In the 1931 case of Western Pacific California Railroad Co. v. Southern Pacific Co., the United States Supreme Court ruled in favor of Western Pacific, stating that Southern Pacific had violated antitrust laws by purchasing a controlling interest in Central Pacific Railway Company and then leasing it to itself at an unreasonably low rate. The court found that this arrangement was intended to stifle competition from other railroads, including Western Pacific, which sought access to Central's tracks for its own operations. As such, the court ordered Southern to divest itself of its control over Central and cease any anti-competitive practices against rival companies.

In the dissenting opinion for Western Pacific California Railroad Co. v. Southern Pacific Co., Justice Stone argued that the majority's decision to uphold a lower court ruling, which found in favor of Southern Pacific Company (SPC), was incorrect and inconsistent with previous rulings on similar cases. He contended that SPC had not demonstrated sufficient evidence to prove its claim of exclusive rights over certain rail lines under an 1866 Act of Congress, as required by precedent set in earlier cases such as Northern Pacific R.R. Co v United States (1885). Furthermore, he disagreed with the majority's interpretation of this act and believed it did not grant absolute rights but rather conditional ones subject to fulfillment of specific obligations - obligations which SPC failed to meet according to him. Therefore, he would have reversed the judgment instead.