United States District
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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.
If Blixseth (or his counsel) had
conducted even a cursory review of that internet information they would

have determined that the information was unreliable.
Simply stated,
Blixseth's newly discovered alleged "evidence" does not in any fashion

support the relief he seeks.
III. ARGUMENT
Blixseth and his counsel are besmirching the character of a sitting

federal judge based on "evidence" they ought to have reason to believe ( 1)
has been altered; and (2) is demonstrably unreliable.
A.
Documents allegedly retrieved from his ex-wife's computer
Blixseth refers to two documents that were allegedly obtained from

the computer of his ex-wife, Edra Blixseth ("Edra"). Specifically, there are
two memos that are said to be attached as Exhibits 13 and 16 to the
Emergency Motion. While these documents are set forth in the voluminous
exhibits tendered by Mr. Blixseth, the YCL T cannot ascertain whether they
have properly been identified as Exhibits 13 and 16. Accordingly, for ease
of reference herein YCL T attaches those documents as Exhibits T and V.
{5290100100736430.DOC I I}
Blixseth repeatedly refers to this "evidence" as "authenticated" when

Blixseth knows full well that it is anything but authenticated. Significantly,
Blixseth fails to tell the Court that there are serious questions about the
authenticity of this "evidence."
Such failure is simply bewildering (and
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 that proceeding, Blixseth brought a Motion for Sanctions and
proffered these exhibits in partial support of that relief.
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
memo, Blixseth points to the following statement as evidence of Judge

Kirscher' s alleged bias and corruption: "Remember we have added help
there from the BK Judge who loves us, and hates Tim and Mike Flynn. At
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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.
Closer examination reveals, however, that the
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
Blixseth boldly proclaims that in her deposition in December of 2012 Edra

authenticated the altered MSA memo. This is an outright misrepresentation
of the record. The deposition transcript referred to in this regard consists
mainly of sparring between lawyers as to whether the document can even be
used. In her deposition Edra was shown the seven-page altered MSA Memo
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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.
According to Edra, the MSA
Bullet Points Memo is "completely manufactured. I didn't type it and I have

never seen it before." (Exh. E). Furthermore, all Blixseth's so-called expert
can offer with respect to MSA Bullet Points Memo (which is a pdf) is the
time at which it was allegedly placed on the so-called "bare" drive.
that, as shown, at first glance has the appearance of being identical to the
original MSA memo. Notably, the statement upon which Blixseth relies
(and which was added) appears on the last page of the seven page document.
What is abundantly clear, however, is that Edra did not authenticate the
alleged statements in the document on which Blixseth places so much
reliance and asks this Court to do so as well.
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11
Blixseth repeatedly makes the feeble allegation that the so-called

expert somehow proves the foregoing documents were created at a time
when "it is believed" the computer was in the exclusive control of Edra. It
does no such thing.
Additionally, one would think before making such
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
Montgomery bankruptcy case, Flynn alleged that Montgomery defrauded the

United States government.
To that end, Montgomery asserted his Fifth
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
deposition, Mr. Flynn accused Montgomery of being a "computer hacker"

and a "fraud." (Exh. J at p. 230).
The above-referenced lawsuit stems from a sanction award Flynn
received from the United States District Court in Nevada against
Montgomery. In that action, the court concluded that "Mr. Montgomery's
September 2007 declaration contained untrue statements, which he knew
were untrue." (Exh. K at p. 1). The court further ordered that a copy of its
order was to be sent to the Office of the United States Attorney. (Exh. K at
p. 53).
Despite the foregoing history, Blixseth (through Flynn and Conant)

now submit to this Court computer related "evidence" that was allegedly
obtained from the same Dennis Montgomery who in their own words, has "a
long history of fraud and perjury" and is a "computer hacker." Apparently,
when Montgomery is providing "evidence" that is allegedly helpful to their
cause, his past pattern of "lying under oath"
IS
of no concern.
submits that for this reason alone this Court
IS
entitled to, and should,
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13
YCL T
disregard entirely everything provided by Montgomery, who, according to a

United States District Judge and Blixseth's own counsel, is a liar.
Significantly, this is not the first time Blixseth's counsel (with the
exception of Mr. Ferrigno) have played fast and loose with a Court when it
comes to evidence. Specifically, in March of 2013, Messrs. Flynn, Conant
and Stillman were sanctioned by the United States District Court in Idaho (in
a case where they represent Mr. Blixseth's son) for improperly relying on
certain evidence. (Exh. L). 4 In that case, counsel submitted an unsigned
declaration from a witness to the Court in connection with a pending Motion
to Dismiss claiming that this "whistle blower"
feared retaliation.
Subsequently, counsel obtained a sworn affidavit from the witness that

differed from the unsigned declaration that had been submitted to the Court.
Messrs. Flynn, Conant and Stillman failed to reveal the existence of this
sworn affidavit and continued to rely on the unsigned declaration.
In
ordering sanctions, the Idaho District Court found:
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.
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14
Plaintiffs' counsel had a duty of candor under Idaho Rule of

Professional Conduct 3.3(a)(l) not to knowingly 'make a false
statement of fact or law to a tribunal or fail to correct a false
statement of material fact or law previously made to the tribunal
by the lawyer.' Plaintiffs' counsel's failure to file the signed
statement of Mr. Miller, once it was received and in the context
of representations in writing and orally about the facts and
circumstances of Mr. Miller's unswom testimony, constituted
the equivalent of an affirmative misrepresentation. The signed
'affidavit' was not the same document as the unsigned
declaration. The statement of fact that the witness, Mr. Miller,
would not sign a statement under oath because of fear of
retaliation was no longer true, even if true at the outset, the
moment he did sign the affidavit. Further, Plaintiffs counsel's
failure to remedy such matters is a breach of a lawyer's duty
'duty of candor to the tribunal' (sic) which warrants 'reasonable
remedial measure.' (Internal citations omitted).
In addition, Mr. Conant was also sanctioned in another federal court
case in which Blixseth filed a $9 billion counterclaim against the then
YCL T Trustee, Marc S. Kirschner. (See Exh. D) In that case, Blixseth
alleged that the YCL T Trustee was part of the same "grand conspiracy"
involving Judge Kirscher. Blixseth's counterclaims were dismissed on the
YCLT's motion to dismiss, and sanctions of $90,182.71 collectively were
granted against Blixseth and Mr. Conant because their filing was made "in
bad faith and in knowing disregard of Rule 13 and the Barton rule." (Id.; see
also Exh. X (order granting sanctions, to be paid 1/3 by Conant and 2/3 by
Blixseth)).
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15
Unfortunately, counsel learned nothing from these experiences. They

continue their pattern of failing in their duty to be fully candid with the
Court. They ought to be sanctioned for it.
B.
Judge Kirscher's alleged relationship with his former law

firm.
Blixseth asserts that Judge Kirscher continues to have some

"undisclosed" relationship with his former law firm, Worden Thane, P.C.,
which he left in 1999 when he took the bench. This is important, posits
Blixseth, because Worden Thane represents the Class B Shareholders (the
appeal relating to the Class B Shareholders is 13-35113). In other words,
Blixseth accuses Judge Kirscher of an improper relationship with the law
firm of one ofBlixseth's creditors.
What is the smoking gun that proves these serious allegations? The
internet -
which we all know is never wrong. Blixseth attaches as evidence
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).
Moreover, there are other
mistakes on the data.com site. For instance, Robert Terrazas is listed as a

vice-president also, yet he is not with the firm, but has his own firm, The
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16
Terrazas Law Offices. (Exh. P). Likewise, Benjamin Williams is no longer

with the firm. Finally, Amy Smith, who data.com lists as a second year
associate, has been with the firm since 2008, making her a fifth or sixth year
associate. (Exh. Q). According to data.com, Ms. Smith's information was
last updated on October 19, 2012. That is obviously inaccurate. Thus, the
fact that Judge Kirscher's information was allegedly updated on September
19, 2012 is suspect to say the least. The fact of the matter is if you are going
to accuse a federal judge of misconduct, you should not stake your claim on
unreliable information from some obscure website that obtained its
information from who knows where or when, with no apparent effort
whatsoever to confirm the accuracy of those serious allegations.
Blixseth also states that according to intelius.com the email address of
rkirscher@wthlaw.net is currently associated with Judge Kirscher. Blixseth
attaches the web page from this site to support his claim. The section above
the email address that is entitled "What is an Email Lookup?" states that it
contains current and historical information. (Exh. R). No one denies that
Judge Kirscher once had an email address at Worden Thane since he once
worked there. The information from the intelius website, however, in no
way proves Judge Kirscher has a current email address there. In fact, the
attorneys from YCL T have attached, an email it received recently from one
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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
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18
without merit. Likewise, the ever-growing list of those allegedly conspiring

against Blixseth is simply too lengthy to set forth herein.
Recently, the
number of alleged conspirators expanded when Blixseth added U.S.

Attorney General, Eric Holder, and his Deputy, Lanny Breuer, to the evergrowing list of individuals out to get him. (Exh. C). In an eleven-page May
29, 2013 letter submitted to the Public Integrity Section of the U.S.
Department of Justice, Blixseth's lawyers (including Messrs. Flynn, Conant
and Stillman) allege that "[i]n 2010 the Montana political machinery
operated by Schweitzer [former Governor of Montana] under the financial
influence of Burkle and Byrne [two more alleged conspirators] then turned
directly to the Holder/Breuer DOJ to directly 'target' Mr. Blixseth with a
baseless criminal investigation, and derail the Montana federal career agent
investigation of Edra." In a word, ridiculous.
It is time for this misconduct to end. YCL T submits that this Court
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.
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19
DATED this I6'"dayofAugust,2013. ~M

Robert . Bell
MULLIN HOARD & BROWN, LLP
Amarillo National Plaza Two, Suite
800
500 South Taylor, Lobby Box #213
Amarillo, Texas 79101-2445
rbell@mhba.com
ATTORNEYS FOR YCLT
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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
Michael John Ferrigno

Law Office of Michael J Ferrigno
PLLC
Suite 486
1200 N. Main Street
Meridian, ID 83680
michael. ferrigno@ferrigno-law.com
Michael James Flynn Sr.

Michael J. Flynn
P.O. Box 690
6125 El Tordo
Rancho Santa Fe, CA 92067
mike@mjfesq.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

MULLINHOARDBROWNLLP
ATTORNEYS AT LAW
ROBERT
R.
BELL, PARTNER
Amarillo Office
RECEIVED
August 16, 2013
MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
Via Federal Express

FILED
DOCKE~T~E~D~~~~~~
Clerk of the Court for the

Ninth Circuit Court of Appeal
95 Seventh Street
San Francisco, CA 94103
Re:
DATE
INITIAL
Emergency Motion to File Under Seal; Cause No. 12-35986
Dear Clerk of the Court:

Pursuant to Circuit Rule 25-5(b)(9) and Circuit Rule 27-13(c), please find the enclosed
documents submitted for filing in paper format:
1.
Motion Under Circuit Rules 27-3 and 27-13 to File Opposition to Emergency
Motion to Stay Under Seal;
2.
YCLT's Opposition to Timothy Blixseth's Emergency Motion to Stay

Proceedings;
3.
Notification of Filing Under Seal Pursuant to Circuit Rule 27-13; and
4.
Proposed Order granting Motion to File Opposition to Emergency to Stay Under

Seal.
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.
Very truly yours,
(})/+fu (I
Ro~~;
PO
BOX
31656,
79120
500 S TAYLOR SUITE 800, LB 213 AMARILLO,

PHONE
806-372-5050 FAX
806-371-6230
AMARILLO
LUBBOCK
DALLAS
WWW.MULLIN HOARD.COM
IDATAIDOCS\LEGALl5290100100736423
DOC
TEXAS
79101
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O9-O0O14-RBK DOc#:713 Filed:12/05/12 Entered:12/05/1215:24:42 Page1Of2
UNITEDSTATESBANKRUPTCY COURT
FORTHEDISTRICTOFMONTANA
lnre
YELLOWSTONEMOUNTAIN CLUB,
LLC,
CaseNo.08-61570-11
Debtor.
TIMOTHYLBLIXSETH,
Plaintiff.
AdvNo.09-00014
MARCSM RSCHNER,TRUSTEEOF
THEYELLOWSTONE CLUB
LIQUIDATINGTRUST,
Defendant.
SECOND AMENDED JUDGMENT

AtButteinsaidDistrictthis5thdayofDecember,2012.
TheissuesofthisproceedinghavingbeendulyconsideredbytheHonorableRalphB.
Kirscher,UnitedStatesBankruptcyJudge,andadecisionhavingbeenreachedaftertrialonthe
merits,
ITISHEREBYORDEREDandADJUDGEDthatJudgementisenteredinfavorof
TimothyL.Blixseth,inpart,andMarcS.Kirschner,TnzsteeoftheYellowstoneClub
LiquidatingTnzst,inpart,witheachpartytopaytheirowncostsofsuit;andMarcS.Kirschner,
TrusteeoftheYellowstoneClubLiquidatingTnzstisawardedajudgmentagainstTimothyL.
1
O9-OOO14-RBK Doc#:713 Filed:12/05/12 Entered:12/05/1215:24:42 Page2Of2

Blixsethintheamountof$40,992,210.8l.
ITISFURTHERORDEREDandADJUDGEDthatnoneoftheproceedsfromthe
foregoingJudgmentshallbepaidtoCreditSuisse.
BY THECOURT
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HON. ALPHB.KIRSCHER
U.S.BankruptcyJudge
UnitedStatesBankruptcyCourt
DistrictofMontana
E xh ib it
B
ase2:11-cv-08283-GAF-SP Document30 Filed04/11/12 Page1Of23 PageID#:597
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,
FOR SANCTIONS;MEMOM NDUM

OFPOINTSANDAUTHORITIESIN
SUPPORTTHEREOF;DECLARATION
OFBRIAN A.GLASSER
Date: May21,2012
Time: 9:30a.m.
Ctrm: 740
Location:RoybalFed.Bldg.
255E.TempleSt.
LosAngeles,CA
Judge: Hon.Gary.A Fees
'
ase2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page2Of23 PageID//:598
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
'
ase2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page3of23 PageID#:599
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
16
AdmittedProHacVice
17
MULLIN HOARD & BROWN,LLP
StevenL.Hoard
18
JohnG.Turner
19
AttorneysforPlaintiff
MARC s.KIRSCHNER,asTrusteeofthe
20
AdmittedProHacVice
21
22
23
24
25
26
27
28
z
NOTICEOFMOTIONAND MOTIONFORSANCTIONS;DECLAM TIONOF
BRIANA.GLASSER
1
2
3
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5
6
7
8
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13lillseth's tllLrtlllt ttEtt;lt()rltlle-1-rtlstkle................................-.......................6)
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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
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22
23
24
25
26
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NOTICEOF OTIONAND OTIONFORSANCTIONS;DECLA TIONOF

BRIAN A.GLASSER
ase2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page5Of23 PageID//:601
1 TABLE OFAUTHO TIES

2 Cases
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
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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
againstan (opposingparty.'Thusapartysuedby atrtlsteemay assertacounterclaim

againstthetrustee,butonlyifthetrusteeisan opposingparty'withinthemeaningof
Rule13.ltiswell-establishedthatwhenapartysuesinhisrepresentativecapacity,heis
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
ase2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page7of23 PageID#:603
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
BRIANA.GLASSER
ase2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page8Of23 PageID4:604
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
18 JudgeKirscher. SeeRJN,Ex.A (MotiontoDisqualifyBankruptcyJudgeKirscher).

19 Blixsethoutrageouslychargedthat:
20
Judge Kirscher has pre-judged that the Yellowstone Club
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
ase2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page9Of23 PageID#:605
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
he(Sam Byrneqhadameetingwith thegovernor,thatthat
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
'
se2:11-cv-08283-GAF-SP Document30 Filed04/11/12 Page10of23 PageID#:606
1
2
3
4
THECOURT:....1justwanttoclearupsomethingthatMr.
Flynn tried to suggest.Mr.Flvnn.there are four disks.

Thev'reriehtthere.Therearetheer-mailsthatwerehanded
to medurinethetrialinAm14.And Itakeexceptionto
vourcommentthatthere,soneorthere,s--thatsugeests
thatthevweremissine.
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
down.....oh1forgotGary Disilvestritoo . . . standby

criminals....Andallofyouaregoingtobeindicted,youare
thecenterofevilandyourlittlefatboybyrneisabouttofall.
Y
ouweresogreedy....youshouldhavebeenhappytogetPC
andYC....ohno,youandfatboyplannedthiswholecharade
andwantedmyhalfandguesswhat....therewasafew who
figuredoutourgame.....andtheyaregoingtohauntyouthe
restofyourlife. Youandyourgangaregoi
ngtojail....as
'
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
se2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page12Of23 PageID#:608
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
se2:11-cv-O8283-GAF-SP Document30 Filed04/11/12 Page13of23 PageID#:609
1 Datsopoulos,MacDonald & Lind,P.C.,Nov.9,2011 3:45 p.

m.). ln separate
2 correspondence,Mr.Stillmanstates:
3
1writethisseparateconcurrencetomakesurethatyou,your
client,and al1otherresponsiblepersonsunderstandtheMr.
4
BlixsethintendstofileaMotionforSanctionspursuanttoRule
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
se2:11-cv-08283-GAF-SP Document30 Filed04/11/12 Page14Of23 PageID//:610
D. Blixseth'sCurrentAttackontheTrustee
OnMarch9,2012- nearl
yseken(7)yearsaflerBlixsethclaimsthatvarious
3
4
5
6
7
8
9
10
11
12
13
14
conspiraciesagainsthim started- Blixsethfinallyaddedthelastpersonhecouldthinkof

asaparticipantin theconspiracies:theTrustee.zTheTrusteewasappointed by the
BankruptcyCourtin2009andsucceededtoa1loftheassetsandclaimsoftheDebtors.
Inthiscase,BlixsethallegesinsummarythattheTrusteeispersonallyliabletohim
because theYCLT and itsTrustee allegedly are the tspawns''ofCreditSuisse and
Crossl-larbor,Counterclaim at1-2,andfurtherthattheYCLT anditsTrusteepersonally
areScnow theprimary instrumentality in CreditSuisseandCrossl-larborimplementing
theirscheme againstMr.Blixseth to defraud Mr.Blixseth by extracting from him
hundredsofmillionsofdollars'worthofassetsthathereceivedoutoftheMSA.''1d. at
61.
These are notCdnew''claimsby Blixseth,although now naming the Trustee
individually certainly isnew.In fact,in AP-14thesevery issuesweresetoutby the
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
barred asaresultofproximatecausation by theconductof

otherparties,including butnotlimited to,thecollusion of
Edra Blixseth,Sam Byrne and CrossHarbor Capitalto
thwarta purchaseoftheDebtorsbv filine a Chapter11
petitioninbadfaith.''
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
BRIAN A.GLASSER
se2:11-cv-08283-GAF-SP Document30 Filed04/11/12 Page18Of23 PageID#:614
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
18 elements.Counterclaim at!! 121,137,138,141(a)& 143.Rather,Blixsethmakes

19
20
21
22
23
24
25
26
27
28
conclusory statementsthattheTrusteeisessentially apawn''oraCzombie.''These

descriptionsaretheexactoppositeoftherequiredStagreement''forRICO purposes.Based
on the allegations in the Counterclaim,the Trustee merely communicated with his
lawyers,filedpleadingspertheTrust'sspecificgrantofauthority,includingthecourtgrantedauthoritytocommencethislitigation,andtestifiedattrialandindepositionsnoneofwhichisactionable,a1lofwhichisinfactconductincumbentupontheTrusteeas
a fiduciary. Blixseth does not allege a single fact involving any conversation,
communication,meeting,oractionbywhichtheTrusteecouldhavelearnedaboutany
agreementbetween CreditSuisse,Cushman & Wakefield,orCrossHarbortodefraud
Blixseth.Blixseth failstoallegeany facts necessary tobring aRICO claim.Rather,
13
BRIANA.GLASSER
1 BlixsethbroughtthisRICO claim toharassandintimidatetheTnzsteepersonally,andto

2 continuehispattem ofdilatorytacticsandvexatiouslitigation,asdemonstratedabove.
3
Accordingly,Blixseth and his counselshould be sanctioned for forcing Mr.
4 Kirschnertodefendagainsttheselegallyfrivolousclaimsforrelief.
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
'
1 hecollectsonbehalfofCreditSuisse.''Counterclaim at103& 103n.2.

