In the Southern Pacific Company v. Stewart case of 1917, the Supreme Court ruled in favor of Southern Pacific Company. The dispute arose when a train owned by Southern Pacific collided with a wagon at an intersection, resulting in injuries to those on board the wagon. The injured parties sued for damages and were awarded compensation by lower courts based on Arizona's law that held railroads liable for any accidents occurring at crossings unless they could prove negligence on part of those injured. However, upon appeal to the Supreme Court, it was found that this state law conflicted with federal laws regulating interstate commerce which required proof of negligence from plaintiffs suing railroads over crossing accidents. Thus, the court overturned previous rulings and absolved Southern Pacific from paying damages as there was no evidence showing their negligence.

In the dissenting opinion for Southern Pacific Company v. Stewart, Justice Holmes disagreed with the majority's decision to hold Southern Pacific liable for damages caused by a fire started by one of its locomotives in Arizona. He argued that under Arizona law, liability should only be imposed if negligence could be proven and there was no evidence presented to suggest that Southern Pacific had been negligent in this case. Furthermore, he contended that even if such a strict liability rule did exist under state law, it would not apply here because federal laws regulating interstate commerce supersede state laws when they conflict. Therefore, according to Justice Holmes' interpretation of both federal and state law, Southern Pacific should not have been held responsible for the damage caused by the fire.