Woods v. Interstate Realty Company/Dissent Jackson

Mr. Justice JACKSON, dissenting.

Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, required federal courts in diversity cases to apply state decisional law as the Rules of Decision Act required them to apply state statutes.

That is what the Court of Appeals tried to do in this case. The State of Mississippi has a statute which says that if a corporation does not qualify to do business within the State it 'shall not be permitted to bring or maintain any action or suit in any of the courts of this state.' (Emphasis supplied.) The Court of Appeals reviewed state court decisions, some of which are not free from ambiguity, and found that the law of Mississippi intends to go no farther than to withhold the aid of state-maintained courts from a noncomplying corporation and that the state law does not deprive contracts of their validity or intend to foreclose foreign corporations from resort to federal courts or to any self-enforcing remedies they may have.

This Court refuses to give the statute that limited effect. I understand it to rule that Mississippi cannot enact a law closing its own courts to such foreign corporations without also closing the federal courts. In this we seem to be doing the very thing we profess to avoid; that is, give the state law a different meaning in federal court than the state courts have given it.

The Mississippi statute follows a pattern general among the states in requiring qualification and payment of fees by foreign corporations. State courts have generally held such Acts to do no more than to withhold state help from the noncomplying corporation ut to leave their rights otherwise unimpaired. This interpretation left such corporations a basis on which to get the help of any other court-federal or state-that could otherwise take jurisdiction, and free to resort to pledged property, offset and various other methods of self-help.

The state statute as now interpreted by this Court is a harsh, capricious and vindictive measure. It either refuses to entertain a cause of action, not impaired by state law, or it holds it invalid with unknown effects on amounts already collected. In either case the amount of this punishment bears no relation to the amount of wrong done the State in failure to qualify and pay its taxes. The penalty thus suffered does not go to the State, which sustained the injury, but results in unjust enrichment of the debtor, who has suffered no injury from the creditors' default in qualification. If the state court had held its statute to have this effect, I should agree that federal courts should so apply it; but the whole basis of our decision is contrary to that of the state courts.

I think the Court's action in refusing to accept the state court's determination of the effect of its own statute is a perversion of the Erie R. Co. v. Tompkins doctrine.

I would affirm the court below.

Mr. Justice RUTLEDGE and Mr. Justice BURTON join in this opinion.