Sveen v. Melin

Sveen v. Melin,, was a case in which the U.S. Supreme Court decided whether a Minnesota law violated the Contract Clause of the Constitution of the United States.

Background
In 1997, Mark Sveen and Kaye Melin got married and the next year, Sveen purchased a life insurance policy. Melin was named as the primary beneficiary on this policy, and two of his children from a prior marriage were named as contingent beneficiaries. Sveen and Melin divorced in 2007 but the family court made no mention of the insurance policy. Sveen died in 2011, and a dispute developed between Melin and Sveen's children as to which of them could collect on his policy.

According to a 2002 Minnesota law, "the dissolution or annulment of a marriage revokes any revocable[ ] disposition, beneficiary designation, or appointment of property made by an individual to the individual’s former spouse in a governing instrument," where a governing instrument is defined to include insurance policies. This meant that in the event of a divorce, one partner would be removed from the other's policies as a beneficiary and vice-versa. Sveen's children claimed that under this law, since their father had not explicitly sought to keep Melin on as his primary beneficiary, they should receive the death benefit.

Article 1, Section 10, Clause 2 of the Constitution, more colloquially known as the Contract Clause, says that, "No state shall pass any Law impairing the obligation of contracts." Melin argued that since the Minnesota law did not exist when her ex-husband purchased his insurance policy, to allow it to alter the terms of that policy later would be a violation of the Constitution.

The District Court ruled in favor of the Sveens but the Eight Circuit reversed on appeal.

Supreme Court
The Court reversed the Appeals court ruling in an 8-1 decision with the majority decision authored by Associate Justice Elena Kagan.

Majority opinion
Kagan writes that in approaching Contract Clause cases, the court typically applies a two-step test. First, the court asks a threshold question as to whether the state law has "operated as a substantial impairment of a contractual relationship." If the court finds that there is a substantial impairment, they then move on to the second part of the test which asks whether the law is an “appropriate” and “reasonable” way to advance “a significant and legitimate public purpose.”

Kagan says that there are three reasons to stop after the first step and rule against Melin.

First, the law purports to support the policy holder's intent and further, rather than impair it because "most divorcees do not aspire to enrich their former partners."

Second, the law doesn't disturb a policy holder's expectations because it is well within the power of divorce courts to revoke beneficiary status upon the dissolution of a marriage. Kagan's much broader argument to this point is that during a divorce all assets, homes, cars, and yes, insurance policies, are "up for grabs," and as such Melin has no reliance interest in remaining the primary beneficiary on her ex-husband's policy.

Third, if Sveen had so wished, he could have easily prevented this default rule from removing his ex-wife from his policy

Dissenting opinion
Associate Justice Neil Gorsuch was the sole dissenter in this case.

Gorsuch dissents by arguing that the retroactive application of the Minnesota Law violates the Contract Clause. First, he argues that the changing of beneficiaries in such a retroactive manner is a substantial impairment on the policy holder. Second, he writes that Minnesota could have used a much less intrusive method of reaching their goal such as requiring the divorce court to confirm beneficiary designation before the dissolution is finalized.

He also argues that the majority's decision introduces a paradox. The majority upheld the law partly on the basis that it could be easily undone, Gorsuch writes, "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."