In 1962, the States of New Jersey and New York entered into an agreement that dedicated the tolls collected by the Port Authority to the repayment of bonds issued by the Authority. However, when a gasoline shortage hit the United States in the 1970’s, the legislatures of the 2 states in 1974 retroactively repealed the agreement in order to provide greater revenue for mass transit. The United States Trust Company, which was a trustee for and holder of Authority bonds, brought suit challenging the repeal. In 1977, the U.S. Supreme Court struck down the repeal as an unconstitutional impairment of a contract. The decision in United States Trust Company v. New Jersey marks a rare use of the Contract Clause to invalidate state action since Home Building and Loan v. Blaisdell was decided in 1934.
SEE ALSO: Contract Clause; Dartmouth College v. Woodward; Fletcher v. Peck; Home Building and Loan v. Blaisdell; Stone v. Mississippi
