FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

TIMOTHY L. BLIXSETH,

Appellant,

v.

CREDIT SUISSE,

Appellee.

No. 16-35304

D.C. No.

2:11-cv-00065-SHE

OPINION

Appeal from the United States District Court

for the District of Montana

Sam E. Haddon, District Judge, Presiding

Argued and Submitted June 17, 2019

San Francisco, California

Filed June 11, 2020

Before: Richard A. Paez, Marsha S. Berzon,

and Jay S. Bybee, Circuit Judges.

Opinion by Judge Berzon
2 BLIXSETH V. CREDIT SUISSE

SUMMARY*

Bankruptcy

The panel affirmed, on different grounds, the district 

court’s dismissal of a challenge to an exculpation clause 

approved by the bankruptcy court as part of a settlement and 

confirmation plan in Chapter 11 proceedings.

The Chapter 11 proceedings were filed by Yellowstone 

Club companies founded by appellant Timothy Blixseth and 

his then-wife. The exculpation clause released certain nondebtors, including Credit Suisse, from liability for acts or 

omissions arising out of the Chapter 11 proceedings. In a 

prior appeal, this court affirmed the district court in part and 

reversed in part, holding that Blixseth had standing to 

challenge the bankruptcy court’s order approving the plan 

and that Blixseth’s challenge to the exculpation clause was 

not equitably moot.

As an initial matter, the panel declined to dismiss 

Blixseth’s appeal as a sanction for his failure to respond to 

an order to show cause for why his appeal should persist in 

the wake of a purported global settlement.

The panel held that, on remand, the district court erred 

by dismissing Blixseth’s challenge on the ground that it was 

barred by equitable mootness. The panel held that its prior 

holding on equitable mootness was law of the case and was 

sound.

* This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
BLIXSETH V. CREDIT SUISSE 3

The panel nonetheless affirmed on the ground that the 

exculpation clause was valid, and the bankruptcy court 

properly released Credit Suisse, a creditor, from liability for 

certain potential claims against it. Consistent with the Third 

Circuit, the panel held that 11 U.S.C. § 524(e), providing 

that discharge of a debt of the debtor does not affect the 

liability of any other entity on such debt, did not bar the 

exculpation clause, which narrowly focused on actions of 

various participants in the plan approval process and related 

only to that process.

COUNSEL

Becky S. James (argued) and Rachael A. Robinson, James 

& Associates, Calabasas, California, for Appellant.

Christopher J. Cariello (argued), Orrick Herrington & 

Sutcliffe LLP, New York, New York; Robert M. Loeb, 

Orrick Herrington & Sutcliffe LLP, Washington, D.C.; J. 

Richard Orizotti, Poore Roth & Robinson P.C., Butte, 

Montana; Evan R. Levy, Mark A. McDermott, and Shaud G. 

Tavakoli, Skadden Arps Slate Meagher & Flom LLP, New 

York, New York; for Appellee.
4 BLIXSETH V. CREDIT SUISSE

OPINION

BERZON, Circuit Judge:

We have been here, or nearly here, before. Timothy 

Blixseth (“Blixseth”) appeals the district court’s dismissal of 

his challenge to an exculpation clause (the “Exculpation 

Clause” or the “Clause”) approved by the bankruptcy court 

as a part of a settlement plan to which Blixseth objected. The 

district court dismissed the challenge because it determined 

that Blixseth’s case is equitably moot, even though we 

previously held his challenge to the Exculpation Clause not 

equitably moot. Although the court erred in doing so, we 

hold the Exculpation Clause valid, and so affirm the 

dismissal.

