Hertz Corp. v. Friend
Citation: 559 U.S. 77 (U.S. Supreme Court, 2010)
Facts
California residents sued Hertz Corporation in California state court. Hertz removed to federal court on diversity grounds, claiming it was a citizen of New Jersey (its state of incorporation and the location of its headquarters), not California. Plaintiffs argued Hertz was a California citizen because it conducted more business there than in any other state. The district court and Ninth Circuit agreed with plaintiffs.
Issue
What is the proper test for determining a corporation’s “principal place of business” for purposes of diversity citizenship under 28 U.S.C. § 1332(c)(1)?
Holding
The Supreme Court unanimously held that a corporation’s principal place of business is its “nerve center” — the place where the corporation’s high-level officers direct, control, and coordinate the corporation’s activities — which is typically its headquarters.
Rule
The nerve center test: a corporation’s principal place of business for diversity purposes is the single place where the corporation’s officers direct, control, and coordinate its activities. A corporation is a citizen of both its state of incorporation and its principal place of business (nerve center).
Significance
Hertz resolved a longstanding circuit split over how to determine corporate citizenship for diversity jurisdiction, rejecting tests based on the location of most business activity or a multi-factor balancing approach. It simplifies the inquiry and is the governing standard for all corporate diversity jurisdiction analysis.