### 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 p laintiffs (collectively referred to as Honeywell) appeal th e district court's grant of summary judgment for the defendant, Minnesot a 1 Life and Health Insur ance Guaranty Association (the Association), in this declaratory judgment suit. At issue is whether an amendment to a Minnesot a 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### This Act has been repealed and was replaced in 1993 with 2 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 applie s retroactively, violates either the Contract Clause or the Du e Proce ss Clause of the Constitution of the United States. The distric t court granted the Ass ociation'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 plac e of business in Minnesota. Honeywell sponsors ce rtain defined contribution benefit and retirement plans for its employees. These plans include the Honeywell Retirement Investment Plan, the Investment Plus Plan of Honeywel l Inc., and the Honeywell Retirement Savings Plan. The current trustee of the Honeywell plans is First Trust National Association, which has it s principal place of business in Minnesota.
The Association is a nonprofit Minnesota corporation created pu rsuant to the Minnesota Life and Health Insurance Guaranty Association Act (the Act), Minn. Stat. Ann. §§ 61B.01-61B.16 (West 1986). The Associatio n 2 exists to protect the contractual rights of policy owners and beneficiarie s of life insurance policies, health insurance policies, and annuit y
co ntracts (subject to certain definitions and limitations), when th e insure r that issued the life insurance, health insurance, or annuit y contract becomes fina ncially unable to perform its obligations. See Minn Stat. Ann. § 61B.02, subd. 2. See also Minnesot a 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, he alth, and annuity contracts and elect to do business in M innesota are required to join and contribute to the Association

. Minnesota Life , 400 N.W.2d at 770. The dispute in this case aros e following the 1991 in solvency of an out-of-state member insurance company and the 1992 enactment by the Minnesota legislature of an amendment that retroactivelyredefines 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 Exec utive Life Insurance Company of California (ELIC), a member of the Association. GICs are unallocated annuity contracts, o r annuitycontracts "not issued to or owned by a named individual." Id

. GICs a re investments made by the trustee for the benefit of the pla n 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 planparticipants for whom the investment was made. Honeywell , 518 N.W.2d at 561.

In 1991, ELIC became insolvent and u nable to fulfill its contractual obligations on the Honeywell GICs, which amounted to $111,000,000. B y letter dated January 10, 1992, the Honeywell trustee, as the residen t policyowner, submitted to the Association a claim for guaranty coverage under the Act. Honey well sought coverage for ELIC's entire obligation to the Honey well trustee, which would inure not only to the benefit o f Honeywell's 9,000 Minnesota resident plan participants but also t o Honeywell's 27,000 nonresident plan participants.

The A ssociation neither granted nor denied Honeywell's clai m initially. ELIC's insolvency had also affected approximately 10,000 other Minnesota residents who were employed in Minnesota by other companies whos e plan trustees owned GICs but which trustees

### 4

were not Minnesota residents. At that time, the Act required th e Associationto guarantee the covered policies of "residents" to whom any "contr actual obligation" was owed from an out-of-state insurer. Minn

. Stat. A nn. § 61B.06, subd. 2 (West 1986). See Honeywell , 518 N.W.2d a t 558. The term "resident," defined as "any person who resides in this stat e at the time the impairment is determined and to whom contractua l obligations are owed," Minn. Stat. Ann. § 61B.03, subd. 13 (West 1986), wa s broad enough to include a trustee who resided in Minnesota. Honeywell , 51 8 N.W.2d at 560-61. The term "contractual obligation," defined as "an y obligation under covered policies," Minn. Stat. Ann. § 61B.03, subd. 5 (West 198 6), was broad enough to include a GIC obligation owed to a
res ident trustee. Honeywell , 518 N.W.2d at 560-61. Thus, as the n codified, the Act, co mbined with ELIC's insolvency, created the potential that all the Honeywell plan participants, thousands of whom were no t residents of Minnesot a, 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 pla n participants, who worked for companies whose plan trustee resided in a diff erent state, might not be entitled to any coverage because thei r trustee ( the one to whom the contractual obligation was owed) was not a Minnesota resident.

Faced with this dilemma, on January 21, 1992, the Minnesot a Department of Commerce (which supervises and reg ulates the Association and to whom appeals may be taken from the Association's determinations, se e 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 th e Dep artment's position that the Guaranty Association Ac t 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 ha s det ermined 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.)

