WACHOVIA BANK v. SCHMIDT
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?
Legal provision: 28 U.S.C. 1348
No. In an 8-0 decision authored by Justice Ruth Bader Ginsburg, the Court ruled that a national bank is "located" in, and therefore a "citizen" of, only the state in which its main office is located. Looking to the history of Congress's diversity jurisdiction statutes, the Court concluded that the word "located" need not be interpreted to mean any state where a bank has a physical presence. Furthermore, the Court ruled that the Fourth Circuit had erred in drawing a distinction between the words "located" and "established": "the Congress may well have comprehended the words 'located' and 'established,' as used in [Section] 1348, as synonymous terms." Justice Thomas took no part in the decision of the case.
Argument of Andrew L. Frey
Chief Justice Roberts: We'll hear argument next in Wachovia Bank v. Schmidt.
Mr. Frey: Mr. Chief Justice, and may it please the Court--
The question in this case is whether, for purposes of Federal diversity jurisdiction, a national xbank is a citizen of every State where it has a branch, or perhaps where it has any physical presence, or only a citizen of the State where it was chartered or, if different, where its main office is located.
The question turns on the meaning of the word located in 28 U.S.C. 1348, which states that national banking associations shall be deemed citizens of the States in which they are respectively located.
Now, before turning to the--
Justice O'Connor: Now, that was enacted, was it not, in 1887?
Mr. Frey: --That's correct.
Justice O'Connor: And hasn't the... the word hasn't changed--
Mr. Frey: --It hasn't changed.
Justice O'Connor: --in all those years.
And there were no interstate branches in 1887, I assume.
Mr. Frey: I'm... I'm not aware of any.
There may have been a few State banks that had interstate branches, although they would have been citizens only of the State of their incorporation.
Justice O'Connor: So it's a little hard to look for congressional intent.
Mr. Frey: Well, it... it... I don't believe it is, Your Honor, because of the sequence of statutes.
You have to start with the 1882 statute and what the Supreme Court has said.
But... but I'd like to make a preliminary comment before I turn to the substantive points here, which is that nobody has ever suggested, not the Fourth Circuit and not the respondent, any reason why Congress would want the result reached by the Fourth Circuit, in... in 1887 or in 1948 or any other relevant time, to uniquely restrict the access of national banks to Federal diversity jurisdiction.
Indeed, the suggestion is incongruous that Congress would want to do that.
National banks are, after all, federally created and federally regulated instrumentalities.
Justice Scalia: The Congress makes mistakes sometimes.
Mr. Frey: Yes, they... they might have... they might have done that.
And I... I acknowledge that this consideration is not controlling, standing by itself, on the case.
That is, if the statute plainly and unambiguously called for such an implausible outcome, then we might have a debate about whether an absurd outcome that the plain language calls for is one that should be enforced.
But this is a background consideration that I don't think the Court can put aside or deem irrelevant to the outcome of this case.
So the key holding of the Fourth Circuit was that the word located has an unambiguous meaning, and it's... that it's the one adopted by the Fourth Circuit majority and not by the Fourth Circuit dissent, the Fifth Circuit, the Seventh Circuit, the Comptroller of the Currency, or anybody else.
The battle of the dictionary definition seems to me plainly inclusive.
The biggest problem with the definitions is that they are cast in terms of the location of tangible physical things, a table, a lake, a piece of land; whereas we're dealing here with an incorporeal abstraction, a corporation, the location of which is not necessarily tied to any particular physical presence.
Both we and the Government have given Ford Motor Company as an example in the brief.
If you ask somebody where is Ford Motor Company located, I venture to say that most people would say Michigan.
But when you stop and think about it, it's possible that it could be also located every place where it has manufacturing facilities or sales outlets.
The only dictionary definition that I've seen that is specific to the location of an incorporeal entity, and specifically a bank, is the one that's cited in the Chase... JPMorgan Chase amicus brief, which was taken from the 1951 edition of Black's Law Dictionary, roughly contemporaneous with the enactment of current section 1348, which states that a bank is, quote, located, close quote, in the place specified in its organization certificate.
The term also appears many places in the National Bank Act, sometimes meaning a specific headquarters location and sometimes meaning any place where there are physical facilities.
And the Court... this Court itself has given located... the word located various meanings.
In the Bougas case, which is much discussed in the briefs, the Court said that the term has no enduring rigidity, and the Court did not base its decision on the inherent or natural or ordinary meaning of the word located.
In Federal Power Commission v. Texaco, which is 377 U.S. 33, the Court interpreted the words in the venue statute for appeals from Federal Power Commission decisions which said the appeal could be taken to the place where the company seeking review was located.
Texaco said, well, we have substantial facilities in the Tenth Circuit.
This matter that is the subject of this arose in the Tenth Circuit.
And the Court looked at the statute and it said, no, located means where... your place of incorporation.
Chief Justice Roberts: Counsel, a... a national bank charter typically lists the national bank's principal place of business.
Mr. Frey: --Well, it lists--
Chief Justice Roberts: Its main office.
Mr. Frey: --it lists the... the charter location, where it's established.
And until 1994, that would have been synonymous with its principal place of business.
Chief Justice Roberts: But isn't that amended if the principal place of business changes?
The charter is amended.
Mr. Frey: You can... just like a corporation could reincorporate in another State, a bank could move its main office, which I think is the term that's used in 12 U.S.C., section 30.
Chief Justice Roberts: So this would put national banks in a favored position compared to corporations--
Mr. Frey: No.
Chief Justice Roberts: --which are citizens of their State of incorporation and their... their principal place of business.
Mr. Frey: Well, if there's... I don't know whether there's a divergence between principal place of business and... and main office, which is what the Comptroller, I think, considers the equivalent of the place of incorporation.
It is possible.
