Bank of the United States v. Planters' Bank of Georgia (1824)

In Bank of the United States v. Planters' Bank of Georgia (1824) 22 U.S. 904, the Supreme court was discussing whether suit against a banking company of which a state was a stockholder must be brought originally in the Supreme Court because of the provision of the 11th amendment to the Federal Constitution that the Supreme Court should have original jurisdiction in cases by one state against another. The Court did discuss the Eleventh Amendment, but only insofar as it held that the fact that a state holds shares in a corporation does not entitle the corporation itself to sovereign immunity. (See id. at 907.) Chief Justice Marshall announced the rule that ownership of shares in a private corporation does not change the character of the corporation. Chief Justice Marshall said: "It is, we think, a sound principle that, when a government becomes a partner in any trading company, it divests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen. Instead of communicating to the company its privileges and its prerogatives, it descends to a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business which is to be transacted. Thus, many states of this Union, who have an interest in banks, are not suable even in their own courts; yet they never exempt the corporation from being sued. The state of Georgia, by giving to the bank the capacity to sue and be sued, voluntarily strips itself of its sovereign character, so far as respects the transactions of the bank, and waives all the privileges of that character. As a member of a corporation, a government never exercises its sovereignty. It acts merely as a corporator, and exercises no other power in the management of the affairs of the corporation, than are expressly given by the incorporating act.""Instead of communicating to the company its privileges and its prerogatives, it descends to a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business which is to be transacted."