Whirlpool Corp. v. Ritter

• Decision Date: 10 April 1991
• Docket Number: No. 90-1998,90-1998
• Citation: 929 F.2d 1318
• Parties: , 13 Employee Benefits Ca 2263 WHIRLPOOL CORPORATION and Aetna Life Insurance Co., Appellees, v. Darlene RITTER, Naomi Ritter, Jamie Ritter, Eric Ritter, and Joshua Ritter, Appellants, Diana Kay Shaw Ritter, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1318

929 F.2d 1318

59 USLW 2626, 13 Employee Benefits Ca 2263

WHIRLPOOL CORPORATION and Aetna Life Insurance Co., Appellees, v. Darlene RITTER, Naomi Ritter, Jamie Ritter, Eric Ritter, and Joshua Ritter, Appellants Diana Kay Shaw Ritter, Appellee.

No. 90-1998.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 9, 1991.

Decided April 10, 1991.

Robert S. Blatt, Fort Smith, Ark., for appellants.

Ronald H. Lawson, Spiro, Okl., for appellees.

Before JOHN R. GIBSON and BOWMAN, Circuit Judges, and FLOYD R. GIBSON, Senior Circuit Judge.

FLOYD R. GIBSON, Senior Circuit Judge.

Darlene Ritter and her four children appeal the district court's determination that funds interpleaded by Whirlpool Corporation ("Whirlpool") and Aetna Life Insurance Company ("Aetna") should be paid to Diana Ritter. For the reasons detailed below, we reverse the district court's decision and remand for further proceedings.

I. BACKGROUND

James and Darlene Ritter were married on April 2, 1972, and lived in Leflore County, Oklahoma. James was employed by Whirlpool in Fort Smith, Arkansas. On September 23, 1985, James enrolled in a group life insurance plan with Aetna Life Insurance Company ("Aetna") offered through Whirlpool. James designated Darlene as his beneficiary and did not designate a contingent beneficiary. In addition, his qualifying survivors would be entitled to certain income benefits ¹ payable by Whirlpool in the event of James' death.

In 1987, the Oklahoma legislature passed a statute providing that if a "party to [a] contract with the power to designate the beneficiary of any death benefit dies after being divorced from the beneficiary named to receive such death benefit in the contract, all provisions in such contract in favor of the decedent's former spouse are thereby revoked." Okla.Stat. tit. 15, Sec. 178(A) (Supp.1987). The statute further provides that "[i]n the event of either divorce or annulment, the decedent's former spouse shall be treated for all purposes under the contract as having predeceased the decedent." Id. Contracts covered by this provision include "life insurance contracts, annuities, retirement arrangements, compensation agreements and other contracts designating a beneficiary of any right, property or money in the form of a death benefit," id., and the statue purports to apply to all such contracts of those persons "dying on or after November 1, 1987." Id. at Sec. 178(D). ²

On April 7, 1989, James and Darlene got divorced. The decree was entered in the District Court of Leflore County, and Darlene retained custody of the couple's four children. A clause in the decree enjoined James and Darlene "from marrying any other parties for a period of six months" after the decree was entered. Appellant's Appendix at 34. On April 28, 1989, James married Diana Kay Shaw in Crawford County, Arkansas. Diana had been divorced in Oklahoma on February 27, 1989; her divorce decree also forbade her from marrying any third party within six months of the decree. Id. at 56.

On July 9, 1989, James died of a gunshot wound to the head. The death certificate indicates that James was "shot by suspect," but the face of the certificate does not identify the suspect; however, it has been alleged that Darlene was the responsible party. See Whirlpool Corp. v. Ritter, No. 89-2233, slip op. at 16 (W.D.Ark. May 10, 1990); Respondent's Brief at 16-18.

Whirlpool and Aetna filed a diversity action in federal district court in Arkansas in the nature of an interpleader and paid the life insurance proceeds and other death benefits to the clerk of the district court. The district court determined that Arkansas' choice of law rule required that Oklahoma's recently-enacted statute be applied. The court further found that the statute applied to James' life insurance contract and it therefore prevented Darlene from receiving the money. The district court also determined that the marriage between James and Diana was not void under Oklahoma law; thus, as James' lawful wife, she was entitled to the interpleaded funds. Because of these determinations, the district court did not make a finding regarding Darlene's involvement in James' death. Darlene appeals, raising a variety of arguments at every stage of the district court's analysis. Diana, in defending the district court's judgment, offers a variety of alternate theories in support of its decision. Only those arguments necessary to our decision are addressed below.

II. ANALYSIS

A. Arkansas' Choice of Law Rule Applies

Darlene contends that because the plaintiffs in this case are merely stakeholders and do not seek an interest in that stake, and because the claimants are all from Oklahoma, Oklahoma's choice of law rule should be applied. We disagree.

