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Wells Fargo Bank N.A. v. Wyo Tech Investment Group LLC

United States District Court, D. Arizona

September 27, 2019

Wells Fargo Bank NA, Plaintiff,
Wyo Tech Investment Group LLC, et al., Defendants.


          Dominic W. Lanza United States District Judge

         Pending before the Court is a motion to strike filed by CWT Canada II Limited Partnership, Resource Recovery Corporation, and Jean Noelting (collectively, the “Judgment Creditors”). (Doc. 228.) Wyo Tech Investment Group LLC (“Wyo Tech”) opposes the motion to strike and also seeks the undersigned judge’s recusal under 28 U.S.C. § 455(a). (Doc. 231.) For the following reasons, both motions will be denied.


         This is a civil interpleader action in which Wyo Tech and the Judgment Creditors have asserted competing claims to a sum of money, $546, 282.55, that was previously deposited in Wyo Tech’s bank account at Wells Fargo. On October 31, 2018, this case was transferred to the undersigned judge. (Doc. 93.) In the 11 months since the reassignment, the undersigned judge has issued numerous rulings, some of which are discussed in detail below.

         On August 22, 2019, a group of non-party subpoena recipients filed a motion for recusal. (Doc. 204.)

         On August 27, 2019, the Court issued an order denying the motion. (Doc. 209.) In a nutshell, the Court concluded that recusal wasn’t warranted because “the reasons identified in the Subpoenaed Individuals’ motion-(1) issuing discovery rulings with which they apparently disagree, (2) being friends with a lawyer who has a brother who has a law partner who is serving as local counsel in this case, (3) working for the [U.S. Attorney’s Office] at the same time that a different [attorney in that office], separated by three levels of supervisors, was pursuing an unrelated criminal investigation involving a non-party, and (4) having a phone call four years ago with a non-party about an unrelated matter-would not cause a reasonable person to question the undersigned judge’s impartiality.” (Id. at 9.)

         This order also included a footnote concerning the timeliness of the recusal motion. Specifically, the Court “note[d] that, had Wyo Tech attempted to file a recusal motion at this late juncture of the case, such a motion would have been untimely. . . . Here, because the only entities formally seeking recusal are the Subpoenaed Individuals (who had no prior involvement in this case), their motion will not be denied on timeliness grounds. That said, the motion is predicated on information that likely came from Wyo Tech and [Dennis] Danzik (and that Wyo Tech’s counsel, Wilenchik & Bartness, must have known at the time this case was reassigned to the undersigned judge). The Subpoenaed Individuals would have no other way of knowing about non-public criminal investigations that didn’t result in charges. Further, the proposed order granting the recusal motion was emailed to the Court’s chambers email address by Wyo Tech’s counsel, not by the Subpoenaed Individuals’ counsel. Such coordination raises the possibility that Wyo Tech is using the Subpoenaed Individuals as a stalking horse to evade the time limits on recusal motions.” (Id. at 6 n.5, citation omitted.)

         On September 12, 2019, Wyo Tech (through its counsel, Dennis Wilenchik of the law firm Wilenchik & Bartness) filed a document entitled “Supplement To Clarify The Record Re: Denial Of Motion For Recusal Filed By Non-Parties” (hereinafter “the Supplement”) (Doc. 227.) In the Supplement, Wyo Tech “takes issue with certain gratuitous statements” in the order denying the recusal motion. (Id. at 1.) First, Wyo Tech disputes that it “was fully aware of all of the facts set forth in the Subpoenaed Parties’ recusal motion” at the time this case was reassigned to the undersigned judge in October 2018. (Id. at 2.) Specifically, Wyo Tech asserts that it “only just recently” learned of the familial relationship between a friend of the undersigned judge and an attorney who works for the law firm that is representing the Judgment Creditors in this case. (Id.) Second, Wyo Tech characterizes as “presumptuous and insulting” the suggestion in the order that Wyo Tech had anything to do with the Subpoenaed Parties’ decision to file the recusal motion, arguing that “[u]ndersigned counsel was not even aware of it.” (Id. at 2-3.)

