### 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. * [PUBLISHED]

_____________ Submitted: October 22, 1996 Filed: April 2, 1997

_____________ Before RICHARD S. ARNOLD, Chief Judge, McMILLIAN, JOHN R. GIBSON , FAGG, BOWMAN, WOLLMAN, MAGILL, BEAM, LOKEN, HANSEN, MORRIS SHEPPAR D ARNOLD, and MURPHY, Circuit Judges, en banc.

_____________ HANSEN, Circuit Judge.

The p laintiffs (collectively referred to as Honeywell) appeal th e district court's grant of summary judgment for the defendant, 1

### 2

Minnesota Life and Health Insurance Guaranty Association (the Association) , in this declaratory j udgment suit. At issue is whether an amendment to a Minnesota statute, wh ich amendment applies retroactively, violates either the Contract Clause or the Due Process Clause of the Constitution of the Uni ted States. The district court granted the Association's motion fo r summary judgment and dismissed Honeywell's complaint, concluding that the amendment passes constitutional muster.

A pane l of this court unanimously affirmed the judgment of th e district court. Honeywell v. Minnesota Life & Health Ins. Guaranty Assoc. , 86 F.3d 766 (1996). Honeywell requested en banc review. We granted this request, vacated the panel's opinion on August 27, 1996, and heard the cas e en banc. We now affirm the judgment of the district court.

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

### This Act has been repealed and was replaced in 1993 wit h 2 

### Minn

. Stat. Ann. §§ 61B.18 - 61B.32 (West Supp. 1996). Th e legislature provided, however, that §§ 61B.01 - 61B.16, as amended in 1992, remain applicable to the subject of this suit. Hon eywell, Inc. v. Minnesota Life & Healt h Ins. Guar. Assoc. , 518 N.W.2d 557, 558 n.4 (Minn. 1994). The issue in this case deals with a 199 2 amendment to the Act, and not the new 1993 version of the Act.
3 1986). The Association exists to protect the contractual righ ts of policy

2

owners and beneficiaries of life insurance policies, health insuranc e polic ies, and annuity contracts (subject to certain definitions an d limita tions), when the insurer that issued the life insurance, healt h 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 insuranc e companies that deal in life, health, and annuity contracts and elect to do bu siness in Minnesota are required to join and contribute to th e 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 insuranc e company and the 1992 enactment by the Minnesota legislature of an amendmen t 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 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

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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 G ICs but which trustees were not Minnesota residents. At that time, the Act required the Association to guarantee the covere d policies of "residents" to whom any "contractual obligation" was owed from an out-of-state insur er. Minn. Stat. Ann. § 61B.06, subd. 2 (West 1986). See Honey well , 518 N.W.2d at 558. The term "resident," defined as "an y person who resides inthis state at the time the impairment is determined and to whom contractu al obligations are owed," Minn. Stat. Ann. § 61B.03, subd. 13 (West 1986), was broad enough to includ e a trustee who resided in Minnesota. Honeywell , 518 N.W.2d at 560-61. The term "contractua l obli gation," defined as "any obligation under covered policies," Minn

. Stat. Ann. § 61B.03, subd. 5 (West 1986), was broad enough to include a GI C obligation owed to a resident trustee. Honeywell , 518 N.W.2d at 560-61. Thus, as then codifie d, the Act, combined with ELIC's insolvency, created the potential that al l the Honeywell plan participants, thousands of whom were not residents of Minnesota, might be

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ent itled to coverage under the Minnesota Act because their plan truste e happened to be a Minnesota resident. Whereas, many other Minnesota nonHoneywell employed resident plan participants, who worked for companie s whose plan trustee re sided in a different state, might not be entitled to any coverage because their trustee (the one to whom the contractua l 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-contribution pension plans funded by Guaranteed Investment Co ntracts 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 retroactively, narrowed the

### 6

definition of "contractual obligation" to specifically exclude an y obligation owed "to nonresident participants of a covered plan or to the plan sponsor, employe r, trustee, or other party who owns the contract; in such cases, the association is obligated under this chapter only t o 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 amendmen t expres slyprovides coverage only to plan participants who are Minnesot a residents. In light of the opinion of the Department of Commerce and the retroa ctive 1992 amendment, the Association took the position that it s gua rantyobligation to Honeywell covers only those Honeywell pla n participants who resided in Minnesota when ELIC became 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 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 obligation"