But remember, at the time all of these statutes were enacted, there would have been complete parity because principal place of business was not--
Chief Justice Roberts: My point is just--
Mr. Frey: --A corporation was not a citizen of... of its principal place of business, only of its State of incorporation.
So there would have been total parity in 1882, 1887, 1911, 1948.
Chief Justice Roberts: --A good bit of your argument is that your friend's interpretation on the other side would put national banks in a disfavored position.
Mr. Frey: Yes.
Chief Justice Roberts: Your argument would put them in a favored position compared to a typical corporation.
Mr. Frey: Well, not necessarily.
You could interpret located to include principal place of business.
This issue doesn't arise in this case because what... what you have to decide is whether the fact that the bank has a branch in South Carolina means they're located in South Carolina.
South Carolina is not Wachovia's principal place of business or--
Justice Kennedy: Well, what would... what would be your view?
I know the question is not before us, but suppose we had a question like the principal place of business.
Mr. Frey: --Our... our view is that it's the main office.
I would defer somewhat to my colleague from the Government who can speak for the Comptroller on this question, but our view would be that it's the main office.
And... and I think it's important to understand that when we're interpreting these statutes, at every time when one of these... when the statute was reenacted, there would have been total parity between our definition of located.
There would have been one place for a national bank.
There would have been one citizenship for a State bank.
Justice Ginsburg: Mr. Frey, in practice, is there, as there often is for a corporation, a divergence between those two places?
You have many corporations incorporated in Delaware with their principal place of business, say, in Michigan.
In the case of a national bank, is there that similar difference that what you call its main office or where it's chartered is different from where it has its principal place of business?
Mr. Frey: It's possible that there would be for some banks, but the main office is the place that... that the Comptroller that... that is in their articles of association, which can be amended to change the main office, and it's approved by the Comptroller of the Currency.
And... and they can move their main office.
Whether it... all... I know that in the case of Wachovia, there is no divergence.
North Carolina is its main office and is its principal place of business.
But I can't speak for everything.
Justice Scalia: You... you would say that the main office is the place where they're established.
Is that what you think the word established refers to?
Mr. Frey: No.
I'm not sure what the word established means.
That would be different.
As the Court said in Bougas, it wasn't going there, and I don't know that we need to go there today.
Justice Scalia: Well, I... I think we need to go there, at least... it seems strange to me that you have two different words and if, indeed, established means the same thing that you're telling us located means, I'm not going to agree with you.
I mean, they're... they're two different words--
Mr. Frey: --Well, established could, I suppose, mean the place of the original charter location, and located could mean the place where... where the main office is today.
They could mean different things.
Remember that at every... at every enactment of this statute, there was no difference between established and located.
The terms had no different applications because a national bank had only one location, which was the place where it was established.
So as a practical matter, there was total parity with State banks because up until 1958 a corporation was a citizen only of the... the place of incorporation, and there was total parity with national banks because they were... they were confined to their original State.
They could not branch outside their State until 1994.
So we're interpreting statutes that were passed for the purpose of achieving parity and at a time when they succeeded in achieving parity.
And... and the Chief Justice's question and... and your question suggest that today, with the changes in the map of interstate banking, you might have some small lack of total overlap between State banks or other corporations, on the one hand, and national banks.
But that is not a reason to say that national banks are citizens of every place where they have any physical presence.
And one of the problems with the Fourth Circuit's reading is that it injects substantial ambiguity into the question of where a bank is located.
It's... the Fourth Circuit said branches, but what about where it has an office that's not a branch?
What about where it stores... where it has warehouses that store its records?
What about where it has employees?
Justice O'Connor: Or an ATM.
Mr. Frey: What about where it has an ATM.
Justice Scalia: --Well, there I think the Fourth Circuit said we... we had a case that resolved that.
Mr. Frey: Excuse me?
Justice Scalia: I think the Fourth Circuit said that we had a case that... that answered that question, not a case involving this particular provision--
Mr. Frey: I don't... I don't recall.
Justice Scalia: --but a case involving another provision of... of the banking laws.
Mr. Frey: I don't recall that.
I don't recall that, but I think the... I think the question is not at all clear where... where a bank would be located if it's in a State where it has facilities, property, or employees but not a branch.
And as you said in your concurring opinion in Sisson against Ruby, it's not a good idea to have a jurisdictional statute... reading of a jurisdictional statute that creates ambiguities.
Justice Ginsburg: Mr. Frey, remind me of the State bank.
A State bank is, for Federal diversity purposes, a citizen of two... two places or only one?
Mr. Frey: It depends on how it does business.
A State bank is a corporation and it is--
Justice Ginsburg: So it would be the--
Mr. Frey: --the same as any corporation.
Justice Ginsburg: --its place of incorporation and--
Mr. Frey: Same as any corporation.
Justice Ginsburg: --principal place of business if it's different.
Mr. Frey: So in 1958, under... if... if you follow the Chief Justice's question, in 1958 when it became possible for corporations to be citizens of more than one State, maybe the meaning of this statute that was passed in 1948 changed.
I... I don't think that makes sense.
We're... we're trying to interpret a statute that Congress passed in 1948.
At that time, there was complete parity.
The fact that in 1958 Congress perceived a problem which is not a problem with national banks, where there was a divergence, a serious divergence, between the place of incorporation and the principal place of business that Congress saw we've got to deal with this problem.
And so they amended section 1332 in 1958 to deal with that particular problem.
That is not a problem that affects national banks.
So there's been no occasion.
When they enacted Riegle Neal, there was no... no need for them to change--
Chief Justice Roberts: Well, but you're... you're asking us to interpret a statute that they passed in light of events subsequent to the passage of the statute.
Mr. Frey: --No.
Chief Justice Roberts: You're saying that when they passed it, national banks were only in one place.
Well, they were only located in one place--
Mr. Frey: That's true.
Chief Justice Roberts: --even if you adopt the reading of the Fourth Circuit.
