Civil Procedure & Federal Courts Blog

SCOTUS Decision in Kiobel v. Royal Dutch Petroleum

Today the Supreme Court decided Kiobel v. Royal Dutch Petroleum Co. (No. 10-1491), a long-pending case involving the Alien Tort Statute (ATS). Although the Court is unanimous that the ATS does not provide jurisdiction in this particular case, there is a 5-4 split on the reasoning.

Chief Justice Roberts authors the majority opinion, joined by Scalia, Kennedy, Thomas, and Alito. In addition, Justice Kennedy files a concurring opinion, and Justice Alito files a concurring opinion that Thomas joins.

Justice Breyer authors an opinion concurring in judgment, joined by Ginsburg, Sotomayor, and Kagan.

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Appellate Jurisdiction and Guantanamo

This week the U.S. Court of Military Commission Review denied petitions for writs of mandamus filed by the ACLU (order here) and a group of several media outlets (order here) in connection with the military commission trials at Guantanamo Bay, Cuba. The petitions were filed under the All Writs Act [28 U.S.C. § 1651(a)], and challenged a protective order issued by the Military Commission Judge. Among other things, the protective order authorizes automatic closure of proceedings and sealing of records whenever classified information is disclosed, even if the information is publicly known, and prohibits personal testimony by the defendants about their experiences while in U.S. custody.

The Court’s order does not address the merits of the petitioners’ arguments, or whether the All Writs Act is properly invoked in this context. Rather, it concludes that the case “is not ripe for our review.” From the order regarding the media petitioners:

This controversy is not ripe for our review. The judge has issued a protective order in accordance with Military Commission Act (MCA) Sec. 949p-3, 10 U.S.C. §949p-3. Petitioners have not alleged a single instance where the Military Commission Judge has improperly applied Amended Protective Order #1 to deny Petitioners access to information, sufficient to warrant the sort of extraordinary relief petitioners seek. See MCA Sec. 949d(c). See generally Clapper v. Amnesty International, 133 S. Ct. 1138 (2013); Cheney v. United States, 542 U.S. 367 (2004); Am. Civil Liberties Union v. U.S. Dep’t of Def., 628 F.3d 612 (D.C. Cir. 2011) (discussing classified information and Freedom of Information Act).

We emphasize the limited scope of our holding. We are not ruling on the merits of the parties claim that there is writ jurisdiction under the All Writs Act, 28 U.S.C. § 1651(a).

Judge Silliman authored a concurring opinion urging the Court to address whether it has jurisdiction under the All Writs Act and arguing that 28 U.S.C. § 2241(e)(2) “explicitly stripped our Court of such jurisdiction.”

Steve Vladeck (American University) has more coverage at Lawfare.

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SCOTUS Oral Argument in U.S. v. Windsor

Today the Supreme Court heard oral argument in United States v. Windsor, the first of two cases on same-sex marriage. The transcript and audio are available on the Supreme Court’s website.

As covered earlier (e.g., here, here, and here), Windsor presents some interesting issues relating to jurisdiction and Article III standing, to which the Court devoted the first half (almost an hour's worth) of the oral argument . 

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SCOTUS Oral Argument in Hollingsworth v. Perry

Today the Supreme Court heard oral argument in Hollingsworth v. Perry, the first of two cases on same-sex marriage. The argument transcript and audio are available on the Supreme Court’s website.

As covered earlier (e.g., here, here, and here), the case presents some interesting Article III standing issues, which received a good amount of attention during the argument.

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SCOTUS Decision in Standard Fire Insurance v. Knowles

Today the Supreme Court issued a unanimous decision in Standard Fire Insurance Co. v. Knowles (No. 11-1450), covered earlier here. The Court concludes that removal under the Class Action Fairness Act (CAFA) is proper even if the named plaintiff in a state court class action stipulates that the class will not seek aggregate damages in excess of CAFA’s $5 million threshold.

