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Wednesday, March 3, 2010

US Supreme Court Issues CAFA "Principal Place of Business" Ruling

In Hertz Corp. v. Friend --- S.Ct. ----, 2010 WL 605601 (U.S. (Cal.) February 23, 2010) the plaintiffs filed a putative class action in state court against Hertz Corp. alleging violations of California's wage and hour laws. Following removal under the so-called Class Action Fairness Act (CAFA), plaintiffs moved to remand, alleging that Hertz's principal place of business was in California, destroying diversity jurisdiction. Hertz countered by submitting a declaration "stating, among other things, that it operated facilities in 44 States, that California accounted for only a portion of its business activity, that its leadership is at its corporate headquarters in New Jersey, and that its core executive and administrative functions are primarily carried out there." Slip op. at 1. "The District Court concluded that it lacked diversity jurisdiction because Hertz was a California citizen under Ninth Circuit precedent, which asks, inter alia, whether the amount of the corporation's business activity is 'significantly larger' or 'substantially predominates' in one State. Finding that California was Hertz's 'principal place of business' under that test because a plurality of the relevant business activity occurred there, the District Court remanded the case to state court. The Ninth Circuit affirmed." Ibid.

The US Supreme Court granted Hertz's petition for certiorari. After finding that it had jurisdiction to decide the matter, a unanimous Supreme Court held:
The phrase “principal place of business” in § 1332(c)(1) refers to the place where a corporation's high level officers direct, control, and coordinate the corporation's activities, i.e., its “nerve center,” which will typically be found at its corporate headquarters.
“[P]rincipal place of business” is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. In practice it should normally be the place where the corporation maintains its headquarters-provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center,” and not simply an office where the corporation holds its board meetings.
Slip op. at 1-2. The Court remanded the case for further proceedings.

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