|United States Trust Company of New York v. New Jersey
69 N.J. 253, 353 A.2d 514, reversed.
[ Blackmun ]
[ Burger ]
[ Brennan ]
United States Trust Company of New York v. New Jersey
APPEAL FROM THE SUPREME COURT OF NEW JERSEY
MR. JUSTICE BRENNAN, with whom MR. JUSTICE WHITE and MR. JUSTICE MARSHALL join, dissenting.
Decisions of this Court for at least a century have construed the Contract Clause largely to be powerless in binding a State to contracts limiting the authority of successor legislatures to enact laws in furtherance of the health, safety, and similar collective interests of the polity. In short, those decisions established the principle that lawful exercises of a State's police powers stand paramount to private rights held under contract. Today's decision, in invalidating the New Jersey Legislature's 1974 repeal of its predecessor's 1962 covenant, rejects this previous understanding and remolds the Contract Clause into a potent instrument for overseeing important policy determinations of the state legislature. At the same time, by creating a constitutional safe haven for property rights embodied in a contract, the decision substantially distorts modern constitutional jurisprudence governing regulation of private economic interests. I might understand, though I could not accept, this revival of the Contract Clause were it in accordance with some coherent and constructive view of public policy. But elevation of the Clause to the status of regulator of the municipal bond market at the heavy price of frustration of sound legislative policymaking is as demonstrably unwise as it is unnecessary. The justification for today's decision, therefore, remains a mystery to me, and I respectfully dissent.
The Court holds that New Jersey's repeal of the 1962 covenant constitutes an unreasonable invasion of contract rights, and hence an impairment of contract. The formulation of [p34] the legal standard by which the Court would test asserted impairments of contracts is, to me, both unprecedented and most troubling. But because the Constitution primarily is "‘intended to preserve practical and substantial rights, not to maintain theories,'" Faitoute Iron Steel Co. v. City of Asbury Park, 316 U.S. 502, 514 (1942), it is necessary to sketch the factual background of this dispute before discussing the reasons for my concern. In my view, the Court's casual consideration both of the substantial public policies that prompted New Jersey's repeal of the 1962 covenant and of the relatively inconsequential burdens that resulted for the Authority's creditors belies its conclusion that the State acted unreasonably in seeking to relieve its citizens from the strictures of this earlier legislative policy.
In an era when problems of municipal planning increasingly demand regional, rather than local, solutions, the Port Authority provides the New York-New Jersey community with a ready-made, efficient regional entity encompassing some 1,500 square miles surrounding the Statue of Liberty. As the Court notes, from the outset, public officials of both New York and New Jersey were well aware of the Authority's heavy dependence on public financing. Consequently, beginning in the decade prior to the enactment of the 1962 covenant, the Authority's general reserve bonds, its primary vehicle of public finance, have featured two rigid security devices designed to safeguard the investment of bondholders. First, pursuant to a so-called "1.3 test," the Authority has been disabled from issuing new consolidated bonds unless the best one-year net revenues derived from all of the Authority's facilities at least equal 130% of the prospective debt service for the calendar year during which the debt service for all outstanding and proposed bonds would be at a maximum. Second, according to a procedure known as a "section 7 certification," [p35] the Authority may not issue bonds to finance additional facilities unless it "shall certify" that the issue
will not, during the ensuing ten years or during the longest term of any such bonds proposed to be issued . . whichever shall be longer, . . . materially impair the sound credit standing of the Authority. . . .
The 1962 covenant existed alongside these security provisions. Viewed in simplest terms, the covenant served to preclude Authority investment and participation in transportation programs by shifting the financial focal point from the creditworthiness of the Authority's activities as a whole to the solvency of each proposed new transit project. Whereas the 1.3 and section 7 tests permit expanded involvement in mass transportation provided that the enormous revenue-generating potential of the Authority's bridges and tunnels aggregately suffice to secure the investments of creditors, the covenant effectively foreclosed participation in any new project that was not individually "self supporting." [n1] Both parties to this litigation are in apparent agreement that few functional mass transit systems are capable of satisfying this requirement.
Whether the 1962 New Jersey Legislature acted wisely in accepting this new restriction is, for me, quite irrelevant. What is important is that the passage of the years conclusively demonstrated that this effective barrier to the development [p36] of rapid transit in the port region squarely conflicts with the legitimate needs of the New York metropolitan community, and will persist in doing so into the next century. [n2] In the Urban Mass Transportation Assistance Act of 1970, 49 U.S.C. § 1601a Congress found that "within urban areas . . . , the ability of all citizens to move quickly and at a reasonable cost [has become] an urgent national problem." Concurrently, the Clean Air Act, as amended, 42 U.S.C. § 1857 et seq., advocated the curtailment of air pollution through the development of transportation control strategies that place heavy emphasis on rapid transit alternatives to the automobile. For northern New Jersey in particular, with ambient air quality levels among the worst in the Nation, the Clean Air Act has led to new regulations premised on the policy:
The development of large-scale mass transit facilities and the expansion and modification of existing mass transit facilities is essential to any effort to reduce automotive pollution through reductions in vehicle use. The planning, acquisition, and operation of a mass transit system is, and should remain, a regional or State responsibility. Many improvements are being planned in mass transit facilities in the State that will make it possible for more people to use mass transit instead of automobiles.
38 Fed.Reg. 31389 (1973). Finally, the Court itself cites the Emergency Petroleum Allocation Act, 15 U.S.C. § 751(a)(3) (1970 ed., Supp. V), which signaled "a national energy crisis which is a threat to the public health, safety, and welfare," and sought to stimulate [p37] further initiatives toward the development of public transportation and similar programs. See ante at 14.
It was in response to these societal demands hat the New Jersey and New York Legislatures repealed the 1962 covenant. The trial court found:
In April, 1970, Governors Cahill and Rockefeller announced a joint program to increase the Port Authority's role in mass transportation by building a rail link to John F. Kennedy International Airport and extending PATH [a commuter rail line under Authority control] to Newark International Airport and other parts of New Jersey.
134 N.J.Super. 124, 168-169, 338 A.2d 833, 858 (1975). But, the court found, this expansion "was not economically feasible under the terms of the 1962 covenant." Id. at 170, 338 A.2d at 859. Consequently, the States repealed the covenant. On signing the New York legislation, Governor Rockefeller stated:
Passed with overwhelming bipartisan support in both houses of the Legislature, the bill removes the absolute statutory prohibition against the use of the revenues of the Port of New York Authority for railroad purposes. That statutory covenant, together with the provision of the bi-state compact creating the Authority that neither State will construct competing facilities within the Port District, could forever preclude the two states from undertaking vitally needed mass transportation projects. In removing the present restriction, the bill would not jeopardize the security of Port Authority bondholders or their rights to maintain that security.