### 7

effect a substantive change in the Association's obligations or merel y clarifyexisting obligations? (2) Is the annuity contract owner's (the truste e's) right to guaranty payment from the Association a purel y sta tutoryright or is it contractual in nature? The Supreme Court o f Minneso ta ruled on the certified questions, holding that (1) the 199 2
ame ndment to the definition of "contractual obligation" substantivel y change d the Association's coverage obligations, and (2) the right t o payment from the Asso ciation 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 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 contractu al in nature and that retroactive application of the amendment constitutes the impairment of its contractual rights in violatio n of th e Contract Clause. Honeywell also argues that the 1992 amendmen t arbit rarilyand irrationally destroyed its accrued, vested right t o guarantycoverage, in violation of the Due Process Clause. We begin our analysis with the Contract Clause.

### 8 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 a statutory obligation. The Suprem e Co urt of Minnesota determined that the right to payment from th e Association is a purely statutory right under state law. Honeywell , 518 N. W.2d at 563. Honeywell first contends that the district cour t erroneously

### 9

certified a question of federal 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.), cert. deni ed , 117 S. Ct. 215 (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 cir cumstances evince a legislative intent to create private rights of a contractual nature enforceable against the State." United States Trust Co

. v. New Jersey , 431 U.S. 1, 17 n.14

### 10

(1977). The right to payment under the Act is n ot 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 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

### 11

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 relati onship, our Contract Clause inquiry is finished. Accordingly, w e affirmthe district court's conclusion that the 1992 amendment did no t unconstitutionallyimpair a contractual relationship in violation of 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 obligation of contracts of third persons may be destroyed or

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impaired." Id. at 44 2. 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 Fourteent h Amendment, of the Federal Constitution." Id. at 448. Honeywell als o relies o n Ettor v. City of Tacoma , 228 U.S. 148, 158 (1913), where th e Supreme Court held that a statutory right to compensation for propert y damage caused by the city in the course of gradi ng streets, which right to compensat ion was complete before a repeal of the cause of action, was a vested property right that could not be retroact ively destroyed. Claiming that thes e cases control the outcome of the case at hand, the Honeywel l trustee asserts a vested 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

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understanding of the historical context of Ettor and Coombes is essential to divine accurately the present weight of their authority on the issu e before us. See Hammond v. United States , 786 F.2d 8, 11 (1st Cir. 1986) (quest ioning the continued vitality of Coombes and Ettor because recen t
cases have retroactively abridged economic and real property rights withou t always carefully distinguishing these prior cases). See also W. Davi d Sla wson, Constitutional and Legislative Considerations in Retroactiv e Lawmaking , 48 Cal. L. Rev. 216, 232 (1960) ("The decision [of Coombes v. Getz ] seems far too rigid in its conception of permissible legislativ e change and would 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 , 512 U.S. 26, 114 S. Ct. 2018, 2023-24 (1994) (recogn izing 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'" (citationomitted)); Planned Parenthood of S.E. Pa. v. Casey , 505 U.S. 833,

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861 (1992) (recognizi ng 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 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 t he expressly protected obligation of contracts (and similarly, w e believe, the concept of vested rights) may be impaired by economi c legislation if "the legislation is addressed to a legitimate end and the
measures taken are reasonable and appropriate to that end." Id. Thi s rational basis substantive due process test appe ars to have supplanted the le gislativelyrestrictive vested rights mode of analysis, and allow s legislatures more freedom in dealing with econom ic situations. See, e.g. , James L . Kainen, The Historical Framework for Reviving Constitutiona l Protection for Property and Contract Rights , 79 Cornell L. Rev. 87, 11 9 (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 Constitutionalit y of Retroactive Legislation , 73 Harv. L. Rev. 692 , 696-97 (1959-60) (noting 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 presumption of

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constitutionality, an d that the burden is on the one complaining of a due process violation to establish that the legislature has acted in a n arbitraryand irrational way." Usery v. Turner Elkhorn Mining Co. , 42 8 U.S. 1, 15 (1976). These authorities leave no doubt that, even thoug h Coombes an d Ettor have never been overruled by the Supreme Court, th e modern framework for substantive due process analysis concerning economic legisl ation requires only an inquiry into whether the legislation i s
reason ablyrelated to a legitimate governmental purpose. Given th e criticism surrounding the Court's Lochner era decisions in general, couple d withthe development of judicial deference to economic legislation since then, we j oin those who question the continued validity of the veste d rights analysis of Co ombes and Ettor when reviewing the constitutionality of economic legislation, recognizing as we must that only the Supreme Cour t itself ca n overrule its precedents. We rely instead on the more recen t Su preme Court pronouncements of substantive due process analysis fo r 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 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

