SJ Properties Suites BuyCo ehf et al v. Specialty Finance Group LLC

Filing 41

ORDER revised August 25, 2010 - see 40 Order. Signed by Judge Rudolph T Randa on 08/24/2010. (cc: all counsel)(Koll, J)

S J Properties Suites BuyCo ehf et al v. Specialty Finance Group LLC

D o c . 41

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

S J PROPERTIES SUITES, BUYCO, EHF, S J -F A S T E I G N I R , EHF, and A S K A R CAPITAL, HF, P l a i n t if fs ,

v. S P E C I A L T Y FINANCE GROUP, LLC, Defendant.

C a s e No. 10-CV-00198

DECISION AND ORDER
R e v ise d August 25, 2010

This action relates to a construction loan agreement for a hotel and condominium re a l estate development project located at 1150 North Water Street, in downtown Milwaukee, W is c o n sin (the "Milwaukee Project"). This Decision and Order addresses the motion for re m a n d pursuant to 28 U.S.C. § 1447(c) (2006) filed by SJ Properties Suites, BuyCo, ehf (" B u yC o " ); SJ-Fasteignir, ehf ("Fasteignir"); and Askar Capital, hf, ("Askar") (collectively, th e "Plaintiffs"), and several additional motions filed by the parties. MOTION TO REMAND In moving to remand this matter to state court, the Plaintiffs maintain that this C o u rt lacks subject matter jurisdiction over this matter because the action does not satisfy the ju ris d ic tio n a l requirement of 28 U.S.C. § 1332(a) that the amount in controversy exceed the

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su m or value of $75,000, exclusive of interest and costs. They also contend that the Court d o e s not have jurisdiction over this action because the state court has already exercised its ju ris d ic tio n over the property that is the subject of the dispute between the parties. Background 1 T h e parties involved in this dispute are BuyCo, Fasteignir, and Askar and the d e f e n d a n t, Specialty Finance Group, LLC ("SFG"). BuyCo and Fasteignir are Icelandic p riv a te limited companies, referred to as an einkahlutafélag ("ehf"), whose principal offices a re located in Reykjavík, Iceland. (Compl. ¶¶ 2, 3.) Askar is an Icelandic limited company, re f erre d to as an hlutafélag ("hf"), whose principal office is also located in Reykjavík, Iceland. (C o m p l. ¶ 4.) SFG is a Georgia limited liability company whose principal office is located in A tlan ta , Georgia. (Compl. ¶ 5.) On approximately November 9, 2006, DOC Milwaukee, LP ("DOC M ilw a u k e e" ) was created to develop the property located at 1150 North Water Street (the " P ro p e rty" ) . (Compl. ¶ 8.) DOC Milwaukee received a loan commitment (the "Loan C o m m itm e n t" ) on March 29, 2007, from SFG to advance a loan in the amount of $20,900,000 f o r the Milwaukee Project.2 (Compl. ¶ 9.) DOC Milwaukee and SFG executed a construction

The facts are derived from the allegations of the Complaint. At this stage in the proceedings, SFG has not file d an answer to the Complaint. However, by its motion to dismiss pursuant to Federal Rule of Civil Procedure 1 2 ( b ) ( 6 ) , SFG disputes many of the allegations of the Complaint. In its brief in support of the motion to dismiss, SFG maintains that the final loan agreement signed by the p a r tie s stipulated, per an amendment to the original agreement, that the loan amount would be for $14,900,000. (Br. S u p p . Def's. Mot. Dismiss 5.) As part of the amended agreement, DOC Milwaukee was not required to secure a letter o f credit in the amount of $6,000,000, because BuyCo was "injecting" an additional $6,000,000 of cash equity into t h e Milwaukee Project. (See Br. Supp. Def's. M o t. Dismiss 3 (citing Amendment to Commitment, included in Ex. G to Loan Agreement).) W h ile not determinative of the Plaintiffs' motion to remand, the Court notes the facts are i n dispute.
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lo a n (the "SFG Loan Agreement") for the Milwaukee Project on January 9, 2008. (Compl. ¶ 10.) The construction loan was secured by a mortgage. The Plaintiffs acknowledge that they a re not in privity to the SFG Loan Agreement. (Compl. ¶¶ 18, 19, 42, 76.) Under the SFG L o a n Agreement, it was stipulated that DOC Milwaukee would make an equity contribution o f $12,993,302 or 25% of the total cost of the Milwaukee Project. (Compl. ¶ 12.) The P la in tif f s maintain that, in reliance on the March 29, 2007, Loan Commitment from SFG and u p o n the oral promises of SFG's loan officers, they advanced $7,286,802.98 to the Milwaukee P rojec t as of September 2007. (Compl. ¶ 14.) Under the SFG Loan Agreement, SFG had the right to demand additional equity c o n t r ib u tio n s from DOC Milwaukee if SFG determined that the amount of the construction l o a n together with the agreed equity contribution from DOC Milwaukee was insufficient to c o m p lete the Milwaukee Project. (Compl. ¶ 16.) The Plaintiffs maintain that SFG had a duty to interpret the contract provision granting this right in good faith. (Id.) Approximately three months after the SFG Loan Agreement was executed, SFG n o tifie d DOC Milwaukee that it was in default, citing "unauthorized cost overruns." (Compl. ¶ 21.) At the time of the first default notice, April 2008, SFG had advanced $7,645,444.38.3 (C o m p l. ¶ 21.) DOC Milwaukee was not in default of the SFG Loan Agreement due to any d e lin q u e n c ie s in payments on the interest or principal that SFG had advanced. (Compl. ¶ 23.)

The Complaint alleges two different figures as the amount that SFG had advanced on the SFG Loan A g r e e m e n t at the time of the first default in April 2008. (Compare Compl. ¶ 21 ($7,645,444.38) & Compl. ¶ 26 ( $ 7 , 6 0 5 , 8 6 6 . 9 8 ) . ) The Court will use the figure set forth in paragraph 21 of the Complaint.