2
lnfact,asBlixsethisawareandtheBankruptcyCourtalreadyfound:
3
Sinceitsinception, thelargestcreditorin thiscasehasbeen
4
CreditSuisseandthePrepetition Lenders. YCLT isonly a
successoroftheDebtors. Blixsethhasshownnoevidenceto
5
suggestanywrongdoingbytheDebtors. Similarly,YCLT is
6
notasuccessorininteresttoEdraandtheCourt,todate,hasnot
agreedwithBlixseth'sgrandconspiracytheoryregardingByrne
7
andEdra. Thus,theCourtisnotconvincedthatYCLT has
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
BRIANA.GLASSER
*1
1 V. CONCLUSION
2
Basedontheforegoing,andtheargumentssetforth in theTrustee'sMotionto
3 Dismiss Blixseth's Counterclaim for $6,000,000,000.00 (Six Billion Dollars),the

4 Trustee'sMotionforSanctions(i)shouldbegrantedinitsentirety,(2)monetarysanctions
5 atleastintheamountofattorneys'feesandcostsinconnectionwithpreparingandfiling
6 theMotiontoDismissandthisMotionforSanctionsshouldbeimposedagainstBlixseth
7 andhiscounsel,(3)counselfortheTrusteeshallhavetwoweekstosubmitfeeandcost
8 petitions.
9
Dated:April11,2012
BIENERT,MILLER& KATZMAN,PLC
10
By: S/StevenJavKatzman
StevenJayKatzman
11
MARCS.KIRSCHNER,asTrusteeofthe
12
13
BAILEY & GLASSER LLP
,
14
BrianA.Glasser
15
16
AdmittedProHacVice
17
18
StevenL.Hoard
JohnG.Turner
19
20
21
AdmittedProHacVice
22
23
24
25
26
27
28
l7
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
NOTICEOFMOTION ANDMOTION FORSANCTIONS;DECLARATIONOF

BRIANA.GLASSER
ase2:11-cv-O8283-GAF-SP Document30-1 Filed04/11/12 Page1Of2 PageID4:620
1 StevenJayKatzman(CaliforniaBarNo.132755)
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4 Tel:(949)36#-3700+ax:(949)369-3701
5 BrianGlasser
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8 Tel:(304)340-2282/17ax:(304)342-1110
9 stevenL.Hoard
1() s
hoard@mhba.com
11 P.0.Box31656
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.
NOTICE OFMOTION AND

MoTlox FoR sAxcTloNs
22
Defendant.
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
2
5E.TempleSt.
Iw5
osAngeles,CA
'
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September20,2011
P'
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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
Case2:1l-cv-O8283-GAF-SP Document30-2 Filed04/11/12 Page3of12 PageID4:624

MarcS.Kirschner
Re:Kirschnery.Blixsetltetal.
September20,2011
Page2of5
freeandbarmlessfromtheBG1Indebtedness.The
assumptionagreementshallbeacknowledgedandratilsedby
BG1afterthestockofBGIistransferredtoPetitioner.
2.Petitionershallexecuteoneormorenotesrepresentingthe
BGlIndebtedness,whichshallacknowledgethatshehas
assulnedtheBGlindebtednessandfurtheracknowledgethat
sheissubstitutedasthesoleobligorwithrespecttosuchnote
orntes.BGIshallformallyapprovethesaidsubstitutionof
obligorafterthestcckofBGlistransferredtoPetitioner,
Petitioner,asthesaleshareholderofBGI,shallcauseBG1in
considerationfortheassumptionofliabilitybyPetitionerandIn
recognitionofherfuturennanagementandcontrolofBGlandthe
assetsandentitiesoverWhichIthastherightofownershipand/or
management,toreleaseRespondentfromanyanda11claims,
obligationsorliabilitiesassociatedwiththeBGIIndebtedness.
Inaddition,asyouarealsoaware,BGIexpresslyreleasedanyclaimsagainstMr.Blixseth
intheMutualWaiverandReleaseAgreement(theS6lkeleases'').Obviously,BGIwasadefined
partytotheReleasesandasignatory.lntheReleases,B(JI
herebyfullyandabsolutelyreleasesanddischargesTil
mothyandeachofthe
TimothyEntities(collectively,the''TimothyReleasedParties''),fi'omanyclaim,
righto,'demandthatanysuchEdraEntityhas,ormayhaveagainstanyofthe
TimothyReleasedPartiesbasedonconductfrom thebeginningoftimeuntilthe
EffectiveDaterelatingto,t
3rbasedonanyfact,circumstance,eventordocument
signedbyTimothyoranyoftheTimothyReleasedParties...
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.
Case2:11-cv-O8283-GAF-SP Document30-2 Filed04/11/12 Page4of12 PageID4:625

MarcS.Kirschner
Re'
.Kltscltnerv.Blixsethetal.
September20)201l
Pagc3of5
B. TheCaliforniaCommercialCodeRendersYCLT'SClaimFrivolous.
Asyoualsoknow,theletterthatyousentmyclientintentiollallyattachedfraudulent
notesthatnolongerexist.Icanonlyassumethatyouintentionallyusedcopiesofnotesthatyou
knowtohavebeencancelledinabadfaithattempttoharassandintimidatemyclient.Infact,as
youcanseefromtheemailattachedheretoasExhibit1,theexactnotesthatyousenttomyclient
havebeenmarkedsuperseded.
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
Case2:11-cv-08283-GAF-SP Document30-2 Filed04/11/12 Page5Of12 PageID#:626

MarcS.Kirsclpner
Re;Kirscltnerv.Blixsethetal.
September20,20ll
Page4of5
theplaintiffinthatactionistherefbl'eisboundbythatnding,AreyoucontendingthatYCLTis
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
Case2:11-cv-O8283-GAF-SP Document30-2 Filed04/11/12 Page6of12 PageID#:627

MarcS.Kirschner
Re:Kirschnerp.BlixsetltetalSeptember20,201l
Page5of5
anticipatesthatanylawsuitwilldalnagehisreputationandinterferewithhisexistingbusiness
dealingsaswell.Moreover,thisnewly-mintedthreatagainstMr.Blixsethonaclearlyffivolons
andfactuallyunfoundedclaimappearstobepal
'tofanexistingpatternofvexatiouslitigation
instigate.
dbyyouagaingtMr.Blixseth,includingKirscbnerv.Blixsetb,Adv.Pro.09-0014,
Kirschnerv.Blixseth,Adv.Pro.10-0064,Kirschnerw.Blixsetb,hdv.Pro.10-0015,andSnow)z.
Blixseth,Adv.Pro.09-0018.Additionally,theMontanaDepartmentofRevenuehasproduced
numerousdocumentstoMr.Blixsethinconnectionwithitsfailedattempttoputhimintoan
involuntarybankl-uptcyandthosedocumentsrevealyouractiveencouragementandsubstantial
assistancetoMDORinfilinganinvoluntarybankruptcypetitionagainstMr.Blixsethinbad
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
Case2:11-cv-08283-GAF-SP Document30-2 Filed04/11/12 Page8Of12 PageID#:629
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PROMISSORYNOTE
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ITE
ase2:11-cv-O8283-GAF-SP Document30-3 Filed04/11/12 Page1Of3 PageID//:634
1
2
3
4
5
6
7
8
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
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28
v.
TIMOTHY L.BLIXSETH,
Defendant.
TIMOTHY L.BLIXSETH,
Counterclaimant,
IPROPOSEDJORDERGRANTING
MOTION FOR SANCTIONS

Date: May21,2012
Time: 9:30a.m.
Ctrm: 740
255E.TempleSt.
LosAngeles,CA
V.
MARC S.KIRSCHNER,DOES1-100,
counterclaim Defendant.
ase2:11-cv-O8283-GAF-SP Document30-3 Filed04/11/12 Page2of3 PageID#:635
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
ase2:11-cv-08283-GAF-SP Document30-3 Filed04/11/12 Page3of3 PageID//:636
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
BAILEY & GLASSER,LLP

209CapitolStreet
Charleston,WV 25301
Tel:(304)340-2282+ax:(304)342-1110
StevenL.Hoard
shoard@mh
ba.com& BROwN
MULLI
N HoARo
,LLp
P.0.Box31656
15 Tel:(806)372-5050/17ax:(806)372-5086
16
17
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20
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22
23
24
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26
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(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
defrauded banksandlendersofabout$50million duringthedivorcewhile

conspiringwithSamuelBp'ne/CrossHarborCapitalPaMnerstokillTim'
ssaleof
YC.EdragavefabricatedDepartmentofJustice'TargetLetters''toBp'netogive
tohisinvestorstokillthesale;andthenshe4bon-owed''$35millionfromByrne
RequestforIlwestigationofMontanaBankruptcyCourtandCreditSuissebyDepartmentofJusticez
withhisknowledgethatshehaddefrauded$50millionfrom thebanks. See

documentedbarikfraudevidenceandByrneloandocumentsintheMay4,2012
memorandum.Seefabricatedtt-rargetLetters''attachedheretoagainasExhibit1.
NotwithstandingthedocumentedfelonyviolationsbyEdraBlixsethinvolvingthe
fabricationoftheDOJS'TargetLetters''tokilltheYC saleaspartofhersand
Byrne'sschemetousetheMontanaBankruptcyCourttoeffectivelyisteal''
hundredsofmillionsofdollarswith thepoliticalcapital''and tsfavors''of
MontanaGovernorSchweitzerhereinafterrecited,BreuerandHolderthwarted
thecriminalinvestigation,whichwasbeingconductedbyateam ofcareerFBI,
Treasury,and1RSagents;andthenusedtheIR.
SandtheDOJto ttarget''Mr.
BlixsethonbehalfofBreuer'sbillionairefriend,RonBurkle.
InJuly-November,2008justbeforeandaherthedivorceclosing,unknownto
Mr.Blixseth,aspartofherdealwith Byrne,Bymepartnered with Ron
Burkle(YucaipaCapitalcontrollingabilliondollarsofCaiifolmiaCALPERSand
CALSTRSPensionfunds)intheirschemetoputtheYCintobankruptcypursuant
totheirt'brilliantbutevil,''<ibilliondollar''conspiracytousespoliticalpressure''
involvingnumerousmeetingsandlargedonationstoSchweitzer.Edrastatedin
onedocument:
HSB (Byrne)and BS (Schweitzer)havespentenormouspolitical

capitalandpoliticalfavorstoensuretheygettherightoutcomefrom
theMontanabankruptcyjudge.''(Exhibit2,attachedhereto)
ThisschemeenabledBurkle,BpmeandSchweitzertouseJudgeKircher'srulings
andBurkle'sconnectionstoLannyBreuer,forthefollowingpuposes:
(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,
submitted with attached May 4,2012 Letterand Memorandum re Burkle

relationshipwithBreuerwherebyBurklepaidmillionsofdollarstoconvicted
felon,AnthonyPellicano,now inprisonfortwelveyears,onbehalfofthe
Clintonsduringtheimpeachmentproceedingstospyonandillegallycollect
allegedevidenceagainstClintonenemieswhenBreuerwasWhiteHousecounsel
anddealingdirectlywithPellicano.TheBurkleconnectiontoByrnealsoenabled
Byrnetoobtain$100Millionfi'om theCaliforniapension funds,andmore
recentlyByrnemadeacapitalcalltoCaliforniaforT23million.
lnMarch,2008,when EdraandByrrtekilled theYC sale,Byrnemetwith
SchweitzertofonrulatetheirschemefortheYCbankruptcybeforeKirscher.See
BpmeadmissionsconcemingmeetingwithSchweitzerintestimonyattachedto
May4,2012Memorandumandexhibitsthereto.Schweitzerwasupforreelection
in2008whenByrneandEdraarrangedthe$35millionByrneloaninAugust,
2008inordertoconstlmmatetheMSAand,aspartoftheirscheme,tofileabad
faithYCbankruptcy.Thechronologyofeventsistelling:
(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
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
date,KirscherapprovedanoverllyillegalbankruptcyplancreatingaStLiquidating
Trust''controlledbyCreditSuisse,whoseprimarypurposewastotargetMr.
Blixsethforthe'tnon-recourse''CreditSuisseloanwhilettexculpating''Edra,
Bpme,Burkle,CreditSuissefrom anyliabilitytoMr.Blixseth,ortotheYCfor
theFIRREA andUSPAP violations,(seeMay4,2Ol2 Memorandum and

exhibits)therebydeprivingMr.Blixsethofa11ofhisdueprocessrightsandjury
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
renewed motion to dismissMDOR'S involuntary petition as wellasMr.

Blixseth'sclaimfordamagesagainstMDORinJuneof20l3.Recently,inMarch
-Apr
il,2013,Kirschner'sroleinthisentirecesspoolofcol-ruptionwasexposed
andheeitherresigned,orhisDirectorpositionwastel-minatedasaDirectorof
Spectrum.Atthesanletime,inApril,20l3,Kirschnerresignedorwasremoved
asTlnzsteeoftheLiquidatingTrust.
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$209millionBGliloan''
wasinfactaloanwith''NoChange''tothefiledtaxretums.TheIRS'decision
nottoissueanychangeswithrespecttoBGI's2005returnwasinitiallymadeon
PublicIntegritySection
November2,2009,agreedtoandsignedoffbyMr.BlixsethonDecember8,
2009andfinalizedbythe1RSonJanuary4,20l0,SeeExhibit7attachedhereto,
(IRSJanuary4,20lOnotificationofd(NoCl'
1ange''l.However,atthebehestof
KirschqerandtheLiquidatingTrust,notwithstandingtheIRSauditresultsandits
t$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
intimidation onOct.19y2010,thenthe1RSresponded withreopenedaudit

notices.Later,theCoastGuardinterceptedMr.Blixseth'syachtinLosAngeles.
l3.WhiletheBreuercontrolledDOJpursueditsintimidationtactics,Kirscher,with
fu11knowledgeandparticipationintheSchweitzer/Burkle/Breuer'tpolitical
favors''campaign)(seelmmunityProffer)onAug.16,2010issuedhis135page
'Memorandum ofDecision''inAPl4,infavoroftheCreditSuissecontrolled
LiquidatingTnlst.ThisdecisionwasbasedonKirscher'spreviouslyengineered
f'backroom deal''whichexoneratedEdra,andencompassedlallingsinfavorofhis
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
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,
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,
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
,
E xh ib it
D
Case2:11-cv-08283-GAF-SP Document72 Filed11/01/12 Page1of39 PageID#:4865

LINKS:29,30,41,57
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)
ORDER RE:MOTION TO DISMISSCOUNTERCLAIM.MOTION TO AMEND

COUNTERCLAIM.MOTION FOR SANCTIONS.AND MOTION TO DISMISSTHIRD
PARTY COMPLAINT
1.
INTRODUCTION
ThislawsuitarisesoutofabanknzptcyproceedingfiledintheDistrictofMontana. The
suitisbroughtbyMarcS.Kirsclmer,thetrusteeinbankruptcy,againstTimothyBlixseth,the
founderofthedebtor,theYellowstoneMountainClub(ts
theClub').TheComplaintseekstoset
aside,underfederalandstatelaw,anallegedlyfraudulentreleaseandtorecoverontwo
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
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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.
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Date November1,2012
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
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Title
Date November1,2012
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,
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Date November1,2012
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
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Title
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'')
.
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Date November1,2012
appraisalsmadebyRICO co-conspiratorCushman& Wakefield. TheTNV appraisalswere
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
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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
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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
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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
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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
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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
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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,
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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.
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28U.
S.C.j9594$(addedemphasis).
b.Discussion
TheCounterclaim suffersfrom twofundamentaldeficienciesthatrequireitsdismissaland

denialofBlixseth'smotionforleavetoamend.First,theCounterclaim mustbedismissed
becauseitisassertedagainstKirsclmerinhisindividualcapacity,inviolationofFederalRuleof
CivilProcedure13.Indeed,Blixsethdoesnotcontendthatthecounterclaimsmaybeasserted
againstKirsclmerinhisindividualcapacity,butheseekstheCourt'sleavetoamendthe
CounterclaimtonameKirsclmerasthetrt
zsteeoftheYCLT.(Mem.Amendat1.
)Second,the
Counterclaim mustbedismissed,andBlixseth'smotionforleavetoamenddeniedbecause
Blixsethhasnotsoughtleavefrom theBankruptcyCourttofilethecounterclaimsagainst
Kirsclmerinhisofficialcapacity,incontraventionofBarton.Amendmentwouldthusbefutile,
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
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(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
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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
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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
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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
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proposedamendedcounterclaimsseekdamagesfrom theestatearisingfrom itsattempttocollect

thoseassets.Bartonisfullyapplicable.
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
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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
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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.
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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
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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.
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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.
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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.
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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
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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
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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
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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
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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.)
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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.)
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(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
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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.
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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)
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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)).
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LINKS:29,30,41,57
Title
Date November1,2012
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

LINKS:29,30,41,57
Title
Date November1,2012
cognizableclaim forcontributionagainstthem.Theclaim forcontributionistherefore

DISMISSED withoutIeavetoamend.
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

LINKS:29,30,41,57
Title
Date November1,2012
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
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DEPARTMENTORROOM:
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:
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
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c.F--lldonottonsenttotheorderrequested,butIconsenttothefoll
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(2)r.
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4.C-RSPOUSALOkPARTNERSUPPORT
a.I---IIconsenltotheorderrequested.
b.I---Ildonotconsenttotheorderrequested.
c.I---IIconsenttothefollwingorder;
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RESPONSIVEDECLARATIONTOREQUESTFORORDER soAuL'
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PETITIONER/PLAINTIFF:EdraBlixscth
RESPONDENT/DEFENDANT:TimothyBlixscth
CMBNUMBER:
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FL-320
OTHERPARTY:
5.F--IATTORNEY'
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a.U--llconsenttotheorderrequested.
b.U--IIdonotconsenttotheorderrequested.
c.r-'
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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:
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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
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FL.3201Rev.JuI
#1.20121
(SI
GNATUREOFDEGLARANT)
RESPONSIVEDECLARATIONTOREQUESTFORORDER
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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
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
'
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/,
$'anotlter
24 acdonpettdlltginMontaltatosetasidetltqMSAw/l/c/lmustbedecldedjlrst.
25
Lastly,andmostdisturbingly,thedocumentsMr.MontgomerystolefromMs.Blixseth's
26 computerhavebeensignificantlyaltered,andinatleastonecase,manufacturedoutofthinair..
27 KnowinglyfilingafalsifieddocumentwiththeCourtis,ofcourse,afelonyunderCalifornia
28 PenalCodej115(t
procuringorofferingfalseorforgedinstrumentforrecord;violations;
oP#osITION'
rMOTIONFOFSANCTIONSANDTOSHOWRECONTEMPT
1 punishment');Peoplev.Swann213Ca1.App.2d447,28Cal.lkptr.830(1963)E$'
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
'
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
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
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
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
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
'
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
'
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
'
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
DECLARATION OF
EDRA BLIXSETH
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
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
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
'
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
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
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-
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
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
'
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
1 dollars.''Tim andhislawyershaverepeatedlyattemptedtohal-m thesaleoftheseitems.They

2 didthesameWhen1wasattemptingtohelpwithsellingYellowstoneClubinventory.They
3 havetpldprospectivebuyersthatiftheybuysomething,itwillgettiedupinlegalownership
4 issues.Theyhavegoncsofarastosendpeopletobidonthingsandthennotpayforthem.
5 Recently,hislawyercalledtotelltheowneroftheRedBaronauctionhousethattheyhadalien
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
'
DECLAR ATION OF
D ENNIS H OLAH AN
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
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
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ftwa
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'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
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
12 andcorrect,andthatthisdelara'n aF ecutdon ecm 26,2012inSantaRo7a,

13 California.
14
.
lsroa an
15
16
17
18
19
20
21
22
23
24
25
26
27
28
3
opposlrloxToMorloxFoRsaNcrloNsANOTosllow RECONTEMBT
EX H IBIT A -1
pennisHolahan
From:
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mynotesonthemsa
NotesontheMSA.doc
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stoyoufirst.ltoldthemIwoul
dhaveittoyout6day!spthatI
hopedyoucouldreadandthenforwardtothembytbmortbWmorning.Okay,rememberthat1hadtotypethlsin
fhyself............sooverI
opktypp'sandwordsthtyouknowwhatImean,okay?Letmeknowifyouhaveanyquestions.I
wasthinkingofsendingtoTfpy,sincetheywerepartoftheothrtrailandhadbeenIookingattheMSA.Edra
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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.
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
* 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
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
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.
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
E X H IB IT A -2
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
* 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
* B,QfPage9-YCW wasinsolventwlzen1receivedit.Thewaythisiswritten,1
wouldhavenowayofknowingthat.
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
8mm ofthe35mm 1got9om CH,togetthem tosignoF.1wastogetthisbackfrom
YC,astheyweregoingtobeiheownersoftheseBsharesandnotmepersonallykOf
cott
rseyouknowthatdidnothappen.(Rememberaswell,1didnotreallygd
35mm 9om CH,butonly22mm.Thnhadborrowpd13mm fromthemin2007and
ItookoverthatpromissorynotewhenIgottheFamilyCompoundback.
)
DNI-Exhibit11
* 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
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
* (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
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
EX H IB IT A -3
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.
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* 4ofPage2-ReadallofitandA C
rl'
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lcal
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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)
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Dated:1- W 2013
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08/19/2013, ID: 8748363, DktEntry: 55-2, Page 155 of 295

CasCase:
e:12-312-35986,
5986 08/
12/2013 ID:8739867 DktEntry'52-2 Page:24Of13/52of364)
09-00014-RBK Doc#:714-1 Filed:12/19/12 Entered:12/19/1216:32242 Page1of10
l
2
3
CHRISTOPC RJ.CONANT
Cal.B/No.244597
73017mStreetSuite200
Denver,Colorado80202
Telephone:(303)298-1800
4 Facsimile;(303)298-1804
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SUPERIORCOURTOFCALIFORNIAFORTHECOUNTYOFRIVERSDE
9 lnretheMarriageof:
CaseNo.1:1171N1791152
1: Petitioner;PlaintiF
(Reassi>edtoDept10omDeptF501)
11
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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

CasCase:
e:12-312-35986,
5986 08/
12/2013 ID:8739867 DktEntry:52-2 Page:25Of13/53of364)
O9-00O14-RBK Doc#:714-1 Filed:12/19/12 Entered:12/19/1216:32:42 Page2of10
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)
09-O0O14-RBK Doc#:714-1 Filed:12/19/12 Entered:12/19/1216:32:42 Page3of10
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 08/12/2013
IDr8739867 DktEntry:52-2 Page:27of13155of364)
09-00014-RBK Doc#:714-1 Filed:12/19/12 Entered:12/19/1216:32:42 Page4of10

1
companybydepositingcasborchecksintoPC1brmkaccount.
(c) Ms.Blixsethorherattorney,DennisHolahm orhisolcestaffkwouldpay
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

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5986 08/
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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
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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
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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
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l
2
3
4
5
6
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8
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10
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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
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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
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1declaretmdermnaltyofperjuryofthelawsoftheStat
eofWashingt
ont
hatthe
2
foregoingistrueandcorrect.
3
4 Dated: December13,2012
5
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7
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oenisL.M to ery
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DECLm TIONOFDENNISL.MONTGOGRY
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Case2:10-ap-01305-BB Doc1 Filed09/28/09 Entered09/28/0911:58:50 Desc
MainDocument Page1of15
1 MichaelJ.Flynn
2 POBox690
6125EITordo
a RanchoSantaFe,CA92067
4 Suite240
etoCe
ter0P2la
5 On
Bos
nn
MA
1z
0a
8.
6 TeI:8587757624
7 Fax:8587590711
I
:mike@mjfesq.com
8 E-Mai
9 Credi
torinpropen
10
11
12
UNITEDSTATESBANKRUPTCYCOURT
FORTHECENTRALDISTRICTOFCALIFORNIA
13
RIVERSIDEBRANCH
14
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)
)
)
)
)
)
09-0OO14-RBK Doc#:724-4 Filed:12/21/12 Entered:12/21/1216:53:38 Page3of16

