The Supreme Court Just Decided Where Your Principal Place Of Business Is

The Supreme Court ruled unanimously today that a corporation’s “principal place of business is where a corporation’s high level officers direct, control, and coordinate the corporation’s activities.”

In other words, for diversity purposes, a corporation is a “citizen” where it’s incorporated (likely Delaware) and where its executives have their well-decorated offices — and nowhere else.

In Hertz v. Friend, the 9th Circuit held that the rental car company’s principal place of business was California, where most of its operations take place, rather than New Jersey, where its headquarters are. The Supreme Court disagreed.

In making its decision, the opinion said, the Court placed “primary weight upon the need for judicial administration of a jurisdictional statute to remain as simple as possible.”

What does this mean? It means that the discussion over removing a case to federal court just got a whole lot simpler. Arguments and calculations regarding what is built where or how much activity is in a particular state just became superfluous. Bottom line — a whole lot of cases will be removed to federal court in big states where a company does a lot of business but does not have its headquarters.

This really is a huge shift, as there were major differences in how the circuits handled the issue. It can also be considered a big victory for corporations in general — they usually prefer to litigate in the more formal federal court system whereas plaintiffs prefer state courts.

It’s is also a victory for law firm associates everywhere, who can scratch one thing off their list when drafting documents to remove cases to federal courts.

SCOTUSblog has a copy of the full opinion.

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