Another United States Circuit Court has ruled that, for purposes of diversity jurisdiction, a national bank is a citizen only of the state in which it has its main office. In doing so, the Second Circuit joins a growing list of appellate courts that have rejected the argument that a national bank is also a citizen of the state in which it has its principal place of business.
In OneWest Bank, N.A. v. Melina, U.S.C.A. 2nd Cir. Case No. 15-3063 (Jun. 29, 2016), a borrower sought dismissal of a foreclosure case for lack of subject matter jurisdiction, arguing that there was not diversity of citizenship because the lender’s principal place of business was in New York (another point with which the appellate court disagreed). The trial court disagreed, finding that, as a national bank, the lender was a citizen only of California, where its main office was located.
In order for a Federal Court to exercise diversity jurisdiction, there must be complete diversity at the time the case is filed. Pursuant to 28 U.S.C. §1348, national banks are deemed to be citizens of the States in which they are located, which the U.S. Supreme Court has interpreted to be the state where the bank has its main office, as designated by its articles of association. The Second Circuit, joining the Ninth, Eighth, Fifth and Seventh Circuits, held that a national bank is a citizen only of the state in which it has its main office and not also in the state in which it has its principal place of business.
While the Eleventh Circuit has held that a national bank is a citizen of the state in which it is designated to have its main office, it has not yet addressed whether this is to the exclusion of another state in which that bank has its principal place of business. This is an issue that will likely arise, as more national banks, whether through mergers or otherwise, end up with their main offices and their principal places of business in different states. When this issue arises, OneWest Bank v. Melina provides a well-reasoned argument for the proposition that a national bank is a citizen only of the state in which its main office is located.
David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office. His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or email@example.com.