Court Opinion

ID: 2824563
Source: CourtListenerOpinion
Date Created: 2015-08-11 05:04:03.686676+00
Date Added: 2024-06-11T12:46:00.500196
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

TIMOTHY L. BLIXSETH,                   No. 12-35986
                        Appellant,
                                          D.C. No.
               v.                      2:11-cv-00073-
                                            SEH
YELLOWSTONE MOUNTAIN CLUB,
LLC; AD HOC GROUP OF CLASS B
UNIT HOLDERS; CIP SUNRISE RIDGE           ORDER
OWNER LLC; CIP YELLOWSTONE
LENDING LLC; CROSSHARBOR
CAPITAL PARTNERS, LLC; MARC S.
KIRSCHNER; CREDIT SUISSE AG,
CAYMAN ISLANDS BRANCH;
YELLOWSTONE CLUB LIQUIDATING
TRUST,
                       Appellees.

                Filed August 4, 2015

       Before: Alex Kozinski, Richard A. Paez,
        and Marsha S. Berzon, Circuit Judges.
2       BLIXSETH V. YELLOWSTONE MOUNTAIN CLUB

                           SUMMARY*

                    Bankruptcy / Sanctions

    The panel imposed sanctions on a party and one of his
attorneys under Fed. R. App. P. 38 and 28 U.S.C. § 1927 for
bringing a frivolous appeal in a bankruptcy case.

    The panel held that the Rule 38 sanctions were warranted
because the appeal from a motion for disqualify the
bankruptcy judge was wholly without merit. The panel also
sanctioned the attorney under section 1927 for multiplying
the proceedings unreasonably and vexatiously in breach of his
professional duty of good faith and candor in dealing with the
judiciary. The panel concluded in its discretion that sanctions
against the party’s other attorneys were not warranted.

                              ORDER

    In a recusal motion, Timothy Blixseth and his attorneys
hurled nineteen accusations of misconduct at a bankruptcy
judge who had ruled against Blixseth. In a forty-seven page
opinion, the judge found the accusations to be meritless. In
re Yellowstone Mountain Club, LLC, No. 08-61570-11, 2011
WL 766979 (Bankr. D. Mont. Feb. 25, 2011). The district
court affirmed, as did we, concluding that Blixseth’s
accusations were “a transparent attempt to wriggle out of an
unfavorable decision by smearing the reputation of the judge
who made it.” Blixseth v. Yellowstone Mountain Club, LLC,

  *
    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. YELLOWSTONE MOUNTAIN CLUB                    3

742 F.3d 1215, 1218, 1222 (9th Cir. 2014). We subsequently
issued an order to show cause why Blixseth and his attorneys
should not be sanctioned for pressing the appeal. Having
heard from all interested parties, we now rule on the order to
show cause.

    1. Blixseth and Flynn

    i. We “have discretion to award damages, attorney’s fees,
and single or double costs as a sanction for bringing a
frivolous appeal.” Glanzman v. Uniroyal, Inc., 892 F.2d 58,
61 (9th Cir. 1989) (citing Fed. R. App. P. 38). An appeal is
frivolous “when the result is obvious or the appellant’s
arguments are wholly without merit.” Id. (internal quotation
marks omitted).

    We noted the utter frivolousness of Blixseth’s claims in
our opinion, Blixseth, 742 F.3d at 1221–22, but gave him and
his attorneys an opportunity to explain why their claims
nevertheless had arguable merit. Blixseth and attorney
Michael Flynn fail, once again, to back up their accusations
“with even a shred of credible evidence.” Id. at 1222.

