Opinion ID: 1548590
Heading Depth: 1
Heading Rank: 6

Heading: Whether Legislation is Reasonable and Necessary

Text: Finally, we determine whether the legislation is reasonable and necessary to achieve the legislature's legitimate public purpose. Unless the State itself is a contracting party, as is customary in reviewing economic and social regulation, courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure. Id. at 412-13, 103 S.Ct. 697 (quotation, citation, brackets and ellipsis omitted); see Opinion of the Justices (Furlough), 135 N.H. at 634-35, 609 A.2d 1204. If the state is a party to the contract, such deference is inappropriate, and the court may inquire whether a less drastic alteration of contract rights could achieve the same purpose and whether the law is reasonable in light of changed circumstances. Nieves v. Hess Oil Virgin Islands Corp., 819 F.2d 1237, 1243 (3d Cir.), cert. denied, 484 U.S. 963, 108 S.Ct. 452, 98 L.Ed.2d 392 (1987); see United States Trust Co., 431 U.S. at 25-26, 30-32, 97 S.Ct. 1505. In this case, because the State is not a party to the agreements between the JUA and the policyholders, we must defer to the legislature's judgment that the Act is reasonable and necessary to achieve its legitimate public purpose. See Lower Village Hydroelectric Assocs., 147 N.H. at 78, 782 A.2d 897. Contrary to the majority's assertions, this does not mean that we give the legislature complete deference, but rather that we examine whether the adjustment of contract rights is reasonable and appropriate to the public purpose underlying the Act. See Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 505, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987) (holding that the finding of a significant and legitimate public purpose is not, by itself, enough to justify the impairment of contractual obligations; rather, the court must also satisfy itself that the legislature's adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation's adoption (quotations and brackets omitted)). In analyzing the reasonableness of the legislation, courts have focused upon such as factors as whether: (1) the law meets an emergency need; (2) the law was enacted to protect a basic societal interest, rather than a favored group; (3) the law is appropriately tailored to the targeted emergency; (4) whether the imposed conditions are reasonable; and (5) whether the law is limited to the duration of the emergency. See Home Bldg. & L. Assn. v. Blaisdell, 290 U.S. 398, 444-47, 54 S.Ct. 231, 78 L.Ed. 413 (1934); Ken Moorhead Oil Co., Inc. v. Federated Mut. Ins., 323 S.C. 532, 476 S.E.2d 481, 488-89 (S.C. 1996); Kimball v. N.H. Bd. of Accountancy, 118 N.H. 567, 570, 391 A.2d 888 (1978). An emergency need not exist, however, before a state may enact a law that impairs a private contract. See Energy Reserves Group, 459 U.S. at 412, 103 S.Ct. 697 (observing that, to be legitimate, the public purpose need not be addressed to an emergency or temporary situation); Allied Structural Steel, 438 U.S. at 249 n. 24, 98 S.Ct. 2716. In our opinion, the Act easily survives scrutiny under this deferential standard. The Act was passed to protect a basic societal interestaffordable healthcare for underserved populations. The protection of public health . . . serves broad societal interests, not merely some `favored' special interest group. Ken Moorhead Oil, 476 S.E.2d at 489. In our view, the Act is a reasonable decision by the legislature that it can better meet this need by transferring funds to programs that provide such access instead of retaining them in the JUA's coffers. The legislature has determined that the funds held by the JUA in its account are significantly in excess of the amount reasonably required to support its obligations as determined by the insurance commissioner. Laws 2009, 144:1. This determination is supported by evidence in the record, which includes an actuarial study that shows that the transfer will not jeopardize the JUA's solvency. The legislature has further determined that the purpose of promoting access to needed health care would be better served through a transfer of the excess surplus . . . to the general fund, than by retaining the funds in the JUA's account. Id. As the majority concedes, the Act expediently accomplishes the legislature's stated purpose. Additionally, in our view, the State's adjustment of the policyholders' contractual rights (to the extent that any has occurred) to allow for the transfer of funds from the JUA to the general fund to support programs that provide access to healthcare serves this public purpose. Particularly given the actuarial study showing that transfer of the funds would in no way jeopardize the JUA's solvency, we believe that the State has reasonably adjusted the policyholders' contractual rights. Accordingly, we conclude that the impairment of the policyholders' contractual rights, to the extent that any has occurred, is amply justified by the public purposes served by the Act, and also that the legislature has reasonably adjusted the contract rights at issue. See Keystone Bituminous Coal Assn., 480 U.S. at 505, 107 S.Ct. 1232. Although [c]ourts are required to defer to the legislature's judgment concerning the necessity and reasonableness of economic and social legislation, the majority