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Tradewinds Inc. v. Citibank


July 27, 1981



Author: Garth

Before: ADAMS, WEIS and GARTH, Circuit Judges

GARTH, Circuit Judge .

In Helco, Inc. v. First National City Bank , 470 F.2d 883 (3d Cir. 1972) a panel of this court held that venue would not lie under 12 U.S.C. § 94 (1976) to sue a national bank in the District Court of the Virgin Islands when that bank was chartered in the Southern District of New York. Today we face the very issue which this court confronted in Helco . Indeed, even the defendant is the same, although it is now known by another name.*fn1 Recognizing that Helco controls our disposition, we reaffirm our previous holding that an action against Citibank may not be brought in the District Court of the Virgin Islands. We do so because the Internal Operating Procedures of this court provide that:

It is the tradition of this court that reported panel opinions are binding on subsequent panels.Thus, no subsequent panel overrules a published opinion of a previous panel. Court in banc consideration is required to overrule a published opinion of this court.*fn2

Our holding here is not predicated on any precedent other than this court's decision in Helco . If not for Helco, logic and recent developments, including the intervening Supreme Court decision of Citizen & Southern National Bank v Bougas , 434 U.S. 35 (1977), would dictate a contrary disposition.


Plaintiff, Tradewinds, Inc. sued IBG Properties, Inc., NBG Properties, Inc. (both Virgin Islands corporations) and Citibank in the District Court of the Virgin Islands. Citibank, which is a national banking association chartered in the Southern District of New York, has a branch in the Virgin Islands. Tradewinds claimed the defendants, IBG, NBG and Citibank, had breached three contracts that they had with Tradewinds. Although Citibank was not a signatory to the contracts, Tradewinds asserted that IBG and NBG were subsidiaries of Citibank, and that the operations of these subsidiaries were intertwined with the operations of Citibank, the parent. The complaint also appeared to assert a claim of tortious interference with contract.

The District Court of the Virgin Islands denied Citibank's Fed.R.Civ.P. 12(b)(3) motion that the complaint against it be dismissed for improper venue. The court reasoned that the Helco court's discussion of venue did not constitute a holding but was dictum; that the spirit of Bougas commanded that venue be found in the Virgin Islands; and that the equities involved weighed heavily in favor of finding venue in the Virgin Islands.The district court therefore held that for the purposes of § 94, Citibank was "established" in the Virgin Islands because it operated a branch there. The district court then certified an interlocutory appeal under § 1292(b), which this court, in turn, accepted.*fn3


The venue provision for national banks, 12 U.S.C. § 94 (1976), provides:

Action and proceedings against any association under this chapter may be had in any district or Territorial court of the United States held within the district in which such association may be established, or in any State, county, or municipal court in the county or city in which said association is located having jurisdiction in similar cases.

Although written in permissive terms, § 94 has been interpreted to be mandatory. See Citizen & Southern National Bank v. Bougas , 434 U.S. 35, 38 (1977). Thus far, all courts that have addressed the issue of venue in a federal court over a national bank have held that venue lies only in the district in which the national bank has been chartered.*fn4 See Id . at 39. To this point, the term "established", as it appears in § 94 has been equated with the term chartered. Citibank, as we have mentioned earlier, is chartered in the Southern District of New York, and under the cases to date, is thus "established" in that district for purposes of § 94 venue.


In Helco , we faced the identical issue that is presented to us here: is a national bank "established" where it has a branch bank?*fn5 The district court there had held that even if a national bank was not "established" where it maintained a branch, by operating a branch in a separate locale, the bank had waived the protection of § 94. Relying on federal decisions interpreting "established" and state cases interpreting the state venue provision ("in any State, county or municipal court in the county or city in which said association is located having jurisdiction in similar cases." § 94 (emphasis added)), our court in Helco held that a national bank was "established" only in the district where it was chartered. In the case of the First National City Bank, now Citibank, that district was the Southern District of New York. No other analysis appears in Helco. Helco , rejecting the district court's analysis, then ruled that by operating a branch in a locale different from the district in which it was chartered, a national bank did not waive its rights under the venue provisions of § 94.*fn6


In the years subsequent to 1972 (the year Helco was decided) Congress has not amended § 94, nor has the Supreme Court ruled on the "established" issue presented in Helco. In Bougas , however, the Court held a national bank to be "located" where it maintained a branch for the purposes of § 94 state court venue.*fn7 In doing so, the Supreme Court expressly declined to address the issue of federal venue. Id . at 39.

