Non-Retroactivity Rules and Due Process

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Amdt5. Non-Retroactivity Rules and Due Process

Fifth Amendment:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Federal regulation of future action, based upon rights previously acquired by the person regulated, is not prohibited by the Constitution. So long as the Constitution authorizes the subsequently enacted legislation, the fact that its provisions limit or interfere with previously acquired rights does not ordinarily condemn it. The imposition upon coal mine operators, and ultimately coal consumers, of the liability of compensating former employees, who had terminated work in the industry before passage of the law, for black lung disabilities contracted in the course of their work, was sustained by the Court as a rational measure to spread the costs of the employees’ disabilities to those who had profited from the fruits of their labor.1 Legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations, but it must take account of the realities previously existing, i.e., that the danger may not have been known or appreciated, or that actions might have been taken in reliance upon the current state of the law; therefore, legislation imposing liability on the basis of deterrence or of blameworthiness might not have passed muster. The Court has applied Turner Elkhorn in upholding retroactive application of pension plan termination provisions to cover the period of congressional consideration, declaring that the test for retroactive application of legislation adjusting economic burdens is merely whether “the retroactive application . . . is itself justified by a rational legislative purpose.” 2

Rent regulations were sustained as applied to prevent execution of a judgment of eviction rendered by a state court before the enabling legislation was passed.3 For the reason that “those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end,” no vested right to use housing, built with the aid of FHA mortgage insurance for transient purposes, was acquired by one obtaining insurance under an earlier section of the National Housing Act, which, though silent in this regard, was contemporaneously construed as barring rental to transients, and was later modified by an amendment that expressly excluded such use.4 An order by an Area Rent Director reducing an unapproved rental and requiring the landlord to refund the excess previously collected, was held, with one dissenting vote, not to be the type of retroactivity which is condemned by law.5 The application of a statute providing for tobacco marketing quotas, to a crop planted prior to its enactment, was held not to deprive the producers of property without due process of law, because it operated not upon production, but upon the marketing of the product after the act was passed.6

In the exercise of its comprehensive powers over revenue, finance, and currency, Congress may make Treasury notes legal tender in payment of debts previously contracted7 and may invalidate provisions in private contracts calling for payment in gold coin,8 but rights against the United States arising out of contract are more strongly protected by the Due Process Clause. Hence, a law purporting to abrogate a clause in government bonds calling for payment in gold coin was invalid,9 and a statute abrogating contracts of war risk insurance was held unconstitutional as applied to outstanding policies.10

The Due Process Clause has been successfully invoked to defeat retroactive invasion or destruction of property rights in a few cases. A revocation by the Secretary of the Interior of previous approval of plats and papers showing that a railroad was entitled to land under a grant was held void as an attempt to deprive the company of its property without due process of law.11 The exception of the period of federal control from the time limit set by law upon claims against carriers for damages caused by misrouting of goods, was read as prospective only because the limitation was an integral part of the liability, not merely a matter of remedy, and would violate the Fifth Amendment if retroactive.12

In acting pursuant to its power to enact uniform bankruptcy legislation, Congress has regularly authorized retrospective impairment of contractual obligations,13 but the Due Process Clause (by itself or infused with takings principles) constitutes a limitation upon Congress’s power to deprive persons of more secure forms of property, such as the rights secured creditors have to obtain repayment of a debt. The Court had long followed a rule of construction favoring prospective-only application of bankruptcy laws, absent a clear showing of congressional intent,14 but it was not until 1935 that the Court actually held unconstitutional a retrospective law. Struck down by the Court was the Frazier-Lemke Act, which by its terms applied only retrospectively, and which authorized a court to stay proceedings for the foreclosure of a mortgage for five years, the debtor to remain in possession at a reasonable rental, with the option of purchasing the property at its appraised value at the end of the stay. The Act offended the Fifth Amendment, the Court held, because it deprived the creditor of substantial property rights acquired prior to the passage of the act.15 However, a modified law, under which the stay was subject to termination by the court and which continued the right of the creditor to have the property sold to pay the debt, was sustained.16