         On September 13, 2019, the Judgment Creditors filed a motion to strike the Supplement. (Doc. 228.) First, the Judgment Creditors argue the Supplement is procedurally improper because it is “functionally a post-decision objection” to the order denying the recusal motion, yet “a party is not authorized by any statute, rule, or court order to submit additional argument or facts merely to ‘clarify the record.’” (Id. at 1-2.) Second, the Judgment Creditors argue that the premise underlying the Supplement-that Wyo Tech had nothing to do with the Subpoenaed Individuals’ decision to file the recusal motion- is false. (Id. at 2-3.) In support of this claim, the Judgment Creditors enclose a series of emails they recently obtained via a subpoena to a Wyo Tech investor. (Doc. 229 at 2 ¶ 2.) These emails show that, on August 16, 2019, Mr. Wilenchik sent an email to other attorneys at Wilenchik & Bartness, asking, “[C]an u [sic] send me a draft objection we can ask [the Subpoenaed Individuals’ counsel] to file?” (Doc. 229-1 at 4.) Mr. Wilenchik’s email added, “Also we shd [sic] file our own.” (Id.) In response, one of those attorneys wrote: “See attached. We are setting up a meeting with [the Subpoenaed Individuals’ counsel] for Monday to discuss this and the motion for recusal as you requested.” (Doc. 229-1 at 3.) Mr. Wilenchik then forwarded this email chain to Wyo Tech’s CEO, who in turn forwarded it to a distribution list of at least 12 individuals (all of whom appear to be Wyo Tech investors). (Doc. 229-1 at 2.) At the top of this email, also sent on August 16, 2019, Wyo Tech’s CEO wrote in part: “[W]e are going to file a motion to have a Judge recuse himself . . . .” (Id.)

         On September 16, 2019, Wyo Tech filed a “Response To . . . Motion To Strike And . . . Motion For Recusal.” (Doc. 231.) Wyo Tech begins by arguing that the Court’s earlier rulings in this case were erroneous and constitute proof of bias. (Id. at 2-4.) Next, Wyo Tech argues the motion to strike should be denied because the “Supplement is not prohibited by any statute, rule, or court order” and the Judgment Creditors have not “pointed to any authority to support that assertion.” (Id. at 4-6.) Wyo Tech also argues that the emails enclosed as an exhibit to the motion to strike (which show that Wyo Tech and its counsel were involved in the preparation of the earlier recusal motion) do not contradict any of the assertions in the Supplement: “Wyo [Tech] and its counsel have never actually ever denied . . . that they agreed with and assisted [the Subpoenaed Individuals’ counsel] in representing his clients based on providing him with the relevant facts and evidence, from which he then decided . . . to file the recusal motion.” (Id. at 4 n.3.) Furthermore, Wyo Tech contends the Judgment Creditors acted improperly in attaching the emails to the motion because they “are clearly attorney-client privileged communications which were obviously inadvertently disclosed by Wyo [Tech].” (Id.) Finally, Wyo Tech makes its own recusal request under 28 U.S.C. § 455(a). (Id. at 7-10.) It incorporates the arguments contained in the earlier recusal motion and also contends that certain “newly discovered information” supports its request. (Id.)


         I. Motion To Strike

         The first motion before the Court is the Judgment Creditors’ motion to strike. (Doc. 228.) It is governed by LRCiv 7.2(m)(1), which provides that “a motion to strike may be filed only if it is authorized by statute or rule, such as Federal Rules of Civil Procedure 12(f), 26(g)(2) or 37(b)(2)(A)(iii), or if it seeks to strike any part of a filing or submission on the ground that it is prohibited (or not authorized) by a statute, rule, or court order.” On the one hand, the Court agrees with the Judgment Creditors that the elements of LRCiv 7.2(m)(1) are satisfied here. The Court is not aware of any “statute, rule, or court order” that would authorize a litigant to file a “supplement” whose sole purpose is to criticize an order, issued 16 days earlier, that denied a motion which hadn’t been filed by that litigant. Thus, the Supplement filed by Wyo Tech could be stricken under LRCiv 7.2(m)(1).

