Wachovia V. Schmidt

Facts: Plaintiff, Schmidt and other citizens of South Carolina, sued Wachovia Bank, (which has its designated office in North Carolina and branch office in many states) in the state Courts in South Carolina claiming that Wachovia induced them into participating in an illegal tax shelter. Wachovia then filed an action against Schmidt and the others in Federal District Court seeking an order compelling arbitration. Wachovia claimed the Federal District Court had jurisdiction under “diversity of citizenship.” Wachovia claimed it was a citizen of North Carolina and the amount in controversy was over $75,000. The District Court denied Wachovia’s claims after a hearing and found in favor of the Schmidts based upon the merits of the case. Wachovia appealed to the Circuit Court of Appeals, that Court found that the Federal Courts did not have jurisdiction to hear the case that Wachovia was a citizen in every state in which it had a branch office, therefore there was no diversity of citizenship and the Federal District Court did not have jurisdiction to hear the case at all. Wachovia appealed.

Procedural History: Plaintiff sued in State Court. Then Wachovia sued in Federal District Court. The District Court found in Schmidt’s favor. Wachovia appealed to the U.S. Fourth Circuit Court of Appeal. The Court of Appeals held that the District Court did not have jurisdiction over this matter to begin with because Wachovia was a citizen of every state that it had a branch office. Since Wachovia had a branch office in South Carolina, it was a citizen there and there was no diversity of citizenship with Schmidt. Wachovia appealed this matter to the United States Supreme Court.

Issue: Which state or states is Wachovia a citizen of for purposes of determining jurisdiction of the federal courts?

Rule: The Supreme Court looked at the legislation that created federally chartered banks which provides that national banks “shall be deemed citizens of the States in which they...