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ERISA's withdrawal liability as supported by rational legislative purpose) ; Usery , 428 U.S. at 19-20 (upholding retroactive aspects of Black Lun g Benefi ts Act of 1972, which required employers to compensate forme r employees disabled by a work-related disease). The Court has repeatedly noted that although certain economic liabilities or burdens were no t anticipated, nevertheless, "`"our cases are clear that legislatio n
rea djusting rights and burdens is not unlawful solely because it upset s otherw ise settled expectations."'" Concrete Pipe & Prod. v. Constr

. Laborers Pension Trust , 113 S. Ct. 2264, 2287 (1993) (quoting Gray , 46 7 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 illegitimate. The stat e has a legitimate interest in regulating the insu rance industry, easing the economic burdens of its own residents, and ensuring the economic life of

an a ssociation created by its statute to protect its residents. Th e general purpose of the Act at issue in this case "is to protect the future fin ancial stability of individuals," Minnesota Life & Health Ins. , 40 0 N.W.2d at 773, and the preamendment Act expressly provided protection to "resid ents" to whom "contractual obligations" are owed. Minn. Stat

. § 61B.06, subd. 2 (1986). The 1992 amendment serves to narrow th e 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 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

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underl ying legislation, which went undetected until some time after th e origin al enactment. Certainly, legislatures have the authority to cur e inadvertent defects in their legislation. See C arlton , 114 S. Ct. at 2022 (uphol ding Congress's attempt to cure a defect in the tax code). I n Carlton , the Court concluded that Congress's purpose in retroactivel y taking away an estate tax deduction, even though the decedent's executor had re lied upon it, was neither illegitimate nor arbitrary becaus e "Congress acted to correct what it reasonably viewed as a mistake in the origin al 1986 provision that would have created a significant an d unanticipat ed revenue loss." 114 S. Ct. at 2023. We also note th e observa tion 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. 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 ervation of 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 Minnesota reside nt workers (whose trustee resided elsewhere) without coverage, while an unintended windfall in favor of nonresident workers who had a Minnesota trust ee 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

### 18

interest in the retro active curing of such a defect in the administration of government outweig hs the individual [trustee's] interest in benefiting from t he defect." Hochman, supra at 705-06. Thus, we conclude tha t retroactive application of the 1992 amendment was a rational means by whic h to 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 a mendment actually eliminates the arbitrary aspect of the prior legislationunder which Minnesota residents may or may not have had coverage for their plan funds, depending solely upon the arbitrar y resid ence of their plan trustee, over which they have no control

. Additionally, the disparate impact results only from the state's legitimat e inter est in maintaining the welfare of its own citizens, not fro m arbitrariness or discrimination. Retroactive ap plication does not deprive nonresidents of any rights (except the expectation of coverage based on th e arbit raryresidence of their trustee), and it does not place any adde d 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.

### 19

Furthermore, even assuming they remain authoritative, we conclude that the y do not co ntrol the outcome in this situation. In our view, Ettor an d Coombes do not stand for the proposition that an inviolable vested right exists whenever a statutory economic right accru es. In Coombes , the Court expresslyprotected what had become a vested contract right, independent of th e statute. 285 U.S. at 448. We have previously concluded that n o contract rights are i mplicated 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 protecte d
a cause o f action that provided a remedy for property damage to privat e property that occurre d while the city graded streets for public use. 228 U.S. at 156. In the present case, neither the state nor the Association
cause d a harm and then took away a remedy for the injury caused, as th e 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 , theydo not dictate a conclusion that accrued economic rights under th e preamendment Act rise to the level of a vested r ight. 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 legiti mate economic goal of ensuring the welfare of Minnesota residen t workers.

### 20 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.
LOKEN, Circuit Judge, with whom BOWMAN, Circuit Judge, joins, concurring.

