Rouse v Wachovia Mortgage: 9th Circuit rules a National Bank is a Citizen only of the State where its Main Office is Located


Rouse v Wachovia Mortgage

Under 28 U.S.C. § 1348, national banking associations are “citizens of the States in which they are respectively located.” Id. But the term “located” is not defined in the statute or elsewhere.

Split in the Circuits

The Circuits have split as to the meaning of the term “located.”  Prior to the Rouse v Wachovia Mortgage case, the Fifth, Seventh and Eighth Circuits had decided the issue, but they came up with different results.  On March 27, 2014, in  Rouse v Wachovia Mortgage, FSB, No. 12-55278, it was the 9th Circuit’s turn to weigh in on the question.

Rouse v Wachovia Mortgage

In Rouse v Wachovia Mortgage, a three-judge panel of the 9th Circuit ruled in a 2-1 decision that, under § 1348, a national bank is “located” only in the state designated as its main office.

The underlying lawsuit

In Rouse v Wachovia Mortgage, the plaintiffs filed suit against Wachovia Mortgage, FSB, a division of Wells Fargo, N.A. (“Wells Fargo”) in California state court, alleging both state and Federal causes of action.  Wells Fargo removed the case to Federal court, alleging Federal question jurisdiction on the Federal causes of action, and diversity of citizenship on the state causes of action.

The Defendants then filed motions to dismiss the Federal causes of action.  In response, the Plaintiffs amended their complaint to state only causes of action arising under California law.

The district court held that national banks are citizens of the state where their principal place of business is located, and they are also citizens of the state where their main office is located as designated in their articles of association.  Because Wells Fargo’s main office is in South Dakota and its principal place of business is in California, and the Rouses are citizens of California, the district court held that complete diversity did not exist, and remanded the case to California state court for want of jurisdiction.

Rouse v Wachovia Mortgage Appeal

In Rouse v Wachovia Mortgage, on appeal, the 9th Circuit reversed.  It did so in part in reliance upon the decision in Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006), in which the Supreme Court held “that a national bank, for § 1348 purposes, is a citizen of the state in which its main office, as set forth in its articles of association, is located.” Id. at 307.  The Rouse v. Wachovia Mortgage court acknowledged that this ruling was made in a different context (because “Wachovia Bank did not address whether a national bank is also a citizen of the state where it has its principal place of business”), but it nevertheless formed the backbone of its decision.

The 9th Circuit also relied upon an 8th Circuit case, Wells Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d 702, 707–08 (8th Cir.2011).

The Rouse v Wachovia Mortgage court concluded, “under § 1348, a national banking association is a citizen only of the state in which its main office is located. Accordingly, Wells Fargo is a citizen only of South Dakota, where its main office is located, and the district court’s judgment to the contrary is reversed.”

The Future?

The plaintiffs in Rouse v Wachovia Mortgage may seek a rehearing en banc, given the 2-1 split decision, and the fact that other circuit courts have held differently.  See, for example, Horton v. Bank One, N.A., 387 F.3d 426, 429–36 (5th Cir.2004), cert. denied, 546 U.S. 1149, 126 S.Ct. 1164, 163 L.Ed.2d 1127 (2006) and Firstar Bank, N.A. v. Faul, 253 F.3d 982, 985–94 (7th Cir.2001).

For now, however, this case is the law in the 9th Circuit.

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