In the case of Madera Water Works v. Madera, 1912, the U.S Supreme Court dealt with a dispute between a private water company and the city of Madera in California over water supply contracts. The private company had entered into an agreement to provide water services for fifty years but was later denied by the city council who wanted to establish their own municipal system. The court ruled that while municipalities have broad powers under state law, they cannot unilaterally alter or terminate valid contracts without due process or just compensation. This decision upheld contractual rights against arbitrary government action and reinforced constitutional protections for property rights.

In the dissenting opinion for Madera Water Works v. Madera, the justice argued that the city of Madera had no right to arbitrarily fix water rates without giving due consideration to the cost of service and a reasonable return on investment for the company. He contended that such an action was in violation of constitutional rights, specifically those pertaining to property ownership and fair compensation. The justice further asserted that it was not within a municipality's power to unilaterally determine what constitutes 'reasonable' rates without taking into account all relevant factors or providing any form of recourse or appeal process for affected parties. This viewpoint essentially posited that while public utilities may be subject to regulation, they should also be protected from potential abuses by local government entities.