Amicus Curiae Brief — General Motors Corp. v. Romein

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In THE SEP § 19

Supreme Court of the Uniteh States

OcroBER TERM, 1991 OFFIGE OF THE

=

GENERAL MoTors CORPORATION,

= Petitioner,

EVERT ROMEIN, et al.,

Respondents.

ForD MOTOR COMPANY,

‘e Petitioner,

ARTURO GONZALEZ, et al.,

Respondents.

On Writ of Certiorari to the

Supreme Court of Michigan

BRIEF OF THE COUNCIL OF STATE GOVERNMENTS,

NATIONAL GOVERNORS’ ASSOCIATION, NATIONAL

CONFERENCE OF STATE LEGISLATURES, NATIONAL

ASSOCIATION OF COUNTIES, INTERNATIONAL

CITY/COUNTY MANAGEMENT ASSOCIATION,

NATIONAL LEAGUE OF CITIES, AND

U.S. CONFERENCE OF MAYORS AS AMICI CURIAE

IN SUPPORT OF RESPONDENTS

RICHARD H. PILDEs RICHARD RUDA *

933 Legal Research Chief Counsel

Ann Arbor, MI 48109-1215 MICHAEL G. DZIALO

(318) 747-1014 STATE AND LOCAL LEGAL CENTER

1525 Massachusetts Ave. Suite 349

Cambridge, MA 02138 Washington, D.C. 20001

Of Counsel (202) 638-1445

* Counsel of Record for the

+ Amici Curiae

WILSON - Eres PRINTING Co., Inc. - 789-0096 - WASHINGTON. D.C. 2000!

'D aN AVAILARIE CODV! |

QUESTION PRESENTED

Amici curiae will address the following question:

Whether the Due Process Clause of the United States

Constitution prevents a State from permitting its legisla-

ture, in response to an unexpected state judicia! decision,

to enact retroactive amendatory legislation for the pur-

poses of (1) restoring recently unsettled expectations;

(2) promoting stability, certainty, and confidence in gov-

ernment’s willingness to honor its prior commitments;

and (3) requiring disgorgement of windfall gains.

(i)

TABLE OF CONTENTS

EE

INTRODUCTION AND SUMMARY OFARGUMENT..

EE ET

I.

Il.

ITI.

THEORY, WELL-ESTABLISHED LEGISLA-

TIVE PRACTICE, AND JUDICIAL PRECE-

DENT SUPPORT LEGISLATIVE POWER TO

REJECT RETROACTIVELY JUDICIAL IN-

TERPRETATIONS OF REGULATORY STAT-

isc ieinisancerntineceersenssnesinnmstenmemseamecsveasaznensse

PRINCIPLES OF FEDERALISM SUPPORT

MICHIGAN’S AUTHORITY TO ACT RETRO-

ACTIVELY IN THE CIRCUMSTANCES OF

ESSE sciecsnipintaenateds

NONE OF THE CIRCUMSTANCES THAT

MIGHT APPROPRIATELY LIMIT THE

SCOPE OF RETROACTIVE LEGISLATION

a

A. Political Process Concerns .._. aiid

ES

SESE TE Sl ee

D. Destruction of Substantial Equity...

E. State Self-Aggrandizement.... ss —s

EL

a f+ +

13

16

iv

TABLE OF AUTHORITIES

CASES Page

149 Madison Ave. Corp. v. Asselta, 331 U.S. 795,

modifying 331 U.S. 199 (1947) ......... Ssiniaidiahsiaahi 10

Addison v. Holly Hill Fruit Products, Inc., 322

ERE ER RS 21

Addison v. Huron Stevedoring Corp., 204 F.2d 88

(2d Cir.), cert. denied, 346 U.S. 877 (1953) ...... 9

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

i FE Se Le 24

Anderson v. Mt. Clemens Pottery Co., 328 U.S.

iinet iii eeens 9

Asselta v. 149 Madison Ave. Corp., 79 F. Supp.

re 10

Asselta v. 149 Madison Ave. Corp., 90 F. Supp.

ES Sa 10

Balti & S. R.R. v. Nesbit, 51 U.S. (10 How.)

5 (1860) EET rs = Rc ee 18, 22

Battaglia v. General Motors Corp., 169 F.2d 254

(2d Cir.) , cert. denied, 335 U.S. 887 (1948) ...... passim

Beauchamp v. Dow Chemical Co., 398 N.W.2d 882

RET SR a RE Se 25

Bowen v. Georgetown Univ. Hosp., 488 U.S. 204

STII clehishchenietenescdibitaetilehieiannsatnsesntaninttaibenemabanbiatanitdmentasinen

Bradley v. Richmond School Bd., 416 U.S. 696

EE ee ee ae ee 28

Calder v. Bull, 3 U.S. (3 Dall.) 386 (1798) .......... 12, 22

Canisius College v. United States, 799 F.2d 18 (2d __

Cir. 1986), cert. denied, 481 U.S. 1014 (1987).. 26

Carpenter v. Pennsylvania, 58 U.S. (17 How.)

EE a re ee 22

Chambers v. General Motors Corp., 389 N.W.2d

I a 2

Charlotte H. & N. R.R. v. Welles, 260 US. 8

ERE SEI anne cae Peet eet Sena So a a 23

Chase See. Corp. v. Donaldson, 325 U.S. 304

REET SR ES aE A 17

Coolidge v. Long, 282 U.S. 582 (1931) 0. 27

Counsel v. Dow, 849 F.2d 731 (2d Cir. 1988), cert.

denied, 488 U.S. 955 (1989) 11

Dreyer v. Illinois, 187 U.S. 71 (1902) 18

El Paso v. Simemons, 379 U.S. 497 (1965) 23

v

TABLE OF AUTHORITIES—Continued

Page

Employment Div. v. Smith, 485 U.S. 660 (1988) 21

Energy Reserves Group, Inc. v. Kansas Power &

Light Co., 459 U.S. 400 (1983)... 23, 29

Fleming v. Rhodes, 321 U.S. 100 (1947)... 19, 21, 23

Fletcher v. Peck, 10 U.S. (6 Cranch) 87 (1810) 24

Forbes Pioneer Boat Line v. Board of Commrs.,

fa NEI SSS ra 14, 23, 30

Franks v. White Pine Copper Div., Copper Range

Co., 375 N.W.2d 715 (Mich. 1985)... passim

Goddard v. Frazier, 156 F.2d 938 (10th Cir.),

cert. denied, 329 U.S. 765 (1946)... 17-18

Graham & Foster v. Goodcell, 282 U.S. 409 (1931). 12

Gregory v. Ashcroft, 111 S.Ct. 2395 (1991) 17

Haffner v. United States, 585 F. Supp. 354 (N.D.

Ill. 1984), modified, 757 F.2d 920 (7th Cir.

ES SEER ERO Eee nL ee 12

Helvering v. Helmholz, 296 U.S. 93 (1935) _... ra 27

Highland Farms Dairy, Inc. v. Agnew, 300 U.S.

RASS SEI a ae 17

Laubie v. Sonesta Int’l Hotel Corp., 752 F.2d 165

REDRESS ETE ae 13

League v. Texas, 184 U.S. I 22

Leedom v. International Bhd. of Elec. Workers,

278 F.2d 237 (D.C. Cir. 1960)... 21

Legal Tender Cases, 79 U.S. (12 Wall.) 457

et ES A ee 30

Lichter v. United States, 334 U.S. 742 ( 1948) _.... 23

Macomb County Prof. Deputies Ass’n v. Macomb

County, 452 N.W.2d 902 (Mich. App. 1990)... 16

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316

EES SUL eels aE ee 20

McGautha v. California, 402 U.S. 183 (1971). 16

Minnesota v. Clover Leaf Creamery Co., 449 U.S.

SRE Sar S SE a ee 17

Missouri v. Dockery, 191 U.S. 165 (1903)... 17

National R.R. Passenger Corp. v. Atchison, T., &

S. F. R.R., 470 U.S. 451 (1985). atin 14

Nichols v. Coolidge, 274 U.S. 531 (1927) 27

Norman v. Baltimore & O. R.R., 294 US. 240

REE EE eee Lt ee eee 30

vi

TABLE OF AUTHORITIES—Continued

Page

North Carolina v. Butler, 441 U.S. 369 (1979)... 21

Orr v. Gilman, 183 U.S. 278 (1901)... 22

Paramino Lumber Co. v. Marshall, 309 U.S. 370

(1940) . 12, 26

Penn Central Transportation Co. v. "New: York

City, 488 U.S. 104 (1978)... 29

Perry v. United States, 294 U.S. 330 (1935)... 30

Prentis v. Atlantic Coast Line Co., 211 U.S. 210

(1908) ict caaieadiaiaeatadiiciieasneieiatteeenintinainticiiantia inter natin 19

Priest v. Canada Life Assur. Co., 446 N. W.2d 352

en ae 13, 16

Rochin v. California, 342 U.S. 165 (1952)... 18

SEC v. Chenery Corp., 332 U.S. 194 (1947) 21

Sanelli ». Glenview State Bank, 483 N.E.2d 226

EE ER LES a ae ee 13

Satterlee v. Matthewson, 27 U.S. (2 Pet.) 380

SII elediahciidntateaiatbidemachananenicitaiipaiilin statin teeta inet 19

Schwarzkopf v. Sac County Bd. of Supervisors,

BP GE ee 13

Seese v. Bethlehem Steel Co., 168 F.2d 58 (4th Cir.

