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Blixseth v. Credit Suisse AG

United States District Court, D. Colorado

September 26, 2014

TIMOTHY L. BLIXSETH, an individual, Plaintiff,
v.
CREDIT SUISSE AG, a Swiss corporation, CREDIT SUISSE GROUP AG, a Swiss corporation, CREDIT SUISSE SECURITIES (USA), LLC, a Delaware limited liability company, CREDIT SUISSE (USA), INC., a Delaware corporation, CREDIT SUISSE HOLDINGS (USA), INC., a Delaware corporation, CREDIT SUISSE CAYMAN ISLAND BRANCH, an entity of unknown type, and DOES 1-100, Defendants.

ORDER

PHILIP A. BRIMMER, District Judge.

This matter is before the Court on the Motion for Reconsideration [Docket No. 63] filed by Credit Suisse[1] and the Motion to Reconsider Court's Order Granting Credit Suisse's Motion to Dismiss in Part and Cushman and Wakefield's Motion to Dismiss [Docket No. 64] filed by plaintiff Timothy Blixseth.

I. BACKGROUND[2]

On February 14, 2012, plaintiff filed the present case, asserting claims against all defendants for (1) violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968; (2) common law fraud; (3) breach of fiduciary duty; (4) common law negligence and negligent misrepresentation; (5) tortious interference with contractual relations; (6) breach of covenants of good faith and fair dealing under the Uniform Commercial Code and common law; (7) breach of contract; (8) equitable indemnity; and (9) common law conspiracy. Docket No. 1 at 68-83. Cushman and Credit Suisse filed motions to dismiss. Docket No. 24; Docket No. 28. In response to Cushman's motion to dismiss, plaintiff indicated that he was no longer pursuing his claims for tortious interference of contract, breach of contract, and equitable indemnity against Cushman. See Docket No. 34 at 34. Similarly, in his response to Credit Suisse's motion to dismiss, plaintiff stated that he is no longer seeking to prosecute his equitable indemnity claim against Credit Suisse. Docket No. 35 at 35.

On September 30, 2013, the Court dismissed all of plaintiff's claims against Cushman. Docket No. 61 at 29. The Court dismissed plaintiff's RICO, fraud, breach of fiduciary duty, negligence and negligent misrepresentation, breach of contract, equitable indemnity, breach of the implied covenant of good faith and fair dealing, and conspiracy claims against Credit Suisse. Id. The Court granted plaintiff leave to amend with respect to his claim for breach of the implied covenant of good faith and fair dealing against Credit Suisse and allowed plaintiff to proceed with his tortious interference claim against Credit Suisse, id., claims which plaintiff now asserts in the First Amended Complaint and Jury Demand [Docket No. 68]. On October 4, 2013, Credit Suisse filed a motion to reconsider, requesting that the Court reconsider its ruling on plaintiff's claim for tortious interference. Docket No. 63 at 2. On October 8, 2013, plaintiff filed a motion to reconsider, requesting that the Court reconsider its ruling dismissing plaintiff's RICO, fraud, breach of fiduciary duty, and negligence and negligent misrepresentation claims. Docket No. 64 at 2.[3] Credit Suisse and Cushman filed responses. Docket Nos. 69, 71.

II. STANDARD OF REVIEW

The Federal Rules of Civil Procedure do not specifically provide for motions for reconsideration, see Hatfield v. Bd. of County Comm'rs for Converse County, 52 F.3d 858, 861 (10th Cir. 1995), and, where a party files a motion for reconsideration prior to the entry of judgment or of a final order, Rules 59(e) and 60(b) do not apply. Houston Fearless Corp. v. Teter, 313 F.2d 91, 92 (10th Cir. 1962). Instead, motions for reconsideration fall within a court's plenary power to revisit and amend interlocutory orders as justice requires. See Paramount Pictures Corp. v. Thompson Theatres, Inc., 621 F.2d 1088, 1090 (10th Cir. 1980) (citing Fed.R.Civ.P. 54(b)); see also Houston Fearless Corp., 313 F.2d at 92. However, in order to avoid the inefficiency which would attend the repeated re-adjudication of interlocutory orders, judges in this district have imposed limits on their broad discretion to revisit interlocutory orders. See, e.g., Montano v. Chao, No. 07-cv-00735-EWN-KMT, 2008 WL 4427087, at *5-6 (D. Colo. Sept. 28, 2008) (applying Rule 60(b) analysis to the reconsideration of interlocutory order); United Fire & Cas. Co. v. McCrerey & Roberts Constr. Co., No. 06-cv-00037-WYD-CBS, 2007 WL 1306484, at *1-2 (D. Colo. May 3, 2007) (applying Rule 59(e) standard to the reconsideration of the duty-to-defend order); M.M. v. Zavaras, 939 F.Supp. 799, 801 (D. Colo. 1996) (applying law of the case doctrine to motion for reconsideration of interlocutory order). Regardless of the analysis applied, the basic assessment tends to be the same: courts consider whether new evidence or legal authority has emerged or whether the prior ruling was clearly in error. Motions to reconsider are generally an inappropriate vehicle to advance "new arguments, or supporting facts which were available at the time of the original motion." Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000).

