Amicus Curiae Brief — Apartment Association of Los Angeles County, Inc., dba Apartment Association of Greater Los Angeles, Petitioner v. City of Los Angeles, California, et al.

No. 21-788

In the Supreme Court of the United States

_____________

APARTMENT ASSOCIATION OF LOS ANGELES COUNTY,

INC., D/B/A APARTMENT ASSOCIATION OF

GREATER LOS ANGELES,

Petitioner,

v.

CITY OF LOS ANGELES, et al.,

Respondents.

_____________

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

_____________

AMICUS CURIAE BRIEF OF THE

NEW CIVIL LIBERTIES ALLIANCE

IN SUPPORT OF PETITIONER

_____________

JARED MCCLAIN

Counsel of Record

MARK CHENOWETH

KARA ROLLINS

NEW CIVIL LIBERTIES ALLIANCE

1225 19th St. NW, Suite 450

Washington, DC 20036

(202) 869-5210

Jared.McClain@NCLA.legal

i

TABLE OF CONTENTS

TABLE OF CONTENTS .....................................................i

TABLE OF AUTHORITIES ............................................. ii

INTEREST OF AMICUS CURIAE ..................................1

STATEMENT OF THE CASE ..........................................2

DISCUSSION ......................................................................2

I. THE ORIGINAL UNDERSTANDING OF THE

CONTRACTS CLAUSE .......................................................2

A. State Responses to Emergencies Inspired

the Contracts Clause ...............................................2

B. This Court Faithfully Applied the Original

Understanding of the Contracts Clause for

150 Years ..................................................................6

C. Blaisdell and Its Limiting Principles....................7

II. THIS COURT’S CURRENT APPROACH TO THE

CONTRACTS CLAUSE ................................................... 11

A. There Are Many Ways a State Law Can

Impair Contractual Obligations ......................... 12

B. Courts Must Ensure that a State Law Is

Appropriately Tailored to a Significant and

Legitimate Purpose .............................................. 15

III. MANY LOWER COURTS TREAT THE CONTRACTS

CLAUSE AS A DEAD LETTER ....................................... 16

A. Deference to States Has Eviscerated the

Contracts Clause .................................................. 16

B. Lower Courts Are also Split on How to

Assess Substantial Impairment ......................... 21

CONCLUSION ................................................................. 23

ii

TABLE OF AUTHORITIES

Cases

Allied Structural Steel Co. v. Spannaus,

438 U.S. 234 (1978) ................................................ 7

Apt. Ass’n of L.A. Cty., Inc. v. Los Angeles,

500 F. Supp. 3d 1088 (C.D. Cal. 2020) ................. 22

Ass’n of Equip. Mfrs. v. Burgum,

932 F.3d 727 (8th Cir. 2019) ................................ 15

Auracle Homes, LLC v. Lamont,

478 F. Supp. 3d 199 (D. Conn. 2020) ............. 17, 22

Baptiste v. Kennealy,

490 F. Supp. 3d 353 (D. Mass. 2020) ............. 17, 22

Bronson v. Kinzie,

42 U.S. (1 How.) 311 (1843).............................. 6, 13

East New York Savings Bank v. Hahn,

326 U.S. 230 (1945) ....................................... passim

Edwards v. Kearzey,

96 U.S. (6 Otto) 595 (1877) ............................ passim

El Papel LLC v. Durkan,

2021 WL 4272323 (W.D. Wash. Sept. 15, 2021) .. 17

Elmsford Apartment Assocs., LLC v. Cuomo,

469 F. Supp. 3d 148 (S.D.N.Y. 2020) ............. 17, 22

Energy Reserves Grp. v. Kansas Power &

Light Co., 459 U.S. 400 (1983) ............................. 12

Everett v. Schramm,

772 F.2d 1114 (3d Cir. 1985) ................................ 21

Ex Parte Milligan,

71 U.S. (4 Wall.) 2 (1866) ..................................... 11

Gen. Motors Corp. v. Romein,

503 U.S. 181 (1992) .............................................. 12

iii

Green v. Biddle,

21 U.S. (8 Wheat.) 1 (1823) .................................. 13

HAPCO v. City of Philadelphia,

482 F. Supp. 3d 337 (E.D. Pa. 2020) .................... 17

Heights Apts., LLC v. Walz,

510 F. Supp. 3d 789 (D. Minn. 2020) ................... 22

Home Bldg. & Loan Ass’n v. Blaisdell,

290 U.S. 398 (1934) ......................................... passim

In re Penniman,

103 U.S. 714 (1880) ................................................ 9

Johnson v. Murphy,

527 F. Supp. 3d 703 (D.N.J. 2021) ................. 16, 22

McCracken v. Hayward,

43 U.S. (2 How.) 608 (1844).................................... 9

Melendez v. City of New York,

16 F.4th 992 (2d Cir. 2021) ............................ 18, 21

Ogden v. Saunders,

25 U.S. (12 Wheat.) 213 (1827) .......................... 3, 4

Reynolds v. McArthur,

27 U.S. (2 Pet.) 417 (1829)...................................... 5

S. Cal. Rental Housing Ass’n v. San Diego Cty.,

2021 WL 3171919 (S.D. Cal. July 26, 2021) ........ 22

Sturges v. Crowninshield,

17 U.S. (4 Wheat.) 122 (1819) ........................ 5, 6, 9

Sveen v. Melin,

138 S. Ct. 1815 (2018) ................................... passim

U.S. Tr. Co. of N.Y. v. New Jersey,

431 U.S. 1 (1977) ........................................... passim

Veix v. Sixth Ward Building & Loan Ass’n of

Newark, 310 U.S. 32 (1940).................................. 14

iv

W.B. Worthen Co. ex rel. Bd. of Comm’rs of

Sch. Imp. Dist. No. 513 of Little Rock, Ark.

