# U ni te d S ta te s Co ur t of A pp ea ls For the Eig hth Circu it

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No. 1 6- 11 72

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Met ro po li ta n Li fe In su ran ce Co m pa ny

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff

v.

Kay e Me li n

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

Ash le y Sv een ; An to ne Sv een

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

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Su bm it te d: Nov em

be r 17 , 20 16 Fil ed : Ap ril 3, 2 01 7

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Befo re BENTON an d S HEPHERD, Circ ui t J ud ge s, an d EBI NGER, 1 Dis tri ct Ju dg e.

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1 The Hon or ab le Reb ecca Goo dg am e Ebi ng er, Uni te d St at es Dis tri ct Ju dg e fo r th e So ut he rn Dis tri ct of I owa , si tt in g b y de si gn at io n.BENTON, Circu it Ju dg e.

M a r k A

. Sv een de si gn at ed hi s th en -wif e, Kay e L. Mel in

, as th e pr i mar y be ne fic ia ry of hi s li fe in su ran ce po li cy , an d hi s ch il dr en as co nt in ge nt be ne fic ia rie s. Late r, Mi nn es ot a e x t en de d it s rev oc at io n- up on -d iv or ce st at ut e to li fe in su ran ce
po li ci es

. The di st ric t co ur t award ed t h e p r o ceed s to th e ch il dr en , r eject in g Mel in ’s

arg um en t th at ap pl y in g th e st at ut e ret ro ac ti ve ly is an im pe rm is si bl e im

pa irment un de r th e Co nt ract Cl au se

. Hav in g juri sd ic ti on un de r 28 U.S.C. § 12 91
, th is co ur t rev ers es

an d re m an ds

.

I.

Sv een pu rch as ed th e li fe in su ran ce po li cy in 19 97 an d m arri ed Mel in la te r th at

y ear. The fo ll owi ng y ear, he na m ed he r as th e pr im ary be ne fic ia ry an d hi s two ad ul t
ch il dr en as co nt in ge nt be ne fic ia rie s. Sv een ha d ad d i t i o n a l li fe in su ran ce wit h hi s ch il dr en as pr im ary be ne fic ia rie s. Mel in an d Sve en di vo rced in 20 07

. Sv een ne ve r ch an ge d t he be ne fic ia ry

de si gn at io n o n t he po li cy

.

In 20 02
, M i nn es ot a am en de d it s pr ob at e co de to ap pl y th e rev oc at io n- up on

d i v o r c e st at ut e to li fe in su ran ce be ne fic ia ry de si gn at io ns : “ th e di ss ol ut io n o r

an nu lm en t of a m arri ag e rev ok es an y rev oc ab le

. . . be ne fic ia ry de si gn at io n

. . . m ad e by an in di vi du al to th e in di vi du al ’s fo rm er sp ou se .” Min n. Sta t. Ann. § 52 4.2 -8 04

.

W he n Sv een di ed in 20 11
, Mel in was st il l th e pr im ary be ne fic ia r y o n th e
po li cy

. The in su ran ce co m p a n y f i l e d an in te rp le ad er to de te rm in e whe th er th e

rev oc at io n- up on -d iv or ce st at ut e rev ok ed th is be ne f i ci ary de si gn at io n. Sv een ’s
ch il dr en —t he co nt in ge nt be ne fic ia rie s— an d Mel in cro ss -cl ai m ed for th e pr oc eed s. Th e d i st ric t co ur t gr an te d su m m ary jud gm en t to th e Sv een s. Thi s co ur t rev ie ws

co ns ti tu ti on al cl ai m s de no vo

. Wa lk er v. Ha rt fo rd Life & Acc id

ent In s. Co

. , 83 1
F.3 d 9 68 , 97 3 (8 th Cir . 20 16 ).

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-II.

A.

The Sv een s arg ue th at Mel in la ck s st an di ng to as se rt a co ns ti tu ti on al ch al le ng e
to th e rev oc at io n- up on -d iv or ce s ta tu te

.

