In the case of Marshall v. People of the State of New York in 1920, the Supreme Court ruled on a dispute involving bankruptcy proceedings and state tax obligations. The All Package Grocery Stores Company had gone bankrupt and its receiver, Marshall, was tasked with managing its assets. However, during this process, he failed to pay taxes owed by the company to New York State. Consequently, New York sued him for these unpaid taxes but he argued that as a federal appointee his actions were protected under federal law which superseded state law (the Supremacy Clause). The court disagreed with Marshall's argument stating that while receivers appointed by federal courts are indeed officers of those courts; they are not immune from their duty to comply with valid state laws such as paying due taxes. Therefore it held that states have power over property within their jurisdiction even if it is being administered by a federally-appointed receiver in bankruptcy proceedings.

In the dissenting opinion for Marshall v. People of the State of New York, Justice Oliver Wendell Holmes Jr. disagreed with the majority's decision to uphold a law that allowed creditors to seize assets from insolvent corporations without court approval. He argued that this violated due process rights under the Fourteenth Amendment because it did not provide an opportunity for hearing or judicial review before seizure occurred. Holmes believed that while states have broad power to regulate businesses and protect public welfare, they must still respect constitutional protections such as due process rights when doing so. In his view, allowing creditors unfettered access to corporate assets without any form of legal oversight was fundamentally unfair and unconstitutional.