Whirlpool and Aetna, in pleading their case in district court, contended that federal jurisdiction existed because the plaintiffs and defendants were citizens of diverse states and more than $50,000 was in controversy. Appellant's Appendix at 4. This pleading thus invoked jurisdiction pursuant to 28 U.S.C. Sec. 1332 (1988) (general diversity of citizenship). Federal district courts must apply the choice of law rules of the state in which they sit when jurisdiction is based on diversity of citizenship. Klaxon Co. v. Stentor Elec. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941). Even if this suit had been filed pursuant to 28 U.S.C. Sec. 1335 (1988) (interpleader jurisdiction), ³ Arkansas' choice of law rules would be applied because the federal interpleader statute is merely a special brand of diversity jurisdiction. Griffin v. McCoach, 313 U.S. 498, 503, 61 S.Ct. 1023, 1025-26, 85 L.Ed. 1481 (1941) (applying Klaxon to suits brought under the federal interpleader statute); see also Williams v. McFerrin, 242 F.2d 53, 55 (5th Cir.1957). Though the Supreme Court has not decided a case presenting the precise procedural posture present in this case, we believe that the same outcome must attain in order to ensure that "the accident of diversity of citizenship [does not] constantly disturb equal administration of justice in coordinate state and federal courts sitting side by side." Klaxon, 313 U.S. at 496, 61 S.Ct. at 1021. No court has suggested that the selection of a choice of law rule in an interpleader action should differ depending upon whether the stakeholder asserts an interest in the stake, and we conclude that to so hold would violate the teachings of Klaxon and Griffin.

B. Arkansas' Choice of Law Rule Dictates that Oklahoma Law be Applied

The appellants, relying on Wallis v. Mrs. Smith's Pie Co., 261 Ark. 622, 550 S.W.2d 453 (1977), contend that Arkansas utilizes Professor Leflar's five choice-influencing factors as its choice of law rule. We do not believe that Wallis applies in actions of a contractual nature. Wallis involved an action sounding in tort, not in contract. Furthermore, on several occasions the Arkansas Supreme Court has discussed choice of law issues in actions ex contractu and has not relied on Wallis in making these decisions. E.g., Tri-State Equip. Co. v. Tedder, 272 Ark. 408, 614 S.W.2d 938 (1981); Standard Leasing Corp v. Schmidt Aviation, 264 Ark. 851, 576 S.W.2d 181 (1979). Had the Arkansas Supreme Court wished to replace the traditional choice of law rules in contract actions with Professor Leflar's test, we would expect it to have done so explicitly as it did for tort actions in Wallis.

In actions ex contractu, Arkansas courts traditionally considered three different bases for making choice of law determinations: "the law of the state in which the contract was made; the law of the state where the contract is performed; and the law of the state which the parties intend to govern the contract, provided that state has a substantial connection with the contract." Tiffany Indus. v. Commercial Grain Bin Co., 714 F.2d 799, 801 (8th Cir.1983) (per curiam) (citing Cooper v. Cherokee Village Dev. Co., 236 Ark. 37, 43, 364 S.W.2d 158, 161 (1963)). More recently, however, Arkansas courts have begun applying the "significant contacts" test. Id. (citing Standard Leasing, 264 Ark. at 855-56, 576 S.W.2d at 184); Bell v. Kansas City Fire & Marine Ins. Co., 616 F.Supp. 1305, 1307 (W.D.Ark.1985) (citations omitted). This test requires an examination of "the nature and quantity of each state's 'contacts' with the transaction at issue." Snow v. Admiral Ins. Co., 612 F.Supp. 206, 209 (W.D.Ark.1985).

The district court properly determined that Oklahoma has the more significant contacts with the substance of this case. Arkansas' primary contacts are that James Ritter worked in Arkansas and the contract was issued pursuant to his employment. On the other hand, James and all the claimants lived in Oklahoma during the time period relevant to this case, and all of the claimants continue to live in Oklahoma. Oklahoma's contacts thus appear to be at least as numerous as Arkansas', and are certainly qualitatively superior to Arkansas' in light of the overriding issue in this case; that is, which of these competing Oklahoma citizens is to receive the money at issue? We thus agree with the district court's conclusion that Oklahoma law will govern this case. ⁴

C. Constitutionality of Applying Oklahoma's Statute to Insurance Contracts Entered Before the Statute was Effective

Darlene contends that the application of the statute to pre-existing contracts impairs obligations of contracts in violation of the Constitution. See U.S. Const. art I, Sec. 10, cl. 1. We agree that such retrospective application is unconstitutional.

Our analysis under the contract clause must begin by ascertaining whether a contractual obligation has been substantially impaired. Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S.Ct. 2716, 2722, 57 L.Ed.2d 727 (1978). "Minimal alteration of contractual obligations may end the inquiry at its first stage. Severe impairment, on the other hand, will push the inquiry to a...