MalnDocument Page2of15
1
2
CREDITORMICHAELJ.FLYNN(herei
nafter'FI
ynn')i
npropri
apersona,herebyfi
l
esthi
s
3 Compl
ainttoDetermineNon-DischargeabilityofDebtorsandtheirDebtsonbehalfofhimselfandalI
4
5 creditors,andforotherclaims,andinsupportthereofallegesasfollows:
6
1.
7
JURISDICTIONANDVENUE
8
1. OnoraboutJune26,2009(
the'Peti
ti
onDate')thedefendantsDenni
sMontgomel
9 andBrendaMontgomel
y5I
edavoluntarypetiti
onforrel
i
ef(the'
Chapter7Case/)underChapter7,
10
Ti
tle11oftheUnit
edStatesBankruptcyCode(the'BankruptcyCode')i
ntheUni
tedStates
11
12 BankruptcyCourtfortheCentmlDistrictofCalifornia,Riversi
deBranch.
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-
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1
2
3
4
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-

1 UnitedStatesDistrictCourtfortheDistrictofNevada,CaseNo.06-cv-00056(PMP.VPC).
2
12 Onthatdate,aMotionforContemptandtoCompelProducti
onofpreviouslyordered
3
documentswaspendi
ngbeforetheNevadaFederalCoud(SeeDoc.#'
s1061,
1075and1076)for
4
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-
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1 Montgomel wasinpossessionofhisinancialrecordsandhadprepared theelectronicdiscthat
2 wasproduced.MontgomeryIaterclaimedonhisschedulesthathehad$36.5millioninclaims
3
againstthesameIawyers,whohenowclaimshaveaIlofhisrecordswhichpreventedhimfrom
4
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-
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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

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,
09-0O014-RBK Doc#:724-4 Filed:12/21/12 Entered:12/21/1216:53:38 Page9of16

1 2006.Ms.BlixsethconfirmedthesefalsefactstotheBushadministration.
2
25 OnJanuary18,2006,MontgomerydepadedeTreppidandtookthesoftwarewith
3
him.
4
26. OnJanuafy18,2006,eTreppidsuedMontgomeryintheRenoSuperiorCourt
5
aimingMontgomerystolethetechnology,deletedordestroyeditoffaIIeTreppidcomputers,
6 cl
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-
O9-O0O14-RBK DOc#:724-4 Filed:12/21/12 Entered:12/21/1216:53:38 Page10Of16
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
FBIand toobstructdiscoveryintheNevadacases. TheFBIinvolvementaroseoutof

Montgomery'saIlegedtheftofthesoftwarefromeTreppid.
31. OnMarch1,2006,theFBIraidedMontgomery'shomeseekingthesoftwaretaken
from eTreppid,includingthe
'sourcecodesi'and''classifiedinformation''Montgomerytookwith
him.Theyseizedhi
scomputersandothermaterials.OnMarch3,2006,theFBlraided
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-
09-O0014-RBK Doc#:724-4 Filed:12/21/12 Entered:12/21/1216:53:38 Page11of16

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-
09-O0014-RBK DOc#:724-4 Filed:12/21/12 Entered:12/21/1216:53:38 Page12Of16

1 technologywasexclusivelycreated,developed,ownedandusedsolelybyhimateTreppid;that
2 thealQaedainterceptsanddecodingwerevitaltonationalsecurity;thatthesourcecodesforit
3 hadneverbeenonthepremisesofeTreppid;thathehadnevertakenanyoftheeTreppjdsource
4
,andthatasaco-ownerofeTreppidhispossessionofcedainharddrives
5 codefrom itspremises'
6 containingemailsandothermaterialsinvolvingthebriberyofGovernorGibbonscopied''overthe
7 yearsobelongedtohim.MontgomerymadetheserepresentationsandotherstotheNevada
8 FederalCoudinordertodefeattheFBIsearchandseizureandtodefeattheclaimsofeTreppid.
9 TheserepresentationswerealIfalse.
10
36. Theseconstituted criticalrepresentationsrelieduponbyFlynnandotherIawyers
11
workingforthedebtors throughout2006untilJune,2007,whentheywithdrew.
12
13
37. The representationsabovewereplacedinsworndeclarationsexecutedby
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.

Case2:10-ap-01305-BB Doc1 Filed09/28/09 Entered09/28/0911:5B:50 Desc
1
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.
09-00014-RBK DOc#:724-4 Filed:12/21/12 Entered:12/21/1216:53:38 Page14of16

1
47. Thedebtorshaveknowinglyandfraudulentlyfailedtoexplainsatisfactorily, before
2 determi
nati
onofdeni
alofdischameunder11U.S.
C.j727(a)(5)theI
ossofmilionsofdoll
arsi
n
3
assetsordesciencyinassetstomeetthedebtors'Iiabilitieswhilereceivingmillionsofdollarsfrom
4
5 EdraBlixsethwhile atthesametimeprocuringsecondmodgagesontheirrealproperties,aIl
6 evidencingaschemetoconcealassets.Uponinformationandbelief,Montgomerysecuredthe
7 secondmodgagesafterconcealingmoneyreceivedfrom Blixseth,forthepurposeofobtaining
8 additionalcash,concealingit,anddefraudingtheIenders.
9
48 Thedischargeofthedebtorsshouldbedeniedpuouantto11U.
S.C.j727(a)(3),(4)
10 and(
5).
11
49. Wherefore,plai
nti
ffdemandsjudgmentdenyingthedebtors'dischargeandforsuch
12
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-
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-
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Case2:10-ap-01305-BB Doq1 Fi
e
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(i
v) Forsuchotherandequi
tabl
erel
iefasthi
sCouddeemsjustandequi
tabl
e.
Datedthis2#bdayofSeptember,2009
MICHAELJ.FLYNN
/s/Y '
-WAA?J.V
By:
15-
MichaelJ.Flynn,InProPer
E xh ib it
l
09-0OO14-RBK DOc#:724-5 Filed:12/21/12 Entered:12/21/1216:53:38 Page2Of22

case2:10-ap-01305-BB Doc54 Filed07/16/10 Entered07/16/1013:40:06 Desc
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
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
'
09-OOO14-RBK Doc#:724-5 Filed:12/21/12 Entered:12/21/1216:53:38 Page3Of22

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
09-O0014-RBK DOc#:724-5 Filed:12/21/12 Entered:12/21/1216253:38 Page4Of22

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
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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
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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
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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
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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
SECONDCLAIM FOR RELIEF
(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
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!
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
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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
13 decodingsoiwarefrom Mr.Montgomeryandfrom Mr.Sandoval,Ms.Blixseth

14 agreedtohaveOpspringLLCpayMontgomery$3.3MillioninSloans''and
$100,000permonthinsalary.
16
49. Ms.BlixsethrepresentedtoMontgomery,Sandovalandothersthatif
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
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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
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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
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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!
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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
THIRDCLAIM FOR RELIEF
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
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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
.
.
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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

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
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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
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kil-Afs'r
aseNo.2:l0-AP-0!305
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O9-0O014-RBK DOc#:724-5 Filed:12/21/12 Entered:12/21/1216:53:38 Page18of22

1
2
3
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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

inevitableliabilityfortheirfraudasdescribedherein.
2
100. Further,andasdiscussedabove,intheNevadaLitigationMagistrate
3 JudgeCookespeciscallyfoundthatMr.Montgomeryhadintentionallycommitted
4 perjuryandengagedinvexatiousandobstmctivebehaviorforthegoalof
5
6
7
8
9
10
preventingPlaintifffrom collectingonthemoneythatwasduetohim fromthe

Defendants.Asaresultofthiscriminalandcontempmousconduct,theNevada
fedemlcourtlevie over$200,000insanctionsagainstMr.Montgomeryas
representedbythe200kJudgment.
101. Wherefore,Defendantshaveintentionallyconcealedandtransferred
theirassetsfromtheircreditorswithinoneyearpriortotheChapter7Caseand
11 theirdischargeshouldthereforebedeniedpumuanttol1U.
S.
C.j727(a)(2).
12
SIXTH CLAIM FOR RELIEF
13
(ObjectiontoDischargePursuantto1lU.S.
C.j727(a)(3))
14
l5
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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
09-0O014-RBK Doc#:724-5 Filed:12/21/12 Entered:12/21/1216:53:38 Page20Of22

Case2:10-ap-01305-BB Doq54 Fi
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ed07/16/10 Entered07/16/1013:
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06 Desc
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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
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CASENUMBER10-18510;Mv.No.1141305
MICBAELJ,FLYNN,anIndi
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DENNISMONTGOMERY,
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08-61570-RBK DoO:2115-5 Filed:01/14/11 Entered:01/14/1114:22206 Page2of345
Dennis Lee Montgomery
November 18,2010
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
In re: Dennis and Kathleen
Montgomery
)
)
MichaelJ.Flynn,
)
)
Plaintiff,
)
)
)case No.:2:10-bk-18510-bb
)
DennisLeeMontgomery and )
Brenda KathleenMontgomery, )
)
Defendants.
)
)
Videotaped Deposition of: DENNIS LEE MONTGOMERY

Date:
November 18,2010
Reported by:
Stephanie P.Borthwick
C.S.R.No.12088
YATES COURT REPORTERS
800.669.1866
08-61570-RBK Doc#:2115-5 Filed:01/14/11 Entered:01/14/1114:22:06 Pagi3of345

Dennis Lee Montgomery - November 18,2010
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Deposition of DENNIS LEE MONTGOMERY, taken on

behalf of the Plaintiff, before Stephanie P.
Borthwick,a Certified shorthand Reporter,
commencing at the hour of 9:20 a.m.,Thursday,
November 18,2010,at the offices of Yates court
Reporters,74967 Sheryl Avenue, Palm Desert,
california.
APPEARANCES:
For the Plaintiff:
CONANT LAW,LLC
Attorneys at Law
BY: CHRISTOPHER J.CONANT,ESQ.
730 17th Street
Suite 200
Denver,Colorado 80202
(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
800.669.1866
Paqe 2
09-OO014-RBK Doc#:724-6 Filed:12/21/12 Entered:12/21/1216:53:38 Page4Of176

Dennis Lee Montgomery November 18, 2010
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For the United States of America:

U.S.DEPARTMENT OF JUSTICE
CIVIL DIVISION
BY: CARLOTTA P.WELLS,Senior Counsel
Federal Programs Branch
20 Massachusetts Avenue, NW
Room 7150
Washington,Dc 20530
(202) 514-4522
Also Present:
Michael J.Flynn, Esq.
Sharon Raya, Paralegal to Ms.Wells
Tom (last namewithheld),

Government
Morgan (last name withheld),U.S.
Government
Videographer:
Jesse Navarro,Orravan Video Litigation
Services
Page 3
800.669.1866
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November 18, 2010
Dennis Lee Mon3
t4
g5omery
09:43:32 1
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THEWITNESS: Ijust did. I alreadydid.

I said I don't recall.
BY MR.CONANT:
Q. It was a yes-or-no question.
A. Well,if I don't recall I guess the answer
is no,I don't recall.
Q. You don't recall.
Mr.Montgomery,yesterday you were in
Las Vegas,were you not?
A. Yes.
Q. What were you doing in Las Vegas yesterday?
A. I'm going to take the -- I'm going invoke
my right to the Fifth Amendment.
Q. Mr.Montgomery,are you aware of any
criminal proceedings against you at this time?
A. I'm going to invoke my right under the
Fifth Amendment.
Q. Well I'm not asking you to tell me
anything about what you may have done. I'm asking
you are you aware of any criminal proceedings
against you at this time?
MR.CROCKETT: Counsel,he has advised you
and I will advise you that he is taking his Fifth
Amendment privlege and he's not going to answer
that question.
Page 36
YATES COURT REPORTERS 800.669.1866
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Dennis Lee Mon3
t4g5omery - November 18,2010
09:44:30 1
And if you have a difficulty with it, I'm
2 surewecantakeitupwithajudge.
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MR.CONANT: Did he answer it -- Well, did

he answer it by taking the Fifth Amendment,
Mr.Crockett?
MR.CROCKETT: Did he answer what,the last
question?
MR.CONANT: My last question.
MR. CROCKETT: You heard him do that and
it's on the record,Counsel.
BY MR.CONANT:
Q. Mr.Montgomery, so you're taking the Fifth
Amendment -- you're pleading the Fifth Amendment in
response to my question about whether you're aware
of any criminal proceedings against you;is that
correct?
A. I've already answered the question.
MR.CROCKETT: Asked and answered,Counsel.
Next question.
BY MR. CONANT:
Q. Mr.Montgomery,I understand that you have
paid to the Clark County district attorney in Nevada
approximately $450,000;is that correct?
A. I'm taking the Fifth Amendment.
Q. Where did you get the money to pay the
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Dennis Lee Mon3
t4g5omery
November 18,2010
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Clark County D.A.this approximately $450,000?

A. I'm asserting my right under the Fifth
Amendment.
MR. FLYNN: Did you get it from Istvan
Burgyan.
BY MR.CONANT:
Q. Did you get it from Istvan Burgyan,
Mr.Montgomery?
Amendment.
MR.FLYNN: Did you give money to Istvan
Burgyan.
BY MR.CONANT:
Q. Have you ever given money to Istvan
Burgyan?
Amendment.
Q. okay. Mr.Montgomery,do you now or have
you ever maintained an office in Palm Desert orthis
general area?
Amendment.
Q. Mr.Montgomery,you had within this office
a large amount of strike that.
You've had in this office computer
800.669.1866
Page 38
09-O0O14-RBK Doc#:724-6 Filed:12/21/12 Entered:12/21/1216:53:38 Page40Of176

Dennis Lee Mon3
t4g5omery - November 18, 2010
09:46:19 1 equipment,have you not?

2
MR.CROCKETT: Which office are you talking
3 about?
4
Which office are you talking about? 1'11
09:46:25 5 objecttotequestionasvague andaskyouto
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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?
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?
Amendment.
Q. Wasn't that computer equipment that you
obtained from Edra Blixseth,Mr.Montgomery?
Amendment.
Q. Wasn't that equipment you obtained from a
Page 39
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Dennis Lee Mon3
t4g5omery November 18,2010
09:47:00 1 company called Blxware,Mr,Montgomery?

2
3 Amendment.
MR.CROCKETT: Why don'tyoujust5itin
09:47:07 5 his lap.

6
MR. CONANT: Thank you,Mr.Crockett. I
7 appreciate you keeping your comments to yourself.
8 If you're not going to object oradviseyourclient,

9 then you can keep yourcomments to yourself.
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MR.CROCKETT: IObject to him continually

asking questions.
MR.CONANT: He's not asking any questions,
Mr.Crockett.
MR.CROCKETT: Of course not.
A little louder, then he won't have to
repeat it.
BY MR.CONANT:
Q. Mr.Montgomery, the computer equipment that
you took out of this office that's 300 yards away
from here,thatwas computer equipmentthatyou
listed on your schedule;isn't that correct?
MR.CROCKETT: Object to thequestion.
23 Assumes facts not in evidence.

24
Go ahead.
09:47:52 25
THE WITNESS: I assert my right under the
800.669.1866
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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,
there purports to be avalue of $10 million.

Do you see that?
A. Yes.
Q. Can you explain to mewhat that $10 million
item of intellectual property is,Mr.Montgomery?
Amendment.
Q. A11 right. Flip with me to the following
page identified at the bottom right-hand corner as
page 22-9.
Mr.Montgomery,are you at that page?
A. Yes.
Q. Do you see that bottom paragraph on this
page that begins with ''In additionn?
A. Yes.
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A. I assert my right under the Fifth

Amendment.
Q. Has your attorney, to your knowledge, been
in contact with any agency of the United States
government concerning your personal property that's
listed on these schedules?
MR.CROCKETT: 1111object to thequestion.
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It's plainly calling for attorney-client

communication.
Instruct him not to answer.
MR. FLYNN: Have him describe the
intellectual -BY MR.CONANT:
Q. Mr.Montgomery,can you briefly describe to
me the intellectual property that we're discussing
16 here that you just described in your schedules as

17 being subjecttotheNationalSecurityAct?
18
MR. CROCKETT: MS.Wells, do you have any
19 objection to him answering this question?

09:53:10 20
MS.WELLS: No.
21
MR.FLYNN: See,welre on the same side.
22
THEWITNESS: I don't believe -- I
23 didn't I don't believe I put this segment on
24 there. I could be wrong. I don't recall that
09:53:18 25 specifically.
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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?
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MR.CROCKETT: 1'11 object tothe question.

It's argumentative. It assumes facts not in
evidence.
Would you like to rephrase it,Counsel?
MR.CONANT: NO. I Want him to answer the
question.
MR.CROCKETT: 1111 instruct him not to
answer.
BY MR.CONANT:
Q. Mr.Montgomery,do you have any personal
property that falls within the description -MR.FLYNN: Intellectual.
MR.CONANT: I'm Sorry. Thank you,
Mr. Flynn.
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Dennis Lee Mon3t4g5omery November 18, 2010
MR. CROCKETT: Read the question back,

09:55:08 1
2 please,would you,Ms.Reporter.
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MR.CONANT: 1111just askthequestion

again.
Q. Mr.Montgomery,do you See this bottom
paragraph on the page identified as 22-9?
A. Yes.
Q. Do you see that it says Dennis Montgomery
is the holder of certain intellectual property
rights?
Do you see that,Mr.Montgomery?
A. Yes.
Q. Describe those intellectual property rights
to me.
Amendment.
MR.FLYNN: I'm glad these gentlemen
stayed.
MR.CROCKETT: Can We go off the record for
a moment,please. I need to talk to my client.
MR.CONANT: You can go off the record.
MR.CROCKETT: Thanks.
THE VIDEOGRAPHER: Going off the record.
The time is 9:56 a.m.
(Recess takena)
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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.''
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
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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?
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. --
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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
7 Fifth Amendment.
8
Q. Isn't it trne,Mr.Montgomery,that this,
9 quote,unquote,''decoding software''that you
10:42:58 10 reference on line 22 is just a complete fraud?

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MR.CROCKETT: Hold it.

Go ahead.
THE WITNESS: I'm going to assert my right
under the Fifth Amendment.
I couldn't hear Mr. Flynn's question.
MR.CONANT: That's fine. 1'11 repeat it.
THE WITNESS: Okay.
BY MR.CONANT:
Q. Beginning on line 21, going to line 24 and
a half where you reference this very specific
intelligence regarding the terrorist plot that you
got from your decoding software regarding these
arrests in London,isn't that the same information
you and Edra Blixseth provided to a person within
Dick Cheney's office?
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Q. Have you ever seen this document before?

A. I'm not certain.
MR. FLYNN: Document like it.
4 BY MR.CONANT:
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Q. Have you ever seen a document like it,

Mr.Montgomery?
A. I'm not certain.
MR.FLYNN: Did you get this document
BY MR. CONANT:
Q. Did you provide this document to Timothy
Blixseth,Mr.Montgomery?
MR.CROCKETT: Youdre asking my client if a
letterthat'saddressed to Mr.Blixsethwas provided
to him by Mr.Montgomery?
Are you asking Mr.Montgomery if he signed
the letter?
MR.CONANT: I'm asking Mr.Montgomery to
answer my question.
MR.CROCKETT: It1S argumentative.
If you can answer it, go ahead.
THE WITNESS: I don't recall specifically.
BY MR. CONANT:
Q. Isn't it true,Mr.Montgomery,that you
gave a copy of this letter to Mr.Blixseth?
A. I'm going to assert my right underthe
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2
Q. Mr.Montgomery,have you ever had a
3 discussion with Mr. Blixseth regarding any form of
4 targetletterbythegrandjuryofthe
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United States?
FifthAmendment.
MR. FLYNN: Did he prepare it.
BY MR. CONANT:
Q. Mr.Montgomery,did you prepare this target
letter that we're looking at?
FifthAmendment.
Q. Did you ever give a copy of this target
letter to Edra Blixseth,Mr.Montgomery?
Fifth Amendment.
Q. Can you explain your involvement,
Mr.Montgomery,with this target letter?
Fifth Amendment.
MR.CONANT: A11 right. I'm going to hand
to youwhat'sgoing to be marked as Plaintiff's
Exhibit No. 7.
(Exhibit 7 was marked foridentification.)

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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?
Fifth Amendment.
Q. HoW do you recognize this document
Mr.Montgomery?
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.
prepared this letter?
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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?
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?
MR.CROCKETT: Object to the question.

Assumes facts not in evidence. Lacks foundation.
MR. FLYNN: -- discussions with Edra
regarding the sale of and giving it to Edra to
kill the sale of the -MR.CONANT: Ms. Borthwick,can you repeat
my last question, please.
THE REPORTER: Question, ''Can y0u describe
a11 the facts and circumstances concerning your
preparation of this document?''
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Q. Can you please answer the question.
3
A. His question?
4
Q. My --
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A. Well,I don't know yours. He just asked

another one. I remember his,not yours.
Q. Mr.Montgomery,please describe to me your
conversations with Ms,Blixseth concerning the
preparation of this document which is marked as
Plaintiff's 7.
A. I invoke my right under the Fifth
Amendment.
Q. Okay. Please explain to me your
conversations wjth Ms. Blixseth concerning your
preparation of Plaintiff's Exhibit No,6.
A. Is that the letter?
I invoke my right under the Fifth
Amendment.
Q. Did you discuss with Ms. Blixseth the
preparation of this document in order to assist her
sn killing the sale of the Yellowstone club to
crossHarborCapital Partners?
MR.CROCKEIT: Object to the questionas
24 argumentative. Assumes facts not in evsdence. In

11:29:35 25 addition,as I previously stated, any questions
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relating to these documents I'm going to instruct

him not to answeron thegroundsof the Fifth
Amendment.
BY MR.CONANT:
Q. What's your answer, Mr.Montgomery?
A. He just answered it. I invokemy right
7 under the FifthAmendment.

