The Honorable Richard H. Kyle, United States District Judge 1

for the District of Minnesota.

_____________

No. 95-1754

_____________

Honeywell, Inc.; Honeywell *

Pension and Retirement *

Committee, on their own behalf *

and on behalf of the Honeywell *

Retirement Investment Plan; *

Investment Plus Plan of *

Honeywell, Inc.; Honeywell *

Retirement Savings Plan; First *

Trust National Association, *

*

Plaintiffs-Appellants, * Appeal from the United States

* District Court for the

v. * District of Minnesota.

*

Minnesota Life and Health *

Insurance Guaranty Association, *

*

Defendant-Appellee. *

_____________

 Submitted: November 16, 1995

 Filed: June 10, 1996

_____________

Before HANSEN, JOHN R. GIBSON, and MURPHY, Circuit Judges.

_____________

HANSEN, Circuit Judge.

The plaintiffs (collectively referred to as Honeywell) appeal the

district court's grant of summary judgment for the defendant, Minnesota

1

Life and Health Insurance Guaranty Association (the Association), in this

declaratory judgment suit. At issue is whether an amendment to a Minnesota

statute, which amendment 
 This Act has been repealed and was replaced in 1993 with 2

Minn. Stat. Ann. §§ 61B.18 - 61B.32 (West Supp. 1996). The

legislature provided, however, that §§ 61B.01 - 61B.16, as

amended in 1992, remain applicable to the subject of this suit. 

Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Assoc., 518

N.W.2d 557, 558 n.4 (Minn. 1994). The issue in this case deals

with a 1992 amendment to the Act, and not the new 1993 version of

the Act. 

2

applies retroactively, violates either the Contract Clause or the Due

Process Clause of the Constitution of the United States. The district

court granted the Association's motion for summary judgment and dismissed

Honeywell's complaint, concluding that the amendment passes constitutional

muster. We affirm.

I. BACKGROUND

Honeywell, Inc. is a Delaware corporation with its principal place

of business in Minnesota. Honeywell sponsors certain defined contribution

benefit and retirement plans for its employees. These plans include the

Honeywell Retirement Investment Plan, the Investment Plus Plan of Honeywell

Inc., and the Honeywell Retirement Savings Plan. The current trustee of

the Honeywell plans is First Trust National Association, which has its

principal place of business in Minnesota. 

The Association is a nonprofit Minnesota corporation created pursuant

to the Minnesota Life and Health Insurance Guaranty Association Act (the

Act), Minn. Stat. Ann. §§ 61B.01-61B.16 (West 1986). The Association

2

exists to protect the contractual rights of policy owners and beneficiaries

of life insurance policies, health insurance policies, and annuity

contracts (subject to certain definitions and limitations), when the

insurer that issued the life insurance, health insurance, or annuity

contract becomes financially unable to perform its obligations. See Minn

Stat. Ann. § 61B.02, subd. 2. See also Minnesota Life & Health Ins. Guar.

Assoc. v. Department of Commerce, 400 N.W.2d 769, 770 (Minn. Ct. App.

1987). To provide this protection, all insurance companies 
3

that deal in life, health, and annuity contracts and elect to do business

in Minnesota are required to join and contribute to the Association.

Minnesota Life, 400 N.W.2d at 770. The dispute in this case arose

following the 1991 insolvency of an out-of-state member insurance company

and the 1992 enactment by the Minnesota legislature of an amendment that

retroactively redefines the term "contractual obligation" under the Act.

In 1988, the Honeywell plans' trustee, who was a Minnesota resident

(as is the current trustee), invested in Guaranteed Investment Contracts

(GICs) issued by Executive Life Insurance Company of California (ELIC), a

member of the Association. GICs are unallocated annuity contracts, or

annuity contracts "not issued to or owned by a named individual." Id.

GICs are investments made by the trustee for the benefit of the plan

participants and are considered covered policies under the Act. See id.

at 775 (holding that GICs are covered annuities under Minn. Stat. § 61B.03,

subd. 3 (1984)). The Honeywell GICs expressly name the Honeywell trustee

as the policy owner, and not the individual plan participants for whom the

investment was made. Honeywell, 518 N.W.2d at 561. 

