Appellant, an Illinois corporation, maintained an office in
Minnesota with 30 employees. Under appellant's pension plan,
adopted in 1963 and qualified under § 401 of the Internal Revenue
Code, employees were entitled to retire and receive a pension at
age 65 regardless of length of service, and an employee's pension
right became vested if he satisfied certain conditions as to length
of service and age. Appellant was the sole contributor to the
pension trust fund, and each year made contributions to the fund
based on actuarial predictions of eventual payout needs. But the
plan neither required appellant to make specific contributions nor
imposed any sanction on it for failing to make adequate
contributions, and appellant retained a right not only to amend the
plan, but also to terminate it at any time and for any reason. In
1974, Minnesota enacted the Private Pension Benefits Protection Act
(Act), under which a private employer of 100 employees or more (at
least one of whom was a Minnesota resident) who provided pension
benefits under a plan meeting the qualifications of § 401 of the
Internal Revenue Code, was subject to a "pension funding charge" if
he terminated the plan or closed a Minnesota office. The charge was
assessed if the pension funds were insufficient to cover full
pensions for all employees who had worked at least 10 years, and
periods of employment prior to the effective date of the Act were
to be included in the 10-year employment criterion. Shortly
thereafter, in a move planned before passage of the Act, appellant
closed its Minnesota office, and several of its employees, who were
then discharged, had no vested pension rights under appellant's
plan, but had worked for appellant for 10 years or more, thus
qualifying as pension obligees under the Act. Subsequently, the
State notified appellant that it owed a pension funding charge of
$185,000 under the Act. Appellant then brought suit in Federal
District Court for injunctive and declaratory relief, claiming that
the Act unconstitutionally impaired its contractual obligations to
its employees under its pension plan, but the court upheld the Act
as applied to appellant.
The application of the Act to appellant violates
the Contract Clause of the Constitution, which provides that "[n]o
State shall . . . pass any . . . Law impairing the Obligation of
Contracts." Pp. 438 U. S.
Page 438 U. S. 235
(a) While the Contract Clause does not operate to obliterate the
police power of the States, it does impose some limits upon the
power of a State to abridge existing contractual relationships,
even in the exercise of its otherwise legitimate police power.
"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
United States Trust Co. v. New Jersey, 431 U. S.
, 431 U. S. 22
438 U. S.
(b) The impact of the Act upon appellant's contractual
obligations was both substantial and severe. Not only did the Act
retroactively modify the compensation that appellant had agreed to
pay its employees from 1963 to 1974, but it did so by changing
appellant's obligations in an area where the element of reliance
was vital -- the funding of a pension plan. Moreover, the
retroactive state-imposed vesting requirement was applied only to
those employers who terminated their pension plans or who, like
appellant, closed their Minnesota offices, thus forcing the
employer to make all the retroactive changes in its contractual
obligations at one time. Pp. 438 U. S.
(c) The Act does not possess the attributes of those state laws
that have survived challenge under the Contract Clause. It was not
even purportedly enacted to deal with a broad, generalized economic
or social problem, cf. Home Building & Loan Assn. v.
Blaisdell, 290 U. S. 398
290 U. S. 445
but has an extremely narrow focus and enters an area never before
subject to regulation by the State. Pp. 438 U. S.
STEWART, J., delivered the opinion of the Court, in which
BURGER, C.J., and POWELL, REHNQUIST, and STEVENS, JJ., joined.
BRENNAN, J., filed a dissenting opinion, in which WHITE and
MARSHALL, JJ., joined, post,
p. 438 U. S. 251
BLACKMUN, J., took no part in the consideration or decision of the
Page 438 U. S. 236
MR. JUSTICE STEWART delivered the opinion of the Court.
The issue in this case is whether the application of Minnesota's
Private Pension Benefits Protection Act [Footnote 1
] to the appellant violates the Contract
Clause of the United States Constitution.
In 1974, appellant Allied Structural Steel Co. (company), a
corporation with its principal place of business in Illinois,
maintained an office in Minnesota with 30 employees. Under the
company's general pension plan, adopted in 1963 and qualified as a
single-employer plan under § 401 of the Internal Revenue Code, 26
U.S.C. § 401 (1976 ed.), [Footnote
] salaried employees were covered as follows: at age 65, an
employee was entitled to retire and receive a monthly pension
generally computed by multiplying 1% of his average monthly
earnings by the total number of his years of employment with the
company. [Footnote 3
] Thus, an
employee aged 65 or more could retire without satisfying any
particular length-of-service requirement, but the size of his
pension would reflect the length of his service with the company.
] An employee could
Page 438 U. S. 237
become entitled to receive a pension, payable in full at age 65,
if he met any one of the following requirements: (1) he had worked
15 years for the company and reached the age of 60; or (2) he was
at least 55 years old and the sum of his age and his years of
service with the company was at least 75; or (3) he was less than
55 years old but the sum of his age and his years of service with
the company was at least 80. Once an employee satisfied any one of
these conditions, his pension right became vested in the sense that
any subsequent termination of employment would not affect his right
to receive a monthly pension when he reached 65. Those employees
who quit or were discharged before age 65 without fulfilling one of
the other three conditions did not acquire any pension rights.
The company was the sole contributor to the pension trust fund,
and each year it made contributions to the fund based on actuarial
predictions of eventual payout needs. Although those contributions,
once made, were irrevocable in the sense that they remained part of
the pension trust fund, the plan neither required the company to
make specific contributions nor imposed any sanction on it for
failing to contribute adequately to the fund.
The company not only retained a virtually unrestricted right to
amend the plan in whole or in part, but was also free to terminate
the plan and distribute the trust assets at any time and for any
reason. In the event of a termination, the assets of the fund were
to go, first, to meet the plan's obligation to those employees
already retired and receiving pensions; second, to those eligible
for retirement; and finally, if any balance remained, to the other
employees covered under the plan whose pension rights had not yet
vested. [Footnote 5
within each of these categories were assured payment only to the
extent of the pension assets.
Page 438 U. S. 238
The plan expressly stated:
"No employee shall have any right to, or interest in, any part
of the Trust's assets upon termination of his employment or
otherwise, except as provided from time to time under this Plan,
and then only to the extent of the benefits payable to such
employee out of the assets of the Trust. All payments of benefits
as provided for in this Plan shall be made solely out of the assets
of the Trust and neither the employer, the trustee, nor any member
of the Committee shall be liable therefor in any manner."
The plan also specifically advised employees that neither its
existence nor any of its terms were to be understood as implying
any assurance that employees could not be dismissed from their
employment with the company at any time.
In sum, an employee who did not die, did not quit, and was not
discharged before meeting one of the requirements of the plan would
receive a fixed pension at age 65 if the company remained in
business and elected to continue the pension plan in essentially
its existing form.
