Louisville Railroad Co. v. Letson

Louisville Railroad Co. v. Letson, 2 How. (43 U.S.) 497 (1844), argued 20 Feb. 1843, decided 7 Mar. 1844 by vote of 5 to 0; Wayne for the Court, Daniel, McKinley, and Taney not participating, Thompson had died. Letson, a New York resident, sued the Louisville Railroad Company, chartered by South Carolina, in federal circuit court under diversity of citizenship jurisdiction for breach of contract. The railroad argued that the federal circuit court had no jurisdiction because the U.S. Supreme Court had ruled, in Bank of the United States v. Deveaux (1809), that the citizenship of a corporation for purposes of diversity jurisdiction was that of its shareholders. The railroad maintained that there was no diversity since some of the its shareholders were citizens of New York.

On a writ of error from a decision upholding jurisdiction, the Court overturned Deveaux and held that for purposes of diversity jurisdiction a corporation is a citizen of the state that chartered it. Because a corporation would thus be a citizen of a single state rather than a citizen of all of the states in which its shareholders resided, Letson increased the opportunities of corporations to sue or be sued in federal court under diversity jurisdiction and enhanced federal judicial power. For the next two decades corporations resisted federal diversity jurisdiction as often as they favored it, but following the Civil War many of them found the federal courts more hospitable than state courts. In 1958 Congress somewhat limited the right of corporations to sue or be sued in federal court under diversity jurisdiction by providing that a corporation should be deemed a citizen of the state that incorporates it and of the state that is its principal place of business.

See also Judicial Power and Jurisdiction.

Robert M. Ireland