I concu r in Part II.B. of the court's opinion, concluding that th e Minnes ota statute at issue does not violate Honeywell's right t o substantive due proce ss, except to the extent that the rollover paragraph
on pages 18 and 19 is inconsistent with my view of the Contract Claus e iss ue. As to that issue, I respectfully disagree with the court' s conclusion that no co ntract has been impaired, but I agree that there has been no unconstitutional impairment. Accordingl y, I concur in the court's decision to affirm.
As the court explains, the modern Contract Clause analysis is ( 1) has the State impaired a contract, (2) is the impairment substantial, and (3) is the statute nevertheless a permissible exercise of the State's police power. See General Motors v. Romein , 503 U.S. 181, 186 (1992); Energ y Reserves, Inc. v. Kansas Power & Light Co. , 459 U.S. 400, 410 (1983). The latter two factors are interrelated. "The severity of the impairmen t
meas ures the height of the hurdle the state legislation must clear. " Allied Structural Steel Co. v. Spannaus , 438 U.S. 234, 245 (1978). 1. Was There a Contract. My starting point on this question i s Coombes v. Getz , 285 U.S. 434, 440-42 (1932), inwhich California repealed
a constitutional provision holding corporate directors personally liable to creditors for embezzled or misappropriated co rporate funds. In holding that the repeal

### 21

unconstitutionally im paired a creditor's contract with a corporation, the Court described the repealed liability as "in its nature contractual. " Justice Cardozo in dissent observed that to call the liability contractual was "a legal fiction . . . borrowed from the law of quasi contracts." But he nonetheless agreed that the Contract Clause may protect a creditor' s "contr act with a corporation secured in certain contingencies by a statutory liability."

To me, Coombes confirms that a statu te may create a contract between private parties that the Contract Clause protect s. See also Steamship Co.

v. Joliffe , 69 U.S. 450, 456-57 (1864) (statute created contract between shipping company and harbor pilots); Hawthorne v. Calef , 69 U.S. 10, 2 2 (1864) (statute provi ding that stock is security for railroad's creditors created contract betw een creditors and shareholders). All recent Supreme Court cases analyzing whether a statute had created a contract for Contrac t Clause purposes dealt with obligations of the State, rather than, as i n Coombe s , obligations the State has compelled private parties to assume

. But tha t should not alter the analysis. For example, even if a statut e mandat es the terms of a fire insurance policy, the policy is still a contract. Accord In re Workers' Compensation Refund , 46 F.3d 813, 818 (8t h Cir. 1995). In this case, the statute created the Guaranty Association, a p rivate non-profit entity consisting of all insurers wis hing to do business in the State, and required that entity to guarantee the "covered policies" of its members i n the event of an insolvency. That third party guaranty look s muchlike the statutory liability in Coombes . "In determining whether a particular statute gi ves rise to a contractual obligation, it is of first importan ce to examine the language of the statute." National R.R

. Passenger Corp. v. At chison, Topeka & S.F. Ry. , 470 U.S. 451, 466 (1985).

### 22

Here, the statute use s the word "guaranty" in its title and provides that th e Association "shall . . . guarantee, assume, or reinsure" th e obligatio ns of its members. Minn. Stat. § 61B.06, subd. 1 (1986). A guarantyis a contract under Minnesota law. See Baker v. Citizens State Bank of St. Louis Park , 349 N.W.2d 552, 557-58 (Minn. 1984). In thes e circumstances, Honeywell has had a "contract" impaired, either it s underlying investment contracts with ELIC or, more directly, the guaranty bythe Guaranty Association. The contrary conclusion of the Minnesot a Supreme Court, though entitled to deference in its construction of state law, is not binding on us for Contract Clause purposes. See Romein , 503 U.S. at 187.

2. Was th e Contract Substantially Impaired. Total destruction of a cont ract is a substantial impairment. Home Building & Loan Ass'n v

. Blaisdell , 290 U.S. 3 98, 431 (1934). At first glance, this case seems to involve total destruction of the guaranty rights of non-resident Honeywell employees. But that ignores the nature of the guaranteed contracts. As
a GI C trade association monograph explained, "GICs are assets of th e pension plan. Individual employees do not own any part of a GIC, nor do employees have any in dividual rights under the contract." Thus, properly viewed, the impairment is partial -- a reduction in the Association' s guaranty obligation to the Honeywell Plan. (Whe ther that loss to the Plan must ultimately be borne only by non-resident beneficiaries is an issue no t before us.)
Though partial, the impairment is quantitatively substantial -- based
on the percentage of non-resident Honeywell employees, the statutor y amendment deprived th e Plan of some 75% of its guaranty claim against the Association. In addition, the impairment was not merely incidental t o another legislative purpose; the statute was

