In the case of City of Knoxville v. Knoxville Water Company in 1908, the Supreme Court was asked to determine whether a city could regulate water rates for a private company that provided public services. The City of Knoxville had granted an exclusive franchise to the Knoxville Water Company, which allowed it to operate within city limits and provide water services. However, when the city attempted to set maximum rates for these services, the company sued on grounds that this violated its contract with the city and infringed upon its property rights without due process of law under Fourteenth Amendment protections. The Supreme Court ruled in favor of the City of Knoxville stating that while granting an exclusive franchise did create a contractual relationship between both parties; it did not prevent future regulation by municipal authorities over matters such as rate setting. This decision upheld cities' right to regulate utilities even if they are privately owned or operated.

In the dissenting opinion for the case of City of Knoxville v. Knoxville Water Company, it was argued that while a city has the right to purchase utilities such as waterworks, this does not automatically grant them authority over rates and services without proper legal procedures. The dissenting justices believed that there were contractual obligations between the company and its customers which could not be unilaterally altered by municipal takeover. They also expressed concern about potential abuse of power if cities could arbitrarily change terms after acquiring private businesses. Furthermore, they disagreed with majority's interpretation of "reasonable compensation," arguing it should include consideration for future profits lost due to premature termination of contracts rather than just current market value. This view emphasized respect for contract rights and warned against government interference in private business affairs without adequate justification or fair compensation.