Peyton v. Railway Express Agency, Inc.

Background

A person who shipped a package from Waco, Texas to an addressee in California sued an interstate carrier after the package was not delivered, seeking $750,000 in damages. The trial judge required the shipper to attach the carrier’s express receipt, which declared the package value as $50, and concluded the disputed amount was under the $3,000 threshold for federal cases, so the claim was dismissed. The Court of Appeals agreed and the shipper asked the Supreme Court to decide whether such claims can be heard in federal court under a federal law that regulates interstate shipping, regardless of the dollar amount claimed.

Reasoning

The Court examined the federal shipping statute that requires carriers to issue receipts and makes them liable for loss or damage, while allowing limited liability when a shipper declares value to get a lower rate. The carrier conceded the suit arises under that federal statute. The Court pointed to a 1914 congressional law that treated cases under the shipping statute as ones arising under a law regulating commerce and explained that whether a suit arises under federal law depends on the plaintiff’s complaint. Because the shipper’s pleading showed the case turns on construction of the federal shipping statute, the Court held the federal district court could hear the claim and reversed the dismissal.

Real world impact

The decision lets shippers bring claims based on the federal shipping law in federal court even when the money at stake is small. It clarifies that such disputes are federal in character when the complaint depends on the federal statute. The ruling decides where these cases are heard, not whether the carrier is actually liable on the merits.