OFMCE OF -i ’"

THE HERTZ CORPORATION,Petitioner,

V.

MELINDA FRIEND, et al. ,Respondents.

On Petition for Writ of Certiorari to theUnited States Court of Appeals

for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

ROBERT A. DOLINKONIXON PEABODY LLPOne Embarcadero CenterSuite 1800San Francisco, California 94111(415) 984-8200

FRANK B. SHUSTERCounsel of Record

CONSTANGY, BROOKS &SMITH, LLP

230 Peachtree Street, NWSuite 2400Atlanta, Georgia 30303(404) 525-8622

Counsel for Petitioner The Hertz Corporation

WIL$ON-EPES PRINTING CO., INC. - (202) 789-0096 - WASHINGTON, D. C. 20002

QUESTION PRESENTED

Whether, for purposes of determining principalplace of business for diversity jurisdiction citizenshipunder 28 U.S.C. § 1332, a court can disregard thelocation of a nationwide corporation’s headquarters -i.e., its nerve center.

ii

PARTIES TO THE PROCEEDING

Pursuant to Rule 14.1(b), the following listidentifies all of the parties appearing here and beforethe United States Court of Appeals for the NinthCircuit.

The Petitioner here and appellant below is TheHertz Corporation.

The Respondents here and appellees below areMelinda Friend and John Nhieu. By virtue of theallegations contained in their Complaint, theRespondents seek to represent a putative class ofpersons similarly situated, but no motion for classcertification has yet been filed and no class has beencertified.

iii

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6, Petitioner states asfollows:

The Hertz Corporation is a wholly ownedsubsidiary of Hertz Global Holdings, Inc., a publiclytraded corporation on the New York Stock Exchange.No publicly traded corporation owns 10% or more ofHertz Global Holdings, Inc.’s common stock.

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TABLE OF CONTENTS

Page

QUESTION PRESENTED ..........................................i

PARTIES TO THE PROCEEDING ...........................ii

CORPORATE DISCLOSURE STATEMENT ...........iii

TABLE OF CONTENTS ............................................iv

TABLE OF AUTHORITIES .....................................vii

OPINIONS BELOW ...................................................1

STATEMENT OF JURISDICTION ...........................1

STATUTORY PROVISIONS INVOLVED .................2

STATEMENT OF THE CASE ....................................2

I. Basis for Federal Jurisdiction andProcedural Summary ............................4

IIo Factual Summary ..................................6

REASONS FOR GRANTING THE PETITION .........8

I. The Circuit Courts Are DeeplyDivided Over How to Determine aCorporation’s Principal Place ofBusiness for Purposes ofDiversity Jurisdiction ............................8

V

A. Nerve Center Test ......................9

Bo Center of CorporateActivities Test ...........................10

C. Place of Operations Test ...........11

D. Total Activities Test .................12

II. The Split Between the CircuitsImplicates Important Questionsof Federal Law that Should beDecided by This Court .........................14

no Absent Resolution by ThisCourt, Corporations Will beSubject to Having Morethan One Principal Place ofBusiness for Purposes ofDiversity Jurisdiction ...............14

Bo The Effect of the NinthCircuit’s Approach Will beThat NationwideCorporations Will be AllDeemed California Citizens .....16

C° This Court InfrequentlyHas the Opportunity toReview Principal Place ofBusiness Issues .........................20

CONCLUSION ..........................................................21

vi

APPENDIX

Appendix A- Opinion of the UnitedStates Court of Appeals for the NinthCircuit Filed October 30, 2008 ......................la

Appendix B - Order of the United StatesDistrict Court for the Northern District ofCalifornia Filed January 15, 2008 ................4a

Appendix C - Order of the United StatesCourt of Appeals for the Ninth CircuitFiled April 17, 2008 .....................................12a

Appendix D - Order of the United StatesCourt of Appeals for the Ninth CircuitFiled September 5, 2008 .............................13a

Appendix E -- Order of the United StatesCourt of Appeals for the Ninth CircuitFiled December 5, 2008 ................................15a

Appendix F -- Notice of Removal of CivilAction Under 28 U.S.C. § 1332(d) and 28U.S.C. § 1441(a) in the United StatesDistrict Court for the Northern District ofCalifornia Filed October 11, 2007 ...............16a

Appendix G -- Declaration of KristaMemmelaar in Support of Removal ofAction in the United States DistrictCourt for the Northern District ofCalifornia Filed October 11, 2007 ...............26a

vii

TABLE OF AUTHORITIES

CASES

Page

American Fire & Casualty Co. v. Finn,341 U.S. 6, 71 S. Ct. 534 (1991) ...................21

Amoco Rocmount Co. v. Ansehutz Corp.,7 F.3d 909 (10th Cir. 1993) ..........................13

BP America Production Co. v. Burton,549 U.S. 84, 127 S. Ct. 638 (2006) .................3

Burgos v. United Airlines, Inc.,2002 WL 102607 (N.D. Cal. Jan. 11,2002) .............................................................15

13

Capitol Indemnity Corp. v. Russellvillo SteelCo., Inc.,367 F.3d 831 (8th Cir. 2004) ........................

