RICO — Shareholder Lacks Standing to Sue If Losses Are Derivative of Corporation’s — Officer Who Signs Fraudulently-Induced Loan Documents Has No Claim Where Misrepresentations Made to Induce Corp. to Borrow
Blixeth v. Cushman & Wakefield of Colo., Inc., 2017 U.S. App. LEXIS 1943 (10th Cir. Feb. 3, 2017):
* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
This case stems from longstanding bankruptcy proceedings for the Yellowstone Mountain Club. Other courts have set out the events occurring before and after the bankruptcy filing, and we do not detail them here.1 For this appeal, we simply note that in 1997, Timothy Blixseth and his wife (now ex-wife and present adversary) founded the Yellowstone Mountain Club, LLC, a luxury golf and ski resort in Montana. In 2004, Dean Paauw, an employee of Cushman & Wakefield,2 appraised the Yellowstone Club for $1.165 billion. In 2005, based on this appraisal, Credit Suisse lent $375 million to the Yellowstone Club.
1 The history of the Yellowstone Mountain Club and its bankruptcy are described in detail in Blixseth v. Kirschner (In re Yellowstone Mountain Club, LLC), 436 B.R. 598 (Bankr. D. Mont. 2010). See also Blixseth v. Glasser (In re Yellowstone Mountain Club, LLC), No. 08-61570-11-RBK, 2014 WL 1369363 (D. Mont. Apr. 7, 2014) aff'd in part and rev'd in part, 656 F. App'x 307 (9th Cir. 2016); Kirschner v. Blixseth, CV 11-08283 GAF (C.D. Cal. June 18, 2014).
2 In his Complaint, Blixseth asserted claims against Dean Paauw, two Cushman entities, and six Credit Suisse entities: Cushman & Wakefield of Colorado, Inc., Cushman & Wakefield, Inc. (collectively Cushman), and Credit Suisse AG, Credit Suisse Group AG, Credit Suisse Securities (USA), LLC, Credit Suisse (USA), Inc., Credit Suisse Holdings (USA), Inc. and Credit Suisse Cayman Island Branch (collectively Credit Suisse).
Until 2008, Blixseth was the president and sole shareholder of Blixseth Group, Inc., which was the majority owner of the Yellowstone Club. From Credit Suisse's $375 million loan to the Yellowstone Club, Blixseth took $209 million for himself based on Credit [*3] Suisse's assurances that he could do so.3 Soon after the loan and Blixseth's cash withdrawal, the Yellowstone Club filed for bankruptcy.
3 In considering the motions to dismiss, we assume the facts alleged in Blixseth's Complaint as true. Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011).
In the district court, Blixseth asserted the same nine claims against each of the Defendants (Dean Paauw, Cushman, and Credit Suisse): (1) violations of the Racketeer Influenced and Corrupt Organizations Act (RICO); (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.
The Defendants filed motions to dismiss all nine claims. In response, Blixseth abandoned three claims against Cushman--claims for tortious interference with contractual relations, breach of contract, and equitable indemnity. He also abandoned his claim against Credit Suisse for equitable indemnity. After considering the motion to dismiss the remaining claims, the district court dismissed all remaining claims against Cushman and Dean Paauw. The district court also dismissed all of Blixseth's claims [*4] against Credit Suisse except one for tortious interference with contractual relations. Though the district court concluded that it would be futile to allow Blixseth to amend his complaint for most of his claims, it allowed Blixseth leave to amend his complaint to try to assert a plausible claim against Credit Suisse for breach of the implied covenant of good faith and fair dealing. Blixseth amended his Complaint and reasserted that claim.
Thus, two claims against Credit Suisse survived dismissal: (1) the claim alleging tortious interference with a contract, and (2) the claim alleging breach of the implied covenant of good faith and fair dealing. Credit Suisse sought and won summary judgment on these two claims. Blixseth now appeals the district court's orders granting dismissal and summary judgment against his claims.
I. Motion to Dismiss
Before addressing the merits of this appeal, we must address Cushman's motion arguing that we lack appellate jurisdiction to review Blixseth's claims dismissed for failure to state a claim. Among the prerequisites to our appellate jurisdiction is one requiring that appellants, in their notices of appeal, "designate the judgment, [*5] order, or part thereof being appealed." Fed. R. App. P. 3(c)(1)(B); see McBride v. CITGO Petroleum Corp., 281 F.3d 1099, 1104 (10th Cir. 2002).
In his Notice of Appeal, Blixseth designated as "the judgment, order, or part thereof being appealed," "the final judgment entered on September 4, 2015, a copy of which is attached hereto as Exhibit 1." R. Vol. 8 at 2068. But instead of attaching the final judgment, Blixseth attached the district court's summary-judgment order. From this, Cushman argues that Blixseth has waived his right to appeal any issues outside the summary-judgment order--specifically any issues arising from the order granting the motions to dismiss. We disagree, because the designation, not the attachment, governs the scope of a permissible appeal. See McBride, 281 F.3d at 1103-04. By designating the final judgment, all earlier orders merged into that final judgment. Id. ("[A] notice of appeal which names the final judgment is sufficient to support review of all earlier orders that merge in the final judgment."). In fact, Rule 3 doesn't even require appellants to attach the order they intend to appeal. See Fed. R. App. P. 3.
None of Cushman's cited cases persuade us otherwise. Unlike in those cases, Blixseth designated the entire final judgment in his Notice of Appeal, not an earlier order or a part of the final judgment. [*6] See Averitt v. Southland Motor Inn of Okla., 720 F.2d 1178, 1180-81 (10th Cir. 1983) (defendant designated the district court's final judgment "insofar as that judgment relates to punitive damages," so we disallowed an appeal of the entire judgment). Thus, we have jurisdiction over the claims dismissed in response to the Defendants' motions to dismiss.
On appeal, Blixseth argues that the district court erred in concluding that he lacked prudential standing to assert his claims alleging RICO violations, fraud, breach of fiduciary duty, negligence, and negligent misrepresentation.4 Blixseth challenges the district court's conclusion that his claimed injuries were derivative of the Yellowstone Club's. We review de novo questions of standing. Wyoming ex rel. Crank v. United States, 539 F.3d 1236, 1241 (10th Cir. 2008).
4 Blixseth does not appeal the district court's dismissal of his claim for breach of fiduciary duty.
In a thorough and well-reasoned order, the district court correctly applied the general rule that shareholders lack standing to assert claims when their losses are only derivative of a corporation's losses, meaning that the individual's losses depend on the company's losses. See Niemi v. Lasshofer, 728 F.3d 1252, 1260 (10th Cir. 2013).
In ruling, the district court also considered an exception to this rule, one allowing shareholders "with a direct, personal interest in a cause of action to bring suit even if the corporation's rights are also implicated." R. Vol. 4 at 1090 [*7] (quoting Bixler v. Foster, 596 F.3d 751, 757 (10th Cir. 2010)). But the district court concluded that this exception didn't apply. It reasoned that Blixseth had signed the loan documents with Credit Suisse as the Yellowstone Club's manager, that Credit Suisse had lent money to the Yellowstone Club and not Blixseth, and that Credit Suisse's alleged misrepresentations had been made to Blixseth as President of Blixseth Group, Inc., and as the Yellowstone Club's manager. Thus, the district court concluded that Blixseth lacked prudential standing to assert his RICO, fraud, breach of fiduciary duty, negligence, and negligent misrepresentation claims against the Defendants because his alleged injuries derived from the Yellowstone Club's injuries. Accordingly, the district court dismissed these claims.
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