Su bsequently, on April 27, 1992, the governor signed into law a n 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 Commerc e opinion. Honeywell , 518 N.W.2d at 562. The 1992 amendment, which specifically applie s ret roactively, narrowed the definition of "contractual obligation" t o 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. Th us, the amendment expressly provides coverage only to pla n participants who are Minnesota residents. In light of the opinion of the Department of Commerce and the retroactive 1992 amendment, the Association too k the position that its guaranty obligation to Honeywell covers onl y those Honeywell plan participants who resided in Minnesota when ELIC becam e insolvent.

Hon eywell then brought an action for declaratory and injunctiv e relie f and monetary damages in Minnesota state court based on th e Association's refusal to fully guaranty the whole of the trustee's claim. Honeyw ell sought a declaration that retroactive application of the 199 2 amendment violates bo th 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 cour t pursuant to 28 U.S.C. § 1441.
After removal, the parties filed cro ss motions for summary judgment. Th e district court ruled in favor of Honeywell, holding that th e retroactive abrogation of Honeywell's guaranty coverage right s imperm issiblydestroyed vested rights in violation of both the Contrac t Clause a nd the Due Process Clause of the Constitution. After th e Association moved for reconsideration, however, the district court vacated its initial opinion and certified two questions to the Supreme Court o f Minnesota: (1) Did the 1992 amendment to the Act's definition o f "contractual obligati on" effect a substantive change in the Association's obligations or merely clarify existing obligations? (2) Is the annuity contra ct owner's (the trustee's) right to guaranty payment from th e Association a purely statutory right or is it contractual in nature? The Supreme Court of Minn esota ruled on the certified questions, holding that (1) th e 1992 amendment to the definition of "contractual obligation " substantively changedthe Association's coverage obligations, and (2) the right to payment from the Association is a purely statutory right unde r state law. See Honeywell , 518 N.W.2d at 563.

After the Supreme Court of Minnesota responded to the certifie d questi ons, the parties again filed cross motions for summary judgment

. This time, the district court granted the Associ ation's motion for summary judgment, concluding that retroactive application of the 1992 amendment di d not violat e either the Contract Clause or the Due Process Clause, an d 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 imp airment of its contractual rights in violation of the Contract Clause. Honeywell also argues that th e 1992 amendment arbitr arily and irrationally destroyed its accrued, vested right to guaranty coverage, in violation of the Due Process Clause. W e begin our analysis with the Contract Clause.

A. CONTRACT CLAUSE

The Consti tution provides, "No State shall . . . pass any La w impairing the Obligat ion of Contracts . . . ." U.S. CONST. art. I, § 10, cl. 1. Read literally, this constitutional prohibition bans an y inte rference with contracts, but cases interpreting the clause clearl y indicat e that this prohibition "is not an absolute one and is not to b e 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 tha t a legislative amendment has impermissibly impaired cont ractual obligations, our inquiry initially focuses on "whether th e cha nge 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 essentia l to this inquiry: (1) Does a contractual relationship exist, (2) does the change in the law imp air that contractual relationship, and if so, (3) is the impai rment substantial? Id. If we conclude that a substantia l impair ment of a contractual relationship exists, we must then carefull y examine "the nature and purpose of the state legislation." Allie d Structural Steel Co. , 438 U.S. at 244.
We first consider whether a contractual relationship exists. I n 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 th e Honeywell trustee, is a contractual or

### 8

a statutory obligation. The Supreme Court of Minnesota determined that th e right to payment from the Association is a purely statutory right unde r state law. Honeywell , 518 N.W.2d at 563. Honeywell first contends that the district court erroneously certified a question of federa l constitutional law to the state court.

While federal courts "accord respectful consideration and grea t weight to the views of the State's highest court," the determination o f whether the Act created a contractual obligation "is a federal question fo r purposes of Contract Clause analysis, and whether it turns on issues o f general or purely local law, we can not surrende r the duty to exercise our
own judgment." Romein , 503 U.S. at 187 (internal quotations omitted)

. Contra ryto Honeywell's assertion, however, the district court did no t avoi d its duty to determine the constitutional issue by certifying a quest ion to the state supreme court. Instead, the district court gav e pro per consideration to the state court's views but independentl y determined that the right to payment under the Act is not contractua l within the meaning of the Contract Clause. We r eview de novo the district
cou rt'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 cour t that the rights at issue a re 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 th e Association and those who qualify for the Act's protection. "In general,
a statu te is itself treated as a contract when the language an d circumstances evince a legislative intent to create