Comm’r of Internal Revenue Service v.Soliman,506 U.S. 168, 113 S. Ct. 701 (1993) ...............2

Dimmitt & Owens Financial, Inc. v. UnitedStates,787 F.2d 1186 (7th Cir. 1986) ........................4

Ellenberg v. Spartan Motors Chassis, Inc.,519 F.3d 192 (4th Cir. 2008) ..........................6

oooVlll

Friend v. Hertz Corp.,297 ~’. App’x. 690, 2008 WL 4750198(9th Cir. 2008) ................................................1

Gafford v. General Elee. Co.,997 ~’.2d 150 (6th Cir. 1993) ..................13, 14

Industrial Tectonics, Inc. v. Aero Alloy,912 ~’.2d 1090 (9th Cir. 1990) ..................5, 11

~.A. Olson Co. v. City of Winona, Miss.,818 F.2d 401 (5th Cir. 1987) ........................14

Kelly v. U.~. ~teel Corp.,284 F.2d 850 (3d Cir. 1960) .........................11

Kohtz v. United Airlines,1991 WL 171330 (N.D. Ill. Aug. 29,1991) .............................................................15

MaeGinnitie v. Hobbs Group, LLC,420 F.3d 1234 (llth Cir. 2005) ....................13

MeNutt v. General Motors Acceptance Corp.,298 U.S. 178, 56 S. Ct. 780 (1936) .................6

Mermen Co. v. Atlantic Mut. Ins. Co.,147 F.3d 287 (3d Cir. 1998) .........................11

Metropolitan Life Ins. Co. v. Estate of

929 F.2d 1220 (7th Cir. 1991) ......................10

ix

Peterson v. Cooley,142 F.3d 181 (4th Cir. 1998) ........................14

R.G. Barry Corp. v. Mushroom Makers, Inc.,612 F.2d 661 (2d Cir. 1979) .........................

Shell Reeky Mountain Production, LLC v.Ultra Resources, Inc.,415 F.3d 1158 (10th Cir. 2005) .................... 15

Teal Energy USA, Inc. v. GT, Inc.,369 F.3d 873 (Sth Cir. 2004) ........................13

Things Remembered, Inc. v. Petrarea,516 U.S. 124, 116 S. Ct. 494 (1995) .............20

Topp v. CompAir, Inc.,814 F.2d 830 (1st Cir. 1987) ........................13

Toseo Corp. v. Communities for a Better Env’t,236 F.3d 495 (9th Cir. 2001) ....................6, 12

Wisconsin Knife Works v, National MetalCrafter,,781 F.2d 1280 (7th Cir. 1986) ......................10

STATUTES AND REGULATIONS

28 U.S.C. § 1254(1) ...................................................1

28 U.S.C. § 1332(c)(1) ......................................passim

28 U.S.C. § 1332(d) ...................................................4

X

28 U.S.C. § 1446(a) ...................................................6

28 U.S.C. § 1447(d) .................................................20

28 U.S.C. § 1453(c)(1) .........................................5, 20

OTHER

S. Rep. 85-1830 (1958), as reprinted in 1958U.S.C.C.A.N 3099 ...................................18, 22

S. Rep. 109-14 (2005), as reprinted in 2005U.S.C.C.A.N. 3 ........................................19, 20

U.S. Census Bureau, State & CountyQuickFacts, available athttp://quickfacts.census.gov/qfd, (lastvisited February 2, 2009) ................................8

Petitioner The Hertz Corporation ("Hertz")respectfully petitions for a writ of certiorari to theUnited States Court of Appeals for the Ninth Circuitin Melinda Friend, et al. v. Hertz Corporation, No.08-16963.

OPINIONS BELOW

The judgment and opinion of the United StatesCourt of Appeals for the Ninth Circuit that gives riseto this Petition is unpublished, but is available at297 F. Appx. 690, 2008 WL 4750198 (9th Cir. 2008)and is reprinted in the Appendix to the Petition("Pet. App.") at la - 3a.-~/ The opinion of the districtcourt at issue in the appeal to the Ninth Circuit wasissued on January 15, 2008 in the case of MelindaFriend, et al. g. Hertz Corporation, Case No. C-07-5222 MMC. Id. at 4a- 1 la.

STATEMENT OF JURISDICTION

The Ninth Circuit issued its judgment andopinion on October 30, 2008. By Order datedDecember 5, 2008, the court denied rehearing andrehearing en bane. Jurisdiction of this Court isinvoked under 28 U.S.C. § 1254(1).

