Volume 90 - No. 5 Minnesota Law Review

Note, Determining a Corporation’s Principal Place of Business: A Uniform Approach to Diversity Jurisdiction

For purposes of federal diversity jurisdiction under 28 U.S.C. § 1332, a corporation is a citizen of both its state of incorporation and the state where it has its principal place of business. In adopting that provision, Congress provided very little guidance to the federal courts as to the method by which they should determine a corporation’s principal place of business. Rather, the federal courts of appeal apply three different tests to make that decision: the nerve center test, the corporate activities test, and the total activity test. This nonuniformity encourages forum-shopping at the federal level, breeds uncertainty, and, in many cases, serves to thwart Congress’s intent to generally limit federal jurisdiction.

The adoption of the Class Action Fairness Act of 2005, which makes it easier for corporate defendants to get into federal court, further complicates the situation. Although Congress intended for this Act to increase federal jurisdiction over class actions, certain of the principal place of business tests defeat that intent. Moreover, there are now increased opportunities for plaintiffs, defendants, and their attorneys to shop around for the best forum, class of plaintiffs, or parties to sue.

In order to address the problems raised by the nonuniform application of § 1332, Congress or the Supreme Court should adopt a uniform test for determining a corporation’s principal place of business. This Note proposes a test based on the total activity test, which balances factors relating to a corporation’s managerial, production, and service activities. This test is well-suited to a modern business environment and will produce results in accordance with congressional intent.


:: View PDF

De Novo

  • Dan’s Flaw

    DAN’S [F]LAW: STATUTORY FAILURE TO ENFORCE ETHICAL BEHAVIOR IN CLINICAL DRUG TRIALS Noah Lewellen* I. INTRODUCTION Paul, a sophomore at the University of Minnesota, bursts into a lecture hall, loudly claims to see monsters sitting in the seats, and offers his services in slaying them. The police are called, and Paul is restrained and delivered […]

  • Case Comment: Bhogaita v. Altamonte

    EVERY DOG CAN HAVE HIS DAY IN COURT: THE USE OF ANIMALS AS DEMONSTRATIVE EXHIBITS Kyle R. Kroll, Volume 100, Online Managing Editor In Bhogaita v. Altamonte, the Eleventh Circuit recently decided whether to allow a dog in the courtroom as a demonstrative exhibit.[1] Although the case presented many serious issues regarding the Fair Housing […]

  • Revisiting Water Bankruptcy

    REVISITING WATER BANKRUPTCY IN CALIFORNIA’S FOURTH YEAR OF DROUGHT Olivia Moe, Volume 100, Managing Editor This spring, as “extreme” to “exceptional” drought stretched across most of California—indicating that a four-year streak of drought was not about to resolve itself[1]—Governor Jerry Brown issued an unprecedented order to reduce potable urban water usage by twenty-five percent.[2] In […]