### 9

privat e rights of a contractual nature enforceable against the State. " Unite d States Trust Co. v. New Jersey , 431 U.S. 1, 17 n.14 (1977). Th e right to payment under the Act is not enforceable against the state o f Minne sota but is an obligation imposed upon the Association. Th e Associationis 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 th e Association were a state agency, the Act contains no "clear indication th at the legislature intends to bind itself contractually," which is necessar y in order to overcome the gener al presumption "that a law is not intended to create privat e contractual or vested rights but merely declares a policy to be pursue d until the legislature shall ordain otherwise." National R.R. Passenge r Cor p. v. Atchison, Topeka & Santa Fe Ry. , 470 U.S. 451, 465-66 (1985 ) (quota tions omitted). Rather, the Act creates an insurance guarant y association with attendant statutory obligations to safeguard the financia l well-being of Minnesota residents to whom contra ctual obligations are owed by its me mber 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 insure r becomes insolvent.

Second, while the Association has th e power to enter into contracts, Minn. Stat. Ann. § 61 B.06, subd. 9(a) (West 1986), the Association is not
a party to the GICs involved here. The GICs at issue are contracts betwee n the H oneywell trustee and the impaired ELIC, not the Association. Th e Honeyw ell trustee did not specifically bargain for protection under th e Act, and the Act is not expressly or impliedly i ncorporated into the terms of the GI Cs. "For the most part, state laws are implied into privat e contr acts regardless of the assent of the parties only when those law s affect the validity, construction, and enforceme nt 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 ob ligation on the GICs. Moreover, there is no evidence that th e GICs were created in pursuance of the statutory obligation. Cf. Coombes

v. Getz , 285 U.S. 434, 442, 448 (1932) (upholding the contractual liabilit y created pursuant to a state constitutional rule of law that was repealed). The 1992 amendment merely altered definitions un der the Act, which in turn affect the Association's statutory obligation to the Honeywell trustee, bu t 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 i n nature rather than contractual. Absent the existence of a contractua l relationship, our Contract Clause inquiry is fin ished. The 1992 amendment simply does not implicate the Contract Clause.

B. DUE PROCESS
Honeywell's due process claim presen ts a closer question. Honeywell argues that retroactive application of the 1992 amendment defeats it s vested right to payment under the Act, in violation of the Due Proces s Clause. Honeywell relies on Coombes , 285 U.S. at 439-48, where the Suprem e Court held unconstitutional the repeal of a California state constitutiona l provision that provided a cause of action against corporate directors. Th e Court stated in absolute terms that "neither vested property rights nor th e obl igation of contracts of third persons may be destroyed or impaired. " Id. at 442. More spe cifically, the Court in Coombes held, "a contractual obligation arose; and the right to enforce it, h aving 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 th e Federal

### 11

Constitu tion." Id. at 448. Honeywell also relies on Ettor v. City o f Tac oma , 228 U.S. 148, 158 (1913), where the Supreme Court held that a statutory right to co mpensation for property damage caused by the city in the course of grading streets, which right to compensation was complet e 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 outco me of the case at hand, the Honeywell trustee asserts a veste d right to payment under the Act as it existed when ELIC became insolvent, prior to the 1992 amendment.

The Ass ociation, on the other hand, urges us to follow more recen t Supreme Court precedents in which the Court reviews economic legislation with a ve ry deferential eye and does not accord vested rights status t o economic rights. The Association observes that under this modern approach , due process is satisfied as long as a reasonable legislative purpos e supports the retroact ive application of the legislation. The Association contends that the ret roactive 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 rig ht. The Supreme Court has never expressly overruled the reasoning of Ettor and Coombes , which accords grea t protection to accrued statutory causes of action . In the area of economic legisl ation, however, we cannot ignore the abundance of cases wher e substa ntive due process has evolved into a deferential rational basi s 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 Ham mond v. United States , 786 F.2d 8, 11 (1st Cir. 1986) (questioning the continued vitality of Coombes and Et tor because recent cases have retroactively abridged economic an d real property rights without always carefully distinguishing these prior cases). See also W. David Slawson,

### 12

Constitutional and Legislative Considerations inRetroactive 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 woul d almost certainly not be followed today.").

