In the Northwestern Bell Telephone Co. v. Nebraska State Railway Commission case of 1935, the U.S Supreme Court ruled in favor of Northwestern Bell Telephone Company (NBTC). The dispute arose when NBTC challenged an order by the Nebraska State Railway Commission that reduced telephone rates across Nebraska. NBTC argued that this reduction was so severe it would prevent them from earning a reasonable return on their investment, thus violating their constitutional right to due process under the Fourteenth Amendment. The court agreed with NBTC's argument and held that while states have power to regulate utilities within their jurisdiction, they cannot enforce regulations which are unjust and unreasonable or confiscatory in nature as it infringes upon property rights protected by due process clause of Fourteenth Amendment.

In the dissenting opinion for Northwestern Bell Telephone Co. v. Nebraska State Railway Commission, Justice Stone argued that the majority's decision to strike down a state regulation on telephone rates was an overreach of judicial power and a violation of states' rights. He contended that it is not within the purview of courts to decide whether or not a business can make reasonable profits under certain regulations; rather, this should be left up to legislative bodies and regulatory commissions who have more expertise in these matters. Furthermore, he asserted that there was no evidence presented in court proving that the regulated rates were confiscatory or unjustly discriminatory against interstate commerce as claimed by Northwestern Bell Telephone Company. Therefore, according to him, there was no constitutional basis for striking down Nebraska's rate-setting authority.