In the 1960 case of Pan American Petroleum Corp. v. Superior Court of Delaware for New Castle County, the U.S Supreme Court ruled in favor of Pan American Petroleum Corporation (Pan Am). The dispute arose when two oil companies, Cities Service Oil and Gas Co., a subsidiary of Pan Am, and Sinclair Refining Co., were both granted drilling rights by different landowners on adjacent properties in Texas. When Sinclair struck oil first, it drained not only its own property but also that belonging to Cities Service's lessor due to the nature of underground reservoirs. This led to a lawsuit against Sinclair by Cities Service which was settled out-of-court with an agreement that included payments from future production profits. However, this settlement did not include any provision regarding taxes on these payments; hence when federal income tax was levied upon them as ordinary income rather than capital gains (which would have been taxed at a lower rate), Pan Am sued for reimbursement arguing they should be considered capital gains instead. The court held that under Delaware law - where both corporations were incorporated - such reimbursements are part of corporate assets and thus subject to state jurisdiction even though neither company had physical presence there beyond their incorporation status.

In the dissenting opinion for Pan American Petroleum Corp. v. Superior Court of Delaware, it was argued that the majority's decision to allow a state court to exercise jurisdiction over an out-of-state corporation based on its "presence" in the state through subsidiary companies contradicted previous Supreme Court rulings and principles of federalism. The dissent contended that this expanded interpretation of corporate presence could lead to unfair burdens on interstate commerce by allowing corporations to be sued in any state where they have business operations, regardless of whether those operations are directly related to the lawsuit at hand. Furthermore, it was suggested that such broad jurisdictional reach might discourage corporations from expanding their businesses across state lines due to fear of litigation exposure.