Article I, Section 10, Paragraph 1 of the Constitution includes the “Contracts Clause”, which protects the integrity of contracts from state intrusion:
No State shall … pass any … ex post facto Law, or Law impairing the Obligation of Contracts
Now this seems pretty simple, right? “No State shall pass any ex post facto (after the fact) law or law impairing the obligation of contracts”. But leave it to the judicial system to turn plain language into putty. In Sveen et al. v Melin, our high priests in black robes at the supreme Court took the simple idea that states are not allowed to pass laws after the fact or impairing (preventing) the obligations of contracts and turned it on it’s head.
In Sveen v Melin, the court found that:
Held: The retroactive application of Minnesota’s statute does not violate the Contracts Clause. That Clause restricts the power of States to disrupt contractual arrangements, but it does not prohibit all laws affecting pre-existing contracts, see El Paso v. Simmons, 379 U. S. 497, 506–507.
In this case, when Mark Sveen and Kaye Melin divorced in 2007, the state of Minnesota effectively changed the contract for the life insurance policy Mr. Sveen entered into in 1998 by removing Ms. Melin as primary beneficiary. “Melin claimed that because the law did not exist when the policy was purchased and she was named as the primary beneficiary, applying the later-enacted law to the policy violates the Constitution’s Contracts Clause. ” In other words, applying Minnesota’s law to a contract entered into before the law existed is an obvious ex post facto application of the law and effectively nullifies the insurance policy contract. I suppose the argument could be made that if the law went into effect before the divorce then it was not retroactive to the divorce, but I have not seen that statement made in the decision.
While the question of the retroactive nature of the law technically may be defensible, the idea of a law that changes the beneficiary of a life insurance policy or any other contract is a clear violation of the Contracts Clause. The Constitution does not say a state may impair the obligations contracts under certain conditions and it doesn’t say states shouldn’t impair contracts. Instead, it explicitly FORBIDS states from creating laws that impair the obligations of contracts. So how, with such clear and simple language, can the state of Minnesota or any court, much less the supreme Court, get this so wrong? By thinking they know what we should want better than we do!
The legal system has long used default rules to resolve estate litigation in a way that conforms to decedents’ presumed intent.
Problem number one is the arrogance that the legal system, that any state or any court, can presume to know the mind and the intent of anyone without documentary proof. When someone dies without will or instruction, the court must determine what to do with their estate. To that end, the passing of laws which specify default rules should a decedent not leave legal instructions makes sense. Even if a will is in place, since it is not a contract a state law nullifying said will upon the divorce of the couple could be defensible constitutionally. However, it is a huge leap to assume the state or the court knows better than the explicit instructions of the decedent! That is not “resolving estate litigation”, but the tyranny of an all knowing state. If Mr. Sveen wanted to remove Ms. Melin from his life insurance policy, he had more than enough time to do so. Neither the state of Minnesota nor the children who were declared Mr. Sveen’s beneficiaries by state dictate could use the excuse that he wanted to make the change since he did not do so in the four years between his divorce and his death.
[The Contracts] Clause restricts the power of States to disrupt contractual arrangements, but it does not prohibit all laws affecting pre-existing contracts,… The two-step test for determining when such a law crosses the constitutional line first asks whether the state law has “operated as a substantial impairment of a contractual relationship.”…The Court stops after the first step here, because three aspects of Minnesota’s law, taken together, show that the law does not substantially impair pre-existing contractual arrangements.
Problem number two is the intentional rewriting of the Constitution effected by the court. According to the supreme Court, to determine if a law violates the Contracts Clause they must first ask whether the law has “operated as a substantial impairment of a contractual relationship”. However the plain language of the Constitution says that no state shall pass a law “impairing the Obligation of Contracts”. The Constitutional standard is not the amount of impairment to the contract but whether ANY impairment to it’s obligations would exist. Clearly, changing the beneficiary of a life insurance contract impairs the contract. Mr. Sveen legally entered into a contact with an insurance company, the terms and conditions stating that in the event of his death while the contact was still in force the primary beneficiary was to be Ms. Melin. However the State of Minnesota, presuming to know what Mr. Sveen wanted better than the documentary proof of the contact itself, changed the contract to remove Ms. Melin as the primary beneficiary. I’m having a hard time thinking of a better example of a state law impairing the obligations of a contract.
This idea of laws changing insurance beneficiaries upon divorce appears to be based on the Uniform Probate Code, a creation of National Conference of Commissioners on Uniform State Laws. Part of this code included provisions that invalidated wills upon certain major life changes such as marriage, child birth, and divorce. In the 1990 revision:
” the revocation-upon-divorce provision (Section 2-804) was substantially revised so that divorce not only revokes testamentary devises, but also nonprobate beneficiary designations, in favor of the former spouse.”