A. Credit Suisse's Motion to Reconsider

Plaintiff and Edra Blixseth entered into a Marital Settlement Agreement ("MSA"), Docket No. 1 at 37, ¶ 93, which contained terms releasing plaintiff from liability (the "releases"). Id. at 75, ¶ 186. The Yellowstone Club was subsequently placed in Chapter 11 involuntary bankruptcy proceedings in the United States Bankruptcy Court for the District of Montana. Docket No. 61 at 8; Docket No. 63 at 3. After a Chapter 11 plan was confirmed (the "Third Amended Plan"), the Liquidating Trust was formed to collect the balance of the $375 million loan from plaintiff's individual assets. Docket No. 1 at 54, 56, ¶¶ 119(p), 120. Plaintiff claims that Credit Suisse exercised control over the Liquidating Trust and induced the Liquidating Trust to bring an adversary proceeding ("AP-14") against plaintiff to recover the loan proceeds, claiming breach of fiduciary duty and fraudulent transfer of assets. Docket No. 1 at 40, ¶ 102. The bankruptcy court found that, with respect to the claims asserted by the Liquidating Trust, plaintiff obtained the releases "with the actual intent to hinder, delay, and defraud his creditors" and found the releases to be a fraudulent transfer and, for purposes of the adversary proceeding, "voidable" under Montana law. In re Yellowstone Mountain Club, LLC, 436 B.R. 598, 664 (Bankr. D. Mont. 2010).

On August 30, 2011, as part of the BGI bankruptcy, BGI's claims against plaintiff were transferred to the Liquidating Trust for purposes of collection. In re BLX Grp. Inc., No. 09-61893-RBK (Bankr. D. Mont. August 30, 2011) (Docket No. 769 at 1-2). On October 5, 2011, the Liquidating Trust brought suit against plaintiff in the United States District Court for the Central District of California to recover on BGI's claims. Kirschner v. Blixseth, No. 11-cv-08283-GAF-SP (C.D. Cal. October 5, 2011) (Docket No. 1). The Liquidating Trust sought to "set aside the release of Blixseth's liability on the Notes as a fraudulent transfer under 11 U.S.C. § 548(a) and California Civil Code § 3439.04, and to collect on the Notes under a breach of contract theory." Id. (Docket No. 72 at 5). Mr. Blixseth filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1) and 12(b)(6), which the court denied. Id. (Docket No. 18 at 13). Mr. Blixseth then filed counterclaims for contribution and unjust enrichment against Credit Suisse. Id. (Docket No. 27 at 3-4). The court noted that the factual allegations underlying the claims against the Liquidating Trust, which were incorporated into the claims asserted against Credit Suisse, were "substantially similar" to those asserted by plaintiff in the present case. Id. (Docket No. 72 at 6). On November 1, 2012, the court dismissed Mr. Blixseth's counterclaims against Credit Suisse pursuant to Fed.R.Civ.P. 12(b)(6). Id. (Docket No. 72 at 2, 36). On June 18, 2014, the court granted summary judgment in favor of the Liquidating Trust, giving preclusive effect to the bankruptcy court's ruling in In re Yellowstone Mountain Club that the releases were fraudulent transfers. Id. (Docket No. 123 at 11).[4]

Plaintiff's original tortious interference claim alleged that, under the terms of the Third Amended Plan, the Liquidating Trust was created for the purpose of pursuing litigation against plaintiff and is controlled by, and/or acts for the benefit of, Credit Suisse. Docket No. 1 at 74, ¶¶ 184, 185. Credit Suisse allegedly "caused the Liquidating Trustee to assert that the releases were invalid and not enforceable, thus depriving Plaintiff of an extremely valuable contract right." Docket No. 1 at 75, ¶ 187. Plaintiff also alleged that Credit Suisse sought to be repaid "by taking all of the assets that plaintiff received [or] was to receive out of the MSA." Id. at 75-76, ¶ 188.

