Legal Document

438 U.S. 234 98 Supreme Court Reporter 2716 57 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 727 ALLIED STRUCTURAL STEEL COMPANY, Appellant,v.Warren SPANNAUS et al. Number 77-747. Argued April 25, 1978. Decided June 28, Rehearing Denied Oct. 2, See 439 886, 99 233. Syllabus Appellant, an Illinois corporation, maintained office in Minnesota with 30 employees. Under appellant's pension plan, adopted 1963 and qualified under § 401 of the Internal Revenue Code, employees were entitled to retire receive a at age 65 regardless length service, employee's right became vested if he satisfied certain conditions as service age. Appellant was sole contributor trust fund, each year made contributions fund based on actuarial predictions eventual payout needs. But plan neither required appellant make specific nor imposed any sanction it for failing adequate contributions, retained not only amend but also terminate time reason. In 1974, enacted Private Pension Benefits Protection Act (Act), which private employer 100 or more (at least one whom resident) who provided benefits meeting qualifications subject "pension funding charge" terminated closed office. The charge assessed funds insufficient cover full pensions all had worked 10 years, periods employment prior effective date be included 10-year criterion. Shortly thereafter, move planned before passage Act, its office, several employees, then discharged, no rights years more, thus qualifying obligees Act. Subsequently, State notified that owed $185,000 brought suit Federal District injunctive declaratory relief, claiming unconstitutionally impaired contractual obligations court upheld applied appellant. Held : application violates Contract Clause Constitution, provides "[n]o shall . pass Law impairing Obligation Contracts." Pp. 240-251. (a) While does operate obliterate police power States, impose some limits upon abridge existing relationships, even exercise otherwise legitimate power. "Legislation adjusting responsibilities contracting parties must reasonable character appropriate public purpose justifying adoption." Trust company versus New Jersey, 431 1, 22, 97 1505, 1518, 52 92. 242-244. (b) impact both substantial severe. Not did retroactively modify compensation agreed pay from so by changing area where element reliance vital—the plan. Moreover, retroactive state-imposed vesting requirement those employers their plans who, like appellant, offices, forcing changes time. 244-247. (c) possess attributes state laws have survived challenge Clause. It purportedly deal broad, generalized economic social problem, cf. Home Building & Loan Assn. Blaisdell, 290 398, 445, 54 231, 78 L.Ed. 413, has extremely narrow focus enters never regulation State. 247-250. 449 F.Supp. 644, reversed. George baron Christensen, Chicago, Ill., Byron E. Starns, St. Paul, Minn., appellees. Mr. Justice STEWART delivered opinion Court. 1 issue this case is whether Minnesota's Act1 Constitution. 2 * 1974 pellant Allied Structural Steel (company), corporation principal place business Illinois, company's general single-employer 26 Code KF62 (1976 ed.),2 salaried covered follows: At employee monthly generally computed multiplying 1% his average earnings total number company.3 Thus, aged could without satisfying particular length-of-service requirement, size would reflect company.4 An become pension, payable 65, met following requirements: (1) 15 reached 60; (2) 55 old sum 75; (3) less than 80. Once these conditions, sense subsequent termination affect when 65. Those quit discharged fulfilling other three acquire rights. 3 Although once irrevocable, they remained part contribute adequately fund. 4 virtually unrestricted whole part, free distribute assets event termination, go, first, meet plan's obligation already retired receiving pensions; second, eligible retirement; finally, balance remained, whose yet vested.5 Employees within categories assured payment extent assets. expressly stated: 5 "No to, interest in, Trust's otherwise, except Plan, such out Trust. All payments Plan solely employer, trustee, member Committee liable therefor manner." 