In the Southern Pacific Railroad Company v. United States case of 1912, the Supreme Court ruled on a dispute over land grants given to railroad companies by Congress in the mid-19th century. The Southern Pacific Railroad Company claimed that it was entitled to certain lands under an 1866 Act of Congress granting lands for railway construction from California to Oregon. However, these claims were contested by settlers who had moved onto and improved these lands before they were surveyed for potential railway use. The court held that while unsurveyed public lands could be granted by Congress, such grants did not take effect until after official surveys took place; thus any settler rights established prior to surveying would supersede those of the railroads'. Therefore, if settlers occupied and improved upon a piece of land before it was officially surveyed for inclusion in a railroad grant, their claim would hold precedence over that of the railroad company's.

In the dissenting opinion for Southern Pacific Railroad Company v. United States, 1912, it was argued that the Interstate Commerce Commission (ICC) did not have authority to regulate rates charged by railroads for intrastate commerce. The dissenters believed that such regulation infringed upon states' rights and exceeded the federal government's constitutional powers. They contended that while Congress had power over interstate commerce, this did not extend to regulating local activities unless they directly affected interstate trade or were so related to it as to be practically a part of it. In their view, merely because an act done within a state may indirectly or incidentally affect commerce among states does not make said act subject to federal control under the Commerce Clause of Constitution.