Hertz Corp. v. Friend

=== Opinion ===

(Slip Opinion)              OCTOBER TERM, 2009                                       1

                                       Syllabus

         NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
       being done in connection with this case, at the time the opinion is issued.
       The syllabus constitutes no part of the opinion of the Court but has been
       prepared by the Reporter of Decisions for the convenience of the reader.
       See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.


SUPREME COURT OF THE UNITED STATES

                                       Syllabus

                  HERTZ CORP. v. FRIEND ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
                  THE NINTH CIRCUIT

No. 08–1107. Argued November 10, 2009––Decided February 23, 2010
Respondents, California citizens, sued petitioner Hertz Corporation in a
  California state court for claimed state-law violations. Hertz sought
  removal to the Federal District Court under 28 U. S. C. §§1332(d)(2),
  1441(a), claiming that because it and respondents were citizens of dif
  ferent States, §§1332(a)(1), (c)(1), the federal court possessed diver
  sity-of-citizenship jurisdiction. Respondents, however, claimed that
  Hertz was a California citizen, like themselves, and that, hence, di
  versity jurisdiction was lacking under §1332(c)(1), which 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 prin
  cipal place of business.” To show that its “principal place of business”
  was in New Jersey, not California, Hertz submitted a declaration
  stating, among other things, that it operated facilities in 44 States,
  that California accounted for only a portion of its business activity,
  that its leadership is at its corporate headquarters in New Jersey,
  and that its core executive and administrative functions are primar
  ily carried out there. The District Court concluded that it lacked di
  versity jurisdiction because Hertz was a California citizen under
  Ninth Circuit precedent, which asks, inter alia, whether the amount
  of the corporation’s business activity is “significantly larger” or “sub
  stantially predominates” in one State. Finding that California was
  Hertz’s “principal place of business” under that test because a plural
  ity of the relevant business activity occurred there, the District Court
  remanded the case to state court. The Ninth Circuit affirmed.
Held:
    1. Respondents’ argument that this Court lacks jurisdiction under
 §1453(c)—which expressly permits appeals of remand orders such as
 the District Court’s only to “court[s] of appeals,” not to the Supreme
2                        HERTZ CORP. v. FRIEND

                                  Syllabus

    Court, and provides 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”—makes far too much
    of too little. The Court normally does not read statutory silence as
    implicitly modifying or limiting its jurisdiction that another statute
    specifically grants. E.g., Felker v. Turpin, 518 U. S. 651, 660–661.
    Here, replicating similar, older statutes, §1254 specifically gives the
    Court jurisdiction to “revie[w] . . . [b]y writ of certiorari” cases that
    are “in the courts of appeals” when it grants the writ. The Court thus
    interprets §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,
    e.g., Aetna Casualty & Surety Co. v. Flowers, 330 U. S. 464, 466–467.
    Pp. 4–5.
       2. The phrase “principal place of business” in §1332(c)(1) refers to
    the place where a corporation’s high level officers direct, control, and
    coordinate the corporation’s activities, i.e., its “nerve center,” which
    will typically be found at its corporate headquarters. Pp. 5–19.
          (a) A brief review of the legislative history of diversity jurisdic
    tion demonstrates that Congress added §1332(c)(1)’s “principal place
    of business” language to the traditional state-of-incorporation test in
    order to prevent corporations from manipulating federal-court juris
    diction as well as to reduce the number of diversity cases. Pp. 5–10.
          (b) However, the phrase “principal place of business” has proved
    more difficult to apply than its originators likely expected. After
    Congress’ amendment, courts were 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 in that State.
    But if those corporate headquarters, including executive offices, were
    in one State, while the corporation’s plants or other centers of busi
    ness activity were located in other States, the answer was less obvi
    ous. Under these circumstances, for corporations with “far-flung”
    business activities, numerous Circuits have looked to a corporation’s
    “nerve center,” from which the corporation radiates out to its con
    stituent parts and from which its officers direct, control, and coordi
    nate the corporation’s activities. However, this test did not go far
    enough, for it did not answer what courts should do when a corpora
    tion’s operations 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, adopting divergent and increasingly complex tests to inter
    pret the statute. Pp. 10–13.
                   Cite as: 559 U. S. ____ (2010)                      3

