Diversity jurisdiction
Corporate citizenship based on principal place of business

The traditional rule only became a problem when general incorporation laws were invented around 1896, state legislatures began a race to the bottom to attract out-of-state corporations, and corporations began to incorporate in one state (usually Delaware) but set up their headquarters in another state. During the 20th century, the traditional rule came to be seen as extremely unfair in that corporate defendants actually headquartered in a state but incorporated elsewhere could remove diversity cases against them from state courts to federal courts, while individual and unincorporated defendants physically based in that same state (e.g., partnerships) could not. Therefore, during the 1950s, various proposals were introduced to broaden the citizenship of corporations in order to reduce their access to federal courts.
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