### 23

enacted to impair. Compare Energy Reserves , 459 U.S. at 418; Exxon v
. Eagerton , 462 U.S. 176, 194 n.14 (1983).
Beyond the sheer magnitude of an imp airment, the Supreme Court looks at whether the impair ed term was central to the contract, whether settled expect ations have been disrupted, and whether the impaired right wa s reasonablyrelied on. See El Paso v. Simmons , 379 U.S. 497, 514 (1965); Spannaus , 438 U.S. at 243 n.14. In general, when an industry is heavily regulated, parties are considered to have less r easonable expectation that legisl ation will not alter their contractual arrangements. See Energ y Reserve s , 459 U.S. at 411. These other factors cut against th e substantiality of thi s impairment. As in Veix v. Sixth Ward Bldg. & Loan Ass 'n of Newark , 310 U.S. 32, 38 (1940), the industry is both heavil y regula ted and "regulated in the particular to which [Honeywell] no w objects," since the State created the impaired g uaranty. Honeywell cannot show substantial reli ance on the Association's guaranty when it purchased the GICs in 1988 because the Association has broad power to unilaterally impose conditions on its guaranty obligations, subject to th e Commis sioner's approval, including the power to declare a moratorium o n paym ents. See Minn. Stat. § 61B.06, subds. 1-3 (1986); Honeywell v

. Minnesota Life & Health Ins. Guar. Ass'n , 518 N.W.2d 557, 563 (Minn. 1994)

. On the other hand, recent Eighth Circuit cases have looke d unfavorably on retroactive legislation impairing contracts, even in heavil y reg ulated industries. See Workers' Compensation Refund , 46 F.3d at 82 0 (statute confiscating excess reinsurance premiums invalid thoug h reinsurance plan documents incorporated changes in state law); Holiday Inn s Fran chising, Inc. v. Branstad , 29 F.3d 383, 384 (8th Cir.), (statut e ret roactivelyrestricting franchisor termination rights invalid), cert
. denied , 115 S. Ct. 61 3 (1994); Minnesota Ass'n of Health Care Facilities, Inc. v. Minnesota Dept.

### 24

of Public Welfare , 742 F.2d 442, 451 (8th Cir. 1984) (statute retroactivel y reduci ng nursing home rates for medicaid patients invalid "because i t disrupts settled and completed financial arrange ments under contracts made in reliance on existing law"), cert. denied , 469 U.S. 1215 (1985).

On balance, I conclude this impairment is substantial. Honeywel l lost 75% of its guara nty benefit. Cf. Spannaus , 438 U.S. at 247 (statute imposi ng $185,000 pension charge on employer closing state office wa s substantial impairment). Thus, on the sliding scale the Supreme Court use s for the last two Contract Clause factors, this impairment requires close scrutiny of the State's justification.

3. Is the Substantial Impairment Justified. The economic interests of a state may justif y its impairing contracts, see, e.g. , Blaisdell , 290 U.S
. at 437, but the Contract Clause imposes limits on that power

. "Le gislation adjusting the rights and responsibilities of contractin g parties must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption." United States Trust Co. of New York v. New Jersey , 431 U.S. 1, 22 (1977). Given the deference pai d to state legislatures, especially when the State is not a party to th e impaired contract, most claims founder on this aspect of the moder n Contract Clause analysis. The Supreme Court looks hard at whether there is a legitimate public purpose and then defers t o the legislative judgment as to the reasonableness of a particular remedy. See Energy Reserves , 459 U.S at 412-13. Of partic ular importance in this case, the Court has stated that it is reasonable to amend a statute to eliminate unforeseen consequences or windfal l benefits, even if that impairs existing contracts. See U.S
. Trust , 431 U.S. at 31 & n.30; Energy Reserves ,

### 25

459 U.S. at 412. For example, the Court in U.S. Trust explained that the amendment in El Paso was valid because it simply limited parties "to those gains reasonably to be expected from the [original] contract." Conversely , the amend ment struck down in U.S. Trust was not in response to windfal l benef its or unforeseen consequences because it repealed a provisio n expressly prohibiting the use of Port Authority revenues for transportatio n subsidies.

