Specialty Finance Group LLC v. DOC Milwaukee LP et al

Filing 147

ORDER signed by Judge Rudolph T Randa on 12/22/2010 granting 70 Motion to Dismiss; dismissing 70 Motion for Joinder; dismissing 112 Motion to Substitute Party; dismissing 145 Motion for Leave to File; dismissing 146 Motion to Withdraw as Attorney. This action is DISMISSED based on the doctrine of prior exclusive jurisdiction; and, The Clerk of Court is DIRECTED to enter judgment accordingly. (cc: all counsel) (Koll, J)

S p e cal lGroup Finance Milwaukee DOC LP i a tv. et y LLC

147 . Doc

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

S P E C I A L T Y FINANCE GROUP LLC, P l a i n t i f f, v. C a s e No. 10-C-315

D O C MILWAUKEE, LP; SETH E. DIZARD, as Receiver of DOC Milwaukee, LP; U I H L E I N ELECTRIC COMPANY, INC.; B L A C K DIAMOND GROUP INCORPORATED; OTIS ELEVATOR COMPANY; SPANCRETE INDUSTRIES, INC.; S U P E R I O R MASONRY BUILDERS, INC.; C O M M E R C I A L WALL & CEILING, a division of BEEN ACOUSTICS CORPORATION; R A N K IN , INC.; VJS CONSTRUCTION SERVICES, INC; C .W . PURPERO, INC; LIPPERT TILE CO, INC.; FREEDOM FIRE PROTECTION, LLC; L A N G E R ROOFING & SHEETMETAL, INC.; K L E I N DICKERT MILWAUKEE, INC.; T H O M A S A. MASON COMPANY, INC.; A L P IN E PLUMBING, INC.; SID'S SEALANTS, LLC; ELECTRICAL RESOURCE MANAGEMENT, INC.; A-AMERICAN CONTRACTORS & SUPPLIERS, INC.; M O R T L SEALANTS & RESTORATION, LLC; M ID W E S T STAIRS AND IRON, INC.; BUTTERS-FETTING CO., INC; ECONOMOU PARTNERS CONSTRUCTION, INC.; S T J , P.C. d/b/a ECONOMOU PARTNERS; VEOLIA ES SOLID WASTE MIDWEST, LLC; ROARING FORK, LLC; and F I R S T FRANCHISE CAPITAL CORP. f/k/a IRWIN FRANCHISE CAPITAL CORP.; Defendants.

Dockets.Justia.com

DECISION AND ORDER

T h is is a federal foreclosure action filed by the Plaintiff, Specialty Finance G ro u p , LLC ("SFG") pursuant to 28 U.S.C. §§ 2001 and 2002. SFG seeks to foreclose upon th e mortgage encumbering property located at 1150 North Water Street, Milwaukee, W is c o n s in (the "Property"). The Defendants are DOC Milwaukee LP ("DOC LP"); Seth E. D iz a rd ("Dizard"), the court-appointed receiver of DOC LP; and 26 entities that SFG alleges m a y claim an interest or lien in the Property. (Compl. ¶ 1.) Jurisdiction is predicated upon 28 U .S .C . § 1332, based on the allegation that the parties are diverse 1 and the amount in c o n tro v e rs y exceeds $75,000, exclusive of interest and costs. Dizard filed a motion asserting that the Complaint should be dismissed pursuant to Fed. R. Civ. P. 12(b)(1). In the alternative, Dizard maintains that all required parties must b e joined in this action, pursuant to Fed. R. Civ. P. 12(b)(7). SFG filed two non-dispositive m o tio n s: a motion to substitute 2010-1 SFG Venture LLC ("Venture") as the Plaintiff in this a c tio n pursuant to Fed. R. Civ. P. 25(c); and a motion to file a reply brief in support of its m o tio n to substitute. Also pending is a motion for withdrawal and discharge of counsel for

1 SFG is a Georgia limited liability company whose sole member is Silverton Bank, N.A. ("Silverton"), a n a tio n a l banking association that has its principal place of business in Georgia. (Compl. ¶ 4). For purposes of d iv e rs ity jurisdiction, a national bank is a citizen of the state designated in its articles of incorporation as the locus of i t s main office. Wachovia Bank v. Schmidt, 546 U.S. 303, 313-14 (2006); Hicklin Eng'g, L.C. v. Bartell, 439 F.3d 3 4 6 , 348 (7th Cir. 2006). The Complaint does not include the relevant jurisdictional fact: the location of Silverton's m a i n office. See id. However, this Court takes judicial notice of the removal notice filed in SJ Properties Suites, Buyco v. S p e c ia lty Finance Group, LLC, Case Number 10-CV-198 (E.D. W i s . ) ( the "198 action") that states Silverton's main o f fi c e is located in Georgia. (198 action, Notice of Removal, ¶ 11.) As such, SFG is a citizen of Georgia.