v. Kavanaugh, 295 U.S. 56 (1935) ................ passim

W.B. Worthen Co. v. Thomas,

292 U.S. 426 (1934) ................................................ 7

Willowbrook Apt. Assocs., LLC v. Mayor &

City Council of Baltimore, 2021 WL 4441192

(D. Md. Sept. 27, 2021) ............................. 17, 21, 22

Other Authorities

An Act for Emitting One Hundred Thousand

Pounds, in May 1786, At the General Assembly

of the Governor and Company of the State of

Rhode-Island and Providence-Plantation

(Providence 1786) ................................................... 3

Douglas W. Kmiec & John O. McGinnis,

The Contract Clause: A Return to the Original

Understanding, 14 Hastings Const. L. Q. 525

(1987) .................................................................. 6, 7

James W. Ely, The Contract Clause: A

Constitutional History (University Press of

Kansas 2016) .......................................................... 5

Jared McClain, An Analysis of Charles Pinckney’s

Contributions to the Constitutional Convention

of 1787, 24 J. OF S. LEGAL HIST. 1 (2016) ............... 5

Laurence Tribe, American Constitutional Law

(2d ed. 1988).......................................................... 19

Max Farrand, The Records of the Federal

Convention of 1787 (1911) ...................................... 6

Principles of Government and Commerce (1788),

in Noah Webster, A Collection of Essays and

Fugitiv Writings 41 (Boston 1790) ..................... 3, 4

INTEREST OF AMICI CURIAE1

The New Civil Liberties Alliance (“NCLA”) is a

nonpartisan, nonprofit civil rights organization and

public-interest law firm. Professor Philip Hamburger

founded NCLA to challenge multiple constitutional

defects in the modern administrative state through

original litigation, amicus curiae briefs, and other

advocacy. NCLA aims to defend civil liberties—

primarily by asserting constitutional constraints on

the modern administrative state.

The “civil liberties” in NCLA’s name include rights

at least as old as the Constitution itself, such as jury

trial, due process of law, and protection from states’

impairing contracts. NCLA views the administrative

state as an especially serious threat to civil liberties.

No other current aspect of American law denies more

rights to more people. Although we still enjoy the

shell of our Republic, a very different sort of

government has developed within it—a type, in fact,

that our Constitution was designed to prevent. This

unconstitutional state within the Constitution’s

United States is the focus of NCLA’s concern.

NCLA is particularly disturbed by the recent trend

among the lower courts deferring to the states in their

justifications for substantially impairing contractual

obligations. Judicial review by an independent

judiciary is necessary to protecting constitutional

rights.

1 All parties consented to the filing of this brief.

No

one other than the amici curiae and its counsel

authored or financed the preparation or the

submission of this brief.

2

STATEMENT OF THE CASE

Many lower courts, like the Ninth Circuit below, have

sensed this Court’s indifference to protecting contractual

obligations from state interference. Given how this

Court has openly ignored the text and the original

meaning and understanding of the Contracts Clause, it’s

really no surprise that the lower courts would constrain

contractual rights even further. A course correction is

long overdue.

The national emergency caused by Covid-19 has led

states to interfere with private contracts, as they have

during basically every emergency since they were

colonies. While legal challenges to these emergency

measures work their way through the lower courts, very

few courts apply the Contracts Clause as if it imposes

any restraint at all on the states. These courts have

expanded the leeway this Court has allowed for state

interference in at least one of two main ways: (1) holding

that there is no reasonable expectation against state

impairment of contractual obligations in regulated

industries and (2) deferring to state justifications for

impairing

contracts.

This

Court’s

immediate

intervention is needed to ensure that the Contracts

Clause serves its purpose during the pandemic response

and beyond.

DISCUSSION

I. THE ORIGINAL UNDERSTANDING

CONTRACTS CLAUSE

OF

THE

A. State Responses to Emergencies Inspired

the Contracts Clause

A contractual duty is worthless without an

enforceable obligation requiring the parties to fulfill their

3

duties. The Founders recognized the importance of

protecting contractual obligations in times of crisis.

The mid-1780s saw a debt crisis, as bad harvests left

farmers unable to pay their mortgages and their taxes to

states already saddled with vast war debts. See

Principles of Government and Commerce (1788), in

Noah Webster, A Collection of Essays and Fugitiv

Writings 41 (Boston 1790). Unanswerable to the

federal government under the Articles of

Confederation, several states “yielded to the necessities

of their constituents” and passed laws that impaired

contractual obligations. See Edwards v. Kearzey, 96 U.S.

(6 Otto) 595, 605 (1877). These states interfered so badly

“that the confidence essential to prosperous trade had

been undermined and the utter destruction of credit was

threatened.” Home Bldg. & Loan Ass’n v. Blaisdell, 290

U.S. 398, 427 (1934).

