Donald v. Philadelphia & Reading Coal & Iron Co.
Headline: Wisconsin law that revoked business licenses for companies that moved lawsuits to federal courts is struck down, protecting corporations’ right to use federal courts and limiting state power to punish removal.
Holding: The Court held that Wisconsin’s statute revoking licenses of out‑of‑state companies for moving state lawsuits into federal court is unconstitutional, affirming that such companies may exercise their federal removal right without losing licenses.
- Prevents states from revoking licenses for removing suits to federal court.
- Protects businesses’ ability to move state cases into federal court.
- Limits state power to punish foreign companies for using federal courts.
Summary
Background
The dispute involves Wisconsin and two out‑of‑state companies: a New York telegraph company and a Pennsylvania coal company. Wisconsin law set conditions for foreign corporations to do business in the State and required licenses. A 1905 statute said the secretary of state must revoke a foreign corporation’s license if that corporation removed a lawsuit filed by a Wisconsin citizen from state court to a federal court. Both companies had licensed to do business in Wisconsin, removed suits to federal court, and asked a court to stop the State from revoking their licenses.
Reasoning
The Court considered whether the State could use license revocation to prevent corporations from moving cases into federal courts. It concluded the statute sought to stop corporations from exercising a constitutional right to have federal courts hear certain suits. Relying on the principle that the federal judicial power is independent of state action, the Court found Wisconsin’s rule beyond the State’s power. The lower court’s ruling that the statute was inoperative as applied to these companies was therefore correct, and the Supreme Court affirmed that decision.
Real world impact
The ruling protects out‑of‑state businesses that do local commerce in Wisconsin from losing their licenses for choosing a federal forum. States may not condition or punish the exercise of the federal right to remove suits by revoking a company’s authorization to do business. This decision therefore limits one tool states might use to keep cases in state courts and preserves corporate access to federal courts.
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