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9th Circuit sanctions attorney in Blixseth bankruptcy for frivolous appeal

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HELENA, Montana — An appellate court ordered sanctions Tuesday for Yellowstone Club co-founder Tim Blixseth and one of his attorneys for filing a frivolous appeal after a failed effort to have a Montana bankruptcy judge removed from his case.

A three-judge panel of the 9th U.S. Circuit Court of Appeals ruled that Blixseth and attorney Michael Flynn of Rancho Santa Fe, California, must pay attorney fees and costs incurred by Yellowstone Club creditors who argued against Blixseth's appeal. The amount of the sanctions is to be determined. They are also to pay $500 in damages each.

In 2010, Bankruptcy Judge Ralph Kirsher issued a $41 million civil fraud judgment against Blixseth and in favor of the creditors in the bankruptcy case of the ultra-exclusive Yellowstone Club. Blixseth then sought to discredit the judge, eventually asking that Kirsher be removed from the case for misconduct.

The panel found in February that Blixseth's accusations against Kirscher were "a transparent attempt to wriggle out of an unfavorable decision by smearing the reputation of the judge who made it."

Still, Flynn and Blixseth were given the opportunity to support their claims. The court found they were unable to back up their allegations with any credible evidence.

"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,'" the court wrote.

"Flynn's conduct has been unprofessional throughout the proceedings," the court wrote, explaining that he offered as evidence two emails from Blixseth's ex-wife that she and her attorneys had conclusively demonstrated were forged.

Flynn accused the 9th Circuit panel of retaliating against him for the effort to disqualify one of their own in the judiciary, and he said he would appeal to the full 9th Circuit and the U.S. Supreme Court, if necessary.

"I feel like Gandhi fighting the Brits," Flynn said. "Truth is on my side. The power is on their side. Ultimately, the truth will prevail."

Four other attorneys who were involved to varying degrees with the appeal were warned to act more responsibly in the future.

Blixseth has been jailed since April 20 on a civil contempt ruling that said he failed to adequately respond to a court order seeking details of how he spent $13.8 million in proceeds from the 2013 sale of a resort in Mexico that Kirsher had ordered him not to sell.

Last week, the 9th Circuit rejected a third emergency appeal filed by Blixseth asking to be released from jail. He is expected to remain jailed until an October hearing.

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