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D e f e n d a n ts Economou Partners Construction, Inc. ("Economou") and STJ, P.C., d/b/a E c o n o m o u Partners ("STJ, P.C."). RELEVANT FACTS T h i s dispute arises out of the insolvency and work stoppage of a partially c o n stru c ted mixed use development located at the Property. (Dizard Aff. ¶ 2, Ex. 1 (Halloin A f f . filed in BuyCo v. DOC LP, Case Number 09-CV-9785 (Milwaukee County Circuit Court) (th e "Receivership action")) ¶¶ 2-3.) The Project's owner is DOC LP.2 (Dizard Aff. ¶ 2, Ex. 1 ¶¶ 4-5.) EP Milwaukee, LLC ("EP") and SJ Properties Suites, BuyCo, ehf ("BuyCo") are tw o partners in DOC LP. (Dizard Aff. ¶ 2, Ex. 1 ¶ 5.) BuyCo and two other companies, S J -F a s te ig n ir, ehf ("Fasteignir") and Askar Capital, hf ("Askar") provided over $17 million in loans and equity for the construction of the Project. (Dizard Aff. ¶¶ 2,5, Ex. 1 ¶ 52; Ex. 4 (P et. Appoint. Receiver in the Receivership action) ¶ 15.) SFG, a subsidiary of Silverton, provided funding for the Project through a c o n stru c tio n loan (the "SFG Loan"). (Compl. ¶¶ 1, 36.) On January 11, 2008, when five sto rie s of the Project had been completed, SFG recorded a mortgage against the Project. ( C o m p l ., Ex. C, 2; Dizard Aff. ¶ 3 Ex. 2 (Roever Aff. Supp. Petitioning Intervening Pls. B u yC o , Fasteignir, and Askar Resp. Br. Opp'n SFG's Mot. Dismiss filed in Dizard v. SFG, N o . 09-CV-11574 (Milw. County)), ¶ 6 and Ex. E thereto (Copy of a June 8, 2009, photograph o f the Project).) The SFG Loan was personally guaranteed by Phillip E. Hugh, John W. E c o n o m o u , and Steve J. Economou (collectively the "Guarantors" ). (Dizard Aff. ¶ 4, Ex. 3

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DOC LP is a Delaware limited partnership. (Compl. ¶ 4.)

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(C o m p l. filed by SFG in Case No. 10-CV-1020 (N.D. Ga.)), ¶ 28) and Ex. C thereto (Guaranty A g re e m e n t) .) W o rk stopped at the Project in January of 2009. DOC LP became insolvent sh o rtly afterwards. On May 27, 2009, BuyCo, Fasteignir, and Askar filed a lawsuit in this f e d era l district court, Case Number 09-CV-533 (the "533 action") against the Project's general c o n tra c to r, its principals, and the former general partner of DOC LP and its principals for v a rio u s claims including theft by contractor. On June 8, 2009, BuyCo also filed a lawsuit in th is federal district court, Case Number 09-CV-569, (the "569 action") against the other p a rtn e rs of DOC LP to attempt to resolve the issues of its interest in DOC LP. On September 1 4 , 2009, this Court allowed the Receiver to intervene in the 533 action. (Court's Decision a n d Order, 533 action, filed on Sept. 15, 2009, 10.) On November 10, 2009, the Court granted B u yC o , Fasteignir, and Askar's motion to consolidate the two actions and granted Dizard's m o tio n to intervene in the 569 action. (Court's Decision and Order, 533 action filed on Nov. 1 2 , 2009, 10-11.) The consolidated action is the 533 action. On June 22, 2009, BuyCo filed the Receivership action, pursuant to Chapter 128 a n d Section 179.73 3 of the Wisconsin Statutes. (Dizard Aff. ¶ 5, Ex. 4 (Pet. Appointment R ec e iv e r).) The Receivership action was filed to address insolvency issues, and because DOC L P 's partners were engaged in a dispute that prevented DOC LP from doing business. (Dizard A f f . ¶¶ 3-21, 34; Court's Decision and Order, 533 action, filed on Sept. 15, 2009, 4.) The R e c e iv e rs h ip action is currently pending in the state circuit court.

