Lipscomb v. Columbus Municipal , 269 F.3d 494 ( 2001 )


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  •               IN THE UNITED STATES COURT OF APPEALS
    
                          FOR THE FIFTH CIRCUIT
    
    
                               No. 00-60245
    
    
    
    J. RANDOLPH LIPSCOMB, on behalf of himself and all
    others similarly situated; MAYOR, CITY OF COLUMBUS;
    CITY COUNCIL OF THE CITY OF COLUMBUS, MISSISSIPPI,
    as the statutorily designated successors in office
    to the Trustees of Franklin Academy,
    
                                               Plaintiffs-Appellees,
    
                                  versus
    
    THE COLUMBUS MUNICIPAL SEPARATE SCHOOL DISTRICT,
    etc.; ET AL.,
    
                                               Defendants,
    
                                  versus
    
    STATE OF MISSISSIPPI; ERIC CLARK,
    In his capacity as Secretary of State,
    
                                               Defendants-Appellants.
    
    
              Appeal from the United States District Court
                For the Northern District of Mississippi
    
    
                             October 3, 2001
    
    Before REYNALDO G. GARZA, HIGGINBOTHAM, and SMITH, Circuit Judges.
    
    PATRICK E. HIGGINBOTHAM, Circuit Judge:
    
         This case requires us to examine a collision between the
    
    Contract Clause of the United States Constitution and Mississippi’s
    
    effort to escape rent and renewal terms of leases of sixteenth
    
    section land in Columbus, Mississippi dating back to the early
    nineteenth century.           The Secretary of State of Mississippi and the
    
    State maintain that the rental and renewal terms are invalid
    
    because their perpetuation of rents that are now nominal violate a
    
    provision of the 1890 Mississippi Constitution forbidding the
    
    donation of public property to private parties.                      Lipscomb sues for
    
    a declaration that the efforts of the Secretary of State to
    
    invalidate      these    leases         violates   the       Contract   Clause.        The
    
    district court held that invalidating the leases would violate the
    
    Contract Clause.         We affirm.
    
    
    
                                                I
    
           Before Mississippi became a state, the United States Congress
    
    set    aside    the     sixteenth       section    of    every       township    in    the
    
    Mississippi Territory to be used for the benefit of schools.1
    
    Congress then authorized the leasing of the sixteenth section land
    
    to    raise    funds    to    finance    public    schools      in    the   Mississippi
    
    Territory.2       Upon       granting    statehood      to    Mississippi       in   1817,
    
    Congress gave the sixteenth section land to the new State for the
    
    
           1
           Act of March 3, 1803, 2 Stat. 233-34. Sixteenth sections
    were not set aside in northern Mississippi until 1817, see Act of
    March 3, 1817, 3 Stat. 375, and “lieu lands” were provided for
    sixteenth sections that were unavailable for various reasons. See,
    e.g., Act of July 4, 1836, 5 Stat. 116 (Chickasaw Cession Lieu
    Lands). The creation of sixteenth section lands and lieu lands is
    discussed in Papasan v. Allain, 
    478 U.S. 265
    , 268-73 (1986).
           2
           Act of Jan. 9, 1815, 3 Stat. 163 (providing for leasing
    certain lands reserved for the support of schools in the
    Mississippi territory).
    
                                                2
    benefit of its schools.3        Thereafter, the Mississippi legislature
    
    authorized the leasing of the school lands, the proceeds of which
    
    would finance public schools.4
    
         In the early-to mid-1800s, various persons leased sixteenth
    
    section land from the school board of Columbus, Mississippi. These
    
    leases were to last 99 years from February 10, 1821, or thereabouts
    
    (regardless     of    when   actually   made)   and   contained   “renewable
    
    forever” provisions authorized by an 1830 Mississippi statute.5
    
    Many of the leases—often after being assigned or subdivided—were
    
    renewed in 1920 under their renewable forever provisions.                The
    
    rental rates paid on the Columbus leases have remained unchanged
    
    for one hundred eighty years.         Leaseholders of lots of property in
    
    downtown Columbus pay pennies in rent per year, a small fraction of
    
    their fair market rent.
    
         In    1890,     Mississippi     ratified   its   current   constitution.
    
    Section 95 of the 1890 constitution prohibits the donation of state
    
    lands    to   private    parties.6      Mississippi    courts   subsequently
    
    interpreted section 95 to prohibit leases or sales of land for
    
         3
             Papasan, 478 U.S. at 271.
         4
           See Miss. Const. of 1817, art. 6, § 20; Act of Feb. 10,
    1821, 1821 Miss. Laws, 4th Sess., Ch. XLVI (authorizing a lease of
    certain Town Lots therein named, and for other purposes).
         5
             Act of Dec. 13, 1830, 1830 Miss. Laws, 14th Sess., Ch. II.
         6
           Miss. Const. of 1890, art. 4, § 95 (“Lands belonging to, or
    under the control of the state, shall never be donated directly or
    indirectly, to private corporations or individuals, or to railroad
    companies.”).
    
                                            3
    grossly inadequate consideration.7                A lease that violates section
    
    95 is voidable.8       Following these rulings, the State and individual
    
    school boards began asserting that sixteenth section leases for
    
    nominal consideration were void and renegotiating the leases.                   The
    
    leases in Columbus, Mississippi, however, occupy a unique position:
    
    because the “renewable forever” leases in Columbus were signed
    
    before the ratification of the 1890 Mississippi Constitution,
    
    voiding the leases implicates the Contract Clause of the United
    
    States Constitution.9
    
         J. Randolph Lipscomb brought a declaratory judgment action in
    
    federal court seeking certification of a class of leaseholders and
    
    a declaration that the State’s threatened action to void the leases
    
    and renegotiate would violate the Contract Clause.                He originally
    
    named     the   Secretary   of   State       of    Mississippi,   the   State   of
    
    Mississippi, the Columbus School Board, and the U.S. Department of
    
    Housing and Urban Development10 as defendants.11
    
    
    
    
         7
              See, e.g., Hill v. Thompson, 
    564 So. 2d 1
    , 9 (Miss. 1989).
         8
              Id. at 12.
         9
              U.S. Const. Art. I, § 10, cl. 1.
         10
           Lipscomb alleged that in response to the State’s declared
    intention to void the leases, HUD had declared the leased lands
    “uninsurable,” thereby causing the leaseholders harm.
         11
           The School District has since been realigned as a plaintiff,
    and HUD remains only as a “nominal” defendant. We will refer here
    often to the remaining defendants collectively as the State.
    
                                             4
          The district court certified the class, but then abstained
    
    under the Pullman and Burford doctrines.         This Court reversed the
    
    ruling on abstention and remanded.12         The district court redefined
    
    the class and ultimately granted summary judgment in favor of
    
    Lipscomb, declaring, in relevant part, that (1) “renewable forever”
    
    in   the   Columbus    sixteenth   section    leases   means   all   rental
    
    covenants, including the lease rate, are renewable forever, (2) the
    
    Contract Clause of the United States Constitution applies to the
    
    leases in this case, (3) voiding the leases under section 95 of the
    
    Mississippi Constitution would violate the Contract Clause.            The
    
    Secretary of State and the State of Mississippi appeal that ruling.
    
    
    
                                        II
    
          The State challenges federal jurisdiction on several grounds,
    
    and we turn first to that question.
    
    
    
                          A. Subject Matter Jurisdiction
    
          The State argues that the district court lacked subject matter
    
    jurisdiction because there is no federal question and the federal
    
    defendant, HUD, has no case or controversy with the plaintiffs.13
    
    
          12
           See Lipscomb v. Columbus Mun. Separate Sch. Dist., 
    145 F.3d 238
    , 240-42 (5th Cir. 1998). The broader history of the leasing of
    state lands for the benefit of schools is discussed below, in the
    context of the Contract Clause analysis. See Part IV.A.
          13
           The State contends that the leases are in fact taxes, and
    thus the federal courts are barred by the Tax Injunction Act, 28
    
                                         5
     Specifically, the State claims that the Supreme Court’s decision
    
    in Public Service Comm’n v. Wycoff14 precludes federal jurisdiction
    
    under 28 U.S.C. 1331 and the well-pleaded complaint rule.15                   We
    
    disagree.
    