In 1991, ELIC became insolvent and unable to fulfill its contractual

obligations on the Honeywell GICs, which amounted to $111,000,000. By

letter dated January 10, 1992, the Honeywell trustee, as the resident

policy owner, submitted to the Association a claim for guaranty coverage

under the Act. Honeywell sought coverage for ELIC's entire obligation to

the Honeywell trustee, which would inure not only to the benefit of

Honeywell's 9,000 Minnesota resident plan participants but also to

Honeywell's 27,000 nonresident plan participants. 

The Association neither granted nor denied Honeywell's claim

initially. ELIC's insolvency had also affected approximately 10,000 other

Minnesota residents who were employed in Minnesota by other companies whose

plan trustees owned GICs but which trustees 
4

were not Minnesota residents. At that time, the Act required the

Association to guarantee the covered policies of "residents" to whom any

"contractual obligation" was owed from an out-of-state insurer. Minn.

Stat. Ann. § 61B.06, subd. 2 (West 1986). See Honeywell, 518 N.W.2d at

558. The term "resident," defined as "any person who resides in this state

at the time the impairment is determined and to whom contractual

obligations are owed," Minn. Stat. Ann. § 61B.03, subd. 13 (West 1986), was

broad enough to include a trustee who resided in Minnesota. Honeywell, 518

N.W.2d at 560-61. The term "contractual obligation," defined as "any

obligation under covered policies," Minn. Stat. Ann. § 61B.03, subd. 5

(West 1986), was broad enough to include a GIC obligation owed to a

resident trustee. Honeywell, 518 N.W.2d at 560-61. Thus, as then

codified, the Act, combined with ELIC's insolvency, created the potential

that all the Honeywell plan participants, thousands of whom were not

residents of Minnesota, might be entitled to coverage under the Minnesota

Act because their plan trustee happened to be a Minnesota resident.

Whereas, many other Minnesota non-Honeywell employed resident plan

participants, who worked for companies whose plan trustee resided in a

different state, might not be entitled to any coverage because their

trustee (the one to whom the contractual obligation was owed) was not a

Minnesota resident. 

Faced with this dilemma, on January 21, 1992, the Minnesota

Department of Commerce (which supervises and regulates the Association and

to whom appeals may be taken from the Association's determinations, see

Minn. Stat. Ann. § 61B.09(c)), issued an opinion, advising the Association

chairman on the coverage problems created by the ELIC insolvency: 

The Department believes it is the clear intent of the Act

to cover the people of Minnesota. Accordingly, it is the

Department's position that the Guaranty Association Act

provides coverage to Minnesota resident employees who are the

beneficiaries of defined-
5

contribution pension plans funded by Guaranteed Investment Contracts

purchased from Executive Life. 

Consistent with that position the Department has

determined that non-resident employees of such a plan,

regardless of the residency of the trustee or plan sponsor, are

not covered under the Act. 

(Appellee's App. at GA-59.) 

Subsequently, on April 27, 1992, the governor signed into law an

amendment to the definition of the term "contractual obligation," in a

purported attempt to retroactively "clarify" the statutory coverage in a

manner consistent with the Department of Commerce opinion. Honeywell, 518

N.W.2d at 562. The 1992 amendment, which specifically applies

retroactively, narrowed the definition of "contractual obligation" to

specifically exclude any obligation owed "to nonresident participants of

a covered plan or to the plan sponsor, employer, trustee, or other party

who owns the contract; in such cases, the association is obligated under

this chapter only to participants in a covered plan who are residents of

the state of Minnesota on the date of impairment." 1992 Minn. Laws, ch.

540. Thus, the amendment expressly provides coverage only to plan

participants who are Minnesota residents. In light of the opinion of the

Department of Commerce and the retroactive 1992 amendment, the Association

took the position that its guaranty obligation to Honeywell covers only

those Honeywell plan participants who resided in Minnesota when ELIC became

insolvent.

Honeywell then brought an action for declaratory and injunctive

relief and monetary damages in Minnesota state court based on the

Association's refusal to fully guaranty the whole of the trustee's claim.

Honeywell sought a declaration that retroactive application of the 1992

amendment violates both the Contract Clause and the Due Process Clause of

the Constitution because Honeywell's entitlement to coverage and payment

under the prior statute had fully accrued before the enactment of the 1992
6

amendment. The Association removed the case to federal district court

pursuant to 28 U.S.C. § 1441. 