ES eS ee 9, 10, 23

Smith v. Robinson, 468 U.S. 992 (1984)... 11

Swayne & Hoyt, Ltd. v. United States, 300 U.S.

ETE ee | a 12

Sweezy v. New Hampshire, 354 U.S. 234 (1957). 17

Thomas v. Carnegie-Illinois Steel Corp., 174 F.2d

I ts 10

Treigle v. Acme Homestead Ass'n, 297 U.S. 189

EERE Sa ene ee Ey Oe 22-23

United States Trust Co. v. New Jersey, 431 US. 1

FE en ee 23, 30

United States v. Darusmont, 449 U.S. 292 (1980). 28

United States v. Heinszen & Co., 206 U.S. 370

i iii lie ta hic ala 12, 15, 26

United States v. Sperry Corp., 110 S. Ct. 387

REET RS LA IS a Sane eR 11, 28

United States v. Wells Fargo Bank, 485 U.S. 351

EE EAL as eee ae 12

Untermyer v. Anderson, 276 U.S. 440 (1928)... 27

Uphaus v. Wyman, 360 U.S. 72 (1959) 17

vii

TABLE OF AUTHORITIES—Continued

Page

Van Emmerik v. Janklow, 454 U.S. 1131 (1982). 13, 15,

26

W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56

EE RE Rea tS a ee 24

Ward v. Illinois, 431 U.S. 767 (1977) ey ae 21

Watson v. Mercer, 33 U.S. (8 Peters) 88 (1834) 22

STATUTES

Deficit Reduction Act of 1984, Pub. L. No. 98-369,

EEE ee Oo a ee 12

Fair Labor Standards Act, 52 Stat. 1060-1069

(1938) (as codified at 29 U.S.C. § 201 et seq.

SCM RS 9

Handicapped Children’ s Protection Act of 1986,

Pub. L. No. 99-372, 100 Stat. 796 (codified as

amended at 20 U.S.C. 1415(e) (4) (Supp. IV

LE LS a Lo 11

Mich. Comp. Laws § 418. nt Se Rae . 3

Mich. Comp. Laws § 418.354... passim

Mich. Comp. Laws § 418.355... 3

Mich. H.B. 5084 (enacted as 1987 Pub. Acts 28,

i iuisiilaliaes 2, 3,4

1980 Mich. Pub. Acts 357 § 1... = RE Nee 3

Portal-to-Portal Act, 61 Stat. 84-90 (as codified at

29 U.S.C. § 251 et seq. (1989))... i)

LEGISLATIVE MATERIALS

Mich. History of Senate Bills in the House 5984

(1987) ... eA See ne 6 cee

10 Mich. House Journal 135-37 (Jan. 29, 1986)

2 Mich. House Journal 2058 (October 16, 1985)

Mich. Senate History of Senate Bills 3675

gS tt eS oe ee 3

MISCELLANEOUS

Gov. Blanchard, News from the Office of the Gov-

EG 2

Detroit Free Press, Jan.5,1986at3A.... 2,8

Detroit Free Press, Nov. 3,1985atH1........ ~

ww &

viii

TABLE OF AUTHORITIES—Continued

Page

Eule, Temporal Limits on the Legislative Mandate:

Entrenchment and Retroactivity, 1987 Am. B.

EER EEE PS es a 8, 16

Fallon & Meltzer, New Law, Non-Retroactivity, and

Constitutional Remedies, 104 Harv. L. Rev. 1731

ct es 20

L. Fuller, The Morality of Law (2d ed. 1969)... 7

Greenblatt, Limitations on Retroactive Civil Legis-

lation, 51 Nw. U.L. Rev. 540 (1956)... 11, 24

H. Hart & A. Sacks, The Legal Process: Basic

Problems in the Making and Application of Law

RECESSES Ale Sosa 10-11

Hochman, The Supreme Court and the Constitu-

tionality of Retroactive Legislation, 73 Harv. L.

Rev. 692 (1960)... EES ee 7, 10, 23, 29

Jurisdictional Statement, United States v. Crocker

Nat'l Bank, 481 U.S. 1047 (1987) (No. 86-

aS iOS LEE REY DIETS: ee ace 12

Munzer, A Theory of Retroactive Legislation, 61

Tes i I Ge GI oeececerccttcnncnceterecteccdercrecce 8,15

Note, A Process-Oriented Approach to the Con-

tracts Clause, 89 Yale L.J. 1623 (1980)... 24

2 Records of the Federal Convention of 1787

a 21

Slawson, Constitutional and Legislative Consider-

ations in Retroactive Lawmaking, 48 Calif. L.

SESE A ae eae | _..8, 28, 27

3 J. Story, Commentaries on the Constitution,

a Acheillatadelinisiiiainasiodtiitidnitaaimnlicas 19, 22

2 J. Story, Commentaries on the Constitution (5th

a I ieinanieticidaitcininictsinhdibincatinisnsigidiiacdbiatcaieiishintisasaas s 22

BRIEF OF THE COUNCIL OF STATE GOVERNMENTS,

NATIONAL GOVERNORS’ ASSOCIATION, NATIONAL

CONFERENCE OF STATE LEGISLATURES, NATIONAL

ASSOCIATION OF COUNTIES, INTERNATIONAL

CITY/COUNTY MANAGEMENT ASSOCIATION,

NATIONAL LEAGUE OF CITIES, AND

U.S. CONFERENCE OF MAYORS AS AMICI CURIAE

IN SUPPORT OF RESPONDENTS

INTEREST OF THE AMICI CURIAE

Amici are organizations whose members include state,

county, and municipal public officia.s and governments

throughout the United States. Amici have a strong inter-

est in safeguarding the integrity of the internal govern-

ance decisions by which States structure their policy-

making processes, particularly the process by which state

legislatures respond to statutory decisions of state courts.’

STATEMENT

In 1985, the Michigan Supreme Court, interpreting

1981 amendments to the State’s Workers’ Disability Com-

pensation Act, concluded that the legislature had reduced

the benefits owing to workers injured before passage of

those amendments. Franks v. White Pine Copper Div.,

375 N.W.2d 715 (1985) [decided together with Cham-

bers v. General Motors Corp. and hereinafter cited as

Chambers) (interpreting Mich. Comp. Law. § 418.354

(1991), “the 1981 Amendments”). This construction of

the 1981 Amendments had a particularly devastating ef-

fect on elderly retirees whose workers’ compensation

benefits were their principal source of income.’ Retirees

who regularly had been receiving fixed weekly compen-

sation benefits for many years suddenly found those bene-

fits drastically reduced; in many cases, including those of

1 The parties’ letters of consent have been filed with the Clerk

pursuant to Rule 37.3 of this Court.

2 The Chambers decision marked the first instance in the state’s

history of such retroactive reductions in v-orkers’ compensation

benefits to injured employees.

2

respondents Romein and Gonzalez, compensation benefits

were eliminated altogether.

Prior to the 1985 Chambers decision, every administra-

tive tribunal and lower court to consider the question had

concluded that the 1981 Amendments had not been in-

tended to have this draconian retroactive effect. Resp. Br.

at 5. The Chambers court acknowledged that its inter-

pretation was “inconsistent with the legislative objective”

of the Workers’ Compensation Act, but felt bound not “to

substitute our view regarding the equities” for what it

considered the plain meaning of the 1981 Amendments.

375 N.W.2d at 727. Later in 1985, Justice Boyle (the

author of Chambers) dissented from the denial of rehear-

ing, concluding that the court had erred and that the

decision had had “harsh and unforeseen consequences.”’

Chambers v. General Motors. Corp., 389 N.W.2d 685

(1985) (denying rehearing). In the case now before this

Court, the Michigan Supreme Court, based on its knowl-

edge of local conditions, recognized that its interpretation

in Chambers had been “an unexpected circumstance.”

Pet. App. 17a.

Public and legislative response to this “unexpected cir-

cumstance” was immediate. The Governor who had

sponsored and signed the 1981 Amendments, the current

Governor, the State’s Workers’ Compensation Director,

the Director of the Labor Department, and numerous leg-

islative sponsors of the 1981 Amendments all character-

ized the Chambers decision as a misconstruction of the

1981 Amendments and deplored its unsettling conse-

quences. J.A. 29-33; Resp. Br. at 5 n.6, 8 n.10, 10 &

n.13.* Within days of the initial decision, legislation was

introduced in the Michigan House specifically designed to

overturn the Chambers result. H.B. 5084; see also 2

House Journal 2058 (October 16, 1985); Resp. Br. 8-9.

Within one month of the denial of rehearing, on January

29, 1986, this bill passed the House by an 87-14 vote.*

3 Detroit Free Press, Jan. 5, 1986 at 3A; Gov. Blanchard, News

From the Office of the Governor 2 (May 6, 1987).