           In Wycoff, the plaintiffs sought a declaratory judgment that
    
    their activities constituted interstate commerce so as to insulate
    
    them    from    state   regulation.     The   Court   held    that   when   “the
    
    complaint in an action for declaratory judgment seeks in essence to
    
    assert a defense to an impending or threatened state court action,
    
    it is the character of the threatened action, and not of the
    
    defense, which will determine whether there is federal-question
    
    jurisdiction in the District Court.”16             The State contends that
    
    Lipscomb       has   similarly   attempted    to   evade     the   well-pleaded
    
    
    
    U.S.C. § 1341, from entertaining a challenge to the state’s actions
    to collect on the leases. This contention is without merit. The
    lease obligations are a creature of contract, not a mandatory
    obligation imposed by the state as taxes are. See New Jersey v.
    Anderson, 
    203 U.S. 483
    , 492 (1906). Although the determination of
    what is a “tax” is ultimately a question of federal law, Neinast v.
    State of Texas, 
    217 F.3d 275
    , 278 (5th Cir. 2000), we note that the
    Mississippi Supreme Court has characterized the leases as leases
    rather than taxes. See Street v. City of Columbus, 
    23 So. 773
    , 774
    (Miss. 1898). The appellants also note that the lease payments are
    collected by the taxing authorities. This court has previously
    rejected this reasoning: “This formalism is unhelpful. . . . [T]he
    question is not where the money is deposited, but the purpose of
    the assessment.” Neinast, 217 F.3d at 278.
           14
                
    344 U.S. 237
    , 248 (1952).
           15
                Louisville & Nashville R.R. v. Mottley, 
    211 U.S. 149
     (1908).
           16
                Wycoff, 344 U.S. at 248.
    
                                           6
    complaint rule, by anticipating the Secretary of State’s judicial
    
    action.      Since    the   state   legislative   action   giving    rise   to
    
    Lipscomb’s    claim    is     the   Mississippi   Constitution      of   1890,
    
    Lipscomb’s complaint does not anticipate a state judicial action,
    
    it seeks redress for an existing harm.17              To the point, the
    
    threatened action is legislative impairment of contract.
    
    
    
                          B. Eleventh Amendment Immunity
    
         The State for the first time seeks a dismissal on grounds of
    
    sovereign immunity.         Lipscomb counters that the State has waived
    
    its Eleventh Amendment immunity and, in the alternative, that Ex
    
    parte Young18 saves the claim for declaratory relief against the
    
    Secretary of State, even if the State of Mississippi must be
    
    dismissed.    We address these contentions in reverse order.
    
         Ex parte Young of course offers an exception to the State’s
    
    Eleventh Amendment immunity.         That is, state immunity is no bar to
    
    enjoining a proper state official from unconstitutional acts.
    
    Lipscomb seeks not damages but a declaration that voiding the
    
    leases would violate the Contract Clause.              In function, this
    
    requested relief is indistinguishable from a suit to enjoin the
    
    Secretary from declining to abide the challenged lease terms.
    
    While such a declaration will not support coercive, retrospective
    
    
         17
              See infra n. 32
         18
              
    209 U.S. 123
     (1908).
    
                                           7
    relief or money damages when confronted by the Eleventh Amendment,
    
    it will support injunctive relief.
    
         The    Secretary    of   State   argues,   however,   that   the   suit
    
    implicates the State’s ownership of land in a manner that takes it
    
    outside the Ex parte Young exception, as in Idaho v. Coeur d’Alene
    
    Tribe of Idaho.19     In Coeur d’Alene the Supreme Court held that a
    
    claim to the ownership of submerged waters brought against the
    
    state is barred by the Eleventh Amendment, even though no damages
    
    were sought.    The Court emphasized that the requested declaration
    
    would strip the state of its jurisdiction and regulatory control
    
    over the lands.20       The Court also noted that state control over
    
    submerged lands was a special incident of sovereignty with deep
    
    historical roots.21
    
         We are not persuaded Coeur d’Alene controls here. The Supreme
    
    Court relied on two interrelated factors: First, the Court noted
    
    that the Eleventh Amendment bars a quiet title action in federal
    
    court absent the state’s consent.22 The tribe claimed ownership and
    
    exclusive occupancy of the lands and was seeking invalidation of
    
    all state laws regulating the land.       It conceded that its suit was
    
    the functional equivalent of a quiet title action.            Second, the
    
    
         19
              
    521 U.S. 261
     (1997).
         20
              Id. at 281-83.
         21
              Id. at 282-87.
         22
              Id. at 281-82.
    
                                          8
    Court emphasized that the relief sought would have been an affront
    
    to the state’s sovereignty.            Because the tribe was a distinct
    
    sovereign, not only would quieting title in the tribe divest the
    
    state of ownership over the land, it would strip the state of all
    
    of its jurisdiction and power over the land.23
    
         We find our case distinguishable.               Lipscomb did originally
    
    seek to quiet title, but he abandoned that claim.                      His amended
    
    complaint seeks only a declaration that the invalidation of the
    
    price terms of the leases is prohibited by the Contract Clause of
    
    the Constitution.      The contention that the requested relief would
    
    be an affront to state sovereignty is not convincing. Mississippi
    
    would retain jurisdiction over the leased lands; indeed, title to
    
    the lands would remain in Mississippi.              The State’s basic police
    
    and taxing power would not be affected.
    
         The    Tenth    Circuit   found    similar     distinctions           from   Coeur
    
    d’Alene    in   a   case   resembling       this   one.        In   Elephant      Butte
    
    Irrigation District of New Mexico v. Department of Interior,24 it
    
    denied    an    Eleventh   Amendment    challenge         to   a    suit    over   the
    
    distribution of profits from land leases to various governmental
    
    
    
         23
            Id. at 282 (“[T]he far-reaching and invasive relief the
    Tribe seeks . . . go[es] well beyond the typical stakes in a real
    property quiet title action.”). The majority opinion treated these
    two factors in tandem.     Justice O’Connor’s concurring opinion
    distinguishes these factors and discusses them at greater length.
    See id. at 288-91.
         24
              
    160 F.3d 602
     (10th Cir. 1998).
    
                                            9
    bodies.     The court acknowledged that the suit involved property
    
    interests of the state, but noted that it was not a suit to quiet
    
    title, and the “special sovereignty interests” present in Coeur
    
    d’Alene did not exist.25 Instead, the Tenth Circuit noted, the only
    
    interest of the state at stake was its relatively mundane interest
    
    in the distribution of lease income.26
    
         In sum, Lipscomb’s suit is not to quiet title, nor would the
    
    granting of relief strip the state of any of its jurisdiction or
    
    authority to regulate the land.     While it would prevent the state
    
    from charging current market rates for rent on renewal, it does
    
    nothing to frustrate state taxation of the leasehold – a reality to
    
    which we will return.       As such, the Ex parte Young doctrine
    
    applies, and the Eleventh Amendment does not deprive federal courts
    
    of jurisdiction to entertain this suit against the Secretary of
    
    State.     This renders moot the claim for the same relief asserted
    
    directly against the state, and we need not address that claim
    
    further.
    
    
    
                                       III
    
         Before turning to the question of whether the Contract Clause
    
    bars invalidation of the lease terms, we must examine a preliminary
    
    question of whether refusing to honor the renewal and price terms
    
    
         25
              Id. at 608-09, 611-12.
         26
              See id. at 612.
    
                                       10
    implicates the Contract Clause at all.              A violation of the Contract
    
    Clause rests on the assertion that the current leases were in place
    
    before the 1890 Mississippi Constitution.                   The Secretary argues
    
    that renewals of the leases in 1920 changed the contract terms to
    
    an extent that they were new contracts rather than renewals.                     The
    
    Secretary’s argument is that the price terms on the contracts have
    
    changed—that the contracts were altered, not merely renewed.                      If
    
    so, the Secretary concludes, there can be no Contract Clause
    
    violation, because the plaintiffs do not hold leases with price
    
    terms that preexisted the 1890 Mississippi Constitution.
    
