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John H. Langbein, Destructive Federal Preemption of State Wealth Transfer Law in Beneficiary Designation Cases: Hillman Doubles Down on Egelhoff, Vand. L. Rev. (forthcoming, 2014), available at SSRN.
Nearly twenty-five years ago, Professor John Langbein published an article with the arresting title The Supreme Court Flunks Trusts. The article critiqued the U.S. Supreme Court’s decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), a decision which, as Professor Langbein explained, “rest[ed] on an elementary error in trust law” (P. 208) producing “a nonsense reading of ERISA” (P. 209). The article’s reasoning was compelling, and particularly devastating was the article’s conclusion (PP. 228-9):
. . .Bruch is such a crude piece of work that one may well question whether it had the full attention of the Court. I do not believe that [the justices] would have uttered such doctrinal hash if they had been seriously engaged in the enterprise. . .
I understand why a Court wrestling with the grandest issues of public law may feel that its mission is distant from ERISA. The Court may increasingly view itself as having become a supreme constitutional court, resembling the specialized constitutional courts on the Continent. If so, the time may have come to recognize a corollary. If the Court is bored with the detail of supervising complex bodies of statutory law, thought should be given to having that job done by a court that would take it seriously. . .
In 2013, the Supreme Court flunked again, this time with the laws of succession and restitution. The case was Hillman v. Maretta, 133 S.Ct. 1943 (2013). Professor Langbein has again penned a valuable and withering critique. It is a must-read.
In order to understand Hillman and its flaws, a bit of doctrinal background is needed.
State probate codes have long contained a default rule of revocation on divorce: if a will is silent on the matter, a later divorce revokes a pre-divorce devise to the testator’s (now ex-) spouse. Imagine the following scenario: Harry and Wilma are spouses; while married, Harry executes a will benefiting Wilma; later, Harry and Wilma divorce; later still, Harry dies, having failed to update his will. The revocation-on-divorce rule in the state’s probate code revokes Harry’s devise to Wilma. The rationale for the revocation-on-divorce rule is straightforward: to effectuate Harry’s presumed intention.
The Uniform Probate Code, and the statutes of several states, extend the revocation-on-divorce rule of probate law into the realm of nonprobate transfers—transfers that occur, for example, through beneficiary designations of life insurance proceeds or the proceeds of pension plan accounts. The rationale for extending the revocation-on-divorce rule to nonprobate transfers is straightforward: these mechanisms of wealth transfer are functional substitutes for a will and should be governed by the same substantive rules.
Enter federal preemption. Section 514(a) of ERISA (the Employee Retirement Income Security Act of 1974) provides that the provisions of Titles I and IV of ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any [ERISA-governed] employee benefit plan.” 29 U.S.C. §1144(a).
In Egelholff v. Egelhoff, 532 U.S. 141 (2001), the U.S. Supreme Court was faced with a typical revocation-on-divorce scenario. David Egelhoff designated his wife, Donna, as the beneficiary of his pension benefits and life insurance proceeds. David and Donna later divorced. Two months after the divorce, David died in a car accident, not having changed his beneficiary designations. David’s children from a prior marriage argued that the State of Washington’s revocation-on-divorce statute (which, like Uniform Probate Code §2-804, extends the revocation-on-divorce rule to nonprobate mechanisms) revoked the designations benefiting Donna. A divided U.S. Supreme Court disagreed, holding that the state statute was preempted because the life insurance policy and pension plan were ERISA-governed. The Court supported its decision by pointing to the rationales for ERISA preemption, especially the desire for uniformity and ease of plan administration. But the effect of the decision—that the ex-spouse was entitled to the proceeds—was directly contrary to David’s likely intention. See, e.g., Thomas P. Gallanis, ERISA and the Law of Succession, 65 Ohio St. L.J. 185 (2004).
In response to the danger of federal preemption of state wealth transfer law, the Uniform Law Commission inserted the following provision into the Uniform Probate Code’s revocation-on-divorce statute (and into other UPC provisions that might be the subject of preemption):
If this section or any part of this section is preempted by federal law with respect to a payment, an item of property, or any other benefit covered by this section, a former spouse, relative of the former spouse, or any other person who, not for value, received a payment, item of property, or any other benefit to which that person is not entitled under this section is obligated to return that payment, item of property, or benefit, or is personally liable for the amount of the payment or the value of the item of property or benefit, to the person who would have been entitled to it were this section or part of this section not preempted.
Uniform Probate Code §2-804(h)(2). This provision imposes a post-distribution constructive trust for the purpose of remedying unjust enrichment. As the Official Comment to subsection (h)(2) explains: “This provision respects ERISA’s concern that federal law govern the administration of the plan, while still preventing unjust enrichment that would result if an unintended beneficiary were to receive the pension benefits. Federal law has no interest in working a broader disruption of state probate and nonprobate transfer law than is required in the interest of smooth administration of pension and employee benefit plans.”
