Originalism and the Contract Clause
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In Sveen v. Melin, decided on June 11, Justice Neil Gorsuch attempted to reopen an originalist discussion on the Impairment of Contacts Clause. But he didn’t get far. Even Clarence Thomas sided with the 8 to 1 majority.
Twenty-six states, including Minnesota, have laws that automatically revoke a beneficiary designation—as in a life insurance policy— to a former spouse upon the dissolution of a marriage. Under the law, the divorced owner of the policy can reinstate the former spouse as a beneficiary—if he wants to and if he remembers to. Husband Sveen and wife Melin divorced. Subsequently, Minnesota passed a revocation of beneficiary law. Sveen died without reinstating Melin as beneficiary even though Melin later swore that, as part of their separation, Sveen and Melin had agreed to keep her on as beneficiary. Because the Minnesota law has a retrospective effect on the life insurance policy, Melin claimed that the state had violated the Contracts Clause by legislatively changing the terms of the life insurance policy.
Using the two-step Contract Clause test enunciated in El Paso v. Simmons, 379 U.S. 497 (1965), Justice Kagan for the majority declared that Melin’s claim had not even reached the threshold step of a “substantial impairment” of the contract. The statute, she wrote, only replicates what is normally a divorced person’s intent, namely, not to continue the former spouse as a beneficiary, that it only does what a divorce court could do on its own in fashioning a divorce settlement, and the policyholder remains free to reinstate the former spouse as beneficiary. The law presumes, she said, “that the average Joe does not want his ex inheriting what he leaves behind.”
She declared that the statute merely relieved a spouse of the administrative inconvenience having to remove the former spouse as beneficiary after a divorce, and she supported her position by citing a number of 19th century cases in which the Court had held that changed statutory requirements of notice did not impair the value of a contract. The new law had only changed a requirement of notice as to whether a former spouse should be reinstated as beneficiary.
Justice Gorsuch began his dissent by declaring that framers thought the prohibition on impairing pre-existing contracts was “categorical” and “absolute.” He accepts the position that the Clause does not impose limitations of prospective regulations of contracts (not mentioning John Marshall’s contrary dissenting views in Ogden v. Saunders), and he levels a trenchant critique of the Court’s recent interpretation of the Clause in Energy Reserves Group, Inc., v. Kansas Power & Light Co, 459 U.S. 400 (1983) as “hard to square with the Constitution’s public meaning.”
Most of his dissent, however, argued that even under modern case law, Minnesota’s law had imposed a substantial burden on the contract. He affirmed the Court’s long distinction between laws that modify “remedial processes” from those that invade the substance of the contract. In a kind of judicial jujitsu, Gorsuch cites Home Building & Loan Association v. Blaisdell, 290 U.S. 398 (1934) in support of the distinction, ignoring the traditional view that Blaisdell signaled death knell of the Contract Clause.
But Gorsuch spent almost no time glossing the original meaning and the subsequently cases, nor do I think that was his intention. I believe that he simply wanted to reopen the issue.
What both sides neglected, however, was the consensus forged by the Court in the 1930s on the Contract Clause following the Blaisdell decision. But even under that consensus, the issue would have been the same: absent an emergency, the only issue is whether the Minnesota law materially impaired the obligations of the parties, or, on the contrary, did the new rules preserve the underlying benefits of the contract to the parties?
What was the underlying benefit sought by the parties Sveen and Melin to the life insurance contract? Was it 1) that Melin should inherit? Or, 2) that only Sveen’s current wife should inherit, if it happens to be Melin? Or, 3) that the mother (Melin) of his children should inherit? The law presumes that, in the majority of cases, the underlying benefit sought by the parties was the second, i.e., that my current wife should inherit, if I have one. If the assumed obligation were other than that, I, as the owner of the policy, could reinstate it.
As a general proposition, it seems that majority had the better of the argument, for the law defines and preserves the underlying obligations of the parties (that the current wife should inherit, if she is still current), and only requires a post-divorce notice if the obligations are in fact different. The mere fact that there is a contract of insurance naming wife Melin as beneficiary in no way indicates whether the intent of the parties was to keep Melin as beneficiary in the event of a divorce. The law chooses one option but allows the policy holder to correct that presumption.
Even under the new law, there was another possible outcome. Melin testified that the underlying benefit intended by her and Sveen was that she should inherit. In fact she and Sveen jointly continued to pay for the premiums. Sveen’s children contested her position. Under Minnesota law, Sveen’s intent would have had to be proven by clear and convincing evidence. If Melin’s assertions had reached that standard, then the lower court could have constructively imposed Sveen’s desire to continue her on as beneficiary. Otherwise, the new law’s default position controlled.
Perhaps this was not the case in which to revisit the true understanding of the Contract Clause. But I think all Gorsuch wanted to do here was to lay down a marker for future discussion when the facts of the case might be more amenable to be adjudicated from an originalist perspective.