Ferraiolo Const., Inc. v. Keybank, N.A.

• Decision Date: 07 October 1997
• Docket Number: Civ. No. 97-0080-B.
• Parties: FERRAIOLO CONSTRUCTION, INC., Ferraiolo Precast, Inc. d/b/a Ferraiolo Concrete Products Co., Inc., Plaintiffs, v. KEYBANK, N.A. d/b/a Key Bank in Maine, KeyCorp, Defendants.
• Court: U.S. District Court — District of Maine

978 F.Supp. 23

FERRAIOLO CONSTRUCTION, INC., Ferraiolo Precast, Inc. d/b/a Ferraiolo Concrete Products Co., Inc., Plaintiffs, v. KEYBANK, N.A. d/b/a Key Bank in Maine, KeyCorp, Defendants.

Civ. No. 97-0080-B.

United States District Court, D. Maine.

October 7, 1997.

Warren M. Silver, Warren M. Silver, P.A., Bangor, ME, for Plaintiffs.

Bruce B. Hochman, Lambert, Coffin, Rudman & Hochman, Portland, ME, for Defendants.

ORDER AND MEMORANDUM OF DECISION

BRODY, District Judge.

Defendants, KeyBank National Association ("KeyBank") and KeyCorp, move to dismiss this action for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). Plaintiffs, Ferraiolo Construction, Inc. and Ferraiolo Precast, Inc. d/b/a Ferraiolo Concrete Products Co., Inc. (collectively, "Ferraiolo"), allege that the basis for the Court's jurisdiction over this matter is diversity of citizenship under 28 U.S.C. § 1332. Defendants contend that complete diversity does not exist here. For the reasons set forth below, Defendants' Motion to Dismiss is GRANTED.

I. BACKGROUND

Plaintiffs commenced this action on April 29, 1997, alleging that Defendants negligently permitted Mr. Robert Calderwood, Sr. to deposit the proceeds of checks that Mr. Calderwood allegedly forged on Ferraiolo accounts into his personal account or accounts at KeyBank, and then permitted him to withdraw those funds. Plaintiffs further allege that KeyBank breached its contract with Ferraiolo by "accepting for payment and charging against the Ferraiolo account" certain of the aforesaid checks, in violation 11 M.R.S.A. § 4-401.

Plaintiffs base jurisdiction in this case on diversity of citizenship pursuant to 28 U.S.C. § 1332.¹ Plaintiffs contend that complete diversity exists in this case because both Plaintiffs are Maine corporations with their principal places of business in Rockland, Maine, Defendant KeyCorp is a bank holding company organized under the laws of Ohio with its principal place of business in Cleveland, Ohio, and Defendant KeyBank is a national banking association with its principal place of business in Cleveland, Ohio.² Defendants respond that complete diversity is absent in this case since KeyBank should be considered a citizen of Maine for jurisdictional purposes.

II. DISCUSSION

For purposes of establishing diversity jurisdiction, citizenship is determined as of the date of the initiation of the lawsuit. See Freeport-McMoRan, Inc. v. K.N. Energy, Inc., 498 U.S. 426, 428, 111 S.Ct. 858, 859, 112 L.Ed.2d 951 (1991); Taber Partners, I v. Merit Builders, Inc., 987 F.2d 57, 59 n. 1 (1st Cir.1993). Any corporate consolidation which may have occurred after the filing of this action is irrelevant to a determination of whether or not jurisdiction exists. As the parties invoking the Court's subject matter jurisdiction, the burden of proof is on Plaintiffs. Thomson v. Gaskill, 315 U.S. 442, 446, 62 S.Ct. 673, 675, 86 L.Ed. 951 (1942), Toste Farm Corp. v. Hadbury, Inc., 70 F.3d 640, 642 (1st Cir.1995).

For diversity purposes, citizenship of a national banking association is governed by 28 U.S.C. § 1348, which provides in relevant part that "[a]ll 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." (emphasis added). Plaintiffs claim that the term "located," as used in this provision, refers solely to the location of a national banking association's principal place of business. Defendants contend that, in addition to its principal place of business, a national banking association is "located" in, and thus a citizen of, every state in which it maintains branch banks.

The Court finds Defendants' interpretation persuasive. Several district courts have recently construed the meaning of "located" in section 1348, and held that a national banking association is a citizen not only of the state in which it maintains its principal place of business, but also of every state in which it maintains branch banks. See Connecticut National Bank v. Iacono, 785 F.Supp. 30, 31-32 (D.R.I.1992); Bank of New York v. Bank of America, 861 F.Supp. 225, 231 (S.D.N.Y.1994); Norwest Bank Minnesota N.A. v. Patton, 924 F.Supp. 114, 115 (D.Colo. 1996); Silver v. Bank Midwest N.A., Civ. A. No. 95-2579-EEO, 1996 WL 328737, at *2 (D.Kan.1996); McHugh v. Westpac Banking Corp. Nos. 93 C 3058, 93 C 3059, 1995 WL 243339, at *1 (N.D.Ill.1995). A few of these courts have expanded the scope of the term "located" further, and held that a national banking association is "located" in every state in which it maintains a substantial presence. Bank of New York, 861 F.Supp. at 231; Minnesota, N.A. v. Patton, 924 F.Supp. at 115; McHugh v. Westpac Banking Corp., 1995 WL 243339, at *1.