Quoted ibid. In following suit, New Jersey also expressly grounded its action upon the necessity of overturning
"the restrictions imposed by the covenant [that] effectively preclude sufficient port authority participation in the development of a public transportation system in the port district."
Id. at 172, 338 [p38] A.2d at 860. Approximately one year later, on April 10, 1975, the Port Authority announced an increase in bridge and tunnel tolls amounting to $40 million, the resulting revenue designed to assist in the financing of passenger transportation facilities without jeopardizing the reserve fund set aside for the Authority's creditors.
The Court's consideration of this factual background is, I believe, most unsatisfactory. The Court never explicitly takes issue with the core of New Jersey's defense of the repeal: that the State was faced with serious and growing environmental, energy, and transportation problems, and the covenant worked at cross-purposes with efforts at remedying these concerns. Indeed, the Court candidly concedes that the State's purposes in effectuating the 1974 repeal were "admittedly important." Ante at 29. Instead, the Court's analysis focuses upon related, but peripheral, matters.
For example, several hypothetical alternative methods are proposed whereby New Jersey might hope to secure funding for public transportation, and these are made the basis for a holding that repeal of the covenant was not "necessary." Ante at 29-31. Setting aside the propriety of this surprising legal standard, [n3] the Court's effort at fashioning its own legislative program for New York and New Jersey is notably unsuccessful. In fact, except for those proffered alternatives which also amount to a repeal or substantial modification of the 1962 covenant, [n4] none of the Court's suggestions is compatible [p39] with the basic antipollution and transportation control strategies that are crucial to metropolitan New York. As the Court itself accurately recognizes, the environmental and transportation program for the New York area rests upon a two-step campaign:
The States inten[d]  to discourage private automobile use by raising bridge and tunnel tolls and  to use the extra revenue from those tolls to subsidize improved commuter railroad service.
Ante at 29. This coordinated two-step strategy has not been arbitrarily or casually created, but is dictated by contemporaneous federal enactments such as the Clean Air Act, [n5] and stems both from New York City's unique geographic situation [n6] and from longstanding provisions in federal law that require the existence of "reasonable and just" expenses -- which may include diversion to mass transit subsidies -- as a precondition to any increase in interstate bridge tolls. [n7] The Court's various [p40] alternative proposals, while perhaps interesting speculations, simply are not responsive to New York's and New Jersey's real environmental and traffic problems, [n8] and, in any event, intrude the Court deeply into complex and localized policy matters that are for the States' legislatures, and not the judiciary, to resolve.
Equally unconvincing is the Court's contention that repeal of the 1962 covenant was unreasonable because the environmental and energy concerns that prompted such action "were not unknown in 1962, and the subsequent changes were of degree, and not of kind." Ante at 32. Nowhere are we told why a state policy, no matter how responsive to the general welfare of its citizens, can be reasonable only if it confronts issues that previously were absolutely unforeseen. [n9] Indeed, [p41] this arbitrary perspective seems peculiarly inappropriate in a case like this where at least three new and independent congressional enactments between the years 1962 and 1974 summoned major urban centers like New York and New Jersey to action in the environmental, energy, and transportation fields. In short, on this record, I can neither understand nor accept the Court's characterization of New Jersey's action as unreasonable.
If the Court's treatment of New Jersey's legitimate policy interests is inadequate, its consideration of the countervailing injury ostensibly suffered by the appellant is barely discernible at all. For the Court apparently holds that a mere "technical impairment" of contract suffices to subject New Jersey's repealer to serious judicial scrutiny and invalidation under the Contract Clause. Ante at 21. The Court's modest statement of the economic injury that today attracts its judicial intervention is, however, understandable. For, fairly read, the record before us makes plain that the repeal of the 1962 covenant has occasioned only the most minimal damage on the part of the Authority's bondholders.
Obviously, the heart of the obligation to the bondholders -- and the interests ostensibly safeguarded by the 1962 covenant -- is the periodic payment of interest and the repayment of principal when due. The Court does not, and indeed cannot, contend that either New Jersey or the Authority has called into question the validity of these underlying obligations. No creditor complains that public authorities have defaulted on a coupon payment or failed to redeem a bond that has matured. In fact, the Court does not even offer any reason whatever for fearing that, as a result of the covenant's repeal, the securities in appellant's portfolio are jeopardized. Such a contention cannot be made in the face of the finding of the trial judge, who, in referring to the increasingly lucrative financial [p42] position of the Authority at the date of the covenant's repeal in comparison to 1962, concluded:
Suffice it to say that, between 1962 and 1974, the security afforded bondholders had been substantially augmented by a vast increase in Authority revenues and reserves, and the Authority's financial ability to absorb greater deficits, from whatever source and without any significant impairment of bondholder security, was correspondingly increased.134 N.J.Super. at 194-195, 338 A.2d at 873. [n10]
By simply ignoring this unchallenged finding concerning the Authority's overall financial posture, the Court is able to argue that the repeal of the 1962 covenant impaired the Authority's bonds in two particular respects. First, it is suggested that repeal of the covenant may have adversely affected the secondary market for the securities. Ante at 19. The Court, however, acknowledges that appellant has adduced only ambiguous evidence to support this contention, and that the actual price position of Authority bonds was, at most, only temporarily affected by the repeal. Ibid. [n11] In fact, the trial [p43] court also explicitly rejected the ultimate significance of this alleged injury:
The bottom line of plaintiff's proofs on this issue is simply that the evidence fails to demonstrate that the secondary market price of Authority bonds was adversely affected by the repeal of the covenant, except for a short-term fall-off in price, the effect of which has now been dissipated insofar as it can be related to the enactment of the repeal.
134 N.J.Super. at 181-182, 338 A.2d at 866 (emphasis supplied).
Secondly, repeal of the covenant is said to have canceled an important security provision enjoyed by the creditors. Ante at 19. Of course, there is no question that appellant prefers the retention to the removal of the covenant, but surely this alone cannot be an acceptable basis for the Court's wooden application of the Contract Clause or for its conclusion that the repeal unfairly diminished bondholder security. By placing reliance on this superficial allegation of economic injury, the Court again is able simply to disregard the trial court's contrary finding that appellant's complaint of insecurity is without factual merit:
The claim that bondholder security has been materially impaired or destroyed by the repeal is simply not supported by the record. The pledge of the Authority's net revenues and reserves remains intact; the Authority will still be barred from the issuance of any new consolidated bonds unless the 1.3 test required by the CBR is met, and the Authority will continue to be prohibited from the [p44] issuance of any consolidated bonds or other bonds secured by a pledge of the general reserve fund without the certification required by section 7 of the series resolutions, to-wit, that, in the opinion of the Authority, the estimated expenditures in connection with any additional facility for which such bonds are to be issued would not, for the ensuing ten years, impair the sound credit standing of the Authority, the investment status of its consolidated bonds, or the Authority's obligations to its consolidated bondholders.
