In the case of Seaboard Air Line Railway v. City of Raleigh in 1916, the U.S Supreme Court ruled in favor of the City of Raleigh. The dispute arose when Seaboard Air Line Railway refused to pay taxes levied by the city on its property within city limits, arguing that it was exempt from such taxation under a state law passed in 1871-72 which granted tax exemption to railroads for a period of thirty years. However, this law was repealed in 1905 and new legislation allowed municipalities like Raleigh to impose taxes on railroad properties within their jurisdiction. The court held that there was no contract between North Carolina and Seaboard guaranteeing perpetual tax-exempt status; therefore, repealment did not violate any contractual obligations or constitutional rights as claimed by Seaboard. Furthermore, even if such a contract had existed, it would have been void because states cannot surrender their power to tax corporations operating within them.

In the dissenting opinion for Seaboard Air Line Railway v. City of Raleigh, Justice Holmes disagreed with the majority's ruling that a city ordinance requiring trains to slow down while passing through certain areas was unconstitutional. He argued that such regulations were within the rights of local governments as they are responsible for ensuring public safety. Furthermore, he contended that it is not unreasonable or discriminatory to require trains to reduce their speed in populated areas where there is an increased risk of accidents and injuries. In his view, any inconvenience caused by this regulation should be seen as part of the cost associated with operating a potentially dangerous business in urban environments.