Mr. Frey: Well, let me... let's... let's go back and... because Justice O'Connor started me off, and I... I don't want to fail to get to her question.
The first statute was the 1882 statute.
The 1882 statute unambiguously stated that the jurisdiction shall be the same as and not other than the jurisdiction for suits by or against banks not organized under any law of the United States.
So the... the purpose of Congress was to... to give national banks access to diversity jurisdiction on the same basis as State banks.
And that... in the Leather Manufacturers Bank case, that was recognized by the Court.
Then in 1887, Congress went to a different wording totally.
It injected the word location.
And I... I should point out that the 1882 statute was in the Bank Act and the 1887 statute was in the Judiciary Act.
So it was... it's not clear what they thought they were doing with the 1882 statute when they adopted the 1887 statute.
But it is clear what this Court said they were doing in the Petri case.
This Court said no reason is perceived why it should be held that Congress intended that national banks should not resort to Federal tribunals as other corporations and individual citizens might.
It then said further on, on page 651 of 142 U.S., the clause was intended to have and must receive the same effect and operation as that of the proviso to the fourth section of the act of July 12, 1882.
And finally, they close by saying, no limitations in the regard of access to Federal diversity jurisdiction was intended.
Then we have the 1911 codification, and in... and after 1911, we have several Supreme Court cases, including the Mitchell case, which again says that the codification worked no change.
It says, the Court held that as pursuits with... within the specified exceptions, national banks were, by the acts of 1882 and 1887, put on the same basis in respect of jurisdiction as if they had not been organized under an act of Congress.
And then in 1948, you have the reenactment or the codification of the current judicial code, not intended to work any change in the meaning of the statute.
Justice Scalia: And you think a lawyer has to go back, in order to advise a client, and... and when he has a word... two words in... in a provision... one, established; the other, located... he has to go back and figure out every one of these reenactments and inquire into, you know, what Congress meant at the time?
Mr. Frey: Well, I don't think it's so difficult to--
Justice Scalia: He... he has... he has a statute that says established in one part, located in another, and he has a Supreme Court case, which I mentioned, but you apparently disregard, which is Bougas, which--
Mr. Frey: --I don't disregard it.
Justice Scalia: --Well, which... when I asked about it, you... you drew a blank.
I mean, that's the case I was referring to.
And in... which had a similar provision using the word established and located and said that established meant one thing and said what in this case it meant.
Now, it was for a different purpose, to be sure, but if I were a lawyer looking up... and it... you know, it dealt with banks.
And if... if I were a... a lawyer, I would have... I would have said, gee, there it is.
The Supreme Court--
Mr. Frey: Well--
Justice Scalia: --says where you have established and located in... in the same provision, located means where they have a branch.
Mr. Frey: --Well, it didn't say that established meant something different.
It said it would not consider what established meant.
And in deciding what located meant, it didn't say located had some obvious meaning.
It said it was going to look at the purpose, and the purpose was the convenience of the bank.
And what... what the Court did in Bougas was to place national banks in a position of parity with State banks with regard to venue.
State banks could be sued anyplace they had a branch, and under Bougas, national banks could be sued.
Justice Scalia: That may well be.
Mr. Frey: What the Fourth Circuit has done is destroy--
Justice Scalia: And... and whatever... whatever the outcome, whether it was equality or nonequality, and whatever the rationale, whether it was the purpose to be served or something else, the Court held that the word located in a banking statute which had both the words established and located in it--
Mr. Frey: --But--
Justice Scalia: --meant where they have a branch.
And... and that seems to me a very persuasive indication for a lawyer--
Mr. Frey: --I think--
Justice Scalia: --who's trying to figure out how to advise his client.
Justice Ginsburg: In a venue statute, as opposed to a subject matter jurisdiction statute, the venue means where, where... what particular court.
Subject matter jurisdiction is which court system.
They're entirely geared to entirely different things.
Mr. Frey: --Entirely different things and entirely different concerns.
And I don't think... well, I'd like to think that most lawyers would go beyond the logic that Your Honor has suggested, would look at what the Supreme Court had said in its cases interpreting section 1348 and its predecessors, and would look at the mode of analysis that the Supreme Court used in Bougas, and applying that mode of analysis, the Fourth Circuit result is wrong.
I'd like to reserve the balance of my time.
Argument of Sri Srinivasan
Chief Justice Roberts: Thank you, counsel.
Mr. Srinivasan, we'll hear now from you.
Mr. Srinivasan: Thank you, Mr. Chief Justice, and may it please the Court--
For purposes of determining its State citizenship under 28 U.S.C. 1348, a national banking association is located in the State in which its main office is found, not every State in which it may maintain a branch office or other form of physical presence.
Justice Ginsburg: What about its principal place of business if it's different from its main office?
Mr. Srinivasan: The--
Justice Ginsburg: Principal place of business.
Mr. Srinivasan: --We... we don't think that a national banking association is a citizen of a State in which its principal place of business is found, insofar as that might be different from the State in which its main office is located.
Justice Ginsburg: So the main office is it, like 1332 before the '58 amendment.
Mr. Srinivasan: That's right, Justice Ginsburg, and in part, that's because of the historical chronology.
The word located was first used in 1887 and the current version of section 1348 was enacted in 1948, which was 10 years before the concept of principal place of business had any jurisdictional salience.
That was the first time that Congress... this was in 1958... that Congress enacted a specific provision dealing with corporate citizenship, and that's the first time that we see the concept of principal place of business having relevance in the jurisdictional context.
Justice Scalia: What did the Government argue in Bougas?
I... I didn't look up the briefs in the case.
Did the Government appear in... in that case?
Mr. Srinivasan: No.
But... but Bougas I think is... shouldn't govern the resolution of this case for several reasons, and one that I think is salient with respect to the points that you were raising earlier, Justice Scalia, is that it really is a happenstance of codification that the terms, established and located, appear together in section 1348.