Y Hereinafter, the United States Court of Appeals for theNinth Circuit will be referred to as "the Ninth Circuit," andother United States Courts of Appeals will be referred to as "theFirst Circuit," "the Second Circuit," and so forth.

STATUTORY PROVISIONS INVOLVED

28 U.S.C. § 1332(c)(1) provides, in relevantpart, that "a corporation shall be deemed to be acitizen of any State by which it has been incorporatedand of the State where it has its principal place ofbusiness .... "

STATEMENT OF THE CASE

This case involves the meaning of the phrase"principal place of business" as used in 28 U.S.C. §1332(c)(1). As this Court previously has recognized,albeit in a very different context:

In deciding whether a location is "theprincipal place of business," thecommonsense meaning of "principal"suggests that a comparison of locationsmust be undertaken.This view isconfirmed by the definition of"principal," whichmeans "mostimportant, consequential or influential."Webster’s Third New InternationalDictionary 1802 (1971). Courts cannotassess whether any one businesslocation is the "most important,consequential or influential" onewithout comparing it to all the otherplaces where business is transacted.

Comm’r of Internal Revenue v. Soliman, 506 U.S.168, 174, 113 S. Ct. 701, 706 (1993)(construing

principal place of business as used in 26 U.S.C. §280A(c)(1)(A) of the Internal Revenue Code).-~/

The circuit courts have divided into a deepfour-way split regarding the tests to be applied inlocating a corporation’s principal (most important,consequential or influential) place of business forpurposes of diversity jurisdiction. These tests rangefrom the Seventh Circuit’s "nerve center test," whichfocuses on locating the corporation’s "brain," andignores all other business operations as irrelevant, tothe Ninth Circuit’s "place of operations test," whichfocuses on the locations of the corporation’s businessoperations, while generally ignoring its nerve center.Unlike either of these tests, the Third Circuit’s"center of corporate activities test" focuses on findingthe center of day-to-day corporate-wide activity andmanagement, with the locations of other businessactivities being relevant, but less important, factors.Finally, the Fifth, Sixth, Eighth, Tenth and EleventhCircuits’ "totality of the circumstances test" hingeson no particular facet of corporate activities, butrather on the company as a whole, including itscharacter, business purpose, nerve center,management center and locations of operations.

While the definition of principal place of business inSo]iman related to the substantive issue of a tax deduction for ahome office, and not the issue of a corporation’s principal placeof business for purposes of determining federal court diversityjurisdiction, statutory terms are generally interpreted inaccordance with their ordinary meaning. BPAmeriea Prod. Co.v. Burton, 549 U.S. 84, 90, 127 S. Ct. 638, 644 (2006).

4

Hertz seeks a writ of certiorari so that thisCourt can resolve this circuit split regarding theproper method for locating a corporation’s principalplace of business for purposes of diversityjurisdiction. This conflict presents an importantquestion of federal law since "parties ought to knowdefinitely what court they belong in, and not face theprospect that their litigation may be set at naughtbecause they made a wrong guess about jurisdiction."Dimmitt & Owens Finanei~l, Inc. v. United States,787 F.2d 1186, 1191 (7th Cir. 1986) (Posner, J.).Absent resolution of this conflict, corporations can be(and are being) deemed to have more than oneprincipal place of business for purposes of diversityjurisdiction, a result not permitted by the plainwording of 28 U.S.C. § 1332(c)(1). In addition,corporations will be deprived of the protectionsintended by the "minimal" diversity provisions of theClass Action Fairness Act ("CAFA"), 28 U.S.C. §1332(d), in a jurisdiction with a penchant for classaction litigation, i.e., California, simply because theirbusiness activities in that state are roughlycommensurate with its rank as the most populousstate in the Union.

Basis for Federal Jurisdiction and ProceduralSummary

On September 6, 2007, Respondents MelindaFriend and John Nhieu filed this putative classaction in California state court seeking damages foralleged violations of California’s wage and hour laws.Pursuant to the removal provisions of CAFA, Hertztimely removed the action to the District Court for

5

the Northern District of California. On November27, 2007, Respondents filed a motion to remand; or,in the alternative, a request for discovery regardingHertz’ principal place of business. In support of theirremand motion, Respondents argued that Hertz wasa citizen of the State of California and that diversityof citizenship did not exist between Hertz andmembers of the putative class. On January 15, 2008,the district court granted Respondents’ motion basedon the court’s conclusions that "a plurality" of Hertz’business activities occur in California and that"Hertz is not the type of litigant that diversityjurisdiction was designed to protect." See DistrictCourt Order Granting Plaintiffs’ Motion to Remand,reprinted at Pet. App. 4a - 11a.

