LAWRENCE K. KARLTON, Senior District Judge.
This court re-affirms its decision in Guinto v. Wells Fargo Bank, N.A., Civ. S-11-372-LKK, 2011 WL 4738519 (E.D.Cal. October 5, 2011). Guinto found that American Surety Co. v. Bank of California, 133 F.2d 160, 162 (9th Cir.1943), is binding, Ninth Circuit authority holding that a national bank is a citizen of the state where it has its principal place of business. Under the authority of American Surety, Wells Fargo is a citizen of California, and under the authority of Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006), Wells Fargo is a citizen of South Dakota.
On August 5, 2010, defendants Wachovia Mortgage ("a division of Wells Fargo Bank, N.A."), and Golden West Savings Association Service Co. removed this state breach of contract action to federal court. Dkt. No. 1. In this court, plaintiffs ultimately filed a Second Amended Complaint,
In their Notice of Removal, defendants assert that this court has diversity jurisdiction over this removed action. They say that plaintiffs are citizens of California,
This court has an obligation to examine its own subject matter jurisdiction.
In that case, Wells Fargo argued that it was a citizen of South Dakota, where it maintained its "main office," that it was not a citizen of California (which it has admitted in other proceedings, is its "principal place of business"), and therefore, it argued, it was diverse from the California plaintiffs. The bank's arguments relied upon: 28 U.S.C. § 1348, which states that a national bank is a citizen of the state where it is "located;" Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163
Wells Fargo did not cite or make any reference to the binding Ninth Circuit case directly on point, American Surety, which held that a national bank is located where it has its principal place of business. Nor did Wells Fargo cite or make reference to any of the subsequent Ninth Circuit cases that have cited American Surety as authority on where a national bank is "located." See Bank of California Nat. Ass'n v. Twin Harbors Lumber Co., 465 F.2d 489 (9th Cir.1972) ("The Bank, for diversity purposes, is a `citizen' of California"), citing 28 U.S.C. § 1348 and American Surety; U.S. Nat. Bank v. Hill, 434 F.2d 1019, 1020 (9th Cir.1970) (per curiam), citing American Surety's interpretation of 28 U.S.C. § 1348.
This court, however — unlike Wells Fargo — is bound by Ninth Circuit precedent. Having concluded that the Supreme Court expressly declined to rule on the issue ruled upon by the Ninth Circuit in American Surety — that the bank is located where it has its principal place of business — this court held that for federal diversity jurisdiction purposes, Wells Fargo was a citizen of California, as were plaintiffs, thus destroying diversity jurisdiction. Accordingly, after exercising its discretionary authority to "declin[e] to exercise supplemental jurisdiction over the remaining claims" pursuant to 28 U.S.C. § 1367(c)(3), this court remanded the matter to state court.
Wells Fargo did not appeal the Guinto decision despite the intra-circuit split it complains about in its brief in this case.
California Dept. of Water Resources v. Powerex Corp., 533 F.3d 1087, 1091 (9th Cir.2008); Carlsbad Technology, Inc. v. HIF Bio, Inc., 556 U.S. 635, 640-41, 129 S.Ct. 1862, 1867, 173 L.Ed.2d 843 (2009) (the non-appealability rule of Section
After Guinto, whenever a subsequent case arose before this judge in which Guinto appeared to be relevant (the issue was typically identified in status conference), this court has requested briefing on whether the matter should be remanded pursuant to American Surety and Guinto. See, e.g., Roberts v. Wells Fargo Bank, N.A., 2012 WL 487922 at *1 (E.D.Cal.2012) (finding, as in Guinto, that "Wells Fargo is a citizen of California, and there is no basis for diversity jurisdiction");
The court in this case requested briefing on whether diversity jurisdiction exists. Wells Fargo again argues to this court, as it did unsuccessfully in Guinto, that under Schmidt, it is a citizen only of South Dakota — not California — and therefore the court has diversity jurisdiction over this breach of contract claim. Wells Fargo now asserts that this court was mistaken to rely on American Surety, and that in any event, it should "be [hesitant] to create a split of authority on jurisdictional questions."
