Wells Fargo Bank, National Association v. Lake of the Torches Economic Development Corporation

Filing 120

ORDER. Within ten (10) days of the date of this Order, Wells Fargo must file a pleading that complies with the mandate of the Seventh Circuit. Failure to do so will result in this matter being dismissed with prejudice; and Within ten (10) days of th e date of this Order, Wells Fargo and its counsel must show cause as to why they should not be sanctioned for failing to comply with this Courts order to file a pleading that complies with the mandate of the Seventh Circuit. Signed by District Judge Rudolph T. Randa on 03/30/2012. (Koll, Jacki)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WISCONSIN

WELLS FARGO BANK, N.A.,
as Trustee,
Plaintiff,
Case No. 09-CV-768
-vsLAKE OF THE TORCHES ECONOMIC
DEVELOPMENT CORPORATION,
Defendant.

DECISION AND ORDER

It isn’t very often that a case comes before the Court in which both parties want the
case to be dismissed, albeit for different reasons. After this case was remanded, the Court
issued an order granting the plaintiff, Wells Fargo Bank, N.A., leave to file an amended
complaint that is “consistent with the mandate of the Seventh Circuit.” In response, Wells
Fargo filed an amended complaint that completely disregards the Seventh Circuit’s mandate
and the overall direction and impact of the prior proceedings in this case. For the reasons
that follow, Wells Fargo is ordered, once again, to file a pleading that complies with the
mandate of the Seventh Circuit. Wells Fargo is also ordered to show cause as to why it
should not be sanctioned for violating the Court’s order.
In the prior district court proceedings, Wells Fargo alleged that the Lake of the
Torches Economic Development Corporation breached a Trust Indenture Agreement. The
Court dismissed the case because the “Trust Indenture is a management contract that was

executed without prior approval from the National Indian Gaming Commission. Without
prior approval, the entire contract is void ab initio.” Wells Fargo Bank, N.A. v. Lake of the
Torches, 677 F. Supp. 2d 1056, 1057 (W.D. Wis. 2010). On appeal, the Seventh Circuit
upheld the Court’s determination that the trust indenture “constitutes an unapproved
management contract within the meaning of the [Indian Gaming Regulation Act] and is
therefore void. Consequently, Lake of the Torches’ waiver of sovereign immunity contained
in that document is also void and cannot serve as a predicate for the district court’s
jurisdiction.” Wells Fargo v. Lake of the Torches, 658 F.3d 684, 685 (7th Cir. 2011).
However, the Seventh Circuit also held that the Court “should have permitted Wells Fargo
leave to file an amended complaint to the extent that it presented claims for legal and
equitable relief in connection with the bond transaction on its own behalf and on behalf of
the bondholder.” Id. at 702. The Seventh Circuit further held that upon the filing of an
amended complaint, “the district court should address the issue of whether, now that the
Indenture has been determined to be void, Wells Fargo has standing to litigate claims on
behalf of the bondholder. The court also must determine whether the collateral documents,
when read separately or together, waive the sovereign immunity of the Corporation with
respect to any such claims. If such a waiver is found, the court may proceed to determine the
merits of those claims.” Id.
As noted, the Court directed Wells Fargo to file an amended complaint that is
consistent with the mandate of the Seventh Circuit. In response, Wells Fargo filed amended
pleadings that attempt to add multiple parties to the case, both as plaintiff and as defendant.

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Wells Fargo then proceeded to argue that the Court now lacks subject matter jurisdiction
because of the addition of these parties, so the case should be dismissed before the Court can
reach the issues that were explicitly flagged by the Seventh Circuit.
The mandate rule “requires a lower court to adhere to the commands of a higher court
on remand.” United States v. Polland, 56 F.3d 776, 777 (7th Cir. 1995). This rule is a
stricter corollary of the “law of the case” doctrine. Id. at 779. When a “court of appeals has
reversed a final judgment and remanded the case, the district court is required to comply with
the express or implied rulings of the appellate court.” Waid v. Merrill Area Pub. Sch., 130
F.3d 1268, 1272 (7th Cir. 1997). On appeal, the Seventh Circuit explicitly found that Wells
Fargo and the Corporation were completely diverse for purposes of subject matter
jurisdiction. 28 U.S.C. § 1332(a). The Seventh Circuit’s ruling that the Court should have
permitted Wells Fargo leave to file an amended complaint was in reference to Wells Fargo’s
motion for leave to file an amended complaint, a motion that was filed soon after the Court
made its initial ruling that the Indenture was void. After remand, the Court retroactively
granted this motion as directed by the court of appeals. Obviously, the implication of the
Seventh Circuit’s ruling is that the Court would continue to exercise subject matter
jurisdiction after the remand, on the basis of a pleading brought by Wells Fargo (only) and
against the Corporation (only). By attempting to bring additional parties into this case and
thereby destroy the Court’s subject matter jurisdiction, Wells Fargo violated this Court’s
order to file an amended complaint that is consistent with the mandate of the Seventh Circuit.

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For whatever reason, after years of litigation, Wells Fargo is attempting to avoid a
substantive, preclusive ruling in federal court. In fact, it appears that Wells Fargo wants to
start over in a different forum – Waukesha County Circuit Court, where Wells Fargo, in
addition to the plaintiffs Wells Fargo attempted to bring into this case, are now pursuing
claims that are identical to the claims alleged here on remand. This strategy will not be
tolerated. Wells Fargo must file a pleading that complies with the mandate of the Seventh
Circuit. Otherwise, this matter will be dismissed with prejudice. Fed. R. Civ. P. 41(b);
James v. McDonald’s Corp., 417 F.3d 672, 681 (7th Cir. 2005) (district court “has the
authority under [Rule 41(b)] to enter a sua sponte order of dismissal for lack of
prosecution”); Harrington v. City of Chi., 433 F.3d 542, 548 (7th Cir. 2006) (“long-standing
precedent holds that district courts have the inherent power to remedy dilatory conduct by
dismissing a case for want of prosecution without a motion from the opposing party”);
Fischer v. Cingular Wireless, LLC, 446 F.3d 663, 665 (7th Cir. 2006).
Moreover, Wells Fargo’s attempt to raise the issue of subject matter jurisdiction
forced the Corporation to brief an issue that never should have been raised in the first place.
Wells Fargo and its counsel must explain why they should not be sanctioned for this conduct.
Fed. R. Civ. P. 11(b); 28 U.S.C. § 1927 (“Any attorney . . . who so multiplies the proceedings
in any case unreasonably and vexatiously may be required by the court to satisfy personally
the excess costs, expenses, and attorneys’ fees reasonably incurred because of such
conduct”).

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NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY
ORDERED THAT:
1.

Within ten (10) days of the date of this Order, Wells Fargo must file a pleading

that complies with the mandate of the Seventh Circuit. Failure to do so will result in this
matter being dismissed with prejudice; and
2.

Within ten (10) days of the date of this Order, Wells Fargo and its counsel

must show cause as to why they should not be sanctioned for failing to comply with this
Court’s order to file a pleading that complies with the mandate of the Seventh Circuit.
Dated at Milwaukee, Wisconsin, this 30th day of March, 2012.
BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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