Hertz Corp. v. Friend , 559 U.S. 77 ( 2010 )


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  • (Slip Opinion)              OCTOBER TERM, 2009                                       1
    
                                           Syllabus
    
             NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
           being done in connection with this case, at the time the opinion is issued.
           The syllabus constitutes no part of the opinion of the Court but has been
           prepared by the Reporter of Decisions for the convenience of the reader.
           See United States v. Detroit Timber & Lumber Co., 
    200 U.S. 321
    , 337.
    
    
    SUPREME COURT OF THE UNITED STATES
    
                                           Syllabus
    
                      HERTZ CORP. v. FRIEND ET AL.
    
    CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
                      THE NINTH CIRCUIT
    
    No. 08–1107. Argued November 10, 2009––Decided February 23, 2010
    Respondents, California citizens, sued petitioner Hertz Corporation in a
      California state court for claimed state-law violations. Hertz sought
      removal to the Federal District Court under 
    28 U.S. C
    . §§1332(d)(2),
      1441(a), claiming that because it and respondents were citizens of dif
      ferent States, §§1332(a)(1), (c)(1), the federal court possessed diver
      sity-of-citizenship jurisdiction. Respondents, however, claimed that
      Hertz was a California citizen, like themselves, and that, hence, di
      versity jurisdiction was lacking under §1332(c)(1), which 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 prin
      cipal place of business.” To show that its “principal place of business”
      was in New Jersey, not California, Hertz submitted a declaration
      stating, among other things, that it operated facilities in 44 States,
      that California accounted for only a portion of its business activity,
      that its leadership is at its corporate headquarters in New Jersey,
      and that its core executive and administrative functions are primar
      ily carried out there. The District Court concluded that it lacked di
      versity jurisdiction because Hertz was a California citizen under
      Ninth Circuit precedent, which asks, inter alia, whether the amount
      of the corporation’s business activity is “significantly larger” or “sub
      stantially predominates” in one State. Finding that California was
      Hertz’s “principal place of business” under that test because a plural
      ity of the relevant business activity occurred there, the District Court
      remanded the case to state court. The Ninth Circuit affirmed.
    Held:
        1. Respondents’ argument that this Court lacks jurisdiction under
     §1453(c)—which expressly permits appeals of remand orders such as
     the District Court’s only to “court[s] of appeals,” not to the Supreme
    2                        HERTZ CORP. v. FRIEND
    
                                      Syllabus
    
        Court, and provides that if “a final judgment on the appeal” in a court
        of appeals “is not issued before the end” of 60 days (with a possible
        10-day extension), “the appeal shall be denied”—makes far too much
        of too little. The Court normally does not read statutory silence as
        implicitly modifying or limiting its jurisdiction that another statute
        specifically grants. E.g., Felker v. Turpin, 
    518 U.S. 651
    , 660–661.
        Here, replicating similar, older statutes, §1254 specifically gives the
        Court jurisdiction to “revie[w] . . . [b]y writ of certiorari” cases that
        are “in the courts of appeals” when it grants the writ. The Court thus
        interprets §1453(c)’s “60-day” requirement as simply requiring a
        court of appeals to reach a decision within a specified time—not to
        deprive this Court of subsequent jurisdiction to review the case. See,
        e.g., Aetna Casualty & Surety Co. v. Flowers, 
    330 U.S. 464
    , 466–467.
        Pp. 4–5.
           2. The phrase “principal place of business” in §1332(c)(1) refers to
        the place where a corporation’s high level officers direct, control, and
        coordinate the corporation’s activities, i.e., its “nerve center,” which
        will typically be found at its corporate headquarters. Pp. 5–19.
              (a) A brief review of the legislative history of diversity jurisdic
        tion demonstrates that Congress added §1332(c)(1)’s “principal place
        of business” language to the traditional state-of-incorporation test in
        order to prevent corporations from manipulating federal-court juris
        diction as well as to reduce the number of diversity cases. Pp. 5–10.
              (b) However, the phrase “principal place of business” has proved
        more difficult to apply than its originators likely expected. After
        Congress’ amendment, courts were uncertain as to where to look to
        determine a corporation’s “principal place of business” for diversity
        purposes. If a corporation’s headquarters and executive offices were
        in the same State in which it did most of its business, the test seemed
        straightforward. The “principal place of business” was in that State.
        But if those corporate headquarters, including executive offices, were
        in one State, while the corporation’s plants or other centers of busi
        ness activity were located in other States, the answer was less obvi
        ous. Under these circumstances, for corporations with “far-flung”
        business activities, numerous Circuits have looked to a corporation’s
        “nerve center,” from which the corporation radiates out to its con
        stituent parts and from which its officers direct, control, and coordi
        nate the corporation’s activities. However, this test did not go far
        enough, for it did not answer what courts should do when a corpora
        tion’s operations are not far-flung but rather limited to only a few
        States. When faced with this question, various courts have focused
        more heavily on where a corporation’s actual business activities are
        located, adopting divergent and increasingly complex tests to inter
        pret the statute. Pp. 10–13.
                       Cite as: 559 U. S. ____ (2010)                      3
    
