                            In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

Nos. 06-1053 & 06-1837
STATE OF WISCONSIN,
                                                 Plaintiff-Appellee,
                                                  Cross-Appellant,
                                v.

HO-CHUNK NATION,
                                            Defendant-Appellant,
                                                 Cross-Appellee.
                        ____________
           Appeals from the United States District Court
              for the Western District of Wisconsin.
              No. 05 C 632—John C. Shabaz, Judge.
                        ____________
     ARGUED JUNE 1, 2006—DECIDED SEPTEMBER 11, 2006
                        ____________


  Before FLAUM, Chief Judge, and MANION and WILLIAMS,
Circuit Judges.
  MANION, Circuit Judge. The State of Wisconsin and
the Ho-Chunk Nation entered into a compact enabling the
Ho-Chunk Nation to conduct certain gaming activities on its
lands in exchange for making payments to Wisconsin. After
a disagreement arose, Wisconsin sued the Ho-Chunk Nation
to compel arbitration and to appoint an arbitrator. The
district court exercised jurisdiction and appointed
an arbitrator. The Ho-Chunk Nation appealed from that
2                                   Nos. 06-1053 & 06-1837

order, arguing that the court lacked subject matter juris-
diction and that Wisconsin’s complaint failed to state a
claim under the Federal Arbitration Act. Wisconsin later
filed a motion seeking a substitute arbitrator, arguing that
the original arbitrator had a conflict of interest. The dis-
trict court denied the motion and Wisconsin appealed.
We conclude that no subject matter jurisdiction exists
over the complaint. We also conclude that the Ho-Chunk
Nation is not entitled to sanctions or double costs for
Wisconsin’s allegedly frivolous appeal that Wisconsin
voluntarily moved to dismiss before the completion of
briefing.


                             I.
   In 1992, the State of Wisconsin entered into a compact
with the Wisconsin Winnebago Tribe, which is now known
as the Ho-Chunk Nation (“the Nation”). The compact
authorized the Nation to conduct on its lands various “Class
III games” such as slot machines and blackjack, regulated
the gaming, and provided that the Nation would pay
Wisconsin’s costs of regulation. The compact was amended
first in 1998 and, relevant to this case, again in 2003. The
second amended compact expanded the permitted casino
games to the full panoply of Las Vegas-style gaming,
including poker, roulette, keno, and craps. In exchange, the
Nation agreed to pay Wisconsin 30 million dollars in 2004
and 2005, and, in subsequent years, a percentage of the
Nation’s net winnings decreasing incrementally from eight
to six percent in years 2006 to 2010. After that, the parties
agreed to payments of six percent “continuing in perpetu-
ity.” The second amended compact established a perpetual
duration for the compact, with the possibility of renegotiat-
ing terms every twenty-five years. It also waived sovereign
Nos. 06-1053 & 06-1837                                        3

immunity, and provided for dispute resolution through
binding arbitration.
  The second amended compact was executed on April 25,
2003, and submitted to the Secretary of the Interior for
approval. The compact went into effect 45 days later, after
the Secretary took no action to approve or disapprove of the
compact. 25 U.S.C. § 2710(d)(8)(C). Just before the first thirty
million dollar payment was due, the Supreme Court of
Wisconsin issued a decision addressing compact provisions
similar to those in the second amended compact. Panzer v.
Doyle, 680 N.W.2d 666 (Wis. 2004), abrogated in part by
Dairyland Greyhound Park, Inc. v. Doyle, 719 N.W. 2d 408
(Wis. 2006). The Panzer decision addressed a compact
between Wisconsin and the Forest County Potawatomi
which, like the compact at issue here, provided that the
agreement would endure in perpetuity and waived Wiscon-
sin’s sovereign immunity. Although the Nation was not a
party in the Panzer case, the Nation, along with other tribes,
submitted an amici curiae brief supporting the validity of
the compacts. Ruling against the position of the tribes, the
Supreme Court of Wisconsin held that the Governor of
Wisconsin lacked the authority to enter into a perpetual
compact, to waive Wisconsin’s sovereign immunity, or to
agree to certain games that violate the Wisconsin constitu-
tion and criminal code. Id. at 701.
  Although the Nation’s own compact was not directly
invalidated by the Panzer case, the Nation’s second amend-
ment to the compact contained terms similar to those in
the Potawatomi compact at issue in Panzer. Following
the Panzer decision, the Nation ceased offering the offending
games, withheld payments to Wisconsin, and sought to
renegotiate the relevant compact provisions. After failing to
negotiate a resolution, the Nation submitted a complaint in
4                                     Nos. 06-1053 & 06-1837

