Thanks! I have read
Sears v. Palm Beach Gardens before.
In brief, Sears entered into a contract with Forbes/Cohen Florida Properties to sublease mall space. That contract allowed Sears to further sublease that space. Without informing Sears, Forbes/Cohen met with the City of Palm Beach Gardens to enact a resolution preventing Sears from subleasing, even though it was in Sears' contract. The Florida Supreme Court ruled for Sears.
As noted in
Sears v. Palm Beach Gardens:
The Florida Constitution offers greater protection for the rights derived from the Contract Clause than the United States Constitution. See Sarasota Cty. v. Andrews, 573 So. 2d 113, 115 (Fla. 2d DCA 1991) (citing Pomponio v. Claridge of Pompano Condo., Inc., 378 So. 2d 774, 780 (Fla. 1979)); James W. Ely, Jr., The Contract Clause: A Constitutional History 253 (2016) (“[T]he Florida Supreme Court has signaled its willingness to protect contracts more fully than the federal courts.”). Thus, the Florida Supreme Court has recognized that it is “not bound to accept as controlling the United States Supreme Court’s interpretation of a parallel provision of the federal constitution.” Pomponio, 378 So. 2d at 779.
“To impair a preexisting contract, a law must ‘have the effect of rewriting antecedent contracts’ in a manner that ‘chang[es] the substantive rights of the parties to existing contracts.’” Searcy, Denney, Scarola, Barnhart & Shipley, etc. v. State, 209 So. 3d 1181, 1191 (Fla. 2017) (citation omitted). “Total destruction of contractual expectations is not necessary for a finding of substantial impairment.” U.S. Fid. & Guar. Co. v. Dep’t of Ins., 453 So. 2d 1355, 1360 (Fla. 1984). Rather, impairment is defined as “to make worse; to diminish in quantity, value, excellency or strength; to lessen in power; to weaken.” Pomponio, 378 So. 2d at 781 n.41 (citation omitted); Pudlit 2 Joint Venture, LLP v. Westwood Gardens Homeowners ***’n, 169 So. 3d 145, 150 (Fla. 4th DCA 2015).
“Any legislative action which diminishes the value of a contract is repugnant to and inhibited by the Constitution.” In re Advisory Opinion, 509 So. 2d at 314. For example, “[a] statute which retroactively turns otherwise profitable contracts into losing propositions is clearly such a prohibited enactment.” Id. at 314-15. Indeed, it is a “well-accepted principle that virtually no degree of contract impairment is tolerable.” Pudlit, 169 So. 3d at 150 (quoting Coral Lakes Cmty. ***’n v. Busey Bank, N.A., 30 So. 3d 579, 584 (Fla. 2d DCA 2010)); see also Citrus Mem’l Health Found., Inc. v. Citrus Cty. Hosp. Bd., 108 So. 3d 675, 677 (Fla. 1st DCA 2013) (“[A]ny legislation that detracts from the value of a contract is subject to the constitutional proscription . . . .”).
And it ends with:
We conclude that the City unconstitutionally impaired Sears’s right to contract and deprived Sears of its rights to substantive due process. Because the City’s Resolution deprived Sears of substantive due process, Sears is also owed attorney’s fees under 42 U.S.C. sections 1983 and 1988. Finally, we conclude that the trial court erred in not granting declaratory relief in Sears’s favor, and we specifically find that Sears has a right to sublease, pursuant to the 1987 lease agreement.
To understand what this means, you have consider the history of Supreme Court rulings on contracts.
Von Hoffman v. City of Quincy is considered a landmark ruling for the Contracts Clause. In it, the Supreme Court held that contracts must not be impaired. Still, it also stated:
It is competent for the States to change the form of the remedy, or to modify it otherwise, as they may see fit, provided no substantial right secured by the contract is thereby impaired.
In other words,
Von Hoffman v. City of Quincy held that States
can change contracts as long as these changes are not "substantial".
Von Hoffman v. City of Quincy was pretty much the standard applied until
Home Building & Loan Assn. v. Blaisdell was decided in 1934.
What
Blaisdell did was to allow States to impair contracts as long as these impairments were justified by "emergency" circumstances. In this particular case, the Supreme Court held that it was OK for the State of Minnesota to alter the terms of contracts in order to reduce the number of foreclosures caused by the Great Depression. (The Great Depression being the emergency.)
Blaisdell has been widely criticized as it allows the government to violate the Contracts Clause of the U.S. Constitution. Since
Blaisdell was decided in 1934, there have been other cases that are viewed as further weakening the Contracts Clause.
Note that
Sears v. Palm Beach Gardens includes:
impairment is defined as “to make worse; to diminish in quantity, value, excellency or strength; to lessen in power; to weaken.”
Also note the frequent use of the word "substantial" (or its derivatives) in
Sears v. Palm Beach Gardens.
The issue here (IMO) is one of substantial impairment.
So when you quote this paragraph from
Sears v. Palm Beach Gardens:
The conclusion, however, that “‘virtually’ no impairment is tolerable necessarily implies that some impairment is tolerable,” though not as much impairment as would be “acceptable under traditional federal contract clause analysis.” Pomponio, 378 So. 2d at 780. “Some impairment” may be “tolerable” where the governmental actor can demonstrate a “significant and legitimate public purpose behind the regulation.” Searcy, 209 So. 3d at 1192 (quoting Energy Reserves Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400, 411 (1983)).
Recalling that the U.S. Supreme Court is the ultimate judge of what the Contracts Clause in the U.S. Constitution means, I interpret this as a rejection
within Sears v. Palm Beach Gardens of the Supreme Court's interpretation of the Contracts Clause as specified in
Blaisdell and all court rulings that have been based on
Blaisdell since then. The Florida Supreme Court has essentially said that no impairment is allowed, where:
impairment is defined as “to make worse; to diminish in quantity, value, excellency or strength; to lessen in power; to weaken.”
Again, this goes back to my previous point. What does it mean to impair a contract? If all bondholders are fully paid according to the terms of their bonds, regardless of who is paying them, is this a substantial impairment? Are these contracts "made worse" or "weakened"? (This is a rhetorical question. I honestly don't know how this will be interpreted legally.)
I believe that, if it makes it that far, this will come down to a ruling by the Florida Supreme Court based on this being a deprivation of "substantive due process" or "substantial impairment".
I hope this makes sense.
