If the 9th Circuit gets its way, your new principal place of business could be sunny California.
Hertz is incorporated in Delaware and headquartered in New Jersey. But a district court invoked the 9th Circuit’s principal place of business test and found Hertz’s to be in California, where the majority of its operations are performed.
Hertz appealed, and the Supreme Court heard arguments yesterday over how to define a corporation’s “principal place of business” for the purposes of determining diversity jurisdiction. Somewhat surprisingly, this is the first time the Court has addressed the issue.
This is an issue of great importance to businesses — in the present case, Hertz was remanded to state court when it believed it should be in federal court. Corporations generally prefer to be in federal court while plaintiffs often-times prefer state court.
In its petition for cert, noted SCOTUSblog, Hertz pointed out that the circuit courts are employing four different methods for determining a company’s place of business — “place of operations” (9th Circuit), “nerve centre” (7th Circuit), centre of activity (3rd Circuit), or the totality of the corporation’s operations (5th, 6th, 8th, 10th and 11th Circuits).
The respondents said these differences were overstated and usually result in a uniform outcome.
The justices seemed wary of the 9th Circuit’s decision, noting that it would place a huge number of corporations under California’s jurisdiction, Kristina Peterson reported for Dow Jones. They instead seemed supportive of the argument that a company’s executive headquarters should be considered its principal place of business as long as there is some check to prevent system-gaming by creating a shell headquarters.
It’s not only important to businesses. Such a ruling could make lives a little easier for young associates who would be relieved of researching where the “totality” of a company’s business really is.
A decision is expected by June.
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