Argument preview: Divorce, death, and preemption
on Apr 21, 2013 at 10:00 am
At Monday’s oral argument in Hillman v. Maretta, the Justices will consider whether federal law preempts state laws permitting the widow or widower of a deceased federal employee to sue that employee’s former spouse to recover life insurance proceeds. Petitioner Jacqueline Hillman – the widow of deceased federal employee Warren Hillman – argues that it does not; instead, she contends that she is entitled to sue to obtain the proceeds of her husband’s life insurance policy because the state law is at issue simply “regulates domestic relations and family matters” without doing any “major damage to a federal interest.”
Respondent Judy Maretta – Warren’s ex-wife and the designated beneficiary of his life insurance policy – counters that the state law that gives Jacqueline a cause of action against her is a “brazen attempt to circumvent federal law” and “redirect proceeds, dollar for dollar, to the State’s preferred beneficiary.” The United States agrees with her, characterizing the state law as “treat[ing] the named beneficiary as a mere conduit for transferring the insurance proceeds to someone lower down in the federal order of precedence,” creating “an intractable conflict with federal law.”
Federal employees have access to group life insurance plans that are governed by statute (FEGLIA) and administered by the government (the Office of Personnel Management). The relevant section of FEGLIA, 5 U.S.C. § 8705, provides that the proceeds of federal life insurance plans “shall be paid” according to “order of precedence.” At the top of the order are “the beneficiary or beneficiaries designated by the employee.” But “if there is no designated beneficiary,” then the “widow or widower of the employee received the proceeds, followed by the employee’s children and descendants, parents, to the administrator of the employee’s estate, and finally to whoever is entitled to receive the funds under state law.
The Commonwealth of Virginia enacted a statute, Va. Code Ann. § 10-111.1(A) (“Subsection A”), providing that in the event of a divorce, the divorced spouses cease to be the designated beneficiaries of each other’s life insurance policies, and that the deceased person’s widow or widower instead becomes entitled to any benefits. The thinking behind the statute is that people would naturally prefer that their life insurance proceeds go to their current families – and not to their ex-wives or ex-husbands – and so the state automatically revokes all life insurance designations to a spouse upon divorce. The insured person can re-designate his or her ex-spouse as a beneficiary after the divorce, but unless the insured does so, the ex is out of the picture in Virginia.
The parties agree that under the Supreme Court’s precedents, Subsection A is preempted by FEGLIA. After all, the statute essentially unwinds the federal order of precedence. Virginia’s crafty legislature also anticipated this possibility, and so it enacted Va. Code Ann. § 10-111.1(D) (“Subsection D”), which provides that “[i]f this section is preempted by federal law with respect to the payment of any death benefit, a former spouse who . . . receives the payment of any death benefit that the former spouse is not entitled to receive under this section is personally liable for the amount of the payment to the person who would have been entitled to it were this section not preempted.” Thus, if preemption causes life insurance payments to flow to an ex-spouse, the widow or widower can sue under Virginia law to get the money back. The question in this case is whether this additional provision is preempted as well.
The parties’ arguments
The parties debate whether FEGLIA expressly or impliedly preempts the Virginia statute. Hillman argues that it doesn’t. She notes that the states generally are responsible for the regulation of domestic relations, so that there is a presumption against preemption of state policies relating to families and divorce. She argues that in light of that presumption, FEGLIA is not sufficiently explicit to expressly preempt the Virginia statute, and its purposes and objectives do not clearly require that designated beneficiaries be allowed to keep life insurance payments.
Contrasting FEGLIA with the Servicemen’s Group Life Insurance Act of 1965 (“SGLIA”), Hillman argues that while SGLIA contains an express preemption provision against attachments on life insurance benefits, FEGLIA does not. This distinction, she urges, indicates that Congress did not intend for FEGLIA to have the same preemptive effect against state civil causes of action. Thus, she contends that while FEGLIA provides that funds “shall be paid” according to the order of precedence, and therefore preempts Subsection A, the statute says nothing about what will happen to the funds after they are paid, and therefore it does not preempt Subsection D.
Hillman also argues that the purposes and objectives of FEGLIA cut against preemption. She contends that FEGLIA’s order of precedence was designed to make it easy for the Office of Personnel Management, which administers the program, to pay out benefits. But, Hillman argues, Congress had no particular preference that ex-spouses receive payments; instead, it would have wanted the payments to go to the intended beneficiary, which more often than not is the widow or widower. She contrasts that with the intent behind SGLIA, which the legislative history discloses was intended to preserve servicemembers’ choice of beneficiary in order to reassure them that their families would be cared for – a promise that was important to morale.
Maretta also points to SGLIA, as well as the National Service Life Insurance Act of 1940. But rather than contrast those policies with FEGLIA, she relies heavily on the Supreme Court’s decisions — Ridgway v. Ridgway (1981) and Wissner v. Wissner (1950) – holding that orders of precedence in those insurance policies preempted state laws that are analogous to Subsection D. Maretta thus argues that FEGLIA’s order of precedence gives the federal employee the right to designate his beneficiary – and preempts any state effort to undermine that choice, whether at the time of payment or later. She reasons that even if administrative convenience could explain why Congress enacted an order of precedence, it cannot explain why Congress chose the particular order it chose in FEGLIA, which privileges designated beneficiaries above all others. She argues further that even if state and federal law permit the same result, the state cannot attempt to achieve that result by its own means, which undermine a choice authorized by the federal statute. Finally, as a backup, she makes an express preemption argument, contending that because Subsection D “relates to” group life insurance and is “inconsistent with” FEGLIA’s Master Policy contract, it is expressly preempted by another provision of FEGLIA, 8 U.S.C.§ 8709, which gives precedence to federal life insurance contracts.
The United States, appearing as an amicus because it administers the FEGLIA insurance program, agrees with Maretta. (Interestingly, this is a case in which the United States recommended that the Court grant certiorari to affirm the decision below, so as to resolve a conflict among state and federal appellate courts.) The government’s brief argues that Wissner and Ridgway, the same two decisions upon which Maretta relies, are indistinguishable because in both cases the Court held that a federal insurance policy preempted a post-distribution state law transfer. The government also agrees with Maretta’s express preemption argument.
At argument, expect Hillman to have to fight to reconcile Virginia’s statute with the Supreme Court’s holdings in Wissner and Ridgway. Essentially, she must convince the Court that in enacting FEGLIA, Congress was not interested in protecting the insured’s designation of a beneficiary – i.e., that the order of precedence is nothing more than an administrative device to spare federal plan administrators the burden of determining, under state law, whether somebody other than a designated beneficiary is the proper recipient of funds. She must do so despite the Court’s determination that other federal insurance policies provided the insured with the right to name his beneficiary, and also despite the government’s insistence that actually, the federal government does intend for named beneficiaries to receive the funds. Hillman will also likely face questioning about the motivations behind the enactment of Subsection D. By drafting a statute that seems designed to circumvent the preemptive effect of FEGLIA, Virginia has attempted to open the door to creative attempts to undermine federal policies – a prospect that might pique some members of the Court.