Louisville, Cincinnati, and Charleston Railroad Co. v. Letson
The case of *Louisville, Cincinnati, and Charleston Railroad Co. v. Letson* centers on a legal dispute involving diversity jurisdiction in the context of federal courts. New York resident Letson filed a lawsuit against the railroad company, which was chartered in South Carolina, for breach of contract. The railroad contested the federal court's jurisdiction, citing that it had shareholders in New York, which traditionally would affect diversity jurisdiction. However, the Supreme Court, in a unanimous decision led by Justice James M. Wayne, overturned an earlier precedent established in 1809, asserting that a corporation's legal home is where it is chartered, not where its shareholders reside. This ruling allowed federal courts to have jurisdiction over corporations, thereby broadening their authority to handle such cases. The decision, however, came with both potential advantages and disadvantages for corporate entities. Notably, it was made with fewer justices than usual due to the absence of several members of the Court. This case is significant as it shifted the landscape of corporate litigation and the jurisdictional power of federal courts in America.
Louisville, Cincinnati, and Charleston Railroad Co. v. Letson
Date: March 7, 1844
Citation: 43 U.S. 497
Issue: Diversity jurisdiction
Significance: The Supreme Court’s ruling enhanced the power of the federal courts by changing the definition of state residency for corporations.
Under diversity jurisdiction, New York resident Letson sued the Louisville, Cincinnati, and Charleston Railroad Co., chartered in South Carolina, in federal circuit court for breach of contract. The railroad claimed that the federal court lacked jurisdiction because the railroad had shareholders in New York. In United States v. Deveaux (1809), the Supreme Court stated that, for purposes of diversity jurisdiction, a corporation’s home was the same as that of all its shareholders. Justice James M. Wayne wrote the unanimous 5-0 decision of the Court, overturning its 1809 decision and granting jurisdiction. Wayne held that a corporation had its home only in the state in which it was chartered, thereby opening the federal courts to corporations to sue and be sued. This had both advantages and disadvantages for corporations, but its immediate impact was to increase the jurisdictional power of federal courts. This jurisdiction was later restricted somewhat. This decision was rendered by a smaller than usual number of justices because Justice Smith Thompson had died. Chief Justice Roger Brooke Taney and Justices Peter V. Daniel and John McKinley did not participate.