Justice Breyer’s opinion (a quick read at 7 pages) emphasizes that—prior to class certification—the named plaintiff’s stipulation is not binding on the other class members:

[A] plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified. See Smith v. Bayer Corp., 564 U. S. ___, ___ (2011)…. Because his precertification stipulation does not bind anyone but himself, Knowles has not reduced the value of the putative class members’ claims. For jurisdictional purposes, our inquiry is limited to examining the case “as of the time it was filed in state court,” Wisconsin Dept. of Corrections v. Schacht, 524 U. S. 381, 390 (1998). At that point, Knowles lacked the authority to concede the amount-in-controversy issue for the absent class members. [Slip Op. 4]

Justice Breyer is more sympathetic to a different argument against CAFA jurisdiction. He writes:  

The strongest counterargument, we believe, takes a syllogistic form: First, this complaint contains a presently nonbinding stipulation that the class will seek damages that amount to less than $5 million. Second, if the state court eventually certifies that class, the stipulation will bind those who choose to remain as class members. Third, if the state court eventually insists upon modification of the stipulation (thereby permitting class members to obtain more than $5 million), it will have in effect created a new, different case. Fourth, CAFA, however, permits the federal court to consider only the complaint that the plaintiff has filed, i.e., this complaint, not a new, modified (or amended) complaint that might eventually emerge. [Slip Op. 5-6]

But he is ultimately unpersuaded:

Our problem with this argument lies in its conclusion. We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective. [Slip Op. 6]

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Grossi on Gunn v. Minton

Professor Simona Grossi (Loyola Los Angeles) has posted on SSRN a draft of her article, Federal Question Jurisdiction: The Compass, the Maze and the Trap. Here’s the abstract:

On February 20, 2013, the Supreme Court announced its decision in Gunn v. Minton. There the Court revisited the scope of statutory “arising under” jurisdiction in the context of a legal malpractice suit premised on alleged attorney errors committed in a prior patent litigation. The significance of the decision transcends the specific context in which it arose. Although Gunn involved patent law arising under jurisdiction, 28 U.S.C. §1338, that jurisdictional standard is interpreted in precisely the same manner as the identically worded §1331 standard. Hence, the decision in Gunn applies to a full range of federal question cases in which a federal issue is embedded in a state-law claim. In addition, Gunn provides insight into the ongoing clash between principle and docket-management concerns that has become so characteristic of Supreme Court decisions in the realm of procedure.

The Gunn opinion was much anticipated by the legal community since prior decisions by the Court had generated considerable confusion as to the scope of arising under jurisdiction in so-called “federal-ingredient” cases. Some commentators hoped that the Court would adopt the creation test as the exclusive measure of jurisdiction. Others hoped for a clarification of the federal-ingredient test. Still others, like this author, hoped that the Court would redirect the jurisdictional analysis to the traditional fundamental principles that once animated federal question jurisdiction. As I explain in my article, everyone will be disappointed by the result. 

The specific jurisdictional issue in Gunn focused on what had come to be known as the third and fourth prongs of the “Grable test,” namely, whether the federal ingredient embedded in the plaintiff’s state-law claim was substantial and whether the exercise of jurisdiction over that claim would upset the congressionally mandated balance between federal and state courts. Lower courts had been struggling with the interpretation and application of both prongs. Some had adopted detailed and highly technical doctrinal tests that led to counterintuitive results where jurisdiction was denied over concededly “significant” federal questions. Others had adopted a more holistic approach, seemingly designed to apply Grable test and, at the same time, avoid that test’s obvious strictures.Some lower courts actually confessed that the jurisdictional determination was subjective and speculative and that, under similar circumstances, different judges might reach different conclusions. While the Gunn Court did address both Grable prongs, it did little other than endorse its previous iterations of those elements, providing neither a defense for them nor a principled method through which they might be applied. Thus, much of the confusion over federal jurisdictional standards that preceded Gunn remains largely unresolved.

In this article, I begin by assessing the development of statutory arising under jurisdiction from its nineteenth century roots to the Court’s most recent decisions. Here I examine the fundamental-principles compass that was developed by the Court in foundational arising-under cases, and synthesized succinctly by Justice Cardozo in Gully v. First Nat. Bank in Meridian. There the Court endorsed a unified jurisdictional theory that focused on the role of the federal issue in the case, asking whether the case was truly about federal law, for if the case was truly about federal law, the exercise of jurisdiction would be inherently consistent with congressional intent to provide a forum for federal question cases.

With this fundamental-principles model as my foundation, I then examine more recent arising-under cases and show that, beginning in the 1980s, the compass got lost and was replaced by a maze of increasingly complex doctrinal tests disconnected from logical and well-established jurisdictional principles. Here the focus shifted from the federal nature of the controversy to a policy-driven model weighted heavily toward case-management concerns.

Gunn offered the Supreme Court an opportunity to recapture the compass or, at the very least, to provide a comprehensible map that would assist lower federal courts in navigating the judicially created maze. The Court, however, missed that opportunity. Instead, the Court continued along a meandering doctrinal path that diverges from the fundamental principles of jurisdiction and often leads to results inconsistent with the congressionally mandated goal of providing a federal forum for the interpretation and application of the principles of federal law.

