Ministers & Missionaries Benefit Bd. v. Snow

• Decision Date: 05 March 2015
• Docket Number: Docket No. 14–1021–cv.
• Citation: 780 F.3d 150
• Court: U.S. Court of Appeals — Second Circuit
• Parties: The MINISTERS AND MISSIONARIES BENEFIT BOARD, Interpleader–Plaintiff–Cross–Defendant–Appellee, v. Leon SNOW, LeAnn Yowell Snow, Interpleader–Defendants–Cross–Claimants–Appellants, v. The Estate of Clark Flesher, Michele Arnoldy, Individually & as Personal Representative of the Estate of Clark Flesher, Interpleader–Defendants–Appellees.

780 F.3d 150

The MINISTERS AND MISSIONARIES BENEFIT BOARD, Interpleader–Plaintiff–Cross–Defendant–Appellee,

v.Leon SNOW, LeAnn Yowell Snow, Interpleader–Defendants–Cross–Claimants–Appellants,

v.The Estate of Clark Flesher, Michele Arnoldy, Individually & as Personal Representative of the Estate of Clark Flesher, Interpleader–Defendants–Appellees.^*

Docket No. 14–1021–cv.

United States Court of Appeals, Second Circuit.

Argued: Jan. 12, 2015

Decided: March 5, 2015

Jesse T. Wilkins (Gregory R. Preston, on the brief), Preston & Wilkins, LLC, Levittown, N.Y., for Leon and LeAnn Yowell Snow.

Brian Rosner, (Natalie A. Napierala, on the brief), Carlton Fields Jorden Burt, P.A., New York, N.Y., for the Estate of Clark Flesher and Michele Arnoldy.

Before: KATZMANN, Chief Judge, KEARSE and RAGGI, Circuit Judges.

KATZMANN, Chief Judge:

This case raises important, yet unanswered, questions of New York State law. Specifically, its resolution turns on 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. For the reasons discussed below, we conclude that this is a threshold issue that is determinative, unsettled, likely to recur, and has important public policy implications. See Osterweil v. Bartlett, 706 F.3d 139, 142 (2d Cir.2013); State Farm Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500, 509 (2d Cir.2004). Accordingly, we CERTIFY two questions concerning this issue to the New York Court of Appeals. See N.Y. Comp.Codes R. & Regs. tit. 22, § 500.27(a); 2d Cir. Local R. 27.2(a).

The Snows filed a timely appeal, and we review the district court's decision de novo. Fieger v. Pitney Bowes Credit Corp., 251 F.3d 386, 393 (2d Cir.2001). Before we can consider the district court's decision to award the disputed funds to the Estate, however, we must first consider a threshold issue with which the district court did not specifically grapple: whether the contracts' governing-law provisions require the application of New York Estates, Powers & Trusts Law section 3–5.1(b)(2), a New York statute that may require application of the law of another state.

The two MMBB contracts at issue in this case each include a governing law provision stating: “The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of New York.” J.A. 101; see J.A. 95. Yet it is unclear how these provisions should be interpreted. The provisions could be read to require a court to apply both New York substantive law and New York choice-of-law principles. They could also be read to require only the application of New York substantive law. Under the first reading, implicitly adopted by the district court, the governing-law provisions in the MMBB plan contracts would have no effect on the outcome of the case. Because the case was brought in federal court in New York, New York substantive law and choice-of-law principles would apply even absent a governing law provision specifically directing the court to apply New York law. See Fieger, 251 F.3d at 393. Under the second reading, by contrast, the district court would apply only New York substantive law without reference to New York choice-of-law principles—what the Restatement (Second) of Conflict of Laws refers to as “local law,” “the body of standards, principles and rules [of a state], exclusive of its rules of Conflict of Laws.” Restatement (Second) of Conflict of Laws § 4(1) (1971) (emphasis added). There is also a third possible reading of the governing-law provisions; namely, that they preclude the application of New York common-law conflict-of-laws analysis, but not the application of a choice-of-law directive in a New York statute.

In a recent case, the New York Court of Appeals expressly approved the second reading, albeit in a statutory context not at issue in this case. See IRB–Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310, 958 N.Y.S.2d 689, 982 N.E.2d 609, 612 (2012). In that case, IRB–Brasil Resseguros, S.A. (“IRB”) purchased $14 million in notes issued by Inepar Investments, S.A. (“Inepar”), a subsidiary of a Brazilian power company. When interest payments and returns of its principal to IRB ceased, it sued Inepar in New York State court. Id., 958 N.Y.S.2d 689, 982 N.E.2d at 610. The underlying guarantee contract between the parties was consummated pursuant to New York General Obligations Law section 5–1401 (“Large Contract Statute”), a statute which expressly permits parties in contracts concerning amounts greater than $250,000 to select New York law as the governing law.² Id., 958 N.Y.S.2d 689, 982 N.E.2d at 611–12.