I

Timothy Blixseth and Edra Blixseth, his wife at the time, 

founded the Yellowstone Club in 2000 as an “exclusive ski 

and golf community” in Big Sky, Montana. In 2005, 

representing that he was planning to take the Yellowstone 

Club global, Blixseth borrowed $375 million from Credit 

Suisse and other lenders. See Blixseth v. Kirschner (In re 

Yellowstone Mountain Club, LLC), 436 B.R. 598, 607, 609–

13. (Bankr. D. Mont. 2010), amended in part by No. 08-

61570-11, 2010 WL 3504210 (Bankr. D. Mont. Sept. 7, 

2010). To secure the loan, Blixseth offered the assets of 

companies related to the Club—Yellowstone Mountain 

Club, LLC; Yellowstone Development, LLC; Big Sky 

Ridge, LLC; and Yellowstone Club Construction Company, 

LLC. Id. at 608–13.

Blixseth and Edra Blixseth divorced in 2008. As a result 

of the divorce proceedings, Edra Blixseth became the 

indirect owner of the Yellowstone companies. Id. at 632. The 
BLIXSETH V. CREDIT SUISSE 5

companies had entered “a downward spiral,” id. at 618, 

largely because Blixseth mismanaged and misused the 

money from the 2005 loan, see id. at 613–15. As a result, 

repayment of that loan was no longer viable. Id. at 620. Edra 

Blixseth decided to take the companies (collectively, the 

“Debtors”) through Chapter 11 bankruptcy proceedings, 

with the intention of selling the Debtors’ assets to 

CrossHarbor Capital Partners, LLC, a real estate 

management company that had purchased residential lots in 

the Yellowstone Club and had offered to buy the Club. Id.

at 619–21, 630–31.

The bankruptcy proceedings were contentious. The 

Debtors, Blixseth, CrossHarbor, Credit Suisse—the 

Debtors’ largest creditor—and a committee of unsecured 

creditors battled over the companies’ assets. As the 

bankruptcy court noted, “litigation and the threat of litigation 

is and was plentiful in this case.” In re Yellowstone Mountain 

Club, LLC, 460 B.R. 254, 274 (Bankr. D. Mont. 2011).

Settlement negotiations narrowed the scope of the 

litigation. On April 3, 2009, the Debtors filed a Second 

Amended Reorganization Plan and Disclosure Statement, 

which included an exculpation clause releasing certain nondebtors from liability for acts or omissions arising out of the 

Chapter 11 proceedings. Credit Suisse was not included as 

an exculpated party. It objected to the plan and, specifically, 

the Clause, on the ground that “such releases are strictly 

forbidden in the Ninth Circuit and grounds for denial of 

confirmation of the Plan.” Blixseth, who was also not 

included as an exculpated party, adopted and joined Credit 

Suisse’s objections.

Credit Suisse’s objection threatened the confirmation of 

the plan and set off another intense round of negotiations. 

Over the course of a weekend in May 2009, Credit Suisse, 
6 BLIXSETH V. CREDIT SUISSE

CrossHarbor, and the Debtors negotiated a “global 

settlement” that allowed the Debtors to avoid liquidating 

their assets. Id. at 264–65. This settlement formed the basis 

for the Third Amended Joint Plan (the “Plan”). The Plan 

resolved lingering litigation between the parties and, 

relevant here, included the Exculpation Clause at issue, 

which now covered Credit Suisse as an exculpated party. 

The full Clause, set out in Section 8.4 of the Plan, provides:

None of [the Exculpated Parties, including 

Credit Suisse, CrossHarbor, and Edra 

Blixseth], shall have or incur any liability to 

any Person for any act or omission in 

connection with, relating to or arising out of 

the Chapter 11 Cases, the formulation,

negotiation, implementation, confirmation or 

consummation of this Plan, the Disclosure 

Statement, or any contract, instrument, 

release or other agreement or document 

entered into during the Chapter 11 Cases or 

otherwise created in connection with this 

Plan; provided, however, that nothing in this 

Section 8.4 shall be construed to release or 

exculpate any Exculpated Party from willful 

misconduct or gross negligence as 

determined by a Final Order or any breach of 

the Definitive Agreement or any documents 

entered into in connection therewith.

Blixseth, who was not covered by the revised 

exculpation clause, again objected to the Plan. The 

bankruptcy court approved the Plan on June 2, 2009, and 

Blixseth appealed. The district court reversed the bankruptcy 

court’s confirmation of the Plan because of the breadth of 

the Exculpation Clause. The court instructed the bankruptcy 
BLIXSETH V. CREDIT SUISSE 7

court to “explicitly identify and delineate those persons or 

representatives determined to be within the scope of the 

release parameters of Section 524(e).”