                                  Syllabus
    
         (c) In an effort to find a single, more uniform interpretation of
    the statutory phrase, this Court returns to the “nerve center” ap
    proach: “[P]rincipal place of business” is best read as referring to the
    place where a corporation’s officers direct, control, and coordinate the
    corporation’s activities. 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 coordina
    tion, i.e., the “nerve center,” and not simply an office where the corpo
    ration holds its board meetings. Pp. 13–19.
            (i) Three sets of considerations, taken together, convince the
    Court that the “nerve center” approach, while imperfect, is superior
    to other possibilities. First, §1332(c)(1)’s language supports the ap
    proach. The statute’s word “place” is singular, not plural. Its word
    “principal” requires that the main, prominent, or most important
    place be chosen. Cf., e.g., Commissioner v. Soliman, 
    506 U.S. 168
    ,
    174. And the fact that the word “place” follows the words “State
    where” means that the “place” is a place within a State, not the State
    itself. A corporation’s “nerve center,” usually its main headquarters,
    is a single place. The public often considers it the corporation’s main
    place of business. And it is a place within a State. By contrast, the
    application of a more general business activities test has led some
    courts, as in the present case, to look, not at a particular place within
    a State, but incorrectly at the State itself, measuring the total
    amount of business activities that the corporation conducts there and
    determining whether they are significantly larger than in the next
    ranking State. Second, administrative simplicity is a major virtue in
    a jurisdictional statute. Sisson v. Ruby, 
    497 U.S. 358
    , 375. A “nerve
    center” approach, which ordinarily equates that “center” with a cor
    poration’s headquarters, is simple to apply comparatively speaking.
    By contrast, a corporation’s general business activities more often
    lack a single principal place where they take place. Third, the stat
    ute’s legislative history suggests that the words “principal place of
    business” should be interpreted to be no more complex than an ear
    lier, numerical test that was criticized as too complex and impractical
    to apply. A “nerve center” test offers such a possibility. A general
    business activities test does not. Pp. 14–17.
            (ii) While there may be no perfect test that satisfies all admin
    istrative and purposive criteria, and there will be hard cases under
    the “nerve center” test adopted today, this test is relatively easier to
    apply and does not require courts to weigh corporate functions, assets
    or revenues different in kind, one from the other. And though this
    test may produce results that seem to cut against the basic rationale
    of diversity jurisdiction, accepting occasionally counterintuitive re
    sults is the price the legal system must pay to avoid overly complex
    4                       HERTZ CORP. v. FRIEND
    
                                      Syllabus
    
        jurisdictional administration while producing the benefits that ac
        company a more uniform legal system. Pp. 17–18.
             (iii) If the record reveals attempts at jurisdictional manipula
        tion—for example, that the alleged “nerve center” is nothing more
        than a mail drop box, a bare office with a computer, or the location of
        an annual executive retreat—the courts should instead take as the
        “nerve center” the place of actual direction, control, and coordination,
        in the absence of such manipulation. Pp. 18–19.
             (d) Although petitioner’s unchallenged declaration suggests that
        Hertz’s “nerve center” and its corporate headquarters are one and the
        same, and that they are located in New Jersey, not in California, re
        spondents should have a fair opportunity on remand to litigate their
        case in light of today’s holding. P. 19.
    297 Fed. Appx. 690, vacated and remanded.
    
        BREYER, J., delivered the opinion for a unanimous Court.
                            Cite as: 559 U. S. ____ (2010)                              1
    
                                 Opinion of the Court
    
         NOTICE: This opinion is subject to formal revision before publication in the
         preliminary print of the United States Reports. Readers are requested to
         notify the Reporter of Decisions, Supreme Court of the United States, Wash
         ington, D. C. 20543, of any typographical or other formal errors, in order
         that corrections may be made before the preliminary print goes to press.
    
    
    SUPREME COURT OF THE UNITED STATES
                                       _________________
    
                                       No. 08–1107
                                       _________________
    
    
         THE HERTZ CORPORATION, PETITIONER v.
    
                MELINDA FRIEND ET AL. 
    
     ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF 
    
                APPEALS FOR THE NINTH CIRCUIT
    
                                  [February 23, 2010] 
    
    
       JUSTICE BREYER delivered the opinion of the 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.” 
    28 U.S. C
    . §1332(c)(1)
    (emphasis added). We seek here to resolve different inter
    pretations that the Circuits have given this phrase. In
    doing so, we place primary weight upon the need for judi
    cial administration of a jurisdictional statute to remain as
    simple as possible. And we conclude that the phrase
    “principal place of business” refers to the place where the
    corporation’s high level officers direct, control, and coordi
    nate the corporation’s activities. Lower federal courts
    have often metaphorically called that place the corpora
    tion’s “nerve center.” See, e.g., Wisconsin Knife Works v.
    National Metal Crafters, 
    781 F.2d 1280
    , 1282 (CA7 1986);
    Scot Typewriter Co. v. Underwood Corp., 
    170 F. Supp. 862
    ,
    865 (SDNY 1959) (Weinfeld, J.). We believe that the
    “nerve center” will typically be found at a corporation’s
    headquarters.
    2                  HERTZ CORP. v. FRIEND 
    
    
                         Opinion of the Court 
    
    
                                   I
    
       In September 2007, respondents Melinda Friend and
    John Nhieu, two California citizens, sued petitioner, the
    Hertz Corporation, in a California state court. They
    sought damages for what they claimed were violations of
    California’s wage and hour laws. App. to Pet. for Cert.
    20a. And they requested relief on behalf of a potential
    class composed of California citizens who had allegedly
    suffered similar harms.
       Hertz filed a notice seeking removal to a federal court.
    
