In the case of Mellon, Director General v. Arkansas Land & Lumber Co., 1927, the United States Supreme Court ruled in favor of the defendant, Arkansas Land & Lumber Co. The plaintiff had argued that a contract between them and the defendant was void due to its violation of federal law which prohibited railroads from transporting goods they produced themselves unless it was for their own use. However, this argument was rejected by the court on grounds that there were no such restrictions at state level where both parties operated and therefore did not violate any laws when entering into said contract. Furthermore, even if it did violate federal law as claimed by plaintiff, it would only render those specific provisions unenforceable rather than nullifying entire agreement.

In the dissenting opinion for Mellon v. Arkansas Land & Lumber Co., Justice Stone argued that the Court's majority decision was incorrect in its interpretation of the Transportation Act of 1920. He believed that this act did not intend to give railroads a right to recover overcharges made under rates established by state authorities before federal control, and then collected during federal control. Instead, he suggested that Congress intended only to preserve existing rights and liabilities as they were at the time when federal control began. Therefore, according to Justice Stone, if there was no pre-existing liability on part of shippers for these overcharges under state law or contracts with carriers prior to federal control period, such liability could not be created retroactively by virtue of provisions in Transportation Act alone.