410 House Journal 135-37 (Jan. 29, 1986).

3

The bill was then referred to committee in the Senate,

where it became enmeshed in efforts to revise other pro-

visions of the Workers’ Compensation Act. After the

Senate Committee and then the full Senate endorsed a

broader package of several significant amendments, and

the package emerged from a House and Senate Confer-

ence, each Chamber approved a set of reforms that was

signed into law on May 14, 1987 (“the 1987 Amend-

ments’’) .°

As originally approved in the House, H.B. 5084 was

made partially retroactive to the effective date of the

original 1981 Amendments. App. to Resp. Br. at 7a-8a.

Workers injured after the 1981 Amendments were not to

be affected. For workes: injured before those Amend-

ments, however, the legislature (like the Michigan Su-

preme Court) concluded that the outcome in Chambers

had been unexpected, inconsistent with the policies of

Michigan’s Workers’ Compensation Act, and inequitable.

This perceived unfairness was heightened by the fact that,

while some of the cost savings from the package of re-

forms had, at the same time, been passed on to workers

in the form of much higher workers’ compensation bene-

fit levels, only workers injured after the 1981 Amend-

ments were eligible for these increased benefits. To pro-

tect what the legislature viewed as the morally significant,

settled expectations of retired and elderly workers; to

maintain the State’s long-standing policy commitment not

to reduce benefit payments retroactively; to preserve the

integrity of the 1981 Amendments as a whole; and to

rectify what the Michigan legislature perceived as an un-

justified windfall gain for business from the unexpected

Chambers decision, the legislature made its rejection of

Chambers retroactive. As enacted in final form, the 1987

5See Senate History of Senate Bills 3675 (1987); History of

Senate Bills in the House 5984 (1987). The Senate vote was 35-1;

the House vote was 95-0. For citation to the full legislative history,

see Resp. Br. at 8-9 & n.11.

1980 Mich. Pub. Acts 357 §1; Mich. Comp. Laws § 418.351;

Mich. Comp. Laws § 418.355.

4

Amendments thus precisely tracked the partial retroac-

tivity provisions first adopted—in the immediate after-

math of Chambers—in H.B. 5084.

For other pertinent facts, amici adopt respondents’

statement of the case.

INTRODUCTION AND SUMMARY OF ARGUMENT

This brief will address only the retroactivity challenges

arising under the Due Process Clause. We agree with re-

spondents that statutorily-mandated workers’ compensa-

tion benefit levels are not the sort of “private agreements”

to which the Contract Clause applies. See Resp. Br. Sec-

tion I.7 The Michigan statute presents a question of

retroactive legislation—nothing more. More specifically,

the central question this case poses is the legitimate extent

of a State’s power to give its legislature final say in the

process of interpreting regulatory statutes.

1. Within a system of generally prospective laws, ret-

roactive lawmaking power can, at times, be a necessary

supplement. This Court and many others have endorsed

the legitimacy of that supplemental power when Congress

and state legislatures retroactively reverse the outcomes

of judicial decisions interpreting regulatory statutes. In

the circumstances presented here, courts have recognized

that such legislative action can affirmatively promote the

certainty, stability, and fairness central to the rule of

law.

2. The choice of a state legislature to overturn a

decision of its own courts raises special constitutional

7 We also agree with respondents that, even if in some instances

statutory benefits can somehow be viewed as incorporated into

private agreements, the present case is not one in which the 1981

Amendments may be given such an effect. First, the courts of the

concerned state, whose decisions on such questions have consistently

been given deference by this Court, have concluded that no contrac-

tual interest was created by those amendments. In addition. the

statutory provision that is challenged here only restored the benefit

level to which respondents, who were injured prior to 1981, were

entitled at the time the 1981 Amendments were enacted.

5

considerations that require federal courts to be wary of

intervening. As a structural mater, States are free to al-

locate power between their courts and legislatures in

whatever way they see fit. Not only are federal

separation-of-powers principles inapplicable at the state

level; the Constitution affirmatively guarantees to the

States the right to structure their internal governmental

arrangements free of federal control. Thus, if States

choose to give their legislatures the last word on the

meaning of public programs—even beyond what might be

constitutionally permitted to Congress—the Federal Con-

stitution does not constrain that choice. Indeed, the choice _

itself is constitutionally protected. Because the Michigan

Supreme Court in this case, as in past decisions, found its

legislature’s actions consistent with the allocation of state

lawmaking authority, this Court must respect that deci-

sion.

Similarly, that the unsettling event triggering a need

for legislative action was a judicial decision, as opposed to

some other change in circumstance, does not raise any

distinct constitutional barriers. The extent to which a

judicial decision departs from widely shared understand-

ings and practices, or resolves genuine uncertainty, may

be relevant in determining the firmness of the foundation

for the legislature’s action, or the substantiality of the

countervailing equities. But even a judicial decision that

may be fairly characterized as “foreordained,” and obvi-

ously “correct,” poses no ineluctable barrier to retroactive

action.

3. Against this background, the Michigan legislation

is fully consistent with established retroactivity doctrine.

The ends for which the statute was enacted include (1)

restoring recently unsettled expectation and reliance in-

terests; (2) promoting stability, certainty, and confidence

in ygovernment’s willingness to honor its commitments;

(3) “curing” a problem arising in the administration of

an ongoing public program; (4) responding to a signifi-

cant change in circumstance, specifically an unexpected

6

judicial decision; and (5) requiring the disgorgement of

windfall gains. For retroactive and other legislation,

these are clearly recognized legitimate public purposes.

In addition, the means chosen by the legislature—

retroactive lawmaking—is both directly related to the

legislature’s objectives and constitutionally valid. In some

circumstances, retroactive state legislation might be so

harsh and arbitrary as to raise substantive due process

questions. Thus, such circumstances might exist when

retroactive legislation is used to target identifiable indi-

viduals or to single out especially vulnerable groups;

when the adverse effects of retroactivity are intensified

by extreme legislative delays; when interests resting on

“substantial equity” are undermined; or when the retro-

active legislation comes as a sharp surprise to settled and

justifiable expectations—particilarly if the disadvan-

taged party could have altered its conduct in advance to

avoid the liabilities being retroactively imposed.

But none of these circumstances is suggested by this

case. The businesses burdened here cannot be considered

to be especially vulnerable to unfair legislative treatment

or consideration. Moreover, the legislative response to the

Chambers decision was swift in its initiation and not un-

duly delayed in its completion. Thus the legislature’s ac-

tion involved no surprise at all, let alone one that could be

found unfair; the only genuine element of surprise in this

case was that caused to employee expectations by the

Chambers decision. For these reasons, petitioners also

cannot claim interference with any interests resting on

“substantial equity.” And in any event, the obligations

imposed by the State under its workers’ compensation

laws could not have been avoided by the petitioners even

if those obligations had been entirely prospective in

nature.

7

ARGUMENT

I. THEORY, WELL-ESTABLISHED LEGISLATIVE

PRACTICE, AND JUDICIAL PRECEDENT SUP-

PORT LEGISLATIVE POWER TO REJECT RETRO-

ACTIVELY JUDICIAL INTERPRETATIONS OF

REGULATORY STATUTES

Both Congress and the legislatures of the States have

long found it necessary to legislate retroactively at times.*

And as Justice Scalia has observed, “retroactive legisla-

tion .. . has long been upheld against constitutional at-

tack where reasonable.” Bowen v. Georgetown Univ.

Hosp., 488 U.S. 204, 223 (1988) (Sealia, J., concurring).

The basis for retroactive policymaking in a context like

that presented here has perhaps been most effectively

stated by Professor Lon Fuller. As he noted, within a

system of generally forward-looking laws, retroactive leg-

islation may on occasion be necessary in order to prese *y

vaiues central] to the rule of law—ensuring stability, pro-

tecting legitimate expectations, and promoting certainty

and reliability:

A system of law composed exclusively of retroactive

rules could exist only as a grotesque conceit worthy

of Lewis Carroll or Franz Kafka. Yet a retroactive

‘curative’ statute can perform a useful function in

dealing with mishaps that may occur within a system

of rules that are generally prospective. . . . retro-

spective law-making can in some instances actually

serve the cause of legality. . .. it can serve to heal

infringements of the principle that like cases should

receive like treatment. L. Fuller, The Morality of

Law 74, 211 (2d ed. 1969).

® Retroactive legislation is here defined to embrace laws that

“attach new rights and duties to already completed transactions.”

Hochman, The Supreme Court and the Constitutionality of Retro-

active Legislation, 73 Harv. L. Rev. 692, 692 (1960), quoted in

Pet. Br. at 33-34.

8

In this case, the Michigan Supreme Court issued a de-

cision in Chambers that, by its own acknowledgement,

the Michigan legislature’s judgment, and all available ex-

ternal evidence, was “unexpected.” The effect of that de-

cision—“harsh and unforseen” in the words of its judicial

author—was the retroactive reduction of compensation

benefits to previously injured workers. Those affected

were the first in the State’s history to find that their ex-

pectations of regular receipt of fixed benefits had been

defeated. In restoring these benefits, and vindicating those

expectations, the Michigan legislature sought to assure

that the affected workers were treated no less equitably

than others who had been injured in the past.

