Opinion ID: 7013436
Heading Depth: 2
Heading Rank: 3

Heading: Impairment of the Obligation of Contract

Text: The threshold issue in this case is whether — assuming for purposes of this discussion the existence of the contractual rights the plaintiffs claim — the actions of the state defendants violated the contracts clause of the United States Constitution. We conclude that they did not. We begin with the language of the clause itself, and the principles established in Long Sault Dev. Co. v. Call, 242 U.S. 272, 37 S.Ct. 79, 61 L.Ed. 294 (1916). Article I, Section 10 of the Constitution prohibits the states from engaging in several specific kinds of activities. In particular, that section decrees that “No State shall ... pass any ... Law impairing the Obligation of Contracts.” U.S. Const., Art. I, Section 10. In Long Sault, the Supreme Court expressly held that the contracts clause applied to state legislation, but not to decisions of state courts. In that case, the Court examined its jurisdiction to review a decision of the highest state court invalidating a 1907 New York statute that had incorporated Long Sault Development Company and granted it certain rights to the use of the waters and beds of the St. Lawrence River. Long Sault, 242 U.S. at 273-74. Shortly before the 1907 law was revoked by the state legislature in 1913, Long Sault brought an action in state court to test its constitutionality. Id. at 275. The highest state court held that the repeal of the 1907 statute could not operate to impair any valid contract or property rights conferred by that statute, but that the 1907 statute exceeded the power of the state legislature under the state constitution, and therefore Long Sault had acquired no valid franchise or property rights under the statute. Id. at 278. Long Sault appealed to the United States Supreme Court, which undertook a de novo review of the state court proceedings to determine what effect, if any, the state court gave to the 1913 repeal in reaching its decision, because [i]f it did not give effect to that act, either expressly or by implication, this court is without jurisdiction to review its decision, for the reason that the provisions of the Constitution of the United States for the protection of contract rights are directed only against the impairment of them by constitutions or laws adopted or passed subsequent to the date of the contract from which such rights spring, and do not reach decisions of courts construing constitutions or laws which were in effect when the contract was entered into. Id. at 277. The Court concluded that the state court had given the repeal no effect, but had determined — without regard to the repeal — that the 1907 legislation was unconstitutional and void under the state’s constitution. Id. at 278. Accordingly, the Court held, because “the prohibition of the Constitution against the impairing of contracts by state legislation does not reach errors committed by state courts when passing upon the validity and effect of a contract under a constitution or laws existing when it is made,” the case presented no federal question over which the Court had jurisdiction. Id. at 280. Long Sault makes it clear that the contracts clause of the Constitution protects the obligations of contracts from being impaired by legislation; it does not protect those obligations from the judgments of courts. Id. at 280; accord Barrows v. Jackson, 346 U.S. 249, 260, 73 S.Ct. 1031, 97 L.Ed. 1586 (1953). As was the case in Long Sault, the statute under which the plaintiffs here claim contract and property rights was declared unconstitutional by the highest court of the state because it exceeded the scope of legislative authority granted to the General Assembly under the Ohio Constitution. Brady, 576 N.E.2d at 729. The rule in Ohio has long been that when a statute is held to have been unconstitutional as of its enactment, that statute is void ab initio. City of Middletown v. Ferguson, 25 Ohio St.3d 71, 495 N.E.2d 380, 388 (1986) (“ ‘An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed.’ ”) (quoting Norton v. Shelby County, 118 U.S. 425, 442, 6 S.Ct. 1121, 30 L.Ed. 178 (1886)). Subsequent to its decision in Brady, the Ohio Supreme Court held that Brady had “invalidated [the statute] in its entirety, negating any right to reimbursement of settlement money and attorney fees.” Mayfield, 597 N.E.2d at 119. The plaintiffs mistakenly believe that S.B. 192 — which formally repealed the unconstitutional Intentional Tort Act and provided for the disbursement of the moneys in the Intentional Tort Fund — impaired their contractual rights to reimbursement from the moneys in the Intentional Tort Fund. In fact, that legislation had no effect whatsoever on the rights the plaintiffs claim were impaired. It was the judgment of the Ohio Supreme Court that rendered the Intentional Tort Act — and hence, the Intentional Tort Fund created by that Act — nullities that conferred no rights and afforded no protections. This judgment, even if erroneous, is not within the reach of the prohibition of the Constitution against the impairing of contracts by state legislation. Long Sault, 242 U.S. at 280.