Supreme Court Ruling Could Help Employers in Class Action Suits

February 23, 2010 ( – The U.S. Supreme Court on Tuesday clarified the definition of a company's "principal place of business" for the purpose of determining the venue for a class action lawsuit.

The high court ruled that a company’s “nerve center” or principal place of business is where its officers “direct, control and coordinate” its activities – not where it has its largest volume of business, Business Insurance reports. The court said that typically would be the company’s headquarters, but if a court finds that a company’s alleged “nerve center” is nothing more than a mailbox or an empty office, a court should determine the location its actual principal place of business.

The Supreme Court remanded the case to a lower court.

According to Business Insurance, legal experts say the court’s unanimous decision in Hertz Corp. vs. Melinda Friend et al. will make it easier for class action parties that are citizens of different states to move the action to federal court from state court. The Class Action Fairness Act, which was backed by businesses that held they could get a fairer hearing in federal rather than state court if they were not resident of a state, allows such a move under most circumstances.

The case involves a group of Hertz Corp. employees based in California that sued Park Ridge, New Jersey-based Hertz in California state court, alleging violations of state employment law. Hertz held that because it is based in New Jersey, the matter should be heard in a federal court.

A district court held that the case should be heard in state court because Hertz’s business activity “substantially predominates in one state” – California, and the 9th U.S. Circuit Court of Appeals, which affirmed the lower court’s decision, according to Business Insurance.