Today the Supreme Court granted certiorari in one case of interest to the business community:
Jurisdiction—A Corporation’s Principal Place of Business
If a case does not present a question of federal law, a federal court will in general have jurisdiction over the case only if the parties to the case are “diverse”—i.e., are citizens of different states. Federal law provides that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.” 28 U.S.C. § 1332(c)(1). Identifying a corporation’s “principal place of business” is, accordingly, of central importance in determining whether the parties to a lawsuit are diverse for purposes of federal jurisdiction. The Supreme Court today granted certiorari in Hertz Corp. v. Friend (No. 08-1107) to resolve disagreement among the circuits over what constitutes a corporation’s “principal place of business.”
This case is important to all corporations that operate or do business in more than one state. The Court’s definition of what constitutes a corporation’s “principal place of business” will determine when a corporation can invoke diversity jurisdiction to remove state-law claims and class actions to federal court.
The courts of appeals have adopted divergent standards for identifying a corporation’s “principal place of business.” Some circuits—the Fifth, Sixth, Eighth, Tenth, and Eleventh—have adopted a totality-of-the-circumstances approach, considering the location of the corporation’s headquarters, management, and business activities, as well as the nature of the corporation’s business. By contrast, the Seventh Circuit considers only the location of the corporation’s “nerve center,” while the Third Circuit looks for the center of its corporate activities. In yet another approach, the Ninth Circuit looks first at the corporation’s principal “place of operations,” determining whether any single state contains a substantial predominance of the corporation’s business activity (including facilities, employees, and revenues); only if no such state exists does it turn to the “nerve center” test. Still other circuits—the First, Second, and Fourth—have not adopted any single test, but apply either the “nerve center” test or the “place of operations” test depending on circumstances. Given this proliferation of approaches, a corporation cannot be certain what states it will be deemed a citizen of, and the same corporation may be held to have a different “principal place of business” (and thus different citizenship) depending on the circuit within which litigation takes place. Moreover, given California’s disproportionate share of the nation’s population and economic activity, under the Ninth Circuit’s test, a national corporation may find itself a citizen of California simply because—commensurate with the state’s size—it locates more employees and derives more revenue there than in any other single state.
In Hertz, the petitioner sought to remove a California state-court action to federal court under the Class Action Fairness Act, 28 U.S.C. § 1453(c). The District Court for the Northern District of California remanded the case to state court, finding that a plurality of Hertz’s business activities could be found in California, which made the corporation a citizen of that state under the Ninth Circuit’s “place of operations” test. The Ninth Circuit affirmed, finding that because Hertz’s business activities were significantly larger in California than in the next largest state (Florida), the district court had properly applied the “place of operations” test.
Absent extensions, amicus briefs in support of the petitioner are due July 30, and amicus briefs in support of the respondents are due August 31. Any questions about this case should be directed to Andrew Tauber (+ 1 202 263 3324) in our Washington, DC office.
Today, the Supreme Court also invited the Solicitor General to file a brief expressing the views of the United States in one other case of interest to the business community:
American Home Products Corporation v. Ferrari, No. 08-1120. The question presented is whether the National Childhood Vaccine Injury Act of 1986 preempts a state-law claim against a vaccine manufacturer that is based on an allegation that the vaccine-related injury could have been avoided by a vaccine design allegedly safer than the one approved by the F.D.A.
Mayer Brown's Supreme Court & Appellate practice distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community and distributes a Docket Report-Decision Alert whenever the Court decides such a case. We hope you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Andrew Tauber, their general editor, at firstname.lastname@example.org or +1 202 263 3324).
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