National Mutual Insurance Co. v. Tidewater Transfer Co.

Article III of the Constitution provides that federal courts have jurisdiction over cases and controversies between citizens of different states. Accordingly, in the Judiciary Act of 1789, Congress gave federal courts diversity jurisdiction over suits “between a citizen of the state where the suit is brought, and a citizen of another state.” In Hepburn & Dundas v. Ellzey, 6 U.S. (2 Cranch) 445 (1805), the United States Supreme Court held that a citizen of Washington, D.C. was not a citizen of a state within the meaning of the Judiciary Act. However, in 1940, Congress enacted a statute that treated citizens of Washington, D.C. as citizens of a state for diversity-jurisdiction purposes. After the statute was enacted, National Mutual Insurance Company (National) (plaintiff), a Washington, D.C. corporation, sued Tidewater Transfer Company (defendant), a Virginia corporation licensed to do business in Maryland, in a Maryland federal district court. National’s complaint alleged that jurisdiction was based on diversity of citizenship. The district court dismissed National’s action, finding that although the diversity in the case satisfied the 1940 statute, the case did not meet the constitutional diversity requirement. The appellate court affirmed, holding that Congress could not constitutionally open the federal courts to actions by a citizen of Washington, D.C. against a citizen of another state. The United States Supreme Court granted certiorari.