In the case of Moffett, Hodgkins and Clarke Company v. Rochester in 1899, the U.S Supreme Court ruled on a dispute involving water rights. The city of Rochester had granted exclusive rights to use water from the Genesee River to plaintiff company for their industrial operations. However, later on, the city decided to construct its own hydraulic works which would interfere with these rights. The court held that such an act by a municipality was not permissible under law as it violated contractual obligations made earlier with private entities like Moffett, Hodgkins and Clarke Company who had invested heavily based on those contracts. Thus, this ruling established that municipalities could not unilaterally alter or violate agreements they have entered into without due process or just compensation.

In the dissenting opinion for Moffett, Hodgkins and Clarke Company v. Rochester, Justice Harlan argued that the majority's decision was inconsistent with previous rulings of the court regarding municipal bonds. He contended that a city should not be allowed to issue bonds without receiving something in return from the company it is benefiting. In this case, he believed that Rochester had received no benefit from issuing its bonds to Moffett, Hodgkins and Clarke Company because there was no evidence showing any public use or advantage derived by citizens due to their operations within city limits. Therefore, according to him, these were not valid obligations of the municipality under state law or constitutionally permissible contracts under federal law as they did not serve a public purpose but rather private interests.