8
9 worked with Ms.Blixseth to help her kill the sale
11:30:03 10 of the Yellowstone Club to Cross Harbor?
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MR.CROCKETT: 1'11 object. It haS -you're now conducting discovery.

THE WITNESS: It's Tim Blixseth. It's Tim
Blixseth's attorney.
MR.CROCKETT: You're now conducting
discovery. It's obvious you're conducting discovery
which is unrelated to Mr.Montgomery's bankruptcy
and is in aid of the discovery your client,
Mr.Blixseth, seeks and on those grounds 1.11 advise
and instruct Mr.Montgomery not to answer.
In addition to which you continued the line
of questions relating to what you purport to be a
criminal conspiracy and on those separate grounds I
will instruct Mr.Montgomery not to answerthe
question.
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2
Q. What's your answer?
3
A. I'm not going to answer the question. I'm
4 doing what my attorney told me to.
11:30:47 5
Q. Are you going to invoke the Fifth
6 Amendment?
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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?
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.
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THE WITNESS: I invoke my right under the

Fifth Amendment.
BY MR.CONANT:
Q. Isn't it true that you started getting paid
by Ms.Blixseth's entities beginning in April of
2006?
MR.FLYNN: 100,000 a month.
THE WITNESS: I'm sorry,your question,
Mr. Flynn?
BY MR.CONANT;
Q. There's no question outstanding by
Mr. Flynn.
A. Well,I'm confused. You both ask questions
at the same time.
Q. Mr.Montgomery,when did Edra Blixseth's
entities begin paying you a hundred thousand dollars
a month?
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MR.CROCKETT: Objection. Lacks

foundation. Assumes facts not in evidence. Based
on Mr. Flynn's statement,I will advise
Mr.Montgomery to invoke his rights under the Fifth
Amendment.
Fifth Amendment.
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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?
MR.CROCKETT: Sameobjection. Same

instruction.
Fifth Amendment.
BY MR.CONANT:
Q. Isn't it true that Ms. Blixseth,through
her entities,was paying you a hundred thousand
dollars a month to facilitate her computer hacking
into the emails of Tim Blixseth and Michael Flynn?
MR.CROCKETT: Same instruction.
Fifth Amendment.
Theseare just sound biteshe's making for

his next artcle. That's a11 this is about.
MR.CROCKETT: I know.
BY MR.CONANT;
Q. What was Ms.Blixseth,through her
entities,paying you a hundred thousand dollars a
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month for?
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?
MR.CROCKETT: I object. Assumesfacts not

in evidence. Lacks foundation. It's argumentative
and it's compound.
Based on Mr. Flynn's statement I instruct
Mr.Montgomery to invoke his rights under the Fifth
Amendment.
Fifth Amendment.
BY MR.CONANT:
Q. Isn't it true that Ms.Blixseth, through
herentities,has paid you at least $6 million since
April of 2006?
MR.CROCKETT: Sameobjections. Same
23 instruction.
24
THE WITNESS: I'm invoking my right under
11:34:27 25 the Fifth Amendment.
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Q. Mr.Montgomery,where did the $6 million
3 that you received through Edra Blixseth go?
4
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MR.CROCKETT: Sameobjections. Same

instruction.
Fifth Amendment.
BY MR. CONANT:
Q. Okay. Mr.Montgomery, do you know who
Istvan Burgyan is?
A. Yes,my son-in-law.
Q. Did you know that I deposed Mr. Burgyan in
September of this year?
A. I knew he had a deposition.
Q. Did you talk to Mr. Burgyan about his
deposition?
A. No.
Q. Right.
Mr.Montgomery,are you familiac with a
company called Demaratech,LLc?
Fifth Amendment,
Q. A11 right. Let me go
MR. FLYNN: On the record I withdraw a11 my
11:35:37 25 objectionstothepresenceofanyof thenepartment

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A. Yes.
Q. Did you receive that $12,500 from
Demaratech?
Fifth Amendment.
Q. Mr.Montgomery,can you explain to me what
you did at Demaratech,LLC?
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?
Fifth Amendment.
Q. In what way is the software that Demaratech
is using different than the intellectual property
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you listed on your bankruptcy schedule?

Fifth Amendment.
Q. Okay.
MR. FLYNN: Did he get that money for the
use of that's listed in the bankruptcy schedule.
BY MR.CONANT;
Q. Mr.Montgomery,did you receive this
$12,500 forusing the -- 1et me strike that.
Isthis $12,500 that you received someform
of compensation for Demaratech using your
intellectual property,Mr.Montgomery?
Fifth Amendment.
Q. A11 right. I'm going to turn now to
page 3-29.
MR.FLYNN: Did you say the date of that
last check? Put the date on the record.
MR.CONANT: A11 right. For the record,
the date of the last check on page dash 3 3-22
check No.1520 is dated March 3, 2010.
Q. Now if you turn with me,Mr.Montgomery, to
page 3-29, if you look on the left-hand column
there's a check,Check No. 5038.
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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?
Fifth Amendment.
Q. What did you do with that $12,500?
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?
Fifth Amendment.
Q. Mr.Montgomery, are you aware of any
effortsby anyone at Demaratech to sell software
technology to Israel?
FifthAmendment.
MR. CONANT: I'm going to introduce what's
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THE VIDEOGRAPHER; The time is 11:45 a.m.
2 We're back on the record.
3 BY MR.CONANT:
4
Q. A11 cight. Mr.Montgomery,I don't know if
11:45:19 5 youlve had a chance to review Plaintiff's Exhibit 8,
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A. You mean 9.
Q. I'm sorry,is it Plaintiff's Exhibit 9 now?
Do you know who George Birnbaum is?
A. I don't recall the name specifically.
Q. Have you evec contacted -- have you ever
been in contact with anyone associated with the
government of Israel to sell software?
Fifth Amendment.
Q. Can you please review Plaintiff's Exhibit
No. 9.
A. I did.
Q. A11 right. Now I'm going to read -- I'm
going to represent that this, Plaintiff's Exhibit
No.9,is an email dated June 30, 2010,from an
email address from Concerned Citizen to Michael
West,who's an FBI agent.
1'11 represent that the Concerned Citizen
email is from a gentleman by the name of George
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MR. CROCKETT: At any point in time about
3 anything?
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MR. FLYNN: No, about Selling his
11:49:50 5 decoding/decrypting technology.

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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?
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?
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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?
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
MR. FLYNN: Did you defraud him.
THEWITNESS: Isthat a statement you just

made? I can't hear you,Mr.Flynn. If you're going
to make a statement about fraud about me,say it
loud enough so everybody can hear it;okay? I'm
sick and tired of it.
MR.CROCKETT: That's enough.
THE WITNESS: Go ahead.
MR.CROCKETT: What's the question?
BY MR.CONANT:
Q. Have you defrauded Mr.Kennedy in
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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?
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.
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A. I don't recall.
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Q. You don't recall if you ever had this
12:09:08 5 communication?
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MR.CROCKETT: Asked and answered,Counsel.
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question until you get an answer you want. I've

answered it three times. I don't recail.
BY MR.CONANT:
Q. Why would Edra tell you,''With al1 going
on,much of which you encouraged me to move forward
with,why are you doing this at this time?''
MR.CROCKETT: Calls for speculation. 1'11
instruct him not to answer.
BY MR.CONANT:
Q. I'm asking you: You have a relationship
with Edra Blixseth,do you not, Mr.Montgomery?
A. I know Edra Blixseth.
Q. Can you explain to me your prior business
relationship with Edra Blixseth?
A. No.
Q. Why can you not -A. 1'11 take the Fifth. 1'11 assert the right
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under the Fifth.

Q. Mr.Montgomery,how does your relationship
with Edra Blixseth implicate you in any criminal
proceeding?
MR.CROCKETT: Don't answer that question.
BY MR.CONANT:
Q. Mr,Montgomery,you are under indictment by
the Clark County D.A.for the state of Nevada,are
you not?
A. 1'11 assert my right under the Fifth
Amendment.
What,are you upset because I asserted my
right? I'm still going to assert it.
MR. FLYNN: C.J., let's break for lunch.
MR.CONANT: Want to break for lunch? Let
16 mejustfinishthislastone.
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I'm going to hand Mr.Montgomery what's
18 going to be marked as Plaintiff's Exhibit No. 11.
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THE WITNESS: Thank you.

MR.CONANT: A11 right. Plaintff's
Exhibit No. 11 is represented to be a Summons issued
by the District court for clark county,Nevada. I
will represent that I received this document in its
form,in the current in its current form from
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Mr.Montgomery's counsel Steve Skirvin.

Why there appears to be three separate
copies of the same indictment,I don't know,but
this is the way I received it from Mr. Skirvin.
Q. Mr.Montgomery, isn't it true you are under
indictment by the clark County district attorney for
obtaining money under false pretenses?
A. 1'11 going to assert my right under the
Fifth Amendment.
Q. A11 right. Theft,Mr. are you under
indictment by the Clark County DA for theft?
Amendment.
Q. Are you under indictment for drawing and
passing a check without sufficient funds in drawee
bank with intent to defraud?
Fifth Amendment.
Q. Are you aware okay. So we're aware of
this indictment against you,Mr.Montgomery.
Are you aware of any other criminal
proceedings against you?
Amendment.
Q. Can you explain to me your current
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A. I'11 assert my right under the Fifth
3 Amendment.
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MR.CONANT: Let's break for lunch.
12:11:47 5
THE VIDEOGRAPHER: Going off the record.
6 The time is 12:11 pvm.
(Luncheon recess.)
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THE VIDEOGRAPHER: The time is 1:17 p.m.
9 We're back on the record.
13:17:19 10
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Can we just -- do we need to swearhim back

in?
THE REPORTER: NO.
BY MR.CONANT:
Q. Where do you currently reside,
Mr.Montgomery?
A. My address?
Q. Yes.
A. 6 Toscana Way West, Rancho Mirage,
California.
Q. Where do you currently work?
A. 0ut of my home.
Q. What do you do,currently?
A. I'm unemployed.
Q. Do you have any form of income right now,
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Fifth Amendment.
Q. Are you aware of any federal investigation
of you concerning yourattempts to sell software to
the Israeli government?
Fifth Amendment.
Q. Have you told anyone in the Israeli
government in any form of words that you were having
your name cleared by the United States government?
Fifth Amendment.
Q. Mr.Montgomery,has Edra Blixseth made any
effort to connect you to the Israeli government in
an effort to sell your software?
Assumes facts not in evidence. Lacks factual
predicate.
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Q. And has Ron Burkle had any involvement in
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24 an attempt to sell your software to the government?
I don't even know who that is.
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Fifth Amendment.
Q. And you had a business relationship with
Ms.Blixseth I'm sorry, strike that.
You had a business re1ationship with
Blxware,didn't you?
A. I'm going to assert the right under the
Fifth.
Q. Mr.Montgomery,weren't you the key
software developer for B1xware?
Fifth.
Q. Weren't you the most valuable asset for
Blxware in that regard?
A. I'm going to assert the right under the
Fifth.
Q. A11 right. Now 1et's read this,I guess,
third ful1 paragraph from Edra to you. ''We need the
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source code, (not about court about our business,)''

end quote or I'm sorry. Let me start over.
''We need the source code, (not about court
about our business,) sowecan have it inthe proper
safe place to be eva)uated and then we can monetize''
24 Four ''work''?
13:33:08 25
A. I thought it said ''our.''
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doing what he's doing and you're asking me

questions.
Q. Mr.Montgomery -A. I'm listening.
Q. -- has Ms. Blixseth ever asked you to
provide Blxware with any source code ever?
A. I don't recall.
Q. Isn't it true that you've never provided
Blxware with any sort of source code?
A. No.
Q. Isn't it true that the purpose of -- 1et me
strike that.
Were you trying -- I'm sorry. Let me
strike that.
When you were at Blxware was Blxware
attempting to procure a hundred million dollar
contract from the United states Government?
Fifth Amendment.
Q. Were you involved in trying to get a
hundred million dollar contract from the
United States Government?
A. Going to assert my right under the Fifth
Amendment.
Q. Didn't Blxware receive approximately
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Mr.Montgomery?
FifthAmendment.
Q. Wasn't that $2.5millionBlxware received
paid ascompensation to Blxware forfraudulent
software?
Fifth Amendment.
Q. Isn't it true that Blxware never had any
software that purported to do what Blxware was
representing it would do to the United States
Government?
Fifth Amendment.
you what's going to be marked as Plaintiff's
Exhibit 15.
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(Exhibit 15was marked foridentification.)
13:40:35 20
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23 email?
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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 ///
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Fifth Amendment.
Q. Was there any software that Blxware was
purporting to develop that was to be used to detect
terrorist attacks?
Fifth Amendment.
Q. Now you chuckled there.
A. Well,because I'm tired of you making these
outrageous allegations against me. It's really
getting old.
MR. FLYNN: Then why are you taking the
Fifth.
BY MR.CONANT:
Q. Then why are you taking the Fifth?
THE WITNESS: IS he asking me that or you,
Mr.Flynn?
BY MR.CONANT:
Q. It doesn't really matter.
A. Yeah, it does. I thought you were the
people asking me the questions but he keeps trying
to get me agitated and throw his weight around in
this deposition and cause a problem.
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that -A. I got it. I got it. Okay.

Q. It's very,very challenging.
A. Go ahead.
Q. Now why did you chuckle,Mr.Montgomery,
when I asked you that?
A. I don't recall.
Q. So what was -A. Mr. Flynn's facial expressions,I guess I'm
getting tired of them and you 1et him keep doing
them.
Q. Why would it be absurd for us to suggest
that this software that Blxware was creating to
detect terrorist attacks was,you know,phoney?
Why would it be absurd for us -A. I'm going to assert my right under the
Fifth.
Q. Because if you turn back to Plaintiff's
Exhibit 3 here -A. The one that Mr. Flynn wrote.
Q. I believe you -- I believe you signed this
declaration,Mr.Montgomery. We've established that
on the record.
A. Yeah.
'Q. Now if you turn with me to page 2 of this
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declaration -A. Bottom 2 or the second page?

Q. Label No. 2.
A. Okay.
Q. -- line 18 and a half -A. Uh-huh.
Q. -- ''Multiple''-A. Wait a minute.
Okay,I'm sorry. Go ahead.
Q. Line 18 and a half,''Multiple software
programs dveloped,owned,possessed and used
exclusively by me, derived from my oDS between 1994
and December 31, 2002,some of the source codes for
which are direct derivatives of my copyrights and
which beginning in November of 2002 I began to adapt
to military applications on behalf of the Department
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redacted, ''mostly utilized in the war on terror

between March 2003 and the present.''
Now weren't these -- this software you're
referring to here, the decoding -- the software to
decode Al-lazeera communications,Mr.Montgomery?
Amendment.
Q. Why would it be -- why would you get upset
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when we would suggest that this software is fake?

Fifth Amendment.
Q. Isn't it true that this softwace was never
legitimate?
Fifth Amendment.
Q. Isn'tittrueit'sjustacompletefraudon
the United States Government,Mr.Montgomery?
Fifth Amendment.
Q. How many terrorist attacks have yoe helped
thwart?
Fifth Amendment.
Q. How many American lives do you believe
you've saved through your softwace?
Fifth Amendment.
Q. How many times have you contacted the
government to alert them to some form of terrorist
attack?
Fifth Amendment.
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Was your compensation by Opspring,LLC,
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$1.2 million peryear,Mr.Montgomery?

Fifth.
Q. So when did -- so beginning in April of
2006 youwere getting paid $1.2 millionperyear.
How long were you -- how long was this contract in
effect?
Fifth.
Q. So isn't it true that in approximately
March of 2009 you stopped getting paid by -- you
stopped getting paid by -- you stopped getting paid
your compensation under thls contract,
Mr.Montgomery?
A. I don't recall that specifically.
Q. Do you know when you stopped getting paid
by Opspring, LLC,or Blxware, LLc,Mr.Montgomery?
A. No.
Q. Who was paying you,was it Opspring,LLc,
or Blxware, LLC?
A. I'm not certain.
Q. Can you describe the relationship between
Opspring, LLC,and Blxware,LLC?
1'11 reask the question,can you describe
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13:57:34 1 to me the difference between opspring,LLC, and

2 Blxware, LLC?
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THEWITNESS: Isnlt that the same question?
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MR.CROCKETT: No.
13:57:42 5
THE WITNESS: I'm sorry,I thought it was.
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I'm going to assert my right underthe
7 Fifth.
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MR. FLYNN: Each them get the 50,000,get
9 the 50,000 each of them.
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Q. A11 right. Let's look at the first

heading -- or,I'm sorry, second heading down on the
first page, Loans to Montgomery. ''As discussed, the
company has agreed to provide you with a $1 million
loan,the first loan.''
A. I see that.
Q. Did you get $1 million fromopspcing,LLC?
A. 1'11 assert my right under the Fifth.
Q. If you look down at the first bullet point
under that first full paragraph -- I'm sorry, 1et me
give context here.
If you go to the last sentence of that
23 paragraph that I just read from

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13:58:29 25
A. Uh-huh.
Q. -- ''Additionally,the company has agreed to
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continuing to be an employee of the company at the

relevant time/'
You see that, Mr. Montgomery?
A. Yes.
Q. A11 right. First bullet point,''$500,000
on the first day you begin working full-time in the
company's offices in Bellevue,Washington.''
Do you see that, Mr.Montgomery?
A. Yes.
Q. Did you get $500,000from Opspring,LLc
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A. I'm sorry.
13:58:59 15
Q. -- under this -- under this first bullet
16 point?
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A. I thought you were done.
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Assert my right under the Fifth.
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Q. Where did that $500,000 go?
13:59:07 20
A. I assert my right under the Fifth.
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Q. In fact, backing up,where did the
22 $1 million go that you got that's referenced under
23 that first paragraph?
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A. I'm confused. I'm trying to I'm
13:59:19 25 confused. I don't know if the first sentence refers
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to those two five hundreds. I don't know. I guess

it does.
Yourquestion's confusing. Reask it.
Q. Okay. Let's go back up. The $1million
loan referred to as ''the First Loan''
A. Uh-huh.
Q. -- where did that money go?
A. I don't recall specifically.
Q. The $1 million -- strikethat.
Isn't it true,Mr.Montgomery,that with
with this $1 million you would launder that -- did
you launder that money through casinos,
Mr.Montgomery?
A. 1'11 assert my right under the Fifth.
Q. Mr.Montgomery,have you ever told anyone
that you had a practice of using chip brokers in
Las Vegas to help you hide your transactions with
with the -- yourmonetary transactions?
A. No.
Q. Would you ever have a practice of using
middlemen to help you in Las vegas who would take
casino chips to -- in any form of using third
parties through using casino chips to help you hide
your monetary transactions?
A. No.
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Fifth.
Q. What was the -- what were you giving to
Blxware in exchange for this -- for entering into
this employment agreement?
Fifth.
Q. So you won't tell me what services you were
providing to Blxware in exchange for this -- your
employment with Blxware?
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A. I just stated my answer to the question.

Q. Or, I should say,Opspring,since it's an
Opspring contract.
MR. FLYNN: Were there any actual loan
documents.
BY MR.CONANT:
Q. Were there any actual loan documents that
were executed in connection with a11 these ''loans''
referenced here in this employment agreement?
A. I don't recall if there was or not.
Q. A11 right. Last bullet point,$300,000
upon the company's receipt -MR. FLYNN: Did he heport these amounts on
his tax return.
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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 --
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BY MR.CONANT:
Q. Now a11 this money that you received on
this employment agreement,did you ever report those
funds on yourtax returns,Mr.Montgomery?

privilege.
Q. What privilege?
A. Fifth.
Q. Fifth Amendment privilege.
A. Excuse me.
Q. A11 right. If you look down here,bullet
point -- I'm sorry,heading Intellectual Property
Assignment Agreement.
It reads, ''Based on your representations
and warrantees and our discussions''-A. Excuse me. Which page? The bottom
Q. Well, really in the middle -A. Okay. Okay. I got it,yeah.
Q.
under the heading Intellectual Property
Assignment Agreement.
''Based on your representations and
warrantees and our discussions, it is our
understanding that you personally and exclusively
own and control certain intellectual property and
technology rights that will be crucial to the
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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?
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
17 the judgmenthehasagainst you.

18
Do you recall that,Mr.Montgomery?
19
A. Well, I produced stuff for Liner so
14:17:18 20
Q. Do you recall producing these bank
21 documents?
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A. No.
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Q. You don't recall.
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Do you remember having to produce your bank
14:17:26 25 records in connection with the Nevada litigation?
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A. Yes.
MR.FLYNN: It'S --
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?
Fifth.
Q. Mr.Montgomery, isn't this million dollars
that was deposited here deposited in connection with
18 youremployment agreement that wejust discussed?

19
14:21:14 20 Fifth.
21
MR. FLYNN: Did he transfer the money out.
22 BY MR. CONANT:
23
Q. And where did this --
24
14:21:57 25
(Mr.Conant and Mr.Flynn confec.)

THE WITNESS: I take it this is not a
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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?
Fifth.
Q. Wasn't that for -- wasn't this in
17 connectionwiththe employment agreement we just

18 discussed?
19
14:22:38 20 Fifth.
21
Q. A11 right. Now I see the next deposit
22 dated April 6 for$300,000 immediately below that.
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A. Yes.
14:22:50 25
Q. What were the source of those -- that
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$300,000?
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?
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?
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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?
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Fifth.
MR. FLYNN: Ask him if it went to any
foreign countries.
BY MR. CONANT:
Q. Did any of that money go to any foreign
country,Mr.Montgomery?
A. No.
Q. Did any of that money go into an account of
your relative?
Fifth.
Q. Did you get a cashier's check when you took
that money out,Mr.Montgomery?
I'm sorry. Strike that question.
What relative of yours did that $800,000 go
to,Mr. Montgomery?
A. I didnlt say it did go to a relative.
Q. Did it or did it not?
A. I'm going to going to assert my right under
the Fifth.
Q. Wasn't this 1et me strike that.
Go down to the next withdrawal,April 6,
the reference is withdrawal made in a branch store,
amount $200,000.
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A. Yes.
Q. When you withdrew that money,didn't you
withdraw that in the form of a cashier's check,
Mr.Montgomery?
Fifth.
Q. What branch store did you go into to make
that withdrawal?
A. I have no way of knowing.
MR. FLYNN: Why would he buy a cashier's
check.
BY MR. CONANT:
Q. Why would you withdraw this money in the
form of a cashier's check,Mr.Montgomery?
A. I don't recall.
Q. Wasn't the purpose of withdrawing this a
cashier's check to hide the money trail?
A. No.
Q. Then what was the purpose?
A. I don't recall.
MR.FLYNN: Where did you cash this
23 $200,000.
24 BY MR. CONANT:
14:25:27 25
Q. Where did you cashthis $200,000 checkthat

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you took out,that $200,000?

