Wednesday, February 24, 2010
Class Action News from Charlottesville
The Supreme Court unanimously held that a corporation's principal place of business is where its executives reside, not where it does a significant amount of business. The underlying facts of the case concerned a class action against Hertz by employees asserting an overtime wage claim. The case was filed in state court, but Hertz removed the case to federal court asserting diversity jurisdiction. The Supreme Court agreed with Hertz and sent the case back to federal court. Why does this decision matter? It makes it harder for plaintiffs to choose where their case against a large corporation will be heard. Most plaintiffs prefer state courts and avoid federal courts because of a number of factors. Corporations now have a greater ability to shift the forum to federal court because a corporation usually has its headquarters in a different state, even if it does a lot of business in the state where the plaintiff lives. Interestingly, this decision does not affect claims made by railroad employees who are injured on the job as they enjoy the protection of the Federal Employer's Liability Act. Thew FELA gives a railroad employee plaintiff the ability to choose to proceed in state or federal court and the claim cannot be removed by the employer, even if it is headquartered in a different state. For instance, Norfolk Southern employees who live in West Virginia can file their suit in state court and keep it there, even though Norfolk Southern has its headquarters in Norfolk, Virginia. But for most other plaintiffs, a new set of rules is now in effect.