In the 1906 case of American Railroad Company of Porto Rico v. Castro, the U.S. Supreme Court ruled in favor of the railroad company, overturning a decision by Puerto Rico's Supreme Court that had favored Pedro J. Castro and his wife Maria R. de Castro who claimed damages for injuries sustained during an accident on one of the company’s trains. The court held that under Spanish law (which was still applicable at this time), there was no basis for liability unless negligence could be proven on part of the defendant - which it couldn't in this case as per Justice Holmes' opinion delivered for a unanimous court. The ruling also clarified certain aspects regarding jurisdictional issues between federal and territorial courts, stating that while decisions from Puerto Rican courts can be reviewed by US Federal Courts due to its status as a territory; they are not bound by their interpretations or applications when it comes to local laws such as those inherited from Spain.

In the dissenting opinion for American Railroad Company of Porto Rico v. Castro, 1906, Justice Harlan argued that Puerto Rico should be considered a territory incorporated into the United States and thus fully protected by the Constitution. He disagreed with the majority's ruling that only fundamental constitutional rights applied to unincorporated territories like Puerto Rico. Harlan believed this created an unjust double standard where U.S citizens in certain areas were not granted full constitutional protections simply because Congress had not officially incorporated those regions as part of the Union. He also expressed concern about potential abuses of power if Congress could selectively apply parts of the Constitution to different territories at its discretion.