Caseflicks

Supreme Court of the United States • 1809

Bank of the United States v. Deveaux

9 U.S. 61 | 3 L. Ed. 38 | 5 Cranch 61 | 1809 U.S. LEXIS 418

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Takeaway

In short, this case allowed a corporation to invoke diversity jurisdiction through the citizenship of its members, while holding that a general charter power to sue does not itself create federal jurisdiction.

Background

The Bank of the United States sued Deveaux, a citizen of Georgia, in federal circuit court. The Bank brought the action in its corporate name but averred that its members were citizens of Pennsylvania, thereby seeking to invoke diversity jurisdiction.

Deveaux challenged the suit through a plea in abatement. He argued that the Bank, as an artificial corporation rather than a natural person, was not itself a citizen and therefore could not sue in federal court on the basis of diversity. The circuit court accepted the jurisdictional objection. The Supreme Court reversed, overruled the plea in abatement, and remanded the cause.

Issues

Issue #1

Whether the Bank's federal charter independently gave it a right to sue in federal court.

Holding

No. The charter's authorization for the Bank to sue and be sued did not itself confer federal-court jurisdiction.

Reasoning

Federal judicial power may depend either on the nature of the case or on the character of the parties. Under the Judiciary Act, however, the circuit courts generally received jurisdiction based on the parties' character, not simply because a dispute arose under federal law. Thus, the Bank could not establish circuit-court jurisdiction merely by saying that its claim involved a federally chartered corporation.

The Bank's charter gave it the ordinary corporate capacity to "sue and be sued" in courts of record. Chief Justice Marshall read that language as allowing the Bank to litigate in any court that otherwise had jurisdiction, not as enlarging the jurisdiction of federal courts. Similar language commonly appears in incorporation statutes and ordinarily gives a corporation legal capacity to appear in court rather than a special federal forum.

Other provisions of the Bank's charter confirmed this reading. Congress expressly authorized certain suits against the Bank's president and directors to be brought in either federal or state court. That express specification showed that a general authorization to sue did not, by itself, carry with it a right to sue in federal court. Congress likewise knew how to confer federal jurisdiction expressly, as it had done in patent legislation.

Issue #2

Whether a corporation may invoke federal diversity jurisdiction by relying on the citizenship of the individuals who compose it.

Holding

Yes. Although a corporation is not itself a citizen, it may sue in its corporate name when all of its members are citizens of a state different from the opposing party's state.

Reasoning

A corporation is an artificial legal entity—"invisible, intangible, and artificial"—and therefore is not literally a citizen. If the Court treated the corporation as wholly separate from its members for jurisdictional purposes, it could not invoke diversity jurisdiction at all. But the Court held that the corporate name represents the natural persons who make up the corporation when they assert a corporate right.

The constitutional purpose of diversity jurisdiction supported looking through the corporate name. The Constitution supplies a national forum for disputes involving citizens of different states because such parties may reasonably fear local bias. Those concerns do not disappear merely because citizens conduct their common business through a corporate form. In substance, the controversy remained between the corporation's member-citizens and the opposing citizen.

English authorities showed that courts could treat a corporation less formally when a statute's purpose required it. Corporations had been regarded as inhabitants or occupiers for certain legal purposes, despite their incorporeal nature. More directly, the Mayor and Commonalty v. Wood permitted a court to look beyond a corporate name to the identity and character of the corporation's members when deciding a jurisdictional question.

The Court therefore construed the Judiciary Act's reference to citizens as encompassing the real persons represented by the corporate plaintiff. Because the Bank alleged that its members were citizens of Pennsylvania and Deveaux was a citizen of Georgia, the suit fell within diversity jurisdiction.

Issue #3

Whether the Bank's allegation of its members' citizenship was sufficient when the Bank sued in its corporate name.

Holding

Yes. The averment was sufficient because it necessarily referred to the Bank's individual members, not to the corporation itself.

Reasoning

The Bank was authorized to sue under its corporate name, yet a corporation itself could not truthfully be described as a citizen. Consequently, its allegation that the relevant citizens were Pennsylvania citizens had to be understood as an allegation about the individual members represented by that corporate name.

Because the pleaded citizenship applied to the Bank's members and placed those members in a different state from Deveaux, the jurisdictional allegation was adequate. The Supreme Court therefore overruled the plea in abatement and remanded the case for further proceedings.