Rhode Island was among the worst offenders. It

issued new paper tender and passed laws that required

creditors to accept the new tender instead of the gold or

silver coin that their contracts required. See, e.g., An Act

for Emitting One Hundred Thousand Pounds, in May

1786, At the General Assembly of the Governor and

Company of the State of Rhode-Island and

Providence-Plantation 13, 16 (Providence 1786).

Such laws “destroyed public credit and confidence”

and “insured and aggravated the ruin of the

unfortunate debtors for whose temporary relief they

were brought forward.” Edwards, 96 U.S. at 605. In

other words, short-sighted debt relief destroyed the

future credit of the exact constituents who state

legislatures tried to help, while also “threaten[ing]

the existence of credit” and public faith in contracts

more generally. Ogden v. Saunders, 25 U.S. (12

Wheat.) 213, 354-55 (1827).

4

Legal commentators at the time recognized that

states’ impairing contractual obligations was “highly

unjust and tyrannical.” Webster, A Collection of

Essays and Fugitiv Writings, 41. As Noah Webster

wrote, “the state has no right to break its own

promises, so it has no right to alter the promises of

individuals. When one man had engaged to pay his

debt in wheat, and his creditor expects the promise to

be fulfilled, the legislature has no right to say, the

debt shall be paid in flax or horses.” Ibid.

When the delegates arrived at the federal

convention of 1787, they were well acquainted with

national emergencies. These emergencies taught

them the need for a more robust social compact that

would secure contractual obligations against state

interference. See Edwards, 96 U.S. at 606; see also

Ogden, 25 U.S. at 355 (guarding against state

interference with contracts “was one of the important

benefits expected from a reform of the government”).

The framers drafted the new Constitution “[t]o meet

these evils in their various phases.” Edwards, 96 U.S.

at 606.

Now known as the Contracts Clause, Article I, § 10

prohibits the states from passing “any … Law

impairing the Obligation of Contracts.” One of the

Constitution’s primary architects, Charles Pinckney

of South Carolina,2 called this provision the “soul of

the Constitution.” James W. Ely, The Contract

Clause: A Constitutional History 15 (University Press

of Kansas 2016).

2 See Jared McClain, An Analysis of Charles Pinck-

ney’s Contributions to the Constitutional Convention

of 1787, 24 J. of S. Legal Hist. 1 (2016), for an empirical analysis of Pinckney’s impact.

5

In choosing the terms of the clause, “the framers

were absolute.” Sveen v. Melin, 138 S. Ct. 1815, 1827

(2018) (Gorsuch, J., dissenting) (“[T]he framers knew

how to impose more nuanced limits on state power

and did so in other clauses of “[t]he very section of the

Constitution where the Contracts Clause is found”).

“The prohibition is plain and unequivocal—needs no

comment, and is susceptible of no misinterpretation.”

Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 133

(1819).

James Madison, another major architect of the

Constitution, emphasized that any “‘inconvenience’ of

a categorical rule would, on the whole, ‘be

overbalanced by the utility of it.’” Douglas W. Kmiec

& John O. McGinnis, The Contract Clause: A Return

to the Original Understanding, 14 Hastings Const. L.

Q. 525, 560 & n.24 (1987) (quoting Max Farrand, 2

The Records of the Federal Convention of 1787, 439

(1911)). Anything less absolute would be prone to

“[e]vasions … devised by the ingenuity of

Legislatures.” Farrand, at 440. Similarly, in his

public advocacy, Madison argued that laws impairing

contractual obligations “were not only forbidden by

the Constitution,” “but were ‘contrary to the first

principles of the social compact, and to every principle

of sound legislation.’” Edwards, 96 U.S. at 606

(quoting Federalist 44). According to Madison, the

Contracts Clause prevented legislation that displaced

established contractual rights. Kmiec, 14 Hastings

Const. L. Q. at 532; see also Reynolds v. McArthur, 27

U.S. (2 Pet.) 417, 434 (1829) (“[L]aws by which human

action is to be regulated, look forwards, not

backwards[.]”).

The states “chose to ratify the

Constitution—categorical Clause and all.” Sveen, 138

S. Ct. at 1827 (Gorsuch, J., dissenting).

6

Although “[t]he treatment of the malady was

severe, [] the cure was complete.” Edwards, 96 U.S.

at 606.

The Contracts Clause restored public

confidence in government, “[c]ommerce and industry

awoke,” and “[p]ublic credit was reanimated. The

owners of property and holders of money freely parted

with both, well knowing that no future law could

impair the obligation of the contract.” Id. at 606-07

(citation omitted).

B. This Court Faithfully Applied the Original

Understanding of the Contracts Clause

for 150 Years

Soon after ratification, this Court recognized that

the original meaning of the Contracts Clause was “to

establish a great principle, that contracts should be

inviolable[.]” Crowninshield, 17 U.S. at 205.