    28 U.S. C
    . §§1332(d)(2), 1441(a). Hertz claimed that the
    plaintiffs and the defendant were citizens of different
    States. §§1332(a)(1), (c)(1). Hence, the federal court
    possessed diversity-of-citizenship jurisdiction. Friend and
    Nhieu, however, claimed that the Hertz Corporation was a
    California citizen, like themselves, and that, hence, diver
    sity jurisdiction was lacking.
       To support its position, Hertz submitted a declaration
    by an employee relations manager that sought to show
    that Hertz’s “principal place of business” was in New
    Jersey, not in California. The declaration stated, among
    other things, that Hertz operated facilities in 44 States;
    and that California—which had about 12% of the Nation’s
    population, Pet. for Cert. 8—accounted for 273 of Hertz’s
    1,606 car rental locations; about 2,300 of its 11,230 full
    time employees; about $811 million of its $4.371 billion in
    annual revenue; and about 3.8 million of its approximately
    21 million annual transactions, i.e., rentals. The declara
    tion also stated that the “leadership of Hertz and its do
    mestic subsidiaries” is located at Hertz’s “corporate head
    quarters” in Park Ridge, New Jersey; that its “core
    executive and administrative functions . . . are carried out”
    there and “to a lesser extent” in Oklahoma City, Okla
    homa; and that its “major administrative operations . . .
    are found” at those two locations. App. to Pet. for Cert.
    26a–30a.
                       Cite as: 559 U. S. ____ (2010)              3
    
                           Opinion of the Court
    
       The District Court of the Northern District of California
    accepted Hertz’s statement of the facts as undisputed.
    But it concluded that, given those facts, Hertz was a citi
    zen of California. In reaching this conclusion, the court
    applied Ninth Circuit precedent, which instructs courts to
    identify a corporation’s “principal place of business” by
    first determining the amount of a corporation’s business
    activity State by State. If the amount of activity is “sig
    nificantly larger” or “substantially predominates” in one
    State, then that State is the corporation’s “principal place
    of business.” If there is no such State, then the “principal
    place of business” is the corporation’s “ ‘nerve center,’ ” i.e.,
    the place where “ ‘the majority of its executive and admin
    istrative functions are performed.’ ” Friend v. Hertz, No.
    C–07–5222 MMC (ND Cal., Jan. 15, 2008), p. 3 (hereinaf
    ter Order); Tosco Corp. v. Communities for a Better Envi
    ronment, 
    236 F.3d 495
    , 500–502 (CA9 2001) (per curiam).
       Applying this test, the District Court found that the
    “plurality of each of the relevant business activities” was
    in California, and that “the differential between the
    amount of those activities” in California and the amount
    in “the next closest state” was “significant.” Order 4.
    Hence, Hertz’s “principal place of business” was Califor
    nia, and diversity jurisdiction was thus lacking. The
    District Court consequently remanded the case to the
    state courts.
       Hertz appealed the District Court’s remand order. 
    28 U.S. C
    . §1453(c). The Ninth Circuit affirmed in a brief
    memorandum opinion. 297 Fed. Appx. 690 (2008). Hertz
    filed a petition for certiorari. And, in light of differences
    among the Circuits in the application of the test for corpo
    rate citizenship, we granted the writ. Compare Tosco
    Corp., supra, at 500–502, and Capitol Indemnity Corp. v.
    Russellville Steel Co., 
    367 F.3d 831
    , 836 (CA8 2004) (ap
    plying “total activity” test and looking at “all corporate
    activities”), with Wisconsin Knife Works, supra, at 1282
    4                   HERTZ CORP. v. FRIEND
    
                          Opinion of the Court
    
    (applying “nerve center” test).
                                   II
       At the outset, we consider a jurisdictional objection.
    Respondents point out that the statute permitting Hertz
    to appeal the District Court’s remand order to the Court of
    Appeals, 
    28 U.S. C
    . §1453(c), constitutes an exception to a
    more general jurisdictional rule that remand orders are
    “not reviewable on appeal.” §1447(d). They add that the
    language of §1453(c) refers only to “court[s] of appeals,”
    not to the Supreme Court. The statute also says that if “a
    final judgment on the appeal” in a court of appeals “is not
    issued before the end” of 60 days (with a possible 10-day
    extension), “the appeal shall be denied.” And respondents
    draw from these statutory circumstances the conclusion
    that Congress intended to permit review of a remand
    order only by a court of appeals, not by the Supreme Court
    (at least not if, as here, this Court’s grant of certiorari
    comes after §1453(c)’s time period has elapsed).
       This argument, however, makes far too much of too
    little. We normally do not read statutory silence as implic
    itly modifying or limiting Supreme Court jurisdiction that
    another statute specifically grants. Felker v. Turpin, 
    518 U.S. 651
    , 660–661 (1996); Ex parte Yerger, 
    8 Wall. 85
    ,
    104–105 (1869). Here, another, pre-existing federal stat
    ute gives this Court jurisdiction to “revie[w] . . . [b]y writ
    of certiorari” cases that, like this case, are “in the courts of
    appeals” when we grant the writ. 
    28 U.S. C
    . §1254. This
    statutory jurisdictional grant replicates similar grants
    that yet older statutes provided. See, e.g., §1254, 62 Stat.
    928; §1, 43 Stat. 938–939 (amending §240, 36 Stat. 1157);
    §240, 36 Stat. 1157; Evarts Act, §6, 26 Stat. 828. This
    history provides particularly strong reasons not to read
    §1453(c)’s silence or ambiguous language as modifying or
    limiting our pre-existing jurisdiction.
        We thus interpret §1453(c)’s “60-day” requirement as
                      Cite as: 559 U. S. ____ (2010)            5
    