The paragraph that contained established and the paragraph that contained located were enacted in separate years.
They concerned separate subjects, and they were always treated as separate provisions until the recodification of the judicial code in 1911.
And that recodification stated in its explicit text that the provisions were... were to continue to carry the substantive meaning that they had beforehand and that the arrangement of the provisions were purely... was purely for convenience.
And so I don't think it's fair to say that because established and located happen to appear in the same provision of section 1348 that they necessarily should be given different meanings.
Justice Souter: In Bougas, they were there to... they were put in originally in the original drafting.
They were paired, right?
Mr. Srinivasan: Just about, Justice Souter.
I... the... the paragraph containing established was in there in the 1863 National Banking Law, and... and the provision containing located was added to that provision in 1864.
So the first time that they both appeared, they did appear together, which is another distinction from the circumstance that the Court faces with respect to 1348.
Chief Justice Roberts: Could I... could I get your position again on exactly 1348?
You say main office is where the bank is located?
Mr. Srinivasan: That's right.
Chief Justice Roberts: What about if that's different from the national bank charter?
Mr. Srinivasan: It would still be the main office.
The... the national bank charter... I think it's called the organization certificate under the terms of the statute... is a historic document that documents where the national bank's initial main office was located.
But, of course, a national bank can relocate its main office under 12 U.S.C. 30.
And we think that when a national bank relocates its main office, it's the current main office that's controlling.
Chief Justice Roberts: Even if its charter says something else.
Mr. Srinivasan: Even if its charter says something else.
Chief Justice Roberts: Because I gather you don't have to amend your charter.
Mr. Srinivasan: You don't.
In fact... in fact, there's no provision for amending the charter.
What you have to do is amend your articles of association if you move the main office... if you move the main office outside the city or town in which the main office previously was found.
Chief Justice Roberts: How... how do you tell where a bank's main office is?
Mr. Srinivasan: Well, as I was saying, you'd have to amend the articles of association if you move to a different city.
So you could look at the articles of association, and those are on file with the Comptroller.
So I think where a national bank's main office is located is readily identifiable and it's publicly available information.
Chief Justice Roberts: So its main office would be... be where its articles of incorporation say, even if it has 90 percent of its branches in another State?
Mr. Srinivasan: That's right.
It's... it's... the main office is... is controlled by where the national bank designates its main office to be.
Now, it's a little bit different than corporations in the following sense, that with the main office of a national bank, it at least has to be a place where the bank is conducting the business of banking.
That's required by the statutes.
Whereas with a corporation, you could conceivably have a situation where they were incorporated in one State--
Chief Justice Roberts: So you can have these banks... I don't know... presumably a State that they bear little or no relation to could offer some favorable treatment of them and they could suddenly say, you know, Wachovia's main office is in Wyoming or something, even though it doesn't... it has one... it has one ATM or one branch there.
And that would be all right with you?
That would be where... where they were located?
Mr. Srinivasan: --That's right, for--
Chief Justice Roberts: That would be the only place that they were located.
Mr. Srinivasan: --For purposes of this provision.
There... there are other provisions where the word located encompasses branch locations, but for purposes of this provision, we think location is synonymous with main office.
And I would say that the court of appeals assumed in its opinion, by the way... and this is at pages 8a and 11a of the... of the petition appendix... that it's rarely going to be the case that a national bank's main office will... will deviate from the national bank's principal place of business.
Justice Stevens: If a national bank changes its main office, it must get the approval of the Comptroller to do so?
Mr. Srinivasan: It... in... in some circumstances, yes.
If it changes its main office--
Justice Stevens: What sort of circumstance?
Mr. Srinivasan: --the same city--
Justice Stevens: Does it say want to open a branch in... just a... just a one window branch in Wyoming and make that the main office.
Would there have been any reason why they couldn't do it?
Mr. Srinivasan: --No, because it's a... it's simply a product of where the--
Justice Stevens: So in other words, the... the Comptroller would automatically approve such a change.
Mr. Srinivasan: --I... I think so.
I don't... I'm not aware of any criterion by which... substantive criterion by which the Comptroller limits where a national banking association could designate its main office to be.
Justice Stevens: Does the term, main office, have any significance for... for any purpose other than this jurisdictional issue in this case?
Mr. Srinivasan: Yes.
It... it has significance in a number of provisions.
For example, it determines where the bank is located with respect to what interest rates it might charge under 12 U.S.C. 85, and that's an issue that this Court confronted a few terms ago in the Smiley case and also in the Marquette case.
But there are other provisions that refer to the... the location of a national banking association, and in all of those we think, as a starting point, the location would be the main office, and in some situations, it would also encompass branch locations.
For purposes of this provision, we don't think that the location would encompass branch locations.
And one reason, in particular, is because the subject that section 1348 deals with is the State citizenship of a national banking association.
And the concept of citizenship has always been thought to require a distinctive association with a State and, in particular, has been thought to require something more than mere physical presence in a State.
That's always been the rule with respect to national persons, and of particular significance, it's always been a rule with respect... it's always been the rule with respect to corporations.
And Congress defined national banking associations as, quote, a body corporate, close quote, in 12 U.S.C. 24.
Justice Stevens: May I ask you another question that is really a follow up on the Chief Justice's earlier... for a private corporation, it's located both where it's incorporated and where it has its principal place of business.
Is it your view that a national bank may have two parallel locations or just one?
Mr. Srinivasan: It... it could have a main office that's different from what one would construe to be its principal place of business under the test that applies to corporations under 1332(c), if... if that's what you're asking, so that factual circumstances--
Justice Stevens: It could... it could have a... it could be a citizen of the State where its... its papers say its main office is and also the State where, in fact, its main office is.
Mr. Srinivasan: --No.
