Oracle Wetmore Co. v. CITIBANK, NA
| Decision Date | 05 April 1982 |
| Docket Number | No. C81-778.,C81-778. |
| Citation | 534 F. Supp. 1159 |
| Parties | ORACLE WETMORE COMPANY, Plaintiff, v. CITIBANK, N. A., Defendant. |
| Court | U.S. District Court — Northern District of Ohio |
Sander Schwartz, Daniel R. McCarthy, McCarthy, Lebit, Crystal, Kleinman & Gibbons, Cleveland, Ohio, for plaintiff.
Ellis McKay, Marilyn Shea-Stonum, Ellen L. Keller, Jones, Day, Reavis & Pogue, Cleveland, Ohio, for defendant.
On April 16, 1981, Oracle Wetmore Company (hereinafter referred to as Oracle Wetmore) filed a complaint in this Court that prayed for damages from Citibank, N. A. (hereinafter referred to as Citibank) for its alleged breach of a loan commitment. Subject matter jurisdiction is based on diversity of citizenship, under 28 U.S.C. § 1332 (1976). On June 10, 1981, Citibank filed a motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(3), or, in the alternative, to transfer the case to the District Court for the Southern District of New York pursuant to 28 U.S.C. § 1406(a) (1976). The basis of its motion is that venue is improper in the Northern District of Ohio.
Citibank argues that, according to the venue provision of the National Bank Act, 12 U.S.C. § 94 (1976), the Southern District of New York, which includes the locality in which Citibank is chartered, is the only district court that has proper venue. In opposition, Oracle Wetmore maintains (1) that venue under this provision is properly in the Northern District of Ohio, or, in the alternative, (2) that Citibank has waived its privilege under the Act by, in effect, maintaining a branch office in this area.
The parties stipulated to several facts, and the Court held an evidentiary hearing on the issue on November 24-25, 1981. Having reviewed the extensive briefs filed by both parties, the hearing record, the stipulations of fact, and the relevant law, the Court grants Citibank's motion to transfer the case to the Southern District of New York for the reasons set out below.
In arguing the venue question, the parties discussed a web of companies and their subsidiaries. To resolve the issue, however, the Court must avoid entanglement in the web and focus on the specific parties to the dispute: Oracle Wetmore and Citibank.
According to the facts stipulated by the parties, Oracle Wetmore is an Arizona limited partnership the general partner of which is, according to the complaint, an Ohio corporation with its principal place of business in Cleveland. The general partner is a second-tier subsidiary of Forest City Enterprises, which has its principal offices in the Northern District of Ohio. Citibank, a subsidiary of Citicorp, is a national banking association, which, according to its charter, is located in the City and County of New York. Stipulations of Fact but not Relevancy ¶¶ 1, 2, 6 ().
During the summer, fall, and winter of 1979, employees and officers of Citibank and of Forest City Enterprises and its subsidiaries met in New York and Cleveland to discuss "the prospect of providing construction financing for a shopping mall in Tucson, Arizona to be developed by Oracle Wetmore Company." Id. ¶ 5; see id. ¶¶ 3-13. On or about February 6, 1980, in New York, Oracle Wetmore and Citibank executed the loan commitment which is at the heart of this dispute. See id. ¶ 14.
Oracle Wetmore claims that Citibank failed to perform its obligations under the loan commitment and breached the commitment. As a result, Oracle Wetmore alleges that it suffered damages of $11,183,550.
Citibank maintains that under the National Bank Act, 12 U.S.C. § 94 (1976),1 venue is proper only in the district within which a national bank is "established." And, the defendant claims, according to almost all the courts that have decided this issue, a national bank is "established" only in the location specified by its charter, in this case, the City and County of New York.
Oracle Wetmore, in opposition, contends that, under 12 U.S.C. § 94, Citibank "is established sufficiently within the Northern District of Ohio to give rise to venue in this district." Plaintiff's Brief in Opposition to Defendant's Motion to Dismiss or in the Alternative, to Transfer Case Pursuant to 28 U.S.C. § 1460(a) sic at 1-2. According to the plaintiff, although Citibank is neither authorized to do business in Ohio nor qualified to do business in Ohio, and has not designated an agent for service of process in Ohio, it is "established" in the Northern District of Ohio because it is, through the offices of other Citicorp subsidiaries, branch banking here. Id. at 2-3. Oracle Wetmore argues that the earlier cases on this issue are no longer apposite because of the great changes that the banking industry has recently undergone. Id. at 4.