                          Opinion of the Court
    
    simply requiring a court of appeals to reach a decision
    within a specified time—not to deprive this Court of sub
    sequent jurisdiction to review the case. See Aetna Casu
    alty & Surety Co. v. Flowers, 
    330 U.S. 464
    , 466–467
    (1947); Gay v. Ruff, 
    292 U.S. 25
    , 28–31 (1934).
                                  III
       We begin our “principal place of business” discussion
    with a brief review of relevant history. The Constitution
    provides that the “judicial Power shall extend” to “Contro
    versies . . . between Citizens of different States.” Art. III,
    §2. This language, however, does not automatically confer
    diversity jurisdiction upon the federal courts. Rather, it
    authorizes Congress to do so and, in doing so, to determine
    the scope of the federal courts’ jurisdiction within constitu
    tional limits. Kline v. Burke Constr. Co., 
    260 U.S. 226
    ,
    233–234 (1922); Mayor v. Cooper, 
    6 Wall. 247
    , 252 (1868).
       Congress first authorized federal courts to exercise
    diversity jurisdiction in 1789 when, in the First Judiciary
    Act, Congress granted federal courts authority to hear
    suits “between a citizen of the State where the suit is
    brought, and a citizen of another State.” §11, 1 Stat. 78.
    The statute said nothing about corporations. In 1809,
    Chief Justice Marshall, writing for a unanimous Court,
    described a corporation as an “invisible, intangible, and
    artificial being” which was “certainly not a citizen.” Bank
    of United States v. Deveaux, 5 Cranch 61, 86 (1809). But
    the Court held that a corporation could invoke the federal
    courts’ diversity jurisdiction based on a pleading that the
    corporation’s shareholders were all citizens of a different
    State from the defendants, as “the term citizen ought to be
    understood as it is used in the constitution, and as it is
    used in other laws. That is, to describe the real persons
    who come into court, in this case, under their corporate
    name.” Id., at 91–92.
       In Louisville, C. & C. R. Co. v. Letson, 
    2 How. 497
    6                  HERTZ CORP. v. FRIEND
    
                         Opinion of the Court
    
    (1844), the Court modified this initial approach. It held
    that a corporation was to be deemed an artificial person of
    the State by which it had been created, and its citizenship
    for jurisdictional purposes determined accordingly. Id., at
    558–559. Ten years later, the Court in Marshall v. Balti
    more & Ohio R. Co., 
    16 How. 314
     (1854), held that the
    reason a corporation was a citizen of its State of incorpora
    tion was that, for the limited purpose of determining
    corporate citizenship, courts could conclusively (and artifi
    cially) presume that a corporation’s shareholders were
    citizens of the State of incorporation. Id., at 327–328.
    And it reaffirmed Letson. 16 How., at 325–326. Whatever
    the rationale, the practical upshot was that, for diversity
    purposes, the federal courts considered a corporation to be
    a citizen of the State of its incorporation. 13F C. Wright,
    A. Miller, & E. Cooper, Federal Practice and Procedure
    §3623, pp. 1–7 (3d ed. 2009) (hereinafter Wright & Miller).
       In 1928 this Court made clear that the “state of incorpo
    ration” rule was virtually absolute. It held that a corpora
    tion closely identified with State A could proceed in a
    federal court located in that State as long as the corpora
    tion had filed its incorporation papers in State B, perhaps
    a State where the corporation did no business at all. See
    Black and White Taxicab & Transfer Co. v. Brown and
    Yellow Taxicab & Transfer Co., 
    276 U.S. 518
    , 522–525
    (refusing to question corporation’s reincorporation motives
    and finding diversity jurisdiction). Subsequently, many in
    Congress and those who testified before it pointed out that
    this interpretation was at odds with diversity jurisdiction’s
    basic rationale, namely, opening the federal courts’ doors
    to those who might otherwise suffer from local prejudice
    against out-of-state parties. See, e.g., S. Rep. No. 530, 72d
    Cong., 1st Sess., 2, 4–7 (1932). Through its choice of the
    State of incorporation, a corporation could manipulate
    federal-court jurisdiction, for example, opening the federal
    courts’ doors in a State where it conducted nearly all its
                     Cite as: 559 U. S. ____ (2010)           7
    
                         Opinion of the Court
    
    business by filing incorporation papers elsewhere. Id., at
    4 (“Since the Supreme Court has decided that a corpora
    tion is a citizen . . . it has become a common practice for
    corporations to be incorporated in one State while they do
    business in another. And there is no doubt but that it
    often occurs simply for the purpose of being able to have
    the advantage of choosing between two tribunals in case of
    litigation”). See also Hearings on S. 937 et al. before a
    Subcommittee of the Senate Committee on the Judiciary,
    72d Cong., 1st Sess., 4–5 (1932) (Letter from Sen. George
    W. Norris to Attorney General William D. Mitchell (May
    24, 1930)) (citing a “common practice for individuals to
    incorporate in a foreign State simply for the purpose of
    taking litigation which may arise into the Federal courts”).
    Although various legislative proposals to curtail the corpo
    rate use of diversity jurisdiction were made, see, e.g.,
    S. 937, S. 939, H. R. 11508, 72d Cong., 1st Sess. (1932),
    none of these proposals were enacted into law.
       At the same time as federal dockets increased in size,
    many judges began to believe those dockets contained too
    many diversity cases. A committee of the Judicial Confer
    ence of the United States studied the matter. See Reports
    of the Proceedings of the Regular Annual Meeting and
    Special Meeting (Sept. 24–26 & Mar. 19–20, 1951), in
    H. R. Doc. No. 365, 82d Cong., 2d Sess., pp. 26–27 (1952).
    And on March 12, 1951, that committee, the Committee on
    Jurisdiction and Venue, issued a report (hereinafter Mar.
    Committee Rept.).
       Among its observations, the committee found a general
    need “to prevent frauds and abuses” with respect to juris
    diction. Id., at 14. The committee recommended against
    eliminating diversity cases altogether. Id., at 28. Instead
    it recommended, along with other proposals, a statutory
    amendment that would make a corporation a citizen both
    of the State of its incorporation and any State from which
    it received more than half of its gross income. Id., at 14–
    8                 HERTZ CORP. v. FRIEND
    
