“No State shall . . . pass any Law impairing the obligation of contract”
Article I, section 10
The Colonial Experience
A nation in debt, War debt and money owed to British creditors, Shays rebellion—a revolt of
creditors that had to be put down by a paid militia
Protection of Property Rights
First draft of Declaration of Independence spoke of “ life, liberty and the pursuit of property.”.
Experience under the Articles of Confederation witnessed several states threatening to abolish
certain kinds of debt. What about the debt owed to the British? creating the national government
was designed to stabilize contract rights free of abolition by states
The revisionist crtique
An Economic Interpretation of the American Constitution by Charles Beard (1912). Constitution
supposedly created by Founders to protect their own economic interests. Answered by Forest
McDonald
But, 18th century thinker would not have seen any distinction between civil rights and economic
rights.
Madison
*“[L]aws impairing the obligation of contracts are contrary to the first principles of the social
compact and to every principle of sound legislation.” Federalist No. 44.
Debt and the Common law
Fundamentally, a contract, although it might be a note. Imprisonment until debt was paid
Bankruptcy
An 1811 New York statute that freed debtors from imprisonment for debt and discharged their
debt if they assigned their property for the benefit of their creditors.
Chief Justice John Marshall rejected a challenge to the state act based on the argument that
federal power over bankruptcy was exclusive but warned in dictum that a federal statute would
preempt conflicting state legislation. He voided the statute because it discharged a preexisting
debt and thus ran afoul of the Contracts Clause (Article I, section 10)
Ogden v Saunders (1827)
NY insolvency law did not violate Constitutional protection against impairing the obligation of
contract when it applied to contract entered into after enactment of the insolvency law.
Marshall, J., dissents.
Way now open to national bankruptcy law which arrives in 1898.
Yazoo
Yazoo land fraud, in U.S. history, scheme by which Georgia legislators were bribed in 1795 to sell
most of the land now making up the state of Mississippi (then a part of Georgia’s western claims)
to four land companies for the sum of $500,000, far below its potential market value. News of
the Yazoo Act and the dealing behind it aroused anger throughout the state and resulted in a
large turnover of legislators in the 1796 election. The new legislature promptly rescinded the act
and returned the money. By this time, however, much of the land had been resold to third
parties, who refused the state’s money and maintained their claim to the territory.
Time of widespread corruption. Even state legislators and members of Congress had invested in
it
SC: Law rescinding the sales was held to impair the obligation of contracts. Rights protected by
contract clause were “vested rights”, i.e. protected by the natural law from divestment by state
action . “When absolute [contractual] rights have vested under the contract, a repeal of the law
cannot divest them.”
Dartmouth College
*Corporate charter of Dartmouth held to be a contract between it and New Hampshire
*In 1816, the New Hampshire legislature attempted to change Dartmouth College-- a privately
funded institution--into a state university. The legislature changed the school’s corporate charter
by transferring the control of trustee appointments to the governor. In an attempt to regain
authority over the resources of Dartmouth College.
She is a small college but there are those who love her
SC: The Court held that the College’s corporate charter qualified as a contract between private
parties, with which the legislature could not interfere.
Chief Justice Marshall’s opinion emphasized that the term “contract” referred to transactions
involving individual property rights, not to “the political relations between the government and
its citizens.”
Marshall’s meaning
*The dead hand of the past new legislature, even if popularly elected, is held to the promises,
no matter how foolish, of prior legislatures
*if strictly construed, legislature gave away its police power if its exercise is constrained by prior
contracts
Charles River Bridge
*Did state legislature by granting charter to one bridge company give away its right to grant
charter to company that would build a second bridge?
*Was charter to first company a contract that could be not be impaired by award of a second
contract to build a bridge over the same river?
Charles River Bridge
*Nothing in the charter supports the claim of an exclusive right to build a bridge
*A state will not be held to have surrendered its power to legislate in the public interest unless
its doing so is demonstrably obvious.
Tension between exercise of police power and not impairing contracts
*Charters granted are subject to being impaired or even negated by legitimate exercise of police
power
*Charter permitting rendering plant yields to legislation prohibiting rendering plant that had
been operated.
