A federal judge in California recently remanded a case back to state court because the remote work practices of the defendant's executives rendered the company a resident of California for purposes of diversity jurisdiction, illustrating the altered landscape presented by post-COVID employment practices.
In the case Evans v. Cardlytics, Inc., 23-CV-606-JWK-KES (C.D. Cal.), two California residents sued their former employer over a pay dispute. The defendant, a digital ad platform incorporated in Delaware with its headquarters in Atalanta removed the case to federal court on the basis of diversity jurisdiction, which requires plaintiffs and defendants to be citizens of different states.
Of course, a corporation is a resident of its state of incorporation as well as the state where its principal place of business is located. To determine the latter, the court had to decide the location of the defendant's “nerve center” - i.e., “the place where a corporation’s officers direct, control, and coordinate the corporation’s activities.” Four of Cardlytics' seven-member leadership team lived and worked in California, with the Golden State executives including both the CEO and the COO. Embracing the anatomic analogy, the Court reasoned that “the CEO and COO are akin to the prefrontal cortex and hippocampus,” and determined that both the quantitatively and qualitatively the majority of defendant's leadership team was located and worked in California. As a result, Cardlytics was unable to carry its burden of showing its principal place of business was in Georgia and not California.
While traditionally you would simply look to the location of a company's headquarters to determine its principal place of business, we don't live in traditional times. Advanced technology combined with the disruption of the COVID 19 pandemic has created decentralized work forces and blurred the lines of corporate residency.