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IN RE YELLOWSTONE MOUNTAIN CLUB, LLC
460 B.R. 254 (2011)
In re YELLOWSTONE MOUNTAIN CLUB, LLC, Debtor.
In re Yellowstone Development, LLC, Debtor.
In re Yellowstone Club Construction Company, LLC, Debtor.
In re Big Sky Ridge, LLC, Debtor.
Nos. 08-61570-11, 08-61571-11, 08-61573-11, 08-61572-11.
United States Bankruptcy Court, D. Montana.
September 30, 2011.
Connie Sue Martin, Bullivant Houser Bailey PC, Seattle, WA, Craig D. Martinson, Billings, MT, David A. Ernst, Thomas L. Hutchinson, Bullivant Houser Bailey PC, Portland, OR, Gig A. Tollefsen, Berg Lilly & Tollefsen, Bozeman, MT, James A. Patten, Billings, MT, Lawrence R. Ream, Bullivant Houser Bailey PC, Seattle, WA, Richard G. Birinyi, Schwabe, Williamson & Wyatt, Seattle, WA, Stephen Deatherage, Troy Greenfield, Bullivant Houser Bailey PC, Seattle, WA, for Debtors.
MEMORANDUM of DECISIONRALPH B. KIRSCHER, Bankruptcy Judge. The Court is tasked with writing yet another chapter in the Yellowstone Club bankruptcy saga, which has been ongoing for almost three years. If this were a book, the reader would most likely read the chapters of the saga in sequence and in a relatively compressed period of time. But this is not a novel and one cannot thumb through a prior chapter to glean a forgotten fact. Thus, the Court directs the reader to prior chapters (Memoranda of Decision and Orders) that provide some insight as to why another chapter is necessary. Relevant facts may be found in this Court's Memorandum of Decision and Order entered in this case at docket entry nos. 1025 and 1026. One may also look at the Memoranda of Decision, Order and Judgment found at docket entry nos. 292, 293, 575 and 582 in related Adversary Proceeding 09-00014, Timothy L. Blixseth v. Marc S. Kirschner, Trustee of the Yellowstone Club Liquidating Trust. Along these same lines, the Court also granted various requests for judicial notice found at docket entry nos. 2203, 2209, 2224 (including its attached Exhibit A summarizing the claims processed or prosecuted by the Liquidating Trustee under the plan), 2228 and 2240. The matter presently before the Court stems from a Memorandum of Decision and Order entered by the Court in the above-referenced Chapter 11 bankruptcy cases on June 2, 2009, at docket entry nos. 1025 and 1026 approving the Yellowstone Club Settlement Term Sheet and confirming the Debtors' Third Amended Joint Plan of Reorganization filed May 29, 2009, at docket entry no. 995. Timothy L. Blixseth ("Blixseth") appealed this Court's June 2, 2009, Order to the United States District Court for the District of Montana on three separate grounds: (1) whether this Court erred in approving the Plan's exculpatory clauses and releases in favor of third parties in the Plan; (2) whether this Court erred in determining the Plan was proposed in good faith when the question
of the Debtors' bad faith remained as an unresolved factual issue in a pending adversary proceeding; and (3) whether this Court erred in approving the settlement incorporated into the Plan without a motion to approve the settlement, notice of motion, and hearing as required under F.R.B.P. 9019(a). In a Memorandum and Order entered November 2, 2010, United States District Judge Sam E. Haddon declined to rule on the issue of good faith, stating "determination of this issue on the present record is premature and unnecessary at this time." On the other two questions presented, Judge Haddon reversed and remanded. First, Judge Haddon held this Court erred when it proceeded to confirmation of the Debtors' Plan without appropriate notice and opportunity for all parties to object to a certain settlement that was incorporated into the Plan. Judge Haddon also reversed and remanded, so this Court could, "to the extent feasible. . . explicitly identify and delineate those persons or representatives determined to be within the scope of the release parameters of Section 524(e) and to state the reasons why it reached such conclusions." In an Order entered May 27, 2011, this Court scheduled a hearing for July 11, 2011, 1. To consider whether Debtor's Third Amended Joint Plan of Reorganization filed May 29, 2009, at docket entry no. 995 was proposed in good faith, 2. To identify and delineate those persons or representatives who are properly within the scope, under 11 U.S.C. § 524(e), of the exculpation and limitation of liability clause set forth in Section 8.4 of Debtor's Third Amended Joint Plan of Reorganization, and
