929 F. Supp. 2d 859
W.D. Wis.2013Background
- Plaintiffs purchased $50 million in bonds issued by Lake of the Torches Economic Development Corporation and resold them to LDF Acquisition, LLC.
- The bond issuance involved a Trust Indenture Agreement with Wells Fargo as trustee; Lake of the Torches allegedly repudiated the bonds and denied compliance with the Indenture.
- Lake of the Torches invoked sovereign immunity; the Seventh Circuit previously held IGRA voided the Indenture but allowed potential relief based on other bond documents.
- The Seventh Circuit remanded to determine whether waivers in offering documents could render the corporation amenable to suit for legal and equitable claims, subject to sovereign immunity.
- Wells Fargo dismissed its standing questions; state-court proceedings were stayed pending this court’s jurisdictional ruling, while Saybrook and LDF filed a parallel state-court action.
- The court must decide whether federal question jurisdiction, complete preemption, or diversity jurisdiction exists, and whether LDF Acquisition’s Wisconsin citizenship can be established.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the complaint raise federal question jurisdiction? | LDF asserts federal issues flow from IGRA-related documents. | No substantial federal question; IGRA issues are defenses, not the claim. | No federal question jurisdiction. |
| Does IGRA completely preempt the state-law claims here? | IGRA preempts state-law contract claims in this context. | No complete preemption because no federal cause of action displaced the state claim. | No complete preemption. |
| Is there federal jurisdiction based on Grable-type substantial federal questions in the alternative claims? | Some alternative claims raise federal IGRA questions. | Issues are fact-bound and not substantial; not a Grable-type question. | Not substantial federal question jurisdiction. |
| Is there diversity jurisdiction under 28 U.S.C. § 1332? | LDF is a Wisconsin citizen; diversity exists against Wisconsin defendants. | At least one member of LDF has not shown Wisconsin citizenship; need proof. | Diversity not established; requires proof of Wisconsin citizenship for LDF's members. |
Key Cases Cited
- Grable & Sons Metal Prods. v. Darue Eng'g, 545 U.S. 308 (2005) (four-factor test for substantial federal question jurisdiction)
- Empire HealthChoice Assur., Inc. v. McVeigh, 547 U.S. 677 (2006) (limits Grable-type jurisdiction to nearly pure, dispositive federal issues)
- Beneficial Nat'l Bank v. Anderson, 539 U.S. 1 (2003) (complete preemption requires a federal claim that displaces state claims)
- Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536 (8th Cir. 1996) (involved IGRA preemption scope over gaming-related actions)
- Wells Fargo Bank, Nat. Ass'n v. Lake of the Torches Econ. Dev. Corp., 658 F.3d 684 (7th Cir. 2011) (held IGRA issues and waivers; addressed whether bonds alone could stand post-Indenture void)
- Wells Fargo Bank, N.A. v. Lake of the Torches Econ. Dev. Corp. (Sokaogon Chippewa Cmty.), 787 F. Supp. 2d 867 (E.D. Wis. 2011) (discussed complete preemption in IGRA context; distinguishes bond vs. contract claims)