Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303 (2006)

Facts

  • South Carolina residents sued Wachovia Bank, N.A., in South Carolina state court, alleging the bank fraudulently induced them to enter an unlawful tax-shelter transaction.
  • Wachovia, a national banking association, had its designated main office in North Carolina and maintained branch offices in multiple states, including South Carolina.
  • Wachovia filed a federal petition to compel arbitration, invoking diversity jurisdiction as the sole basis for subject-matter jurisdiction.
  • The jurisdictional dispute turned on 28 U.S.C. § 1348, which deems national banks citizens of the states in which they are “located,” and on the meaning of “located.”

Issues

  1. Under 28 U.S.C. § 1348, is a national bank a citizen of every state where it maintains branch offices, or only the state where its main office (as specified in its articles of association) is located?

Decision

  • The Supreme Court reversed the Fourth Circuit and remanded.
  • The Court held that, for § 1348, a national banking association is a citizen of the state where its main office, as set forth in its articles of association, is located.
  • Because Wachovia’s main office was in North Carolina, it was not a citizen of South Carolina solely due to maintaining branches there; complete diversity existed.

Legal Principles

  • For diversity jurisdiction, 28 U.S.C. § 1348 deems a national bank a citizen of the state in which its main office (as designated in its articles of association) is located.
  • “Located” in § 1348 does not mean every state in which a national bank operates branch offices.
  • The meaning of “located” in venue provisions does not control its meaning in a subject-matter jurisdiction statute.
  • Courts should not import the corporate citizenship rule of 28 U.S.C. § 1332(c)(1) (including principal place of business) into § 1348 absent statutory text doing so.

Conclusion

The Court construed § 1348 to confer single-state citizenship on national banks based on the location of their main office, preserving diversity jurisdiction notwithstanding a multi-state branch network.