Opinion ID: 1110248
Heading Depth: 2
Heading Rank: 2

Heading: New JerseySedarous v. Sedarous

Text: ¶ 30. In Sedarous v. Sedarous, 285 N.J.Super. 316, 666 A.2d 1362 (1995), the New Jersey superior court similarly held that FEGLIA does not preempt the state court from imposing a constructive trust on the insurance proceeds after the death of the insured federal employee. Sedarous, 666 A.2d at 1363. In Sedarous, the federal employee, Mr. Sedarous, had designated his sister as the sole beneficiary of his life insurance policies. Id. Mr. Sedarous commenced divorce proceedings against his wife, but before final judgment was entered, he died. Id. Mrs. Sedarous filed a complaint against the sister seeking a constructive trust on the FEGLIA insurance proceeds. Id. at 1364. The judge initially entered an interim order placing part of the proceeds in a trust account; however, later the judge granted summary judgment in favor of the sister, holding that FEGLIA preempted the imposition of a constructive trust. Id. Mrs. Sedarous appealed, and the appellate court reversed and remanded. Id. ¶ 31. The New Jersey court first noted that it was a case of first impression for its jurisdiction; however, the issue had been previously considered by both federal and state courts, with disparate results. Id. The New Jersey court concluded that the starting point for analyzing this issue was the case of Ridgway v. Ridgway , noting the Supreme Court had held in that case that SGLIA preempted state law from imposing a constructive trust on SGLIA proceeds 666 A.2d at 1364. However, the New Jersey court determined that Ridgway was distinguishable: The question, of course, is whether Ridgway controls the preemption question in respect of FEGLIA. In resolving this question, we note at the outset that FEGLIA and SGLIA are not cognate enactments. First, FEGLIA is not attended by the exigency that motivated SGLIA, namely the congressional intention to provide military personnel on active duty with insurance unavailable to them in the private market because of the hazardous nature of their work. FEGLIA provides insurance for all federal employees as an additional job benefit in much the same way as any large private employer provides group life insurance to its employees at shared cost. Second, FEGLIA, in § 8705, includes the same provisions respecting payment or proceeds as SGLIA, and while one of FEGLIA's implementing regulations, 5 C.F.R. § 870.902, accords the same absolute employee right of beneficiary designation, FEGLIA, unlike SGLIA, does not have any anti-attachment provision at all. Finally, FEGLIA, but not SGLIA, includes by 1980 amendment, an express preemption of conflicting state law, 5 U.S.C.A § 8709(d)(1).... 666 A.2d at 1365. The New Jersey court then analyzed the preemption issue, in light of the deference given to the paramount state interest in its family law: The preemption test has been most recently prescribed by the Supreme Court in Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992). The Court there again explained that state law is not preempted by federal law unless it is the clear and manifest purpose of Congress to effect preemption, a purpose that can be demonstrated by the express language of the federal enactment or its structure and purpose, or by a direct conflict between the terms of the federal and state enactments, or by a showing that federal law occupies the field so completely as to justify the inference that state legislation addressing that subject is precluded. Moreover, and to the point here, the inclusion of an express preemption clause does not end the inquiry. Rather, the clause must itself be construed to determine just what it does preempt, and matters beyond the preemptive reach are then presumed not to be preempted, provided, of course, that the field is not occupied and that there is no direct conflict with federal law. 666 A.2d at 1366 (internal citations omitted). The New Jersey court concluded: Considering then on one side of the balance the administrative convenience that is at the heart of § 8705 of FEGLIA and of its implementing regulation and, on the other side of the balance, the intensity and pervasiveness of the state interest in the financial protection of the dependents of the divorced obligor spouse, we are confident that FEGLIA's lack of an anti-attachment provision is the critical factor justifying, if not indeed compelling, the conclusion that Ridgway does not govern the FEGLIA preemption issue. Clearly, if Congress had intended the same immunity of proceeds from state court action in FEGLIA as it provided for in SGLIA, it could easily have done so by the simple expedient of including SGLIA's anti-attachment provision in FEGLIA. The fact that it did not militates strongly against both a preemption conclusion and a mandatory extension of Ridgway to FEGLIA problems. Id. at 1367. The New Jersey court held that FEGLIA does not preclude the state court from imposing a constructive trust on insurance proceeds in the same manner as if the insurance had been privately contracted for. Id.