Wells Fargo Asia Ltd. v. Citibank, N.A.

Wells Fargo Asia Ltd. (Wells Fargo) (plaintiff) maintained deposits at the Philippines branch of Citibank, N.A. (defendant). The Philippine government imposed a requirement prohibiting Citibank from repaying Wells Fargo without government approval. Wells Fargo sued Citibank in New York federal court for breach of contract, predicating federal jurisdiction on diversity of citizenship and the presence of a federal question. The district court ruled that New York law applied due to New York’s interest in the dispute based on its position as a world financial capital, the parties’ reasonable expectations, and the facts that (1) Citibank’s headquarters were in New York and (2) the parties’ transactions were denominated in United States dollars and were settled via their New York correspondent banks. The district court further ruled that under New York law, a parent bank was liable for the obligations of its foreign branch and that Citibank failed to act in good faith in seeking government approval to pay Wells Fargo, rendering it unnecessary to decide whether the government’s refusal to consent would excuse Citibank’s nonperformance. Additionally, the district court found that the parties did not enter into any agreement regarding where Wells Fargo could collect repayment. The district court noted that it might have reached a different conclusion had the Philippine government confiscated or expropriated Wells Fargo’s money rather than imposing a repayment-approval requirement. Citibank appealed, arguing, among other things, that federal policy required that depositors bear the risk of foreign-law impediments to the repayment of deposits. Wells Fargo responded that (1) the district court’s rulings were correct and (2) Citibank was wrong about federal policy. Wells Fargo further contended that Citibank demonstrated its ability to obtain government-payment approval because Citibank undisputedly obtained permission to pay itself at least $25 million in profits from the Philippines and that Citibank should use some of these profits to repay Wells Fargo.