In this case, the Minnesota Legislature based its initial 197 7 statute on the NAIC Model Life & Health Guaranty Association Act. Th e Model Act at that time provided that the association must guarantee al l obligations of an insolvent domestic insurer. F or an insolvent foreign or out-of-state insurer, however, the association only guaranteed "the covere d policies of residents," and it would have "no li ability" if that insurer's home State provided "substantially similar" protection "for residents of other states." See Minn. Stat. § 61B.06, subds. 2 and 4 (1986). In other words, if every State had enacted this Model Act and uniformly applied it, the association in an insolvent U.S. insurer's home State would pay al l guaranty claims. But if an offshore insurer grabbed everyone's money and went under, each Stat e's association would guarantee the covered policies of that State's residents.

In this environment, Honeywell's guaranty claim for its investmen t in ELIC GICs posed a substantial unforeseen consequence in Minnesota for three reasons. First, the legislators who enacted the initial Minnesota statute in 1977 did not foresee that, unlike regulators in most every othe r State, Minnesota's Commissioner would take the position in the 1980s , bef ore ELIC became insolvent, that GICs are "covered policies," and th e Supreme Court of Minnesota would agree in Minnesota Life & Health Guar

. Ass 'n v. Department of Commerce , 400 N.W.2d 769, 773-74 (1987). As a result

### 26

of this lack of uniform implementation, when Honeywell sent its ELIC claim s to all fifty States, it received blanket denials from most everyone except Minnesota.
Second, the Legislature did not foresee that "covered policies" would include group annuities in which a single contract holder, rather tha n thousands of beneficiaries, is the "resident." One can argue that thi s issue was reasonably foreseeable. But I see no indication that even the dra fters of the various Model Acts anticipated the problem before 1985

. That the issue was unforeseen is confirmed by the fact that any carefu l drafter familiar with ERISA insurance-funded group life and health plans
wou ld not try to solve this complex an issue with the single wor d "resident."

Third, Honeywell took the position that the $300,000 statutor y ceiling on the Association's liability "for all benefits . . . with respec t to any one life," Min n. Stat. § 61B.06, subd. 8 (1986), does not apply to its GIC claims. That exposed the Association to a $111,000,000 claim, far

more than any State has allowed in expressly covering GICs. See Minn

. Sta t. § 61B.19, subd. 4(6) (1996) ($7,500,000 limit on claims regardin g "unall ocated annuities of a retirement plan"); 1985 NAIC Model Ac t § 3(c)(2)(B) ($5,000,000 limit).

Faced with this surprising confluence of factors that produced a genuinely unforeseen consequence and arguable windfall benefit, th e Legislature enacted a n amendment that reduced the Association's statutory guaranty t o a level that Honeywell (or any other plan sponsor) shoul d reasonably have expec ted from the statute as originally enacted: because GICs ar e not "covered policies" in California, ELIC's home State, th e Minnesota Association must guarantee ELIC's GIC obligations to Minnesota residents; therefore,

### As t he court observes in its substantive due proces s 3 

### discussion, because the Association's liabilities are unfunded -- claims are paid by post-insolvency assessments of the remaining , solvent members -- it does not take a team of actuaries to deduce that i f Minnesota compels the Association to bestow uniquel y generous guaranty benefits on the non-Minnesota customers of this year's insolvent insurer, ELIC, the Association's members mus t eventually recoup those benefits by imposing higher insuranc e premiums on future Minnesota policyholders.
27 the Honeywell Plan is entitled to a guaranty ben efit equal to that portion of its GIC contracts that represent investments on behalf of its Minnesota resident beneficiaries.

In en acting this amendment, the State acted in furtherance of th e legitimate economic interests of its citizens. The effect of its action 3

was to reduce a state-mandated private benefit in a manner not inconsisten t withthe reasonable expectations of the parties to that "contract." I n these circumstances, I concur in the court's con clusion that Minnesota did not unconstitutionall y impair the Contract Clause rights of the Honeywell Plan trustee or the Plan's ultimate employee beneficiaries.

RICHARD S. ARNOLD, Chief Judge, with whom McMILLIAN, MAGILL, BEAM, an d MORRIS SHEPPARD ARNOLD, Circuit Judges, join, dissenting.

