Blixseth v. Credit Suisse AG

• Decision Date: 04 September 2015
• Docket Number: Civil Action No. 12-cv-00393-PAB-KLM
• Citation: 129 F.Supp.3d 1190
• Parties: Timothy L. Blixseth, an individual, Plaintiff, v. Credit Suisse AG, a Swiss corporation, Credit Suisse Group AG, a Swiss corporation, Credit Suisse Securities (USA), LLC, a Delaware limited liability company, Credit Suisse (USA), Inc., a Delaware corporation, Credit Suisse Holdings (USA), Inc., a Delaware corporation, Credit Suisse Cayman Island Branch, an entity of unknown type, and Does 1-100, Defendants.
• Court: U.S. District Court — District of Colorado

129 F.Supp.3d 1190

Timothy L. Blixseth, an individual, Plaintiff,

v.Credit Suisse AG, a Swiss corporation, Credit Suisse Group AG, a Swiss corporation, Credit Suisse Securities (USA), LLC, a Delaware limited liability company, Credit Suisse (USA), Inc., a Delaware corporation, Credit Suisse Holdings (USA), Inc., a Delaware corporation, Credit Suisse Cayman Island Branch, an entity of unknown type, and Does 1-100, Defendants.

Civil Action No. 12-cv-00393-PAB-KLM

United States District Court, D. Colorado.

Signed September 4, 2015

Michael John Ferrigno, Law Office of Michael J. Ferrigno PLLC, Boise, ID, Michael James Flynn, Michael J. Flynn, Attorney at Law, Rancho Santa Fe, CA, for Plaintiff.

David Jason Lender, Kevin Francis Meade, Weil Gotshal & Manges, LLP, New York, NY, Thomas Ray Guy, Weil Gotshal & Manges, LLP, Dallas, TX, Kathleen E. Craigmile, Pryor, Johnson, Carney, Karr, Nixon, P.C., Greenwood Village, CO, for Defendants.

ORDER

PHILIP A. BRIMMER, United States District Judge

This matter is before the Court on the Motion for Summary Judgment [Docket No. 117] filed by Credit Suisse AG, Credit Suisse Securities (USA), LLC, Credit Suisse (USA) Inc., Credit Suisse Holdings (USA) Inc., and Credit Suisse Cayman Islands Branch (collectively, "Credit Suisse.")

I. BACKGROUND¹

Timothy Blixseth and his former wife, Edra Blixseth, founded the Yellowstone Mountain Club, LLC ("Yellowstone Club"), a master-planned golf and ski resort development in Montana. Docket No. 115 at 1-2, ¶ 1. Cushman & Wakefield of Colorado, Inc. ("Cushman") appraised the Yellowstone Club, valuing it at $1.165 billion as of July 2005. Docket No. 123 at 7, ¶ 51. Plaintiff was the sole shareholder of Blixseth Group, Inc. ("BGI"), later known as BLX Group, Inc. ("BLX"), until August 2008. Docket No. 115 at 2, ¶¶ 2-3.² BGI was the majority owner of the Yellowstone Club, Yellowstone Development, LLC ("YD"), and Big Sky Ridge, LLC ("BSR") (collectively, the "borrowers"). Id. at 1-2, ¶¶ 1, 2.

In 2005, Credit Suisse arranged a $375 million loan to the borrowers, the terms of which were set forth in the Credit Agreement dated September 30, 2005. Id. at 2, ¶ 4. Plaintiff signed the Credit Agreement on behalf of the Yellowstone Club as president of BGI. Id. at 2, ¶ 6. Credit Suisse signed the Credit Agreement as administrative agent, collateral agent, paying agent, sole lead arranger, and sole bookrunner. Id. at 2, ¶ 5. Section 9.20 of the Credit Agreement stated:

No Recourse to Partners. Notwithstanding anything in any of the Loan Documents to the contrary, no partner or member or managing member in the Borrower shall be personally liable for the payment of the Obligations; provided, however , nothing contained herein shall release, diminish or impair the obligations of the Borrower to pay in full when due all Obligations in accordance with the provisions of the Loan Documents.

