Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-1_13-cv-00004/USCOURTS-almd-1_13-cv-00004-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:2201 Declaratory Judgement

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IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

SOUTHERN DIVISION

U.S. BANK NATIONAL ASSOCIATION, )

as Trustee for the Cooperative District of )

Houston County–Country Crossing Project )

$21,325 Revenue bonds Series 2009 and )

$7,735,000 Revenue bond Series 2012, )

 )

Plaintiff, )

v. ) Case No.: 1:13cv4-WHA

 ) (wo)

RUSSELL T. WRIGHT, an individual; DR. )

ROBERT L. WRIGHT, JR., an individual, )

 )

Defendants. )

MEMORANDUM OPINION AND ORDER

I. Introduction 

This cause is before the court on a Motion to Dismiss Plaintiff’s Complaint (Doc. #17).

The Plaintiff filed a Complaint for Declaratory Judgment (Doc. #1) asserting diversity

subject matter jurisdiction in this court. The Plaintiff U.S. Bank National Association is serving

as Trustee for the Cooperative District of Houston County–Country Crossing Project

$21,325,000 Revenue Bonds Series 2009 and $7,735,000 Revenue Bond Series 2012 (“U.S.

Bank”). U.S. Bank alleges that it is located in Ohio. Defendant Russell T. Wright is a citizen of

Virginia and Defendant Dr. Robert L. Wright, Jr. is a citizen of Georgia.

Russell T. Wright and Dr. Robert L. Wright, Jr. (“the Wrights”) filed the instant Motion

to Dismiss, stating that this court lacks subject matter jurisdiction. The case is before the court

on the Motion, the response and reply, as well as a sur-reply and response to that sur-reply.

 

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II. MOTION TO DISMISS 

A Rule 12(b)(1) motion challenges the district court’s subject matter jurisdiction and

takes one of two forms: a “facial attack” or a “factual attack.” A “facial attack” on the complaint

requires the court to assess whether the plaintiff has alleged a sufficient basis for subject matter

jurisdiction. Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990). A “factual attack,” on

the other hand, challenges the existence of subject matter jurisdiction based on matters outside

the pleadings. Lawrence, 919 F.2d at 1529. Under a factual attack, the court may hear

conflicting evidence and decide the factual issues that determine jurisdiction. Colonial Pipeline

Co. v. Collins, 921 F.2d 1237, 1243 (11th Cir. 1991). The burden of proof on a Rule 12(b)(1)

motion is on the party averring jurisdiction. Thomson v. Gaskill, 315 U.S. 442, 446 (1942). 

III. FACTS

The allegations of the Complaint are as follows:

The Houston County Commission entered into a development agreement with Ronnie

Gilley Properties in February 2008 to develop an entertainment facility known as Country

Crossing. This development was to include, among other things, electronic bingo. Ronnie

Gilley Properties structured Country Crossing to be owned by three affiliates: Resorts and

Entertainment Group II, LLC; Resorts and Development Group II, LLC; and Country Crossing,

LLC.

The Houston County Commission created a Cooperative District and Improvement

District of Houston County–Country Crossing Project. The Cooperative District issued Series

2009 bonds to finance public improvements to 375 acres of land which comprised the Country

Crossing Development. The Series 2009 Bonds were issued pursuant to Indentures. 

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The payment sources of the Series 2009 Bonds were assessments and fees at Country

Crossing. 

Some of the proceeds from the sale of the Series 2009 Bonds were required to be held in

a fund by the Indenture Trustee to ensure sufficient funds to make interest payment installments

under the Trust Indenture. The Trust Indenture also authorized the Cooperative District to

provide U.S. Bank with a Letter of Credit to serve as additional security for repayment of the

revenue bonds.

As a condition of its purchase of the Series 2009 bonds, the holders required additional

repayment security in the form of an Irrevocable Standby Letter of Credit naming the Indenture

Trustee as beneficiary. 

Defendant Dr. Robert Wright, Jr. sent a Side Letter to U.S. Bank in which he stated that

Wells Fargo Bank f/k/a Wachovia Bank would issue a $5 million Irrevocable Standby Letter of

Credit. The Letter of Credit said it would extend for one year periods up until November 12,

2013, when it would expire. U.S. Bank alleges that consistent with the Side Letter, the Letter of

Credit allowed U.S. Bank to draw on the Letter of Credit if given notice of non-extension of the

Letter of Credit. 

In May of 2010, Dr. Robert Wright, Jr. sent U.S. Bank an Amended and Restated Side

Letter which restated the Side Letter and provided for default under the Amended Side letter

upon an indenture of additional bonds.