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S F G then threatened the Plaintiffs that if they did not agree to advance additional f u n d s to DOC Milwaukee for the Milwaukee Project, SFG would accelerate the SFG Loan A g re e m e n t, forcing DOC Milwaukee into foreclosure proceedings on the mortgage and by im p lic a tio n , wiping out the Plaintiffs' investment in the Milwaukee Project. (Compl. ¶¶ 24, 2 5 .) In return for the Plaintiffs' promise to advance additional funds to DOC Milwaukee, SFG p ro m is e d to fund the remaining principal balance of the SFG Loan Agreement. (Compl. ¶ 27.) T o avoid acceleration and foreclosure on the Milwaukee Project and to obtain the remaining lo a n proceeds, DOC Milwaukee entered into a forbearance agreement with SFG on a p p ro x im a te ly October 8, 2008. (Compl. ¶ 28.) O n about February 10, 2009, SFG again notified DOC Milwaukee that it was in default on the SFG Loan Agreement due to unanticipated cost increases for completing the M ilw a u k e e Project with the result that the undistributed balance remaining on the SFG Loan A g r e e m e n t and the equity contributions of DOC Milwaukee were insufficient to cover the cost o f completing the Milwaukee Project. (Compl. ¶¶ 31, 32.) At the time of the second default n o tic e , SFG had advanced $13,431,373.42 on the SFG Loan Agreement while the Plaintiffs h a d advanced $17,419,807.75 to DOC Milwaukee to complete the Milwaukee Project. (C o m p l. ¶ 33.) DOC Milwaukee was not delinquent in any payments on the principal or in te re s t on the SFG Loan Agreement at the time of the second default. (Compl. ¶ 34.) O n c e again, SFG demanded that the Plaintiffs inject additional funds into the M ilw a u k e e Project, threatening that if the Plaintiffs did not agree to advance the funds to DOC M ilw a u k e e , SFG would accelerate the SFG Loan Agreement and foreclose on the property,

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w ip i n g out the Plaintiffs' investment in the Milwaukee Project. (Compl. ¶¶ 35, 36.) SFG also p ro m ise d that if the Plaintiffs advanced additional funds to the Milwaukee Project, it would a g re e to advance the remaining undistributed principal balance on the SFG Loan Agreement. (C o m p l. ¶ 37.) To avoid acceleration and foreclosure on the Milwaukee Project and to obtain th e remaining loan proceeds, DOC Milwaukee entered into a second forbearance agreement w ith SFG on approximately April 3, 2009. (Compl. ¶¶ 38, 39.) T h e Plaintiffs allege that, during this period, SFG engaged in abusive lending p ra c tice s, including repeated threats to sell the SFG Loan Agreement and a specific threat to " se ll the loan to the loan shark," if the Plaintiffs did not take immediate action to complete the M ilw a u k e e Project using their own funds. (Compl. ¶ 41.) The Plaintiffs further allege that, e v e n though the Plaintiffs are not parties to, or guarantors of the SFG Loan Agreement, they h a v e made loans and other cash advances for the Milwaukee Project, and they have also made p a ym e n ts on the SFG Loan Agreement on behalf of DOC Milwaukee to avoid default and to k e e p the work on the property progressing towards completion. (Compl. ¶ 42.) The Plaintiffs m a in ta in that despite these efforts, SFG has not fulfilled its promise to advance the remaining u n d istrib u ted principal balance on the SFG Loan Agreement. (Compl. ¶ 43.) They allege that, d u e to SFG's breach of its promise to advance funds, there are a number of unpaid s u b c o n tra c to rs who have placed liens on the Property, amounting to more than $3,453,888.20 in unpaid obligations. (Id.) T h e Plaintiffs allege that they have made payments on the SFG Loan Agreement d ire c tly to SFG to keep payments on the interest and principal current through June 30, 2009.

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(C o m p l. ¶ 44.) Despite these payments, SFG declared the SFG Loan Agreement in default a th ird time and notified the Plaintiffs that it would not accept any further payments on the SFG L o a n Agreement after June 30, 2009, and that it intended to foreclose the Property and "wipe o u t " the Plaintiffs' interest in the Property as well as the lien interests of all subcontractors. (C o m p l. ¶ 45.) T h e Plaintiffs maintain that the unanticipated cost overruns cited by SFG as re a so n s for default were the result of SFG's construction inspector's failure to properly inspect th e Milwaukee Project. (Compl. ¶ 54.) SFG designated Broadlands Financial Group, LLC (" B ro a d la n d s" ) to serve as its agent, providing construction risk management services that in c lu d e d oversight of the Milwaukee Project and contract funds administration. (Compl. ¶¶ 47, 48.) Under the SFG Loan Agreement, DOC Milwaukee was required to submit p a ym e n t applications in conformity with the procedure established by Broadlands. (Compl. ¶ 49.) Under this procedure, DOC Milwaukee was required to submit all payment applications to Broadlands' project finance manager. (Compl. ¶ 50.) The project finance manager was to re q u e st a site inspection to confirm the accuracy of the payment application against the actual sta tu s of construction so that the distributed payments were made for work that was actually p e rf o rm e d . (Compl. ¶ 51.) T h e Plaintiffs further allege that SFG, in reliance on Broadlands' payment p ro c e d u re , distributed funds for payment applications that "overstated the actual status of c o n stru c tio n and that requested payment for work that had not yet been performed." (Compl. ¶ 53.) Thus, the unanticipated cost overruns cited as reasons for default were caused in whole

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o r in part by SFG's construction inspector's failure to accurately verify the payment a p p lic a tio n s against the actual status of construction. (Compl. ¶ 54.) I n addition, the Plaintiffs maintain that SFG's own financial troubles were a m o tiv a tin g factor in its decision to "improperly issue default notices, refusal to fully fund the S F G Loan Agreement and Loan Commitment, and fulfill oral promises to advance additional f u n d s " to DOC Milwaukee to complete the Milwaukee Project. (Compl. ¶ 59.) The

re f ere n c e d financial troubles of SFG are that on May 1, 2009, Silverton Bank, National A s s o c ia tio n ("Silverton"), SFG's parent company, was placed into receivership by the Federal D ep o s i t Insurance Corporation ("FDIC"). (Compl. ¶ 56.) On June 5, 2009, the FDIC a n n o u n c ed that the Silverton receivership proceeding would be discontinued on June 29, 2009, d u e to the receivership's inability to sell Silverton's loan portfolios. (Compl. ¶ 57.) The P la in tif f s allege that SFG "was motivated by its own cash needs and desire to avoid advancing a d d itio n a l funds for the [Milwaukee] Project." (Compl. ¶ 59.) B a se d on these alleged events, the Plaintiffs make three claims for relief: 1) u n ju s t enrichment, 2) equitable subordination, and 3) promissory estoppel. The unjust e n ric h m e n t claim rests on the proposition that beginning with the Loan Commitment of $ 2 0 ,9 0 0 ,0 0 0 to DOC Milwaukee and subsequent promises, the Plaintiffs were induced to a d v a n ce $17,419,807.75 to the Milwaukee Project. (Compl. ¶ 67.) In addition, SFG had a co n trac tu al right, in the event of a default, to perform or cause to perform any work necessary to complete the Milwaukee Project, to advance funds that had not already been distributed, as w e ll as funds above the SFG Loan Agreement amount, in order to take possession of the

