Source: https://supreme.justia.com/cases/federal/us/584/16-1432/
Timestamp: 2019-10-18 19:50:41
Document Index: 264088826

Matched Legal Cases: ['§2', '§2', '§456', '§524', '§524', '§524', '§10', '§10', '§20', '§30']

Sveen v. Melin :: 584 U.S. ___ (2018) :: Justia US Supreme Court Center
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Sveen v. Melin, 584 U.S. ___ (2018)
Minnesota law provides that “the dissolution or annulment of a marriage revokes any revocable . . . beneficiary designation . . . made by an individual to the individual’s former spouse,” Minn. Stat. 524.2–804. If an insurance policyholder does not want that result, he may rename the ex-spouse as beneficiary. Sveen and Melin were married in 1997. Sveen purchased a life insurance policy, naming Melin as the primary beneficiary and designating his children from a prior marriage as contingent beneficiaries. The marriage ended in 2007. The divorce decree did not mention the insurance policy. Sveen did not revise his beneficiary designations. After Sveen died in 2011, Melin and the Sveen children claimed the insurance proceeds. Melin argued that because the law did not exist when the policy was purchased, applying the later-enacted law violated the Contracts Clause. The Supreme Court reversed the Eighth Circuit, holding that the retroactive application of Minnesota’s law does not violate the Contracts Clause. The test for determining when a law crosses the constitutional line first asks whether the state law has “operated as a substantial impairment of a contractual relationship,” considering the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights. If such factors show a substantial impairment, the inquiry turns to whether the state law is drawn in a “reasonable” way to advance “a significant and legitimate public purpose.” Three aspects of Minnesota’s law, taken together, show that the law does not substantially impair pre-existing contractual arrangements. The law is designed to reflect a policyholder’s intent and to support, rather than impair, the contractual scheme. The law is unlikely to disturb any policyholder’s expectations at the time of contracting, because an insured cannot reasonably rely on a beneficiary designation staying in place after a divorce. Divorce courts have wide discretion to divide property upon dissolution of a marriage. The law supplies a mere default rule, which the policyholder can easily undo.
Minnesota law, providing that the dissolution or annulment of a marriage revokes any revocable beneficiary designation made by an individual to the individual’s former spouse, does not violate the Contracts Clause.
Changes in society brought about changes in the laws governing revocation of wills. In addition to removing gender distinctions, most States abandoned the common-law rule canceling whole wills executed before a marriage or birth. In its place, they enacted statutes giving a new spouse or child a specified share of the decedent’s estate while leaving the rest of his will intact. See Sitkoff & Dukeminier, Wills, Trusts, and Estates, at 240. But more important for our purposes, climbing divorce rates led almost all States by the 1980s to adopt another kind of automatic-revocation law. So-called revocation-on-divorce statutes treat an individual’s divorce as voiding a testamentary bequest to a former spouse. Like the old common-law rule, those laws rest on a “judgment about the typical testator’s probable intent.” Id., at 239. They presume, in other words, that the average Joe does not want his ex inheriting what he leaves behind.
Over time, many States extended their revocation-on-divorce statutes from wills to “will substitutes,” such as revocable trusts, pension accounts, and life insurance policies. See Langbein, The Nonprobate Revolution and the Future of the Law of Succession, 97 Harv. L. Rev. 1108, 1109 (1984) (describing nonprobate assets). In doing so, States followed the lead of the Uniform Probate Code, a model statute amended in 1990 to include a provision revoking on divorce not just testamentary bequests but also beneficiary designations to a former spouse. See §§2–804(a)(1), (b)(1), 8 U. L. A. 330, 330–331 (2013). The new section, the drafters wrote, aimed to “unify the law of probate and nonprobate transfers.” §2–804, Comment, id., at 333. The underlying idea was that the typical decedent would no more want his former spouse to benefit from his pension plan or life insurance than to inherit under his will. A wealth transfer was a wealth transfer—and a former spouse (as compared with, say, a current spouse or child) was not likely to be its desired recipient. So a decedent’s failure to change his beneficiary probably resulted from “inattention,” not “intention.” Statement of the Joint Editorial Bd. for Uniform Probate Code, 17 Am. College Trust & Est. Counsel 184 (1991). Agreeing with that assumption, 26 States have by now adopted revocation-on-divorce laws substantially similar to the Code’s.[1] Minnesota is one.
