In the 1919 case of Fort Smith Lumber Company v. State of Arkansas, the U.S. Supreme Court ruled in favor of Arkansas, upholding a state law that required foreign corporations to pay an annual franchise tax for doing business within its borders. The Fort Smith Lumber Company, incorporated in Delaware but operating extensively in Arkansas, argued that this law violated both the Due Process and Equal Protection Clauses of the Fourteenth Amendment by unfairly discriminating against out-of-state businesses. However, the court disagreed with this argument stating that states have broad powers to regulate commerce within their boundaries and can impose taxes on foreign corporations as long as they are not discriminatory or unreasonable. Therefore, it was concluded that requiring a franchise tax from companies like Fort Smith did not violate constitutional principles.

In the dissenting opinion for Fort Smith Lumber Company v. State of Arkansas, Justice Holmes argued that the majority's decision to uphold an Arkansas law prohibiting out-of-state corporations from removing cases to federal court was incorrect. He contended that this law violated the U.S. Constitution by infringing on a corporation’s right to equal protection under the Fourteenth Amendment and its privileges and immunities as a citizen under Article IV, Section 2. Holmes believed that these constitutional protections should extend equally to all citizens, including corporations, regardless of their state of incorporation or operation. Therefore, he disagreed with the majority's interpretation which allowed states like Arkansas to discriminate against foreign corporations in terms of access to federal courts.