On remand, the bankruptcy court conducted two days of 

evidentiary hearings and argument on the Exculpation 

Clause. On September 30, 2011, the court confirmed the plan 

once more, not modifying the Plan but construing the Clause 

to be “narrow in both scope and time.” In re Yellowstone 

Mountain Club, LLC, 460 B.R. at 272.

Blixseth appealed again. The district court rejected the 

Plan proponents’ argument that Blixseth’s appeal was barred 

by the doctrine of equitable mootness but concluded that 

Blixseth did not have standing to appeal the bankruptcy 

court’s approval of the Plan. Blixseth and the Plan 

proponents cross appealed to this Court. In an unpublished 

disposition, we affirmed the district court in part and 

reversed in part, holding (1) that Blixseth was a “person 

aggrieved” by the bankruptcy court’s order and thus had 

standing to challenge that order, and (2) that Blixseth’s 

challenge to the Exculpation Clause was not equitably moot 

because it was “apparent that one or more remedies is still 

available.” Blixseth v. Yellowstone Mountain Club, LLC, 

609 F. App’x 390, 391–92 (9th Cir. 2015) (citation omitted). 

We remanded to the district court with instructions to 

consider the merits of Blixseth’s challenge to the Clause.

But on remand, the district court did not rule on the 

merits of Blixseth’s challenge to the Clause. Instead, it 

dismissed Blixseth’s challenge on the ground that it was 

barred by equitable mootness.

This appeal followed.
8 BLIXSETH V. CREDIT SUISSE

II

As an initial matter, we face a procedural question: 

Credit Suisse contends Blixseth’s appeal should be 

dismissed outright because of his failure to respond to our 

order requiring him to show cause for why his appeal should 

persist in the wake of a purported global settlement.

During the pendency of this appeal, we became aware 

that settlement negotiations among the parties to the dispute 

had been ongoing and the parties might have reached a 

settlement. We issued an order stating:

It appears that these appeals may be moot 

because of settlement or should otherwise be 

dismissed. Within 21 days after the filing 

date of this order, appellant shall move to 

voluntarily dismiss these appeals or show 

cause why these appeals should not be 

dismissed. If appellant fails to respond to this 

order, these appeals will be automatically 

dismissed by the Clerk for failure to 

prosecute. See 9th Cir. R. 42-1. If appellant 

files a response, appellees shall file a 

response or an appropriate motion within 

14 days after service of appellant’s filing. 

Further briefing is stayed pending resolution 

of this order.

It turned out that Blixseth had settled with two parties, 

CrossHarbor and Yellowstone Mountain Club, LLC, but not 

with Credit Suisse. In response to our order, Blixseth moved 

to dismiss CrossHarbor and Yellowstone Mountain Club; he 

did not explain why he made no motion concerning Credit 

Suisse, nor did he explain why his appeal with regard to 

Credit Suisse was not moot.
BLIXSETH V. CREDIT SUISSE 9

Our order had stated that Blixseth’s appeal would be 

“automatically dismissed by the Clerk,” if he failed to 

respond to the order. In fact it was not dismissed. Blixseth 

did respond to the order, albeit incompletely, by moving to 

dismiss two defendants but not responding with regard to 

Credit Suisse.

Blixseth finally did respond as to mootness with regard 

to Credit Suisse—a month and a half later than required by 

our order—after Credit Suisse moved to dismiss his appeal.1

Given Blixseth’s belated response with regard to Credit 

Suisse, we have the authority to dismiss Blixseth’s appeal 

now for incomplete compliance with our order. But 

equitable factors persuade us not to do so.

Under our Circuit’s rules,

[w]hen an appellant fails to file a timely 

record, pay the docket fee, file a timely brief, 

or otherwise comply with rules requiring 

processing the appeal for hearing, an order 

may be entered by the clerk dismissing the 

appeal. In all instances of failure to prosecute 

an appeal to hearing as required, the Court 

may take such other action as it deems 

appropriate.

