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United States Trust CO. v. New Jersey 431 U.S. 1 (1977)


This decision marked the beginning of the modern revitalization of the contract clause as a limitation on state legislative power. New York and New Jersey had promised, on issuing bonds to support their Port Authority, to limit severely their use of Authority revenues to subsidize rail passenger transportation. Twelve years later the states sought to divert commuters from automobiles to railroads; they raised bridge and tunnel tolls and, repealing their earlier promise, authorized use of the increased revenues to subsidize commuter railroads. The Supreme Court, 4–3, held the repeal unconstitutional as an impairment of the obligation of contract.

The dissenters, led by Justice william j. brennan, accurately described the decision as the first in nearly forty years to invalidate economic legislation under the contract clause and argued vigorously for maintaining judicial deference to legislative power. For the majority, Justice harry a. blackmun commented that the outright repeal had deprived bondholders of an important security interest and could be justified only if it were both "reasonable and necessary to serve an important public purpose." The repeal failed this heightened standard of review, because alternative means of diverting commuters to railroads were available: taxing parking or gasoline, for example.

Kenneth L. Karst

(see also: Allied Structural Steel Company v. Spannaus.)

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