The court does not wish to encourage Wells Fargo or any other party to seek reconsideration through means other than those provided for in the Local Rules of this District. However, in this case, Wells Fargo addresses American Surety which for some reason it did not address on its first go-round. Accordingly, the court will address each of the bank's arguments in turn.
Civil actions not involving a federal question are removable to a federal district court if there is diversity of citizenship between the parties. 28 U.S.C. § 1332(a)(1). Section 1332 requires that there be complete diversity, that is, each plaintiff's citizenship must be diverse as to each defendant's citizenship. Id.
On a motion to remand, the removing defendant faces a strong presumption against removal, and bears the burden of establishing that removal was proper by a preponderance of evidence. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 403-404 (9th Cir.1996). Section 1447(c), 28 U.S.C., provides that a case removed from state court "shall be remanded" if it appears that it "lacks subject matter jurisdiction." Federal jurisdiction must be rejected if there is any doubt as to the right of removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992).
Wells Fargo is a "national banking association" otherwise known as a "national bank." For purposes of diversity jurisdiction:
28 U.S.C. § 1348.
The Supreme Court and the Ninth Circuit have cleared up the mystery to some extent. It is now clear that a national bank is located where it maintains its "main office." Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). It is equally clear that a national bank's location is not determined by the state(s) where it maintains branches. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797; American Surety Co. v. Bank of California, 133 F.2d 160, 162 (9th Cir.1943).
But what of the "principal place of business?" The Ninth, Fifth and Seventh Circuits, and the Comptroller of the Currency ("the administrator charged with supervision of the National Bank Act"), have all determined that a national bank is a citizen of the state where its principal place of business is, even if it is also a citizen of the state where it maintains its home office.
American Surety, 133 F.2d at 162, aff'g, American Surety Co. of New York v. Bank of California, 44 F.Supp. 81, 83 (D.C.Or. 1941) ("a national bank should be considered as a citizen of the state where it has its principal place of business, irrespective of the fact that it has authorized branches in other states").
Firstar Bank, N.A. v. Faul, 253 F.3d 982, 989 & n. 3 (7th Cir.2001). The Fifth Circuit, also citing American Surety, held that a national bank was not located where it had branch offices. Rather, it held:
Horton v. Bank One, N.A., 387 F.3d 426, 436 (5th Cir.2004), cert. denied, 546 U.S. 1149, 126 S.Ct. 1164, 163 L.Ed.2d 1127 (2006).
Neither the Supreme Court nor the Ninth Circuit, nor any intervening Congressional enactment has ever held or instructed that a national bank is not located in the state of its principal place of business.
First, in considering where national banks are "established," a term used in a different part of Section 1348, the Court states:
Schmidt, 546 U.S. at 315 n. 8, 126 S.Ct. 941 (emphasis added). Later, the Court again refers to the bank's principal place of business without ruling on whether that is a proper basis for determining citizenship:
Schmidt, 546 U.S. at 317 n. 9, 126 S.Ct. 941.
Wells Fargo argues that American Surety is irreconcilable with the intervening Supreme Court authority of Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). The bank is correct that "where intervening Supreme Court authority is clearly irreconcilable with ... prior circuit authority, ... a three-judge panel of this court and district courts should consider themselves bound by the intervening higher authority and reject the prior opinion of this court as having been effectively overruled." Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc).
However, Wells Fargo's argument is premised upon its assertion that "American Surety and Schmidt both held for single, but different, standards for citizenship. Using the PBB [principal place of business] test to the exclusion of main office, as American Surety had in 1943, is simply irreconcilable with Schmidt." Dkt. No. 58 at p. 9 (emphasis in text). The bank's premise is doubly false: (1) American Surety did not use the principal place of business test "to the exclusion" of the main office test of Schmidt; and (2) Schmidt did not use the main office test "to the exclusion" of the principal place of business test of American Surety, Horton, and Firstar Bank.