Bougas involved a suit against a national bank (Citizens and Southern National Bank) which was chartered in the "City of Savannah, in the County of Chatham and State of Georgia." Id . at 36-37. One of the bank's branches was located in Decatur in DeKalb County, Georgia. Bougas, on a transitory cause of action, brought a suit for damages against the bank in the state court of DeKalb County. The bank moved to dismiss Bougas's suit on grounds of improper venue, claiming that it could be sued only in Chatham County where it had been chartered.The Supreme Court affirmed the Georgia Court of Appeal's holding (the Georgia Supreme Court had denied certiorari) that venue lay in DeKalb County. In doing so the Court held that with respect to § 94's state court venue provision, the bank could be sued not only in the county where its charter was issued, but also in the county where its business was conducted at an authorized branch.

The Court's analysis in Bougas began with a review of the statutory history. See also Mercantile National Bank v. Langdeau , 371 U.S. 555 (1963). It noted that the original antecedent of § 94 only provided for suit in the federal court the district where the bank was established. § 59 of the 1863 Act, 12 State. 681. In the National Bank Act of 1864, 13 Stat. 99, Ch. 106, Congress provided for suit in state court. At the time that the 1863 and 1864 Acts were passed, "the activities of a national bank were restricted to one particular location." Bougas at 42-43. Not until 1927 were branch banks permitted, and consequently, the Court observed, Congress had not contemplated the subject or consequences of branch banking when the original bank venue provisions were enacted.

The Court then proceeded to distinguish the cases that held that a bank was only "established" in the district named in its certificate. It reasoned that "established" and "located" were "different" because "a federal judicial district, which the statute associates with the word 'established', is not the same as the geographic area that delineates the jurisdiction of a state court, which the statute associates with 'located.'" Id . at 44. This distinction between "located" and "established" apparently was drawn so that the Court could avoid deciding whether a national bank was "established" in the district where it operated a branch.

Having distinguished "located" from "established", the Court gave its reasons for holding a bank to be "located" where it maintained an authorized branch. The Court explained:

There is no enduring rigidity about the word "located." What Congress was concerned with was the untoward interruption of a national bank's business that might result from compelled production of bank records for distant litigation. Charlotte Nat. Bank v. Morgan , 132 U.S., at 145; Mercantile Nat. Bank v. Langdeau , 371 U.S., at 561-562, n. 23. That concern largely evaporates when the venue of a state-court suit coincides with the location of an authorized branch.*fn9 It is also diminished by improvements in data processing and transportation.*fn10

Id . at 44. Accordingly, the Court held that a national bank was "located" (but did not meet the question of whether it was "established"), where it had an authorized branch.

Justice Stewart was disturbed because he believed that the Court's distinction between "located" and "established" might be misinterpreted. In his concurring opinion he wrote:

The Court's opinion, despite its disclaimer, may be read by some to imply approval of the view that, for the purposes of federal-court venue under 12 U.S.C. § 94, a national bank is "established" only in the district that includes its charter county. See ante , 39-41, 44, 45. I have serious doubt that the cases so holding were correctly decided,*fn* and in any event this question remains an open one here.

Id . at 45-46.

Although expressly limited to defining "located," the reasons given in Bougas would, as the Court recognized, also be applicable in defining "established." Id . at 44 n. 9.The Court ascertained congressional intent by focusing on Congress's concern that a bank's business might be disrupted if it had to produce bank records for distant litigation. The Court understandably found that such concern had little basis if the venue of the suit coincided with the location of an authorized branch, particularly in light of modern developments in communication and transportation.

The congressional concern with bank disruption, which the Court had discussed in the context of state court venue, and which the Court held had evaporated when a state court action was brought where a branch bank was located, appear to evaporate as well when federal court venue is considered. We can perceive no reason from a bank's standpoint, why a suit brought in federal court where the bank's branch is situated should have any different consequence on a bank's operation than if the suit had been brought in state court of the same locale. Thus, if congressional intent is to be inferred solely by he reasoning found in Bougas , which relied on the realities of the contemporary banking industry, then it follows that § 94 should be construed to provide that a bank is "established" not only in the district where it is chartered, but also in any district where it operates a branch.


We recognize that there has been a line of consistent and uniform precedents which have held that a bank is not "established" where it has a branch. See, e.g., Buffins v. Chase National Bank , 192 F.2d 58 (7th Cir. 1951), cert. denied , 342 U.S. 944 (1952); Leonardi v. Chase National Bank , 81 F.2d 19 (2d Cir.), cert. denied , 298 U.S. 677 (1936). Indeed, as we noted at the outset of this opinion, this court itself has so held.Justice Stewart in his Bougas concurrence however, pointed out that these precedents are not convincing. We share his view that these precedents are unpersuasive, particularly now that a bank may be sued in a state court where a bank's branch is "located." See Bougas, supra .

