Saturday, September 3, 2011

Decision of Interest: Circuit Split on Diversity Jurisdiction and National Banks

Yesterday a panel of the U.S. Court of Appeals for the Eighth Circuit issued a 2-1 decision that appears to create (or at least deepen) a circuit split over the citizenship of national banks for purposes of diversity jurisdiction. The case is Wells Fargo Bank, N.A. v. WMR e-PIN LLC, No. 09-3800, 2011 WL 3862589 (Sept. 2, 2011).

Here’s some background: Under 28 U.S.C. § 1348, “[a]ll national banking associations shall . . . be deemed citizens of the States in which they are respectively located.” In Wachovia Bank v. Schmidt, 546 U.S. 303 (2006), the Supreme Court rejected the notion that such a national bank is “located” in every state where it has a branch office, holding instead that a “a national bank, for § 1348 purposes, is a citizen of the State in which its main office, as set forth in its articles of association, is located.” Id. at 307.

The Wachovia decision acknowledged but did not directly confront the question of whether, for purposes of diversity jurisdiction, a national bank is also a citizen of the state where it has its principal place of business (PPB). See 317 n.9. That question could be significant if the bank’s PPB is in a different state than the “main office” listed in its article of association. That’s precisely the issue in Wells Fargo. The party opposite Wells Fargo was a California citizen, and it argued that diversity jurisdiction was lacking because Wells Fargo’s PPB is in California, even though the “main office” set forth in its articles of association is in South Dakota.

The majority opinion in Wells Fargo, authored by Judge Wollman, concludes that a national bank is not a citizen of the state where it’s PPB is located for purposes of diversity jurisdiction. Judge Wollman acknowledges that this holding is contrary to decisions from other circuits such as Horton v. Bank One, 387 F.3d 426 (5th Cir. 2004), and Firstar Bank v. Faul, 253 F.3d 982 (7th Cir.2001), although he asserts that the Seventh Circuit changed course on this issue in Hicklin Engineering v Bartell, 439 F.3d 346 (7th Cir. 2006).

Judge Murphy dissents, arguing that a national bank like Wells Fargo can be a citizen of two states: the state of its PPB and the state where its main office, as listed in its articles of association, is located.


(Hat Tip: How Appealing)

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