*Charter permitting lottery yields to legislation that outlaws lotteries
Lottery
*All that one can get by such a charter is a suspension of certain governmental rights in his favor,
subject to withdrawal at will. He has in legal effect nothing more than a license to enjoy the
privilege on the terms named for the specified time, unless it be sooner abrogated by the
sovereign power of the state. It is a permit, good as against existing laws, but subject to future
legislative and constitutional control or withdrawal.
Lottery
*Even in Dartmouth College, Marshall conceded that “that the framers of the Constitution did
not intend to restrain states in the regulation of their civil institutions, adopted for internal
government, and that the instrument they have given us is not to be so construed.”
Blaisdell
*For two
years or as long as depression lasted, debtor permitted to petition court to adjust
mortgage by having it extended and their paying a court approved rate as opposed to what was
due.
*Cf CDC regulation barring evictions during the Covid 19 epidemic.
Blaisdell
*The principle of this development is . . . . that the reservation of the reasonable exercise of the
power of the State is read into all contracts.
Energy reserves
*The Kansas Power & Light Company (KPL) entered long-term contracts in 1977 governing its
purchase of natural gas from the Energy Reserves Group (ERG), a Kansas-based oil company. The
contracts contained "price escalator" clauses which provided for gas prices to rise to the levels
set by governmental authorities. In 1978, the federal government established a new system for
regulating natural gas prices under the Natural Gas Policy Act. The Act set maximum lawful prices
that could be charged for different types of natural gas and applied these price levels to intrastate
gas markets. The Act allowed states to set maximum price levels below federal levels, which
Kansas did under the Kansas Natural Gas Price Protection Act (Kansas Act). When ERG tried to
raise its prices to the higher federal levels using the "price escalator" clause, KPL insisted that it
was only legally obligated to buy gas at the lower prices set by the Kansas Act. ERG claimed that
KPL violated the contract by refusing to pay federal prices
Energy Reserves
*Imposition of price controls on gas market which prohibited company from raising price as
contract permitted
Energy Reserves
*State law forbade what a contract permitted
*The Contract Clause’s prohibition of any state law impairing the obligation of contracts must
be accommodated to the State’s inherent police power to safeguard the vital interests of its
people.
Energy Reserves
*If a substantial impairment is found, the State, in justification, must have a significant and
legitimate public purpose behind the regulation. Once such a purpose has been identified, the
adjustment of the contracting parties’ rights and responsibilities must be based upon reasonable
conditions, and must be of a character appropriate to the public purpose justifying the
legislation’s adoption.
Energy Reserves
* To the extent, if any, the Kansas Act impairs appellant’s contractual interests, it rests on
significant state interests in protecting consumers from the escalation of natural gas prices
caused by deregulation.
*Nor are the means chosen to implement these purposes deficient, particularly in light of the
deference to which the Kansas Legislature’s judgment is entitled.
Keystone
*State law diminished coal that company was permitted to take under contract. Company
required by regulation to leave at least 50% of coal in ground under structure.
*When implementing the Act, DER prevented coal miners from removing more than 50% of coal
from mines located beneath buildings.
*Coal company responsible for damage despite earlier waivers given it under contracts with land
owners.
Keystone
The State may revoke a mining permit if the removal of coal causes damage to a structure and
the operator has not within six months either repaired the damage, satisfied any claim arising
therefrom, or deposited a sum equal to the reasonable cost of repair with the DER as security.
Keystone
*The Contracts Clause has not been read literally to obliterate valid exercises of the States’ police
power to protect the public health and welfare. Here, the Commonwealth has a significant and
legitimate public interest in preventing subsidence damage to the protected buildings,
cemeteries, and watercourses, and has determined that the imposition of liability on coal
companies is necessary to protect that interest. This determination is entitled to deference,
because the Commonwealth is not a party to the contracts in question. Thus, the impairment of
petitioners’ right to enforce the generations-old damages waivers is amply justified by the public
purposes served by the Act.
What remains
*United States Trust:
*A 1962 statutory covenant between New Jersey and New York limited the ability of the Port
Authority of New York and New Jersey to subsidize rail passenger transportation from revenues
and reserves pledged as security for consolidated bonds issued by the Port Authority. A 1974
New Jersey statute, together with a concurrent and parallel New York statute, retroactively
repealed the 1962 covenant
Port Authority
*Bridges (e.g. George Washington Bridge) make money; trains between New York and New
Jersey lose it
United States Trust
The security provision of the 1962 covenant was purely a financial obligation and did not
compromise State’s reserved police power
It was neither necessary to serve any interest and there were alternatives that rendered
impairment unreasonable.