Docket No. 28–2 at 47, § 9.20 (the "no recourse provision"). On September 28, 2005, the Yellowstone Club, YD, BSR, and Credit Suisse executed a Mortgage, Security Agreement, Assignments of Rents and Leases and Fixture Filing (the "Security Agreement"). Docket No. 115 at 3, ¶ 9. Pursuant to the Credit Agreement and the Security Agreement, repayment of the Credit Suisse loan was secured by a majority of the borrowers' assets (the "collateral"). Docket No. 123–1 at 4.

Pursuant to the Credit Agreement, Credit Suisse transferred approximately $342 million to the borrowers. Docket No. 123 at 2, ¶ 6. The Yellowstone Club transferred approximately $209 million of those funds to BGI, who in turn distributed approximately $199 million directly to plaintiff in the form of notes (the "BGI notes"). Docket No. 115 at 3, ¶ 11; Docket No. 117 at 5, ¶¶ 6-7.

A. Divorce Proceedings

In 2006, plaintiff and Ms. Blixseth began divorce proceedings. Docket No. 115 at 3, ¶ 12. On June 26, 2008, plaintiff and Ms. Blixseth settled their divorce and agreed to divide their marital assets pursuant to the Marital Settlement Agreement ("MSA"). Id. at 3, ¶ 14; see also Docket No. 123–15. Pursuant to the MSA, plaintiff transferred ownership of BGI to Ms. Blixseth. Docket No. 115 at 3, ¶ 15. In her capacity as president of BGI, Ms. Blixseth executed the Assumption Agreement, which stated, in relevant part, "BGI hereby releases [Mr. Blixseth] from any and all claims, obligations or liabilities associated with the BGI Indebtedness. Simultaneously herewith, BGI is delivering the original [Promissory Notes] to [Edra Blixseth] to be marked ‘Superceded by Replacement Note.’ " Docket No. 123–13 at 3, ¶ 4; see also Docket No. 115 at 4, ¶¶ 16, 18.³ Pursuant to the Assumption Agreement, the BGI notes were marked "Superseded by Replacement Note." Docket No. 117 at 5, ¶ 11. As part of the MSA and in conjunction with the Assumption Agreement, plaintiff and Ms. Blixseth executed the Mutual Waiver and Release Agreement (the "releases"). Docket No. 115 at 4, ¶ 21; see also Docket No. 123–11. The releases state: "each of the Edra Entities hereby fully and absolutely releases and discharges Timothy and each of the Timothy Entities (collectively, the "Timothy Released Parties "), from any claim, right or demand that any such Edra Entity has, or may have against any of the Timothy Released Parties...." Docket No. 123–11 at 3. On July 3, 2008, as part of the Blixseths' divorce, the California Superior Court approved the releases. Docket No. 115 at 4, ¶ 22; see also Docket No. 123–12 at 2.

B. Bankruptcy⁴

On November 10, 2008, the Yellowstone Club, YD, BSR, and Yellowstone Club Construction Company, LLC (collectively, the "debtors") filed for Chapter 11 bankruptcy protection (the "Yellowstone Club bankruptcy") in the United States Bankruptcy Court for the District of Montana (the "bankruptcy court"). Docket No. 115 at 5, ¶ 24; see alsoIn re Yellowstone Mountain Club, LLC ("YMC Bankruptcy "), No. 08–61570–RBK (Bankr.D.Mont. Nov. 10, 2008) (Docket No. 1).⁵