In the modern regulatory state, judicial decisions inter-

preting ongoing regulatory programs often have policy

consequences far beyond their éffects on the parties before

the court.” On many such occasions, Congress and state

legislatures have found it appropriate to reject those con-

sequences and retroactively alter the outcomes judicial

decisions have wrought. And in circumstances virtually

identical to those here, courts consistently have upheld

such actions.'®

A. Congress

The famous “Portal-to-Portal”’ cases, which petitioners

do not cite, are directly on point. See, e.g., Battaglia v.

General Motors Corp., 169 F.2d 254 (2d Cir.), cert. denied,

®The Chambers decision appears to affect as many as 40,000

workers, may redistribute nearly $80 million from injured workers

to businesses, and changes long-standing public policies regarding

the stability of established compensation benefits. See, e.g., Detroit

Free Press, Jan. 5, 1986 at 3A; id., Nov. 3, 1985 at H1.

10 See generally Eule, Temporal Limits on the Legislative Man-

date: Entrenchment and Retrvactivity, 1987 Am. B. Found. Res.

J. 379, 447 (“Curative laws, although commonly labeled retroactive

because of their alteration of the pre-enactment status of an act,

are nearly always sustained by the courts.”); Munzer, A Theory

of Retroactive Legislation, 61 Tex. L. Rev. 425, 468 (1982); Slaw-

son, Constitutional and Legislative Considerations in Retroactive

Lawmaking, 48 Calif. L. Rev. 217 (1960).

9

335 U.S. 887 (1948); Seese v. Bethlehem Steel Co., 168

F.2d 58 (4th Cir. 1948). In 1938, Congress enacted the

Fair Labor Standards Act (“FLSA’’),'' which required

specific wage compensation rates for overtime work and

provided liquidated damages as sanctions. Contrary to

customary understandings in many industries, this Court,

in a line of decisions culminating in Anderson v. Mt.

Clemens Pottery Co., 328 U.S. 680 (1946), held that the

Act included employees’ transportation, preparation, wait-

ing time, and the like (“portal-to-portal time”) within the

statutory definition of “work.” The decision subjected

employers to potentially substantial liabilities, and one

year later, Congress responded by enacting the Portal-

to-Portal Act,'* extinguishing—retroactively to the date

of the original FLSA—any right of employees to recover

under the Anderson ruling."

This action was subjected to the same due process

challenge advanced here. Employees argued that “the

provisions of the [FLSA] statute must be read into the

contract of employment and that the right to recover com-

pensation in accordance with its terms accrues upon the

rendering of services.” Seese, 168 F.2d at 64-65. They

also asserted that the decision in Anderson had generated

“vested rights” in this Court’s interpretation. But Judge

Learned Hand expressed the universal judicial response:

“I agree that that right was ‘vested’ in every sense of

that word. However, it is another matter whether the

uncertainty that had prevailed and the unexpectedness

of the new liabilities were irrelevant upon whether the

Act was constitutional.” Addison v. Huron Stevedoring

Corp., 204 F.2d 88, 97 (2d Cir.) (Hand, J., concurring),

cert, denied, 346 U.S. 877 (1953). At least seven court

11 §2 Stat. 1060-1069 (1938) (as codified at 29 U.S.C. § 201 et seq.

(1989) ).

1261 Stat. 84-90 (as codified at 29 U.S.C. § 251 et seq. (1989)).

18 As the Michigan legislature did here, Congress excepted indi-

vidual cases that had been reduced to a final judgment before

enactment of the Portal-to-Portal Act. Seese, 168 F.2d at 62.

10

of appeals decisions, 42 reported district court decisions,

and 81 unreported ones held that the Constitution did not

preclude Congress trom retroactively overturning this

Court’s decision. After surveying these decisions, one

court of appeals said: “{E]very decision has upheld the

constitutionality of the statute. This unanimity of result

represents as accurate an expression of the views of the

federal judiciary as it is possible to obtain.” Thomas v.

Carnegie-Illinois Steel Corp., 174 F.2d 711, 713 (3d Cir.

1949) ."*

Two facets of the Portal-to-Portal controversy are par-

ticularly relevant here. First, Congress characterized this

Court’s decision in Anderson as “unexpected,” see Bat-

taglia, 169 F.2d at 259-60 n.11, and the courts accepted

that characterization, see, e.g., Seese, 168 F.2d at 64.

Second, Congress concluded that the Court’s interpreta-

tion had generated an unjustified windfall gain for em-

ployees, see Battaglia, 169 F.2d at 259-60 n.11, and the

courts also accepted that policy judgment. Seese, 168

F.2d at 64. The basic principle of these decisions is

that “[a] retroactive statute, by remedying an unexpected

judicial decision, may actually effectuate” important ex-

pectations. Hochman, The Supreme Court and the Con-

stitutionality of Retroactive Legislation, 73 Harv. L. Rev.

692, 693 (1960). In such circumstances, retroactive re-

versal is not constitutionally problematic.”

14 This Court consistently denied certiorari. In 149 Madison Ave.

Corp. v. Asselta, 331 U.S. 795, modifying 331 U.S. 199 (1947),

after the Court initially affirmed a judgment for overtime pay,

but before the time for rehearing had run, Congress enacted the

Portal-to-Portal Act. On rehearing, this Court vacated and re-

manded for reconsideration under the new law, and on remand,

the employers prevailed. Asselta v. 149 Madison Ave. Corp., 79

F. Supp. 413 (S.D.N.Y. 1948) and later proceeding Asselta v.

149 Madison Ave. Corp., 90 F. Supp. 442 (S.D.N.Y. 1950).

15 As Professors Henry Hart and Albert Sacks rhetorically ask:

“Would it be fair to say that, in principle, it was the Mt. Clemens

line of decisions rather than the statute which was actually open

to objection on the score of retroactivity?” H. Hart & A. Sacks,

The Legal Process: Basic Problems in the Making and Application

11

In Battaglia, General Motors successfully argued that

the Constitution does not prevent Congress from going

back nine years in retroactively depriving employees of

the unexpected benefits of a recent Supreme Court deci-

sion. Today, General Motors urges that the Constitution

does prevent a legislature from retroactively going back

five years to deprive employers of their unexpected gains

from a recent Michigan Supreme Court decision. If any-

thing, the circumstances here more strongly support the

legislature’s actions; while the FLSA was the first federal

statute regulating wages, the 1981 Workers’ Compensa-

tion Amendments were enacted against a longstanding

state practice of not reducing benefit levels retroactively."

In United States v. Sperry Corp., 110 S. Ct. 387 (1989),

the United States Claims Court had held that the Depart-

ment of the Treasury did not have statutory authority to

impose a fee on awards issued by the Iran-United States

Claims Tribunal; Congress swiftly granted that authority

and made its statutory grant retroactive for three years,

back to the date Treasury had first acted. This Court

unanimously upheld the statute. Similarly, when a dis-

trict court held certain commercial notes issued by local

of Law 647 (Tent. ed. 1958). See also Greenblatt, Limitations on

Retroactive Civil Legislation, 51 Nw. U.L. Rev. 540, 556 (1956).

16For another example of congressional action giving retro-

active effect to its rejection of a decision of this Court, see the

Handicapped Children’s Protection Act of 1986, Pub. L. No. 99-372,

100 Stat. 796 (codified as amended at 20 U.S.C. 1415(e) (4) (Supp.

IV 1986)). In that Act, Congress specifically overturned this

Court’s decision in Smith v. Robinson, 468 U.S. 992 (1984), by

permitting the award of attorney’s fees in circumstances Smith

had held precluded under earlier legislation. Congress made its

policy choice retroactive to the day before Smith had been decided,

more than two years earlier. Counsel v. Dow, 849 F.2d 731, 738-39

(2d Cir. 1988), cert. denied, 488 U.S. 955 (1989). Upholding

this retroactive overturning, the Second Circuit noted: “ ‘Curative’

legislation such as this, which is designed to cure what Congress

perceived as a defect in prior law, is entitled to particular defer-

ence.” Jd. (emphasis added). At least two district courts have

reached the same conclusion, id. at 739; no court appears to have

reached a contrary result.

12

governments not subject to estate taxes, and Congress

retroactively overturned that decision,'’ the Solicitor Gen-

eral defended the statute on the ground that it was “de-

signed simply to avoid giving taxpayers a windfall bene-

fit as a result of a judicial decision that postulated (we

believe erroneously) a previously unrecognized estate tax

exemption.” Jurisdictional Statement at 12-13, United

States v. Crocker National Bank, 481 U.S. 1047 (1987)

(No. 86-1521).

Earlier in the century, this Court established the prin-

ciples on which these legislative actions rest. A judicial

decision about the meaning of a statutory policy creates

no general bar to a legislative decision reaching a con-

trary policy conclusion and applying that conclusion retro-

actively. See, e.g., Swayne & Hoyt, Ltd. v. United States,

300 U.S. 297 (1936); Graham & Foster v. Goodcell, 282

U.S. 409 (1931); United States v. Heinszen & Co., 206

U.S. 370 (1907). Although a statute overturning a final

judgment that is res judicata between specific parties

might present a more difficult question,’® even such actions

have been sustained, as in the classic decision in Calder v.

