In the 1921 case Southern Pacific Railroad Company v. Fall, Secretary of the Interior, et al., the Supreme Court ruled in favor of Southern Pacific Railroad Company. The dispute arose over land grants made by Congress to aid in building a railroad and telegraph line from Missouri to California. The government claimed that certain lands were excluded from these grants because they contained valuable minerals, but this was disputed by Southern Pacific who argued that only lands specifically known at the time of grant to be mineral-rich could be withheld. The court agreed with Southern Pacific's interpretation and held that only those lands known at the date of withdrawal for potential railroad purposes (July 27th, 1866) as being mineral in character were excepted from such grant.

The dissenting opinion in the Southern Pacific Railroad Company v. Fall case argued that the majority's decision was based on an incorrect interpretation of the law and a misunderstanding of its intent. The dissenters believed that Congress, when it granted land to railroad companies for construction purposes, did not intend to give them unlimited rights over water sources located on this land. They contended that these water rights were meant to be shared with other settlers and users as per common law principles governing riparian rights (rights relating to access and use of water bodies). Therefore, they disagreed with the majority's ruling which effectively gave exclusive control over such resources to railroads at the expense of local communities' needs and interests.