Amicus Curiae Brief — Seven Up Pete Venture v. Montana

5

to its contractual obligations when it enters financial or

other markets.” Energy Reserves Group, Inc. v. Kansas

Power and Light Co., 459 U.S. 400, 413, n. 14 (1983)

(emphasis added).

As such, Montana acted in its own interest by shifting

the burdens that resulted from its adoption of 1-137 from

itself to Petitioners. Therefore, the Montana Supreme

Court should have considered whether Montana’s adoption

of I-137 constituted an “important public purpose” that

was both “reasonable” and “necessary.” Because the

Montana Supreme Court and, in similar contexts, various

federal circuit courts have decided this important federal

question in a way that conflicts with the decisions of this

Court and another State Supreme Court, this Court

should grant certiorari to clarify when heightened scrutiny

ought to be applied to contractual impairments by a State.

B. Petitioners Have Been Materially Harmed

Because Had Heightened Scrutiny Been

Applied To The State’s Contract, Which The

State Impaired, Montana Would Have Vio-

lated The Contracts Clause.

Petitioners have been materially harmed because the

Montana Supreme Court improperly applied a deferential

standard to Montana's contract impairment instead of a

heightened scrutiny standard. Under the heightened

scrutiny standard, for a contract impairment not to violate

the Contracts Clause that impairment must be reasonable

and necessary to further an important public purpose.

U.S. Trust, 431 U.S. at 25-26. Applying this standard,

Montana violated the Contracts Clause by its purposeful

impairment of its contract with Petitioners because none

of the three criteria required by this Court was satisfied.

6

First, Montana’s actions did not “serve an important

public purpose.” The Montana Supreme Court concluded

that the purpose of the contractual impairment was to

“protect the environment.” Seven Up Pete Venture, 114 P.3d

at 1023. Yet 1-137 did not appear to “protect the environ-

ment” because the court itself admitted that “cyanide heap

leaching has been shown to be safer than other methods of

mining...” Jd.

Second, Montana’s actions were not “necessary.” For

the impairment to have been necessary, it must have been

impossible to achieve Montana’s goals without modifying

the contract. U.S. Trust, 431 U.S. at 29-30. Here, 1-137

expressly exempts from the ban mines operating prior to

November 3, 1998. If the purported public interest of

environmental protection could have been achieved with-

out requiring other mines to abide by the cyanide-leaching

prohibition, that interest would also likely have been

achieved had Petitioners’ contract been honored.

Finally, Montana’s actions were not “reasonable.” In

U.S. Trust, 431 U.S. 1, this Court analyzed the repeal of

parallel State statutes in New York and New Jersey that

impaired the contracts between the States and certain

bondholders in an attempt to further the goals of mass

transportation, energy conservation, and environmental

protection. This Court concluded that the States’ action

was unreasonable since the contract with the bondholders

was formed in spite of the States’ knowledge of these goals

and the potential consequences:

(T]he need for mass transportation in the New

York metropolitan area was not a new develop-

ment, and the likelihood that publicly owned

commuter railroads would produce substantial

deficits . as well known ... It was with full

7

knowledge of these concerns that the 1962 cove-

nant [which the state of New York attempted to

repeal] was adopted.

Id. at 31-32. Similarly, Montana, understanding the need

to protect the environment, entered into a contract with

Petitioners knowing that Petitioners intended to use a

cyanide heap leaching method to extract minerals. Seven

Up Pete Venture, 114 P.3d 1022.

In its analysis in U.S. Trust, this Court distinguished

City of El Paso v. Simmons, 379 U.S. 497 (1965). There,

the State’s contractual impairment was held reasonable

because, absent the government impairment, the private

party would have realized benefits that were “hardly to be

expected or foreseen.” Jd. at 515. Here, the Montana

Supreme Court concluded that no “party, even one consid-

ered sophisticated, could have reasonably anticipated, at

the time the agreement was entered in 1986, that Mon-

tana would enact the first state ban of this form of mining

twelve years later.” Seven Up Pete Venture, 114 P.3d at

1022. Therefore, unlike Simmons, the benefits that Peti-

tioners would have realized were “expected [and] fore-

seen.”

