In the case of Golden State Transit Corp. v. City of Los Angeles, the Supreme Court ruled in favor of Golden State Transit Corp., a taxi company that had its franchise renewal denied by the city due to an ongoing labor dispute with its drivers. The court held that federal labor law did not preempt a municipality from considering labor issues when deciding whether to renew a taxicab franchise, but it was unconstitutional for the city to refuse renewal based on these disputes as it interfered with collective bargaining rights protected under federal law. This decision clarified that while local governments have some authority over business licensing and regulation, they cannot use this power to interfere in federally-protected activities such as collective bargaining.

In the dissenting opinion for Golden State Transit Corp. v. City of Los Angeles, Justice Scalia argued that the court majority had overstepped its jurisdiction by intervening in a labor dispute between a private company and its employees' union, which should have been resolved through collective bargaining under federal labor law. He contended that the city's refusal to renew Golden State's taxi franchise was not an act of government regulation but rather an attempt to influence negotiations between two private parties, thus falling outside the scope of preemption doctrine as defined by previous Supreme Court rulings on similar cases. Furthermore, he criticized the majority for creating new legal standards without clear constitutional or statutory basis and warned against potential negative consequences this could have on future litigation involving local governments and their regulatory powers.