In the 1951 case of Gardner v. Panama Railroad Co., the U.S. Supreme Court ruled in favor of the defendant, Panama Railroad Company, stating that it was not liable for injuries sustained by an employee while off duty and on a personal errand. The plaintiff, Mr. Gardner, was employed as a conductor with his residence provided by the company in Colon City (Panama). He got injured during his off-duty hours when he fell into an open drain near his quarters while returning from a restaurant after dinner. He claimed compensation under Federal Employers' Liability Act (FELA), arguing that since he lived on premises owned and controlled by the railroad company, they were responsible for maintaining safe conditions there at all times. However, Justice Reed delivered majority opinion holding that FELA did not apply to this situation because Mr.Gardner's injury occurred outside working hours and wasn't related to employment duties or risks inherent therein; hence no liability could be imposed upon employer under FELA provisions which are specifically designed to cover work-related accidents only.

In the dissenting opinion for Gardner v. Panama Railroad Co., Justice Jackson disagreed with the majority's interpretation of jurisdiction in this case. He argued that Congress did not intend to exclude federal employees working outside U.S territory from seeking compensation under the Federal Employers' Liability Act (FELA). According to him, such an exclusion would contradict FELA’s purpose of providing broad protection for workers injured on duty. Furthermore, he contended that a literal reading of "any State or Territory" should include all areas where U.S law applies and is enforced by American courts, including Canal Zone as it was governed by United States at that time. Therefore, he believed that Mr.Gardner should be allowed to sue his employer in a US court despite being injured while working abroad.