declines to do so. Nieves, 819 F.2d at 1249 (emphasis added). The majority contends that substantial judicial deference is unwarranted because the Act transfers money from the JUA to the general fund. But see Mercado-Boneta, 125 F.3d at 16 n. 8 (noting, even where public contracts are at issue, some deference is due a legislature); Local Div. 589, Etc. v. Comm. of Mass., 666 F.2d 618, 642 (1st Cir.1981) (even where public contracts are involved, courts are not required to reexamine de novo all the factors underlying the legislation and to make a totally independent determination regarding the necessity and reasonableness of the law), cert. denied, 457 U.S. 1117, 102 S.Ct. 2928, 73 L.Ed.2d 1329 (1982); but cf. United States Trust Co., 431 U.S. at 25, 97 S.Ct. 1505 (holding, [t]he Contract Clause is not an absolute bar to subsequent modification of a State's own financial obligations). This transfer to the general fund, the majority reasons, is not broad-based social or economic regulation directed to meet a societal need, but a sign that the State's self-interest is at stake, thus, justifying reviewing the Act under a heightened standard. In our view, the majority's reasoning is flawed in several respects. First, we fail to see how an act designed to support programs that promote public access to health care is not broad-based social or economic regulation directed to meet a societal need. The legislature's justification for the Act, to support health care programs for underserved populations, serves public interests. It stands in stark contrast to the narrowly focused, private interest-oriented law that the United States Supreme Court struck down in Allied Structural Steel, 438 U.S. at 248-49, 98 S.Ct. 2716. Mercado-Boneta, 125 F.3d at 15. The law at issue in Allied Structural Steel applied only to certain private employers with voluntary private pension plans and only when such employers closed their Minnesota offices or terminated their pension plans. Allied Structural Steel, 438 U.S. at 248, 98 S.Ct. 2716. As such, the law had an extremely narrow focus and was not enacted to protect a broad societal interest rather than a narrow class. Id. at 248, 249, 98 S.Ct. 2716. By contrast, here, the State was not legislating on behalf of private interests when it enacted [the Act], and sought only to protect the legitimate interests of the public in having affordable health care. Mercado-Boneta, 125 F.3d at 15. The majority concludes that the Act is not broad-based social or economic regulatory legislation because of its funding scheme, which the majority describes as singularly target[ing] for transfer to the State's general fund discrete funds generated by premiums paid by a discrete class of private parties. Regardless of its funding mechanism, the Act constitutes broad-based social or economic legislation because it was enacted to protect a broad societal interest rather than a narrow class. Allied Structural Steel, 438 U.S. at 249, 98 S.Ct. 2716. Moreover, the record refutes the majority's assertion that the funds were generated by premiums paid by a discrete class of private parties. According to the deputy commissioner of the insurance department, while the excess surplus has resulted, in part, from the accumulation of premiums, it has also resulted from the accumulation of investment income free of taxes and assessments paid by private insurers. The JUA is exempt from federal income tax and New Hampshire premium tax. It is also exempt from and has never paid the New Hampshire business profits tax, business enterprise tax, and the interest and dividends tax. It is also exempt from assessments levied upon private insurers that fund the insurance department. Second, we believe that the majority construes the term self-interest too broadly. Under the majority's construction of the term, virtually every state statute that impairs a purely private contract would be subject to heightened scrutiny. Ken Moorhead Oil Co., 476 S.E.2d at 488. Presumably, every state statute is intended to serve [the State's] self-interest; otherwise the General [Court] would not enact the legislation in the first place. Id. The self-interest to which the United States Supreme Court has referred is the state's interest as a party to a contract, rather than to its interests as a sovereign seeking to further important public policies. Id.; see Keystone Bituminous Coal Assn., 480 U.S. at 505, 107 S.Ct. 1232 (United States Supreme Court has repeatedly held that unless the State is itself a contracting party, courts should properly defer to the legislature's judgment (quotation omitted)); Peick v. Pension Ben. Guar. Corp., 724 F.2d 1247, 1270 (7th Cir. 1983) (holding that there is no merit to the argument that heightened scrutiny applies to legislative impairment of private contracts; such scrutiny applies only when the State is a contracting party), cert. denied, 467 U.S. 1259, 104 S.Ct. 3554, 82 L.Ed.2d 855 (1984); Lower Village Hydroelectric Assocs., 147 N.H. at 78, 782 A.2d 897 (judicial deference required unless State is contracting party). When, as in this case, the state has in fact altered none of its own financial obligations, then the legislature's assessment of whether the legislation is reasonable and necessary deserves significant deference because the