A. I -- I'm sorry.
I don't recall.
Q. Did you take that cashier's check to a
casino,Mr.Montgomery?
A. I don't recall.
Q. I See here -MR.FLYNN: Did he buy chips.
BY MR.CONANT:
Q. Did you buy any chips, any casino chips,
with that $200,000?
A. I don't recall.
Q. Did you use that money to pay back any
casino debts,Mr.Montgomery?
A. Youknow,I'm justgoingto I'mgoingto

assert the Fifth.
Q. To what question?
A. The last one.
Q. Was any of this money that you withdrew
here,was any of this money still in the form of
cash at the time that you filed for bankruptcy,
Mr.Montgomery?
A. No.
Q. Was any of this money being held by any
friend or family of yours at the time you filed for
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THE WITNESS: It's What your version is.

MR. FLYNN: I know you conned me and you
conned the U.S.Government. You conned Edra
Blixseth to an extent. You're a computer hacker and
you're a fraud,Mr.Montgomery.
THE WITNESS: You're outrageous,Mr. Flynn;
Youlre outrageous.
MR.CROCKETT: Dennisj let's get through
this.
MR. FLYNN: And you conned me,sir,that's
why we're here.
THE WITNESS: Yeah. No,it isn't.
Okay. I don't know if there was a question
on the table.
MR.CROCKETT: There isn't.
BY MR.CONANT:
Q. Let's flip to Tab No. 3. Mr.Montgomery,
let's take a break from the bank statement for a
second.
You recallsigningaconfessionof judgment

21 where you --a couple of confessions of judgment in
22 connection with the Nevada litigation?

23
24 Fifth.
14:30:20 25
Q. It's a public document,Mr.Montgomery. Do
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A. Take the Fifth.

Q. Did Ms.Blixsethever -- 1etme rephrase
that.
Did Ms.Blixseth ever personally or through
her entities ever give you any computer equipment
that was owned by opspring or Blxware or Azimyth,
Mr.Montgomery?
Fifth.
Q. Do you have still have possession of any of
the computer equipment that you worked on while you
were employed for Ms. Blixseth's entities?
Fifth.
Q. Do you still have the hardware that you
used to create the source code that you were that
we reference in Plaintiff's Exhibit 3?
Fifth.
Q. Don't you still have copies of a11 the
source code that you were trying sell to the
government,Mr.Montgomery?
Fifth.
Q. Did you have possession of the sourcecode
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2 months ago,Mr.Montgomery?
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A. I'm sorry.
4
I'm going to invoke my right under the
15:10:22 5 Fifth.
Q. Now thesourcecodethatwe'vejustbeen
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discussing,that's the same intellectual property

that's listed in your bankcuptcy schedules,
Mr.Montgomery?
A. I think you've asked me that question
multiple times and I've answered it.
Q. I don't think I've ever gotten a very clear
answer, Mr.Montgomery.
I told you I Wasn't aware that I wrote that
piece at the bottom of that particular document.
The source code and intellectual property referred
to in that schedule were copyrights filed with the
18 U.S.Copyright office.
19
Q. Do you have -- I mean is that your personal
15:10:59 20 property,that intellectual property that's subject

21 to the National Security Act that's listed in your
22 schedule?
23
Was that your personal property at the time
24 you filed your bankruptcy schedule?
15:11:09 25
A. I'm not going answer the question. I don't
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Are we at 20, Stephanie?

THE REPORTER: Yes.
MR.CONANT: Plaintiff's Exhibit 20.
It's just more bank records from Istvan
16:07:03 5 Burgyan. I don't know if you have any interest in

6 reviewing them.
(Exhibit 20wasmarked for identification.)
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Q. Mr.Montgomery,can you just refreshour

memory as to your relationship with Istvan Burgyan?
A. My son-in-law.
Q. Was he involved with operating Demaratech,
LLC?
A. Yes.
Q. Have you ever lent money to Mr.Burgyan?
Fifth Amendment.
Q. Has Mr.Burgyan ever lent money to you?
Fifth Amendment.
Q. Does Mr.Burgyan currently have any 1et
me strike that.
Does Mr. Burgyan ever strike that again.
Does Mr. Burgyan currently hold any of your
assets on your behalf?
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A. I'm going to assert that on the Fifth

Amendment.
Q. A11 right.
MR. FLYNN: Get a copy of the casino cash.
BY MR.CONANT:
Q. Has Mr.Burgyan ever accompanied you to any
casinos?
A. Yes.
Q. Which casinos has he accompanied you
A. I don't recall.
Q. And casinos in California or casinos in
Nevada?
A. Nevada.
Q. Do you ever do you ever gamble at Rancho
16:08:28 15 Morongo (sicq casino here in Palm Springs?

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Fifth Amendment.
Q. A11 right. Can you explain to me what
Demaratech's relationship with cardiac Network,
Inc., is Mr. Montgomery?
Fifth Amendment.
Q. Were you -- I see here on Bates stamp
No. 352 of Plaintiff's Exhibit 20 a deposit in the
amount of $200,000 into Istvan's bankaccount from
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Cardiac Network,Inc.
A. Yes.
Q. Do you know why Cardiac Network,Inc.,
would be depositing $200,000 into Istvan Burgyan's
account?
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?
Fifth Amendment.
Q. Isn't that same technology the same
technology lsted in your bankruptcy schedule,
Mr.Montgomery?
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?
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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:
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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
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A. 558,okay.
13
MS.WELLS: For the record,are these more
14 bank records?
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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
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from Backhouse Fiduciary Services.

Do you know -- are you familiarwith
Backhouse Fiduciary Services,Mr.Montgomery?
Fifth Amendment.
Q. Isn't Backhouse Fiduciary Services
connected with Josh Kennedy?
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Fifth Amendment.
Q. And isn't Josh Kennedy a funder of
Demaratech, LLc?
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?
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.
Q. I see a deposit dated 12/15in the amount
19 of -- I'm sorry,it's a withdrawal in the amount of

16:12:43 20 a hundred thousand dollars.
21
A. I see that.
22
Q. Do you see that?
23
A. Yes.
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Q. And the -- the description appears to be
16:12:49 25 David z.Chesnoff.
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Mr.Montgomery,who is David Chesnoff?

Fifth Amendment.
Q. Isn't he your criminal defense counsel in
Clark county,Nevada?
Fifth Amendment.
Q. Didn't he appear for you yesterday at your
arraignment,Mr.Montgomery?
Fifth Amendment.
Q. Speaking of the arraignment yesterday in
13 clark County,what did the judge give youa two-week

14
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extension for?
Fifth Amendment.
Q. Did he give you an extension to arrange
some sort of financing to pay off the DA,
Mr.Montgomery?
Fifth Amendment.
Q. Mr.Montgomery,you've paid the DA
$450,000
We've asked this question. 1'11 move on.
Now I'm looking backat this 12/15

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withdrawal from Istvan Burgyan's account to what

appears to be David Chesnoff who is your criminal
counsel.
Why would Istvan Burgyan pay a hundred
thousand dollars to your criminal counsel?
Av I'm going to assert my right under the
Fifth Amendment.
Q. Isn't it true this is really your hundred
thousand dollars,Mr.Montgomery?
Fifth Amendment.
MR.CONANT: A11 right. Let's hand you
what wefve marked as Plaintiff's Exhibit No.22.
(Exhibit 22 wasmarked foridentification.)

BY MR. CONANT:
Q. A11 right. Mr,Montgomery,who do you -do you pay yourmortgage,Mr.Montgomery?
A. Ever you mean?
Q. Who do you have who do you currently
have -- what banks do you currently have to pay
mortgage payments to,Mr.Montgomery?
A. Bank of America.
Q. You just have onemortgage that you pay?
24
A. No. Auroca Home Loans,I don't know the
16:15:03 25 name of the bank but --
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Q. You think it's Aurora Loan Services?
2
THE REPORTER: Sorry?
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THE WITNESS: Aurora,
4 BY MR. CONANT:
16:15:10 5
Q. Aurora Loan,okay.
6
I'm sorry, Mr.Montgomery,I didn't mean to
7 cut 9ouoff.
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A11 right. If youlook at me Esic) with

Bates stamp No.944, there is a withdrawal in the
amount --dated June 1,in the amountof $15,000.
A. Yes.
Q. And the description is wire tcansfer out,
JMBM retainer,and then it says Joseph A.
Eisenberg or Gisenberg, PC.
Do you know who Joseph Gisenberg is,
Mr.Montgomery?
Fifth Amendment.
Q. Isn't he your counsel in yourmain
bankruptcy case,Mc.Montgomery?
A. I'm going to assert my right.
Q. Why wouldMr.Burgyan pay $15,000,a
$15,000 retainer,to yourbankruptcy counsel,
Mr.Montgomery?
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Fifth Amendment.
Q. Isn't it truethat this $15,000 is really
your money,Mr.Montgomery?
Fifth Amendment.
Q. Now you said a minute ago,Mr.Montgomery,
that one of your mortgage payments is to Aurora Loan
Services.
A. That's correct.
Q. Okay. I see now,if you look down to
June 4
A. I see.
Q. -- you have a withdrawal in the amount of
$8,104.40.
A. Yes.
Q. That's to Aurora Loan Services,
Mr.Montgomery?
A. Yes.
Q. Isn't that a mortgage payment,
Mr. Montgomery,for one of the mortgages that you
owe money to?
Or -- 1et me rephrase it.
This $8100 payment to Aurora Loan Services,
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isn't that a payment for one of -- on a mortgage

payment that you're responsible for,Mr.Montgomery?
Fifth Amendment.
Q. It's really your -- so Mr.Burgyan is
really paying stcike that.
A11 right. Let's hand you what we've
marked as Plaintiff's Exhibit 23.
(Exhibit 23wasmarked for identification.)
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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
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Fifth Amendment.
Q. Isn't it those were funds paid to your
criminal counsel,are they not,Mr.Montgomery?
Fifth Amendment.
Q. Isn't that,in fact,your money,
Mr.Montgomery, that's going to Mr.Chesnoff?
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.)
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THE VIDEOGRAPHER: This marks the beginning

of Media No-4. The time is 4:23 p-m. We're back
on the record.
MR.CONANT: A11 right. Mr.Montgomery,
I'm going to hand you what'll be marked as
Plaintiff's Exhibit 24.
23
(Exhibit 24 was marked foridentification.)
24 BY MR.CONANT:
16:23:20 25
Q. A11 right. Mr.Montgomery,take a second
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to review this document.

A. Okay.
Q. I'm going to represent that this is a -this is a document we got from a casino in relation
to a subpoena.
Does this -- did you -- is this your
cashier's check,Mr.Montgomery,that you I'm
sorry. Let me back up.
Is this one of the cashier's checks that
you got from Wells Fargo Bank on April 25,2006?
Fifth Amendment.
Q. What did you do with this -- did you bring
this cashier's check and cash it with -- I shouldn't
say ''cash it.'' Let me strike that.
Did you submit this cashier's check to
caesar's Casino?
Fifth Amendment.
Q. What did you do what was the purpose of
giving caesar's Casino this $50,000 cashier'scheck?
Fifth Amendment.
Q. Didn't you take this money out,
Mr.Mont- -- take this check to the casino and get
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ennis Lee Montgomery - November 18, 2010
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cash with it,Mr.Montgomery?

Fifth Amendment.
Q. What did you do with the cash that you got
from the casino,Mr.Montgomery?
Fifth Amendment.
Q. Do you still have this $50,000 in cash,
Mr.Montgomery?
Fifth Amendment.
you what we've marked as Plaintiff's Exhibit 25.
(Exhibit 25was marked foridentification.)

THE WITNESS: That's it.
MR.CONANT: Sorry.
BY MR.CONANT:
Q. Mr.Montgomery, can you tell me what can
you tell me what casinos you've gambled at since
2006?
Fifth Amendment.
Q. Between 2006 -- within the year 2006, can
you tell me how much money you've won gambling or
how much you money you've lost gambling?
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Fifth Amendment.
Q. 1'11 ask you the same question for 2007.
Can you tell me how much money you won gambling or
lost gambling?
FifthAmendment.
Q. I'm asking for net. When I'm asking how
much you won,how much you lost,I'm asking net for
the year.
Fifth Amendment.
Q. Isn't it true that -- well,1et me back up.
For the year 2008 can you tell me how much
you won gambling or how much you lost gambling?
Fifth Amendment.
Q. Same question for 2009.
A. Same answer.
Q. Isn't it true that for the years 2008
through 2009 you've won more money gambling than
lost?
Fifth Amendment.
Q. Approximately how much money have you
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borrowed in one form or another,Mr.Montgomery,

from casinos
A. I'm goqng to assert my right under the
Ffth Amendment.
Q. Let me finish the question.
Between the years 2006, 2009,how much
money have you borrowed from casinos,
Mr.Montgomery?
Fifth Amendment.
MR.FLYNN: When he was getting those
millions of dollars of cash from Edra Blixseth,was
he putting second mortgages on his homes.
BY MR.CONANT:
Q. Mr.Montgomery,we just reviewed a11 your

bank statements where you received a large amount of
money from Edra Blixseth's entities.
During that time period,were you taking
out second mortgages on real estate?
Fifth Amendment.
Q. What did you do with a1l the cash you took
out on these mortgages on your real estate?
Fifth Amendment.
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Q. A11 right. Did you put second mortgages on

each piece of real estate that you owned during this
time period?
Fifth Amendment.
Q. A11 right. Mr.Montgomery,do you not want
to file your tax returns for '08 and '09 because you
don't want to report yourwins from gambling?
Fifth Amendment.
Q. A11 right. Let me see here.
Have you ever reported to a casino that you
were robbed of a large amount of money,
Mr.Montgomery?
Fifth Amendment.
Q. Okay. Were you,in fact, robbed of any
money at any time,Mr.Montgomery?
A. I'm sorry.
Are you done?
Q. I'm trying to find it. It's in here. I'm
22 just trying to find the exact referenceto it,

23 because there's an interesting --yeah. I justwant
24 to find it.
16:29:50 25
A11 right. Mr.Montgomery,on -- are
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A. Assert my right under the Fifth Amendment.

MR. FLYNN: Herels hoW he did it,by making
it look like
BY MR.CONANT:
Q. How much money -- well, let's go back to -how much money, approximately,were you borrowing?
Let me back up. Do you understand what a
marker is in casino parlance?
Fifth Amendment.
Q. Isn't a marker kind of like a note that the
casino advances you money in some manner and you,
essentially,have to pay it back?
Fifth Amendment.
Q. So weren't you taking out markers to
gamble,you'd win,but then not pay back the marker?
A. I'm sorry. Are you done?
Q. I'm done.
Fifth Amendment.
22
Q. Now I notice that thismemo text,4/6/2006,
23 this is the same day that you were receiving,I

24 think,based on your records,over a million dollars
16:32:30 25 from Opspring;is it not,Mr.Montgomery?
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THE WITNESS: I despise that he keeps

16:32:35 1
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3 It'sjustannoying.
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MR.CROCKETT: Almost done. Almost done.

THE WITNESS: I#m going to assert my right
BY MR. CONANT:
Q. So you were robbed -- you were purportedly
robbed of $300,000, but at the same time it appears
that you still had outstanding markers owed to the
casinos.
In fact, this memo says brought in you
brought in a hundred K cashier's check to take care
of his -- ''to take care of half his outstanding
markers/'
So you had roughly $200,000 inoutstanding
markers and you paid down a hundred thousand dollars
of those,but the very same day you're being paid
over a million dollars from you receive over a
million dollars from Edra's entities.
So the questioniswhy didn't you just pay
22 off a11 your markers with a11 the monky you were
23 receiving from Edra's entities?
24
16:33:36 25 Fifth Amendment.
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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
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hired an accountant to help you detecmine your wins

and your losses from the various casinos?
A. I assert my cight under the Fifth
Amendment.
Q. What I mean hired an accountant. I mean
hired an accountant to help you prepare your tax
returns?
A. I'm going to going to assert my right under
the Fifth Amendment.
Q. A11 right. Now,Mr.Montgomery,if you
flip to the next page here,September 1, '06,Memo
ID 42710, ''Memo Text: Customer requests increase to
300k,denied at this point. Keep at 200k per Mike
Jones.''
Who's Mike -- do you know who Mike zones is
that they're referring to here?
Fifth Amendment.
Q. Were you asking casinos for extensions of
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2
3 FifthAmendment.
Q. How much cash -- what is a -- what is
16:35:13 5 what is a casino -- how does a casino operate with
6 respect to how much money they're willing to extend
7 to you on credit?
8
9 BY MR.CONANT:
16:35:22 10
Q. In your experience with the casinos,
11 Mr.Montgomery,hoW do you get -- how did you
12 establish a line of credit with a11 these casinos,
13 Mr.Montgomery?
14
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MR.CONANT: A11 right.
17
A11 right. Just got to get through some of
18 these. The amount, the volume,of documents here
19 youseefromcasinos
16:36:33 20
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one pointjustabsolutely
overwhelming, so we've had to get through some of

this.
A11 right. Mr.Montgomery,I'm going to
hand you what will be marked as Plaintiff's Exhibit
No.26.
Are we at 26?
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Do you recall why you requested this

information from the casino,Mr.Montgomery?
Fifth Amendment.
Q. Did you report this $83,000 win onyour
2005 tax returns or your tax year 2005 tax
returns,Mr.Montgomery?
MR.CROCKETT: SorryrCounsel,a11 three of
these letters are dated September 16th and yet they
deal with years 2005, '-6 and '-7 and this is the
way they were produced to me.
MR.CONANT: This is the way they were
produced to me. I haven't altered these documents
in any way.
Q. Mr.Montgomery?
A. I'm sorry, rephrase the question.
MR.CROCKETT: I'm Sorry, read the question
back, please.
BY MR. CONANT:
Q. Did you report this $83,400win on yourtax
year 2005 tax returns?
A. I don't recall I don't recall
Q. Mr.Montgomery, isn't it true that part of
your entire scheme was to horde away a bunch of cash
and then file bankruptcy and claim that you lost a11
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your money gambling,Mr.Montgomery?
Q. A11 right. Mr.Montgomery, I'm looking at
the second page of this exhibit here,''Dear Dennis,
16:40:45 5
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below isyourestimatedwin and/orloss information

per your request for the period January 2006 through
December31,2006/'and thenit showsa loss of
$132,600.
Mr.Montgomery,do you recall why you
16:41:00 10 requested yourwin/loss record for this -- forthe

11 MontBleu Resort?
12
13 Fifth Amendment.
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Q. Did you report that $132,000 lossonyour

taxes,Mr. Montgomery?
A. I'm going to assert my right.
Q. Did you really lose $132,600,
Mr.Montgomery?
Fifth Amendment.
Q. Does that include money that was borrowed?
Does the $132,000 included jn thislawsuit,does
that include money that was borrowed by you from the
24 resort,Mr. Montgomery?
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2
Q. A11 right. And then last page,
3 January '07 through December 31, '07,this document
4 purports to show that you lost 36,800.
16:41:44 5
Is that accurate,Mr. Montgomery?
6
7 Fifth Amendment.
8
Q. Did you report that loss on any of your tax
9 returns?
16:41:53 10
11 Fifth Amendment.
12
Q. A11 right. Moving on.
13
MR. FLYNN: Does he have an estimate of how
14 much he lost,how much he lost gambling -16:42:07 15 BY MR. CONANT:
16
Q. Mr.-- Mr.Montgomery,do you have an
17 estimate of the net amount of money you've lost
18 gambling between April '06 and March of 2009?
19
21
MR. FLYNN: Same thing on wins.
22 BY MR.CONANT:
23
Q. Same question with respect to how much
24 you've won, net, between April '06 and March of
16:42:28 25 2009?
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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
(Exhibit 27was markedforidentificationo)
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
THE WITNESS: Thank you.

MR.CONANT: I don't have an extra copy.
A11 right. 1'11 represent this is a
printout from -- in response to a subpoena I served
on -- unfortunately which casino is not obvious, but
I can find the copy here.
Yes,Peppermill. This is in response to a
subpoena I served on the Peppermill Resort -- or
Casino,I should say.
Q. Now,Mr.Montgomery, I See here that on
August 6,2010, first entry here,says amount
$5,000,that they received a payment from youin the
amount of $5,000,
Do you recall making a payment to any
casino in the amount of $5,000 on or about August 6,
2010?
Amendment.
Q. And I see here for zuly 16 another payment
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16:45:25 1
2
3
4
16:45:32 5
6
7
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9
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11
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16
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16:46:04 20
21
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23
in the amount of $5,000.

