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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Wells Fargo Bank NA,

Plaintiff,

v. 

Wyo Tech Investment Group LLC, et al.,

Defendants.

No. CV-17-04140-PHX-DWL

ORDER 

Pending before the Court is the parties’ most recent status report. (Doc. 298.) For 

the following reasons, the stay will remain in place until the parties resolve their litigation 

before Judge Logan in Resource Recovery Corp. v. Inductance Energy Corp. et al., 20-

CV-764-PHX-SPL.

RELEVANT BACKGROUND

In this interpleader action, which was initiated in November 2017, the CWT Parties 

and Wyo Tech each contend they are entitled to $546,282.55 in funds that were previously 

held in an account at Wells Fargo. (See generally Doc. 119.) The litigation has been 

extremely contentious, involving sanctions, contempt orders, and recusal requests. (See 

generally Doc. 246.) Nevertheless, the parties filed a notice on November 20, 2019 

announcing that they “and their affiliates have agreed to have global settlement discussions 

in an attempt to settle this and all other related pending litigation.” (Doc. 287 at 1.) Based 

on this development, the parties asked the Court to enter a stay. (Id.) This request was 

granted. (Doc. 289.) 

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At the time the stay was issued, there was one pending motion: the CWT Parties’ 

motion to transfer a different case to the undersigned judge—a fraudulent transfer action 

they filed against Wyo Tech and Inductance Energy Corporation (“Inductance”) in 

September 2019, which bears the case number 19-CV-5255-PHX-MTL and has been 

assigned to Judge Liburdi (the “Fraudulent-Transfer Action”). (Doc. 238.) Additionally, 

about two weeks after the stay was issued, Wells Fargo filed a motion for attorneys’ fees. 

(Doc. 290.) That motion also remains unresolved in light of the stay.

On December 13, 2019, the parties filed a second status report. (Doc. 291.) In it, 

they requested a continuation of the stay because “scheduling issues” had caused the 

mediation to be postponed until January 2020, but they clarified that “[o]ver the last several 

weeks, the parties’ principals have also productively communicated in writing and by 

phone concerning potential settlement terms and issues to be resolved at this mediation.” 

(Id. at 2.) Given these representations, the Court kept the stay in place. (Doc. 292.)

On January 24, 2020, the parties filed a third status report. (Doc. 293.) It stated:

[T]he parties held a mediation in Phoenix, Arizona before the Honorable 

Barry C. Schneider, at which the parties entered into a binding term sheet. 

Under this term sheet, upon execution of formal settlement documentation 

and closing of the transaction contemplated by the parties’ settlement, the 

claims of [the CWT Parties] in this action will be resolved by way of 

assignment to William J. Hinz or his designee. The parties are in the process 

of negotiating a formal settlement agreement. Once executed, under the 

parties’ settlement, there will be a 60-day waiting period before the 

contemplated transaction closes. Thus, the parties jointly request that the 

stay of this action be continued until further order of this Court.

(Id. at 2.) Accordingly, the Court allowed the stay to remain in place and ordered the 

parties to file a substitution order (or further status report) by April 24, 2020. (Doc. 294.)

On March 11, 2020, the CWT Parties filed a motion asking the Court to hold a 

telephonic conference to address their “contemplated motion to enforce the parties’ binding 

term sheet.” (Doc. 295 at 2.) The following day, the Court denied this request, explaining 

that the earlier orders only contemplated lifting the stay before April 24, 2020 at the joint 

request of the parties. (Doc. 297.) The Court also encouraged the parties to continue 

working toward a settlement. (Id.)

On April 20, 2020, one of the CWT Parties filed a new lawsuit in the District of 

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Arizona. It is captioned Resource Recovery Corp. v. Inductance Energy Corp et al., CV20-764-PHX-SPL, and has been assigned to Judge Logan (the “Term-Sheet Action”). As 

for the nature of the lawsuit, the complaint explains:

This is an action to enforce a settlement agreement Defendants entered into 

with RRC and the CWT Parties to resolve several lawsuits pending in this 

District and in other courts, in exchange for a payment of $2.5 million by the 

Defendants to RRC and the CWT Parties. Under the terms of the settlement 

agreement, all the Defendants are jointly and severally liable for the $2.5 

million payment. But despite RRC and the CWT Parties’ performance of all 

their obligations, Defendants have unaccountably repudiated the validity of 

the agreement and refused to pay. Thus, RRC now sues for this settlement 

payment and specific enforcement of the Defendants’ nonmonetary 

obligations under the agreement.

(Id., Doc. 1, ¶ 1.) The complaint also notes that “[t]his action is related to the interpleader 

action captioned Wells Fargo Bank, N.A. v. Wyo Tech Investment Group, LLC, et al., Case 

No. 17-cv-4140-DWL.” (Id. at 2 n.1.) 

On April 24, 2020, the parties filed their fourth status report, which is addressed 

below. (Doc. 298.)

DISCUSSION

I. The Parties’ Arguments

In the fourth status report, the CWT Parties argue that the parties entered into a 

“binding” settlement agreement—in the form of a term sheet—during the mediation in 

January 2020, that William Hinz (who is an investor in Wyo Tech and the CEO of 

Inductance) agreed under the term sheet to be personally responsible for the $2.5 million 

settlement payment, that Mr. Hinz’s personal guarantee was a critical settlement term. 