134 N.J.Super. at 196, 338 A.2d at 874 (emphasis supplied). [n12]
In brief, only by disregarding the detailed factual findings of the trial court in a systematic fashion is the Court today able to maintain that repeal of the 1962 covenant was anything but a minimal interference with the realistic economic interests of the bondholders. The record in this case fairly establishes that we are presented with a relatively inconsequential infringement of contract rights in the pursuit of substantial and important public ends. Yet this meager record is seized upon by the Court as the vehicle for resuscitation of long discarded Contract Clause doctrine -- a step out of line with both the history of Contract Clause jurisprudence and with constitutional doctrine generally in its attempt to delineate the reach of the lawmaking power of state legislatures in the face of adverse claims by property owners.
The Court today dusts off the Contract Clause, and thereby undermines the bipartisan policies of two States that manifestly [p45] seek to further the legitimate needs of their citizens. The Court's analysis, I submit, fundamentally misconceives the nature of the Contract Clause guarantee.
One of the fundamental premises of our popular democracy is that each generation of representatives can and will remain responsive to the needs and desires of those whom they represent. Crucial to this end is the assurance that new legislators will not automatically be bound by the policies and undertakings of earlier days. In accordance with this philosophy, the Framers of our Constitution conceived of the Contract Clause primarily as protection for economic transactions entered into by purely private parties, rather than obligations involving the State itself. See G. Gunther, Constitutional Law 604 (1975); B. Schwartz, A Commentary On the Constitution of the United States, pt. 2, The Rights of Property 274 (1965); B Wright, The Contract Clause of the Constitution 15-16 (1938). [n13] The Framers fully recognized that nothing would so jeopardize the legitimacy of a system of government that relies upon the ebbs and flows of politics to "clean out the rascals" than the possibility that those same rascals might perpetuate their policies simply by locking them into binding contracts.
Following an early opinion of the Court, however, that [p46] took the first step of applying the Contract Clause to public undertakings, Fletcher v. Peck, 6 Cranch 87 (1810), later decisions attempted to define the reach of the Clause consistently with the demands of our governing processes. The central principle developed by these decisions, beginning at least a century ago, has been that Contract Clause challenges such as that raised by appellant are to be resolved by according unusual deference to the lawmaking authority of state and local governments. Especially when the State acts in furtherance of the variety of broad social interests that came clustered together under the rubric of "police powers," see E. Freund, The Police Power (1904) -- in particular, matters of health, safety, and the preservation of natural resources -- the decisions of this Court pursued a course of steady return to the intention of the Constitution's Framers by closely circumscribing the scope of the Contract Clause.
This theme of judicial self-restraint and its underlying premise that a State always retains the sovereign authority to legislate in behalf of its people was commonly expressed by the doctrine that the Contract Clause will not even recognize efforts of a State to enter into contracts limiting the authority of succeeding legislators to enact laws in behalf of the health, safety, and similar collective interests of the polity [n14] -- in [p47] short, that that State's police power is inalienable by contract. For example, in Fertilizing Co. v. Hyde Park, 97 U.S. 659 (1878), the Illinois General Assembly granted to a fertilizer company an 1867 corporate charter to run for 50 years. The corporation thereafter invested in a factory and depot on land which it owned within the area designated by the charter. Five years later, the village authorities of Hyde Park adopted an ordinance that rendered the company's charter valueless [p48] by prohibiting the transportation of offal within the village and forbidding the operation of a fertilizer factory within the village confines. This Court nonetheless rejected the contention that the new ordinance offended the Contract Clause:
We cannot doubt that the police power of the State was applicable and adequate to give an effectual remedy [to the nuisance]. That power belonged to the States when the Federal Constitution was adopted. They did not surrender it, and they all have it now. . . .
* * * *
. . . Pure air and the comfortable enjoyment of property are as much rights belonging to [the village residents] as the right of possession and occupancy. . . .
* * * *
The [company's] charter was a sufficient license until revoked; but we cannot regard it as a contract guaranteeing, in the locality originally selected, exemption for fifty years from the exercise of the police power of the State, however serious the nuisance might become in the future. . . .
Id. at 667, 669, 670.
Two years later, this principle of the Contract Clause's subservience to the States' broad lawmaking powers was reasserted in another context. In 1867, the Mississippi Legislature entered into a contract with a company whereby the latter was chartered to operate a lottery within the State "in consideration of a stipulated sum in cash. . . ." The next year, the State adopted a constitutional provision abolishing lotteries. The Court once again unhesitantly dismissed a challenge to this provision grounded on the Contract Clause, Stone v. Mississippi, 101 U.S. 814, 817-818 (1880):
"Irrevocable grants of property and franchises may be made if they do not impair the supreme authority to make laws for the right government of the State; but no legislature can curtail the power of its successors to make [p49] such laws as they may deem proper in matters of police." . . . No one denies . . . that [this legislative power] extends to all matters affecting the public health or the public morals.
Later cases continued to read the Contract Clause as qualified by the States' powers to legislate for the betterment of their citizens, while further expanding the range of permissible police powers. For example, in Atlantic Coast Line R. Co. v. Goldsboro, 232 U.S. 548 (1914), the State chartered and contracted with the plaintiff railway company to operate rail lines within the State. Pursuant to this contract, the railroad acquired in fee land for use as rights-of-way and similar transportation activities. The Court recognized that the charter was a binding contract, and that the company, in reliance on the agreement, had acquired land which it enjoys as "complete and unqualified" owner. Id. at 556, 558. Yet, the Court brushed aside a constitutional challenge to subsequent ordinances that greatly circumscribed the railroad's activities on its own land:
For it is settled that neither the "contract" clause nor the "due process" clause has the effect of overriding the power of the State to establish all regulations that are reasonably necessary to secure the health, safety, good order, comfort, or general welfare of the community; that this power can neither be abdicated nor bargained away, and is inalienable even by express grant; and that all contract and property rights are held subject to its fair exercise.
Id. at 558.