Acknowledging the categorical prohibition against

retroactive interference with contracts, Chief Justice

John Marshall wrote that the Court should give the

Clause its “full and obvious meaning” because the

Constitution’s plain text should give way to “extrinsic

circumstances” only if “the absurdity and injustice of

applying the provision to the case[] would be so

monstrous[] that all mankind would, without

hesitation, unite in rejecting the application.” Id. at

202-03, 205-06. For the next 100 years or so, this

Court continued to “carry out the intent of contracts

and the intent of the Constitution[,]” Edwards, 96

U.S. at 607, recognizing that it would “ill become this

court, under any circumstances, to depart from the

plain meaning of the words used” in the Contracts

Clause. Bronson v. Kinzie, 42 U.S. (1 How.) 311, 318

(1843).

7

C. Blaisdell and Its Limiting Principles

In the wake of the Great Depression, though, this

Court balked at enforcing the plain meaning of the

Contracts Clause. The Minnesota law at issue in

Blaisdell authorized a court in equity, upon a showing

of necessity, to extend the redemption period under a

mortgage “for such additional time as the court may

deem just and equitable,” but only for the duration of

the ongoing state of emergency. Blaisdell, 290 U.S. at

416. According to the Court, four main features

worked in tandem to keep the law from impairing the

obligation of mortgages in violation of the Contracts

Clause: the law (1) provided only “temporary and

conditional” relief, (2) was “sustained because of [an]

emergency,” (3) provided relief already available

through courts in equity (i.e., extending the

redemption period); and (4) “provided reasonable

compensation” to the creditors during the redemption

period. 290 U.S. at 441-42, 444-47.

Given these factual limits on Blaisdell’s holding,

the decision was relatively narrow, as the Court made

clear just one term later in W.B. Worthen Co. ex rel.

Bd. of Comm’rs of Sch. Imp. Dist. No. 513 of Little

Rock, Ark. v. Kavanaugh, 295 U.S. 56, 63 (1935); see

also W.B. Worthen Co. v. Thomas, 292 U.S. 426, 432

(1934) (distinguishing Blaisdell). This Court has

reiterated those narrow limits more recently too.

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234,

242 (1978) (recognizing that this Court would have

invalidated the law in Blaisdell “had [it] not

possessed the characteristics attributed to it by the

Court”).

Kavanaugh addressed three Arkansas laws that

also responded to the Great Depression. The laws,

which the legislature did not tie to the duration of the

8

emergency, changed how property assessments could

be used as security for bonds and mortgages—

extending the redemption period, lowering the

interest available, and repealing the right of

possession of a property during the redemption

period. Kavanaugh, 295 U.S. at 58-59.

This Court rebuked the Arkansas legislature for

“put[ting]

restraint

aside,”

“[w]ith

studied

indifference to the interests of the mortgagee or to his

appropriate protection[.]” Id. at 60. The laws

undermined the debtor’s incentive “to pay his

assessments if he could, and to pay them without

delay,” and instead gave him “every incentive to

refuse to pay a dollar, either for interest or for

principal.” Id. at 60-61. By removing the contractual

remedy of regaining possession (and charging rents)

during the redemption period, the legislature

destroyed the “enforceable obligation” of debtors to

pay while the laws were in effect. Id. at 61.

Distinguishing Blaisdell (and reinforcing that

decision’s limitations), this Court highlighted that the

Arkansas laws extended beyond the existing

emergency, did not require a showing of necessity,

and made no “attempt to assimilate what was done by

[] decree to the discretionary action of a chancellor in

subjecting an equitable remedy to an equitable

condition.” Id. at 63. These limitations still matter.

In Sveen, the Court once again upheld a Minnesota

law, in part, because a legislative change to the

default life-insurance beneficiary in case of divorce

did no more than divorce courts routinely do through

their discretionary powers of equity. 128 S. Ct. at

1823. A law tied to a court’s equitable power, Sveen

reaffirmed, is less likely to upset a contracting party’s

ex ante expectations. Ibid.

9

Another limiting feature of Blaisdell was the

ability of a state “to regulate the procedure in its

courts even with reference to contracts already made,

and moderate extensions of the time for pleading or

for trial will ordinarily fall within the power so

reserved.” Kavanaugh, 295 U.S. at 62 (quoting

Bronson, 42 U.S. at 311). Blaisdell claimed to extend

only to “the measure of control which the state retains

over remedial processes[.]” Id. at 434 (emphasis

added). Dating back to Crowninshield, 17 U.S. at

206-07, this Court held that the Contracts Clause

prohibited any law impairing contractual obligations,

see, e.g., McCracken v. Hayward, 43 U.S. (2 How.)

608, 612 (1844), but a state typically remained free to

regulate its civil processes and remedies. See, e.g., In

re Penniman, 103 U.S. 714, 720 (1880) (holding that a

state may abolish imprisonment for unpaid debts

because “the right to imprison constitutes no part of

the contract”). For instance, a state could moderately

alter the statute of limitations for breaches of contract

but not rule that mortgages providing for foreclosure

as a contractual remedy are unenforceable. See

Kavanaugh, 295 U.S. at 62. In the Court’s view, the

Minnesota law in Blaisdell fell into this former

category, and its holding did not extend to laws

impairing contractual obligations.

Today, however, this Court treats the

remedy/obligation distinction raised in Blaisdell as

little more than an indicator of the contracting

parties’ ex ante expectations. U.S. Tr. Co. of N.Y. v.