9th Cir. R. 42-1 (emphases added). In general, “[d]ismissal 

is a harsh penalty and is to be imposed only in extreme 

circumstances,” because, inter alia, “public policy favor[s] 

disposition of cases on their merits.” Henderson v. Duncan, 

1 According to Blixseth, Credit Suisse contributed to his failure to 

respond by unexpectedly refusing to sign the settlement release the other 

parties executed.
10 BLIXSETH V. CREDIT SUISSE

779 F.2d 1421, 1423 (9th Cir. 1986). We routinely dismiss 

cases pursuant to Rule 42-1 when an appellant fails to file an 

opening brief. See, e.g., Hinds & Shankman, LLP v. Lapides, 

No. 19-56236, 2020 WL 1943511, at *1 (9th Cir. Mar. 24, 

2020). But in circumstances closer to those here, we have 

chosen not to dismiss.

Radici v. Associated Insurance Cos., for instance, 

involved an appellant who filed a Civil Appeal Docketing 

Statement late, in violation of an order that “specifically 

provided that failure to file [the statement] in timely manner 

would result in dismissal.” 217 F.3d 737, 746 (9th Cir. 

2000). We nonetheless declined to dismiss the appeal in 

Radici, because “Appellees’ counsel conceded that 

Appellants’ delay . . . did not prejudice or harm her clients’ 

interests,” making dismissal “appear[] harsher than 

necessary.” Id.

Credit Suisse does not concede that Blixseth’s delay 

caused it no prejudice, but we cannot identify any interest of 

Credit Suisse’s that was harmed as a result of the delay. And, 

like the appellant in Radici, Blixseth did respond—if 

incompletely—to our order, by moving to dismiss 

CrossHarbor and Yellowstone Mountain Club. In light of 

those factors, and given the extensive litigation that has 

occurred to date over the validity of the Exculpation Clause, 

dismissal “appears harsher than necessary.” Id. Rather than 

sanction Blixseth for his incomplete compliance with our 

directive, we consider the substance of his appeal.

III

A

On remand from Blixseth’s earlier appeal, the district 

court dismissed his case on the ground that Blixseth’s 
BLIXSETH V. CREDIT SUISSE 11

challenge to the Exculpation Clause was equitably moot. In 

reaching this conclusion the district court disregarded our 

earlier holding that “Blixseth’s appeal as to the exculpation 

clause is not equitably moot, because it is apparent that one 

or more remedies is still available.” Blixseth, 609 F. App’x. 

at 392. Our holding bound the district court, and it binds us 

now, as the law of the case. See Herrington v. Cty. of 

Sonoma, 12 F.3d 901, 904–05 (9th Cir. 1993).

Even if we were not bound by our earlier decision, we 

remain convinced that it was sound. Credit Suisse argues, 

and the district court concluded, that Blixseth’s appeal is 

moot because his only proposed remedy, invalidating the 

Exculpation Clause, “would require that the [Bankruptcy] 

Plan be vacated and constructed anew, thereby creating ‘an 

uncontrollable situation for the bankruptcy court.’” Blixseth 

v. Yellowstone Mountain Club, LLC, CV-11-65-BU-SEH, 

slip op. at 4 (D. Mont. Mar. 23, 2016) (quoting Motor 

Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe 

Insulation Co.), 677 F.3d 869, 881 (9th Cir. 2012)). But 

equitable mootness involves the capacity of courts, not 

parties, to fashion a remedy. As In re Thorpe stated, 

“[b]ecause traditional equitable remedies are extremely 

broad and vest great discretion in a court devising a remedy, 

we expect that if there is violation of Appellants’ legal rights 

from the plan, the bankruptcy court should be able to find a 

remedy that is appropriate.” 677 F.3d at 883 (emphases 

added). There are “plan modifications adequate to give” 

Blixseth at least some relief—for example, the bankruptcy 

court could modify the Plan to make even more express the 

limited temporal and substantive scope of the Exculpation 

Clause. Id. “Where equitable relief, though incomplete, is 

available, the appeal is not moot.” Id.
12 BLIXSETH V. CREDIT SUISSE

B

Because it improperly dismissed the case as equitably 

moot, the district court did not determine whether the 

Exculpation Clause is valid. We could remand the case once 

more, but will not do so. “We are in as good a position to 

review the bankruptcy court's decision as is the district 

court.” Sousa v. Miguel (In re United States Tr.), 32 F.3d 

1370, 1372 (9th Cir. 1994) (citation and internal quotation 

marks omitted). “Whether a bankruptcy court has the power 

to release claims against a non-debtor is a question of law 

which we review de novo.” Resorts Int’l, Inc. v. 