On April 9, 1974, Minnesota enacted the law here in question,
the Private Pension Benefits Protection Act, Minn.Stat. §§
181B.01-181B.17. Under the Act, a private employer of 100 employees
or more -- at least one of whom was a Minnesota resident -- who
provided pension benefits under a plan meeting the qualifications
of § 401 of the Internal Revenue Code, was subject to a "pension
funding charge" if he either terminated the plan or closed a
Minnesota office. [Footnote 6
The charge was assessed if the pension funds were not sufficient to
cover full pensions for all employees who had worked at least 10
years. The Act required the employer to satisfy the deficiency by
purchasing deferred annuities, payable to the employees at their
normal retirement age. A separate provision
Page 438 U. S. 239
specified that periods of employment prior to the effective date
of the Act were to be included in the 10-year employment criterion.
During the summer of 1974, the company began closing its
Minnesota office. On July 31, it discharged 11 of its 30 Minnesota
employees, and the following month it notified the Minnesota
Commissioner of Labor and Industry, as required by the Act, that it
was terminating an office in the State. [Footnote 8
] At least nine of the discharged employees
did not have any vested pension rights under the company's plan,
but had worked for the company for 10 years or more, and thus
qualified as pension obligees of the company under the law that
Minnesota had enacted a few months earlier. On August 18, the State
notified the company that it owed a pension funding charge of
approximately $185,000 under the provisions of the Private Pension
Benefits Protection Act.
The company brought suit in a Federal District Court asking
Page 438 U. S. 240
for injunctive and declaratory relief. It claimed that the Act
unconstitutionally impaired its contractual obligations to its
employees under its pension agreement. The three-judge court upheld
the constitutional validity of the Act as applied to the company,
Fleck v. Spannaus, 449 F.
, and an appeal was brought to this Court under 28
U.S.C. § 1253 (1976 ed.). [Footnote
] We noted probable jurisdiction. 434 U.S. 1045.
There can be no question of the impact of the Minnesota Private
Pension Benefits Protection Act upon the company' contractual
relationships with its employees. T he Act substantially altered
those relationships by superimposing pension obligations upon the
company conspicuously beyond those that it had voluntarily agreed
to undertake. But it does not inexorably follow that the Act, as
applied to the company, violates the Contract Clause of the
The language of the Contract Clause appears unambiguously
absolute: "No State shall . . . pass any . . . Law impairing the
Obligation of Contracts." U.S.Const., Art. I, § 10. The Clause is
not, however, the Draconian provision that its words might seem to
imply. As the Court has recognized,
"literalism in the construction of the contract clause . . .
would make it destructive of the public interest by depriving the
State of its prerogative of self-protection."
W. B. Worthen Co. v. Thomas, 292 U.
, 292 U. S. 433
Page 438 U. S. 241
Although it was perhaps the strongest single constitutional
check on state legislation during our early years as a Nation,
] the Contract
Clause receded into comparative desuetude with the adoption of the
Fourteenth Amendment, and particularly with the development of the
large body of jurisprudence under the Due Process Clause of that
Amendment in modern constitutional history. [Footnote 12
] Nonetheless, the Contract Clause
remains part of the Constitution. It is not a dead letter. And its
basic contours are brought into focus by several of this Court's
First of all, it is to be accepted as a commonplace that the
Contract Clause does not operate to obliterate the police power of
"It is the settled law of this court that the interdiction of
statutes impairing the obligation of contracts does not prevent the
State from exercising such powers as are vested in it for the
promotion of the common weal, or are necessary for the general good
of the public, though contracts previously entered into between
individuals may thereby be affected. This power, which in its
various ramifications is known as the police power, is an exercise
of the sovereign right of the Government to protect the lives,
health, morals, comfort and general welfare of the people, and is
paramount to any rights under contracts between individuals."
Manigault v. Springs, 199 U. S. 473
199 U. S. 480
As Mr. Justice Holmes succinctly put the matter in his opinion for
the Court in Hudson Water Co. v. McCarter, 209 U.
, 209 U. S.
"One whose rights, such as they are, are subject to state
restriction cannot remove them from the power of the State by
making a contract
Page 438 U. S. 242
about them. The contract will carry with it the infirmity of the
If the Contract Clause is to retain any meaning at all, however,
it must be understood to impose some limits upon the power of a
State to abridge existing contractual relationships, even in the
exercise of its otherwise legitimate police power. The existence
and nature of those limits were clearly indicated in a series of
cases in this Court arising from the efforts of the States to deal
with the unprecedented emergencies brought on by the severe
economic depression of the early 1930's.
In Home Building & Loan Assn. v. Blaisdell,
290 U. S. 398
Court upheld against a Contract Clause attack a mortgage moratorium
law that Minnesota had enacted to provide relief for homeowners
threatened with foreclosure. Although the legislation conflicted
directly with lenders' contractual foreclosure rights, the Court
there acknowledged that, despite the Contract Clause, the States
retain residual authority to enact laws "to safeguard the vital
interests of [their] people." Id.
at 290 U. S. 434
In upholding the state mortgage moratorium law, the Court found
five factors significant. First, the state legislature had declared
in the Act itself that an emergency need for the protection of
homeowners existed. Id.
at 290 U. S. 444
Second, the state law was enacted to protect a basic societal
interest, not a favored group. Id.
at 290 U. S. 445
Third, the relief was appropriately tailored to the emergency that
it was designed to meet. Ibid.
Fourth, the imposed
conditions were reasonable. Id.
at 290 U. S.
-447. And, finally, the legislation was limited to
the duration of the emergency. Id.
at 290 U. S.
opinion thus clearly implied that, if the
Minnesota moratorium legislation had not possessed the
characteristics attributed to it by the Court, it would have been
invalid under the Contract Clause of the Constitution. [Footnote 13
Page 438 U. S. 243
These implications were given concrete force in three cases that
followed closely in Blaisdell's
In W. B. Worthen Co. v. Thomas, 292 U.
, the Court dealt with an Arkansas law that
exempted the proceeds of a life insurance policy from collection by
the beneficiary's judgment creditors. Stressing the retroactive
effect of the state law, the Court held that it was invalid under
the Contract Clause, since it was not precisely and reasonably
designed to meet a grave temporary emergency in the interest of the
general welfare. In W. B. Worthen Co. v. Kavanaugh,
295 U. S. 56
Court was confronted with another Arkansas law that diluted the
rights and remedies of mortgage bondholders. The Court held the law
invalid under the Contract Clause. "Even when the public welfare is
invoked as an excuse," Mr. Justice Cardozo wrote for the Court, the
security of a mortgage cannot be cut down "without moderation or
reason, or in a spirit of oppression." Id.
at 295 U. S. 60
And finally, in Treigle v. Acme Homestead Assn.,
297 U. S. 189
Court held invalid under the Contract Clause a Louisiana law that
modified the existing withdrawal rights of the members of a
building and loan association. "Such an interference with the right
of contract," said the Court,
"cannot be justified by saying that in the public interest t.he
operations of building associations may be controlled and
regulated, or that, in the same interest, their charters may be
at 297 U. S.
