In the 1920 case of Erie Railroad Company v. Board of Public Utility Commissioners, the U.S Supreme Court ruled in favor of the railroad company. The dispute arose when New Jersey's Board of Public Utility Commissioners ordered Erie to construct a bridge over one of its tracks at its own expense for public safety reasons. However, Erie argued that this order was unconstitutional as it violated their due process rights under the Fourteenth Amendment by imposing an undue financial burden without sufficient justification or compensation. The court agreed with Erie and held that while states have broad powers to regulate businesses within their jurisdiction for public welfare purposes, they cannot do so in a way that arbitrarily imposes excessive costs on private entities without just cause or fair compensation.

In the dissenting opinion for Erie Railroad Company v. Board of Public Utility Commissioners, Justice Holmes argued that the state of New Jersey had a right to regulate its own railroad crossings and that this regulation did not interfere with interstate commerce. He believed that it was within the state's police power to ensure safety at these crossings and disagreed with the majority's view that federal law preempted state law in this case. Holmes contended there was no conflict between federal and state regulations as they both aimed at promoting public safety, albeit through different means - one by regulating train speeds (federal) and another by requiring installation of safety gates or devices (state). Therefore, he saw no reason why both could not coexist without infringing upon each other’s jurisdictional boundaries.