New Jersey, 431 U.S. 1, 19 n.17 (1977). The thinking

goes: a contracting party is more likely to expect (and

therefore price in) that a state might alter its

remedial processes than it might alter contractual

obligations. Ibid. So, reasonable modification of

remedial processes “is much less likely to upset

10

expectations than a law adjusting the express terms

of an agreement.” Ibid.

The true legacy of Blaisdell, it turns out, has little

to do with the law at issue or the case’s holding.

Instead, the Blaisdell majority’s atextual and antioriginalism language has inspired lower courts to

abandon their enforcement of the Contracts Clause,

despite that case’s careful enunciation of limiting

principles. According to Blaisdell, the Contract

Clause’s original meaning and understanding were

outdated by the 1930s: “It is no answer to … insist

that what the provision of the Constitution meant to

the vision of that day it must mean to the vision of our

time.” 290 U.S. at 442-43. Lower courts took this

attitude—a laissez-faire attitude toward the

Contracts Clause to combat laissez-faire economics—

as an invitation to blunt the Contracts Clause to the

point of uselessness.

Blaisdell abandoned first principles in favor of

leniency toward states’ impairing private contractual

obligations, but the Court did so in a limited manner.

As this Court has emphasized, Blaisdell would have

come out differently if not for the specific

“characteristics attributed to [the law] by the Court.”

Spannaus, 438 U.S. at 242. So, the Contracts Clause

“is not a dead letter.” Id. at 241.

Many lower courts, however, have ignored

Blaisdell’s limiting principles and disregarded this

Court’s insistence that the Contracts Clause is still in

fact part of the Constitution. The Ninth Circuit is one

of several lower courts that has elevated Blaisdell’s

rhetoric over its holding when faced with the ongoing

emergency.

But Blaisdell maintained that

“[e]mergency does not increase granted power or

remove or diminish the restrictions imposed upon

11

power granted or reserved.” 290 U.S. at 425; see also

Ex Parte Milligan, 71 U.S. (4 Wall.) 2, 76 (1866) (“No

doctrine, involving more pernicious consequences,

was ever invented by the wit of man than that any of

its provisions can be suspended during any of the

great exigencies of government.”). This Court needs

to make that point again.

II. This Court’s Current Approach to the Contracts

Clause

Despite the text of the Contracts Clause

prohibiting

any

impairment

of

contractual

obligations, the Court now interprets that prohibition

to apply to only substantial impairments. And even

then, a state law that substantially impairs

contractual obligations can still survive scrutiny if the

law is an appropriate means of advancing a

significant state interest. See Sveen, 128 S. Ct. at

1821-22. Worse, courts will then defer to the state’s

determination that the law is appropriate, deference

which effectively allows states to impair any contract

so long as they say the law was in the public interest.

The current Contracts Clause inquiry has two

steps. The “threshold issue” is (1) “whether the state

law has ‘operated as a substantial impairment of a

contractual relationship.’” Id. at 1821-22. If so, the

court asks (2) “whether the state law is drawn in an

‘appropriate’ and ‘reasonable’ way to advance ‘a

significant and legitimate public purpose.’” Ibid. The

level of scrutiny a court applies at the second step

depends on the level of impairment the court

identifies at step one.

The Ninth Circuit below misunderstood the

function of this inquiry and skipped the threshold

question, so it’s anyone’s guess how the court decided

12

how strongly to scrutinize this case. That error alone

calls for reversal.

A. There Are Many Ways a State Law Can

Impair Contractual Obligations

The first step of the Contracts Clause analysis has

three components of its own: “whether there is a

contractual relationship, whether a change in law

impairs that contractual relationship, and whether

the impairment is substantial.” Gen. Motors Corp. v.

Romein, 503 U.S. 181, 186 (1992). But the first two

components often resolve easily, leaving the court to

focus on the severity of the impairment. Ibid.

The substantiality of state interference turns on

“the extent to which the law undermines the

contractual bargain, interferes with a party’s

reasonable expectations, and prevents the party from

safeguarding or reinstating his rights.” Sveen, 128 S.

Ct. at 1822.

“Total destruction of contractual

expectations is not necessary for a finding of

substantial impairment.” Energy Reserves Grp. v.

Kansas Power & Light Co., 459 U.S. 400, 411 (1983).

Courts look to “the legitimate expectations of the

contracting parties,” to assess whether, “at the time

the parties entered into the contract and relied on its

terms,” they would have expected the modification at

issue. U.S. Trust, 431 U.S. at 19 n.17).

Over the years, this Court has identified several

factors that tend to show when an impairment would

upset the contracting parties’ legitimate expectations:

•

The law impairs a contractual right or

obligation rather than the procedural remedies

available, U.S. Trust, 431 U.S. at 19 n.17;

•

The contract has “an express covenant”

permitting the action that the law now

13

prohibits, Bronson, 42 U.S. at 320-21; see also

Spannaus, 438 U.S. at 247 (“[T]he statute in

question here nullifies express terms of the

company’s contractual obligations[.]”); U.S.