Lowenschuss (In re Lowenschuss), 67 F.3d 1394, 1401 (9th 

Cir. 1995) (citation omitted). We hold that the Clause, as 

applied to Credit Suisse, is valid.

The question before us is whether the bankruptcy court 

could release Credit Suisse, a creditor, from liability for 

certain potential claims against it by approving the 

Exculpation Clause.2

The liability release here is “narrow in both scope and 

time,” In re Yellowstone Mountain Club, 460 B.R. at 272, 

limited to releasing the parties from liability for “any act or 

omission in connection with, relating to or arising out of the 

Chapter 11 cases” or bankruptcy filing, id. at 267. It does not 

affect obligations relating to the claims filed by creditors and 

discharged through the bankruptcy proceedings, as it 

exclusively exculpates actions that occurred during the 

bankruptcy proceeding, not before. And, during that time 

period, the Clause’s release applies only to negligence 

2 As Blixseth has settled with the other parties covered by the 

Clause, we discuss the validity of the clause only as it releases Credit 

Suisse from liability.
BLIXSETH V. CREDIT SUISSE 13

claims; it does not release parties “from willful misconduct 

or gross negligence.” Id. Further, the Clause covers only 

parties “closely involved” in drafting the Plan—as relevant 

here, Credit Suisse. Id. at 277. The bankruptcy court 

reasoned that Credit Suisse should be covered because, as 

the largest creditor, it “had the ability to single-handedly 

disrupt the entire confirmation process,” but had become a 

“plan proponent[]” through its direct participation in the 

negotiations that preceded the adoption of the Plan. Id.

at 275–77. Altogether, as the bankruptcy court noted, the 

Exculpation Clause is not “a broad sweeping provision that 

seeks to discharge or release nondebtors from any and all 

claims that belong to others.” Id. at 270.3

Blixseth primarily contends the Exculpation Clause 

violates 11 U.S.C. § 524(e). Subject to exceptions not 

relevant here, § 524(e) establishes that “discharge of a debt 

of the debtor does not affect the liability of any other entity 

on, or the property of any other entity for, such debt.” We 

have interpreted the section generally to prohibit a 

bankruptcy court from discharging the debt of a non-debtor. 

See In re Lowenschuss, 67 F.3d at 1402.4

3 Neither party contests on appeal the bankruptcy court’s 

interpretation of the Clause.

4 There is a long-running circuit split on this issue. Other circuits do 

allow bankruptcy plans to “discharge the debts of certain non-debtor 

third parties.” Deocampo v. Potts, 836 F.3d 1134, 1143 (9th Cir. 2016) 

(citing Menard-Sanford v. Mabey (In re A.H. Robins Co.), 880 F.2d 694, 

702 (4th Cir. 1989)). See generally Joshua M. Silverstein, Hiding in 

Plain View: A Neglected Supreme Court Decision Resolves the Debate 

over Non-Debtor Releases in Chapter 11 Reorganizations, 23 Emory 

Bankr. Dev. J. 13 (2006).
14 BLIXSETH V. CREDIT SUISSE

We conclude, however, that § 524(e) does not bar a 

narrow exculpation clause of the kind here at issue—that is, 

one focused on actions of various participants in the Plan 

approval process and relating only to that process.

Section 524(e) establishes that “discharge of a debt of the 

debtor does not affect the liability of any other entity on . . .

such debt.” 11 U.S.C. § 524(e) (emphases added). In other 

words, “the discharge in no way affects the liability of any 

other entity . . . for the discharged debt.” 4 Collier on 

Bankruptcy ¶ 524.05 (emphasis added). By its terms, 

§ 524(e) prevents a bankruptcy court from extinguishing 

claims of creditors against non-debtors over the very debt 

discharged through the bankruptcy proceedings. See In re 

PWS Holding Corp., 228 F.3d 224, 245–46 (3d Cir. 2000) 

(making the same point).