The most recent Contract Clause case in this Court was
United States Trust Co. v. New Jersey, 431 U. S.
. [Footnote 14
Page 438 U. S. 244
that case, the Court again recognized that, although the
absolute language of the Clause must leave room for "the
essential attributes of sovereign power,' . . . necessarily
reserved by the States to safeguard the welfare of their citizens,"
id. at 431 U. S. 21,
that power has limits when its exercise effects substantial
modifications of private contracts. Despite the customary deference
courts give to state laws directed to social and economic
"[l]egislation adjusting the rights and responsibilities of
contracting parties must be upon reasonable conditions and of a
character appropriate to the public purpose justifying its
at 431 U. S. 22
Evaluating with particular scrutiny a modification of a contract to
which the State itself was a party, the Court in that case held
that legislative alteration of the rights and remedies of Port
Authority bondholders violated the Contract Clause because the
legislation was neither necessary nor reasonable. [Footnote 15
In applying these principles to the present case, the first
inquiry must be whether the state law has, in fact, operated as a
substantial impairment of a contractual relationship. [Footnote 16
Page 438 U. S. 245
The severity of the impairment measures the height of the hurdle
the state legislation must clear. Minimal alteration of contractual
obligations may end the inquiry at its first stage. [Footnote 17
] Severe impairment, on the
other hand, will push the inquiry to a careful examination of the
nature and purpose of the state legislation.
The severity of an impairment of contractual obligations can be
measured by the factors that reflect the high value the Framers
placed on the protection of private contracts. Contracts enable
individuals to order their personal and business affairs according
to their particular needs and interests. Once arranged, those
rights and obligations are binding under the law, and the parties
are entitled to rely on them.
Here, the company's contracts of employment with its employees
included as a fringe benefit or additional form of compensation,
the pension plan. The company's maximum obligation was to set aside
each year an amount based on the plan's requirements for vesting.
The plan satisfied the current federal income tax code and was
subject to no other legislative requirements. And, of course, the
company was free to amend or terminate the pension plan at any
time. The company thus had no reason to anticipate that its
Page 438 U. S. 246
pension rights could become vested except in accordance with the
terms of the plan. It relied heavily, and reasonably, on this
legitimate contractual expectation in calculating its annual
contributions to the pension fund.
The effect of Minnesota's Private Pension Benefits Protection
Act on this contractual obligation was severe. The company was
required in 1974 to have made its contributions throughout the
pre-1974 life of its plan as if employees' pension rights had
vested after 10 years, instead of vesting in accord with the terms
of the plan. Thus, a basic term of the pension contract -- one on
which the company had relied for 10 years -- was substantially
modified. The result was that, although the company's past
contributions were adequate when made, they were not adequate when
computed under the 10-year statutory vesting requirement. The Act
thus forced a current recalculation of the past 10 years'
contributions based on the new, unanticipated 10-year vesting
Not only did the state law thus retroactively modify the
compensation that the company had agreed to pay its employees from
1963 to 1974, but also it did so by changing the company's
obligations in an area where the element of reliance was vital --
the funding of a pension plan. [Footnote 18
] As the Court has recently recognized:
"These [pension] plans, like other forms of insurance, depend on
the accumulation of large sums to cover contingencies. The amounts
set aside are determined by a painstaking assessment of the
insurer's likely liability. Risks that the insurer foresees will be
included in the
Page 438 U. S. 247
calculation of liability, and the rates or contributions charged
will reflect that calculation. The occurrence of major unforeseen
contingencies, however, jeopardizes the insurer's solvency and,
ultimately, the insureds' benefits. Drastic changes in the legal
rules governing pension and insurance funds, like other unforeseen
events, can have this effect."
Los Angeles Dept. of Water & Power v. Manhart,
435 U. S. 702
435 U. S.
Moreover, the retroactive state-imposed vesting requirement was
applied only to those employers who terminated their pension plans
or who, like the company, closed their Minnesota offices. The
company was thus forced to make all the retroactive changes in its
contractual obligations at one time. By simply proceeding to close
its office in Minnesota, a move that had been planned before the
passage of the Act, the company was assessed an immediate pension
funding charge of approximately $185,000.
Thus, the statute in question here nullifies express terms of
the company's contractual obligations and imposes a completely
unexpected liability in potentially disabling amounts. There is not
even any provision for gradual applicability or grace periods.
the Employee Retirement Income Security Act of 1974
(ERISA), 29 U.S.C. §§ 1061(b)(2), 1086(b), and 1144 (1976 ed.).
Yet there is no showing in the record before us
that this severe disruption of contractual expectations was
necessary to meet an important general social problem. The
presumption favoring "legislative judgment as to the necessity and
reasonableness of a particular measure," United States Trust
431 U.S. at 431 U. S. 23
simply cannot stand in this case.
The only indication of legislative intent in the record before
us is to be found in a statement in the District Court's
"It seems clear that the problem of plant closure and pension
plan termination was brought to the attention
Page 438 U. S. 248
of the Minnesota legislature when the Minneapolis-Moline
Division of White Motor Corporation closed one of its Minnesota
plants and attempted to terminate its pension plan."
449 F. Supp. at 651. [Footnote 19
But whether or not the legislation was aimed largely at a single
employer, [Footnote 20
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. [Footnote 21
] Thus, this law can
Page 438 U. S. 249
hardly be characterized, like the law at issue in the
case, as one enacted to protect a broad societal
interest, rather than a narrow class. [Footnote 22
Moreover, in at least one other important respect, the Act does
not resemble the mortgage moratorium legislation whose
constitutionality was upheld in the Blaisdell
legislation, imposing a sudden, totally unanticipated, and
substantial retroactive obligation upon the company to its
employees, [Footnote 23
not enacted to deal with a situation remotely approaching the broad
and desperate emergency economic conditions of the early 1930's --
conditions of which the Court in Blaisdell
notice. [Footnote 24
Entering a field it had never before sought to regulate, the
Minnesota Legislature grossly distorted the company's existing
contractual relationships with its employees by superimposing
retroactive obligations upon the company substantially
Page 438 U. S. 250
beyond the terms of its employment contracts. And that burden
was imposed upon the company only because it closed its office in
This Minnesota law simply does not possess the attributes of
those state laws that, in the past, have survived challenge under
the Contract Clause of the Constitution. The law was not even
purportedly enacted to deal with a broad, generalized economic or
social problem. Cf. Home Building & Loan Assn. v.