Thus, Montana’s actions neither served an “important

public purpose” nor were “reasonable” or “necessary.”

Because none of the three heightened scrutiny criteria

were satisfied, Petitioners suffered a cognizable injury-in-

fact, a Contracts Clause violation, that should have been

redressed by the Supreme Court of Montana. That Court’s

failure to issue such a ruling, in accordance with this

Court’s ruling in U.S. Trust, necessitates the granting of

this petition.

8

Il. THE COURT SHOULD GRANT CERTIORARI

TO CORRECT RECENT INTERPRETATIONS

OF THE CONTRACTS CLAUSE, WHICH DEVI-

ATE SUBSTANTIALLY FROM THE ORIGINAL

UNDERSTANDING OF THE CONTRACTS

CLAUSE.

Since 1934, this Court has substantially deviated from

the original understanding of the Contracts Clause as it

relates to the ability of a State to impair contracts. The

Court should seize this opportunity to reject recent inter-

pretations of the Clause, which are irreconcilable with the

original, more intrinsically sound interpretation that the

Contracts Clause is absolute.

A. Though This Court Ought To Give Great

Deference To Precedent, It Should Reject

Precedent That Is Irreconcilable With A

Prior, More Intrinsically Sound Interpre-

tation Of The Constitution.

“The doctrine of stare decisis is essential to the respect

accorded to the judgments of chis Court and to the stabil-

ity of the law,” Lawrence v. Texas, 539 U.S. 558, 577 (2003)

(wherein the Court expressly overruled Bowers v. Hard-

wick, 478 U.S. 186 (1986)); however, that doctrine is “not

an inexorable command, particularly when ... interpret-

ing the Constitution.” Dickerson v. U.S., 530 U.S. 428, 443

(2000) (quoting State Oil Co. v. Khan, 522 U.S. 3, 20 (1997)

(expressly overruling Albrecht v. Herald Co., 390 U.S. 145

(1968)); Agostini v. Felton, 521 U.S. 203, 235 (1997) (aban-

doning a strict application of stare decisis). Instead, it is a

mere “principle of policy.” Lawrence, 539 U.S. at 577.

Therefore, “[iJn prior cases, when this Court has con-

fronted a wrongly decided, unworkable precedent calling

9

for some further action by the Court, [the Court has]

chosen not to compound the original error, but to overrule

the precedent.” Payne v. Tennessee, 501 U.S. 808 (1991)

(Souter, J., concurring) (wherein the Court partially

overruled Booth v. Maryland, 482 U.S. 496 (1987), and

South Carolina v. Gathers, 490 U.S. 805 (1989)). Reconsid-

eration of earlier decisions is particularly important in

constitutional cases because in such cases “correction

through legislative action is practically impossible.” Payne,

501 U.S. at 828, citing Burnet v. Coronado Oil & Gas Co.,

285 U.S. 393, 407 (1932) (Brandeis, J., dissenting).

In the context of the Contracts Clause of the U.S.

Constitution, stare decisis is merely a helpful, though not

conclusive method of analysis, particularly when recent

interpretations are erroneous. Thus, “[w]hile the Court

has indicated that it must apply the Contract Clause ‘with

due respect for its purpose and the prior decisions of this

court,’ the value of precedent in this area is uncertain.”

Legislative Alteration of Private Pension Agreements, 92

Harv. L. Rev. 86, 88 (1978). Ultimately, recent Contracts

Clause jurisprudence should be overruled if there is a

“special justification” for doing so. Dickerson, 530 U.S. at

443.

B. A “Special Justificatiun” Exists, And Stare

Decisis Should Yield, When Recent Interpre-

tations Differ From The Original Under-

standing Of A Clause Of The Constitution.

