Chisholm v. Georgia
Perhaps the earliest Supreme Court case that most Americans are familiar with is Marbury v. Madison. However, that case wasn't decided until the 19th century, and many Supreme Court decisions had already been made by that point. Chisholm v. Georgia was the most important Supreme Court decision of the 18th century. Ruled on in 1793, this case would lead to the passage of the Eleventh Amendment, the first amendment to the United States Constitution ratified by the states after the original Bill of Rights.
During the American Revolution, Chisholm had lived abroad, and some of his property included bonds held by two men living in America. After Chisholm died, the executors of his estate discovered that the bonds had been held by people who were important in the revolution. Because of this, the state of Georgia (which had remained loyal to the British Crown for some time) had confiscated their property and refused to give it back to the estate.
Chisholm's executors were citizens of the state of South Carolina, and they petitioned the courts for redress of their grievances. They sued the state of Georgia itself, demanding the money that had previously been confiscated. However, the state of Georgia refused to appear at any proceedings regarding the case. They reasoned that states had the right of sovereignty, and that as sovereign entities were immune to being sued by citizens of another state.
The Case Goes Before the Court
Whether states were sovereign, and thus whether they had sovereign immunity from lawsuits, was already a hotly contested political topic in the late 18th century. The United States had only recently moved from a looser conglomeration of states under the Articles of Confederation to its recent Constitution.
What made the case even more difficult to decide was the fact that there was not really any existing precedent for—well, just about any case at all in the United States under the Constitution. Since the common law system is based on previous judicial decisions, the court's ruling in Chisholm v. Georgia would be likely to set precedent. In the end, the court ruled that states could in fact be sued by citizens, and that the Constitution limited the sovereign immunity to the states.
The 11th Amendment
Someone canny about Constitutional issues might ask at this point, “but don't states have sovereign immunity today?” They do. After the decision in Chisholm v. Georgia, legislators all over the nation realized the flood of lawsuits states could be subject to if citizens were allowed to simply sue them whenever they liked. Because of this, the Congress drafted the 11th Amendment, which explicitly granted sovereign immunity to the states.
This amendment would eventually gain the ratification needed to become law. Today, it is only possible to sue a state under very specific circumstances, and those circumstances are those under which the state or nation actually has made an exception allowing itself to be sued.