Section 179.73 relates to the wind-up of a limited partnership's affairs, and authorizes, upon a showing of c a u s e , a state circuit court to direct a wind-up.

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O n July 8, 2009, after a hearing on the petition for a receiver, Judge Mel F la n a g an ("Flanagan") signed an order appointing Dizard. (Dizard Aff. ¶ 6, Ex. 5 (Order A p p o in tin g Receiver)). The order appointing receiver generally allows the receiver to take c o n tr o l of and administer, the assets of DOC LP -- primarily the Project. The order also a llo w s the receiver to perform the following actions, among others: b . To sell the property of [DOC LP] outside the ordinary course o f business, free and clear of all liens, claims and encumbrances w ith any and all liens, claims and encumbrances attaching to the s a le proceeds in the priority which existed prior to such sale, th ro u g h public or private proceedings, in any commercially re a so n a b le manner, subject to the prior approval of this Court; c . To lease space in the property of [DOC LP] under terms and c o n d itio n s consistent with the applicable real estate market and as c o m m e rc ially prudent and reasonable; d. To bring and prosecute all proper actions for the: (a) collection o f revenues derived from the property of [DOC LP], (b) removal fro m the property of [DOC LP] of persons not entitled to entry th e re o n , (iii) [sic] protection of the property of [DOC LP], and (c ) any damage caused to the property of [DOC LP] e . To employ any person or firm to collect, manage, lease, m a in ta in and operate the property of [DOC LP] if the Receiver d e e m s it necessary or appropriate in its discretion and judgment to do so; f. To hire, employ and retain attorneys, certified public a c c o u n tan ts, investigators, security guards, consultants, property m a n a g em e n t companies, brokers and any other personnel or e m p l o ye e s (in addition to those listed in paragraph 8) which the R e c e iv e r deems necessary to assist him in the discharge of his d u tie s ; ....

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h . To confirm that the property of [DOC LP] is adequately in s u re d , to promptly report any evidence of findings to the c o n tra ry to the parties and to the Court and, if necessary, to d isb u rse funds for the maintenance of fire, hazard and liability in su ra n c e for the property of [DOC LP], as applicable; .... l. To make any repairs to the property of [DOC LP] that the R e c eiv e r, in his discretion, deems necessary or appropriate; .... u . To actively pursue and enter into bona fide financing proposals o n the building project in order to satisfy creditor claims, protect e q u ity, and complete the construction and fully open the project, if doing so is in the best interests of creditors. ((Dizard Aff. ¶ 6, Ex. 5 ¶ 9.) S F G declined to participate in the Receivership action asserting that as a secured c re d ito r it may not be compelled to participate in that action. (Dizard Aff. ¶ 7, Ex. 6 (Not. f ro m SFG of "Intent Not to Participate [In] or be Bound by Ch. 128 Wis. Stat. Proceedings").) S F G has not provided any funding to protect the Project, to collect rents, to provide insurance, o r to secure the Project. (Dizard Aff. ¶ 16.) BuyCo and other lenders for the Project, F a s te ig n ir and Askar, have been providing the funds. (Id.) On July 24, 2009, Dizard brought an action for declaratory relief in Milwaukee C o u n ty Circuit Court, Case Number 09-CV-11574 (the "Declaratory action"), partly in resp o n se to SFG's refusal to participate in the receivership. (Dizard Aff. ¶ 8, Ex. 7 (Receiver's C o m p l. for Declaratory J.).) Dizard brought the Declaratory action on behalf of all of the c re d ito rs to resolve the issue of whether SFG's mortgage had priority over the subcontractor lie n s , or the funds advanced by BuyCo, Fasteignir, and Askar. (Id.) Dizard is obligated to

