Bank v. Wmr E-Pin Llc

• Decision Date: 07 November 2011
• Docket Number: No. 09–3800.,09–3800.
• Citation: 653 F.3d 702
• Parties: WELLS FARGO BANK, N.A., Appellee,v.WMR e-PIN, LLC; e-Banc, LLC; Synoran, Inc., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

653 F.3d 702

WELLS FARGO BANK, N.A., Appellee,

v.WMR e-PIN, LLC; e-Banc, LLC; Synoran, Inc., Appellant.

No. 09–3800.

United States Court of Appeals, Eighth Circuit.

Submitted: April 1, 2011.Filed: Sept. 2, 2011.Rehearing and Rehearing En Banc Denied Nov. 7, 2011.*

T. Earl LeVere, Columbus, OH, for appellant.Richard T. Thomson, Tyler D. Candee, Minneapolis, MN, Howard N. Wisnia, San Diego, CA, Kevin M. O'Brien, Washington, DC, W. Barton Rankin, Dallas, TX, for appellee.Before WOLLMAN, MURPHY, and GRUENDER, Circuit Judges.WOLLMAN, Circuit Judge.

Synoran, LLC (Synoran) ¹ and WMR e-Pin LLC (e-Pin) appeal from the district court's ² confirmation of an arbitration award of $1.865 million in favor of Wells Fargo, N.A., which had prevailed on its claims for breach of contract and for misappropriation of trade secrets. Appellants maintain that the district court lacked jurisdiction to confirm the award, erred in confirming the award, and abused its discretion in denying their motion to amend or terminate a permanent injunction issued as part of the award. We affirm.

I.

In 2001, Wells Fargo entered into a business relationship with appellant Synoran. The parties outlined the terms of the relationship in a Software Licensing Agreement (SLA), an umbrella agreement to be fleshed out by subsequent agreements between the parties. Under the SLA, Synoran would provide consulting services and software products to Wells Fargo that related to its management of customer accounts.

In 2003, Wells Fargo sought additional consulting services from Synoran related to the development of its Digital Information Exchange software (DIXE Software). The DIXE Software adopted a “distributed network” approach that Wells Fargo deemed proprietary. Wells Fargo and Synoran entered a second agreement (DIXE Consulting Agreement), under which Wells Fargo reserved certain intellectual property rights associated with the DIXE Software and acknowledged that certain other intellectual property rights associated with a “central switch” approach belonged to appellant e-Pin.

In 2004, Wells Fargo and e-Pin executed a Patent License Agreement (PLA) through which Wells Fargo acquired a license to use certain products patented by e-Pin that relate to check clearing and check settlement services. The PLA incorporated by reference the dispute resolution procedures from the SLA, which provided that any dispute must be resolved through arbitration. Of particular relevance to this appeal are provisions that relate to the scope of the arbitration proceeding and the forms of relief available to the parties:

Arbitrators (i) shall resolve all Disputes in accordance with the substantive law of the state in which the arbitration is held, (ii) may grant any remedy or relief that a court of the state in which the arbitration is held could order or grant with the scope here of and such ancillary relief as is necessary to make effective any award; and (iii) shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the extent a judge could pursuant to the Federal Rules of Civil Procedure, or other applicable law.

[ ... ]

Any award in arbitration under this Section shall be limited to monetary damages and shall include no injunction or direction to any party other than the direction to pay a monetary amount.

J.A. Ex. 000029 at ¶ 7, ¶ 9.

After e-Pin and Wells Fargo executed the PLA, e-Pin assigned certain patent interests to DataTreasury Corporation (DTC). DTC sued Wells Fargo for patent infringement. Wells Fargo invoked the dispute resolution procedures and initiated arbitration proceedings against e-Pin and DTC. DTC contended that it was not subject to arbitration and was ultimately dismissed. Synoran intervened and together with e-Pin asserted counterclaims against Wells Fargo arising from their rights under the SLA.

In July 2008, a three-member arbitration panel (the Panel) convened and heard twelve days of testimony. In its findings of facts and conclusions of law, the Panel dismissed the appellants' counterclaims, found in favor of Wells Fargo on its claims for breach of the SLA and misappropriation of the DIXE software trade secrets, and ordered that “Synoran and WMR e-Bank LLC” pay $1,265,000.00 in attorneys' fees and $600,000.00 in costs.³ The Panel also permanently enjoined the appellants from using or disclosing the DIXE software trade secrets.

