# Amicus Curiae Brief — Seven Up Pete Venture v. Montana

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0434%3A5

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2006
- **Citation:** 546 U.S. 1170

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0434%3A5. Public record. Not legal advice.