(Doc. 298 at 2-4.) Nevertheless, the CWT Parties contend that Mr. Hinz and the Wyo Tech 

parties have refused, in the months since the mediation, to execute a formal settlement 

agreement that is consistent with those terms and have instead attempted to impose a 

“material modification” by “insist[ing] that any follow-up agreement make only [a defunct 

company called] RDX liable for this [$2.5 million] payment.” (Id.) As relief, “the CWT 

Parties request that the stay in this action be lifted solely to the extent of (1) allowing the 

CWT Parties to move to transfer the Term-Sheet Action to Your Honor, and allowing this 

Court to rule on that motion, and (2) allowing this Court to rule on the CWT Parties’ motion 

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to transfer the Fraudulent-Transfer Action to Your Honor.” (Id. at 7.)

Wyo Tech, unsurprisingly, has a much different take on the current state of affairs. 

In its portion of the status report, Wyo Tech contends that it (and Inductance) “always 

contemplated that RDX would be solely liable for the payment,” that the law firms who 

have represented it in this action—Wilenchik & Bartness and Beus Gilbert—were 

improperly excluded from attending the mediation, that Mr. Hinz “inadvertently signed 

[the term sheet] on a signature line with his personal name, not Inductance, as he intended,” 

that the mediator “has no recollection of any discussion or agreement reached that the 

individual signatories would personally guarantee or become liable for the payment,” and 

that the first draft of the settlement agreement, which was drafted by the CWT Parties 

following the mediation, didn’t require Mr. Hinz to personally guarantee the payment. 

(Doc. 298 at 7-13.) As for how to proceed, Wyo Tech offers two options: (1) “the Court 

should dismiss this action with prejudice and return the interpled funds,” or (2) 

“alternatively, [the Court should] continue the stay in this case until the CWT Parties’ new 

lawsuit filed on April 20, 2020 (2:20-cv-00764-SPL) . . . is resolved.” (Id. at 7-8.) Wyo 

Tech also disagrees with the CWT Parties’ suggestion that this Court could lift the stay and 

resolve the enforceability of the term sheet, arguing that the Court “only has jurisdiction 

over Wyo [Tech] and the CWT Parties, but the Terms Sheet was signed by several 

individuals and entities that are not parties to this action,” such that the Court “has no 

jurisdiction over them and therefore cannot pass upon the enforceability of the Terms 

Sheet.” (Id. at 9.)

II. Analysis

It is disappointing, although perhaps not surprising, that the parties’ settlement 

attempt has now become the springboard for even more litigation. As for how to proceed, 

one option would be to lift the stay for the limited purpose of addressing whether the parties 

entered into a binding settlement agreement during the mediation. In general, a district 

court “has inherent authority to enforce agreements that settle litigation before it.” Slater 

v. Arizona, 2019 WL 5801981, *3 (D. Ariz. 2019) (citing In re City Equities Anaheim, Ltd., 

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22 F.3d 954 (9th Cir. 1994)). The difficulty here, however, is that the alleged settlement 

agreement isn’t limited to these parties and this action—instead, it is a global settlement 

agreement that, in the CWT Parties’ view, resolves an array of different lawsuits and binds

an array of different individuals and entities who are not parties in his action. As Wyo 

Tech points out, it is unclear whether the Court would possess authority, as part of this 

action, to address the enforceability of such an agreement. Additionally, given that the 

CWT Parties have now filed a different action to resolve the enforceability question, there 

are sound reasons not to address it as part of this case.

Another option (which the CWT Parties propose) would be to lift the stay so the 

CWT Parties can file a motion to transfer the Term-Sheet Action from Judge Logan to this 

Court. Although this approach might make sense from an efficiency perspective, see 

LRCiv 42.1(a), the presence in the Term-Sheet Action of counsel from Fennemore Craig, 

P.C. (see 20-CV-764-PHX-SPL, Doc. 11 at 4), a firm in which the undersigned judge’s 

spouse is a shareholder, creates a conflict that precludes the Court from overseeing it. 

Wyo Tech suggests a third option would be to declare that this case is over and 

release the disputed money back to Wyo Tech. (Doc. 298 at 7.) It is unclear why Wyo 

Tech believes this would be a legally appropriate outcome, given the pending dispute over 

the terms and enforceability of the alleged settlement agreement.

The remaining option is to allow the stay to remain in place while the parties (and 

non-parties) litigate the Term-Sheet Action before Judge Logan. Although this is an 

imperfect option, because it will delay the resolution of this long-pending action, it is the 

best option available. Indeed, if the term sheet is deemed enforceable, it appears this action 

will be resolved without the need for further litigation.

...

...

...

...

...

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Accordingly, IT IS ORDERED that the stay in this action shall remain in effect 

pending the resolution of the Term-Sheet Action. In the interim, the two pending motions 

in this action (Docs. 238, 290) will remain unresolved. The parties are ordered to file a 

joint status report within five days of the resolution of the Term-Sheet Action.

Dated this 1st day of May, 2020.

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