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National Bank May be a Citizen of Two States When Measuring Diversity Under CAFA

Mount v. Wells Fargo Bank, N.A., No. 2:08-cv-6298, 2008 WL 5046286 (C.D. Cal. Nov. 24, 2008)

A national bank can be a citizen of two states for CAFA diversity purposes when its principal place of business and the main office designated in its articles of association are located in different states.

Relying on CAFA, Wells Fargo Bank, N.A., removed a class action from California state court. Wells Fargo argued that CAFA’s minimal diversity requirement was met because, as a national bank, its citizenship was determined by the South Dakota main office location specified in its articles of association (citing Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303 (2006) and Cole v. Wells Fargo Bank, N.A., 437 F. Supp. 2d 974 S.D. Iowa 2006)). [Note: Pursuant to 28 U.S.C. § 1348, “All national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively located.”]

Relying on decisions of the 5th and 7th Circuits, the district court disagreed and held that a national bank’s citizenship for diversity purposes could be based on its principal place of business, as well as the place specified in its articles of association (citing Horton v. Bank One, N.A., 387 F.3d 426 (5th Cir. 2004) and Firestar Bank, N.A. v. Faul, 253 F.3d 982 (7th Cir. 2001)). 

Although Wells Fargo argued that its principal place of business was the Iowa location of its mortgage subdivision involved in the class action, the district court found that the activity of the subdivision, even a separate subsidiary corporation, could not determine the citizenship of a parent corporation. Because the district court found that Wells Fargo’s principal place of business was in San Francisco, CAFA’s minimal diversity requirements were not met and the case was remanded to the state court. 

[Note: Another district court, in a non-CAFA matter, disagreed with the California district court and held that Wells Fargo’s principal place of business did not determine its citizenship. See Wells Fargo Bank, N.A. v. WMR e-Pin, LLC, 08-5472, 2008 WL 5429134 (D. Minn. Dec. 29, 2008).]

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on February 03, 2009 (boomark / email).