Bull, 3 U.S. (3 Dall.) 386 (1798) (legislature set aside

probate court decree and ordered new hearing). See also

Paramino Lumber Co. v. Marshall, 309 U.S. 370 (1940)

(five years after final administrative judgment, and long

after time for judicial review had passed, Congress or-

dered new compensation hearing).

17 Haffner v. United States, 585 F. Supp. 354 (N.D. Ill, 1984),

modified, 757 F.2d 920 (7th Cir. 1985), the result of which was

overturned by Section 641(a) of the Deficit Reduction Act of 1984,

Pub. L. No. 98-369, 98 Stat. 939.

18 This Court found that the original statute had not exempted

the notes, thus obviating any constitutional challenge to the sub-

sequent statute. United States v. Wells Fargo Bank, 485 U.S. 351

(1988).

19In the present case, such final judgments were specifically

exempted from the reach of the Michigan statute.

—~

13

B. State Legislatures

Like congressional legislation, retroactive state policy-

making has at times been prompted by judicial decisions

interpreting statutes. And like the federal courts, state

courts typically have upheld such legislation.*® State leg-

islatures have a substantial interest in the occasional use

of this technique in order to retain ultimate control over

ongoing regulatory programs.

This Court has had less occasion to review state legisla-

tion responding to state court decisions. But in Van

Emmerik v. Janklow, 454 U.S. 1181 (1982), the Court

concluded that a state court’s rejection of a challenge to

such legislation did not present a substantial federal ques-

tion. Significantly, the State’s justifications for retroac-

tivity in Van Emmerik were less weighty than in the

present case, and the burdens imposed substantially

greater.

In Van Emmerik, the South Dakota statute under

attack responded not to the legitimate expectations of

elderly retirees but to a judicial decision holding that the

proper sales tax rate on utility services was three per-

cent, rather than the four percent imposed by the general

sales tax. Although no well-entrenched state policy indi-

cated that the general sales tax rate and that for utility

services should be the same, the South Dakota legislature

retroactively fixed a four percent rate reaching back 11

years. This Court sustained the South Dakota Supreme

Court’s conclusion that the act did not violate any consti-

tutional prohibitions.

The broad range of retroactive policymaking (and prec-

edent sustaining it) indicates not only the degree of dis-

ruption that would be caused by increased constitutional

20 See, e.g., Laubie v. Sonesta Int'l Hotel Corp., 752 F.2d 165

(5th Cir. 1985); Priest v. Canada Life Assur. Co., 446 N.W.2d 352

(Mich. App. 1989) ; Sanelli v. Glenview State Bank, 483 N.E.2d 226

(Ill. 1985) (and cases cited therein); Schwarzkopf v. Sac County

Bd. of Supervisors, 341 N.W.2d 1 (lowa 1983) (and cases cited

therein).

14

constraints on retroactivity, but the extent to which the

kind of retroactivity involved here is widely regarded as

appropriate and fair. In part because of the frequency

of such retroactive policymaking, petitioners bear a heavy

burden of proving that the effect of this state statute is

so arbitrary, unfair, and irrational that it violates their

constitutional rights. See National R.R. Passenger Corp.

v. Atchison, T., & S. F. R.R., 470 US. 451, 472 (1985).

Petitioners acknowledge only parts of this overwhelm-

ing array of case law. Seeking to meet their burden of

proof, they distinguish the small sample of cases they

cite, arguing that there are two radically different kinds

of legislative action overturning judicial decisions. Pet.

Br. at 38-44. The first are cases said to implicate only

“curative” reversal of judicial decisions; the second are

said instead to entail a “reversal” of legislative policy.

Not surprisingly, petitioners assert that all the adverse

decisions they acknowledge fall in the first category, while

the instant case—allegedly standing alone in the case law

—falls into the second. Such a distinction is of doubtful

value," and whatever its utility may be in other con-

texts, it is of no avail here.

First, when a legislature overturns a judicial construc-

tion of a statute, the suggested distinction is largely with-

out substance. Beyond recitation of these labels, pti-

tioners offer no helpful analysis, capable of being judici-

aliy applied, to distinguish between legislative reversals

that merely “cure” statutory problems and those that are

“true reversals.” In all these cases, legislatures respond

to a judicial decision, typically regarded as erroneous,

that is said to require remedial or curative legislation.

Taking petitioners’ suggested line seriously would require

courts to second-guess legislative judgments about the

necessity for legislative action.

21 The only decision of this Court in which the distinction appears

even arguably to have contributed to the invalidation of a state

legislative act is Forbes Pioneer Boat Line v. Board of Commrs.,

258 U.S. 338 (1922), discussed infra Section I11.C and note 28.

15

Second, nothing distinguishes this case from those

cited—including the Portal-to-Portal decisions and Van

Emmerik—in which legislatures overturned other judicial

decisions ; if those cases are explained as “curative,” the

“curative” category must be applied here as well. Indeed,

commentators have recognized as “curative” any legisla-

tion that simply overturns a statutory interpretation.

See, e.g., Munzer, A Theory of Retroactive Legislation,

61 Tex. L. Rev. 425, 468 (1982) (“[C]urative acts are

Statutes that retroactively adjust existing legislation to

conform to the putative intent of the legislature .. .

| T] hey are routinely upheld.”’).

Third, in every case of this sort, those disadvantaged

by retroactive legislation claim a “sudden reversal” of

policy. In Heinszen, for example, businesses complained

that Congress, in retroactively authorizing tariffs eight

years into the past, had simply enacted a new tariff. This

Court said such a claim “begs the question” and “mis-

stat{es] the nature of the act of Congress”; the statute

“on its very face” had been designed as a response to a

specific judicial decision. 206 U.S. at 385-86. Looking

to the legislature’s asserted purposes and to the context,

the Court found that the statute had simply restored ex-

pectations that the Court’s own decisions had disrupted.

Finally, on the facts of this case, there is no sudden

“reversal of policy’; despite their reconstruction of the

facts, petitioners cannot carry their burden of rebutting

the well-substantiated conclusions of the Michigan Su-

preme Court and legislature that it was the court’s own

decision in Chambers that was “unexpected.”

The labels “curative” and “reversal of policy’ are con-

clusory and distract from genuine analysis. They are

vestiges of a pre-Realist era in which courts sought to

categorize problems in formal terms, rather than directly

examining the underlying interests involved. Serious ef-

forts to apply them would intrude on the prerogatives of

state legislatures to define the bases for their actions.

Instead, the Court has generally looked, and should con-

16

tinue to look, to the justifications for retroactive state

legislation, to the nature of the interests affected, and to

the extent of the burden imposed. As the following sec-

tions show, based on these concrete concerns, the Michigan

legislature’s actions fall well within constitutional limits.

II. PRINCIPLES OF FEDERALISM SUPPORT MICHI-

GAN’S AUTHORITY TO ACT RETROACTIVELY IN

THE CIRCUMSTANCES OF THIS CASE

Some critiques of retroactive legislation focus on con-

cern for protecting the judiciary from undue legisla-

tive interference, or protecting earlier legislatures from

subsequent ones.*? But as Justice Brennan noted, “we

have held the States not bound, as is the Federal Govern-

ment, by the doctrine of separation of powers.” McGau-

tha v. California, 402 U.S. 183, 254 n.3 (1971) (Bren-

nan, J., dissenting). As a result, even if retroactive fed-

eral legislation might be barred in some circumstance by

separation «f powers principles, similar state legislation

should 1. «© this ground, be held to violate the Con-

stitution.

Yet, in essence, the allocation of policymaking author-

ity between the branches of state government is ulti-

mately all that is involved in this case. In the courts be-

low, petitioners aggressively challenged the Michigan leg-

islature’s actions on state separation of powers grounds.

The Michigan Supreme Court rejected those arguments,

and, as in previous Michigan cases,”* upheld the power of

the legislature to give retroactive effect to a law over-

turning a statutory interpretation by that State’s courts.

Under Michigan law, the legislature simply has the final

word on the meaning of the statutes it enacts. Argu-

ments about whether that legislature actually honored

the intent of the original, enacting legislature, or whether

the Michigan Supreme Court’s decision was unexpected,

22 See, e.g., Eule, supra note 10.

23 Priest v. Canada Life Assur. Co., 446 N.W.2d 352 (Mich. App.

1989): Macomb County Prof. Deputies Ass’n v. Macomb County,

452 N.W. 2d 902 (Mich. App. 1990).

17

are therefore ultimately beside the point. Michigan has,

in a sense, chosen to give its legislature the option of act-

ing as a court of last resort on questions of statutory con-

struction—at least when general policy consequences are

at stake. As Justice Stevens has said, “it is not our busi-

ness to disagree with the state tribunal’s evaluation of

the State’s own lawmaking process.” Minnesota v. Clover

Leaf Creamery Co., 449 U.S. 456, 483-84 (1981) (Stev-

ens, J., dissenting).** Basic principles of constitutional

federalism protect the choice Michigan has made. See

generally Gregory v. Ashcroft, 111 S. Ct. 2395, 2399-

2400 (1991).

