In the 1902 case Davis and Farnum Manufacturing Company v. Los Angeles, the U.S. Supreme Court ruled in favor of the city of Los Angeles against a claim by Davis and Farnum Manufacturing Company for damages due to an alleged breach of contract. The manufacturing company had entered into a contract with the city to provide water pipes but later claimed that changes made by the city constituted a breach of this agreement, causing them financial harm. However, upon review, it was found that these alterations were within reasonable expectations for such contracts and did not significantly change what was initially agreed upon between both parties. Therefore, no compensation was awarded to Davis and Farnum Manufacturing Company as there had been no substantial violation on part of Los Angeles.

In the dissenting opinion for Davis and Farnum Manufacturing Company v. Los Angeles, the justice argued that the city of Los Angeles did not have a valid claim to ownership of certain water rights because it had failed to properly maintain and use them over time. The justice contended that under California law, an entity can lose its right to water if it does not make beneficial use of it within a reasonable period. In this case, he believed that Los Angeles had abandoned its rights by failing to adequately develop or utilize the waters in question for many years after acquiring them. He also disagreed with majority's interpretation of "reasonable" usage as being relative to each individual situation rather than having a fixed standard across all cases involving similar circumstances.