In the case of California v. Texas et al., 1981, the Supreme Court was asked to resolve a dispute over which state had jurisdiction in an inheritance tax matter. The issue arose from Howard Hughes' death without a will and his significant property holdings in both states. California argued that it should have jurisdiction because Hughes lived there before moving to Nevada (a move Texas claimed was not permanent). However, the court ruled against California, stating that under federal law, only one state could impose its inheritance tax on an estate - specifically where the deceased person was legally domiciled at their time of death. Since evidence suggested Hughes intended for his domicile to be in Texas despite spending considerable time elsewhere due to business interests or health reasons, Texas had rightful claim as per majority opinion written by Justice Powell.

In the dissenting opinion for California v. Texas et al., 1981, Justice William H. Rehnquist argued that the majority's decision to allow a state to sue another state in federal court over an alleged violation of its sovereign immunity was inconsistent with previous case law and violated principles of federalism. He contended that allowing such suits would open up states to litigation from other states on any matter, undermining their sovereignty and potentially leading to conflicts between states. Furthermore, he disagreed with the majority's interpretation of Article III of the Constitution as granting jurisdiction over disputes between two or more States without considering whether they involve justiciable controversies under traditional principles applicable in all other contexts.