In perfect conformity with these earlier cases that recognized the States' broad authority to legislate for the welfare of their citizens, New Jersey and New York sought to repeal the 1962 covenant in furtherance of "admittedly important" interests, ante at 29, in environmental protection, clean air, and safe and efficient transportation facilities. The States' policy of deploying excess tolls for the maintenance and expansion [p50] of rapid transit was not oppressively or capriciously chosen; rather, it squarely complies with the commands embodied by Congress in several contemporaneous national laws. Supra at 36-37. By invalidating the 1974 New Jersey repeal -- and, by necessity, like action by New York -- the Court regrettably departs from the virtually unbroken line of our cases that remained true to the principle that all private rights of property, even if acquired through contract with the State, are subordinated to reasonable exercises of the States' lawmaking powers in the areas of health (Fertilizing Co. v. Hyde Park, 97 U.S. 659 (1878); Butchers' Union Co. v. Crescent City Co., 111 U.S. 746 (1884)); environmental protection (Hudson Water Co. v. McCarter, 209 U.S. 349 (1908); Manigault v. Springs, 199 U.S. 473 (1905); cf. Henderson Co v. Thompson, 300 U.S. 258, 267 (1937); Illinois Central R. Co. v. Illinois, 146 U.S. 387, 452-453 (1892)); and transportation (New Orleans Pub. Serv. v. New Orleans, 281 U.S. 682 (1930); Erie R. Co. v. Public Util. Comm'rs, 254 U.S. 394 (1921); Denver & R. G R. Co. v Denver, 250 U.S. 241 (1919); Atlantic Coast Line R. Co. v. Goldsboro, supra; Northern Pac. R. Co. v. Duluth, 208 U.S. 583 (1908); Chicago, B. & Q. R. Co. v. Nebraska ex rel Omaha, 170 U.S. 57 (1898); New York & N.E. R. Co v. Bristol, 151 U.S. 556 (1894)). In its disregard of these teachings, the Court treats New Jersey's social and economic policies with lesser sensitivity than former Members of this Court who stressed the protection of contract and property rights. Even Mr. Justice Butler recognized that the Contract Clause does not interfere with state legislative efforts in behalf of its citizens' welfare unless such actions
are . . . clearly unreasonable and arbitrary. . . . [And in applying this standard] [u]ndoubtedly the city, acting as the arm of the State, has a wide discretion in determining what precautions in the public interest are necessary or appropriate under the circumstances.
New Orleans Pub. Serv., supra at 686. [p51]
Thus, with at best a passing nod to the long history of judicial deference to state lawmaking in the face of challenges under the Contract Clause, see ante at 23 n. 20, the Court today imposes severe substantive restraints on New Jersey's attempt to free itself from a contractual provision that it deems inconsistent with the broader interests of its citizens. Today's decision cannot be harmonized with our earlier cases by the simple expedient of labeling the covenant "purely financial," ante at 25, rather than a forfeiture of "an essential attribute of [New Jersey's] sovereignty," ante at 23. As either an analytical or practical matter, this distinction is illusory. It rests upon an analytical foundation that has long been discarded as unhelpful. [n15] And as a [p52] purely practical matter, an interference with state policy is no less intrusive because a contract prohibits the State from resorting to the most realistic and effective financial method of preserving its citizens' legitimate interests in healthy and safe transportation systems, rather than directly proscribing the States from exercising their police powers in this area. The day has long since passed when analysis under the Contract Clause usefully can turn on such formalistic differences. Cf. Home Bldg. & Loan Assn. v. Blaisdell, 290 U.S. 398, 438 (1934).
Nor is the Court's reading of earlier constitutional doctrine aided by cases where the Contract Clause was held to forestall state efforts intentionally to withhold from creditors the unpaid interest on, Von Hoffman v. City of Quincy, 4 Wall. 535 (1867), or principal of, Louisiana ex rel. Hubert v. New Orleans, 215 U.S. 170 (1909); Wolff v. New Orleans, 103 U.S. 358 (1881), outstanding bonded indebtedness. Beyond dispute, the Contract Clause has come to prohibit a State from embarking on a policy motivated by a simple desire to escape its financial obligations or to injure others through "the repudiation of debts or the destruction of contracts or the denial of means to enforce them." Home Bldg. & Loan Assn. v. Blaisdell, supra at 439. Nor will the Constitution permit [p53] a State recklessly to pursue its legitimate policies involving matters of health, safety, and the like with "studied indifference to the interests of the mortgagee or to his appropriate protection. . . ." W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56, 60 (1935). In this regard, the Court merely creates its own straw man when it characterizes the choice facing it today either as adopting its new, expansive view of the scope of the Contract Clause or holding that the Clause "would provide no protection at all." Ante at 26. The Constitution properly prohibits New Jersey and all States from disadvantaging their creditors without reasonable justification or in a spirit of oppression, and New Jersey claims no such prerogatives. But if a State, as here, manifestly acts in furtherance of its citizens' general welfare, and its choice of policy, even though infringing contract rights, is not "plainly unreasonable and arbitrary," Denver & R. G. R. Co v. Denver, 250 U.S. at 244, our inquiry should end:
The question is . . . whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end.
Home Bldg. & Loan Assn. v. Blaisdell, supra at 438.
The Court, however, stands the Contract Clause completely on its head, see supra at 45, and both formulates and strictly applies a novel standard for reviewing a State's attempt to relieve its citizens from unduly harsh contracts entered into by earlier legislators: [n16] Such "an impairment may be constitutional [p54] if it is reasonable and necessary to serve an important public purpose." Ante at 25. Not only is this apparently spontaneous formulation virtually assured of frustrating the understanding of court and litigant alike, [n17] but it [p55] is wholly out of step with the modern attempts of this Court to define the reach of the Contract Clause when a State's own contractual obligations are placed in issue.
Mr. Justice Cardozo's opinion in W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56 (1935), is the prime exposition of the [p56] modern view. As a relief measure for financially depressed local governments, Arkansas enacted a statute that greatly diminished the remedies available to creditors under their bonds. This resulted in a remedial scheme whereby creditors were "without an effective remedy" for a minimum of 6 1/2 years, during which time the government's obligation to pay principal or interest was suspended. Id. at 61. The Court invalidated the alteration in remedies. It did so, however, only after concluding that the challenged state law cut recklessly and excessively into the value of the creditors' bonds:
[W]ith studied indifference to the interests of the mortgagee or to his appropriate protection [the State has] taken from the mortgage the quality of an acceptable investment for a rational investor.
Id. at 60.
So viewed, [the State's action is] seen to be an oppressive and unnecessary destruction of nearly all the incidents that give attractiveness and value to collateral security.
Id. at 62.
In the present case, the trial court expressly applied the Kavanaugh standard to New Jersey's repeal of the covenant, and properly found appellant's claim to be wanting in all material respects: in a detailed and persuasive discussion, the court concluded that neither New Jersey nor New York repealed the covenant with the intention of damaging their creditors' financial position. Rather, the States acted out of "vital interest[s]," for "[t]he passage of time and events between 1962 and 1974 satisfied the Legislatures of the two states that the public interest which the Port Authority was intended to serve could not be met within the terms of the covenant." 134 N.J.Super., at 194, 338 A.2d at 873. And the creditors' corresponding injury did not even remotely reach that proscribed in Kavanaugh: not only have Authority bonds remained "an ‘acceptable investment,'" but "[t]he claim that bondholder security has been materially impaired or destroyed by the repeal is simply not supported by the record." Id. at 196, 338 A.2d at 874.
The Court, as I read today's opinion, does not hold that [p57] the trial court erred in its application of the facts of this case to Mr. Justice Cardozo's formulation. Instead, it manages to take refuge in the fact that Kavanaugh left open the possibility that the test it enunciated may merely represent the "‘outermost limits'" of state authority. Ante at 27. This, I submit, is a slender thread upon which to hang a belated revival of the Contract Clause some 40 years later. And, in any event, whatever opening remained after Kavanaugh was surely closed by Mr. Justice Frankfurter in Faitoute Iron & Steel Co. v. City of Asbury Park, 316 U.S. 502 (1942). Speaking for a unanimous Court, id. at 515, he employed the precise constitutional standard established by Mr. Justice Cardozo seven years earlier, and upheld under the Contract Clause a New Jersey plan to reorganize the outstanding debt obligations held by creditors of Asbury Park. The Court thereby authorized an impairment of creditors' financial interests that was far more substantial than that involved here: in fact, the reorganization plan both extended the maturity date of the city's bonds by some 30 years and reduced the relevant coupon rate. Yet, rather than suggesting, as does the Court today, that New Jersey possessed lesser authority in the public interest to amend its own contracts than to alter private undertakings, the Court made clear that the State's powers are more expansive
[w]here . . . the respective parties are not private persons . . . but are persons or corporations whose rights and powers were created for public purposes, by legislative acts, and where the subject matter of the contract is one which affects the safety and welfare of the public.
Id. at 514 n. 2, quoting Chicago, B. & Q. R. Co. v. Nebraska, 170 U.S. at 72.
In my view, the fact that New Jersey's repeal of the 1962 covenant satisfies the constitutional standards defined in Kavanaugh and Faitoute should, as the state courts concluded, terminate this litigation. But even were I to agree that the test [p58] in Kavanaugh remains open to further refinement, that, I repeat, would hardly justify the Court's attempt to deploy the Contract Clause as an apparently unyielding instrument for policing the policies of New Jersey and New York. For such an interpretation plainly is at odds with the principles articulated in Kavanaugh and Faitoute, and subsequently reconfirmed by El Paso v. Simmons, 379 U.S. 497 (1965). The Court there considered a provision of Texas law that abolished an unlimited redemption period for landowners whose land had been defaulted to the State for nonpayment of interest, substituting a 5-year reinstatement period in its place. Unlike appellant here, Simmons at least could claim to have suffered tangible economic injury by virtue of the State's modification of his land sale contract; indeed, as a result of that "impairment," he permanently lost property to the State. And, of course, Texas' "self-interest [was] at stake," ante at 26, since it alone was the beneficiary of Simmons' curtailed right of reinstatement. Yet, properly applying the teachings of Blaisdell, Kavanaugh, and Faitoute, the Court had little difficulty in sustaining the measure as a means of removing clouds on title arising from pending reinstatement rights, 379 U.S. at 508-509 (citations omitted):
The Blaisdell opinion, which amounted to a comprehensive restatement of the principles underlying the application of the Contract Clause, makes it quite clear that
[n]ot only is the constitutional provision qualified by the measure of control which the State retains over remedial processes, but the State also continues to possess authority to safeguard the vital interests of its people. It does not matter that legislation appropriate to that end "has the result of modifying or abrogating contracts already in effect.". . . Once we are in this domain of the reserve power of a State, we must respect the "wide discretion on the part of the legislature in determining what is and what is not necessary." [p59]
It need hardly be said that today's decision is markedly out of step with this deferential philosophy. The Court's willingness to uphold an impairment of contract -- no matter how "technical" the injury -- only on a showing of "necessity" ante at 29-31, is particularly distressing, for this Court always will be able to devise abstract alternatives to the concrete action actually taken by a State. For example, in virtually every decided Contract Clause case, the government could have exercised the Court's "lesser alternative" of resorting to its powers of taxation as a substitute for modifying overly restrictive contracts. Ante at 30 n. 29. Nothing, at least on the level of abstraction and conjecture engaged in by the Court today, prevented the appropriation of monies by Illinois to buy back or modify the corporate charter of the polluting fertilizer company in Fertilizing Co. v. Hyde Park, 97 U.S. 659 (1878); or by New Jersey to ensure the financial solvency of Asbury Park bonds, Faitoute Iron & Steel Co. v. City of Asbury Park, supra; or by Texas to purchase the unlimited redemption rights involved in El Paso v. Simmons, supra. Yet, in all these cases, modifications of state contracts were countenanced, and this Court did not feel compelled or qualified to instruct the state legislatures how best to pursue their business. In brief, these cases recognized that, when economic matters are concerned, "the availability of alternatives does not render the [decisionmaker's] choice invalid." Knebel v. Hein, 429 U.S. 288, 294 (1977). State legislation "may not be held unconstitutional simply because a court finds it unnecessary, in whole or in part." Whalen v. Roe, 429 U.S. 589, 597 (1977).
By the same token, if unforeseeability is the key to a "reasonable" decision, as the Court now contends, ante at 32, almost all prior cases again must be repudiated. Surely the legislators of Illinois could not convincingly have claimed surprise because a fertilizer company polluted the air and transported fertilizer to its factory, Fertilizing Co. v. Hyde [p60] Park, supra. Nor was it unforeseeable to Mississippi that a corporation which was expressly chartered to operate a lottery, in fact, did so, Stone v. Mississippi, 101 U.S. 814 (1880). And, of course, it was "not unknown," ante at 32, to either debtor or creditor that a municipality's financial condition might falter, as in Faitoute Iron & Steel Co. v. City of Asbury Park, supra; indeed, the foreseeability of that very risk inheres in the process of selecting an appropriate coupon rate. Yet, in all of these instances, this Court did not construe the Contract Clause to prevent the States from confronting their real problems if and when their legislators came to believe that such action was warranted. It is not our province to contest the "reasonable judgments" of the duly authorized decisionmakers. Knebel v. Hein, supra at 297.
