In the case of American Railroad Company of Porto Rico v. Birch, the U.S Supreme Court ruled in favor of Birch, a landowner whose property was taken by the railroad company for public use without proper compensation. The court held that while it is within a government's power to take private property for public use - also known as eminent domain - this must be accompanied by just compensation to the owner under the Fifth Amendment. This ruling clarified that these constitutional protections extend not only within states but also to territories like Puerto Rico where American law applies. Therefore, even though Puerto Rico had its own laws regarding eminent domain which did not require immediate payment before seizure, they were found inconsistent with U.S constitution and thus invalid.

In the dissenting opinion for American Railroad Company of Porto Rico v. Birch, Justice Oliver Wendell Holmes Jr. argued that Puerto Rico should be considered a foreign country in terms of tariff laws because it was not incorporated into the United States at the time. He believed that Congress had full power to regulate commerce with Puerto Rico as if it were a foreign nation until such incorporation occurred. Therefore, he disagreed with the majority's view that tariffs could not be imposed on goods transported from Puerto Rico to mainland U.S., arguing instead that these tariffs were constitutional and within Congress' powers under its Commerce Clause authority.