290 U.S. at 290 U. S. 445
It did not operate in an area already subject to state regulation
at the time the company's contractual obligations were originally
undertaken, but invaded an area never before subject to regulation
by the State. Cf. Veix v. Sixth Ward Building & Loan
Assn., 310 U. S. 32
310 U. S. 38
] It did not
effect simply a temporary alteration of the contractual
relationships of those within its coverage, but worked a severe,
permanent, and immediate change in those relationships --
irrevocably and retroactively. Cf. United States Trust Co. v.
431 U.S. at 431 U. S. 22
its narrow aim was leveled not at every Minnesota employer, not
even at every Minnesota employer who left the State, but only at
those who had, in the past, been sufficiently enlightened as
voluntarily to agree to establish pension plans for their
"Not Blaisdell's case, but Worthen's (W. B.
Worthen Co. v. Thomas,
[292 U.S. 426]) supplies the
applicable rule" here. W. B. Worthen Co. v. Kavanaugh,
U.S. at 295 U. S. 63
is not necessary to hold that the Minnesota law impaired the
obligation of the company's employment contracts "without
moderation or reason or in a spirit of oppression." Id.
295 U. S. 60
] But we do hold
that, if the Contract Clause means anything at
Page 438 U. S. 251
all, it means that Minnesota could not constitutionally do what
it tried to do to the company in this case.
The judgment of the District Court is reversed.
It is so ordered.
MR. JUSTICE BLACKMUN took no part in the consideration or
decision of this case.
Minn.Stat. § 181B.01 et seq.
(1974). This is the same
Act that was considered in Malone v. White Motor Corp.,
435 U. S. 497
case presenting a quite different legal issue.
The plan was not the result of a collective bargaining
agreement, and no such agreement is at issue in this case.
The employee could elect to receive instead a lump-sum
Thus, an employee whose average monthly earnings were $800 and
who retired at 65 would receive eight dollars monthly if he had
worked one year for the company and $320 monthly if he had worked
for the company for 40 years.
Apart from termination of the fund and distribution of the trust
assets, there was no other situation in which employees in this
third category would receive anything from the pension fund.
Although the company had only 30 employees in Minnesota, it was
subject to the Act because it had over 100 employees
Entitled "Nonvested Benefits Prior to Act," Minn.Stat. § 181B.04
"Every employer who hereafter ceases to operate a place of
employment or a pension plan within this state shall owe to his
employees covered by sections 181B.01 to 181B.17 a pension funding
charge which shall be equal to the present value of the total
amount of nonvested pension benefits based upon service occurring
before April 10, 1974, of such employees of the employer who have
completed ten or more years of any covered service under the
pension plan of the employer and whose nonvested pension benefits
have been or will be forfeited because of the employer's ceasing to
operate a place of employment or a pension plan, less the amount of
such nonvested pension benefits which are compromised or settled to
the satisfaction of the commissioner as provided in sections
181B.01 to 181B.17."
According to the stipulated facts, the closing of the company's
Minnesota office resulted from a shift of that office's duties to
the main company office in Illinois the previous December. The
closing was not completed until February, 1975, by which time the
Minnesota Act had been preempted by federal law. See Malone v.
White Motor Corp.,
435 U.S. at 435 U. S. 499
We deal here solely with the application of the Minnesota Act to
the 11 employees discharged in July, 1974.
The claims of Walter Fleck and the other two individual
plaintiffs were dismissed by the District Court for lack of
standing, Fleck v. Spannaus, 421 F.
, leaving only the company as an appellant. Warren
Spannaus, the Attorney General of Minnesota, is an appellee.
B. Schwartz, A Commentary on the
Constitution of the United States, Pt. 2, The Rights of Property
266-306 (1965); B. Wright, The Contract Clause of the Constitution
Perhaps the best known of all Contract Clause cases of that era
was Dartmouth College v.
4 Wheat. 518.
Indeed, at least one commentator has suggested that
"the results might be the same if the contract clause were
dropped out of the Constitution, and the challenged statutes all
judged as reasonable or unreasonable deprivations of property."
Hale, The Supreme Court and the Contract Clause: III, 57
Harv.L.Rev. 852, 890-891 (1944).
In Veix v. Sixth Ward Building & Loan Assn.,
310 U. S. 32
310 U. S. 38
the Court took into account still another consideration in
upholding a state law against a Contract Clause attack: the
petitioner had "purchased into an enterprise already regulated in
the particular to which he now objects."
See also El Paso v. Simmons, 379 U.
. There the Court held that a Texas law shortening
the time within which a defaulted land claim could be reinstated
did not violate the Contract Clause.
"We do not believe that it can seriously be contended that the
buyer was substantially induced to enter into these contracts on
the basis of a defeasible right to reinstatement . . . , or that he
interpreted that right to be of everlasting effect. At the time the
contract was entered into, the State's policy was to sell the land
as quickly as possible. . . ."
at 379 U. S. 514
In sum, "[t]he measure taken . . . was a mild one indeed, hardly
burdensome to the purchaser . . . , but nonetheless an important
one to the State's interest." Id.
at 379 U. S.
The Court indicated that impairments of a State's own contracts
would face more stringent examination under the Contract Clause
than would laws regulating contractual relationships between
private parties, 431 U.S. at 431 U. S. 22
although it was careful to add that "private contracts are not
subject to unlimited modification under the police power."
at 431 U. S. 22
The novel construction of the Contract Clause expressed in the
dissenting opinion is wholly contrary to the decisions of this
Court. The narrow view that the Clause forbids only state laws that
diminish the duties of a contractual obligor, and not laws that
increase them, a view arguably suggested by Satterlee
2 Pet. 380, has since been expressly
repudiated. Detroit United R. Co. v. Michigan,
242 U. S. 238
Georgia R. & Power Co. v. Decatur, 262 U.
. See also, e.g., Sherman v. Smith,
Black 587; Bernheimer v. Converse, 206 U.
, 206 U. S. 530
Henley v. Myers, 215 U. S. 373
National Surety Co. v. Architectural Decorating Co.,
226 U. S. 276
Columbia R., Gas & Electric Co. v. South Carolina,
261 U. S. 236
Stockholders of Peoples Banking Co. v. Sterling,
300 U. S. 175
Moreover, in any bilateral contract, the diminution of duties on
one side effectively increases the duties on the other.
The even narrower view that the Clause is limited in its
application to state laws relieving debtors of obligations to their
creditors is, as the dissent recognizes, post
438 U. S. 257
n. 5, completely at odds with this Court's decisions.
See Dartmouth College v.
4 Wheat. 518; Wood v. Lovett,
313 U. S. 362
El Paso v. Simmons, supra. See generally
The Supreme Court and the Contract Clause, 57 Harv.L.Rev. 512,
In some situations the element of reliance may cut both ways.
