Lathfield Investments, a family of small property companies in Michigan, purchased a commercial property in Lathrup Village with the goal of providing affordable space for local entrepreneurs. Their agreements with occupants include confidentiality provisions—protecting occupants’ names and business details from being disclosed.
But the City of Lathrup Village requires property owners to obtain a landlord license before renting space, and the city refuses to issue a license unless the owner first discloses the names and principal businesses of every occupant. That’s not a typical requirement—it isn’t about fire safety, zoning, or health standards. Instead, it forces property owners to share private contractual information with city officials.
For Lathfield, complying would mean breaking its contracts. Refusing means the city bars them from renting their property at all. Caught in this trap, Lathfield sued, arguing that the city’s ordinance violates the Constitution’s Contracts Clause, which forbids states and cities from passing laws that impair contracts.
The Sixth Circuit dismissed the case, ruling that Contracts Clause rights cannot be enforced under a federal civil rights statute, 42 U.S.C. section 1983, which allows a suing when a municipal government deprives someone of their “rights, privileges, or immunities secured by the Constitution and laws.” That decision deepened a split among federal appeals courts: while some allow these claims, others deny them entirely. The result is that whether property owners can enforce their contracts depends on where they live—an outcome the Constitution never intended.
What’s at stake is more than one Michigan property. If the Supreme Court takes the case and rules for Lathfield, property owners nationwide will have a clear path to defend their agreements when government overreach threatens them.
The Contracts Clause once stood as a cornerstone of property rights. A victory here would restore that protection and reaffirm that the government cannot undermine contracts simply to expand its control.
What’s At Stake?
- Constitutional rights must apply equally across the nation. Whether your contracts are protected should not depend on which state or city you happen to live in.
- The Constitution protects the freedom of individuals and businesses to make and honor their contracts without government meddling. That safeguard is essential for property rights, entrepreneurship, and economic security.
- Property owners should never be forced to break their contracts just to rent or use their property. Local governments cannot use licensing schemes as leverage to interfere with private agreements.
