In Re Yellowstone Mountain Club, LLC
460 B.R. 254
Bankr. D. Mont.2011Background
- This is a Chapter 11 proceeding involving Yellowstone Mountain Club and related debtors in the District of Montana (Nos. 08-61570-11 et al.).
- The Court previously approved a Settlement Term Sheet and confirmed the Debtors’ Third Amended Joint Plan of Reorganization filed May 29, 2009.
- Timothy Blixseth appealed the June 2, 2009 confirmation order on grounds including exculpation clauses, alleged bad faith, and settlement approval process.
- Judge Haddon's November 2, 2010 memorandum remanded for identification of those within the §524(e) release scope and for proper notice around the settlement.
- After multiple hearings, the Court held the Settlement Term Sheet was negotiated in good faith and approved under Rule 9019, and reaffirmed the exculpation provisions as narrowly tailored in time and scope.
- The Court also addressed Blixseth’s pending motions seeking relief from the confirmation order and concluded the court retained jurisdiction under the “close nexus” test post-confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the Settlement Term Sheet properly approved under Rule 9019? | Blixseth argued improper notice and process flaws. | Debtors/CrossHarbor/New CH argued Rule 9019 was satisfied and orders were proper. | No reversible error; Rule 9019 action deemed moot as settlement underlying the plan. |
| Whether Exculpation Clause §8.4 oversteps §524(e) limits? | Blixseth contends clause broad and releases nondebtors improperly. | Clause is narrow, temporal (Nov 10, 2008–Jul 17, 2009) and tied to the plan’s settlement. | Exculpation clause upheld as narrow, temporal, and within plan context; does not violate §524(e). |
| Whether the Court had post-confirmation jurisdiction to adjudicate exculpation scope? | Blixseth challenged post-confirmation jurisdiction after Stern v. Marshall. | Settlement and plan provisions created a close nexus with the plan’s administration. | Court retained jurisdiction under Resorts Int’l close nexus standard; standing objection overruled. |
| Whether Blixseth’s relief-from-order motion should be granted? | Blixseth seeks to void downstream effects of the plan. | Plan terms and post-confirmation actions were binding and substantial consummation occurred. | Motion denied; relief from order denied and related strike motion denied. |
Key Cases Cited
- In re American Hardwoods, Inc., 885 F.2d 621 (9th Cir. 1989) (limits of § 524(e) and post-confirmation relief; nondebtors cannot be discharged)
- In re Resorts Int'l, Inc., 372 F.3d 154 (3d Cir. 2004) (close nexus test for post-confirmation jurisdiction)
- In re Lowenschuss, 67 F.3d 1394 (9th Cir. 1995) (reaffirms limits of § 524(e) and post-confirmation powers)
- In re A & C Properties (Martin v. Kane), 784 F.2d 1377 (9th Cir. 1986) (factors for determining reasonableness of compromise under Rule 9019)
- PWS Holding Corp., 228 F.3d 224 (3d Cir. 2000) (exculpation/limitations provisions in plan contexts)