Here, the company had relied upon the funding obligation of the
pension plan for more than a decade. There was no showing of
reliance to the contrary by its employees. Indeed, Minnesota did
not act to protect any employee reliance interest demonstrated on
the record. Instead, it compelled the employer to exceed
bargained-for expectations, and nullified an express term of the
The Minnesota Supreme Court, Fleck v. Spannus,
Minn. 223, 251 N.W.2d
, engaged in mere speculation as to the state legislature's
In Malone v. White Motor Corp.,
435 U.S. at
435 U. S. 501
n. 5, the Court noted that the White Motor Corp., an employer of
more than 1,000 Minnesota employees, had been prohibited from
terminating its pension plan until the expiration date of its
collective bargaining agreement, May 1, 1974. International
Union, UAW v. White Motor Corp.,
505 F.2d 1193 (CA8). On April
9, 1974, the Minnesota Act was passed, to become effective the
following day. When White Motor proceeded to terminate its
collectively bargained pension plan at the earliest possible date,
May 1, 1974, the State assessed a deficiency of more than $19
million, based upon the Act's 10-year vesting requirement.
Not only did the Act have an extremely narrow aim, but also its
effective life was extremely short. The United States House of
Representatives had passed a version of the Employee Retirement
Income Security Act of 1974, 29 U.S.C. § 1001 et seq.
(1976 ed.), on February 28, 1974, 120 Cong.Rec. 4781-4782 (1974),
and the Senate on March 4, 1974, id.
at 5011. Both
versions expressly preempted state laws. That the Minnesota
Legislature was aware of the impending federal legislation is
reflected in the explicit provision of the Act that it will
"become null and void upon the institution of a mandatory plan
of termination insurance guaranteeing the payment of a substantial
portion of an employee's vested pension benefits pursuant to any
law of the United States."
Minn.Stat. § 181B.17. ERISA itself, effective January 1, 1975,
expressly preempts all state laws regulating covered plans. 29
U.S.C. § 1144(a) (1976 ed.). Thus, the Minnesota Act was in force
less than nine months, from April 10, 1974, until January 1, 1975.
The company argues that the enactment of the law while ERISA was on
the horizon totally belies the State's need for this pension
In upholding the constitutionality of the Act, the District
Court referred to Minnesota's interest in protecting the economic
welfare of it older citizens, as well as their surrounding economic
communities. 449 F.
the gradual applicability of ERISA, which
itself is not even mandatory. At the outset, ERISA did not go into
effect at all until four months after it was enacted. 29 U.S.C. §
1144 (1976 ed.). Funding and vesting requirements were delayed for
an additional year. §§ 1086(b), 1061(b)(2) (1976 ed.). By contrast,
the Minnesota Act became fully effective the day after its passage.
The District Court rejected out of hand the argument that employers
were constitutionally entitled to some grace period to adjust their
pension planning. 449 F. Supp. at 651.
This is not to suggest that only an emergency of great magnitude
can constitutionally justify a state law impairing the obligations
of contracts. See, e.g., Veix v. Sixth Ward Building & Loan
310 U.S. at 310 U. S. 39
East New York Savings Bank v. Hahn, 326 U.
; El Paso v. Simmons, 379 U.
As Mr. Justice Cardozo's opinion for the Court in the
case made clear, these criteria are "the
outermost limits only." The opinion went on to stress the state
law's "studied indifference to the interests" of creditors. 295
U.S. at 295 U. S.
MR. JUSTICE BRENNAN, with whom MR. JUSTICE WHITE and MR. JUSTICE
MARSHALL join, dissenting.
In cases involving state legislation affecting private
contracts, this Court's decisions over the past half century,
consistently with both the constitutional text and its original
understanding, have interpreted the Contract Clause as prohibiting
state legislative Acts which, "[w]ith studied indifference to the
interests of the [contracting party] or to his appropriate
protection," effectively diminished or nullified the obligation due
him under the terms of a contract. W. B. Worthen Co. v.
Kavanaugh, 295 U. S. 56
295 U. S. 60
(1935). But the Contract Clause has not, during this period, been
applied to state legislation that, while creating new duties, in
nowise diminished the efficacy of any contractual obligation owed
the constitutional claimant. Cf. Goldblatt v. Hempstead,
369 U. S. 590
(1962). The constitutionality of such legislation has, rather, been
determined solely by reference to other provisions of the
the Due Process Clause, insofar as
they operate to protect existing economic values.
Today's decision greatly expands the reach of the Clause. The
Minnesota Private Pension Benefits Protection Act (Act) does not
abrogate or dilute any obligation due a party to a private
contract; rather, like all positive social legislation, the Act
imposes new, additional obligations on a particular class of
persons. In my view, any constitutional infirmity in the law must
therefore derive not from the Contract Clause, but from the Due
Process Clause of the Fourteenth Amendment.
Page 438 U. S. 252
I perceive nothing in the Act that works a denial of due
process, and therefore I dissent.
I begin with an assessment of the operation and effect of the
Minnesota statute. Although the Court disclaims knowledge of the
purposes of the law, both the terms of the Act and the opinion of
the State Supreme Court disclose that it was designed to remedy a
serious social problem arising from the operation of private
pension plans. As the Minnesota Supreme Court indicated, see
Fleck v. Spannaus,
312 Minn. 223, 231, 251 N.W.2d
, 338 (1977), the impetus for the law must have been a
legislative belief -- shared by Congress, see generally
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
§ 1001 et seq.