A “special justification” exists when recent case law

differs from a prior, more intrinsically sound interpreta-

tion. Adarand Constructors, Inc. v. Pefia, 515 U.S. 200, 231

(1995) (discussing Helvering v. Hallock, 309 U.S. 106, 119

(1940) (the Court overrode stare decisis in its interpretation

10

of estate tax law). Interpreting the Constitution based on

the original understanding of the text is the most intrinsi-

cally sound method of construction. This Court has consis-

tently recognized the importance of the actual text of these

founding documents. See, e.g., State Board of Equalization

of California v. Young’s Market Co., 299 U.S. 59, 63 (1936)

(finding no need to discuss the history of the Twenty-First

Amendment, subsequent Court rulings interpreting the

amendment, or statutes passed in reliance on the amend-

ment because the language of the amendment is clear);

City of Boerne v. P-F. Flores, 521 U.S. 507, 519 (1997) (“In

assessing the breadth of § 5’s lof the Fourteenth Amend-

ment] enforcement power, we begin with its text.”); Dred

Scott v. Sandford, 60 U.S. 393 (1857) (Curtis, J., dissent-

ing) (“When a strict interpretation of the Constitution,

according to the fixed rules which govern the interpreta-

tion of laws, is abandoned, and the theoretical opinions of

individuals are allowed to control its meaning, we have no

longer a Constitution; we are under the government of

individual men, who for the time being have power to

declare what the Constitution is according to their own

views of what it ought to mean.”). Indeed, “the text of our

Constitution is the best guide to its meaning.” Granholm

v. Heald, __. U.S. ___, 125 S. Ct. 1885, 1920 (2005) (Tho-

mas, J., dissenting).

When interpreting the Constitution, “[t]he words are

to be taken in their natural and obvious sense, and not in

a sense unreasonably restricted or enlarged.” Martin uv.

Hunter’s Lessee, 14 U.S. (1 Wheat.) 304, 326 (1816).

Specifically, “the terms in the Constitution must be given

the meaning ascribed to them at the time of their ratifica-

tion.” Dickerson, 508 U.S. at 379 (1993) (Scalia, J., concur-

ring). To discern the original understanding of the

11

constitutional text, this Court must examine the contem-

poraneous understanding of the text, the historical per-

spective of the text, and the overall structure of the

document. Antonin Scalia, Originalism: The Lesser Evil,

57 U. Cin. L. Rev. 849 (1989) (in praise of Chief Justice

Taft’s opinion in Myers v. U.S., 272 U.S. 52 (1926)); See

also, David F. Forte, The Originalist Perspective, in The

Heritage Guide to the Constitution 15-16 (Edwin Meese III,

et al., eds., 2005). In fact, the Framers themselves applied

similar interpretive methods. Jd. As Justice Thomas

explained, the purpose of this method of construction is

threefold: .

First, it deprives modern judges of the opportu-

nity to write their own preferences into the Con-

stitution by tethering their analysis to the

understanding of those who drafted and ratified

the text. Second, it places the authority for creat-

ing legal rules in the hands of the people and

their representatives rather than in the hands of

the nonelected, unaccountable federal judiciary.

Thus, the Constitution means not what the

Court says it means, but what the delegates of

the Philadelphia and of the state ratifying con-

ventions understood it to mean. Third, it recog-

nizes the basic principle of a written Constitution.

We as a nation adopted a written Constitution pre-

cisely because it has a fixed meaning that does

not change.

Clarence Thomas, Judging, 45 U. Kan. L. Rev. 1, 5 (1996).

Because originalism is the most intrinsically sound

interpretation of the Constitution, a “special justification”

for reversing precedent exists whenever there is a vari-

ance from the original understanding of the text. “When

faced with a clash of constitutional principle and a line of

12

unreasoned cases wholly divorced from the text, history,

and structure of our founding document, we should not

hesitate to resolve the tension in favor of the Constitu-

tion’s original meaning.” Kelo v. City of New London,

Conn., 125 S. Ct. 2655, 2687 (2005) (Thomas, J., dissent-

ing).

C. This Court Should Reject Recent Contracts

Clause Jurisprudence And, Instead, Adopt

An Originalist Interpretation, Whereby Any

Retrospective Impairment Of A Contract By

A State Would Violate The Clause.

Recent Contracts Clause jurisprudence is divorced

from the contemporaneous understanding of the text, the

historical perspective of the text, and the overall structure

of the Constitution.

