Glasser v. Blixseth et al

Filing 429

OPINION AND ORDER. Blixseth remains in civil contempt of this Court. He will continue to be held in the custody of the United States Marshals pending further order of this Court. Signed by Judge Sam E Haddon on 2/19/2016. (TAG, )

FILED
FEB 19 2016
Clerk, U.S. District Court
District Of Montana
Helena

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
In re
Case No. 08-61570-11
Adversary No. 09-00064

YELLOWSTONE MOUNTAIN
CLUB, LLC,
Debtor

BRIAN A. GLASSER, SUCCESSOR
TRUSTEE OF THE YELLOWSTONE
CLUB LIQUIDATING TRUST,

No. CV 13-68-BU-SEH

Plaintiff,

OPINION AND ORDER

vs
TIMOTHY L. BLIXSETH, CASA 20
LLC, TAMARINDO LLC, JOHN
DOES 1-100, and XYZ CORP. 1-100,
Defendants.

1

INTRODUCTION

This matter is before the Court for address and resolution of three questions
presented by the Ninth Circuit Court of Appeals in its January 11, 2016, Order. 1
BACKGROUND

The issues presented for resolution are in culmination of ongoing contempt
proceedings in this Court and in the Ninth Circuit Court of Appeals involving one
Timothy L. Blixseth ("Blixseth") dating back to December 6, 2013.
On October 23, 2013, 2 this Court was advised that Blixseth, in direct
contravention of the order of Judge Ralph B. Kirscher, United States Bankruptcy
Judge for the District of Montana in Adversary Proceeding Number 09-00064
(Doc. 9), had sold a resort property owned by him in Mexico known as the
Tamarindo Resort ("Tamarindo") and had dissipated the sale proceeds totaling
some $13,820,139.84 3 • Proceedings to determine whether Blixseth should be held
in contempt of court for his actions in selling the resort were commenced in this
Court on December 6, 2013. 4

1

See Doc. 405.

2

See Doc. 37.

3

See Doc. 178-1 at 2.

4

See Doc. 54.
2

The various contempt-related proceedings occurring in this Court and
involving Blixseth and the sale ofTamarindo since December 6, 2013, have
included: (1) three accountings filed by Blixseth in this Court together with
multiple supplements and submissions; (2) submission by Blixseth of over twentytwo thousand pages of what were claimed to be Tamarindo business and sale
records; (3) a summary accounting compilation from an Idaho-based accounting
firm hired by Blixseth; 5 (4) nine separate hearings and status conferences before
the Court; 6 and ( 5) six separate appeals filed by Blixseth in the Ninth Circuit Court
of Appeals, 7 the most recent of which was dismissed by the Circuit for lack of
jurisdiction on February 9, 2016. 8
A number of statements by the Circuit in rulings issued in the several
appeals are noteworthy:
1.

We therefore conclude that the contempt order was civil
in nature. We have reviewed Blixseth's remaining
arguments and hold that they are without merit. 9

5

See Docs. 67, 68, 70, 90, 97, 98, 113, 130, 131, 132, 133, 134, 137, 138, 139, 140, 141,
142, 143, 144, 145, 146, 147, 148, 149, 150, 157, 178, 179, 180, 181, 182, 183and 184.
6

See Docs. 58, 99, 108, 119, 158, 194, 324, 343 and 414.

7

See Docs. 74, 109, 167, 200, 396, and 40
See Doc. 424 .
Doc. 80 at 5-6.

8
9

3

2.

Petitioner has not demonstrated that his remaining
contentions warrant the intervention of this court by
means of the extraordinary remedy of mandamus ....
No further filings will be entertained in this closed case. 10

3.

Appellant's renewed emergency motion to stay the
district court's April 20, 2015 order pending review of
the petition for writ of mandamus is denied. 11

4.

Petitioner has not demonstrated that
this case warrants the intervention of this
court by means of the extraordinary remedy
of mandamus ....
Petitioner's request for reassignment
to a different district judge is also denied. 12

5.

Petitioner may secure his release by providing an accounting that
clearly shows the disposition of the proceeds of the sale of the
Tamarindo Resort. 13

6.

