A citizen of State A sues a corporation in federal court for text 500,000 . The corporation is incorporated in State B and has its only manufacturing plant in State A, but its 'nerve center' (headquarters where officers direct activities) is in State B. The corporation moves to dismiss for lack of diversity. How should the court rule?

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Federal Rules of Civil Procedure (FRCP) QUESTION #3685

Question 1

A citizen of State A sues a corporation in federal court for $\text{\$500,000}$. The corporation is incorporated in State B and has its only manufacturing plant in State A, but its 'nerve center' (headquarters where officers direct activities) is in State B. The corporation moves to dismiss for lack of diversity. How should the court rule?

Grant the motion, because the plant is in State A, making the corporation a citizen of State A.
Grant the motion, because the amount in controversy must be proven with certainty at the pleading stage.
Deny the motion, because under the 'nerve center' test, the corporation is a citizen only of State B.✔️
Deny the motion, because a corporation is only a citizen of its state of incorporation.

Correct Answer Explanation

Under 28 U.S.C. $\S 1332(c)(1)$ and the Supreme Court's ruling in Hertz Corp. v. Friend, a corporation's principal place of business is its 'nerve center.' Since the nerve center and incorporation are in State B, and the plaintiff is in State A, complete diversity exists.

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