After removal, the parties filed cross motions for summary judgment.

The district court ruled in favor of Honeywell, holding that the

retroactive abrogation of Honeywell's guaranty coverage rights

impermissibly destroyed vested rights in violation of both the Contract

Clause and the Due Process Clause of the Constitution. After the

Association moved for reconsideration, however, the district court vacated

its initial opinion and certified two questions to the Supreme Court of

Minnesota: (1) Did the 1992 amendment to the Act's definition of

"contractual obligation" effect a substantive change in the Association's

obligations or merely clarify existing obligations? (2) Is the annuity

contract owner's (the trustee's) right to guaranty payment from the

Association a purely statutory right or is it contractual in nature? The

Supreme Court of Minnesota ruled on the certified questions, holding that

(1) the 1992 amendment to the definition of "contractual obligation"

substantively changed the Association's coverage obligations, and (2) the

right to payment from the Association is a purely statutory right under

state law. See Honeywell, 518 N.W.2d at 563.

After the Supreme Court of Minnesota responded to the certified

questions, the parties again filed cross motions for summary judgment.

This time, the district court granted the Association's motion for summary

judgment, concluding that retroactive application of the 1992 amendment did

not violate either the Contract Clause or the Due Process Clause, and

dismissed Honeywell's complaint with prejudice. Honeywell appeals. 

II. DISCUSSION

Honeywell contends that its preamendment right to insurance guaranty

coverage is contractual in nature and that retroactive 
7

application of the amendment constitutes the impairment of its contractual

rights in violation of the Contract Clause. Honeywell also argues that the

1992 amendment arbitrarily and irrationally destroyed its accrued, vested

right to guaranty coverage, in violation of the Due Process Clause. We

begin our analysis with the Contract Clause. 

A. CONTRACT CLAUSE

The Constitution provides, "No State shall . . . pass any Law

impairing the Obligation of Contracts . . . ." U.S. CONST. art. I, § 10,

cl. 1. Read literally, this constitutional prohibition bans any

interference with contracts, but cases interpreting the clause clearly

indicate that this prohibition "is not an absolute one and is not to be

read with literal exactness like a mathematical formula." Home Bldg. &

Loan Ass'n v. Blaisdell, 290 U.S. 398, 428 (1934). Instead, when a

litigant contends that a legislative amendment has impermissibly impaired

contractual obligations, our inquiry initially focuses on "whether the

change in state law has `operated as a substantial impairment of a

contractual relationship.'" General Motors Corp. v. Romein, 503 U.S. 181,

186 (1992) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234,

244 (1978)) (other citation omitted). Three basic components are essential

to this inquiry: (1) Does a contractual relationship exist, (2) does the

change in the law impair that contractual relationship, and if so, (3) is

the impairment substantial? Id. If we conclude that a substantial

impairment of a contractual relationship exists, we must then carefully

examine "the nature and purpose of the state legislation." Allied

Structural Steel Co., 438 U.S. at 244. 

We first consider whether a contractual relationship exists. In this

case, the district court certified to the state supreme court the question

of whether the Association's guaranty obligation to GIC owners, such as the

Honeywell trustee, is a contractual or 
8

a statutory obligation. The Supreme Court of Minnesota determined that the

right to payment from the Association is a purely statutory right under

state law. Honeywell, 518 N.W.2d at 563. Honeywell first contends that

the district court erroneously certified a question of federal

constitutional law to the state court. 

While federal courts "accord respectful consideration and great

weight to the views of the State's highest court," the determination of

whether the Act created a contractual obligation "is a federal question for

purposes of Contract Clause analysis, and whether it turns on issues of

general or purely local law, we can not surrender the duty to exercise our

own judgment." Romein, 503 U.S. at 187 (internal quotations omitted).

Contrary to Honeywell's assertion, however, the district court did not

avoid its duty to determine the constitutional issue by certifying a

question to the state supreme court. Instead, the district court gave

proper consideration to the state court's views but independently

determined that the right to payment under the Act is not contractual

within the meaning of the Contract Clause. We review de novo the district

court's judgment on this constitutional question. See United States v.

Bates, 77 F.3d 1101, 1104 (8th Cir. 1996). 

