Bank of the United States v. Deveaux
The Court ruled that a corporation's charter power to "sue and be sued" does not by itself give it the right to sue in federal court, but that a corporation can still get into federal court if the individual people who own it are citizens of a different state than the person being sued.
This meant courts had to look past the corporate name to the citizenship of the real people behind it, establishing an early and lasting rule about how corporations fit into the federal courts' limited power to hear cases between citizens of different states.
How it got here: A federal circuit court dismissed the bank's suit on a plea in abatement questioning its right to sue there; the bank brought the jurisdictional question to the Supreme Court.
The Case in Depth
What happened
The Bank of the United States, a corporation created by Congress, sued a citizen in federal circuit court. The defendant objected that a corporation is not a "citizen" and that the bank's federal charter did not itself authorize suits in federal court, raising the question of whether this corporate plaintiff could be there at all.
The question before the Court
Could a bank chartered by Congress sue a citizen of another state in federal court, either because its charter said it could "sue and be sued" or because its shareholders were citizens of different states?
Why it matters
This decision shaped how corporations could use federal courts for well over a century. Businesses organized as corporations could not simply invoke federal diversity jurisdiction by name; they (and their opposing parties) needed to establish the citizenship of the actual shareholders, affecting how banks, insurers, and other early corporations litigated interstate disputes.
What changes now
The case is sent back to the circuit court, where the plea in abatement (the objection that the court lacked power to hear the case) is overruled, allowing the suit to proceed. Going forward, corporations seeking to sue or be sued in federal court based on diversity of citizenship would need to establish the citizenship of their individual members rather than relying on the corporate name alone.
What this does not decide
The Court does not decide that a corporation itself is a "citizen" for constitutional purposes; it holds only that the citizenship of a corporation's individual members can be looked to for diversity jurisdiction. It also does not address whether Congress could grant broader federal-court access by explicit statute.
How the Court got there
The legal reasoning, step by step
- The Court first asked whether the bank's incorporating statute itself gave it a right to sue in federal court. It reasoned that a charter clause allowing a corporation to "sue and be sued" merely lets the corporation appear in whatever court would already have power to hear the case if brought by individuals — it does not expand any court's jurisdiction.
- The Court supported this reading by pointing to another section of the same charter that expressly named federal or state courts for a specific kind of suit, showing that Congress knew how to grant federal-court access explicitly when it meant to, and had not done so for ordinary suits by the bank.
- Turning to the constitutional question, the Court noted that federal diversity jurisdiction under the Constitution and the Judiciary Act depends on the citizenship of the actual parties, and that a corporation itself — an intangible legal creation — is not a citizen in the ordinary sense.
- The Court reasoned that a corporation is essentially a name under which real people conduct joint business, and that looking to the citizenship of those individual members, rather than treating the corporate name as a fictional non-citizen, better serves the constitutional purpose of giving out-of-state parties access to neutral federal tribunals.
- Drawing on English precedent holding that courts may look past a corporate name to the individuals composing it for jurisdictional purposes, the Court concluded that a corporation may sue in federal court so long as its members are citizens of a different state than the opposing party.
- Because the bank's members could be treated as the true parties for this purpose, the Court held the lower court's dismissal on the pleading was in error and that the case could proceed once corporate citizenship was properly established.