The electronic bingo planned for Country Crossing was determined to be illegal under

Alabama law, and Country Crossing closed its doors. See Lord Abbett Municipal Income Fund,

Inc. v. Tyson, 671 F.3d 1203, 1205 (11th Cir. 2012). U.S. Bank alleges in the Complaint that

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collected revenues were insufficient to pay debt service on the bonds. The Cooperative District

went into default. 

On April 27, 2012, U.S. Bank made a draw on the Letter of Credit in the amount of

$2,132,500.00. On June 14, 2012, the Wells Fargo Bank provided notice to U.S. Bank that they

were not going to extend the Letter of Credit beyond November 12, 2012. U.S. Bank states that

after receiving a Notice of Non-Extension from Wells Fargo Bank on or about October 24, 2012,

U.S. Bank withdrew the remaining funds available under the Letter of Credit. 

In February of 2012, Resorts Development Group II, LLC, one of the owners of the

Country Crossing Development, filed for bankruptcy. Defendant Russell Wright was listed in

court filings as the CEO of Resorts Development Group II, LLC. In the bankruptcy case, Russell

Wright filed a Proof of Claim which included a Promissory Note in the same amount as the

Letter of Credit. Dr. Robert Wright, Jr. did not file a proof of claim in the bankruptcy case. The

bankruptcy case was dismissed.

On December 3, 2012, an attorney representing Russell Wright wrote to U.S. Bank and

stated that Russell Wright has a legal interest in the Letter of Credit. (Ex. H, Doc. #1). In that

letter, Russell Wright threatened to commence litigation and demanded the return of the $5

million. 

U.S. Bank seeks declaratory relief as to the validity of the Letter of Credit, the Side

Letter, and the Amended Side Letter; U.S. Bank’s right to draw on the Letter of Credit; the rights

of the Wrights with respect to the Letter of Credit; whether Russell Wright has the legal right and

standing to challenge the validity of the obligations owed; the effect of the bond validation

judgment; and seeks a declaration that Russell Wright is judicially estopped from asserting any

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positions that are inconsistent with positions he took in the Resorts Development Group II, LLC

bankruptcy. 

IV. DISCUSSION

The Wrights argue that this court lacks subject matter jurisdiction over the Complaint for

declaratory judgment because U.S. Bank failed to seek a declaration of its rights with respect to

the Letter of Credit before drawing down the funds to zero. The Wrights say that this action

seeks an after-the-fact validation of the draw-down, and a legitimization of U.S. Bank’s defenses

to a theoretical future lawsuit by the Wrights. The Wrights argue that because U.S. Bank

presented, and Wells Fargo honored, the Letter of Credit with no interference by the Wrights,

U.S. Bank’s harm, if any, is conjectural and not actual or imminent. In response to a brief by U.S.

Bank, counsel for the Wrights have further represented to the court that they have been instructed

to inform the court and parties “in no uncertain terms, that they are not going to file a lawsuit

against U.S. Bank regarding its drawn down of the $5,000,000 letter of credit.” (Doc. #20 at

¶2).

In light of these arguments, there are two issues presently before the court; namely,

whether the court had subject matter jurisdiction at the time the Complaint was filed, see

Household Bank v. JFS Group, 320 F.3d 1249, 1259 (11th Cir. 2003) (stating, in a case in which

declaratory judgment defendants had informed the district court that they did not intend to file a

suit, that the court must look to the facts as they existed at the time the action was filed), and, if

so, whether the court now lacks jurisdiction because the case has become moot. 

 “If there is an underlying ground for federal court jurisdiction, the Declaratory Judgment

Act allow[s] parties to precipitate suits that otherwise might need to wait for the declaratory relief

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defendant to bring a coercive action.” Household Bank, 320 F.3d at 1253 (quotation omitted). 

The Declaratory Judgment Act provides that a declaratory judgment may be issued only in the

case of an “actual controversy.” Malowney v. Federal Coll. Deposit Group, 193 F.3d 1342, 1347

(11th Cir. 1999). The case may not be “conjectural, hypothetical, or contingent; it must be real

and immediate, and create a definite, rather than speculative threat of future injury.” Id.

(quotation omitted). 

In an attempt to establish the conjectural nature of this case, the Wrights rely in part on 1

Hendrix v. Poonai, 662 F.2d 719 (11th Cir. 1981), in which the court found no case or

controversy existed where a hospital sought a declaration that if it denied privileges to a doctor,

that doctor would not have a cause of action against it. The court reasoned that because the

privileges could in fact be granted by the hospital, the doctor did not “have a cause of action

upon which he may carry through with his alleged threats of litigation . . .” so that there was no

case or controversy. Hendrix, 662 F.2d at 722. 

