9th Circuit Weighs In On Where National Banks Are Located

On March 27, the Ninth Circuit—the federal appellate court for many west coast states, including California—held that, for certain jurisdictional purposes, national banks are located in the state in which their main office is located. Rouse v. Wachovia Mortgage, FSB, No. 12-55278, 2014 U.S. App. LEXIS 5704. (9th Cir. March 27, 2014). A “national bank” is bank that is chartered by the Comptroller of the Currency of the Treasury Department, unlike state-chartered banks. In Rouse, the plaintiffs, California residents, sued Wells Fargo in state court in California, which is where Wells Fargo’s principal place of business is located. But, Wells Fargo’s “main office” is located in South Dakota. Under federal law, Wells Fargo removed the suit from state court to federal court in California, relying on federal diversity jurisdiction: plaintiff and defendant are citizens of two different states and the amount at stake exceeds $75,000. Wells Fargo removed, in part, on the basis that it was a citizen of South Dakota, not California. The federal district court, to which the case was removed, held in favor of the plaintiffs, stating that Wells Fargo was a citizen of both California and South Dakota. The Ninth Circuit reversed, relying on U.S. Supreme Court precedent which held that banks are not citizens of every state in which they operate a branch, as well as interpreting congressional intent behind the relevant statutes. One of the three Ninth Circuit judges dissented, writing that the majority should have viewed Wells Fargo as a California citizen.

Generally, defendants of all industries and locations may favor a federal forum and seek removal for various reasons, including a more diverse jury pool, favorable case law, or a faster time to trial. In Rouse, the Ninth Circuit joins the First, Fifth, Sixth, Seventh, and Eighth Circuits, in using the main office location for diversity jurisdiction analysis. In these circuits, national banks may have increased access to a federal forum when sued in state court, presuming that plaintiffs opt not to sue in in the main office state, which seems especially likely if the main office state is remote, like South Dakota. The Fourth Circuit, which governs Virginia, had previously held that national banks are located in all states in which they maintain branches, which the U.S. Supreme Court reversed. The Fourth Circuit, however, has yet to address directly a jurisdictional case where a national bank has its main office and principal place of business in two separate states, and the Supreme Court has yet to address a case with those facts, like Rouse.

Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.


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