Donnelly et al v. Branch Banking and Trust Company

Filing 11

MEMORANDUM OPINION. Signed by Judge Alexander Williams, Jr on 6/19/2013. (c/m 6/19/2013 eb)(ebs2, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SOUTHERN DIVISION
V. CHARLES DONNELLY, et al.,
Plaintiffs,

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v.
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Case No. 13-cv-00852-AW
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BRANCH BANKING AND TRUST
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COMPANY,
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Defendant.
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MEMORANDUM OPINION
I.

FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs V. Charles Donnelly and Deborah A. Steffan filed a Complaint against

Defendant Branch Banking and Trust Company (“BB&T”) in the Circuit Court for Calvert
County on February 4, 2013. Doc. No. 2. Plaintiffs are residents of Calvert County, Maryland,
and own a 50% interest in Solomons Two, LLC (“Solomons”), a Maryland Limited Liability
Corporation, which in turn owns a 90% percent interest in a property in Solomons, Maryland.
Id. ¶ 4. Plaintiffs allege counts of negligence, negligent misrepresentation, promissory estoppel,
and breach of contract (breach of implied covenant of good faith and fair dealing) against BB&T
related to Plaintiffs’ obligations as borrowers and guarantors under the deed of trust, note, and
other documents held by BB&T as financing for the purchase of the Solomons property.
Plaintiffs seek $1,000,000 in damages.

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BB&T filed a timely Notice of Removal on March 20, 2013, as required by 28 U.S.C.
§ 1446. Doc. No. 1. According to the Notice, BB&T is a national banking association chartered
by the Office of the Comptroller of the Currency within the Department of the Treasury, and its
headquarters and principal place of business are in Winston Salem, North Carolina. Id. ¶ 8.
On April 22, 2013, Plaintiffs filed a Motion to Strike Notice of Removal or, in the
Alternative, to Remand to the Circuit Court for Calvert County. Doc. No. 9. In the Motion,
Plaintiffs argue that complete diversity does not exist between the parties, and therefore the
Court lacks jurisdiction under 28 U.S.C. § 1332(a). Plaintiffs further argue that BB&T waived
its right to litigate the suit in federal court by previously filing an action in state court that “arises
from the same set of commercial transactions and relationships” as the instant suit. Plaintiffs
refer to an action for confessed judgment by BB&T against Plaintiffs and the remaining 50%
owners of Solomons which was filed in the Circuit Court for Calvert County on October 5, 2012.
See Doc. No. 9 Ex. A. The Clerk of the Circuit Court for Calvert County entered judgment
against Plaintiffs on March 11, 2013 for $694,531.13. Doc. No. 9 Ex. D. Plaintiffs have moved
to vacate the confessed judgment, but it is not clear whether the Circuit Court has taken any
action on Plaintiffs’ motion to vacate in that case. Doc. No. 9 Ex. E. Finally, Plaintiffs argue
that BB&T’s Notice of Removal is fatally defective because it references the Northern Division,
rather than the Southern Division, of the District of Maryland. See Doc. No. 1 at 1.
BB&T filed a response in opposition to Plaintiffs’ Motion on May 13, 2013. Doc. No.
10. As Plaintiffs did not file a timely reply, the Motion is now ripe for the Court’s consideration.
Although Plaintiffs purportedly move to strike the Notice of Removal, they do not identify any
particular portions of the Notice that they seek to strike, and for every alleged defect Plaintiffs

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assert that the proper remedy is remand to the state court. Accordingly, the Court will treat
Plaintiffs’ Motion as a motion to remand.
II.

ANALYSIS

“On a motion to remand, a court must ‘strictly construe the removal statute and resolve
all doubts in favor of remanding the case to state court.’” Receivership of Mann Bracken, LLP v.
Cline, No. RWT 12cv292, 2012 WL 2921355, at *2 (D. Md. July 16, 2012) (quoting Stephens v.
Kaiser Found. Health Plan of the Mid-Atl. States, Inc., 807 F. Supp. 2d 375, 378 (D. Md. 2011)).
“Because removal jurisdiction raises significant federalism concerns, we must strictly construe
removal jurisdiction.” Mulcahey v. Columbia Organic Chem. Co., Inc., 29 F.3d 148, 151 (4th
Cir. 1994) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941)). “While a
defendant filing a notice of removal under 28 U.S.C. § 1446(a) need only allege federal
jurisdiction with a short plain statement . . . when removal is challenged, the removing party
bears the burden of demonstrating that removal jurisdiction is proper.” Strawn v. AT & T
Mobility LLC, 530 F.3d 293, 297 (4th Cir. 2008) (emphasis in original) (citing Ellenburg v.
Spartan Motors Chassis, Inc., 519 F.3d 192, 200 (4th Cir. 2008). “If federal jurisdiction is
doubtful, a remand is necessary.” Mulcahey, 29 F.3d at 151 (citing In re Bus. Men's Assurance
Co. of Am., 992 F.2d 181, 183 (8th Cir. 1993). While strict construction of the removal statute is
required, district courts should be cautious about denying defendants access to a federal forum
because the decision to remand is effectively unreviewable. See Semtek Int’l, Inc. v. Lockheed
Martin Corp., 988 F. Supp. 913, 914-15 (D. Md. 1997).

