OPINION OF THE COURT
HERTZ CORP. V. FRIEND
559 U. S. ____ (2010)
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 interpretations
that the Circuits have given this phrase. In doing so, we place
primary weight upon the need for judicial 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 coordinate the corporation’s activities. Lower federal
courts have often metaphorically called that place the
corporation’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.
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, diversity 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 declaration also stated that the “leadership of Hertz
and its domestic subsidiaries” is located at Hertz’s “corporate
headquarters” in Park Ridge, New Jersey; that its “core executive
and administrative functions . . . are carried out” there and “to a
lesser extent” in Oklahoma City, Oklahoma; and that its “major
administrative operations . . . are found” at those two locations.
App. to Pet. for Cert. 26a–30a.
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 citizen 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 “significantly 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 administrative functions are
performed.’ ”
Friend v.
Hertz, No. C–07–5222
MMC (ND Cal., Jan. 15, 2008), p. 3 (hereinafter Order);
Tosco Corp. v.
Communities for a Better
Environment, 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 California, 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 corporate 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)
(applying “total activity” test and looking at “all corporate
activities”), with
Wisconsin Knife Works,
supra,
at 1282 (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 implicitly 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 statute
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 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
Aetna Casualty
& 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
“Controversies . . . 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 constitutional
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 (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.
Baltimore & Ohio R. Co., 16 How.
314 (1854), held that the reason a corporation was a citizen of its
State of incorporation was that, for the limited purpose of
determining corporate citizenship, courts could conclusively (and
artificially) 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 incorporation” rule was virtually absolute. It held that a
corporation closely identified with State A could proceed in a
federal court located in that State as long as the corporation 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 business by filing incorporation papers
elsewhere.
Id., at 4 (“Since the Supreme Court has decided
that a corporation 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 corporate 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 Conference 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
jurisdiction.
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 14–15 (requiring
corporation to show that “less than fifty per cent of its gross
income was derived from business transacted 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
members circulated their report and attended circuit conferences at
which federal judges discussed the report’s recommendations.
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 business.’ ” 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 Judge John Parker (who had
chaired the Judicial Conference 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 Hearings 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 coordinated, directed, and
carried out, which would ordinarily 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 corporation, 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 Conference 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 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 business.” 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 Bankruptcy Act
provide no rigid legal formula for the determination 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 Consultants,
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
interpretation of the Bankruptcy Act to answer this question in
part:
“Where a corporation is engaged in far-flung and
varied 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 activities 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
controlled’—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
different ways in different regions, a general “business
activities” approach has proved unusually difficult to apply.
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 inventory, employees, income, and sales).
The number of factors grew as courts
explicitly combined 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 emphasize 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, different circuits (and sometimes
different courts within a single circuit) have applied these highly
general multifactor 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
decentralized” followed by an application of either the “place of
operations” or “nerve center” test; the Third Circuit applies the
“center of corporate activities” test searching for the
“headquarters of a corporation’s day-to-day activity”; 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 different 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
jurisdiction,
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 example, its office or plant location, its
sales, its employment, or the nature of the goods or services it
supplies, will sometimes bear no more than a distant relation to
the likelihood 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
interpretations. 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
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).
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, consequential, 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 headquarters, is a single place. The public often (though not
always) 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. 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 purposes.”
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 determine 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 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 predictability. 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 corporation”). 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
corporate “brain,” while not precise, suggests a single location.
By contrast, a corporation’s general business activities more often
lack a single principal place where they take place. That is to
say, the corporation may have several plants, many sales locations,
and employees located in many different places. If so, it will not
be as easy to determine 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
benchmark. The Judicial Conference provided an initial version of
its proposal that suggested a numerical test. A corporation 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 business” should be interpreted to be no more
complex than 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 communicating 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 revenues
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 generate 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
supra, 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 corporation 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 federal court, despite the New York public’s presumed
prejudice against the corporation.
We understand that such seeming anomalies will
arise. However, in view of the necessity of having a clearer rule,
we must accept them. Accepting occasionally counterintuitive
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 allegations 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 Commission’s Form 10–K
listing a corporation’s “principal executive 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 Financial, Inc. v
. United States, 787
F. 2d 1186, 1190–1192 (CA7 1986) (distinguishing “principle
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 possibilities 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
manipulation—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.
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.
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