Supreme Court takes corporate diversity jurisdiction, bankruptcy cases

[JURIST] The US Supreme Court [official website; JURIST news archive] on Monday granted certiorari [order list, PDF] in two cases. In Hertz Corporation v. Friend, Melinda, et al [docket; cert. petition, PDF], the Court will consider whether the location of a nationwide corporation's headquarters can be disregarded by a court in determining a principal place of business for the purposes of diversity jurisdiction [USCourts backgrounder]. Federal law [28 USC § 1332 text] stipulates that "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." The petitioners maintained that their case should be heard on the grounds that the circuit courts are divided on how to determine a corporation's principal place of business. Currently, four different tests are being employed by federal courts that range from a strict focus on the corporation's "nerve center" to a broad consideration of multiple factors with no particular focus. The petitioners summarized their concerns with having a circuit split on the issue, saying:

Due to their differing emphases, these tests result in different outcomes with respect to the location of a corporation’s principal place of business. For example, a court which applies the nerve center test will locate a corporation’s principal place of business in one state, though a court applying the place of operations test would likely locate it in another. However, the very wording of 28 USC § 1332(c)(1) makes clear that a corporation can have one, and only one, principal place of business.
The appeal comes from a Ninth Circuit [official website] ruling [opinion, PDF] affirming the district court's application of the "place of operations" test, which looks to the location of the corporation's business activities and only considers its "nerve center" if the activities do not substantially predominate in any one state. The petition points out that this test is in direct conflict with the tests used by the Seventh and Third Circuit courts.

In the consolidated cases of Milavetz, Gallop & Milavetz v. United States and United States v. Milavetz, Gallop & Milavetz [dockets; cert. petition; cert. petition], the Court will decide the scope of a federal law prohibiting certain bankruptcy professionals from advising consumer debtors to incur more debt in contemplation of filing for bankruptcy and whether it violates the First Amendment [text]. The law firm of Milavetz, Gallop & Milavetz [corporate website] brought the suit against the United States seeking a judgment declaring that certain provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) [text] are unconstitutional as applied to attorneys. The Eighth Circuit [official website] ruled [opinion, PDF] that, while bankruptcy attorneys meet the definition of a "debt relief agency" in the legislation, the BAPCPA provisions codified in 11 U.S.C. § 526(a)(4) [text] are unconstitutional as applied to attorneys.


 

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