Because the district court's contempt order becomes
criminal, and subject to appellate review, if Blixseth
lacks the ability to comply with the order ... the district
court must make "an individualized decision that the
continued confinement of [the appellant] would have a
coercive effect," and a finding that 'appellant is able to
comply with its orders of production.' 14

7.

[W]e dismiss this appeal for lack of jurisdiction." 15

10

165 at 2.
174.
188 at 1.
283 at 1.
405 at 2 (citation omitted).
424 at 2.

Doc.
Doc.
12
Doc.
13
Doc.
14
Doc.
15
Doc.
11

4

An evidentiary hearing directed to the question of whether Blixseth had
purged himself of contempt as required by prior orders of this Court issued on
January 9, 2015, April 20, 2015, 16 was held on October 19, 2015. 17 Proposed
findings of fact and conclusions of law were submitted by the parties in advance of
the hearing. 18 On December 30, 2015, the Court issued and filed findings of fact
and conclusions of law, an order, and a decision in the matter ("Doc. 399"). 19
A very substantial part of the findings of fact and discussion in Doc. 399
were: (1) directed to identification of the form and substance of statements, data
and explanations that Blixseth was required to furnish "which were necessary to
appropriately account for the expenditure and disposition of the proceeds received
from the sale of Tamarindo;" 20 and (2) provided an analysis and explanation by the
Court as to why and how Blixseth had failed or refused to comply with the Court's
orders as required. The Court also pointed out that "[n ]otwithstanding that
Blixseth directed and controlled every aspect of the sale of Tamarindo and of
distribution of the proceeds, he has provided nothing of significance to assist in
the task of producing the required accounting." 21
16

See Docs. 112 and 159.
See Doc. 343.
18
See Docs. 331 and 332.
19
See Doc. 399.
20
Doc. 399 at 16.
21
Doc. 399 at 18.
17

5

Specific deficiencies and inadequacies in the materials and evidence
produced by Blixseth were pointed out in the findings. 22 Critical gaps in the
material and in the evidence as presented were identified. 23 Deficiencies apparent
from the production of documents written in the Spanish language as a part of the
accounting without benefit of accurate translation into English were addressed. 24
In assessing the issues presented to the Court by the several claimed
accountings, a number of matters of significance cannot be overlooked or ignored:
(1) that Blixseth carried the burden of proving a proper accounting; (2) that he
owned and controlled the Tamarindo Resort; (3) that he conducted and carried out
the sale of the resort contrary to and in direct defiance of court order; (4) that he
personally controlled and directed every aspect of the sale and dissipation of the
sale proceeds; ( 5) that he knew to whom the sale proceed distributions were to be
made and were made; and (6) that he had, and still has, the ability and capacity to
obtain from those persons and entities who had a part in the several distributions
or received funds from the sale, the records and materials that would provide
missing or incomplete information necessary to furnish an accounting that "clearly
shows" disposition of the resort sale proceeds. The existing record is essentially
22

See Doc. 399 at 18.
See Doc. 399 at 22.
24
See Doc. 399 at 29 and 30.
23

6

void of effort by Blixseth to have made any meaningful attempt to obtain and
produce the missing materials either voluntarily or through available and
customary discovery procedures in this Court.
Except for depositions of four of his former employees, 25 Blixseth took no
steps of significance to gather and present to the Court records necessary to the
accounting. The resort sale proceeds were divided and distributed into three
separate accounts shortly after the sale. 26 Nineteen individual distributions were
claimed to have been made from the three separate accounts. 27 More than three
hundred and ninety persons or entities were claimed to have received portions of
the proceeds. 28 Absolutely no information of meaningful value was provided by
Blixseth or his accountants as to the reason or reasons many of these distributions
and payments were made, what the claimed bases for such payments were, how
the payments related to Tamarindo, if at all, and significantly, what happened to
the money after the last identified distribution or transfer was made. Literally
hundreds of thousands of dollars in disbursements made to various Blixseth family
members or to entities he owned or controlled have simply vanished without
adequate or even plausible explanation.
25

See Docs. 335, 336, 337, and 338.
See Doc. 178-1 at 2.
27
See Doc. 178-1 at 2.
28
See Docs. 178 to 184.
26

