In the 1894 case of New Orleans City and Lake Railroad Company v. Louisiana Ex Rel. City of New Orleans, the U.S Supreme Court ruled in favor of the railroad company, overturning a decision by the state court that had ordered it to pave and maintain certain streets in New Orleans where its tracks were laid. The city argued that an 1882 ordinance gave them authority to require such maintenance from railroads operating within their jurisdiction. However, this was disputed by the railroad company who claimed they only agreed to keep up with repairs on parts directly occupied by their rails under an earlier agreement from 1878 which did not include paving or maintaining entire streets. The Supreme Court held that while municipalities have power over local improvements and can impose conditions for use of public ways, these powers are subject to constitutional limitations especially when it comes to impairing obligations under existing contracts as protected by Contract Clause (Article I Section X) of US Constitution. Therefore, imposing new burdensome requirements retroactively was deemed unconstitutional because it violated terms set out in original franchise contract between city and railroad company.

In the dissenting opinion for New Orleans City and Lake Railroad Company v. Louisiana Ex Rel. City of New Orleans, Justice Brewer argued that the majority's decision was a departure from established precedent regarding taxation powers. He contended that while states have broad authority to levy taxes, they cannot do so in a manner that interferes with interstate commerce or violates constitutional protections against unequal treatment under the law. In this case, he believed both principles were violated by imposing an additional tax on railroad companies operating within city limits but not on those outside it - creating an unfair burden solely based on geographic location which could potentially disrupt interstate commerce activities as well as infringe upon equal protection rights of these entities under Fourteenth Amendment.