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Excelsior Funds, Inc. v. JP Morgan Chase Bank

November 27, 2006

EXCELSIOR FUNDS, INC. AND EXCELSIOR FUNDS TRUST, PLAINTIFFS,
v.
JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, DEFENDANT



The opinion of the court was delivered by: Koeltl, District Judge.

OPINION AND ORDER

The plaintiffs have moved to remand this action to state court. The plaintiffs, Excelsior Funds, Inc. ("EFI") and Excelsior Funds Trust ("EFT"), filed this action in the New York State Supreme Court, New York County, alleging various state causes of action against the defendant, JP Morgan Chase Bank, N.A. ("JPMC"). JPMC removed the action to this Court pursuant to 28 U.S.C. § 1441(a), claiming that removal was proper based on diversity of citizenship, 28 U.S.C. § 1332(a). Following removal, the plaintiffs timely filed the present motion pursuant to 28 U.S.C. § 1447(c) to remand the action to state court, arguing that removal was improper under 28 U.S.C § 1441(b) because JPMC, a national banking association, both is and was at the time of removal a citizen of the State of New York, the state in which the action was brought, because its principal place of business is located in New York.

The central issue on this motion is whether a national bank is a citizen of the state in which its principal place of business is located, as well as the state in which its main office is located, as designated in its articles of association.*fn1 As explained below, a national bank is a citizen only of the state in which its main office is located, and not the state in which its principal place of business is located, if that state differs from the location of its main office. Therefore, removal was proper in this case, and the plaintiff's motion to remand is denied.

I.

The following facts are not disputed for the purposes of the pending motion. The plaintiff, EFI, is a corporation that is "organized and existing under the laws of the State of Maryland." (Compl.¶ 2.) The plaintiff, EFT, is a business trust that is "organized and existing under the laws of the State of Delaware." *fn2 (Compl.¶ 3.) The defendant, JPMC, is a national banking association with its main office in the State of Ohio, as designated in its articles of association. As stipulated, JPMC's principal place of business is in New York.

II.

The plaintiffs argue that removal was improper pursuant to 28 U.S.C. § 1441(b). Section 1441(b) provides:

Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.

Because the Court's jurisdiction is based solely on diversity of citizenship, if the defendant was a "citizen" of New York at the time of removal, the state in which this action was brought, then removal was improper.*fn3 The plaintiffs argue that JPMC, a national bank, both is and was at the time of removal a New York citizen because it maintains its principal place of business in New York. The citizenship of national banks is defined in 28 U.S.C. § 1348, which provides in pertinent part: "All national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively located." *fn4

A.

In Wachovia Bank, N.A. v. Schmidt, 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." 546 U.S. 303, ----, 126 S.Ct. 941, 945, 163 L.Ed.2d 797 (2006). The defendant argues that this holding precludes a finding that a national bank's principal place of business provides an independent basis for establishing citizenship under § 1348. The plaintiffs, on the other hand, argue that the Supreme Court did not confront whether a bank may also be "located" in the state of its principal place of business and that the question remains open after Wachovia Bank. Therefore, the first issue is whether the Supreme Court's decision in Wachovia Bank conclusively resolved this issue.

1.

In Wachovia Bank, a group of South Carolina citizens sued Wachovia Bank, a national banking association, in a South Carolina state court alleging fraud. 126 S.Ct. at 946. In response, Wachovia filed an action against those South Carolina citizens in the United States District Court for the District of South Carolina seeking to compel arbitration and asserting diversity of citizenship as the sole basis for the court's jurisdiction. Id. Wachovia's main office, as designated in its articles of association, was located in North Carolina. Id. at 945. Its principal place of business was also in North Carolina. See id. at 951 n. 9. However, Wachovia operated branch offices throughout the United States, including in South Carolina, the state of citizenship for the plaintiffs in the state action, the respondents in Wachovia's federal action to compel arbitration ("plaintiffs-respondents"). Id. at 945-46.

After the district court denied Wachovia's motion on the merits, the Fourth Circuit Court of Appeals vacated the judgment and remanded the case to the district court with instructions to dismiss because it determined that the district court lacked subject matter jurisdiction. Id. at 946. The Court of Appeals interpreted the word "located" in § 1348 "in accordance with its ordinary meaning of 'physical presence' " and held that "a national banking association is 'located'... in any state where it operates branch offices." Wachovia Bank, N.A. v. Schmidt, 388 F.3d 414, 432 (4th Cir.2004).

The Courts of Appeals were divided on this issue. Consistent with the Fourth Circuit Court of Appeals, the Second Circuit Court of Appeals had noted in dictum that "a national bank ... by statute is deemed to be a citizen of every state in which it has offices." World Trade Center Prop., L.L.C. v. Hartford Fire Ins. Co., 345 F.3d 154, 161 (2d Cir.2003).

The Fifth and Seventh Circuit Courts of Appeals rejected the view that a national bank was a citizen of every state in which it maintained a branch office. See Horton v. Bank One, N.A., 387 F.3d 426, 429 (5th Cir.2004); Firstar Bank, N.A. v. Faul, 253 F.3d 982, 984-85 (7th Cir.2001). These courts found that a national bank's citizenship should be the same as that of a similarly situated state bank and state corporation, as described in 28 U.S.C. § 1332(c)(1), namely the state of incorporation and the state where the corporation had its principal place of business. Therefore, these courts determined generally that a national bank is a citizen of, first, the state these courts found to be the national banking analogue to place of incorporation and, second, the state where the bank's principal place of business is located.*fn5 See Horton, 387 F.3d at 436; Firstar, 253 F.3d at 993.

The Supreme Court granted Wachovia's petition for writ of certiorari "to resolve the disagreement among Courts of Appeals on the meaning of ยง 1348." Wachovia Bank, 126 S.Ct. at 946. In discussing ...


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