Litigation

U.S. Supreme Court defines corporations' place of residence for diversity jurisdiction

By Lori Bauman

In January, the U.S. Supreme Court gots lots of attention for ruling, in Citizens United v. FEC, on the free speech rights of corporations.  On Tuesday, the Court addressed a less-controversial aspect of a corporation's role as "citizen" -- namely, how to determine its state of residence.

In federal court, diversity jurisdiction may exist if the parties are citizens of different states.  A corporation is deemed to be a citizen of the state or states where it is incorporated and where it has its principal place of business.  28 USC sec. 1332(c)(1).  The Supreme Court held in Hertz Corp. v. Friend that "principal place of business" means the place where a corporation's high level officers direct, control, and coordinate the corporation's activities -- i.e., its "nerve center." This reversed the Ninth Circuit, which held that a corporation's principal place of business can be the state where it conducts the most business activity.

See our earlier coverage of the case here.

Full post as published by Northwest Business Litigation Blog on February 25, 2010 (boomark / email).