That § 524(e) confines the debt that may be discharged 

to the “debt of the debtor”—and not the obligations of third 

parties for that debt—conforms to the basic fact that “a 

discharge in bankruptcy does not extinguish the debt itself 

but merely releases the debtor from personal liability. . . .

The debt still exists, however, and can be collected from any 

other entity that may be liable.” Landsing Diversified 

Props.-II v. First Nat’l Bank & Tr. Co. of Tulsa (In re W. 

Real Estate Fund), 922 F.2d 592, 600 (10th Cir. 1990) 

(alteration in original) (quoting In re Lembke, 93 B.R. 701, 

702 (Bankr. D.N.D. 1988)); see also Lewis v. Scott (In re 

Lewis), 97 F.3d 1182, 1185 (9th Cir. 1996). As § 524(a) 

elucidates, a discharge

voids any judgment at any time obtained, to 

the extent that such judgment is a 

determination of the personal liability of the 

debtor with respect to any debt discharged 

. . . [;] operates as an injunction against the 
BLIXSETH V. CREDIT SUISSE 15

commencement or continuation of an action 

. . . to collect, recover or offset any such 

[discharged] debt as a personal liability of the 

debtor . . . [;] and operates as an 

injunction against the commencement or 

continuation of an action . . . to collect or 

recover from, or offset against, property of 

the debtor.

11 U.S.C. § 524(a). A bankruptcy discharge thus protects the 

debtor from efforts to collect the debtor’s discharged debt 

indirectly and outside of the bankruptcy proceedings; it does 

not, however, absolve a non-debtor’s liabilities for that same

“such” debt.

The legislative history of § 524(e) makes clearer the 

distinction between claims for the underlying debt and other 

claims, such as those relating specifically to the bankruptcy 

proceedings. As Underhill v. Royal summarized, § 524(e) 

is a

reenactment of Section 16 of the 1898 Act 

which provided that “[t]he liability of a 

person who is a co-debtor with, or guarantor 

or in any manner a surety for, a bankrupt shall 

not be altered by the discharge of such 

bankrupt.” Act of July 1, 1898, ch. 541, § 16, 

30 Stat. 550 (formerly codified at 11 U.S.C. 

§ 34 (1976)).

769 F.2d 1426, 1432 (9th Cir. 1985) (alteration in original). 

The emphasis on the liability of co-debtors and guarantors, 

but not creditors or other third parties, indicates the intended 

scope of Section 16 and, by extension, § 524(e). “The import 

of Section 16 [of the 1898 Act] is that the mechanics of 
16 BLIXSETH V. CREDIT SUISSE

administering the federal bankruptcy laws, no matter how 

suggestive, do not operate as a private contract to relieve codebtors of the bankrupt of their liabilities.” Id. (alterations in 

original) (quoting Union Carbide Corp. v. Newboles, 

686 F.2d 593, 595 (7th Cir. 1982) (per curiam)). Like its 

predecessor provision in the 1898 Bankruptcy Act, § 524(e) 

prevents a reorganization plan from inappropriately 

circumscribing a creditor’s claims against a debtor’s codebtor or guarantors over the discharged debt, and so does 

not apply to the Clause before us.

Consistent with our analysis, the Third Circuit has 

upheld an exculpation clause similar to the one here at issue. 

PWS, 228 F.3d at 245–46. In doing so, the court took into 

account that the exculpated non-debtors there were members 

of the creditors’ committee and related professionals and 

individuals. At the same time, and more broadly, PWS stated 

that “Section 524(e), by its terms, only provides that a 

discharge of the debtor does not affect the liability of nondebtors on claims by third parties against them for the debt 

discharged in bankruptcy,” id. at 245 (emphasis added), and 

held that the partial exculpation for acts committed during 

the process of developing and confirming a Chapter 11 plan 

did not “affect the liability of another entity on a debt of the 

debtor within the meaning of § 524(e),” id. at 247.