arbitration, in accordance with the compact, on June 23,
2005. The arbitration complaint alleged breaches of contract
and breaches of good faith and fair dealing.
  The parties then sought a mutually acceptable arbitrator,
a contentious process that culminated in the present litiga-
tion. After striking each other’s proposed arbitrators, the
parties withdrew the strikes and agreed to appoint one
arbitrator each, who together would select an arbitrator to
conduct the binding arbitration.1 The two arbitrators
conferred without success. The Nation’s arbitrator sug-
gested that they continue to negotiate until November 15,
2005, and that if an agreement were not reached by that
date, then both parties could jointly petition the district
court for the appointment of an arbitrator. Before that date,
Wisconsin filed a complaint in the Western District of
Wisconsin, along with a motion to compel arbitration and
to appoint an arbitrator. The Nation filed a motion to
dismiss the complaint for lack of jurisdiction, which also
argued that the Federal Arbitration Act (“FAA”) does not
apply to Indian tribes or Indian commerce and that the
motion to compel lacked merit since no lapse in the negotia-
tions occurred.
  The district court determined that it had jurisdiction, that
the FAA applied, and that a lapse in the arbitration pro-
cess had occurred. Then, choosing from arbitrators pro-
posed by both parties, the district court selected the Honor-
able William A. Norris, a retired federal judge, to conduct
the arbitration. In the opinion of the district court, Judge
Norris, one of the Nation’s proposed arbitrators, had no


1
  We note that the parties appear to dispute whether the compact
provides for arbitration before a single arbitrator or before a
panel of three arbitrators. We express no opinion on this issue.
Nos. 06-1053 & 06-1837                                      5

conflict of interest or bias and had “considerable and
meaningful experience in both gaming and Indian law,” as
was required by the compact. Having ordered arbitration,
the district court dismissed Wisconsin’s action without
prejudice, permitting the “immediate reopening upon
motion of either party where all issues have not been
resolved by arbitration.” The Nation filed a notice of appeal,
seeking to challenge the district court’s denial of its motion
to dismiss, but not the appointment of Judge Norris.
  As the parties prepared for arbitration, Wisconsin learned
that Judge Norris’s law firm, Akin Gump, had represented
several Indian tribes in compact negotiations and poten-
tially would do so again in the future. Wisconsin considered
this a conflict of interest and accordingly filed a motion
before the district court requesting the reopening of the case
for the substitution of an arbitrator without conflicts. The
district court denied the motion, although it noted that it
may lack jurisdiction over the motion because of the
pending appeal. Wisconsin filed a notice of appeal from that
order, which was docketed as appeal 06-1837. We consoli-
dated the two appeals.
  Less than two weeks after Wisconsin filed its opening
appellate brief in appeal 06-1837, and about one week before
the Nation’s response brief was due, Wisconsin notified the
Nation that it was willing to dismiss its appeal voluntarily.
The next day, without having heard whether the Nation
agreed, Wisconsin mailed to the court a motion to dismiss
the appeal voluntarily, which was filed the following day.
We requested a response from the Nation. The Nation
responded that it supported Wisconsin’s motion, but
requested sanctions. Since the parties disagreed about the
costs, we denied the motion to dismiss. See Fed. R. App. P.
42(b) (“The circuit clerk may dismiss a docketed appeal if
6                                     Nos. 06-1053 & 06-1837

the parties file a signed dismissal agreement specifying how
costs are to be paid and pay any fees that are due.”). Even
though the parties agreed that Wisconsin’s appeal would
not proceed on the merits, we directed the Nation to file a
motion for sanctions, which remains for our adjudication.
Thus, before the court are both the Nation’s appeal and the
sanctions issue presented in Wisconsin’s appeal.


                              II.
  The Nation argues on appeal that the district court lacked
subject matter jurisdiction over this case and that the FAA
does not apply to Indian tribes or Indian commerce. We
begin with the jurisdictional issue, a question of law that we
review de novo. America’s Moneyline, Inc. v. Coleman, 360
F.3d 782, 784 (7th Cir. 2004). To determine whether subject
matter jurisdiction exists, we look first to the complaint filed
by Wisconsin because “federal jurisdiction exists only when
a federal question is presented on the face of the plaintiff’s
properly pleaded complaint.” Caterpillar, Inc. v. Williams, 482
U.S. 386, 392 (1987) (citation omitted). Wisconsin claims that
subject matter jurisdiction exists because the case arises
from federal law. 28 U.S.C. § 1331. To arise under federal
law, the law must “ ‘create[ ] the cause of action.’ ” Nat’l
Farmers Union Ins. Cos. v. Crow Tribe of Indians, 471 U.S. 845,
850-51 (1985) (quoting Am. Well Works Co. v. Layne & Bowler
Co., 241 U.S. 257, 260 (1916)). In the complaint, the State
brings exactly one cause of action: it seeks an order compel-
ling arbitration under the FAA. The complaint also states
that the parties negotiated the compact that provides for
arbitration pursuant to the Indian Gaming Regulatory Act
of 1988 (“IGRA”) and lists IGRA as a basis for jurisdiction.
As we explain below, neither the FAA nor the IGRA creates
Nos. 06-1053 & 06-1837                                       7