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P r o p e rty to either complete the construction or to protect the physical condition of the P ro p e rty. (Compl. ¶¶ 70-73.) SFG has not attempted to exercise its contractual right. (Compl. ¶ 73.) As a result, the Plaintiffs have advanced additional funds to protect the physical state o f the Property, including making payments for security, insurance, and engineering a ss e ss m e n ts of the Property. (Compl. ¶ 76.) The Plaintiffs maintain that SFG will be unjustly e n ric h e d by the Plaintiffs' affirmative efforts to protect the physical state of the Property b e c au s e they are protecting the value of SFG's security interest, while the Plaintiffs have an u n s e c u re d lien interest in the property. (Compl. ¶¶ 86-88.) B y the Plaintiffs' equitable subordination claim, they assert that they were "c o erc ed . . . to advance additional funds for the purpose of increasing the value of SFG's c o lla te ra l on an under-collateralized loan." (Compl. ¶ 98.) The Plaintiffs further maintain that it would be inequitable, given SFG's bad faith dealing during the course of the Milwaukee P r o je c t, for SFG to retain its secured-creditor status and that SFG's security interest should be s u b o rd in a te d in whole or in part to the interest of the lower-priority lien holders: the Plaintiffs a n d the other subcontractors. (Compl. ¶ 101.) T h e Plaintiffs maintain, on their promissory estoppel claim, that they relied on S F G 's promise that it would advance the funds toward the Milwaukee Project under the SFG L o a n Agreement and Loan Commitment and the oral promises of SFG's loan officers that it w o u ld advance additional funds over and above the amount promised in the Loan Agreement a n d Loan Commitment. (Compl. ¶¶ 104, 105.) In reliance on these promises, the Plaintiffs a d v a n c e d the first $7,286,802.98 toward the project in September 2007. (Compl. ¶ 105.)

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F u r th e rm o re , in reliance on SFG's promises that it would fully fund the SFG Loan Agreement a n d Loan Commitment, the Plaintiffs advanced an additional $10,419,807.75 toward the M ilw a u k e e Project. (Compl. ¶ 107.) The Plaintiffs contend that if they knew SFG did not in te n d to fully fund the SFG Loan Agreement, they would not have advanced additional funds to w a rd the Milwaukee Project. (Compl. ¶ 109.) In their prayer for relief, the Plaintiffs do not make any specific request for a m o n e ta r y sum of damages. Rather, they seek "actual monetary damages, statutory damages, a n d penalties . . . including interest, attorneys' fees, and costs." (Compl. 18.) The Plaintiffs a lso seek an equitable subordination of the "funds advanced by SFG to DOC Milwaukee to th e funds that the Plaintiffs advanced after October 8, 2008, obligations incurred by [DOC M ilw a u k e e ] to lien creditors, and for the subsequent protection and repair of the Property, inclu d in g all costs associated with the receivership." (Compl. 18.) Also relevant to this dispute are two actions that are pending in the Circuit Court f o r Milwaukee County, Wisconsin. On June 22, 2009, BuyCo filed an action in the state c irc u it court requesting appointment of a receiver for DOC Milwaukee, placing it into a C h a p te r 128 receivership proceeding. See SJ Properties Suites, BuyCo, ehf, v. DOC

M ilw a u k e e County L.P., Milwaukee County Circuit Court, No. 2009CV009785, available at h ttp ://w cc a. w ico u rts.g o v (last visited Aug. 23, 2010). The receiver, Seth E. Dizard ("Dizard"), h a s been appointed and has the responsibility of seizing and preserving all of DOC M ilw a u k e e ' s property, including the Property, for the benefit of DOC Milwaukee's creditors.

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(A p p . Docs. Opp'n Remand Ex. 1.) The receiver is responsible for winding up the affairs o f DOC Milwaukee. (Id.) The receivership proceedings are still ongoing. On July 24, 2009, Dizard filed a separate action for declaratory judgment in the M ilw a u k e e County Circuit Court. See Dizard v. Specialty Fin. Group, LLC., Milwaukee C o u n ty Circuit Court, No. 2009CV011574, available at http://wcca.wicourts.gov (last visited A u g . 23, 2010). In that action, Dizard sought a declaration of SFG's priority status on its m o rtg a g e interest in the Property against the other competing lien interests of the s u b c o n tra c to rs . BuyCo, Fasteignir, and Askar filed a motion to intervene in this case. The m o tio n to intervene is virtually identical to the Complaint filed in this action. The Circuit C o u rt dismissed the receiver's action on the basis that the receiver lacked standing. (App. D o c s . Opp'n Remand Ex. 5.) The Circuit Court Order states: [ S F G 's ] motion to dismiss is granted with prejudice meaning that th e receiver is precluded from seeking any further declaratory ju d g m e n t relief based upon the allegations in the complaint in this a c tio n . However, it does not prevent the receiver from asking the c o u rt that appointed him receiver in this Chap. 128 proceeding for s u c h relief or direction as may be authorized under Chap. 128, Wis. S ta ts . . . . . This ruling holds that the receiver does not have s ta n d in g to seek the relief requested in this independent action o u ts id e the confines of the Chap. 128 proceeding. (Id .) The Circuit Court Order states further that the "action is dismissed as to the intervening c o n tra c to rs , subcontractors or lien holders without prejudice and the court is not making any f in d in g s or conclusions about their rights to bring an independent declaratory judgment action in any other case." (Id.)

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A n a l y s is In seeking remand, the Plaintiffs argue that the amount in controversy does not e x c ee d $75,000 because this is an action for declaratory judgment; and, the damages are too s p e c u la tiv e to make a determination of whether the amount in controversy will exceed the ju ris d ic tio n a l amount required because there is no way to accurately predict the amount that u ltim a te ly will be recovered in the foreclosure sale of the Property. The Plaintiffs further m a in ta in that the Court is precluded from exercising its jurisdiction over the subject matter of th e dispute because the state court has already exercised its jurisdiction over the Property. O n February 12, 2010, the Plaintiffs filed a summons and Complaint in the C irc u it Court for Milwaukee County, Wisconsin. SFG was served with the Complaint on a b o u t February 18, 2010. (Notice of Removal ¶ 2.) SFG subsequently filed a motion for rem o v al pursuant to 28 U.S.C. § 1441 on March 10, 2010. Pursuant to 28 U.S.C. § 1446(b), th e notice of removal is timely because it was filed within 30 days of SFG's receipt of the P lain tiff s' Complaint. The Plaintiffs now move to remand the matter to the state court p u rsua n t to 28 U.S.C. § 1447(c). For venue to be proper where jurisdiction is founded solely on diversity of c itiz e n sh ip , the action must be brought in 1) a judicial district where any defendant resides, if all defendants re sid e in the same State, 2) a judicial district in which a su b sta n tial part of the events or omissions giving rise to the claim o c c u rre d , or a substantial part of property that is the subject of the a c tio n is situated, or 3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is c o m m e n c ed , if there is no district in which the action may o th e rw is e be brought. 11

