Hermandad de Empleados del Fondo del Seguro del Estado, Inc., et al. v. Commonwealth of Puerto Rico, et al.

The last case that this Honorable Court struck down a law for impairing a government contract was United States Trust Co. of New York v. New Jersey, 431 U.S. 1 (1977) because the State failed to demonstrate that the impairment was reasonable and necessary. In that case, this Court applied a heightened scrutiny than what is employed when evaluating the impairment of a contract between private parties. This Court also established that when a law has impaired a public contract, less deference must be given to the legislature’s assessment of reasonableness and necessity of the impairment because the State’s self-interest is at stake. Nonetheless, the scope of this “heightened scrutiny” has not been clarified. Consequently, in this case, the Court of Appeals for the First Circuit placed the burden of proof on Petitioners regarding the reasonableness/necessity inquiry under the Contract Clause of the U.S. Constitution. However, the First, Second, Third, Sixth, Seventh, and Ninth Circuits are split on what party should have the burden of proof on this inquiry. Thus, the questions presented are: 1. Whether placing the burden of proof on the plaintiffs regarding the reasonableness and necessity of a legislation that impaired a public contract conflicts with this Court’s rule that less deference must be given to the State when it impaired a contract to which it is a party.