Taheny v. Wells Fargo Bank, N.A.

• Decision Date: 03 April 2012
• Docket Number: No. CIV. S–10–2123 LKK/EFB.,CIV. S–10–2123 LKK/EFB.
• Citation: 878 F.Supp.2d 1093
• Parties: Michael TAHENY, et al., Plaintiffs, v. WELLS FARGO BANK, N.A., et al., Defendants.
• Court: U.S. District Court — Eastern District of California

878 F.Supp.2d 1093

Michael TAHENY, et al., Plaintiffs,

v.WELLS FARGO BANK, N.A., et al., Defendants.

No. CIV. S–10–2123 LKK/EFB.

United States District Court,

E.D. California.

April 3, 2012.

Matthew Mellen, Mellen Law Firm, San Mateo, CA, Jamil Louis White, Louis/White, Sacramento, CA, for Plaintiffs.

Christopher A. Carr, Yaw–Jiun Gene Wu, Anglin Flewelling Rasmussen Campbell & Trytten, LLP, Pasadena, CA, for Defendants.

ORDER

LAWRENCE K. KARLTON, Senior District Judge.

I. SUMMARY

This court re-affirms its decision in Guinto v. Wells Fargo Bank, N.A., Civ. S–11–372–LKK, 2011 WL 4738519 (E.D.Cal. October 5, 2011). Guinto found that American Surety Co. v. Bank of California, 133 F.2d 160, 162 (9th Cir.1943), is binding, Ninth Circuit authority holding that a national bank is a citizen of the state where it has its principal place of business. Under the authority of American Surety, Wells Fargo is a citizen of California, and under the authority of Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006), Wells Fargo is a citizen of South Dakota.¹ Since complete diversity is lacking (plaintiffs share Wells Fargo's California citizenship), and there is no other basis for asserting federal jurisdiction,this case will be remanded to the state court pursuant to 28 U.S.C. § 1447(c), for lack of federal jurisdiction.

II. BACKGROUNDA. Defendants Remove This Lawsuit to Federal Court.

On August 5, 2010, defendants Wachovia Mortgage (“a division of Wells Fargo Bank, N.A.”), and Golden West Savings Association Service Co. removed this state breach of contract action to federal court. Dkt. No. 1. In this court, plaintiffs ultimately filed a Second Amended Complaint,² naming Wells Fargo Bank, N.A. (“Wells Fargo” or “the bank”), and Golden West Savings Association Service Co. as the only defendants.

In their Notice of Removal, defendants assert that this court has diversity jurisdiction over this removed action. They say that plaintiffs are citizens of California,³ and that Wells Fargo is a citizen exclusively of South Dakota, the location of its “main office.” ⁴

B. Diversity Jurisdiction and Guinto.

This court has an obligation to examine its own subject matter jurisdiction. ⁵ In Guinto, this court dismissed out all the federal claims and thereupon ordered the parties to show cause why the matter should not be remanded back to the state court.

In that case, Wells Fargo argued that it was a citizen of South Dakota, where it maintained its “main office,” that it was not a citizen of California (which it has admitted in other proceedings, is its “principal place of business”), and therefore, it argued, it was diverse from the California plaintiffs. The bank's arguments relied upon: 28 U.S.C. § 1348, which states that a national bank is a citizen of the state where it is “located;” Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006), which held that a national bank is located in the state where it maintains its “main office;” Lowdermilk v. U.S. Bank National Ass'n, 479 F.3d 994, 997 (9th Cir.2007), which holds that the national bank in that case was a citizen where it had its main office, citing Schmidt; and non-binding cases, some of which interpreted Schmidt to mean that a national bank was a citizen of only the state where it had its main office, and others which interpreted the case as permitting dual citizenship, namely the bank's home office, and its principal place of business.

Wells Fargo did not cite or make any reference to the binding Ninth Circuit case directly on point, American Surety, which held that a national bank is located where it has its principal place of business. Nor did Wells Fargo cite or make reference to any o the subsequent Ninth Circuit cases that have cited American Surety as authority on where a national bank is “located.” See Bank of California Nat. Ass'n v. Twin Harbors Lumber Co., 465 F.2d 489 (9th Cir.1972) (“The Bank, for diversity purposes, is a ‘citizen’ of California”), citing28 U.S.C. § 1348 and American Surety;U.S. Nat. Bank v. Hill, 434 F.2d 1019, 1020 (9th Cir.1970) (per curiam), citing American Surety's interpretation of 28 U.S.C. § 1348.⁶

This court, however—unlike Wells Fargo—is bound by Ninth Circuit precedent. Having concluded that the Supreme Court expressly declined to rule on the issue ruled upon by the Ninth Circuit in American Surety—that the bank is located where it has its principal place of business—this court held that for federal diversity jurisdiction purposes, Wells Fargo was a citizen of California, as were plaintiffs, thus destroying diversity jurisdiction. Accordingly, after exercising its discretionary authority to “declin[e] to exercise supplemental jurisdiction over the remaining claims” pursuant to 28 U.S.C. § 1367(c)(3), this court remanded the matter to state court.

