Louisville, Cincinnati, & Charleston Rail-Road v. Letson
2 How. 497, 43 U.S. 497, 11 L. Ed. 353 (1844)
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Rule of Law:
For the purpose of determining federal diversity jurisdiction, a corporation is conclusively presumed to be a citizen of the state in which it was incorporated.
Facts:
- The Louisville, Cincinnati, and Charleston Rail-road Company was a corporation created by and located in the state of South Carolina.
- The corporation's members included individuals from multiple states.
- Specifically, two members of the corporation, John Rutherford and Charles Baring, were citizens of North Carolina.
- The state of South Carolina was also a member of the corporation.
- A citizen of New York entered into a dispute with the corporation.
Procedural Posture:
- A citizen of New York sued the Louisville, Cincinnati, and Charleston Rail-road Company in the U.S. Circuit Court for the District of South Carolina.
- The Rail-road Company (defendant) filed a plea challenging the court's jurisdiction, arguing that complete diversity of citizenship was lacking because some of its members were citizens of North Carolina.
- The Circuit Court rejected the defendant's plea, exercised jurisdiction over the case, and entered a judgment in favor of the plaintiff.
- The Rail-road Company (appellant) appealed the judgment to the Supreme Court of the United States.
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Issue:
Does the fact that some members of a defendant corporation are citizens of a state different from its state of incorporation defeat federal diversity jurisdiction when the plaintiff is a citizen of another state?
Opinions:
Majority - Justice Wayne
No. For the purposes of suing and being sued, a corporation is to be deemed a citizen of the state which created it and where its business is done. The court explicitly departs from the rule established in cases like Strawbridge v. Curtis and Bank of the United States v. Deveaux, which required courts to look through the corporate entity to the citizenship of each of its individual members. The court found that prior rule to be impractical, unsatisfactory, and based on flawed reasoning. Instead, the court held that a corporation is an 'artificial person' and an 'inhabitant' of its state of incorporation, and this legal fiction is sufficient to establish its citizenship for jurisdictional purposes. Therefore, the citizenship of individual members is irrelevant, and jurisdiction can be maintained as long as the corporation (as a citizen of its state) is diverse from the opposing party.
Analysis:
This case established a pivotal legal fiction that fundamentally reshaped federal diversity jurisdiction involving corporations. By treating a corporation as a citizen of its charter state, the decision swept away the cumbersome and restrictive requirement of complete diversity among all corporate members and the opposing party. This change greatly expanded the access of corporations to federal courts, reflecting the growing economic importance of corporations in the 19th century. The clear, predictable rule announced here remains the foundation of corporate citizenship for jurisdictional purposes, though later modified by statute to also include the corporation's principal place of business.