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More Coverage of Gunn v. Minton

Here’s some more coverage of last week’s Supreme Court decision in Gunn v. Minton, which addresses Grable and federal question jurisdiction:  

• Prof. Josh Blackman (South Texas)
• Prof. Rodger Citron (Touro), Justia
• Prof. Ronald Mann (Columbia), SCOTUSblog

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SCOTUS Opinion in Gunn v. Minton

Today the Supreme Court issued a unanimous opinion in Gunn v. Minton, covered earlier here and here. The case revisits the recurring problem of when a federal law ingredient in a state law cause of action is sufficient for federal question jurisdiction (cases "arising under" federal law). It's a pretty quick turnaround--oral argument was on January 16.

Chief Justice Roberts authors the opinion, which endorses and applies the test developed eight years ago in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308 (2005). Here’s one colorful passage on Grable [Slip Op. 6], which the Chief distills into a four-part test:

[E]ven where a claim finds its origins in state rather than federal law—as Minton’s legal malpractice claim indisputably does—we have identified a “special and small category” of cases in which arising under jurisdiction still lies.  Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U. S. 677, 699 (2006).  In outlining the contours of this slim category, we do not paint on a blank canvas.  Unfortunately, the canvas looks like one that Jackson Pollock got to first. See 13D C. Wright, A. Miller, E. Cooper, & R. Freer, Federal Practice and Procedure §3562, pp. 175–176 (3d ed. 2008) (reviewing general confusion on question).

In an effort to bring some order to this unruly doctrine several Terms ago, we condensed our prior cases into the following inquiry: Does the “state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities”?  Grable, 545 U. S., at 314.  That is, federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.  Where all four of these requirements are met, we held, jurisdiction is proper because there is a “serious federal interest in claiming the advantages thought to be inherent in a federal forum,” which can be vindicated without disrupting Congress’s intended division of labor between state and federal courts.  Id., at 313–314.

Applying Grable, the Court ultimately concludes that federal jurisdiction did not extend to Minton’s state law malpractice action, even though issues of federal patent law were “necessary” and “actually disputed” for purposes of requirements 1 and 2. As to the third requirement, Chief Justice Roberts writes [Slip Op. 8]:

[T]he federal issue in this case is not substantial in the relevant sense…. As our past cases show, … it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim “necessarily raise[s]” a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.

The full discussion of the third requirement [Slip Op. 8-12] is worth a read, with some interesting discussion of the possible effect (or lack thereof) of state court malpractice actions on federal patent law and issue preclusion. As to the fourth requirement, the Chief Justice writes:

It follows from the foregoing that Grable’s fourth requirement is also not met. That requirement is concerned with the appropriate “balance of federal and state judicial responsibilities.” Ibid. We have already explained the absence of a substantial federal issue within the meaning of Grable. The States, on the other hand, have “a special responsibility for maintaining standards among members of the licensed professions.” Ohralik v.  Ohio State Bar Assn., 436 U. S. 447, 460 (1978).  Their “interest . . . in regulating lawyers is especially great since lawyers are essential to the primary governmental function of administering justice, and have historically been officers of the courts.”  Goldfarb v. Virginia State Bar, 421 U. S. 773, 792 (1975) (internal quotation marks omitted).

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The Latest on Federal Question Jurisdiction: From Merrell Dow to Grable to... Gunn v. Minton?

The Supreme Court heard oral argument today in Gunn v. Minton—the latest in the Court’s long-running struggle to define when a federal law ingredient in a state law cause of action is sufficient for federal question jurisdiction (cases "arising under" federal law). 

Here’s the oral argument transcript, which includes this comment from Justice Scalia [p.16 of the transcript]:

"Well, I like -- I like bright-line rules. In fact -- you know, I thought Holmes had it right. It doesn't arise under unless the cause of action is a Federal cause of action."

Justice Thomas is on record as being receptive to the so-called Holmes approach (in his Grable concurrence, 545 U.S. at 320-21). He is not alone, apparently.

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SCOTUS Oral Argument in Standard Fire v. Knowles

Yesterday the Supreme Court heard oral argument in The Standard Fire Insurance Co. v. Knowles (No. 11-1450), which considers whether plaintiffs can block CAFA removal by stipulating that the class is seeking damages below the $5 million threshold for CAFA diversity jurisdiction. Check out the oral argument transcript.

