Wachovia Bank, N.A. v. Schmidt

PETITIONER:Wachovia Bank, National Association
RESPONDENT:Daniel G. Schmidt, III, et al.
LOCATION:U.S. Court of Appeals for the Ninth Circuit

DOCKET NO.: 04-1186
DECIDED BY: Roberts Court (2005-2006)
LOWER COURT: United States Court of Appeals for the Fourth Circuit

CITATION: 546 US 303 (2006)
GRANTED: Jun 13, 2005
ARGUED: Nov 28, 2005
DECIDED: Jan 17, 2006

Mr. Andrew L. Frey – argued the cause for Petitioner
James R. Gilreath – argued the cause for Respondents
Sri Srinivasan – argued the cause for Petitioner

Facts of the case

Schmidt, a South Carolina citizen, sued Wachovia Bank in a South Carolina state court for fraudulently inducing him to participate in an illegal tax shelter. Wachovia is a national bank with its main office in North Carolina and branch offices in several other states, including South Carolina. Under federal diversity jurisdiction, federal courts can hear cases in which the parties are citizens of different states. Wachovia filed a petition in Federal District Court, seeking to compel arbitration of the dispute. After the petition was denied on the merits, Wachovia appealed to the Fourth Circuit Court of Appeals, which dismissed the case for lack of jurisdiction. Under 28 U.S.C. Section 1348, national banks are “deemed citizens of the States in which they are respectively located.” The Circuit Court interpreted “located” to mean any state where the bank has a branch location. Noting that the statute uses both “located” and “established” to refer to the presence of a bank, the Circuit Court determined that a national bank is “established” in the state where its main office is located, and “located” in every state where it has a branch office. Therefore, under the Fourth Circuit’s reasoning, Wachovia was “located” in, and a citizen of, South Carolina (as well as several other states with branch offices). Since both parties, Schmidt and Wachovia, had South Carolina citizenship, the Circuit Court dismissed the case for lack of diversity jurisdiction.


For the purposes of federal diversity jurisdiction, is a national bank “located” in every state in which it maintains a branch office?

Media for Wachovia Bank, N.A. v. Schmidt

Audio Transcription for Oral Argument – November 28, 2005 in Wachovia Bank, N.A. v. Schmidt

Audio Transcription for Opinion Announcement – January 17, 2006 in Wachovia Bank, N.A. v. Schmidt

John G. Roberts, Jr.:

Justice Ginsburg has the opinion in Wachovia Bank versus Schmidt.

Ruth Bader Ginsburg:

This case concerns the access of national banks to a federal forum, based on the diverse citizenship of the parties to the controversy.

Congress empowered federal district courts to hear civil actions between citizens of different states where the amount in controversy exceeds $75,000.

Congress further provided that a corporation, for diversity-of-citizenship purposes, shall be treated as the citizen of any state by which it has been incorporated and also of the state where it has its principal place of business.

State banks incorporated under state law fit comfortably within this prescription.

National banks do not, for they are not incorporated in any state; instead, they are federally charted by the U.S. Treasury’s Comptroller of the Currency.

Congress, therefore, separately provided in 28 U.S.C. §1348 that national banks, for diversity-jurisdiction purposes, shall be deemed citizens of the states in which they are respectively located.

What does the word “located” mean as used in §1348?

That is the dispositive question in this case.

Does “located” signal, as the petitioning national bank and the United States urge, that the bank’s citizenship is determined by the place designated in the bank’s Articles of Association as the location of its main office, or does it mean, in addition, as the Court of Appeals for the 4th Circuit held, that a national bank is a citizen of every state in which it maintains a branch?

The word “located”, we have recognized, is not one of enduring rigidity; rather, “located” is a chameleon word, gaining its precise meaning from context.

In a 1977 decision, we held that, for purposes of a now-repealed venue provision, a national bank was located and venue was therefore proper in any country or city in which the bank maintained a branch office.

That decision does not control this case, for venue and subject-matter jurisdiction are distinct concepts serving different purposes.

Venue presents a where question, in what geographical area may a case proceed?

Subject-matter jurisdiction concerns the court system, federal or state, competent to adjudicate controversies of a certain kind.

Our reading of the venue provision at issue in the 1977 case effectively aligned the treatment of national banks with the treatment of state banks and corporations operating in the same area.

By contrast, the 4th Circuit’s decision, which we today reverse, severely constricted national banks’ access to federal courts as compared to the access available to corporations generally.

For purposes of federal-court diversity jurisdiction, a corporation is not a citizen of every state in which it maintains a business establishment, and we read §1348 in that light.

Thus, we hold that a national bank is a citizen of the state in which its main office, as set forth in its Articles of Association, is located.

Were we to hold, as the Court of Appeals did, that a national bank is also a citizen of every state in which it has established a branch, we would render federally chartered banks singularly disfavored corporate bodies regarding their access to federal courts.

The language of §1348 does not call for that incongruous outcome, nor does this Court’s precedent.

The decision reversing the 4th Circuit’s judgment is unanimous; Justice Thomas took no part in the consideration or decision of this case.