Wells Fargo Bank, National Ass'n v. Lake of the Torches Economic Development Corp.
658 F.3d 684
7th Cir.2011Background
- Wells Fargo, as trustee, sues Lake of the Torches to enforce a $50 million gaming revenue bond indenture secured by Casino revenues.
- Lake of the Torches is a tribal-corporate entity under Lac du Flambeau Band sovereignty; it waived immunity in the Bond Documents.
- Indenture allegedly governs casino revenues and includes provisions that grant bondholders extensive control over management.
- District court held the Indenture is an unapproved IGRA “management contract,” rendering it void and waiving sovereign immunity; dismissed for lack of jurisdiction.
- Wells Fargo sought to amend to assert claims under related Bond Documents and for relief on behalf of the bondholder; district court denied leave to amend.
- This appeal challenges jurisdiction, the characterization of the Indenture, severability, and amendment/standing issues, with partial reversal and remand requested.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court had diversity jurisdiction over a tribal plaintiff. | Lake of the Torches is Wisconsin citizen; Wells Fargo diverse. | Tribal entity not a state citizen; diversity not met. | Lake of the Torches may be considered a Wisconsin citizen; jurisdiction proper. |
| Whether the Indenture is a management contract requiring IGRA approval. | Indenture is a loan instrument, not management. | Indenture empowers bondholders to control operations, thus management. | Indenture is a management contract requiring Chairman approval; void ab initio without approval. |
| Whether offending terms can be severed from the Indenture to avoid total invalidity. | Severability and reformation allowed; Owens Olson-like logic applies. | IGRA voids entire contract; no severance. | Severability cannot cure void ab initio; reformation not permitted; but issues on remand may allow amended claims. |
| Whether Wells Fargo could amend to assert claims under related Bond Documents despite Indenture voiding. | Collateral documents may waive immunity and support claims. | Waivers tied to Indenture; void if Indenture void. | On remand, court should allow amendment for claims arising from bond transaction and assess standing and collateral waivers. |
| Whether the district court abused its discretion in denying amendment and in its standing/waiver analysis. | Remand allows proper analysis of standing and waivers; amendment should not have been futile. | Void Indenture forecloses related claims; amendment futile. | Remand appropriate; proceed to determine standing and whether collateral documents waive immunity. |
Key Cases Cited
- McCarthy v. Bronson, 500 U.S. 136 (1991) (statutory interpretation in context matters)
- Catskill Dev., L.L.C. v. Park Place Entm't Corp., 547 F.3d 115 (2d Cir. 2008) (deference to NIGC framing of management contracts; collateral agreements cross-reference)
- Olson v. Paine, Webber, Jackson & Curtis, Inc., 806 F.2d 731 (7th Cir. 1986) (reformation when regulatory invalidity would occur; not applicable to IGRA void ab initio)
- United States ex rel. Bernard v. Casino Magic Corp., 293 F.3d 419 (8th Cir. 2002) (agency view on what constitutes management contracts)
- First American Kickapoo Operations, L.L.C. v. Multimedia Games, Inc., 412 F.3d 1166 (10th Cir. 2005) (IGRA/agency framework dominates tribal gaming contracts)