7

Absolutely no limitations were placed on Blixseth or his counsel or his
accountants in gathering and presenting everything necessary to provide the
required accounting. The record remains, that materials and evidence absolutely
necessary to the accounting were not provided, that Blixseth had the ownership
interests, the capacity, and the control necessary to make the evidence available,
that he did not do so and that he has no one to blame for his own deliberate
shortcomings. Notwithstanding the serious failure to properly account as set out in
Doc. 399, Blixseth still has done absolutely nothing to meet or address the
ongoing and obvious deficiencies in the accountings.
It has been and continues to be Blixseth's unequivocally stated and
maintained position that he will do nothing more to render a proper accounting.
The record before the Court is replete with such declarations. Examples are:
1.

According to Mr. Ratte, as the custodian of
financial records of the various companies that were
owned or controlled by Mr. Blixseth when he was
comptroller of those companies, all of the documents
regarding the Tamarindo proceeds transferred to and
expended by Kawish, WAW, DR, BGW, BSM, Cody
Ranch, Friday Records, Little Bear, NCRS and Overlook
(collectively the "Blixseth Related Companies) have
been provided to the Court. Ratte Deel. ,-r 89. Mr. Ratte
has further warranted that no documents responsive to
the Court's January 9, 2015 order are being withheld
from the Blixseth Related Companies. Id.
8

(Defendant Timothy L. Blixseth's Statement of Position of Compliance with
Court's Order (Docs. 112 & 125) at 4 (Feb. 6, 2015)(Doc. 129).)
2.

I, Phillip Defelice, as an officer of this Court, hereby
certify to the following: ... I personally certify that, as
of February 6, 2015, that I in good faith have assisted my
client and have complied with the production
requirements of the Court's Order of January 9, 2015, to
the very best of my knowledge and ability, and I am not
aware of any documents or materials within the scope of
the production requirements of the Court's Order of
January 9, 2015, that have either been withheld or have
not been produced.
I am further informed and believe that no documents or
material within the scope of the production requirements
of the Court's January 9, 2015 Order that are within Mr.
Blixseth's possession, custody or control have been
withheld by Mr. Blixseth."

(Certification of Phillip Defelice Pursuant to the January 23, 2015 Order (Doc.
125) at 2 (Feb. 6, 2015)(Doc. 135).)
3.

I, Michael J. Ferrigno, as an officer of this Court,
hereby certify to the following:

To the very best of my knowledge and ability, I am
not aware of any additional documents or materials
within the scope of the production requirements of the
Court's Order of January 9, 2015, that have either been
withheld or have not been produced, including the
documents produced concurrently with this Certification.
(Certification of Michael J. Ferrigno Pursuant to the January 23, 2015 Order (Doc.
125) at 2 (Feb. 7, 2015)(Doc. 136).)

9

4.

[T]he updated and revised accounting [June 4, 2015]
represents all that Mr. Blixseth can do to comply with
the Orders of this Court and he has, to the best of his
ability, complied with the various orders of this court.

(Defendant's Petition for the Immediate Release of Timothy L. Blixseth from
Custody at 9 (June 4, 2015) (Doc. 177).)
5.

After reviewing the accounting and all the backup
documents contained in the excerpts of record, I hereby
swear under penalty of perjury to the best of my personal
knowledge that the accounting attached hereto as Exhibit
l accounts in full for the sale of the Tamarindo Hotel and
Resort as ordered by this Court.
All the documents that I know to be responsive
that I have had in my possession, custody and control,
regarding the sale and use of the proceeds from the sale
of the Tamarindo Hotel and Resort have been provided
and cited to.

(Defendant Timothy L. Blixseth's Declaration in Support of his Petition for
Release from Incarceration, at 3, i-fi-f 6-7 (June 4, 2015)(Doc. 178).
6.

The Defendants' position is that Mr. Blixseth has
complied with the Court's orders to account for the sale
of the Tamarindo Hotel and Resort. Mr. Blixseth has
provided all the documents that he knows to be
responsive that he had in his possession, custody and
control, regarding the sale and use of the proceeds from
the sale ofTamarindo Hotel. Doc. 178 at if 7.

(Defendants' Supplemental Statement of Position Pursuant to Court's June 22,
2015 Order [Doc. 191] at 2 (June 26, 2015)(Doc. 193).)
7.

