The Eleventh Amendment and the Contracts Clause (Part III)

The Court shifted gears in New Hampshire v. Louisiana (1883). The Court held the States of New York and New Hampshire could not circumvent the Eleventh Amendment by filing suit against Louisiana on behalf of its citizens. In this case, New York and New Hampshire tried to recoup defaulted loan payments from Louisiana for their citizens. Elliot v. Jumel (1883) was another Louisiana loan default case where the Court again shielded Louisiana from the suit using the Eleventh Amendment. In Cunningham v. Macon Railroad (1895), the Court provided Georgia sovereign immunity. In this case, when the railroad sold its ownership to the State, the State only honored corporate bonds held by one group of investors while neglecting another. Both Justices Stephen Field and John Harlan dissented. Field and Harlan wanted to protect citizens from breach of contract using the contracts clause. But the New Hampshire, Elliot, and Cunningham line of cases essentially provided the Eleventh Amendment priority over the contracts clause. This is something the Founders did not intend to happen. Again, no clause or Amendment in the Constitution has priority over any other. And just because the Eleventh Amendment was “newer” than the original text of the Constitution this does not mean it can supersede all other provisions, clauses, and amendments. In fact, the Ninth Amendment provides that all rights, enumerated or not, should face exactly the same levels of scrutiny or priority. By 1890, it was official, the Eleventh Amendment was shielding States who defaulted on contracts with citizens. What’s worse, in Ex parte Ayers (1887), the Court held that State officers could not be held liable for carrying out unconstitutional State laws. Most can agree with that outcome (the State should be liable), but where is the recourse for citizens who have been wronged? The Ayers precedent meant citizens cannot sue either the State or its officers who can both hide under the guise of the Eleventh Amendment allowing them to impair or default on contracts or worse yet, violate other fundamental rights.

In Reagan v. Farmers Loan and Trust (1894), the Court shifted gears again. Justice David Brewer initiated a new doctrine. The Brewer doctrine distinguished between governmental and pecuniary cases when identifying which State cases the Court may apply sovereignty immunity via the Eleventh Amendment. Reagan dealt with State railroad rates set by the Texas railway commission. The Court held the rates were too high in violation of the Fourteenth Amendment. The Court viewed the action taken by the State of Texas as being a pecuniary one and not a governmental one. The Brewer pecuniary doctrine was an unnecessary balancing test. After all, aren’t most of the contract clause / Eleventh Amendment disputed cases discussed in this section pecuniary in nature? Interestingly, the Court conjured up the Brewer doctrine so it did not appear as if the Court was justifying using the Fourteenth Amendment to supersede the Eleventh Amendment. In fact, Clyde Jacobs believes this would be acceptable and may explain why the Eleventh Amendment has more clout than the contracts clause. Once again, there is nothing in the structure of the Constitution which provides any provision, clause, or amendment priority over another.

Other cases such as Smyth v Ames (1898) and Prout v. Starr (1903) had similar outcomes as Reagan over railway rates. Fitts v. McGhee (1899) was the anomaly ruling during the era holding States could be provided Eleventh Amendment protection over setting predatory railroad rates. However, Ex parte Young (1908) established, without a doubt, the Reagan, Smyth, and Prout line of cases were the clear precedent. The Court would correctly hold that States violating property or other rights of individuals would not be tolerated for any reason. States could not seek shelter from these violations via the Eleventh Amendment. For example, in Ex parte Young, the Court held that State laws forcing railroad companies to set outrageous rates or face high fines, long jail sentences, and the forfeiture of property was way too extreme and a violation of both individual and corporate due process rights.

But why would the Supreme Court protect citizen rights via the Fourteenth Amendment but not through the contracts clause? One reason, discussed earlier, it is incorrectly believed that the Fourteenth Amendment is newer and trumps the Eleventh Amendment whereas the newer Eleventh Amendment trumps the contracts clause. Justice George Shiras dispels that myth in his opinion in Prout v. Starr: “The Constitution of the United States, with the several amendments thereof, must be regarded as one instrument, all of whose provisions are to be deemed of equal validity. It would, indeed, be most unfortunate if the immunity of the individual states from suits by citizens of other states, provided for in the 11th Amendment, were to be interpreted as nullifying those other provisions which confer power on Congress to regulate commerce among the several states, which forbid the states from entering into any treaty, alliance, or confederation, from passing any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or, without the consent of Congress, from laying any duty of tonnage, entering into any agreement or compact with other states, or from engaging in war, all of which provisions existed before the adoption of the 11th Amendment, which still exist, and which would be nullified and made of no effect if the judicial power of the United States could not be invoked to protect citizens affected by the passage of state laws disregarding these constitutional limitations. Much less can the 11th Amendment be successfully pleaded as an invincible barrier to judicial inquiry whether the salutary provisions of the 14th Amendment have been disregarded by state enactments.” Notice Justice Shiras writes the Eleventh Amendment is not meant to protect States from a “law impairing the obligation of contracts”. Despite Shiras opinion States have been allowed to impair or default on contracts by hiding behind the Eleventh Amendment. Clyde Jacobs correctly asserts the “contracts clause had no limitation on state power” but what’s worse, it continues to have no limitation on State power.

Hence, if any provision, clause, or amendment is violated then the law is unconstitutional using the Shiras equality theory. The only way a law is constitutional is when ALL provisions, clauses, and amendments within the Constitution are not violated (or true). Therefore, if the contacts clause is violated, it does not matter if the Eleventh Amendment is not violated, they both must be Constitutional for States to receive sovereign immunity. But by holding that sovereign immunity is true in a scenario where the contracts clause is violated, this is incorrectly providing more power to the Eleventh Amendment. The Eleventh Amendment should only apply and protect States if they are not violating the rights of citizens with unconstitutional laws. This follows the logic and precedent set forth in the Reagan, Smyth, Prout, and Young line of cases which withheld sovereign immunity from States for violating the Fourteenth Amendment. Although the line of cases from Reagan to Young were correctly decided the Brewer doctrine was wrong. The Brewer pecuniary doctrine is not needed to justify the holding in these cases: The Fourteenth Amendment is not trumping the Eleventh Amendment (they are both given the same weight).