“Rights under [the Fourteenth] amendment turn on

the power of the State, no matter by what organ it acts.”

Missouri v. Dockery, 191 U.S. 165, 170-71 (1903)

(Holmes, J.). Of course, the Michigan legislature origi-

nally could have made quite explicit its decision to apply

the 1981 Amendments only to workers injured after those

Amendments took effect. Similarly, the Michigan courts

could have interpreted the Amendments as having only

prospective effect and hence as applicable only to such

workers. Had the Michigan legislature intervened to

clarify the 1981 Amendments before any court had con-

strued them, it is hard to see any constitutional barrier

that would have stood in the way. Had the legislature

instead stepped in after a lower state court had inter-

preted the statute, while that decision could still have been

reversed in a higher state court, a “retroactive” legisla-

tive clarification would surely not raise any constitutional

problems. See, e.g., Chase Sec. Corp. v. Donaldson, 325

U.S. 304 (1945) ; Goddard v. Frazier, 156 F.2d 938 (10th

24 See also id. at 461 n.6 (majority opinion) (“the States are free

to allocate the lawmaking function to whatever branch of the state

government they may choose”) ; Uphaus v. Wyman, 360 U.S. 72, 77

(1959); Sweezy v. New Hampshire, 354 U.S. 234, 256-57 (1957)

(Frankfurther, J., concurring in result); Highland Farms Dairy,

Inc. v. Agnew, 300 U.S. 608, 612-13 (1937) (Cardozo, J.) (“How

power shall be distributed by a state among its governmental organs

is commonly, if not always, a question for the state itself.’’).

18

Cir.), cert. denied, 329 U.S. 765 (1946). If the State’s

highest court had rejected prior judicial interpretations,

its decision would have had precisely the same retroactive

effect as the legislation at issue here, and yet no constitu-

tional issues would be raised. Finally, as occurred here,

the legislature could intervene after interpretation of the

statute by the State’s highest court. Viewed from the per-

spective of the federal Constitution, this last situation is

no different from the others. Whether a state legislature

chooses to act before any judicial decision, after a lower

court decision, or after a highest court decision, is purely

a question of legislative judgment and the internal allo-

cation of state policymaking authority. At least in the

absence of some extraordinary abuse of power that “shocks

the conscience,” Rochin v. California, 342 U.S. 165, 172

(1952), as far as the Constitution is concerned, that is

the end of the matter.

“It might seem advantageous to some of the states that

the judicial and legislative authorities or functions of the

government should be blended in the same body; and that

the legislature should in all cases exercise powers similar

to those now vested in one branch of the British Parlia-

ment. ... Should such an organization be adopted by a

state, whatever might be thought of its wisdom, where

beyond the body politic of the state would exist any power

to impugn its legitimacy?” Baltimore & S. R.R. v. Nesbit,

51 U.S. (10 How.) 395, 400 (1850).%° Division of au-

thority between courts and legislatures at the state level

25The most frequently cited statement of this view is from

Dreyer v. Illinois, 187 U.S. 71, 84 (1902) :

“Whether the legislative, executive and judicial powers of a

State shall be kept altogether distinct and separate, or whether

persons or collections of persons belonging to one department

may, in respect to some matters, exert powers which, strictly

speaking, pertain to another department of government, is for

the determination of the State. And its determination one way

or the other cannot be an element in the inquiry whether the

due process of law prescribed by the Fourteenth Amendment

has been respected by the State or its representatives when

dealing with matters involving life or liberty.”

19

vary greatly from those the Constitution requires of the

national government. Some state courts issue advisory

opinions; participate directly in making political appoint-

ments; issue final rules of practice not subject to legisla-

tive validation; have a more unconstrained policymaking

role through relaxed standing requirements or the power

to issue prospective decisions beyond whatever limits Arti-

cle III might impose; or serve in administrative capacities

not available to the federal courts. See, e.g., Prentis v.

Atlantic Coast Line Co., 211 U.S. 210, 225 (1908)

(“|Wlhen, as here, a state constitution sees fit to unite

legislative and judicial powers in a single hand, there is

nothing to hinder so far as the Constitution of the United

States is concerned’). Ever since Calder v. Bull, this

Court has recognized that state legislatures may similarly

play a more direct, quasi-judicial role vis-a-vis their state

courts than is permitted to Congress under separation-of-

powers principles. “There is nothing in the constitution

of the United States which forbids the legislature of a

state to exercise judicial functions.” Satterlee v. Matthew-

son, 27 U.S. (2 Pet.) 380, 413 (1829). See generally, 3

J. Story, Commentaries on the Constitution, § 1392, at

266-67 (1833) (same).

The limited nature of the quasi-judicial role implicated

here must be stressed. Thus, this is not a case in which

a state legislature is upsetting a final judgment that is

res judicata on the rights and liabilities of specific par-

ties.°* Indeed, adjudicated controversies between specific

litigants are explicitly exempted from the reach of the

1987 Amendments. The legislature’s concern was rather

with the thousands of other individuals, not parties to the

case, who were affected by the state court’s ruling, and

with the broad policy consequences of that ruling for an

ongoing regulatory program. If it is necessary to draw

a sharp line between legislative and judicial functions

(and for the States it assuredly is not), this legislature

*6 Even if it were, the statute might still be valid. See Fleming

v. Rhodes, 331 U.S. 100 (1947) (upholding retroactive legislation

overturning final judgments).

20

has thus left to the courts the quintessential judicial func-

tion of resolving individual disputes; the Michigan legis-

lature has addressed only the consequences of such reso-

lutions for disputes not yet adjudicated. This focus, es-

pecially in matters of this magnitude, would seem to go

to the heart of the legislative role.

In general, legislatures are no more disabled from re-

sponding to changed circumstances triggered by judicial

decisions than by other acts. Judicial decisions do not

differ in kind from other events that might disrupt settled

expectations, constitute unexpected changes in circum-

stances, or produce unbargained-for windfall gains. The

extent to which a judicial decision departs from widely

shared understandings and practices, or resolves genuine

uncertainty, may be relevant in determining the firmness

of the foundation for legislative action, or the substanti-

ality of the countervailing equities. But the substantial

body of precedent on this practice, see Section I, shows

that in cases involving legislative reversal of judicial de-

cisions, courts examine these specific considerations just

as they do in any other circumstance prompting retro-

active legislation.

As we explained above, in the many cases upholding

legislative reversals of judicial decisions, this Court and

others have consistently considered the extent to which

the decisions in question disrupted settled expectations or

produced windfall gains.*? And on questions such as these

—which go to how necessary legislation is perceived to

be—courts historically have deferred to legislative judg-

ments. See, e.g., McCulloch v. Maryland, 17 U.S. (4

Wheat.) 316, 423 (1819). That the state courts are best

positioned to characterize the local circumstances and

purposes leading to state legislation further structures

27 See Section I. In such analogous contexts as the availability

of a remedy in habeas corpus, or in damages, for constitutional vio-

lations, the Court has looked to the “newness,” or unpredictability,

of the decision relied upon by the person alleging a constitutional

wrong. See generally Fallon & Meltzer, New Law, Non-Retroactivity,

and Constitutional Remedies, 104 Harv. L. Rev. 1731 (1991).

21

and constrains this Court’s review. See, e.g., North Caro-

lina v. Butler, 441 U.S. 369, 8376 n.7 (1979); Ward v.

Illinois, 431 U.S. 767, 772 (1977); see also Employment

Div. v. Smith 485 U.S. 660, 676-77 (1988) (Brennan, J.,

dissenting) . Inquiry into whether a judicial decision was

in fact a change in circumstance justifying retroactive

legislation thus poses no special constitutional problems.

In addition, even a judicial decision that can be char-

acterized as “foreordained” and obviously “correct” does

not present an ineluctable barrier to legislative reversal.

The relevant question is not whether legislation is retro-

active with respect to a judicial decision or some other

event, but whether, in context, the burdens imposed are

so harsh, and the legislature’s reasons for acting so arbi-

trary, as to constitute a denial of due process. Reversal

of a judicial decision, in and of itself, is not per se so of-

fensive to basic notions of fairness that it is constitution-

ally barred, See, e.g., Fleming (upholding retroactive re-

versal of even final judgments).

Federal administrative agencies, which at times com-

bine adjudicatory and policymaking roles, have the power

to adopt retroactive policies. See, e.g., Leedom v. Interna-

tional Bhd. of Elec. Workers, 278 F.2d 237 (D.C. Cir.

