U.S. Supreme Court

Is Starbucks’ Principal Place of Business in California? Justices Think Not

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Civil procedure students everywhere may be able to thank the U.S. Supreme Court if it rules as expected and holds that, for purposes of diversity jurisdiction, a corporation’s home place of business is in the state where its headquarters is located.

The headquarters test is simpler than the rule established by the San Francisco-based 9th U.S. Circuit Court of Appeals that looks to the state where a company’s people and property are located. In oral arguments yesterday, Justice Anthony M. Kennedy worried that the 9th Circuit rule could stump some lawyers, the National Law Journal reports.

“Not all diversity suits have major law firms in them” that could handle the calculations to determine a company’s citizenship under the “complex tests” of the 9th and other circuits, he said.

The National Law Journal and Dow Jones newswires both reported that the justices appeared likely to reject the 9th Circuit test. The National Law Journal put it this way: “For a corporation, the U.S. Supreme Court’s axiom may soon be: Home is where the headquarters is.”

Corporate lawyers are also likely to like such a decision, since it would allow more lawsuits to be tried in federal court based on diversity jurisdiction, rather than more plaintiff-friendly state courts, according to the NLJ.

In the case before the Supreme Court, lawyers representing Hertz employees in a wage-and-hour suit are arguing that the company’s principal place of business is in California, where more of its business activities take place, even though its headquarters is in New Jersey.

Chief Justice John G. Roberts Jr. asked where Starbucks’ principal place of business would be located under the 9th Circuit test. The coffee company was founded in Seattle, but the lawyer for the Hertz plaintiffs said the answer was California, since it has so many employees there.

The articles have a justice replying, “That’s a surprise.” Dow Jones says the justice was Roberts, and he answered “dryly.” The Supreme Court transcript (PDF) and the National Law Journal identify the justice as Antonin Scalia. According to the NLJ, he answered “sarcastically.”

The case is Hertz Corp. v. Friend.

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