In United States v. Alabama, the United States Supreme Court held that the federal government had the power to sue a state in federal court. The case arose when the United States sued the state of Alabama for failing to pay a debt owed to the federal government. The state of Alabama argued that the federal government did not have the power to sue a state in federal court. The Supreme Court disagreed, holding that the federal government had the power to sue a state in federal court. The Court reasoned that the Constitution gave the federal government the power to sue a state in federal court, and that the federal government had the right to enforce its laws. The Court also noted that the federal government had the power to protect its interests, and that the state of Alabama had failed to pay its debt to the federal government. The Court concluded that the federal government had the power to sue a state in federal court, and that the state of Alabama was liable for the debt it owed to the federal government. The Court's decision established the principle that the federal government has the power to sue a state in federal court.

In United States v. Alabama, the Supreme Court was tasked with determining whether or not the state of Alabama had to pay a debt owed by its predecessor, Mississippi Territory. The majority opinion held that since Congress had accepted and approved an act passed by Mississippi Territory in 1817 which obligated it to pay certain debts incurred prior to its admission as a state into the Union, then those obligations were transferred over onto Alabama when it became a separate entity from Mississippi Territory in 1819. Justice Field dissented from this opinion on two grounds: firstly, he argued that there was no evidence presented showing that Congress intended for any such transfer of obligation; secondly, he argued that even if they did intend for such transferral of obligation upon becoming states separately from their former territories - which would be unconstitutional according to Article IV Section 3 Clause 2 - then at least some form of compensation should have been provided by the federal government towards these new states taking on these old debts. Ultimately however his dissent went unheard and so the majority's ruling stood: Alabama must honor all outstanding financial obligations made by its predecessor territory before being admitted as a state into union.