We now come to Hillman, which was another standard revocation-on-divorce case. Warren Hillman named his wife, Judy, as the beneficiary of a life insurance policy governed by FEGLIA (the Federal Employees’ Group Life Insurance Act of 1954), which has a preemption provision similar to ERISA’s. The couple later divorced; Warren married Jacqueline; then Warren died without having revised his beneficiary designation. The plan administrator paid the proceeds to Judy as the named beneficiary. Jacqueline agreed that the state’s revocation-on-divorce rule was preempted but sued Judy for the proceeds under the state’s version of subsection (h)(2), the statutory constructive-trust remedy. In Hillman, the Court regrettably decided 8-0 that the statutory constructive-trust remedy was also preempted. Almost certainly, this result frustrated the donor’s intention regarding succession to his property and unjustly enriched his former spouse.
In January 2014, the Uniform Law Commission revised the Official Comment to Uniform Probate Code §2-804 (the revocation-on-divorce provision) in response to Hillman. Here is the relevant excerpt from the new Official Comment, which draws on Professor Langbein’s article:
The Court’s decision in Hillman has many unfortunate consequences. First, the decision frustrates the dominant purpose of wealth transfer law, which is to implement the transferor’s intention. The result in Hillman, that the decedent’s ex-spouse remained entitled to the proceeds of the decedent’s life insurance policy purchased through a program established by FEGLIA, frustrates the decedent’s intention. Second, the Hillman decision ignores the decades-long trend of unifying the law governing probate and nonprobate transfers. The revocation-on-divorce rule has long been a part of probate law (see, e.g., pre-1990 Section 2-508). In 1990, this section extended the rule of revocation on divorce to nonprobate transfers. Third, the decision in Hillman fosters a division between state- and federally-regulated nonprobate mechanisms. If the decedent in Hillman had purchased a life insurance policy individually, rather than through the FEGLIA program, the policy would have been governed by the Virginia counterpart of this section.
Having previously flunked trusts in Bruch, the Court has flunked succession and restitution in Hillman. Professor Langbein’s article is well worth reading, and I recommend it highly. I also highly recommend another article to be published in the same Vanderbilt symposium: Lawrence W. Waggoner, The Creeping Federalization of Wealth-Transfer Law. Professor Waggoner’s article examines multiple areas in which federal law interacts with state wealth-transfer law, including revocation-on-divorce, the elective share, the validity of beneficiary designations, perpetual trusts, and Social Security survivor benefits. Professor Waggoner’s article is available on SSRN, abstract no. 2355314.
Sometimes we need to restore a blog from backups. Backups of the HTML code are emailed to storage at post.law.miami.edu manged by UM; consult the sysop for information on how to get these and how best to restore them. The steps for restoring backups of the database that has all the postings and comments are a little different depending on whether the blog being restored is the front page or one of the sections.
The following steps apply in either case: Find the backup you want: Backups of the SQL database that has all the text of all the jotwell posts are emailed weekly to editor@jotwell.com and stored under the “backups” tag. Clicking on “backups” in the left margin of gmail will show you a long list of backups.
(Note: before doing a restore, it’s probably smart to download a backup of the damaged database in case the restore turns out worse than what you wanted to replace. The easiest way to do a snapshot database backukp is to go to the dashboard of the blog, click Tools/Backup, and then create and download one.)
Pick the section and date you want, click on it, download the attachment.
Next, using an SFTP program such as WinSCP upload the file to the top-level directory of the blog you wish to restore (i.e. /home/jot_main/). Do not upload it to the top-level directory of the blog (ie. /home/jot_main/jowtell.com) because it’s possible someone might be able to see it there.
(Note that this and all other necessary passwords are found in the crown jewels file linked to from Froomkin’s office desktop. The file has a password you can get from Caroline Bradley or from Froomkin’s secretary.)
Then using a different program such as PUTTY, open a shell session on the blog you want to restore. find the file you uploaded and confirm its name ends in sql.gz
Unzip the uploaded file by navigating to the right directory then typing
gunzip (filename)
This should produce a file with the same name but without the .gz at the end (it should end in .sql).
The next step will be irreversible unless you have made a backup of the existing database (see above), as it will write over it, so be sure to have made that extra backup if possible. Type the following:
mysql -u {database username} -p –default-character-set=utf8 -h {database host} {database name} < {file you uploaded ending in .sql}
The names you substitute in for the items in {} (and don't use the brackets when you actually type this!) can be found either in the passwords spreadsheet, or by looking at the wp-config file for that blog.
You will be prompted for the DATABASE password, so have it ready
Restore from backup can take a few moments, so don't panic At this point matters diverge depending on whether it's the main section or subject section. For a subject section, the only way to re-create any postings that are not in the backup is to re-enter them based on the last version saved in the dropbox. Please check carefully for errors, especially in the citation block, as those tend to be caught late in the production cycle. For the main section, if the backup is less than two months old, it should be possible to restore all the new posts by going from the main dashboard to Syndication/Syndicated sites then updating all the syndicated sites at once. This can take a while. Also be sure to empty your browser's cache before checking if it worked. Even if the backup is older than two months, it's worth doing this to restore the most recent postings. After that it either has to be done manually, or there may be some way to get the RSS feeds for the sections to temporarily feed more posts
I recently installed the WordPress PDF Templates plugin on the family of blogs at *.jotwell.com and it seems to work very well. But what I really need is slightly different.
