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08/14/2019

Claimants Win Contracts Clause Case in the Eighth Circuit
Michael Ramsey

In Association of Equipment Manufacturers v. Burgum (Judge Colloton, writing for himself and Judge Stras), with this discussion of the contracts clause's original meaning and subsequent history:

As a matter of the text and original meaning of the Contract Clause, there seems to be little doubt that the North Dakota law would be unconstitutional. The Clause’s terms are absolute: “No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . . .” U.S. Const. art. I, § 10, cl. 1. The Clause’s principal target was debtor-relief legislation that many States had passed in the wake of the Revolutionary War, see Sveen, 138 S. Ct. at 1821, but the text is not so limited, and historical context suggests that the Clause was “aimed at all retrospective, redistributive schemes in violation of vested contractual rights.” Douglas W. Kmiec & John O. McGinnis, The Contract Clause: A Return to the Original Understanding, 14 Hastings Const. L.Q. 525, 533-34 (1987). The Supreme Court, through Chief Justice Marshall, understood the Framers “to have intended to establish a great principle, that contracts should be inviolable,” and concluded in an early case construing the Clause that the Court should give these words their full and obvious meaning.” Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 205-06 (1819). Even where a state statute was designed to further a legitimate state purpose of assisting poor people who were oppressed by debts, the  Contract Clause forbade legislation that discharged contractual liability without performance. See id. at 206; Kmiec & McGinnis, supra, at 536-37. The Clause did not prevent a State from regulating health, safety, and morals, see Stone v. Mississippi, 101 U.S. 814, 817-19 (1880), but drew the line at efforts “to redistribute resources in violation of vested contractual rights.” Kmiec & McGinnis, supra, at 541; see also Richard A. Epstein, Toward a Revitalization of the Contract Clause, 51 U. Chi. L. Rev. 703, 715-16, 730-40 (1984) (arguing that while the Contract Clause encompasses a modest police power limitation, “the transfer of wealth by special-interest politics” is the “evil to which the clause is directed”).

Modern jurisprudence, however, has taken a different course. The Court in Home Building &Loan Association v. Blaisdell, 290 U.S. 398 (1934), disavowed that “what the Constitution meant at the time of its adoption it means to-day,” or that “the great clauses of the Constitution must be confined to the interpretation which the framers . . . would have placed upon them.” Id. at 442-43. Blaisdell upheld  Minnesota’s mortgage moratorium law, a form of debtor-relief legislation, against a challenge under the Contract Clause. Id. at 447-48. Yet Blaisdell did not rest on a mere assertion of conceivable public purpose; the Court cited legislative findings, supported by an adequate factual basis, that documented the existence of an economic emergency. Id. at 421 n.3, 444-45; see also Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 486 & n.14 (1987) (upholding state statute where “the legislative purposesset forth in the statute were genuine,substantial, and legitimate”). 

Since Blaisdell, the Court has reaffirmed that the Contract Clause prohibits special-interest redistributive laws, even if the legislation might have a conceivable or incidental public purpose. Allied Structural involved a Minnesota law that sought to protect pension benefits for those who worked for a specific class of employers. See 438 U.S. at 238. A three-judge district court had “no trouble concluding” that the statute addressed “a problem of vital public interest,” namely, “protecting the economic welfare of its senior citizens by assuring the receipt of earned pension benefits as a form of retirement income.” Fleck v. Spannaus, 449 F. Supp. 644, 650-51 (D. Minn. 1977). But the Supreme Court reversed, observing that the law had “an extremely narrow focus” because it applied only to certain employers. Allied Structural, 438 U.S. at 248. The Court ruled that the statute could “hardly be characterized, like the law at issue in the Blaisdell case, as one enacted to protect a broad societal interest.” Id. at 248-49. As such, the Minnesota law was unconstitutional.

Judge Colloton goes on to hold (over a dissent) that the challenged law failed the Blaisdell test, applying a fairly demanding level of scrutiny,  (The dissent would have been much more deferential to the state).

I would describe the result a originalist-influenced, even though the court applies a non-originalist test created by the Supreme Court.  The Court in Blaisdell leaves open some question of how deferential a review it establishes; since in any event Blaisdell establishes a more permissive review than does the original understanding, originalism indicates that, at least, a court should apply a strict version of the Blaisdell test.

(via Volokh Conspiracy's "Short Circuit").