Black and White Taxicab Co. v. Brown and Yellow Taxicab Co.
276 U.S. 518 (1928)

  • The Brown and Yellow Cab Company, a Kentucky corporation, sought to create a business association with the Louisville and Nashville Railroad, where Brown and Yellow would have a monopoly on soliciting passengers of the railroad, effectively eliminating the competition, the Black and White Cab Co. Black and White sued.
  • The Kentucky Supreme Court found for Black and White.
    • The Kentucky Supreme Court found that such an agreement was illegal under Kentucky common law.
    • Note that this case came out before the rules about a corporation existing in their principle place of business were defined.
  • Brown and Yellow dissolved itself, reincorporated in Tennessee, and executed the same exact business agreement with Louisville there,
    • Unlike Kentucky, in Tennessee, that kind of agreement was perfectly legal.
  • Brown and Yellow sued Black and White in a Kentucky Federal Court to prevent them from soliciting passengers.
  • The Federal Court found for Brown and Yellow.
    • The Federal Court upheld the agreement, citing Swift v. Tyson (41 U.S. 1 (1842)), and arguing that under general Federal common law, the agreement was valid.
    • The Court didn’t care whether the agreement would be legal under Kentucky law or Tennessee law, they only considered whether it would be legal under Federal common law.
      • Note that if Brown and Yellow had brought suit in a Kentucky State court, then Kentucky common law would have applied and the agreement would not have been upheld.
  • This case would have turned out differently if it had happened after the Erie Doctrine was developed.
    • See Erie Railroad Co. v. Tompkins (304 U.S. 64 (1938)).