In the 1923 case Davis, Director General of Railroads v. Wechsler, the United States Supreme Court ruled on a dispute regarding jurisdiction over railroad companies during World War I. The federal government had taken control of railroads for wartime use and appointed William G. McAdoo as Director General of Railroads to oversee operations. A lawsuit was filed against him by an individual named Wechsler in New York state court concerning a personal injury claim from an accident that occurred while working on the railroad. The main issue before the Supreme Court was whether or not state courts had jurisdiction over such cases when they involved federally controlled entities like railroads during war times. The court held that federal law applied because it superseded any conflicting state laws due to its supremacy clause in situations where national interests were at stake, such as wartime management of crucial infrastructure like railways. Therefore, lawsuits involving these circumstances should be heard in federal courts rather than state ones since they involve matters under direct control and regulation by Congress through its constitutional powers related to war efforts and interstate commerce regulation.

In the dissenting opinion for Davis, Director General of Railroads v. Wechsler, Justice Oliver Wendell Holmes Jr. disagreed with the majority's decision that federal courts had jurisdiction over a dispute between two private parties regarding a contract related to railroad operations during World War I. He argued that this case did not involve any substantial federal question and should have been resolved by state courts under local law instead of being brought before the Supreme Court on appeal from a lower federal court. Holmes believed that just because one party was acting as an agent for the U.S government at some point in time does not automatically make it a matter involving federal rights or obligations, especially when there is no claim made against or by United States itself nor any assertion about constitutionality of its laws involved in this contractual dispute.