Pursuant to 28 U.S.C. § 1453(c)(1), Hertzsought discretionary review of the district court’sremand order by the Ninth Circuit. The NinthCircuit initially denied Hertz’ petition for review.See Ninth Circuit Order, reprinted at Pet. App. 12a.Hertz then moved for reconsideration or, in thealternative, rehearing en bane, and the court vacatedits prior denial and agreed to review the remandorder. See Ninth Circuit Order, reprinted at Pet.App. 13a- 14a.

On review, the Ninth Circuit concluded thatthe district court had correctly applied the circuit’s"place of operations" test as articulated in IndustrialTectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1094(9th Cir. 1990)("the ’nerve center’ test should be usedonly when no state contains a substantialpredominance of the corporation’s business

6

activities") and Toseo Corp. v. Communities for aBetter Env’t, 236 F.3d 495, 500 (9th Cir.2001)(substantial predominance "requires only thatthe amount of corporation’s business activity in onestate be significantly larger than any other state inwhich the corporation conducts business"). In afurther refinement of this test, the panel below foundthat no "policy concerns" justified taking California’spopulation into account when determining whether acorporation’s business activities in California weresignificantly larger than in any other single state.See Memorandum Opinion, reprinted at Pet. App. la- 3a. The Ninth Circuit subsequently deniedrehearing and rehearing en bane and this Petitiontimely followed. See Ninth Circuit Order, reprintedat Pet. App. 15a.

II. Factual Summary

The facts relevant to the issues presented areundisputed.-~/ Hertz is incorporated in Delaware and

Consistent with the requirements of 28 U.S,C. §1446(a), Hertz’ Notice of Removal contained "a short and plainstatement of the grounds for removal," supported by a sworndeclaration showing that Hertz was incorporated in Delaware,with its principal place of business in New Jersey. SeeEllenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 199(4th Cir. 2008)("removing party’s notice of removal sufficientlyestablishes jurisdictional grounds for removal by makingjurisdictional allegations in the same manner" as a plaintiffwould be required in their original complaint); see also MeNuttv. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785 (1936)(a party asserting jurisdiction must allegefacts essential to show jurisdiction and must support them bycompetent proof if challenged by his adversary or by the court).

operates "on-airport" and "off-airport" rental facilitiesin 44 of the 50 states. Pet. App. 26a at ¶ 3. Theleadership of Hertz is found at its corporateheadquarters in Park Ridge, New Jersey. Id. at ¶ 11.The core executive and administrative functions forHertz’ domestic operations are carried out in NewJersey and, to a lesser extent, Oklahoma. Id. Hertz’overall executive and administrative functions arenot found in the State of California. Id.

During the period relevant to Hertz’ removalof this action to federal court, 83% of Hertz’ rentalfacilities were located in states other than California,81.8% of its vehicle rentals were transacted in statesother than California, 81.4% of its total revenueswere generated in states other than California and79.5% of its entire workforce were employed in statesother than California. Id. at ¶¶ 6 - 9.

As relevant to the Ninth Circuit’s place ofoperations test, which compares business activitiesbetween the two states containing the largestamount of those activities: (1) 17% of Hertz’ rentalfacilities were located in California and 9.7% werelocated in Florida; (2) 18.2% of Hertz’ vehicle rentalswere transacted in California and 10.7% weretransacted in Florida; (3) 18.6% of Hertz’ revenueswere generated in California and 11.6% weregenerated in Florida; and, (4) 20.5% of Hertz’

While Respondent requested discovery with respect to Hertz’principal place of business, it offered no facts controverting theallegations made in support of removal, and the district courtdid not challenge any of them.

8

employees were employed in California and 14.3%were employed in Florida. Id.

Similar to its requests in the District Courtand Ninth Circuit, Hertz requests that this Courttake judicial notice of the U.S. Bureau of the Censuspopulation figures for 2006 (est.) as follows: UnitedStates 299,398,484, California 36,457,549 (12.2% ofU.S. total), Florida 18,089,888 (6.0%), Texas23,507,783 (7.9%), Illinois 12,831,970 (4.3%), andNew York 19,306,183 (6.5%). See U.S. CensusBureau, State & County QuickFacts, available athttp://quickfacts.census.gov/qfd,(last visitedFebruary 2, 2009).4/

REASONS FOR GRANTING THE PETITION

The Circuit Courts Are Deeply DividedOver How to Determine a Corporation’sPrincipal Place of Business for Purposesof Diversity Jurisdiction

The circuit courts have developed fourdifferent tests for determining a corporation’sprincipal place of business: (1) the nerve center test,which focuses exclusively on locating thecorporation’s "brain," without regard to the locationof its other business activities; (2) the center of

In its filings in the District Court and the Ninth Circuit,Hertz presented population figures for 2005 from the U.S.Census Bureau’s "QuickFacts" website as they were the mostcurrent data available at that time. The 2006 populationfigures are not materially different.