The rule that federal court venue may be laid only in the district where a federal bank is chartered appears to have unfair consequences, particularly in the Virgin Islands, where there is, of course, no state court system.*fn8 Tradewinds is now obligated to bring suit against Citibank in New York, since there is no Virgin Islands forum. Yet nearly all the transactions underlying the suit took place in the Virgin Islands and almost all the parties may be found there. Most of the witnesses who would be likely to testify are also present in the Virgin Islands. Two of the three contracts being sued upon provide that the laws of the Virgin Islands should govern. And Citibank which has been operating a branch in the Virgin Islands continues to engage in commercial activities in the Islands. It seems obvious, therefore, that the suit against all parties should be maintained in the Virgin Islands. Nevertheless, the plaintiff here would only have the choice of suing all the defendants in New York (assuming that there is in personam jurisdiction over the two Virgin Islands corporate defendants in New York), or suing Citibank in New York and the other two defendants in the Virgin Islands.

Finally, the distinction drawn in Bougas between "located" and "established" does not convince us that those terms should be construed to give the disparate results which the current interpretation of § 94 would produce. It appeals evident to us that the Court in discussing the "established" clause of § 94 was reluctant to upset lower court precedents when it was not faced with the need to do so. Bougas did not involve federal venue; hence it did not involve that portion of § 94 which pertains to the district in which a national banking association is "established." When the court therefore, distinguished between the words "established" and "located," it did so looking only at the latter portion of the statute which deals with state court venue. It admittedly did not face the issue which confronts us today. And to the extent that it distinguished the term "established" from the term "located" in a state court context and then held that they were not functionally synonymous, its distinction in a federal court context can not be regarded as dispositive of the issue that we face here.

It seems to us that when the Supreme Court is squarely presented with the issue of whether federal venue may be laid in a district where a bank's branch is situated, it will appear as anomalous to the Supreme Court, as it does to us, that a venue rule should be perpetuated which encourages, if not forces, litigants to sue national banks, chartered under federal law, in state courts. Originally Congress did not even authorize national banking associations to be sued in state courts.Nor had national banks always fared well in state forums. See, e.g., McCulloch v. Maryland , 4 Wheat (17 U.S.) 316 (1819). It is unlikely that had Congress in 1864 foreseen the development and proliferation of branch banking and modern technology, it would have intended to provide a broader venue for suits against national banks in state courts, than it provided in federal courts.


In our opinion, both reason and equity dictate that venue should be permitted to lie against Citibank in the Virgin Islands where Citibank has conducted, and is presently conducting, business free from facing litigation in that locale. However, Helco , as we have observed, has never been overruled by an en banc decision of this court, nor has the Supreme Court in Bougas or in any other opinion, overturned the Helco rule. Moreover, § 94 has not been amended by Congress.

In such a posture this panel, and this case, is bound by Helco .Therefore, despite the course that we might have taken, had Helco not been decided as it was, we are forced to conclude that venue may not be placed in the District Court of the Virgin Islands for this action against Citibank. For that reason, and that reason only, we will reverse the order of the district court, dated December 30, 1980, and direct that the district court enter an order dismissing plaintiff's action against Citibank for improper venue.

ADAMS, Circuit Judge , concurring.

While I agree that in the absence of an en banc hearing we are bound by this Court's prior decision in Helco , there is another, equally compelling ground for the decision we reach today, and I write separately to stress this alternative constraint on our action. Quite simply, we are governed by the statutory language as initially employed by Congress and subsequently interpreted by the federal courts. Respect for the doctrine of stare decisis -- that "[t]he knowne certaintie of the law is the safetie of all"*fn1 -- as well as for the separation of legislative and judicial functions commands the result arrived at by the Court.

Although the National Bank Act was originally enacted in 1864, under conditions which have little relation to present needs, and was re-enacted in 1875, at a time when neither branch banking nor technological advances had yet transformed the banking industry, Congress has chosen not to alter the statutory text.*fn2 Thus, we are controlled by language which admittedly stems from another era but whose constant terminology we are not at liberty to cast aside. Further, throughout this century, federal courts have consistently interpreted "established" as designating only the federal district encompassing the place specified in the bank's charter. See Northside Iron & Metal Co., Inc. v. Dobson & Johnson, Inc ., 480 F.2d 798 (5th Cir. 1973); United States National Bank v. Hill , 434 F.2d 1019 (9th Cir. 1970); Buffum v. Chase National Bank of City of New York , 192 F.2d 58 (7th Cir. 1951); cert. denied , 342 U.S. 944 (1952); and Leonardi v. Chase National Bank of City of New York , 81 F.2d 19 (2d Cir. 1936), cert. denied , 298 U.S. 677 (1936).*fn3 And as the majfority acknowledges, our Court, based on these precedents, has also adopted this definition. See Helco, Inc. v. First National City Bank , 470 F.2d 883 (3d Cir. 1972). This undeviating interpretation of the meaning Congress intended its words to carry completes the judicial function and creates an appropriate setting for the operation of the precept of stare decisis.

