Second Circuit Holds That National Banks Are
Not Citizens of States in Which They Have
Their Principal Places of Business for
Diversity Purposes
Publication:
Riker Danzig Banking Alert: August 2, 2016
The United States Court of Appeals for the Second Circuit recently held that, for purposes of diversity jurisdiction,
a national bank is only a citizen of the state in which its main office is located per its articles of association. See
OneWest Bank, N.A. v. Melina, 2016 WL 3548346 (2d Cir. June 29, 2016). There, a bank initiated a foreclosure
action in the United States District Court for the Eastern District of New York. The borrower, a New York
resident, moved to dismiss the action for lack of subject matter jurisdiction, arguing that there was no diversity
between the parties because the foreclosing lender’s parent company’s principal place of business was in New York
as well. The district court denied the borrower’s motion, and he filed an appeal to the Second Circuit. On appeal,
the Second Circuit focused on the issue of whether a national bank is only a citizen of the state in which its main
office is located per its articles of association, or whether it is also a citizen of the state in which it has its principal
place of business. Although the borrower had made this argument based on the claim that the lender’s parent
company had a principal place of business in New York, the court rejected using the parent company’s principal
place of business for that of its subsidiary. The court nonetheless addressed the issue of diversity. The court first discussed the Supreme Court’s 2006 decision in Wachovia Bank v. Schmidt. 546 U.S. 303 (2006). In
Schmidt, the United States Supreme Court held that a national bank is a citizen of the state designated in its articles
of association as the location of its main office, and further held that it is not a citizen of every state in which it has a
branch. The Supreme Court did not directly address whether a national bank is also a citizen of the state in which it
has its principal place of business because “in almost every case . . . the location of a national bank’s main office and
of its principal place of business coincide.” However, the Supreme Court did note that a corporation is a citizen of
both the state “by which it has been incorporated” and the state “where it has its principal place of business”
pursuant to 28 U.S.C. § 1332; whereas, the corresponding provision for national banks does not mention a principal
place of business. See 28 U.S.C. § 1348. The Second Circuit followed the Supreme Court’s dicta and expressly noted that Congress had not included
“principal place of business” in the relevant national bank statute. It likewise noted that Congress enacted a statute
in 1958 stating that state-chartered banks are citizens of both their states of incorporation and their principal place
of business, but did not change the corresponding statute for national banks. This indicated that Congress did not
intend to link the jurisdiction of national and state banks. Therefore, the Second Circuit found that national banks
are only citizens of the state designated by its articles of association as the location of its main office. In doing so,
the Second Circuit joined the Fifth, Seventh, Eighth and Ninth Circuits in this finding. See Tu Nguyen v. Bank of Am.
, N.A., 516 Fed. Appx. 332 (5th Cir. 2013); Hicklin Eng’g, L.C. v. Bartell, 439 F.3d 346 (7th Cir. 2006); Wells Fargo
Bank, N.A. v. WMR e–PIN, LLC, 653 F.3d 702 (8th Cir. 2011); Rouse v. Wachovia Mortg., FSB, 747 F.3d 707 (9th
Cir. 2014).
For a copy of the decision, please contact Michael O’Donnell at [email protected].
Attorney:
Michael R. O’Donnell
Practice:
Financial Services
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