         Lipscomb replies that changes in the price terms reflected
    
    subdivision of the land, and lower price terms for contracts for
    
    smaller plots represented pro rata division of the original lease
    
    price.27     Lipscomb     also   notes       that   the     leases   were    labeled
    
    “renewals”   and   thus    we    may   conclude      that    they    were   in   fact
    
    renewals.
    
         We agree with the district court that the defendants failed to
    
    create a genuine issue of material fact on this issue.                      Lipscomb
    
    presented evidence that the leases were labeled “renewals.”                      This
    
    view is consistent with the 1830 statute that authorized the
    
    trustees of Franklin Academy to make all the leases at issue in
    
    
    
    
         27
           A state statute allowed lessees to subdivide their leases.
    Act of January 28, 1846, 1846 Miss. Laws, (Regular Sess.) Ch. 143.
    
                                            11
    this case renewable forever.28   Further, although the leases were
    
    divided and re-divided, increasing the difficulty of determining
    
    whether their rents changed over time, Lipscomb presented evidence
    
    that the aggregate rentals on the lands in question did not change
    
    before and after 1920. The State responded only with evidence that
    
    the per-acre rents changed over time.   This is not relevant, since
    
    allocation of rentals on sub-divided pieces of leased land could
    
    rest on the quality of each lot rather than its area.   For example,
    
    a two-acre lot rented for two dollars a year could be divided into
    
    two one-acre lots, one of which rented for $1.20 and one of which
    
    rented for $0.80.   Even though the rent-per-acre went up in one lot
    
    and down in the other, the rental rate of two dollars for two acres
    
    
    
         28
           Act of Dec. 13, 1830, 1830 Miss. Laws, 14th Sess., Ch. II.
    The State claims that this statute only authorized the creation of
    leases that were renewable forever and that it did not make
    previously created leases renewable forever or allow those leases
    to be terminated and then renegotiated with renewable forever
    provisions. The State argues that the statute provides that the
    only way a prior lease can be renewed forever is at the end of its
    lease term. The State misreads the statute. It states: “And be it
    further enacted, That the Trustees of said Franklin Academy ... be,
    and are hereby authorized to make out all leases for the lots of
    [sixteenth section land in Columbus], for ninety nine years, dating
    from the first leasing of lots in said town of Columbus, renewable
    forever.... [A]nd that all leases heretofore made of lots, by the
    said Trustees, be renewable at the expiration of the time for which
    they were leased, in like manner as above, provided for, in cases
    of lots to be leased hereafter.” Id. (emphasis added). The statute
    is silent on the surrender or termination of pre-existing leases.
    As the defendant’s note, the statute may well have induced holders
    of pre-1830 leases to surrender them, so as to gain the benefits of
    the renewable forever provisions that were now authorized. The
    simple fact remains that the leases here at issue contain renewable
    forever terms authorized by this statute.
    
                                     12
    did not change.    The difference in rent between the two lots could
    
    reflect the value of each lot’s location, the quality of its soil,
    
    access to water or roads, or other differences.                      The precise
    
    reasons for such differences in valuation are irrelevant.                       The
    
    State thus has failed to create a genuine issue of material fact
    
    that subdividing or releasing lands changed their rental rates. We
    
    accept the district court’s conclusion that the 1920 leases were
    
    renewals and at last reach the question of the limits imposed by
    
    the Contract Clause.
    
    
    
                                         IV
    
                                         1
    
         The 1890 Mississippi Constitution, section 95, states, “Lands
    
    belonging to, or under the control of the state, shall never be
    
    donated    directly   or   indirectly,        to     private    corporations     or
    
    individuals, or to railroad companies.”29              Mississippi courts have
    
    consistently     construed    this       to        forbid      transactions     for
    
    consideration    so   inadequate   that       they    are   the    equivalent   of
    
    donations.30    The Mississippi Supreme Court, in Hill v. Thompson,31
    
    held that a sale or lease of sixteenth section land that violates
    
    
    
         29
              Miss. Const. of 1890, art. 4, § 95.
         30
           See, e.g., Hill v. Thompson, 
    564 So. 2d 1
    , 9 (Miss. 1989)
    (reviewing cases).
         31
              
    564 So. 2d 1
     (Miss. 1989).
    
                                         13
    section 95 is voidable.32     However, the Mississippi Supreme Court,
    
    in interpreting section 95 to make certain sixteenth section land
    
    leases voidable, has invoked equity and held that even when a lease
    
    is voided, the leaseholder retains the right of first refusal after
    
    the land is appraised for fair rental value.33
    
         In sum, the Secretary of State has sought, under section 95,
    
    the invalidation of leases of sixteenth section lands throughout
    
    Mississippi.      The sixteenth section land leases in Columbus,
    
    Mississippi, however, are renewals of leases signed before the
    
    ratification of section 95 of the 1890 Mississippi Constitution.
    
    Thus, Lipscomb     argues   for   a   declaration   that   this   effort   to
    
    invalidate the leases in Columbus violates the Contract Clause of
    
    the United States Constitution.
    
                                          2
    
         Article I, section 10 of the U.S. Constitution states, “No
    
    State shall ... pass any ... Law impairing the Obligation of
    
    Contracts.”34   The Supreme Court has emphasized, however, that the
    
    
         32
              See id. at 9.
         33
              See id. at 12.
         34
           U.S. Const. Art. I, § 10, cl. 1. The defendants argue that
    the Contract Clause is not implicated by this lawsuit because the
    alleged impairment of the leases was not caused by the legislative
    act of enacting the 1890 Mississippi Constitution, but by the
    judicial act of the Supreme Court of Mississippi in deciding Hill.
    The defendants are correct in claiming that only legislative
    actions, not judicial actions, can create a viable Contract Clause
    claim. See Tidal Oil Co. v. Flanagan, 
    263 U.S. 444
    , 451 (1924);
    Frazier v. Lowndes County, Mississippi, Bd. of Educ., 
    710 F.2d 14
    absolute language      of   the   Contract   Clause   does   not   create   an
    
    absolute prohibition; a State must be given some accommodation in
    
    passing laws “to safeguard the vital interests of its people.”35
    
    The Supreme Court has developed a three-part test to balance the
    
    State’s obligation not to impair contracts with its interest in
    
    public welfare.     These three are applied against the backdrop of
    
    legislative    power   to   exercise    eminent   domain.     That   a   state
    
    legislature has by statute given assurance that it would not do so
    
    does not mean that the legislature cannot later take the property
    
    by eminent domain or paying just compensation.36               That is, we
    
    address a claim of police power to regulate – without compensation.
    
    And while impairment of contract analysis has an air of due process
    
    about it, our analysis is distinct.
    
         First, “[t]he threshold inquiry is whether the state law has,
    
    in fact, operated as a substantial impairment of a contractual
    
    relationship.”37   In considering whether an impairment to contract
    
    
    
    
    1097, 1099 (5th Cir. 1983). But the impairment stems from the “no
    donations” clause of the 1890 Mississippi Constitution that the
    Hill court interpreted, not from the Hill decision itself, which
    merely engaged in constitutional construction. Our prior opinion
    in Lipscomb said as much. Lipscomb v. Columbus Mun. Separate Sch.
    Dist., 
    145 F.3d 238
    , 243 n.4 (5th Cir. 1998).
         35
           Energy Reserves Group, Inc. v. Kansas Power & Light Co., 
    459 U.S. 400
    , 410 (1983).
         36
              See West River Bridge Co. v. Dix, 6 How. (47 U.S.), 507
    (1848).
         37
              Id. at 411 (internal quotations omitted).
    