1960). More significantly, federal agencies have the

power to respond to judicial decisions interpreting their

governing statutes with retroactive policy changes. SEC

v. Chenery Corp., 332 U.S. 194 (1947) ; Addison v. Holly

Hill Fruit Products, Inc., 322 U.S. 607, 620 (1943). To

deny at least this much power to state legislatures, re-

sponding to the interpretation of state regulatory pro-

grams by state courts, would make federalism ai empty

guarantee.”*

*8 That principles of federalism support Michigan’s authority to

act as it did is underscored by the Framers’ specific rejection of a

proposed prohibition of retroactive state legislation. A proposal by

Edward Rutledge—to add a ban on “retrospective laws” to the

other specific prohibitions on state action—was deleted from the

Convention draft by the Committee on Style. See 2 Records of the

Federal Convention of 1787 440, 597 (Farrand ed. 1937). And

22

III. NONE OF THE CIRCUMSTANCES THAT MIGHT

APPROPRIATELY LIMIT THE SCOPE OF RETRO-

ACTIVE LEGISLATION IS PRESENT HERE

No dispute can exist as to the legitimacy of the ends

for which the Michigan legislature acted. Those ends

consistently with this decision, this Court frequently held, during

the first half of the Nineteenth Century, that the Constitution did

not preclude retroactive state civil laws. See, e.g., Calder v, Bull,

8 U.S. (3 Dall.) at 397 (Patterson J.) (“I had an ardent desire

to have extended the provision in the constitution to retrospective

laws in general.”); Carpenter v. Pennsylvania, 58 U.S. (17 How.)

456 (1854); Baltimore & S. R.R., 51 U.S. (10 How.) at 401 (“That

there exists a general power in the state governments to enact

retrospective or retroactive laws, is a point too well settled to

admit of question at this day.”); Watson v. Mercer, 33 U.S. (8

Peters) 88, 110 (1834) (“it is clear that this court has no right

to pronounce an act of the state législature void, as contrary to the

Constitution of the United States, from the mere fact that it

divests antecedent vested rights of property. The Constitution of

the United States does not prohibit the state from passing retro-

spective laws generally; but only ex post facto laws.”). Moreover,

Justice Story, in the sentence of his treatise immediately following

the one quoted by petitioner, Pet. Br. at 38, said that notwith-

standing objections to retroactive laws, such laws are nonetheless

“left open to the States, according to their own constitutions of

government.” 2 J. Story, Commentaries on the Constitution 272

(5th ed. 1891). See also 3 J. Story, Commentaries on the Consti-

tution 266 (1833) (same).

Nor is there anything in the text or history of the fourteenth

amendment to suggest that its adoption operated to limit the exist-

ing powers of the States in this respect. As the Court stated in

League v. Texas, 184 U.S. 156, 161 (1902), the Amendment “contains

no prohibition of retroactive legislation as such, and therefore now,

as before, the mere fact that a statute is retroactive in its operation

does not make it repugnant to the Federal Constitution.” See also

Orr v. Gilman, 183 U.S. 278, 286 (1901) (reaffirming Carpenter,

supra). Thus, in the Fifth Edition of Justice Story’s Commentaries,

published in 1891, the passage quoted above appears unchanged.

2 J. Story, Commentaries on the Constitution 272 (5th ed. 1891).

To be sure, at the height of the era in which economic interests

were held to be protected by notions of substantive due process,

there are several suggestions in the Court’s opinions that the four-

teenth amendment prohibits retroactive state laws defeating

“vested rights.” E.g., Treigle v. Acme Homestead Ass’n, 297 U.S.

23

include (1) restoring recently unsettled expectation and

reliance interests; (2) promoting stability, certainty, and

confidence in government’s willingness to honor its com-

mitments; (3) responding to significant, sudden changes

in circumstances, including unexpected judicial decisions;

(4) requiring disgorgement of windfall gains; and (5)

assuring that injured workers and their dependents have

sufficient means to avoid falling into poverty and the

need for public assistance. The propriety of these pur-

poses, whether in the context of retroactive legislation

or elsewhere, is well-established.””

The principal question, then, is whether the particular

means chosen—retroactive policymaking—is so arbitrary

and oppressive in the context of this case as to suggest

serious substantive due process concerns. In specific cir-

cumstances, retroactive legislation might conceivably raise

189 (1936). But the only decision during this era that appears to

rest exclusively on this rationale—and certainly the most recent—

is Forbes Pioneer Boat Line v. Board of Comm'rs, 258 U.S. 338

(1922) (holding unconstitutional a state statute seeking to vali-

date retroactively a toll collected from a vessel for passage through

a canal). Forber is distinguishable from the present case on many

factual grounds, but more notably for present purposes, the Court’s

four paragraph opinion relies on no American precedent and cites

no constitutional text or history to support the result. Whether or

not that result is equitable, it provides no support for finding a

barrier to retroactive state legislation in the Constitution’s text or

original understandings. Moreover, in the same year that Forbes

was decided, this Court declined to extend it “beyond its facts,”

Charlotte H. & N. R.R. v. Welles, 260 U.S. 8, 12 (1922), and it has

never since invoked the decision to invalidate any other state stat-

ute on retroactivity grounds.

*° For cases recognizing the legitimacy of these purposes, see

Section I. On preventing receipt of windfall profits, or requiring

their disgorgement, as legitimate public purposes, see Energy Re-

serves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400,

412 (1983); United States Trust Co. v. New Jersey, 431 U.S. 1,

31 n.30 (1977); El Paso v. Simmons, 379 U.S. 497, 515 (1965):

Lichter v. United States, 334 U.S. 742 (1948); Fleming v. Rhodes,

331 U.S. 100 (1947); Battaglia, 169 F.2d at 259-60 n.11; Seese,

168 F.2d at 65. See generally Hochman, supra, at 705; Slawson,

supra, at 226.

24

such concerns. Against that possibility, the Court might

reserve some outer limitations on the power of state leg-

islatures to overturn decisions of their own courts. The

possible limitations that case law and the history of retro-

active legislation suggest, however, are not remotely im-

plicated in this case.

A. Political Process Concerns

When legislating retroactively, a legislature may be

able to identify with certainty the particular individuals

who will be adversely affected. Thus, retroactive legisla-

tion can be (and has been) a vehicle to target specific

individuals or to single out particularly vulnerable groups

for legislatively-imposed disadvantages. See Greenblatt,

supra, at 540; ef. Fletcher v. Peck, 10 U.S. (6 Cranch)

87, 137-38 (1810) (Contracts Clause stemmed from “ap-

prehension {of| violent acts which might grow out of the

feelings of the moment”).

The type of retroactive statute involved here raises no

such question of possible exploitation. It is not targeted

at a few employers singled out from the rest, compare

Allied Structural Steet Co. v. Spannaus, 488 U.S. 234

(1978), and is as general in its effects as prospective leg-

islation on the subject would be. Moreover, petitioners

General Motors and Ford, and business more broadly, can

hardly be considered particularly vulnerable groups un-

likely to have their interests heard and fairly considered

in the Michigan legislature. In general, they are not

“nolitically weak or an easy target for the imposition of

costs and hence chosen to bear those costs without fair

attention to [their] interests.” Note, A Process-Oriented

Approach to the Contracts Clause, 89 Yale L.J. 1623,

1646-47 (1980). And in this specific case, the Michigan

statute was not enacted with “studied indifference’,

W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56, 60

(1935) (Cardozo, J.), to their interests. Business inter-

ests participated actively in the legislative process and

succeeded in having the legislation as initially proposed

transformed into a package of comprehensive reforms of

25

the compensation system; indeed, among the provisions

included in this package as enacted was one that business

had long sought and that overruled another decision of

the Michigan Supreme Court. Beauchamp v. Dow Chemi-

cal Co., 398 N.W.2d 882 (Mich. 1986) (holding exclusive

remedy provisions of workers’ compensation system do

not bar actions for intentional torts). The legislation was

not enacted hastily, but with full deliberation and atten-

tion to business concerns.

B. Extreme Delay

Retroactive legislation that responds to a change in cir-

cumstances and seeks to restore the status quo might

raise concern if not enacted reasonably promptly. But in

this case, legislation to overturn Chambers was intro-

duced within days of the decision, passed by the House

within one month of the court’s denial of rehearing, and

signed into law a little more than one year later. This is

well within the time periods courts have accepted for

legislative responses to judicial decisions. Particularly

given the need for full legislative deliberation, and the

fact that the challenged provision became part of a com-

prehensive reform of workers’ compensation in Michigan,

this action was reasonably prompt.

Petitioners obscure the fact that the legislation was a

response to a particular judicial decision. Rather than

recognizing that the statute was designed to overturn the

ruling in Chambers—a decision rendered only 17 months

earlier—they describe the statute as reaching back five

years, to the effective date of the original 1981 Amend-

ments. Of course, not until Chambers was decided was

the legislature faced with the changed circumstance that

triggered the need to consider a possible response.

Furthermore, even on petitioners’ more expansive meas-

ure, the statute does not reach back nearly as far as

existing precedent permits. In the Portal-to-Portal cases,

see Section I.A, Congress acted almost a year after this

Court’s decision, and on petitioners’ measure, the legisla-

tion there “reached back” nine years (to the original

26

Fair Labor Standards Act). More recently, courts have

sustained Congress’ decision, in validating Treasury De-

partment regulations, to make its action retroactive for

four years. See, e.g., Canisius College v. United States,

799 F.2d 18 (2d Cir. 1986), cert. denied, 481 U.S. 1014

(1987). In Heinszen, this Court sustained Congress’ de-

cision to “reach back” and validate a tariff collected six

years earlier. And in Van Emmerik, which this Court

dismissed for want of a substantial federal question, the

state legislature acted within one year of a state supreme

court decision, but the response “reached back” 12 years.”