In May 2009, Credit Suisse, in its capacity as an agent for the prepetition lenders⁶ ("prepetition agent"), the Official Unsecured Creditors Committee ("UCC"), the debtors, and CrossHarbor Capital Partners, LLC negotiated and executed the Settlement Term Sheet [Docket No. 123–21]. The Settlement Term Sheet, among other things, released the UCC's and debtors' claims against Credit Suisse and provided for the creation of the Yellowstone Club Liquidating Trust ("Liquidating Trust" or "YCLT"), which would hold the debtors' claims, causes of action, and other assets. Docket No. 123–21 at 4-5, 8-9; Docket No. 115 at 8, ¶ 51. The Settlement Term Sheet provided that the Liquidating Trust would be governed by a seven member board. Id. at 8, ¶ 46. Credit Suisse had the right to appoint four members to the Liquidating Trust board. Id. The Settlement Term Sheet provided that board decisions would be made by majority vote, with the exception of retaining new counsel, which required a unanimous vote, and the settlement of certain claims, which required at least five votes. Id. at 8, ¶ 47. On May 22, 2009, the debtors filed a Third Amended Joint Plan of Reorganization ("Third Amended Plan") [Docket No. 123–23], which incorporated the Settlement Term Sheet and provided for the resolution "of the outstanding claims against and interests in the Debtors." YMC Bankruptcy (Docket No. 947 at 9); Docket No. 123–23 at 52, § 9.2.5. Credit Suisse was among those entities that helped to draft and voted in support of the Third Amended Plan. Docket No. 123 at 9, ¶ 59. On June 2, 2009, the bankruptcy court confirmed the Third Amended Plan. Docket No. 115 at 8, ¶ 49. Marc S. Kirschner was appointed trustee of the Liquidating Trust. YMC Bankruptcy (Docket No. 1065). On July 17, 2009, the Third Amended Plan took effect and the debtors' claims were assigned to the Liquidating Trust. Docket No. 115 at 9, ¶ 52; YMCBankruptcy (Docket No. 1119 at 1).⁷

Plaintiff asserts that the Third Amended Plan and Settlement Term Sheet made him the sole target in funding the Yellowstone Club bankruptcy plan, while releasing Credit Suisse from liability. Docket No. 123 at 8-9, ¶¶ 57, 59-60. He further contends that Credit Suisse asserts control over the Liquidating Trust because

(1) CS is a beneficiary of the YCLT as an recipient of allowed claims 3 and 8; (2) CS appoints 4 of 7 members on the YCLT Board with a majority vote; (3) the Board advises and directs the trustee; (4) Majority vote appoints the Trustee; (5) Trust Board Advises, instruction and direction [sic] on administration and assists in the pursuit of Trust Claims, as requested; (6) CS-appointed members['] votes must [ ] approve any settlement with Mr. Blixseth (5 of 7 votes to settle); and (7) CS' local counsel in YMC bankruptcy, Holland & Hart, is designated as counsel for the YCLT, and cannot be removed absent unanimous approval.

Id. at 8–9, ¶ 58 (citations omitted).

C. AP-14

On February 25, 2009, before the Settlement Term Sheet was agreed to, Credit Suisse filed an adversary proceeding ("AP-14") against the debtors and the UCC in the bankruptcy court. Docket No. 115 at 5, ¶ 26; see also Blixseth v. Kirschner (‘AP–14 ‘), AP No. 09–00014–RBK (Bankr.D.Mont. Feb. 25, 2009) (Docket No. 1). The UCC then filed a complaint against Credit Suisse and John Does 1-15 in a separate adversary proceeding, which was consolidated with AP-14 on March 3, 2009. AP-14 (Docket No. 20). On March 24, 2009, plaintiff filed a complaint in intervention against the debtors and the UCC in AP-14. AP-14 (Docket No. 38). On April 3, 2009, the UCC filed an answer asserting counterclaims against plaintiff for breach of fiduciary duty, alter ego, and recovery of fraudulent transfers. Id. (Docket No. 98 at 21-25).

Part I of the trial in AP-14 was held over the course of six days in late April and early May 2009. Docket No. 115 at 6, ¶ 36. The UCC claimed that Credit Suisse aided and abetted plaintiff's breach of fiduciary duties, that the Credit Suisse loan was a fraudulent transfer, and that Credit Suisse's claims...