Trust, 431 U.S. at 19 n.17 (reasoning that “a

law adjusting the express terms of an

agreement” is more likely to upset

expectations);

•

The law changes a contract in a way that a

court could not have done through its equitable

power, see supra Sveen, 138 S. Ct. at 1823;

Kavanaugh, 295 U.S. at 63; Blaisdell, 290 U.S.

at 446;

•

The change in law “lessen[s] the value of the

contract,” Edwards, 96 U.S. at 601, 607 (“One

of the tests that a contract has been impaired

is[] that its value has by legislation been

diminished.”); Green v. Biddle, 21 U.S. (8

Wheat.) 1, 75-76 (1823) (“[C]onditions and

restrictions tending to diminish the value and

amount of the thing recovered, impairs [the

plaintiff’s] right to, and interest in, the

property.”); see also U.S. Trust, 431 U.S. at 19

(“[T]he State has made no effort to compensate

the bondholders for any loss sustained by the

repeal.”); Blaisdell, 290 U.S. at 432-34 (relying

on the fact that the law compensated creditors

during the extended redemption period);

•

The law changes the incentive structure

created by the contract, Kavanaugh, 295 U.S.

at 60-61, or undermines the parties’ reliance

interests, Spannaus, 438 U.S. at 246 (“Not only

did the state law thus retroactively modify the

[compensation scheme], but also it did so by

changing the company’s obligations in an area

14

where the element of reliance was vital[.]”);

•

The law does not provide the impaired party

with an opportunity to restore its rights under

the contract, compare Sveen, 138 S. Ct. at 1823

(“[A] policyholder can reverse the effect of the

Minnesota statute with the stroke of a pen.”);

with Spannaus, 438 U.S. at 250 (“It did not

effect simply a temporary alteration of the

contractual relationships … but worked a

severe, permanent, and immediate change in

those

relationships—irrevocably

and

retroactively.”); and

•

Prior regulation in the industry would not have

caused the contracting parties to expect the

future change in regulation, Energy Reserves

Grp., 459 U.S. at 411 (“In determining the

extent of the impairment, we are to consider

whether the industry the complaining party

has entered has been regulated in the past.”);

Veix v. Sixth Ward Building & Loan Ass’n of

Newark, 310 U.S. 32 (1940) (“When he

purchased into an enterprise already regulated

in the particular to which he now objects, he

purchased subject to further legislation upon

the same topic.”).

Although many lower courts have ignored these

indicators during the pandemic, see supra Section

III.B., the trial court below rightly recognized that

Los Angeles substantially impaired residential leases

in the city. But the Ninth Circuit erred by skipping

this threshold inquiry altogether.

15

B. Courts Must Ensure that a State Law Is

Appropriately Tailored to a Significant and

Legitimate Purpose

At the second stage of the inquiry, courts scrutinize

the state law to ensure that it is adequately tailored to a

legitimate purpose. The greater the impairment, the

higher “the hurdle the state legislation must clear” at

step two. Spannaus, 438 U.S. at 245. A severe

impairment “will push the inquiry to a careful

examination of the nature and purpose of the state

legislation.” Ibid. But even when the impairment is

less severe, a court will not sustain an unreasonable

regulation “simply because the [creditors’] rights were

not totally destroyed.” U.S. Trust, 431 U.S. at 27.

Further, a law impairing contractual rights must

help the public generally rather than just a discrete

group. Energy Reserves Grp., 459 U.S. at 412; see also

Spannaus, 438 U.S. at 242 (explaining that the law in

Blaisdell did not offend the Contracts Clause, in part,

because it “was enacted to protect a basic societal

interest, not a favored group”). “Since Blaisdell, the

Court has reaffirmed that the Contract[s] Clause

prohibits special-interest redistributive laws, even if

the legislation might have a conceivable or incidental

public purpose.” Ass’n of Equip. Mfrs. v. Burgum, 932

F.3d 727, 732 (8th Cir. 2019) (citation omitted). See

also Laurence Tribe, American Constitutional Law, §

9-8, p. 613 (2d ed. 1988) (The Contracts Clause serves

to protect minority rights “from improvident

majoritarian impairment.”).

Laws with incidental public benefits violate the

Contracts Clause if the benefit is targeted at a specific

constituency. See, e.g., Burgum, 932 F.3d at 733

(“The law primarily benefits a particular economic

actor in the farm economy—farm equipment dealers.

16

Even if the law indirectly might benefit farmers and

rural communities, the Contract Clause demands

more than incidental public benefits.”). In Spannaus,

for instance, this Court held unconstitutional a law

altering pensions, which despite seeming generally

applicable on its face, could “hardly be characterized

… as one enacted to protect a broad societal interest

rather than a narrow class.” Id. at 238, 248-49. The

law “applie[d] only to private employers who” met

certain extremely specific requirements. Id. at 248.

This targeted relief did not satisfy the broad public

purpose required by the Contracts Clause.

Rather than conducting this review, however,

many courts simply defer to the state’s explanation of

why the law should remain in place.

III. MANY LOWER COURTS TREAT THE CONTRACTS

CLAUSE AS A DEAD LETTER

A. Deference to States Has Eviscerated the

Contracts Clause

Lower courts are split on how to scrutinize state

laws under the second step of this Court’s modern

Contracts Clause analysis. Courts like the Ninth

Circuit will uphold a state law that substantially

impairs contractual obligations because they claim

they are bound to defer to a state’s decision-making.

App.21.