Well, I... well, I don't... in fact, its main office is... is a creature of statutory designation, but I think what--
Justice Stevens: Well, I should use a different word.
Where its principal place of business--
Mr. Srinivasan: --Principal place of business.
Justice Stevens: --they have a big operation in New York and a... and a Delaware headquarters in... in Dover.
Mr. Srinivasan: No.
Our view is that it wouldn't be a citizen of a State simply by virtue of the fact that it has its principal place of business there.
Now, I would say, though, that it's not an open and shut case because the Court in a case that specifically raised the issue, which of course this one doesn't, it could construe 1332(c), which is the provision that deals with corporations generally, as also applying to national banking associations insofar as national banking associations are, after all, corporations.
But we think the better reading is that the specific governs the general, and therefore, that section 1348, which specifically deals with the question of national bank citizenship, would govern over the 1332(c) which more generally deals with the question of corporate citizenship.
Chief Justice Roberts: What--
Justice Scalia: And if we did... if we did interpret 1332(c) that way, there wouldn't be any favoritism for national banks.
Mr. Srinivasan: That's right.
It would entirely eliminate favoritism.
But I think it's important to note that the type of favoritism that we're discussing is the potential inequity as between one State and two States; whereas under the court of appeals' interpretation of section 1348, you could have an inequity that... and it's not farfetched to think... that would encompass 50 States in the case of a national banking association and one or two States in the case of a State corporation.
And so we're--
Chief Justice Roberts: --What... what do you mean that national banking associations are, after all, corporations?
I thought they were distinct entities from corporations.
Mr. Srinivasan: --No.
They're... they're not State chartered corporations.
They're federally chartered corporations, but they are corporate in the... as... as distinguished from other sort of forms that an entity, an incorporeal entity, may take.
And Congress specifically provided that in 12 U.S.C. 24--
Chief Justice Roberts: You mean--
Mr. Srinivasan: --when it defined them as, quote, a body corporate, close quote.
So I think it makes sense to apply the normal rules that we apply to corporate citizenship.
Chief Justice Roberts: --They're not incorporated... they're not incorporated under the laws of any State, though.
Mr. Srinivasan: They're not incorporated under the laws of any State, but they're incorporated under... under the National Bank Act.
They're federally chartered corporations like other federally chartered corporations.
And so in that sense, we think it makes sense to apply the normal rules that apply to corporate citizenship to national banks.
Chief Justice Roberts: But... I'm sorry.
Maybe this is something everybody knows but me.
But I would have thought that a national association is distinct from a corporation in a way, for example, that a partnership is distinct from a corporation.
And I wouldn't have assumed that the laws with respect to corporations automatically applied to national banking associations.
But you say they do?
Mr. Srinivasan: If I could just... just briefly.
Chief Justice Roberts: Yes.
Mr. Srinivasan: I think what I'm trying to say is that federally... national banks are federally chartered corporations and they share the salient characteristics of a corporation, i.e., there's limited liability for shareholders... and that's at 12 U.S.C. 64(a)... and they have a perpetual existence in the same way that corporations do, and that's at 12 U.S.C. 24.
Justice Ginsburg: But you did say 1332(c) does not apply to the national bank.
It's only one location.
Mr. Srinivasan: That... that's our view, but again, I'm... I wouldn't characterize it an... as an open and shut case because 1332(c) refers generally to corporations, and so one could reach the conclusion that 1332's reference to principal place of business should also apply to national banks.
Argument of James R. Gilreath
Chief Justice Roberts: Thank you, counsel.
Mr. Gilreath: Mr. Chief Justice, and may it please the Court--
Mr. Chief Justice, I want to follow up on a point you... you were on about this thing about an association.
Before I do that, I want... I want to say so I'll be sure I don't forget it.
Wachovia, according to... I think we've got it in our papers that we filed in opposition to the petition... has 179 branches in South Carolina.
But it... but it is important, as... as you pointed out, Mr. Chief Justice, that a national bank is not a corporation, but it is a association formed under Federal law.
So there's no State to which this Court can look or anybody can look to determine what their citizenship is.
In fact, in the Langdeau case, they said it was a quasipublic institution, national in character.
So it's not a... it's not a State corporation.
It's got no ties to a State corporation.
So if it's going to have citizenship for diversity purposes, Congress has got to say how we going to figure that out.
And that's what they did in 1448.
This Court, in a series of cases back in the mid-'80's, was faced with the... with the issue of how do you determine the citizenship of a corporation, and it went back and forth but finally came down with a doctrine that said a corporation will be deemed a citizen of the State in which it is incorporated.
And then in 1958, Congress enacted 1332 and added the additional clause of principal place of business.
Now, given that it is a national association and it's not a State corporation, it was necessary for Congress to legislate and enact a statute so we could determine how it would have diversity.
And that's what they did in 28-1448.
And going to the question Justice Scalia asked, do we have to go back and look at all of this statutory history... and you can believe I've been looking at it a lot more than I'd like to have lately.
It kind of ruined my holiday.
But I think I understand it.
And my answer to your question is that you do not.
When Congress enacts a statute that says you are deemed to be a citizen of a State... let me be sure I read it right here... deemed to be a citizen of the State in which you're respectively located, I don't know how Congress can speak much clearer.
Justice Souter: Let me... let me raise the reality check question.
If... if we assume that that is not the only possible reading of that statute, why in the world would Congress have wanted to impose the... the system that follows from... from your result in which the... the national banks are... are excluded from diversity jurisdiction to a degree that the State banks clearly are not?
Mr. Gilreath: I don't think, when Congress enacted section 1448, that they even knew about branch banking.
The... the... that... that is something that has evolved really since 1994 when the Neal Riegle Act was enacted.
So the statute says--
Justice Souter: But the... I guess the problem is if... if we start with the assumption that I made a second ago that your reading is not a necessity... it's a possible reading.
No question about it.
