Resurrecting a Once Potent Clause The U.S. Supreme Court hasn't heard a contract clause case in at least a generation. Contract clause, you say? You can be forgiven if that clause, in Article I, Section 10, is not on the top of your list of most memorable constitutional clauses. The clause has "largely faded to insignificance," says
James Ely, professor emeritus at
Vanderbilt University Law School, considered an authority on the clause.
Just how much voltage remains could be revealed when the justices rule in
Sveen v. Melin to be argued Monday, March 19. The case stems from a not-so-rare fight over life insurance benefits between the designated beneficiary—the ex-spouse of the dead policyholder—and the secondary beneficiaries—the children of the policyholder's earlier marriage.
Minnesota's revocation-on-divorce law, like the laws of roughly 19 states, provides that if a person designates a spouse as the life insurance beneficiary, the designation is automatically revoked if the policyholder later gets divorced. The law assumes that a divorced policyholder does not intend an ex-spouse to remain as the beneficiary. However, the policyholder can add the ex-spouse back to the policy by contacting the insurer after the divorce.
But can that law be applied to a life insurance policy purchased before the law was enacted? The U.S. Court of Appeals for the Eighth Circuit said, no, because retroactive application violates the contract clause.
Making the
childrens' argument that the appellate court was wrong will be
Jenner & Block partner Adam Unikowsky. His opponent, representing the
ex-spouse's position, is
Jones Day partner Shay Dvoretzky.
Vanderbilt's Ely, who
filed an amicus brief supporting the ex-spouse and urging the justices to restore the original meaning—and teeth—to the contract clause, answered some general questions about the clause that we posed recently.
Why are these cases so rare in the Supreme Court?I think the Supreme Court in the 1930s and during the New Deal period tended to downplay or ignore various clauses designed to protect property owners and to facilitate the spread of the regulatory state. The contract clause was a casualty of this jurisprudential shift. In the 1970s, the Supreme Court decided a few cases that seemed to breathe life into it, using a multi-pronged test and leaving to states and state courts to figure out. The clause has only been partially recalled from limbo.Were you surprised the justices took a life insurance contract case?A number of situations are more pressing that might trigger review. There have been attempts in some states to rewrite retroactively the terms of franchise agreements; to revamp or eliminate teacher tenure, and most hot-button effort—to trim public employee benefits.This case seems to have something for justices on the left and the right: originalism, federalism and even gender discrimination. How do you see this playing out?Whether they will rule on the broader ground in my brief or a narrower ground, I don't know. I was trying to remind the court that there was a long history on the contract clause and modern history has wandered pretty far from what the framers provided.
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