                         Opinion of the Court
    
    15 (requiring corporation to show that “less than fifty per
    cent of its gross income was derived from business trans
    acted within the state where the Federal court is held”).
    If, for example, a citizen of California sued (under state
    law in state court) a corporation that received half or more
    of its gross income from California, that corporation would
    not be able to remove the case to federal court, even if
    Delaware was its State of incorporation.
       During the spring and summer of 1951 committee mem
    bers circulated their report and attended circuit confer
    ences at which federal judges discussed the report’s rec
    ommendations. Reflecting those criticisms, the committee
    filed a new report in September, in which it revised its
    corporate citizenship recommendation. It now proposed
    that “ ‘a corporation shall be deemed a citizen of the state
    of its original creation . . . [and] shall also be deemed a
    citizen of a state where it has its principal place of busi
    ness.’ ” Judicial Conference of the United States, Report of
    the Committee on Jurisdiction and Venue 4 (Sept. 24,
    1951) (hereinafter Sept. Committee Rept.)—the source of
    the present-day statutory language. See Hearings on
    H. R. 2516 et al. before Subcommittee No. 3 of the House
    Committee on the Judiciary, 85th Cong., 1st Sess., 9
    (1957) (hereinafter House Hearings). The committee
    wrote that this new language would provide a “simpler
    and more practical formula” than the “gross income” test.
    Sept. Committee Rept. 2. It added that the language
    “ha[d] a precedent in the jurisdictional provisions of the
    Bankruptcy Act.” Id., at 2–3.
       In mid-1957 the committee presented its reports to the
    House of Representatives Committee on the Judiciary.
    House Hearings 9–27; see also H. Rep. No. 1706, 85th
    Cong., 2d Sess., 27–28 (1958) (hereinafter H. R. Rep. 1706)
    (reprinting Mar. and Sept. Committee Repts.); S. Rep. No.
    1830, 85th Cong., 2d Sess., 15–31 (1958) (hereinafter
    S. Rep. 1830) (same). Judge Albert Maris, representing
                     Cite as: 559 U. S. ____ (2010)            9
    
                         Opinion of the Court
    
    Judge John Parker (who had chaired the Judicial Confer
    ence Committee), discussed various proposals that the
    Judicial Conference had made to restrict the scope of
    diversity jurisdiction. In respect to the “principal place of
    business” proposal, he said that the relevant language
    “ha[d] been defined in the Bankruptcy Act.” House Hear
    ings 37. He added:
        “All of those problems have arisen in bankruptcy
        cases, and as I recall the cases—and I wouldn’t want
        to be bound by this statement because I haven’t them
        before me—I think the courts have generally taken
        the view that where a corporation’s interests are
        rather widespread, the principal place of business is
        an actual rather than a theoretical or legal one. It is
        the actual place where its business operations are co
        ordinated, directed, and carried out, which would or
        dinarily be the place where its officers carry on its
        day-to-day business, where its accounts are kept,
        where its payments are made, and not necessarily a
        State in which it may have a plant, if it is a big corpo
        ration, or something of that sort.
          “But that has been pretty well worked out in the
        bankruptcy cases, and that law would all be available,
        you see, to be applied here without having to go over it
        again from the beginning.” Ibid.
    The House Committee reprinted the Judicial Conference
    Committee Reports along with other reports and relevant
    testimony and circulated it to the general public “for the
    purpose of inviting further suggestions and comments.”
    Id., at III. Subsequently, in 1958, Congress both codified
    the courts’ traditional place of incorporation test and also
    enacted into law a slightly modified version of the Confer
    ence Committee’s proposed “principal place of business”
    language. A corporation was to “be deemed a citizen of
    any State by which it has been incorporated and of the
    10                 HERTZ CORP. v. FRIEND
    
                          Opinion of the Court
    
    State where it has its principal place of business.” §2, 72
    Stat. 415.
                                 IV
       The phrase “principal place of business” has proved
    more difficult to apply than its originators likely expected.
    Decisions under the Bankruptcy Act did not provide the
    firm guidance for which Judge Maris had hoped because
    courts interpreting bankruptcy law did not agree about
    how to determine a corporation’s “principal place of busi
    ness.” Compare Burdick v. Dillon, 
    144 F. 737
    , 738 (CA1
    1906) (holding that a corporation’s “principal office, rather
    than a factory, mill, or mine . . . constitutes the ‘principal
    place of business’ ”), with Continental Coal Corp. v.
    Roszelle Bros., 
    242 F. 243
    , 247 (CA6 1917) (identifying the
    “principal place of business” as the location of mining
    activities, rather than the “principal office”); see also
    Friedenthal, New Limitations on Federal Jurisdiction, 11
    Stan. L. Rev. 213, 223 (1959) (“The cases under the Bank
    ruptcy Act provide no rigid legal formula for the determi
    nation of the principal place of business”).
       After Congress’ amendment, courts were similarly
    uncertain as to where to look to determine a corporation’s
    “principal place of business” for diversity purposes. If a
    corporation’s headquarters and executive offices were in
    the same State in which it did most of its business, the
    test seemed straightforward. The “principal place of
    business” was located in that State. See, e.g., Long v.
    Silver, 
    248 F.3d 309
    , 314–315 (CA4 2001); Pinnacle Con
    sultants, Ltd. v. Leucadia Nat. Corp., 
    101 F.3d 900
    , 906–
    907 (CA2 1996).
       But suppose those corporate headquarters, including
    executive offices, are in one State, while the corporation’s
    plants or other centers of business activity are located in
    other States? In 1959 a distinguished federal district
    judge, Edward Weinfeld, relied on the Second Circuit’s
                     Cite as: 559 U. S. ____ (2010)           11
    
