Contracting Around the Constitution?

The Goldwater Institute filed a brief in the Arizona Supreme Court last week urging the justices to review a case in which lower courts declared a law unconstitutional—and then said it could be enforced anyway. At issue was a contract in which the parties agreed to be bound by that law before it was declared unconstitutional. But if left unchanged, this odd ruling would mean that even laws that courts have ruled unenforceable could still be enforced because they were embedded in private agreements like mosquitoes in ancient amber. That’s never been the law, and our brief asks the court to make clear that it is not the law going forward.

The case originated in a dispute between condominium owners. Due to an old law called Section 33-1128, if a majority of condo owners vote to sell their properties, the condominium association can force everyone to sell, including those who voted “no.” The Arizona Court of Appeals declared that law “unconstitutional on its face,” because it would enable one private party to take property from another private party—and Arizona’s Constitution says “private property shall not be taken for private use.” But that court went on to say that the majority could still force the owners to sell, because when they bought their units, everyone was required to sign a contract that said the condominium association had all the “rights, powers, and duties as are prescribed by [Section 33-1128].”

That ruling violates common sense. While it’s true that contracts are typically interpreted as including whatever law is in existence at the time the contract is made—a principle lawyers call lex loci contractus—that principle does not extend to laws that are unconstitutional. The reason is that an unconstitutional law isn’t a law at all—it’s a legal nullity. Otherwise, even laws that violate the state’s most fundamental rules and are later declared void would nevertheless continue to operate in any case bound by a contract written before the court declared it unconstitutional. And that’s exactly the outcome the Court of Appeals declared in this case.

That logical contradiction has ramifications far beyond cases involving condominiums. In fact, it has also caused havoc in other cases we’ve been involved in, such as the litigation following up on the Supreme Court’s recent Janus ruling. That case held that public employees could not be forced to join, or to financially support, a union against their will. Yet in subsequent cases, unions have claimed that they can continue to force people to send money to the union because the employees signed contracts agreeing to do so at a time before Janus made clear that such requirements are illegal.

Thus in a case called Savas, a California-based public employee union argued that it could prohibit its members from quitting the union because they signed contracts agreeing not to quit. In reality, they didn’t—the contract only said that their ability to resign from the union might be limited, and the prohibition on resigning only went into effect afterwards. But the Ninth Circuit Court of Appeals ruled in favor of the union. (We filed a brief asking the U.S. Supreme Court to take that case.)

Of course, people can waive their constitutional rights if they choose—but as the Janus decision itself said, there must be clear evidence that they did so knowing what they were doing. A mere recitation in a contract that the parties agree to be bound by the law can’t satisfy that requirement—especially because the Constitution is itself the law, and a higher law than any mere statute.

You can read our brief here.

Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute.