Argument recap: Looking for the less wrong answer
on Apr 22, 2013 at 11:09 pm
At today’s argument in Hillman v. Maretta, the Justices disagreed with both sides’ readings of the Federal Employees Group Life Insurance Act (FEGLIA). While Justice Scalia commented that petitioner Jacqueline Hillman’s understanding of the statute’s purpose was “blown away” by its terms, Justice Alito stated that he could not see “what [other] purpose Congress could have thought this provision serves.” Amidst the sharp disagreement, however, a majority appeared to accept that respondent Judy Maretta’s interpretation of the statute was less offensive to Congress’s purposes.
As noted in our argument preview, FEGLIA provides that a deceased federal employee’s life insurance proceeds shall be paid according to an “order of precedence.” The top spot in the order belongs to the beneficiary whom the employee designates, typically in a form provided by the Office of Personnel Management. In this case, that designated beneficiary was Maretta –the ex-wife of federal employee Warren Hillman, who received approximately $125,000 when he died.
But FEGLIA is not the only law governing the payment of life insurance proceeds. Virginia also enacted a statute providing that upon divorce, any designation of a spouse as beneficiary is automatically revoked. The statute provides further that if its revocation provision is deemed preempted by federal law, then any person who would otherwise be entitled to the funds under state law may sue the ex-spouse to obtain the life insurance proceeds. Because the revocation provision has been held preempted, Hillman sued Maretta under this second section – which, the Supreme Court of Virginia held, was also preempted by FEGLIA’s order of precedence. The petition for certiorari asked the Supreme Court of the United States to revisit that determination.
Summary of the argument
At argument, the issue reduced to whether FEGLIA’s order of precedence is solely designed for the administrative convenience of federal plan administrators (in which case the state law likely would not be preempted), or instead reflects a more robust congressional agenda to ensure that the insured’s choice of beneficiary would be honored so that designated beneficiaries not only receive, but also keep, life insurance proceeds (in which case the state law almost certainly would be preempted). Because the statute does not accomplish either purpose perfectly, the advocates faced the challenge of trying to square a circle to the Justices’ satisfaction – and the Justices were not easily satisfied.
Taking the lectern to argue against preemption, Hillman’s lawyer Daniel Ruttenberg argued that “the federal interest ends once the insurance proceeds are paid out,” and that the states should be left to determine the effect of a divorce on the ultimate destination of the funds. He had barely begun when Justice Scalia asked him about a specific provision of FEGLIA, 5 U.S.C. § 8705(e), which provides that the order of precedence may be superseded by the terms of a “decree of divorce, annulment, or legal separation,” but only if that decree “is received, before the date of the covered employee’s death, by the employing agency.” Justice Scalia inquired why, if Congress was solely concerned with the convenience of federal administrators, it would require them “to have to look to see if there’s a divorce decree on the books, blah, blah, blah, blah, blah.” According to Justice Scalia, “[t]hat obviously shows that Congress . . . not only had a concern about efficiency of payment, but also had a concern about who gets the payment.” The Justice went so far as to state that the presence of the divorce decree provision “blows away” Ruttenberg’s explanation of the statutory purpose.
Justice Ginsburg echoed Justice Scalia’s skepticism, arguing that under Ruttenberg’s interpretation, “this specific exception, rightly cabined, is generalized so that in all cases, the second wife will prevail over the first.” Justice Ginsburg also raised the Court’s prior holdings in Wissner v. Wissner (1950) and Ridgway v. Ridgway (1981), both of which held that the orders of precedence in other federal insurance statutes preempted state laws that resemble Virginia’s. Later in the argument, she offered additional justifications for the order of precedence, including not only honoring the insured’s choice of a beneficiary, but also the need to have a uniform regime for federal employees who may move from state to state.
As the back and forth continued, Ruttenberg stated the rule he wanted the Court to adopt: “[A] bright-line rule that said State laws that interfere with the administration of a plan are preempted, but after that, after the money has been paid out, laws that affect the benefits are not preempted.” Justice Kennedy interjected: “In other words, they’re preempted, but the whole purpose of preemption can be thwarted.” Justice Sotomayor eventually joined the fray as well, focusing on FEGLIA’s explicit limitations on divorce decrees and asking why, if Congress had intended for the states to have plenary control of funds after they were paid, it didn’t just say so.
Ruttenberg’s only friend on the bench was Justice Alito, who helpfully put the shoe on the other foot for him by asking why, if Congress was truly concerned with effectuating the will of beneficiaries, it forced those beneficiaries to channel their intentions into a designation form as opposed to permitting them to simply execute a will under state law. But the respite was short, as Justices Ginsburg and Scalia resumed their grilling until Ruttenberg sat down.