Here, a team of CPA's prepared an accounting that
complies in every single respect with the District Court's
April 20, 2015 Order, and Mr. Keller, Blixseth's
accounting expert, testified that there was nothing more
10

that could be done to comply with the District Court's
accounting requirement, and the accounting represents
the most that either Blixseth or others on his behalf could
prepare. If this accounting is insufficient, there is
absolutely nothing more that Mr. Blixseth or any of those
acting on his behalf can do. The District Court made no
findings to the contrary. Eight months in solitary
confinement no longer bears any reasonable relationship
to the court's "accounting" requirement.
(Petitioner's Emergency Petition for Writ of Mandamus and Motion for an
Immediate Stay of October 19, 2015 Incarceration Order Pending a Ruling or[ sic]
the Emergency Petition at 31, Jn re Timothy L. Blixseth, No. 15-73 820 (9th Cir.
December 21, 2015)(Doc. 396-1).)
8.

When the determination is heard by this Court (if
the Court believes a hearing is necessary), Mr. Blixseth's
position will remain the same -- that he has produced all
information to trace the funds from the sale of the
Tamarindo Hotel and Resort. He can do nothing further
from his jail cell. If the Court were to call Mr. Blixseth
to the stand, given the direction of these proceedings,
Mr. Blixseth would likely invoke his 5th Amendment
right to not incriminate himself.

(Defendants' Position Regarding Court's Jurisdiction at 7 (Jan. 21, 2016)(Doc.
413).)
9.

THE COURT: ... we are going to need to be
prepared through whatever discovery, if any, is
necessary, and setting hearings as may be necessary to
take up and to resolve these three questions: No. 1, as
noted in the order, whether Mr. Blixseth lacks the ability
to comply with prior orders. And I understand, Mr.
Brain, that it has been made, at least to this Court,
eminently clear the Mr. Blixseth's claim to this Court is
that he doesn't have any further capacity to comply with
11

prior orders of the Court beyond what he has done.
MR. BRAIN: That's correct, Your Honor.
(Transcript of Status Conference at 12:19-25, 13:1-3 (Jan. 22, 2016)(Doc. 421).

10.

Moreover, what more does the District Court think
that Blixseth can do from his jail cell? Logically, there is
nothing more he can do, whether relevant or not, and
thus is more pretext for continuing his incarceration.

(Appellant's Reply Brief at 26, Timothy L. Blixseth v. Brian Glasser, No. 1635034 (9th Cir. February 5, 2016).)
There can be no doubt at this point about Blixseth's steadfast assertion that
"he has done all he can do" and that he will not submit anything more in support
of his position. Consequently, the Court is prepared to accept, and does accept,
that nothing further by way of evidence in compliance with this Court's Orders of
January 9, 2015, April 20, 2015, and Doc. 399 will be forthcoming from Blixseth.
The state of the record is accepted by the Court where it is and as it is. Further
hearings or proceedings are neither necessary nor appropriate to resolve the
Circuit's January 11, 2016, questions.
The record today, is of course, the same record as was before the court at the
close of the October 19, 2015, hearing. None of the deficiencies or missing or
unsupplied or lacking information has been provided. It also remains that the sale

12

of Tamarindo and the dissipation of the sale proceeds were totally controlled by
Blixseth, that he and he alone could have produced documentation and evidence
required for the accounting and could still do so. Even so, the deficiencies and
failures to comply with the Court's orders continue to be present and unresolved.
Blixseth has done nothing to challenge any of the deficiencies outlined in
Doc. 399. Moreover, further scrutiny of the existing record reveals the presence of
even more deficiencies and failures to provide an accurate or complete accounting.
The following transactions involving Tamarindo sale proceeds totaling
$2,656,664.06 remain unsatisfactorily accounted for and are of particular concern
to the Court.
1.

On May 3, 2011, Kawish, LLC, ("Kawish")(a company owned by

Blixseth)29 transferred $14,000 to JTB, LLC. No designated purpose for the
transfer is shown. 30 JTB, LLC is not identified in the record as to ownership or
activity. The transfer is not supported by documentation showing the reason JTB,
LLC was said to be entitled to any amount of Tamarindo sale proceeds. Absent
reliable documentation informing the Court why JTB, LLC was entitled to this
specific amount ofTamarindo sale proceeds, the requirements of paragraph (l)(e)

29
30

See Doc. 177 at 7.
Doc. 179-8 at 3.
13

of the January 9, 2015, Order have not been met. The accounting remains
incomplete.
2.