a cause of action that confers subject matter jurisdiction over
this dispute.
  The FAA by itself does not provide subject matter jurisdic-
tion for any dispute; as a result, “there must be diversity of
citizenship or some other independent basis for federal
jurisdiction” to address an arbitration dispute. America’s
Moneyline, 360 F.3d at 784 (internal quotation and citation
omitted); 9 U.S.C. § 4 (allowing claims for arbitration to be
brought in “any United States district court which, save for
such [arbitration] agreement, would have jurisdiction under
Title 28” over the controversy). Thus, a federal court may
issue “an order compelling arbitration only when the
federal district court would have jurisdiction over a suit on
the underlying dispute.” America’s Moneyline, 360 F.3d at
784; see also Wise v. Wachovia Sec., L.L.C., 450 F.3d 265, 266
(7th Cir. 2006) (noting that the FAA “confers federal juris-
diction in cases involving arbitration only of disputes that,
were they litigated rather than arbitrated, would be within
federal jurisdiction” (citations omitted)). We note, however,
that this circuit has recognized that “[a] strong body of
caselaw has developed . . . holding that the nature of the
underlying dispute [in arbitration] is irrelevant for purposes
of subject matter jurisdiction, even on a motion to compel
[arbitration] . . . the motion itself must involve diversity or
federal question jurisdiction.” Minor v. Prudential Sec., Inc.,
94 F.3d 1103, 1106 (7th Cir. 1996) (collecting cases); see also
Greenberg v. Bear, Stearns & Co., 220 F.3d 22, 27-28 (2d Cir.
2000) (noting that “the simple presence of federal claims
in the arbitration itself [is] insufficient as an indepen-
dent basis for federal jurisdiction,” but exercising juris-
diction because the complaint alleged “manifest disre-
gard of the federal laws”). Thus, we do not look to the
Nation’s underlying complaint in arbitration, but confine
our analysis to the federal claims articulated in Wiscon-
8                                     Nos. 06-1053 & 06-1837

sin’s complaint before the district court. Since the FAA does
not provide an independent basis for jurisdiction,
we examine Wisconsin’s other proffered basis for juris-
diction in its complaint: the IGRA.
   The IGRA confers jurisdiction on the district court in three
instances: (1) for “any cause of action initiated by an Indian
tribe arising from the failure of a State to enter into negotia-
tions with the Indian tribe . . . or to conduct such negotia-
tions in good faith,” (2) for “any cause of action initiated by
a State or Indian tribe to enjoin a class III gaming activity
located on Indian lands and conducted in violation of any
Tribal-State compact,” or (3) for “any cause of action
initiated by the Secretary to enforce the procedures”
prescribed in the IGRA. 25 U.S.C. § 2710(d)(7)(A)(i)-(iii).
This case does not fall within any of these three options: the
Nation did not initiate the case, neither the State nor the
Nation seeks to enjoin class III gaming, nor did the Secretary
initiate the action. Thus, this case is outside of the jurisdic-
tional grant in the plain language of the IGRA. Id.
  Nonetheless, Wisconsin argues that this case arises out
of a compact, and since a compact is a creation of federal
law and since IGRA governs the scope of the compact,
Wisconsin claims that this case arises under federal law.
Thus, even without reliance on the Nation’s complaint
in arbitration, Wisconsin argues that its complaint sets forth
a federal question. Wisconsin cites to several cases, each of
which presents causes of action distinguishable from the
single cause of action to compel arbitration brought in this
case. Wisconsin first relies on Forest County Potawatomi
Community of Wisconsin v. Norquist, 45 F.3d 1079 (7th Cir.
1995), to support its jurisdictional argument. In Norquist, a
lawsuit initiated by a tribe, this court exercised jurisdiction
based on the tribe’s “federal right” to operate its gaming
Nos. 06-1053 & 06-1837                                         9