But if... if we assume that it's not an absolute necessity, we... we try to avoid freakish results, and this seems like a freakish result.
And I take it your answer is it may be a freakish result.
We're not claiming that Congress intended it.
But that still leaves us, I think, with the problem of a... a reading which is not absolutely necessary that does produce a freakish result.
And if that's the case, why shouldn't you lose?
Mr. Gilreath: --Well, that assumes that you want to give the... the... I'm not suggesting that you... you want to do this, but that... that a court would want to give the national banks what I say is a free ticket to the Federal courts, to the--
Justice Ginsburg: No.
The question is why would Congress... let's assume we have a choice between two readings.
Why would Congress want to give the State courts... the State banks... State banks... greater access to Federal courts than it gives national banks?
What earthly reason would there be for Congress wanting to do that?
Mr. Gilreath: --I can't... I can't give you a reason for that.
I... I would suggest that they... they don't want to give greater access one way or the other, but they've got to write a statute.
And when they wrote the statute, nobody had in mind what the branch banking system was going to be today.
And so now what this Court is faced with is they are looking at a statute that, when you read it literally, says that they ought to be deemed to be a citizen of South Carolina if they have a branch in South Carolina.
Chief Justice Roberts: Well, it... it says located.
I mean, do you... what about an ATM?
Does an ATM make them... that's all they've got in Wyoming.
Does that make them located in Wyoming?
Mr. Gilreath: That's a good question.
I... I think you could argue either way.
I... I would say they probably are located there because if--
Justice Breyer: What... what about if we go back to 1880 or whatever and they had a messenger?
You know, they only had one office, but they had depositors in different States, and this messenger went from State to State handing out the cash and collecting a fee.
Would Congress at that time have considered that bank to be located in all the States where the messenger showed up?
Mr. Gilreath: --I'm... I'm not sure that even I could say that located goes quite that far.
I'm not even sure that back then the... the statutes would have allowed them to have had a messenger, but assuming it--
Justice Breyer: Couldn't have a messenger?
He just delivered some mail.
The post office was slow.
Mr. Gilreath: --You make it to... I... I can't... I can't--
Justice Breyer: The Pony Express.
Mr. Gilreath: --with that point.
Chief Justice Roberts: You can have private delivery of mail.
Well, that's a... but what... what even more... what about a... a warehouse?
I mean, it's where they keep the... the money bags or whatever.
That's all that's... that's all that's... and that's all that's in the State.
Are they located in that State?
Mr. Gilreath: They've got a presence there and they're doing business there.
I think they would be deemed located there.
Justice Stevens: May I ask you... call your attention to another word in the statute that seems persuasive to me?
It's the word respectively.
The statute says all national banking associations shall be, for the purposes of all other actions by or against them, be deemed citizens of the State in which they are respectively located, which I would read as saying in which each of them is located.
Mr. Gilreath: That... that's the way I read it, and we... we discussed that in our brief, that... that word.
We... we said more so that it doesn't take away from the position that we've got, but I... I agree with what you're saying.
It could be each State.
And... and the statute also says States, in the plural, in which they're located.
Justice Stevens: --They're talking about a plural banking associations, not just plural branches of one association.
And it's in which each... in which they are respectively located, which strikes me as saying in... in which each of those national banking association is located, which seems to me to read as though there's only one location for each bank.
Justice Scalia: Well, that... that would be true if it said the State in which they are... in which they are respectively located, but it does say of the States.
Justice Stevens: That's what it does say the States in which they are respectively--
Justice Scalia: Yes, so each one could be in many States.
Mr. Gilreath: I read it, because it says States, that it's referring to more than one State in which they could be located.
Justice Stevens: --And of course, it refers to more than one State because it referred to even more than one national bank association.
It's a plural associations, and then it says, each of them shall be deemed a citizen of the State in which... it says in the plural... in which they are respectively located.
Mr. Gilreath: I think what... what we said in our brief was that the word respectively is... is in there so that you are not talking about all the banks, but talking about each bank.
Justice Stevens: Correct.
That's exactly right.
Mr. Gilreath: If I could move on.
There are many different business entities that anybody can elect to... to do business under.
As I think the Chief Justice raised earlier, a limited partnership, for instance, is deemed to have the citizenship of all of its various partners.
Justice Ginsburg: But not with every State with which it has a close nexus.
Mr. Gilreath: Right.
Justice Ginsburg: So, in other words, the partnership... we have a corporation where it's incorporated and Congress said a principal place of business.
We have a partnership where each partner is located.
I don't know of any instance where for subject matter jurisdiction, that is, which court system you go to, as distinguished from personal jurisdiction or venue, you have a notion that someone is a citizen of every place where it does the business.
Is there... is there any other example?
It's certainly not true of a partnership.
It isn't true of... of a corporation.
Is there any other entity that would, for subject matter jurisdiction purposes--
Mr. Gilreath: I don't know of any.
It's the... it's the same for a limited liability company as it is for a partnership I believe, that you have to... you have to look through it.
Justice Ginsburg: --Its members.
Mr. Gilreath: But the point... the point I was making is that it... it doesn't necessarily have to be the same rule that it is for a corporation, and... and that... that's what this Court decided in the Carden case.
Justice Ginsburg: Yes, but the question that I asked you is, in the realm of subject matter jurisdiction, that is, which court system, Federal or State, as distinguished from where can I grab this person for personal jurisdiction purposes, what are my venue choices, is there any other example in all of title 28 where, for subject matter jurisdiction purposes, this... every place where it's located counts?
Mr. Gilreath: Not... not that I know of.
Chief Justice Roberts: Do we owe any degree of deference to the Comptroller's interpretation of the provision?
Mr. Gilreath: There... there is some authority that I think is cited in their brief or somebody's brief that the Court should give deference to... to their interpretations.
But this Court is not bound by their interpretations.