(1976 ed.) -- that private pension plans
often were grossly unfair to covered employees. Not only would
employers often neglect to furnish their employees with adequate
information concerning their rights under the plans, leading to
erroneous expectations, but also, because employers often failed to
make contributions to the pension funds large enough adequately to
fund their plans, employees often ultimately received only a small
amount of those benefits they reasonably anticipated. See Fleck
v. Spannaus, supra
at 231, 251 N.W.2d at 338. Acting against
this background, Minnesota, prior to the enactment of ERISA,
adopted the Act to remedy, inter alia,
what was viewed as
a related serious social problem: the frustration of expectation
interests that can occur when an employer closes a single plant and
terminates the employees who work there. [Footnote 2/1
Pension plans normally do not make provision to protect
Page 438 U. S. 253
the interests of employees -- even those within only a few
months of the "vesting" of their rights under the plan -- who are
terminated because an employer closes one of his plants. See
Bernstein, Employee Pension Rights When Plants Shut
Down: Problems and Some Proposals, 76 Harv.L.Rev. 952 (1963). Even
assuming -- contrary to common experience -- that an employer
adequately informs his employees that a termination for any reason
prior to vesting will result in forfeiture of accrued pension
credits, denial of all pension benefits not because of job-related
failings, but only because the employees are unfortunate enough to
be employed at a plant that closes for purely economic reasons, is
harsh indeed. For unlike discharges for inadequate job performance,
which may reasonably be foreseen, the closing of a plant is a
contingency outside the range of normal expectations of both the
employer and the employee -- as is made clear by the fact that
Allied did not rely upon the possibility of a plant's closing in
calculating the amount of its contributions to its pension plan
fund. [Footnote 2/2
The Minnesota Act addresses this problem by selecting a period
-- 10 years of employment -- after which this generally unforeseen
contingency may not be the basis for depriving employees of their
accumulated pension fund credits, and by establishing a mechanism
to provide the employees with the equivalent of the earned pension
plan credits. Although the Court glides over this fact, it should
be apparent that the Act will impose only minor economic burdens on
employers whose pension plans have been adequately funded. For,
where, as was true here and as will generally be true, the
possibility of a plant's closing was not relied upon by actuaries
in calculating the amount of the employer's contributions to the
Page 438 U. S. 254
adequate pension plan fund would include contributions on behalf
of terminated employees of 10 or more years' service whose rights
had not vested. Indeed, without the Act, the closing of the plant
would create a windfall for the employer, because, due to the
resulting surplus in the fund, his future contributions would be
reduced. In denying the windfall, the Act requires that the
employer use the money he will save in the future to purchase
annuities for the terminated employees. [Footnote 2/3
] Of course, the consequence for the
employer may be a slightly higher pension expense; the greater
outlay might arise, in part, because the past contributions to the
plan would have reflected the actuarial possibility that some of
the employees who had served 10 years might not ultimately satisfy
the plan's vesting requirement.
I emphasize, contrary to the repeated protestations of the
Court, that the Act does not impose "sudden and unanticipated"
burdens. The features of the Act involved in this case come into
play only when an employer, after the effective date of the Act,
closes a plant. The existence of the Act's duties -- which are
similar to a legislatively imposed requirement of
Page 438 U. S. 255
severance pay measured by the length of the discharged
employees' service -- is simply one of a number of factors that the
employer considers in making the business decision whether to close
a plant and terminate the employees who work there. In no sense,
therefore, are the Act's requirements unanticipated. While the
extent of the employer's obligation depends on preenactment
conduct, the requirements are triggered solely by the closing of a
plant subsequent to enactment. [Footnote 2/4
The primary question in this case is whether the Contract Clause
is violated by state legislation enacted to protect employees
covered by a pension plan by requiring an employer to make outlays
-- which, although not in this case, will largely be offset against
future savings -- to provide terminated employees with the
equivalent of benefits reasonably to be expected under the plan.
The Act does not relieve either the employer or his employees of
any existing contract obligation. Rather, the Act simply creates an
additional, supplemental duty of the employer, no different in kind
from myriad duties created by a wide variety of legislative
measures which defeat settled expectations but which have
nonetheless been sustained by this Court. See, e.g., Usery v.
Turner Elkhorn Mining Co., 428 U. S. 1
Hadacheck v. Sebastian, 239 U. S. 394
(1915). For this reason, the Minnesota Act, in my view, does not
implicate the Contract Clause in any way. The basic fallacy of
today's decision is its mistaken view that the Contract Clause
protects all contract-based expectations, including that of an
employer that his obligations to his employees will not be
legislatively enlarged beyond those explicitly provided in his
Page 438 U. S. 256
Historically, it is crystal clear that the Contract Clause was
not intended to embody a broad constitutional policy of protecting
all reliance interests grounded in private contracts. It was made
part of the Constitution to remedy a particular social evil -- the
state legislative practice of enacting laws to relieve individuals
of their obligations under certain contracts -- and thus was
intended to prohibit States from adopting "as [their] policy the
repudiation of debts or the destruction of contracts or the denial
of means to enforce them," Home Building & Loan Assn. v.
Blaisdell, 290 U. S. 398
290 U. S. 439
(1934). But the Framers never contemplated that the Clause would
limit the legislative power of States to enact laws creating duties
that might burden some individuals in order to benefit others.
The widespread dissatisfaction with the Articles of
Confederation and, thus, the adoption of our Constitution, was
largely a result of the mass of legislation enacted by various
States during our earlier national period to relieve debtors from
the obligation to perform contracts with their creditors. The
economic depression that followed the Revolutionary War witnessed
"an ignoble array of [such state] legislative schemes."
at 290 U. S. 427
Perhaps the most common of these were laws providing for the
emission of paper currency, making it legal tender for the payment
of debts. In addition, there were "installment laws," authorizing
the payment of overdue obligations in several installments over a
period of months or even years, rather than in a single lump sum as
provided for in a contract; "stay laws," statutes staying or
postponing the payment of private debts or temporarily closing the
courts; and "commodity payment laws," permitting payments in
certain enumerated commodities at a proportion, often three-fourths
or four-fifths, of actual value. See id.
at 290 U. S.
-459 (Sutherland, J., dissenting); Sturges v.
4 Wheat. 122, 17 U. S. 204
(1819); see also
B. Wright, The Contract Clause of the
Page 438 U. S. 257
Constitution 4 (1938); Hale, The Supreme Court and the Contract
Clause, 57 Harv.L.Rev. 12-513 (1944).
Thus, the several provisions of Art. I, § 10, of the
Constitution -- "No State shall . . . coin Money; emit Bills of
Credit; make any Thing but gold and silver Coin a Tender in Payment
of Debts; [or] pass any . . . Law impairing the Obligation of
Contracts. . . . " -- were targeted directly at this wide variety
of debtor relief measures. Although the debates in the
Constitutional Convention and the subsequent public discussion of
the Constitution are not particularly enlightening in determining
the scope of the Clause, they support the view that the sole evil
at which the Contract Clause was directed was the theretofore
rampant state legislative interference with the ability of
creditors to obtain the payment or security provided for by
contract. The Framers regarded the Contract Clause as simply an
adjunct to the currency provisions of Art. I, § 10, which operated
primarily to bar legislation depriving creditors of the payment of
the full value of their loans. See
at 16. The Clause was thus intended by the Framers to be applicable
only to laws which altered the obligations of contracts by
effectively relieving one party of the obligation to perform a
contract duty. [Footnote 2/5
The terms of the Contract Clause negate any basis for its
interpretation as protecting all contract-based expectations from
unjustifiable interference. It applies, as confirmed by consistent
judicial interpretations, only to state legislative Acts. See
generally Tidal Oil Co. v. Flanagan, 263 U.
(1924). Its inapplicability to impairments by
state judicial acts or by national legislation belies
interpretation of the Clause as
Page 438 U. S. 258
intended broadly to make all contract expectations inviolable.
Rather, the only possible interpretation of its terms, especially
in view of its history, is as a limited prohibition directed at a
particular, narrow social evil, likely to occur only through state
legislative action. This evil is identified with admirable
precision: "Law[s] impairing
the Obligation of Contracts."