6 specifically advised existence terms understood implying assurance cou d dismissed 7 sum, die, quit, requirements fixed elected continue essentially form. 8 On 9, law here question, Minn.Stat. §§ 181B.01-181B.17. more—at resident either office.6 sufficient years. satisfy deficiency purchasing deferred annuities, normal retirement A separate provision specified criterion.7 9 During summer began closing July 31, 11 month Commissioner Labor Industry, terminating State.8 nine few months earlier. August 18, approximately provisions asking relief. claimed agreement. three-judge constitutional validity company, Fleck Spannaus, appeal 28 1253 ed.).9 We noted probable jurisdiction. 434 1045, 88 , 795. II Atlantic There can question relationships substantially altered superimposing conspicuously beyond voluntarily undertake. inexorably follow 12 language appears unambiguously absolute: U.S.Const., Article I, 10. not, however, Draconian words might seem imply. As recognized, "literalism construction contract clause destructive depriving prerogative self-protection." W. Worthen Thomas, 292 426, 433, 816, 818, 1344.10 13 perhaps strongest single check legislation during our early Nation,11 receded into comparative desuetude adoption Fourteenth Amendment, particularly development large body jurisprudence Due Process Amendment modern history.12 Nonetheless, remains dead letter. And basic contours are Court's 20th-century decisions. 14 First all, accepted commonplace States. "It settled interdiction statutes contracts prevent exercising powers promotion common weal, necessary good public, though previously entered between individuals may thereby affected. This power, which, various ramifications, known sovereign Government protect lives, health, morals, comfort welfare people, paramount individuals." Manigault Springs, 199 473, 480, 127, 130, 50 274. Holmes succinctly put matter Hudson Water McCarter, 209 349, 357, 529, 531, 828, "One rights, are, restriction, cannot remove them making about them. will carry infirmity subject-matter." B If retain meaning o nature clearly indicated series cases arising efforts unprecedented emergencies severe depression 1930's. 16 against attack mortgage moratorium provide relief homeowners threatened foreclosure. conflicted directly lenders' foreclosure there acknowledged that, despite Clause, residual authority enact "to safeguard vital interests [their] people." Id., 434, 239. upholding law, found five factors significant. First, legislature declared itself emergency need protection existed. 444, S.Ct., 242. Second, societal interest, favored group. Third, appropriately tailored designed meet. Ibid. Fourth, reasonable. 445-447, 242-243. And, limited duration emergency. 447, 243. 17 Blaisdell implied possessed characteristics attributed Court, been invalid Constitution.13 These implications given concrete force followed closely wake. 18 1344, dealt Arkansas exempted proceeds life insurance policy collection beneficiary's judgment creditors. Stressing effect held since precisely reasonably grave temporary welfare. Kavanaugh, 295 56, 555, 79 1298, confronted another diluted remedies bondholders. "Even invoked excuse," Cardozo wrote security cut down "without moderation reason spirit oppression." 60, 557. Treigle Acme Homestead Assn., 297 189, 56 408, 80 575, Louisiana modified withdrawal members building loan association. "Such interference contract," said "cannot justified saying operations associations controlled regulated, same charters amended." 196, 411. 19 most recent 92.14 again recognized although absolute leave room "the 'essential power,' necessarily reserved citizens," id., 21, 1517, effects modifications contracts. Despite customary deference courts give directed problems, "[l]egislation 1518. Evaluating scrutiny modification party, legislative alteration Port Authority bondholders violated because reasonable.15 III 20 applying principles present case, first inquiry has, fact, operated impairment relationship.16 severity measures height hurdle clear. Minimal end stage.17 Severe impairment, hand, push careful examination legislation. 21 measured high value Framers placed Contracts enable order personal affairs according needs interests. arranged, binding rely 22 Here, fringe benefit additional form compensation, maximum set aside amount vesting. current federal income tax code requirements. course, anticipate employees' accordance relied heavily, reasonably, expectation calculating annual 23 throughout pre-1974 after instead accord Thus term contract—one years—was modified. result past made, statutory requirement. forced recalculation years' new, unanticipated 24 plan.18 recently recognized: 25 "These [pension] plans, forms insurance, depend accumulation sums contingencies. amounts determined painstaking assessment insurer's likely liability. Risks insurer foresees calculation liability, rates charged calculation. occurrence major unforeseen contingencies, jeopardizes solvency and, ultimately, insureds' benefits. Drastic legal rules governing funds, events, effect." Los Angeles Dept. Power Manhart, 435 702, 721, 1370, 1382, 657. terminat offices. By simply proceeding close Minnesota, immediate $185,000. 