1. The contemporaneous understanding of

the text.

The meaning ascribed to the text by the Framers is a

helpful, though not exclusive, resource in ascertaining the

contemporaneous understanding of the text. Unfortu-

nately, in the construction of the Contracts Clause, “the

debates in the Constitutional Convention are of little aid.”

Blaisdell, 290 U.S. at 427.

Nonetheless, it appears certain that the Framers

presumed the Contracts Clause was absolute and wholly

independent of other alleged public purposes. The Clause

was inspired by the Northwest Ordinance, which read, in

part: “[Nlo law ought ever to be made or have force in the

said territory, that shall, in any manner whatever, inter-

fere with or affect private contracts, or engagements bona

13

fide, and without fraud previously formed.” Benjamin

Fletcher Wright, The Contract Clause of the Constitution 8

(Greenwood Press, 1982) (1938), citing Max Farrand,

Record of the Federal Convention (1911), I, 439; U.S.C.A.

Northwest Ordinance (emphasis added); see also, Richard

A. Epstein, Obligation of Contract, in The Heritage Guide

to the Constitution 171 (Edwin Meese III, et al., eds.,

2005). Indeed, upon introduction of the Clause at the

Constitutional Convention, Gouveneur Morris worried

that such a clause would prevent States from passing

necessary legislation:

This would be going too far. There are a thou-

sand laws, relating to bringing actions — limita-

tions of actions which affect contracts. The

Judicial power of the U. S. will be a protection in

cases within their jurisdiction; and within the

State itself a majority must rule, whatever may

be the mischief done among themselves.

The Avalon Project at Yale Law School, The Debates in the

Federal Convention of 1787 reported by James Madison:

August 28 (Nov. 18, 2005), available at http://www.yale.

edu/lawweb/avalon/debates/828. htm.

In an address to the Maryland House of Delegates,

another delegate to the Convention, Luther Martin,

expressed concern that the Clause would preclude state

legislation even in times of “great public calamities.”

Blaisdell, 290 U.S. at 461-62 (Sutherland, J., dissenting)

(citing 1 Elliot’s Debates, 344, 376, 377). Mr. Martin’s

statement is evidence that the Framers believed that the

Contracts Clause is absolute.

14

Furthermore, in the years following the Constitutional

Convention, contemporaries believed the Clause was

absolute. At the Virginia Ratifying Convention in 1788,

Patrick Henry explained that a public contract could not

be altered or impaired, no matter how compelling the

public need.

How will this thing [the Contracts Clause] oper-

ate, when ten or twenty millions are demanded

as the quota of this state? You will cry out that

speculators have got it at one for a thousand, and

that they ought to be paid so. Will you then have

recourse, for relief, to legislative interference?

They cannot relieve you, because of that clause.

The expression includes public contracts, as well

as private contracts between individuals. Not-

withstanding the sagacity of the gentleman, he

cannot prove its exclusive relation to private con-

tracts. Here is an enormous demand, which your

children, to the tenth generation, will not be able

to pay. Should we ask if there be any obligation

in justice to pay more than the depreciated value,

we shall be told that contracts must not be im-

paired. Justice may make a demand of millions,

but the people cannot pay them.

The Founders Constitution, Debate in the Virginia Ratify-

ing Convention (Nov. 28, 2005), available at http://press-

pubs. uchicago.edu/founders/documents/a1_10_1s8.html.

Likewise, Alexander Hamilton reasoned, in 1796, that

an impairment by a State legislature of a contract in

which the State was a party was a per se violation of the

Contracts Clause. Giving his opinion as to the constitu-

tionality of a repeal of the sale of land from the State of

Georgia to purportedly unscrupulous land companies, he

wrote:

15

Every grant from one to another, whether the

grantor be a state or an individual, is virtually a

contract ... [and] the revocation of the grant by

the act of the legislature of Georgia may justly be

considered as contrary to the Constitution of the

United States and, therefore null.

Wright, supra, 8, 22.