If... if this Court concludes that their interpretation is... is clearly incorrect, then it's not... it's not bound by it.
Justice Scalia: This is not a matter of... of... over which the Comptroller has administrative responsibility, is it?
I mean, this is just a matter for the courts as to what court these associations can be... can be sued in.
And I don't see how the Comptroller has any business in that area.
Mr. Gilreath: Well--
Justice Scalia: I mean, I... I guess he deals with these associations all the time, so we should... we should listen to him, but... but he... he is not authoritative as to... as to who comes into court, is he?
Mr. Gilreath: --No.
I would agree.
In fact, Congress has the final say so, and then this Court has got to look at what Congress says to interpret it.
And Congress said, I say very simply, that they're deemed a citizen of any State wherever they are located.
Chief Justice Roberts: What do you do with their... their hypothetical in both your friend's brief and the Government's brief about Ford Motor Company, not in terms of 1332 but common parlance?
If you ask somebody where Ford Motor is located, they're likely to respond by saying, well, what do you mean?
Do you mean their headquarters?
Do you mean the... the plant down the street?
Do you mean the dealership?
It does suggest that located doesn't have the clear meaning that you rely on.
Mr. Gilreath: You... you can make that argument, but it... it depends on, like you say, what... what do you mean when you ask that question.
If you're going out to buy a Ford car, then you obviously would want to know where it's located other than in Michigan.
You'd want to know where the nearest Ford dealership is.
Located, obviously, can have several meanings, but that's one of the points, I think, that Judge Luttig made in his opinion, is you've got to look at it in the context in which it is said in the statute.
And looking at the statute, in the context in which the word located is there, it says where... in... in the States where it's located.
Now, there are other places in the statute, which I'm sure they will argue or have argued in their brief, that... that say, you know, it's located, when they're talking about a bank... a branch bank where you can do insurance or whatever, that it can... it can sell insurance in any branch where... where it's located, and that means another meaning to locate.
But you've got to look at locate in the context in which it's used, and--
Justice Scalia: But the... the argument here is... is in the context of deciding which citizen an entity is a citizen... which State an entity is a citizen of, we normally don't think that entities are citizens of multiple States.
Just as you wouldn't think if... if you're asking, you know, where does the Ford Motor Company manage its... its operations from, you wouldn't think from multiple States.
So here when you're talking about citizenship, why doesn't this argument of context cut precisely against you?
We're talking about citizenship.
People aren't citizens of... of 50 States.
I mean, that... that's an extraordinary result to reach.
Mr. Gilreath: --I... I agree.
A citizen is a citizen.
Justice Scalia: So we should be looking for one State or maybe two States at most.
Mr. Gilreath: Well, we... I... I contend... I can understand why you say that, but if you read the... the statute the way it's worded and you... and you look at what's going on out there, I don't see any problem with this Court construing that they are a citizen of a State like South Carolina where they've got 179 branches.
The... according to the brief by, I think, the ABA or one of the amicus, they've got something like 3,600 branches.
Now, they come into South Carolina, they're taking... if I bank with them, they're taking my money and the... and the money of other millions of South Carolinians and... who... who are entrusting their money to them, as opposed to entrust it to a State court, and if I'm banking with them, I've got to go sue them in... in Federal court.
Whereas, if I'm banking with a--
Justice Ginsburg: In South Carolina.
It's not... it's not as though you're being sent to some other place.
The only question is whether they would have access to the Federal court.
But as far as personal jurisdiction is concerned, you have it in South Carolina.
Mr. Gilreath: --No.
I think if... if we... if this Court adopts the position the petitioner wants, they would be deemed a... a citizen of North Carolina, not South Carolina.
And if I had... if I got into a controversy with them about something in my account, I would have to go file court... file suit in a Federal court to bring them to South Carolina where I would be drawing a jury from 8 or 10 counties as opposed if they were a State bank or--
Justice Ginsburg: But it would still be in South Carolina.
Mr. Gilreath: --It would still be in South Carolina.
Chief Justice Roberts: And the same would be true if you were dealing with a State bank incorporated in North Carolina with its principal place of business in Virginia that had 50 branches in South Carolina.
The same thing--
Mr. Gilreath: That's... that's true.
Chief Justice Roberts: --would still be true.
Mr. Gilreath: That's exactly true.
Chief Justice Roberts: And that's the parity that Congress has... that has been the guiding principle of Congress' enactments in this area since 1882.
Mr. Gilreath: Well, I don't... I don't know whether I necessarily agree with that or with this parity argument that they've got.
I wanted... I want to address that just briefly, if I could, is the parity argument... and... and all of this parity argument they get they get from... from these 1882, 1885, 1887 statutes.
All of those statutes have been repealed.
The parity argument is gone.
If... if Congress had wanted parity, then where is parity in section 1448?
It's not there.
It was there in 1882, 1885 and '87, but those statutes have been repealed.
Parity is not some doctrine or something in the Constitution.
So I think--
Justice Stevens: May I go... may I go back to the textual argument that Justice Scalia was suggesting a little while ago?
If we presume that normally a citizen is a citizen of only one place... there are multiple... there are other situations where you have a dual citizen... and that you would normally assume they're only a citizen in one place, then Congress, in order to solve the problem of corporate headquarters in the private commercial world, corporate headquarters, a main piece of business, went out of its way to say corporations shall be deemed to be a citizen of two places... they made a special statute when they could be a citizen of two places, which overcomes the presumption that it's a citizen of only one place.
But there's nothing to overcome the presumption that in 1348 they're assuming each citizen has only one place of citizenship because that statute just used the word respectively.
It talks about many banks but in... respectively citizens of... of different States.
But I think that's fully consistent with the notion, sort of the basic background notion, that one person has one... one citizenship; one corporation has only one place of citizenship.
Mr. Gilreath: --I can't... I can't argue with the logic that you've got.
But I... I still come back to the language of the statute.
