This past week I noted here that SCOTUS had taken up a case dealing with the Contract Clause of the US Constitution. Oral arguments in the case took place on Monday (you can read the transcript for yourself here). Briefly, the lawyer for the kids, who wanted to get the proceeds of the life insurance policy due on the death of their father, squared off against counsel for dad's ex-wife, who had remained the beneficiary on the life insurance policy even after their divorce. The kids had lost before the Eighth Circuit Court of Appeals when that court held that a Minnesota law, enacted after dad bought the insurance but before the divorce, couldn't override the policy itself. Why? Because Article I, section 10, clause 1 of the Constitution says that "No State shall pass any Law impairing the Obligation of Contracts."
For what it's worth, I think the kids will prevail for two reasons. First, the Minnesota law had come into effect before the divorce (and, obviously, before dad died). The timeline struck several members of the Court as significant. The law would clearly be unconstitutional had it come into effect after dad died but before the insurance company paid out. Several justices seemed squeamish about a law that would have changed the beneficiary after the divorce but seemed more sanguine about a pre-divorce change that the attorneys for the parties should have talked about with their divorcing clients.* And, there's no reason to believe anyone on the Court would have had a problem with the constitutionality of the law had it pre-dated buying the policy. After all, it's black-letter law that contracts are always subject to existing statutes.
Second, a state's "police powers" are in principle very extensive. Historically, they included the power of a state to regulate the health, safety, and morals of its citizens. Hence, the continuation of established churches in several of the newly independent (but united) states for some decades even after ratification of the Constitution. These powers today are cabined by the constitutions of the states themselves and by the Constitution as through the 14th Amendment it has become ever-more a means of limiting state powers. Nonetheless, the Contract Clause has always been a limit on a state's police powers but, equally so, SCOTUS has recognized that family law largely remains one of the fields over which the police powers remain effective. And Minnesota's "revocation-on-divorce" statute falls squarely within the realm of the retained police powers.
Combining the timing of the change in the law--before the divorce--and the general deference to a state's control over its laws of marriage and divorce, I predict that SCOTUS will reverse the Eighth Circuit and give the kids the money.
* Counsel for the ex-wife made a big deal of the fact that no one knows if the lawyer for either divorcing party mentioned the change in the law at the time of the divorce. And the similar law of Virginia got a shout-out because it requires divorcing parties to be informed that Virginia law revokes spousal life insurance beneficiary designations at the time of divorce. Minnesota law does not. (As an aside, my favorite estate planning attorney informed me this kerfuffle could have been avoided had dad made a trust the beneficiary of his insurance policy. Minnesota law did not purport to change the beneficiaries of a trust upon divorce.)
For what it's worth, I think the kids will prevail for two reasons. First, the Minnesota law had come into effect before the divorce (and, obviously, before dad died). The timeline struck several members of the Court as significant. The law would clearly be unconstitutional had it come into effect after dad died but before the insurance company paid out. Several justices seemed squeamish about a law that would have changed the beneficiary after the divorce but seemed more sanguine about a pre-divorce change that the attorneys for the parties should have talked about with their divorcing clients.* And, there's no reason to believe anyone on the Court would have had a problem with the constitutionality of the law had it pre-dated buying the policy. After all, it's black-letter law that contracts are always subject to existing statutes.
Second, a state's "police powers" are in principle very extensive. Historically, they included the power of a state to regulate the health, safety, and morals of its citizens. Hence, the continuation of established churches in several of the newly independent (but united) states for some decades even after ratification of the Constitution. These powers today are cabined by the constitutions of the states themselves and by the Constitution as through the 14th Amendment it has become ever-more a means of limiting state powers. Nonetheless, the Contract Clause has always been a limit on a state's police powers but, equally so, SCOTUS has recognized that family law largely remains one of the fields over which the police powers remain effective. And Minnesota's "revocation-on-divorce" statute falls squarely within the realm of the retained police powers.
Combining the timing of the change in the law--before the divorce--and the general deference to a state's control over its laws of marriage and divorce, I predict that SCOTUS will reverse the Eighth Circuit and give the kids the money.
* Counsel for the ex-wife made a big deal of the fact that no one knows if the lawyer for either divorcing party mentioned the change in the law at the time of the divorce. And the similar law of Virginia got a shout-out because it requires divorcing parties to be informed that Virginia law revokes spousal life insurance beneficiary designations at the time of divorce. Minnesota law does not. (As an aside, my favorite estate planning attorney informed me this kerfuffle could have been avoided had dad made a trust the beneficiary of his insurance policy. Minnesota law did not purport to change the beneficiaries of a trust upon divorce.)
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