Ministers & Missionaries Benefit Bd. v. Snow
| Decision Date | 15 December 2015 |
| Docket Number | No. 131,131 |
| Citation | 45 N.E.3d 917,25 N.Y.S.3d 21,2015 N.Y. Slip Op. 09186,26 N.Y.3d 466 |
| Parties | The MINISTERS AND MISSIONARIES BENEFIT BOARD, Interpleader Plaintiff, v. Leon SNOW et al., Appellants. Estate of Clark Flesher et al., Respondents. |
| Court | New York Court of Appeals Court of Appeals |
Preston & Wilkins, LLC, Levittown (Jesse T. Wilkins and Gregory R. Preston of counsel), for appellants.
Carlton Fields Jorden Burt, P.A., New York City (Brian Rosner and Natalie A. Napierala of counsel), for respondents.
STEIN
, J.
, cert. denied 569 U.S. ––––, 133 S.Ct. 2396, 185 L.Ed.2d 1105 (2013), this Court held that, where parties include a New York choice-of-law clause in a contract, such a provision demonstrates the parties' intent that courts not conduct a conflict-of-laws analysis (see
id. at 312, 958 N.Y.S.2d 689, 982 N.E.2d 609 ). We now extend that holding to contracts that do not fall under General Obligations Law § 5–1401, and clarify that this rule obviates the application of both common-law conflict-of-laws principles and statutory choice-of-law directives, unless the parties expressly indicate otherwise.
Plaintiff Ministers and Missionaries Benefit Board (MMBB) is a New York not-for-profit corporation, based in New York County, that administers a retirement plan and a death benefit plan for certain ministers and missionaries. Decedent Clark Flesher was a minister enrolled in both plans. He named his then-wife, defendant LeAnn Snow, as his primary beneficiary and her father, defendant Leon Snow, as the contingent beneficiary. Both plans state that they “shall be governed by and construed in accordance with the laws of the State of New York.”
Flesher and LeAnn Snow divorced in 2008. Flesher moved to Colorado in 2010 and died there in 2011. A Colorado court has apparently admitted his will to probate, naming his sister, defendant
Michele Arnoldy, as personal representative of the estate. Despite the divorce, Flesher never changed his beneficiary designations under the MMBB plans. Because MMBB was unsure to whom the plan benefits should be paid after Flesher's death, it commenced a federal interpleader action against Flesher's Estate, Arnoldy (individually and as personal representative of the Estate), LeAnn Snow and Leon Snow.1
The United States District Court for the Southern District of New York (Griesa, J.) allowed MMBB to post a bond and be released from the case, with the obligation to pay the benefits as the court directs. Arnoldy and the Estate moved for summary judgment, and the Snows cross-moved for summary judgment. The District Court (Forrest, J.) denied the Snows' motion, granted the motion of Arnoldy and the Estate and directed MMBB to pay the disputed funds to Arnoldy, as representative of the Estate (2014 WL 1116846, 2014 U.S. Dist. LEXIS 37822
[S.D.N.Y., Mar. 18, 2014, No. 11 Civ. 9495(KBF) ] ). In making that determination, the District Court reasoned that: (1) the parties agreed that the relevant choice-of-law rules are the rules of New York, as the forum state; (2) the disputed funds constitute personal property; (3) under EPTL 3–5.1(b)(2), revocation of a disposition of personal property, where such property is not disposed of by a will, is determined by the law of the state where the decedent was domiciled at the time of death; (4) Flesher was domiciled in Colorado at the time of his death, so Colorado law applied; and (5) Colorado's revocation law terminated any claims to the plans by both Snows (i.e., the former spouse and her relatives) when Flesher and LeAnn Snow were divorced.
On the Snows' appeal, the Second Circuit Court of Appeals determined that there were important and unanswered questions of New York law and, therefore, certified two questions to this Court before deciding the appeal (780 F.3d 150 [2d Cir.2015]
). Those questions are:
“(1) Whether a governing-law provision that states that the contract will be governed by and construed in accordance with the laws of the State of New York, in a contract not consummated pursuant to New York General Obligations Law section 5–1401
, requires the application of New York Estates, Powers & Trusts Law section 3–5.1(b)(2), a New York statute that may, in turn, require application of the law of another state?
