Corporate Location an Issue in Hertz Suit

The U.S. Supreme Court is hearing a class action suit against Hertz Corp., alleging the company had violated state wage and hour laws, but a dispute has risen during the case over where to try the lawsuit, according to the Dow Jones.

During the case — Hertz Corp. v. Melinda Friend — the Supreme Court appeared ready on Nov. 10 to overrule a test for determining a corporation’s principal place of business that effectively locates a majority of national companies in California. A decision on the case is expected by June.

In the case, Friend and fellow defendant John Nhieu filed a class-action lawsuit against Hertz in 2007. The 9th Circuit U.S. Court of Appeals in San Francisco based its determination of a national company's place of business — and therefore where it should go to state court — on where it performs the majority of its overall operations. Most members of the Supreme Court criticized that decision. The Ninth Circuit based its decision on the fact that Hertz employs more people and operates more rental locations in California than any other state, despite the fact that it was incorporated in Delaware and runs its executive headquarters in New Jersey.

To illustrate the point against the 9th Circuit decision, Chief Justice John Roberts asked where the Ninth Circuit would locate the place of business for Starbucks Corp. founded in Seattle. When the defendants' attorney answered "California," Roberts responded, "That's a surprise."

The justices mostly supported Hertz's argument that the location of a company's executive headquarters is the best way to determine where a company is based, unless a challenger could prove that to be a shell office.

The headquarters would be defined as where the "direction of control comes from," said Hertz attorney Sri Srinivasan. And he noted that in public filings, public companies must already state where their executive offices are located.

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