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« New Ninth Circuit UCL/CLRA pleading decision: Kearns v. Ford Motor Co. | Main | Massachusetts Supreme Judicial Court strikes down no-class-action arbitration clause: Feeney v. Dell, Inc. »

Wednesday, July 15, 2009

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Joshua Daniels

I read the brief by Hertz and I think they miss an important approach. They spend most of their time reasoning about the proper interpretation of the diversity jurisdiction statute with lengthy discussion of the proper interpretation of the "principl place of business test." While I think they make an excellent case and ought to win based on that reasoning, it seems to me courts need more than the correct legal opinion. Too often courts make a decision based on the policy impact of a given decision and then formulate legal reasoning to support the ruling ex post. I think there are two key policy impacts:

1) If Hertz loses, this means any large national business that conducts any operations within California or any other populous state will become a de-facto citizen of that state for purposes of jurisdiction and will continually be haled into state courts (this is bad, unfair, unpredictable, and inefficient). Hertz does argue this. But more importantly...

2) This defies the whole concept of federal regulation of interstate commerce. I think Hertz ought to argue the very real impact this decision would have on the concept of federal regulation in interstate commerce. It is clear that the underlying reason diversity jurisdiction, especially with regard to corporate citizenship, exists as a key to the federal courts, is that the Constitution delegates regulation of interstate commerce to the federal government (and for good reason too). Federal regulation of interstate commerce creates efficiency, fairness, and predictability for corporations that operate on a national basis; this is good for everyone for many reasons. If the court decides against Hertz, they undermine this key fact. I think petitioners should make this clear to the court to give an additional policy impact of the decision.

Furthermore, in a country where ridiculous and seemingly unrelated federal regulations claim "interstate commerce" for their warrant, it would be unfair to then punish corporations by withholding their access to federal court by undermining the regulation of interstate commerce with regard to diversity jurisdiction. This creates an obvious contradiction. Without skipping a beat, the federal government would not hesitate to slap a national corporation like Hertz with any number of federal violations under the guise of interstate commerce merely because the company operates in multiple states, yet the federal court here rejects Hertz as a diverse citizen and claims that they (an obvious national corporation operating in 44 states) is a citizen of California and has no access to the federal court. I think the SCOTUS needs to consider the underlying issue of interstate commerce in this case and rule for Hertz.

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