In the case of Diamond National Corp. et al. v. State Board of Equalization, 1975, the U.S Supreme Court ruled in favor of California's State Board of Equalization against a group of lumber companies led by Diamond National Corporation who challenged the constitutionality and fairness of a state tax on harvested timber. The plaintiffs argued that this tax was discriminatory as it exempted small harvesters from paying taxes while large corporations were taxed heavily, violating their rights to equal protection under law as provided by Fourteenth Amendment to the US Constitution. However, the court upheld California’s taxation scheme stating that it did not violate any constitutional provisions or federal laws because states have broad powers in designing and implementing their own taxation systems within certain limits set by federal statutes and constitutional principles.

In the dissenting opinion for Diamond National Corp. v. State Board of Equalization, Justice William O. Douglas argued that the majority's decision to uphold California's tax on out-of-state corporations was a violation of the Commerce Clause in the U.S. Constitution, which prohibits states from passing laws that discriminate against interstate commerce or unduly burden it. He contended that by taxing these corporations based on their worldwide income rather than just their income within California, the state was effectively imposing an unfair and unconstitutional burden on them simply because they were engaged in business across state lines - something he believed went directly against what our founding fathers intended when they drafted this clause into our constitution.