Allied Structural Steel
*Pension plan permitted company to terminate it at any time but Minnesota passed law that
required payment to pensioners of $185,000 but obligation was imposed only on those who left
state and had pension plan.
Allied Structural
Steel
*Legislation
adjusting the rights and responsibilities of contracting parties must be upon
reasonable conditions and of a character appropriate to the public purpose justifying its
adoption.
*Failed that test and therefore impaired obligation of contracts.
Allied Structured Steel
*But whether or not the legislation was aimed largely at a single employer, it clearly has an
extremely narrow focus. It applies only to private employers who have at least 100 employees,
at least one of whom works in Minnesota, and who have established voluntary private pension
plans, qualified under § 401 of the Internal Revenue Code. And it applies only when such an
employer closes his Minnesota office or terminates his pension plan. Thus, this law can hardly be
characterized, like the law at issue in the Blaisdell case, as one enacted to protect a broad societal
interest rather than a narrow class
*Allied Structural Steel Co. v. Spannaus , 438 U.S. 234, 249, 98 S. Ct. 2716, 2724, 57 L. Ed. 2d 727,
739 (1978)
Substantive due process
An advance and an utter retreat
The 14th amendment
Constitution
to
the
us
* Purpose:
Slaughter house cases
*Objection
to monopoly on grounds of deprivation of liberty without due process rejected on
grounds that only purpose of Amendment XIV was to protect the rights of the freed slaves
Slaughter house cases
* The Court held that the monopoly violated neither the Thirteenth or Fourteenth Amendments,
reasoning that these amendments were passed with the narrow intent to grant full equality to
former slaves. Thus, to the Court, the Fourteenth Amendment only banned the states from
depriving blacks of equal rights; it did not guarantee that all citizens, regardless of race, should
receive equal economic privileges by the state.
Slaughter house cases Field, J. dissenting
* The question
presented is, therefore, one of the gravest importance not merely to the parties
here, but to the whole country. It is nothing less than the question whether the recent
amendments to the Federal Constitution protect the citizens of the United States against the
deprivation of their common rights by State legislation. In my judgment, the fourteenth
amendment does afford such protection, and was so intended by the Congress which framed and
the States which adopted it.
Slaughter house case, Field J., dissenting
* The fourteenth amendment, in my judgment, makes it essential to the validity of the legislation
of every State that this equality of right should be respected
Slaughter house cases, Bradley, J., dissenting
*In my view, a law which prohibits large class of citizens from adopting a lawful employment, or
from following a lawful employment previously adopted, does deprive them of liberty as well as
property, without due process of law. Their right of choice is a portion of their liberty; their
occupation is their property. Such a law also deprives those citizens of the equal protection of
the laws, contrary to the last clause of the section .
* Slaughter-House Cases, 83 U.S. (16 Wall.) 36, 122 (1872)
The dissent becomes the law
* State law which deprives a person of life, liberty or property without due process of law or
* Denies to any person within its jurisdiction the equal protection of the laws
* Is invalid
The questions then presented
* What is the “liberty” protected by the 14th
amendment?
* When does a state deprive a person of that liberty?
The elements of a judicial philosophy
* Laissez faire economy
* Social Darwinism
* Lack of trust in state legislatures
Mugler
* manufacture
of liquor prohibited in Kansas. While upheld, strong suggestion that if law,
purporting to have been enacted to protect health and welfare, is not reasonably and rationally
related to those goals, it takes liberty (or property) without due process of law
Quantum leap from Slaughter house
* Chicago,
Milwaukee & St. Paul (1890). Commission created to set reasonable rates to be
charged by RR. Held: unreasonable rate would deprive RR of liberty or property without due
process of law
* Supreme Court and federal courts will now decide what is or is not a reasonable regulation.
