In the case of City of Texarkana v. Arkansas Louisiana Gas Co., 1938, the Supreme Court ruled in favor of Arkansas Louisiana Gas Company (Arkla). The city had entered into a contract with Arkla to supply natural gas for public use. However, when Arkla raised its rates, the city refused to pay and sued on grounds that it was being charged an unreasonable rate. The court found that under their contract, any disputes over rates were subject to arbitration rather than litigation in court. Therefore, by refusing to arbitrate before suing, the city had breached its contractual obligations. Furthermore, because this was a matter involving interstate commerce - as Arkla transported gas across state lines - federal law applied instead of state law; specifically here: Federal Arbitration Act which favors enforcement of arbitration agreements.

In the dissenting opinion for the case City of Texarkana v. Arkansas Louisiana Gas Co., Justice Black disagreed with the majority's decision that a natural gas company could not be taxed by both Texas and Arkansas for gas sold in Texarkana, which straddles both states. He argued that each state had an equal right to tax all property within its borders, regardless of whether it was also being taxed by another state. He further contended that if one state were allowed to exempt certain properties from taxation because they were already being taxed elsewhere, this would lead to unequal treatment of taxpayers and undermine states' sovereignty over their own territory. In his view, allowing such exemptions would create a dangerous precedent where businesses could potentially avoid paying taxes altogether by strategically locating themselves across multiple jurisdictions.