2 8 U.S.C. § 1391(a). This action focuses on the events surrounding the Milwaukee Project; th e re f o re , venue is proper. Furthermore, the parties agree that venue is proper in this judicial d is tr ic t. SFG bears the burden of establishing federal jurisdiction, and the Court will in ter p re t the removal statute narrowly in favor of the Plaintiffs' choice of forum in the state co u rt . Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 758 (7th Cir. 2009). SFG bases re m o v a l on federal diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). Section 1332(a) re q u ire s complete diversity of citizenship between the parties and that the amount in c o n tro v e rs y exceed $75,000. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806); Schur, 5 7 7 F.3d at 758. A federal court has an independent obligation to determine whether subject m a t te r jurisdiction exists, even in the absence of a challenge from either party to a dispute. H e rtz Corp. v. Friend, U.S. , 130 S.Ct. 1181, 1193 (2010); Arbaugh v. Y&H Corp., 546

U .S . 500, 515 (2006) (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999)). W h e n a plaintiff who files suit in a state court could have invoked the original jurisdiction of th e federal courts, the defendant may remove the action to the federal court. See 28 U.S.C. § 1441(a); Schur, 577 F.3d at 758. With respect to the citizenship of the parties, SFG is a limited liability company th a t is wholly owned by Silverton. The citizenship of a limited liability company is determined b y the citizenship of each of its members. See Hukic v. Aurora Loan Servs., 588 F.3d 420, 427 (7 th Cir. 2009). A national banking association is determined to be a citizen of the state in w h ich it has its main office. See Wachovia Bank v. Schmidt, 546 U.S. 303, 318-19 (2006).

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S ilv e r to n is the sole member of SFG and Silverton's main office is located in Georgia. Thus, S F G is a citizen of Georgia for purposes of diversity. In its notice of removal, SFG alleges that BuyCo and Fasteignir are both e in k a h lu taf é lag s incorporated under the laws of Iceland with their principal offices in R eyk ja v ík , Iceland. SFG also alleges that Askar is a hlutafélag incorporated under the laws o f Iceland. However, Plaintiffs' Complaint characterizes both BuyCo and Fasteignir as private lim ite d companies, and Askar as a limited company. (Compl. ¶¶ 2-4.) The citizenship of a lim ite d liability company is determined by the citizenship of its members whereas a c o rp o ra tio n is deemed to be a citizen of the state where it is incorporated and where it has its p rin c ip a l place of business. 28 U.S.C. § 1332(c)(1). Although the parties do not dispute that d iv e rs ity exists, the Court has an independent duty to determine whether subject matter ju ris d ic tio n is present. The Plaintiffs should clarify whether the entities organized under I c e la n d ic law are equivalent to corporations or limited liability companies under United States' la w . In addition, in the event that any Plaintiff is the equivalent of a limited liability company, th e Plaintiffs must set forth the citizenship of each member of that entity, until the facts u n d erlyin g the basis for that entity's citizenship are disclosed. However, at present, the Court is satisfied that jurisdiction is proper for purposes of diversity of citizenship. A. State/Federal Concurrent Jurisdiction and the Doctrine of Prior Exclusive Jurisdiction T h e Plaintiffs argue that this Court may not entertain jurisdiction over the subject m a tte r of this dispute because the state court has already exercised jurisdiction over the P r o p e rty. In so contending, the Plaintiffs rely on State Engineer of State of Nevada v. South

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F o r k Bank of Te-Moak Tribe of West Shoshone Indians of Nevada, 339 F.3d 804, 811 (9th Cir. 2 0 0 3 ), for the application of the doctrine of prior exclusive jurisdiction. (Pls. Br. 10.) The P la in tif f s assert further that in cases where prior exclusive jurisdiction is present, the doctrine is a mandatory jurisdictional limitation. See Palmer v. Texas, 212 U.S. 118, 125 (1909). The principle of prior exclusive jurisdiction is illustrated by Kline v. Burke C o n s tr u c tio n Company, 260 U.S. 226, 229 (1922), stating: W h e r e the action is in rem the effect is to draw to the federal court th e possession or control, actual or potential, of the res [i.e., the p r o p e r ty that is the subject matter of the dispute], and the exercise b y the state court of jurisdiction over the same res necessarily im p airs, and may defeat, the jurisdiction of the federal court a lre a d y attached. The converse of the rule is equally true, that w h e re the jurisdiction of the state court has first attached, the f e d era l court is precluded from exercising its jurisdiction over the s a m e res to defeat or impair the state court's jurisdiction. The doctrine of prior exclusive jurisdiction developed out of the recognition that b o th federal and state courts have concurrent jurisdiction over property within their shared d is tric ts and that the interests of comity and the desire to avoid piecemeal litigation warranted th e sound principle that a federal court should cede jurisdiction to a state court over property w h e n that court has first exercised its power over the property and vice versa. The invocation o f the doctrine is appropriate in cases where two suits are in rem or quasi in rem, requiring that the court or its o f f ic e r have possession or control of the property which is the s u b je c t of the suit in order to proceed with the cause and to grant th e relief sought, the jurisdiction of one court must of necessity yie ld to that of the other . . . . the court first assuming jurisdiction o v e r the property may maintain and exercise that jurisdiction to the e x c lu sio n of the other. This is the settled rule with respect to suits

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in equity for the control by receivership of the assets of an in s o lv e n t corporation. Penn Gen. Cas. Co. v. Commonwealth of Penn., 294 U.S. 189, 195 (1935); see also, Princess L id a of Thurn and Taxis v. Thompson, 305 U.S. 456, 466 (1939). Jurisdiction attaches on the f ilin g of the complaint in court, either federal or state, where process issues in due course. P e n n Gen., 294 U.S. at 196 (citing Palmer, 212 U.S. at 129). However, the doctrine of prior exclusive jurisdiction may not be invoked where a n action is strictly in personam, seeking relief in the form of damages or an injunctive order. P r in c e s s Lida, 305 U.S. at 465-66. The reason for this lies in the important distinction b e t w e e n actions in personam and actions either in rem or quasi in rem. The Supreme Court o u tlin e d the distinctions between each: "[a] judgment in personam imposes a personal liability o r obligation on one person in favor of another. A judgment in rem affects the interests of all p e rso n s in designated property. A judgment quasi in rem affects the interests of particular p e rs o n s in designated property." Hanson v. Denckla, 357 U.S. 235, 246 n.12 (1958). Thus, a judgment in personam does not implicate a party's interest in a designated property, but only im p o se s a personal liability or obligation on one party in favor of another. Because of this d istinctio n , the doctrine of prior exclusive jurisdiction will not apply in the circumstance where o n e court exercises its jurisdiction over a specific property and another court exercises its ju ris d ic tio n over individuals. The relevant question in this case then is whether the state court action and the c u rre n t action in this Court are in rem or quasi in rem and, if so, whether the doctrine p re c lu d e s this Court's exercise of jurisdiction over the subject matter of the dispute. The 15