27 statute nullifies express imposes completely unexpected liability potentially disabling amounts. gradual applicability grace periods. Cf. Employee Retirement Income Security (ERISA), 29 1061(b)(2), 1086(b), 1144 ed.). n. 23, infra. Yet showing record us disruption expectations important problem. presumption favoring "legislative necessity reasonableness measure," Co., U.S., stand case. indication intent statement opinion: seems clear problem plant closure attention Minneapolis-Moline Division White Motor Corporation plants attempted plan." F.Supp., 651.19 aimed largely employer,20 focus. applies works established voluntary Code. closes terminates plan.21 hardly characterized, broad rather class.22 31 respect resemble constitutionality legislation, imposing sudden, totally unanticipated, employees,23 situation remotely approaching desperate 1930's—conditions took judicial notice.24 32 Entering field sought regulate, Legislature grossly distorted burden 33 originally undertaken, invaded Veix Sixth Ward 310 32, 38, 60 792, 794, 84 1061.25 coverage, severe, permanent, change relationships—irrevocably retroactively. 1517. aim leveled, every left State, sufficiently enlightened agree establish 34 "Not Blaisdell's Worthen's (W. [292 1344]) supplies applicable rule" here. 63, 558. hold 557.26 we do means anything constitutionally what tried 35 36 ordered. 37 BLACKMUN consideration decision 38 BRENNAN, WHITE MARSHALL join, dissenting. 39 involving affecting contracts, decisions over half century, consistently text original understanding, interpreted prohibiting Acts "[w]ith studied indifference [contracting party] protection," effectively diminished nullified due him contract. 557, 1298 (1935). period, while creating new duties, nowise efficacy claimant. Goldblatt Hempstead, 369 590, 82 987, 130 (1962). rather, reference e. g., insofar values. 40 Today's greatly expands reach (Act) abrogate dilute party contract; positive class persons. my view, therefore derive, Amendment. N Dec. Immigration Nationality Decisions perceive nothing denial process dissent. 41 begin operation statute. disclaims knowledge purposes disclose remedy serious plans. indicated, see 312 Minn. 223, 251 North Western Reporter, 2nd 334, 338 (1977), impetus belief—shared Congress, 1001 seq. ed.)—that often unfair neglect furnish information concerning leading erroneous expectations, failed enough ultimately received small anticipated. supra, N.W.2d, 338. Acting background, enactment ERISA, remedy, inter alia, viewed related problem: frustration occur work there.1 42 normally employees—even "vesting" plan—who plants. Bernstein, Rights When Plants Shut Down: Problems Some Proposals, 76 Harv.L.Rev. 952 (1963). Even assuming—contrary experience—that informs forfeiture accrued credits, job-related failings, unfortunate employed purely reasons, harsh indeed. For unlike discharges inadequate job performance, foreseen, contingency outside range employee—as fact possibility plant's fund.2 43 addresses selecting period—10 employment—after basis accumulated establishing mechanism equivalent earned credits. glides should apparent minor burdens funded. For, where, true true, actuaries employer's include behalf vested. Indeed, create windfall because, resulting surplus future reduced. denying windfall, requires use money save purchase annuities employees.3 Of consequence slightly higher expense; greater outlay arise, reflected served 44 emphasize, contrary repeated protestations "sudden unanticipated" burdens. features involved come play plant. Act's duties—which similar legislatively severance service—is considers there. sense, therefore, unanticipated. depends pre-enactment conduct, triggered enactment.4 45 primary requiring outlays—which, offset savings—to expected relieve obligation. Rather, creates additional, supplemental duty different kind myriad duties created wide variety defeat nonetheless sustained See, Usery Turner Elkhorn Mining 428 96 2882, 49 752 (1976); Hadacheck Sebastian, 239 394, 143, 348 (1915). reason, implicate way. fallacy today's mistaken view protects contract-based including enlarged explicitly 46 Historically, crystal intended embody protecting grounded Constitution evil—the practice enacting contracts—and prohibit adopting "as repudiation debts destruction enforce them," 439, 240, 413 (1934). contemplated limit others. 