Faced with challenges to the ways the states’

emergency responses have interfered with contracts,

many courts have misapplied this Court’s precedent

and declared that courts “must accord substantial

deference to the State’s conclusion that its approach

reasonably promotes the public purposes for which it

was enacted.” Johnson v. Murphy, 527 F. Supp. 3d

703, 716 (D.N.J. 2021) (emphasis added; cleaned up),

17

appeal pending No. 21-1795 (3d Cir.). See also

Willowbrook Apt. Assocs., LLC v. Mayor & City

Council of Baltimore, 2021 WL 4441192, at *13 (D.

Md. Sept. 27, 2021) (applying “substantial deference”

to the state’s “justifications” analogous “to a rational

basis inquiry” even when the law at issue

substantially impaired a material term of residential

leases); El Papel LLC v. Durkan, 2021 WL 4272323,

at *8 (W.D. Wash. Sept. 15, 2021) (“[C]ourts must

‘defer to legislative judgment[.]’”) (emphasis added;

citations omitted); HAPCO v. City of Philadelphia,

482 F. Supp. 3d 337, 355 (E.D. Pa. 2020)

(“Considering the deference owed to this legislative

judgment, the Court cannot conclude that the City’s

methods of alleviating the emergency were

inappropriate

or

unreasonable.”);

Elmsford

Apartment Assocs., LLC v. Cuomo, 469 F. Supp. 3d

148, 169 (S.D.N.Y. 2020) (courts must defer); Auracle

Homes, LLC v. Lamont, 478 F. Supp. 3d 199, 225 (D.

Conn. 2020) (same).

Despite this Court’s proclaiming that the second

step of the Contracts Clause analysis should be more

rigorous the more a state law impairs obligations,

precious few courts have actually scrutinized the

offending state laws at issue. The first court during

the pandemic to consider the role deference plays in

this Court’s precedent was the U.S. District Court for

the District of Massachusetts.

See Baptiste v.

Kennealy, 490 F. Supp. 3d 353, 374 (D. Mass. 2020).

Rather than imposing a substantial-deference

requirement on itself, that court recognized that the

degree of deference owed to states is “influenced by

the degree to which they manifest consideration of the

requirements of the Constitution and also of the

implications of changed relevant facts.” Ibid.

18

More recently, the Second Circuit conducted an

extensive analysis of the role that deference plays, in

a section aptly called, “The Contract Clause’s

Continued Vitality.” Melendez v. City of New York, 16

F.4th 992, 1026-32 (2d Cir. 2021). After untangling

this Court’s precedent on Contracts Clause deference,

the Second Circuit applied an intermediate scrutiny

to a law that impaired residential leases. Id. at 1032

(“Th[e] standard is more demanding than rational

basis review … [b]ut it is more deferential to

legislative judgment than strict scrutiny[.]”).

The explanation in support of deferring to a state’s

legislative judgment “as to the necessity and

reasonableness of a particular measure” that impairs

contracts seems to trace back to East New York

Savings Bank v. Hahn, 326 U.S. 230 (1945); See also

U.S. Trust, 431 U.S. at 22-23 (citing Hahn). The

Second Circuit called Hahn the “high-water mark” for

this Court’s “contraction of Contracts Clause

protection,” Melendez, 16 F.4th at 1025; yet much like

the lower courts’ expansion of Blaisdell, the judicial

eagerness to shrink protections even further has led

to far more deference than Hahn would allow.

Based on Hahn, deference to a state’s judgment is

proper only if the legislative process justifies it. Hahn

analyzed the “whole course” of New York’s lawmaking process at issue, which the Court described as

“the empiric process of legislation at its fairest:

frequent reconsideration, intensive study of the

consequences of what has been done, readjustment to

changing conditions, and safeguarding the future on

the basis of responsible forecasts.” 236 U.S. at 234.

The legislature “was not even acting merely upon the

pooled general knowledge of its members. … The New

York Legislature was advised by those having special

responsibility to inform it that ‘the sudden

19

termination of the legislation which ha[d] dammed up

normal liquidation of [] mortgages for more than eight

years might well result in an emergency more acute

than that which the original legislation was intended

to alleviate.’” Id. at 234-35 (quoting the legislative

record). Given all the evidence that New York’s

legislature acted with considered judgment to

safeguard residents against a serious danger, the

Court declined the plaintiffs’ invitation to take

judicial notice of conflicting economic data to “reject

the judgment of the joint legislative committee, of the

Governor, and of the Legislature.” Id. at 234.

To illustrate the standard of legislative judgment

deserving of deference, Hahn contrasted New York’s

legislative process against that of the Arkansas

Legislature in Kavanaugh, 295 U.S. at 60, which had

shown “studied indifference to the interests of the

mortgagee or to his appropriate protection.” Hahn,

326 U.S. at 234 (quoting Kavanaugh). The Court in

Kavanaugh admonished the Arkansas Legislature for

“put[ting] restraint aside” when impairing the

contractual rights of mortgagees. 295 U.S. at 60.

According to Kavanaugh, the law’s overbreadth was

evidence that the legislature acted without the

considered judgment worthy of deference. Id. at 61.

The Arkansas Legislature had not made any serious

attempt to tailor its laws to their stated purposes,

resulting in an unnecessarily broad impact on private

contracts. Id. (“There is not even a requirement that

the debtor shall satisfy the court of his inability to

pay.”). Given this ready-fire-aim legislative process,

the Court refused to defer to such “an oppressive and

unnecessary destruction of nearly all the incidents

that give attractiveness and value to” the contracts at

issue. Id. at 62.