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National banks are “corporate entities chartered not by any State, but by the Comptroller
of the Currency of the U.S. Treasury.” Wachovia Bank v. Schmidt, 546 U.S. 303, 306 (2006).1
“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. For
diversity purposes, courts have interpreted § 1348 to provide that a national bank is a citizen of
the state in which its main office, as listed in its articles of association, is located. N. Va. Foot &
Ankle Assocs., LLC v. Pentagon Fed. Credit Union, No. RWT 10CV1640, 2011 WL 280983, at
*5 (D. Md. Jan. 26, 2011) (citing Wachovia Bank, 546 U.S. at 318); see also Yacoubou v. Wells
Fargo Bank, 901 F. Supp. 2d 623, 626 (D. Md. 2012).2
Based on the record before it, the Court is unable to conclude with certainty that complete
diversity exists in this case. Specifically, BB&T has not identified the location of its main office
as listed in its articles of association. In Schlegel v. Bank of America, N.A., Case No.
3:07cv00022, 2007 WL 1244567 (W.D. Va. Apr. 27, 2007), the court dealt with jurisdictional
allegations similar to those alleged here. The notice of removal in that case alleged that the
plaintiff was a citizen of Virginia while the national banking association’s principal place of
business was in North Carolina. Id. at *1. The court, interpreting § 1348 and Wachovia,
concluded that the jurisdictional allegations were insufficient to satisfy the court that complete
diversity existed. Id. The Schegel court explained:

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Under 12 U.S.C. §§ 21 et seq., national banking associations may be formed when five or more individual
institutions enter into articles of association specifying the purpose for association and provisions for regulation.
The terms “national bank” and “national banking association” are synonymous and interchangeable under the
National Banking Act. See 12 U.S.C. § 221.
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Plaintiffs urge the court to adopt the “localization test” to determine BB&T’s citizenship. See Feuchtwanger Corp.
v. Lake Hiawatha Fed. Credit Union, 272 F.2d 453, 455 (3d Cir. 1959). However, the localization test is not
relevant to this inquiry. Plaintiffs have ignored the Supreme Court’s holding in Wachovia Bank that national banking
associations are subject to the “main office” test. 546 U.S. at 318. The fact that BB&T has branches in Maryland
does not make it a Maryland citizen. Id. at 317 (rejecting argument that national bank is a citizen of every state in
which it has branch offices).

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A national banking association’s “principal place of business” could be the same
state as the one in which its main office as set forth in its articles of association is
located, but the two phrases should not be used interchangeably. The “principal
place of business” test is relevant to a corporation’s citizenship under 28 U.S.C. §
1332(c)(1); as discussed above, the “main office, as set forth in its articles of
association” test is relevant to a national banking association’s citizenship under
28 U.S.C. § 1348. . . . [A] national banking association’s articles of association
could set forth a different state for its main office than the one determined to be its
principal place of business.

Id. at *1 n.1 (emphasis added). Although BB&T’s Notice of Removal identifies North Carolina
as the location of its headquarters3 and principal place of business, Doc. No. 1 ¶ 8, the Court
cannot necessarily conclude that its “main office,” as set forth in the articles of association, is
similarly located in North Carolina. The Court requires information regarding BB&T’s main
office not as “a mere formality designed to trap the unwary,” but because it is essential to ensure
that complete diversity exists. Schlegel, 2007 WL 1244567, at *1.
Defendant emphasizes that Plaintiffs’ Complaint identifies BB&T as a “North Carolina
banking corporation,” but this does not equate to an admission that BB&T’s main office, as set
forth in its articles of association, is located in North Carolina. See Doc. No. 2 ¶ 3. BB&T also
attaches an exhibit showing a page from the Federal Deposit Insurance Corporation which
identifies BB&T’s headquarters as being in North Carolina. See Doc. No. 10 Ex. A. Again, the
Court cannot necessarily infer that BB&T’s “main office” is located in North Carolina based on
the record before it. Certain representations in BB&T’s opposition brief also fail to clarify the
issues regarding its citizenship For example, Defendant claims that it is a North Carolina citizen,
“the State by which it is chartered,” and also suggests that it is incorporated in the state of North
Carolina. See Doc. No. 10 at 2, 4. These assertions appear to contradict the Notice of Removal,

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For the same reasons the Schlegel court did not equate “principal place of business” to “main office,” the Court
cannot necessarily infer that Defendant’s “headquarters” is identical to its “main office,” as listed in its articles of
association.

