- Ninth Circuit Holds That a National Bank Is “Located” Only in the State of its Main Office for the Purposes of Diversity Jurisdiction
- April 11, 2014 | Authors: Seth M. Gerber; Christopher A. Raftery
- Law Firm: Bingham McCutchen LLP - Santa Monica Office
A recent Ninth Circuit opinion makes it easier for national banks to have access to a federal forum under diversity jurisdiction. In Rouse v. Wachovia Mortgage, FSB, No. 12-55278, 2014 WL 1243869 (9th Cir. Mar. 27, 2014), the dispositive issue before the appellate court was whether a national bank is a citizen for the purposes of diversity jurisdiction both in the state in which its principal place of business is located and in the state where its main office is located. The relevant statute governing diversity jurisdiction with regard to national banks, 28 U.S.C. § 1348, provides that national banks are deemed citizens of the states in which they are “located.” The Ninth Circuit prefaced its opinion by noting that “the relevant statute is ambiguous, the courts are split on the question, and the Supreme Court has not squarely decided the issue.” The Ninth Circuit held that a national bank is a citizen only of the state in which its main office is located.
The Background Facts
The plaintiffs in Rouse filed suit against Wells Fargo Bank, N.V., a Wachovia Mortgage division (“Well Fargo”), in the Superior Court of the State of California for claims relating to their home loan and deed of trust. The bank removed the case to federal court, alleging both federal question and diversity jurisdiction. The plaintiffs, citizens of California, amended their complaint to assert only state law causes of action. The federal district court remanded the case to state court on the basis that the parties lacked diversity jurisdiction. The district court reasoned that the parties were not diverse because Wells Fargo was a citizen of South Dakota, the state in which its main office is located, and a citizen of California, the state in which its principal place of business is located.
The Ninth Circuit’s Analysis
The Ninth Circuit reversed the district court’s decision to remand the case to state court. The Ninth Circuit first analyzed the statutory language of 28 U.S.C. § 1348. In relevant part, the statute provides that “[a]ll national banking associations shall...be deemed citizens of the States in which they are respectively located.” The appellate court noted that the statute offers no definition of the word “located,” and in light of the “chameleon” nature of the term, it must look beyond the plain text of the statute to discern the meaning of the word for the purposes of § 1348.
The Ninth Circuit next turned to Supreme Court precedent on the subject of diversity jurisdiction in the context of national banks. In Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303, 318 (2006), the United States Supreme Court held that a national bank is not “located” under 28 U.S.C. § 1348 in each state in which it has a branch, but rather in the state in which its main office is located. The Ninth Circuit stated that “although this holding appears to be a categorical statement with respect to § 1348, [the Ninth Circuit] acknowledge[d] that it was rendered in response to a slightly different question” than presented there. The question before the Supreme Court, as the Ninth Circuit noted, was limited to whether national banks are citizens of every state in which they operate a branch. For two principal reasons, the Ninth Circuit determined that Wachovia Bank’s holding encompassed the question of whether a national bank is a citizen of the state of its principal place of business in addition to the state of its main office. First, the Ninth Circuit reasoned that the Supreme Court’s holding in Wachovia Bank was largely based on the conclusion that Congress intended to protect the right of national banks to remove cases to federal courts. And second, the Ninth Circuit noted that the Supreme Court discussed the national bank’s principal place of business, which “strongly suggest[s] that the Court did not overlook the issue.”
Finally, the Ninth Circuit analyzed the Congressional intent behind § 1348. Specifically, the Ninth Circuit sought to assess whether the principle of jurisdictional parity—i.e. whether diversity citizenship of national banks should align with the statutory definition of state-chartered banks, which are citizens of the state of their incorporation and their principal place of business—still applies. In its examination of the relevant diversity statutes, the Ninth Circuit commented that, when the current version of § 1348 was enacted in 1948, state-chartered corporations were deemed citizens only of the states in which they were incorporated. Congress did not revise the relevant state-chartered bank statute, 28 U.S.C. § 1332(c)(1), to provide that state-chartered corporations would also be deemed citizens of the states in which they maintain their principal places of business until 1958. The Ninth Circuit noted that when Congress made this change to the state-chartered bank statute, it did not amend § 1348. As such, the Ninth Circuit concluded that at the time Congress enacted § 1348, it did not intend that a national bank's principal place of business would determine its citizenship. Therefore, the Ninth Circuit held that “under § 1348, a national banking association is a citizen only of the state in which its main office is located.”
Circuit Judge Ronald Gould dissented from the majority opinion in Rouse on the basis that Ninth Circuit precedent supports jurisdictional parity between national banks and state-chartered banks, as well as on his view that the issue of principal place of business was not raised in the Supreme Court’s decision in Wachovia Bank because the defendant bank’s principal place of business was located in the same state as its main office.
The Ninth Circuit’s ruling in Rouse has important implications for the ability of federally chartered banks to access a federal forum. As the Supreme Court noted in Wachovia Bank, 546 U.S. at 307, “[w]ere we to hold...that a national bank is additionally a citizen of every State in which it has established a branch, the access of a [national] bank to a federal forum would be drastically curtailed....” Rouse now makes it easier for national banks involved in lawsuits within the Ninth Circuit’s jurisdiction to get into federal court, where there are perceived litigation advantages, such as mandatory disclosures, more limited discovery and a requirement that jury verdicts are unanimous.
1 A bank is a national bank if the “corporate entit[y] [is] chartered not by any State, but by the Comptroller of the Currency of the U.S. Treasury.” Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303, 306 (2006). A national bank, on formation, must designate, in its organization certificate and articles of association, the “place where its operations of discount and deposit are to be carried on,” which serves as the bank’s “main office.” Id. at 307, n.1.