WASHINGTON — The Supreme Court ruled today that a corporation’s principal place of business is where the company’s executives work, not where the company’s products are sold.
The unanimous ruling by the high court likely will make it harder to sue out-of-state corporations in state courts, which are considered friendlier to class-action lawsuits than are federal courts.
Hertz Corp. was sued in California state court by employees there seeking unpaid overtime and vacation wages. But the company, which keeps its headquarters in New Jersey, wanted the trial moved to federal court since the plaintiff and defendant would be from two different states.
A federal judge sent the case back to state court, saying that because most of Hertz’s business was done in California, that was the company’s principal place of business, and the class-action lawsuit should be heard there. The 9th U.S. Circuit Court of Appeals in San Francisco agreed.
The Supreme Court overturned that decision, sending the case back to federal court.
“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,” Justice Stephen Breyer wrote. “Lower federal courts have often metaphorically called that place the corporation’s ‘nerve center.’ We believe that the ‘nerve center’ will typically be found at a corporation’s headquarters.”
The case is Hertz v. Friend, 08-1107.
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