Ettor and Coombes were decided during what is referred to in th e history of American jurisprudence as the Lochner era, named for the pivota l
cas e of judicial activism, Lochner v. New York , 198 U.S. 45 (1905 ) (invalidating maximum work hours legislation as an unconstitutiona l
exer cise of police power). Cases of that era frequently invalidate d statutes that limited economic autonomy in a manner thought by the Court to b e unnecessary or unwise, but in more recent decisions, the Cour t plainly sees its role differently: "[W]e do not sit as a super legislatur e to weigh the wisdom o f 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 th e

" 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 th e Lochner era "were decided during an era characterized by exacting review of economic legislation under an approach that `has long since bee n discarded'" (citationomitted)); Planned Parenthood of S.E. Pa. v. Casey , 505 U.S. 833, 861 (1992) (recognizing that the demise of Lochner er a reasoning began in We st Coast Hotel Co. v. Parrish , 300 U.S. 379 (1937)).

Within two years of the Coombes decision, substantive due proces s analysis in the area of retroactive economic legislation began to be frame d in terms of reasonableness, drifting away from the Lochner era's stric t 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, th e concept of vested rig hts) may be impaired by economic legislation if "the legislationis addressed to a legitimate end and the measures taken ar e
rea sonable and appropriate to that end." Id. This rational basi s substantive due proce ss test appears to have supplanted the legislatively restrictive vested rights mode of analysis, and allows legislatures more freedom in dealing wi th economic situations. See, e.g. , James L. Kainen, The Historical Framework for Reviving Constitutional Protection fo r Prop ertyand Contract Rights , 79 Cornell L. Rev. 87, 119 (Nov. 1993 ) ("Modern jurists reje ct the categorical logic of vesting and consider the statute's justifications under the rubric of substantive due process."); Charle s B. Hochman, The Supreme Court and the Constitutionality o f Retroa ctive Legislation , 73 Harv. L. Rev. 692, 696-97 (1959-60) (notin g that the vested rights analysis has been replaced by balancing thre e factors: (1) the nature and strength of the pub lic interest served by the stat ute, (2) the extent to which the statute modifies or abrogates a pre enactment right, and (3) the nature of the right altered by th e statute).

In 1976, the Court announced, "It is by now well established tha t legislative Acts adju sting the burdens and benefits of economic life come to the Court with a p resumption of constitutionality, and that the burden is on the one complaining of a due process viola tion to establish that the legislature has acted in an arbitrary and irrational way." Usery v. Turne r Elkhorn Mining Co. , 428 U.S. 1, 15 (1976). These authorities leave n o doubt that, even though Coombes and Ettor have n ever been overruled by the Supreme Court, the modern framework for substantive due process analysis concerning economic l egislation 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 i n genera l, coupled with the development of judicial deference to economi c legislation since the n, we join those who question the continued validity of the

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vested rights analysis of Coombes and Ettor when reviewing th e constitutionality of economic legislation, recognizing as we must that onl y the Supreme Court its elf can overrule its precedents. We rely instead on the mo re recent Supreme Court pronouncements of substantive due proces s analysis for economic legislation, which articul ate 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 reasonabl eness test of due process. Usery , 428 U.S. at 17. "But that burden is met simply by showing that the retroa ctive 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 bee n upheld as reasonable even in circumstances where it destroys a settle d 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 relie d up on deduction for estate tax); Gray , 467 U.S. at 734 (upholdin g retroactive application of ERISA's withdrawal liability as supported b y rational legislative purpose); Usery , 428 U.S. at 19-20 (upholdin g retroactive aspects of Black Lung Benefits Act of 1972, which require d emplo yers to compensate former employees disabled by a work-relate d disease). The Court has repeatedly noted that although certain economic liabilities or burdens were not anticipated, nevertheless, "`"our cases ar e clear that legislation readjusting rights and burdens is not unlawfu l solely because it upsets otherwise settled expec tations."'" 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 rede fining "contractual obligation" was neither arbitrary nor

### 15

ille gitimate. The state has a legitimate interest in regulating th e insurance industry, e asing the economic burdens of its own residents, and
ensur ing the economic life of an association created by its statute t o protect its residents. The general purpose of the Act at issue in thi s
case " is to protect the future financial stability of individuals, " Minnesota Life & Heal th Ins. , 400 N.W.2d at 773, and the preamendment Act expres slyprovided protection to "residents" to whom "contractua l obligat ions" are owed. Minn. Stat. § 61B.06, subd. 2 (1986). The 199 2
am endment serves to narrow the definition of contractual obligation , explicitly providing coverage only to resident p lan participants. This is a legitimate purpose.