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a d d re ss and resolve priority issues under the order appointing receiver, (Dizard Aff. ¶ 6, Ex. 5 , ¶¶ 1, 9), and under Wis. Stat. §§ 128.17 and 179.73. O n August 17, 2009, BuyCo, Fasteignir, and Askar sought to intervene in the D e c la r a to ry action, as specifically interested entities challenging SFG's alleged priority p o sitio n . (Dizard Aff. ¶ 9, Ex. 8 (Buyco, Fasteignir and Askar's Jt. Notice Mot and Mot. Interv e n e Declaratory action).) Uihlein Electric Company, Inc. ("Uihlein"), a primary

e lec trica l subcontractor for the Project, also sought to intervene to challenge SFG's claims to p rio rity under Wisconsin's visible commencement of work rule in Wis. Stat. § 779.01(4). (D iz a rd Aff. ¶ 10, Ex. 9 (Uihlein Mot. Intervene Declaratory action dated Dec. 3, 2009).) SFG f ile d a motion challenging BuyCo, Fasteignir, and Askar's intervention, and for dismissal of t h e Declaratory Action. (Dizard Aff. ¶ 11, Ex. 10 (SFG's Mot. Dismiss Declaratory action d ated Dec. 14, 2009).) Prior to a decision in the Declaratory action, Dizard brought a motion in the R ec eive rsh ip action, requesting an order for express authority to prosecute the Declaratory a c tio n . (Dizard Aff. ¶ 12, Ex. 11 (Receiver's Mot. Clarify and/or, Expand Order Appointing R e c eiv e r dated Dec. 14, 2009).) BuyCo submitted a brief in support of Dizard's motion. (D i z a rd Aff. ¶ 13, Ex. 12 (BuyCo Br. Support Dizard Mot. to Clarify and/or Expand Ord. A p p o in tin g Receiver).) Judge Flanagan granted Dizard's motion, ruling that he had the a u th o rity, under the order appointing receiver, to bring and prosecute the Declaratory Action. (D iz a rd Aff. ¶ 14, Ex. 13 (Ord. Granting Mot. Clarify Order Appointing Receiver dated Jan.

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1 3 , 2010, nunc pro tunc July 8, 2009)); (Dizard Reply Aff. ¶ 1, Ex. A (Tr. Feb. 12, 2010, h ea rin g , Declaratory action) 4.) On February 12, 2010, Judge Dugan held a continued hearing on SFG's motion to dismiss the Declaratory action. (Dizard Reply Aff. ¶ 1, Ex. A.) Judge Dugan dismissed the D e c la ra to ry action concluding that Dizard did not have standing under Wisconsin law to bring a declaratory judgment action. (Dizard Reply Aff. ¶ 1, Ex. A 43.) The dismissal was with p re ju d ic e to the extent that no other declaratory judgment actions may be brought by Dizard. (D iz a rd Reply Aff. ¶ 1, Ex. A 44.) Judge Dugan stated that the dismissal had no impact on the R e c eiv e rs h ip action. (Dizard Reply Aff. ¶ 1, Ex. A 44.) Thus, the Declaratory action was u ltim a te ly dismissed, with explicit deference to Dizard's powers under Chapter 128 and the o rde r appointing the receiver. (Dizard Aff. ¶ 15, Ex. 14.) BuyCo, Fasteignir, and Askar's m o tio n to intervene in that action was not decided. (Dizard Aff. ¶ 15, Ex. 14.) O n February 12, 2010, BuyCo, Fasteignir, and Askar filed an action against SFG in Milwaukee County Circuit Court, Case Number 10-CV-2175, challenging SFG's priority p o s itio n and ability to foreclose. (Dizard Aff. ¶ 17.) SFG removed that case to this District w h e re it is now pending before this Court as the 198 action. (198 action, Not. of Removal.) O n April 7, 2010, SFG filed a lawsuit in the United States District Court for the N o rth e rn District of Georgia, as Case No. 10-CV-1020 (the "1020 action.") (Dizard Aff. ¶ 4, E x . 3 (1020 action Compl.).) SFG sued the partners of DOC LP for the monies owed to it f ro m the SFG Loan, which is between SFG and DOC LP. SFG also named the individual