In this case, U.S. Bank has alleged threatened injury in the form of a lawsuit to challenge

the propriety of its draw-down against the Letter of Credit and seeks a declaration of its rights in

the face of that threatened injury. Unlike in Hendrix, U.S. Bank has already drawn down funds,

and the Wrights have demanded return of the money, and threatened litigation, so the cause of

action and the threat to pursue it exist. Therefore, the allegations of the Complaint present an

actual case or controversy so as to support subject matter jurisdiction in this case. See Household

 The non-binding case, Turbine Corp. v. York Research Corp. No. 91cv8414, 1992 WL 1

147603 (S.D. N.Y. June 15, 1992), also relied on by the Wrights, in which the court accepted

assurances from counsel that it was unlikely there would be litigation in finding that a claim was

not ripe for purposes of a Rule 15 motion to amend, does not appear consistent with Eleventh

Circuit precedent discussed below, so the court is not persuaded to follow it.

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Bank, 320 F.3d at 1256 (finding jurisdiction over a declaratory judgment action based on

defendant’s “anticipated coercive action”).

The Wrights also state that this court should decline to exercise jurisdiction because U.S.

Bank has asked the court to make declarations that implicate parties other than those in the case,

including the Cooperative District, Wells Fargo, Southern Farms, and the State of Alabama. This

is an issue which the court will address after finally deciding mootness, as discussed below.

As to the mootness issue, the Wrights argue that they have no intention to sue U.S. Bank

about the Letter of Credit, so that there is no jurisdiction. U.S. Bank relies on the analysis in

Already, LLC v. Nike, Inc., __ U.S. __, 133 S. Ct. 721 (2013) and argues that the Wrights’

argument is necessarily a mootness argument, which requires proof under a “voluntary cessation

test.” As the Court explained, if a defendant claims that its voluntary compliance moots a case, it

must show that it is “absolutely clear the allegedly wrongful behavior could not reasonably be

expected to recur.” Already, 133 S. Ct. at 727 (quotation omitted). In Already, Nike Corporation

filed a covenant stating that it would not make any claim or demand against the other party

involved in the litigation in that case. The Court concluded that the breadth of the unconditional

and irrevocable covenant was sufficient to meet the “voluntary cessation test,” and establish

mootness. Id. at 728. 

The Wrights do not appear to disagree that the Already analysis is appropriate in this

case, but they contend that the Already case does not set out a particular form which they must

follow to disavow their intention to pursue further litigation, and they have expressed their

intention not to pursue further litigation on the subject matter of the instant lawsuit. Although

the Wrights urge that their representations should “preclude the type of future litigation about

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which U.S. Bank is concerned,” (Doc. #24 at ¶15), the court cannot conclude, in view of the

breadth of language contained in the December 3, 2012 letter on behalf of the Defendants, under

Already or Eleventh Circuit precedent, that a “renunciation” in brief, in the absence of a formal

agreement or other document, is sufficient to establish mootness. See Household Bank, 320 F.3d

at 1260 (stating that “[r]egardless of their present renunciation, without a binding, judicially

enforceable agreement,” the defendants could still force the declaratory judgment plaintiffs to

defend against the claims identified in the declaratory judgment action). In their final brief filed

in this case, the Wrights state that they “stand ready and willing to execute a more formal

document expressing their intentions.” (Doc. #24 at ¶16). Accordingly, before ruling on the

mootness issue, the court will give the Wrights additional time in which to formally state their

intentions. If the parties can come to an agreement and file a joint document, the court will

consider it in ruling on mootness. If the parties cannot come to an agreement, the court will

consider their positions and rule on mootness, and decide whether the court should abstain from

exercising jurisdiction. 

V. CONCLUSION

For the reasons discussed, it is hereby ORDERED that the Motion to Dismiss (Doc. #17)

is DENIED in part, and held in abeyance in part. It is further ORDERED as follows:

1. The parties are given until August 5, 2013 to confer with one another and to file a

joint document as to the Defendants’ intention with respect to future litigation against U.S. Bank.

2. If after conferring with one another the parties are unable to file a joint document, the

Defendants are given until August 12, 2013 to file whatever formal document they wish to file to

establish mootness in this case. The Plaintiff is given until August 19, 2013 to respond to that

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filing.

 Done this 24th day of July, 2013.

/s/ W. Harold Albritton ______________

W. HAROLD ALBRITTON

SENIOR UNITED STATES DISTRICT JUDGE

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