Recently, the US Supreme Court issued an opinion in the case Hertz Corp. vs. Friend which clarified confusion as to the citizenship of corporations. Pursuant to 28 USC 1332, a corporation is deemed to be a citizen of the state in which it has its principal place of business. This mirrors Ohio law which states that venue is proper in a county in which a corporation has its principal place of business.
The Supreme Court held that the “principal place of business” is the same as the company’s “nerve center”. Explaining further, the Court states that this is the place where the operations of the business radiate “out to its constituent parts and from which its officers direct, control and coordinate” the activities of the business.
In the Hertz case, argument was made that California should be deemed to be the principal place of business, despite the corporate headquarters being located in New Jersey. It was determined that California accounted for 17% of Hertz’s car rental locations, 20% of its full-time employees, 18.5% of its annual revenue and 18% of its annual transactions. This is significantly higher than any other state in the country, including New Jersey.
The Supreme Court rejected this argument, claiming that any other test besides the “nerve center” test was too cumbersome and unreliable to be used consistently.
It is worth noting for businesses in Ohio as, no doubt, some of these arguments may be made here and a business may wish to consider in what county it desires to have its “nerve center”.