In the 1930 case of Missouri Pacific Railroad Company v. Norwood, Attorney General of Arkansas, et al., the U.S. Supreme Court was tasked with determining whether a state law that required railroads to maintain and operate passenger trains on certain routes constituted an undue burden on interstate commerce. The Missouri Pacific Railroad Company argued that it was losing money by operating these lines and sought relief from this obligation under federal laws governing interstate commerce. However, the State of Arkansas contended that discontinuing service would harm local communities dependent on those train routes for transportation. The court ruled in favor of Missouri Pacific Railroad Company stating that while states have considerable power to regulate businesses within their borders for public welfare purposes, they cannot do so in ways which place an unreasonable burden upon interstate commerce or violate constitutional protections afforded to businesses engaged therein. This decision affirmed the supremacy of federal over state law when it comes to regulating aspects related directly or indirectly with interstate trade.

In the dissenting opinion for Missouri Pacific Railroad Company v. Norwood, Justice Stone argued that the Arkansas statute in question did not violate due process rights under the Fourteenth Amendment as it was a reasonable exercise of state power to regulate business within its borders. He contended that railroads were not deprived of their property without just compensation since they could still earn a fair return on their investments even with rate regulation imposed by the state. Furthermore, he believed that courts should defer to legislative judgment when determining what constitutes a fair and reasonable rate unless there is clear evidence of arbitrary or discriminatory action. In his view, this case lacked such evidence.