Wells Fargo and Fifth Third ask Chapman to resolve class contradictions

By Steve Korris | Aug 5, 2011


Wells Fargo and Fifth Third banks call on Madison County Associate Judge Thomas Chapman to resolve contradictions they see between two orders that retired circuit judge Daniel Stack signed when he certified a class action against them.

Stack granted summary judgment to defendants on all claims but negligence last November, and he certified a class action on negligence.

The class consists of 649 individuals in 38 states who completed 2,013 transactions in connection with tax free bond issues of $40,550,000, for seven nursing homes.

The nonprofit bond issuer, Malachi Corporation, defaulted on the bonds.

Wells Fargo moved for reconsideration of class certification in June, claiming Stack's summary judgment order cleared them of any role in any negligence.

David Wells of St. Louis wrote that the class certification order failed to incorporate findings within the summary judgment order.

"As a result, the class certification order and the summary judgment order are contradictory," he wrote.

He wrote that the obligation to pay the bonds rested exclusively on Malachi.

"The bonds were unrated, and as such involved a high degree of risk as explicitly stated in the official statements," he wrote.

He wrote that proceedings in Wisconsin and Minnesota recovered most of the proceeds through sale of the nursing homes.

He wrote that Stack applied Illinois law even though only 57 individuals reside there.

He wrote that Stack failed to analyze variations in laws of 38 states.

"Applying Illinois law to the entire class of bondholders violates due process and controlling Illinois law," he wrote.

"This motion was not filed sooner due to the parties failing to agree until recently on the judicial assignment of this case."

Fifth Third joined the motion in July.

So did bond counsel Gilmore and Bell, and investment adviser Blue and Company.

Christopher Threlkeld, of Lucco and Brown in Edwardsville, represents the class.

Wells practices at Thompson Coburn. Catherine Schroeder of the same firm worked on the brief. So did Patrick McLaughlin, of Dorsey and Whitney in Minneapolis.

Chapman plans a hearing Aug. 30.

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