C irc u it Court for Milwaukee County has exercised its jurisdiction over the Property in the rec eive rsh ip proceeding. When BuyCo filed its receivership complaint, the state court's ju ris d ic tio n attached to DOC Milwaukee's property, which includes the premises located at 1 1 5 0 North Water Street. The receivership action is in rem because it affects the interests of s e c u re d and non-secured creditors in the Property, as well as DOC Milwaukee's interest. Both unjust enrichment and promissory estoppel are common law remedies over w h ich the state court had subject matter jurisdiction and could render a valid judgment. H o w e v e r, equitable subordination is not a common law contract remedy. In In re Mader's S to r e for Men, Inc., the Wisconsin Supreme Court explained that the power of a court in a C h a p te r 128 proceeding to equitably subordinate the claims of a creditor to those of other c re d ito rs does not derive from "any statute specifically conferring it, but is within the inherent a u th o rity of a court of equity in administering the insolvent estate `to the end that fraud will n o t prevail, that substance will not give way to form, that technical considerations will not p re v e n t substantial justice from being done.'" 254 N.W.2d 171, 184 (Wis. 1977) (quoting P e p p e r v. Litton, 308 U.S. 295, 305 (1939)). The Mader court relied on the language of W is c o n sin Statute section 128.15 (1937) directing the court to "make such order as shall be ju s t" in adjudicating creditor's claims to which objections have been filed as the basis of the s ta te court's power to subordinate claims. 254 N.W.2d at 184-85. The language of § 128.15 relied on by Mader remains unchanged. See Wis. Stat. § 128.15 (2007-08). D O C Milwaukee is currently in receivership proceedings in which Dizard has b e e n appointed receiver. It is the province of the tribunal administering the Chapter 128

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p ro c e e d in g to determine the priority of lien creditors during the liquidation of DOC M ilw a u k e e 's assets for the benefit of its outstanding creditors. Under the receivership p ro c e ed in g , the creditors must submit their claims to the receiver before the expiration of the p e rio d of time for filing claims. Section 128.15(1)(b) directs that "[a]t any time after the ex p iratio n of the period of time limited for the filing of claims, the receiver or assignee or, u p o n the receiver's or assignee's refusal or failure to act, any creditor may file written o b je c tio n s to any claim specifying the grounds for the objection." (Emphasis added.) In order for the Plaintiffs to prevail on their equitable subordination claim, they m u s t follow the procedure as set out by § 128.15, submitting their claim to the receiver and f ilin g any objections with the tribunal adjudicating the Chapter 128 proceeding. The tribunal a d ju d ic a tin g the Chapter 128 proceeding has the proper authority to subordinate the claims of c re d ito rs based on equity. Mader makes clear that it is the "court of equity . . . administering th e insolvent estate" that has the power to equitably subordinate claims. 254 N.W.2d at 184. In the instant case, that court is the court presiding over the receivership proceeding. Furthermore, an equitable subordination claim is necessarily by its nature a quasi in rem claim because it affects the interests of particular persons or entities in the Property. See Mader, 254 N.W.2d at 185 n.14; Hanson 357 U.S. at 246 n.12. Therefore, this Court may n o t exercise its jurisdiction over the Property because the tribunal adjudicating the Chapter 128 re c eiv e rs h ip proceedings already acquired jurisdiction over the Property. This Court cannot im p o s e upon the receivership proceedings by interfering with that tribunal's control over the

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P ro p e rty. The doctrine of prior exclusive jurisdiction over the equitable subordination claim p re c lu d e s this Court from interfering with the state tribunal's control over the Property. The Court has an individual responsibility to determine whether jurisdiction is p re s e n t and may, sua sponte, dismiss any or all claims in a complaint over which there is found to be a jurisdictional limitation. See Three Keys, Ltd. v. SR Util. Holding Co., 540 F.3d 220, 2 2 5 -3 0 n.7 (3d Cir. 2008); Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U .S . 694, 702 (1982); Palmer, 212 U.S. at 125. This Court does not have subject matter ju r is d ic tio n over the equitable subordination claim because that claim is quasi in rem and the trib u n a l administering the Chapter 128 proceeding has jurisdiction over that claim. As such, th is Court is precluded from exercising jurisdiction over the Property. It is worth noting that if , as the Plaintiffs maintain, this action were solely for equitable subordination, the doctrine o f prior exclusive jurisdiction would mandate that this Court dismiss the entire action; h o w e v e r, that is not the case here. In summation, the Plaintiffs' equitable subordination claim is dismissed without prejudice because, under the doctrine of prior exclusive jurisdiction, this C o u rt lacks subject matter jurisdiction over that claim. What remains is whether the claims for promissory estoppel and unjust e n r ic h m e n t are actions in personam, in rem, or quasi in rem. The remedy for promissory e s to p p e l is either money damages or an order specifically enforcing the promise. See Hoffman v . Red Owl Stores, Inc., 133 N.W.2d 267, 276-77 (Wis. 1965). The remedy for unjust e n ri c h m en t is damages "limited to the value of the benefit conferred on the defendant," a f f o rd in g a plaintiff restitutionary relief. Lindquist Ford, Inc. v. Middleton Motors, Inc., 557

18

F .3 d 469, 477 (7th Cir. 2009)(citing Mgmt. Computer Servs., Inc. v. Hawkins, 206 Wis.2d 1 5 8 , 557 N.W.2d 67, 79-80 (Wis. 1996)). Both promissory estoppel and unjust enrichment a r e actions in personam because the judgment will impose a personal liability or obligation u p o n SFG and do not affect the nature of either parties' interest in the Property. See Hanson, 3 5 7 U.S. at 246 n.12. Therefore, the doctrine of prior exclusive jurisdiction is not applicable to either claim. Consequently, whether the amount in controversy exceeds $75,000 as required b y 1332(a) must be analyzed solely under the claims for unjust enrichment and promissory e s to p p e l. Before addressing those two claims, the Court addresses the Plaintiffs' c o n te n t io n that the only relief that they seek is declaratory judgment. The Plaintiffs'

C o m p la in t does not contain any claim solely for declaratory judgment except to the extent that s u c h relief is implicit in the equitable subordination claim. Nevertheless, under federal p l e a d in g requirements, it is not necessary for the complaint to make overt statements of claims. S e e Ryan v. Ill. Dep't of Children and Family Servs., 185 F.3d 751, 764 (7th Cir. 1999); A lb ie ro v. City of Kankakee, 122 F.3d 417, 419 (7th Cir. 1997); Shannon v. Shannon, 965 F.2d 5 4 2 , 552-53 (7th Cir. 1992). A complaint need only contain a short and plain statement s h o w in g the pleader is entitled to relief. See Shannon, 965 F.2d at 552-53. To the extent that the Plaintiffs seek an adjudication of their rights in the P r o p e r ty, a claim which is quasi in rem, the doctrine of prior exclusive jurisdiction does not p r e c lu d e this Court from exercising its jurisdiction and its concomitant power to adjudicate th e quantum of the parties' interests in the Property even though the receivership proceeding