47 widespread dissatisfaction Articles Confederation thus, mass earlier national period debtors perform Revolutionary War witnessed "an ignoble array [such state] schemes." 427, 236. P rhaps providing emission paper currency, tender debts. addition, "installment laws," authorizing overdue installments lump "stay staying postponing temporarily courts; "commodity permitting enumerated commodities proportion, three-fourths four-fifths, actual value. 454-459, 246-248 (Sutherland, J., dissenting); Sturges Crowninshield, Wheat. 122, 204, 529 (1819); Wright, (1938); Hale, 512-513 (1944). 48 10, Constitution—"No coin Money; emit Bills Credit; Thing gold silver Coin Tender Payment Debts; [or] ."—were targeted debtor measures. debates Constitutional Convention discussion enlightening determining scope support evil theretofore rampant ability creditors obtain regarded adjunct currency primarily bar loans. 5-16. relieving duty.5 negate interpretation unjustifiable interference. applies, confirmed consistent interpretations, Acts. Tidal Oil Flanagan, 263 197, 68 382 (1924). Its inapplicability impairments acts belies broadly inviolable. possible terms, especially history, prohibition particular, evil, through action. identified admirable precision: "Law[s] (Emphasis supplied.) abuse English interpret, "impairing" duties. conceptualized "enlarging" add agreement, prohibited nullify person obligated himself perform. Early interpretations rejected argument enactments enlarge Satterlee Matthewson, Pet. 380, 458 (1829), There, claim gave held, statute, "impaired contract." reasoned "all admit retrospective [the enactment, none surely contended, contract, destroy impair one, mean thing." 412-413.6 Since existed course increasing impairment.7 514-516. 51 attempt justify distortion ground upset much anomalous "impairment" deny claimant Clause's National Congress denies creditor payment. Both results consequences expectations. More fundamentally, anomalies own threatens undermine property developed last clauses values governmental Fifth Amendment's command "private [shall not] taken use, just compensation" clause. second heyday substantive process, Lochner York, 198 45, 539, 937 (1905), supplanted importance potent limitation government's interfere G. Gunther, Cases Materials 603-604 (9th ed. 1975); Clause: III, 852, 890-891 coherent, unified latitude promote Penn Central Transp. York City, 104, 2646, 631; Pittsburgh Alco Parking Corp., 417 369, 94 2291, 132 (1974); (1962); Sproles Binford, 286 374, 581, 1167 (1932); Euclid Ambler Realty 272 365, 114, 71 303 (1926). wording historic purposes, diluted, utter beneficiary duty, obligation, (1935); 92 (1977); El Paso Simmons, 379 497, 85 577, 446 (1965); 53 conversion assumed inevitably produce difficult square rational conception order. opinion, characterized "superimposing" "sudden, substantial, burdens" subjected exacting scrutiny. turn judges deals (as be) operates regulation, apply ante, 249-250. extreme malleability vague criteria vest subjective discretion happen them.8 To permit level anomaly. sacrosanct rooted immunity denied Laws (and burdens) uniformly (1915) illustrative. owner parcel land perfectly lawful brickyard, continued However, local ordinance passed brickyards locale diminishing claimant's investment nearly 90%. Notwithstanding investment, taking claim. Miller Schoene, 276 272, 246, 72 568 (1928) (statute cutting ornamental red cedar trees rust harmful apple vicinity). logical sustaining Hadacheck, invalidating Surely, laws. identically: They persons another. difference relationship benefited burdened classes. accept significance. avoiding anomaly construe understanding inapplicable whatsoever State's address validity.9 think merit. My conclusion rests considerable (1976). That operators coal mines compensate contracted pneumoconiosis coal-mining industry passed. mine danger service. 17, 2893; n.4, 2904 (POWELL, concurring part). indicating limitations Government's legislate retrospectively act prospectively, former miners "a measure spread costs disabilities profited fruits labor—the consumers." 2893. 