Regardless of the wisdom of the existing interpretation of the statute, stare decisis, in and of itself, performs several salutary functions.Knowledge that the law, once decided, will remain constant, permits the public to order its life in reliance on prior court decisions. And for the world of business and finance, whose decisions are affected by the rule at issue here, the ability to calculate the consequences of future actions is especially critical. More importantly, adherence to earlier decisions encourages public confidence in the judicial system; it serves as an external indicium that courts operate according to the rule of law and dispense equal treatment to persons similarly situated.*fn4 As Justice Brandeis Observed,

Stare decisis is usually the wise policy, because in most matters it is more important that the applicable rule of law be settled than that it be settled right.... This is commonly true even where the error is a matter of serious concern, provided correction can be had by legislation.

Burnet v. Coronado Oil & Gas Co ., 285 U.S. 393, 406 (1932) (dissenting opinion).

This possibility of ameliorative legislative action complements and justifies observance of the principle of stare decisis here. Precisely because Congress can correct a judicial construction of a statute which arguably misperceives the legislative intent, we should abstain from usurping the congressional power of altering or amending legislation.*fn5 In the present situation, Congress, faced with the courts' unchanging statutory interpretation, has nevertheless remained impassive. It is difficult to interpret this congressional failure to respond as anything other than acquiescence in the status quo.*fn6 Were we now to alter our interpretation we would not only disturb the separation of judicial and legislative functions, but would appear to be acting contrary to the will of Congress.

Notwithstanding the supreme Court's willingness to interpret "located" in Citizens & Southern National Bank v. Bougas , 434 U.S. 35 (1977), I do not believe that we are the appropriate forum to initiate a new construction of "established." Insofar as the Supreme Court carefully maintained that "established" and "located" were distinct terms, an intermediate appellate court should be particularly circumspect in treating the words as functionally synonymous. See Bougas, supra at 44-45. Moreover, if we have erred in adhering to the present interpretation, Supreme Court review affords an additional check against unsound statutory construction.

While I admit that changed circumstances may favor a new basis for venue, it is for Congress, not the courts, to make that ultimate decision. If the Congress finds that it is more appropriate to permit branch banks to be sued at their place of business, then it is Congress that should alter the statute.

WEIS, Circuit Judge , dissenting.

As the majority opinion convincingly demonstrates, court's opinion in Helco, Inc. v. First National City Bank , 470 F.2d 883 (3d Cir. 1972), should be overruled. The majority, however, feels bound by that prior precedent because our Internal Operating Procedures state that published panel opinions bind subsequent panels faced with the same issue. Internal Operating Procedures, Ch. VIII(C). That rule is a salutary one with which I heartily agree, but there are exceptions to it, and this case comes within one of them.

When the validity of a panel decision has been explicitly or implicitly undermined by the Supreme Court, we no longer are bound by our earlier pronouncement, and instead must follow the high Court's lead. See, e.g., United States v. Busic , 639 F.2d 940, 943 n.3, 953 N.14 (3d Cir. 1981). As I read it, Citizen & Southern National Bank v. Bougas , 434 U.S. 35 (1977), repudiates the rationale of Helco and, therefore, presages the inevitable demise of that decision and similar ones from other courts of appeals. Although it is true that Bougas specifically reserved the precise issue presented to us, Id . at 39, as the majfority demonstrates, every reason cited by the Supreme Court in support of its ruling with respect to state courts applies with equal force to the question of federal court venue.

If the words "locate" and "establish" are meant to distinguish more than geographical boundaries of state and federal courts respectively, maj. op. typescript at 7, it can be argued even more convincingly that the federal venue provision applies to a bank's branch location as well as the place of its charter. When the Banking Act was amended in 1927 and 1933 to authorize branch banking, Congress used the word "establish" several times in the statute delineating the conditions under which a national banking association may operate a branch. 12 U.S.C. § 36 (1976). The statutory language of the federal venue provision, requiring suit to be brought where a bank is "established," id . at § 94, should thus be interpreted to encompass both the place where the bank is chartered and where it operates and maintains a branch.

The harshly restrictive venue holding of Helco has no passionate defenders,*fn1 and need not await correction by congressional action or an express decision of the Supreme Court. When this court makes a mistake, we should set out own house in order without waiting for the Supreme Court or Congress to do it, particularly in connection with a matter such as venue, where no substantive rights have vested. Frilette v. Kimberlin , 508 F.2d 205, 212 (3d Cir. 1974) (in banc), cert. denied , 421 U.S. 980 (1975).

Overcome by time and logic, Helco is swaying on the frail remaining foundation that Bougas -- at least for the time -- has left standing.*fn2 We should not prolong our error, but ought to dismantle the structure before it collapses on us.

For the reasons so well stated in the majority opinion, I would affirm the judgment of the district court.

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