In the 1936 case of Kentucky Whip & Collar Co. v. Illinois Central Railroad Co., the U.S Supreme Court ruled in favor of Illinois Central Railroad, stating that it was not liable for damages to a shipment while in transit. The plaintiff, Kentucky Whip & Collar Company had sued for losses incurred when their goods were damaged during transportation by the defendant's railroad company due to an alleged delay and negligence on part of the carrier. However, according to federal law at that time (the Carmack Amendment), carriers could limit their liability through contracts unless they were guilty of gross negligence or fraud which wasn't proven here. Therefore, since there was no evidence suggesting such misconduct from Illinois Central Railroad and considering they had a contract limiting their liability with Kentucky Whip & Collar Company beforehand, the court held them not responsible for any damage caused.

In the dissenting opinion for Kentucky Whip & Collar Co. v. Illinois Central Railroad Co., it was argued that the majority's decision to uphold a state law requiring railroads to pay damages for lost or damaged goods, even if they were not negligent, was unconstitutional. The dissenting justices believed this violated the Due Process Clause of the Fourteenth Amendment because it unfairly penalized railroads without giving them an opportunity to defend themselves or prove their innocence. They also felt that such laws could potentially bankrupt railroad companies and disrupt interstate commerce by making shipping costs prohibitively expensive due to increased insurance premiums and other expenses related to potential damage claims.