UNITED STATES TRUST CO. V. NEW JERSEY
431 U.S. 1 (1977)
JUSTICE BLACKMUN delivered the opinion of the Court.
[In 1962, New York and New Jersey adopted laws prohibiting the
use of toll revenues from the Port Authorities of those states from
being used to subsidize railroad passenger service. The purpose of
the laws was to assure those holding Port Authority bonds that the
toll funds would remain available to pay that debt. In 1974, during
the energy crisis of the 1970s, New York and New Jersey adopted
additional laws to repeal the earlier prohibition and to permit the
use of toll funds to improve rail transit.]
This case presents a challenge to a New Jersey statute as
violative of the Contract Clause of the United States Constitution.
That statute, together with a concurrent and parallel New York
statute repealed a statutory covenant made by the two States in
1962 that had limited the ability of The Port Authority of New York
and New Jersey to subsidize rail passenger transportation from
revenues and reserves.
We first examine appellant's general claim that repeal of the
1962 covenant impaired the obligation of the States' contract with
the bondholders. It long has been established that the Contract
Clause limits the power of the States to modify their own contracts
as well as to regulate those between private parties. Fletcher v.
Peck (1810); Dartmouth College v. Woodward (1819). Yet the Contract
Clause does not prohibit the States from repealing or amending
statutes generally, or from enacting legislation with retroactive
effects. Thus, as a preliminary matter, appellant's claim requires
a determination that the repeal has the effect of impairing a
contractual obligation.
In this case the obligation was itself created by a statute, the
1962 legislative covenant. It is unnecessary, however, to dwell on
the criteria for determining whether state legislation gives rise
to a contractual obligation. The trial court found, and appellees
do not deny, that the 1962 covenant constituted a contract between
the two States and the holders of the Consolidated Bonds issued
between 1962 and the 1973 prospective repeal. The intent to make a
contract is clear from the statutory language: "The 2 States
covenant and agree with each other and with the holders of any
affected bonds . . . ." Moreover, as the chronology set forth above
reveals, the purpose of the covenant was to invoke the
constitutional protection of the Contract Clause as security
against repeal. In return for their promise, the States received
the benefit they bargained for: public marketability of Port
Authority bonds to finance construction of the World Trade Center
and acquisition of the Hudson & Manhattan Railroad. We
therefore have no doubt that the 1962 covenant has been properly
characterized as a contractual obligation of the two States.
It is not always unconstitutional, however, for changes in
statutory remedies to affect pre-existing contracts. During the
early years when the Contract Clause was regarded as an absolute
bar to any impairment, this result was reached by treating remedies
in a manner distinct from substantive contract obligations.
