Provident Nat. Bank v. Cal. Fed. Sav. & Loan Ass'n

• Decision Date: 12 December 1985
• Docket Number: Civ. A. No. 85-1963.
• Citation: 624 F. Supp. 858
• Parties: PROVIDENT NATIONAL BANK v. CALIFORNIA FEDERAL SAVINGS & LOAN ASSOCIATION.
• Court: U.S. District Court — Eastern District of Pennsylvania

624 F. Supp. 858

PROVIDENT NATIONAL BANK v. CALIFORNIA FEDERAL SAVINGS & LOAN ASSOCIATION.

Civ. A. No. 85-1963.

United States District Court, E.D. Pennsylvania.

December 12, 1985.

William A. Slaughter, Philadelphia, Pa., for plaintiff.

J. Justin Blewitt, Jr., Los Angeles, Cal., for defendant.

MEMORANDUM AND ORDER

BECHTLE, District Judge.

Presently before the court is defendant's motion to dismiss plaintiff's complaint on the grounds that this court lacks jurisdiction over the subject matter of the complaint and jurisdiction over the person of the defendant and plaintiff's motion for sanctions. For the reasons stated herein, defendant's motion will be denied and plaintiff's motion will be dismissed as moot.

FACTS

Plaintiff, Provident National Bank, is a national banking association with its principal place of business in the Commonwealth of Pennsylvania. Defendant, the California Federal Savings and Loan Association, is a Federal Savings and Loan Association, federally chartered under the Home Owners' Loan Act of 1933. See 12 U.S.C. § 1461 et seq. Defendant has 138 branch offices in California, 37 branch offices in Florida, 13 branch offices in Georgia, and 6 branch offices in Nevada. A substantial amount of defendant's business is conducted in those four states, California, Florida, Georgia, and Nevada.

A smaller amount of defendant's business is conducted in Pennsylvania. Defendant had on December 31, 1984, 631 depositors with Pennsylvania addresses of a total number of 953,390 depositors. Defendant's Pennsylvania depositors number only .066% of defendant's total number of depositors. In addition, the Pennsylvania depositors contributed a mere $10,000,000.00 to defendant's $14 billion of total deposits, or .071% of defendant's total deposits. Moreover, on December 31, 1984, a mere $10,000,000.00 of defendant's total outstanding loans of $12 billion could be traced to Pennsylvania residents. In other words, only .083% of defendant's total outstanding loans on December 31, 1984 were to Pennsylvania residents.

On January 8, 1985, plaintiff agreed to sell a Negotiable Certificate of Deposit (the "Certificate") to Asset Management Fund for Savings Institutions, Inc.¹ in the amount of $5 million at a rate of $8.30%. The Certificate was to have a term of 61 days, beginning on January 9, 1985 and maturing on March 11, 1985. It was to be delivered, physically, on January 9, 1985, by Manufacturers Hanover Bank,² defendant's transfer agent for all negotiable instruments in the United States, to State Street Boston Securities Service Corporation.³

The offer, acceptance, negotiation, and arrangement of the sale of the Certificate was done on January 8, 1985 in a telephone call between P. Louis Johnson ("Johnson"), defendant's Vice President Corporate Savings, and Mark McEntee ("McEntee"), an employee of Lehman Management Co., Inc. At the time of the phone call, Johnson was physically located in California, and McEntee was in New York. At the end of the phone conversation, Johnson agreed to send McEntee a letter confirming the conversation and, at McEntee's request, to send a copy of that letter to Provident Institutional Management Corporation in Pennsylvania.⁴

On January 9, 1985, the confirmation letter was sent to McEntee and a copy of that letter was sent to Provident Institutional Management Corporation in Pennsylvania.

Plaintiff provided the funds on January 9, 1985 for the purchase of the Certificate. The Certificate was not delivered on January 9, 1985. In fact, the Certificate had not been delivered on February 25, 1985, 47 days after the scheduled delivery date.⁵

At the maturity of the Certificate, defendant made a repayment. Plaintiff asserts in this lawsuit, however, that defendant's repayment was inadequate, or, in other words, defendant failed to repay plaintiff $54,180.56. Plaintiff seeks a recovery of damages in the amount of $54,180.56 plus interest and costs.

In its present motion to dismiss, defendant argues (1) that this court, a Federal District Court, lacks diversity jurisdiction because, as a federally chartered savings and loan association, defendant is not a citizen of any state for diversity jurisdiction purposes and (2) that this court, sitting in Pennsylvania, cannot assert general jurisdiction over the person of the defendant because the defendant has not had continuous and systematic business contacts with Pennsylvania at any time. Defendant contends, and plaintiff concedes, that this court cannot assert specific jurisdiction because plaintiff's claim does not arise out of or relate to defendant's contacts with Pennsylvania.