Because New York conflict-of-laws principles might have required the application of Brazilian rather than New York law, the New York Court of Appeals was faced with deciding “whether a conflict-of-laws analysis must be undertaken when there is an express choice of New York law in the contract pursuant to General Obligations Law § 5–1401.” Id., 958 N.Y.S.2d 689, 982 N.E.2d at 610. The Court of Appeals concluded that it was not permitted to look to Brazilian law. It reasoned, first, that “[t]he plain language of [the Large Contract Statute] dictates that New York substantive law [alone] applies.” Id., 958 N.Y.S.2d 689, 982 N.E.2d at 612. Moreover, it emphasized,

[u]nder the Restatement (Second) [of Conflict of Laws] the parties' decision to apply New York law to their contract results in the application of New York substantive law, not New York's conflicts principles.

It strains credulity that the parties would have chosen to leave the question of the applicable substantive law unanswered and would have desired a court to engage in a complicated conflict-of-laws analysis, delaying resolution of any dispute and increasing litigation expenses.

Id.

The key differences between IRB–Brasil Resseguros and this case are that (1) the MMBB contracts were not consummated pursuant to the Large Contract Statute, and (2) the MMBB contracts might implicate another New York statute, New York Estates, Powers & Trusts Law section 3–5.1(b)(2). Accordingly, in order to reach a conclusion in this case, we must first determine how the Court of Appeals would interpret governing law provisions in non-Large Contract Statute contracts, particularly in the context of New York Estates, Powers & Trusts Law section 3–5.1(b)(2). See Michalski v. Home Depot, Inc., 225 F.3d 113, 116 (2d Cir.2000) (“Absent law from a state's highest court, a federal court sitting in diversity has to predict how the state court would resolve an ambiguity in state law.”)

DISCUSSION

Under Second Circuit Local Rule 27.2, we may certify questions of New York law to the New York Court of Appeals. See N.Y. Comp.Codes R. & Regs. tit. 22, § 500.27(a) (“Whenever it appears to ... any United States Court of Appeals ... that determinative questions of New York law are involved in a case pending before that court for which no controlling precedent of the [New York] Court of Appeals exists, the court may certify the dispositive questions of law to the Court of Appeals.”) Our decision whether to certify such questions is discretionary. See 10 Ellicott Square Court Corp. v. Mountain Valley Indem. Co., 634 F.3d 112, 125 (2d Cir.2011). In this regard, our analysis is “principally guided by three factors.” Id. They are: “(1) whether the New York Court of Appeals has addressed the issue and, if not, whether the decisions of other New York courts permit us to predict how the Court of Appeals would resolve it; (2) whether the question is of importance to the state and may require value judgments and public policy choices; and (3) whether the certified question is determinative of a claim before us.” Barenboim v. Starbucks Corp., 698 F.3d 104, 109 (2d Cir.2012). Applying this rubric to the present case, we conclude that two questions warrant certification to the New York Court of Appeals.

First, the New York Court of Appeals has not expressly considered the specific questions at issue in this case.³ As we explained above, the New York Court of Appeals has considered similar questions in the context of contracts consummated pursuant to the Large Contract Statute in IRB–Brasil Resseguros. However, it is not clear from that decision whether the New York Court of Appeals would apply the same reasoning outside of that statutory context. There, the Court of Appeals relied not only on the general conflict-of-laws principles embodied in the Restatement (Second) of Conflict of Laws, but also on the specific legislative purpose of the Large Contract Statute. In addition, in that decision, the Court of Appeals rejected the application of common-law conflict-of-laws principles, whereas the contracts in this case may implicate a choice-of-law directive in a New York State statute. We therefore cannot confidently predict whether the New York Court of Appeals would apply the holding of IRB–Brasil Resseguros to the contracts at issue here. Moreover, if the New York Court of Appeals would apply the holding in IRB–Brasil Resseguros to these contracts, we are unaware of any New York Court of Appeals decision that dictates whether a person's entitlement to the proceeds of a death benefit or retirement plan constitutes “personal property ... not disposed of by will” within the meaning of New York Estates, Powers & Trusts Law § 3–5.1(b)(2). Accordingly, this factor supports the certification of these sequential questions to the New York Court of Appeals. See Osterweil, 706 F.3d at 143.

Second, these questions are of great importance to New York State contract law and implicate significant issues of public policy. Many contracts select New York law...