Our independent review leads us to agree with the district court that

the rights at issue are statutory in nature and therefore, no contractual

relationship existed between Honeywell and the Association. Two factors

lead us to this conclusion: (1) the Act itself does not create a contract,

and (2) the GICs do not specifically incorporate the terms of the Act. 

First, the Act's guaranty is not itself a contract between the

Association and those who qualify for the Act's protection. "In general,

a statute is itself treated as a contract when the language and

circumstances evince a legislative intent to create 
9

private rights of a contractual nature enforceable against the State."

United States Trust Co. v. New Jersey, 431 U.S. 1, 17 n.14 (1977). The

right to payment under the Act is not enforceable against the state of

Minnesota but is an obligation imposed upon the Association. The

Association is a nonprofit legal entity and not a state agency. Minn.

Stat. Ann. § 61B.04, subd. 1 (West 1986). See also Minn. Stat. Ann.

§ 61B.21, subd. 1 (West Supp. 1996). Even if the Association were a state

agency, the Act contains no "clear indication that the legislature intends

to bind itself contractually," which is necessary in order to overcome the

general presumption "that a law is not intended to create private

contractual or vested rights but merely declares a policy to be pursued

until the legislature shall ordain otherwise." National R.R. Passenger

Corp. v. Atchison, Topeka & Santa Fe Ry., 470 U.S. 451, 465-66 (1985)

(quotations omitted). Rather, the Act creates an insurance guaranty

association with attendant statutory obligations to safeguard the financial

well-being of Minnesota residents to whom contractual obligations are owed

by its member insurance companies. The Act does not create a contract;

instead, it creates a statutory safety net to protect the economic wellbeing of Minnesota resident policy owners in the event a member insurer

becomes insolvent. 

Second, while the Association has the power to enter into contracts,

Minn. Stat. Ann. § 61B.06, subd. 9(a) (West 1986), the Association is not

a party to the GICs involved here. The GICs at issue are contracts between

the Honeywell trustee and the impaired ELIC, not the Association. The

Honeywell trustee did not specifically bargain for protection under the

Act, and the Act is not expressly or impliedly incorporated into the terms

of the GICs. "For the most part, state laws are implied into private

contracts regardless of the assent of the parties only when those laws

affect the validity, construction, and enforcement of contracts." Romein,

503 U.S. at 189. The Association's statutory obligation to guaranty the

insurance coverage of residents protected by the Act 
10

does not in any way affect the validity, construction, or enforcement of

ELIC's obligation on the GICs. Moreover, there is no evidence that the

GICs were created in pursuance of the statutory obligation. Cf. Coombes

v. Getz, 285 U.S. 434, 442, 448 (1932) (upholding the contractual liability

created pursuant to a state constitutional rule of law that was repealed).

The 1992 amendment merely altered definitions under the Act, which in turn

affect the Association's statutory obligation to the Honeywell trustee, but

the amendment did not alter or affect any bargained-for agreement between

the Association and the Honeywell trustee. The Contract Clause does not

"protect against all changes in legislation, regardless of the effect of

those changes on bargained-for agreements." Romein, 503 U.S. at 190.

We conclude that the Association's obligations are statutory in

nature rather than contractual. Absent the existence of a contractual

relationship, our Contract Clause inquiry is finished. The 1992 amendment

simply does not implicate the Contract Clause. 

B. DUE PROCESS

Honeywell's due process claim presents a closer question. Honeywell

argues that retroactive application of the 1992 amendment defeats its

vested right to payment under the Act, in violation of the Due Process

Clause. Honeywell relies on Coombes, 285 U.S. at 439-48, where the Supreme

Court held unconstitutional the repeal of a California state constitutional

provision that provided a cause of action against corporate directors. The

Court stated in absolute terms that "neither vested property rights nor the

obligation of contracts of third persons may be destroyed or impaired."

Id. at 442. More specifically, the Court in Coombes held, "a contractual

obligation arose; and the right to enforce it, having become vested, comes

within the protection of both the contract impairment clause in Art. 1,

§ 10, and the due process of law clause in the Fourteenth Amendment, of the

Federal 
11

Constitution." Id. at 448. Honeywell also relies on Ettor v. City of

Tacoma, 228 U.S. 148, 158 (1913), where the Supreme Court held that a

statutory right to compensation for property damage caused by the city in

the course of grading streets, which right to compensation was complete

before a repeal of the cause of action, was a vested property right that

could not be retroactively destroyed. Claiming that these cases control

the outcome of the case at hand, the Honeywell trustee asserts a vested

right to payment under the Act as it existed when ELIC became insolvent,

prior to the 1992 amendment. 

