Generally, federal courts can only accept cases where federal laws are key to the legal dispute in question; or else where “diversity” jurisdiction exists in that the plaintiff(s) and the defendant(s) are considered to be citizens of different states; or as noted above, where the court has “in rem” jurisdiction over property in its district. 

The U.S. Supreme Court has now clarified the issue of “citizenship” of a corporation for purposes of such diversity jurisdiction, holding that a corporation is only a citizen of the one-and-only state from which its officers “direct, control, and coordinate the corporation’s activities” (Hertz Corp. v. Friend, U.S. Supreme Court No. 08-1107, February 23, 2010).  The different federal circuit courts around the country had developed historically distinct and incompatible test for corporate citizenship, making it uncertain where a corporation’s citizenship was deemed to rest, and therefore whether submitting or removing a case to federal court was appropriate.  Elaborating on its new guidance, the Supreme Court stated that the corporation’s “nerve center . . . should normally be the place where the corporation maintains its headquarters – provided that the headquarters is the actual center of direction, control, and coordination, i.e., the ‘nerve center’ and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion.)”  Determining corporate citizenship for diversity jurisdiction may not always be instantly clear, but should now be easier and more consistent.

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