Friday, May 9, 2014

Diversity Jurisdiction and National Banks

Diversity Jurisdiction and National Banks
      The availability of access to the federal court based upon diversity jurisdiction is in many respects form dependent.  For example, a corporation is deemed to be a citizen of up to two jurisdictions, namely that in which it is incorporated and that in which it maintains its principal place of business.  28 U.S.C. § 1362.  Conversely, partnerships, limited partnerships and LLCs each have the citizenship of the each of its members with that of natural persons being based upon domicile.  National banks, which are chartered not by a state but by the Comptroller of the Currency, have their own diversity jurisdiction statute, 28 U.S.C. § 1348, which provides that a national bank is deemed a citizen of the states in which it is “located.”  In a recent decision, the 9th Circuit Court of Appeals considered the question of interpreting where a national bank is “located.”  Rouse v. Wachovia Mortgage, FSB, No. 12-55278, 2014 WL 1243869 (9th Cir. Mar. 27, 2014).
      The underlying lawsuit involved the plaintiff’s claims in connection with a home loan and deed of trust issued by Wachovia Mortgage, that being a division of Wells Fargo.  The suit was originally filed in state court, and the bank removed it to federal court on the basis of both diversity jurisdiction and a federal question.  After the plaintiffs dropped their claims based upon federal law, the suit was remanded by the district court on the basis that diversity jurisdiction was lacking, that determination being premised upon the fact that California was the principal place of business of Wells Fargo.
      The 9th Circuit would reverse that determination.
      Parsing the statute, as well as changes made and not made over the years to analogous statutes addressing that diversity jurisdiction of state chartered banks (28 U.S.C. § 1332), the 9th Circuit would hold that a national bank is “located,” for purposes of 28 U.S.C. § 1348, at the place designating in its articles of association as its principal place of business.  On that basis, in that Wells Fargo’s principal location was identified in its articles as being in South Dakota, diversity jurisdiction existed.
      It bears noting that there is a circuit split as to this issue, with at least two circuits holding that a national bank can be “located” in two or more states while others, including the Sixth, holding that national banks are citizens of the state in which they maintain their “main office,” a/k/a principal place of business.

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