In the case of Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 1950, the U.S Supreme Court ruled that federal courts do not have jurisdiction over cases involving state utility rates unless there is a constitutional issue at stake. The dispute arose when Montana-Dakota Utilities Company sued Northwestern Public Service Company for damages due to an alleged breach of contract related to natural gas sales and prices set by South Dakota's regulatory commission. However, the court held that it could not review or alter state-approved utility rates as this would infringe upon states' rights to regulate their own utilities under federal law (the Federal Power Act). Therefore, any disputes about these rates should be resolved in state courts instead.

In the dissenting opinion for Montana-Dakota Utilities Co. v. Northwestern Public Service Co., Justice Frankfurter disagreed with the majority's ruling that federal courts have jurisdiction over a dispute between two utility companies regarding rates charged under a contract, even when state law governs such contracts and disputes. He argued that this interpretation of Section 301 of the Federal Power Act was incorrect because it extended federal jurisdiction too broadly, infringing upon states' rights to regulate their own utilities industries. Furthermore, he contended that Congress did not intend for this section to apply to private contractual disputes but rather designed it as a regulatory tool for interstate commerce in electricity and natural gas markets. Therefore, according to Justice Frankfurter, this case should have been handled by state courts instead of being brought before the Supreme Court.