Timothy Blixseth v. Yellowstone Mountain Club, LLC, et al
FILED PER CURIAM OPINION (ALEX KOZINSKI, RICHARD A. PAEZ and MARSHA S. BERZON) AFFIRMED. FILED AND ENTERED JUDGMENT. 
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UNITED STATES COURT OF APPEALS
FEB 18 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
TIMOTHY L. BLIXSETH,
D.C. No. 2:11-cv-00073-SEH
YELLOWSTONE MOUNTAIN CLUB,
LLC; AD HOC GROUP OF CLASS B
UNIT HOLDERS; CIP SUNRISE
RIDGE OWNER LLC; CIP
YELLOWSTONE LENDING LLC;
PARTNERS, LLC; MARC S.
KIRSCHNER; CREDIT SUISSE AG,
CAYMAN ISLANDS BRANCH;
Appeal from the United States District Court
for the District of Montana
Sam E. Haddon, District Judge, Presiding
Argued and Submitted November 5, 2013
KOZINSKI, Chief Judge, PAEZ and BERZON, Circuit Judges.
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Timothy Blixseth sounds the clarion call of many a disappointed litigant:
“It’s not fair!” He insists that the judge who presided over the administration of
the Yellowstone Mountain Club ski resort’s bankruptcy was biased against him
and should have recused himself. The bankruptcy judge denied the recusal motion
and the district court affirmed. Blixseth has now filed a blunderbuss appeal.
Blixseth and his ex-wife founded Yellowstone Mountain Club, a ski and golf
resort built on the twin pillars of luxury and exclusivity. A haven for the ultrawealthy, Yellowstone offers “Private Powder”: over 2,200 acres of skiable terrain
available only to club members and their invited guests. See Yellowstone Club,
Ski, http://goo.gl/tfWQ5n. It was at one point the only private ski area in the
world. See In re BLX Group, Inc., 419 B.R. 457, 460 (Bankr. D. Mont. 2009). In
2005, Yellowstone borrowed $342 million. Id. at 461. The same day, over $200
million of this money was “disbursed by Blixseth to various personal accounts and
payoffs benefitting Blixseth and [his ex-wife] personally.” Id. Unsurprisingly,
Yellowstone eventually filed for bankruptcy.
Blixseth objected to the proposed bankruptcy settlement plan (the Plan),
arguing that his ex-wife and others were the cause of Yellowstone’s financial
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problems. See In re Yellowstone Mountain Club, LLC, 436 B.R. 598, 641–44
(Bankr. D. Mont. 2010), amended in part by In re Yellowstone Mountain Club,
LLC, No. 08-61570-11, 2010 WL 3504210 (Bankr. D. Mont. Sept. 7, 2010). The
bankruptcy court disagreed. It found that Blixseth had misappropriated
Yellowstone’s cash and property for his personal use and that his fraudulent intent
in doing so “could not be more clear.” Id. at 657–64. The bankruptcy court
entered a $40 million judgment against Blixseth—the amount the court determined
was necessary to pay off certain classes of creditors. Id. at 679. The district court
reversed on narrow grounds, directing the bankruptcy court to give proper notice to
the affected parties and further refine an exculpation clause in the Plan. See
generally Blixseth v. Yellowstone Mountain Club, LLC, No. CV-09-47, 2010 WL
4371368 (D. Mont. Nov. 2, 2010).1
While the case was again before the bankruptcy court, Blixseth filed a
motion alleging numerous incidents of judicial misconduct and urging that the
On remand, the bankruptcy court explained that, in its view, notice was
proper and the exculpation clauses were supported by Ninth Circuit precedent. In
re Yellowstone Mountain Club, LLC, 460 B.R. 254, 258–63, 266–77 (Bankr. D.
Mont. 2011). Blixseth again appealed, but the district court held that Blixseth
lacked appellate standing to challenge the bankruptcy court’s ruling because he no
longer claimed to be an unsecured creditor and thus had no interest in the Plan.
Memorandum & Order, No. 2:11-cv-00065, Dkt. # 121 (D. Mont. Mar. 6, 2013).
That decision is currently the subject of a separate appeal.
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bankruptcy judge recuse himself. The bankruptcy judge denied the motion, and the
district court affirmed, finding that “extraordinary consideration was accorded
Blixseth and his position throughout the proceedings.”
We review the bankruptcy judge’s denial of a recusal motion for abuse of
discretion. See In re Marshall, 721 F.3d 1032, 1039 (9th Cir. 2013). Recusal is
appropriate where “a reasonable person with knowledge of all the facts would
conclude that the judge’s impartiality might reasonably be questioned.” Pesnell v.
Arsenault, 543 F.3d 1038, 1043 (9th Cir. 2008). Actual bias isn’t required; the
appearance of impropriety can be a sufficient basis for judicial recusal. See
Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 864–65 (1988);
Yagman v. Republic Ins., 987 F.2d 622, 626 (9th Cir. 1993). We gauge
appearance by considering how the conduct would be viewed by a reasonable
person, not someone “‘hypersensitive or unduly suspicious.’” United States v.
