The U.S. Supreme Court case Texas & New Orleans Railroad Company v. Sabine Tram Company in 1912 revolved around a dispute over freight rates for lumber transportation between the two companies. The Sabine Tram Company, a lumber company, argued that the Texas & New Orleans Railroad had unfairly raised its rates and was charging more than what was reasonable or justifiable under federal law governing interstate commerce. The railroad countered that it had acted within its rights to adjust rates as necessary based on market conditions and operational costs. Ultimately, the Supreme Court ruled in favor of the railroad company, stating that while railroads were indeed subject to regulation regarding their charges for service, they also retained some discretion to set those charges according to business needs and circumstances.

In the dissenting opinion for Texas & New Orleans Railroad Company v. Sabine Tram Company, it was argued that the majority's decision to uphold a state law requiring railroads to provide equal facilities for interchange of traffic with all connecting lines was an overreach of federal power and infringed upon states' rights. The dissenting justices believed that this ruling interfered with private contracts between railroad companies, which should be protected under the Commerce Clause of the Constitution. They also contended that such laws could potentially lead to unreasonable demands on railroads by small tramway companies, causing undue burden and disruption in operations. Furthermore, they disagreed with the majority's interpretation of "interstate commerce," arguing that not every transaction involving interstate transportation falls within its scope as defined by federal law.