The U.S. Supreme Court ruled yesterday in favor of The Hertz Corporation in a lawsuit which questioned how a court determines a national corporation's principal place of business.
Hertz argued successfully that a corporation's headquarters, its 'nerve center', should be considered its primary place of business. In a unanimous opinion, the Supreme Court agreed with Hertz, adopting a sweeping nerve center test. The opinion overturns a lower court ruling that held Hertz to a California class action lawsuit in state court as opposed to federal court. The potential class action lawsuit was brought about by two Californians who sued Hertz in state court for alleged violations of that state’s wage and hour laws, according to Reuters.
In the case of Hertz Corp. vs. Friend, the plaintiffs argued that Hertz was a California citizen and subject to the jurisdiction of state courts, because of the business it conducted there. A federal district court sided with the plaintiffs, finding that California was Hertz’s principal place of business because it did significantly more business there than anywhere else, according to Reuters.
However, the Supreme Court’s ruling overturns the lower court’s ruling against Hertz.
"Hertz is gratified by the Supreme Court's decision," commented Mark P. Frissora, Chairman and Chief Executive Officer, The Hertz Corporation. "We applaud the unanimous opinion and the common sense approach in determining where major litigation affecting multi-state businesses should be handled. The opinion impacts every corporation doing business on a nationwide basis, allowing legal disputes between citizens of different states to be decided in a federal court, rather than state court."
The Chamber of Commerce, Business Roundtable, and American Trucking Association joined together in supporting Hertz's appeal, advocating that a corporation's headquarters is its principal place of business. According to the court's opinion, adoption of a nerve center test "promotes greater predictability . . . [which] is valuable to corporations making business and investment decisions."