A. I see it.
Q. Okay. Do you recall making that payment,
Mr.Montgomery?
Amendment.
Q. What are the source of the funds for
that payment,Mr.Montgomery?
Amendment.
Q. Is this -- is this payment here part of an
arrangement with the casino or the DA to prevent
being indicted by any casino?
Amendment.
Q. Does this represent any arrangement with
you or between you and a casino or the clark
County DA to avoid criminal sanctions,
Mr.Montgomery?
Q. What's the source of these funds that
you're making payments with to the casino,
24 Mr.Montgomery?
16:46:15 25
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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?
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
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16:50:17 1 companies that may be interested in buying some of

2 your software.
3
4
A. Yes.
16:50:22 5
Q. Is that an accurate statement,
6 Mr.Montgomery?
7
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?
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?
Fifth Amendment.
Q. Is this when you were meeting with Israel
to try and sell them software?
Fifth Amendment.
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November 18, 2010
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
Q. Mr.Montgomery,I'm going to noW talk

turn to the part dated November 20, '09.
A. Okay.
Q. ''Rob spoke with Dennis's attorney, Scott
Freeman. Freeman told Rob that Dennis is currently
in Paris signing contracts.''
Were you in Paris signing contracts in
approximately in November of '097
Fifth Amendment.
Q. What contracts would those be refecring to?
A. I'm going to assert my cight under the
Fifth Amendment.
Q. And weren't those contracts associated with
property listed on your bankruptcy schedule,
Mr.Montgomery?
Fifth Amendment.
Q. At the same time were you attempting to
sell this software to the federal government?
Fifth Amendment.
Q. And when I mean ''software/'Imean the
software referenced in the dates for February 16,
2010.
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3
4
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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

Fifth Amendment.
Q. Now didyou have possessionof this
software that you were supposedly in Europe meeting
with potential buyers?
Fifth Amendment.
Q. A11 right.
A11 right. Turn to the next page.
A. I have to leave at 5 o'clock.
Q. We'l1 be done by 5 o'clock.
A. Oh,okay.
Okay.
Q. A11 right. I see here first line under
additional remarks first full sentence, ''Rob had
been told by him he would call Rob to let him know
about a payment to Dennis/'
That was -- I'm sorry. That was
October 21, '09,entry.
I'm looking now at September 18, '09,
entries. ''We received a call from local attorney
Scott Freeman about a month ago. He said he's
working with Dennis's attorney in Las vegas and
wanted to know if we had turned this over to the
DA's office.
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21
22
23
24
16:54:54 25
ennis Lee Montgomery - November 18, 2010

''Rob spokewith Scott and sounded as if
Dennis may want to make a payment arrangement.
Scott was going to get back to us/'
Is that true,Mr.Montgomery,were you
trying to make a payment arrangement with the
Peppermill Casino?
Amendment.
Q. How would you -- how would you make such a
payment arrangement, Mr.Montgomery,at this time in
September 18 of 2009?
Amendment.
Q. A11 right. Okay.
A11 right. If you flip with me to oh,
on the right-hand side dates dated -- remarks dated
October of '06,October 16, '06.
A. '06?
Q. Yeah.
A. Which,which period of time?
MR. CROCKETT: Same exhibit.
THE WITNESS: Oh, okay.
MR. FLYNN: 1099.
BY MR.CONANT:
Q. A11 right. Mr.Montgomery, between the
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MR.CROCKETT: Answer the question.
2
THE WITNESS: I don't know.
3
MR. CONANT: That's a11 I wanted to know.
4
MR.CROCKETT: Because the documents are
16:58:52 5 the best evidence anyway.
6
THE WITNESS: I know.
7
It's 5. I really need to leave at
8 5o'clock and it's 5 o'clock.
9
Or is it not maybe.
16:59:02 10
MR.CONANT: I have two minutes.
11
Anything further?
12
THE WITNESS: Are these ours to take?
13
THE REPORTER: No.
14
THE WITNESS: These are yours?
16:59:22 15
MR.CROCKETT: These are -16 BY MR.CONANT;
17
18
19
16:59:34 20
21
22
23
24
16:59:56 25
Q. Mr.Montgomery,the reference that wejust

saw on these casino records,your attempts to sell
your software to countries overseas,did Edra
Blixseth have any involvement at a11 with youc
efforts in that regard?
A. I've answered the Fifth.
MR. CONANT: It'S 5o'clock.
Mr.Montgomery needs to go,as does his attorney.
I'm going to hold -- 1'11 reserve the right to
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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

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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
applicatlon forpro hac vfcchmsbeen made. The

Massachuset?Barhassentacertitkateofgoodstanding
otheStateBarofNevada.neStateBarofNevadahas
issueditsapproval.Itwasover-nightedyesterdaytomy
o
i0c0e.oI
s0
h:
o3u0ldthbie
recml
eiynegdbyFederalExpressabout
1f
0i
:
rt1
smo
vingcompliedwiththe
,ha
S
u
p
r
e
me
C
o
u
r
t
ml
e
a
s
t
o
n
d
r
n
i
s
s
i
,a
ndttwer
eoas
Morf
s
Flynnbepenmttedtoappearinto
hp
ls
ma
nkbt
eh
haat
lf
thedefendant.
ld.
6. Mr.Montgomerywasseatedatcounseltablewithhisattomeysatthishcaring. Tr.
130:l7-23.sealedheanng.
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2
3
4
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).

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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
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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
23. From March2006untilNovcmbcr2006,thiscourtpresidcdovermotionsand

evidentiaryhearingsconcerningthesedisputes,andonNovember28.2006.thecourt
issueditsordergrantinginpartanddenyinginpartMr.Montgomery'smotiontounseal
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
26. Duringthisinterim period,severaleventsoccurredwhicharerclcvanttothccoun's

considerationofMr.Flyrm'smotionforsanctions.
27. OnFebruary7,2007,Mr.Flynn,onbehalfofMr.Momgomely sentalenertothe
following:UniedStatesAttomeyGeneral.AlbertoR.Gonzalez;DepuyAttorney
General,PaulJ.McNulty:EdwardNucci.ActingChitfofthePublicIntegritySection.
U.S.DepmmentofJustice;andDanielBogden.NevadaUnitedStatesAttorney,Ex.30.
sealedhearing.TheIetterconcernedthestamsofthesearchwarrantproceedingsand
mattersconcerningthcUnitedSmtesAttomey'softice.ld.
28. OnFebruary9,2007,Mr.FlynnsentanotherlettertoMessrs.Gonzalez.McNulty,and
Nucciconcemingthestamsofthcsearchwarrantproceedings,Mr.Montgomery'swork
onbehalfoftheUnitedStatcs,andrelatedmatters.Ex.28.sealedhearing.
29. 80thlettersexpresscdconcemsabouttheNevadaUnitedStatesAttomey'shandlingof
hesearchwarrantproceeding.Exs.28&30.sealedhearing.
30. Emailcommunications among Mr.Flynn.his co-counsel.Carla DiMare.Mr.
27
Montgomery,andEdraBlixseth(%Ms.Blixseth*')indicatethatthesepersonsdiscussed
28
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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

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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
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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.

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l D. Aewzllrff/zloftheClvllProceedingsInMarch2007andtheLinerFirm'sfa/r.pasCounsel
fortheMontgomeryPardes1
-aJu#2007
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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

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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
56. 0nJuly31.2007.Mr.F1ynnandMs.Pham hadatelephoneconferenccconccrningMr.
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.
)()
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Exhibit2 Page11of54
1
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

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2
3
4
5
6
7
8
9
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12
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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

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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
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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
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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
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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

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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
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18
19
20
21
22
23
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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
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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
83. Mr.Flynnexamined Mr.Montgomeryextensivclyaboutparagraphsevenofhis

declnmtionandoferedseveralexhibitsabouttheircommunicationspriortohis
withdrawalascounsel.Exs.5,9.15,20.21.23.28.29,30.31.&32,sealedhcaring.
:4. TheseexhibitsdemonstrateapatterninMr.FlynnandMr.Montgomery'sattorney-clicn:
relationshipofcxtremelyfrequentanddetailedcommunicationsaboutcvcryaspcctof
thtactionsptndinginthiscoun,andgiventbcpavityoftbclttterssenttohighranking
govcmmcntoftkialsandthepaperst5ledwiththiscourt,itisdifficulttoimagincthatMr.
MontgomerydidnotknowthatMr.Flynnwas'EadmittedonlyinMassachusetts,''mshis
letterheadsstates.
85. PriortosigninghisSeptember10,2007declnmtion,Mr.Montgomerycouldnotrecall
whetherhereviewedordiscusscdthcnoticeofIodgemcntscnttohisnewcounsel.
whetherhereviewedthesearchwarrantdockctsheetprovidedtoMs.Pham andMs.
Klar,whetherhereviewedlettersMr.Flyrmprovidedtohisnewcounselstatinghcwas
admittedonlyinM%sachusetts,whetherhereviewedthetranscriptoftheFebruary2006
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''
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8
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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
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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

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2
3
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
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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.
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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

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2
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5
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7
8
9
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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.
.-
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2
3
4
5
6
7
8
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
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and comprehensive orders with respect to the

transmissionofthefiles.AttomeyFlynnwasadmittcdrzr
hacviceintheNevadaCounandassuch.inconncction
wi
hio
atnaplrcoocned
eu
di
is
bj
th
oet
heva
sd
taand
ar
of
proth
fest
s
cn
tg
a,
sa
dos
pute
dec
bt
yt
Ne
Su
pdrs
eme
Court.
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
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Exhibit2 Page25of54
ase3'
.06-cv-00056-PMP-VPC Document985 Fil
ed03/31/09 Page25of54
I
2
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
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Pangte98
25
6of
4d03/31/09 Page26of54
ase3:06-cv-00056-PMP-VEPxChibDito2cume
F5
ile
l
2
3
4
5
6
7
8
9
l0
11
l2
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l4
15
16
l7
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19
20
21
22
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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

Exhibit2 Page27of54
1
2
3
4
5
6
7
8
9
10
I1
l2
13
l4
15
16
l7
l8
l9
20
21
22
23
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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
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Exhibit2 Page28of54
l
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

Pangte98259of
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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

Exhibit2 Page30of54
ase3;O6-cv-00056-PMP-VPC Document985 Filed03/31/09 Page30of54
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2
3
4
5
6
7
8
9
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12
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l4
l5
l6
l7
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19
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22
23
24
25
26
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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

Exhibit2 Page31of54
ase3:
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l
2
3
4
5
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

Exhibit2 Page32of54
I
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

Exhibit2 Page33of54
l thatimposilionofsanctionsunderthecourt'sinhercntpowerrequircsasNcificsndingofbadfaithor
2 lsconducttantsmounttobadfaith:''
3
Sanctionsareavailableforavarietyoftypesofwillfulactions,including
recklessness when combined with an additionalfactorsuch as
4
f
rivolousnsss,harassment,oranimproperpurpose..:Anattorney's
recklessmlsstatemen?oflawandfact.whencoupledwlthanimproper
5
pu
rc
pp
sdue
crhta
at
ec
mtl
pct
l
peurla
ro
ee
naobnlc
c
as
mse
o,r
osga
an
in
tt
a
at
loai
dnvf
au
ne
tn
agce
eo
inrma
anonti
h
ct
ae
sp
e,
ac
re
sd
ai
nncg
bjoi
n
e
6
underthecourt'sinherentpower.
7 ld.at994.
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

Case2:10-ap-01305-BB Doc54-2 Filed07/16/10 Entered0T/16/1013:40:06 Desc
Exhibit2 Page34of54
3:06-cv-00056-PMP-VPC Docement985 Filed03/31/09 Page34of54
AlloughSeclion1927hasaclearcompensatorypumosebecauseitpermitsanawardof
attomey'sfeesandcosts,Seitisinrealityapenalstatutcdesigncdtodiscouragcunnecessarydclayin
3 litigationbyrequiringattorncys%orotherpcrsons'tocompensatepcrsonallyothcrlitigantswhoincnr
1
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
09-O0014-RBK DOc#:724-9 Filed:12/21/12 Entered:12/21/1216:53:38 Page36Of55

Exhibit2 Page35of54
3:06-cv-00056-PMP-VPC Document985 Filed03/31/09 Page35of54
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

Ex
Pang
4d03/31/09 Page36of54
ase3206-cv-00056-PMP-VP
ChibDito2
cume
te
98356of
F5
ile
1
2
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:
(a)A lawyerisboundbythe RulesofProfessionalConduct

n
o)
twi
ao
nd
gat
he
la
ct
t
h
ir
iou
nl
os
fo
an
ef
rep
so
(b
Athss
utb
rdip
ln
th
eat
l
atw
yc
rwy
doeersan
oetdvll
otl
ae
tedt
heectR
e
foPth
ro
sc
sq
lo
nn
ai
P
o
n
d
u
c
t
i
f
t
h
e
l
a
wy
e
r
a
c
B
i
n
a
c
c
o
r
d
n
n
c
e
wi
t
h
a
s
u
p
e
r
v
i
s
o
r
y
l
a
wy
e
r
's
reasonableresolutionofanarguablequcstionofprofessionalduty.
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
09-000l4-RBK Doc#:724-9 Filed:12/21/12 Entered:12/21/1216:53:38 Page38Of55

Pangte98
35
7ofF5il4
ase3206-cv-Q0056-PMP-VEPxChibDito2cume
ed03/31/09 Page37of54
l subvertthatorder;hisorherrecourseistotakeappropriatestepstotestthcvalidityofthatruling
2 pursuanttotheFederalRulesofCivilProcedurc,andobservingatalltimestheRulesofProfessional
3 Conduct.
4
Baseduponthechronologyofeventsdescribcdatlengthherein,thecourtfindsthereisclcarand
5 convincingevidencethatMs.KlarandMs.Phamactedinbadfaithorconducttantamounttobadfaith
6 withtheintentiontounderminethiscourt'sordcrsfortheimproperpumoseofobtainingamorc
7 favorableforumforresolutionofthefeedisputeandthetumoveroftheclicnttilcs.Ms.KlarandMs.
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

Exhibit2 Page38of54
l stmtegyforherclients,anditwasevidentfromtheoutsctofherappenrnnccthatalthoughsuYrdinate
2 attorneysfrom tbeLinerfirmpedbrmcdlegalserviccsinthiscase,itwasMs.Klarwhodirectedthose
3 attomeysandthemanagcmcntofthiscase.Ms.Klarwasordtredtoappearatthesealcdhcaringonthc
4 motionforsanctions,andalthoughshewaspresent.shedidnottestify.
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

Exhibit2 Page39of54
l tothethousandsofemailsandattacheddocumentsinMr.Montgomery'spossession.aswellasacccss
2 tocounfilingsviaPACER.
3
Ms.KlarandMs.PhamknewthatMr.FlynndidnotrepresenttheMontgomerypartiesinany
4 matterspendinginCalifomiaandthathewasproperlyadmittedtopracticebeforethiscourtproJl/c
5 vice.Ms.KlarandMs.PhamalsokncwthatMr.FlynnandMr.Montgomerywerecmbroiledinafcc
6 disputeovcrunpaidattomey'sfecsinexcessofS600.000.AsearlyasJuly3l.2007,theyknewthatMr.
7 FlmnintendedtoclaimaretaininglienovertbeclientfilesunderNevadalaw.Ms.KlarandMs.Pham
8 knew,oruponreuonableinquiryshouldhaveknown,thatthtretaininglienwouldallowMr.Flynnto
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
09-OO014-RBK Doc#:724-9 Filed:12/21/12 Entered:12/21/1216:53:38 Page41of55

Exhibit2 Page40of54
1 IatcrinCalifomiaandMassachusettsallegestrikinglysimilarfactsconccmingMr.Flynn'sbar
2 admission.thelocationofhislawoffices.hisresidence,andsoon.
3
WhenMs.KlarandMs.PhnmfiledtheircomplaintinCaliforniaSuperiorcourtinearlyAugust
4 2007,theymayarguablyhavehadareasonable,goodfaithbeliefbasedonthelawandfactsthatthcy
5 wcreentitledtoseekaturnoveroftheclientfilesinCalifornia.Mr.Flynn'scaliforniaaddressappeared
6 onallpapersfiledinthiscourqhesenlinvoicestotheMontgomerypartiesfromCalifomia.Mr.Flynn's
7 clicntfileswereinCalifomia,hchasaCalifomiarcsidence,andheidentitiedhimselfasamember
8 Flyrm&Stillman.whichhadaCalifomiaaddress.Ms.KlarandMs.Phammayhavealsoarguablyhad
9 areasonablc,goodfaithbeliefthattbeywereentitlcdtoseekarbitrationoftbefeedisputebeforea
10 Califomiabarentitybasedonthissameinformation.ThcDistrictCounherehadnotruledonMr.
l1 Flynn'smotiontowithdrawortheUnitedStates'motionforprotectivcorder.Mr.FlynnandMs,
l2 DiMarehadnotyetfilcdtheirnoticesofretainingIienortheirmotionforattorney'sfecs.
13
However.thcchronologyofeventsthatoccurrcd.aswellasMr.Montgomery'sinconsistent
14 declnmtionsandhislawyers'complicityindraftingtheuntruthfulStptember10,2007declaration,
15 convinc:thecourtthatMs.KlarandMs.Pham'sactionswerepartofalitigationstmtegydcsigncdto
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

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l
80thMs.KlarandMs.PhamsubmittedtheapplicationforfeearbitrationtotheSanDiego
2 CountyBarAssociationonStptembcr7,2007,andthrccdayslatcr.sledthciroppositiontoMr.Flynn's
3 motionforattomey'sfccs,attachingMr.Montgomcry'sSeptember10.2007declaration.Twodays
4 latcr,September12,2007,theyfiledtheirexparteapplicationforwritofposscssionandonceagain.
5 attachedMr.Montgomery'sSeptember10.2007declaration.
6
Assuming/raen#othatMs.KlarandMs.PhamwereignorantofMr.Montgomery'sFebruary
7 28,2007declarationinoppositiontotheUnitedStates'motiontodisqualifyMr.Flynnandhadagood
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

Exhibit2 Page42of54
ase3:0&cv-00056-PMP-VPC Document985 Filed03/31/09 Page42of54
l
Ms.KlarandMs.PhamdidnotvoluntarilydismisstheCalifomiaaction,nordidtheywithdraw
2 theirclients'applicationforarbitrationofthefeedisputewiththeSanDiegoBarAssociation.Instead,
3 theyproceededwiththeOctober18.2007hearingbeforethewritcommissionerandengagedinsmnning
4 misreprcscntationsofthiscourt'sorders.Thecourthasearlierquotedthesemisreresenutionsverbatim
5 andwillnotrepeatthem.Thecourtnotesthatinherzealtoadvanceherclients'cause,Ms.Phnm
6 engagedinatorturcdanalysisofthiscourt'sthreeorderstosupportberclaimgthatsomehowvcalifomia
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

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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
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Exhibit2 Page44of54
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
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.
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mp
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e
l
to expend subsxntialtimeand attomeys'feesin
d
efendingtherpselves,eveninthefaceofclearorders
issucdbytheDlstrictCourtandthiscourttothecontrary.
Thisconductresulted in the expenditureofmany
l3
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a
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et
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14
l5
thousandjofdollarsinattomeyj'feesforalIcpncemed,
complmnedtothiscourtthattheyhavebeqnpreludiced
becausetlleydonothaveformercounsels'clienttiles.
j
Hua
d
tp
ety
n
of
t
pm
urs
ue
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o
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o
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.
.
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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
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Exhibit2 Page45of54
l localmlesofpracticeforthisCourqaswellasrelatedcounorders,andthatfutureviolationswillnot
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

Exhibit2 Page46of54
1 lcgalproccedingstoharassandpunishMr.Flynn.Ms.Klarcrossedoverthclineasazcalousadvocatc
2 forhcrclicnts'interestsandabdicatedherethicalandprofessionaldutiestothecourtinadvancingthis
3 strategy.f:il7ollowingorders'ofaclientorasuperiororemployerisnodefenseto5lingaplcadingin
4 badfaithorforanimproperpurpose.''I.
nrcAston-NevadaLtd.P'
ship.39!B.R.84.106(Bankr,D.
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
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3:06-cv-00056-PMP-VPC Document985 Filed03/31/09 Page47of54
l ThisisoddbecausethcUnitedStates,asholderofthcstatesccrctsprivilcge.wastheonlypartywho
2 couldasscrttheprivilegevandlusticeDepartmentcounselpresumablydeterminedthedeclarationshould
3 bcunsealed,ortheywouldnothavemadctherequest.
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
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Exhibit2 Page48of54
ase3:06-cv-00O56-PMP-VPC Document985 Filed03/31/09 Page48of54
l voluntarilytailoredthislatestdeclarationtoachicvchislawyers'goalsandmaywcllhavcdonesoatthe
2 directionofMs.Klar.
3
TheconductofMs.KlarandMs.Pham epitomizesthescorchedearthlitigationtacticsthat
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
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ase3:06-cv-00056-PMP-VPC Document985 Flled03/31/09 Page49of54
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
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Ex
Pann
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ase3;06-cv-00056-PMP-VP
ChibDito2cume
'
Ie
98
F5
ile
l preparingforfamilylcave.whichmayhavecausedhertofollowthepathofleastresistanccandacccdc
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:

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Px
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F5
ile
1
Mr.Montzomery:ncAmericanBarAssociationfactorsinmitigationofsanctionssctfonh
2 hereindonotapplytoparties,butthecourtobservesthatduringhistestimonyatthesealcdhcaring,as
3 wellasotherhearingsinthisaction,Mr.Montgomerydtmonstratedaconsistentinabilitytortcall
4 pivotalfacts,andthecourtdidnotGndhistestimonycredible.Mr.Montgomerywasalsosanctioned
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

Exhibit2 Page52of54
1
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

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ase3.06-cv-00056-PMP-VPC Document985 Filed03/31/09 Page53of54
l West'sFederalSupplement.SeeWilliamW.Schwnrtzer,SanctionsUndertheNewFederalRulel12 :4CloserLook.l04F.R.D.l81,20l(l985).
3
E. CommunityLegalService
4
Thecourthasalreadyimposedsubstantialmonetarysanctionsinthismatter;however.thecourt
5 believesthatadditionalsanctionsagainstMs.KlarandMs.Pham arcwarrantcdfortheirpatternof
6 contemptforthiscourt'sordersandthelegalsysteminwhichtheyareprivilegedtoserveasofficersof
7 thecourt.nistypeofprofessionalmisconductnotonlydnmagesthelegalsystcmandrequirescouns
8 todivertsubstantialresourcestodisciplineattomeysandpanies;itunderminescitizens'conGdencein
9 attomeyswhoaregivenapublictrusttoconductthemselvesethicallyandpreservcthcruleoflaw.To
10 remediatethisviolation,thecourtfashionsasanctionthatitbelieveswillrestoretoMs.KlarandMs.
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

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Exhibi
t2 Page54of54
l professionalcommitmcnttoabidebythehighestidealsofthcIegalprofessionandt5crulcofIaw
2
ITISORDEREDthatMr.Flynn'motionforsanctionspursuantlo28U.S.C.j1927and/or
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
CaseI:IO-CV-OOOOI-EJL-REB Document352 Filed03/29/13 Page1of28