In a leading case on this issue, Connecticut National Bank v. Iacono, 785 F.Supp. 30, 31-32 (D.R.I.1992), the court granted a defendant's motion to dismiss for lack of diversity jurisdiction where the plaintiff national bank's principal place of business was in Connecticut, but it maintained branch offices in Rhode Island where at least one of the defendants was a citizen. In analyzing the term "located" in section 1348, the Iacono court examined the Supreme Court's decision in Citizens & Southern National Bank v. Bougas, 434 U.S. 35, 37, 98 S.Ct. 88, 89, 54 L.Ed.2d 218 (1977), where the Court considered the term "located" as used in 12 U.S.C. § 94, the provision governing venue in actions against national banking associations. At the time, section 94 restricted venue in a federal court action against a national banking association to the judicial district where the national bank was "established," and venue in a state court action against a national banking association to the county or city where the national bank was "located." The Court noted that while the terms "established" and "located" may have led to the same ultimate venue result before the advent of the modern "national banking system, replete with branches," the two words were not synonymous. Id. at 43-44, 98 S.Ct. at 92. Congress' concern in restricting venue in state court actions was "the untoward interruption of a national bank's business that might result from compelled production of bank records for distant litigation,...." Id. at 44, 98 S.Ct. at 93. Since this concern largely disappeared with modern data processing and transportation, the Court held that a national banking association was "located," for venue purposes, wherever it maintained an authorized branch. Id.

The Iacono court applied the Supreme Court's definition of the term "located" in the former 12 U.S.C. § 94 to the term "located" in 28 U.S.C. § 1348 for several reasons. After Bougas, Congress revised section 94 to specify that venue in actions against national banking associations is only proper where the "association's principal place of business is located." 12 U.S.C. § 94. Plaintiffs contend that by revising section 94, Congress "statutorily overruled the Supreme Court's decision in Bougas ... to clarify its intention that where a national banking association was `located' referred to the bank's principal place of business." Pls.' Opp. Mot. Dismiss at 4. The Court, however, is persuaded by the reasoning of the Iacono court which held that the revision indicates Congress' clear intention "to limit venue ... without raising any doubt as to where a national bank is located." Iacono, 785 F.Supp. at 33; see also Bank of New York, 861 F.Supp. at 231 (the revision "indicates that Congress appreciated the Bougas holding and knew how to supplant it"). If Congress had intended to limit "located" in section 1348 to a national banking association's "principal place of business," it would have amended that provision just as it amended section 94. Iacono, 785 F.Supp. at 33; see also Bank of New York, 861 F.Supp. at 231 ("The fact that Congress did not similarly amend § 1348 suggests that it was prepared to accept the Bougas construction of `located' for § 1348, particularly in view of the fact that Bougas expressly referenced that statute.").³

The Iacono court also noted that, as in the former section 94, section 1348 uses the word "established" in one paragraph, and "located" in the next paragraph. Since the Supreme Court expressly recognized the distinction between the two terms in Bougas, the court held that the two words should have different meanings in this provision as well. Iacono, 785 F.Supp. at 33.

The cases Plaintiffs cite in support of their more restrictive reading of the term "located" are not persuasive. First, while the court in American Surety Co. v. Bank of California, 133 F.2d 160, 161-62 (9th Cir. 1943) did hold that a national bank should only be considered a citizen of the state in which it maintains its principal place of business, this case was decided well before the Supreme Court's decision in Bougas. See Iacono, 785 F.Supp. at 32 (refusing to rely on American Surety in light of Bougas and the subsequent revision of 12 U.S.C. § 94).

Although Plaintiffs contend that courts have continued to interpret "located" as meaning "principal place of business" after Bougas, none of the cases that they cite address the specific issue of whether or not "located" in section 1348 includes states in which national banking associations maintain branch banks. For example, in In re First National Bank of Boston, 70 F.3d 1184, 1187-88 (11th Cir.1995), vacated on other grounds, 102 F.3d 1577 (11th Cir.1996), the court held that where a defendant national bank stated its principal place of business in its removal notice, but failed to allege the state in which it was incorporated, the district court was incorrect to remand sua sponte for lack of diversity jurisdiction. The court found that the defendant's omission was irrelevant, since the national banking association did not have an incorporation state. Id. at 1188. Contrary to Plaintiffs' contentions, the court never...