Under prior Minnesota law, a divorce alone did not affect a beneficiary designation—but a particular divorce decree could do so. Take first the simple case: Joe names his wife Ann as beneficiary of his insurance policy, later gets divorced, but never changes the designation. Upon his death, Ann would receive the insurance proceeds—even if Joe had just forgotten to redirect the money. In other words, the insurance contract’s beneficiary provision would govern after the divorce, exactly as it would have before. See Larsen v. Northwestern Nat. Life Ins. Co., 463 N. W. 2d 777, 779 (Minn. App. 1990). But now introduce a complication, in the form of a court addressing a spousal designation in a divorce decree. In Minnesota, as across the nation, divorce courts have always had “broad discretion in dividing property upon dissolution of a marriage.” Maurer v. Maurer, 623 N. W. 2d 604, 606 (Minn. 2001); see 24 Am. Jur. 2d, Divorce and Separation §456 (2008). In exercising that power, a court could revoke a beneficiary designation to a soon-to-be ex-spouse; or conversely, a court could mandate that the old designation remain. See, e.g., Paul v. Paul, 410 N. W. 2d 329, 330 (Minn. App. 1987); O’Brien v. O’Brien, 343 N. W. 2d 850, 853 (Minn. 1984). Either way, the court, rather than the insured, would decide whether the ex-spouse would stay the beneficiary.
In contrast to the old law, Minnesota’s new revocation-on-divorce statute starts from another baseline: the cancellation, rather than continuation, of a beneficiary designation. Enacted in 2002 to track the Code, the law provides that “the dissolution or annulment of a marriage revokes any revocable[ ] disposition, beneficiary designation, or appointment of property made by an individual to the individual’s former spouse in a governing instrument.” Minn. Stat. §524.2–804, subd. 1. The term “governing instrument” is defined to include an “insurance or annuity policy,” along with a will and other will substitutes. §524.1–201. So now when Joe and Ann divorce, the clause naming Ann as Joe’s insurance beneficiary is automatically revoked. If nothing else occurs before Joe’s death, his insurance proceeds go to any contingent beneficiary named in the policy (perhaps his daughter Emma) or, failing that, to his estate. See §524.2–804, subd. 2.
We granted certiorari, 583 U. S. ___ (2017), to resolve a split of authority over whether the Contracts Clause prevents a revocation-on-divorce law from applying to a pre-existing agreement’s beneficiary designation.[2] We now reverse the decision below.
The Contracts Clause restricts the power of States to disrupt contractual arrangements. It provides that “[n]o state shall . . . pass any . . . Law impairing the Obligation of Contracts.” U. S. Const., Art. I, §10, cl. 1. The origins of the Clause lie in legislation enacted after the Revolutionary War to relieve debtors of their obligations to creditors. See Keystone Bituminous Coal Assn. v. DeBenedictis,480 U. S. 470, 502–503 (1987). But the Clause applies to any kind of contract. See Allied Structural Steel Co. v. Spannaus,438 U. S. 234, 244–245, n. 16 (1978). That includes, as here, an insurance policy.
At the same time, not all laws affecting pre-existing contracts violate the Clause. See El Paso v. Simmons,379 U. S. 497, 506–507 (1965). To determine when such a law crosses the constitutional line, this Court has long applied a two-step test. The threshold issue is whether the state law has “operated as a substantial impairment of a contractual relationship.” Allied Structural Steel Co., 438 U. S., at 244. In answering that question, the Court has considered the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights. See id., at 246; El Paso, 379 U. S., at 514–515; Texaco, Inc. v. Short,454 U. S. 516, 531 (1982). If such factors show a substantial impairment, the inquiry turns to the means and ends of the legislation. In particular, the Court has asked whether the state law is drawn in an “appropriate” and “reasonable” way to advance “a significant and legitimate public purpose.” Energy Reserves Group, Inc. v. Kansas Power & Light Co.,459 U. S. 400, 411–412 (1983).