“free from state or city interference.” Norquist, 45 F.3d at
1082. In contrast, this case is not brought by a tribe com-
plaining of state interference. Instead, Wisconsin brings a
suit to compel arbitration that does not present a claim
regarding a federal right. Wisconsin also relies on Cabazon
Band of Mission Indians v. Wilson, 124 F.3d 1050 (9th Cir.
1997). Cabazon, however, concerned a claim brought by
tribes “to enforce the Compacts” and to enforce a prior
federal court ruling allowing certain tribes “to recover
money taken by the State in violation of federal law.”
Cabazon, 124 F.3d at 1056. While the Ninth Circuit cautions
against construing federal question jurisdiction and the
IGRA “too narrowly,” id., Wisconsin’s complaint in this case
does not ask the federal court to resolve a breach of or to
enforce a tribal compact. Finally, Wisconsin submits
language from a footnote of the Eleventh Circuit’s case in
Tamiami Partners, Limited v. Miccosukee Tribe of Indians of
Florida, 177 F.3d 1212, 1223 n.11 (11th Cir. 1993), to suggest
that the court “ ‘look through’ [the plaintiff’s] arbitration
request at the underlying [ ] dispute in order to determine
whether [the plaintiff’s] complaint states a federal ques-
tion.” As discussed above, we do not look through to the
underlying complaint in arbitration to ascertain whether
subject matter jurisdiction obtains. See Minor, 94 F.3d at
1106. Regardless, in Tamiami, the Eleventh Circuit clarified
in another footnote that “a licensing dispute,” specifically
whether the tribe breached an obligation in rejecting gaming
license applications, “provides a basis for exercising fed-
eral question jurisdiction over” the complaint. 177 F.3d at
1223 n.12. That case, in its third visit to the Eleventh Circuit,
presented causes of action concerning the scope of the
tribe’s authority and “rel[ied] on certain provisions of
IGRA.” Id. at 1222. The Eleventh Circuit even described
Tamiami as “more than a mere dispute concerning a contract
or an agreement to arbitrate.” Id. at 1222.
10                                   Nos. 06-1053 & 06-1837

  In this case, Wisconsin’s complaint simply requests that
the court compel arbitration over this controversy that
“arises from and concerns a gaming compact negotiated
pursuant to” the IGRA. While Wisconsin claims that an
interpretation of the IGRA will be required in arbitration,
this is not clear from its complaint, and even if it were, the
underlying matter may not be sufficient to provide juris-
diction. See Minor, 94 F.3d at 1106. If a similar controversy
over the appointment of an arbitrator arose from a con-
tract between two Wisconsin corporations, the district court
would not have subject matter jurisdiction over the case
unless the complaint in district court somehow alleged a
federal question. See Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 26 n.32 (1983) (noting that the FAA
“is something of an anomaly in the field of federal-court
jurisdiction” since “it does not create any independent
federal-question jurisdiction” and requires either diversity
jurisdiction or some other basis for federal jurisdiction in
order for the federal court to address the case). The question
here is: since the IGRA enables and regulates contracts
between tribes and the states, does any dispute arising from
the resulting compact present a question under the IGRA?
We think not. The connection to federal law set forth in
Wisconsin’s complaint is tangential: Wisconsin’s complaint
is based on an arbitration clause that happens to be con-
tained in a compact between a state and a tribe. The com-
plaint does not present the district court with any claim for
a violation of the IGRA, require an interpretation of the
IGRA, encompass any of the situations for which the IGRA
confers jurisdiction, or even require the district court to
address a breach of the compact that was formed pursuant
to the IGRA. Wisconsin’s complaint simply requests that the
district court compel arbitration. Without more, and without
incorporating the Nation’s underlying complaint in arbitra-
Nos. 06-1053 & 06-1837                                       11

tion, this complaint does not present a federal question over
which the court has jurisdiction.
  Wisconsin also argues that the compact provides for
jurisdiction in the Western District of Wisconsin. Specifi-
cally, Wisconsin points to language in the compact stat-
ing that “[a]ny action to compel arbitration, determine
whether an issue is arbitrable or to confirm an award
entered by the arbitrator shall be brought in the United
States District Court for the Western District of Wis-
consin under the Federal Arbitration Act . . . .” It is, how-
ever, axiomatic that “[n]o court may decide a case with-
out subject matter jurisdiction, and neither the parties
nor their lawyers may stipulate to jurisdiction or waive
arguments that the court lacks jurisdiction.” United States v.
Tittjung, 235 F.3d 330, 335 (7th Cir. 2000) (citations omitted).
An Indian tribe’s waiver of its sovereign immunity to
subject itself to suit does not change this requirement. The
provisions in the compact do not alter our determination
that Wisconsin’s complaint does not provide for subject
matter jurisdiction over its cause of action. Similarly, our
analysis cannot be affected by the availability or unavail-
ability of another forum for this dispute.
  In determining that Wisconsin’s complaint fails to provide
a basis for subject matter jurisdiction, we do not hold that
these facts are impervious to jurisdiction. We express no
opinion as to whether either party could craft a complaint
that states a federal question in this situation or whether
Wisconsin should be permitted to amend its complaint on
remand before the district court. Accordingly, we remand
to the district court with instruction to dismiss the case for
lack of subject matter jurisdiction.
  The Nation further argues that the FAA does not apply to
the case, essentially arguing that Wisconsin fails to state a
12                                     Nos. 06-1053 & 06-1837