The 1992 amendment is also curative in nature, even though it worked
a s ubstantive change in the law. See Honeywell , 518 N.W.2d at 560-6 3 (holding that the amendment worked a substantive change in the law because before the amendment, it plainly entitled resident policy owners, includin g trustees, to coverage). Curative legislation corrects an unintended and unanticipated mistake in the underlying legislat ion, which went undetected until some time after the original enactment. Certainly, legislatures hav e the authority to cure inadvertent defects in their legislation. Se e Carlton , 114 S. Ct. at 2022 (upholding Congress' s attempt to cure a defect in the tax code). In Carlton , the Court conclud ed that Congress's purpose in retr oactively taking away an estate tax deduction, even though th e decede nt's executor had relied upon it, was neither illegitimate no r arbitrary because "Co ngress acted to correct what it reasonably viewed as
a m istake in the original 1986 provision that would have created a significant and unanticipated revenue loss." 11 4 S. Ct. at 2023. We also not e the observation of one commentator that "the individual who claim s 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 su ch right would have arisen." Hochman, supra at 705.

### 16 Here, the Minnesota legislature acted reasonably when it gav e retroactive effect to the 1992 amendment in order to cure a drafting defec t that might have inadvertently left thousands of Minnesota residents withou t coverage und er the Act due to the ELIC debacle. We agree with th e obs ervationof the Supreme Court of Minnesota: "Given that unallocate d annuity contracts were not prevalent at the time of the statute's enactmen t in 1977, the legislature likely did not contemplate how the Ac t specificallyapplied to these contracts." Honeywell , 518 N.W.2d at 561. Absent retroactive effect, an unintended gap in coverage would have left many Mi nnesota resident workers without coverage, while an unintende d windfall in favor of nonresident workers who hada Minnesota trustee would have strained the financial capabilities of the Association and required Minnes ota residents to pay higher premiums to finance the Association' s obligation to out-of-state residents. In sum, "the interest in th e ret roactive curing of such a defect in the administration of governmen t
ou tweighs the individual [trustee's] interest in benefiting from th e defect." Hochman, supra at 705-06. Thus, we conclude that retroactiv e app licationof the 1992 amendment was a rational means by which t o accomplish the state's legitimate goals. Ho neywell contends that retroactive application is arbitrary an d irrational because there is no connection linkin g the Honeywell trustee to the ELIC failure that triggered coverage and because the amendment has a disparate impact on non-residents. Neither cont ention has merit. We have alreadydetermined that the retroactive application of the amendment was rational and prevente d an unanticipated gap in coverage for resident plan participants and an unexpected windfall for nonr esident plan participants. Because t he context here is curative in nature, there is no need t o demonstrate any connection of the Honeywell trus tee to the ELIC failure in order for the legislation to be rational. We ag ree 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 t heir plan funds, depending solely upon the arbitrary residence of their pla n trustee, over which they have no control. Additionally, the disparate im pact results only from the state's legitimate interest in maintaining the welfare of its own citizens , not from arbitrariness or discrimination. Retroactive application does no t depriv e nonresidents of any rights (except the expectation of coverag e based on the arbitrar y 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 a nd Ettor , we also disagree. As already noted, we question th e continued vitality of these cases. Furthermore, even assuming they remain authoritative, we conclude that they do not control the outcome in thi s situation. In our view, Ettor and Coombes do not stand for the propositio n 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 hav e previously concluded that no contract rights are implicated by th e 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 preamendmen t Act. In Ettor , the Court protected a cause of action that provided a remedy for property damage to private property that occurred while the cit y grad ed 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 di rectly applicable to the case at hand because each involves an element distinguishable from the type o f economic legislation at issue here. Thus, even if Coombes and Ettor apply , they do not dictate a conclusion that

### 18

accrued economic righ ts under the preamendment Act rise to the level of a vested right. Rather, in spite of the expectancies that may have bee n based u pon the preamendment Act, the retroactive 1992 amendment was a rationa l means by which to accomplish the legitimate economic goal o f ensuring the welfare of Minnesota resident workers.

III. CONCLUSION
Finding no violation of either the Contract Clause or the Due P rocess Clause through retroactive application of the 1992 amendment, we affirm th e judgment of the district court.

A true copy.

Attest:

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