Here, we may stop after step one because Minnesota’s revocation-on-divorce statute does not substantially impair pre-existing contractual arrangements. True enough that in revoking a beneficiary designation, the law makes a significant change. As Melin says, the “whole point” of buying life insurance is to provide the proceeds to the named beneficiary. Brief for Respondent 16. But three aspects of Minnesota’s law, taken together, defeat Melin’s argument that the change it effected “severely impaired” her ex-husband’s contract. Ibid. First, the statute is designed to reflect a policyholder’s intent—and so to support, rather than impair, the contractual scheme. Second, the law is unlikely to disturb any policyholder’s expectations because it does no more than a divorce court could always have done. And third, the statute supplies a mere default rule, which the policyholder can undo in a moment. Indeed, Minnesota’s revocation statute stacks up well against laws that this Court upheld against Contracts Clause challenges as far back as the early 1800s.[3] We now consider in detail each of the features that make this so.
In cases going back to the 1800s, this Court has held that laws imposing such minimal paperwork burdens do not violate the Contracts Clause. One set of decisions addresses so-called recording statutes, which extinguish contractual interests unless timely recorded at government offices. In Jackson v. Lamphire, 3 Pet. 280 (1830), for example, the Court rejected a Contracts Clause challenge to a New York law granting title in property to a later rather than earlier purchaser whenever the earlier had failed to record his deed. It made no difference, the Court held, whether the unrecorded deed was “dated before or after the passage” of the statute; in neither event did the law’s modest recording condition “impair[ ] the obligation of contracts.” Id., at 290. Likewise, in Vance v. Vance,108 U. S. 514 (1883), the Court upheld a statute rendering unrecorded mortgages unenforceable against third parties—even when the mortgages predated the law. We reasoned that the law gave “due regard to existing contracts” because it demanded only that the mortgagee make a “public registration,” and gave him several months to do so. Id., at 517, 518. And more recently, in Texaco, Inc. v. Short,454 U. S. 516 (1982), the Court held that a statute terminating pre-existing mineral interests unless the owner filed a “statement of claim” in a county office did not “unconstitutionally impair” a contract. Id., at 531. The filing requirement was “minimal,” we explained, and compliance with it would effectively “safeguard any contractual obligations or rights.” Ibid.
So too, the Court has long upheld against Contracts Clause attack laws mandating other kinds of notifications or filings. In Curtis v. Whitney, 13 Wall. 68 (1872), for example, the Court approved a statute retroactively affecting buyers of “certificates” for land offered at tax sales. The law required the buyer to notify the tax-delinquent property owner, who could then put up the funds necessary to prevent the land’s final sale. If the buyer failed to give the notice, he could not take the land—and if he provided the notice, his chance of gaining the land declined. Still, the Court made short work of the Contracts Clause claim. Not “every statute which affects the value of a contract,” the Court stated, “impair[s] its obligation.” Id., at 70. Because the law’s notice rule was “easy [to] compl[y] with,” it did not raise a constitutional problem. Id., at 71. Similarly, in Gilfillan v. Union Canal Co. of Pa.,109 U. S. 401 (1883), the Court sustained a state law providing that an existing bondholder’s failure to reject a settlement proposal in writing would count as consent to the deal. The law operated to reduce the interest received by an investor who did not respond. Yet the Court rebuffed the ensuing Contracts Clause suit. “If [the bondholder did] not wish to abandon his old rights and accept the new,” the Court explained, “all he ha[d] to do [was] to say so in writing.” Id., at 406. And one last: In Conley v. Barton,260 U. S. 677 (1923), the Court held that the Contracts Clause did not bar a State from compelling existing mortgagees to complete affidavits before finally foreclosing on properties. The law effectively added a paperwork requirement to the mortgage contracts’ foreclosure terms. But the Court said it was “only [a] condition, easily complied with, which the law, for its purposes, requires.” Id., at 681.