Liberty of contract is born
*Alleyer v. Louisiana (1897). La law barred citizens from purchasing insurance from out of state
carriers who did not comply with requirements of La. law. Held: unreasonable and citizens have
a right contract with whomever they want—liberty of contract is born
Miners are protected
* Holden v. Hardy:
Sup Ct would judge reasonableness of law and law that restricted miners from
working more than 8 hours a day was reasonable.
* Upon
the principles above stated, we think the act in question may be sustained as a valid
exercise of the police power of the state. The enactment does not profess to limit the hours of
all workmen, but merely those who are employed in underground mines, or in the smelting,
reduction, or refining of ores or metals. These employments, when too long pursued, the
legislature has judged to be detrimental to the health of the employees; and, so long as there are
reasonable grounds for believing that this is so, its decision upon this subject cannot be reviewed
by the federal courts.
lochner: the Zenith
*Lochner: Statute forbade bakers from working more than ten hours per day.
*•
“Is this a fair, reasonable, exercise of the police powers of the State?
*•
Interests of public in how many hours a baker works are non-existent.
*•
There is no connection between the number of hours a baker works and any interest the
state may protect.
*•
Limitation invades their right to contract.
Lochner-HOlmes dissents
*•
Holmes, J: Constitution does not embody a particular economic point of view
The Brandeis brief
*•
Muller v. Oregon: Thanks to Brandeis brief, limitation on number of hours a woman could
work upheld because protecting women who bear children is legitimate and reasonable use of
state power.
*•
Adkins v. Children’s Hospital: 261 U.S. 525 (1923): Imposition by statute of obligation to
pay minimum wage cannot stand. To require a certain payment per hour, irrespective of any
other consideration, is a naked, arbitrary exercise of power
Holmes, J. Dissenting
*•
Holmes, J. (dissenting) The “liberty to contract” is not mentioned in the Fifth or
Fourteenth Amendments. If hours they work can be regulated, why can’t the wages they earn be
regulated as well?
The new Deal and the depression
* Purpose of minimum wage
* Purpose of hours per week and of overtime
The switch in time that saved nine
*•
West Coast Hotel v. Parrish, 300 U.S. 379 (1937). Adkins overruled. Regulation that is
reasonable in relation to its subject and adopted in the interests of the community is due process.
* Minimum wage upheld
A new standard
* Prevailing test of due process as applied to state or federal legislation:
*•
opponent of legislation must know show that there is no conceivable relation between
legislation and a legitimate function of government.
Since west coast no legislation has ever flunked the test
••
E.g., Williamson: Law the prohibited optician from selling glasses unless she first had
prescription from doctor, ophthalmologist, or optometrist.
While law may exact a needless, wasteful requirement, it is for the legislature not the courts to
balance the advantages and disadvantages of the requirement.
Use of due process clause in privacy
* To be continued . . .
The source of constitutional rights
*Incorporation
vs. The Concept of Ordered Liberty
Review
The Civil Rights Cases
•Congressional enactment:
•“[A]ll persons within the United States shall be entitled to the full and equal enjoyment of the
accommodations . . . of inns, public conveyances . . . applicable alike to citizens of every race and
color, regardless of any previous condition of servitude.
•Held: Statute is unconstitutional. 14th Amendment pertains only to state action and Congress
has no power granted by that Amendment to enforce it by speaking to the legality of actions by
private parties
Where are we?
*14th Amendment only prohibits state action that deprives any person of life, liberty or property
without due process of law and denies any person of equal protection of law.
*But,
what is “liberty?”
Review second part
*“Substantive
due process” where Supreme Court judged validity of state legislation by whether
it invaded the liberty of contract is demolished by the Supreme Court and replaced with highly
deferential standard to assess the validity of state regulation-is there a rational relation between
legislation and a governmental interest?
*But,
what is the “liberty” protected?
The battle is joined
Palko-permitting government to appeal from acquittal
•Two requirements need to be met for a state to appropriately choose to not include the
prohibition on double jeopardy, or any other piece of the 5th Amendment, in its law. They do not
have to incorporate such a right if it is not of the very essence of a scheme of ordered liberty, and
if its abolishment would not violate a principle of justice so rooted in the traditions and
conscience of the American people as to be ranked fundamental.
Black, J.
