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The Corporate CounselorLJN NewslettersNewsSections

The Determination of a Corporation's 'Principal Place of Business'

By Jeremy A. Rist and Catherine A. Armentano
March 26, 2010

Every first-year law student learns one of the canonical formulations of federal civil procedure: In order for a federal court to have subject matter jurisdiction over a case or controversy, the matter generally must either arise under the Constitution, laws, or treaties of the United States (“federal question” jurisdiction); or the plaintiffs in an action based on state law must have complete diversity of state citizenship from all of the defendants, and the amount in controversy must exceed $75,000 (“diversity” jurisdiction). 28 U.S.C. ”' 1331; 1332. When the litigants are individuals ─  ”natural persons” ─ determinations of citizenship are simplified by the rule that a person has only one domicile, and by the well-tested standards that have evolved for identifying where that place may be. Where a corporation is a litigant, however, determinations of citizenship are complicated by the so-called “dual citizenship” doctrine, that holds a corporation is a citizen of both its state of incorporation and “of the State where it has its principal place of business[.]” 28 U.S.C. ” 1332(c)(1).

Exactly what this phrase means, however, has never been altogether clear since that second basis of state citizenship was codified in 1958. As the decades have progressed, the evolution of corporate structure and corporate commercial activity has rendered the application of this unarticulated standard a quagmire. What is the “principal place of business” of a multinational corporation that has corporate headquarters in New York, but enjoys relatively few sales in that state, and instead conducts business in all 50 states and 39 other nations? What about a corporation whose leadership team is spread across three offices in three separate states, and does roughly equal amounts of business in each of the states in which those offices are located? Is the proper locus of analysis whether there is a particular place within a state that can be said to be a corporation's “principal place of business,” or should a court look to which state has the greatest aggregate number of business-related contacts to the corporation in determining where the corporation's principal “place of business” lies?

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