Sveen v. Melin,
584 U.S. ___ (2018)

Annotate this Case



No. 16–1432



on writ of certiorari to the united states court of appeals for the eighth circuit

[June 11, 2018]

Justice Gorsuch, dissenting.

The Court’s argument proceeds this way. Because people are inattentive to their life insurance beneficiary designations when they divorce, the legislature needs to change those designations retroactively to ensure they aren’t misdirected. But because those same people are simultaneously attentive to beneficiary designations (not to mention the legislature’s activity), they will surely undo the change if they don’t like it. And even if that weren’t true, it would hardly matter. People know existing divorce laws sometimes allow courts to reform insurance contracts. So people should know a legislature might enact new laws upending insurance contracts at divorce. For these reasons, a statute rewriting the most important term of a life insurance policy—who gets paid—somehow doesn’t “substantially impair” the contract. It just “makes a significant change.” Ante, at 7.

Respectfully, I cannot agree. Minnesota’s statute automatically alters life insurance policies upon divorce to remove a former spouse as beneficiary. Everyone agrees that the law is valid when applied prospectively to policies purchased after the statute’s enactment. But Minnesota wants to apply its law retroactively to policies purchased before the statute’s adoption. The Court of Appeals held that this violated the Contracts Clause, which guarantees people the “right to ‘rely on the law . . . as it existed when the[ir] contracts were made.’ ” Metropolitan Life Ins. Co. v. Melin, 853 F. 3d 410, 413 (CA8 2017) (quoting Whirlpool Corp. v. Ritter, 929 F. 2d 1318, 1323 (CA8 1991)). That judgment seems to me exactly right.


Because legislation often disrupts existing social arrangements, it usually applies only prospectively. This longstanding and “sacred” principle ensures that people have fair warning of the law’s demands. Reynolds v. McArthur, 2 Pet. 417, 434 (1829); 3 H. Bracton, De Legibus et Consuetudinibus Angliae 530–531 (1257) (T. Twiss ed. 1880). It also prevents majoritarian legislatures from condemning disfavored minorities for past conduct they are powerless to change. See, e.g., Landgraf v. USI Film Products, 511 U. S. 244, 266 (1994); Vermeule, Veil of Ignorance Rules in Constitutional Law, 111 Yale L. J. 399, 408 (2001).

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).

The categorical nature of the Contracts Clause was not lost on anyone, either. When some delegates at the Constitutional Convention sought softer language, James Madison acknowledged the “ ‘inconvenience’ ” a categorical rule could sometimes entail “ ‘but thought on the whole it would be overbalanced by the utility of it.’ ” Kmiec & McGinnis, The Contract Clause: A Return to the Original Understanding, 14 Hastings Const. L. Q. 525, 529–530 (1987). During the ratification debates, these competing positions were again amply aired. Antifederalists argued that the proposed Clause would prevent states from passing valuable legislation. Id., at 532–533. Federalists like Madison countered that the rule of law permitted “property rights and liberty interests [to] be dissolved only by prospective laws of general applicability.” Id., at 532. And, of course, the people chose to ratify the Constitution—categorical Clause and all.

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.

More recently, though, the Court has charted a different course. Our modern cases permit a state to “substantial[ly] impai[r]” a contractual obligation in pursuit of “a significant and legitimate public purpose” so long as the impairment is “ ‘reasonable.’ ” Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U. S. 400, 411–412 (1983). That test seems hard to square with the Constitution’s original public meaning. After all, the Constitution does not speak of “substantial” impairments—it bars “any” impairment. Under a balancing approach, too, how are the people to know today whether their lawful contracts will be enforced tomorrow, or instead undone by a legislative majority with different sympathies? Should we worry that a balancing test risks investing judges with discretion to choose which contracts to enforce—a discretion that might be exercised with an eye to the identity (and popularity) of the parties or contracts at hand? How are judges supposed to balance the often radically incommensurate goods found in contracts and legislation? And does this test risk reducing the “Contract Clause’s protection” to the “Court’s judgment” about the “ ‘reasonableness’ ” of the legislation at hand? Simmons, 379 U. S., at 529 (Black, J., dissenting). Many critics have raised serious objections along these and other lines. See, e.g., ibid.; Kmiec & McGinnis, supra, at 552; Rappaport, Note, A Procedural Approach to the Contract Clause, 93 Yale L. J. 918, 918 (1984); Epstein, Toward a Revitalization of the Contract Clause, 51 U. Chi. L. Rev 703, 705–717 (1984); J. Ely, The Contract Clause: A Constitutional History 7–29 (2016). They deserve a thoughtful reply, if not in this case then in another.