state is essentially acting not according to its economic interests, but pursuant to its police powers. Mercado-Boneta, 125 F.3d at 16 (emphasis added). We disagree with the majority's conclusion that the Act inures to the State's financial benefit. Unlike the majority, we give credence to the fact that the Act specifically earmarks the transferred funds to support programs that provide underserved populations with access to needed healthcare. Under such a scheme, it [is] the public welfare, not the [State's] bank account, that [stands] to [gain]. Id. Contrary to the majority's implication, there is no evidence in the record that the legislature enacted the Act because of an ill-motive of political expediency or unjustified welching. Buffalo Teachers, 464 F.3d at 373. Third, even if a heightened standard of review were justified in this case, we disagree with the majority's application of this standard. [L]ess deference does not imply no deference. Id. at 370. Even when the State's purported self-interest is at stake, courts are not required to reexamine all of the factors underlying the legislation at issue and to make a de novo determination whether another alternative would have constituted a better statutory solution to a given problem. Id.; see Local Div. 589, Etc., 666 F.2d at 642. Nor is the heightened scrutiny to be applied as exacting as that commonly understood as strict scrutiny. Buffalo Teachers, 464 F.3d at 371. Finally, today's decision leaves a number of unresolved issues, including:  What now becomes of the $110 million surplus?  If it is to be distributed to such health care providers covered by the [JUA], does that include both current and past policyholders, even if, as the majority holds, only current policyholders have viable Contract Clause claims?  Once the policyholders' policies expire, does their supposed vested right to the $110 million surplus also expire? If so, does this mean that, as the majority suggests, if new legislation were passed that became effective upon issuance of the policyholders' new policies, the legislature could require the JUA to transfer the $110 million surplus without violating the policyholders' constitutional rights?  What effect will this decision have on the JUA's exemption from both State and Federal taxes?  If it is distributed to policyholders, what impact will this have on the private medical malpractice insurance market in New Hampshire? III. Part I, Article 12 Our determination that the policyholders lack vested rights to the surplus itself or to its use for their benefit is dispositive of their claim that the Act constitutes a taking. The New Hampshire Constitution provides that no part of a man's property shall be taken from him . . . without his own consent. N.H. CONST. pt. I, art. 12. In the absence of a vested property right, no taking for purposes of Part I, Article 12 of the State Constitution has occurred. See Adams v. Bradshaw, 135 N.H. 7, 14, 599 A.2d 481 (1991), cert. denied, 503 U.S. 960, 112 S.Ct. 1560, 118 L.Ed.2d 208 (1992). Accordingly, because the policyholders lack vested rights, the Act does not operate as a taking for the purposes of Part I, Article 12.                                       IV. Conclusion We believe that the majority's conclusion that the Act violates Part I, Article 23 of the State Constitution is erroneous as a matter of law. We also believe that by failing to defer to the legislature's judgment that the Act is a reasonable and necessary measure to further an indisputably legitimate public purpose, the majority encroaches upon legislative decision-making. If there is one rule that is now ingrained in the doctrine of judicial review of legislative enactments it is this: that an act of the Legislature is presumed to be constitutional and may be struck down only when it is proven to be unconstitutional beyond a reasonable doubt. Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 690 (Hancock, J., dissenting); see N.H. Assoc. of Counties v. State of N.H., 158 N.H. 284, 288, 965 A.2d 1012 (2009). Particularly since the Supreme Court's abandonment of the Lochner [ v. New York, 198 U.S. 45, 25 S.Ct. 539, 49 L.Ed. 937 (1905)] era concept of economic due process as a justification for striking down regulatory legislation, courts have been mindful of this rule in recognition of the basic principle that under the doctrine of separation of powers, it is to their elected representatives, not to the members of the judiciary that the citizens have delegated the power to make the law. Chu, 569 N.Y.S.2d 364, 571 N.E.2d at 690 (Hancock, J., dissenting) (citation omitted); see Appeal of Bosselait, 130 N.H. 604, 613, 547 A.2d 682 (1988) (observing, legislation merely regulating economic benefits and burdens . . . is reviewable under the rational basis criterion when challenged . . . under the due process clause), cert. denied, 488 U.S. 1011, 109 S.Ct. 797, 102 L.Ed.2d 788 (1989); Petition of Kilton, 156 N.H. 632, 645, 939 A.2d 198 (2007) (noting, [m]atters of public policy are reserved for the legislature). The majority's opinion is contrary to the rule that [t]he wisdom, effectiveness, and economic desirability of a statute is not for us to decide. Grievance Committee, 120 N.H. at 863, 424 A.2d 816. We, therefore, cannot join it, and respectfully dissent.