U.S. Supreme Court hears jurisdiction case

Chris Rizo Nov. 10, 2009, 3:23pm

U.S. Supreme Court building

WASHINGTON (Legal Newsline)-The U.S. Supreme Court on Tuesday heard argument in a case that could change the way a company's principal place of business is determined, and thus where lawsuits against it are litigated.

A 9th U.S. Circuit Court of Appeals decision found that a national company's place of business should be determined by where the majority of its operations are located. The ruling makes most national firms based in California.

The high court's decision in the case could determine where litigation -- including class action lawsuits -- against multistate companies is heard.

The original case comes from Melinda Friend and John Nhieu, who filed a class action lawsuit in 2007 against Hertz, alleging the company had violated state wage and hour laws.

The lawsuit was originally filed in state court. Hertz successfully removed the action to federal district court pursuant to the U.S. Class Action Fairness Act.

At trial, a U.S. District Court determined that the car rental company, which is a unit of Hertz Global Holdings Inc., is a California company, and as such the case should be heard in a California courtroom.

Because Hertz, which is incorporated in Delaware is headquartered in New Jersey, has more locations and employees in California than in any other state, the federal appeals court in October 2008 agreed that the lawsuit should be litigated in state there.

Hertz appealed the ruling to the U.S. Supreme Court. The high court granted the company's petition for certiorari on June 8.

The California Retailers Association filed a friend-of-the-court brief in the case, urging the justices to overturn the 9th Circuit ruling.

"Retailers with nationwide operations generally do more business in California than in any other state because there are more people, and more consumers, in California," the amicus brief said. "Consequently, under Ninth Circuit law, most nationwide retailers risk being declared California citizens despite the location of their nationwide headquarters and despite their extensive operations outside of California. There is no basis in the diversity jurisdiction statute to deny nationwide corporations doing business in California the benefits of a federal forum simply because they do more business there than any other single state."

On the flip side, the Legal Aid Society argued in a brief that national firms should be held for account where they do most of their business.

"When corporations target California for its resources and markets, performing substantially more activity in our State than in any other, they should not be permitted to avoid the jurisdiction of our judiciary simply by citing to out-of-state headquarters," the group said.

The case is the Hertz Corporation v. Melissa Friend, 08-1107.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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