A no n- pa rty m ay as se rt a cl ai m un de r a co nt ract if th e in di vi du al is a th ird -p art y be ne fic ia ry

. Se e Day to n Dev. Co

. v. Gil m an Fi n. Ser vs ., In c. , 41 9 F.3 d 85 2, 85 5 (8 th
Ci r. 20 05 ). Thi rd -p art y st an di ng is ap pr op ria te wher e: (1) th e li ti ga nt “ su ffer ed an ‘inju ry in fact ,’ [ ] gi vi ng hi m or he r a ‘suf fic ie nt ly co nc ret e in te res t’ in th e ou tc om e of th e is su e in di sp ut e”; (2 ) wha t th e li ti ga nt se ek s ha s a “ cl os e rel at io n” to th e rig ht s of th e ab se nt pa rty; an d (3 ) th ere is “ so m e hi nd ran ce to th e [ab se nt ] pa rty’ s ab il it y to

pr ot ect hi s or he r own in te res ts .” Pow er s v. Ohio
, 49 9 U.S. 40 0, 41 1 (1 99 1)

, qu ot in g Si ng le to n v. Wul

ff , 42 8 U.S. 1 06 , 11 2 (1 97 6)

.

A co nt es te d be ne fic ia ry li ke Mel in ha s st an di ng be cau se : (1 ) sh e wou ld su ffer
th e lo ss of po li cy pr oc eed s, a co nc ret e in jury, if th e st at ut e were ap pl ie d; (2 ) sh e se ek s
to en fo rce th e co nt ract as writ te n, vi nd ic at in g Sv een ’s writ te n in te nt ; an d (3 ) Sv een ’s
de at h h i n d e r s hi s ab il it y to pr ot ect hi s in te res t to en fo rce th e co nt ract

. Se e, e.g

. , Mea rn s v. Scha rb ac h , 1 2 P.3 d 10 48 , 1 0 5 5 ( Wa s h . C t. App . 2 00 0) (h ol di ng fo rm er
sp ou se ha d th ird -p art y st an di ng to as se rt co ns t i t u t i o n al ch al le ng e to ret ro act iv e
ap pl ic at io n of rev oc at io n- up on -d iv or ce st at ut e whe re po l i c yh ol de r’s ch il dr en were

co nt in ge nt be ne fic ia rie s)

.

B.

The Co n t r a c t Cl au se pr oh ib it s a st at e la w fro m “ im pa iri ng th e Obl ig at io n of
Co nt ract s.” U.S. Con st

. ar t. I, § 10 , cl

. 1

. The pr oh ib it io n, th ou gh no t ab so lu te ,

en co m pa ss es la ws th at “ op erat e[ ] as a s u b s t a nt ia l im pa irment of a co nt ract ua l

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-rel at io ns hi p” an d do no t se rv e a le gi ti m at e pu bl ic pu rp os e or are no t “ ba se d up on

reas on ab le co nd it io ns an d [ ] of a ch ara c t e r ap pr op ria te to th e pu bl ic pu rp os e.”
Ener gy Res er ves Grp ., In c
. v
. K a n
. Pow er & Lig ht Co

. , 45 9 U.S. 40 0, 41 0- 12 (1 98 3)

, qu ot in g fi rs t Al

li ed St ru ct ur al St

eel Co

. v. Sp an na us , 4 3 8 U.S. 23 4, 24 4 (1 97 8)

, th en qu ot in g U.S. Trus t Co . of N.Y . v. New J

er se y , 43 1 U.S. 1 , 22 (19 77 ).

Thi s co ur t ha s he ld th at a rev oc at io n- up on -d iv or ce st at ut e l i k e t h e o ne he re vi ol at es th e Co nt ract Cl au se whe n ap pl ie d ret ro act iv el y

. Whi rl po ol Co rp
. v. Ri tt

er , 92 9 F.2 d 1 3 1 8
, 1 3 2 4 (8 th Ci r. 19 91 ). The re, th e hu sb an d ha d de si gn at ed hi s th en

wife as hi s be ne fic ia ry be fo re Okl ah om a pa ss ed it s rev oc at io n- up on -d iv or ce st at ut e. Id