Instead, Schmidt and American Surety each identify a different possibility for citizenship — main office or principal place of business — without excluding the other possibility. Since this is a district court which is bound both by the Ninth Circuit and by the Supreme Court, Guinto accepted both possibilities for citizenship since they were not in conflict.
It is true that American Surety stated: "The trial court was right in holding that defendant is a citizen only of the state in which its principal place of business is located, the State of California." American Surety, 133 F.2d at 162 (emphasis added). But that "only" does not mean to the exclusion of the state where the bank has its main office — also California.
As this court stated in Guinto, and as Wells Fargo asserts here, both Schmidt and American Surety were faced with the exact same question: is a national bank a citizen of every state where it maintains a branch office? Both cases answered "No." Schmidt said national banks are citizens of the state where they maintain their "main office," not everywhere they maintain branch offices. American Surety said that Bank of America (a national bank) was a citizen of the state where it had its principal place of business — California — not everywhere it had branch offices, without addressing whether it was also a citizen of
This is clear from the district court decision in American Surety, which held: "a national bank should be considered as a citizen of the state where it has its principal place of business, irrespective of the fact that it has authorized branches in other states." American Surety Co. of New York v. Bank of California, 44 F.Supp. 81, 83 (D.C.Or.1941) (emphasis added). And it is also clear from the Ninth Circuit opinion itself:
American Surety, 133 F.2d at 162 (emphasis added).
Thus, both the district court and the Ninth Circuit were contrasting the location of the principal place of business against the location of the branch office, and both determined that the principal place of business was the bank's "location" for purposes of diversity jurisdiction. Neither decision excluded the "main office" as the bank's location. In fact, they could not have done so, as the issue never came up, and neither the district court nor the Ninth Circuit ever discussed it.
Wells Fargo next argues that American Surety's "principal place of business" test for national bank citizenship should not be used at all because the case was decided before interstate banking and dual citizenship for corporations "was even possible." Dkt. No. 58 at p. 10.
In support of this argument, Well Fargo offers a history lesson. The bank asserts that interstate banking did not exist before it was authorized by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("1994 Interstate Banking Act"), Section 101, 103 Pub.L. 328, 108 Stat. 2338, 2339. But this is plainly false. Clearly, there were banks with interstate operations in 1943, even if there was no full-on interstate banking as it exists today, with national banks permitted to open branches in every state of the union. Most important, the bank in American Surety — Bank of America — was one of the
The Supreme Court is the better source for the history lesson on interstate banking. From Schmidt itself it can be seen how it came to pass that Bank of America, the defendant in American Surety, was engaged in interstate banking at a time when Wells Fargo thinks such banking did not exist:
Schmidt, 546 U.S. at 307 n. 2, 126 S.Ct. 941 (citations converted into footnotes) (emphasis added). Thus, even though broad, full-on interstate banking legislation did not arrive until 1994, the national bank in American Surety was engaged in interstate banking.
In any event, the bank then concludes — based upon its belief that interstate banking did not exist in 1943 — that at the time American Surety was decided, "a national bank's PPB [principal place of business] and main office had to be in the same state." Dkt. No. 58 at p. 10 (emphasis added). But this is yet another faulty conclusion, based as it is on the false premise that Bank of America was not engaged in interstate banking. The only support Wells Fargo offers for this latter conclusion is — improbably — Guinto, as well as the district court decision in American Surety. In fact, neither case supports the bank's conclusion that the main office "had to be" in the same state as the principal place of business.
Wells Fargo also offers no logic for its conclusion, nor does any present itself. The fact is that notwithstanding the absence of the 1994 Interstate Banking Act,
In any event, from these two faulty, unsupported conclusions, Wells Fargo concludes further that American Surety's identification of "principal place of business" as the bank's location was "a distinction without a difference," that this court should ignore. If Wells Fargo is referring to the distinction between "principal place of business" and "main office," its argument is a non-sequitur, because American Surety never made that distinction. Rather, it distinguished only between the principal place of business and the branch office location.
