In the 1923 case of Panama Railroad Company v. Johnson, the U.S. Supreme Court ruled in favor of an employee who was injured while working on a ship owned by his employer, Panama Railroad Company. The company argued that they were not liable for injuries sustained outside territorial waters under the Federal Employers' Liability Act (FELA). However, Justice Oliver Wendell Holmes Jr., writing for the majority, held that FELA applied to all employees involved in interstate or foreign commerce regardless of where their injury occurred. This ruling expanded workers' rights and protections beyond U.S borders when engaged in work-related activities.

In the dissenting opinion for Panama Railroad Company v. Johnson, Justice McReynolds disagreed with the majority's ruling that a U.S. court had jurisdiction over an accident occurring in Panama involving a U.S.-owned company. He argued that applying American law to incidents happening outside of its territory was inappropriate and could lead to confusion and inconsistency in legal rulings. Furthermore, he contended that it would be more appropriate for Panamanian courts to handle such cases as they are better equipped to understand their own laws and customs which should govern any incident within their borders. The justice also expressed concern about potential diplomatic issues arising from imposing American law on foreign soil without explicit agreement between nations.