. at 13 19 -2 0. Two y ears af t e r t h e s ta tu te was pa ss ed

, th ey di vo rced

. Id

. The
hu sb an d ne ve r up da te d th e be ne fic ia ry de s i g n a ti on

. Id

. Thi s co ur t he ld th at

au to m at ic al l y rev ok in g an ex -s po us e’s be ne fic ia ry de si gn at io n m ad e be fo re

en act m en t of th e st at ut e wou ld v i o l a te th e Co nt ract Cl au se

. Id

. at 13 22

. The

un co ns ti tu ti on al it y

tu rn ed on th e po li cyh ol de r’ s rig ht s an d e xp ect at io ns :

[ A] t th e ti m e Ja m es de si gn at ed Darl en e as hi s be ne fic ia ry , Okl ah om a la w pr ov id ed th at sh e wou ld rem ai n th e be ne fic ia ry un le ss an d un ti l he de si gn at ed so m eo ne el se ; th us , whe n Ja m es at te m pt ed to or de r hi s pe rs on al a f

fai rs , th is ru le of in su ran ce co nt ract co ns tru ct io n be cam e a pa rt of t h e in su ran ce co nt ract ’s ob li ga ti on s. Ja m es was en ti tl ed to

ex pe ct th at hi s wis he s reg ard in g th e in su ran ce pr oc eed s, as as cert ai ne d
pu rs ua nt to th is th en -ex is ti ng la w, wou ld be effe ct ua te d. By reac h i ng ba ck in ti m e an d d is ru pt in g th is ex pe ct at io n, th e Okl ah om a leg is la tu re im pa ire d J am es ’ co nt ract

.

Id

.

“ It is a card in al ru le in ou r ci rcu it th at on e pa ne l is bo un d by th e de ci si on of a
pr io r pa ne l.” Ows le

y v. Lueb be rs , 28 1 F.3 d 68 7, 69 0 (8 th Ci r. 20 02 ). The W hi rl po ol

cas e co nt ro ls th is cas e. The Sv een s arg ue th at W hi rl po ol is d i st in gu is ha bl e or , al te rn at iv el y , sh ou ld no t b e fo ll owe d.

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-Tho ug h W hi rl po ol ad dr es se d an Okl ah om a st at ut e, bo th it an d th e Mi nn es ot a
st at ut e h av e th e sa m e effe ct : to di sr up t th e p ol ic y ho ld er’s ex pe ct at io ns an d ri gh t t o

“ rel y on th e la w go ve rn in g in su ran ce co nt ract s as it ex is te d whe n th e co nt ract s were

m ad e.” Whi rl

po ol
, 9 2 9 F

. 2 d at 13 23

. The Sv een s arg ue th at W hi rl po ol is
di st in gu is ha bl e in sev eral way s.

Fi rs t, fact ua ll y : The be ne fic ia ry in W hi rl po ol was t h e mo t h e r of th e
po li cy ho ld er’s fo ur m in or ch il dr en , whi le Mel in an d Sv een ha d no ch il dr en to ge th er. Id

. Tho ug h th e W

hi rl po ol co ur t no te d it was “ pl au si bl e” th at th e po li cy ho ld er wou ld

wan t to pr ov id e fin an ci al se cu rit y fo r hi s ch il dr en by de si gn at in g th ei r care gi ve r (n ot
hi s ne w wife ) as th e be ne fic ia ry , th is co ur t was ex pl ai ni ng th at th e st at ut e was jus t as li ke ly to “ ei th er effe c t u a t e o r fru st rat e hi s in te nt .” Id

. The ho ld in g res te d on th e
po li cy ho ld er’s r i g h t t o “ rel y on th e la w go ve rn in g in su ran ce co nt ract s as it ex is te d

w he n th e co nt ract s were m ad e.” Id

. The ho ld in g di d no t de pe nd on th e ag e o r

nu m be r of ch il dr en

. Se e id

.

Seco nd

, th e Sv een s n o te th at Mi nn es ot a la w gi ve s a be ne fic ia ry no ve st ed
in te res t in th e po li cy

. Se e McC lo ud v. Aet

na Life In s. Co

. , 21 N.W .2d 47 6, 47 8- 79 (Mi nn

. 1 9 4 6 )

. Thi s, to o, is be si de th e po in t. W ha t m at te rs are th e po li cy ho ld er’s rig ht s an d ex pe ct at io ns , no t an y in te res t of th e be ne fic ia ry

. Se e Whi rl po ol
, 92 9 F.2 d

at 13 23

.