                         Opinion of the Court
    
    interpretation of the Bankruptcy Act to answer this ques
    tion in part:
        “Where a corporation is engaged in far-flung and var
        ied activities which are carried on in different states,
        its principal place of business is the nerve center from
        which it radiates out to its constituent parts and from
        which its officers direct, control and coordinate all ac
        tivities without regard to locale, in the furtherance of
        the corporate objective. The test applied by our Court
        of Appeals, is that place where the corporation has an
        ‘office from which its business was directed and con
        trolled’—the place where ‘all of its business was under
        the supreme direction and control of its officers.’ ”
        Scot Typewriter Co., 170 F. Supp., at 865.
    Numerous Circuits have since followed this rule, applying
    the “nerve center” test for corporations with “far-flung”
    business activities. See, e.g., Topp v. Compair Inc., 
    814 F.2d 830
    , 834 (CA1 1987); see also 15 J. Moore et al.,
    Moore’s Federal Practice §102.54[2], p. 102–112.1 (3d ed.
    2009) (hereinafter Moore’s).
       Scot’s analysis, however, did not go far enough. For it
    did not answer what courts should do when the operations
    of the corporation are not “far-flung” but rather limited to
    only a few States. When faced with this question, various
    courts have focused more heavily on where a corporation’s
    actual business activities are located. See, e.g., Diaz-
    Rodriguez v. Pep Boys Corp., 
    410 F.3d 56
    , 60–61 (CA1
    2005); R. G. Barry Corp. v. Mushroom Makers, Inc., 
    612 F.2d 651
    , 656–657 (CA2 1979); see also 15 Moore’s
    §102.54, at 102–112.1.
       Perhaps because corporations come in many different
    forms, involve many different kinds of business activities,
    and locate offices and plants for different reasons in differ
    ent ways in different regions, a general “business activi
    ties” approach has proved unusually difficult to apply.
    12                 HERTZ CORP. v. FRIEND
    
                          Opinion of the Court
    
    Courts must decide which factors are more important than
    others: for example, plant location, sales or servicing
    centers; transactions, payrolls, or revenue generation.
    See, e.g., R. G. Barry Corp., supra, at 656–657 (place of
    sales and advertisement, office, and full-time employees);
    Diaz-Rodriguez, supra, at 61–62 (place of stores and in
    ventory, employees, income, and sales).
       The number of factors grew as courts explicitly com
    bined aspects of the “nerve center” and “business activity”
    tests to look to a corporation’s “total activities,” sometimes
    to try to determine what treatises have described as the
    corporation’s “center of gravity.” See, e.g., Gafford v.
    General Elec. Co., 
    997 F.2d 150
    , 162–163 (CA6 1993);
    Amoco Rocmount Co. v. Anschutz Corp., 
    7 F.3d 909
    , 915
    (CA10 1993); 13F Wright & Miller §3625, at 100. A major
    treatise confirms this growing complexity, listing Circuit
    by Circuit, cases that highlight different factors or empha
    size similar factors differently, and reporting that the
    “federal courts of appeals have employed various tests”—
    tests which “tend to overlap” and which are sometimes
    described in “language” that “is imprecise.” 15 Moore’s
    §102.54[2], at 102–112. See also id., §§102.54[2], [13], at
    102–112 to 102–122 (describing, in 14 pages, major tests
    as looking to the “nerve center,” “locus of operations,” or
    “center of corporate activities”). Not surprisingly, differ
    ent circuits (and sometimes different courts within a
    single circuit) have applied these highly general multifac
    tor tests in different ways. Id., §§102.54[3]–[7], [11]–[13]
    (noting that the First Circuit “has never explained a basis
    for choosing between ‘the center of corporate activity’ test
    and the ‘locus of operations’ test”; the Second Circuit uses
    a “two-part test” similar to that of the Fifth, Ninth, and
    Eleventh Circuits involving an initial determination as to
    whether “a corporation’s activities are centralized or de
    centralized” followed by an application of either the “place
    of operations” or “nerve center” test; the Third Circuit
                      Cite as: 559 U. S. ____ (2010)             13
    
                          Opinion of the Court
    
    applies the “center of corporate activities” test searching
    for the “headquarters of a corporation’s day-to-day activ
    ity”; the Fourth Circuit has “endorsed neither [the ‘nerve
    center’ or ‘place of operations’] test to the exclusion of the
    other”; the Tenth Circuit directs consideration of the “total
    activity of the company considered as a whole”). See also
    13F Wright & Miller §3625 (describing, in 73 pages, the
    “nerve center,” “corporate activities,” and “total activity”
    tests as part of an effort to locate the corporation’s “center
    of gravity,” while specifying different ways in which differ
    ent circuits apply these or other factors).
       This complexity may reflect an unmediated judicial
    effort to apply the statutory phrase “principal place of
    business” in light of the general purpose of diversity juris
    diction, i.e., an effort to find the State where a corporation
    is least likely to suffer out-of-state prejudice when it is
    sued in a local court, Pease v. Peck, 
    18 How. 595
    , 599
    (1856). But, if so, that task seems doomed to failure.
    After all, the relevant purposive concern—prejudice
    against an out-of-state party—will often depend upon
    factors that courts cannot easily measure, for example, a
    corporation’s image, its history, and its advertising, while
    the factors that courts can more easily measure, for exam
    ple, its office or plant location, its sales, its employment, or
    the nature of the goods or services it supplies, will some
    times bear no more than a distant relation to the likeli
    hood of prejudice. At the same time, this approach is at
    war with administrative simplicity. And it has failed to
    achieve a nationally uniform interpretation of federal law,
    an unfortunate consequence in a federal legal system.
                                   V
    
                                   A
    
      In an effort to find a single, more uniform interpretation
    of the statutory phrase, we have reviewed the Courts of
    Appeals’ divergent and increasingly complex interpreta
    14                 HERTZ CORP. v. FRIEND
    
                          Opinion of the Court
    
    tions. Having done so, we now return to, and expand,
    Judge Weinfeld’s approach, as applied in the Seventh
    Circuit. See, e.g., Scot Typewriter Co., 170 F. Supp., at
    865; Wisconsin Knife Works, 
    781 F. 2d
    , at 1282. We con
    clude 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 corpora
    tion’s “nerve center.” And in practice it should normally
    be the place where the corporation maintains its head
    quarters—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 corpora
    tion holds its board meetings (for example, attended by
    directors and officers who have traveled there for the
    occasion).
       Three sets of considerations, taken together, convince us
    that this approach, while imperfect, is superior to other
    possibilities. First, the statute’s language supports the
    approach. The statute’s text deems a corporation a citizen
    of the “State where it has its principal place of business. ”
    
