Sveen v. Melin: The Retro View of Revocation on Divorce Statutes
The George Washington Law Review is pleased to announce the publication of a response by Professor Naomi Cahn to the Court’s recent decision in Sveen v. Melin, No. 16-1432, slip op. (U.S. June 11, 2018).
The Supreme Court rarely considers domestic relations or probate cases; nonetheless, when state statutes regulating insurance benefits and retirement designations upon divorce conflict with federal statutes, the Court has repeatedly held the state statutes preempted. Sveen v. Melin similarly presented issues concerning a state statute affecting beneficiary designations upon divorce and federal law, but the case concerned a potential conflict between the Constitution’s Contracts Clause and a state revocation-upon-divorce statute.
In 1997, Mark Sveen purchased a life insurance policy, and later that year, he married Kaye Melin. The following year, he named her as the primary beneficiary and his two adult children from a prior marriage, Ashley and Antone Sveen, as contingent beneficiaries. Sveen also had additional life insurance, which listed his children as primary beneficiaries. In 2002, years after Sveen had purchased the policy, Minnesota enacted the statute at issue in the case, which states: “[T]he dissolution or annulment of a marriage revokes any revocable . . . beneficiary designation . . . made by an individual to the individual’s former spouse.”
Sveen and Melin divorced in 2007. Their divorce decree did not mention the insurance policy, and Sveen never changed the beneficiary designation. According to Melin, the two of them agreed to keep the other as the primary beneficiary, even after the divorce. In 2011, Sveen died.
Following Sveen’s death, the insurance company filed an interpleader to determine whether the Minnesota statute revoked the beneficiary designation. Sveen’s children, who were the contingent beneficiaries, and Melin crossclaimed for the proceeds. The district court found in favor of the children, but the Eighth Circuit, relying on a case it had decided in 1991 presenting a Contracts Clause challenge to the Oklahoma revocation-upon-divorce statute, reversed, finding in favor of Melin. As in the 1991 case, the Eighth Circuit found that the statute disrupted the expectations of the policyholder, who was entitled to “rely on the law governing insurance contracts as it existed when the contracts were made.” Other circuits, however, had reached the opposite conclusion. The Supreme Court, 8–1, in an opinion authored by Justice Kagan, resolved the issue by finding no Contracts Clause violation.
The Contracts Clause provides that “[n]o state shall . . . pass any . . . Law impairing the Obligation of Contracts.” By its terms, as the Court noted, the Contracts Clause does set limits on when states can enact laws that interfere with pre-existing contracts, that is, on the retroactivity of new legislation. Not all such laws are, however, unconstitutional, and Justice Kagan briefly reviewed the history of the Court’s Contracts Clause jurisprudence. She observed that the “Court has long applied” a two-part test for determining such a law’s validity. The first part asks whether the state law “operated as a substantial impairment of a contractual relationship.” A law operates as a substantial impairment if it: (1) “undermines the contractual bargain,” (2) “interferes with a party’s reasonable expectations,” and (3) “prevents the party from safeguarding or reinstating his [sic] rights.” Only if those factors reflect a substantial impairment does the Court turn to the second step to determine whether the law has been crafted in “an ‘appropriate’ and ‘reasonable’ way to advance ‘a significant and legitimate public purpose.’”
For more, please visit Sveen v. Melin: The Retro View of Revocation on Divorce Statutes.