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US Supreme Court Appears Set To Change Corporate Location Test

By Kristina Peterson, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The U.S. Supreme Court appeared poised on Tuesday to overrule a test for determining a corporation's principal place of business that effectively locates a majority of national companies in California.

Most members of the high court readily criticized the 9th Circuit U.S. Court of Appeals in San Francisco for basing its determination of a national company's place of business - and therefore where it should go to state court - on where it performs the majority of its overall operations.

In the case before the court, Hertz Corp. v. Melinda Friend, lower courts deemed the national car rental corporation a California company. Friend and fellow defendant John Nhieu filed a class-action lawsuit against Hertz, a unit of Hertz Global Holdings Inc. (HTZ) in 2007, alleging the company had violated state wage and hour laws.

In the dispute over where to try the lawsuit, the Ninth Circuit ruled to keep the case in-state, focusing on the fact that Hertz has more employees and rental locations in California than any other state, despite the fact that it was incorporated in Delaware and has its executive headquarters in New Jersey.

"California's going to come out the winner much more than any other state in this test just based on its size," said Justice Ruth Bader Ginsburg.

To illustrate the point, Chief Justice John Roberts asked where the Ninth Circuit would locate the place of business for Starbucks Corp. (SBUX), founded in Seattle.

"California," answered Todd Schneider, the defendants' attorney.

"That's a surprise," Roberts said dryly.

The justices seemed largely supportive of the argument advanced by Hertz that the simplest way to determine where a company is based is to look to where its executive headquarters are located, unless a challenger could prove that to be a shell office.

"It's got to be one place, so why not keep it simple?" asked Ginsburg. " Presumptively it's the business headquarters, unless you show otherwise."

The headquarters would be defined as where the "direction of control comes from," said Hertz attorney Sri Srinivasan. And he noted that public companies must already state where their executive offices are located in public filings.

A decision is expected by June.

The case is the Hertz Corporation v. Melissa Friend, 08-1107.

- By Kristina Peterson, Dow Jones Newswires, 202 862-6619; kristina.peterson@ dowjones.com

  (END) Dow Jones Newswires
  11-10-091317ET
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