In the case of Sutter Butte Canal Company v. Railroad Commission of California, 1928, the Supreme Court ruled in favor of the state regulatory body. The dispute arose when Sutter Butte Canal Company challenged an order by the California Railroad Commission that required them to provide water service at a fixed rate to another company, Oswald Irrigation District. The canal company argued that this violated their rights under both federal and state constitutions as it constituted taking private property for public use without just compensation (a violation of Fifth Amendment). However, Justice Holmes delivered a unanimous decision stating that while there was indeed a contract between two parties involved - one being bound to pay and other to receive certain rates - it did not exempt them from future legislation which might limit their contractual rights for public good. Therefore, he concluded that no constitutional right had been infringed upon by setting such rates.

In the dissenting opinion for Sutter Butte Canal Company v. Railroad Commission of California, it was argued that the majority's decision to uphold the state commission's authority over water rates interfered with private property rights and contractual obligations. The dissenting justices contended that a public utility does not lose its character as a private corporation or its right to fix charges for services based on contracts simply because it serves a public interest. They believed this case represented an unwarranted extension of regulatory power by allowing governmental interference in freely negotiated contracts between parties, which could potentially discourage investment in such utilities due to fears of unpredictable rate changes imposed by regulators. Furthermore, they expressed concern about potential violations of constitutional protections against deprivation of property without due process if states were allowed unchecked powers to alter contract terms through regulation.