In the alternative, the plaintiff contends that, "by its large establishment, its large advertising program and its active solicitation of business and conduct of business within this jurisdiction, Citibank, N.A. has impliedly consented to the venue within this district." Id.
Citibank denies that it has a branch bank within this judicial district or that the presence of other subsidiaries of Citicorp would "establish" Citibank here. It refutes that it has waived the venue privilege, arguing that, even if Citibank were branch banking here, such activity, without more, has not been held to constitute waiver of the section 94 venue privilege. The transaction which is the basis of the dispute, the defendant has stated, was handled by Citibank's New York office, and thus has no connection with this district. Reply Brief of Citibank, N.A. to Plaintiff's Brief in Opposition to Defendant's Motion to Dismiss at 3-4.
Although the venue provision of the National Bank Act is mandatory, not permissive, Mercantile National Bank v. Langdeau, 371 U.S. 555, 562, 83 S.Ct. 520, 524, 9 L.Ed.2d 523 (1963), it has been held to be "a privilege personal to the bank, and to be subject to waiver," Citizens & Southern National Bank v. Boughas, 434 U.S. 35, 38, 98 S.Ct. 88, 90, 54 L.Ed.2d 218 (1977). Thus, absent a showing that Citibank is "established" here or that Citibank waived its privilege, the case cannot be maintained here. Both of Oracle Wetmore's arguments in opposition to the motion to dismiss or transfer for improper venue — (1) that Citibank is "established" here or (2) that Citibank has waived its venue privilege under section 94 — are based primarily upon the premise that Citibank operates a branch office within this district.2
Oracle Wetmore asks this Court to find that Citibank has a branch located within the area encompassed by the Northern District of Ohio. Its argument hinges on two cases, Independent Bankers Association v. Board of Governors of the Federal Reserve System, 516 F.2d 1206 (D.C.Cir. 1975), and Connecticut Bankers Association v. Board of Governors of the Federal Reserve System, 627 F.2d 245 (D.C.Cir.1980), but the plaintiff's reliance on these cases appears misplaced.
The National Bank Act holds a branch of a national bank "to include any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State or Territory of the United States or in the District of Columbia at which deposits are received, or checks paid, or money lent." 12 U.S.C. § 36(f) (1976). Section 36 prescribes the only conditions under which national banks may establish branches, and provides: "No branch of any national banking association shall be established or moved from one location to another without first obtaining the consent and approval of the Comptroller of the Currency." Id. § 36(e).
The Bank Holding Company Act, 12 U.S.C. §§ 1841 et seq. (1976 & Supp. IV 1980), provides that bank holding companies may, in limited circumstances file an application with the Federal Reserve Board to enter businesses that provide services closely related to banking. See Connecticut Bankers Association v. Board of Governors of the Federal Reserve System, 627 F.2d at 249; 12 U.S.C. § 1843. Persons who object to the application may file their objections with the Board, which, after formal or informal hearings, decides whether the company may enter the business. See Connecticut Bankers Association v. Board of Governors of the Federal Reserve System, 627 F.2d at 250-51. "While fully recognizing that bank holding companies would be permitted to engage in activities that were precluded to a bank, Congress sanctioned bank holding company entry into geographical areas where the company's subsidiary banks were excluded by stringent branch banking laws." Id. at 252.
Citicorp Industrial Credit, Inc. (hereinafter referred to as CIC) and Citicorp ( , Inc. (hereinafter referred to as CUSA), are both second-tier subsidiaries of Citicorp organized pursuant to the Bank Holding Company Act. They maintain offices in Cleveland, Ohio, and have appointed statutory agents for service of process. See Stipulations, supra, ¶¶ 18 & 19.
Neither of the parties claims that Citibank has, with the consent and approval of the Comptroller of the Currency, pursuant to 12 U.S.C. § 36, established a branch within the Northern District of Ohio. Oracle Wetmore does maintain, however, that CIC and CUSA operate, in effect, as a branch of Citibank. See Post-hearing Brief at 7-8.
Oracle Wetmore argues that courts have deemed a related corporation to be a branch office of a bank under circumstances similar to those here. But the cases on which it relies do not establish judicial standards for finding that a bank holding company is involved in branch banking. Instead they review the issue of whether a person who objects to an application...
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