DISCUSSION

1. Subject Matter Jurisdiction.

The Home Owners' Loan Act of 1933 created the Federal Home Loan Bank Board (the "Board"), 12 U.S.C. § 1464, and authorized the Board "to provide for the organization, incorporation, examination, operation and regulation" of Federal Savings and Loan Associations and "to issue charters therefor...." 12 U.S.C. § 1464(a)(1). Defendant has been chartered by the Board.

National banks may be subject to a federal court's diversity jurisdiction⁶ pursuant to 28 U.S.C. § 1348. See Trent Realty Associates v. First Federal Savings and Loan Association, 657 F.2d 29 (3d Cir.1981). Other federally charted corporations, such as defendant, may also fall without the court's diversity jurisdiction. Wright, Miller & Cooper in Federal Practice and Procedure explains as follows:

When ... federally chartered corporations , other than national banks, are involved, three situations should be distinguished for the purpose of determining whether a federal court has diversity jurisdiction. 1) If a corporation is federally chartered and more than one half of its capital stock is owned by the United States, then federal question jurisdiction exists,⁷ provided, of course, that any requisite amount in controversy is met. 2) If a corporation is federally chartered and more than one half of its capital stock is not owned by the United States, but the corporation's activities are localized in a particular state, it is deemed a citizen of the state in which these activities take place. Consequently, the federal courts may exercise diversity jurisdiction, assuming, of course, the opposing party is a citizen of a state other than that in which the corporation performs most of its activities and the requisite amount in controversy exists.⁸ 3) If more than one half of the corporation's capital stock is not owned by the United States and the corporation's activities are distributed among several states, then federal question jurisdiction does not exist,⁹ and "the general rule * * * followed is that the citizenship of a federal corporation created to operate in one or more states is national only. Such a corporation has no state citizenship for jurisdictional purposes unless Congress so enacts." Footnotes Added

Wright, Miller & Cooper, Federal Practice and Procedure, Jurisdiction 2d § 3627 (1984) (Quoting Burton v. U.S. Olympic Committee, 574 F.Supp. 517 (C.D.Pa. 1983).)

In the present case, on this record, defendant's business activity appears to be localized in California. The record reflects that, on December 31, 1984, defendant had 138, or 71%, of its branch offices in California and had a substantial amount of its deposits and outstanding loans in California. Consequently, defendant, the court finds, is a citizen of California for diversity jurisdiction purposes.

Defendant does not contend that plaintiff's claim does not satisfy the statutorially required jurisdictional amount.

As a result, briefly stated, the court holds that it has subject matter jurisdiction over the instant lawsuit.

2. Jurisdiction Over the Person of the Defendant.

Turning to defendant's second argument, that this court cannot assert personal jurisdiction over the defendant, it is appropriate to set forth briefly the frequently repeated principals of personal jurisdiction. The plaintiff has the burden of establishing a sufficient jurisdictional facts upon which the court can exercise jurisdiction. Compagnie des Bauxites de Guinee v. L'Union, 723 F.2d 357, 362 (3d Cir.1983); Gehling v. St. George's School of Medicine, Ltd., 773 F.2d 539 (3d Cir.1985). Before a forum may assert jurisdiction over a nonresident defendant in that jurisdiction over the nonresident defendant is authorized by a so-called "long-arm statute" of the forum. Under Pennsylvania's long-arm statutes a court, sitting in Pennsylvania, "may exercise jurisdiction over a nonresident defendant to the fullest extent allowed by the Constitution of the United States ...," id., § 5322(b), where plaintiff's cause of action arose from nonresident's "transacting business" within the forum, 42 Pa.Cons.Stat. Ann. § 5322,¹⁰ or where the nonresident defendant has been "carrying on ... a continuous and systematic part of its general business" within Pennsylvania. Id. § 5301(a)(2)(iii). See Johnson v. Summa Corporation, No. 84-2844, Slip Op. (E.D.Pa. October 3, 1985) (Ditter, J.).

The extent to which the long-arm statute may reach, however, is limited by the due process clause of the United States Constitution. A long-arm statute may not authorize a court to assert personal jurisdiction over a nonresident defendant unless the nonresident defendant has "certain minimum contacts with the forum such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940)). In Pennsylvania, the reach of the long-arm statutes are coextensive with the extent permitted by the due process clause of the United States Constitution. See Commodore Business Machines v. JST Distributing Co., 596 F.Supp. 409 (E.D.Pa.1984).

The court, after International Shoe, has explained that there are two types of personal...