On June 30, 2011, Kawish transferred $264,664.06 to Waterstone

Bank, SSB for a purpose designated as "Unknown." 31 No documentation
explaining why Waterstone Bank, SSB, was entitled to receive this specific
amount ofTamarindo sale proceeds was provided. Although the comptroller for
Kawish offered the explanation that this transaction was for past due interest and
principal reduction, he was unable to locate or provide backup documentation
confirming the claim. 32 Absent reliable supporting documentation substantiating
the transfer to Waterstone Bank, SSB, the requirements of paragraph (l)(e) of the
January 9, 2015, Order are not met. This component of the accounting also
remains incomplete.
3.

On October 25, 2011, November 7, 2011, November 18, 2011,

December 29, 2011, and December 30, 2011, the sums of $275,000, $185,000,
$188,000, $460,000, and $40,00033 were transferred to Western Pacific Timber for
the purpose, in each instance, of what were described as "Loans." None of the
transfers were supported by any evidence of loan documentation or demonstrating
31

Doc. 179-8 at 5.
See Doc. 370-1 at 4.
33
Doc. 179-8 at 9, 10, and 12.
32

14

why any transfer was made. Nothing has been provided supporting a finding of
any legitimate business reasons for the claimed loans, why the payments were
made, or as to who received the over $1,000,000 paid out from the Tamarindo
proceeds. In short, the entire $1,148,000 is gone without explanation.
4.

On June 25, 2012, Desert Ranch transferred $1,178,000 of the

Tamarindo sale proceeds to "Timothy I Jessica Blixseth" 34 for a purpose
designated as "Unknown." This transfer is not supported by any documentation
supporting the conclusion that Timothy and Jessica Blixseth were entitled to
receive this or any other part of Tamarindo sale proceeds. Although there was
some evidence the $1,178,000 was claimed to be in repayment of funds that
Blixseth had advanced to Desert Ranch, 35 absent reliable evidence and supporting
documentation showing that Blixseth had advanced funds to Desert Ranch to
cover operational expenses or for any other purpose, this intrafamily transfer of
over $1,000,000, likewise, falls far short of meeting the requirements of paragraph
(l)(e) of the January 9, 2015, Order or otherwise demonstrating that such
intrafamily transfers were legitimate.

34

Doc. 178-7 at 5, Check No. 1329.
See Doc. 103, Hrg. Transcr. 80-81 (Dec. 18, 2014); Doc. 337-1, Transcr. Depo. Patrick
Ratte 94-96 (Sep. 21, 2015).
35

15

5.

On June 25, 2012, Desert Ranch transferred $52,000 to JTB, LLC for

a purpose described as "Loan Payable." 36 As noted above, JTB, LLC is not
identified to either ownership or activity. Moreover, this transfer is not supported
by documentation showing why JTB, LLC was entitled to any specific amount of
Tamarindo sale proceeds. Absent reliable documentation establishing the
existence of a loan subject to repayment between Desert Ranch and JTB, LLC and
which Blixseth was obliged to pay, the requirements of paragraph (l)(e) of the
January 9, 2015, Order are not met, particularly in light of the factual reality that
Blixseth owned and controlled Desert Ranch. 37
Blixseth's complaint that he has done all he can and that he can do no more
rings hollow and is unjustified. He plainly had the capacity and the ability to
follow the requirements of the Court's orders, to comply with those orders, and to
account as required. His failure or refusal to do so is a product of his own actions
and nonactions from which he cannot be extracted by evidence in the record.
No conclusion can be drawn except that Blixseth "'carries the keys of his
prison in his own pocket. "' 38 He has not accounted for the proceeds of the sale of

36

Doc. 178-7 at 5.
See Doc. 177 at 7.
38
Int'l Union v. Bagwell, 512 U.S. 821, 828 (1994) (quoting Gompers v. Buck's Stove &
Range Co., 221 U.S. 418, 442 (1911) (quoting In re Nevitt, 117 F. 488, 451 (8th Cir. 1902))).
37