When it comes to legislation affecting contracts, the Constitution hardens the presumption of prospectivity into a mandate. The Contracts Clause categorically prohibits states from passing “any . . . Law impairing the Obligation of Contracts.” Art. I, §10, cl. 1 (emphasis added). Of course, the framers knew how to impose more nuanced limits on state power. The very section of the Constitution where the Contracts Clause is found permits states to take otherwise unconstitutional action when “absolutely necessary,” if “actually invaded,” or “wit[h] the Consent of Congress.” Cls. 2 and 3. But in the Contracts Clause the framers were absolute. They took the view that treating existing contracts as “inviolable” would benefit society by ensuring that all persons could count on the ability to enforce promises lawfully made to them—even if they or their agreements later prove unpopular with some passing majority. Sturges v. Crowninshield, 4 Wheat. 122, 206 (1819).
For much of its history, this Court construed the Contracts Clause in this light. The Court explained that any legislative deviation from a contract’s obligations, “however minute, or apparently immaterial,” violates the Constitution. Green v. Biddle, 8 Wheat. 1, 84 (1823). “All the commentators, and all the adjudicated cases upon Constitutional Law agree[d] in th[is] fundamental propositio[n].” Winter v. Jones, 10 Ga. 190, 195 (1851). But while absolute in its field, the Clause also left significant room for legislatures to address changing social conditions. States could regulate contractual rights prospectively. Ogden v. Saunders, 12 Wheat. 213, 262 (1827). They could retroactively alter contractual remedies, so long as they did so reasonably. Sturges, supra, at 200. And perhaps they could even alter contracts without “impairing” their obligations if they made the parties whole by paying just compensation. See West River Bridge Co. v. Dix, 6 How. 507, 532–533 (1848); El Paso v. Simmons, 379 U. S. 497, 525 (1965) (Black, J., dissenting). But what they could not do is destroy substantive contract rights—the “Obligation of Contracts” that the Clause protects.
Nor are arrangements like the ones Ms. Melin described so unusual. As the federal government has recognized, revocation on divorce statutes cannot be assumed to “effectuat[e] the insured’s ‘true’ intent” because a policyholder “might want his ex-spouse to receive insurance proceeds for a number of reasons—out of a sense of obligation, remorse, or continuing affection, or to help care for children of the marriage that remain in the ex-spouse’s cus- tody.” Brief for United States as Amicus Curiae in Hillman v. Maretta, O. T. 2012, No. 11–1221, p. 28. After all, leaving your ex-spouse life insurance proceeds can be a cheaper, quicker, and more private way to provide for minor or disabled children than leaving the matter to a trustee or other fiduciary. See, e.g., Feder & Sitkoff, Revocable Trusts and Incapacity Planning: More Than Just a Will Substitute, 24 Elder L. J. 1, 15–18 (2016). For these reasons, the federal government and nearly half the states today do not treat divorce as automatically revoking insurance beneficiary designations. Brief for Petitioners 8–9, and nn. 1–2; Hillman, supra, at 494–495.
Consider next the question of the impairment’s reason- ableness. Our cases suggest that a substantial impairment is unreasonable when “an evident and more moderate course would serve [the state’s] purposes equally well.” United States Trust Co. of N. Y. v. New Jersey, 431 U. S. 1, 31 (1977); see also Allied Structural Steel Co. v. Spannaus, 438 U. S. 234, 247 (1978) (analyzing whether an impairment of private contracts “was necessary to meet an important general social problem”). Here, Minnesota’s stated purpose is to ensure proceeds aren’t misdirected to a former spouse because a policyholder forgets to update his beneficiary designation after divorce. But the state could have easily achieved that goal without impairing contracts at all. It could have required courts to confirm that divorcing couples have reviewed their life insurance designations. See Va. Code Ann. §20–111.1(E) (2017); Utah Code §30–3–5(1)(e)(i) (2018). It could have instructed insurance companies to notify policyholders of their right to change beneficiary designations. It could have disseminated information on its own. Or it could have required attorneys in divorce proceedings to address the question with affected parties. A host of women’s rights organizations have advocated for these and other alternatives in various states. See, e.g., Brief for Women’s Law Project et al. as Amici Curiae 34–35. Yet there’s no evidence Minnesota investigated any of them, let alone found them wanting.