Later, in 1819, Daniel Webster, in a successful argu-

ment. to this Court, asserted that the people, in ratifying

the Constitution, wisely limited the ability of a State to

impair contracts, even in times of apparent necessity.

Trustees of Dartmouth Coll. v. Woodward, 17 U.S. (4

Wheat.) 518, 598 (1819) (overturning an act by the New

- Hampshire legislature which impaired an existing con-

tract). Similarly, in 1827, lawyer and court reporter Henry

Wheaton argued that “the Convention intended to prohibit

every possible mode in which the obligation of contracts

might be violated by state legislation.” Ogden v. Saunders,

25 U.S. (12 Wheat.) 213 (1827) (upholding a state bank-

ruptcy statute because no contractual obligation was

impaired). Chief Justice Marshall agreed with Wheaton on

this point, and concluded that “|a] State is entirely forbid-

den to pass laws impairing the obligation of contracts.” Id.

at 335 (per Chief Justice Marshall). Conversely, in the 50

years following ratification of the Constitution, very few

interpretations of the Contracts Clause limited its appli-

cability. See, e.g., id. at 286 (per Justice Johnson). Ulti-

mately, in 1977, this Court conceded that the Contracts

Clause was originally understood as “an absolute bar to

any impairment...” U.S. Trust, 431 U.S. at 19, n. 17.

16

2. The historical perspective of the text.

A careful analysis of the Contracts Clause’s historical

underpinnings also reveals its absolutism. It has been

argued often that the Contracts Clause is not absolute

because the sole purpose of the Clause was to protect the

rights of Revolutionary War creditors. See, e.g., Blaisdell,

290 U.S. at 453-54 (Sutherland, J., dissenting); Allied

Structural Steel, 438 U.S. at 257 (1978) (Brennan, J.,

dissenting). This interpretation ignores, however, the

greater context in which the Constitutional Convention

took place. Obviously, this was a period during which the

Framers endeavored to establish a new, stable society.

Many delegates were esteemed businessmen who believed

that commerce was, in and of itself, a social good that was

best cultivated through the freedom to contract. Richard A.

Epstein, Toward a Revitalization of the Contract Clause,

51 U. Chi. L. Rev. 703, 707 (1984). They desired, through

the Contracts Clause, to “inspire a genera] prudence and

industry, and give a regular course to the business of

society.” The Federalist No. 44 (J. Madison). See also U.S.

Trust, 431 U.S. at 15 (“[T}he general purpose of the Clause

was clear: to encourage trade and credit by promoting

confidence in the stability of contractual obligations.”).

In addition, the delegates at the state ratifying con-

ventions viewed the Contracts Clause in a broader histori-

cal context. Edmund Randolph of Virginia supported the

Clause because it prevented the fraud and injustice that

had been perpetrated by state legislatures that had

impaired contracts. Blaisdell, 290 U.S. at 462 (Sutherland,

J., dissenting) (citing 3 Elliot’s Debates 478). Charles

Pinckney of South Carolina argued that the Clause was

the very “soul of the Constitution,” mandating that States

“cultivate those principles of public honor and private

17

honesty which are the sure road to national] character and

happiness.” Blaisdell, 290 U.S. at 462 (Sutherland, J.,

dissenting) (citing 4 Elliot’s Debates 333).

Further, Chief Justice Marshall, in a majority opinion

explaining the purpose of the Contracts Clause, wrote:

“That anterior to the formation of the [Clonstitution, a

course of legislation had prevailed in many, if not in all, of

the states, which weakened the confidence of man in man,

and embarrassed all transactions between individuals, by

dispensing with a faithful performance of engagements.”

Trustees of Dartmouth Coll., 17 U.S. at 628 (emphasis

added). It is evident that, according to Justice Marshall,

the Framers intended the Contracts Clause to be absolute.

Therefore, examination of the historical context

indicates that the Framers intended to prohibit, abso-

lutely, State impairment of all contracts, not merely debt

contracts.