DISTRICTOFIDAHO
L.J.GIBSON,BEAUBLIXSETH,AMYKOENIG, CaseNo.:CV IO-I-EJL-REB

VERN JENNINGS,MARKMUSHKm,
MONIQUELEFLEUR,andGRIFFEN
MEMORANDUMDECISIONAND
DEVELOPMENT,LLC,JUDYLAND,and
ORDERRE:
CHARLESDOMINGUEZ,eachindividually,and
onbehalfofotherssimilarlysituated
CUSHMAN& WAKEFIELD'S
MOTIONFORSANCTIONS
Plaintiffs,
(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
Case1:1O-cv-0O001-EJL-REB Document352 Filed03/29/13 Page2of28
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
Case1:1O-cv-0O001-EJL-REB Document352 Filed03/29/13 Page3Of28
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
Case1:1O-cv-00O01-EJL-REB Document352 Filed03/29/13 Page5of28
(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).
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
Case1:1O-cv-00001-EJL-REB Document352 Filed03/29/13 Page7of28
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
CaseICIO-CV-OOOOI-EJL-REB Document352 Filed03/29/13 Page8of28

InresponsetotheCourt'squestionconcerningwhetherPlaintiffs'breachof
fiduciarydutyclaimagainstC&W lthasbecomemoreplausiblethanitwasatthe
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:
(Csince(dismissingPlaintiffs'breachoffiduciarydutyclaim againstC& W),

however,Plaintiffsclaimthatnew informationintheformofaninsideraccount
- na
mely,fromMr.MichaelMiller-revealsaconspiracybetweenCreditSuisse
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).
Case1:10-cv-O0001-EJL-REB Document352 Filed03/29/13 Page10of28

OnMay11,2012,C& W movedforreconsiderationofJudgeLodge'sMarch30,
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
CaseI:IO-CV-OOOOI-EJL-REB Document352 Filed03/29/13 Page11Of28
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).
CaseICIO-CV-OOOOI-EJL-REB Document352 Filed03/29/13 Page12Of28
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).
Case1:1O-cv-O0O01-EJL-REB Document352 Filed03/29/13 Page13Of28
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).
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.
Case1:1O-cv-0O001-EJL-REB Document352 Filed03/29/13 Page15Of28
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
$tatindingthattheattorneyrecklesslyorintentionallymisledthecourtissufficienttoimpose
sanctionsunderg28U.S.
C.Jjl927....
''InreGirardi,611F.3d1027,106l(9t
hCi
r.20l0)
CaseICIO-CV-OOOOI-EJL-REB Document352 Filed03/29/13 Page16of28
(quotingB.KB.v.MauiPoli
ceDep'
t,276F.3d1091,ll07(9t
hCir.2002)andcitingInre
KeeganMgmt.Co.Sec.Liti
g.,78F.
3d43l,436(9t
hCi
r.l996)).
IdahoRuleofProfessionalConduct3.35
lslnadditiontocaselawandapplicablecourtrules,courtsmayconsidercodesof
professionalconductindeterminingwhetheranattorney'sconductfallsbelowthestandardsof
theprofessionandissanctionable.SeeGirardi,611F.3dat1035.IdahoRuleofProfessional
Conduct3.3(a)(1)providesthatalawyershallnotknowingly
makeafalsestatementoffactor
lawtoatribunalorfailtocorrectafalsestatementofmaterialfactorlawpreviouslymadetothe
tribunalbythelawyer.
''IRPC3.3(a)(l);butcomparewithIRCP3.
3(a)(3)&cmt.8Cd
rhe
prohibitionagainstofferingfalsetvidenceonlyappliesifthelawyerknowsthattheevidenceis
false.Alawyer'sreasonablebeliefthatevidenceisfalsedoesnotprecludeitspresentationtothe
trieroffact.
''
).Consistentwi
ththis,al
awyer'sfailuretomakeadiscl
osurecanbetheequi
valent
ofanaffirmativemisrepresentation.SeeIRCP3.3,cmt.3.Moreover,givena(slawyer's
obligationasanofticerofthecourttopreventthetrieroffactfrombeingmisledbyfalse
evidence''(seeIRCP3.3,cmt.5),whenpreviously-offeredmaterial
sturnouttobe
false/misleading,alawyer's(Cdutyofcandortothetribunal''warrantsltreasonableremedial
measures''(seeIRCP3.
3,cmt.10).
5UndertheLocalCivilRulesoftheDistrictofIdaho,$
d(a1Ilmembersofthebarofthe
DistrictCourt...fortheDistrictofIdaho(hereafterthe
(Court''
)andallattorneyspermitt
edto
practiceinthisCourtmustfamiliarizethemselveswithandcomplywiththeldahoRulesof
ProfessionalConductoftheIdahoStateBaranddecisionsofanycourtinterpretingsuchrules.
TheseprovisionsareadoptedasthestandardsofprofessionalconductforthisCourtbutmustnot
beinterpretedtobeexhaustiveofthestandardsofprofessionalconduct.''Dist.ldahoLoc.Civ.
R.83.5.

4. Court'slnherntPowers
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
Case1:1O-cv-0OO01-EJL-REB Document352 Filed03/29/13 Page18Of28

Court,asofficersofthisCourt,inthecircumstancesunderlyingthependingmotions.TheCourt
findsthatPlaintiffs'counselmadedramatic,strident,andrepeatedwrittenandoral
representationstotheCourtregardingMr.Miller'spurportedtestimony,withtheunmistakable
inttntionthatsuchrtpresentationsbereliedupontheCourtasitconsidereddispositivtmotions
andmotionstoamend,al1motionswhichwereofgreatsignificanceconcerningtheclaimswhich
PlaintiffsmightbepermittedtofurtherpursueagainstDefendantsinthislawsuit.
lnaddition,therepresentationsmadebyPlaintiffs'counselwerecloakedinthecredence
ofsworntestimony.Plaintiffs'counseltiledaprepareddeclarationinthenameofMr.Miller,
butlackinghissignatureunderoathonlybecauseofhisallegedunwillingnessonhisparttosign
thedeclarationforfearofretaliationfrom hisformeremployer,DefendantC& W.Indeed,that
purportedreasonwasemphasizedbyPlaintiffs'counselasabasisforwhichtheCourtshould
attachevengreatercredibilitytothetestimonialdetailsofMr.Miller'sunsigneddeclaration.
AccordingtoPlaintiffs,thiswitnesswasawhistleblower,privytotheallegedmisdeedsofboth
Defendants,whoconsideredhimselfindangerofpersonalrepercussionsifheweretotalkabout
whatotherwistmightremainunspoken.
ThereisnoquestionbutthatPlaintiffs'counselsoughttocolortherecordbeforethe
Courtassuchmotionswereconsideredanddecided,withtheparticularsofMr.Miller's
testimonyallegedalreadytohavebeenobtained,andreadytobeoementedintosworntestimony,
butforthefearofretaliation.TheunsworntestimonyofMr.Millerwasrepeatedlyreferencedin
thePlaintiffs'filings,andinoralargumenttotheCourt.WhetherornotPlaintiff's
characterizationofMr.Miller'stestimonybecomesthesmokinggunPlaintiffscontendittobe,
orsomethinglessthanthat,remainstobeseen.ButoncePlaintiffs'counselchosetoputsucha
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.
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
Case1:10-cv-00001-EJL-REB Document352 Filed03/29/13 Page23Of28
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.
(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.
Case1:10-cv-O0O01-EJL-REB Document352 Filed03/29/13 Page25Of28
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;
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
CaseICIO-CV-OOOOI-EJL-REB Document352 Filed03/29/13 Page27Of28

That,acknowledgingthatmostattorneysdonotearnafullbilling
rateforeveryhourina40hourrate,andacknowledgingthatnoteveryattorneyamongthosein
thelistofPlaintiffs'counselhasthesamenumberofyearsofexperienceorreputationin
practice,whichalsocanaffectthegrossincomeofanatlorney'
,
(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
Case1:1O-cv-O00O1-EJL-REB Document352 Filed03/29/13 Page28Of28
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.
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DATED:March29,2013
i
HonorableRonaldE.Bush
U.S.MagistrateJudge
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M

DISTRICTOFIDAHO

VERNJENNINGS,MARKMUSHKm,
ORDERRE:PLAINTIFFS'MOTION
DEVELOPMENT,LLC,JUDYLAND,and
FORSTAYOFSANCTIONS
CHARLESDOMINGUEZ,eachindividually,and MEMORANDUM DECISIONAND
onbehalfofPROPOSEDPlaintiffCLASS
ORDERECF352,PENDING
MembersofTamarackResort,YellowstoneClub, RESOLUTIONOFRULE72
LakeLasVegas,andGinnsurMer,
OBJECTIONS
Plaintiffs,
(DOCKETNo.358)
VS.
DelawareIimitedliabilitycompany,CREDIT
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.
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DATED:April22,2013
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8/15/2013
E xh ib it
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Case:12-35986 08/12/2013
ID:8739867 DktEntry:52-2 Page:35Of13163Of364)
O9-00O14-RBK Doc#:714-3 Filed:12/19/12 Entered;12/19/1216:32:42 Page1of7
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
C0
a9s-e
:0
12
0c
8#
/1
13Fi
89
7/
3
k:
tE
226:
a2
ge:
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1k3-5R9B8K6 Do
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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
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,
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
8mm ofthe35mm 1gotfrom CH,togetthem tosignoff.Iwastogetthisbackfrom

YC,astheyweTegoingtobetbeowuersofthtseBsharesandnotmepersonaEy. Of
courseyouknowthatdidnothappen.(Rememberaswell,ldidnotreallygd
35mm 9om CH,butonly22mm.Tim hadborrowed13mm9omthem in2007and
1tookoverthatpromissorynotewhen1gottheFamil
yCompoundback.)
DM -Exhibit11
case:12-35986 08/12/2013
ID:8739867 DktEntry:52-2 Page:38Of13666Of364)
o9-O0o14-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page4of7

* 20.ofPage14-1-11isisnot:1bigdeal.but'
Fin-itooklnostoftllisout.S
'olnethings
Tverebrotlghttlackbythe'
Yt-'elnp.lt
nyeesthatrelnoveclitperllisdirectiononce
tlleyknexi
v'thatheulasnottotakeit.btltl'
lotnearlyalI.(5z
lal'bethisisAvllere11e
gottheideathatIsvotlldtakennorcoutofl762)
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
C
ase:12-35986 08/12/2013 ID:8739867 DktEntry:52-2 Page:39Of13167of364)
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
COa
se:12-35986 08/12/2013 lD:8739867 DktEntry:52-2 Page:40Of13168of364)
* (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 08/12/2013
ID:8739867 DktEntry:52-2 Page:41Of13/69of364)
O9-00014-RBK Doc#:714-3 Filed:12/19/12 Entered:12/19/1216:32:42 Page7of7

1(
'
-lhadknouznanyofthisaINvoktldnothavesettledintllevvayIdid. INvoklldhas'ebcen
grantedbotl)tenlpandlong-tenuspotlsalsuppoll.1Rvotllclnothavelnadtocontinuet()
borrou'naoneyto1ive.1lvouldnothavetlorroNved351131
-11togettheS/IS-Aclosecl.
Relnenzber,oftlle35n'
11n-Ipersonal1),
.onlygot.i
tlstover1.ol'
nl
nofthat.Therestur
entto
Tilnortohrc.'1'
-l
'
1epal-tthatnzellttoNrCshotllclhavebeenpaidbacktoiue.iftllingstllere
'
Were;StlleyNverep.l
-eSe1)tCd.
lnC.
zz
&falnil)-1a&.
v,I
R
.25yearntarriageNvitl)tl'
le1
-ncolneandtaxretul
-nstllatvzelqad,'
&,
'
otl1d
havegiveni'
neavel3'niceannualincolnefron'
lspousalsupport.
N 36.-44..ofPages30-34Yougll).
'saregoingtohnvetoreadundtellmewhat
youthink.
> Reallyforyouguys....-....it'salltherepsandwarrantiesyouwillhavetotell
mewhatyouthink.
* 64.ofPage41
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.'
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too.
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AssumptionAgreenlent.Therearesevel'
althingsintheminisettlements,likeTimwasto
keeppayingtheoverheadfbrPC&butthatendedashesaidtherewasnocolnmunitycash
flow.Veno'
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ecanl'itthatin.
Hopethishelps.Edra
DM -Exhibit11
E xh ib it
U
08-6157O-RBK DOc#:2129 Filed:02/25/11 Entered:02/25/1116:21:53 Page1Of47
UNITED STATESBANKRUPTCYCOURT
FORTHEDISTRICTOFMONTANA
lnre
YELLOWSTONEMOUNTAINCLUB,
LLC,
CaseNo.08-61570-11
Debtor.
MEMOM NDUM ofDECISION

AtButteinsaidDistrictthis25thdayofFebrtzary,20l1.
InthisChapter11bankruptcy,afterduenotice,ahearingwasheldJanuary18,20l1,in
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
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Woodard,ThomasA.BanducciandJenniferSchrackDempseyofBoise,ldaho,JoelE.Guthals
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
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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
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onJanuary25,2009.SeeBankzuptcyCaseNo.09-60061.ThisCourtgenerallyreferstoallthe
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
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YellowstoneClubbankruptcy,whichdependsuponsuccessfullitigationagainst
Mr.Blixseth;
4.JudgeKirscher's1awclerkhasengagedinexpartecommunications
withoneofMr.Blixseth'sadversaries,urginghisadversarytoEnalizea
settlementwithMr.BlixsethbeforeMr.Blixsethcouldrenege;
5.NumeroustimesJudgeKirscherruledonimportantmotionsagainst
Mr.BlixsethbeforeMr.Blixsethhadanopportunitytofilearesponsepennitted
underthertzles;
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:

OnJune10,2010,1receivedaphonecallfrom Mr.Amsdenregardingmy
setllementwithhisclient,RossRichardsonasTnzsteeforYCW.Dttringthat
phoneconversation,Mr.AmsdenrelatedtomethatMr.Richardsonhadtalkedon
thephonewithTerryHealowwhoisoneofJudgeKirscher'slawclerks.During
thisconversationbetweenMr.RichardsonandMr.Healow,Mr.Healowasked
Mr.Richardsonifhehadfinalizedhissettlementwithme.Mr.Richardson
respondedbysayingthatthesettlementwasalmostcompletebutthatafew
mattersneededtobeaddressedbeforeitcouldbefinalized.lnresponse,Mr.
Healow toldMr.Richardsontohurryupandgetitfinalizedbeforelcould
(renege.';
*+*
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
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turnedovertheseemailstotheUCC,Mr.Brownfailedtoinformmeofthisas
requiredbytheABAModelRulesofProfessionalConduct.Whenlleamedof
thisdisclosure,IraisedbeforeJudgeKirscherthegrossproblem thatmycurrent
counselhadturnedovertomyadversary,theUCC,over400potentially
privilegedcommunications.InsteadofJudgeIkirscherallowingmetoreview
thesecommunications,JudgeKirscherreviewedthesedocumentsincamera
withoutgivingmeachancetoreviewthem anddetenninewhatJudgeKirscher
reviewedoropinionshepotentiallyformedbythisincamerareview.Todate,
JudgeKirscherhasnevergivenmetheopporttznitytoreview thesepotentially
attorney-clientprivilegeddocuments.
***
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

Clubbanknzptcieswerefiledingoodfaith.Mr.BlixsethsimilarlyarguesthattheCourtdeprived
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
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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
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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
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sufficientthatwestatethatwherethebasicunderlyingfactsassetforthinthe
afdavitsupportingarecusalapplicationarenotindispute,thedistrictcourt
shouldnotminutelyexaminethemovant'
scharacterizationofthem,andweighthe
courfsmemoryofwhathappenedagainstthatoftheaffiant.Wethinkitsimply
inappropriateinthecircumstanceshereforthecourttohavemadeacredibility
assessmentofitself.Consequently,weholdthatthedistrictjudgeimproperl
y
consideredthetnzthoftheassertedgroundsforhisrecusal.
1d.at583.
lnthiscase,Mr.Blixseth'sAmendedMotiondoesnotreference28U.S.C.jl44and
moreimportantly,Mr.Blixseth'sAmendedMotionisnotaccompaniedbyacertificateof
counselofrecordstatingthatitismadeingoodfaith.Underthefactsofthiscase,itisnotclear
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).
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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
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however,restrictedtoitslegalsufficiencyanddoesnotincludethetrtzthoftheallegations.There
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
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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
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:
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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.
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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
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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
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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
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abiasorpartialitychallenge.Theymaydosoiftheyrevealanopinionthat
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
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notshowthatlrelieduponknowledgeacquiredoutsidetheseproceedingsorthatlhaveadeep-
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
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finalized.Inresponse,Mr.HealowallegedlytoldMr.Richardsontohurryupandgetthe
settlementnalizedbeforeMr.Blixsethcouldsrenege.''
First,itisnotclearfrom Mr.Blixseth'sAffidavitandtheattachedExhibitAwhethermy
1aw clerkTerryHealow usedthewordtrenege''inhisconversationwithMr.Richardson,or
whetherthatisMr.Blixseth'sinterpretationofwhatwasrelayedtohimthroughMr.Amsden.
Second,1donotrecallaskingMr.HealowtoplaceacalltoMr.RichardsonandIsimilarlydo
notrecallwaitingforanysettlementinvolvingtheYellowstoneClubWorldbankruptcyestate
andMr.Blixseth.
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

conductedamediationonFebrualyl1,2010,andMay5,2010.Asnotedearlier,theCourtsees
noreasonwhyitwouldhaveanticipatedasettlementinAdversaryProceeding09-86,andinfact,
theCourtenteredaMemorandum ofDecisionandOrderonJune9,2010,grantingMr.
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

exclusivelyonthiscase.Iwouldnotgenerallyaskone1awclerktomakeaninquiryaboutacase
inwhichanother1aw clerkisorwasassistingme.GiventhefactthatMr.Healowhasnot
generallyassistedmewiththeYellowstoneClubbankruptciesandgiventhedateofthetext
messagesbetweenMr.AmsdenandMr.BlixsethandtheirproximitytoaMay2010mediation
thatwasconductedbytheHonorableJohnL.Peterson,IdeterminedthatperhapsMr.Healow
madethereferencedtelephonecalltoMr.Richardson'sofficeatthedirectionofJudgePeterson,
andnotme.Toconfirmmysuspicions,IposedsuchquestiontoMr.Healowandhespecifically
recalledplacingatelephonecalltoMr.Richardsonregardingthewhereaboutsofasettlement.
However,thecallwasplacedattherequestofJudgePeterson,andnotme.3
Next,Mr.Blixsethasserts:d-f'
hebanknzptcyauctionfortheYellowstoneClubassets
occurredaroundMay13tb15t
bof2009. TheauctionforthesaleoftheClubassetsoccun-edatthe
BillingsCrownePlazaHotel.ThebiddersattheauctionwereCreditSuisseandCrossl-larbor
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

waspresentatthehotel,hewasnotallowedtoparticipateintheauction,hadnopaMicipationin
thebidders'expartecommunicationswithJudgeKirscher,andwasothenviselockedoutfrom
thenegotiations.Eventhoughthenegotiationsweretcloseddoor',JudgeKirschernevertheless
metwithCrossHarborandCreditSuisseatthehotelduringtheirnegotiationstoresolvebidding
issuesastheyarose.ImmediatelyfollowingthesecloseddoornegotiationswithCrossHarbor
andCreditSuisse,JudgeKirscherapprovedthePlanofReorganizationfortheYellowstoneClub
andsaleoftheClub'sassetstoCrossl-larboronMay18,2009withnoformalnoticetome,or
otherinterestedparties.ThealteredPlansubstantiallyaffectedcreditors'rights.''
A littlebackgroundaddscontexttoMr.Blixseth'saboveclaim. AtahearingheldApril
4,2009,theCourtapprovedtheDebtors'DisclosureStatementandscheduledthehearingon
confirmationoftheDebtors'AmendedJointPlanofReorganizationforMayl8,2009,inButte.
ThecontinnationhearingwasscheduledforMayl8,2009,toaccommodatenotonlytheCourt's
schedulebutalsotheDebtors'expiringdebtor-in-possessionfinancing. Beforeconfinnation
couldoccur,theCourthadtoresolveatleastaportionoftheissuesinAdversaryProceeding0900014.PhaseoneofthetrialinAdversaryProceeding09-00014commencedonApril29,2009,
andconcludedonMay5,2009.TheCourtthengrantedthepartiesinAdversaryProceeding0900014untilMay11,2009,tofilepost-trialbriefs.Thereafter,onMay12,2009,theCourt
enteredapaMialandinterim orderequitablysubordinatingCreditSuisse'sclaim. TheCourt's
partialandinterim orderleftunresolvedtheissuesinvolvingMr.Blixseth,theissuesregarding
valuationofDebtors'assetsandthequestionofwhetherCreditSuisse,whosecollateralwas
subsequentlyvaluedonMay12,2009,at$232million,couldcreditbidatanauctionofDebtors'
assets.
25
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TheCourt'sMayl2,2009,partialandinterim orderinAdversaryProceeding09-00014
andtheCourt'svaluationorderofthatsamedate,setoffafrenzyofactivity,particularlyasan
auctionofeitherDebtors'assetsor100% oftheDebtors'equitywasscheduledforMay13,
2009.Theminuteentriesoftheso-calledclosedmeetingsthatallegedlytookplaceatthe
CrownePlazaHotelcanbefoundatdocketentrynos.1047forMay12tb,1048forMay13tb7
1049forMay14thand1054forMay15tb.Thosehearings,whichMr.Blixsethreferstoasclosed
meetings,whichincludedmuchoftheactualbiddingprocessbetweenCrossHarborandCredit
Suisse,wereheldintheFederalCourthouseinBillings,nottheCrownePlazaHotel.Imust
concede,however,thatbecausemydutystationisnotinBillingsandbecauseldonotlivein
Billings,Ididrentahotelroom attheCrownePlazaHotel,whichistwoblocksfrom theFederal
Courthouse.lrentedaroom so1wouldhaveaplacetosleepandshowerandnotasingleperson,
otherthanmyself,visitedtheroom which1rentedattheCrownePlazaHotel.Thus,Mr.
Blixseth'sstatementthathearingswereheldintheYellowstoneClubentities'bankrtzptcieson
May12,13,14and15,2009,iscorrect.Mr.Blixsethisalsocorrectthat1rentedaroom atthe
CrownePlazaHotel.However,Mr.Blixseth'scontentionthat1rentedaroom attheCrowne
PlazaHoteltofacilitateexpartecommunicationswithpartiesinvolvedinthisbanknzptcy
proceedingissimplyfalse.
Thetranscriptsshowthatthepartieswereusingaconferenceroom attheHotelto
facilitatebidding.However,theylostaccesstothatconferenceroom andtheongoing
negotiationsconcemingbiddingnaturallymovedtotheFederalcourthouseinBillingswhere1
wasconductingongoinghearingsinthecase.Irecallduringarecessfrom ahearingatthe
courthouse,1believeonMay13th,whilelwasvisitingwithcourtsecurityof/cersthatlgreeted
26
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Mr.Blixseth'scounsel,Mr.Guthals,ashewaswalkingthroughthelobbyonthe5tbfloorofthe
courthouse.Mr.Guthalsinfonnedmethathewasleavingthecourthouseasnoneofthebidding
partieswishedtoconsultwithhim.1donotrecallifMr.Guthalsreturned.lalsodonotrecall
Mr.Blixsethpersonallyattendinganyofthehearingsduringthatweek.Theexchangebetween
Mr.Guthalsandmyselfoccurredwhilepaztieswerenegotiatinganddeterminingwhowouldbe
qualifiedbiddersinvariouscourtroomsandconferenceroomsatthecourthouse.1wasnot
involvedinthosemeetingsordiscussions.From timetotimethevariouspartieswouldprovide
anupdateontheirprogressso1couldplanwhenwewouldcontinuewithanyauctionorrequired
hearing.Also,theywereattemptingtokeepmeinformedastowhethertheyweremakingany
progressresolvingcontestedissuesinvolvingconfirmation.
ThetranscriptsofthehearingsheldMay12ththroughMayl5thshowthattheauctionof
theDebtors'assetswasacollaborativeeffortbetweentheDebtors,theOfficialCommitteeof
UnsecuredCreditorsandtheAdHocCommitteeofYellowstoneClubMembers.Seedocket
entrynos.1047,1048,l049and1054.Partieswereworkingvirttzallyaroundtheclockto
determinetheextentofCreditSuisse'screditbid,toqualifybiddersandtoconcludeanauction
oftheDebtors'assetspriortotheMay18,2009,confirmationhearingdate.4
Thelonghoursweretakingatollandpatiencewaswearingthin.Duringthattime,the
partieswouldthinktheywereonthebrinkofaglobalresolution,onlytodiscoverthattheymight
beatanimpasse.lnfact,counselforCreditSuissecommentedonMayl4tbthattherehadtobe
analtemativetonotreachingaresolution.Thecreditversuscashbiddingprocessreached
4ThehearingonconfirmationoftheDebtors'jointChapter11planwasscheduled
pursuanttoanOrderenteredApril7,2009.

