The Hinderlider v. La Plata River & Cherry Creek Ditch Co., case in 1937 revolved around a dispute over water rights between Colorado and New Mexico. The Supreme Court ruled that the federal government, not individual states, has the ultimate authority to regulate interstate waters. This decision was based on the Constitution's Commerce Clause which gives Congress power to regulate commerce among states. In this case, it was determined that Colorado had been diverting more than its fair share of water from the La Plata River, an interstate body of water also flowing into New Mexico. The court ordered Colorado to allow more water flow downstream into New Mexico as per an agreement made earlier by both states' engineers but ignored by local authorities in Colorado.

In the dissenting opinion for Hinderlider v. La Plata River & Cherry Creek Ditch Co., Justice Butler argued that Colorado's rights to use water from the La Plata River should not be limited by an interstate compact with New Mexico, as it was inconsistent with a prior decree of the Supreme Court in Wyoming v. Colorado (1922). He believed that this case had established a precedent which allowed states to divert and use waters from interstate streams without regard to any harm caused downstream. In his view, this principle should have been applied in favor of Colorado's right to continue using water from the river despite New Mexico's objections. Furthermore, he disagreed with majority’s reliance on principles of international law regarding equitable apportionment between countries sharing an international stream; instead he maintained that these principles were irrelevant because they did not apply within United States federalism where each state is sovereign over its own natural resources.