         Nevertheless, the Court will decline to grant the Judgment Creditors’ motion. “Motions to strike, ” at least in the Rule 12(f) context, “are viewed with disfavor and are not frequently granted.” Operating Engineers Local 324 Health Care Plan v. G & W Constr. Co., 783 F.3d 1045, 1050 (6th Cir. 2015).[1] There are sound reasons for this disfavored status. Motions to strike often needlessly run up the cost of litigation and squander judicial resources, and there is a quick, simple, and cost-free alternative to striking an irrelevant pleading-ignoring it. Cf. v. AirFX LLC, 2012 WL 129804, *1 (D. Ariz. 2012) (“Defendant moves to strike plaintiffs’ reply . . ., arguing that the reply raises new arguments . . . . [A] motion to strike in this case is unnecessary, as we do not consider new arguments raised in a reply.”). For these reasons, some district courts have concluded that “[a] motion to strike should not be granted unless the matter to be stricken clearly could have no possible bearing on the subject of the litigation. If there is any doubt whether the portion to be stricken might bear on an issue in the litigation, the court should deny the motion.” Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F.Supp.2d 1048, 1057 (N.D. Cal. 2004) (citation omitted). Thus, the Court will decline to strike the Supplement.

         Wyo Tech should not, however, construe this outcome as an invitation to keep filing procedurally-improper documents. This is the second time Wyo Tech has filed an unauthorized “supplement” in this case. (Docs. 176, 227.) Any similar future filing will be stricken by the Court, without the need for a motion by the Judgment Creditors.

         II. Motion For Recusal

         The second motion before the Court is Wyo Tech’s motion for recusal, which is incorporated into its response to the motion to strike. (Doc. 231.)[2]

         A. The Prior Rulings

         Wyo Tech’s first argument is that the Court’s previous rulings in this case were not just wrong, but so obviously wrong that they must have been motivated by a secretly-harbored bias and sense of antipathy toward Wyo Tech and Danzik. (Doc. 231 at 1-4, 9.)

         This argument is baseless. Although the Court is hesitant to comment on its previous rulings-they speak for themselves-Wyo Tech’s decision to advance such an argument in its recusal motion triggers a need to address it. 1. April 9, 2019 Ruling The first ruling with which Wyo Tech apparently disagrees is the Court’s April 9, 2019 order, which concluded that the Judgment Creditors should be entitled to conduct discovery in this case.

         As background, in February 2019, the parties notified the Court (via a joint letter) that they had a disagreement concerning the enforceability of a particular subpoena. (Doc. 101.) Two days later, the Court held a telephonic hearing to address the dispute. (Doc. 103.) At the outset of the hearing, the Court stated it was “tentatively inclined to quash the subpoena” at Wilenchik & Bartness’s request, based on one of the cases cited in the joint letter, but also noted that “[i]n Shepardizing that case just recently in preparing for this hearing, [the Court] found several other cases by federal courts in New York” that also touch upon the availability of discovery in restraining-notice cases. (Doc. 106 at 2-4.) The Court ultimately took the matter under advisement, rather than ruling from the bench, so it could further review the newly-discovered cases. (Id. at 17.) About a week later, the Court issued an order explaining that, “[a]lthough the Court initially hoped to rule on the discovery dispute promptly, the Court has concluded, after further consideration, that the issues presented by this dispute are intertwined with broader unresolved issues in the case. Accordingly, the Court will order the parties to file supplemental briefing.” (Doc. 109 at 1.) This order then summarized three interrelated legal issues and gave the parties an opportunity to address those issues via 10-page briefs. (Id. at 5-11.)

         On April 9, 2019, after reviewing the parties’ supplemental briefs (Docs. 113, 114) and after hearing oral argument (Docs. 118, 121), the Court issued a lengthy order that, among other things, concluded the Judgment Creditors should be entitled to conduct discovery. (Doc. 119.)

         2. May ...

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