Thus, as I had occasion to remark only last Term, the Court again offers a constitutional analysis that rests upon "abstraction[s] without substance," National League of Cities v. Usery, 426 U.S. 833, 860 (1976) (dissenting opinion). Given that this is the first case in some 40 years in which this Court has seen fit to invalidate purely economic and social legislation on the strength of the Contract Clause, one may only hope that it will prove a rare phenomenon, turning on the Court's particularized appraisal of the facts before it. But there also is reason for broader concern. It is worth remembering that there is nothing sacrosanct about a contract. All property rights, no less than a contract, are rooted in certain "expectations" about the sanctity of one's right of ownership. Compare ante at 19-21, n. 17, with J. Bentham, Theory of Legislation c. 8 (1911 ed.). And other constitutional doctrines are akin to the Contract Clause in directing their protections to the property interests of private parties. Hence, the command of the Fifth Amendment that "private property [shall not] be taken for public use without just compensation" also "remains a part of our written Constitution." Ante at 16. And during the heyday of economic due process associated with Lochner v. New [p61] York, 198 U.S. 45 (1905), and similar cases long since discarded, see Whalen v. Roe, supra at 597, this Court treated "the liberty of contract" under the Due Process Clause as virtually indistinguishable from the Contract Clause. G. Gunther Constitutional Law, 603-604 (1975); Hale, The Supreme Court and the Contract Clause: III, 57 Harv.L.Rev. 852, 890-891 (1944). In more recent times, however, the Court wisely has come to embrace a coherent, unified interpretation of all such constitutional provisions, and has granted wide latitude to "a valid exercise of [the States'] police powers," Goldblatt v. Hempstead, 369 U.S. 590, 592 (1962), even if it results in severe violations of property rights. See Pittsburgh v. Alco Parking Corp., 417 U.S. 369 (1974); Sproles v. Binford, 286 U.S. 374, 388-389 (1932); Miller v. Schoene, 276 U.S. 272, 279-280 (1928); cf. Williamson v. Lee Optical Co., 348 U.S. 483, 488 (1955). If today's case signals a return to substantive constitutional review of States' policies, and a new resolve to protect property owners whose interest or circumstances may happen to appeal to Members of this Court, then more than the citizens of New Jersey and New York will be the losers.
I would not want to be read as suggesting that the States should blithely proceed down the path of repudiating their obligations, financial or otherwise. Their credibility in the credit market obviously is highly dependent on exercising their vast lawmaking powers with self-restraint and discipline, and I, for one, have little doubt that few, if any, jurisdictions would choose to use their authority "so foolish[ly] as to kill a goose that lays golden eggs for them," Erie R. Co. v. Public Util. Comm'rs, 254 U.S. at 410. But in the final analysis, there is no reason to doubt that appellant's financial welfare is being adequately policed by the political processes and the [p62] bond marketplace itself. [n18] The role to be played by the Constitution is, at most, a limited one. Supra at 52-53. For this Court should have learned long ago that the Constitution -- be it through the Contract or Due Process Clause -- can actively intrude into such economic and policy matters only if my Brethren are prepared to bear enormous institutional and social costs. Because I consider the potential dangers of such judicial interference to be intolerable, I dissent.
1. The covenant does enable the Authority to finance passenger railroad facilities to a level of "permitted deficits," defined as one-tenth of the General Reserve Fund or 1% of the total bonded indebtedness. While the Court notes in passing that this provision "permitted, and perhaps even contemplated, additional Port Authority involvement in deficit rail mass transit," ante at 11, the formula restricts the Authority to a small percentage of the fund, even though aggregate reserves and revenues may far exceed expenses and creditor claims. In any event, the parties have stipulated that as a practical matter the Authority has been unable to expand its involvement in rapid transit by reliance on this alternative formula. App. 692a.
2. The 1962 covenant does not merely bind the Authority's hands for the decades of the 1960's and 1970's. Rather, the covenant will preclude the deployment of the Authority's toll revenues to public transit needs until all the bonds previously issued under the covenant have been retired. Appellant trust company advises that the covenant thus continues, "as a practical matter, until the year 2007," Brief for Appellant 24, even if now repealed prospectively as suggested ante at 18 n. 15.
3. See, e.g., infra at 59, and n. 17.
4. See ante at 30 n. 28. I am puzzled whether the Court really intends these alternatives to be taken seriously in view of the footnote's closing reminder that even these "lesser impairments" also may be found to be unconstitutional. If the Court, in fact, means that New Jersey and New York could remedy any Contract Clause defects merely by modifying their repeal of the 1962 covenant so as to limit transit subsidization solely to future toll increases -- the policy that is being followed by the States in actual practice -- then today's decision would be rendered into a temporary formalism.
5. Cf. Friends of the Earth v. Carey, 552 F.2d 25 (CA2 1977); Friends of the Earth v. Carey, 535 F.2d 165 (CA2 1976); Friends of the Earth v. EPA, 499 F.2d 1118 (CA2 1974).
6. Because cars entering or leaving Manhattan must pass over bridges or through tunnels, the regulation of tolls offers an unusually convenient and effective method of discouraging automobile usage in addition to promising a highly lucrative revenue base.
7. Thus, if toll funds cannot be diverted to rapid transit needs, any increase in bridge revenues necessarily would produce an expansion of the Authority's general reserve fund well beyond that necessary or contemplated for the protection of bondholders. Faced with such a mere accumulation of capital, the Federal Highway Administrator, acting under § 503 of the General Bridge Act of 1946, 33 U.S.C. § 526 evidently would be obligated to disallow any toll increases as not "reasonable and just" under the Act. See generally Delaware River Port Authority v. Tiemann, 531 F.2d 699 (CA3 1976). The United States Department of Transportation, however, has stated that,
in some areas (New York, Philadelphia, San Francisco), bridge toll revenues provide significant support for transit capital and/or operating costs, thereby providing transit service improvements which promote decreased dependence on automobile travel.
App. 726a-727a. The Department has recommended that a diversion of funds to serve rapid transit needs should qualify as "reasonable and just," and, therefore, would be capable of supporting a general increase in toll revenues. Ibid. This is in stark contrast with the Court's suggested alternative policies outlined ante at 30 n. 29, which would permit no general increase in bridge tolls and no coordination of the bridge toll and transit subsidization strategies that are central to the antipollution effort in metropolitan New York, and, therefore, until today, have been considered secondary and inadequate to serve the community's needs.
8. See, e.g., n. 7, supra. In short, all the alternatives that the Court leaves to the States, ante at 30 n. 29, deny access to the Authority's tolls, even though they represent a potentially lucrative revenue source which can be tapped without injury to the bondholders. See Part B, infra.