19

is in rem and a claim for declaratory judgment of the parties' interest in the Property is also q u a s i in rem. A claim for declaratory relief would be viable in the federal and state court b e c au s e the principle that underlies the doctrine of prior exclusive jurisdiction "has no a p p lica tio n to a case . . . wherein the plaintiff seeks merely an adjudication of his right of his in te re st as a basis of a claim against a [property] in the possession of a state court." Princess L id a , 305 U.S. at 466. A plaintiff is free to seek an adjudication as to the "quantum of his in te re st" in a particular property, even if both actions are in rem or quasi in rem. Id. at 467. T h e doctrine of res judicata will necessarily be implicated in the action where e ith e r this Court or the tribunal administering the Chapter 128 proceeding renders a judgment o n the parties' interests in the Property. However, this does not pertain to the priority of the p a rtie s ' interest in the Property because priority relates to the administration of the Property. T h e priority of the creditors' interests is the responsibility of the receivership proceeding to a d ju d ic a te , not this Court. B. Section 1332(a)­Amount in Controversy Requirement T h e amount in controversy is the amount necessary to satisfy the plaintiff's total d e m a n d for relief either on the day that the suit is first filed, Hart v. Schering-Plough Corp., 2 5 3 F.3d 272, 273 (7th Cir. 2001), or, in the case of removal, on the date that the action was re m o v e d , BEM I, LLC. v. Anthropologie, Inc., 301 F.3d 548, 552 (7th Cir. 2002). The d e f en d a n t invoking federal jurisdiction has the burden of proving by a preponderance of the e v id e n c e that the amount in controversy meets the jurisdictional minimum. Meridian Sec. Ins. C o . v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006). In the case where the plaintiff does not

20

p ro v id e specific information about the value of his claim in the prayer for relief, a "good-faith e s tim a te of the stakes is acceptable if it is . . . supported by a preponderance of the evidence." O s h a n a v. Coca-Cola Co., 472 F.3d 506, 511 (7th Cir. 2006). Once the defendant has met his b u r d e n of establishing the requisite amount in controversy minimum, the plaintiff can only d e f ea t jurisdiction by showing that, to a legal certainty, the amount of the claim is less than the ju ris d ic tio n a l minimum required for diversity cases. St. Paul Mercury Indem. Co. v. Red Cab C o ., 303 U.S. 283, 289 (1938); Meridian, 441 F.3d at 541. In their brief in opposing the Plaintiffs' motion for remand, SFG relies upon C h a s e v. Shop `N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997), asserting th a t they need only offer evidence which proves "to a reasonable probability that jurisdiction e x is ts ." (Def.'s Br. Opp'n Remand 5.) However, Meridian states that the phrase

" `[ r]e a so n a b le probability that jurisdiction exists' . . . is banished from our lexicon." 441 F.3d a t 543. The Meridian court explained the provenance of the "reasonably probable" language a n d the mistaken interpretation of that phrase: T h e requirement of "proof" comes from McNutt v. General Motors A c c ep ta n c e Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1 9 3 6 ) (if plaintiff's "allegations of jurisdictional facts are c h a l le n g e d by his adversary in any appropriate manner, he must s u p p o rt them by competent proof."). The "reasonable probability" la n g u a g e comes from Shaw v. Dow Brands, Inc., 994 F.2d 364, 366 (7 th Cir. 1993), and has been repeated in six other decisions of this c irc u it plus more than 80 decisions of district judges within our ju ris d ic tio n ­ and, as far as we can ascertain, by no judge outside th is circuit. [citations omitted] Judges of the seven district courts w ith in this circuit now regularly dismiss suits under the diversity ju ris d ic tio n with the observation that the plaintiff has not "proved" th a t there is a "reasonable probability" that the judgment will e x c ee d the threshold. 21

S h a w ' s mention of "reasonable probability that jurisdiction exists" th u s has been taken to mean that uncertainty about the stakes must b e resolved against the proponent of jurisdiction. That's not what S h a w set out to establish. In retrospect it is clear that the turn of p h r a s e was infelicitous. We now retract that language; it has no ro le to play in determining the amount in controversy. 4 4 1 F.3d at 539-40. The Meridian court's retraction of the "reasonable probability" language d id not overrule any prior decision, 441 F.3d at 540 n. 4 ; however, the phrase is no longer an a p p ro p ria te standard by which to determine whether the defendant has met its burden of proof. T h e Meridian court explained the appropriate standard of proof for determining w h e th e r the amount in controversy requirement is met: "[w]hat the proponent of jurisdiction m u s t `prove' is contested factual assertions ­ for example, where each party resides plus any p la n s for change of residence, in order to establish domicile, or what state issued a c o rp o ra tio n 's charter. Jurisdiction itself is a legal conclusion, a consequence of facts rather th a n a provable `fact.'" Id. at 540-41. Proving that the amount in controversy exceeds the ju ris d ic tio n a l requirement is an easy matter when the plaintiff's complaint makes a clear s ta te m e n t of the monetary relief sought. In this case, as in Shaw v. Dow Brands, Inc., 994 F.2d 3 6 4 , 366 (7th Cir. 1993), and Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 447-49 (7 th Cir. 2005), the Plaintiffs have not made a clear statement of the amount of monetary relief so u g h t in their bill of complaint, asking only for generalized "monetary damages." (Compl. ¶ 18.)

4

The symbol denoted appears in the original publication of the opinion cited.

22

M e rid ia n provides guidance for such situations stating that the removing d e f e n d a n t may establish what the plaintiff stands to recover by calculation from the complaint's allegations (as in Brill) . . . . any g iv e n proponent of federal jurisdiction may find a better way to e sta b lis h what the controversy between the parties amounts to, and th is demonstration may be made from either side's viewpoint (what a judgment would be worth to the plaintiff, or what compliance w ith an injunction would cost to the defendant). Id. at 541-42 (citing In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 610 (7th Cir. 1997)). In Brill, the court made a clear distinction between the question of what damages th e plaintiff will likely recover and what amount is "in controversy" between the parties. 427 F .3 d at 448. The plaintiff, as Brill pointed out, may very well ultimately recover less than the ju ris d ic tio n a l minimum amount in controversy, but this does not prevent removal, and by e x te n s io n , warrant a remand. Id. The appropriate factual matter that the defendant must e sta b lis h by a preponderance of the evidence is what the amount in controversy is, not what th e plaintiff will ultimately recover. Id.; see also, Meridian, 411 F.3d at 543. Once the d e f e n d a n t has established that the amount in controversy exceeds $75,000, only in a case w h e re there is a "legal certainty" that the judgment will be less than the jurisdictional re q u ire m e n t will federal diversity jurisdiction be defeated. See St. Paul, 303 U.S. at 288-90. S F G can meet its burden of proof that the amount in controversy exceeds $ 7 5 ,0 0 0 by establishing that either claim by the Plaintiffs for unjust enrichment or promissory e sto p p e l exceeds $75,000, or that both claims aggregated meet the requisite amount in c o n tro v e rs y. See Clark v. State Farm Mut. Auto. Ins. Co., 473 F.3d 708, 711 (7th Cir. 2007); 23

