Supreme Court Grants Cert in Federal Diversity Case

The Supreme Court has agreed to interpret the term “located” in a federal statute providing that national banking associations are citizens of the states in which they are located for purposes of federal diversity jurisdiction.

The Fourth Circuit, in a decision by Supreme Court hopeful (and Bush I appointee) Michael Lutig, held that a banking association is "located" in, and thus deemed to be a citizen of, every state in which the association maintains a branch.  Wachovia Bank v. Schmidt, 388 F.3d 414 (4th Cir. 2004), cert. granted, No. 04-1186,  --- S.Ct. ----, 2005 WL 555377, 73 USLW 3540 (U.S. Jun 13, 2005).  Reagan appointee Robert Beezer of the 9^th Circuit joined the Wachovia opinion, and Clinton nominee Robert King dissented.  Three other courts of appeals held that banks have more limited citizenship. 

 The case could affect whether a wide range of consumer actions against banks are litigated in state or federal court.  In the Wachovia case, the Fourth Circuit dismissed for lack of jurisdiction the bank’s petition to compel arbitration of a complaint filed in state court alleging that the bank fraudulently induced the plaintiffs to engage in a risky tax-motivated investment scheme.