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Hertz Corp. v. Friend

Supreme Court of the United States · 2010 · Civil Procedure

Civil ProcedureDiversity JurisdictionCorporate CitizenshipRemoval Jurisdictionprincipal place of businessnerve centercorporate citizenshipdiversity jurisdiction

Facts

Friend and Nhieu, both California citizens, sued Hertz in California state court and sought relief on behalf of a potential class of California citizens. Hertz removed, asserting diversity jurisdiction and contending that its principal place of business was in New Jersey, supported by a declaration stating that its corporate headquarters and leadership were in Park Ridge, New Jersey, with core executive and administrative functions carried out there and to a lesser extent in Oklahoma City. The declaration also showed that Hertz conducted substantial business in California, including many locations, employees, revenues, and transactions. Applying Ninth Circuit precedent focused first on the magnitude of business activity in each state, the district court concluded that California was Hertz's principal place of business and remanded.

Issue

What does the phrase "principal place of business" in 28 U.S.C. § 1332(c)(1) mean for determining a corporation's citizenship? Also, did the Supreme Court have jurisdiction to review the court of appeals' decision affirming the remand order under § 1453(c)?

Rule

For purposes of 28 U.S.C. § 1332(c)(1), a corporation's principal place of business is the place where the corporation's high-level officers direct, control, and coordinate the corporation's activities, commonly called its nerve center. This will typically be the corporation's headquarters, so long as that headquarters is the actual center of direction, control, and coordination and not merely a formal office or site of occasional board meetings; the party asserting diversity bears the burden of proving jurisdictional facts with competent proof.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeshore Outdoor Equipment, Inc. is incorporated in Delaware. It manufactures and sells camping gear nationwide, with its largest factory network, workforce, and sales volume in Texas, but its CEO, CFO, and other top officers work from the company's Chicago headquarters, where they set policy, approve budgets, and coordinate nationwide operations.

If a Texas plaintiff sues Lakeshore in Texas state court and Lakeshore removes based on diversity, which state is most likely Lakeshore's principal place of business?

Explanation. Under the majority rule, a corporation's principal place of business is its 'nerve center'—the single place where high-level officers direct, control, and coordinate the corporation's activities. That will typically be the headquarters if it is the actual center of direction and control. The fact that Lakeshore's most extensive business activities occur in Texas does not make Texas the principal place of business.