The US Supreme Court recently has ruled in the case of Hertz Global Holdings Inc. that the test for determining a corporation’s principal place of business is to establish where its key executives work, which will typically be at its headquarters as opposed to where its products or services may be sold.  The Hertz ruling is likely to have the effect of limiting the abilities of parties to ‘shop around’ for courts that have favorable laws or conditions under which to sue.

In the Hertz case, two California citizens sued Hertz in California on the basis that Hertz conducted business in California.  Hertz sought to move the case to the US Federal Court and argued its core executive functions were at its New Jersey Headquarters.  Hertz submitted that it operated in 44 US States and its operations in California constituted less than 20% of its business.  Initially, the federal district court ruled against Hertz, and this decision was affirmed by the US Ninth Circuit of Appeals.  However, the US Supreme Court unanimously overturned the previous decisions, saying that a business’ 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”.