Texas & Pacific Railway Co. v. Eastin & Knox

Background

The dispute involved the Texas and Pacific Company, a corporation chartered under an act of Congress, and the St. Louis and San Francisco Railroad Company, a local railroad. Texas and Pacific sought to remove the case to federal court, arguing its federal charter made the suit one arising under national law. Instead of merely defending, Texas and Pacific also brought its own claim against the local railroad and obtained a state-court judgment for $1,800, which was later affirmed by the state’s highest court.

Reasoning

The Court considered two main questions: whether being a corporation created by Congress makes a case removable to federal court, and whether that removal right is lost when the corporation itself invokes the state court by suing a local defendant. Relying on earlier decisions, the Court explained that removal rights exist for federally chartered companies, but a party that invokes state-court jurisdiction for its own affirmative relief submits to that court. By suing the local company and pursuing a judgment there, Texas and Pacific effectively accepted state-court jurisdiction and could not later force removal.

Real world impact

The decision means corporations that want federal courts must avoid invoking state courts for affirmative relief or must promptly preserve removal by filing the record in federal court. A company that chooses to sue in state court and obtains a judgment cannot later claim removal to undo that process. The Court affirmed the state-court judgment and noted protections for removal remain if a party follows the correct procedures.

Dissents or concurrances

Two Justices, Peckham and Day, dissented. The opinion does not give their reasoning in the text provided, only that they disagreed with the Court’s judgment.