For additional coverage:

• Associated Press (Mark Sherman)
• Bloomberg (Greg Stohr)
• How Appealing (Howard Bashman)
• National Law Journal (Tony Mauro)
• N.Y. Times (Adam Liptak)
• Reuters (Jonathan Stempel)
• SCOTUSblog (Prof. Debra Lyn Bassett, Southwestern Law School)
• @SCOTUSHUMOR (Prof. Jay Wexler, Boston University)

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More on Standing & Jurisdictional Issues in the SCOTUS Same-Sex Marriage Cases

Today the Supreme Court issued an order in United States v. Windsor (docket no. 12-307) appointing Prof. Vicki Jackson (Harvard) “to brief and argue this case, as amicus curiae, in support of the positions that the Executive Branch’s agreement with the court below that DOMA is unconstitutional deprives this Court of jurisdiction to decide this case, and that the Bipartisan Legal Advisory Group of the United States House of Representatives lacks Article III standing in this case.”

For more coverage, check out Lyle Denniston (SCOTUSblog).

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SCOTUS Cert Grant of Interest: Gunn v. Minton

Last week the Supreme Court granted certiorari in Gunn v. Minton (No. 11-1118), which presents the question:

Did the Federal Circuit depart from the standard this Court articulated in Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005), for "arising under" jurisdiction of the federal courts under 28 U.S.C. § 1338, when it held that state law legal malpractice claims against trial lawyers for their handling of underlying patent matters come within the exclusive jurisdiction of the federal courts? Because the Federal Circuit has exclusive jurisdiction over appeals involving patents, are state courts and federal courts strictly following the Federal Circuit's mistaken standard, thereby magnifying its jurisdictional error and sweeping broad swaths of state law claims - which involve no actual patents and have no impact on actual patent rights - into the federal courts?

You can find a link to the Texas Supreme Court’s opinion below and other information about the case at SCOTUSblog’s case file.

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SCOTUS Cert Grant of Interest on CAFA Jurisdiction & Removal: Standard Fire Insurance v. Knowles

Today the Supreme Court granted certiorari in The Standard Fire Insurance Co. v. Knowles (11-1450). Here’s the question presented in the petition for certiorari:

Last Term, this Court held that in a putative class action “the mere proposal of a class . . . could not bind persons who were not parties.” Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). In light of that holding, the question presented is:

When a named plaintiff attempts to defeat a defendant’s right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a “stipulation” that attempts to limit the damages he “seeks” for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the “stipulation,” exceeds $5 million, is the “stipulation” binding on absent class members so as to destroy federal jurisdiction?

You can find links to the lower court opinion and the cert-stage briefing at SCOTUSblog's casefile.

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SCOTUS Cert. Grants of Interest

Today the Supreme Court granted certiorari in a number of cases. Some of these may be of particular interest:

Comcast Corp. v. Behrend (No. 11-864), with certiorari limited to the following question: Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.

Genesis HealthCare Corp. v. Symczyk (No. 11-1059), which presents the question: Whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff ’s claims.

Another case looks on the surface like it’s about trademark law, but the question presented has a federal courts angle. Already, LLC v. Nike, Inc. (11-982) presents the question: Whether a federal district court is divested of Article III jurisdiction over a party’s challenge to the validity of a federally registered trademark if the registrant promises not to assert its mark against the party’s then-existing commercial activities.

You can find links to the lower court opinions and the cert-stage briefing at the SCOTUSblog casefiles for Comcast v. Behrend; Genesis HealthCare v. Symczyk; and Already v. Nike.

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Ninth Circuit Holds Parens Patriae Suit Not Removable Under CAFA

In State of Nevada v. Bank of America, No. 12-15005 (Mar. 2, 2012), the Ninth Circuit held that the district court did not have subject matter jurisdiction under either the Class Action Fairness Act or Section 1331 (under Grable & Sons):

The State of Nevada . . .filed this parens patriae lawsuit against Bank of America . . . in Clark County [Nevada] District Court. Nevada alleges that Bank of America misled Nevada consumers about the terms and operation of its home mortgage modification and foreclosure processes, in violation of the Nevada Deceptive Trade Practices Act, Nev. Rev. Stat. §§ 598.0903-.0999. Nevada also alleges that Bank of America violated an existing consent judgment (“Consent Judgment”) in a prior case between Nevada and several of Bank of America’s subsidiaries, entered in Clark County District Court.

