Duhaime's Law Dictionary


Place of Operations Test Definition:

A judicial analysis used to determine a corporation's real place of business which prioritizes the venue of corporate activities.

Related Terms: Nerve Center Test

Also known as the locus of operations test.

In Justice Benson Legg of the United States District Court (Maryland) stated the law as follows in Trans/Air Manufacturing Corporation:

"In determining a corporation's principal place of business under the place of operations test, relevant considerations include the location(s) of the corporation's offices, personnel and tangible assets, as well as the locus of its day-to-day operations. Other factors include the location(s) where meetings are held, taxes are paid, and corporate records are kept, in addition to the location that the corporation would consider its home."

Two years prior to Justice Benson's opinion, the same 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. Under this test, a corporation's principal place of business is the location in which the corporation has its most extensive contacts with, or its greatest impact on, the general public. 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."

REFERENCES:

  • Eugenia VI Venture Holdings, Ltd. v Surinder Chabra, Narinder Chabra, and Parvinder Chabra, 419 F. Supp.2d 502 (2005)
  • Trans/Air Manufacturing Corporation v. Merson, 524 F. Supp. 2d 718 (2007)

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