L lo y d v. Kull, 329 F.2d 168, 170 (7th Cir. 1964). At least one of the plaintiffs listed in this a c tio n must meet the jurisdictional minimum amount in controversy. See Exxon Mobil Corp. v . Allapattah Servs., Inc., 545 U.S. 546, 549 (2005) (holding that where at least one plaintiff in a multi-plaintiff action meets the jurisdictional minimum, 28 U.S.C. § 1367 authorizes s u p p le m e n ta l jurisdiction over the claims of other plaintiffs in the same action provided that th e claims are part of the came case or controversy). The remedy for a claim of promissory estoppel may take the form of either in ju n c tiv e relief ­ i.e., by enforcing the defendant's promise ­ or monetary damages. See H o ffm a n , 133 N.W.2d at 276-77. The goal of relief for promissory estoppel is to put the p lain tiff back to where he was before he relied on the defendant's promise to his detriment. Id . The amount of damages allowed in actions for promissory estoppel "may be determined b y the plaintiff's expenditures or change of position in reliance as well as by the value to him o f the promised performance." Id. at 277. I n the instant case, the Plaintiffs' Complaint does not make a specified request f o r a monetary sum for their promissory estoppel claim. However, the Plaintiffs state that in re lia n c e on SFG's promises, the Plaintiffs advanced the first $7,286,802.98 toward the M ilw au k ee Project in September of 2007. (Compl. ¶ 105.) Furthermore, in reliance on SFG's p ro m i s e s that it would fully fund the SFG Loan Agreement and Loan Commitment, the P la in tif f s advanced an additional $10,419,807.75 toward the Milwaukee Project. (Compl. ¶ 1 0 7 .) The Plaintiffs state that had they known that SFG did not intend to fully fund the SFG L o a n Agreement and Loan Commitment, they would not have advanced the additional funds.

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(C o m p l. ¶ 109.) The Plaintiffs state that they changed position in the total amount of $ 1 7 ,7 0 6 ,6 1 0 .7 3 in reliance on SFG's promises. At this juncture, it is of no consequence w h e th e r the Plaintiffs will be able to prove the basis of their promissory estoppel claim. The o n ly relevant issue is what the amount in controversy is, not whether the Plaintiffs will s u c c e e d . See Brill, 427 F.3d at 448. The alleged amount in controversy for the promissory e sto p p e l claim is $17,706,610.73, far exceeding the $75,000 requirement. Therefore, subject m a tte r jurisdiction over this action is proper. Even if the Court were to grant injunctive relief to the Plaintiffs, the amount in c o n tro v e rs y meets the jurisdictional requirement. As stated in Meridian, the amount in c o n tro v e rs y may be determined either by the amount that the plaintiff stands to recover, or by th e cost to the defendant to comply with an injunctive order. 441 F.3d at 542; see also, Uhl v . Thoroughbred Tech. and Telecomms., Inc., 309 F.3d 978, 983 (7th Cir. 2002); In re Brand N a m e Prescription Drugs Antitrust Litig., 123 F.3d at 610. In the event of an injunction e n f o rc in g SFG's promise to fully fund the Loan Agreement and the Loan Commitment, the c o st to comply with the order would undoubtedly exceed $75,000. C o m p la in t, SFG has funded $13,431,373.42 of the Loan Agreement. According to the (Compl. ¶ 33.)

T h e re f o re , fully funding the Loan Agreement of $20,900,000 would cost SFG $7,468.626.58.5 S F G has met its burden of proof because the Plaintiffs' complaint establishes by a p re p o n d e ra n c e of the evidence that the amount in controversy exceeds $75,000. Because the

If the Loan Agreement amount reflects the amended agreement to fund $14,900,000, the cost to SFG to fully f u n d the amended Loan Agreement would be $1,468,626.58, which still exceeds the jurisdictional minimum.

5

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a m o u n t in controversy pertaining to the claim for promissory estoppel exceeds the ju ris d ic tio n a l requirement, the Plaintiffs' motion for remand is denied. Although the Plaintiffs' unjust enrichment claim does not specify the amount th e y have expended in order to protect the Property, it is not necessary to examine this claim f u rth e r to determine whether the claim meets the required amount in controversy. The claim f o r unjust enrichment may be aggregated with the claim for promissory estoppel, which e x c ee d s the jurisdictional requirement; therefore, pursuant to § 1332(a), this Court has subject m a tte r jurisdiction over both claims for promissory estoppel and unjust enrichment. It is not possible to ascertain from the face of the Complaint the reliance d a m a g e s of each individual Plaintiff's promissory estoppel claim. However, at least one p l a i n tif f will meet the jurisdictional minimum though the other two plaintiffs may not.6 T h e re f o re , in the event that two of the named plainitiffs in this action do not meet the j u ris d ic tio n a l minimum amount in controversy, 28 U.S.C. § 1367 authorizes supplemental ju ris d ic tio n over those two plaintiffs' claims. NON-DISPOSITIVE MOTIONS T h e re are a number of non-dispositive motions pending that the Court will now a d d re ss . The Plaintiffs filed a Civil Local Rule 7(h) expedited non-dispositive motion to stay th e case pending a decision on the Plaintiffs' motion for remand. Because this Decision and

The promissory estoppel claim is determined to be $17,706,610.73. If two of the plaintiffs only advanced $ 7 5 ,0 0 0 each, the remaining plaintiff would have advanced $17,556,610.73, exceeding the jurisdictional minimum. G iv e n the amount in controversy, there is no circumstance that all three plaintiffs will fail to meet the jurisdictional m i n i m u m amount in controversy.

6

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O rd e r addresses the Plaintiffs' motion for remand and denies that motion, the Plaintiffs' nond is p o s itiv e motion to stay the case is moot and, therefore, is denied. T h e Plaintiffs also filed a Civil Local Rule 7(h) non-dispositive motion to extend tim e to file a response brief to the SFG's motion to dismiss pending a decision on their motion to remand. The Plaintiffs' non-dispositive motion to extend time to file response brief is g ra n te d . The Plaintiffs may file their response to SFG's 12(b)(6) motion to dismiss on or b e f o re September 20, 2010. SFG may file its reply on or before October 8, 2010. On April 9, 2010, the Plaintiffs filed a Civil Local Rule 7(h) expedited nond i s p o s i tiv e motion to extend the time to amend their pleadings as a matter of course if their m o tio n to remand is denied. They state that an extension of time is necessary to prevent the P lain tiff s from having to file amended pleading requesting jurisdiction, while simultaneously c h a lle n g in g jurisdiction with a motion to remand. Because this is a procedural matter, Federal Rule of Civil Procedure 15(a) g o v e rn s this issue. See Hanna v. Plumer, 380 U.S. 460, 465 (1965). Federal Rule of Civil P r o c e d u r e 15(a)(1) provides that a party "may amend its pleading once as a matter of course w ith in : (A) 21 days after serving it, or (B) if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion u n d e r Rule 12(b), (e), or (f), whichever is earlier." The Plaintiffs served their summons and c o m p la in t upon SFG about February 18, 2010. SFG served its Rule 12(b)(6) motion on March 2 4 , 2010. The time to amend as a matter of course began to run on March 25, 2010, see Fed.