Contesting this limited view of § 524(e), Blixseth directs 

us toward broad language we have used in three cases in 

which we interpreted § 524(e) to bar nondebtor releases. The 

first of these cases, Underhill, stated that “the bankruptcy 

court has no power to discharge the liabilities of a nondebtor 

pursuant to the consent of creditors as part of a 

reorganization plan.” 769 F.2d at 1432, rejected on other 

grounds by Reves v. Ernst & Young, 494 U.S. 56 (1990). In 

re American Hardwoods, Inc. added that “Section 524(e) . . .
BLIXSETH V. CREDIT SUISSE 17

limits the court’s equitable power under section 105 to order 

the discharge of the liabilities of nondebtors.” 885 F.2d 621, 

626 (9th Cir. 1989). Finally, based on Underhill and 

American Hardwoods, Lowenschuss declared “[t]his court 

has repeatedly held, without exception, that § 524(e) 

precludes bankruptcy courts from discharging the liabilities 

of non-debtors.” 67 F.3d at 1401.

But Underhill, American Hardwoods, and Lowenschuss

all involved sweeping nondebtor releases from creditors’ 

claims on the debts discharged in the bankruptcy, not 

releases of participants in the plan development and approval 

process for actions taken during those processes. Underhill, 

for example, disapproved a release provision that discharged 

“all claims against the debtor, any affiliate of the Debtor, and 

any insider of the debtor,” including for securities law 

violations that occurred prior to the bankruptcy filing. 

769 F.2d at 1429–30 (emphases added) (internal quotations 

marks omitted). American Hardwoods involved an 

injunction that, like a release provision, would have 

permanently prevented a creditor from collecting any debt 

from American Hardwoods’ guarantors—the president and 

vice president of American Hardwoods—on American 

Hardwoods’ discharged debts. 885 F.2d at 622. And 

Lowenschuss dealt with a “Global Release” provision that, 

true to its title, “released numerous parties . . . from all 

claims.” 67 F.3d at 1397, 1401. In each of these cases, the 

breadth of the coverage—the “Global Release” in 

Lowenschuss; the permanent injunction in American 

Hardwoods; and the “all claims” exculpation in Underhill—

would have affected the ability of creditors to make claims 

against third parties, including guarantors and co-debtors, 

for the debtor’s discharged debt.
18 BLIXSETH V. CREDIT SUISSE

In contrast, the Exculpation Clause here deals only with 

the highly litigious nature of Chapter 11 bankruptcy 

proceedings.5 As one of the bankruptcy attorneys in this case 

stated during the bankruptcy court’s hearing on the 

Exculpation Clause, in bankruptcy proceedings lawyers 

“battle each other tirelessly . . . . oxes [sic] are gored.” 

460 B.R. at 274 (internal quotation marks omitted). Rather 

than provide an unauthorized “fresh start” to a non-debtor, 

Bank of N.Y. Tr. Co., NA v. Official Unsecured Creditors’ 

Comm. (In re Pacific Lumber Co.), 584 F.3d 229, 251–53 

(5th Cir. 2009), the Clause does nothing more than allow the 

settling parties—including Credit Suisse, the Debtors’ 

largest creditor—to engage in the give-and-take of the 

bankruptcy proceeding without fear of subsequent litigation 

over any potentially negligent actions in those proceedings.6

Under 11 U.S.C. § 105(a), which empowers a 

bankruptcy court to “issue any order, process, or judgment 

5 Notably, Blixseth has never shown that the Exculpation Clause 

impermissibly releases Credit Suisse—or anyone—from any potential 

viable claims he might bring. At oral argument, Blixseth raised the 

dismissal of a breach of contract claim against Credit Suisse in a separate 

suit he filed in the District of Colorado. See Blixseth v. Cushman & 

Wakefield of Colo., Inc., 2013 WL 5446791 (D. Colo. 2013). The district 

court there did determine that the Exculpation Clause barred his claim, 

but the claim involved Credit Suisse’s participation in the bankruptcy 

proceedings, not its conduct outside those proceedings. Id. at *9.

