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In Hertz Corporation v. Melinda Friend, (08-1107) plaintiffs brought a class action suit against Hertz in California state court seeking damages for alleged violated of California wage and hour laws by Hertz. Hertz moved to remove the case to federal district predicated upon purported diversity jurisdiction because the company headquarters is located in New Jersey. Therefore, Hertz wanted the trial moved to federal court based upon plaintiffs and defendants being residents of different states. To the contrary, plaintiffs argued that there was no diversity jurisdiction because Hertz' principal place of business was California, not Florida. The federal district court agreed and remanded the case to state court.
On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed the federal district court. The appellate court held that the district court correctly applied the "place of operations test" to determine Hertz' principal place of business. Accordingly, there was no diversity jurisdiction and the district court had no subject matter jurisdiction to hear the case.
In a unanimous decision dated February 23, 2010, the Court concluded that the phrase "principal place of business" refers to the place where the corporation's high level officers direct, control and coordinate the corporation's activities," Justice Stephen Breyer wrote. "Lower federal courts have often metaphorically called that place the corporation's 'nerve center.' We believe that the 'nerve center' will typically be found at a corporation's headquarters."
Under 28 U.S.C. § 1332(c)(1), a corporation is a citizen of its state of incorporation and the state “where it has its principal place of business.” Accordingly, the case hinges on the interpretation of the language “principal place of business.” The Supreme Court’s ruling could broadly affect the way multistate corporations conduct their business and the specific recourse available to plaintiffs seeking to litigate state law claims against them.
