In the case of Baltimore & Ohio Railroad Co. v. Kepner in 1940, the U.S Supreme Court ruled that a federal court could not enjoin a state court proceeding at the request of an insolvent debtor who had been sued by one of its creditors in state court. The railroad company was under reorganization pursuant to Section 77 of the Bankruptcy Act and sought to prevent Kepner from pursuing his claim for damages resulting from personal injuries sustained while working for them, arguing that it would interfere with their ongoing bankruptcy proceedings. However, Justice Hugo Black delivered the majority opinion stating that there is no absolute right under Section 265 (now §2283) of Judicial Code which allows federal courts to restrain state court proceedings merely because they involve claims against assets within control or custody of federal courts during bankruptcy cases.

In the dissenting opinion for Baltimore & Ohio Railroad Co. v. Kepner, Justice Frankfurter argued that the majority's decision was a departure from established principles of federalism and comity among states. He contended that there was no constitutional or statutory provision preventing a state court from hearing a case just because it had been previously dismissed by another state's court on jurisdictional grounds. The justice believed this ruling would lead to unnecessary interference with state courts' ability to administer their own laws and procedures, undermining their sovereignty in violation of fundamental tenets of American jurisprudence. Furthermore, he expressed concern about potential negative impacts on litigants who might be unfairly denied access to local courts due to circumstances beyond their control.