9

corporate activities test, which focuses primarily onlocating the headquarters of day-to-day corporateactivities and management, but permitsconsideration of the location of other businessactivities as relevant (but less important) factors; (3)the place of operations test, which focuses exclusivelyon the location of the corporation’s businessactivities, and only considers the location of its nervecenter if those business activities do notsubstantially predominate in any one state; and, (4)the total activities test, which requires a fact-intensive inquiry and focuses on no one factor to theexclusion of others, and requires consideration offactors such as the character of the corporation, itspurposes, the kind of business in which it is engaged,the situs of its operations and the location of itsheadquarters.

Due to their differing emphases, these testsresult in different outcomes with respect to thelocation of a corporation’s principal place of business.For example, a court which applies the nerve centertest will locate a corporation’s principal place ofbusiness in one state, though a court applying theplace of operations test would likely locate it inanother. However, the very wording of 28 U.S.C. §1332(c)(1) makes clear that a corporation can haveone, and only one, principal place of business.

~1. Nerve Oe~ter Te~t

The Seventh Circuit uses the nerve center testas its sole method for determining a corporation’sprincipal place of business for purposes of diversity

10

jurisdiction. Under this test, a district court is to lookfor the location of "the corporation’s brain," whichordinarily is found "where the corporation has itsheadquarters." Wisconsin Knife Works v. NationalMetal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986);Metropolitan Life Ins. Co. v. Estate o£ Cammon, 929F.2d 1220, 1223 (7th Cir. 1991)("this court followsthe ’nerve center’ approach to corporate citizenship:a corporation has a single principal place of businesswhere its executive headquarters are located").

In adopting this test, the Seventh Circuitrecognized that other circuits "use a vaguer standard¯ . . [and] look not just to where the corporation hasits headquarters but also to the distribution of thecorporation’s assets and employees[but w]eprefer [a] simpler test. Jurisdiction ought to bereadily determinable." Wisconsin Knife Works, 781F.2d at 1282. Consequently, the amount of businessthat a corporation transacts in any particular state is"irrelevant" to the Seventh Circuit’s test for locatingits principal place of business. Metropolitan Life Ins.Co., 929 F.2d at 1223 ("that Metropolitan Life doeslots of business in Illinois is accordingly irrelevant, solong as the record reveals (as it does) that its’principal’ place of business [i.e., nerve center] iselsewhere").

Center of Corporate Activities Test

The Third Circuit uses the center of corporateactivities test as its sole method for locating acorporation’s principal place of business for purposesof diversity jurisdiction. Under this test, a district

11

court is to look for the location of the corporation’s"headquarters of day-to-day corporate activity andmanagement." Kelly v. U.S. Steel Corp., 284 F.2d850, 854 (3d Cir. 1960). The center of corporateactivities test is similar to the nerve center test inthe sense that it looks for a "headquarters," albeit ofday-to-day corporate activities and management.However, unlike the nerve center test, the location ofthe corporation’s plants, employees, etc., are relevantconsiderations, but they are "elements of lesserimportance" in the determination. Id. at 854; seealso Mermen Co. v. Atlantic Mut. Ins. Co., 147 F.3d287, 291 (3rd Cir. 1998)(Kelly requires a court tolocate a corporation’s headquarters for day-to-dayactivity and management, with the location of plants,employees, etc., being considerations of lesserimportance, but some significance).

C. Place of Operations Test

In direct conflict with the tests applied by theSeventh and Third Circuits, the Ninth Circuitconsiders the location of a corporation’s plants,employees, and assets, to be factors of paramountimportance in locating its principal place of businessfor purposes of diversity jurisdiction. Under theNinth Circuit’s test, a corporation must first provethat no single state contains a substantialpredominance of its business activities before thedistrict court can consider the location of thecorporation’s nerve center or its headquarters of day-to’day corporate activities and management.Industrial Tectonics, 912 F.2d at 1094 ("nerve centertest should be used only when no state contains a

12

substantial predominance of the corporation’sbusiness activities")(emphasis supplied).

According to the Ninth Circuit, a corporationfails to meet this burden when its business activitiesin one state, e.g., plants, employees, revenues, etc.,are "significantly larger" than the next largest state.Toseo Corp., 236 F.3d at 500 ("substantialpredominance . . . requires only that the amount ofcorporation’s business activity in one state besignificantly larger than any other state in which thecorporation does business"). Thus, the place ofoperations test does not make a comparison of all theplaces where business is transacted, i.e., the locationof the corporation’s nerve center, the location(s) of itsday-to-day management and the location(s) of all itsother business activities. Rather, it only considerswhether business activities (in terms of facilities,employees, revenues, etc.) are "significantly larger"in one state in comparison to the one other statecontaining the next largest amount of such businessactivities. Further, as for the comparison of businessactivities between these two states, the Ninth Circuithas stated that there is no need to consider whetherthe difference between the two is in proportion topopulations of the states being compared. See NinthCircuit Opinion and Judgment, reprinted at Pet.App. la, 3a.

