In the case of Baltimore & Ohio Southwestern Railroad Company v. Settle et al., the U.S Supreme Court was asked to determine whether a state could impose taxes on interstate commerce, specifically in relation to railroad companies. The dispute arose when W.H. Settle & Co., a Kentucky-based company, sued the Baltimore & Ohio Southwestern Railroad for failing to pay taxes imposed by Kentucky law on freight transported across state lines. The railroad company argued that this tax violated the Commerce Clause of the U.S Constitution which prohibits states from regulating interstate commerce. The Supreme Court ruled in favor of Settle and upheld Kentucky's right to levy such taxes, stating that they did not interfere with interstate trade but were instead a legitimate exercise of its taxing power over property within its jurisdiction. This decision affirmed that while states cannot regulate or burden interstate commerce directly, they can still exert their taxing powers indirectly as long as it does not create an undue interference with such commerce.

In the dissenting opinion for Baltimore & Ohio Southwestern Railroad Company v. Settle et al., Justice Holmes disagreed with the majority's interpretation of the Interstate Commerce Act. He argued that it was not intended to regulate every aspect of a railroad company’s business, but rather only those aspects which directly affected interstate commerce. In this case, he believed that the act of loading and unloading freight did not constitute such an effect on interstate commerce as to warrant federal regulation under the Act. Furthermore, he contended that if Congress had intended for such activities to be regulated by federal law, they would have explicitly stated so in their legislation. Therefore, according to Justice Holmes’ interpretation of both Congressional intent and legal precedent regarding interstate commerce regulations, state laws should govern these types of disputes between railroads and shippers.