The U.S. Supreme Court case Adams v. Louisiana Board of Liquidation in 1891 revolved around the issue of whether a state could alter its contract obligations through legislative action without violating the Contract Clause of the Constitution, which prohibits states from passing laws that impair contractual rights. The case involved bondholders who had purchased bonds issued by Louisiana and were promised repayment with interest at a specific rate. However, due to financial difficulties, Louisiana passed legislation reducing the interest rate on these bonds unilaterally, prompting bondholders to sue for breach of contract. The Supreme Court ruled in favor of the plaintiffs (bondholders), stating that while states have broad powers under their police power authority, this does not extend to altering or repudiating contracts they themselves have entered into as it would violate constitutional protections provided by the Contract Clause. This decision reinforced that even public entities like states are bound by their contractual commitments and cannot use legislative measures to evade them.

In the dissenting opinion for Adams v. Louisiana Board of Liquidation, Justice Lamar argued that the majority's decision was a misinterpretation of the Contract Clause in relation to state bonds. He contended that states have inherent sovereign powers which include control over their own financial obligations and should not be restricted by federal interpretation of contract law. The justice believed this case represented an unwarranted intrusion into state affairs by federal courts, undermining principles of federalism and potentially leading to a dangerous expansion of judicial power at the expense of states' rights. Furthermore, he expressed concern about potential negative impacts on public finance if courts could interfere with states’ ability to manage their debt as they see fit.