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g u a r a n t o r s of the SFG Loan. That lawsuit did not name DOC LP as a defendant and is not a tte m p tin g to collect against the primary collateral for the SFG Loan -- the Project. (Id.) On April 14, 2010, one week after SFG filed the 1020 action, SFG filed the in s ta n t action to foreclose on the Property as a priority lien holder. (Compl. 10-CV-315 (the " 3 1 5 action").) SFG alleges that it "has the right to have a receiver appointed to take p o ss e ss io n of the Property, to operate the Property pending a foreclosure sale, to collect rents f r o m the Property and to apply income from the Property, to the extent in excess of the cost o f the receivership, to the Note." (315 action Compl. ¶ 60.) SFG requests that "a receiver be a p p o in te d by order of the Court to collect rents and prevent the commission of waste." (Id. a t ¶ 62(G).) SFG did not petition the Milwaukee County Circuit Court for permission to file a suit against DOC LP in federal court. The 1020 action filed by SFG in Georgia was transferred to this District on D ec em b er 1, 2010, and is assigned to this Court. See 2010-1 SFG Venture LLC v. EP M ilw a u k e e LLC et al, Case No. 10-CV-1079 (E.D. Wis.) (the "1079 action"). The 533, 198, 3 1 5 , and the 1079 actions are pending before this Court. There are five cases pending in the f e d e ra l and state court systems with closely related issues. MOTION TO DISMISS OR FOR JOINDER In seeking dismissal of this action, Dizard relies upon the doctrine of prior e x c lu s iv e jurisdiction, also know as the Princess Lida 4 doctrine, asserting that it is improper f o r this Court to exercise subject matter jurisdiction over this case because the Receivership

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The term refers to Princess Lida of Thurn and Taxis v. Thompson, 305 U.S. 456, 466 (1939).

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a c tio n in the state circuit court is an in rem or quasi in rem proceeding. He also contends that s u b je c t matter jurisdiction is not proper under the Barton doctrine so named based on the d e c is io n in Barton v. Barbour, 104 U.S. 126, 136 (1881). Alternatively, Dizard maintains that S F G should be required to join two additional parties that it has not named as defendants; n a m e ly, BuyCo and EP. SFG counters that the Princess Lida doctrine does not apply to it. SFG contends th a t the receivership order expressly exempts secured creditors, such as it, from the bar against p ro c e ed in g s against DOC LP and allows it to bypass the receivership. SFG also suggests that D iz a rd may not be challenging the entire action but only SFG's request for appointment of a re c eiv e r. It also maintains that the Barton doctrine does not foreclose its action against Dizard. S F G further contends that Dizard's argument that BuyCo and EP are required parties is m e ri tle s s . Prior Exclusive Jurisdiction In asserting that this Court may not exercise jurisdiction over this action, Dizard re lie s upon the doctrine of prior exclusive jurisdiction, citing Dailey v. National Hockey L e a g u e , 987 F.2d 172, 175 (3d Cir. 1993). In Dailey, the appeals court held that the re q u ire m e n ts for the application of the Princess Lida doctrine, also referred to as the doctrine o f prior exclusive jurisdiction, precluded federal district court jurisdiction over an action b ec au s e there was a prior pending Canadian action seeking the same relief that would require th e district court to exercise control over the same property that was subject to control by the

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C a n a d ia n court. Id. SFG does not directly address the doctrine of prior exclusive jurisdiction. In the 198 action, this Court explained: The principle of prior exclusive jurisdiction is illustrated by Kline v . Burke Construction Company, 260 U.S. 226, 229, 43 S.Ct. 79, 6 7 L.Ed. 226 (1922) stating: W h e r e the action is in rem the effect is to draw to th e federal court the possession or control, actual or p o te n tia l, of the res [i.e., the property that is the s u b je c t matter of the dispute], and the exercise by t h e state court of jurisdiction over the same res n e c es s a rily impairs, and may defeat, the jurisdiction o f the federal court already attached. The converse o f the rule is equally true, that where the ju ris d ic tio n of the state court has first attached, the f e d e r a l court is precluded from exercising its ju risd ictio n over the same res to defeat or impair th e state court's jurisdiction. S J Properties Suites, BuyCo v. Specialty Finance Group, No. 10-C-198, 2010 WL 3313667, at *7 (E.D. Wis. Aug. 24, 2010). T h is Court stated that "the doctrine of prior exclusive jurisdiction developed out o f the recognition that both federal and state courts have concurrent jurisdiction over property w ith in their shared districts and that the interests of comity and the desire to avoid piecemeal litig a tio n warranted the sound principle that a federal court should cede jurisdiction to a state c o u r t over property when that court has first exercised its power over the property and vice v e rs a ." SJ Properties, 2010 WL 3313667, at *7. As this Court stated, the invocation of the doctrine is appropriate in cases where tw o suits are in rem or quasi in rem, requiring that th e court or its officer have possession or control of th e property which is the subject of the suit in order 11 F. Supp. 2d

