In the 1963 case of Parden et al. v. Terminal Railway of the Alabama State Docks Department et al., the U.S Supreme Court ruled that states surrender their sovereign immunity when they engage in commercial activities, and thus can be sued under federal law for violations related to those activities. The case involved two employees who were injured while working on a railroad owned by Alabama's state docks department and sought compensation under the Federal Employers' Liability Act (FELA). The state argued it was immune from such suits as per its sovereign immunity rights, but this argument was rejected by the court which held that engaging in interstate commerce constituted a waiver of this right. This decision expanded federal power over states engaged in commercial activity.

The dissenting opinion in Parden v. Terminal Railway of the Alabama State Docks Department argued that the majority's decision was a departure from established precedent and an unwarranted expansion of federal power at the expense of state sovereignty. The dissenters contended that by operating a railroad, Alabama did not lose its immunity to suit under the Federal Employers' Liability Act (FELA). They maintained that FELA was not intended to apply to states as employers and there is no clear evidence Congress wanted it applied this way. Furthermore, they disagreed with the majority's view that Alabama had waived its sovereign immunity simply by continuing to operate a railway after FELA became law; such waiver should be explicit rather than implied. The dissenting justices feared this ruling would open up states for lawsuits whenever they engaged in commercial activities, which could have far-reaching implications on state functions.