6 Blixseth does not challenge the Exculpation Clause on the grounds 

that it violates the “hallmarks of permissible non-consensual releases—

fairness, necessity to the reorganization, and specific factual findings to 

support these conclusions.” Gillman v. Continental Airlines (In re 

Continental Airlines), 203 F.3d 203, 214 (3d Cir. 2000). We therefore do 

not consider that possibility in detail, but we do note that, based on the 

bankruptcy courts findings, In re Yellowstone Mountain Club, LLC, 

460 B.R. at 272, the Clause almost certainly displays these hallmarks.
BLIXSETH V. CREDIT SUISSE 19

that is necessary or appropriate to carry out the provisions of 

[Chapter 11],” and 11 U.S.C. § 1123, which establishes the 

appropriate content of a bankruptcy plan, the bankruptcy 

court here had the authority to approve an exculpation clause 

intended to trim subsequent litigation over acts taken during 

the bankruptcy proceedings and so render the Plan viable. 

Section 524(e) constrains this power by ensuring that no 

third party is released from its obligation for the underlying 

debt. See 11 U.S.C. § 1123(a); Am. Hardwoods, 885 F.2d 

at 625–26. But, as we have discussed, the Exculpation 

Clause does not affect claims for that debt, and so it was 

within the bankruptcy court’s power to approve the 

Exculpation Clause as a part of the Plan.7 According to PWS, 

similar limited exculpatory clauses focused on acts 

committed as part of the bankruptcy proceedings are 

“apparently a commonplace provision in Chapter 11 plans,” 

228 F.3d at 245; see also In re Yellowstone Mountain Club,

460 B.R. at 271, 274, presumably because of the features of 

bankruptcy litigation just noted.8

7 The Fifth Circuit has reached a conclusion opposite ours. In re 

Pacific Lumber Co. held that § 524(e) barred a release provision that 

would have released non-debtors who were not “co-liable for the 

Debtors’ pre-petition debts . . . . from any negligent conduct that 

occurred during the course of the bankruptcy,” except insofar as the 

release covered negligent conduct of members of the creditors’ 

committee already protected by a limitation on liability implied from the 

bankruptcy code. 584 F.3d at 252. In re Pacific Lumber Co. reasoned 

that “[t]he fresh start § 524(e) provides to debtors is not intended to serve 

this purpose.” Id. at 252-53. But, as we have discussed, the Exculpation 

Clause does not provide a “fresh start” to Credit Suisse, because it affects 

only claims arising from the bankruptcy proceedings themselves.

8 Unlike the creditors committee in PWS, one of the exculpated 

parties in that case, Credit Suisse, the Debtors’ largest creditor, does not 

have an implied fiduciary duty derived from the statute to the participants 
20 BLIXSETH V. CREDIT SUISSE

Aside from his § 524(e) argument, Blixseth also argues 

he is not bound by the Plan’s settlement because there was 

no consideration for the settlement and he was not in privity 

with the parties. These arguments misunderstand the source 

of a bankruptcy court’s power. As Underhill explained, 

“When a bankruptcy court discharges the debtor, it does so 

by operation of the bankruptcy laws, not by consent of the 

creditors. . . . [T]he payment which effects a discharge is not 

consideration for any promise by the creditors, much less for 

one to release non-party obligators.” 769 F.2d at 1432 

(internal quotation marks omitted) (quoting Union Carbide 

Corp., 686 F.2d at 595). Whether or not there was 

consideration and privity, the bankruptcy court had the 

power to confirm the Plan.

IV

In sum, we shall not dismiss Blixseth’s appeal because 

of his failure to reply to our show cause order. We remain 

bound by our earlier decision that Blixseth’s challenge to the 

Exculpation Clause is not equitably moot. Considering the 

merits of Blixseth’s challenge, we hold that § 524(e) does 

not prohibit the Exculpation Clause at issue, because the 

Clause covers only liabilities arising from the bankruptcy 

proceedings and not the discharged debt. Perhaps we have 

reached the end of this matter.

AFFIRMED.

of the bankruptcy proceedings. 228 F.3d. at 246; see also 11 U.S.C. 

§ 1103(c). But the fundamental point remains that the Clause, as applied 

to Credit Suisse, does not reach “such debt” within the meaning of 

§ 524(e)—it merely releases Credit Suisse from some potential liability 

that might arise from its actions in the bankruptcy proceedings.