    28 U.S. C
    . §1332(c)(1).           The word “place” is
    in the singular, not the plural. The word “principal” re
    quires us to pick out the “main, prominent” or “leading”
    place. 12 Oxford English Dictionary 495 (2d ed. 1989)
    (def. (A)(I)(2)). Cf. Commissioner v. Soliman, 
    506 U.S. 168
    , 174 (1993) (interpreting “principal place of business”
    for tax purposes to require an assessment of “whether any
    one business location is the ‘most important, consequen
    tial, or influential’ one”). And the fact that the word
    “place” follows the words “State where” means that the
    “place” is a place within a State. It is not the State itself.
       A corporation’s “nerve center,” usually its main head
    quarters, is a single place. The public often (though not
    always) considers it the corporation’s main place of busi
    ness. And it is a place within a State. By contrast, the
                     Cite as: 559 U. S. ____ (2010)          15
    
                         Opinion of the Court
    
    application of a more general business activities test has
    led some courts, as in the present case, to look, not at a
    particular place within a State, but incorrectly at the
    State itself, measuring the total amount of business activi
    ties that the corporation conducts there and determining
    whether they are “significantly larger” than in the next
    ranking State. 297 Fed. Appx. 690.
       This approach invites greater litigation and can lead to
    strange results, as the Ninth Circuit has since recognized.
    Namely, if a “corporation may be deemed a citizen of
    California on th[e] basis” of “activities [that] roughly
    reflect California’s larger population . . . nearly every
    national retailer—no matter how far flung its operations—
    will be deemed a citizen of California for diversity pur
    poses.” Davis v. HSBC Bank Nev., N. A., 
    557 F.3d 1026
    ,
    1029–1030 (2009). But why award or decline diversity
    jurisdiction on the basis of a State’s population, whether
    measured directly, indirectly (say proportionately), or with
    modifications?
       Second, administrative simplicity is a major virtue in a
    jurisdictional statute. Sisson v. Ruby, 
    497 U.S. 358
    , 375
    (1990) (SCALIA, J., concurring in judgment) (eschewing
    “the sort of vague boundary that is to be avoided in the
    area of subject-matter jurisdiction wherever possible”).
    Complex jurisdictional tests complicate a case, eating up
    time and money as the parties litigate, not the merits of
    their claims, but which court is the right court to decide
    those claims. Cf. Navarro Savings Assn. v. Lee, 
    446 U.S. 458
    , 464, n. 13 (1980). Complex tests produce appeals and
    reversals, encourage gamesmanship, and, again, diminish
    the likelihood that results and settlements will reflect a
    claim’s legal and factual merits. Judicial resources too are
    at stake. Courts have an independent obligation to de
    termine whether subject-matter jurisdiction exists, even
    when no party challenges it. Arbaugh v. Y & H Corp., 
    546 U.S. 500
    , 514 (2006) (citing Ruhrgas AG v. Marathon Oil
    16                HERTZ CORP. v. FRIEND
    
                         Opinion of the Court
    
    Co., 
    526 U.S. 574
    , 583 (1999)). So courts benefit from
    straightforward rules under which they can readily assure
    themselves of their power to hear a case. Arbaugh, supra,
    at 514.
       Simple jurisdictional rules also promote greater predict
    ability. Predictability is valuable to corporations making
    business and investment decisions. Cf. First Nat. City
    Bank v. Banco Para el Comercio Exterior de Cuba, 
    462 U.S. 611
    , 621 (1983) (recognizing the “need for certainty
    and predictability of result while generally protecting the
    justified expectations of parties with interests in the cor
    poration”). Predictability also benefits plaintiffs deciding
    whether to file suit in a state or federal court.
       A “nerve center” approach, which ordinarily equates
    that “center” with a corporation’s headquarters, is simple
    to apply comparatively speaking. The metaphor of a cor
    porate “brain,” while not precise, suggests a single loca
    tion. By contrast, a corporation’s general business activi
    ties more often lack a single principal place where they
    take place. That is to say, the corporation may have sev
    eral plants, many sales locations, and employees located in
    many different places. If so, it will not be as easy to de
    termine which of these different business locales is the
    “principal” or most important “place.”
       Third, the statute’s legislative history, for those who
    accept it, offers a simplicity-related interpretive bench
    mark. The Judicial Conference provided an initial version
    of its proposal that suggested a numerical test. A corpora
    tion would be deemed a citizen of the State that accounted
    for more than half of its gross income. Mar. Committee
    Rept. 14–15; see supra, at 8. The Conference changed its
    mind in light of criticism that such a test would prove too
    complex and impractical to apply. Sept. Committee Rept.
    2; see also H. Rep. 1706, at 28; S. Rep. 1830, at 31. That
    history suggests that the words “principal place of busi
    ness” should be interpreted to be no more complex than
                      Cite as: 559 U. S. ____ (2010)           17
    