to proceed with the cause and to grant the relief s o u g h t, the jurisdiction of one court must of n ec essi ty yield to that of the other . . . . the court f irs t assuming jurisdiction over the property may m a in ta in and exercise that jurisdiction to the e x c lu sio n of the other. This is the settled rule with r e s p e c t to suits in equity for the control by re c e i v e rs h ip of the assets of an insolvent c o rp o r a tio n . P e n n Gen. Cas. Co. v. Commonwealth of Penn., 294 U.S. 189, 1 9 5 , 55 S.Ct. 386, 79 L.Ed. 850 (1935); see also, Princess Lida o f Thurn and Taxis v. Thompson, 305 U.S. 456, 466, 59 S.Ct. 275, 8 3 L.Ed. 285 (1939). Jurisdiction attaches on the filing of the c o m p lain t in court, either federal or state, where process issues in d u e course. Penn Gen., 294 U.S. at 196, 55 S.Ct. 386 (citing P a lm e r, 212 U.S. at 129, 29 S.Ct. 230). SJ Properties, 2010 WL 3313667, at *7-*8. 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. Id . at *8 (citing Princess Lida, 305 U.S. at 465-66). The reason for this lies in the important d is tin c tio n between actions in personam and actions either in rem or quasi in rem. SJ P r o p e rtie s, 2010 WL 3313667, at *8. The Supreme Court outlined the distinctions between each: "[a] judgment in p e rs o n a m imposes a personal liability or obligation on one person in favor of another. A ju d g m e n t in rem affects the interests of all persons in designated property. A judgment quasi in rem affects the interests of particular persons in designated property." Id. (quoting Hanson v . Denckla, 357 U.S. 235, 246 n.12, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). Thus, a judgment in personam does not implicate a party's interest in a designated property, but only imposes

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a personal liability or obligation on one party in favor of another. SJ Properties, 2010 WL 3 3 1 3 6 6 7 , at *8. Because of this distinction, the doctrine of prior exclusive jurisdiction will n o t apply in the circumstance where one court exercises its jurisdiction over a specific property a n d another court exercises its jurisdiction over individuals. Id. Based on the foregoing, the critical questions in this foreclosure action are w h e th e r the state court action and this action are in rem or quasi in rem and, if so, whether the d o c trin e precludes this Court's exercise of jurisdiction over the subject matter of the dispute. A s this Court held in the 198 action, the Circuit Court for Milwaukee County has exercised its jurisdiction over the Property in the Receivership action. Id. When BuyCo filed its re c e iv e r s h i p complaint, the state court's jurisdiction attached to the Property. Id. The R e c e iv e r s h ip action is in rem because it affects the interests of secured and non-secured c re d ito rs in the Property. Id. See also, Blackhawk Heating & Plumbing Co., Inc. v. Geeslin, 5 3 0 F.2d 154, 158 (7th Cir. 1976) (holding that the appointment of a receiver and the in s titu tio n of liquidation proceedings in the Illinois court against an insurer were in rem). SFG's Complaint in this action is in rem, pertains to the Property, and seeks f o re c lo s u re pursuant to 28 U.S.C. §§ 2001 and 2002.5 (See Compl. ¶¶ 1, 61-62.) Thus, the d o c trin e of prior exclusive jurisdiction applies.

F.D.I.C. v. Four Star Holding Co., 178 F.3d 97, 101-02 (2d Cir. 1999) (citing Donovan v. City of Dallas, 3 7 7 U.S. 408, 412 (1964)), holds that a federal foreclosure action is an in rem action. See also, Syver v. Hahn, 94 N . W . 2d 161, 164-65 (W is . 1959) (holding that, under W is c o n s i n law, a mortgage foreclosure action is a quasi p r o c e e d in g in rem); Sec. Nat'l Bank v. Cohen, 143 N.W . 2 d 454, 456-57 (W i s . 1966) (same).

