Canada Malting Co. v. Paterson Steamships, Ltd.

The Yorkton and the Mantadoc were vessels registered in Canada and owned by Canadian corporations. Both vessels were traveling in Lake Superior between Canadian ports when they collided with each other, after unintentionally crossing into United States waters at a point where the waterway narrowed. The Yorkton sank with a loss of cargo. A Canadian investigation found that both of the vessels had been at fault in the accident. Paterson Steamships, Ltd. (Paterson) (defendant), the owner of the Mantadoc, instituted a proceeding in Canadian court seeking a judicial determination of the liability issues. Three owners of cargo that had been lost on the Yorkton (the cargo owners) (plaintiffs) brought suit against Paterson in United States federal court. The cargo owners brought their cases in the United States because under Canadian law Paterson would only be responsible for half of the loss, but under United States law the cargo owners could recover their entire damages wholly from Paterson if the salvage value of the Yorkton was insufficient to cover half of the loss. Paterson moved to have the district court decline jurisdiction because all of the parties and vessels were Canadian. The cargo owners alleged that the district court was obligated to grant jurisdiction because the accident had occurred in United States waters. The district court granted Paterson’s motion and declined jurisdiction. The court of appeals affirmed the decision. The United States Supreme Court granted certiorari.