In the 1923 case Craig v. Hecht, the United States Supreme Court ruled on a matter concerning bankruptcy law and jurisdictional issues. The petitioner, Craig, was a trustee in bankruptcy who sought to recover assets from Hecht, a U.S. Marshal for the Southern District of New York. These assets had been seized by Hecht under an admiralty process issued out of the district court prior to bankruptcy proceedings being initiated against their owner. The question before the court was whether or not these assets were part of the bankrupt estate that could be recovered by Craig as trustee. The Supreme Court held that they were indeed part of this estate and should thus be returned to it for distribution among creditors according to bankruptcy laws rather than being subject solely to admiralty law procedures and priorities. This decision clarified important aspects regarding jurisdictional boundaries between different areas of federal law (admiralty versus bankruptcy) when dealing with asset recovery in insolvency situations.

In the dissenting opinion for Craig v. Hecht, Justice Holmes argued that the case should not have been dismissed on jurisdictional grounds. He contended that there was a substantial federal question involved in this case and thus it fell within the purview of federal courts. The majority had ruled that since New York law did not provide for such an action, neither could federal law under diversity jurisdiction; however, Holmes disagreed with this interpretation of Erie doctrine principles. Furthermore, he believed that even if state laws were silent or ambiguous on a matter like this one involving stockholder rights and corporate governance issues, then common law principles should be used to fill in any gaps rather than dismissing outright due to lack of explicit statutory authority.