    Blixseth’s personal “response” is almost entirely
nonresponsive. Mostly he reasserts the conspiracy theory he
advanced throughout Yellowstone’s bankruptcy proceedings.
Blixseth criticizes the bankruptcy judge’s rulings, but, as we
explain in our opinion, adverse rulings are almost never a
valid basis for a recusal motion. Blixseth, 742 F.3d at 1220.
Blixseth also hurls baseless accusations against one of the
judges on this panel. Nothing in Blixseth’s personal response
comes close to persuading us that his recusal motion or the
resulting appeals weren’t a meritless “effort . . . to rid himself
of a judge who had ruled against him.”
4      BLIXSETH V. YELLOWSTONE MOUNTAIN CLUB

    Blixseth and Flynn spend significant time discussing facts
outside the record, but fail to defend many of the nineteen
frivolous accusations they raised. For example, we explained
in our opinion that Blixseth’s accusation that the bankruptcy
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’” was “at
best, a distortion of the record.” Blixseth, 742 F.3d at 1221.
Blixseth and Flynn ignore this, along with many other
accusations we rejected in our opinion. Still, Blixseth claims
to “stand behind” the disqualification motion and appeal
“more so today than ever.”

    Blixseth’s and Flynn’s responses do nothing to change
our conclusion that the appeal was “wholly without merit.”
Glanzman, 892 F.2d at 61 (internal quotation marks omitted).

    ii. We may also order an attorney “who so multiplies the
proceedings in any case unreasonably and vexatiously . . . to
satisfy personally the excess costs, expenses, and attorneys’
fees reasonably incurred because of such conduct.”
28 U.S.C. § 1927. “Sanctions pursuant to section 1927 must
be supported by a finding of subjective bad faith.” New
Alaska Dev. Corp. v. Guetschow, 869 F.2d 1298, 1306 (9th
Cir. 1989). We have held that “[b]ad faith is present when an
attorney knowingly or recklessly raises a frivolous argument
or argues a meritorious claim for the purpose of harassing an
opponent.” Id. (internal quotation marks omitted).

    Flynn has not retracted his “demonstrably inaccurate”
statements to the court at oral argument regarding the
involvement of a senior bankruptcy judge in a mediation. See
Blixseth, 742 F.3d at 1220 n.2. At oral argument before us,
Flynn also accused the bankruptcy judge of “concealing his
       BLIXSETH V. YELLOWSTONE MOUNTAIN CLUB                 5

involvement in . . . settlement negotiations,” but he has
offered no evidence that the judge concealed anything. Flynn
continues to accuse the bankruptcy judge of engaging in “ex
parte communications” and attending a “clandestine
meeting.” But Flynn fails to acknowledge that Blixseth, who
was not a bidder, had no right to attend this meeting, and thus
the meeting “wasn’t ex parte as to him.” Blixseth, 742 F.3d
at 1220.

    Flynn’s propensity for distortion doesn’t end with the
record developed in the bankruptcy court. For example,
when discussing a telephone call from the bankruptcy judge’s
law clerk at oral argument before us, a judge posed the
following question to Flynn: “I thought the [bankruptcy]
judge made findings that it didn’t happen?” Flynn replied
that the bankruptcy judge found that he didn’t know that the
call had happened, not that it hadn’t happened. Despite this
interaction, Flynn’s response to the order to show cause
accuses the judge of concluding during oral argument that the
call “never occurred.” At argument, we also warned Flynn
about his improper reliance on facts outside the record;
nonetheless, Flynn continues to rely on such facts.

    Flynn’s conduct has been unprofessional throughout the
proceedings. He proffered two emails allegedly obtained
from Blixseth’s ex-wife’s account—unsurprisingly,
documents outside the record—without even alluding to the
fact that in another action, “[Blixseth’s ex-wife] and her
counsel filed affidavits and supporting documents that
conclusively demonstrate that the ‘evidence’ is forged.” This
omission is an unreasonable and irresponsible breach of
Flynn’s “duty of good faith and candor in dealing with the
judiciary.” United States v. Associated Convalescent Enters.,
6      BLIXSETH V. YELLOWSTONE MOUNTAIN CLUB

Inc., 766 F.2d 1342, 1346 (9th Cir. 1985). Such a breach
supports sanctions under section 1927. See id. at 1346–47.