It is difficult to know what to make of petitioners’ as-

sertion that, apart from “curative” cases, “we are not

aware of any decision of any other court affirming the

authority of a legislature to reach back beyond the ses-

sion of its immediate predecessor.” Pet. Br., at 41. If, as

we believe, the cases just listed all involve “curative”

legislation, then this case does as well; nothing distin-

guishes the Portal-to-Portal cases, Van Emmerik, and

other cases cited in Section I from the situation here.

And even if, for reasons we do not perceive, this case in-

volves something radically different from “curative” leg-

islation, numerous other cases (which petitioners do cite

for other points*') uphold similar legislation in circum-

stances where legislatures have reached back as far—

and in many instances much further—than here. As this

well-established body of law makes clear, the Michigan

legislature acted with sufficient promptness in overturn-

ing the result in Chambers.

C. Unfair Surprise and Interferences with Free Choice

Retroactive legislation most offends the values asso-

ciated with security and stability when its burdens fall

as a sudden surprise. Moreover, questions of fairness are

intensified if a person would likely have altered his con-

%©In Paramino, supra, Congress acted after new information

became available and opened up hearings that had been reduced

to final awards more than five years earlier.

31 Pet. Br. at 39-40.

27

duct had he known in advance of the duties or liabilities

that retroactive legislation subsequently imposes.

The combination of these factors best explains those

few cases in this century in which this Court has invali-

dated retroactive legislation. The gift/estate tax cases,

for example,” imposed retroactive taxes that, had they

been known in advance, might well have caused parties to

structure their transactions differently or not to make

the gifts in question at all. Some of these cases also in-

volved either the first federal gift tax, whose effect on

previously completed transactions could well come as a

surprise,” or, another, wholly new type of tax imposed

for the first time." In the same vein, Forbes involved

“the most obviously unjust” retroactive law, a law that

sought to impose a fee for a ship’s use four years earlier

of a particular lock and canal. Slawson, Constitutional

and Legislative Considerations in Retroactive Lawmak-

ing, 48 Calif. L. Rev. 217, 220 (1960). Had notice of

the fee existed in advance, the ship’s owners might well

have charted a different course.

Neither unfair surprise nor interference with free

choice can be ascribed to the statute challenged here. At

the time they first took their aggressive litigation posture,

petitioners knew that their argument was controversial;

that other employers refused to make it; that the legisla-

ture had adopted a resolution rejecting it; and that ad-

ministrative tribunals and lower Michigan courts were

rejecting it whenever raised. They knew that, should they

prevail in Chambers, legislative response was a distinct

possibility. Moreover, at no point did they have any rea-

sonable basis for acting as if Chambers were the final

word; as soon as it was decided, legislation to overturn

it was introduced, made retroactive, and quickly adopted

82 Helvering v. Helmholz, 296 U.S. 93 (1935); Coolidge v. Long,

282 U.S. 582 (1931); Untermyer v. Anderson, 276 U.S. 440 (1928) :

Nichols v. Coolidge, 274 U.S. 531 (1927), cited in Pet. Br. at 43.

33 Untermyer, 276 U.S. 440.

34 Nichols v. Coolidge, 274 U.S. 531.

28

in one house of the Michigan legislature. That thorough

legislative deliberation took slightly more than one year

does not make the final outcome any more of a surprise.

“Appellee is hardly in a position to claim surprise at the

[amendments] to the minimum tax. The proposed in-

crease in rate had been under public discussion for almost

a year before its enactment.” United States v. Darus-

mont, 449 U.S. 292, 299 (1980).

Nor can petitioners plausibly claim that they would

have altered their conduct had they known in advance

that they would have to pay full benefits to workers in-

jured before 1982. First, at the time those workers were

injured, Michigan law required those payments. Second,

as most employers recognized, from 1982 (when the 1981

Amendments went into effect) to the 1985 Chambers

decision, that remained the State of Michigan law. As

sophisticated business entities, petitioners surely knew

there was a significant risk that their litigation position

would be rejected and that they would owe full benefit

payments; they doubtless took that risk into account in

their planning. Third, as soon as Chambers was de-

cided, the immediate legislative response told petitioners

they could not assume Chambers would stand inviolable.

Most significantly, workers’ compensation is a manda-

tory regulatory scheme, not one of unconstrained volun-

tary choice. Even had this legislation come as a complete

surprise, it likely would not violate substantive due

process principles. Because neither employers nor em-

ployees can choose to opt out of the workers’ compensation

system, petitioners could not have chosen a different course

(short of ceasing to do business in Michigan) had the

statutory changes been enacted earlier and made prospec-

tive. That petitioners might have left Michigan alto-

gether, or restructured any significant business decisions,

is simply implausible, given the relationship of the amount

in dispute to their revenues and earnings. Cf. Sperry, 110

S. Ct. at 395-96; Bradley v. Richmond School Bd., 416

U.S. 696, 721 (1974). Indeed, although petitioners

vaguely invoke “reliance,” the record does not identify

a

29

any specific decision that might have been altered at any

time had petitioners known—as they did in fact through-

out—that they might well have to pay full benefits to

workers injured before 1982. The Michigan legislature’s

action involved no surprise at all, let alone one that could

be considered unfair. Nor did it unfairly impose liabili-

ties that could have been avoided had they been clearly

defined sooner.

D. Destruction of Substantial Equity

Interference with interests resting on reasonable reli-

ance may be necessary but is not sufficient to invalidate

retroactive legislation. Not every reliance-based interest

receives or warrants the same constitutional protection.

Instead, the nature and quality of the interest burdened

is relevant to the permissible scope of legislative action;

when a statute affects interests in which individuals have

a substantial stake, legislative interference becomes more

vulnerable to challenge under the Due Process Clause. Cf.

Energy Reserves, 459 U.S. at 412; Penn Central Trans-

portation Co. v. New York City, 488 U.S. 104, 124

(1978) (special protection for “investment-backed” ex-

pectations under Just Compensation Clause). As a lead-

ing study puts it, “it is not unconstitutional to deprive a

person of a right which rests on no substantial equity.”

Hochman, supra, at 722.

In this case, the only interests resting on substantial

equity are those of the injured workers affected, includ-

ing elderly retirees. Their lives had been structured

around the well-justified expectation that, like all pre-

viously injured workers, they would regularly receive the

benefit payments (often their principal income source) to

which they had been found entitled at the time an award

had been made. Employers cannot point to any similar

substantial equity, or indeed any investment at all, that

could reasonably have been based on Michigan law as it

stood prior to the legislation at issue. With regard to the

pre-Chambers period, they cannot reasonably have in-

vested in reliance on a statute whose meaning was at best

controversial and sub judice. And virtually as soon as

30

Chambers was decided, legislation to reverse it retroac-

tively was introduced and approved in one legislative

chamber.

E. State Self-Aggrandizement

Retroactive state action might be subject to special ju-

dicial scrutiny when the State itself directly benefits from

its own retroactive policies. In such cases, States confront

special incentives that might raise concerns as to whether

full and fair attention will be given to the interests dis-

advantaged by retroactive policies. Cf. United States

Trust v. New Jersey, 431 U.S. 1 (1976) (heightened scru-

tiny under Contracts Clause).* In the gift/estate tax

cases, and in Forbes, where the Court invalidated retro-

active statutes, the State stood to benefit in just this way.

But that is not the case here. The Michigan legislature

has simply reached one more accommodation in the on-

going conflict between two powerful interests—business

and labor.

* & & &

In sum, judicial decisions interpreting regulatory stat-

utes are a subset of the larger class of events that occa-

sionally may produce unexpected, unsettling disturbances

to a long established status quo. At least apart from

actual final judgments, judicial interpretations of statutes

pose no special barrier to a legislative determination to

adopt a retroactive policy response. Such responses may

be circumscribed by the Constitution in the presence of

at least one of the special factors noted above. But be-

cause none is present here, the Michigan legislation falls

well within acceptable constitutional boundaries.

CONCLUSION

The judgment of the Michigan Supreme Court should be

affirmed.

35 The famous Legal Tender Cases, 79 U.S. (12 Wall.) 457 (1871),

and the Gold Clause cases, Perry v. United States, 294 U.S. 330

(1935) and Norman v. Baltimore & O. R.R., 294 U.S. 240 (1935),

stand for the similar principle that repudiation of public (as opposed

to private) obligations warrants heightened scrutiny.

RICHARD H. PILDES

933 Legal Research

Ann Arbor, MI 48109-1215

(313) 747-1014

DAVID SHAPIRO

1525 Massachusetts Ave.

Cambridge, MA 02138

Of Counsel

September 1991

31

_ Respectfully submitted,

RICHARD RUDA *

Chief Counsel

MICHAEL G. DZIALO

STATE AND LOCAL LEGAL CENTER

444 North Capitol Street, N.W.

Suite 349

Washington, D.C. 20001

(202) 638-1445

* Counsel of Record for the

Amici Curiae