                          Opinion of the Court
    
    the initial “half of gross income” test. A “nerve center” test
    offers such a possibility. A general business activities test
    does not.
                                     B
       We recognize that there may be no perfect test that
    satisfies all administrative and purposive criteria. We
    recognize as well that, under the “nerve center” test we
    adopt today, there will be hard cases. For example, in this
    era of telecommuting, some corporations may divide their
    command and coordinating functions among officers who
    work at several different locations, perhaps communicat
    ing over the Internet. That said, our test nonetheless
    points courts in a single direction, towards the center of
    overall direction, control, and coordination. Courts do not
    have to try to weigh corporate functions, assets, or reve
    nues different in kind, one from the other. Our approach
    provides a sensible test that is relatively easier to apply,
    not a test that will, in all instances, automatically gener
    ate a result.
       We also recognize that the use of a “nerve center” test
    may in some cases produce results that seem to cut
    against the basic rationale for 
    28 U.S. C
    . §1332, see su
    pra, at 6. For example, if the bulk of a company’s business
    activities visible to the public take place in New Jersey,
    while its top officers direct those activities just across the
    river in New York, the “principal place of business” is New
    York. One could argue that members of the public in New
    Jersey would be less likely to be prejudiced against the
    corporation than persons in New York—yet the corpora
    tion will still be entitled to remove a New Jersey state case
    to federal court. And note too that the same corporation
    would be unable to remove a New York state case to fed
    eral court, despite the New York public’s presumed preju
    dice against the corporation.
       We understand that such seeming anomalies will arise.
    18                 HERTZ CORP. v. FRIEND
    
                         Opinion of the Court
    
    However, in view of the necessity of having a clearer rule,
    we must accept them. Accepting occasionally counterin
    tuitive results is the price the legal system must pay to
    avoid overly complex jurisdictional administration while
    producing the benefits that accompany a more uniform
    legal system.
       The burden of persuasion for establishing diversity
    jurisdiction, of course, remains on the party asserting it.
    Kokkonen v. Guardian Life Ins. Co. of America, 
    511 U.S. 375
    , 377 (1994); McNutt v. General Motors Acceptance
    Corp., 
    298 U.S. 178
    , 189 (1936); see also 13E Wright &
    Miller §3602.1, at 119. When challenged on allegations of
    jurisdictional facts, the parties must support their allega
    tions by competent proof. McNutt, supra, at 189; 15
    Moore’s §102.14, at 102–32 to 102–32.1. And when faced
    with such a challenge, we reject suggestions such as,
    for example, the one made by petitioner that the mere
    filing of a form like the Securities and Exchange Commis
    sion’s Form 10–K listing a corporation’s “principal execu
    tive offices” would, without more, be sufficient proof to
    establish a corporation’s “nerve center.” See, e.g., SEC
    Form 10–K, online at http://www.sec.gov/about/forms/
    form10-k.pdf. (as visited Feb. 19, 2010, and available in
    Clerk of Court’s case file). Cf. Dimmitt & Owens Finan
    cial, Inc. v. United States, 
    787 F.2d 1186
    , 1190–1192 (CA7
    1986) (distinguishing “principal executive office” in the tax
    lien context, see 
    26 U.S. C
    . §6323(f)(2), from “principal
    place of business” under 
    28 U.S. C
    . §1332(c)). Such possi
    bilities would readily permit jurisdictional manipulation,
    thereby subverting a major reason for the insertion of the
    “principal place of business” language in the diversity
    statute. Indeed, if the record reveals attempts at manipu
    lation—for example, that the alleged “nerve center” is
    nothing more than a mail drop box, a bare office with a
    computer, or the location of an annual executive retreat—
    the courts should instead take as the “nerve center” the
                     Cite as: 559 U. S. ____ (2010)           19
    
                         Opinion of the Court
    
    place of actual direction, control, and coordination, in the
    absence of such manipulation.
                                 VI
      Petitioner’s unchallenged declaration suggests that
    Hertz’s center of direction, control, and coordination, its
    “nerve center,” and its corporate headquarters are one and
    the same, and they are located in New Jersey, not in
    California. Because respondents should have a fair op-
    portunity to litigate their case in light of our holding,
    however, we vacate the Ninth Circuit’s judgment and
    remand the case for further proceedings consistent with
    this opinion.
                                               It is so ordered.
    

Document Info

DocketNumber: 08-1107

Citation Numbers: 559 U.S. 77, 130 S. Ct. 1181, 175 L. Ed. 2d 1029, 2010 U.S. LEXIS 1897

Filed Date: 2/23/2010

Precedential Status: Precedential

Modified Date: 3/23/2018

Authorities (32)

Louisville, C. & CR Co. v. Letson , 43 U.S. 497 ( 1844 )

Marshall v. Baltimore & Ohio R. Co. , 57 U.S. 314 ( 1854 )

Pease v. Peck , 59 U.S. 595 ( 1856 )

Mayor v. Cooper , 73 U.S. 247 ( 1868 )

Ex Parte Yerger , 75 U.S. 85 ( 1869 )

United States v. Detroit Timber & Lumber Co. , 200 U.S. 321 ( 1906 )

Kline v. Burke Constr. Co. , 260 U.S. 226 ( 1922 )

B. & W. Taxi. Co. v. B. & Y. Taxi. Co. , 276 U.S. 518 ( 1928 )

Gay v. Ruff , 292 U.S. 25 ( 1934 )

McNutt v. General Motors Acceptance Corp. , 298 U.S. 178 ( 1936 )

Aetna Casualty & Surety Co. v. Flowers , 330 U.S. 464 ( 1947 )

Navarro Savings Assn. v. Lee , 446 U.S. 458 ( 1980 )

First Nat. City Bank v. Banco Para El Comercio Exterior De ... , 462 U.S. 611 ( 1983 )

Sisson v. Ruby , 497 U.S. 358 ( 1990 )

Kokkonen v. Guardian Life Ins. Co. of America , 511 U.S. 375 ( 1994 )

Felker v. Turpin , 518 U.S. 651 ( 1996 )

Ruhrgas Ag v. Marathon Oil Co. , 526 U.S. 574 ( 1999 )

Arbaugh v. Y & H Corp. , 546 U.S. 500 ( 2006 )

Diaz-Rodriguez v. Pep Boys Corp. , 410 F.3d 56 ( 2005 )

R. G. Barry Corporation v. Mushroom Makers, Incorporated , 612 F.2d 651 ( 1979 )

View All Authorities »

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