Total Activities Test

The Fifth, Sixth, Eighth, Tenth, and EleventhCircuits apply the total activities test in locating acorporation’s principal place of business for purposes

13

of diversity jurisdiction. See, e.g., Teal Energy USA,Inc. g. GT, Inc., 369 F.3d 873, 876 (5th Cir. 2004);Gafford v. General Elee. Co., 997 F.2d 150, 163 (6thCir. 1993); Capitol Indemnity Corp. v. RussellvilleSteel Co., Inc., 367 F.3d 831, 836 (8th Cir. 2004);Amoco Roemount Co. y. Ansehutz Corp., 7 F.3d 909,915 (10th Cir. 1993); MacGinnitie g. Hobbs Group,LLC, 420 F.3d 1234, 1239 (llth Cir. 2005). Pursuantto this test, a district court is to consider not only thelocation of the corporation’s nerve center, and thelocations of its business activities, but also thetotality of the surrounding circumstances, includingthings like the character of the corporation, itspurposes and the kind of business in which it isengaged. See, e.g., Gafford, 997 F.2d at 161; AmocoRoemount Co., 7 F.3d at 915. Unlike the other testsdescribed above, the total activities test "does nothinge on one particular facet of corporate operations,but on the total activity of the company considered asa whole." Amoco Roemount Co., 7 F.3d at 915.-~/

The First, Second and Fourth Circuits have yet toformally adopt any one of the tests described above. Rather,they recognize that the nerve center and place of operationstests may point to different locations as a corporation’s principalplace of business and have provided guidance for selectingbetween the two, e.g., nerve center test should apply tocorporations with far flung activities, but the center of corporateactivities test or place of operations test should apply whenoperations are not far flung. See, e.g., Topp v. CompAir, Inc.,814 F.2d 830, 834 (lst Cir. 1987)(recognizing that courts applyvarying tests for determining principal place of businessdepending upon the factual circumstances of the corporation atissue); R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d651,655 (2d Cir. 1979)(providing guidance for selection between

14

II. The Split Between the Circuits ImplicatesImportant Questions of Federal Law thatShould be Decided by This Court

Ao Absent Resolution by This Court,Corporations Will be Subject to HavingMore than One Principal Place ofBusiness for Purposes of DiversityJurisdiction

"By common sense and by law, a corporationcan have only one principal place of business forpurposes of establishing its state of citizenship."Gafford, 997 F.2d at 161; see also J.A. O]son Co. v.City of Winona, Miss., 818 F.2d 401, 406 (5th Cir.1987)("the amendment makes clear that everycorporation has one and only one principal place ofbusiness"); 28 U.S.C. § 1332(c)(1)("a corporation shallbe deemed to be a citizen of any state by which it hasbeen incorporated and the state where it has itsprincipal place of business") (emphasis supplied).However, pursuant to the various tests which districtcourts have been instructed to use by their respectivecircuit courts of appeal, corporations are subject tothe distinct possibility of having more than oneprincipal place of business; a result at odds with theclear language of the diversity jurisdiction statute.

nerve center test and place of operations test); Peterson v.Cooley, 142 F.3d 181, 184 (4th Cir. 1998)(approving use ofeither the nerve center test or place of operations test, withneither to the exclusion of the other).

15

For example, in Burgos v. United Airlines,Inc., 2002 WL 102607, at *6 (N.D. Cal. Jan. 11,2002), the district court concluded that UnitedAirlines’ principal place of business was inCalifornia. In doing so, the district court applied theNinth Circuit’s place of operations test, i.e., itcompared United Airlines’ business activities in thestate at issue, California, to the state containing thenext largest amount of such activities, and it did sowithout regard to the location of its headquarters(whether that be the nerve center or its center ofcorporate activities). However, pursuant to the nervecenter test, a district court in the Seventh Circuitwould be required to locate, and has previouslylocated, United’s principal place of business at itscorporate headquarters in Illinois. See, e.g., Kohtz v.United Airlines, 1991 WL 171330, at *1 (N.D. Ill.Aug. 29, 1991)(granting United’s motion to dismissfederal court action for lack of diversity jurisdictiondue to United’s principal place of business beinglocated in Elk Grove, Illinois, the location of itscorporate headquarters).

The outcome identified above is not limited tothe conflict between the nerve center and place ofoperations tests. Thus, a district court applying thetotal activities test has located a corporation’sprincipal place of business in a state other than theone containing its nerve center, and it did so on thebasis of facts which would not be considered inapplying the nerve center test, e.g., the nature of itsbusiness activities and the situs of its operations;see, e.g., Shell Rocky Mountain Production, LLC v.Ultra Resources, Inc., 415 F.3d 1158, 1163 (10th Cir.

