In the case of Western & Atlantic Railroad v. Railroad Commission of Georgia et al., 1922, the U.S Supreme Court was tasked with determining whether a state could regulate rates for intrastate passenger travel on railroads that were owned by another state but operated within its borders. The State of Georgia had leased the Western & Atlantic Railroad to a private company and sought to impose its own rate regulations. However, this action was challenged by the railroad company which argued that as an instrumentality of another state (Tennessee), it should be exempt from such regulation under federal law. The court ruled in favor of the State of Georgia stating that while states cannot directly control or interfere with interstate commerce, they do have power over matters purely local - including regulating rates for intrastate passenger travel on railroads operating within their boundaries even if those lines are owned by other states. This decision upheld principles related to federalism and dual sovereignty where both national and subnational governments have certain exclusive powers.

In the dissenting opinion for Western & Atlantic Railroad v. Railroad Commission of Georgia, Justice Holmes argued that the state had a right to regulate railroad rates within its borders even if it affected interstate commerce indirectly. He contended that states should have control over their internal affairs and believed this case fell under such jurisdiction. The majority's decision, he felt, was an unwarranted extension of federal power into areas traditionally controlled by individual states. This interpretation could potentially undermine state sovereignty and disrupt the balance between federal and state powers as established in the Constitution. Furthermore, he expressed concern about potential negative impacts on local businesses due to increased competition from out-of-state companies which would be able to offer lower prices because they were not subject to similar regulations.