Wells Fargo next argues that Schmidt did not mention American Surety because the 1943 Ninth Circuit decision "is no longer relevant on this issue." Dkt. No. 58 at p. 11. The bank concedes that the Supreme Court did not explain its omission of the Ninth Circuit decision when it stated that there was a split among the circuits. But the bank guesses that the Court only bothered to mention the cases that are still relevant, that is, those decided after the 1994 Interstate Banking Act. This court will not guess, as it has no basis for such guesswork.
Certainly, it is interesting that the Supreme Court did not mention American Surety in the Schmidt Opinion. The fact is, American Surety was clearly and unambiguously brought to the attention of the Justices as one of the circuit cases that made up the circuit split on the citizenship of national banks. The Petition in Schmidt presents the question thus:
Wachovia Bank, Nat. Ass'n v. Schmidt, Petition for Writ of Certiorari, 2005 WL 544000 (March 4, 2005) (emphasis added). The "three other courts of appeals" set forth in the Petition are the Fifth Circuit (Horton, which held citizenship was determined by "principal place of business" and "main office,") the Seventh Circuit (Firstar Bank, which held the same), and the Ninth Circuit (American Surety, which held that citizenship was determined by "principal place of business," but was silent on "main office").
As for American Surety, the Petition advised the Justices: "Likewise, construing the immediate predecessor to Section 1348, the Ninth Circuit concluded that a national bank should not be deemed a citizen of every state in which it has a branch." At *6. In setting forth the question it would decide, the Supreme Court stated that it was granting certiorari "to resolve the disagreement among Courts of Appeals on the meaning of § 1348." Schmidt, 546 U.S. at 303, 126 S.Ct. 941, citing Horton, Firstar Bank, Schmidt, and World Trade Center Properties, L.L.C. v.
Wells Fargo next argues that the Ninth Circuit has not cited American Surety post-Schmidt, despite two opportunities to do so.
In Lowdermilk v. U.S. Bank, 2006 WL 4100011 (D.Or.2006) (unpublished), aff'd, 479 F.3d 994 (9th Cir.2007), the district court was called upon to determine whether the "jurisdictional amount" had been properly averred in a removed action under the Class Action Fairness Act of 2005 ("CAFA"), Pub.L. 109-2, 119 Stat. 4 (2005). The district court found that the jurisdictional amount allegation was lacking, and accordingly ordered the case remanded to the state court.
Along the way, however, the district court first considered whether the "minimal diversity" of CAFA had been established. Under CAFA, minimal diversity is met when "any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C.A. § 1332(d)(2)(A). In its Notice of Removal, defendant, a national bank, "properly alleged that at least one member of the class is a citizen of Oregon." Plaintiff contended that minimal diversity was lacking because defendant U.S. Bank N.A., a national bank, was also a citizen of Oregon, as its principal place of business was there.
The district court held:
Lowdermilk, 2006 WL 4100011 at *2. Thus, although it did not expressly find that defendant was not a citizen of Oregon, where it had its principal place of business, that is the conclusion to be drawn from the court's statement. If the bank were also a citizen of Oregon, then minimal diversity would have been lacking under 28 U.S.C. § 1332(d)(2)(A).
The "minimal diversity" finding — and the district court's implicit rejection of the "principal place of business" test for citizenship — were "not contested on appeal." Lowdermilk, 479 F.3d at 997. However, presumably because subject matter jurisdiction was challenged in the district court, the Ninth Circuit addressed the matter anyway, although very briefly:
Id. The Ninth Circuit made no mention of the bank's "principal place of business," or the district court's implicit rejection of that test for citizenship. Most importantly, the Ninth Circuit had no reason to address the issue, because it was "not contested on appeal." Neither the district court nor the
Lowdermilk does not contain a holding on the issue facing this court — whether a national bank is a citizen, not only where it has its main office, but also the state of its principal place of business. This court would not lightly decline to follow the language of a Ninth Circuit decision, even when it was uttered on an issue that was not contested on appeal, and did not have the benefit of briefing. However, in this case: (i) in Lowdermilk, there is no Ninth Circuit language relating to the "principal place of business" issue, as that language exists only in the unpublished district court order, which was not contested on appeal; and (ii) if the Ninth Circuit intended to give silent approval to the district court's implicit rejection of the principal place of business test, it was both unnecessary to the court's decision, and made in a casual manner not indicative of a binding ruling, especially one that overrules the considered holding of a prior panel.