                                           15
    is substantial, the court should consider the expectations of the
    
    parties with respect to changes in the law.38 Particularly relevant
    
    to this inquiry is whether the subject matter of the contracts had
    
    been subject to regulation at the time the contracts were made.39
    
    A   “regulation        that   restricts    a    party    to    gains    it   reasonably
    
    expected        from   the    contract    does    not     necessarily        constitute
    
    substantial impairment.”40              The court should also consider what
    
    terms      of    the   contract   are    affected   and        the   duration   of   the
    
    effects.41
    
          Second, if we find a substantial impairment of contractual
    
    rights, we must consider the justification offered by the State for
    
    its impairment of the contract.42                 A State can only justify a
    
    substantial        impairment     of    contracts       with    a    “significant    and
    
    legitimate public purpose behind the regulation, such as the
    
    remedying of a broad and general social or economic problem.”43 The
    
    problem need not be “an emergency or temporary situation,”44 and
    
          38
           See Chrysler Corp. v. Kolosso Auto Sales, Inc., 
    148 F.3d 892
    , 894 (7th Cir. 1998).
          39
               See Energy Reserves Group, 459 U.S. at 411.
          40
               Id.
          41
           Cf. Allied Structural Steel Co. v. Spannaus, 
    438 U.S. 234
    ,
    245-47 (1978) (describing example of a severe impairment of
    contractual rights).
          42
               See Energy Resources Group, 459 U.S. at 411.
          43
               Id. at 411-12.
          44
               Id. at 412.
    
                                               16
    “the elimination of unforeseen windfall profits” is a legitimate
    
    state      interest   sufficient   to    justify   state     impairment    of
    
    contracts.45      The requirement that the problem be “broad and
    
    general” ensures “that the State is exercising its police power,
    
    rather than providing a benefit to special interests.”46                  The
    
    scrutiny to which the court subjects the state law is proportional
    
    to the degree of impairment.47
    
          Third, if the State presents a legitimate justification for
    
    the impairment, we determine whether the impairment is reasonable
    
    and     necessary.       “Legislation     adjusting    the     rights     and
    
    responsibilities of contracting parties must be upon reasonable
    
    conditions and of a character appropriate to the public purpose
    
    justifying its adoption.”48        In cases involving impairment of
    
    contracts between private parties, the court does not independently
    
    
    
          45
               Id.
          46
               Energy Reserves Group, 459 U.S. at 412.
          47
            See Allied Structural Steel Co. v. Spannaus, 
    438 U.S. 234
    (1978) (“The severity of the impairment measures the height of the
    hurdle the state legislation must clear.”). In Allied Structural
    Steel, the Supreme Court noted that the challenged legislation
    “worked a severe, permanent, and immediate change in [the
    contractual] relationships—irrevocably and retroactively.” Id. at
    250.   The Court had little hesitation in striking down such
    legislation when it (1) interfered with a previously unregulated
    field, (2) was directed at a small subset of employers, rather than
    business in general, and (3) did not even purport to be a necessary
    step in remedying a social or economic problem. See id. at 247-50.
          48
           United States Trust Co. of New York v. New Jersey, 
    431 U.S. 1
    , 22 (1977); see also Energy Reserves Group, 459 U.S. at 412.
    
                                        17
    review the reasonableness of the legislation; it should defer to
    
    the judgment of the legislature.49
    
           However, when the State is a party to the contracts, the court
    
    cannot defer to the State because the State’s self-interest as a
    
    party is implicated.50 Instead, the court must engage in a two-part
    
    inquiry.       First, the court should determine whether the contracts
    
    surrender “an essential attribute of [the State’s] sovereignty.”51
    
    If   so,      the   Contract   Clause    does   not   prevent    the   State   from
    
    impairing such an obligation, because “the legislature cannot
    
    bargain away the police power of a State.”52                    Purely financial
    
    obligations, however, do not surrender aspects of the State’s
    
    sovereignty, and thus are subject to the Contract Clause.53 Second,
    
    even if the impairment is subject to the Contract Clause, the court
    
    must        determine    whether   the    impairment     is     “reasonable    and
    
    necessary,”         without    giving      “complete     deference”      to    the
    
    legislature’s judgment.54
    
    
           49
                Energy Reserves Group, 459 U.S. at 412.
           50
                United States Trust Co., 431 U.S. at 25-26.
           51
                Id. at 23.
           52
                Id.
           53
           See id. The Supreme Court has held that “any substantial
    alteration by subsequent legislation of the rights of a purchaser
    at a tax sale, accruing to him under laws in force at the time of
    his purchase, is void as impairing the obligation of contract.”
    Wood v. Lovett, 
    313 U.S. 362
    , 369 (1941).
           54
                United States Trust Co., 431 U.S. at 25-26.
    
                                              18
         In sum, the court must first determine whether the impairment
    
    of the contract is substantial and the degree of that impairment.
    
    If the impairment is not substantial, there is no claim under the
    
    Contract Clause.55    The court must next assess the strength of the
    
    State’s justification for the impairment.        The justification must
    
    identify a public purpose that is significant and legitimate.           If
    
    the State fails to provide such a justification, the impairment
    
    violates the Contract Clause.56 Finally, the court must compare the
    
    impairment   and     the   justification   to   determine    whether   the
    
    impairment is “reasonable and necessary.”       The degree of deference
    
    shown the legislature’s judgment on this question depends on
    
    whether the government has impaired contracts to which it is a
    
    party.
    
                                        3
    
         We begin by asking whether section 95 substantially impairs
    
    the contractual rights of the leaseholders.           To determine the
    
    effect of a law on a contract, we must identify which contractual
    
    rights are being affected by the law, and then consider the extent
    
    to which the law has contravened the reasonable expectations of the
    
    parties.   Section 95 affects the renewal rent term.        As read by the
    
    Mississippi Supreme Court section 95 makes voidable the current
    
    
         55
           See, e.g., City of El Paso v. Simmons, 
    379 U.S. 497
     (1965).
    This case is discussed at length below.
         56
           See, e.g., Allied Structural Steel Co. v. Spannaus, 
    438 U.S. 234
     (1978).
    
                                        19
    lease price, allowing the State to seek a fair market rate, but
    
    giving the current leaseholder the right of first refusal.57              The
    
    actual    impairment   to   the   leases   is   the   invalidation   of   the
    
    “renewable forever” clauses that guaranteed a continuation of the
    
    original price term to the present day.          Section 95 thus impairs
    
    the contract term that freezes the rents at prices that the State
    
    contends have become grossly inadequate with the passage of time.
    
         Given that section 95 affects the renewal price term, we must
    
    ask what the reasonable expectations of the contracting parties
    
    were with respect to that contract term.              The renewable forever
    
    clauses are authorized by state statute.58 Additionally, the leases
    
    were made in furtherance of the State’s duty to preserve the value
    
    of the school trust lands.        The leases in this case were signed in
    
    
    
    
         57
           Because the Mississippi Supreme Court has held that the
    leases are voidable, rather than void, the State has no right to
    seek foregone rent from past years. See Hill, 564 So.2d at 9.
         58
             The Mississippi legislature passed numerous statutes
    regulating the leasing of sixteenth section land in the years after
    the creation of the State. Legislation in 1821 and 1830 authorized
    the leases in this case. See Miss. Const. of 1817, art. 6, § 20;
    Act of Feb. 10, 1821, 1821 Miss. Laws, 4th Sess., Ch. XLVI; Act of
    Dec. 13, 1830, Miss. Laws 14th Sess. Ch. II.       The Mississippi
    legislature altered the regulation of Mississippi sixteenth section
    lands throughout the 19th century. See, e.g., Act of Feb. 10, 1830,
    1830 Miss. Laws Ch. XXIV; Act of December 16, 1830, 1830 Miss. Laws
    14th Sess. Ch. II; Act of Feb. 27, 1833, 1833 Miss. Laws [pp.452-
    54]; Act of January 28, 1846, 1846 Miss. Laws, (Regular Sess.) Ch.
    143.    Indeed, since the nineteenth century, the Mississippi
    legislature has continued to place a great importance on the
    management of sixteenth section lands. See Act of March 20, 1914,
    Miss. Laws Ch. 462.
    
