In the case of Prendergast et al., constituting The Public Service Commission of the State of New York et al. v. New York Telephone Company, 1922, the Supreme Court ruled in favor of the telephone company. The court held that a state regulation requiring telephone companies to provide free service to police and fire departments was unconstitutional because it constituted an unlawful taking without just compensation under the Fifth Amendment's Takings Clause. This decision affirmed that even public utilities have property rights protected by this clause and cannot be compelled to offer services for free or at unreasonably low rates set by government regulators.

In the dissenting opinion for Prendergast et al., Constituting The Public Service Commission of The State of New York et al. v. New York Telephone Company, Justice Holmes argued that the majority's decision was based on a misunderstanding or misapplication of the law and facts at hand. He contended that it is not within the jurisdiction of courts to interfere with rates set by public service commissions unless they are so low as to be confiscatory, which he did not believe was true in this case. Furthermore, he disagreed with their interpretation of what constitutes fair value for rate-making purposes, arguing that it should be based on present value rather than historical cost or reproduction cost new less depreciation (RCNLD). Finally, he criticized their reliance on expert testimony regarding RCNLD as arbitrary and unscientific.