U.S. SC ruling could limit forum shopping by trial lawyers

By Chris Rizo | Feb 24, 2010


WASHINGTON - A U.S. Supreme Court ruling this week could put a damper on the trial lawyer practice of filing lawsuits, particularly class actions, in vaguely related jurisdictions where judges are seen as plaintiff-friendly.

The controversial practice is called "forum shopping," and legal reformers often bemoan plaintiffs' lawyers scurrying to counties and states where they feel they can get a better settlement rather than filing in the jurisdiction where there is an actual nexus to the case.

Trial lawyers, when asked to justify a remote filing, often say the company does most of its business or has a significant presence in the questioned venue. Many of the civil suits filed against major corporations in Madison and St. Clair counties make such a claim. But that may no longer be good enough, given a U.S. Supreme Court decision handed down Tuesday.

The high court, in a unanimous opinion, said a company's principal place of business is where its top executives work, not where most of its business is transacted.

Illinois Civil Justice League President Ed Murnane said at first glance the opinion could mean good news for his native Illinois, which he said "has become home to many lawsuits that don't seem to have much, if any, connection" to the state.

Murnane also is chairman of the American Tort Reform Association (ATRA).

"Hooray for the U.S. Supreme Court if the court has actually achieved something that we have been trying to achieve for more than 10 years," said Murnane.

The ICJL has opposed law firms filing so-called outside class-action and asbestos-related cases, among other actions, in Illinois's Madison, St. Clair and Cook counties just because many judges in those jurisdictions have a national reputation of being trial lawyer-friendly.

The U.S. Supreme Court decision could become a key weapon for the civil defense bar.

Writing for the high court, Associate Justice Stephen Breyer said a firm's principal place of business is the place where a corporation's officers direct, control and coordinate the corporation's activities.

"Lower federal courts have often metaphorically called that place the corporation's 'nerve center.' We believe that the 'nerve center' will typically be found at a corporation's headquarters," he wrote.

The ruling vacated a 9th U.S. Circuit Court of Appeals decision that a national company's place of business should be determined by where the majority of its operations are located.

The original case comes from Melinda Friend and John Nhieu of California, who filed a class action lawsuit in 2007 against Hertz Corp., alleging the car rental company had violated California's wage and hour laws.

The lawsuit was originally filed in state court. Hertz successfully removed the action to federal district court pursuant to the U.S. Class Action Fairness Act.

At trial, a U.S. district court determined that the car rental company, a unit of Hertz Global Holdings Inc., is a California company, and as such the case should be heard in a California courtroom.

Because Hertz, which is incorporated in Delaware and is headquartered in New Jersey, has more locations and employees in California than in any other state, the San Francisco-based federal appeals court in October 2008 agreed that the lawsuit should be litigated in there.

Hertz appealed the 9th Circuit ruling to the U.S. Supreme Court. The case is Hertz Corporation v. Melinda Friend, 08-1107.

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