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Dueling Interpretations for Dual Citizenship of National Banks

Wells Fargo Bank, N.A. v. WMR e-Pin, LLC, 08-5472, 2008 WL 5429134 (D. Minn. Dec. 29, 2008)

If you are a National Bank, can you claim the citizenship of more than one state? The answer to that question is yes and no. No, this in not a trick question, but the answer depends on the federal district court. 28 U.S.C. § 1348 provides 'All national banking associations shall…be deemed citizens of the States in which they are…located.' But what exactly does 'located' mean?

 Recently, the District of Minnesota directed Wells Fargo to correct deficiencies in its jurisdictional allegations. In response, Wells Fargo stated it is a citizen of South Dakota. Respondents disagreed, and sought to obtain preclusive effect of a 2008 decision by the Central District of California, which held that Wells Fargo Bank is a citizen of California because its principal place of business is located in California. The court's decision was premised on cases from the Fifth and Seventh Circuits, which interpreted § 1348 to provide that national banks are considered citizens of the state of their principal place of business and the state specified in its articles of incorporation. 

The District of Minnesota disagreed, and held that the principal place of business did not determine a National Bank's citizenship.   Relying on Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303 (2006), the District of Minnesota noted an express distinction between corporations, which are citizens of the state of incorporation and its principal place of business under 28 U.S.C. § 1332(c)(1), from national banks, whose jurisdictional counterpart, § 1348, makes no reference to a principal place of business. 

Furthermore, the district court relied on a Seventh Circuit case, which stated, 'Wachovia Bank held that national banks are citizens only of the states in which their main offices are located….' Hicklin Eng'g L.C. v. Bartell, 439 F.3d 346, 348 (7^th Cir. 2006). 

But here's the problem, the court in Bartell misconstrued the holding in Wachovia Bank!

The heart of this confusion stems from the interpretation of § 1348 in Wachovia Bank. In Wachovia Bank, the U.S. Supreme Court reversed the Fourth Circuit's holding that a National Bank is a citizen of each state in which a branch office is located. The Supreme Court expressly chose not to rule on whether 'located' under § 1348 should be construed to give National Banks the citizenship of only one state (the state where their main office is located in accordance with the organizational certificate) or dual citizenship from their principal place of business and the state listed on the bank's organizational certificate. However, the Court noted that this distinction would be of scant significance because, 'in almost every case, as in this one, the location of a national bank's main office and of its principal place of business coincide.'

Since, the Supreme Court expressly chose not to rule on this particular issue, the District of Minnesota's reliance on Bartell is misguided. While the distinction may be of 'scant significance' it has caused dueling interpretations of § 1348, and until this issue is resolved National Banks will be dueling in court whether they should have dual citizenship.

(Editors' Note: See the CAFA Law Blog analysis of a similar issue in Mount v. Wells Fargo posted on February 3, 2009).

By: Adam Bosso

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on July 23, 2009 (boomark / email).