In the 1937 case New York ex rel. Consolidated Water Co. v. Maltbie et al., the U.S Supreme Court ruled in favor of a water company that had been denied an increase in rates by state regulators, finding that their refusal violated the Fourteenth Amendment's due process clause. The Consolidated Water Company of Utica, New York sought to raise its rates but was denied by the Public Service Commission and lower courts on grounds that it would yield more than a fair return on property value dedicated to public use. However, upon appeal, Justice Benjamin N Cardozo for majority opinion stated that while rate regulation is within states' police power domain, this does not permit arbitrary confiscation under guise of regulation - thus making it unconstitutional if regulatory action results in utility not earning enough revenue to cover operating costs and capital charges including reasonable profit.

In the dissenting opinion for New York ex rel. Consolidated Water Co. v. Maltbie et al., Justice Butler argued that the majority's decision violated the due process clause of the Fourteenth Amendment by allowing a state to confiscate private property without just compensation. He contended that while states have broad powers to regulate public utilities, they cannot use these powers as a pretext for taking over such utilities without providing fair remuneration. In this case, he believed that New York had effectively taken control of Consolidated Water Co.'s assets by setting rates so low as to make it impossible for the company to operate profitably or attract necessary investment capital, thereby depriving it of its property in violation of constitutional protections.