*Supreme Court Adopts “Nerve Center” Test for Determining a Corporation’s “Principal Place of Business,” for Diversity Purposes.

Pursuant to 28 USC § 1332, a corporation shall, for the purposes of determining diversity “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, except that in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business.”

Where a corporation’s “principal place of business” is, has engendered various tests, such as “total activities,” “center of gravity,” “nerve center,” “locus of operations,” or “center of corporate activities.” Judge Breyer, writing for a unanimous Supreme Court, this past week, in Hertz Corp. v. Friend et al., set forth which test is the one to use now.

In Hertz he wrote that “[i]n an effort to find a single, more uniform interpretation of the statutory phrase, [“principal place of business,”] we have reviewed the Courts of Appeals’ divergent and increasingly complex interpretations. … . 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).
… [T]his approach, while imperfect, is superior to other possibilities.”

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