*Purpose
of the 14th Amendment was to overturn Barron and to apply the Bill of Rights to the
states
*If
the right claimed is not specified in the Bill of Rights, it is not within the liberty protected by
the due process clause.
all rights protected by the Bill of Rights (being “liberty) are within the protection of the 14 th
amendment and may not be abridged by state action
*But,
The Battle continues
Harlan, J Poe v. ullman
*Law
banning sale of contraceptives; majority held case was moot and did not reach the issue.
*Harlan,
J., dissents. Liberty protected by due process clause cannot be found in specific
guarantees provided elsewhere in the Constitution.
a truly silly law
*Griswold
v. Conn
*state outlawed
*Planned
sale of contraceptives but law never enforced
parenthood and doctor figure out a way to get arrested.
The decisions
“Fundamental rights”
•If defined in Bill of Rights, it is incorporated into 14th amendment and any restriction upon it
is subject to strict scrutiny—what state interest justifies it and is there an alternative available to
the state that avoids the infringement on the right but satisfies the interest.
•If not defined in the Bill of Rights but nevertheless deemed fundamental it is subject to the
same scrutiny
Fundamental rights
•If state law discriminates in its operation so that certain parties are disfavored in the exercise
of a fundamental right and discrimination is based on an immutable characteristic such as race,
the state’s asserted interest is subject to strict scrutiny lest these parties be denied the equal
protection of the law.
Standards of interpretation of the 14th amendment
Standards
•Is there an alternative that will fulfill the state’s interest without engaging in discrimination or
violating the right?
•
Standards
•What level of scrutiny is to be applied?
•For a court to apply strict scrutiny, the legislature must either have passed a law that infringes
upon a fundamental right or involves a suspect classification. Suspect classifications include race,
national origin, religion, and alienage.
Modern theories of fundamental rights
•Kennedy, J; courts are to exercise reasoned judgment in identifying interests of the person so
fundamental that the State must accord them its respect. . . . . History and tradition guide and
discipline this inquiry but do not set its outer boundaries. That method respects our history and
learns from it without allowing the past alone to rule the present.
•We learn the meaning of liberty as we enjoy it.
•That at certain point in history right was not deemed fundamental is not a bar from recognizing
it now.
Roberts, C.J.
•Unless the right to homosexual marriage is and was deemed fundamental at some point in the
nation’s history, it cannot be part of the liberty that is protected by the due process clause.
Scalia and fundamental rights
Substantive due process
Rhenquist
••
Cruzan v. Director, Mo. Dep’t of Health, 497 U.S. 261 (1990). plaintiff has constitutional
right (liberty interest) in refusing unwanted care and Mo. requirement that decision that invalid
would have wished her life to be terminated to be established by clear and convincing evidence
is constitutional.
•Premised on right to refuse medical treatment that has long tradition—unauthorized touching
by physician is battery
But, there is no right of physician assisted death
suicide
••
Right to be acknowledged as fundamental must be deeply rooted in this Nation’s history
and traditions and so implicit in the concept of ordered liberty such that neither liberty nor justice
would exist if they were sacrificed.
••
But, there is instead a universal tradition that has long rejected the asserted right by
punishing as a crime assisting suicide.
Suicide
Fundamental rights recognized
•The right to marry
•A fundamental right and miscegenation law deprives them of liberty without due process of
law.
•Loving v. Virginia, 388 U.S. 1 (1967)
Loving
*The
connection to Georgetown Law
Right to engage in sexual conduct
*•
Tx. statute that did not permit sexual conduct between members of the same sex was
unconstitutional. Lawrence v. Texas, 539 U.S. 558 (2003)
The right to Marry
Marriage
•▾
Significant interference with fundamental right requires support of sufficiently important
state interests and closely tailored to effectuate those interests.
•
•
•
other means exist to enforce the support obligations
•
Under inclusive in that they do not speak to any other financial obligations.
DOMA and same sex marriage
•▾
•
DOMA, United States v. Windsor, 133 S.Ct. 2675 (2013)
•
marriage means only a marriage between a man and a woman and spouse refers
only to a person of the opposite sex who is a husband or a wife.
•
•
inheritance by partner in same sex marriage (NY permitted registration as
domestic partners) but she lost right to claim marital exemption under federal law and sued for
refund
DOMA
•State recognized same sex marriage but federal government did not, injuring the very class that
the state sought to protect.
