The U.S. Supreme Court case Smyth v. Ames in 1897 revolved around the issue of railroad rates set by the Nebraska State Legislature, which were challenged as being unconstitutionally low and thus violating the Fourteenth Amendment's due process clause. The legislature had passed a law setting maximum freight and passenger rates for railroads operating within its jurisdiction, but these rates were deemed confiscatory by several railroad companies who argued that they did not allow them to earn a reasonable return on their investments. In this landmark decision, the Supreme Court ruled in favor of the railroads (Ames), stating that while states have power to regulate industries such as railroads under their police powers, this regulation must be reasonable and cannot result in confiscation of property or destruction of property rights without due process. This meant that if a state sets railroad rates too low - so low that it amounts to seizure or taking away private property without just compensation - then it is unconstitutional under the Fourteenth Amendment. This ruling established an important precedent known as "fair value" standard where courts would consider factors like reproduction cost new less depreciation (RCNLD) when determining whether regulated prices allowed businesses to earn fair returns on their investments.

The dissenting opinion in the case of Smyth v. Ames argued that the court had overstepped its bounds by interfering with state regulation of railroad rates, which should be a matter left to individual states. The justices contended that it was not within their jurisdiction to determine whether or not these rates were reasonable and fair, as this would require them to act as a "super-legislature." They also expressed concern about the potential for judicial activism if courts began setting economic policy. Furthermore, they disagreed with the majority's interpretation of what constituted confiscation under the Fourteenth Amendment's due process clause; they believed it only applied when property was physically taken without compensation rather than simply regulated in a way that might reduce profits.