The Association, on the other hand, urges us to follow more recent

Supreme Court precedents in which the Court reviews economic legislation

with a very deferential eye and does not accord vested rights status to

economic rights. The Association observes that under this modern approach,

due process is satisfied as long as a reasonable legislative purpose

supports the retroactive application of the legislation. The Association

contends that the retroactive 1992 amendment is supported by a reasonable

legislative purpose, and alternatively, that no vested rights accrued in

favor of the Honeywell trustee upon ELIC's insolvency. 

In one sense, both arguments are right. The Supreme Court has never

expressly overruled the reasoning of Ettor and Coombes, which accords great

protection to accrued statutory causes of action. In the area of economic

legislation, however, we cannot ignore the abundance of cases where

substantive due process has evolved into a deferential rational basis

analysis. We believe that an understanding of the historical context of

Ettor and Coombes is essential to divine accurately the present weight of

their authority on the issue before us. See Hammond v. United States, 786

F.2d 8, 11 (1st Cir. 1986) (questioning the continued vitality of Coombes

and Ettor because recent cases have retroactively abridged economic and

real property rights without always carefully distinguishing these prior

cases). See also W. David Slawson, 
12

Constitutional and Legislative Considerations in Retroactive Lawmaking, 48

Cal. L. Rev. 216, 232 (1960) ("The decision [of Coombes v. Getz] seems far

too rigid in its conception of permissible legislative change and would

almost certainly not be followed today."). 

Ettor and Coombes were decided during what is referred to in the

history of American jurisprudence as the Lochner era, named for the pivotal

case of judicial activism, Lochner v. New York, 198 U.S. 45 (1905)

(invalidating maximum work hours legislation as an unconstitutional

exercise of police power). Cases of that era frequently invalidated

statutes that limited economic autonomy in a manner thought by the Court

to be unnecessary or unwise, but in more recent decisions, the Court

plainly sees its role differently: "[W]e do not sit as a super legislature

to weigh the wisdom of legislation nor to decide whether the policy which

it expresses offends the public welfare." Day-Brite Lighting, Inc. v.

Missouri, 342 U.S. 421, 423 (1952). The reasoning prevalent during the

"Lochner [era] has been implicitly rejected many times." Whalen v. Roe,

429 U.S. 589, 597 & n.18 (1977). See also United States v. Carlton, 114

S. Ct. 2018, 2023-24 (1994) (recognizing that three tax cases from the

Lochner era "were decided during an era characterized by exacting review

of economic legislation under an approach that `has long since been

discarded'" (citation omitted)); Planned Parenthood of S.E. Pa. v. Casey,

505 U.S. 833, 861 (1992) (recognizing that the demise of Lochner era

reasoning began in West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937)).

Within two years of the Coombes decision, substantive due process

analysis in the area of retroactive economic legislation began to be framed

in terms of reasonableness, drifting away from the Lochner era's strict

protection of economic freedom and vested rights. See Blaisdell, 290 U.S.

at 438 (upholding as an emergency measure a mortgage moratorium law that

impaired obligations on mortgage contracts). The Court acknowledged that

even the 
13

expressly protected obligation of contracts (and similarly, we believe, the

concept of vested rights) may be impaired by economic legislation if "the

legislation is addressed to a legitimate end and the measures taken are

reasonable and appropriate to that end." Id. This rational basis

substantive due process test appears to have supplanted the legislatively

restrictive vested rights mode of analysis, and allows legislatures more

freedom in dealing with economic situations. See, e.g., James L. Kainen,

The Historical Framework for Reviving Constitutional Protection for

Property and Contract Rights, 79 Cornell L. Rev. 87, 119 (Nov. 1993)

("Modern jurists reject the categorical logic of vesting and consider the

statute's justifications under the rubric of substantive due process.");

Charles B. Hochman, The Supreme Court and the Constitutionality of

Retroactive Legislation, 73 Harv. L. Rev. 692, 696-97 (1959-60) (noting

that the vested rights analysis has been replaced by balancing three

factors: (1) the nature and strength of the public interest served by the

statute, (2) the extent to which the statute modifies or abrogates a

preenactment right, and (3) the nature of the right altered by the

statute). 

