“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.” —Breyer, Justice 

Facts: Melinda Friend, a California citizen, sued the Hertz Corporation in California state court seeking damages for Hertz’s alleged violation of California’s wage and hour laws. Hertz filed notice to remove the case to federal court, asserting diversity of citizenship of the parties. Friend argued that because Hertz operated more than 270 rental car locations and had more than 2,000 employees in California, it was a citizen of California and diversity of citizenship did not apply and the case could not be moved to federal court. Hertz alleged that because it was incorporated in the state of Delaware and its headquarters office was in the state of New Jersey, it was a citizen of those states and not a citizen of California. The U.S. district court held that Hertz was a citizen of California and that the case could not be moved to federal court. The U.S. court of appeals affirmed this decision. Hertz appealed to the U.S. Supreme Court. Issue Is Hertz Corporation a citizen of California? 

Language of the U.S. Supreme Court: The federal diversity jurisdiction statute 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.” And we conclude that the phrase “principal place of business” refers to the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities. We believe that the “nerve center” will typically be found at a corporation’s headquarters. The metaphor of a corporate “brain,” while not precise, suggests a single location. 

Decision: The U.S. Supreme Court held that Hertz’s corporate headquarters is located in New Jersey, not California. As such, there is diversity of citizenship with Friend, a California citizen, and the case could be moved to federal court. 

Note: Hertz has sufficient “minimum contacts” with California to be subject to suit in California. However, because of diversity of citizenship, the case will be heard by a federal court located in California and not California state court. The federal court will apply California law in deciding the case. 

Ethics Questions: Was it ethical for Hertz to try to avoid trial in California state court? Why would Hertz want the case tried in federal court rather than in state court?