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Hertz Corp. v. Friend

Citation. 599 U.S. 77 (2010)

Brief Fact Summary.

A company sued by a group of its employees in state court attempts to remove the case to federal court based on diversity jurisdiction.

Synopsis of Rule of Law.

For federal diversity jurisdiction purposes, a corporation’s principal place of business refers to the place where the corporation’s high level officers direct, control, and coordinate the company’s activities.

Facts.

Plaintiffs, a class represented by Plaintiff Friend, sue their employer, Defendant Hertz, in California state court for violating the state’s wage and hour laws. Defendant Hertz attempts to remove the case to federal court claiming that the company and the Plaintiffs are from different states, therefore satisfying diversity jurisdiction. Plaintiffs sought to keep the case in state court, claiming that Hertz should be considered domiciled in California because it derived most of its revenue from the state and because the majority of its business activities were conducted there.

Issue.

For federal diversity jurisdiction purposes does a corporation’s principal place of business refer to the place where the corporation’s high level officers direct, control, and coordinate the company’s activities?

Held.

Yes, for federal diversity jurisdiction purposes a corporation is a citizen of any state in which it has been incorporated and of the state where it has its principal place of business. Judgement of the Court of Appeals vacated and remanded for further proceedings consistent with the opinion.

Dissent.

.

Discussion.

  1. Circuits are split on where a corporation has its principal place of business.
  2. “Principal place of business” refers to where a corporation’s high level officers direct, control, and coordinate the corporation’s activities. Many courts refer to this as the “nerve center.”
  3. Three reasons why “nerve center” is equal to a corporation’s principal place of business for federal diversity jurisdiction.
  4. First the plain language of the statute supports it.
  5. Second, the “nerve center” analysis is simple and easily applicable.
  6. Courts spend a lot of time and money trying to determine what a corporation’s principal place of business is, which leads to inconsistent rulings.
  7. Third, the federal statute’s legislative history supports it.
  8. The Judicial Conference rejected a proposal suggesting that a corporation would be deemed a citizen of the state that accounted for more than half of its gross income as being too complex and not easily applicable.

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