In the case of The State of New Mexico v. The State of Colorado in 1924, the Supreme Court was asked to resolve a dispute over water rights between the two states. New Mexico claimed that Colorado's use and diversion of waters from an interstate river, specifically the Rio Grande River, had significantly reduced its flow into New Mexico causing harm to its citizens and their ability to irrigate their lands. In response, Colorado argued that it had prior appropriation rights which allowed them to divert water for beneficial uses within its borders before allowing any remaining flow downstream. After considering both arguments, as well as historical usage patterns and existing compacts or agreements regarding shared water resources among western states, the court ruled in favor of Colorado stating that they were not violating any legal obligations towards New Mexico by using waters from Rio Grande River.

In the dissenting opinion for The State of New Mexico v. The State of Colorado, Justice Holmes argued that the case should not have been dismissed outright. He believed that there was a genuine dispute between the states regarding water rights from the Rio Grande River and its tributaries which warranted further investigation by experts to determine if Colorado's actions were indeed causing harm to New Mexico's agricultural interests. Holmes felt it was premature to dismiss New Mexico’s complaint without first obtaining more detailed information about how much water was being diverted by Colorado and what impact this had on downstream users in New Mexico. He also disagreed with majority’s view that interstate disputes over river waters should be resolved through Congressional action rather than litigation before Supreme Court.