9. Indeed, the Court's single-minded emphasis on the existence of changed circumstances leads it to embrace a rather perverse constellation of values in which New Jersey's desire to care for the health, environmental, and energy needs of its citizenry is relegated to lesser importance than the desire of Texas in El Paso v. Simmons, 379 U.S. 497 (1965), to deny windfall economic gains to purchasers of school land from the State. Ante at 31. I, of course, do not dispute the importance of Texas' stake in Simmons. But surely any reasonable ordering of values and social objectives would compel the conclusion that a State's concern for its citizens' health and general welfare is far more deserving of this Court's recognition.
10. The court found:
Between 1961 and 1973, the net revenues of the Authority increased from $68,000,000 to $137,000,000, and, over that period, the Authority had available to it $582,732,000 in excess of its debt service requirements. . . . Through 1974, the corresponding figures are $161,283,000 and $649,750,000, respectively.
134 N.J.Super. at 195 n. 43, 338 A.2d at 873 n. 43. Thus, both prior to and following the repeal of the covenant, the Authority's revenues and earned surplus continued their unhampered and overwhelmingly impressive growth.
11. Indeed, one of the anomalous aspects of this suit is the Court's willingness to invalidate an Act of the State of New Jersey, and indirectly of New York, while apparently recognizing that, if this were an action by creditors for damages, or an action to fix "just compensation," the trial court's findings raise serious doubt that any compensable monetary loss would be found. Ante at 19. By sidestepping the damages question, ibid., and by mandating reinstatement of the covenant, the Court manages to burden the Port Authority with an unwanted contract, while relieving the creditor-appellant of the need to establish any tangible economic injury arising from the covenant's repeal. This suggests that any protection afforded bondholders today may well prove to be purely illusory. Even after the mandate issues, New Jersey, we are told, may again condemn or repeal the covenant and offer just compensation to its creditors. See ante at 29 n. 27. However, in light of the trial court's factual conclusions, this promise of compensation will entitle bondholders to little or no financial recovery.
12. The fundamental soundness of the Authority's bonds is reflected in the ratings received from the principal financial surveys, Moody's and Standard & Poor's, following repeal of the covenant. The trial court found:
The bonds carried the same ["A"] rating prior to the enactment of the covenant, after it was enacted, after it was prospectively repealed, and after the [retroactive] repeal act of 1974.
134 N.J.Super. at 179, 338 A.2d at 864.
13. One scholar for example, after undertaking extensive research into the history of the Constitutional Convention, concluded that there is no evidence that the Constitution's Framers perceived of the Contract Clause as applicable to public agreements. "[I]t is evident that all of them discussed the clause only in relation to private contracts, i.e., contracts between individuals." B. Wright, The Contract Clause of the Constitution 15 (1938). Moreover,
[a] careful search has failed to unearth any other statements even suggesting that the contract clause was intended to apply to other than private contracts.
Id. at 16. Indeed, Professor Wright found that only two anti-federalists, neither of whom was a member of the Convention, ever suggested that the Clause would support "a broader meaning" encompassing public contracts, but "their interpretations were denied by members of the Convention, and the denials were not challenged." Ibid.
14. Parallel doctrines worked to the same end of freeing the States from contractual duties allegedly imposed by earlier legislators. For example, it has long been held that, in applying the Contract Clause to government contracts, every ambiguity and gap is to be strictly construed in behalf of the State. "[I]n grants by the public, nothing passes by implication." Charles River Bridge v. Warren Bridge, 11 Pet. 420, 546 (1837).
Every reasonable doubt is to be resolved adversely [to the private party claiming under the contract]. Nothing is to be taken as conceded but what is given in unmistakable terms, or by an implication equally clear. The affirmative must be shown. Silence is negation, and doubt is fatal to the claim. This doctrine is vital to the public welfare.
Fertilizing Co. v. Hyde Park, 97 U.S. 659, 666 (1878).
Along these lines, it is noteworthy that the state law of New Jersey itself raises serious doubts concerning the reasonableness of appellant's reliance on the covenant for permanent protection from later laws enacted by the state legislature. In a case involving an alleged impairment of a township's municipal bonds, Hourigan v. North Bergen Township, 113 N.J.L. 143, 149, 172 A.193, 196 (1934), the State's highest court declared:
It is a well established doctrine that the interdiction of statutes impairing the obligation of contracts does not prevent the state from exercising such powers as are vested in it for the promotion of the common weal, or are necessary for the general good of the public, though contracts entered into between individuals may thereby be affected. This power, which in its various ramifications is known as the police power, is an exercise of the sovereign right of the government to protect the lives, health, morals, comfort and general welfare of the people, and is paramount to any rights under contracts between individuals. While this power is subject to limitations in certain cases, there is wide discretion on the part of the legislature in determining what is and what is not necessary -- a discretion which courts ordinarily will not interfere with.
In my view, therefore, appellant should be held to have purchased the Authority's bonds subject to the knowledge that under New Jersey law the State's obligation was conditionally undertaken subject to reasonable future legislative action.
The record raises similar doubts and ambiguities. Thus, State Senator Farley, who chaired the committee that inquired into the status of the Authority's bonds prior to enactment of the covenant, noted:
[W]e well appreciate that . . . we could not impair any obligation such as contracts of bond issues. Likewise, you [Commissioner Clancy of the Port Authority], as a lawyer, know that one legislature cannot bind the other involving policy five, ten, or twenty years hence.
App. 89a (emphasis supplied). It may well be that appellant subjectively believed that the covenant was unimpeachable under state law. But given the doubts and hesitancies contained in the record, the principles established in earlier cases extending back to John Marshall should require that such "doubt is fatal to [appellant's] claim." Fertilizing Co., supra at 666.
15. Among other difficulties, the question-begging attempt to categorize inviolable legislation powers vis-a-vis the Contract Clause depends upon a conception of state sovereignty that is both simplistic and unpersuasive. We are told that the Contract Clause "does not require a State to adhere to a contract that surrenders an essential attribute of its sovereignty," ante at 23, but in applying this principle, the Court finds that the States' "taxing and spending powers," unlike the power of eminent domain, lie outside this rule, ante at 24. Before today, one might well have supposed that the States' authority to tax, spend money, and generally make basic financial decisions is among the most important of their governmental powers. Indeed, only last Term, this Court announced that a State's decision to pay its employees less than the minimum wage -- a decision of far less importance to the citizens generally than efforts to derive funding for improving the facilities that directly and vitally affect their health and safety -- is immune from federal regulation under the Commerce Clause, an authority previously thought to be virtually plenary in nature. The Court there reasoned that the minimum wage decision falls within the sovereign powers of "States qua States." National League of Cities v. Usery, 426 U.S. 833, 847 (1976). One may rightfully feel unease that the Court is in the process of developing a concept of state sovereignty that is marked neither by consistency nor intuitive appeal.