C. Wells Fargo's Response to Guinto.

Wells Fargo did not appeal the Guinto decision despite the intra-circuit split it complains about in its brief in this case.⁷ It could have done so, since a remand order is appealable when, as in Guinto, it is issued pursuant to 28 U.S.C. § 1367(c):

Here the district court clearly identified 28 U.S.C. § 1367(c) as the source of its authority to remand, and explicitly stated that it was declining to exercise supplemental jurisdiction. In this circuit, “a district court's order remanding pendent state claims on discretionary grounds [is] not pursuant to § 1447(c),” and thus a “district court's discretionary remand of pendent state claims is a reviewable order.”

California Dept. of Water Resources v. Powerex Corp., 533 F.3d 1087, 1091 (9th Cir.2008); Carlsbad Technology, Inc. v. HIF Bio, Inc., 556 U.S. 635, 640–41, 129 S.Ct. 1862, 1867, 173 L.Ed.2d 843 (2009) (the non-appealability rule of Section 1447(d) does not apply to Section 1367(c) discretionary remands).⁸

D. Post- Guinto Cases.

After Guinto, whenever a subsequent case arose before this judge in which Guinto appeared to be relevant (the issue was typically identified in status conference), this court has requested briefing on whether the matter should be remanded pursuant to American Surety and Guinto. See, e.g., Roberts v. Wells Fargo Bank, N.A., 2012 WL 487922 at *1 (E.D.Cal.2012) (finding, as in Guinto, that “Wells Fargo is a citizen of California, and there is no basis for diversity jurisdiction”); ⁹Pena v. Wells Fargo Bank NA, Dkt. No. 17, Civ. S–11–1761–LKK–CKD (E.D.Cal. November 14, 2011) (Order To Show Cause pending).

The court in this case requested briefing on whether diversity jurisdiction exists. Wells Fargo again argues to this court, as it did unsuccessfully in Guinto, that under Schmidt, it is a citizen only of South Dakota—not California—and therefore the court has diversity jurisdiction over this breach of contract claim. Wells Fargo now asserts that this court was mistaken to rely on American Surety, and that in any event, it should “be [hesitant] to create a split of authority on jurisdictional questions.” ¹⁰

The court does not wish to encourage Wells Fargo or any other party to seek reconsideration through means other than those provided for in the Local Rules of this District. However, in this case, Wells Fargo addresses American Surety which for some reason it did not address on its first go-round. Accordingly, the court will address each of the bank's arguments in turn.

III. STANDARDS

Civil actions not involving a federal question are removable to a federal district court if there is diversity of citizenship between the parties. 28 U.S.C. § 1332(a)(1). Section 1332 requires that there be complete diversity, that is, each plaintiff's citizenship must be diverse as to each defendant's citizenship. Id.

On a motion to remand, the removing defendant faces a strong presumption against removal, and bears the burden of establishing that removal was proper by a preponderance of evidence. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 403–404 (9th Cir.1996). Section 1447(c), 28 U.S.C., provides that a case removed from state court “shall be remanded” if it appears that it “lacks subject matter jurisdiction.” Federal jurisdiction must be rejected if there is any doubt as to the right of removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992).

IV. ANALYSIS

Wells Fargo is a “national banking association” otherwise known as a “national bank.” For purposes of diversity jurisdiction:

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.

28 U.S.C. § 1348.¹¹ Over the years, the courts have struggled over what “located” means in this context. In general, the courts have split over the following possibilities: (1) where the bank has its “main office;” (2) where the bank has branches; (3) where the bank's “principal place of business” is; and (4) some combination of the prior three. The statute does not, by its express terms at least, specify which of these possibilities is correct. Nor does the statute indicate whether a national bank can have only one location, or whether it can be located in two or more of these possible locations, for diversity purposes.

The Supreme Court and the Ninth Circuit have cleared up the mystery to some extent. It is now clear that a national bank is located where it maintains its “main office.” Wachovia Bank v. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). It is equally clear that a national bank's location is not determined by the state(s) where it maintains branches. Schmidt, 546 U.S. 303, 126 S.Ct. 941, 163 L.Ed.2d 797;American Surety Co. v. Bank of California, 133 F.2d 160, 162 (9th Cir.1943).

But what of the “principal place of business?” The Ninth, Fifth and Seventh Circuits, and the Comptroller of the Currency (“the administrator charged with supervision of the National Bank Act”), have all determined that a national bank is a citizen of the state where its principal...