FRIEND V. THE HERTZ CORPORATION, NO. R G07344896 (SUPERIOR COURT OF CALIFORNIA, COUNTY OF ALAMEDA)

Plaintiffs brought this class action on behalf of current and former location managers (formerly called senior station managers, station managers and branch managers) in California who worked for the Hertz Corporation during the period September 2003 through the present. Plaintiffs allege that The Hertz Corporation's uniform policy of classifying Location Managers as exempt from the overtime requirements violates California labor law. Plaintiffs allege that this misclassification results in Hertz failing to pay these employees premium pay for overtime hours worked and failing to provide uninterrupted meal and rest periods. Plaintiffs also allege that Hertz's vacation policy contains a use-it-or-lose-it provision that violates California law.

The case is currently pending in California state court. Throughout the case, Hertz has contended that the case belongs in Federal court. After appealing to the Ninth Circuit Court of Appeals, Hertz petitioned the United States Supreme Court for certiorari which was granted.

On November 10, 2009, the United States Supreme Court heard oral arguments in this case concerning diversity jurisdiction. The question presented involved what was the proper test for determining a corporation's "principal place of business" for purposes of diversity jurisdiction.

The Supreme Court issued its Opinion in this case on Monday, February 22, 2010. Justice Breyer delivered the opinion for a unanimous Court holding that the phrase "principal place of business" as it relates to diversity jurisdiction, refers to the place where the corporation's high level officers direct, control and coordinate the corporation's activities, i.e., its "nerve center," which will typically be found at its corporate headquarters. The Court acknowledged that while, in practice a corporation's principal place of business may normally be the place of its headquarters, provided that the headquarters is the actual "nerve center" and not simply an office where the corporation holds its board meetings. In establishing its "nerve center" test, the Court recognized that the burden of persuasion for establishing diversity jurisdiction remains on the party asserting it and that when jurisdiction is challenged, the parties must support their allegations by competent proof. In that vein, the Court rejected Hertz's suggestion that the mere filing of a Form 10-K with the SEC listing a corporation's "principle executive offices" would, without more, be sufficient proof to establish a corporation's "nerve center." The Supreme Court vacated the Ninth Circuit's judgment and remanded the case for further proceedings consistent with the opinion and to give respondents/plaintiffs a fair opportunity to litigate their case in light of the Court's holding.

While Abbey Spanier is disappointed with this result, we do not believe it impacts the merits of this case which it believes are quite strong in the favor of plaintiffs.

The United States Court of Appeals for the Ninth Circuit issued an order on May 11, 2011, in Friend v. The Hertz Corporation, Case No. 3:07-cv-05222, U.S. District Court for the Northern District of California, accepting Plaintiffs' petition for leave to appeal the district court's order denying their motion for class certification. In Friend, the Plaintiffs, former Hertz station managers, allege that they were improperly classified and seek to have the case certified as a class action on behalf of all current and former Hertz station managers in California.

Plaintiffs contend that the district court's order follows an increase in cases misinterpreting the 9th Circuit's recent decisions in Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 947 (9th Cir. 2009), and In re Wells Fargo Home Mortgage Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009). Since Vinole and Wells Fargo, the question of whether class members perform the same duties for the same length of time has become a litmus test for denying class certification, regardless of the other common and predominant evidence presented.

The 9th Circuit's Order in Friend held briefing in abeyance pending the Court's decision in Delodder v. Aerotek, Inc., No. 10-80178, a case already before the Court involving similar issues.