In any event, in addition to resting on a most dubious conception of sovereignty, the Court's effort to demonstrate that the States are free to contract away their taxing and spending powers -- and hence free "to enter into effective financial contracts" notwithstanding later exercises of the police power -- must fail because it is untenable. While it is true that New Jersey v. Wilson, 7 Cranch 164 (1812) (Contract Clause precludes a legislature from repudiating a grant of tax exemption) has never explicitly been overruled, subsequent cases have almost uniformly avoided adherence to either its reasoning or holding. See, e.g., New York ex rel. Clyde v. Gilchrist, 262 U.S. 94 (1923); Seton Hall College v. South Orange, 242 U.S. 100 (1916); Rochester R. Co. v. Rochester, 205 U.S. 236 (1907); Wisconsin & M. R. Co. v. Powers, 191 U.S. 379 (1903); Morgan v. Louisiana, 93 U.S. 217 (1876). These cases appreciate, as today's decision does not, that the operative consideration for constitutional purposes is not whether a contract can or cannot be branded as "financial." Rather, in adjudging the constitutionality of "an exercise of the sovereign authority of the State," Seton Hall College, supra at 106 -- be it financial or otherwise -- the Contract Clause tolerates reasonable legislative Acts in the service of the broader interests of the society generally.
16. The Court makes clear that it contemplates stricter judicial review under the Contract Clause when the government's own obligations are in issue, but points to no case in support of this multi-headed view of the scope of the Clause. See ante at 25-26. As noted previously, see n. 13, supra, this position finds no support in the historical rationale for inclusion of the Contract Clause in the Constitution. And it is clear that the Court's citation to Perry v. United States, 294 U.S. 330 (1935), see ante at 26 n. 25, offers no support for its rewriting of history. In that case, one of the Gold Clause Cases, Perry challenged the constitutionality of a congressional enactment which authorized the redemption of outstanding United States gold bonds by payment of legal tender currency rather than "‘by the payment of 10,000 gold dollars each containing 25.8 grains of gold, .9 fine,'" 294 U.S. at 347, the value of the dollar in gold when the bonds were acquired. Perry complained that inflation had devalued the worth of legal tender with respect to gold and, therefore, claimed financial injury by the conversion. The Government defended its actions on the ground that the gold clause obstructed Congress' express power to "regulate the Value" of money, Art. I, § 8, and, accordingly, argued that Congress was free to repudiate the gold standard under that power. Although Perry ultimately was denied recovery, the Court found that the authority to "regulate the Value" of money, while permitting Congress "to control or interdict the contracts of private parties" with regard to the legal exchange rate, 294 U.S. at 350, did not include the power to repudiate the Government's own obligations, which were governed by entirely different constitutional provisions: e.g., Congress may "borrow Money on the credit of the United States," Art. I, § 8, cl. 2, and "The validity of the public debt of the United States . . . shall not be questioned," Amdt. 14, § 4. Thus, the differential standard in Perry emerged from the collision of competing grants of power to the Federal Government, and did not purport to suggest that the Contract Clause -- or its federal counterpart, the Fifth Amendment -- standing alone, would produce different standards for reviewing governmental interference with public and private contractual obligations.
17. The Court's newly announced standard of review, like all such formulations, can merely hope to suggest the direction that a court's inquiry should take, and the relative weight to be afforded a constitutional right. But particular words like "reasonable" and "necessary" also are fused with special meaning, for judges have long experience in applying such standards to constitutional contexts. Reasonableness generally has signified the most relaxed regime of judicial inquiry. See, e.g., Dandridge v. Williams, 397 U.S. 471, 485 (1970) ("If the classification has some ‘reasonable basis,' it does not offend the Constitution"). Contrariwise, the element of necessity traditionally has played a key role in the most penetrating mode of constitutional review. See, e.g., Shapiro v. Thompson, 394 U.S. 618, 634 (1969) (a classification which burdens a fundamental constitutional right must be "necessary to promote a compelling governmental interest"). The Court's new test, therefore, represents a most unusual hybrid which manages to merge the two polar extremes of judicial intervention, see generally Gunther, Foreword: In Search of Evolving Doctrine on A Changing Court: A Model for a Newer Equal Protection, 86 Harv.L.Rev. 1, 8 (1972), into one synthesis. Plainly, courts are apt to face considerable confusion in wielding such a schizophrenic new instrument. And well they might, for until today, one would have fairly thought that, as a matter of common sense as well as doctrine, state policies that are "necessary to serve an important public purpose," ante at 25, a fortiori would be "reasonable."
The Court, however, seems to discover new meanings in these terms. "Necessary" appears to comport with some notion of a less restrictive alternative. As applied by the Court in this instance, however, the less restrictive alternative bears no relationship to previous uses of that analytical tool when economic and social matters were involved. Thus, the Court does not actually inquire whether "the government can achieve the purposes of the challenged regulation equally effectively by one or more narrower regulations." Struve, The Less-Restrictive Alternative Principle and Economic Due Process, 80 Harv.L.Rev. 1463 (1967). Rather, the Court concludes that an impairment of contract was not "necessary" because the Court apparently is able to hypothesize other means of achieving some or all of the State's objectives, even though these alternatives have long been deemed as secondary in importance, nn. 7, 8, supra, or arguably are unconstitutional, ante at 30 n. 28. Under this approach, few, if any, Contract Clause cases in history that have deferred to state policymaking have been correctly decided. See infra at 59.
The "reasonableness" test does no better. No longer does it mean that this Court will defer to the "reasonable judgments" of the authorized policymakers. Knebel v. Hein, 429 U.S. 288, 297 (1977). Instead, the Court appears to ask whether changed circumstances took the state legislature by surprise, ante at 31-32. Again, I find no basis in this Court's prior cases for adopting such a constrictive view of that constitutional test. See infra at 59-60.
18. And, of course, there is every reason to expect that appellant, with combined trust and fiduciary holdings of Authority bonds amounting to some $300 million, is not powerless in protecting its interests either before the state legislature or in the economic marketplace. Indeed, a myriad of sophisticated investors, investment banks, and market analysts regularly oversee the operation of the bond market and the affairs of municipalities which appear in search of credit. Accordingly, any city or State that enters the marketplace is well aware that, should it treat its creditors abusively, the market is apt to exact "justice" that is quicker and surer than anything that this Court can hope to offer. In brief, appellant is the paradigm of a litigant who is neither "discrete" nor "insular" in appealing for this Court's time or protection.