I ag ree with Judge Loken that a contract was impaired by th e Minnesota Legislature’s amendment of section 61B. I also believe tha t impairment was substantial within the meaning of the Contracts Clause, and not sufficiently justified. I therefore respectfully dissent. The lead opinion holds that there was no contract to be impaire d when the Minnesota Legislature amended § 61B to exclude out-of-state-resident life- insurance policyholders and other beneficiaries from its coverage

. As Judge Loken’s opinion

### 28

explains, it is settled law that obligations bet ween private parties which are mandated by statu te may nonetheless be contractual and enforceable as such. The statute which created the Minnesota Life and Health Insurance Guaranty Association states that the Association was created to protect th e rights of policyowners and other beneficiaries by guaranteeing th e obligations owed them by insurance companies. Minn. Stat. § 61B.02 subd. 2 ( 1990) (“The purpose of sections 61B.01 to 61B.16, is to protec t policyowners, death b enefit certificate holders, insureds, beneficiaries,
an nuitants, payees, and assignees of life insurance policies, healt h insurance policies, annuity contracts and supple mental contracts . . ..”). The duty to guarantee the obligations of member insurance companies appear s to be the Association’s primary reason for existence. The power to collec t
assess ments from member companies exists to enable the Association t o fulfill that duty. A guaranty is itself a kind of contract, an undertakin g to fulfill the obligation of another if that other is in default.

It seems improbable that the Legislature would create a separate , nonprofit legal entit y and endow it with the power to collect assessments frommember insurance companies without demanding reciprocal performance from the Association. The words of the statute belie such a possibility: “If a do mestic insurer is an impaired insurer [unable to meet it s obligations to policyholders and other beneficiaries], the associatio n shall . . . guarantee, assume, or reinsure, or cause to be guaranteed , assumed, or reinsured, the covered policies of the impaired insurer . . .. ”

### 29

Minn. Sta t. 61B.06 subd. 1(b); see also § 61B.06 subd. 2 (pertaining t o foreign insurers). The lead opinion today holds the Association did not
owe a co ntractual duty to guarantee all covered policies because a legislature must exhibit a clear indication that it intends to bind itself contractually before it will be considered to be so bound. The Legislatur e in the instant case did not bind itself, however; it bound the Association

. The Le gislature created the Association to collect membership fees fro m insurance companies and to assume the obligations of those companies shoul d they become “impaired.” I therefore agree with Judge Loken that th e obligations owed by the Association, even though their origin is in th e statute, are nonetheless contractual and not merely “statutory.”
It follows that the Minnesota Legisl ature’s amendment of the statute
was an impairment of a contract. Two sets of contractual relationship s
were i mpaired by the Legislature’s action: that between Honeywell’ s trustee and the Association, and that between the trustee and ELIC. The former is affected be cause the Association, under the amended statute, is released from most of its duty to guarantee the obligation owed th e trustee. The latter is affected because the trustee contracted with ELIC under th e prior version of the statute, and consequently under th e assumption that the GICs were fully guaranteed by the Association. Judge Loken’s concurring opinion concludes that there was only a par tial destruction of the contract in this case, because the amendmen t merely diminished the Association’s obligation to guarantee the GICs , rather than destroying that obligation completely. As Judge Loke n
rec ognizes, a substantial impairment need not be a total destruction t o violate the Contracts Clause. I agree that the impairment in this case wa s substantial. Indeed, the Minnesota Legislature chose which investments to protect and

### 30

which to abandon at the level of the individual, according to th e individual’s state of residence. It specificall y intended to abrogate the Association’s duty to guarantee a given obligati on based on the individual investor to whom that duty was owed. It therefore seems appropriate t o view the Legislature’s action as a complete destruction of those individua l contractual relationships.

The Supre me Court has held that the Constitution does not prevent a leg islature from working a substantive change in the law, and impairin g contracts thereby, as long as it had sufficient justification for doing so

. “[L]e gislation adjusting the rights and responsibilities of contractin g parties” w ill not violate the Contracts Clause if it is created “upo n reasonable conditions and of a character appropr iate to the public purpose justifying its adoption.” Allied Structural Steel v. Spannaus , 438 U.S. 234, 244 (1978) (internal quotation omitted).