3. The overall structure of the Constitution.

Finally, the Constitution’s structure mandates a strict

interpretation of the Contracts Clause. A central objective

of the Constitution is to limit accumulation of government

power. This theme is inherent in the doctrine of enumer-

ated powers, the checks and balances system, and the

bicameral legislature of the federal government. More

explicitly, this theme is also evident in the enumerated

limitations on State government power, as listed in Article

I, section 10. Although the first part of the Clause is

specific, the second part is more general. To be sure,

Clause 1 of that section prohibits States from coining

money, emitting bills of credit, or making anything except

gold or silver legal tender in the payment of debts. These

18

prohibitions evince a specific concern for the debtor-

creditor relationship. Unlike these provisions, the rv «t of

the Clause is written in far more general terms; S* «es are

generally prohibited from passing bills of attainder, ex post

facto laws or “impairing the Obligation of Contracts.” This

suggests an application far broader in context than merely

the debtor-creditor relationship.

Moreover, the structure of the Constitution indicates

that no public purpose — not even an emergency ~— permits

a State to impair the obligation of contracts. The Constitu-

tion specifically provides for certain exigencies. As Justice

Sutherland wrote in his dissent in Blaisdell:

The emergency of war furnishes an occasion for

the exercise of certain of the war powers... The

existence of another kind of emergency author-

izes the United States to protect each of the

states of the Union against domestic violence

Const. art. 4, §4... [But unlike these clauses,

the Contracts Clause] restricts every state power

in the particular specified, no matter what may

be the occasion. It does not contemplate that an

emergency shall furnish an occasion for softening

the restriction or making it any the less a restric-

tion upon state action in that contingency than it

is under strictly normal conditions.

Blaisdell, 290 U.S. at 473 (Sutherland, J., dissenting).

Simply put, the structure of the Constitution indicates

that no State may impair the obligations of any contract,

regardless of the type of contract or the public purpose.

19

4. Recent interpretations of the Contracts

Clause and proposed solution.

In spite of the original meaning of the Contracts

Clause, this Court has held, under the guise of the States’

' police power, that “the common weal” and “the general

good of the public” are sufficient justifications for dispens-

ing with the Contracts Clause. Blaisdell, 290 U.S. at 240.

To that end, this Court pronounced that when a State's

self-interest is at stake, a State’s impairment of a contract

“may be constitutional if it is reasonable and necessary to

serve an important public purpose.” U.S. Trust, 431 U.S.

at 25. These interpretations so weakened the Contracts

Clause that this Court found it necessary to remind the

people that “the Contract Clause remains a part of our

written Constitution” and “is not a dead letter.” Jd. at 16;

Allied Structural Steel, 438 U.S. at 241. These recent

interpretations also eroded the freedom to contract, a

bedrock principle of a free society, and the originalism

principles necessary to ensure a true rule of law.

In the past, when constitutional jurisprudence has

strayed from the proper, original interpretation, this Court

has not shirked its duty to correct the error. See, e.g., Law-

rence, 539 U.S. 558; Seminole Tribe of Florida v. Florida, 517

U.S. 44 (1996); Payne, 501 U.S. 808. Here, the Montana

Supreme Court has reasoned that Petitioners’ contract was

impaired, yet, contrary to original interpretations of the

Clause, it concluded that the impairment was constitutional.

This Court should seize the opportunity to apply an original-

ist interpretation of the Contracts Clause, thereby reversing

the judgment of the Montana Supreme Court and rectifying

Contracts Clause jurisprudence hereafter.

.

CONCLUSION

Inconsistent with U.S. Supreme Court precedent and

the holding of another State Supreme Court, the Montana

Supreme Court applied deferential scrutiny to an impair-

ment of its own contract. In addition, recent Contracts

Clause jurisprudence of this Court has deviated substan-

tially from the original, absolute interpretation of the

Clause. Therefore, Mountain States Legal Foundation

respectfully requests that this Court grant this Petition for

Writ of Certiorari to correct these errors.

Respectfully submitted,

WILLIAM PERRY PENDLEY*

*Counsel of Record

JOEL M. SPECTOR

MOUNTAIN STATES LEGAL FOUNDATION

2596 South Lewis Way

Lakewood, Colorado 80227

(303) 292-2021

Attorneys for Amicus Curiae

Dated: January 9, 2006