Marshall v. Baltimore & Ohio Railroad Co., 57 U.S. (16 How.) 314 (1853)
A corporation is considered a citizen of the state in which it is incorporated for purposes of federal diversity jurisdiction, preventing it from suing or being sued in federal court by citizens of that same state.
Summary
This case established the principle that a corporation is considered a citizen of the state where it is incorporated for the purposes of establishing diversity jurisdiction in federal courts. Marshall, a citizen of Virginia, brought suit in federal court against the Baltimore & Ohio Railroad Company. The railroad was incorporated in Maryland. The court had to determine whether the suit could proceed in federal court based on diversity of citizenship between the parties, given the presence of stockholders who were also citizens of Virginia. The Supreme Court held that the corporation is treated as a citizen of Maryland, distinct from its individual members, thus establishing diversity jurisdiction.
Facts
Marshall, a citizen of Virginia, sought to sue the Baltimore & Ohio Railroad Company in the United States Circuit Court for the District of Maryland.
The Baltimore & Ohio Railroad Company was incorporated by the state of Maryland.
Marshall alleged that the Railroad Company owed him money.
The defendant argued that the court lacked jurisdiction because some of the railroad’s stockholders were also citizens of Virginia, thus destroying diversity of citizenship.
Procedural History
The United States Circuit Court for the District of Maryland initially heard the case.
The Circuit Court’s jurisdiction was challenged based on the argument that some stockholders of the Baltimore & Ohio Railroad were also citizens of Virginia, the same state as the plaintiff, Marshall.
The Circuit Court allowed the suit to proceed.
The Supreme Court of the United States reviewed the Circuit Court’s decision on the issue of jurisdiction.
Issue(s)
Whether a corporation should be considered a citizen of the state that chartered it for the purpose of determining diversity jurisdiction in federal courts, even if some of its stockholders are citizens of a different state.
Holding
Yes, because a corporation is treated as a citizen of the state in which it is created, regardless of the citizenship of its individual stockholders, for purposes of diversity jurisdiction.
Court’s Reasoning
The Supreme Court addressed the critical issue of corporate citizenship for federal jurisdiction. The Court explicitly affirmed its prior ruling in Bank of the United States v. Deveaux, 9 U.S. 61 (1809), which initially allowed inquiry into the citizenship of a corporation’s members to determine diversity. However, the Court recognized the impracticality of such an inquiry, stating that it would be virtually impossible to ascertain the citizenship of every stockholder in a large corporation. The Court reasoned that a corporation, for jurisdictional purposes, is to be regarded as if it were a citizen of the state where it was created. The Court stated, “The question has been several times before this court, and they have never been able to come to a conclusion that a corporation, as such, was a citizen of any State.” The practical consideration of enabling corporations to sue and be sued in federal courts without the cumbersome task of determining the citizenship of each stockholder heavily influenced the decision. This ruling solidified the concept of corporate citizenship based on the state of incorporation for diversity jurisdiction purposes. The decision effectively overruled the practical application of Deveaux while technically upholding the precedent.