Supreme Court affirms “Nerve Center” approach to “Diversity Jurisdiction” in Hertz v. Friend

by Art Gutman Ph.D., Professor, Florida Institute of Psychology

Generally, federal courts can only hear claims arising under federal law. However, statutory law empowers federal courts to exercise “diversity jurisdiction” over state law civil claims between citizens of different states. In this case, two plaintiffs sued Hertz Corporation in California state court for wage/hour violations on behalf of other potential class members. Hertz argued the federal courts have “diversity jurisdiction” because it is a Delaware corporation with corporate headquarters in New Jersey. The plaintiffs argued that Hertz is a “California Citizen” like themselves. In Hertz v. Friend [2010 U.S. LEXIS 1897], decided February 23, 2010, the Supreme Court sided with the plaintiffs, ruling that the "principal place of business" is “where the corporation's high level officers direct, control, and coordinate the corporation's activities”, or what lower federal courts have called a company’s “nerve center.”

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