                                          20
    the 1820s, 1830s, and 1840s, against a backdrop of the State’s
    
    binding trust obligations.
    
                                           4
    
          The nature of the trust is here relevant in two ways: first,
    
    the extent of the State’s trust obligations in the management of
    
    the sixteenth section lands affects the strength of Mississippi’s
    
    interest in regulating those lands; second and relatedly, the
    
    fetters of trust obligations bear on the reasonable expectations of
    
    the parties to the leases on their execution – the strength of the
    
    facially unqualified obligation to renew.
    
          Since   its   earliest   days,    Mississippi   has   held   sixteenth
    
    section lands in trust for the benefit of the schools of the State.
    
    Although courts often refer to “the” trust, there are in fact two
    
    trusts—one    state,   one   federal—in     which   Mississippi    holds   its
    
    sixteenth section lands.       Detailing this duality is necessary to
    
    understanding Mississippi’s trust obligation. We turn first to the
    
    federal trust.
    
          Beginning with the Northwest Territory in 1785, Congress set
    
    aside public lands in most of the territories of the United States
    
    to   be used for the benefit of territorial schools.         The lands set
    
    aside were composed of the sixteenth section of each township; in
    
    later years, additional sections were set aside as well. As states
    
    were formed out of territories, Congress, in the enabling act of
    
    
    
    
                                           21
    each new state, granted the school lands to the state.59         These
    
    grants contain language that the land is being given to the state
    
    for the benefit of its schools.        This is the source of the claim
    
    that the states hold the school lands in a federally created
    
    trust.60
    
         In defining the character of any federal trust, we then first
    
    turn to the language of the statute granting the sixteenth section
    
    lands to the State and their interpretation.        Earlier grants of
    
    sixteenth section did not contain any language creating specific
    
    obligations on the part of the states.61 The Supreme Court long ago
    
    held that such grants gave the sixteenth section lands to the
    
    states in fee simple;62 the federal trust was purely honorary.63
    
    
         59
           Thus, almost every state aside from the original thirteen
    has sixteenth section lands. See Andrus v. Utah, 
    446 U.S. 500
    , 522
    (1980) (Powell, J., dissenting); see also P. Gates, History of
    Public Land Law Development 287-88 (1968).
         60
           For a more extensive discussion of the history of sixteenth
    section lands, see Papasan v. Allain, 
    478 U.S. 265
    , 268-70 (1986);
    Andrus v. Utah, 446 U.S. at 522-24 (Powell, J., dissenting); Semmes
    Luckett, Mississippi’s Sixteenth Section School Lands, 
    23 Miss. L
    .
    J. 281 (1962).
         61
           See, e.g., Act of March 3, 1817, 3 Stat. 375 (“[S]ection No.
    16, in each township, [ ] shall be reserved for the support of
    schools therein.”) (Mississippi enabling act); Act of Feb. 14,
    1859, 11 Stat. 383 (“[S]ections numbered sixteen and thirty-six in
    every township of public lands ... shall be granted to said State
    for the use of schools.”) (Oregon enabling act).
         62
              Cooper v. Roberts, 
    59 U.S. 173
    , 181-82 (1855).
         63
           See Alabama v. Schmidt, 
    232 U.S. 168
    , 173-74 (1914). The
    Fifth Circuit long ago held that the statute creating Louisiana’s
    sixteenth section land, Act of March 3, 1811, 2 Stat. 662 (the
    
                                      22
    Some later   land   grants—those   to   Arizona   and   New   Mexico,   for
    
    example—were worded to create very specific rights and duties of
    
    the United States and the state.64      The Supreme Court has treated
    
    these grants as binding trusts.65
    
         The grant of sixteenth section land to Mississippi was one of
    
    the earliest trusts created, and contained no language establishing
    
    a binding trust.    We remain convinced then that the federal trust
    
    in which Mississippi holds its sixteenth section lands is purely
    
    honorary,66 that Mississippi holds absolute title to the land
    
    without federal restriction and we turn to the matter of trust
    
    obligations imposed by the law of Mississippi.
    
    
    
    
    sixteenth section “shall be reserved in each township, for the
    support of the schools within the same”), created only an honorary
    trust. See Louisiana v. William T. Joyce Co., 
    261 F. 128
    , 130, 133
    (5th Cir. 1919).
         64
             See Lassen v. Arizona ex rel. Arizona Highway Dept., 
    385 U.S. 458
    , 470-74 (1967) (reprinting statutory language of the land
    grants).
         65
           See id. at 460-61, 466-67; see also Papasan v. Allain, 
    478 U.S. 265
    , 270 (1986) (“[T]he most recent grants are phrased not as
    outright gifts to the state for specific use but instead as express
    trusts.”).
         66
           Madison County Bd. of Educ. v. Illinois Central R.R. Co.,
    
    939 F.2d 292
    , 305 (5th Cir. 1991).
    
                                       23
         “An overwhelming body of law”67 in Mississippi holds that the
    
    lands are held in a binding trust.68   The Mississippi Supreme Court
    
    has said the trust dates back to the creation of the state.69
    
    Although the source of this trust obligation is obscure,70 the
    
    
    
    
         67
           Morrow v. Vinson, 
    666 So. 2d 802
    , 805 (Miss. 1995); see also
    Mississippi Gaming Comm’n v. Bd. of Educ., 
    691 So. 2d 452
    , 461
    (Miss. 1997) (quoting Morrow).
         68
            See Morrow, 666 So. 2d at 805-06; Hill v. Thompson, 
    564 So. 2d
     1, 7 (Miss. 1990); Turney v. Marion County Bd. of Educ., 
    481 So. 2d
     770, 776-77 (Miss. 1985); Bragg v. Carter, 
    367 So. 2d 165
    , 167
    (Miss. 1978); Tally v. Board of Supervisors, 
    323 So. 2d 547
    , 549-50
    (Miss. 1975); Edwards v. Harper, 
    321 So. 2d 301
    , 303 (Miss. 1975);
    Holmes v. Jones, 
    318 So. 2d 865
    , 868 (Miss. 1975); Keys v. Carter,
    
    318 So. 2d 862
    , 864 (Miss. 1975); State ex rel. Coleman v. Dear,
    
    212 Miss. 620
    , 
    55 So. 2d 370
    , 373-74 (1951); Koonce v. Bd. of
    Supervisors, 
    202 Miss. 473
    , 
    32 So. 2d 264
    , 265-66 (1947); Pace v.
    State ex rel. Rice, 
    4 So. 2d 270
    , 272, 274, 276 (Miss. 1941);
    Washington County v. Riverside Drainage Dist., 
    131 So. 644
    , 645
    (Miss. 1931); Jefferson Davis County v. James-Sumrall Lumber Co.,
    
    49 So. 611
    , 612 (Miss. 1909).
         69
           See Hill, 
    564 So. 2d
     at 7. One case, Pace v. State ex rel.
    Rice, 
    4 So. 2d 270
    , 272, 274, 276 (Miss. 1941), has applied the
    trust obligation to a lease beginning in 1847. The court stated
    that “the state cannot abdicate its duty as trustee of property in
    which the whole people are interested, any more than it can
    surrender its police powers ....” Id. at 277.
         70
           Some cases suggest that the obligation is a creature of
    state statute. See Broadhead v. Bonita Lakes Mall, Ltd.
    Partnership, 
    702 So. 2d 92
    , 105 (Miss. 1997); Holmes v. Jones, 
    318 So. 2d 865
    , 868-69 (Miss. 1975).      Other cases appeal to the
    Mississippi Constitution of 1890, see Morrow v. Vinson, 
    666 So. 2d 802
    , 805-06 (Miss. 1995); Koonce v. Bd. of Supervisors, 
    202 Miss. 473
    , 
    32 So. 2d 264
    , 265-66 (1947), or the public trust doctrine,
    see Secretary of State v. Wiesenberg, 
    633 So. 2d 983
    , 987 (Miss.
    1994); Cinque Bambini Partnership v. State, 
    491 So. 2d 508
    , 511
    (Miss. 1986).
    