Perhaps seeking a way out of this problem, the Court offers an entirely different line of argument. Here the Court suggests the statute doesn’t substantially impair contracts because it does no more than a divorce court might. Ante, at 9–10. But this argument doesn’t work either. Courts may apply pre-existing law to alter a beneficiary designation to ensure an equitable distribution of marital property in specific cases. That hardly means legislatures may retroactively change the law to rearrange beneficiary designations for everyone. A court can fine you for violating an existing law against jaywalking. That doesn’t mean a legislature could hold you retroactively liable for violating a new law against jaywalking that didn’t exist when you crossed the street. No one would take that idea seriously when it comes to crime, and the Contracts Clause ensures we don’t when it comes to contracts, either. After all, the Clause applies only to the “law[s]” legislatures “pass,” not to the rulings of courts. Tidal Oil Co. v. Flanagan, 263 U. S. 444, 451 (1924) (emphasis deleted). That’s because legislatures exist to pass new laws of general applicability responsive to majoritar- ian will, often upsetting settled expectations along the way. The same does not hold true for courts that are supposed to apply existing laws to discrete cases and controversies independently and without consulting shifting political winds.
June 1, 2017 Petition for a writ of certiorari filed. (Response due July 3, 2017)
June 5, 2017 Waiver of right of respondent Kaye Melin to respond filed.
August 1, 2017 Response Requested. (Due August 31, 2017)
August 16, 2017 Order extending time to file response to petition to and including September 29, 2017.
September 29, 2017 Brief of respondent Kaye Melin in opposition filed.
October 6, 2017 Reply of petitioners Ashley Sveen, et al. filed.
October 23, 2017 Rescheduled.
December 18, 2017 Letter from counsel for petitioners regarding case caption filed.
January 16, 2018 Motion to dispense with printing the joint appendix filed by petitioners Ashley Sveen, et al.
January 22, 2018 Motion to dispense with printing the joint appendix filed by petitioners GRANTED.
January 22, 2018 Brief of petitioners Ashley Sveen, et al. filed.
January 24, 2018 SET FOR ARGUMENT ON Monday, March 19, 2018
January 26, 2018 Brief amicus curiae of American College of Trust and Estate Counsel filed.
February 21, 2018 Brief of respondent Kaye Melin filed. (Distributed)
February 27, 2018 Brief amicus curiae of Professor James W. Ely, Jr. filed. (Distributed)
February 28, 2018 Brief amici curiae of The Women’s Law Project, et al. filed. (Distributed)
March 5, 2018 Record received from the U.S.C.A. 8th Circuit. (1 Box)
March 8, 2018 Reply of petitioners Ashley Sveen, et al. filed. (Distributed)
March 19, 2018 Argued. For petitioners: Adam G. Unikowsky, Washington, D. C. For respondent: Shay Dvoretzky, Washington, D. C.
June 11, 2018 Judgment REVERSED and case REMANDED. Kagan, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy, Thomas, Ginsburg, Breyer, Alito, and Sotomayor, JJ., joined. Gorsuch, J., filed a dissenting opinion.
August 21, 2018 The Record from the U.S.C.A. 8th C has been returned.
Oral Argument - March 19, 2018
Melin v. Sveen, No. 16-1172 (8th Cir. Apr. 03, 2017)
After Mark A. Sveen designated his then-wife, Kaye L. Melin, as the primary beneficiary of his life insurance policy, and his children as contingent beneficiaries, Minnesota extended its revocation-upon-divorce statute to life insurance policies. When Mark died in 2011, his children and Melin cross-claimed for the proceeds. The district court granted summary judgment to the children. The court concluded that a contested beneficiary like Melin has standing; this court has held in Whirlpool Corp. v. Ritterthat a revocation-upon-divorce statute like the one here violates the Contract Clause when applied retroactively; and thus the court's previous opinion forecloses any conclusion other than that the statute here was unconstitutional when applied retroactively. Accordingly, the court reversed and remanded for further proceedings.
Ashley Sveen, et al.
Kaye Melin, et al.