Hertz Corp. v. Friend

Background

Respondents Melinda Friend and John Nhieu, two California citizens, sued Hertz Corporation in California state court over alleged violations of California wage-and-hour laws and sought class relief. Hertz removed the suit to federal court, saying the parties were citizens of different States because Hertz’s 'principal place of business' was in New Jersey. Hertz’s declaration said it operated in 44 States, had 273 of 1,606 rental locations and about 2,300 of 11,230 full-time employees in California, generated about $811 million of $4.371 billion in revenue, and processed about 3.8 million of roughly 21 million annual transactions in California, while its leadership and core executive functions were at its Park Ridge, New Jersey headquarters. The district court applied Ninth Circuit law focused on which State had the largest share of activity, found California was Hertz’s principal place of business, and remanded; the Ninth Circuit affirmed.

Reasoning

The Court addressed what “principal place of business” means for corporate citizenship and adopted the “nerve center” test: the single place where top officers direct, control, and coordinate corporate activities, usually the company’s headquarters. The Court relied on the statute’s singular wording, administrative simplicity, and legislative history, rejected broader multi-factor state-by-state activity tests, and warned against sham headquarters or mail-drop manipulation. The Court also explained that it could review the matter despite a separate statute’s time limit.

Real world impact

The ruling makes a company’s corporate headquarters the usual determinative factor in deciding its legal 'home' for federal diversity suits, simplifying many disputes over where cases belong. The Court vacated the Ninth Circuit’s judgment and sent the case back for further proceedings; this is not a final decision on the underlying wage claims.