Bank of America removed this action to federal district court, asserting federal subject matter jurisdiction as either a “class action” or “mass action” under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), and as arising under federal law, 28 U.S.C. § 1331. Denying Nevada’s motion to remand, the federal district court concluded that it has jurisdiction over this action as a CAFA “class action,” but not as a “mass action,” and that it also has federal question jurisdiction because resolving the state claims will require an interpretation of federal law.

We granted Nevada’s request for leave to appeal the district court’s denial of its motion to remand pursuant to 28 U.S.C. § 1453(c)(1). We conclude that because parens patriae actions are not removable under CAFA, and the action does not otherwise satisfy CAFA’s “mass action” requirements, the district court lacks jurisdiction under CAFA. We also exercise our interlocutory appellate jurisdiction under 28 U.S.C. § 1453(c) to review the district court’s determination that it has federal question jurisdiction because the complaint references the federal Home Affordable Mortgage Program and the Fair Debt Collection Practices Act. We conclude that the district court lacks federal question jurisdiction [citing Grable & Sons]. Because there is no basis for federal subject matter jurisdiction, this case must be remanded to Nevada state court.

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More Kiobel Coverage

Lots of coverage on Kiobel v. Royal Dutch Petroleum, which is being argued today:

• Kenneth Anderson (Volokh Conspiracy)
• Lyle Denniston (SCOTUSblog)
• Jonathan Hafetz (ABA Preview)
• Julian Ku (Point of Law)
• Juan Mendez (Opinio Juris)
• David Savage (Los Angeles Times)
• Nina Totenberg (NPR)
• Peter Weiss (New York Times)
• David Weissbrodt (Point of Law)
• Stephen Wermiel (SCOTUSblog)

One issue that isn’t squarely raised by the questions presented is whether the Alien Tort Statute applies to claims brought by one alien against another (as in Kiobel). Amanda Frost’s Academic Round-up for SCOTUSblog covers an essay by Anthony Bellia and Bradford Clark, which argues that the Alien Tort Statute applies only to claims brought by an alien against a U.S. citizen. Marco Simons has a response on Concurring Opinions.

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SCOTUS Decision in Mims v. Arrow Financial

Today the Supreme Court issued a unanimous decision in Mims v. Arrow Financial Services LLC (covered earlier here), which considers whether federal-question jurisdiction exists under 28 U. S. C. §1331 for claims brought against telemarketers under the Telephone Consumer Protection Act of 1991 (TCPA). The provision of the TCPA that created a private cause of action refers to actions that would be brought in state court. See 47 U. S. C. §227(b)(3) (“A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an ap­propriate court of that State . . . an action based on a violation of this subsection . . . .”).

In an opinion by Justice Ginsburg, the Supreme Court holds that federal-question jurisdiction is proper under §1331. From the opinion [Slip Op. at 2]:

The question presented is whether Congress’ provision for private actions to enforce the TCPA renders state courts the exclusive arbiters of such actions. We have long recognized that “[a] suit arises under the law that creates the cause of action.” American Well Works Co. v. Layne & Bowler Co., 241 U. S. 257, 260 (1916). Beyond doubt, the TCPA is a federal law that both creates the claim Mims has brought and supplies the substantive rules that will govern the case. We find no convincing reason to read into the TCPA’s permissive grant of jurisdiction to state courts any barrier to the U. S. district courts’ exercise of the general federal-question jurisdiction they have possessed since 1875.

In particular, Justice Ginsburg notes [Slip Op. at 11]: “Title 47 U. S. C. §227(b)(3) does not state that a private plaintiff may bring an action under the TCPA ‘only’ in state court, or ‘exclusively’ in state court.”

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"He Signed You, Bill! Now You're A Law!"

With apologies to Schoolhouse Rock for the title of this post, President Obama has signed the Federal Courts Jurisdiction and Venue Clarification Act of 2011, covered earlier here. The law contains many significant provisions regarding federal diversity jurisdiction, removal and remand, and venue. If you’re keeping score, it amends 28 U.S.C. §§ 1332, 1391, 1404, 1441, 1446, and 1453; repeals 28 U.S.C. § 1392; and enacts new code sections 28 U.S.C. §§ 1390 and 1455.

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Federal Courts Jurisdiction and Venue Clarification of Act of 2011

This week Congress passed the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (H.R. 394), although it is still awaiting the President's signature. It’s a very important piece of legislation that will be significant for academics and practitioners alike.

Prawfsblawg’s Howard Wasserman (Florida International) has posted a summary of the final bill that was circulated by Arthur Hellman (Pittsburgh). If you want to keep tabs on the bill, check out the Bill Summary & Status here.

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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 id.at 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.

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(Hat Tip: How Appealing)