In the Vanderbilt v. Eidman case of 1904, the U.S. Supreme Court ruled on a dispute involving railroad rates in Tennessee. The plaintiff, Cornelius Vanderbilt, was a major shareholder in several railroads and challenged an act passed by the state legislature that set maximum freight and passenger rates for railroads operating within its jurisdiction. He argued that this law violated his rights under both federal commerce laws and the Fourteenth Amendment's due process clause because it interfered with interstate commerce and deprived him of property without due process of law. The court upheld Tennessee’s right to regulate intrastate railway fares despite objections from Vanderbilt who claimed such regulations were unconstitutional as they infringed upon interstate commerce rules which should be governed federally rather than at state level. Justice Oliver Wendell Holmes delivered the opinion for a unanimous court stating that while states cannot interfere with interstate trade directly or indirectly through discriminatory legislation or taxation, they do have power over local matters even if those might incidentally affect interstate commerce.

In the dissenting opinion for Vanderbilt v. Eidman, Justice Harlan argued that the majority's decision was a departure from established principles of constitutional law and an encroachment on states' rights. He contended that it was within New York State’s power to regulate its own internal commerce, including imposing taxes on corporations operating within its borders. The tax in question did not interfere with interstate commerce as it was levied based on capital stock rather than business transactions crossing state lines. Furthermore, he pointed out that this corporation willingly subjected itself to such taxation by choosing to operate under New York laws when incorporating there originally. Therefore, according to him, federal courts should not intervene in what is essentially a matter of state jurisdiction and policy-making prerogative.