In October 2008, Wells petitioned the district court to confirm the arbitration award (the Award). Before ruling on that petition, the district court heard argument from the parties regarding its jurisdiction, ultimately concluding, over appellants' objection, that the prerequisites of subject-matter jurisdiction had been satisfied. The appellants filed a cross-motion to vacate or modify the Award, arguing that the Panel had exceeded its authority when it 1) granted injunctive relief in violation of the governing arbitration procedures, 2) awarded attorneys' fees, and 3) concluded that Wells Fargo was the “inventor and owner” of the DIXE software trade secrets.

The district court denied appellants' motion to vacate or modify and granted Wells Fargo's motion to confirm. It entered a judgment of $1,685,000 against the appellants and permanently enjoined them from disclosing or otherwise making use of the DIXE software trade secrets. Appellants moved to alter the judgment, asking the district court to lift the permanent injunction on the ground that Wells Fargo had made public the DIXE software trade secrets when it filed patent application with the United States Patent and Trademark Office. Appellants argued that the information no longer constituted a trade secret and that the injunction against its use or disclosure should be lifted. The district court denied that motion, and this appeal followed.

Appellants ask that we vacate the district court's confirmation of the award for lack of subject-matter jurisdiction. In the alternative, they ask that we reverse the confirmation of the arbitration award, vacate the finding that Wells is the “inventor” of the DIXE software trade secrets, vacate the award of attorneys' fees and costs against e-Pin, and lift the permanent injunction against them.

II.

Appellants contend that the district court lacked subject matter jurisdiction to confirm the Award. We review de novo questions of subject matter jurisdiction. Sac & Fox Tribe v. Bureau of Indian Affairs, 439 F.3d 832, 835 (8th Cir.2006). Federal subject matter jurisdiction exists if the amount in controversy exceeds $75,000 and the suit is between citizens of different states. 28 U.S.C. § 1332(a)(1). The parties agree that the amount in controversy element has been satisfied, but dispute whether they are diverse parties.

Appellant Synoran is a citizen of several states, including California. Appellants maintain that Wells Fargo is a citizen of California, its principal place of business, and of South Dakota, where its main office is located. They argue that the district court erred in holding that Wells Fargo, as a national bank, is deemed a citizen only of the state in which its main office is located.⁴

National banks are “corporate entities chartered not by any State, but by the Comptroller of the Currency of the U.S. Treasury.” Wachovia Bank v. Schmidt, 546 U.S. 303, 306, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). The relevant statutory language defining the citizenship of national banks for diversity purposes appears in the second paragraph of 18 U.S.C. § 1348: “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.” At issue is whether a national bank is “located” in the state of its principal place of business, if its main office is in a different state.

We begin by noting that every court to consider the meaning of § 1348 for purposes of jurisdiction has recognized that the term “located” is ambiguous. See Wachovia Bank, 546 U.S. at 318, 126 S.Ct. 941 (“To summarize, ‘located,’ as its appearances in the banking laws reveal ... is a chameleon word; its meaning depends on the context in and purpose for which it is used.”). Consequently, we examine the statutory history and case law in order to construe the meaning of the term “located” in § 1348.

Congress first authorized national banks in 1863, at which time they could “sue and be sued in the federal district and circuit courts solely because they were national banks, without regard to diversity, amount in controversy or the existence of a federal question in the usual sense.” Mercantile Nat. Bank at Dallas v. Langdeau, 371 U.S. 555, 565–66, 83 S.Ct. 520, 9 L.Ed.2d 523 (1963). In 1882, Congress eliminated “federal question” jurisdiction for any lawsuit involving a national bank and created diversity jurisdiction under the same rubric as that governing state banks. See Excelsior Funds, Inc. v. JP Morgan Chase, N.A., 470 F.Supp.2d. 312, 318 n. 8 (S.D.N.Y.2006). A subsequent amendment in 1887 provided that national banks shall “be deemed citizens of the States in which they are respectively located,” id. (quoting Act of March 3, 1887, § 4, 24 Stat. 552, 554–55). Congress retained that phrasing without alteration in the Judicial Code of 1911, which “combined two formerly discrete provisions on proceedings involving national banks,” Wachovia, 546 U.S. at 311, 126 S.Ct. 941, and retained the same phrasing once more when it amended § 1348 in 1948.

These predecessors of § 1348 demonstrated Congress's intent “to put national banks on the same footing as the banks of the state where they were located for all the purposes of the jurisdiction of the courts of the United States,” Leather Manufacturers' Nat'l Bank v. Cooper, 120 U.S. 778, 780, 7 S.Ct. 777, 30 L.Ed. 816 (1887), and to “limit the access of national banks to, and their suability in, the federal courts to the same...