In the case of Pennsylvania Railroad Company v. Towers et al., 1917, the U.S. Supreme Court ruled in favor of the Pennsylvania Railroad Company, overturning a decision by Maryland's Public Service Commission that had mandated reduced freight rates on intrastate shipments within Maryland. The court found that these state-imposed rate reductions were unjust and unreasonable as they resulted in revenue loss for the railroad company which was already operating under thin profit margins due to existing federal regulations on interstate commerce. This ruling established an important precedent regarding states' rights versus federal authority over railroads and other forms of interstate commerce; it affirmed that while states have some power to regulate businesses within their borders, such regulation must not interfere with or undermine federally regulated activities or cause undue harm to companies engaged in interstate commerce.

In the dissenting opinion for Pennsylvania Railroad Company v. Towers, Justice Holmes argued that the court should not have intervened in this case as it was a matter of state law and policy. He believed that Maryland had every right to regulate its own railroads and set rates as they saw fit, without interference from federal courts. The majority's decision to strike down Maryland's rate-setting authority on constitutional grounds represented an overreach of judicial power in his view. Furthermore, he disagreed with their interpretation of what constituted "reasonable" rates under the Fourteenth Amendment's due process clause; instead arguing that reasonableness is subjective and best left up to individual states to decide based on their unique circumstances and needs.