Credit Suisse argues that the acts upon which plaintiff's tortious interference claim are based were authorized by the bankruptcy court as part of the Third Amended Plan such that plaintiff's claim is barred by "bankruptcy preemption." Docket No. 63 at 6. Credit Suisse's argument is insufficient for multiple reasons. First, the premise of Credit Suisse's argument - that the Third Amended Plan authorized all of Credit Suisse's allegedly wrongful acts - is contradicted by plaintiff's allegations, which must be taken as true. It is not disputed that the Third Amended Plan authorized the Liquidating Trust to pursue plaintiff in order to recover loan proceeds. Docket No. 1 at 41, ¶ 103. However, plaintiff alleges that Credit Suisse engaged in conduct that is separate from or predates the conduct authorized under the Third Amended Plan. For example, although the Liquidating Trust's authority to pursue plaintiff under the Third Amended Plan is undisputed, plaintiff claims Credit Suisse exerted control over the Liquidating Trust and "caused" the Liquidating Trust to decide to assert that the releases were invalid. Id. at 74-75, ¶¶ 185, 188. Additionally, plaintiff claims that Credit Suisse influenced the creation of the "Term Sheet, " which made plaintiff "the sole target in funding a bankruptcy plan" and was incorporated into the Third Amended Plan. Docket No. 1 at 75, ¶ 188; see also id. at 76, ¶ 190 (alleging that Credit Suisse "negotiat[ed] for and... approved the Third Amended Plan" that made plaintiff the "sole litigation target to collect over $280 million"). In other words, plaintiff's claim appears based, not on the authorized actions taken by the Liquidating Trust, but on Credit Suisse's actions in knowingly inducing the Liquidating Trust to take legal action with the purpose of furthering Credit Suisse's allegedly wrongful goal of interfering with the MSA. Such conduct arguably falls within the exception to the Third Amended Plan's exculpatory clause, which contemplates that liability may exist for "willful misconduct or gross negligence" as determined by an order of the bankruptcy court or other court of competent jurisdiction. See Docket No. 28-12 at 48, § 8.4; id. at 16, ¶ 1.62 (defining "Final Order"). Thus, Credit Suisse fails to support its assertion that the bankruptcy court "expressly authorize[d] the specific actions upon which Blixseth's tortious interference claim is based." See Docket No. 70 at 5.

Second, Credit Suisse fails to identify information relevant to its bankruptcy preemption analysis. Credit Suisse asserts, with little explanation, that "bankruptcy preemption" bars plaintiff's claims for actions taken under orders issued by a bankruptcy court. Docket No. 63 at 6. State laws are preempted in three circumstances: (1) express preemption, when Congress expressly defines the extent to which a federal law preempts state law, (2) implied preemption, when state law "regulates conduct in a field that Congress intended the Federal Government to occupy exclusively, '" and (3) conflict preemption, when state law actually conflicts with federal law. See Glannon v. Garrett & Assocs., Inc., 261 B.R. 259, 263 (D. Kan. 2001) (quoting English v. General Elec. Co., 496 U.S. 72, 78 (1990)) (explaining express, implied, and conflict preemption). Credit Suisse does not appear to assert express preemption and fails to identify a specific provision of the Bankruptcy Code that would conflict with a state law claim for tortious interference with contract; thus, by process of elimination, Credit Suisse appears to argue that plaintiff's claims are barred by the doctrine of implied preemption.

State law claims related to abuse of the bankruptcy process brought by a creditor or debtor are, in many circumstances, impliedly preempted by the Bankruptcy Code. See Glannon, 261 B.R. at 265 (collecting cases); Leonard v. McMorris, 106 F.Supp.2d 1098, 1115 (D. Colo. 2000) (considering whether Wage Act claim brought against non-debtor was preempted and concluding that "defendants have not cited any language in the Bankruptcy Code which extends the Bankruptcy Code's protection to individuals or entities which have not filed a bankruptcy petition... [h]ad Congress intended that bankruptcy protection extend beyond the entity filing the bankruptcy petition, it could have drafted the Bankruptcy Code to so provide"), reversed on state law grounds, 320 F.3d 1116 ...


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