                                    24
    Mississippi Supreme Court has declared its existence as a matter of
    
    state law,71 and that is the end of the matter.72
    
         The State holds title to the land for the benefit of its
    
    schools; the common law rules applicable to private trusts apply to
    
    the trust in which Mississippi holds its school lands.73    and any
    
    action taken by the State in violation of this trust is voidable.74
    
    
         71
            In addition to the state-law sources of the trust cited
    above, a few cases suggest that the trust is a federally
    enforceable creation of Congress, See Hill, 
    564 So. 2d
     at 6;
    Turney v. Marion County Bd. of Educ., 
    481 So. 2d
     770, 776 (Miss.
    1985). Since the Mississippi Supreme Court has adhered to Hill in
    the face of federal precedent reaffirming that the federal trust is
    honorary, however, it is clear that the binding trust is grounded
    in state law. See Morrow, 666 So. 2d at 805.
         72
            “[W]e interpret the state statute the way we believe the
    state Supreme Court would.” Vielma v. Eureka Co., 
    218 F.3d 458
    ,
    462 (5th Cir. 2000). Of course, the significance of this trust to
    the Contract Clause is a question of federal law. We note that an
    earlier Fifth Circuit case, Madison County Bd. of Ed. v. Illinois
    Central Railroad Co., 
    939 F.2d 292
    , 305-06 (5th Cir. 1991), had
    held that Mississippi state law created no binding trust obligation
    for sixteenth section lands. This holding was superseded by the
    Mississippi Supreme Court’s decision in Morrow, 666 So. 2d at 805.
    In any case, the narrow holding of Madison County, that no trust
    obligation prevented the sale of sixteenth section land in 1882,
    remains good law; the Mississippi Supreme Court has held that the
    trust, as modified by the state constitution, did not prevent the
    sale of sixteenth section land between 1869 and 1890. See Lambert
    v. State, 
    211 Miss. 129
    , 
    51 So. 2d 201
    , 203 (1951). We in no way
    question the validity of sales of sixteenth section land made prior
    to 1890.
         73
              See Hill v. Thompson, 
    564 So. 2d 1
    , 6 (Miss. 1990).
         74
           See Secretary of State v. Wiesenberg, 
    633 So. 2d 983
    , 987
    (Miss. 1994) (“Since [1817], the common law of this State has
    adhered to the doctrine of public trust, applying it in both
    sixteenth section lands as well as tidelands.”); Cinque Bambini
    Partnership v. State, 
    491 So. 2d 508
    , 511 (Miss. 1986) (describing
    the State’s tidelands and navigable waters and the sixteenth
    
                                      25
    The Mississippi Supreme Court has stated that the State’s trust
    
    obligations are the equivalent of its police powers, and cannot be
    
    contracted away.75   The exact requirements of the trust have been
    
    narrowed at times by statute and state constitution,76 but the
    
    binding nature of the obligation has existed since 1817.77
    
         When the leases were signed more than one hundred years ago,
    
    the parties did not have the benefit of the body of law on school
    
    lands trusts that we have today.    The relevant inquiry here is into
    
    
    section lands as “two great public trusts”); Pace, 4 So. 2d at 276-
    77. That grants of land held in public trust are revocable is
    discussed in Illinois Central R. Co. v. Illinois, 
    146 U.S. 387
    ,
    453-54 (1892). See also 63C Am. Jur. 2d Public Lands § 7 (1997).
    Courts also note that common law rules applying to trusts also
    apply to the maintenance of the sixteenth section lands trust.
    Hill v. Thompson, 
    564 So. 2d 1
    , 6, 9 (Miss. 1990); Bragg, 
    367 So. 2d
     at 167.    Even contracts made in good faith are voidable if
    violating the trust. See State ex rel. Kyle v. Dear, 
    46 So. 2d 100
    , 105 (Miss. 1950); Koonce v. Bd. of Supervisors, 
    32 So. 2d 264
    ,
    265-66 (Miss. 1947).
         75
           State ex rel. Coleman v. Dear, 
    55 So. 2d 370
    , 373-74 (Miss.
    1951); Pace v. State ex rel. Rice, 
    4 So. 2d 270
    , 276 (Miss. 1941).
         76
            Elements of this trust are embodied in the Mississippi
    Constitution of 1890.    See Miss. Const. of 1890, art. 4, § 95
    (forbidding the donation of public lands to private parties); Miss.
    Const. of 1890, art. 8, § 211 (governing the legislature’s
    regulation of sixteenth section lands). The Mississippi Supreme
    Court has noted that the Mississippi legislature has discretion in
    executing its obligations under the trust, at least between 1869
    and 1890. See Lambert, 51 So. 2d at 203. Lambert involved a lease
    made under the Mississippi Constitution of 1869, which, unlike the
    Constitution of 1890, placed no express limitation upon the
    alienation of sixteenth section lands.
         77
            See Hill, 
    564 So. 2d
     at 7. The Mississippi Supreme Court
    in Hill emphasized that section 95 of the 1890 Constitution did not
    create the state law trust obligation, but merely made it “more
    concrete.” Id.
    
                                       26
    the trust obligations that were the backdrop to the execution of
    
    the leases.   We must repair then to the understanding of the trust
    
    at that time in order to assess what the parties to the original
    
    leases reasonably expected the State’s duties and powers with
    
    respect to the land were. While the parties would undoubtedly have
    
    understood that the leases were being signed subject to some sort
    
    of a binding trust obligation, the source of the trust obligations
    
    was far less clear then than now.
    
         At the same time the leases were signed, there was warrant for
    
    believing that any trust was federal. It was generally believed in
    
    Mississippi that the Mississippi legislature did not have the
    
    authority to sell sixteenth section land until Congress passed a
    
    law authorizing its sale in Mississippi in 1852.78 Indeed, Congress
    
    regularly passed laws altering states’ control over sixteenth
    
    section land prior to 1852.79   For virtually all of the nineteenth
    
    century, the Mississippi Supreme Court labored under the belief
    
    
    
    
         78
            See Act of May 19, 1852, 10 Stat. 6.         In 1829, the
    Mississippi legislature petitioned the U.S. Congress for authority
    to sell sixteenth section land. See Memorial of Feb. 5, 1829, 1829
    Miss. Laws Ch. CI.
         79
            See Act of Feb. 1, 1826,      4 Stat. 138 (authorizing the
    legislature of the state of Ohio      to sell the lands heretofore
    appropriated for the use of schools   in that state); Act of March 2,
    1827, 4 Stat. 237 (Alabama); Act      of May 24, 1828, 4 Stat. 298
    (Indiana); Act of Feb. 15, 1843, 5    Stat. 600 (Illinois, Arkansas,
    Louisiana, and Tennessee).
    
