In the 1921 case of State of North Dakota ex rel. Lemke, Attorney General v. Chicago & Northwestern Railway Company et al., the Supreme Court ruled on a dispute between the state and several railway companies over freight rates set by a state commission. The railroads argued that these rates were confiscatory and violated their rights under the Fourteenth Amendment to due process and equal protection under law. The court held that while states have power to regulate commerce within their borders, they cannot do so in such a way as to infringe upon interstate commerce or violate constitutional protections for property owners against unjust seizure or deprivation without due process of law. Therefore, it was determined that if an intrastate rate is found discriminatory against interstate commerce, then federal authority can intervene even though this may result in affecting intrastate operations.

In the dissenting opinion for the case of State of North Dakota Ex Rel. Lemke, Attorney General, v. Chicago & Northwestern Railway Company et al., Justice Holmes disagreed with the majority's decision to strike down a North Dakota law that regulated railroad freight rates within its borders. He argued that states should have more authority in regulating businesses operating within their boundaries and believed it was not unconstitutional for a state to regulate commerce as long as it did not interfere with interstate trade or violate federal laws. Furthermore, he contended that courts should defer to legislative judgment on economic matters unless there is clear evidence of constitutional violation or irrationality in legislation. In his view, this approach would better respect democratic principles by allowing elected representatives rather than judges to make policy decisions about economic regulation.