In the 1902 case of Texas and Pacific Railway Company v. Watson, the U.S Supreme Court ruled in favor of the railway company. The dispute arose when Watson claimed that he was injured due to negligence on part of the railway company's employees while working as a brakeman for them. He sought damages under Texas law which allowed employees to sue employers for injuries caused by fellow workers' carelessness if they were engaged in common employment at time of injury. However, since his contract with the railway stated it was governed by Louisiana law (which did not have such provision), this became a point of contention. The court held that because Watson had signed an employment contract agreeing that any disputes would be settled according to Louisiana law, he could not claim compensation under Texas state laws where incident occurred but where neither party resided or contracted their agreement. This decision reinforced principle that parties can choose governing law in contracts and courts will uphold these choices unless there is substantial reason not to do so.

In the dissenting opinion for Texas and Pacific Railway Company v. Watson, Justice Harlan disagreed with the majority's decision to dismiss the case on jurisdictional grounds. He argued that federal courts should have jurisdiction over cases involving interstate commerce disputes, even if they also involve state law issues. In this specific case, he believed that because it involved a dispute about freight rates between states - which is an issue of interstate commerce - it fell under federal jurisdiction. Furthermore, he contended that dismissing such cases could lead to inconsistent rulings in different states and undermine national uniformity in matters of interstate commerce regulation. Thus, Justice Harlan advocated for a broader interpretation of federal court jurisdiction over these types of cases.