What is Class Action Lawsuits Agains Corporation

On February 23rd, 2010, the United States Supreme Court unanimously ruled in Hertz Corporation vs. Friend class action lawsuit, adopting that a ‘Corporations’ principal place of business is where its executives work and not where its products are sold. The Court stated that it was adopting a single test among the numerous approaches previously employed by the lower federal courts. Now, a corporation is deemed a citizen both of the state of its incorporation’s and the State where it has its principal place of business. Prior to this decision, the lower courts had adopted a number of increasingly complex and divergent interpretations of the provision, leading to a variety of different tests for determining diversity jurisdiction. Basically, it creates a more uniform interpretation of the statutory phrase ‘Principal Place of Business.’ This ruling will make it harder for class action suits to be filed against out-of-state corporations in state courts, which are known to be friendlier to class-action lawsuits compared to federal courts.

The Supreme court ruled that a corporation’s place of business, or so called ‘nerve center’, is where its officers direct, coordinate and control its activities and not where the corporation has its largest amount of business. The ruling said if it finds that the corporation’s alleged ‘nerve center’ is nothing more than a mailbox or an empty office, then a court should determine the location of its actual principal place of business for purposes of determining the venue for a class action lawsuit.

Legal experts claim the Supreme Court’s unanimous decision will make it easier for parties of class action lawsuits in different states to move the suit to from state court to federal court. The Class Action Fairness Act of 2005, which was backed by businesses, held that they could get fairer hearings in federal courts rather than state courts, especially if they are not residence of a state.

This entry was posted on Tuesday, March 23rd, 2010 at 1:13 pm and is filed under Class Action Information, Corporate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.


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