Holland, 519 F.3d 909, 913 (9th Cir. 2008) (quoting In re Mason, 916 F.2d 384,
386 (7th Cir. 1990)).
Blixseth’s accusations fall into three categories: (1) alleged ex parte
communications; (2) rulings made by the judge that purportedly denied Blixseth
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due process; and (3) supposedly biased statements made by the judge during
various proceedings. We see no need to clutter the pages of the Federal Reporter
with a discussion of each one of Blixseth’s myriad and often duplicative claims. A
few examples in each of the three categories more than suffice to give a sense of
The “Ex Parte” Communications
While ex parte communications are discouraged, see, e.g., United States v.
Van Griffin, 874 F.2d 634, 637 (9th Cir. 1989), they aren’t always improper and
don’t necessarily call for recusal. See Willenbring v. United States, 306 F.2d 944,
946 (9th Cir. 1962); see also Reed v. Rhodes, 179 F.3d 453, 468–69 (6th Cir.
1999). Ex parte motions may be brought in emergencies, to preserve state secrets
and in a variety of other contexts. The Federal Rules of Civil Procedure
specifically recognize the legitimacy of ex parte contacts in certain circumstances.
See, e.g., Fed. R. Civ. P. 6(c). Ex parte contacts are improper where, given all the
circumstances, they could cause a reasonable person to question that judge’s
impartiality. See Pesnell, 543 F.3d at 1043; United States v. Wecht, 484 F.3d 194,
214–15 (3d Cir. 2007).
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We start with the incident that Blixseth claims most clearly demonstrates the
judge’s partiality: that the judge met with representatives of the debtor and
bankruptcy bidders in Blixseth’s absence. The meeting concerned an upcoming
non-public auction of the debtor’s assets. In a non-public bankruptcy auction, the
debtor’s assets are auctioned off to qualified bidders—parties who commit to
making a certain minimum bid and provide collateral as a guarantee of that
commitment. This is a procedure widely employed by bankruptcy courts to
maximize the value of estates. See, e.g., Peterson v. U.S. Bank Nat’l Ass’n, 918 F.
Supp. 2d 89, 98 (D. Mass. 2013); In re Trident Water Works, Inc., No. 09-49166,
2010 WL 5167286, at *2 (Bankr. W.D. Wash. Aug. 27, 2010); In re Farmland
Indus., Inc., 376 B.R. 718, 730 (Bankr. W.D. Mo. 2007).
The debtor, Yellowstone, and the unsecured creditors were attempting to
identify qualified bidders so they could conduct an auction. They invited the judge
to one informal meeting in the hope that he could help them resolve differences
about the proposed auction. Blixseth wasn’t the debtor or an unsecured creditor
and he never attempted to qualify as a bidder. The upcoming auction therefore did
not affect his interests and he had no right to participate. An ex parte contact with
a judicial officer is one where a party who has a right to be present is excluded.
Because Blixseth had no right to be present, the meeting between the judge, the
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debtor, the unsecured creditors and potential qualified bidders wasn’t ex parte as to
him. See In re Goodwin, 194 B.R. 214, 222 (9th Cir. BAP 1996).
Blixseth argues that any meeting between the judge and the parties was
improper because the judge hadn’t yet ruled on Blixseth’s liability. He suggests
that, during the meeting, the judge and the parties must have discussed Blixseth’s
claim. But Blixseth provides no evidence that anything other than the upcoming
auction was discussed at the meeting. A judge need not remove himself from all
legitimate activity in administering a complex estate simply because he has
motions pending. Blixseth presents nothing that would have required the judge to
Blixseth makes a variety of other claims about supposedly improper ex parte
contacts. He points to an email from a senior bankruptcy judge to Yellowstone’s
counsel providing two case citations. But the senior judge didn’t preside over the
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Yellowstone bankruptcy,2 and Blixseth doesn’t explain how the email shows bias
on the part of the bankruptcy judge whose recusal he seeks.
Equally meritless is Blixseth’s assertion that four emails sent by one of the
bankruptcy judge’s law clerks show improper bias. The emails discussed such
innocuous details as the date for the filing of the bankruptcy petition, what
paperwork was required before a cash collateral motion could be approved and the
judge’s intention to enter a generic order unless counsel wished to submit a
proposed order. Ex parte communications with judicial staff concerning routine
administrative matters do not raise any inference of bias. See In re Kensington
Int’l Ltd., 368 F.3d 289, 305 (3rd Cir. 2004). Blixseth’s overwrought argument
that these emails prove some sort of conspiracy against him is wholly unfounded.
Nor are we persuaded that a phone call between a law clerk assisting a
different judge and the bankruptcy trustee in a related proceeding demonstrates that
the bankruptcy judge is biased. Blixseth claims to have heard from a third party
At oral argument, Yellowstone’s counsel suggested that the senior judge’s
email was related to a mediation that occurred in 2009. Blixseth’s counsel,
Michael Flynn, responded that it was a “complete fabrication” to suggest that in
2009 the senior judge “was involved in a mediation in this case.” Flynn’s
statements to this court are demonstrably inaccurate: The record shows that the
senior judge acted as a mediator in this case in 2009. Counsel could have verified
his assertion following oral argument, but he has not retracted his erroneous
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that, during the call, the clerk encouraged the trustee to complete a settlement
before Blixseth could back out. Even if this rumor were true, encouraging parties
to finalize a settlement before one of them has a change of heart is not improper.