20

Kavanaugh is not a relic of the past, nor did Hahn

impose a substantial-deference regime under the

Contracts Clause. This Court confirmed in Spannaus

that deference is inappropriate when “there [wa]s no

showing in the record … that th[e] severe disruption

of contractual expectations was necessary to meet an

important general social problem.” 438 U.S. at 247.

To the extent deference has any role in the inquiry,

a proposition with no basis in the text or history of the

Contracts Clause, Hahn set the standard for deciding

whether a state’s legislation deserves deference. To

justify deference from federal courts, courts must

scrutinize the “whole course” of the law-making

process to figure out whether the law at issue resulted

from the sort of considered, empirical judgment that

deserves deference. Hahn, 236 U.S. at 234. This

inquiry is a critical one. The federal courts’ duty to

uphold and apply the Constitution demands far more

than the rubber stamp that the Ninth Circuit applied

in this case.

The decision below shows why this Court should

reconsider when—if ever—deference is proper in

Contracts Clause challenges. Many lower courts have

seized on sentiment in this Court’s opinions to turn

the Contracts Clause into an obligatory deference

regime under which federal courts no longer protect

against state interference with any private contracts.

But scrutinizing state interference with contracts is

the precise role that the Contracts Clause imposes on

the federal judiciary.

By granting substantial

deference to the states, lower courts abdicate the

judicial office and bias the outcome of their

deliberations in the state’s favor.

Deference

to

the

state is

particularly

inappropriate given the purpose of the Contracts

21

Clause, which exists to provide citizens with a federal

venue that will protect their private contracts from

undue state interference. See Edwards, 96 U.S. at

605. The Ninth Circuit’s approach (App.21) of

requiring deference renders that constitutional

promise nugatory—skewing the resolution of

Contracts Clause cases in the state’s favor. Los

Angeles is so confident that deference turned the

Contracts Clause into a paper tiger that the City

waived its right to respond to this petition.

As this Second Circuit’s chronicling of this Court’s

precedent in Melendez illustrates, the confusion in the

lower courts over the level of scrutiny in a Contracts

Clause inquiry is this Court’s own doing. 16 F.4th at

1026-32. This petition presents an opportunity for

this Court to resolve the resultant circuit split and

restore the federal judiciary to its proper role of

protecting private contracts against undue state

interference. Ignoring the problem “would seriously

undermine the national government’s role[.]” Everett

v. Schramm, 772 F.2d 1114, 1119 (3d Cir. 1985).

B. Lower Courts Are also Split on How to

Assess Substantial Impairment

This case also shows just how split the lower

courts are on how to apply the first step of the

Contracts Clause analysis. The district court below

properly recognized that “it would be difficult to

conclude” that Los Angeles “d[id] not, at a minimum

substantially interfere with landlords’ reasonable

expectations.” App.40. But remarkably, other lower

courts have held that similar laws did not

substantially impair residential leases.

The U.S. District Court for the District of

Maryland recently identified a major reason for this

22

split: the over-emphasis some courts place on whether

prior regulation in an industry defeats a contracting

party’s expectation that the state won’t retroactively

impair contracts in that industry. See Willowbrook,

2021 WL 4441192, at *6. “Some have found that ‘the

business area of renting residential property is

heavily-regulated’ and, therefore, landlords could

have expected regulations that would interfere with

their ability to raise and collect fees.” Id. (citing S.

Cal. Rental Housing Ass’n v. Cty. of San Diego, 2021

WL 3171919, at *9 (S.D. Cal. July 26, 2021); Auracle

Homes, 478 F. Supp. 3d at 199, 222-23; Elmsford, 469

F. Supp. 3d at 171-72). “Others, by contrast, have

noted that ‘although landlords understood they were

operating in a highly regulated area, they could not

have expected the COVID-19 pandemic and its

attendant regulations.” Id. at *6 (citing Baptiste, 490

F. Supp. 3d at 390; Heights Apts., LLC v. Walz, 510 F.

Supp. 3d 789, 813 (D. Minn. 2020); Apt. Ass’n of L.A.

Cty., Inc. v. Los Angeles, 500 F. Supp. 3d 1088, 1096

(C.D. Cal. 2020) (“[N]o amount of prior regulation

could have led landlords to expect anything like the

blanket Moratorium.”)); see also Johnson, 527 F.

Supp. 3d at 717 (“[T]he foreseeability of additional

regulation [of residential leases] allows states to

interfere with both past and future contracts[.]”)

(quoting Elmsford).

Government regulation touches almost all aspects

of modern life. To rule that a contracting party must

reasonably expect the retroactive impairment of

contractual obligations in all regulated industries is

to write the Contracts Clause out of the Constitution.

23

CONCLUSION

This Court should grant the petition, reverse the

Ninth Circuit’s misapplication of the Contracts Clause,

and restore that provision’s original vitality.

Respectfully submitted,

JARED MCCLAIN

Counsel of Record

MARK CHENOWETH

KARA ROLLINS

NEW CIVIL LIBERTIES ALLIANCE

1225 19th St. NW, Suite 450

Washington, DC 20036

(202) 869-5210

Jared.McClain@NCLA.legal

Counsel for Amicus Curiae

December 2021