16

2005)("[i]rrespective of whether Houston constitutesUltra’s nerve center, an evaluation of Ultra’s totalactivity convinces us that there is ample evidence tojustify the district court’s conclusion that Ultra’sprincipal place of business is either Wyoming orColorado").

Due to the split between the circuits withrespect to the appropriate test to apply indetermining a corporation’s principal place ofbusiness for purposes of diversity jurisdiction, adistrict court in California (pursuant to the place ofoperations test), a district court in Illinois (pursuantto the nerve center test), and a district court inWyoming (pursuant to the total activities test), couldlocate the same corporation’s principal place ofbusiness in three different states. Such results arenot permitted by 28 U.S.C. § 1332(c)(1) and thesecorporations either would be deprived of the federalforum that diversity jurisdiction is intended toprovide or subjected to a legal proceeding for whichjurisdiction was lacking.

The Effect of the Ninth Circuit’~Approach Will be That NationwideCorporations Will be All DeemedCalifornia Citizens

Absent review by this Court, not only willcorporations be subject to having more than oneprincipal place of business for purposes of diversityjurisdiction, but corporations with nationwidebusiness operations, including operations inCalifornia commensurate with its population,

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invariably will have one of these multiple principalplaces of business located in California. Thus, it isbeyond dispute that Hertz transacts business in 44states, approximately 80% of all its businessactivities (in terms of employees, facilities, rentalsand revenues) are located outside of California, andthe headquarters from which it operates thisbusiness is located in New Jersey. Nonetheless,pursuant to the place of operations test, the courtignored the nationwide scope of Hertz’ businessactivities, and the location of the headquarters fromwhich it exercises control over its far flungoperations, and simply compared Hertz’ businessactivities in the state at issue, California, to the nextlargest state in terms of those activities, Florida.Moreover, the court made this comparison withoutregard to the fact that California’s population is morethan double that of Florida.

As has already happened to United Airlinesand Hertz, numerous other corporations withnationwide business activities, and businessactivities in California commensurate with its sizeand population, will be deemed to have a principalplace of business in California pursuant to such aplace of operations test. This result is contrary to theunderlying purposes of diversity jurisdiction ingeneral and, CAFA jurisdiction in particular.

With respect to the underlying purposes ofdiversity jurisdiction in general, the legislativehistory of the 1958 amendments to 28 U.S.C. §1332(c)(1) recognized that "the underlying purpose ofdiversity of citizenship legislation.., is to provide a

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separate forum for out-of-state citizens against theprejudices of local courts and local juries by makingavailable to them the benefits and safeguards of thefederal courts." S. Rep. 85-1830 (1958), as reprintedin 1958 U.S.C.C.A.N. 3099, 3102. The existence ofsuch diversity jurisdiction was recognized as beingessential to both the proper administration of justiceand the free flow of commerce. Id. at 3116-3119.

Consistent with the above-described purposesof diversity jurisdiction, the principal place ofbusiness provision of 28 U.S.C. § 1332(c)(1) wasadded to address "the evil whereby a localinstitution, engaged in a local business and in manycases locally owned, is enabled to bring its litigationinto the federal courts simply because it has obtaineda corporate charter from another state." Id. at 3101-3102. After rejecting a suggestion that corporationsbe deemed citizens of every state in which they dobusiness, as well as a suggestion that a corporationbe deemed to be a citizen of the state where morethan half of its gross income is received, Id. at 3119-3120, the Committee on Jurisdiction and Venuesettled on the recommendation that a corporation bedeemed to be a citizen of the state containing itsprincipal place of business. Id. at 3132. According tothe Committee, this provision provided a "simplerand more practical formula" for locating acorporation’s citizenship, "while at the same timepreserving the purpose of [its] previousrecommendations to prevent frauds and abuses of thefederal jurisdiction by corporations which areprimarily local in character." Id. The Ninth Circuit’stest disregards these principles and will result in

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nationwide corporations, with far flung activitiesspread across many states, being deemed to becitizens of California simply because they haveoperations in that state commensurate with itspopulation. Such corporations, however, are not"primarily local in character," and they have engagedin no "fraud or abuse" with respect to federaljurisdiction. Nonetheless, the test being applied bythe Ninth Circuit will result in such corporationslosing the protections intended by diversityjurisdiction with the potential for resultinginterference with interstate commerce.

With respect to CAFA jurisdiction inparticular, the Senate Report which accompaniedCAFA recognized

[a] mounting stack of evidencedemonstrat[ing] that abuses [in classaction litigation] are undermining therights of both plaintiffs and defendants.