claim under the FAA because the FAA does not encompass
a case that involves, according to the Nation, only Indian
commerce, rather than interstate or foreign commerce.
Because subject matter jurisdiction over this case is absent,
we will not reach the issue of whether the FAA applies to
this situation.


                              III.
  We next address the Nation’s motion for sanctions in
Wisconsin’s appeal. The Nation requests sanctions based on
Federal Rule of Appellate Procedure 38, which states that
“[i]f a court of appeals determines that an appeal is frivo-
lous, it may, after a separately filed motion or notice from
the court and reasonable opportunity to respond, award just
damages and single or double costs to the appellee.” A
“frivolous” appeal is one in which “ ’the result is obvious or
when the appellant’s argument is wholly without merit.’ ”
Ins. Co. of the W. v. County of McHenry, 328 F.3d 926, 929 (7th
Cir. 2003) (quoting Grove Fresh Distribs. v. John Labatt, Ltd.,
299 F.3d 635, 642 (7th Cir. 2002)). Frivolity “depends on the
work product: neither the lawyer’s state of mind nor the
preparation behind the appeal matter.” Mars Steel Corp. v.
Cont’l Bank N.A., 880 F.2d 928, 938 (7th Cir. 1989) (en banc).
This court has found appeals that “rehash[ ] positions that
the district court properly rejected,” or that “present[ ]
arguments that are lacking in substance and foreordained to
lose” to be frivolous. Berwick Grain Co. v. Ill. Dep’t of Agric.,
217 F.3d 502, 505 (7th Cir. 2000) (citations and internal
quotation omitted). Whether to impose sanctions for a
frivolous appeal “is within the sound discretion of this
court.” Ins. Co. of the W., 328 F.3d at 929 (citing Grove Fresh
Distribs., 299 F.3d at 642). Even if an appeal is frivolous,
Rule 38 by its use of the permissive “may,” “allows the
Nos. 06-1053 & 06-1837                                      13

court of appeals to decline to impose sanctions.” Mars Steel
Corp., 880 F.2d 928, 938 (citation omitted).
   We need not determine whether Wisconsin’s appeal is
frivolous, because even if it were frivolous, sanctions are not
appropriate in this case. In Ormsby Motors Incorporated v.
General Motors Corporation, 32 F.3d 240, 241 (7th Cir. 1994),
we considered an appeal in which, after the opening briefs
were filed by both the appellant and appellee, the appellant
moved to voluntarily dismiss the appeal in lieu of filing a
reply brief. The appellee moved for sanctions. We declined
to award sanctions and stated that “only in an exceptional
case would we be inclined to grant such relief.” Ormsby
Motors, Inc., 32 F.3d at 241. We explained: “We do not want
to discourage voluntary dismissals, which save the time not
only of appellees but of this court, by a readiness to grant
sanctions.” Id. In this case, Wisconsin notified the Nation of
its willingness to dismiss the appeal before the filing of the
Nation’s opening brief, in contrast to Ormsby in which the
appellee had already filed its brief. Although the Nation had
understandably already expended efforts in the drafting of
its brief when it received notice from Wisconsin, the notice
and the filing of the motion for voluntary dismissal
weigh against sanctions. We do not find that Wisconsin
acted in bad faith. In sum, we do not find extraordinary
circumstances that would warrant the imposition of sanc-
tions after the filing of a motion to dismiss the appeal
voluntarily.


                             IV.
  Because subject matter jurisdiction is lacking, we VACATE
the district court’s opinion denying the Nation’s motion
to dismiss and REMAND to the district court with instruc-
14                                  Nos. 06-1053 & 06-1837

tions to dismiss the case for want of jurisdiction. We also
DISMISS appeal number 06-1837 pursuant to Rule 42(b), and
DENY the Nation’s motion for sanctions and double costs.

A true Copy:
       Teste:

                         _____________________________
                          Clerk of the United States Court of
                            Appeals for the Seventh Circuit




                   USCA-02-C-0072—9-11-06