                                     27
    that the United States did not transfer title to the lands to
    
    Mississippi until 1852.80
    
          That is, the concept of a state law trust obligation was then
    
    perceived to be weaker.      The Mississippi Constitution of 1817
    
    contained a provision that appeared to create a trust obligation,
    
    and   the   Mississippi   legislature   regularly   passed   statutes
    
    regulating the leasing of sixteenth section land.81 The Mississippi
    
    Constitution of 1832, however, did not contain such a provision,
    
    
    
    
          80
           Hester v. Crisler, 
    36 Miss. 681
    , 
    1859 WL 3619
    , *2 (Miss.
    Err. & App. 1859), held that the United States held title to
    Mississippi’s sixteenth section lands until the passage of a
    federal statute in 1852. Before then, the court held, the State
    had no authority over the lands. In 1895, the Mississippi Supreme
    Court recognized that its decision was contrary to the weight of
    authority and reversed Hester. See Jones v. Madison County, 
    18 So. 87
    , 92 (Miss. 1895). See Cooper v. Roberts, 
    59 U.S. 173
    , 181-82
    (1855) (holding that the grant of sixteenth section land to
    Michigan, which was virtually identical to the Mississippi grant,
    created only an honorary trust). See also Street v. City of
    Columbus, 
    23 So. 773
     (Miss. 1898) (expressing the view that
    Mississippi took title to lands when it was admitted into the
    union). An 1841 Mississippi case did not reach the question of the
    nature of the trust but suggested that Mississippi did have
    authority over the lands. See Connell v. Woodard, 
    6 Miss. 665
    ,
    
    1841 WL 1865
    , *5 (Miss. Err. & App. 1841).
          81
           See Miss. Const. of 1817, art. VI, § 20 (“That the general
    assembly shall take measures to preserve from unnecessary waste or
    damage such lands as are or may hereafter be granted by the United
    States for the use of schools . . . and apply the funds which may
    be raised from such lands, by rent or lease, in strict conformity
    to the object of such grant; but no lands granted for the use of
    such township schools shall ever be sold by any authority in this
    State.”). Congress had authorized the leasing, but not sale, of
    Mississippi sixteenth section land in 1815. See An Act to provide
    for leasing certain lands reserved for the support of schools in
    the Mississippi territory, 3 Stat. 163 (1815).
    
                                     28
    stating only that “[a]ll laws now in force in this State, not
    
    repugnant to this Constitution, shall continue to operate.”82
    
         Lipscomb appeals to our prior opinion in this case, which
    
    stated that “the trust under which Mississippi operated at best
    
    created an honorary, not a mandatory, obligation on the part of the
    
    state to administer the lands for the benefit of schoolchildren.”83
    
    This statement responded to the State’s argument that the 1830
    
    statute authorizing the “renewable forever” clauses violated the
    
    State’s trust obligations.     Lipscomb argues that the law of the
    
    case doctrine requires that we reject the appellants arguments that
    
    the State is bound by its trust obligation to maximize the value of
    
    the sixteenth section lands.
    
         As should be clear, Mississippi’s sixteenth section lands are
    
    held in two trusts: one state, one federal.    Our prior opinion did
    
    not address the existence of a state-law trust obligation and
    
    relied only on federal law in reaching its conclusion.84     As the
    
    prior opinion did not expressly or by necessary implication rule on
    
    the nature of the state-law trust, there is no law of the case on
    
    the state-law trust.
    
    
    
         82
              See Miss. Const. of 1832, Schedule, § 4.
         83
           Lipscomb v. Columbus Mun. Separate Sch. Dist., 
    145 F.3d 238
    ,
    246 (5th Cir. 1998).
         84
            See id. (citing Madison County Bd. of Ed. v. Illinois
    Central Railroad Co., 
    939 F.2d 292
    , 305-06 (5th Cir. 1991), and
    Alabama v. Schmidt, 
    232 U.S. 168
    , 173-74 (1914)).
    
                                      29
         With increasing state regulation, the reasonableness of the
    
    regulated private parties’ expectations of being freed from future
    
    regulations    by   contract   with    the   state    is    diminished.      The
    
    Mississippi statutes of the nineteenth century, however, acted               to
    
    facilitate the transfer of state land to private parties, not to
    
    limit the activities of private parties.             The statute authorizing
    
    the renewable forever leases in Columbus reflects the State’s
    
    interest in encouraging the development of land in that township –
    
    as we will explain, not in derogation of trust obligations but in
    
    their discharge.
    
                                           5
    
         In discharging its obligations to administer the lands for the
    
    benefit   of   education,      Mississippi    faced        certain   realities.
    
    Unsettled land generates no revenue for the State; yields no
    
    agricultural bounty; supports no population; generates no commerce.
    
    Both sales and long-term leases at low rates encourage settlement
    
    and private investment in new lands.
    
         But a lease that is renewable forever is here superior to a
    
    land sale.     By retaining title to the land, the State protects
    
    itself against default.        A lease ensures a perpetual stream of
    
    income,   however    small,     that    guarantees     that     misfortune   or
    
    mismanagement of sales proceeds cannot completely dissipate the
    
    income from the lease.        Selling land for a lump-sum risks such a
    
    loss.   Such a judgment is born out in Mississippi’s history.             It is
    
    
    
                                           30
    the sad story of the Chickasaw lieu lands.85                In 1836, Congress
    
    conveyed some 174,555 acres of land from the Chickasaw Cession to
    
    Mississippi     in    lieu    of    sixteenth    section    land.     In   1856,
    
    Mississippi sold this land and invested the proceeds in 8 percent
    
    loans to Mississippi’s railroads.              Within ten years, this entire
    
    investment was rendered worthless when Mississippi’s railroads were
    
    destroyed during the Civil War.
    
         Thus,    to     this    day   Mississippi    continues   to    receive   its
    
    bargained-for benefit from these leases, just as the leaseholders
    
    reap the benefit of extremely favorable rental rates.                The leases
    
    have generated a constant stream of revenue that is secured by the
    
    State’s continuing ownership in the land.             For its first 50 years
    
    or so the rental income sustained the schools.                The guarantee of
    
    perpetual low lease rates attracted settlement in Columbus, and the
    
    leaseholders improved the land they held, increasing the general
    
    wealth of the community and enlarging the tax base for later
    
    property taxes to support schools.                Upsetting this balance by
    
    invalidating the renewal lease rates would substantially impair the
    
    contracts.
    
         The     State    identifies      a   significant,     legitimate,     public
    
    interest in the leased sixteenth section lands.                The Mississippi
    
    courts have stated that preservation of the trust lands for the
    
    benefit of the schools is a central governmental power and duty,
    
    
         85
              See Papasan v. Allain, 
    478 U.S. 265
    , 271-72 (1986).
    
                                              31
    comparable    to    the   police    powers.86      As    we    have   explained,
    
    Mississippi case law has repeatedly emphasized the significance of
    
    the State’s interest in preserving the value of the sixteenth
    
    section lands.
    
         Of course, this interest in protecting the school lands trust
    
    is a valid reason for the State’s action.                Funding schools and
    
    avoiding    the    dissipation     of   state   assets   are    classic   police
    
    functions, and section 95 of the Mississippi Constitution is a law
    
    of “broad and general” application that does not single out any
    
    subset of leaseholders.87        All this is a given – but it does not
    
    respond to the reality that the original structure of the leases
    
    has not frustrated the state’s obligation.           To the contrary, it has
    
    rather done the opposite.
    
         We now turn to the final step of the analysis.               The State is
    
    a party to the contracts, so we cannot defer in the manner of due
    
    process to the State’s judgment of the reasonableness of its
    
    threatened action.88      Instead, we first ask whether the contracts
    
    
         86
           State ex rel. Coleman v. Dear, 
    55 So. 2d 370
    , 373-74 (Miss.
    1951) (“[T]he exercise of the police power of the State is inherent
    in the existence of a government and is not the subject of a
    waiver, barter, forfeiture or sale. The State cannot abdicate its
    duty as trustee of property in which the whole people are
    interested, such as sixteenth section land held by the State as
    trustee for schools, any more than the State can surrender its
    police power in the administration of government and in the
    preservation of peace and order.”).
         87
              Energy Reserves Group, 459 U.S. at 412.
         88
              United States Trust Co., 431 U.S. at 25-26.
    
                                            32
    surrender “an essential attribute of [the State’s] sovereignty.”89
    
    If   not,    we   judge   the   reasonableness    and   necessity   of   the
    
    impairment.
    
