Hertz Corp. v. Friend--The Basics
On February 23, 2010, law professors and Fed Court wonks the world over were observed in giddy and somewhat unseemly displays of enthusiasm for the Supreme Court’s opinion in Hertz Corporation v. Friend (pdf). Allow me to join the fray, because it is not often that federal practitioners get a new case necessitating republication of an entire volume of Federal Practice and Procedure.
In Hertz, the Court held that you can chuck volume 13F of Wright and Miller (really, go ahead) because a corporation is deemed to be a citizen of the state where it is incorporated as well as state where the boss’s office or the “nerve center” is located.
After the jump, analysis, the court’s holding, and a challenge.
For those of you scoring at home, there are basically two ways for a defendant to rip* ™ a case from state to federal court. First, you can do it if you’ve been sued in state court under federal law (“federal question” jurisdiction). But Hertz deals with the second way: diversity of citizenship.
The Constitution gives federal courts judicial power over “Controversies . . . between Citizens of different states.” What could be simpler, right? The framers did not want defendants to be “home-towned.” But to create actual jurisdiction, Congress must get involved and define what is a “controversy between citizens of different states.”
Congress did get involved, with its customary precision, and created the “principal place of business” requirement to define corporate citizenship. But which place is that? And what if the corporation does business everywhere? And what if it has factories in New Jersey but grand corporate suites in New York? Is it not at home in New Jersey even if the fat-cats are in Manhattan?
After recounting a volume of history and several pages of logic, the Court rejected the mish mash of tests that had encrusted the jurisdictional statute like barnacles. It held:
We conclude that 'principal place of business' is best read as referring to the place where a corporation’s officers direct, control, and coordinate the corporation’s activities. It is the place that Courts of Appeals have called the corporation’s 'nerve center.' And in practice it should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e., the 'nerve center,' and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).
So, this answers all the questions, right?
Not exactly.
And the opinion is a paragon of clarity that serves as a useful model for legal drafting, right?
Not exactly.
- What issues do you see?
- And if you had enough gall to rewrite Justice Breyer’s opinion as a writing exercise, how might you do it?
Because that’s exactly what I’m about to do. Much more discussion on the Court’s reasoning, the remaining issues, and lessons to be learned in a later post.
*The “ripping” process is actually called “removing” a case; but, “shredding” or “ripping” is so much more graphic and exciting, we at The Appellate Record elect to rename the process and trademark it as our own.
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