523 U.S. 767 (1998)

Ellis Island, the immigrant processing center in New York Harbor that so many Americans can trace their ancestors to, is in an interesting location. According to the defined boundary between New York and New Jersey, it should be in New Jersey. In 1834, however, the two states signed an agreement that the island belonged to New York. Then, in 1891, the federal government started adding landfill on the New Jersey side of Ellis Island, in order to expand their facilities there. Eventually, this landfill reached 24.5 acres.

In 1908, the United States Supreme Court ruled, in Central R. Co. of New Jersey v. Jersey City (209 U.S. 473), that New Jersey had rights to all the submerged land on its side of the Hudson River and New York Harbor. This gave New Jersey a chance to claim that the new portions of Ellis Island were actually part of their state.

At first, this wasn't an issue, since the feds owned Ellis Island anyway. However, in 1954, the Immigration and Naturalization Service closed up shop on the island, and it was soon redeveloped as a historic site. Suddenly, New Jersey had a motive to sue for control of their part of Ellis Island, and they filed such a suit in the Supreme Court in 1993.

New York made several arguments in defense of their sovereignty. Their lawyers said that landfilling was such a common practice in the early 1800's that it was implied in the original 1834 compact. They said that New York had been providing several services for Ellis Island's residents for decades, and also argued that New Jersey had not made any claims to sovereignty over the landfilled portions for the better part of a century, and that it was therefore chargable with "laches," or a lack of diligence.

Oral arguments were heard on January 12, 1998, and the Court made its decision on May 26, 1998. New Jersey won.

David Souter's opinion, joined by four other justices:

...In sum, the peculiar facts of this case affected New York's capacity to invoke a sovereign's claim as well as the significance of such acts it now adduces as prescriptive in character. New York's position as sovereign of the original Island under the Compact rendered any statement of "Ellis Island, New York" equivocal, without more, for prescriptive purposes, and the National Government's occupation tended to limit the notice to New Jersey of such acts as New York did perform. ...

We have recognized before that the belief of the inhabitants of disputed territory that they are citizens of one of the competing States is "of no inconsiderable importance." ...

In 1900, when the Government requested proposals for a kitchen and restaurant building on the Island, its announcement stated that "Ellis Island is not under the jurisdiction of the State or City of New York. The New York City and State Building Laws and City Ordinances will not apply to the same in regard to building matters." ... From 1890 to 1911, however, the federal spokesmen did not stop at saying merely that the Island was not part of New York; in these years the federal Harbor Line Board prepared surveys of recommended Island pierhead and bulkhead lines for the approval of the Secretary of War, all of which were titled "Pierhead & Bulkhead Lines for Ellis' Island, New Jersey, New York Harbor, as recommended by the New York Harbor Line Board." ...

Stephen Breyer's concurring opinion, joined by Ruth Bader Ginsburg, stated that:

Many of us have parents or grandparents who landed as immigrants at "Ellis Island, New York." And when this case was argued, I assumed that history would bear out that Ellis Island was part and parcel of New York. But that is not what the record has revealed. Rather, it contains a set of facts, ...which shows, in my view, that the filled portion of Ellis Island belongs to New Jersey.

...The Federal Government's virtually exclusive authority over the Island means that New Jersey could well have thought about the same. Perhaps more specialized property lawyers would have phrased their own conclusions in less ringing terms and with more numerous qualifications. But, still, one cannot reasonably expect New Jersey to have mounted a major protest against New York's assertions of "sovereignty" (modest as they were) over territory that was within the control of the Federal Government. Nor can one expect the immigrants themselves to have taken a particular interest in state boundaries, for most would have thought, not in terms of "New York" or "New Jersey," but of a New World that offered them opportunities denied them by the Old. Given this background, any legal rule of "prescription" that found New York to have surmounted its high barrier here would create serious problems of fairness in other cases.

To this, Rudolph Giuliani replied that "nobody got on a ship in Europe saying they were headed for New Jersey."

John Paul Stevens wrote one of two dissenting opinions:

During the period between 1892 and 1954 Ellis Island served as the Gateway to America for over 12 million immigrants. Thousands of citizens worked on the Island and hundreds resided there during those six decades. There is no evidence that any of those people ever believed that any part of Ellis Island was in the State of New Jersey. What evidence is available uniformly supports the proposition that whenever a question of state authority was considered by any members of that multitude of immigrants and citizens, both they and the responsible authorities in New York assumed that all of Ellis Island was a part of New York. The relevant facts were sufficiently public and obvious to support a presumption that, with one temporary exception, the authorities in New Jersey shared that belief. The fact that all of the relevant evidence concerning that period points in the same direction is far more significant than the fact that the quantity of evidence supporting certain propositions is not large. A solitary fingerprint may establish a preponderance of the evidence when there is a total absence of evidence pointing in another direction.
Antonin Scalia also dissented, and was joined by Clarence Thomas:

For a lengthy period of time all the parties to the compact—New York, New Jersey, and the United States—behaved as though all of Ellis Island belonged to New York. New York provided to the residents of the island, including the filled portions, privileges and services a sovereign normally provides—the right to vote, civil marriages, birth and death certificates, police and fire protection. As far as appears, New Jersey provided none of them; and whether or not New Jersey knew that New York was behaving like a sovereign, it assuredly knew that it was not. And the United States, for its part, treated the island as part of New York for its governmental purposes, including the constitutionally required decennial census, the assignment of postal zones, and (in the end) application of the Davis-Bacon Act. That practical construction suffices, in my view, to establish what the Compact of 1834 meant.
So New Jersey was given most of Ellis Island: everything below the low water line, which would have been its territory in 1834. The boundary line was not adjusted to account for buildings or other modifications to the island. Said the Court, "The difficulties created by a boundary line that divides not just an island but some of its buildings are the price of New Jersey's success in litigating under a compact whose fair construction calls for a line so definite."

source: http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=000&invol=120ORIG