In 1976, the Court announced, "It is by now well established that

legislative Acts adjusting the burdens and benefits of economic life come

to the Court with a presumption of constitutionality, and that the burden

is on the one complaining of a due process violation to establish that the

legislature has acted in an arbitrary and irrational way." Usery v. Turner

Elkhorn Mining Co., 428 U.S. 1, 15 (1976). These authorities leave no

doubt that, even though Coombes and Ettor have never been overruled by the

Supreme Court, the modern framework for substantive due process analysis

concerning economic legislation requires only an inquiry into whether the

legislation is reasonably related to a legitimate governmental purpose.

Given the criticism surrounding the Court's Lochner era decisions in

general, coupled with the development of judicial deference to economic

legislation since then, we join those who question the continued validity

of the 
14

vested rights analysis of Coombes and Ettor when reviewing the

constitutionality of economic legislation, recognizing as we must that only

the Supreme Court itself can overrule its precedents. We rely instead on

the more recent Supreme Court pronouncements of substantive due process

analysis for economic legislation, which articulate a rational basis test.

Our task, then, is to determine whether the retroactive application

of the 1992 amendment is justified by a rational legislative purpose, or

whether it is illegitimate and arbitrary. Retroactive legislation, like

prospective legislation, must meet the reasonableness test of due process.

Usery, 428 U.S. at 17. "But that burden is met simply by showing that the

retroactive application of the legislation is itself justified by a

rational legislative purpose." Pension Benefit Guar. Corp. v. R. A. Gray

& Co., 467 U.S. 717, 730 (1984). Retroactive economic legislation has been

upheld as reasonable even in circumstances where it destroys a settled

expectancy or imposes a new liability. See, e.g., Carlton, 114 S. Ct. at

2022-23 (upholding a curative measure that took away an expected and relied

upon deduction for estate tax); Gray, 467 U.S. at 734 (upholding

retroactive application of ERISA's withdrawal liability as supported by

rational legislative purpose); Usery, 428 U.S. at 19-20 (upholding

retroactive aspects of Black Lung Benefits Act of 1972, which required

employers to compensate former employees disabled by a work-related

disease). The Court has repeatedly noted that although certain economic

liabilities or burdens were not anticipated, nevertheless, "`"our cases are

clear that legislation readjusting rights and burdens is not unlawful

solely because it upsets otherwise settled expectations."'" Concrete Pipe

& Prod. v. Constr. Laborers Pension Trust, 113 S. Ct. 2264, 2287 (1993)

(quoting Gray, 467 U.S. at 729, quoting Usery, 428 U.S. at 16). 

Using these standards, we conclude that the 1992 amendment redefining

"contractual obligation" was neither arbitrary nor 
15

illegitimate. The state has a legitimate interest in regulating the

insurance industry, easing the economic burdens of its own residents, and

ensuring the economic life of an association created by its statute to

protect its residents. The general purpose of the Act at issue in this

case "is to protect the future financial stability of individuals,"

Minnesota Life & Health Ins., 400 N.W.2d at 773, and the preamendment Act

expressly provided protection to "residents" to whom "contractual

obligations" are owed. Minn. Stat. § 61B.06, subd. 2 (1986). The 1992

amendment serves to narrow the definition of contractual obligation,

explicitly providing coverage only to resident plan participants. This is

a legitimate purpose. 

