In the case of Defiance Water Company v. City of Defiance, 1903, the U.S Supreme Court ruled in favor of the city. The dispute arose when the City of Defiance decided to construct its own waterworks system despite an existing contract with a private company, The Defiance Water Company. This move was challenged by the water company as they believed it violated their exclusive rights granted under their contract with the city and would result in financial loss due to competition. However, upon review, it was found that there were no explicit exclusivity clauses within this agreement preventing such action from being taken by the city. Therefore, since there were no legal barriers stopping them from doing so and considering that public welfare is paramount over individual contracts or agreements where not explicitly protected by law; it was deemed lawful for cities to establish their own utilities even if similar services are already provided privately.

In the dissenting opinion for Defiance Water Company v. Defiance, it was argued that the city of Defiance had no right to construct its own waterworks without compensating the existing company for its loss of business. The justice contended that a contract existed between the city and the water company which granted exclusive rights to supply water in exchange for certain obligations on part of the company. This contract, according to him, could not be unilaterally altered or terminated by one party (the city) without due compensation being paid to other party (the water company). He further stated that such actions violated principles of fairness and equity as well as constitutional protections against deprivation of property without due process or just compensation.