Even under our modern precedents, though, I still do not see how the statute before us might survive unscathed. Recall that our recent precedents indicate a state law “substantially impairing” contracts violates the Contracts Clause unless it is “reasonable” in light of a “significant and legitimate public purpose.”

Start with the substantial impairment question. No one pays life insurance premiums for the joy of it. Or even for the pleasure of knowing that the insurance company will eventually have to cough up money to someone. As the Court concedes, the choice of beneficiary is the “ ‘whole point.’ ” Ante, at 7. So when a state alters life insurance contracts by undoing their beneficiary designations it surely “substantially impairs” them. This Court has already recognized as much, holding that a law “displac[ing] the beneficiary selected by the insured . . . and plac[ing] someone else in her stead . . . frustrates ” a scheme designed to deliver proceeds to the named beneficiary. Hillman v. Maretta, 569 U. S. 483, 494 (2013) (quoting Wissner v. Wissner, 338 U. S. 655, 659 (1950) (internal quotation marks omitted)). As Justice Washington explained long ago, legislation “changing the objects of [the donor’s] bounty . . . changes so materially the terms of a contract” that the law can only be said to “impair its obligation.” Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 662 (1819) (concurring opinion). Just so.

Cases like ours illustrate the point. Kaye Melin testified that, despite their divorce, she and the decedent, Mark Sveen, agreed (repeatedly) to keep each other as the primary beneficiaries in their respective life insurance policies. Affidavit of Kaye Melin in No. 14–cv–05015, Dkt. No. 46, ¶¶3, 4, 10–14. Ms. Melin noted that they adopted this arrangement not only because they remained friends but because they paid the policy premiums from their joint checking account. Deposition of Kaye Melin in No. 14–cv–0515, Dkt. No. 45–4, pp. 26–27, 64–65. Of course, we don’t know for sure whether removing Ms. Melin as beneficiary undid Mr. Sveen’s true wishes. The case comes to us after no one was able to meet Minnesota’s clear and convincing evidence standard to prove Mr. Sveen’s intent. But what we do know is the retroactive removal of Ms. Melin undid the central term of the contract Mr. Sveen signed and left in place for years, even after his divorce, until the day he died.

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.


What’s the Court’s reply? It says that we don’t have to decide whether the statute reasonably impairs contracts because it doesn’t substantially impair them in the first place. It’s easy enough to see why the Court might take this tack given the many obvious and less burdensome alternatives Minnesota never considered. To save the law, the Court must place all its chips on a “no substantial impairment” argument. The gamble, though, proves a tricky one.

The Court first stresses that individuals sometimes neglect their beneficiary designations after divorce. Because of this, it says, Minnesota’s law affords “many” persons what they would want if only they had thought about it. Ante, at 8. But as we’ve seen the law depends on a stereotype about divorcing couples that not everyone fits. A sizeable (and maybe growing) number of people do want to keep their former spouses as beneficiaries. Brief for Women’s Law Project 25–26. Even the Court admits the law’s presumption will sometimes prove “wrong.” Ante, at 10. And that tells us all we need to know. That the law is only sometimes wrong in predicting what divorcing policyholders want may go some way to establishing its reasonableness at the second step of our inquiry. But at the first step, where we ask only whether the law substantially impairs contracts, the answer is unavoidable. The statute substantially impairs contracts by displacing the term that is the “ ‘whole point’ ” of the contract. Ante, at 7. This Court would never say a law doesn’t substantially burden a minority’s religious practice because it reflects most people’s preferences. See Church of Lukumi Babalu Aye, Inc. v. Hialeah, 508 U. S. 520 (1993). Equally, I do not see how a statute doesn’t substantially impair contracts just because it reflects “many” people’s preferences. Ante, at 8. The Contracts Clause does not seek to maximize the bottom line but to protect minority rights “from improvident majoritarian impairment.” L. Tribe, American Constitutional Law §9–8, p. 613 (2d ed. 1988).