In other words, the states thought it necessary to revise their laws so that divorce not only revoked wills (testamentary devices), but also other items, including contract items such as life insurance and retirement plan beneficiaries. While some may debate the logic of state revocation of designated beneficiary benefits after a divorce (I think it’s tyrannical for any government to tell people how they should change their legal documents, for any reason), there’s still that little problem of the U.S. Constitution, which specifically forbids states from writing laws that change (impair) the obligations of a contract.
This travesty of justice was compounded by multiple courts, including the U.S. supreme Court, substituting their judgment for the black letter law of the Constitution they swore an oath to uphold. Even under the courts own standard of “substantially impair”, this does not pass the smell test. If I have a contract says you are to pay one person and you change it to pay another, that is a SIGNIFICANT change to the contract. According to the court, if Mr. Sveen did not like the modification the State of Minnesota made to his contract he could change it. Why should Mr. Sveen have to undo an unconstitutional change to his legally binding contact? Why would anyone even consider that the state would modify a contract without their knowledge? We’ve all heard that ignorance of the law is no excuse, but the supreme law of the land says Minnesota cannot change a contract, period, full stop, no arguments or debates.
While travesties of justice, illogical and just plain stupid opinions are nothing new from the supreme Court, the third, and arguably most troubling problem with this ruling is that out of nine justices, only one, Justice Gorsuch, disagreed with the decision. But apparently even he cannot read the plain language of the Contracts Clause.
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.
Justice Gorsuch’s issue with the opinion is not that Minnesota law substantially changes and therefore impairs the contract for life insurance, but that it does so retroactively, or ex post facto. While documenting the fallacy that the state must step in because during a divorce those involved may be inattentive to the beneficiaries of their life insurance policies while at the same time expecting them to be attentive to the change made by state law, he goes on to state that the problem isn’t with the change in the contract but the fact that ‘Minnesota wants to apply its law retroactively to policies purchased before the statute’s adoption.” “Everyone agrees that the law is valid when applied prospectively to policies purchased after the statute’s enactment.” Mr. Gorsuch, everyone in the legal system may agree, but the Constitution does not! It clearly says that no state may pass a law that impairs the obligation of contacts. It does not say states cannot impair contracts except for major life changes, because the state presumes to know how people should change those contracts or even because nine people in black robes say so. By your own words you admit that this law rewrites “the most important term of a life insurance policy—who gets paid”. How can that not be an impairment of the contract? Also, if the court had decided the way you prefer, they would have condoned the blatant violation of the Constitution, destroyed the sanctity of contracts, and secured the supplanting of a person’s wishes with that of the state in legal precedent!
While this is yet another example of why the courts were never intended to be the arbiter of what is Constitutional, the real damage this decision does is to effectively nullify the Contracts Clause of the Constitution. By allowing states to write laws that change contacts between other parties, contract law in the U.S. becomes a plaything of courts and legislatures. From now on you cannot rely on the words in the contact you signed to be legally binding. All it takes is a state legislature to write a law that changes the contract and those carefully crafted words are meaningless. And the supreme Court, rather than protecting your right to have secure contracts, simply rubber stamps the states’ desire to tell you what you should do with your contract.
Worse than the change to contract law is the damage this opinion does to the republic itself. If the court, through the issuing of an opinion, can effectively change the meaning of the plain language of the Constitution, we no longer live in a republic, but a banana republic, ruled by an oligarchy of nine justices in Washington.
What can we do to reverse this travesty of justice and attack on our Constitution? First, contact your state legislators; I understand that many states have similar laws. Show them how this is a blatant violation of the U.S. Constitution. If they refuse to act, tell them you will work to remove them since the oath they took upon taking office included supporting and defending the Constitutions of the United States and their state. If they will not uphold their oath they are unfit to serve in the state legislature. Make sure your state legislators know that you will not stand for them supporting such an illegal and unconstitutional law and will work against them in their next campaign and in support of someone who takes their oath seriously. Most drastically, we should all contact our representatives in Congress. While they will be very much opposed to doing so, they should file articles of impeachment against those who decided in favor of Minnesota law over the U.S. Constitution. Subverting the Constitution along with the prescribed method of changing it is clearly not “good behavior” and therefore grounds for removal from office.
The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour
United States Constitution, Article III, Section 1
While those in Congress are loath to do so, we must demand that they fulfill all of their duties, including the ones to keep the executive and judicial branches in check. If our elected representatives will not uphold their duties to keep the other branches accountable, then it is high time they be removed, preferably at the ballot box.
Few seem to have recognized this infringement on their rights, and even fewer seem to know how to defend them. The supreme Court is not our Supreme Ruler. No matter what they say, it is the Constitution that is the supreme law of the land, not the supreme Court! This is another example of why we MUST return the Constitution to We the People if we are to live free.