    2. Fox, Conant, Ferrigno and Stillman

    Patrick T. Fox, Christopher J. Conant, Michael J. Ferrigno
and Philip H. Stillman were involved to varying degrees in
bringing the appeal. Like Flynn, they all argue that the
appeal was not frivolous because one could have inferred that
the bankruptcy judge was biased against Blixseth from the
nineteen accusations that they raised. As explained in our
opinion and order to show cause, we find this argument
risible. Nevertheless, these other attorneys limit their
responses to address (1) how some of the accusations
supported the theory of the appeal, (2) how they acted in good
faith in appealing and (3) their limited roles in the appeal.
They don’t attack the bankruptcy judge or this panel, nor do
they regurgitate Flynn and Blixseth’s conspiracy theories.

    Tellingly, these four attorneys distance themselves from
Blixseth and Flynn; some even criticize Flynn’s handling of
the argument. Stillman writes: “[I] certainly appreciate[ ] the
Court’s concerns about what it termed the ‘blunderbuss’
approach to the appeal, and [I] cannot honestly say that [I]
would have emphasized the same arguments . . . .” Ferrigno,
Fox and Conant are withdrawing from their representation of
Blixseth, and Stillman claims to have had “almost no
involvement” in the appeal.

    The fact remains, however, that these lawyers allowed
their names to be placed on briefs that presented frivolous and
inflammatory arguments. But a finding of frivolousness does
not automatically result in sanctions. See Glanzman,
892 F.2d at 61 (sanctioning a frivolous appeal is a
       BLIXSETH V. YELLOWSTONE MOUNTAIN CLUB                7

discretionary matter). And although “a finding of bad faith
is not necessary to impose sanctions under” Rule 38, In re
Becraft, 885 F.2d 547, 549 (9th Cir. 1989), lack of bad faith
cuts against sanctioning these four attorneys. Id. (“Bad faith
may aggravate the circumstances justifying sanctions [under
Rule 38] . . . .” (quoting Coghlan v. Starkey, 852 F.2d 806,
814 (5th Cir. 1988))). We believe that their response to the
order to show cause and our comments today will serve as a
sufficient warning to them to act more responsibly in the
future.

               *              *             *

    Accordingly, we order Blixseth and Flynn to pay
appellees’ attorneys’ fees and costs in defending against this
appeal. See Fed. R. App. P. 38; 28 U.S.C. § 1927. In
addition, they shall each pay $500 in damages to the Clerk of
Court as reimbursement for the costs incurred during this
frivolous and bad-faith appeal. See Chambers v. NASCO,
Inc., 501 U.S. 32, 43–45 (1991) (discussing the inherent
power of federal courts “to fashion an appropriate sanction
for conduct which abuses the judicial process”); see also
Lasar v. Ford Motor Co., 399 F.3d 1101, 1118 (9th Cir.
2005). We refer the determination of an appropriate amount
of attorneys’ fees and costs to the Appellate Commissioner,
who shall have authority to enter an order awarding fees to
appellees. See 9th Cir. R. 39-1.9. The order to show cause is
discharged as to the other respondents.

    Because we do not rely on Federal Rule of Appellate
Procedure 46 to sanction Flynn, his request for a Rule 46
hearing is denied. Flynn’s request for an evidentiary hearing
is denied because the authenticity of the emails allegedly
authored by Blixseth’s ex-wife is irrelevant. Whether or not
8     BLIXSETH V. YELLOWSTONE MOUNTAIN CLUB

the emails turn out to be genuine, Blixseth and Flynn were
required to disclose that their authenticity is in dispute.

    Fox’s, Conant’s, Ferrigno’s and Stillman’s requests for
Rule 46 hearings; Ferrigno’s and Conant’s motions to
withdraw as counsel; and Stillman’s motion to strike Cross
Harbor’s supplemental excerpts of the record are all denied
as moot.