1. Counsel for CrossHarbor represented at the hearing that the parties had agreed prior to the hearing that Greenspan's Rule 2004 examination transcript could be admitted into evidence and used for all purposes. Blixseth's counsel disagreed, arguing Blixseth did not agree that Greenspan's Rule 2004 examination transcript could be used at hearing for every purpose. Greenspan lives in California and was not available at the time of the July 25th hearing. Additionally, CrossHarbor's counsel, Moore, sent various parties an email on July 19, 2011, that reads:
"Since it appears that our colloquy yesterday concerning signing the deposition and its admission at the hearing on Monday was not memorialized by the court reporter, Phil and I just spoke regarding confirming it by this email. We ordered the transcript on an expedited basis agreed that, since Ron will be travelling [sic] to New York on Sunday, he will attempt to review and sign it, and make any corrections before he leaves, in which case Andy will provide us changes at or before the hearing. If Ron is unable to do so, we all agreed that the deposition can nevertheless be used at the hearing on Monday as if signed by Mr. Greenspan.
Andy-Let us know if this differs in any way from your recollection, and Phil, feel free to advise if I got it wrong in any way. Otherwise, just reply all to this email confirming our agreement"
Patten responded on July 19, 2011: "That is my recollection and understanding." Stillman did not respond, prompting Moore to send another email the following day asking Stillman "did you confirm email yesterday?" Stillman responded: "I didn't, but I do." The email exchange clearly establishes that Blixseth's counsel was agreeable to using Greenspan's deposition for all purposes at the hearing scheduled for July 25, 2011.
2. Substantial consummation is defined in 11 U.S.C. § 1101 as "(A) transfer of all or substantially all of the property proposed by the plan to be transferred; (B) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and (C) commencement of distribution under the plan."
3. Blixseth makes some incorrect declarations with respect to the Settlement Term Sheet. For instance, in a Reply Brief filed July 5, 2011, Blixseth's counsel argues "the Settlement Term Sheet had not even been finalized at the conclusion of the May 18, 2009 hearing," and then later maintains in the same Reply Brief that when the parties announced their settlement at the May 18, 2009, hearing, it "was still not even reduced to writing[.]" The foregoing assertions are incorrect. I recall, and the record confirms, that the Debtors, Committee, CrossHarbor and Credit Suisse presented the Court with a fully executed copy of the Settlement Term Sheet at the May 18, 2009, hearing.
4. In bankruptcy, a discharge is an involuntary release by operation of law of asserted and non-asserted claims by a creditor against an entity who has filed a petition under the Bankruptcy Code and who has abided by its rules. In re Arrowmill Development Corp., 211 B.R. 497, 504 (Bankr.D.N.J.1997). Upon confirmation of a plan, a Chapter 11 debtor receives a discharge of its debts which arose before confirmation. 11 U.S.C. § 1141(d)(1). Subsection § 524(e) limits the scope of the discharge. A "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." 11 U.S.C. § 524(e).
5. Blixseth also argued in a Reply Brief filed July 5, 2011, that "[a]s written, Section 8.4 releases the Exculpated Parties from liability for pre and post-petition conduct which violates not only Section 524(e) by also Mr. Blixseth's due process rights."
6. Larry Ream was employed to represent the Debtors' in this bankruptcy case and was the person who drafted the Debtors' plans.
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