Duhaime's Law Dictionary


Nerve Center Test Definition:

A judicial analysis used to determine a corporation's real place of business where activities are decentralized; the focus is locating where the corporation's overall policy originates.

Related Terms: Place of Operations Test

The United States District Court Court, sitting in New York in the case of Eugenia VI Venture Holdings, Ltd., Justice Chin presiding wrote that there are:

"... two tests for determining the principal place of business of a corporation.

"Where a corporation's activities are decentralized and spread across numerous states, courts apply what is known as the nerve center test. Under the nerve center test, courts focus on those factors that identify where the corporation's overall policy originates.

"In contrast, where a corporation's activities are centralized, courts apply the place of operations or locus of operations test to determine a corporation's principal place of business....

"Where, as here, a corporation does not sell a service or product, the nerve center test may be the more accurate test to determine the location of the corporation's principal place of business."

In Scot Typewriter, Justice Weinfeld wrote:

"Where a corporation is engaged in far-flung and varied activities which are carried on in different states, its principal place of business is the nerve center from which it radiates out to its constituent parts and from which its officers direct, control and coordinate all activities without regard to locale, in the furtherance of the corporate objective. The test applied ... is that place where the corporation has an office from which its business was directed and controlled - the place where all of its business was under the supreme direction and control of its officers."

REFERENCES:

  • Eugenia VI Venture Holdings, Ltd. v Surinder Chabra, Narinder Chabra, and Parvinder Chabra, 419 F. Supp. 2d 502 (2005)
  • Scot Typewriter Co. v. Underwood Corp., 170 F. Supp. 862 (United States District Court, Southern District of New York, 1959)

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