“(2) If so, whether a person's entitlement to proceeds under a death benefit or retirement plan, paid upon the death of the person making the designation, constitutes ‘personal property ... not disposed of by will’ within the meaning of New York Estates, Powers & Trusts Law section 3–5.1(b)(2)
?” (780 F.3d at 155 ).
This Court accepted the certified questions (25 N.Y.3d 935, 5 N.Y.S.3d 365, 28 N.E.3d 545 [2015]
). We now answer the first question in the negative and, accordingly, have no occasion to reach the second question.
The retirement and death benefit plans here each state that they “shall be governed by and construed in accordance with the laws of the State of New York.” The first certified question essentially asks us how to interpret the phrase “laws of ... New York” in those contractual provisions.
We begin with the basic premises that courts will generally enforce choice-of-law clauses and that contracts should be interpreted so as to effectuate the parties' intent (see Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624, 629, 825 N.Y.S.2d 692, 859 N.E.2d 498 [2006]
). In a case based on New York law, the United States Supreme Court held that a choice-of-law provision in a contract “may reasonably be read as merely a substitute for the conflict-of-laws analysis that otherwise would determine what law to apply to disputes arising out of the contractual relationship” (Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 59, 115 S.Ct. 1212, 131 L.Ed.2d 76 [1995] ). Thus, the parties here agree that, pursuant to the choice-of-law provisions in the MMBB plans, the contracts will be governed only by New York's substantive law, not by New York's common-law conflict-of-laws rules.
are determined by the law of the jurisdiction in which the decedent was domiciled at death” (EPTL 3–5.1[b][2]
).2 The question is whether section 3–5.1(b)(2)
should be characterized as part of New York's substantive or “local law,” which the contracting parties intended to apply, or whether it is simply a conflict-of-laws rule, which they did not intend to apply. The answer to this question is crucial here because the recipients of the MMBB plan benefits will be different depending on whether courts apply the law of New York or the law of Colorado.
The plans here fall under the definition of governing instruments (see EPTL 5–1.4[f][5]
). Thus, under New York's purely substantive law, Flesher's designation of LeAnn Snow as a beneficiary of the plans was revoked upon their divorce in 2008, while the designation of Leon Snow as contingent beneficiary remained in effect (see
Matter of Lewis, 25 N.Y.3d 456, 459, 13 N.Y.S.3d 323, 34 N.E.3d 833 [2015] ).
In contrast, the relevant Colorado statute provides that a divorce acts to revoke any dispositions or appointments by the divorced person to his or her former spouse and to relatives of the former spouse (see Colo Rev Stat § 15–11–804
[2] ). Colorado courts have confirmed that the term “governing instruments” in that state's revocation statute includes designations of beneficiaries in life insurance policies (see
In re Estate of Johnson, 304 P.3d 614, 616 [Colo.App.2012], cert. denied 2013 WL 3321113, 2013 Colo. LEXIS 457 [July 1, 2013, No. 13SC46] ). Because Leon Snow, as the father of LeAnn Snow, falls within the definition of a “[r]elative of the divorced individual's former
spouse” in relation to Flesher (Colo Rev Stat § 15–11–804
The Second Circuit concluded that this case presented a close question based, in part, on this Court's recent decision in IRB–Brasil Resseguros, S.A., 20 N.Y.3d 310, 958 N.Y.S.2d 689, 982 N.E.2d 609
. There, we decided that the need for a conflict-of-laws analysis is obviated by a contract, made pursuant to General Obligations Law § 5–1401, that contains a New York choice-of-law clause (see
id. at 312, 958 N.Y.S.2d 689, 982 N.E.2d 609 ). Section 5–1401 embodies the legislature's desire to encourage parties to choose the New York justice system to govern their contractual disputes (see
id. at 314–315, 958 N.Y.S.2d 689, 982 N.E.2d 609 ). In IRB, we concluded that, where a contract met the requirements of General Obligations Law § 5–1401 —including that the transaction exceeded $250,000 and the parties designated New York law as controlling—“New York substantive law must govern” and “[e]xpress contract language excluding New York's conflict-of-laws principles is not necessary” (id. at 315, 958 N.Y.S.2d 689, 982 N.E.2d 609 ). We reasoned that, “[t]o find ... that courts must engage in a conflict-of-laws analysis despite the parties' plainly expressed desire to apply New York law would...
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