Court Rules that Wells Fargo is a Citizen of South Dakota, not California

Monday, March 31, 2014

If, as some have said, corporations are people, then Wells Fargo might have to go outside and shovel its driveway about now.


The Ninth Circuit Court of Appeals ruled Thursday that although much of its business is in California and the company has many historic ties to the Golden State, Wells Fargo is a citizen of South Dakota because its “main office” is located there.


A California couple, Robert and Victoria Rouse, sued Wells Fargo and its Wachovia mortgage division in California superior court. Citing the principle of “diversity jurisdiction,”—that when a civil case involves residents of different states, the case can be heard by a federal court—the bank had the case removed to federal court, where it was dismissed.


The Rouses revised their complaint to include only violations of California law and refiled the suit in state court. According to Courthouse News Service, the federal district judge then sent the suit back to state court, saying a national bank is a citizen of both the state with its “principal place of business” and the state listed in its articles of association. Wells Fargo appealed the ruling and the Ninth Circuit agreed with the bank in a 2-1 decision.


Judge M. Margaret McKeown referred to a 2006 United States Supreme Court opinion in Wachovia Bank, N.A. v. Schmidt, which rejected the view of some circuits that a national bank is a citizen of every state in which they operate a branch. The court said 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.”


McKeown noted “One might think that 150 years after Congress established national banks in 1863, the question of their citizenship for purposes of diversity jurisdiction would be well established. Not so. The relevant statute is ambiguous, the courts are split on the question, and the Supreme Court has not squarely decided the issue.”


Judge Ronald Gould dissented, however. “To say that a bank like Wells Fargo, traditionally identified with California and with its principal place of business there for more than a century, is not a citizen of California for diversity purposes, would mean that any bank broadly identified with a state in which it started its business and maintained its principal place of business could ensure federal court diversity actions, and rule out the state courts, even when pitted against adverse citizens of the state where it is most closely identified and understood to operate,” he wrote. “I do not think that idea, at odds with principles of federalism that give state courts a say in resolving their residents' disputes, is what Congress had in mind.”

-AllGov Editors


To Learn More:

Wells Fargo Bank Is Citizen of South Dakota—Ninth Circuit (Metropolitan News-Enterprise)

Centuries Haven't Yet Set Bank's Jurisdiction (by Tim Hull, Courthouse News Service)

Rouse v. Wachovia (United States Court of Appeal for the Ninth Circuit) (pdf)

Wells Fargo Main Investor in Nation’s Worst Private College Company (by Noel Brinkerhoff, AllGov)

L.A. Files Lawsuits against Wells Fargo and Citigroup for Mortgage Discrimination (by Ken Broder, AllGov California)


Leave a comment