In the case of Louisville and Nashville Railroad Company v. Mottley, 1910, the U.S. Supreme Court established a key principle regarding federal jurisdiction known as "the well-pleaded complaint rule." The plaintiffs, Mr. and Mrs. Mottley, were injured in a train accident and received lifetime railroad passes from the company as part of their compensation settlement agreement. When Congress later passed an act making it illegal for railroads to provide free transportation services to anyone except employees or certain others not including the Mottleys', they sued on grounds that this violated their contract with the railroad company. The court ruled against them stating that federal courts only have jurisdiction if there is a federal question raised directly by plaintiff's claim itself rather than any anticipated defense by defendant; hence establishing 'the well-pleaded complaint rule'. In this case, although there was indeed a Federal issue (i.e., whether or not Congress' Act superseded their contract), it arose only as part of defendant’s potential defenses but wasn't inherent in plaintiff's original breach-of-contract claim which was purely state law-based.

In the dissenting opinion for Louisville and Nashville Railroad Company v. Mottley, Justice Holmes disagreed with the majority's interpretation of jurisdictional rules. He argued that federal question jurisdiction should be determined by looking at the plaintiff’s original complaint rather than any anticipated defenses from the defendant. In this case, he believed that since Mottleys' claim was based on a contract whose validity depended upon an Act of Congress, it presented a federal question sufficient to invoke federal jurisdiction. The fact that their right to relief necessarily required resolution of a substantial question of federal law made it appropriate for consideration in Federal Court according to him.