In the 1916 case of Lehigh Valley Railroad Company v. United States, the Supreme Court ruled that a railroad company was not entitled to recover damages for losses incurred due to government negligence in maintaining and operating the Panama Canal. The Lehigh Valley Railroad Company had shipped coal through the canal on two vessels which collided due to faulty navigation caused by poor maintenance and operation by U.S. authorities. As a result, one vessel sank causing significant loss of cargo (coal). The court held that while private parties could sue for damages resulting from negligent acts committed by federal employees within their official duties under certain circumstances, this did not extend to operational activities related directly with Panama Canal's functioning as an international waterway because it is considered a governmental function immune from liability.

In the dissenting opinion for the case of Lehigh Valley Railroad Company v. United States, it was argued that the Interstate Commerce Commission (ICC) did not have authority to regulate practices related to coal distribution and pricing by railroad companies. The dissenting justices believed that Congress had only given ICC power over transportation rates and discrimination issues, but not over broader business practices like those at issue in this case. They also contended that even if ICC had such powers, its orders were unreasonable because they interfered with legitimate business operations without sufficient justification or evidence of harm to public interest. Furthermore, they disagreed with majority's interpretation of Hepburn Act amendments as expanding ICC's regulatory scope beyond what was originally intended by Congress.