In Kutter v. Smith, the Supreme Court of the United States ruled that a state court had no jurisdiction to hear a case involving an alleged breach of contract between two citizens from different states. The plaintiff, Kutter, was a citizen of Pennsylvania and sued Smith in New York State Court for failing to pay him money owed under an agreement made while both parties were living in Pennsylvania. The defendant argued that since he was now residing in New York and the contract had been formed in another state, it should be heard by federal courts instead. The Supreme Court agreed with this argument and held that only federal courts could decide cases where there is diversity of citizenship between the parties involved; thus preventing any one state from having authority over matters outside its own borders.

In Kutter v. Smith, the Supreme Court was asked to decide whether a state court had jurisdiction over an action brought by a non-resident against another non-resident in which the cause of action arose out of a contract made and executed within that state. The majority opinion held that such jurisdiction did exist, but Justice Field dissented on the grounds that it violated due process for one state to exercise judicial power over persons who were not present within its boundaries at any time during the litigation or when they contracted with each other. He argued that this would be an unreasonable burden on citizens who may have no connection whatsoever with the forum state and could potentially lead to conflicting judgments from different states if similar cases were litigated simultaneously in multiple jurisdictions. Furthermore, he noted that Congress had never granted authority for such actions and thus it should remain solely within federal courts' purview as provided by Article III of the Constitution.