          The leases do not surrender any essential attribute of the
    
    State’s sovereignty.       The leases do not limit the ability of the
    
    State to exercise its jurisdiction or police powers over the land.
    
    Mississippi courts have stated that the State’s duty to the school
    
    lands trust is like a police power that cannot be contracted away.90
    
    But the State has not contracted away its stewardship over the
    
    school lands. As we explained, the leases themselves represent the
    
    State’s fulfillment of its obligation to ensure the funding of
    
    schools.
    
          It is instructive that the Mississippi Supreme Court has noted
    
    that renewable forever leases are, for tax purposes, practically
    
    identical to lands sold by the State.91          Thus, although the State
    
    received the benefit of retaining title to the leased lands, taxes
    
    can be levied against the leaseholders.            The State has had the
    
    benefit of being able to tax the leased land—at the market value
    
    
          89
               Id. at 23.
          90
             Of   course,   whether   state   powers   are   legitimate
    justifications for impairment of contracts is a question of
    federal, not state, law. We need not decide the extent to which
    the State’s trust obligations are like a police power, however, for
    its obligations under the trust are not diminished by the renewal
    rental rates of the Columbus school lands.
          91
               See Street v. City of Columbus, 
    23 So. 773
    , 774 (Miss.
    1898).
    
                                         33
    swelled by the incentive to develop created by the renewal and
    
    price terms—as if it had been sold, while retaining the protection
    
    of the collateral that leasing provides. The leases brought rental
    
    income and encouraged development that allowed the imposition of
    
    property taxes for the benefit of schools.
    
         The leases exercise the State’s power to serve the trust, they
    
    do not limit that power.         The State seeks to escape a purely
    
    financial obligation—its agreement to accept fixed rent terms for
    
    the Columbus school lands while reaping the benefits of the land’s
    
    development – an arrangement that proved to be a hedge against
    
    inflationary erosions of rental income, inevitably attended by
    
    increasing land “values.”
    
         In sum, invalidating the renewal rental rates of the leases is
    
    not reasonable and necessary to protect the State’s interest in its
    
    school lands. Mississippi might have followed the familiar path of
    
    granting fee title to land in exchange for its development—a common
    
    practice in the American West and the Mississippi Territory.        It is
    
    fair to ask whether in such circumstances the state could now
    
    exercise its police power to alter an incident of fee ownership to
    
    charge     market   rents   in   addition   to   school   taxes   without
    
    compensating the landowner.      In actual fact, the state constructed
    
    a hedge.
    
    
    
    
                                        34
           The State insists, nonetheless, that the Supreme Court’s
    
    decision in City of El Paso v. Simmons92 requires that we reverse
    
    and find no violation of the Contract Clause.                      We disagree.
    
    Simmons involved a land purchase contract entered into in 1910. At
    
    that time, the Texas State Land Board was authorized to sell state
    
    lands for the benefit of the State’s Permanent Free School Fund.
    
    The sales had generous terms and in practical effect the buyers of
    
    the land had only to put down one-fortieth of the purchase price
    
    and pay interest on the remaining principal in order to keep the
    
    property.        But   upon   failure   to    pay   interest,   the    statutes
    
    authorized forfeiture of the property back to the State.93              A buyer
    
    retained a perpetual right of reinstatement, however, if he paid
    
    all of the back-interest due.94          In 1941, the legislature changed
    
    the reinstatement law to allow reinstatement only within five years
    
    of forfeiture.95       A buyer who failed to gain reinstatement within
    
    five    years    brought   suit,   alleging    that   the   1941    legislation
    
    violated the Contract Clause.96
    
           The Supreme Court held that the 1941 legislation did not
    
    violate the Contract Clause. The Court emphasized that the measure
    
    
           92
                
    379 U.S. 497
     (1965).
           93
                See id. at 498.
           94
                See id. at 498-99.
           95
                See id. at 499.
           96
                See id. at 500.
    
                                            35
    was enacted to remedy a substantial abuse of the prior law:
    
    Speculators would enter into contracts to purchase land and then
    
    immediately default.          If oil was discovered on their land, they
    
    would exercise their right to reinstatement; otherwise, they would
    
    remain in default.97      In essence, the buyers purchased an option of
    
    infinite duration, obtaining all of the benefits of any substantial
    
    appreciation in the value of the property, while leaving Texas with
    
    the risk that the land would decline in value.                   This situation
    
    undermined the purpose of the land sale contracts–the funding of
    
    schools.98        Further,    it   did   not    serve   the     purpose    of   the
    
    reinstatement clause, which was to protect bona fide purchases who
    
    fell behind on payments, not to subsidize speculators.99
    
          The Supreme Court noted that the right to reinstatement “was
    
    not   the     central   undertaking      of    the   seller    nor   the   primary
    
    consideration for the buyer’s undertaking.”100                The Court reasoned
    
    that the right to reinstatement could not have reasonably been
    
    intended to create “an endless privilege” since such a construction
    
    “would render the buyer’s obligations under the contract quite
    
    illusory.”101     The fact that Texas was seeking to sell as much land
    
    
          97
                See id. at 509-13.
          98
                See id. at 515.
          99
                See id.
          100
                Id. at 514.
          101
                Id.
    
                                             36
    as possible at the time of the sales did not undermine the validity
    
    of its change of policy.102             Most importantly, the Court stated,
    
    “[l]aws which restrict a party to those gains reasonably to be
    
    expected from the contract are not subject to attack under the
    
    Contract Clause, notwithstanding that they technically alter an
    
    obligation of the contract.”103                   It then went on to note “the
    
    State’s vital interest in administering its school lands to produce
    
    maximum revenue,” and it concluded that given this interest and the
    
    prior      abuses    of   the   law,    “a    statute   of   repose   was   clearly
    
    necessary.”104
    
         This         case    differs      substantially     from   Simmons.       The
    
    reinstatement clause in Simmons operated to frustrate the purpose
    
    of the land sale contract by allowing speculators to buy an option
    
    on the land.        An indefinite reinstatement provision, as the Court
    
    noted, rendered the buyer’s obligations “illusory.”                    Under this
    
    construction Texas would depend on the buyer’s discretion in making
    
    payments.         Thus, the purpose of the plan was frustrated from the
    
    outset.
    
         As we have explained, by contrast, in this case the leasing
    
    arrangements guaranteed Mississippi a steady stream of income,
    
    which in fact supported the public school in Columbus for many
    
    
         102
                Id.
         103
                Id. at 515.
         104
                Id. at 516.
    
                                                 37
    years.    The renewable forever provisions created incentives for
    
    substantial investment in the development of leased lands and a
    
    growing tax base to further sustain the schools.                      Moreover, the
    
    state was left with remedies should the lessee default.                    The state
    
    got exactly what it needed, and the purpose of the contract was
    
    fulfilled, not frustrated.
    
    
    
                                              V
    
         To summarize:        We have jurisdiction over this case.                   The
    
    current leases are renewals of the original leases executed before
    
    the ratification of the 1890 Constitution. Thus, section 95 of the
    
    1890 Constitution impairs the renewal terms of the lease contracts.
    
    Because voiding     the       current    lease   rates   on    the    school   lands
    
    substantially impairs the contract rights of the leaseholders, and
    
    the State’s threatened action is not reasonable and necessary, we
    
    affirm    the   entry    of    summary    judgment    against        the   Secretary
    
    declaring that voiding the Columbus school land leases would
    
    violate the Contract Clause, a declaration that may be enforced by
    
    injunctive relief.
    
         We   AFFIRM   and    REMAND    to    the    district     court    for   further
    
    proceedings including any necessary resolution of disputes over the
    
    entitlement of individual class members to the relief declared by
    
    the district court and today affirmed by this court.                       We do not
    
    suggest that there will be such disputes.                   Rather we here make
    
    
    
                                             38
    clear that our mandate does not foreclose their resolution by the
    
    district court.
    
    
    
         AFFIRMED and REMANDED.
    
    
    
    
                                   39