Doma
• By seeking to injure the very class New York seeks to protect, DOMA violates basic due process
and equal protection principles applicable to the Federal Government. The Constitution’s
guarantee of equality “must at the very least mean that a bare congressional desire to harm a
politically unpopular group cannot” justify disparate treatment of that group. “
Obergell v. Hodges
*Exclusion
of same sex couples demeans them
*Making such marriages different in legal consequences violates the 14th Amendment guarantee
of the “ equal protection of the law.”
reproduction
•▾
Reproductive Rights
•
•
Buck v. Bell, 274 U.S. 200 (1927). Grounds for preventing further procreation
existed and state had an interest in her sterilization. “3 generations of imbeciles are enough.”
•
•
Skinner v. OK, 316 U.S. 535 (1942). Right to procreation and sterilization of
habitual criminal denied him equal protection because it permitted sterilization of criminal
convicted of one form or larceny but not another.
Right to custody
••
Stanley v. Illinois, 405 U.S.645 (1972) unwed father presumed unfit and children made
wards of the state when mother died.
right to custody
••
••
Held: right to raise one’s children is fundamental
Presumption, irrespective of individualized showing, cannot stand. If all Illinois parents
are constitutionally entitled to a hearing on their fitness before their children are removed from
their custody equal protection requires that unwed father have that same right.
right to control education and upbringing of their children
visitation rights to grandparents
••
Troxel v. Granville, 530 U.S. 57 (2000): Visitation rights granted grandparents under
statute that permitted any one to seek visitation rights interfered with mother’s right to raise her
child.
restraints on parental rights
Sexual intimacy and reproduction
Griswold and the battle
••
Harlan, J. “implicit in the concept of ordered liberty” ; decries artificial restriction of the
due process clause by claim that Bill of Rights is incorporated into liberty protected by 14th
amendment
••
••
Black, J: Ninth amendment did not confer on Supreme Court veto power over lawmaking
Goldberg, J. Right of privacy falls within rights specified in 9th
prohibitions on use and sale of contraceptives
•Prohibition on distribution except to married couples held to be unconstitutional. Eisenstadt v.
Baird, 405 U.S. 438 (1972)
•not justified by interest in chastity; married person could have sex with unmarried one;
discrimination between married and unmarried was invidious
•does nothing to prevent disease among unmarried and why should married be protected from
disease and not unmarried-not justified by health concerns
•right of unmarried is equal to right of married to prevent contraception.
other restrictions
contraceptives
•▾
exception for physicians prescribing them for minors is not justified by any medical
necessity or intent to deter sexual behavior.
•
•
ban on advertising because it may offend someone is unjustified; that speech
offends someone is not grounds to suppress it.
The legacy of griswold
••
Griswold stands for the proposition that due process clause protects individual decision
to have or not have a child from governmental intrusion.
•Burdening distribution impairs liberty of deterring whether or not to have a child and not
justified by state interests in maintaining medical standards.
The new cases
*
When ratified in 1791, the Bill of Rights applied only to the Federal Government. Barron
ex rel. Tiernan v. Mayor of Baltimore, 7 Pet. 243 (1833). “The constitutional Amendments
adopted in the aftermath of the Civil War,”however, “fundamentally altered our country’s
federal system.” McDonald, 561 U. S., at 754. With only “a handful” of exceptions, this Court has
held that the Fourteenth Amendment’s Due Process Clause incorporates the protections
contained in the Bill of Rights, rendering them applicable to the States.
Timbs v. Indiana, No. 17-1092 (U.S. Feb. 20, 2019)
•A Bill of Rights protection is incorporated, we have explained, if it is “fundamental to our
scheme of ordered liberty,”or “deeply rooted in this Nation’s history and tradition.”
Timbs
•Prohibition of excessive fines goes back to Magna Carta in 1215.
Timbs
•In short, the historical and logical case for concluding that the Fourteenth Amendment
incorporates the Excessive Fines Clause is overwhelming. Protection against excessive punitive
economic sanctions secured by the Clause is, to repeat, both “fundamental to our scheme of
ordered liberty” and “deeply rooted in this Nation’s history and tradition.
History