                              Syllabus

     (c) In an effort to find a single, more uniform interpretation of
the statutory phrase, this Court returns to the “nerve center” ap
proach: “[P]rincipal place of business” is best read as referring to the
place where a corporation’s officers direct, control, and coordinate the
corporation’s activities. 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 coordina
tion, i.e., the “nerve center,” and not simply an office where the corpo
ration holds its board meetings. Pp. 13–19.
        (i) Three sets of considerations, taken together, convince the
Court that the “nerve center” approach, while imperfect, is superior
to other possibilities. First, §1332(c)(1)’s language supports the ap
proach. The statute’s word “place” is singular, not plural. Its word
“principal” requires that the main, prominent, or most important
place be chosen. Cf., e.g., Commissioner v. Soliman, 506 U. S. 168,
174. And the fact that the word “place” follows the words “State
where” means that the “place” is a place within a State, not the State
itself. A corporation’s “nerve center,” usually its main headquarters,
is a single place. The public often 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. Second, administrative simplicity is a major virtue in
a jurisdictional statute. Sisson v. Ruby, 497 U. S. 358, 375. A “nerve
center” approach, which ordinarily equates that “center” with a cor
poration’s headquarters, is simple to apply comparatively speaking.
By contrast, a corporation’s general business activities more often
lack a single principal place where they take place. Third, the stat
ute’s legislative history suggests that the words “principal place of
business” should be interpreted to be no more complex than an ear
lier, numerical test that was criticized as too complex and impractical
to apply. A “nerve center” test offers such a possibility. A general
business activities test does not. Pp. 14–17.
        (ii) While there may be no perfect test that satisfies all admin
istrative and purposive criteria, and there will be hard cases under
the “nerve center” test adopted today, this test is relatively easier to
apply and does not require courts to weigh corporate functions, assets
or revenues different in kind, one from the other. And though this
test may produce results that seem to cut against the basic rationale
of diversity jurisdiction, accepting occasionally counterintuitive re
sults is the price the legal system must pay to avoid overly complex
4                       HERTZ CORP. v. FRIEND

                                  Syllabus

    jurisdictional administration while producing the benefits that ac
    company a more uniform legal system. Pp. 17–18.
         (iii) If the record reveals attempts at jurisdictional manipula
    tion—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. Pp. 18–19.
         (d) Although petitioner’s unchallenged declaration suggests that
    Hertz’s “nerve center” and its corporate headquarters are one and the
    same, and that they are located in New Jersey, not in California, re
    spondents should have a fair opportunity on remand to litigate their
    case in light of today’s holding. P. 19.
297 Fed. Appx. 690, vacated and remanded.

    BREYER, J., delivered the opinion for a unanimous Court.
                        Cite as: 559 U. S. ____ (2010)                              1

                             Opinion of the Court

     NOTICE: This opinion is subject to formal revision before publication in the
     preliminary print of the United States Reports. Readers are requested to
     notify the Reporter of Decisions, Supreme Court of the United States, Wash
     ington, D. C. 20543, of any typographical or other formal errors, in order
     that corrections may be made before the preliminary print goes to press.


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 inter
pretations that the Circuits have given this phrase. In
doing so, we place primary weight upon the need for judi
cial 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 coordi
nate the corporation’s activities. Lower federal courts
have often metaphorically called that place the corpora
tion’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.
2                  HERTZ CORP. v. FRIEND 


                     Opinion of the Court 


                               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, diver
sity 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 declara
tion also stated that the “leadership of Hertz and its do
mestic subsidiaries” is located at Hertz’s “corporate head
quarters” in Park Ridge, New Jersey; that its “core
executive and administrative functions . . . are carried out”
there and “to a lesser extent” in Oklahoma City, Okla
homa; and that its “major administrative operations . . .
are found” at those two locations. App. to Pet. for Cert.
26a–30a.
                   Cite as: 559 U. S. ____ (2010)              3

                       Opinion of the Court

   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 citi
zen 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 “sig
nificantly 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 admin
istrative functions are performed.’ ” Friend v. Hertz, No.
C–07–5222 MMC (ND Cal., Jan. 15, 2008), p. 3 (hereinaf
ter Order); Tosco Corp. v. Communities for a Better Envi
ronment, 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 Califor
nia, 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 corpo
rate 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) (ap
plying “total activity” test and looking at “all corporate
activities”), with Wisconsin Knife Works, supra, at 1282
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                      Opinion of the Court

