Is a corporation's "principal place of business" for diversity jurisdiction purposes determined solely by the location of its corporate headquarters?

Melinda Friend and John Nhieu, both California residents, filed a lawsuit against Hertz Corporation in California state court, alleging violations of California wage and hour laws. Hertz sought to move the case to federal court, asserting diversity jurisdiction based on its claim that its principal place of business was in New Jersey. To support this claim, Hertz provided a declaration detailing its operations across 44 states. The declaration indicated that California accounted for 12% of Hertz's car rental locations, approximately 20% of its workforce, 18.5% of its revenue, and 3.8 million out of 21 million annual transactions. Hertz also stated that its corporate headquarters and primary executive functions were located in New Jersey.

Hertz Corporation (defendant) was initially sued in California state court. The case was removed to the U.S. District Court for the Northern District of California. The District Court, following Ninth Circuit precedent, determined that Hertz's principal place of business was California. As a result, the court found it lacked diversity jurisdiction and remanded the case back to state court. Hertz appealed this decision to the Ninth Circuit Court of Appeals, which affirmed the District Court's ruling. Subsequently, Hertz filed a petition for certiorari with the U.S. Supreme Court. The Supreme Court granted certiorari due to existing circuit splits regarding the interpretation of 'principal place of business' for diversity jurisdiction purposes.

(Breyer, J.)

Yes. A corporation's "principal place of business" for diversity jurisdiction purposes is determined by the location of its "nerve center," which is typically the corporate headquarters.

The "nerve center" test is the definitive standard for determining a corporation's principal place of business. This approach focuses on the single location where a corporation's high-level officers direct, control, and coordinate the company's activities. Simplicity and ease of application are paramount considerations in adopting this test. The statutory language and legislative history support this interpretation, emphasizing the need for a clear, consistent rule in jurisdictional matters. Complex "business activities" tests are rejected as they lead to unpredictable and potentially manipulable standards, undermining the purpose of diversity jurisdiction. The "nerve center" is typically the corporation's headquarters, where the company's core executive and administrative functions are carried out. This location is generally more stable and identifiable than other corporate locations, providing a reliable point of reference for jurisdictional determinations. The test aligns with the fundamental purpose of diversity jurisdiction by identifying the single state where a corporation is most likely to be subject to local bias. By focusing on the center of overall direction, control, and coordination, the "nerve center" test accurately reflects the true seat of corporate power and decision-making. This approach promotes judicial efficiency by providing a straightforward method for courts to determine jurisdiction, reducing litigation over threshold jurisdictional issues. The adoption of this clear standard enhances predictability for corporations and litigants, allowing for more informed decisions about where to file or defend lawsuits.