Notice and the New Deal

By Sohoni, Mila | Duke Law Journal, March 2013 | Go to article overview

Notice and the New Deal


Sohoni, Mila, Duke Law Journal


As the New Deal progressed, the Court's stance toward retroactivity evolved in conjunction with its treatment of the Contracts Clause. In Contracts Clause jurisprudence, a critical turning point was Home Building & Loan Ass'n v. Blaisdell. (167) The Blaisdell decision approved a scheme adopted by the state of Minnesota to provide emergency relief to debtors by extending the period in which the debtors could redeem property that would otherwise be foreclosed on--in other words, a mortgage moratorium. (168) A five-justice majority of the Court reasoned that the Contracts Clause posed no bar to legislation that was reasonably drawn to further an appropriate legislative end: "The question is not whether the legislative action affects contracts incidentally, or directly or indirectly, but whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end." (169)

Blaisdell did not mark a complete reversal of course in Contracts Clause jurisprudence. In the two years following Blaisdell, the Court did strike down statutes with similar effects to the Minnesota law in which the challenged statutes were not tethered to the existence of economic emergencies. (170) By 1940, however, the Court had relaxed this limitation, holding in Veix v. 6th Ward Building & Loan Ass'n (171) that state legislation restricting sales of shares of building-and-loan associations was valid regardless of the existence of conditions of economic emergency. (172) Five years later, the Court in East New York Savings Bank v. Hahn (173) again upheld retroactive legislation continuing a mortgage moratorium, despite the fact that it had no link to conditions of economic emergency. (174) In rejecting a retroactivity challenge to a regulation some years later, the Court admonished that "[i]mmunity from federal regulation is not gained through forehanded contracts. Were it otherwise the paramount powers of Congress could be nullified by 'prophetic discernment."' (175)

The Court's shift on Contracts Clause doctrine influenced its treatment of retroactivity. With the demise of Contracts Clause jurisprudence, challenges to a law's substantive retroactivity came to be analyzed within the rubric of due process. (176) Under the categorical approach of post-1938 due process jurisprudence, economic legislation will withstand due process challenge if it bears some rational relationship to a legitimate legislative purpose. In this calculation, the retroactive effects of legislation do not constitute a reason for special scrutiny. (177) Rather, retroactivity is merely "a factor to be weighed in deciding whether a particular interference with economic rights constitutes a violation of substantive due process." (178) And it is a factor with "virtually no independent significance." (179) Though the Court has occasionally implied that retroactive legislation may be harder to sustain in the face of a due process challenge than prospective legislation, (180) it has also emphatically disclaimed that any such greater burden exists. (181)

An additional change deserves mention. In 1940, the Court held that a past practice of regulation has relevance to the assessment of whether a new law has impermissibly retroactive effect. (182) This principle took root over time. (183) By holding that the foreseeability of regulation can, in essence, mitigate a law's retroactive effects, the Court has authorized a kind of regulatory piggybacking whereby the existence of regulations with prospective effects can justify the adoption of regulations with retroactive effects. (184) Retroactive legislation can thus follow most readily when prospective regulation can most readily be enacted--in the economic realm, where only rational-basis review applies. (185)

The Court would subsequently tie expressly its changing stance on retroactive legislation to the New Deal revolution in constitutional jurisprudence. …

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