Justice Stevens: Well, this... I'm... I'm relying strictly on the statutory language in making this argument.
Mr. Gilreath: Are you talking about 1448?
Justice Stevens: Yes, because it doesn't say anything about anybody being a... capable of being a citizen of two different places, whereas 1332 does, which is the unusual situation.
Mr. Gilreath: I agree that it says they shall be deemed citizens of the States in which they are respectively located.
Justice Stevens: Respectively.
Mr. Gilreath: The statute says State... says citizens, which to me says the statute is allowing you to find that they can be a citizen of more than one State.
Justice Stevens: See, but it's clearly unusual to say you can be a citizen of two places.
And to do that, you had a special statute in 1332.
To say you can be a citizen of 40 or 50 States simultaneously, there really is no precedent for that.
Mr. Gilreath: I... I can't argue with you, but I... I still come back, you know, to the statute.
I... I think... I think the real problem here is that you've got a statute that was enacted in 1948 that really, if you go back and look, it goes back to 1911.
And obviously, in 1911, nobody knew the proliferation of branch banking that was going to take place.
Nobody knew the proliferation of branch banking that was going to take place in... in 1948 when it was enacted.
And I think the real decision that this Court has got to make is whether you... you read the statute and apply it or either whether you're going to leave it to Congress to... to make that change.
I'm not... and... and you may... you may apply it the way I'm arguing, and I hope you do.
And it may be... and... and if you do, then the national banking associations, with all the clout they've got, can go over here across the street to Congress and they can get it changed.
And you can bet they probably will be trying.
But I think the real question is... is are you going to read the statute for what it says or are you going to, you know, give it the reading they want by going back in all this history and twisting and turning to get to the point they want to get to.
They even... I think this is one point I want to make is if you look at their brief, right at the last page of their brief... and I think this highlights the... the problem that you've got is they say you don't need to go so far as to determine two places.
They just want you to determine one place.
And I think that highlights the fact of how far they're trying to stretch the rubber band on this word to... to get the... get the meaning that they want.
They... they say that ought to be left for another day.
And so I come back that the... the ordinary meaning of the word located should... should put it in each State.
The... I... I think this... I come back and I think the statute is unambiguous.
And that leads me to the... the Bougas case, which was talked about a little bit.
It's not very often that you have a statute where this Court has already ruled, as it did in Bougas some 28 years ago, a... a virtually identical statute dealing with the banking laws.
They... they try to say, well, the in pari materia doctrine ought not to apply, but I mean, you've got a statute there that's a... a banking statute, admittedly dealing with venue, where this Court found the same meaning that we would like for it to find here.
The courts... and... and their argument about established and located completely goes away because the Court said whatever the reason behind the distinction in those two words, it does exist and we recognize it.
And... and even if you say, well, in pari materia doesn't apply... and that's what they argue.
Judge Luttig said, well, it... it's... still there's some authority that similar statutes should apply.
And here, we have a decision that's construing an almost identical statute.
It reaches the conclusion that... that we would like.
In summary, kind of the way I look at it it's kind of like in 1948 the Congress tailored a citizenship suit of clothes for national banks, and... and that suit of clothes, a pattern of which was laid out even back into the... the 19th century, still fits the bill today.
It's a 57-year-old suit of clothes, and... but it still... it can still work.
It may not work the way the banks want it to work, but it will work.
And if the banks want to get a new suit of clothes for jurisdiction, then they need to go over across the street here to Congress and let it make that enactment.
If you have no further questions, that concludes my argument.
Rebuttal of Andrew L. Frey
Chief Justice Roberts: Thank you, counsel.
Mr. Frey, you have 2 minutes remaining.
Mr. Frey: Thank you, I'll try to speak quickly.
I just have a couple of points.
One is with regard to the spread of national banks.
There is a comparable spread of State banks.
For instance, Sun Trust is a bank that's comparable in scope to Wachovia.
It has operations in many States.
It has many branches, I assume, in South Carolina.
And yet, it is a citizen only of its home State, its State of incorporation, or principal place of business.
If there were a problem of abuse of relocation, which I think the Court was a little bit worried about, Congress would deal with it the way they dealt with the abuses of corporate... stated place of incorporation by passing 1332(c).
So let me--
Chief Justice Roberts: No, but if there were the problems that you hypothesize here, Congress could have dealt with them by enacting something that dealt with the proliferation of branch banks rather than interpreting the 1948 statute in light of 1980's--
Mr. Frey: --It could have, but it saw no need.
There was a statute that had been consistently on the books for a century that meant the same thing, which is surely what Congress wanted.
Why would Congress bother when it enacted Riegle Neal and allowed interstate branching, to say, by the way, just like State corporations which conduct business in many States, you know, the rule that we... we've adopted that banks are located in their main office or their charter location, still applies?
Chief Justice Roberts: --Well, but that's not a rule that they've adopted.
All they say is that they're citizens of wherever they're located.
Mr. Frey: --But it's been interpreted by the Court.
It's... it's been... you have a series of statutes, and each time the Court says it doesn't change from the original 1882 meaning.
You have the 1882 statute and you have 1887, and the Court says this means the same thing as 1882.
Then you have 1911.
The Court says this means the same thing as 1911.
I think Langdeau says it means the same thing there.
Let me just, in the brief time I have left, on in pari materia, which is at the heart of Justice Scalia's question about the Bougas case.
Let me just cite two cases to the Court that I think are instructive on this, United States against Granderson, 511 U.S. 39, and Fort Stewart Schools, 495 U.S. 641, both refusing to apply the in pari materia doctrine where you had quite comparable statutes.
Chief Justice Roberts: Thank you, counsel.
The case is submitted.
Argument of Speaker
Mr. Speaker: Justice Ginsburg has the opinion in Wachovia Bank versus Schmidt.
Argument of Justice Ginsburg
Mr. 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.