[with] [o]ne key reason for theseproblems . [being] that most classactions are currently adjudicated instate courts, where the governing rulesare applied inconsistently.., and wherethere is often inadequate supervisionover litigation procedures and proposedsettlements.

S. Rep. 109-14 (2005), as reprinted in 2005U.S.C.C.A.N. 3, 5.

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In an effort to deal with these abuses, whichincluded "copycat class actions," and the use of classaction devices as "judicial blackmail," Congressenacted CAFA for the express purpose ofsubstantially expanding federal court jurisdictionover class actions. Id. at 23. This expansion wasintended to address the abuses previously noted, aswell as others, all of which were recognized as havingthe potential for interfering with interstatecommerce. Id. at 5-6. Despite these underlyingpurposes of CAFA, nationwide corporations withoperations in California commensurate with thatstate’s population will be deprived of the statute’sprotections in a jurisdiction with a penchant for classaction litigation.

This Court Infrequently Has theOpportunity to Review Principal Placeof Business Issues

This Court has not previously addressed theproper test for locating a corporation’s principal placeof business for purposes of diversity jurisdiction, andits opportunities for doing so are limited. First,remand orders in traditional diversity cases are notsubject to appellate review. ~ee 28 U.S.C. §1447(d)("[a]n order remanding a case to the Statecourt from which it was removed is not reviewable onappeal or otherwise ."); see also ThingsRemembered, Inc. v. Petrarca, 516 U.S. 124, 127-128,116 S. Ct. 494, 497 (1995)("[a]s long as a districtcourt’s remand is based on a timely raised defect inremoval procedure or on lack of subject-matterjurisdiction.., a court of appeals lacks jurisdiction to

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entertain an appeal of the remand order under [28U.S.C.] § 1447(d)"). Second, remand orders in CAFAcases are subject to discretionary review only. See 28U.S.C. § 1453(c)(1)("a court of appeals may accept anappeal from an order of a district court granting ordenying a motion to remand a class action to theState court from which it was removed .").Consequently, this is an important issue relating tofederal court jurisdiction which may evade review formany years to come.

CONCLUSION

The "prompt, economical and soundadministration of justice depends to a large degreeupon definite and finally accepted principlesgoverning important areas of litigation, such as therespective jurisdictions of federal and statecourts .... " American Fire ~ Casualty Co. v. Finn,341 U.S. 6, 7, 71 S. Ct. 534, 537 (1951). As evidencedby the circuit split described above, such "definiteand finally accepted" principles do not exist withrespect to determining the location of a corporation’sprincipal place of business for purposes of diversityjurisdiction.

Hertz respectfully submits that a test fordetermining a corporation’s principal place ofbusiness for purposes of diversity jurisdiction shouldbe guided by: (1) the ordinary meaning of thosewords, i.e., the most important, consequential orinfluential place of business in comparison to allothers; (2) the underlying purposes of diversityjurisdiction, e.g., protecting out-of-state citizens

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against the bias of local tribunals and promoting thefree flow of commerce; and, (3) Congress’ expressedreasons for adding the principal place of businessprovision to 28 U.S.C. § 1332(c)(1), i.e., "a simple[and] practical" method for readily determining theexistence of jurisdiction, which also allows judges toprotect against "frauds and abuses of federaljurisdiction by corporations which are primarily localin character." S. Rep. 85-1830 (1958), as reprinted in1958 U.S.C.C.A.N. 3099, 3132.

The Ninth Circuit’s place of operations test,which reduces a corporation’s nerve center to anafterthought, does not comport with the ordinarymeaning of the statute, it is not tailored to addressthe "evil" which prompted Congress to amend thestatute, and it is inconsistent with the underlyingpurposes of diversity jurisdiction. Corporations likeHertz, United Airlines, Target, Home Depot andcountless others, who do business in Californiacommensurate with its population, are not Californiainstitutions, engaged in a California business, whileseeking to avoid the jurisdiction of California statecourts through some fraud or artifice. Rather, theyare nationwide corporations, headquartered andoperated from states outside of California.

Hertz respectfully submits that this Courtshould grant certiorari in order to establish definiteand accepted principles pursuant to which federalcourts can readily and uniformly determine theirjurisdiction in a manner consistent with the wordingof 28 U.S.C. § 1332(c)(1), and the underlyingpurposes of diversity jurisdiction.

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Respectfully Submitted,

Frank B. ShusterCounsel of Record

CONSTANGY, BROOKS &SMITH, LLP230 Peachtree Street, NWSuite 2400Atlanta, Georgia 30303(404) 525-8622

Robert A. DolinkoNIXON PEABODY LLPOne Embarcadero CenterSuite 1800San Francisco,California 94111(415) 984-8200

Counsel for PetitionerThe Hertz Corporation