In the case of City of Newark v. State of New Jersey in 1922, the Supreme Court ruled on a dispute over water rights between the city and state. The city had been using water from a river that flowed through both public and private lands for its supply, but when it sought to increase this usage by diverting more water upstream, it was challenged by the state which claimed ownership over all waters within its boundaries. The court sided with Newark, ruling that while states do have control over their own natural resources as part of their inherent sovereignty, they cannot prevent municipalities or individuals from making reasonable use of these resources if doing so does not harm others or violate any laws. This decision established an important precedent regarding how conflicts between different levels of government over resource use should be resolved.

In the dissenting opinion for the case City of Newark v. State of New Jersey, Justice Holmes argued that the city had no right to pollute waters used by others downstream without their consent. He disagreed with the majority's view that a state could grant such rights to a municipality and contended that it was not within its power to do so. According to him, if one person polluted another's water in his own interest, he would be liable for damages regardless of any benefit derived from it. Therefore, he believed this principle should also apply when a city is involved as well; they should not have special privileges or immunity from liability simply because they are acting under state authority. The justice concluded by stating that pollution caused harm and inconvenience which required compensation or cessation irrespective of whether it was done under legislative sanction or not.