Hertz Corp. v. Friend

Brief Fact Summary.

Respondents, California citizens, sued Petitioner in state court for violations of California wage and hour laws.  Petitioner sought to remove the proceeding to federal court, asserting jurisdiction based on diversity. The district court concluded that Hertz was a citizen of California, so that diversity jurisdiction was lacking. The Ninth Circuit affirmed. The Supreme Court granted certiorari.

Synopsis of Rule of Law.

For diversity jurisdiction purposes, a corporation’s principal place of business is its “nerve center”; i.e., the place where its high level officers direct, control and coordinate its activities. Normally, this will be at the corporation’s headquarters.

Facts.

In the underlying state court action, Respondents, California citizens, sued Petitioner for violations of California wage and hour laws, and also requested relief on behalf of a potential class of similarly situated plaintiffs. Petitioner sought to remove the proceeding to federal court, asserting jurisdiction on diversity because its principal place of business was New Jersey. The district court concluded that Petitioner was a citizen of California, so that diversity jurisdiction was lacking. The Ninth Circuit affirmed. The Supreme Court granted certiorari.

Issue.

Did the lower courts properly conclude that Petitioner was a citizen of California for purposes of diversity jurisdiction?

Held.

No. The corporation’s principal place of business was its “nerve center,” normally the place where it maintained its headquarters.  The Supreme Court vacated the Court of Appeals’ decision and remanded the matter to the district court for determination of Petitioner’s “nerve center.”

Discussion.

In determining the situs of a corporation’s principal place of business for purposes of diversity jurisdiction, the “nerve center” test is the superior test because:

• • the language of 28 USC 1331(c)(1) supports this approach
  • it affords administrative simplicity
  • the legislative history supports this simplicity- related interpretation