(Emphasis supplied.) It is nothing less than an abuse of the
English language to interpret, as does the Court, the term
"impairing" as including laws which create new duties. While such
laws may be conceptualized as "enlarging" the obligation of a
contract when they add to the burdens that had previously been
imposed by a private agreement, such laws cannot be prohibited by
the Clause, because they do not dilute or nullify a duty a person
had previously obligated himself to perform.
Early judicial interpretations of the Clause explicitly rejected
the argument that the Clause applies to state legislative
enactments that enlarge the obligations of contracts.
2 Pet. 380 (1829), is the leading case.
There, this Court rejected a claim that a state legislative Act
which gave validity to a contract which the state court had held,
before the enactment of the statute, to be invalid at common law
could be said to have "impaired the obligation of a contract." It
"all would admit the retrospective character of [the particular
state] enactment, and that the effect of it was to create a
contract between parties where none had previously existed. But it
surely cannot be contended, that to create a contract, and to
destroy or impair one, mean the same thing."
at 27 U. S.
-413. [Footnote 2/6
Since creating an obligation where none had existed previously is
not an impairment of contract, it of course should follow
Page 438 U. S. 259
legislation increasing the obligation of an existing contract is
not an impairment. [Footnote 2/7
The Court seems to attempt to justify its distortion of the
meaning of the Contract Clause on the ground that imposing new
duties on one party to a contract can upset his contract-based
expectations as much as can laws that effectively relieve the other
party of any duty to perform. But it is no more anomalous to give
effect to the term "impairment" and deny a claimant protection
under the Contract Clause when new duties are created than it is to
give effect to the Clause's inapplicability to acts of the National
Government and deny a Contract Clause remedy when an Act of
Congress denies a creditor the ability to enforce a contract right
to payment. Both results are simply consequences of the fact that
the Clause does not protect all contract-based expectations.
More fundamentally, the Court's distortion of the meaning of the
Contract Clause creates anomalies of its own and threatens to
undermine the jurisprudence of property rights developed over the
last 40 years. The Contract Clause, of course, is but one of
several clauses in the Constitution that protect existing economic
values from governmental interference. The Fifth Amendment's
command that "private property [shall not] be taken for public use,
Page 438 U. S. 260
compensation" is such a clause. A second is the Due Process
Clause, which, during the heyday of substantive due process,
see Lochner v. New York, 198 U. S. 45
(1905), largely supplanted the Contract Clause in importance and
operated as a potent limitation on government's ability to
interfere with economic expectations. See
Cases and Materials on Constitutional Law 603-604 (9th ed.1975);
Hale, The Supreme Court and the Contract Clause: III, 57
Harv.L.Rev. 852, 890-891 (1944). Decisions over the past 50 years
have developed a coherent, unified interpretation of all the
constitutional provisions that may protect economic expectations
and these decisions have recognized a broad latitude in States to
effect even severe interference with existing economic values when
reasonably necessary to promote the general welfare. See Penn
Central Transp. Co. v. New York City, ante,
p. 438 U. S. 104
Pittsburgh v. Alco Parking Corp., 417 U.
(1974); Goldblatt v. Hempstead,
369 U. S. 590
(1962); Sproles v. Binford, 286 U.
(1932); Euclid v. Ambler Realty Co.,
272 U. S. 365
(1926). At the same time, the prohibition of the Contract Clause,
consistently with its wording and historic purposes, has been
limited in application to state laws that diluted, with utter
indifference to the legitimate interests of the beneficiary of a
contract duty, the existing contract obligation, W. B. Worthen
Co. v. Kavanaugh, 295 U. S. 56
(1935); see United States Trust Co. v. New Jersey,
431 U. S. 1
cf. El Paso v. Simmons, 379 U. S. 497
(1965); Home Building & Loan Assn. v. Blaisdell,
290 U. S. 398
Today's conversion of the Contract Clause into a limitation on
the power of States to enact laws that impose duties additional to
obligations assumed under private contracts must inevitably produce
results difficult to square with any rational conception of a
constitutional order. Under the Court's opinion, any law that may
be characterized as "superimposing" new obligations on those
provided for by contract is to be
Page 438 U. S. 261
regarded as creating "sudden, substantial, and unanticipated
burdens" and then to be subjected to the most exacting scrutiny.
The validity of such a law will turn upon whether judges see it as
a law that deals with a generalized social problem, whether it is
temporary (as few will be) or permanent, whether it operates in an
area previously subject to regulation, and, finally, whether its
duties apply to a broad class of persons. See .ante
438 U. S.
-250. The necessary consequence of the extreme
malleability of these rather vague criteria is to vest judges with
broad subjective discretion to protect property interests that
happen to appeal to them. [Footnote
To permit this level of scrutiny of laws that interfere with
contract-based expectations is an anomaly. There is nothing
sacrosanct about expectations rooted in contract that justify
according them a constitutional immunity denied other property
rights. Laws that interfere with settled expectations created by
state property law (and which impose severe economic burdens) are
uniformly held constitutional where reasonably related to the
promotion of the general welfare. Hadacheck v. Sebastian,
239 U. S. 394
(1915) is illustrative. There, a property owner had established on
a particular parcel
Page 438 U. S. 262
of land a perfectly lawful business of a brickyard, and, in
reliance on the existing law, continued to operate that business
for a number of years. However, a local ordinance was passed
prohibiting the operation of brickyards in the particular locale
and diminishing the value of the claimant's parcel, and thus of his
investment, by nearly 90%. Notwithstanding the effect of the
ordinance on the value of the investment, the ordinance was
sustained against a taking claim. See also Miller v.
Schoene, 276 U. S. 272
(1928) (statute required cutting down ornamental red cedar trees
because they had cedar rust which would be harmful to apple trees
in the vicinity).
There is no logical or rational basis for sustaining the duties
created by the laws in Miller
invalidating the duty created by the Minnesota Act. Surely, the Act
effects no greater interference with reasonable reliance interests
than did these other laws. Moreover, the laws operate identically:
they all create duties that burden one class of persons and benefit
another. The only difference between the present case and
is that here there was a
prior contractual relationship between the members of the benefited
and burdened classes. I simply cannot accept that this difference
should possess constitutional significance. The only means of
avoiding this anomaly is to construe the Contract Clause
consistently with its terms and the original understanding and hold
it is inapplicable to laws which create new duties.
But my view that the Contract Clause has no applicability
whatsoever to the Minnesota Act does not end the inquiry in this
case. The Due Process Clause of the Fourteenth Amendment limits a
State's power to enact such laws, and I therefore address that
related challenge to the Act's validity. [Footnote 2/9
] I think that any claim based on due
process has no merit.
Page 438 U. S. 263
My conclusion rests to a considerable extent upon Usery v.