16

Tamarindo and gives no indication of any intent to do so. He continues to have
the capacity and ability to do what is necessary to purge himself of the ongoing
contempt and could, ifhe chose to do so, comply with the Court's prior orders.
Blixseth's contention that he can do no more to comply is unworthy of acceptance
or belief, particularly given that he has never submitted himself to examination on
the subject.
The issues posed in the Court's January 13, 2016, Order, nevertheless,
remain as yet unaddressed and unresolved:
1.
Whether Blixseth lacks the ability to comply
with the prior orders of this Court, including the orders
dated February 3, 2014, January 9, 2015, January 23,
2015, and April 20, 2015;
2.
For this Court to make an individualized
decision as to whether Blixseth's continued confinement
would have a coercive effect; and
3.
For this Court to determine whether
Blixseth is able to comply with the prior orders of this
Court, including the orders of February 3, 2014, January
9, 2015, January 23, 2015, and April 20, 2015. 39
Questions 1 and 3 are interrelated and in substance raise the question of
whether Blixseth lacks the ability to comply with the prior orders of this Court or
whether he is able to comply with such prior orders.

39

Doc. 407 at 2-3 (footnotes omitted).
17

Notwithstanding over twenty-two thousand pages of accounting entries,
statements, spread sheets, data compilations, and summaries that were submitted
by Blixseth in no less than three separate what were claimed to be accountings, the
materials remain critically lacking in content essential to compliance with the
Court's orders of January 9, 2015, and April 20, 2015, and even more deficient in
addressing and satisfying Blixseth's obligation to account for the disposition of
the proceeds received from the sale ofTamarindo.
This Court's specific answers to the issues posed in the Circuit's January
11, 2016, Order40 are:
1.
Whether Blixseth lacks the ability to comply
with the prior orders of this Court, including the orders
dated February 3, 2014, January 9, 2015, January 23,
2015, and April 20, 2015; 41
Blixseth continues to have the ability, ifhe chooses to do so, "to comply
with the prior orders of this Court."
2.
For this Court to make an individualized
decision as to whether Blixseth's continued confinement
would have a coercive effect; 42

40

41
42

Doc. 405.
Doc. 407 at 2 (footnotes omitted).
Doc. 407 at 2 (footnotes omitted).
18

The confinement of Blixseth remains civil in nature and continues to have
the intended coercive effect of ensuring Blixseth's compliance with the Court's
orders.
3.
For this Court to determine whether
Blixseth is able to comply with the prior orders of this
Court, including the orders of February 3, 2014, January
9, 2015, January 23, 2015, and April 20, 2015. 43
Blixseth, as stated, remains fully able "to comply with the prior orders of
this Court."

CONCLUSION
Blixseth has not purged himself of his ongoing contempt of this Court. He
has not done what is necessary to purge himself of the contempt. He can do so.
The Court is obliged to conclude, and does conclude, that the coercive effect of
the Court's orders to obtain compliance with the accounting requirements remains
viable and nonpunitive. Blixseth is not entitled to release.
ORDERED:
Blixseth remains in civil contempt of this Court. He will continue to be

43

Doc. 407 at 2-3 (footnotes omitted).
19

held in the custody of the United States Marshals pending further order of this
Court. 44
DATED this

/CJ

~

day of February, 2016.

~{i'~~
United States District Judge

44

The issue remains - unresolved by this Court - as to whether the entirety of the
$13,820,139.84 received by Blixseth from the sale ofTamarindo, contrary to the specific
prohibition and order against sale imposed by the Bankruptcy Court, was in law, subject to a
constructive trust in favor of the Yellowstone Club Liquidating Trust, which if recognized and
applied would have prohibited Blixseth from further expenditure or dissipation of the sale
proceeds. Address or resolution of that question will have to await institution and completion of
other proceedings not yet undertaken. See, e.g., Moore v. Crawford, 130 U.S. 122 (1889);
Lockheed Corp. v. Spink, 517 U.S. 882 (1996); In re Seaway Express Corp., 912 F.2d 1125 (9th
Cir. 1990).
20