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S F G argues that under Wisconsin law, secured creditors may bypass a r e c e iv e rs h ip citing Wisconsin Brick and Block Corp. v. Vogel, 195 N.W.2d 664, 667 (Wis. 1 9 7 2 ). Regardless of Wisconsin Brick and Block, the receiver has the authority to determine p r i o r ity under Wis. Stat. § 128.17. And, SFG's contention that it has first priority is hotly c o n te ste d . (Dizard's Reply in Supp. Mot. to Dismiss 4-6.) The issue regarding SFG's position a s a creditor may be resolved through the state court receivership proceeding and the re s o lu tio n of those issues will impact on SFG's ability to foreclose. SFG also cites Gotkin v. Korn, 182 F.2d 380 (D.C. 1950); and Allen v. See, 196 F .2 d 608 (10th Cir. 1952). Both cases address the rights of a secured creditor under the B a n k ru p tcy Act of 1898. SFG simply cites the cases ­ without any pin cite or argument. S F G has failed to articulate the relevance of Gotkin and Allen to the issues presented by D iz a rd 's motion to dismiss. Under Wisconsin law, SFG cannot be compelled to participate in the re c eiv e rs h ip . However, prior to the commencement of the instant federal foreclosure action, th e receivership acquired in rem jurisdiction over the property. Wisconsin Brick and Block d o e s not abrogate a receiver's power to make priority decisions and potentially avoid liens. S e e Wis. Stat. §§ 128.17-128.18. Wisconsin Brick and Block also does not address the d o c trin e of prior exclusive jurisdiction. SFG also suggests that Dizard may only be challenging the appointment of the re c eiv e r, contending that there is a difference between the functions of the type of receiver that it is requesting and Dizard's functions as a Chapter 128 receiver.

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S F G maintains that it seeks the appointment of a receiver under Wis. Stat. § 813.16 6 ancillary to a foreclosure, citing M &I Marshall & Ilsley Bank v. Urquhart Co., 706 N .W .2 d 335, 340 (Wis. Ct. App. 2005). SFG cites Emil v. Hanley, 130 F.2d 369, 370 (2d Cir. 1 9 4 2 ), which supports the conclusion that there is a functional difference between "a f o re c lo s u re receiver" and "a receiver appointed in an equity receivership or a state insolvency p r o c e e d in g ." SFG also cites Lincoln Crest Realty v. Standard Apartment Development of W e s t Allis, 211 N.W.2d 501, 504-05 (Wis. 1973), for the proposition that Wisconsin law is

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Section 813.16 of the W is c o n s i n Statutes provides:

A receiver may be appointed: ( 1 ) On the application of either party, when the applying party establishes an apparent right to or in t e r e s t in property which is the subject of the action and which is in the possession of an adverse p a rty , and the property or its rents and profits are in danger of being lost or materially impaired. ( 2 ) By the judgment, or after judgment, to carry it into effect or to dispose of the property according t o the judgment. ( 3 ) To preserve the property during the pendency of an appeal; or when an execution has been r e t u r n e d unsatisfied and the judgment debtor refuses to apply the judgment debtor's property in s a tis fa c tio n of the judgment or in an action by a creditor under ch. 816. ( 4 ) W h e n a corporation has been dissolved or is insolvent or in imminent danger of insolvency, or h a s forfeited its corporate rights. ( 5 ) In accordance with the practice which obtained when the code of 1856 took effect except as o th e r w is e provided in this chapter. ( 6 ) The receiver shall give to and file with the clerk of the court a bond, conditioned in the usual m a n n e r , with sureties to be approved by the judge making the appointment sufficient to cover all p r o p e r t y likely to come into the receiver's hands. ( 7 ) If the person seeking the appointment of a receiver under sub. (1) is a savings and loan a ss o c ia tio n or savings bank supervised by the division of banking or a corporation supervised by th e home loan bank board, federal office of thrift supervision, federal deposit insurance corporation, o r resolution trust corporation, the court, unless the opposing party objects, shall appoint an officer o f such corporation as receiver to act without compensation and to give such bond as the court req uires.