Turner Elkhorn Mining Co., 428 U. S. 1
That case involved a federal statute that required the operators of
coal mines to compensate employees who had contracted
pneumoconiosis even though the employees had terminated their work
in the coal mining industry before the Act was passed. This federal
statute imposed a new duty on operators based on past acts and
applied even though the coal mine operators might not have known of
the danger that their employees would contract pneumoconiosis at
the time of the particular employees' service. Id.
see also id.
at 40 n. 4 (POWELL, J., concurring in part).
While indicating that the Due Process Clause may place greater
limitations on the Government's power to legislate retrospectively
than it does on the Government's ability to act prospectively, the
statute was upheld on the ground that Congress had broad discretion
to deal with the serious social problem of pneumoconiosis affecting
former miners, and that it was
"a rational measure to spread the costs of the employees'
disabilities to those who have profited from the fruits of their
labor -- the operators and the coal consumers."
A similar analysis is appropriate here. The Act is an attempt to
remedy a serious social problem: the utter frustration of an
employee's expectations that can occur when he is terminated
because his employer closes down his place of work. The burden on
his employer is surely far less harsh than that saddled upon coal
operators by the federal statute. Too, a large part of the
employer's outlay that the Act requires will be offset against
future savings. To this extent, the Act merely
Page 438 U. S. 264
prevents the employer from obtaining a windfall, an effect which
would immunize this aspect of the statutory requirement from attack
even under the more stringent standards the Court reads into the
Contract Clause. See El Paso v. Simmons,
379 U.S. at
379 U. S. 515
and cases cited. To the extent the Act does more than prevent a
windfall, it is simply implementing a reasonable legislative
judgment that the expectation interests of employees of more than
10 years' service in the receipt of a pension but who, as an
actuarial matter, would not satisfy the vesting requirements of the
pension plan, should not be frustrated by the generally unforeseen
contingency of a plant's closing.
Significantly, also, the Minnesota Act, unlike the federal
statute upheld in Turner Elkhorn Mining,
is not wholly
retrospective in its operation. The Act requires an outlay from an
employer like appellant only if after the enactment date of the Act
(thus when it may give full consideration to the economic
consequences of its decision) the employer decides to close its
Nor, finally, do I believe it relevant that the Act is limited
in coverage to large employers.
"In establishing a system of unemployment benefits the
legislature is not bound to occupy the whole field. It may strike
at the evil where it is most felt."
Carmichael v. Southern Coal Coke Co., 301 U.
, 301 U. S.
In sum, in my view, the Contract Clause has no applicability
whatsoever to the Act, and because I conclude the Act is consistent
with the only relevant constitutional restriction -- the Due
Process Clause -- I would affirm the judgment of the District
Since appellant's plan remains in force at its other plants,
this case does not involve a termination of a pension plan, and I
will therefore not discuss the aspect of the statute that involves
such contingencies except to observe that it, too, is a sensitive
attempt to protect employees' expectation interests.
All parties to this case agree that Allied's actuarial
assumptions in calculating its annual contributions to the pension
plan did not include the possibility of a plant's closing.
Because appellant's pension plan was, at the time of the plant
closing, underfunded by in excess of $295,000, appellant's pension
funding charge -- which the parties stipulate will be between
$114,000 and $195,000 -- will not, in fact ,be offset by future
out-of-pocket savings. But this is incidental. What is critical is
that appellant, like all covered employers, will be forced to
assume an economic burden only a little greater than that inherent
in its original undertaking to set up a pension plan for the
benefit of its employees.
Although the Court refers to the fact that, under the terms of
the plan, no sanctions could be imposed on appellant for not
adequately funding it, no substantial objection can be levied
against the Act to the extent that it mandates funding sufficient
to meet the employer's original undertaking. The plan in the
present case can be interpreted as imposing a duty on the employer
to fund it adequately, see
App. to Brief for Appellant 10a
(§ 10 of the plan), and the employees here surely would have
understood it as imposing that requirement. There can be no serious
objection to a measure that makes such a promise enforceable.
Although appellant here apparently decided to close its
Minnesota plant prior to the Act's effective date, appellant had
every opportunity to reconsider that decision after the Act was
adopted, and presumably reached its final decision after weighing
the possible liabilities under the Act.
Of course, as our recent decisions make plain, the applicability
of the Clause has not been confined to classic "debtor relief"
laws, but has been regarded as implicated by any measure which
dilutes or nullifies a duty created by a contract. See, e.g.,
El Paso v. Simmons, 379 U. S. 497
which was written by Mr. Justice Washington,
necessarily rejected the contrary dictum of Green v.
8 Wheat. 1, 21 U. S. 84
(1823), another of Mr. Justice Washington's Court opinions.
In Georgia R. & Power Co. v. Decatur, 262 U.
(1923), Detroit United R. Co. v.
Michigan, 242 U. S. 238
(1916), and in dictum in other cases, see ante
438 U. S.
-245, n. 16, this Court embraced, without any careful
analysis and without giving any consideration to Satterlee
2 Pet. 380 (1829), the contrary view
that the impairment of a contract may consist in "adding to its
burdens" as well as in diminishing its efficacy. Georgia R.
& Power Co. v. Decatur, supra
at 262 U. S. 439
These opinions reflect the then-prevailing philosophy of economic
due process, which has since been repudiated. See Ferguson v.
Skrupa, 372 U. S. 726
(1936). In my view, the reasoning of Georgia R. & Power
and Detroit United R. Co.
is simply wrong.
With respect, the Court's application of these criteria
illustrates this point. First, I find it difficult to understand
how the Court can assert that the Act's attempt to protect the
expectation interests of employees to pension plans does not deal
with a "broad, generalized . . . social problem," but that the
mortgage moratorium in Home Building & Loan Assn. v.
Blaisdell, 290 U. S. 398
(1934), did. The Court's suggestion that the Act has a "narrow aim"
because it applies only to pension plans overlooks that it is the
existence of the pension plan that creates the need for this
legislation. Second, the assertion that Minnesota here "invaded an
area never before subject to regulation" takes an exceedingly
restrictive view of the subject matter of t.he Act. If it is
regarded not as a private pension plan, but rather as the
compensation afforded employees by large employers, then the
statute operates in an area that has been extensively regulated.
The only explanation for the Court's decision is that it
subjectively values the interests of employers in pension plans
more highly than it does the legitimate expectation interests of
I recognize that the only question presented by appellant is
whether the Minnesota Act violates the Contract Clause.
Jurisdictional Statement 2. However, I think that a
due process claim is fairly subsumed by the question presented and,
under the circumstances, elementary fairness requires that I
address the due process claim. This reasoning does not apply to the
other possible challenges to the Act -- e.g.,
on the "Taking" Clause or on the Commerce Clause -- for these
others involve rather different considerations from those involved
in the Contract and Due Process Clause analyses.