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Bank of Augusta v. Earle

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Significance: The Supreme Court recognized that the comity clause gave corporations a conditional right to do business in other states, but it also allowed states to regulate or even prohibit such business by explicit legislation.


An Alabama citizen refused to pay the bills of exchange of an out-of-state bank on the grounds that a foreign corporation had no legal right to make and enforce contracts in Alabama. The bank responded that a corporation, like a citizen, was guaranteed basic privileges and immunities in all the states, including the right to conduct business. Writing for an 8-1 majority, Chief Justice Roger Brooke Taney ruled in favor of the bank. The comity principle was operative in the absence of clear laws to the contrary, which was the situation in Alabama. Taney refused to recognize corporations as possessing all the rights of natural persons. Based on the Bank of Augusta principle, state legislatures enacted a great deal of legislation restricting business practices of out-of-state corporations. Although it never overturned the decision, the Supreme Court has subsequently held that regulations must not impose an undue burden on interstate commerce.