Allied Structural Steel Co. v. Spannaus

The Court voted 5-3 for reversal. Justice Stewart, writing for the majority, held that the Contract Clause imposed limits on the power of a state to interfere in existing contractual relationships, and although the clause did not "obliterate" the state's police power, it did create limits "even in the exercise of [a state's] otherwise legitimate police power." The level of interference by the state in this situation, and the impact thereof, "was both substantial and severe." The act required Allied to retroactively change a plan it had had in place for the 11 years preceding the passing of Minnesota's statute, and furthermore, the retroactivity aspect of the act was applied selectively. It was directed "only to those employers who terminated their pension plans or who, like the appellant, closed their Minnesota offices, thus forcing the employer to make all the retroactive changes in its contractual obligations at one time." Finally, the act had not been created to deal with a "broad, generalized economic or social problem," which constituted an emergency over a limited period of time. Such had been the case in 1934, when the Court reviewed Home Building & Loan Association v. Blaisdell; and it was not, in the view of the Court, the case now.

The Contract Clause, as Stewart explained, had once been "the strongest single constitutional check on state legislation." The passage of the Fourteenth Amendment in 1868, however, had diminished the power of the clause; thenceforth the Due Process Clause of that amendment had sufficed to protect individuals or corporations from interference by states. "Nonetheless," Stewart said, "the Contract Clause remains part of the Constitution. It is not a dead letter. And its basic contours are brought into focus by several of the Court's 20th-century decisions."

Most important among the latter was Home Building & Loan Association v. Blaisdell (1934). In that case, which ironically also involved Minnesota, the state had passed a law placing a moratorium on the requirements of individuals to make regular mortgage payments. The moratorium was a response to the Depression, and to the fact that many people were unable to come up with the money to pay their mortgages. It extended the grace period to 1 May 1935. When a mortgage company challenged the law, the Court upheld it for five reasons: the statute dealt with an emergency situation; it "was enacted to a protect a basic societal interest, not a favored group;" the relief was "appropriately tailored" to the emergency situation; the conditions it imposed were reasonable; and the legislation imposed a time limit on the emergency measures.

Three other cases reinforced the Court's decision in Home Building & Loan Association: W. B. Worthen Co. v. Thomas (1934), W. B. Worthen Co. v. Kavanaugh (1935), and Treigle v. Acme Homestead Assn. (1936). The first two dealt with Arkansas' laws, the third with a Louisiana statute; and in each case the Court found the laws invalid under the Contract Clause. The first of the Worthen cases involved an Arkansas' statute preventing creditors of a deceased person from making claims on the proceeds from that person's life insurance policy. Here the Court found that the provision "was not precisely and reasonably designed to meet a grave temporary emergency in the interest of the general welfare."

Just the year before Spannaus, the Court had considered United States Trust Co. v. New Jersey and again ruled against a state because its legislation "was neither necessary nor reasonable." In examining the Minnesota law, the only evidence of its original intent that the Court could find was a statement made by the district court, not the Minnesota legislature. The lower court had opined that the plant-closure problem had come to Minnesota's attention after the White Motor Corporation had closed a Minnesota plant. In all respects, "the Minnesota law simply does not possess the attributes of those state laws that in the past have survived challenge under the Contract Clause of the Constitution." In the narrowness of its aim, Stewart concluded, it "was leveled, not at every Minnesota employer . . . but only at those who had in the past been sufficiently enlightened as voluntarily to agree to establish pension plans for their employees."