anotherimpasseonMay15thwhenneitherCreditSuissenorCrossllarborwouldmovefrom their
respectivepositions.Atthattime,IsuggestedthatperhapslshouldhaveabrieftalkwithByrne
from CrossHarborandMr.Yankauerfrom CreditSuissetoseewhetheraresolutionwasata1l
possibleandwhethertheattorneysforthepartiesinvolvedorthepartiesthemselveswerethe
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

theycouldcontactme,so1advisedthepartiesinopencourtthattheycouldcontactmethrough
Ms.Harringtoniftheyhadanemergency.Aspreviouslynoted,thebiddingprocesshadtobe
concludedsotheCourtcouldmoveforwardwithconfirmationonMonday,May18,2009.On
theeveningofeitherMay13thorMay14thorperhapsboth,thepartiesinvolvedinthebidding
process,throughMs.Harrington,contactedmeafterhourstoprovideastatusupdateregarding
theirnegotiationsandtonotifytheCourtwhetherthebiddingprocesscouldbeconcludedby
Mayl5.ImetwiththeDebtors,theOfficialCommitteeofUnsecuredCreditors,theAdHoc
CommitteeofYellowstjmeClubMembersandthetwoqualiledbidders,CrossllarborCapital
PartnersandCreditSuisse,attheCrownePlazaHotel.Anymeetingwasverybriefanddidnot
inanywayinvolveMr.Blixseth.Mybriefpresenceatthemeetingobviouslywasnoteffective
becausewecontinuedwithbiddingandauctionissuesthroughMayl5th,whentheauctionwasto
havebeencompletedonMay13tb. Infact,whenIleftthecourtroom lateonMay15t
h5Iwasnot
convincedthatanyauctionoranydiscussionofglobalresolutionwouldoccurpriortothe
confirmationhearingscheduledforMay18'h.
ThemeetingdidnotandcouldnothaveinvolvedMr.BlixsethbecauseMr.Blixsethdid
notseektoqualifyhimselfasabidder,wasnotaqualifiedbidderandwasthusnotinvolvedin
theactualbiddingprocess.BecauseMr.Blixsethwasnotpartofthebiddingprocessandwasnot
involvedinthelastminutebiddingnegotiations,mybriefmeetingwiththebiddingpartieswas
notexparte:
Theprohibitionagainstexpartecontactsisbaseduponnotionsofproceduraldue
process.Guentherv.CommissioneroflnternalRevenue,889F.
2d882,884(9th
Cir.1989).Proceduraldueprocessrequiresthatapartybeprovidednoticeandan
opportunitytorespond.Id.lfthepartyhasnorighttonoticeoranopporttmityto
respond,thenitfollowsthatthecommunicationisnotexparte.
29
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Goodwin,194B.Rat222.
Moreover,thefactsassertedbyMr.Blixsethwithregardtotheso-calledexparte
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

Theemailappearstohavegonetoal1individualswhoweredoingpresentationsattheMontana
BanknzptcyCLEheldOctober21and22,2010,inMissoula,Montana. Eachyear,landseveral
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
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emails,generallypertainingtothesubmissionofproposedordersinaccordancewithMont.LBR
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
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
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YellowstoneClub'sunsecuredcreditorscommittee,whichwassuingMr.BlixsethinAdversary
Proceeding09-14fortherecoveryof$209million.Browntestified,withoutcontradictionfrom
Mr.Blixseth,thatMr.BlixsethhadencouragedBrowntobeontheunsecuredcreditors'
committee.Notwithstandinghispriorencouragement,Mr.BlixsetharguesthatMr.Brown,in
hiscapacityasamemberoftheunsecuredcreditors'committee,t'urnedovertotheunsecured
creditors'committeeanditscounselover400emailcommunicationsbetweenhis51711andMr.
BlixsethorMr.Blixseth'sotherattorneyswhichcouldpotentiallycontainattomey-client
privilegeddiscussions.
Mr.Blixseth'scounselconcededatahearingheldDecember2,2010,thattheemails
referencedinMr.Blixseth'sAmendedAffidavitareinfactemailsbetweenMr.Brownasa
memberoftheunsecuredcreditors'committeeandthecommittee'scounsel.ThisCourt
previouslyfoundthatMr.BrownhadnotdisclosedanyinformationprotectedbyMr.Blixseth's
attorney-clientprivilege.Rather,theCourtfoundthattheemailscontainedinformationthatwas
protectedbytheunsecuredcreditors'committee'sattomey-clientprivilege.Assetforthinan
OrderenteredbythisCourtonDecember6,2010,inAdversaryProceeding09-14,$Mr.Blixseth
hasnotcitedanylegalauthoritywhichwouldpennitthisCourttoviolatetheOfficialCommittee
ofUnsecuredCreditors'attorney-clientprivilegewithouttheOfficialCommitteeofUnsecured
Creditors'consent.''TheCourtstandsbysuchrtzling.
Favoritism towardMs.BlixsethandBwme.
InhisbriefandatthehearingheldJanuazy18,201l,Mr.Blixseth'scounselargued
extensivelythatthisCourt'sbiasandprejudiceisevidentbytheleniencythisCourthasshowed
towardMs.Blixseth.Mr.Blixseth'sargumentisinterestingbecausethisCourthasbasicallyhad
34

onlyoneopportunityinwhichitwasrequiredton4lefororagainstMs.Blixseth.Thatone
instancearosewhentheOftkeoftheUnitedStatesTnlsteefiledamotiontoconvertMs.
Blixseth'sChapter11bankruptcytooneunderChapter7oftheBanknzptcyCode.OverMs.
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
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CapitalPartnersandWachoviaBank.Mr.Flylm characterizedMs.Blixseth'sloanwith
Wachoviaas'soneofthemostfraudulentloansinmy40yearsoflitigating,havingrepresented
bankpresidentsandCEOsandwhite-collarcriminals.''Mr.Flylmrepresentedthatsthey''
pledgednonexistenttechnologyascollateralfortheWachovialoan.Mr.FlynnthenassertsMs.
BlixsethpledgedcertainnoisefilteringtechnologysoftwaretechnologytoWachoviaBankin
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

FlynnargtzesthatthisCourtisbootstrappedbypriorIulingscastingMs.Blixseth'scredibilityin
afavorablelight,suchastheCourt'sSeptember27,2010,twenty-sixpageMemorandum of
DecisioninAdversaryProceeding09-00l00whereintheCourtdeniedWesternCapitalPartners'
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.
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

obviouslymakesreferencetoahearingheldOctober12,2010,inAdversaryProceeding0900105andtheCourt'sresultingorderenteredOctober25,2010.ContrarytowhatMr.Flynn
argues,Mr.Cotner,whowasretainedascounselbytheChapter7trusteeinMs.Blixseth's
bankruptcy,washeardattheOctober12,2010,hearingandtheCourt'ssubsequentOrderof
October25,2010,makesnotasinglecredibilityfindingastoMs.Blixseth.Rather,thatOrder
setsforthhow Mr.Cotnercametofileanamendedcounterclaim andamendedthird-party
complaintthatMr.Cotnernow believescontainsnumerousinaccuracies.TheCourtOrderof
October25,2010,foundatdocketentryno.147speaksforitself.Intheabovepotedpassage
fromthetranscriptoftheJanuary18,2011hearingwhenMr.Flynnmakesreferenceto$fMr.
Cotnerormyself',lbelieveMr.FlynnmeanttosayMr.ConantandnotMr.Cotner.
AsfarasothermattersinvolvingMs.Blixseth,otherparties,includingtheYellowstone
ClubWorldtnzstee,SourceCapital,Palm DesertNationalBank,CasaCaptiva,Mr.Blixseth,Mr.
Blixseth'sattorney,MichaelFlynn,andMr.Blixseth'ssons,BeauandMorganBlixseth,have
fileddischargeabilitycomplaintsagainstMs.Blixseth.StipulationswerereachedintheSource
CapitalandCasaCaptivaactions,andPalmDesertNationalBallkdismisseditsaction.
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
08-61570-R814 Doc#:2129 Filed:02/25/11 Entered:02/25/1116:21:53 Page40of47
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

Junel1,2009,atdocketentryno.292inAdversaryProceeding09-14,theCourtexplainedwhy
itwasnotpersuadedbyMr.Blixseth'sargument.Mr.BlixsethintervenedintoAdversary
Proceeding09-14,knowingatthetimethattheproceedingwasscheduledfortrialonan
expeditedbases.Moreover,Mr.Blixsethfailstomentionthathecallednotasinglewitnessin
hisdefenseatphaseoneofthetrialinAdversaryProceeding09-14.Havingmountedaminimal
defenseaftersixdaysoftrial,theCourtentereditsJune11,2009,Memorandum ofDecision
suggestingtoMr.BlixseththathistrialtacticsatthetrialinAprilandMayof2009werenot
particularlyeffective.TheCourtthusproceededtoleavetherecordopenandcontinuedthetrial
toFebruary24,2010.ThatcontinuancewasforthesolebenefitofMr.Blixseth.Forthereasons
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
08-6l57O-RBK DOc#:2129 Filed:02/25/11 Entered:02/25/1116:21:53 Page42of47

KirschershoweddisgustwithhavingtheReleasesincludedinthePTOinadvertently,gavethe
appearancethathisintentandtheintentoftheDebtor'sandtheUCCwastodeprivemeacritical
affirmativedefenseinalawsuitinwhichlwassuedliterallyonlyfewdaysbeforetrial
commenced.''
MyfrustrationsinAdversaryProceeding09-14werenumerous,butthosefnzstrations
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

wasandwasnotinthefinalpretrialorderpreparedbythepartiesandsubmittedtotheCourtfor
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

didnotresolveAdversaryProceeding09-14.So,1andmylawclerkonceagainturnedour
effortstothedecisioninAdversaryProceeding09-14withthetacitunderstandingthatsummer
vacationswouldbeputonholduntilthedecisioninAdversaryProceeding09-14wascompleted.
Tothatend,my1aw clerkscheduledhersummerfamilyvacationfortheweekofAugust16,
2010,andthetwoofusworkedondraftingthedecision.Astherecordretlects,thedecisionin
AdversaryProceedingwasenteredonAugust16,2010,thesamedatethatMs.Harringtonstarted
hersummervacation,ContrazytowhatMr.Blixsethmaybelieve,workloadandthescheduling
oftimeoffweretheonlyfactorsthatdeterminedwhenthedecisionwasenteredinAdversary
Proceeding09-14.
Mr.Blixseth'sfinalcomplaintstemmingfrom AdversaryProceeding09-14isthatthis
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
(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

byMr.Blixseth.AstheCourtexplained,itwas69pagesintodraftingthatdecisionwhenit
electedtoscrapthe69-pagesandoptedinsteadtoissueafourpagememorandum.TheCourt
hadafirm grasponthefactsandwasfullyconvincedthatthereweredisputedissuesofmaterial
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
08-6157O-RBK Doc#:2129 Filed:02/25/11 Entered:02/25/1116:21:53 Page47Of47

process.Therefore,consistentwiththeforegoing,theCourtwillenterseparateordersinthis
caseandinAdversaryProceedingNos.09-00014,09-00018,09-00064.10-00015,and10-00088
providingasfollows:
ITISORDEREDthatTimothyL.Blixseth'sAmendedMotiontoDisqualifyBankruptcy
JudgeKirscher(WithExhibits)t
'
iledNovember30,2010,atdocketentryno.2042,togetherwi
th
thesameAmendedMotionfiledDecember14,2010,inAdversalyProceedingNos.09-00014,
09-00018,09-00064.10-00015,and10-00088areDENIED.
BYTHECOURT
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Case2:11-cv-0OO73-SEH Document51 Filed11/16/12 Page1Of5
IN THEUNITED STATESDISTRICT COURT
FORTHEDISTWCTOFMONTANAFILED
BUTTEDIWSION
wy j$pj1
M- usG- -
lnre:
YELLOWSTONEMOUNTAIN
CLUB,LLC,
Debtor.
No.CV-II-73-BU-SEH
TIMOTHY L.BLIXSETH,
Appellant,
MEMORANDUM AND ORDER
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.
Case2:11-cv-OOO73-SEH Document51 Filed11/16/12 Page2Of5
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.
Case2:11-cv-O0O73-SEH Document51 Filed11/16/12 Page3of5
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.
Case2:11-cv-O0073-SEH Document51 Filed11/16/12 Page4of5
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
Case2:11-cv-O0073-SEH Document51 Filed11/16/12 Page5of5
erredinrefusingtodisqualifyhimself.
ORDER
TheFebruary25,2011,Memorandum ofDecision6oftheUnitedStates
BankruptcyCourtisAFFIR D.
DATEDthisZLdayofNovember,2012.
S M E.HADDON
UnitedStatesDistrictJudge
6CasvNo.08-61570-11
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CaseNo. CV 11-08283-GAF-SP
Date December11,2012
Title
Present:TheHonorable
GARY ALLEN FEESS
ReneeFisher
None
N/A
DeputyClerk
CourtReporter/Recorder
TapeNo.
AttorneysPresentforPlaintiffs:
AttorneysPresentforDefendants:
None
None
Proceedings:
(InChambers)
ORDER lkE:MOTION FOR AWARD OFATTORNEYS'FEESAe COSTS

1.
INTRODUCTION
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
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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
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CIVIL MIM JTES-GENEM L
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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.
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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$85,014.
75
lodestarcalculationisbasedonareasonablebillingrate.
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Thetimespentdraftingthetllreemotionsinquestion 258.95hours-isalsoreasonable
especiallyconsideringthecomplexityoftheissuespresentedandthevexatiousconductofthe
opposition.(Mem.at6.
)AstheSupremeCourtnotedinHensley,indetermini
ngbotha
reasonablebillingrateandareasonablenumberofhours,ltlhereisnopreciseruleorformula..
..'
'Hensley,461U.S.at436.However,tlthemostcriticalfactoristhedegreeofsuccess
obtained.''1d.Here,KirschnerfiledthreemotionsandtheCourtgranteda1ltllree. (11/1/12
Order.
)Themotionswerecomplex,involvi
ng(
hundredsofpagesofpleadings,''Cc
thousandsof
pagesofexhibits,''andrequiringtheCourttoissueanordersparmingsomethirty-ninepagesto
disposeofthecase.(Mem.At2,
'11/1/12Order)Finally,Kirschnerhasvoluntarilyexcludedthe
dtimeoftwopartnersandtwoparalegalsatB&G''andMr.Glasser'stimeCiwasreducedfrom
47.70to24.50hottrs.
''(Mem.at7.)
Blixseth'sOppositiondoesnotaltertheCourt'sconclusionthatKirsclmer'srequestfor
attorneys'feesisreasonable.HisargtlmentthatKirschnerfailedtomeetandconferasrequired
byLocalRule7-3isutterlyunpersuasive.NotonlyisBlixsethraisingthisargumentnearly
eightmonthsafterthefilingofthemotionsinquestion,butKirsclmereffectivelyrebutsthese
allegationswithMr.Glasser'sbillingrecords,whichdemonstratethatthepartiesdid,infact,
meetandconfer.(Replyat2(citingGlasserDecl.
,Exhi
bitA,entryitemdatedMarch27,2012
(1$
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
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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.
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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.
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Case1:10-cv-000O1-EJL-REB Document408 Filed08/15/13 Page1Of4

UNITEDSTATESDISTRICTCOURT
DISTRICTOFIDAHO
VERNJENNINGS,MARKMUSHKIN,
ORDERRE:
DEVELOPMENT,LLC,JUDY LAND,and
CHARLESDOMINGUEZ,eachindividually,and PLAINTIFFS'MOTIONTO
onbehalfofotherssimilarlysituated
RECONSIDER
Plaintiffs,
(DocketNo.392)
DelawareIimitedliabilitycompany,CREDIT
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
Case1:10-cv-O0001-EJL-REB Document408 Filed08/15/13 Page2of4
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
Case1:10-cv-0O001-EJL-REB Document4O8 Filed08/15/13 Page3Of4
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
Case1:10-cv-0OO01-EJL-REB Document408 Filed08/15/13 Page4Of4
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
.
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. '
N
2.
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k
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.'
z- t71
:
DATED:August15,2013
i
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

Blix V YMC App # 55 - 12-35986 - YCLT Opp W Exhibits

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Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 1 of 23

Case No. 12-35986

IN THE UNITED STATES COURT OF APPEALS

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE

YCLT'S OPPOSITION TO TIMOTHY BLIXSETH'S EMERGENCY

Attorneys for YCLT

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 2 of 23

Yellowstone Club Liquidating Trust ("YCL T") files this Opposition

Blixseth seeks a stay of enforcement without having to post a supersedeas

Blixseth further seeks to stay YCLT's pursuit of other lawsuits.

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 3 of 23

(Exh. B at pp. 3-9) Blixseth's grand conspiracy

theory now even reaches to Washington, D.C., where in a recent letter

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 4 of 23

However, there is more: the voluminous evidence produced

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 5 of 23

further concluded concerning Blixseth, "[t]he overwhelming evidence shows

And finally, the Bankruptcy Court concluded,

"Blixseth's fraudulent intent could not be more clear." Id. at 664.

Apparently, he has also

recently filed under seal a Complaint of Judicial Misconduct against Judge

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 6 of 23

overwhelming evidence supporting YCLT's claims. Id. As a result, Judge

Although he found that

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 7 of 23

II. SUMMARY OF ARGUMENT

Frankly, the older

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 8 of 23

remainder of this response will focus on this so-called new "evidence."

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 9 of 23

If Blixseth (or his counsel) had

conducted even a cursory review of that internet information they would

Blixseth's newly discovered alleged "evidence" does not in any fashion

Blixseth and his counsel are besmirching the character of a sitting

Documents allegedly retrieved from his ex-wife's computer

Blixseth refers to two documents that were allegedly obtained from

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 10 of 23

Blixseth repeatedly refers to this "evidence" as "authenticated" when

Such failure is simply bewildering (and

In that proceeding, Blixseth brought a Motion for Sanctions and

proffered these exhibits in partial support of that relief.

memo, Blixseth points to the following statement as evidence of Judge

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 11 of 23

Closer examination reveals, however, that the

Blixseth boldly proclaims that in her deposition in December of 2012 Edra

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 12 of 23

According to Edra, the MSA

Bullet Points Memo is "completely manufactured. I didn't type it and I have

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 13 of 23

Blixseth repeatedly makes the feeble allegation that the so-called

Additionally, one would think before making such

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 14 of 23

Montgomery bankruptcy case, Flynn alleged that Montgomery defrauded the

To that end, Montgomery asserted his Fifth

deposition, Mr. Flynn accused Montgomery of being a "computer hacker"

Despite the foregoing history, Blixseth (through Flynn and Conant)

submits that for this reason alone this Court

entitled to, and should,

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 15 of 23

disregard entirely everything provided by Montgomery, who, according to a

Subsequently, counsel obtained a sworn affidavit from the witness that

ordering sanctions, the Idaho District Court found:

Case: 12-35986, 08/19/2013, ID: 8748363, DktEntry: 55-1, Page 16 of 23