Originally published June 13, 2005
Recently the Supreme Court granted certiorari in one case of interest to the business community. Barring extensions, amicus briefs in support of the petitioner will be due on July 28, 2005, and amicus briefs in support of the respondent will be due on September 1, 2005.
Diversity Jurisdiction — Citizenship of National Banks. Federal law provides that, for purposes of diversity jurisdiction, national banking associations shall "be deemed citizens of the States in which they are respectively located." 28 U.S.C. § 1348. The Supreme Court granted certiorari in Wachovia Bank, National Association v. Schmidt, No. 04-1186, to decide whether national banks are "located" in all states in which they maintain a branch or, instead, only in those states in which they maintain their principal place of business or that are listed in the bank’s organizational certificate or articles of association.
The courts of appeals are split on this question. Three Circuits — the Fifth, Seventh, and Ninth — have taken the narrower view, holding that a national bank is "located" for diversity purposes only in the state where it maintains its principal place of business or that is named in the bank’s organizational certificate. But in Wachovia Bank, reported at 388 F.3d 414, a divided panel of the Fourth Circuit rejected the views of the other courts of appeals, concluding that a national bank is located in every state in which it has a branch.
This issue is one of significant practical importance to national banks. More than 160 national banks operate interstate branches. Under the Fourth Circuit’s rule, for diversity purposes these banks are deemed citizens of all states in which they do business — which means that the banks often will be unable to shield themselves from local bias in diversity actions by removing suits to federal court. This rule also uniquely disadvantages national banks, because all other corporations, including the state banks that are national banks’ competitors, are treated as citizens only of the states in which they are incorporated or in which they maintain their principal place of business.
Mayer, Brown, Rowe & Maw LLP is counsel of record for petitioner.
Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.