When Steffen Johnson took the lectern to argue in favor of preemption, he was greeted by the heretofore silent Chief Justice Roberts, who asked why, if life insurance proceeds could be diverted into a bankruptcy estate, they couldn’t be diverted to a widow under state law. Johnson responded that divorce decrees were different because they were expressly dealt with in FEGLIA itself, while bankruptcy was not.
Justice Alito then reprised his question to Ruttenberg, asking why a designation on a beneficiary form should supersede a clear last will if the purpose of the statute was to enforce the insured’s intent. Johnson responded that FEGLIA expressly accounts for wills, providing that if a will is signed, witnessed, and received before death in the employing office, then the designation in the will controls in the same way that the designation in a FEGLIA form controls. When Justice Alito pressed him as to why Congress would have wanted to restrict the forms of acceptable expressions of intent, Johnson responded that Congress made a policy decision about the best way to assess the beneficiary’s intent that the Court should not second-guess.
Justice Breyer sprang to Johnson’s aid, pointing out that while in a pristine hypothetical, a will might more accurately reflect the insured’s intent, opening the door to such inquiries would result in thorny administrative problems, including unclear wills, so perhaps Congress’s choice to rely only on forms that met certain formalities made sense. Justice Breyer would later suggest a narrow ground for affirming: that the Virginia statute attempts to “run[] around the earlier cases” in an effort to circumvent preemption doctrine in an impermissible manner. Johnson readily accepted that as “a short route to affirmance.” He then segued back to the Court’s prior holding in Wissner, arguing that the case is indistinguishable.
At this point, Justice Kagan casually floated the idea that perhaps Wissner had been wrongly decided because states are better able to determine an insured’s intent. Johnson began to respond that the case had been decided before FEGLIA was enacted, and Congress had presumably relied on it in drafting FEGLIA itself. Before he could complete his thought, Justice Scalia offered an answer of his own: that if Congress and a state government have different views on the best way to discern an insured’s intent, then the federal view must prevail under the Supremacy Clause. At that point, the questioning became more sporadic, and Johnson took a few moments before sitting down to address some arguments from the other side.
Assistant to the Solicitor General Elaine Goldenberg then took the lectern to argue in favor of preemption for the United States. The Chief Justice and Justice Alito questioned her along substantially the same lines as they had Johnson. She fleshed out the responses to these questions, pointing out to the Chief Justice that even if funds are diverted into a bankruptcy estate, they still inure to the benefit of the beneficiary, because they are used to discharge his or her obligations. In response to Justice Alito’s question, she argued that because the federal rules are so clear, the federal designation of a beneficiary should be presumed to be the best indication of the insured’s intent. She also made the point that whatever the flaws of relying on FEGLIA designation forms to determine an insured’s intent, a contrary approach authorizing a free-ranging inquiry into the insured’s intent was surely a worse system, as it would provide less clarity and predictability to both insureds and beneficiaries.
Ruttenberg’s rebuttal was brief and uneventful. He attempted to cover quite a few arguments in his three minutes, and the Justices permitted him to clip through them without questions.
Predictions
Affirmance is the most likely outcome. Both sides faced tough questions, but Maretta has the advantage in this case because Hillman must prove that FEGLIA’s order of precedence serves only one purpose: administrative convenience. If it also serves another purpose – however imperfectly – such that transferring the proceeds away from the designated beneficiary would conflict with federal law, then Maretta wins. While Justice Alito’s pointed questions certainly revealed that FEGLIA might not effectively honor an insured’s intentions in all cases, they do not show that Congress was not attempting to do so. From the tenor of the argument, it appears unlikely that five Justices are willing to draw that inference for Hillman. Moreover, although the argument was not explored in detail, there is something to the point made by Justice Ginsburg, and echoed by Ms. Goldenberg, that Congress would have wished to spare federal employees the burden of understanding the interactions between state and federal law on their insurance policies, and would have wanted the employees to instead rely solely on federal forms and guidance.
Piecing the argument together from the questions, Justice Alito appears inclined to reverse, and the Chief Justice may be leaning in the same direction. On the other hand, Justices Scalia and Ginsburg will vote to affirm. Justices Kennedy and Breyer likewise appear persuaded that, at a minimum, Virginia cannot enact a statute for the purpose of circumventing the preemptive effect of a federal law, and will likely also vote to affirm. The other Justices were quieter, but to the extent they offered any signals, they suggested affirmance: Justice Sotomayor expressed skepticism regarding Hillman’s view of the statute; and Justice Kagan’s question may signal that even though she believes that Wissner and Ridgway may not have been correctly decided, those cases dictate affirmance. Since nobody has suggested overruling those cases, she may feel compelled to side with Maretta.
