In the Letson case, a citizen of New York brought suit in federal court against a railroad corporation chartered in South Carolina. The railroad, citing the Supreme Court's 1809 decision in Bank of the United States v. Deveaux, claimed that diversity jurisdiction did not exist because some of its shareholders were New York citizens. The Court overruled Deveaux, holding that a corporation's citizenship for purposes of diversity jurisdiction was to be determined by its state of incorporation rather than the state or states in which its shareholders resided. The ruling expanded federal court power, as corporations, now deemed citizens of a single state, were more likely to sue and be sued in federal court on the basis of diveristy jurisdiction.

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