The Third Circuit Punts On Whether Contracts Clause Violations Are Actionable Under Section 1983
The Contract Clause, U.S. Const. Art I, § 10, provides: “No State shall … pass any … Law Impairing the Obligation of Contracts.”
The Supreme Court has developed a three-part Contracts Clause test: (1) does the state law operate as a substantial impairment of the contractual relationship; (2) if so, does the state have a significant, legitimate public purpose behind the regulation; and (3), if so, is the adjustment of the rights and responsibilities of the contracting parties based on reasonable conditions and is it appropriate to the public purposes justifying the state regulation? See, generally, Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400 (1983).
Are Contracts Clause violations actionable under section 1983?
I addressed this in an earlier post setting out the circuit split on this question. See Southern California Gas Co. v. City of Santa Ana, 336 F.3d 885, 887 (9th Cir. 2003) (per curiam)(actionable); Crosby v. City of Gastonia, 635 F. 3d 634 (4th Cir. 2011)(not actionable) and Kaminski v. Coulter, 865 F.3d 339 (6th Cir. 2017)(not actionable). See also Elliott v. Board of School Trustees, 876 F.3d 926 (7th Cir. 2017)(assuming without deciding that Contracts Clause violations are actionable for damages under section 1983). I also argued in that post that such violations should indeed be actionable under section 1983.
Here is the post: https://nahmodlaw.com/2018/04/04/are-contract-clause-violations-actionable-under-section-1983-a-circuit-split/
The Third Circuit recently could have decided the issue for its circuit but instead punted.
In Watters v. Board of School Directors, 975 F.3d 406 (3rd Cir. 2020), tenured teachers who were suspended sued under section 1983 and the Contracts Clause alleging that public school directors and a school district thereby violated the Clause. The Third Circuit, affirming their suspension, stated: “We assume for purposes of this appeal that §1983 confers a private right of action on the type of Contracts Clause claim that the teachers bring and that … [the challenged conduct] substantially impaired the teachers’ tenure contract rights.” It ruled against the teachers, however, on the ground that the suspensions were an “appropriate and reasonable way to advance” the school district’s attempt to alleviate its budget problems.
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