In the case of Clark Distilling Company v. Western Maryland Railway Company and State of West Virginia, 1916, the Supreme Court was asked to determine whether a state could regulate alcohol transportation within its borders when it conflicted with federal law. The Clark Distilling Company had shipped whiskey into West Virginia from Kentucky without paying taxes or obtaining permits required by West Virginia's laws. The company argued that these regulations were unconstitutional because they interfered with interstate commerce which is under federal jurisdiction according to the Commerce Clause in the U.S Constitution. The court ruled in favor of Western Maryland Railway Co., upholding West Virginia’s right to regulate alcohol within its borders despite conflicting with federal law on interstate commerce. This decision was based on Section 2 of the Webb-Kenyon Act passed by Congress in 1913, which prohibited shipments of alcoholic beverages into any state where such shipment would be contrary to its laws. Therefore, even though this regulation might have been seen as an interference with interstate commerce under other circumstances; given this specific context involving alcohol transportation and consumption control - states' rights prevailed over federal authority.

In the dissenting opinion for Clark Distilling Company v. Western Maryland Railway Company and State of West Virginia, Justice Holmes disagreed with the majority's ruling that a state could not regulate interstate commerce in this manner. He argued that while states cannot directly control interstate commerce, they can indirectly influence it through their police powers if there is no conflict with federal law. In his view, West Virginia’s prohibition on alcohol importation was an exercise of its police power to protect public health and safety rather than an attempt to regulate trade between states. Therefore, he believed it should be upheld even though it affected interstate commerce because there was no existing federal legislation on this issue contradicting or overriding the state law.