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which alleges that BB&T is a national banking association chartered by the Office of the
Comptroller of the Currency. In light of this uncertainty, the Court will defer ruling on the
motion to remand and grant BB&T ten days to clarify its position. In particular, BB&T must
specify the location of its main office as set forth in its articles of association. Such clarification
may be achieved by filing an amended notice of removal3 or by filing an affidavit which
establishes a factual basis for the Court to determine that BB&T is not a citizen of Maryland for
diversity purposes.
Plaintiffs’ remaining arguments in support of remand are without merit. Plaintiffs argue
that BB&T has waived federal subject matter jurisdiction because it filed the confessed judgment
action in the Circuit Court for Calvert County. See Doc. No. 9 Ex. A. Plaintiffs argue that the
confessed judgment action “arises from the same set of commercial transactions and
relationships giving rise to Plaintiff's’ Complaint, which Defendant now seeks to transfer to this
Court.” Doc. No. 9 at ¶ 9. The issue here is whether previously filing an action in state court
waives a defendant’s right to remove to federal court in a subsequent case when the actions have
common facts.
“A defendant may waive the right to remove by taking . . . substantial defensive action in
state court before petitioning for removal.” Aqualon Co. v. Mac Equip., Inc., 149 F.3d 262, 264
(4th Cir. 1998) (emphasis in original) (noting that defendant’s filing of cross-claim or
counterclaim in state court would constitute substantial defensive action); but see Trademark
Remodeling, Inc. v. Rhines, 853 F. Supp. 2d 532, 542 (D. Md. 2012) (holding that a defendant
who moved to dismiss plaintiff’s petition to enforce an arbitration award before removing to

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“Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.” 28 U.S.C.
§ 1653. “[C]ourts allow amendment of removal petitions where the imperfection in the jurisdictional allegation is
a mere technical defect.” Molnar-Szilasi v. Sears Roebuck & Co., 429 F. Supp. 2d 728, 730 (D. Md. 2006) (internal
quotations omitted). 

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federal court did not take substantial defensive action sufficient to constitute a waiver of its right
to remove), Haak Motors LLC v. Arangio, 670 F. Supp. 2d 430, 433 (D. Md. 2009) (holding that
filing of general denial and affirmative defenses in state court action did not constitute
substantial defensive action). “The defensive action must demonstrate a clear and unequivocal
intent to remain in state court.” Haak, 670 F. Supp. 2d at 433 (internal quotations omitted).
“Waiver is found only in extreme situations.” Id. (internal quotations omitted).
BB&T took no action on Plaintiffs’ suit in state court prior to removing to this Court.
Plaintiffs have not cited any legal authority that suggests that the initiation of prior, separate
actions automatically waives the right to remove in a subsequent, separate case. Filing a timely
Notice of Removal does not constitute “substantial defensive action,” and thus BB&T has not
waived its access to federal court.
Plaintiffs’ final objection is that BB&T’s Notice of Removal indicates that the venue for
this action is the United States District Court of Maryland, Northern Division, while “[t]he
proper venue and jurisdiction rests with the Southern Division of this Court, not the Northern
Division. The Southern Division includes Calvert County where this case originated and
Defendant filed its Notice of Transfer [sic] from the Circuit Court of Calvert County to Federal
District Court.” Doc. No. 9 ¶ 6. However, the defect that Plaintiffs identify in this case is not
even a jurisdictional allegation, but rather, a mistaken designation of division in the caption and
paragraph 3 of the Notice of Removal. Despite these mistaken designations, the case was
removed to the Southern Division of this District, and the Court discerns no jurisdictional defect.
Accordingly, remand is not appropriate based on the mistaken designation of division. The
Eastern District of New York reached such a conclusion when faced with a similar defect,
denying the plaintiffs’ motion to remand where the defendant mistakenly labeled its notice of
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removal a “petition of removal.” See Waldron Midway Enters., Inc. v. Coast Fed. Bank, No.
CV-91-1750 (RJD), 1992 WL 81724, at *2 (E.D.N.Y. Apr. 10, 1992).
III.

CONCLUSION

For the foregoing reasons, BB&T will be required, within ten days of the date this
Opinion and accompanying Order are docketed, to file an amended notice of removal or an
affidavit that clarifies the location of its main office as set forth in its articles of association, such
that the Court is able to determine whether complete diversity exists in this case. A separate
Order follows.

June 19, 2013
Date

/s/
Alexander Williams, Jr.
United States District Judge

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