In the case of St. Louis Southwestern Railway Company v. State of Arkansas, 1914, the U.S Supreme Court ruled on a dispute concerning railroad freight rates set by the state of Arkansas. The railway company argued that these rates were so low they violated its constitutional right to earn a reasonable return on its property and thus constituted an unlawful confiscation under the Fourteenth Amendment's due process clause. However, after examining evidence regarding operating costs and potential earnings at different rate levels, the court upheld most of Arkansas' rate regulations as valid exercises of police power in protecting public welfare against excessive charges for transportation services within state borders. It found only one specific commodity rate (for transporting cotton seed) unreasonably low and therefore unconstitutional.

In the dissenting opinion for St. Louis Southwestern Railway Company v. State of Arkansas, Justice Holmes disagreed with the majority's decision that a state law requiring railroads to provide separate but equal accommodations for black and white passengers was unconstitutional under the Fourteenth Amendment. He argued that while he personally found such laws distasteful, it was not within the purview of federal courts to strike down state laws based on personal beliefs or preferences about social policy. Instead, he believed that unless there is clear evidence that a law violates specific constitutional rights or protections, federal courts should defer to states' authority to regulate their own affairs as they see fit. In this case, he did not believe there was sufficient evidence showing racial segregation in public transportation violated any specific constitutional right or protection.