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 14–20 (1976). But see id. at 38 (Justice Powell concurring) (questioning application of retroactive cost-spreading). back
Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 730 (1984). Accord, United States v. Sperry Corp., 493 U.S. 52, 65 (1989) (upholding imposition of user fee on claimants paid by Iran-United States Claims Tribunal prior to enactment of fee statute). Concrete Pipe & Products v. Construction Laborers Pension Trust, 508 U.S. 602, 636–41 (1993) (imposition of multiemployer pension plan withdrawal liability on an employer is not irrational, even though none of its employees had earned vested benefits by the time of withdrawal). In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), the challenge was to a statutory requirement that companies formerly engaged in mining pay miner retiree health benefits, as applied to a company that had placed its mining operations in a wholly owned subsidiary three decades earlier, before labor agreements included an express promise of lifetime benefits. In a fractured opinion, the justices ruled 5-4 that the scheme’s severe retroactive effect offended the Constitution, though differing on the governing clause. Four of the majority justices based the judgment solely on takings law, while opining that “there is a question” whether the statute violated due process as well. The remaining majority justice, and the four dissenters, viewed substantive due process as the sole appropriate framework for resolving the case, but disagreed on whether a violation had occurred. back
Fleming v. Rhodes, 331 U.S. 100, 107 (1947). back
FHA v. The Darlington, Inc., 358 U.S. 84, 89–91, 92–93 (1958). Dissenting, Justices Harlan, Frankfurter, and Whittaker maintained that under the Due Process Clause the United States, in its contractual relations, is bound by the same rules as private individuals unless the action taken falls within the general federal regulatory power. back
Woods v. Stone, 333 U.S. 472 (1948). back
Mulford v. Smith, 307 U.S. 38 (1939). An increase in the penalty for production of wheat in excess of quota was valid as applied retroactively to wheat already planted, where Congress concurrently authorized a substantial increase in the amount of the loan that might be made to cooperating farmers upon stored “farm marketing excess wheat.” Wickard v. Filburn, 317 U.S. 111, 133 (1942). back
Legal Tender Cases (Knox v. Lee), 79 U.S. (12 Wall.) 457, 551 (1871). back
Norman v. Baltimore & O R.R., 294 U.S. 240 (1935). back
Perry v. United States, 294 U.S. 330 (1935). back
Lynch v. United States, 292 U.S. 571 (1934). See also De La Rama S.S. Co. v. United States, 344 U.S. 386 (1953). Notice that these kinds of cases are precisely the ones that would be condemned under the Contract Clause, even under the relaxed scrutiny now employed, if the action were taken by a state. E.g., United States Trust Co. v. New Jersey, 431 U.S. 1 (1977). “Less searching standards” are imposed by the Due Process Clauses than by the Contract Clause. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 733 (1984). Also, statutory reservation of the right to amend an agreement can defuse most such constitutional issues. Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41 (1986) (amendment of Social Security Act to prevent termination by state when termination notice already filed). The Court has addressed similar issues under breach of contract theory. United States v. Winstar Corp., 518 U.S. 839 (1996). back
Noble v. Union River Logging R.R., 147 U.S. 165 (1893). back
Danzer Co. v. Gulf R.R., 268 U.S. 633 (1925). back
E.g., Hanover National Bank v. Moyses, 186 U.S. 181, 188 (1902); Continental Illinois Nat’l Bank & Trust Co. v. Chicago, R.I. & P. Ry., 294 U.S. 648, 673–75 (1935). back
Holt v. Henley, 232 U.S. 637, 639–40 (1914). See also Auffm’ordt v. Rasin, 102 U.S. 620, 622 (1881). back
Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555 (1935). back
Wright v. Vinton Branch, 300 U.S. 440 (1937). The relatively small modifications that the Court accepted as making the difference in validity, and the fact that subsequently the Court interpreted the statute so as to make smaller the modifications, John Hancock Mut. Life Ins. Co. v. Bartels, 308 U.S. 180, 184 & n.3 (1939); Wright v. Union Central Ins. Co., 311 U.S. 273, 278–79 (1940), has created differences of opinion with respect to whether Radford remains sound law. Cf. Helvering v. Griffiths, 318 U.S. 371, 400–01 & n.52 (1943) (suggesting Radford might not have survived Vinton Branch). back

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