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s im ila r to that of New York as noted in Emil -- a mortgagee's right to collect rents does not v e s t until it obtains a receiver to collect the rents for its benefit. While two types of receivers may have a functional difference, that distinction d o e s not resolve the issue raised by Dizard. Any receiver appointed by this Court would still b e taking control of the Property from the Chapter 128 receiver. These cases do not have any b e a rin g on the doctrine of prior exclusive jurisdiction.7 S F G further contends that, even if the Court determines that Princess Lida p re c lu d e s it from appointing a foreclosure receiver, the entire action need not be dismissed c itin g to National Partnership Investment Corp. v. National Housing Development Corp., 153 F .3 d 1289, 1291 (11th Cir. 1998) and L. I. G. Pet Goods Trading, LLC v. Goldfarb, Civil A c tio n No. 08-CV-5345, 2009 WL 141845, at*3-*5 (E.D. Pa. Jan. 16, 2009). Again, N a tio n a l Partnership Investment, 153 F.3d at 1291, did not involve the doctrine of prior e x c lu s iv e jurisdiction. It was limited to addressing whether federal or state law governed the ap p o in tm en t of a receiver in a federal court exercising diversity jurisdiction over a foreclosure a c tio n , and L.I.G. Pet Goods is not analogous to the instant case, because the doctrine was not ra is e d in conjunction with the relief sought by the plaintiffs or in support of dismissal of the

Urquhart Co., 706 N.W . 2 d at 340, presented the issue of whether an unsecured creditor could intervene in a pending § 813.16 receivership. Emil, 130 F.2d at 370, addressed the narrow issue of whether Congress intended to subject a previously pending New York court foreclosure action to federal bankruptcy jurisdiction under two p r o v is io n s added in 1938 to the 1898 Bankruptcy Act. The Second Circuit held that Congress did not intend to do so .

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e n tire action. The action was brought under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the plaintiffs did not request the appointment of a receiver. 8 In light of the foregoing, this Court grants Dizard's motion to dismiss based on th e doctrine of prior exclusive jurisdiction. See FDIC v. Four Star Holding Co., 178 F.3d 97, 1 0 2 (2d Cir. 1999); Carvel v. Thomas and Agnes Carvel Found., 188 F.3d 83, 85-86 (2d Cir. 1 9 9 9 ). Based on this conclusion, Court need not address the Barton doctrine, which held that a suit against an equity receiver could not be maintained without the permission of the court th a t appointed him. Because the Court is dismissing the action and deferring to the state court, th e Court also dismisses the remaining pending motions without ruling upon them. N O W , THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY O R D E R E D THAT: Dizard's motion (Docket No. 70) to dismiss this action based on the doctrine of p rio r exclusive jurisdiction is GRANTED; D iza rd 's alternative motion (Docket No. 70) for joinder of required parties is D IS M IS S E D ; S F G ' s expedited motion to substitute the Plaintiff and to correct caption p u r su a n t to Civil Local Rule 7(h) (Docket No. 112) is DISMISSED;

Further, L. I. G. Pet Goods, 2009 W L 141845, at *3-*5, addressed a defendant's motion for appointment o f a receiver. The district court denied the motion mechanically, not on its merits, based on the doctrine of prior e x c l u s iv e jurisdiction. The court determined that the suits were both in rem and that the earlier state court divorce p r o c e e d in g had established control over the rem. Id. It also stated that "the federal action is in rem because the r e q u e s te d appointment of the receiver would require this Court to exercise control over property disputed by Mr. and M r s . Goldfarb." Id. at *5.

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S F G 's motion for leave to file reply brief in support of its Civil Local Rule 7(h) e x p e d ite d non-dispositive motion for substitution of the Plaintiff and to correct caption ( D o c k e t No. 145) is DISMISSED; T h e motion for withdrawal and discharge of counsel for Economou Partners and S T J , P.C. is DISMISSED (Docket No. 146); This action is DISMISSED based on the doctrine of prior exclusive jurisdiction; and, T h e Clerk of Court is DIRECTED to enter judgment accordingly. Dated at Milwaukee, Wisconsin this 22nd day of December, 2010. BY THE COURT s / Rudolph T. Randa Hon. Rudolph T. Randa U .S . District Judge

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