58 analysis work. far saddled Too, savings. merely prevents obtaining immunize aspect stringent standards reads 515, 587 cited. implementing receipt matter, frustrated closing. 59 Significantly, also, Mining, wholly operation. (thus decision) decides Nor, believe relevant coverage employers. "In system unemployment bound occupy field. strike felt." Carmichael Southern Coal Coke 301 495, 519-520, 868, 877, 81 1245 (1937). 61 conclude restriction—the Clause—I affirm 181B.01 (1974). considered Malone 1185, 443, presenting quite issue. collective-bargaining agreement elect lump-sum $800 eight dollars $320 Apart distribution assets, third category altogether. Entitled "Nonvested Prior Act," 181B.04 provided: "Every hereafter ceases owe sections 181B.17 equal nonvested occurring completed ten forfeited ceasing compromised satisfaction commissioner 181B.17." According stipulated facts, resulted shift office's main previous December. until February 1975, pre-empted law. 499, 1187. 1974. claims Walter two individual plaintiffs lack standing, 421 20, leaving Warren Attorney General appellee. Schwartz, Commentary Pt. Property 266-306 (1938). Perhaps best era Dartmouth College Woodward, 518, 629. commentator suggested dropped challenged judged unreasonable deprivations property." 795, 1061, account still attack: petitioner "purchased enterprise regulated now objects." 446. Texas shortening defaulted reinstated violate "We seriously contended buyer induced enter defeasible reinstatement everlasting effect. sell quickly ." 514, 587. "[t]he mild indeed, burdensome purchaser interest." 516-517, 588. face regulating parties, 22-23, unlimited power." novel expressed dissenting forbids diminish obligor increase them, arguably 458, repudiated. Detroit R. Michigan, 242 238, 87, 268; Georgia Decatur, 262 432, 613, 67 1065. Sherman Smith, Black 587, 163; Bernheimer Converse, 206 516, 530, 755, 759, 1163; Henley Myers, 215 373, 148, 240; Surety Architectural Decorating 226 276, 221; Columbia Gas Electric South Carolina, 261 236, 306, 629; Stockholders Peoples Banking Sterling, 300 175, 386, 586. bilateral diminution side increases other. narrower deb ors is, dissent recognizes, post, 257, 5, odds Wood Lovett, 313 362, 983, 1404; supra. 512, 514-516 14, situations ways. decade. demonstrated record. Instead, compelled exceed bargained-for engaged mere speculation legislature's purpose. 501 n.5, 1188 1,000 expiration May International Union, UAW 505 1193 (CA8). passed, day. proceeded collectively bargained earliest date, $19 million, aim, short. House Representatives version ed.), 120 Cong. Rec. 4781-4782 (1974), Senate March 4, 5011. versions aware impending explicit "become null void institution mandatory guaranteeing portion pursuant States." 181B.17. ERISA itself, January pre-empts a) months, 1975. argues horizon referred older citizens, well surrounding communities. 644. Compare mandatory. outset go four enacted. Funding delayed year. 1061(b)(2) contrast, fully day passage. hand adjust planning. 651. suggest great magnitude 39-40, 795-796; East Savings Bank Hahn, 326 230, 66 69, 90 34; 13, Cardozo's Kavanaugh clear, outermost only." went stress law's "studied interests" 556. plants, involve discuss involves contingencies observe it, too, sensitive Allied's assumptions Because was, closing, underfunded excess $295,000, pension-funding charge—which stipulate $114,000 $195,000—will out-of-pocket incidental. What critical employers, assume little inherent undertaking up refers sanctions objection levied mandates undertaking. adequately, App. Brief 10a (§ plan), makes promise enforceable. apparently decided opportunity reconsider presumably final weighing liabilities plain, confined classic "debtor relief" laws, implicated dilutes (1965). Satterlee, written Washington, dictum Green Biddle, 84, 547 (1823), Washington's opinions. 1065 (1923), 268 (1916), cases, 244-245, 16, embraced, giving consist "adding efficacy. Ry. 616. opinions then-prevailing philosophy Ferguson Skrupa, 372 726, 83 1028, 93 (1936). reasoning Unified wrong. With respect, illustrates point. find understand how assert "broad, problem" (1934), did. suggestion "narrow aim" overlooks assertion "invaded regulation" takes exceedingly restrictive afforded extensively regulated. explanation subjectively highly recognize presented Jurisdictional Statement 2. fairly subsumed circumstances, elementary fairness challenges Act—e. ones "Taking" Commerce Clause—for others considerations analyses.

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