In the case of American Railroad Company of Porto Rico v. Didricksen (1912), the U.S. Supreme Court was tasked with determining whether a Puerto Rican court had jurisdiction over an accident that occurred on a railroad owned by an American company but located in Puerto Rico. The plaintiff, Didricksen, was injured while working for the defendant and sought compensation under local law which differed from federal laws governing such incidents at that time. The Supreme Court ruled in favor of Didricksen, asserting that although Puerto Rico is a territory of the United States, it maintains its own distinct legal system separate from federal law unless explicitly stated otherwise by Congress. Therefore, cases arising within its borders are subject to local laws and courts have jurisdiction over them.

In the dissenting opinion for American Railroad Company of Porto Rico v. Didricksen, Justice Holmes disagreed with the majority's interpretation of Puerto Rican law and its application to this case. He argued that under local law, a railroad company was not liable for damages caused by an employee unless it could be proven that the company had been negligent in hiring or supervising them. In this case, there was no evidence presented to suggest such negligence on part of the railroad company. Therefore, he believed that they should not have been held responsible for their employee’s actions which led to Didricksen's injury and subsequent death. Furthermore, he contended that even if Puerto Rican law did hold employers vicariously liable for employees' acts as suggested by the majority opinion; it would still be inappropriate because such a rule is inconsistent with common principles of justice and fairness recognized in most jurisdictions at that time.