Allied Structural Steel Co. v. Spannaus
438 U.S. 234 (1978)

  • Spannaus worked for Allied and was covered under their pension plan.
    • The plan required workers to be employed for 15 years before they could collect anything upon retirement.
  • Minnesota enacted the Private Pensions Benefits Protection Act, which said in part that if a company terminated an employee who'd worked for at least 10 years, they were responsible for paying the worker's pension benefits, regardless of what the employment contract said.
  • Allied closed their office and fired Spannaus. Spannaus asked for his pension, but Allied refused because he'd been there less than 15 years. Spannaus sued.
    • Allied argued that the Minnnesota law was a violation of their freedom of contract, and therefore a violation of the Contracts Clause of the Constitution.
      • Article I 10 says, "No State shall pass any law impairing the obligation of contracts."
  • The US Supreme Court found for Allied and overturned the Minnesota law.
    • The Court used the same three part test they later annunciated in Energy Reserves Group Inc. v. Kansas Power and Light Co. (459 U.S. 400 (1983)), for determining if a law could survive under the Contracts Clause:
      • Is there a substantial impairment of a contractual relationship?
      • If so, does it serve a significant and legitimate public purpose?
      • If so, does is reasonably related to achieving the goal?
    • In this case, the Court found that the law caused a "substantial and severe" impact.
    • However, the Court found that the law failed the second part of the test because it was not enacted "to deal with a broad, generalized economic, or social problem."
      • The law regulated an area that had never been regulated before by the State, was not temporary, and was not narrowly tailored.
  • So far, this has been the only time the US Supreme Court has invalidated a State Statute on Contracts Clause grounds since 1934.