US Bank v. PLANTERS'BANK
The Supreme Court ruled that the Bank of the United States could sue the Planters' Bank of Georgia in federal court, even though the State of Georgia was a shareholder in the Planters' Bank and the notes at issue were originally made out to Georgia residents.
The Court held that a state does not become 'the state' for constitutional immunity purposes just by investing in a bank, and that the Bank of the United States' charter gave it a standalone right to sue in federal court that the ordinary rules limiting suits by assignees did not cut off.
“when a government becomes a partner in any trading company, it devests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen”
Explaining why a state's ownership of stock in a bank does not make lawsuits against the bank lawsuits against the state.
How it got here: The federal circuit court in Georgia split evenly on whether it had jurisdiction and whether the Bank was entitled to judgment, so the judges certified those questions to the Supreme Court.
The Case in Depth
What happened
The Bank of the United States sued the Planters' Bank of Georgia to collect on promissory notes payable 'to bearer' that had been transferred to the Bank. The Planters' Bank argued the suit couldn't be heard in federal court because the State of Georgia was one of its shareholders, and because the notes had originally been made out to citizens of Georgia rather than to the Bank itself.
The question before the Court
Could the federally chartered Bank of the United States sue a state-affiliated Georgia bank in federal court, even though Georgia itself owned stock in that bank and the notes were originally payable to Georgia citizens?
Why it matters
The ruling meant that banks and companies partly owned by states could still be sued in federal court like any private business, preventing states from using stock ownership as a shield. It also confirmed that Congress could give a federally chartered institution broad access to federal courts that overrode the usual limits on lawsuits by people who acquired debts from someone else.
What changes now
The Supreme Court's answers were certified back to the circuit court in Georgia, which was instructed that it had jurisdiction over the case and that the Bank of the United States was entitled to judgment on the pleadings. This was a final resolution of the legal questions dividing the circuit judges, clearing the way for the case to proceed to judgment in the Bank's favor.
What this does not decide
The Court did not decide whether the notes, as bank notes functioning like currency, might be treated differently than ordinary promissory notes for assignment purposes — Justice Johnson flagged that question as unresolved. The ruling also did not address suits against states acting in their sovereign capacity outside the corporate-shareholder context.
Concurrences and dissents
Concurrence — Justice Johnson
Justice Johnson agreed with the outcome based on the Court's decision in the companion case, Osborn v. Bank of the United States, but expressed doubts about the reasoning. He argued that under the Court's earlier decision in Bank v. Deveaux, looking behind a corporation's charter to the citizenship of its members should cut both ways, meaning Georgia's status as a shareholder arguably should have barred jurisdiction. He also questioned whether bank notes functioning as currency should be treated like ordinary assigned promissory notes, though he agreed the Bank's charter likely overrode that objection.
How the Court got there
The legal reasoning, step by step
- The Court first asked whether Georgia's ownership of stock in the Planters' Bank made the State itself a defendant, which would trigger the constitutional rule (later reinforced by the Eleventh Amendment) that private citizens generally cannot sue a state directly in federal court.
- The Court reasoned that a state loses its sovereign character for purposes of a business it invests in: once a government becomes a shareholder in a trading company, it acts as an ordinary corporator, and a lawsuit against the company reaches only the company's property, not the state's.
- Because the Planters' Bank, not Georgia itself, was the actual party being sued and would satisfy any judgment from its own funds, the Court concluded the suit was not really a suit 'against a State' and so did not require the case to start in the Supreme Court or fall within the Eleventh Amendment's bar.
- The Court then turned to a separate limit in the Judiciary Act of 1789, which normally stops someone who received a debt from someone else (an assignee) from suing in federal court unless the original creditor could have sued there too.
- The Court reasoned that this limit did not apply here because the Bank of the United States was not suing merely as an ordinary assignee — its own charter from Congress independently gave it the right to sue its debtors in federal court, regardless of who held the notes originally.
- Reading the charter narrowly to block such suits would have gutted the Bank's ability to sue almost anyone, since citizens of nearly every state held Bank stock, so the Court held the charter's broad grant of a right to sue controlled over the assignee limitation.
Doctrinal impact
Cases affected by this decision
Reaffirms Osborn v. The Bank of the United States
The Court relied on its reasoning in this companion case to resolve the jurisdictional question here.