Denial of Due Process
“[J]udicial rulings alone almost never constitute a valid basis for a bias or
partiality [recusal] motion.” Liteky v. United States, 510 U.S. 540, 555 (1994).
Recusal is only warranted if rulings are based on extrajudicial “knowledge that the
[judge] ought not to possess” or “reveal such a high degree of favoritism or
antagonism as to make fair judgment impossible.” Id. at 550, 555.
We have already concluded that Blixseth’s claims of ex parte contacts are
baseless. His only other significant argument that the judge relied on extrajudicial
sources is that the judge improperly took judicial notice of facts established in
related proceedings. But such facts don’t constitute “knowledge that the [judge]
ought not to possess.” Id. at 550. If Blixseth believed the judge erred in
considering them, his remedy was to raise the issue on appeal.
Nor do any of Blixseth’s claims of judicial antagonism hold water. For
example, Blixseth complains that the judge ruled against him on three summary
judgment motions (all filed on the same day) after the opposition filed an omnibus
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response, but before Blixseth filed a reply brief. Blixseth claims that, because the
version of Fed. R. Civ. P. 56 in effect at the time provided that he “may file a reply
within 14 days after the response is served,” it was improper for the judge to rule
before such a reply was filed. See Fed. R. Civ. P. 56 (2009). At most, this was
another error that Blixseth was free to raise on appeal. It comes nowhere near
showing that the judge had “such a high degree of favoritism or antagonism as to
make fair judgement impossible.” Liteky, 510 U.S. at 555. There is simply no
evidence that the judge acted out of an improper or corrupt motive.
Blixseth fails to acknowledge that the judge made a number of significant
rulings in his favor. For example, Yellowstone argued that the damages against
Blixseth should be $286.4 million, but the bankruptcy judge held Blixseth liable
for only $40 million. In re Yellowstone Mountain Club, 436 B.R. at 679. Such
favorable rulings cut strongly against any inference that the judge was unable to
“render fair judgment.” Liteky, 510 U.S. at 551.
A judge isn’t required to recuse himself even if he becomes “exceedingly ill
disposed towards [a] defendant  who has been shown to be a thoroughly
reprehensible person.” Id. at 550–51. Here, not only is there no sign of
antagonism requiring recusal, there’s not even any evidence of a general negative
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disposition towards Blixseth. The bankruptcy judge, in fact, showed remarkable
restraint given Blixseth’s scorched-earth litigation tactics.
“[J]udicial remarks [made] during the course of a trial” require recusal only
if “they reveal such a high degree of favoritism or antagonism as to make fair
judgment impossible.” Id. at 555. Blixseth cherry-picks a handful of quotes out of
an enormous record; none shows even a slight degree of antagonism.
According to Blixseth, the judge “sua sponte requested” that counsel in his
ex-wife’s bankruptcy proceeding “opine on the reputation of Mr. Blixseth’s lead
litigation counsel, Michael Flynn.” This is, at best, a distortion of the record. The
judge was asking counsel about points raised in his brief. One of those had to do
with Flynn’s reputation: Opposing counsel stated that he had previously accepted
Flynn’s factual representations because “at the time [he] was not aware of Mr.
Flynn’s reputation.” The judge said “Then another statement that was made, I
believe in your brief, is you make some reference to now you know Mr. Flynn’s
reputation. What is that? What did you mean by that?”
Asking counsel to explain statements in briefs doesn’t give the appearance
of partiality. One would expect a judge to seek clarification of statements
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impugning the reputation of one of the lawyers before him. Just as with his other
claims, Blixseth makes extravagant accusations, but fails to back them up with
even a shred of credible evidence.
Blixseth’s claims are a transparent attempt to wriggle out of an unfavorable
decision by smearing the reputation of the judge who made it. The bankruptcy
court was correct in denying the recusal motion, as was the district court in
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Michael James Flynn, Sr., Rancho Santa Fe, CA (argued), Phillip H. Stillman,
Stillman & Associates, Miami Beach, FL, Patrick T. Fox, Doubek Pyfer & Fox,
LLP, Helena, MT, Christopher J. Conant, Conant Law LLC, Denver, CO and
Michael J. Ferrigno, Law Office of Michael Ferrigno, PLLC, Meridian, ID, for
James A. Patten, Patten, Peterman, Bekkedahl & Green, PLLC, Billings, MT
(argued), Michael R. Lastowski, Duane Morris LLP, Wilmington, DE, Robert R.
Bell, Mullin, Hoard & Brown, Amarillo, TX and Benjamin P. Hursh, Crowley
Fleck, PLLP, Missoula, MT for Appellees.
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