One possible justification for the amendment could be to avoi d unfore seen consequences or windfall benefits. Under that view, th e Legislature could not have foreseen that Minnesota’s Association would be the only one which guaranteed GICs as “covered policies.” To the contrary , it was not only fores eeable, but readily ascertainable, that other states did not treat GICs the way Minnesota did. Minnesota’s Commissioner and it s State Supreme Court both came to that conclusion in the 1980s. Minnesot a also, it is argued, could not have intended to guarante e
cov erage of policies based simply on the residence of a trustee. Th e coverage m andated by such a rule, the argument continues, is far mor e expans ive than the Legislature could have anticipated. Perhaps th e Legislature did not anticipate that the Association would incur such a large obligation. Bu t it should have; the language of the statute is not so ambiguous that such a

### 31

reading should be surprising. Under the subdivi sion which applies to outof-st ate impaired insurers, the statute requires the Association t o “guarantee, assume, or reinsure or cause to be guaranteed, assumed, o r reinsured, the covered policies of residents, and shall make or cause to be made prompt payment of the impaired insurer’s contractual obligations which are due and owi ng to residents.” Minn. Stat. § 61B.06 subd. 2. It
was clear when Honeywell applied for coverage of its ELIC GICs that GICs were already “coveredpolicies” in Minnesota. The ambiguity is allegedly whether “residents” could foreseeably have included a trustee which held
severa l “covered policies” on behalf of both resident and non-residen t benefi ciaries. The statute defines “resident” in § 61B.03: “‘Resident ’
means any person who resides in this state at the time the impairment is determ ined and to whom contractual obligations are owed.” “Person, ” according to the statute, “means any individual, corporation, partnership, association or voluntary organization.” Minn. S tat. § 61B.03 subd. 12-13. The drafters should have realized that individual corporations , partnerships, associations, and voluntary organizations could hold numerou s covered policies on behalf of employees or other beneficiaries. I therefore cannot agre e that the Legislature’s amendment of the statute is justified because of unforeseeable consequences. That the amendment imposed a retroactive change raises the “hurdle” the state must clear in order to justify a substantial impairment o f contracts. Legislati on which makes prospective changes affecting private contracts is an appro priate and commonplace legislative function; private contracting parties, especially in regulated industries, should expect tha t laws and r egulations may change and affect their future dealings. W e examine the state’s justification for retroactive changes more carefully because the opposite is generally true: private

### 32

contracting parties should and do expect that the conditions under which they contracted will remain in effect unless and until there is a change. They do not normally expect lawmakers to change the basic assumption s underlying those agreements so as to affect lega l obligations incurred, or rights vested, in the past. See Minnesota Ass’n of Health Care Facilities , Inc. v. Minnesota Dep’t of Pub. Works , 742 F.2d 442, 450-51 (8th Cir. 1984 ) (upholding prospective change but striking down retroactive change because it “disrupt[ed] settled and completed financial arrangements unde r contracts made in rel iance on existing law”), cert. denied , 469 U.S. 1215 (1985); Holiday Inns Franchising, Inc. v. Branstad , 29 F.3d 383, 385 (8th Cir.) (observing that retroactive changes which alter prior contractua l relationships have “a lmost uniformly been declared unconstitutional,” and that “thi s is a datum on which [parties] are presumably allowed to rel y while bargaining”), cert. denied , 115 S. Ct. 613 (1994). The Mi nnesota Legislature in this case deliberately effected a retroactive change in the law to allow the Association to avoid a $11 0 millio n payout. The Minnesota Supreme Court has held that th e Legi slature’s amendment was a change, and not a clarification of th e statute. Honeywell, Inc. v. Minnesota Life & He alth Ins. Guar. Ass’n , 518 N.W.2d 557, 562 (Minn . 1994). The Legislature’s action was a deliberate, retroactive change in the law which altered the settled contractual duties of the Association, and greatly impaired Honeywell’s right to payment. Th e siz e of the payout, while substantial, does not seem to me to provid e sufficient justification for the change. Indeed, the large size of th e payout serves only to underscore the substantial ity of the obligation that the Legislature has nullified.

Many rea sons underlay the determination of the Framers to create a new Constitution. Perhaps none was more prominent than

### 33

their conviction that States should not be allowed to destroy or water down contracts for the payment of money. The Contrac ts Clause “was perhaps the strongest single constitutional check on state legislation during our earl y years as a Nation . . ..” Allied Structural Ste el Co. v. Spannaus , supra , 438 U.S. at 241 (footnote omitted). I regret that this Court today shrink s from enf orcing this part of the Constitution, which is designed t o safeguard a basic human right, the right to make private contracts. It is not a coincidence that most of the people injured by this statute cannot vote for the Minnesota Legislature.
I respectfully dissent.

A true copy.

Attest:

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