The Court’s answer to this problem introduces an apparent paradox. If the statute substantially impairs contracts, it says, the impairment can be easily undone. Anyone unhappy with the statute’s beneficiary re-designation can just re-re-designate the beneficiary later. Ante, at 10. Yet the Court just finished telling us the statute is justified because most policyholders neglect their beneficiary designations after divorce. Both claims cannot be true. The statute cannot simultaneously be necessary because people are inattentive to the details of their insurance policies and constitutional because they are hyperaware of those same details.

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.

The Court finally claims that its course finds support in cases where we’ve approved retroactive legislation. Ante, at 10–12. Those cases, though, involved statutes altering contractual remedies. Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398, 434, and n. 13 (1934) (noting that each of the 19th century cases relied on by the Court today affected only “remedial processes”). And Minnesota’s law changes the key contractual obligation—who gets the insurance proceeds—not the method by which the contract’s existing obligation is satisfied. Although the Constitution allows legislatures some flexibility to address changing social conditions through retroactive remedial legislation, it does not permit upsetting settled expectations in contractual obligations. See, e.g., Fletcher v. Peck, 6 Cranch 87, 137–138 (1810); Simmons, 379 U. S., at 526 (Black, J., dissenting). We must respect that line found in the text of the Constitution, not elide it. Indeed, our precedent teaches that if remedial changes are just disguised efforts at impairing obligations they will violate the Constitution too. Blaisdell, 290 U. S., at 434, n. 13 (collecting cases).

Consider just how different our case is from the classic remedial change the Contracts Clause permits. In Jackson v. Lamphire, 3 Pet. 280 (1830), a shady landowner sold the same tract to two people. Id., at 287–288. The Court held that the second buyer was entitled to keep the land because he recorded the deed as a retroactive law required. Id., at 289–290. At the same time, nothing in Jackson or the new statute stopped the first buyer (who failed to record his deed) from obtaining damages from the seller for breach of contract. See id., at 287–291. The statute altered the first buyer’s remedy, but he remained free to enforce the obligation found in his contract. By contrast, the statute here changes the “ ‘whole point’ ” of the contract’s obligation, substituting a new beneficiary in place of the one found in the contract’s terms. Ante, at 7.

Even the remedial case on which the Court leans most heavily does little to help its cause. In Gilfillan v. Union Canal Co. of Pa., 109 U. S. 401 (1883), the Court upheld a statute requiring bondholders to enforce their contract rights within a shortened timeframe (that is, altering the remedy) or else accept a reorganization plan that threatened a poorer rate of interest. Id., at 402–403, 406. The Court gave three primary reasons for upholding this change. It emphasized that the bonds at issue were “of a peculiar character” because “each bondholder under them enter[ed] by fair implication into certain contract relations with” the other bondholders who approved the reorganization. Id., at 403. It observed that “ ‘a calamity common to all’ ” had occurred, as the company that issued the bonds “was bankrupt” and payment of “its debts in the ordinary way was impossible.” Id., at 405. Finally, it added that the plaintiff challenging the statute had “actual notice” of the law and so faced no difficulty in asserting his contract rights in a timely manner. Id., at 406. These considerations, the Court concluded, justified shortening the limitations period for obtaining full relief even though it might reduce a late-moving party’s interest rate a few points. No comparable considerations are present here. And this statute doesn’t just reduce Ms. Melin’s remedy; it denies her one altogether.


The judicial power to declare a law unconstitutional should never be lightly invoked. But the law before us cannot survive an encounter with even the breeziest of Contracts Clause tests. It substantially impairs life insurance contracts by retroactively revising their key term. No one can offer any reasonable justification for this impairment in light of readily available alternatives. Acknowledging this much doesn’t even require us to hold the statute invalid in all applications, only that it cannot be applied to contracts formed before its enactment. I respectfully dissent.

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