The mention of "minimal diversity" was completely unnecessary to Lowdermilk's decision. Although the Ninth Circuit presumably wanted to assure itself that the district court had subject matter jurisdiction, that is what the entire appeal was about — whether the plaintiffs properly alleged the jurisdictional amount. That was the only question presented on appeal,
In any event, Wells Fargo does not ask this court simply to follow the language of Lowdermilk — that a national bank is a citizen where it maintains its main office. This court does follow that language, and it is not disputed here — nor could it be after Schmidt — that Wells Fargo is a citizen where it maintains its main office. Wells Fargo instead asks this court to give meaning to what Lowdermilk did not say, namely the absence of a reference to American Surety. Since the issue addressed in American Surety was not contested in the Lowdermilk appeal, this court cannot attach significance to this absence.
Wells Fargo next cites Peralta v. Countrywide Home Loans, Inc., 375 Fed.Appx. 784 (9th Cir.2010) (mem.), an unpublished decision. The bank cites the case not as
Peralta, 375 Fed.Appx. at 785.
Wells Fargo somehow interprets this as proof that "the Ninth Circuit no longer considers American Surety to be viable." Dkt. No. 58 at p. 12. After all, it argues, if American Surety were binding, the court would simply have cited it as precedent and moved on. The fact that the court referred to "the complex jurisdictional issue" is proof, says the bank, that American Surety is dead.
The argument is difficult to credit, or even understand. It seems extraordinarily unlikely that the Ninth Circuit would overrule its prior, considered, binding decision in American Surety by simply not mentioning that case in a subsequent, unpublished memorandum decision.
Wells Fargo asserts that post-Schmidt, the Ninth Circuit has not cited American Surety. That appears to be true. But this court again declines the invitation to read the minds of other judges. The court does note however, that the Ninth Circuit has not had an opportunity or a need to cite American Surety in a published opinion after Schmidt.
In any event, Wells Fargo insinuates that once American Surety was decided, it was never heard from again. That is not so. the Ninth Circuit has cited American Surety, together with the current statute, Section 1348, as authority in determining where a national bank is a citizen.
In Bank of California Nat. Ass'n v. Twin Harbors Lumber Co., 465 F.2d 489 (9th Cir.1972) ("Twin Harbors"), the Ninth Circuit said:
Twin Harbors, 465 F.2d at 492.
U.S. Nat. Bank, 434 F.2d at 1020.
Wells Fargo next asserts that 1994 legislation establishes where banks are "located," thus superseding American Surety. It correctly points out that American Surety, in determining the meaning of "located," stated that "[n]o case defining `located', in this connection, has come to our attention." American Surety, 133 F.2d at 161-62 (emphasis added). Wells Fargo then asserts that that problem was fixed in 1994 when Congress defined "home State." Dkt. No. 58 at p. 12.
The argument is a non-sequitur. Congress in 1994 did not define the meaning of "located," it defined the meaning of "home State." Congress defined what it meant by "home State" in legislation addressing whether banks can operate branch offices in states other than their "home States." See Pub.L. 103-328, 108 Stat. 2349 (1994). And what it meant by "home State" was the state where its "main office" was. It did not state or indicate that the "home State" or the "main office" was where the bank was "located" for diversity jurisdiction purposes. Nor did Schmidt rely on this definition in finding that a bank was located where it had its main office. Schmidt, in a footnote simply recites that fact that "[t]he state in which the main office is located qualifies as the bank's `home State' under the banking laws." 546 U.S. at 307 n. 1, 126 S.Ct. 941.
It is true that speaking generally, it makes sense to think of bank's "home State" as a place where it is located, but the question here is not a general one. The question is where a bank is "located" for purposes of diversity jurisdiction. Thus, when American Surety said Congress had not defined "located" in this connection, it was referring to the jurisdictional connection.
