Contract Law for the Spending Clause

Abstract

The Second Circuit’s recent en banc decision in Soule v. Connecticut Interscholastic Athletic Conference, addressing transgender athletes’ participation in school sports under Title IX, brings into sharp relief the problematic evolution of the Pennhurst doctrine, a cornerstone of Spending Clause jurisprudence. Under Pennhurst, damages actions are only available under statutes providing conditional federal aid to states when the statutory terms provide “clear notice” of a recipient state’s legal obligations. The rationale underlying the doctrine is the contractual nature of such Spending Clause legislation. However, as Soule helps demonstrate, lower courts have increasingly applied the doctrine in a manner inconsistent with its purported contractual foundations, transforming the doctrine into a defense akin to qualified immunity. This trend threatens to undermine civil rights statutes by narrowing the circumstances in which they can be enforced through actions for damages.

This Essay uses the Soule decision as an entry point to critically examine the Pennhurst doctrine’s development and application. Drawing on principles such as the void-for-vagueness rule, contra proferentem, the implied covenant of good faith and fair dealing, and doctrines relating to changed circumstances, this Essay proposes a reconstruction of the Pennhurst doctrine that better aligns with its contractual rationale and the distinctive federalism concerns implicated by conditional aid under Spending Clause legislation. This approach offers a more nuanced and flexible framework for interpreting Spending Clause legislation, particularly in evolving areas like Title IX enforcement­—an area implicated by, among other things, recent litigation challenging the Biden Administration’s regulations expanding the scope of Title IX to protect sexual orientation and gender identity discrimination. This revised doctrine can provide courts with a toolkit for navigating complex disputes in federal-state partnerships, balancing the need for clear congressional mandates with the realities of rapidly changing social norms and policy needs.

Keywords: Constitutional Law, Spending Clause, Pennhurst Doctrine, Title IX, Civil Rights, Federalism, Contract Law, Administrative Law, Education Law, Clear Notice Rule, Federal Courts, Contra Proferentem, Educational Equity, Federal Funding, State Rights

JEL Classification: K00, K10, K30, K41, H77, I28, J16