According to Hertz v. Friend,
the nerve center test is the only appropriate test for determining the location
of a principal place of business. The Court stated that a corporation's
principal place of business is the place where its officers direct, control,
and coordinate its activities, most often its headquarters. Under bankruptcy
law, however, the principal place of business is only one of several venues
that a debtor can consider.
The United States Supreme Court
has ruled that, for purposes of establishing diversity jurisdiction, a
corporation's principal place of business is the place where the corporation's
officers direct, control, and coordinate the corporation's activities, normally
its headquarters. The decision, Hertz Corp. v. Friend, 559 U.S. ___, 2010
U.S. LEXIS 1897, 130 S. Ct. 1181 (Feb. 23, 2010) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law],
resolves a split among circuit courts regarding whether a corporation's principal
place of business is where it does the most business, where it is
headquartered, or some other place where it has a large amount of business
assets. The Court stated that identifying a corporation's principal place of
business as its headquarters serves the purposes of the diversity jurisdiction
statute. A headquarters is a single location that lends predictability and
simplicity to a jurisdictional determination.
Federal courts have jurisdiction in diversity cases pursuant to 28
U.S.C. § 1332(a). According to this statute, a federal court may decide a
case in which the defendants are citizens of different states than the plaintiffs.
Section 1332(c) further provides that, for purposes of determining diversity, a
corporation is a citizen of the states in which it is incorporated and where it
has its principal place of business. Over time, courts have developed a great
number of tests for determining in which state a corporation has its principal
place of business. Depending on the court in which the case is pending, the
principal place of business may be the location of a corporation's "center
of gravity," "nerve center," principal office, principal
business assets, or where it does the most business. Hertz, 2010 U.S.
LEXIS 1897, at *26-29, 130 S. Ct. at 1192-3.
Under bankruptcy law, a debtor has several options when deciding where to file
its petition. A debtor may file its petition in the district "in which the
domicile, residence, principal place of business in the United States, or
principal assets in the United States ... have been located for the  days
immediately preceding such commencement." 28
U.S.C. § 1408(1). In addition, 28 U.S.C. § 1408(2) allows a corporate
debtor with multiple subsidiaries and affiliates to file its petition in any
district that is appropriate for any single entity in its corporate family.
Because principal place of business appears in both the federal diversity
jurisdiction statute and the bankruptcy venue statue, the Hertz decision
is relevant for both bankruptcy and non-bankruptcy courts.
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