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Supreme Court ruling upholds TRALA’s ‘nerve center’ argument

A national corporation’s principal place of business is its corporate headquarters, and not any other operational locations, the US Supreme Court ruled February 23, 2010.

This ruling reverses one by the Ninth Circuit of the US Court of Appeals in the Hertz v Friend case to support arguments that TRALA made in an August 17, 2009 amicus brief along with the US Chamber of Commerce, the American Trucking Associations, and the Business Roundtable. The Ninth Circuit of the US Court of Appeals had ruled October 31, 2008, that Hertz’s principal place of business is the state of California due to its large volume of business in that state.

The Supreme Court’s ruling establishes that the “nerve center” test is the most certain and stable method for determining questions of corporate citizenship and questions of jurisdiction. In the ruling, Justice Stephen Breyer delivered the opinion of the Supreme Court, by stating that the court concludes “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’… We believe that the ‘nerve center’ will typically be found at a corporation’s headquarters.”

In the amicus brief filed with the Supreme Court, TRALA and its pro-business allies argued operations-based determinations of a principal place of business involve statistical analysis of corporate operations and are based on constantly changing factors. The Supreme Court agreed, stating that complex jurisdictional tests can complicate a case, eat up time and money, and make it less likely that results will be based on legal and factual merit. The court goes on to say that the “‘nerve center’ approach, which ordinarily equates that ‘center’ with a corporation’s headquarters, is simple to apply, comparatively speaking.”

For more information, e-mail TRALA’s Tom James at [email protected] or Joe Sculley at [email protected] or call (703) 299-9120.

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