Term: 2005
Docket: 04-1186
Wachovia Bank, National Association v. Daniel G. Schmidt, Iii, Et Al.
- Pro
04-1186 WACHOVIA BANK V. SCHMIDT DECISION BELOW: 388 F3d 414 CERT. GRANTED 6/13/2005 QUESTION PRESENTED: 28 U.S.C. § 1348 provides that, with limited exceptions that are inapplicable here, "[a]ll national banking associations shall * * * be deemed citizens of the States in which they are respectively located." The questions presented are (i) whether, for purposes of federal diversity jurisdiction, a national banking association is "located" in, and thus deemed to be a citizen of, every state in which the association maintains a branch, as held by the court below, or instead has a more limited citizenship, as held by three other courts of appeals; and (ii) whether the word "located," as used in 28 U.S.C. § 1348, is ambiguous. LOWER COURT CASE NUMBER: 03-2061
In the 2005 case Wachovia Bank, National Association v. Daniel G. Schmidt III et al., the U.S. Supreme Court ruled in favor of Wachovia Bank, stating that national banks are only citizens of the state where they have their main office as listed on their articles of association for purposes of diversity jurisdiction under federal law. The respondents (Schmidt and others) had filed a class-action lawsuit against Wachovia in South Carolina State court alleging deceptive trade practices by the bank's mortgage division located within that state. However, since Wachovia is chartered in North Carolina, it moved to transfer this suit to Federal District Court arguing complete diversity existed between parties - an argument rejected by lower courts which held that a national bank is also citizen of states where it has significant operations apart from its principal place of business or charter location. The Supreme Court reversed these decisions based on interpretation of relevant statutes (28 U.S.C §1348), concluding that for diversity jurisdiction purposes, a national banking association is only considered a citizen in one state: where its main office as set forth in its articles is located.
In the dissenting opinion for Wachovia Bank, National Association v. Daniel G. Schmidt III et al., Justice Ginsburg disagreed with the majority's interpretation of federal banking law and its preemption of state laws regarding banks' operating subsidiaries. She argued that Congress did not intend to exempt national bank subsidiaries from state regulation when it passed the National Bank Act (NBA). According to her, if Congress had intended such a broad exemption, it would have explicitly stated so in the NBA or subsequent amendments. Instead, she believed that states should retain their traditional power to regulate businesses within their borders unless expressly prohibited by federal law. Therefore, she concluded that South Carolina could enforce its licensing requirements on Wachovia's mortgage lending subsidiary without violating federal law.