The 1992 amendment is also curative in nature, even though it worked

a substantive change in the law. See Honeywell, 518 N.W.2d at 560-63

(holding that the amendment worked a substantive change in the law because

before the amendment, it plainly entitled resident policy owners, including

trustees, to coverage). Curative legislation corrects an unintended and

unanticipated mistake in the underlying legislation, which went undetected

until some time after the original enactment. Certainly, legislatures have

the authority to cure inadvertent defects in their legislation. See

Carlton, 114 S. Ct. at 2022 (upholding Congress's attempt to cure a defect

in the tax code). In Carlton, the Court concluded that Congress's purpose

in retroactively taking away an estate tax deduction, even though the

decedent's executor had relied upon it, was neither illegitimate nor

arbitrary because "Congress acted to correct what it reasonably viewed as

a mistake in the original 1986 provision that would have created a

significant and unanticipated revenue loss." 114 S. Ct. at 2023. We also

note the observation of one commentator that "the individual who claims

that a vested right has arisen from the defect is seeking a windfall since,

had the legislature's . . . action had the effect it was intended to and

could have had, no such right would have arisen." Hochman, supra at 705.
16

Here, the Minnesota legislature acted reasonably when it gave

retroactive effect to the 1992 amendment in order to cure a drafting defect

that might have inadvertently left thousands of Minnesota residents without

coverage under the Act due to the ELIC debacle. We agree with the

observation of the Supreme Court of Minnesota: "Given that unallocated

annuity contracts were not prevalent at the time of the statute's enactment

in 1977, the legislature likely did not contemplate how the Act

specifically applied to these contracts." Honeywell, 518 N.W.2d at 561.

Absent retroactive effect, an unintended gap in coverage would have left

many Minnesota resident workers without coverage, while an unintended

windfall in favor of nonresident workers who had a Minnesota trustee would

have strained the financial capabilities of the Association and required

Minnesota residents to pay higher premiums to finance the Association's

obligation to out-of-state residents. In sum, "the interest in the

retroactive curing of such a defect in the administration of government

outweighs the individual [trustee's] interest in benefiting from the

defect." Hochman, supra at 705-06. Thus, we conclude that retroactive

application of the 1992 amendment was a rational means by which to

accomplish the state's legitimate goals.

Honeywell contends that retroactive application is arbitrary and

irrational because there is no connection linking the Honeywell trustee to

the ELIC failure that triggered coverage and because the amendment has a

disparate impact on non-residents. Neither contention has merit. We have

already determined that the retroactive application of the amendment was

rational and prevented an unanticipated gap in coverage for resident plan

participants and an unexpected windfall for nonresident plan participants.

Because the context here is curative in nature, there is no need to

demonstrate any connection of the Honeywell trustee to the ELIC failure in

order for the legislation to be rational. We agree with the Association's

contention that the amendment actually eliminates the arbitrary aspect of

the prior legislation under which Minnesota 
17

residents may or may not have had coverage for their plan funds, depending

solely upon the arbitrary residence of their plan trustee, over which they

have no control. Additionally, the disparate impact results only from the

state's legitimate interest in maintaining the welfare of its own citizens,

not from arbitrariness or discrimination. Retroactive application does not

deprive nonresidents of any rights (except the expectation of coverage

based on the arbitrary residence of their trustee), and it does not place

any added burdens or liabilities on nonresidents. 

To the extent Honeywell argues that this case is fully controlled by

Coombes and Ettor, we also disagree. As already noted, we question the

continued vitality of these cases. Furthermore, even assuming they remain

authoritative, we conclude that they do not control the outcome in this

situation. In our view, Ettor and Coombes do not stand for the proposition

that an inviolable vested right exists whenever a statutory economic right

accrues. In Coombes, the Court expressly protected what had become a

vested contract right, independent of the statute. 285 U.S. at 448. We

have previously concluded that no contract rights are implicated by the

1992 amendment. This case involves legislation of economic matters which

exist only by statute and have not been integrated into a private contract,

and Honeywell did not even make choices in reliance on the preamendment

Act. In Ettor, the Court protected a cause of action that provided a

remedy for property damage to private property that occurred while the city

graded streets for public use. 228 U.S. at 156. In the present case,

neither the state nor the Association caused a harm and then took away a

remedy for the injury caused, as the city and state did in Ettor. 

In sum, Coombes and Ettor are not directly applicable to the case at

hand because each involves an element distinguishable from the type of

economic legislation at issue here. Thus, even if Coombes and Ettor apply,

they do not dictate a conclusion that 
18

accrued economic rights under the preamendment Act rise to the level of a

vested right. Rather, in spite of the expectancies that may have been

based upon the preamendment Act, the retroactive 1992 amendment was a

rational means by which to accomplish the legitimate economic goal of

ensuring the welfare of Minnesota resident workers.

III. CONCLUSION

Finding no violation of either the Contract Clause or the Due Process

Clause through retroactive application of the 1992 amendment, we affirm the

judgment of the district court. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.