In the case of Defense Supplies Corp. et al. v. Lawrence Warehouse Co. et al., 1948, the U.S Supreme Court was tasked with deciding whether a government corporation had the right to sue in federal court based solely on its status as a federally chartered entity or if it needed to meet diversity jurisdiction requirements like any other plaintiff would have to do so under normal circumstances. The Defense Supplies Corporation (DSC), along with another government agency, sued Lawrence Warehouse Company for breach of contract and negligence after goods stored by DSC were damaged while in Lawrence's care. Lawrence argued that since DSC was incorporated in Washington DC and not considered a citizen of any state, there could be no diversity jurisdiction which is typically required for cases heard at federal level courts. However, The Supreme Court ruled unanimously against this argument stating that because DSC was created under an Act of Congress and served national interests; it should be treated as though it were an inhabitant of every State when determining issues related to diversity jurisdiction. This ruling allowed federally chartered corporations such as DSC access to federal courts without needing to prove they met typical criteria for diversity jurisdiction.

In the dissenting opinion for Defense Supplies Corp. et al. v. Lawrence Warehouse Co. et al., Justice Robert H. Jackson argued that the majority's decision to allow a government corporation to sue in federal courts without showing diversity of citizenship or a federal question was an overreach of judicial power and violated principles of state sovereignty and separation of powers outlined in the Constitution. He contended that Congress did not explicitly grant such authority, nor could it be implied from its creation as a corporate entity under Delaware law, which he believed should have been respected by allowing state courts jurisdiction over disputes involving these corporations unless there were compelling reasons otherwise.