Litigation

New SCOTUS Diversity Ruling Adopts Nerve Center Test

By Bruce Nye

Let's face it, most companies who get sued love diversity jurisdiction, and from the point of  view of a corporate defendant, what's not to like?  Unanimous juries!  Strict procedural requirements!  And most important of all, particularly in California, Daubert!  (See CBL's earlier discussion here.) 

Most removals are based on diversity of citizenship under 28 U.S.C. § 1332, and a for purposes of diversity, a corporation is a citizen of the state where it is incorporated and of its "principal place of business." 

And what does "principal place of business" mean?  According to the Ninth Circuit, it means the place that  "contains a substantial predominance of corporate operations."  Tosco Corporation v. Communities for a Better Environment, 236 Fed. 3d 495 (CA9th 2001).  At least that's what it meant until yesterday, when everything changed as a result of a California wage and hour case filed against Hertz Corporation.

SCOTUS issued its decision in Hertz Corporation v. Friend, ___US___(2010) adopting the "nerve center test."  A corporation's principal place of business is now "the place where it's high level officers direct, control and coordinate the corporation's activities, i.e., the 'nerve center.'"  Id., slip op. at 14.  And this will typically be found at its corporate headquarters.

Full post as published by CalBizLit on February 24, 2010 (boomark / email).