27

R . Civ. P. 6(a)(1)(A),7 and expired on April 19, 2010. However, with exception of the time to act under a few specific rules ­ that do not include the rule for amendment of pleadings ­ R u l e 6(b)(1)(A) allows the Court, for good cause, to extend the time to do an act, if the request is made before the original time expires. See Fed. R. Civ. P. 6(b)(1)(A) & (b)(2). The P la in tif f s have established good cause for an extension of time to amend their pleading, and there fo re, their motion is granted. They may file an amended Complaint on or before S e p te m b e r 20, 2010. In their amended pleading, the Plaintiffs must clarify whether the entities o rg a n iz e d under Icelandic law are equivalent to corporations or limited liability companies u n d e r United States' law and, in the event that any such entities are deemed to be limited liab ility companies, set forth the citizenship of each member of that entity, until the facts u n d e rlyin g the basis for that entity's citizenship are disclosed. See Civil L.R. 8. The Court also notes that, in their reply brief in support of their motion for re m a n d , the Plaintiffs discussed justifications for a consolidation of the multiple cases pending in the state and federal courts. If the Plaintiffs wish to petition the Court for a consolidation o f the multiple actions pending in this District, they may do so by proper motion setting forth th e ir reasons for consolidation and which pending actions should be consolidated. See Fed. R . Civ. P. 7(b)(1); Fed. R. Civ. P. 42; Civil L.R. 42. Also pending is SFG's Civil Local Rule 7(h) expedited non-dispositive motion f o r substitution of the defendant and to correct the caption. SFG requests, pursuant to Federal

Under Federal Rule of Civil Procedure 6(a), the day on which a period begins is excluded and the last day is included, with certain exceptions not applicable here.

7

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R u le of Civil Procedure 25(c), that this Court order the substitution of 2010-1 SFG Venture L L C ("Venture") for it as the defendant. Venture is a Delaware limited liability company with its principal office located at 450 Park Avenue, New York, New York. (See Ex. B attach. to S F G 's Civil Local Rule 7(h) Expedited Non-Dispositive Motion for Substitution of the D ef en d an t and to correct the Caption.) According to SFG's motion, on May 18, 2010, SFG executed an "Allonge, A ssign m en t of Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture F ilin g , and Assignment of Leases and Rents and Other Loan Documents," assigning its in te re sts in the "Loan Documents" to the FDIC, in the FDIC's capacity as the receiver for S ilv e rto n in its receivership proceedings in Georgia. On that same day, FDIC executed an "A llong e, Assignment of Mortgage, Assignment of Leases and Rents, Security Agreement and F ix tu r e Filing, and Assignment of Leases and Rents and Other Loan Documents" (the " A ss ig n m e n t Agreement"), assigning its rights and interest in the "Loan Documents" to V e n tu re . According to the Assignment Agreement, Venture now has all "right, title, and in te re s t" in the mortgage that SFG entered into with DOC Milwaukee. Rule 25(c) "does not require that anything be done after an interest has been tra n sf e rre d . The action may be continued by or against the original party, and the judgment w ill be binding on his successor in interest even though he is not named." Charles Alan W rig h t, Arthur R. Miller & Mary Kay Kane, 7C Federal Practice and Procedure § 1958 (3d e d . 2010). The nature of Rule 25(c) "vests a great deal of discretion in the hands of the court. It is not mandatory that a substitution be made in every case of a transfer of interest." Panther

29

P u m p s & Equip. Co., Inc. v. Hydrocraft, Inc., 566 F.2d 8, 16 (7th Cir. 1977) (citing McComb v . Row River Lumber Co., 177 F.2d 129 (9th Cir. 1949)). In this matter, the record indicates that the Plaintiffs are not a party to the Loan A g re e m e n t or Loan Commitment entered into by SFG and DOC Milwaukee. The Plaintiffs are not pursuing claims based on the Loan Agreement or Loan Commitment because they are n o t a party to those agreements. The Plaintiffs' promissory estoppel and unjust enrichment c la im s only pertain to the interactions between the Plaintiffs and SFG based on quasi-contract th e o rie s. Venture's interest in the Property is not implicated in this action because the P lain tiff s' claim for equitable subordination has been dismissed in this proceeding. Any claim f o r equitable subordination will implicate Venture's interest in the Property in the Chapter 128 p ro c e ed in g pending in the Wisconsin state courts, not this action. Because Venture does not h a v e a claim pending against it in regard to the Loan Agreement or Loan Commitment that im p l ic a te s its interest in the Property, substitution is not appropriate in these circumstances. T h e re f o re , SFG's request for substitution is denied. The Plaintiffs also filed a Civil Local Rule 7(h) expedited non-dispositive m o tio n to stay the decision on SFG's motion for substitution of the defendant and to correct th e caption pending the decision on remand. The Court has resolved SFG's motion for s u b s titu tio n and stay; therefore, the motion for additional time is denied.

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N O W , THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY O R D E R E D THAT: The Plaintiffs' motion to remand pursuant to 28 U.S.C. § 1447(c) (Docket No. 1 5 ) is DENIED; T h e Plaintiffs' claim for equitable subordination is DISMISSED WITHOUT P R E J U D IC E ; T h e Plaintiffs' Civil L.R. 7(h) expedited non-dispositive motion to stay the case p e n d i n g a decision on the Plaintiffs' motion for remand (Docket No. 19) is DENIED; T h e Plaintiffs' Civil L.R. 7(h) expedited non-dispositive motion to extend time to file response brief pending a decision on the Plaintiffs' motion for remand (Docket No. 20) is GRANTED; The Plaintiffs may file their response to SFG's 12(b)(6) motion to dismiss on or b e f o re September 20, 2010, and SFG may file its reply thereto on or before October 8, 2010. T h e Plaintiffs' Civil L.R. 7(h) expedited non-dispositive motion to extend time to amend the pleadings pending a decision on the Plaintiffs' motion for remand (Docket No. 2 1 ) is GRANTED; The Plaintiff may file an amended Complaint on or before September 20, 2010. S F G 's Civil L.R. 7(h) expedited non-dispositive motion for substitution of the D e f e n d a n t and to correct the caption (Docket No. 34) is DENIED; and,

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T h e Plaintiffs' Civil L.R. 7(h) expedited non-dispositive motion to stay decision o n SFG's motion for substitution of the Defendant and to correct the caption pending a d e c i sio n on remand (Docket No. 37) is DENIED. D a te d at Milwaukee, Wisconsin this 25th day of August, 2010, nunc pro tunc A u g u s t 24, 2010. BY THE COURT s / Rudolph T. Randa Hon. Rudolph T. Randa U .S . District Judge

32