Even if Wells Fargo is correct that Congress has now told us where national banks are "located" for purposes of interstate banking regulations, that definition does not carry over to the jurisdictional
Wachovia Bank v. Schmidt, 546 U.S. 303, 313, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). But Schmidt expressly rejected the view that "located" for purposes of venue meant "located" for purposes of diversity jurisdiction, even though the statutes used the identical word "located:"
Finding that venue and diversity jurisdiction statutes were not in pari materia, it rejected the assertion that it therefore had to find that "located" for diversity jurisdiction mean wherever the bank had a branch, precisely what it had found for venue.
The 1994 legislation does not even use the term "located." It cannot be said, therefore, to define the term "located" in the diversity jurisdiction statute.
Wells Fargo argues that the Ninth Circuit was "simply wrong" in deciding American Surety. That argument is not properly made to this court. This court is bound by American Surety in the absence of contrary intervening en banc Ninth Circuit, Supreme Court, or federal statutory authority.
Defendant asserts that the "location" holding of American Surety is not binding because it is dicta, "`made casually and without analysis, uttered in passing without due consideration of the alternatives, or where it is merely a prelude to another legal issue that commands the panel's full attention ...'" Dkt. No. 58 at p. 17 (emphasis in text), citing V.S. ex rel. A.O. v. Los Gatos-Saratoga Joint Union H.S. Dist., 484 F.3d 1230, 1232 n. 1 (9th Cir. 2007). There is quite a bit wrong with this argument.
First, both the district court and the Ninth Circuit issued reasoned opinions on the meaning of "located" in the diversity jurisdiction statute. The district court engaged in close statutory construction, discussed the statute, its legislative history, other statutes, Supreme Court precedent, cases from other circuits, and other legislation in reaching its conclusion. The Ninth Circuit engaged in its own close reading of the statute, applied Supreme Court precedent to the issue, analyzed Congressional intent, and ultimately found that the district
Second, the jurisdictional holding was not a mere "prelude" to the main action of American Surety. It was a determination on federal subject matter jurisdiction, and had to be decided before the merits. Under Wells Fargo's reasoning, every decision that determined jurisdiction before the merits would be dicta, a mere "prelude." That is not so.
Wells Fargo argues that this court should defer to the "understanding" of the 2006 Congress — as Wells Fargo interprets that understanding — in interpreting 28 U.S.C. § 1348, even though that statute was most recently amended in 1948.
In any event, the legislation Wells Fargo is referring to expressly states that for Federal Savings Associations (not national banks like Wells Fargo), for diversity jurisdiction, the bank is a citizen "only of the State in which such savings association has its home office." 12 U.S.C. § 1464(x). Congress did not amend the corresponding statute addressing the citizenship of national banks. This legislation is not relevant to the meaning of "located" in 28 U.S.C. § 1348.
Wells Fargo's request that this court avoid a split of authority within the Ninth Circuit comes too late. The district courts in the Ninth Circuit are already split, post-Schmidt, on the meaning of Section 1348, and were so long before Guinto was decided. However, this court does not have the power to resolve the split. Wells Fargo had the power to bring the split to the attention of the Ninth Circuit by appealing Guinto, but it chose not to do so.
Wells Fargo has not shown that this court should reverse course from the one it set in Guinto. Wells Fargo is a citizen of California as well as a citizen of South Dakota. Since plaintiffs are, at least prima facie, citizens of California, diversity jurisdiction does not exist, and did not exist at the time the matter was removed.
Accordingly, this case is
IT IS SO ORDERED.
Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir.2001).
Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 593, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) (some citations omitted).
OCC Interpretive Letter 952, 2002 WL 32072482 (October 23, 2002). The Ninth Circuit gives "great weight" to such interpretations by the Comptroller:
Bank of America v. City and County of San Francisco, 309 F.3d 551, 563 (9th Cir.2002), cert. denied, 538 U.S. 1069, 123 S.Ct. 2220, 155 L.Ed.2d 1127 (2003) (citations omitted).
