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Jim Flynn: Divorce case goes all way to high court

By: Jim Flynn
April 15, 2018 Updated: April 15, 2018 at 4:44 pm
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photo - Jim Flynn - Business (2013)
Jim Flynn - Business (2013) 

It's rare for a divorce case to end up before the U.S. Supreme Court. But Sveen v. Melin is such a case.

In 1997, Mark Sveen married Kaye Melin. The next year, Mark purchased a life insurance policy from MetLife and named Kaye as the primary beneficiary, with his two adult children from a prior marriage, Ashley and Antone, as contingent beneficiaries. (Mark and Kaye have no children together.) In 2002, Minnesota, where the couple lived, adopted a revocation-upon-divorce statute applicable to life insurance beneficiary designations. Five years later, Mark and Kaye divorced, and Mark died in 2011, without removing Kaye as the named primary beneficiary on the MetLife policy.

Kaye argued that Minnesota's revocation-upon-divorce statute, as applied to her situation, was unconstitutional because of the "contract clause" of the U.S. Constitution. The contract clause says "No state shall . pass any Law impairing the Obligations of Contracts." Minnesota passed a law impairing a life insurance contract by removing her as beneficiary, and this it could not do. So, she gets the money.

Ashley and Antone argued the Minnesota statute didn't violate the contract clause and they should get the money. They said Kaye was not a party to this contract, which was between Mark and MetLife and remained in effect. The Minnesota Legislature had merely bolted a procedural term onto the contract in the belief that most people don't want an ex-spouse to get the proceeds of a life insurance policy.

Ashley and Antone won at the district court. But Kaye appealed to the 8th Circuit Court of Appeals and prevailed. The 8th Circuit panel decided it had to follow an earlier ruling by another panel in the same court that ruled that an Oklahoma statute functionally identical to the Minnesota statute had violated the contract clause when it was applied to an existing insurance policy.

The reasoning behind the two 8th Circuit decisions was simple. The contract clause is unequivocal and leaves no room for judicial fiddling.

Ashley and Antone appealed, and the U.S. Supreme Court agreed to hear the case. Oral argument was in March, and a ruling will come this year. The case is closely watched, not because anyone cares who gets the insurance money (well, other than Mark's kids and Kaye). That's because the Supreme Court has said nothing about the contract clause for 25 years; states are regularly passing laws affecting contracts; and some observers feel it's time for the contract clause to reassert itself, with vigor, as an important tool of commerce.

Colorado also has a revocation-upon-divorce statute that works just like the Minnesota statute and, in 2002, the Colorado Supreme Court ruled applying it to an existing life insurance policy did not violate the contract clause.

The lesson in this for divorcing couples is - don't take chances. As part of a divorce, make beneficiary changes.

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