(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 implic
itly 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 stat
ute 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
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                      Opinion of the Court

simply requiring a court of appeals to reach a decision
within a specified time—not to deprive this Court of sub
sequent jurisdiction to review the case. See Aetna Casu
alty & 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 “Contro
versies . . . 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 constitu
tional 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
6                  HERTZ CORP. v. FRIEND

                     Opinion of the Court

(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. Balti
more & Ohio R. Co., 16 How. 314 (1854), held that the
reason a corporation was a citizen of its State of incorpora
tion was that, for the limited purpose of determining
corporate citizenship, courts could conclusively (and artifi
cially) 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 incorpo
ration” rule was virtually absolute. It held that a corpora
tion closely identified with State A could proceed in a
federal court located in that State as long as the corpora
tion 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
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                     Opinion of the Court

business by filing incorporation papers elsewhere. Id., at
4 (“Since the Supreme Court has decided that a corpora
tion 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 corpo
rate 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 Confer
ence 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 juris
diction. 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–
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                     Opinion of the Court

15 (requiring corporation to show that “less than fifty per
cent of its gross income was derived from business trans
acted 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 mem
bers circulated their report and attended circuit confer
ences at which federal judges discussed the report’s rec
ommendations. 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 busi
ness.’ ” 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
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                     Opinion of the Court

Judge John Parker (who had chaired the Judicial Confer
ence 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 Hear
ings 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 co
    ordinated, directed, and carried out, which would or
    dinarily 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 corpo
    ration, 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 Confer
ence 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
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                      Opinion of the Court

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 busi
ness.” 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 Bank
ruptcy Act provide no rigid legal formula for the determi
nation 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 Con
sultants, 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
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                     Opinion of the Court

interpretation of the Bankruptcy Act to answer this ques
tion in part:
    “Where a corporation is engaged in far-flung and var
    ied 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 ac
    tivities 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 con
    trolled’—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 differ
ent ways in different regions, a general “business activi
ties” approach has proved unusually difficult to apply.
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                      Opinion of the Court

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 in
ventory, employees, income, and sales).
   The number of factors grew as courts explicitly com
bined 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 empha
size 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, differ
ent circuits (and sometimes different courts within a
single circuit) have applied these highly general multifac
tor 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 de
centralized” followed by an application of either the “place
of operations” or “nerve center” test; the Third Circuit
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                      Opinion of the Court

applies the “center of corporate activities” test searching
for the “headquarters of a corporation’s day-to-day activ
ity”; 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 differ
ent 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 juris
diction, 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 exam
ple, its office or plant location, its sales, its employment, or
the nature of the goods or services it supplies, will some
times bear no more than a distant relation to the likeli
hood 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 interpreta
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                      Opinion of the Court

tions. 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 con
clude 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 corpora
tion’s “nerve center.” And in practice it should normally
be the place where the corporation maintains its head
quarters—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 corpora
tion 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, consequen
tial, 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 head
quarters, is a single place. The public often (though not
always) considers it the corporation’s main place of busi
ness. And it is a place within a State. By contrast, the
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                     Opinion of the Court

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 activi
ties 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 pur
poses.” 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 de
termine 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
16                HERTZ CORP. v. FRIEND

                     Opinion of the Court

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 predict
ability. 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 cor
poration”). 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 cor
porate “brain,” while not precise, suggests a single loca
tion. By contrast, a corporation’s general business activi
ties more often lack a single principal place where they
take place. That is to say, the corporation may have sev
eral plants, many sales locations, and employees located in
many different places. If so, it will not be as easy to de
termine 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 bench
mark. The Judicial Conference provided an initial version
of its proposal that suggested a numerical test. A corpora
tion 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 busi
ness” should be interpreted to be no more complex than
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                      Opinion of the Court

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 communicat
ing 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 reve
nues 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 gener
ate 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 su
pra, 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 corpora
tion 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 fed
eral court, despite the New York public’s presumed preju
dice against the corporation.
   We understand that such seeming anomalies will arise.
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                     Opinion of the Court

However, in view of the necessity of having a clearer rule,
we must accept them. Accepting occasionally counterin
tuitive 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 allega
tions 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 Commis
sion’s Form 10–K listing a corporation’s “principal execu
tive 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 Finan
cial, Inc. v. United States, 787 F. 2d 1186, 1190–1192 (CA7
1986) (distinguishing “principal 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 possi
bilities 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 manipu
lation—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
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                     Opinion of the Court

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.