A U.S. bankruptcy judge has upheld court decisions that the state of Montana lacked legal standing to file an involuntary bankruptcy petition nearly a decade ago against Yellowstone Club co-founder Tim Blixseth.
Judge Mike N. Nakagawa of Nevada on June 3 confirmed the ruling by previous judges to dismiss the involuntary petition, noting the case has lingered for nearly 10 years.
The 9th Circuit Court of Appeals ruled in 2019 the Montana Department of Revenue (MDOR) lacked legal standing to file an involuntary bankruptcy petition against Blixseth and referred the case to bankruptcy court to see if it should be dismissed.
The Yellowstone Club, a private ski and golf resort in Big Sky founded by Blixseth and his now ex-wife in 1997, filed for bankruptcy in 2008. Blixseth was accused of pocketing much of a $375 million Credit Suisse loan to the resort and later gave up control of the enterprise to his ex-wife during their 2008 divorce. The club, which has touted billionaire Microsoft co-founder Bill Gates and former Vice President Dan Quayle as members, has emerged from bankruptcy under new ownership.
The Montana Department of Revenue had done an audit of Blixseth and in 2009 said he owed $56.8 million in taxes, penalties and interest arising from eight audit issues, court documents stated. The Montana action against Blixseth is separate from Blixseth’s claims against Montana in Nevada for damages due to the involuntary petition , the Independent Record reported.
In 2011, Montana joined with the Idaho State Tax Commission and the California Franchise Tax Board against Blixseth, however, those two states had settled agreements and withdrew from the petition, according to court documents.
Nakagawa noted that as of the hearing date, close to a decade has passed since the Involuntary Petition was filed. He said that since April 20, 2011, only Montana has continuously pursued this issue against Blixseth.
He said Yellowstone Club Liquidating Trustee apparently was interested in pursuing the involuntary proceeding against Blixseth, but gave up nearly two years before the 9th Circuit mandate was received by this bankruptcy court.
