Chisholm v. Georgia (1793) was the first important decision by the U.S. Supreme Court, and during the early national period the most controversial. Reaction to the decision was so strong, and so negative, that it led to the Eleventh Amendment to the Constitution, which prevented the Supreme Court from ever hearing such a case again.
The facts behind Chisholm are relatively mundane. During the Revolution, Robert Farquhar, a South Carolina businessman, sold various goods to the state of Georgia, which then refused to pay its bills. Complicating this case was the fact that while he sold goods to Georgia, Farquhar himself was a Loyalist, which may explain why Georgia refused to pay him. This fact, and the fear that other Loyalists would sue the states, may also explain Georgia's adamant hostility to the Supreme Court taking jurisdiction in the case. Alexander Chisholm, who was Farquhar's executor, sued Georgia to recover the money. He brought suit under the clause in Article III, section 2 of the U.S. Constitution, which gave jurisdiction to the federal courts in suits "between a State and Citizens of another State." Georgia refused to send counsel to the Supreme Court to even argue the case. Georgia simply denied that the Supreme Court had jurisdiction over the matter.
Justice James Iredell of North Carolina agreed with Georgia that the federal courts had no jurisdiction to hear the suit of a private citizen brought against a state. The rest of the Court disagreed. Justice James Wilson believed the case went to the heart of what a nation was. He rejected the idea that the states were sovereign, and thus they could not be sued against their will. Chief Justice John Jay agreed, asserting that the Constitution "recognizes and rests upon this great moral truth, that justice is the same whether due from one man to a million, or from a million to one man."
The Court found in favor of Chisholm and entered a default judgment for him. This set the stage for a trial on the actual damages. But that trial never took place. Even if it had taken place, Georgia's governor, Edward Telfair, made it clear that his state would never submit to the jurisdiction of the Supreme Court on this matter. However, Georgia ultimately settled the case out of court, and the legislature appropriated money to Chisholm.
The most important result of the case was not Georgia's initial refusal to abide by a Supreme Court decision but the almost universal rejection of the holding by American politicians. The Supreme Court issued its decision on 17 February 1793. Within two days of the decision U.S. senators were considering an amendment to the Constitution to prevent citizens of one state from suing other states in federal court. Within a year of the decision both the House and Senate had voted in favor of such an amendment. By 7 February 1795, almost exactly two years after the decision, the amendment had received the support of three-fourths of the states and was thus in theory ratified. However, for reasons that are not entirely clear, the amendment did not officially become part of the Constitution until 8 January 1798. This was the first change in the Constitution since the adoption of the Bill of Rights. But unlike the first ten amendments, the Eleventh Amendment dealt with the restructuring of the original Constitution. The amendment simply declared that the judicial power of the federal courts did not "extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State."