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New United States Supreme Opinion on Diversity Jurisdiction

On Behalf of | Feb 24, 2010 | Legislative Issues

The United States Supreme Court decided a rule of jurisdiction pertaining to parties who are involved in potentially federal court litigation. In the case of Hertz V. Friend, the Court reviewed a case in which Hertz Corporation was named as a defendant and sought to remove the state court case to federal court based upon a diversity-of-citizenship jurisdiction argument. The plaintiffs sued in the state court of California alleging that Hertz’ principal place of business was in California because a plurality of the relevant business activity occurred there.

The Court adopted the “nerve center” approach to determining diversity jurisdiction. The Court felt that the “principal place of business” is best read as referring to the place where it corporation’s officers direct, control, and coordinate the corporation’s activities. And while this is normally the place where the corporation maintains its headquarters, the Court recognized that the “nerve center” test adopted will not answer all hard cases in a simple fashion. In a situation in which the alleged “nerve center” is nothing more than a mail drop box, a bare office with a computer, or the location of an annual executive retreat, courts should instead take as the “nerve center” the place of actual direction, control, and coordination in the absence of any type of manipulation.

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