Thi rd

, th e Sv een s st res s th at th e Mi nn es ot a st at ut e ha s ex cep ti on s al lo win g th e
po li cy ho ld er to “ op t ou t of th e de fau lt ru le of rev oc at io n.” Not on ly is th is irr el ev an t

to W hi rl po ol ’s fo c u s o n th e po li cy ho ld er’s rig ht to rel y on th e la w at th e ti m e of

co nt ract fo rm at io n, bu t W hi rl po ol it se lf fo un d a si m il ar es cap e in su ffi ci en t. Id

. The
Okl ah om a st at ut e al lo wed a po li cy ho ld er to “ ren am e” a fo rm er sp ou se as be ne fic ia ry , bu t: “ Thi s fact do es no t cure th e co ns ti tu ti on al in fir m it y .” Id

. Sim il arl y , her e, th at
th e st at ut e wou ld ha ve al lo we d h i m to op t ou t do es no t rem ed y th e vi ol at io n of
Sv een ’s rig ht s th at wou ld oc cu r by ap pl y in g th e st a t u t e t o “ di rect ly al te r[ ] th e ob li ga ti on s an d e xp ect at io ns of t he co nt ract in g p art ie s.” Id

.

-5

-The res t of th e Sv een s’ at te m pt ed di st in ct io ns ei the r m is ch arac te riz e W hi rl po ol

or do no t con fro nt it s rati on al e—m ai nt ai ni ng th e po li cy ho ld er’s exp ect at io ns un de r th e la w th at ex is te d a t t he ti m e o f co nt ract in g.

A c c or di ng to th e Sv een s, W hi rl po ol “ un de rcu ts th e po li cy reas on s se r v e d b y

rev oc at io n up on di vo rce st at ut es ” be cau s e “t h e r e is no jus ti fic at io n fo r ex te nd in g Co nt ract Cl au se co nc ern s to a st at ut e th at on ly affe ct s t he do na ti ve co m po ne nt of a li fe in su ran ce po li cy .” S e e , e

. g

. , S ti ll m an v. Tea cher

s In s. & Annu it

y As s’ n Co ll

. Ret

. Eq ui ti es F

u nd
, 34 3 F.3 d 13 11
, 13 22 (1 0t h Ci r. 20 03 ) (d is ag reei ng wit h

W hi rl po ol an d c it in g c rit ic is m

by th e Jo in t Edit or ia l Boar d for th e Uni fo rm Pro ba te
Co de ). But

see Ma ss . Mut

. Life I ns . Co. v. C

ur le y , 45 9 F . App x. 1 01 , 10 6 (3 d C ir.
20 12 ) (rel y in g on Par

so ne se v. Mid la nd Na t. In s. Co

. , 70 6 A.2d 81 4 (Pa. 19 98 ) to

reac h t he same resu lt as W hi rl po ol ). The W

hi rl po ol cas e reject s t hi s ar gu m en t:

The le gi sl at ur e, in pa ss in g th is st at ut e, de t e r mi n e d th at pe op le fai l to

co ns id er t he ne ed to ch an ge th ei r in su ran ce po li ci es aft er exp eri en ci ng

a ch an ge in fam il y rel at io ns

. . . . Howev er, th i s s a me co nc lu si on

su gg es ts th at an in di vi du al co ul d rel y on th e pr e-ex is ti ng la w an d ne it he r kn ow no r ex pe ct th at th e ru le s go ve rn in g hi s po li cy ha ve ch an ge d, and th us m ig ht fai l to co ns id er th e ne ed to in ve st ig at e po te nt ia l ch an ge s in th e la w.

Whi rl po ol
, 92 9 F.2 d at 13 23

. Thi s co ur t’s pr ev io us op in io n fo recl os es an y

co nc lu si on ot he r th an th at th e st at ut e he re is un co ns ti tu ti on al whe n ap p l ie d

ret ro act iv el y

.

* * * * * * *

The jud gm en t is re v e r s e d, an d th e cas e rem an de d fo r pr oc eed in gs co ns is te nt
wit h t hi s o pi ni on

.

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