In the case of State of North Dakota v. State of Minnesota in 1923, the Supreme Court ruled on a dispute between states regarding water pollution. The state of North Dakota sued Minnesota and several municipal corporations for damages caused by pollution to the Red River from sewage discharged into it upstream in Minnesota. The court held that while a state has an interest in protecting its natural resources from substantial injury due to actions taken outside its borders, this does not give rise to a cause of action for money damages against another state or its municipalities under federal common law unless there is clear proof that such damage was imminent and virtually certain to occur. In this case, North Dakota failed to provide sufficient evidence proving immediate and inevitable harm resulting from Minnesota's activities; therefore, their claim for monetary compensation was denied.

In the dissenting opinion for the case of State of North Dakota v. State of Minnesota, Justice Holmes disagreed with the majority's decision to grant an injunction against Minnesota. He argued that it was not within the Court's jurisdiction to regulate a state’s use and control over its natural resources or interfere in their internal affairs unless there is clear evidence that such actions would cause significant harm to another state. In this case, he believed that North Dakota failed to provide sufficient proof showing substantial injury from Minnesota's drainage project on Red River Valley lands bordering both states. Furthermore, he contended that any potential damage could be compensated monetarily rather than through an injunction halting progress on a public work beneficial for one state just because it might affect another adversely.