The plugin prodcus a pdf at a predictable URL on the user’s demand. I’d like a way to have a static (and cacheable) pdf produced at a predictable URL (which need not be that of the post) either at the time the post is created or as a result of a cron job. The reason I need this — which unlikely to be unique to my situation — is that some scholarly indexing services for journals require that material be sent to them either as pdfs or as links to pdfs and I wish to automate this procedure.
In my case the matter is further complicated by that fact that I wish to aggregate the outpout of a large number of blogs onto one list that I would then forward to the indexing service because my journal is organized in sections each of which is its own blog. If the files were being output to a predictable directory, however, it would not be hard for me to pull the names and assemble the list.
I would be very grateful for any advice you could offer. Thank you.
To help test the feedburner plugin
Equality tie test
Personal privacy in developed countries is disappearing faster than the polar ice caps. The rapid growth in the number and breadth of databases, the continuing drop in the costs of information processing, the spread of cheap sensors and of self-identification practices, all have combined to make this the era of Big Data. Much like global warming, drift-net data collection and collation creates wide-spread harms substantially caused by actions not visible to most of those affected. Market failures, information asymmetries, and collective action problems characterize many aspects of the privacy problem.
Current US regulatory structures are not just unprepared for this data collection deluge, but almost totally incapable of responding to it because they tend to focus on data sharing rather than data collection and because US law currently has relatively few privacy-protecting rules. Although courts have found a limited right to privacy in the Constitution, that right finds most of its expression in the context of bodily integrity, and the traction in the information privacy arena is speculative and limited at best. Some members of the Supreme Court have signaled an interest in an evolution of privacy law, but if the law works at its usual pace those developments are still far in the future — if they ever come at all. Tort law has little to offer, as the classic privacy torts are somewhat limited and generally do not apply to the major data collection efforts that occur in (or through) public spaces. Nor do privacy torts have much traction against the often-unseen consequences of contractual agreements, most notably those relating to cell phones and internet-based technologies. Both Contract and Property-rights based approaches have to date yielded little due to a combination of factors ranging from transactions costs to the bounded rationality of consumers to problems inherent in domains where who owns what is at best contested. The fact is, it is increasingly difficult to defend one’s privacy in industrialized countries: sensor technologies and data aggregation technology are winning an arms race against privacy enhancing technologies, an arms race that most consumers are only dimly aware they are involved in.
Perhaps Herbert Wechsler needs no introduction, no expression of appreciation. He did, after all, leave an indelible mark on three bodies of law: criminal law, constitutional law, and the law of federal jurisdiction. He served as the third director of the American Law Institute, shepherding an important collection of Restatements through the process of drafting and approval. Also in his director’s role, he played a central role in the ALI Study of the Division of Jurisdiction Between State and Federal Courts (1969), which occupies a place on my federal courts bookshelf alongside the 1953 casebook Wechsler wrote with Henry Hart.
But despite his many contributions to legal scholarship, Wechsler’s reputation these days might appear to depend on two articles: 1959’s Toward Neutral Principles of Constitutional Law and 1953’s The Political Safeguards of Federalism. The first has suffered from its criticism of the Supreme Court’s decision in Brown v. Board of Education, which comes as close as one can these days to academic apostasy. The second contributed an enduring idea to the canon of constitutional law, but one that may have fallen temporarily from grace with the rise of the judicially enforced federalism of the Rehnquist Court.
I want to focus instead on Wechsler’s 1948 article, Federal Jurisdiction and the Revision of the Judicial Code. I find myself returning to the article for a number of reasons. To begin with, the choices of the 1948 revisers and codifiers remain very much a part of our jurisdictional law over sixty years on, as do Wechsler’s criticisms of those choices. In addition, the article has the remarkable Wechslerian ability to identify doctrinal and statutory rough patches and foresee new departures in jurisdictional law. Indeed, a surprising number of Wechsler’s suggestions have been written into the law of federal jurisdiction, either by Congress or the Supreme Court, thus underscoring the power of scholarship as a tool of effective law reform. Wechsler managed to accomplish all this in thirty pages, deploying a gift for concision we should all envy.
Finally, the article offers a glimpse backward to the middle years of the twentieth century, when Congress was placing the government on a more responsible footing in relation to the citizens hurt by the conduct of government business. Congress had just adopted the Administrative Procedure Act and the Federal Tort Claims Act, both aimed at facilitating litigation to remedy illegal federal government action. Rather than something that courts and commentators cherished or sought to defend, sovereign immunity was rightly regarded as a relic of a less enlightened age.
Much recent scholarship on financial regulatory reform since the global financial crisis critiques the substance of new standards and rules. For this paper (the draft is dated September 2011) Kimberly Krawiec chose to examine the process which produces rules of financial regulation (this is the sausage-making of the paper’s title). The current administration, like governments of other countries, has emphasized the importance of transparency and open government and of opening up decision-making to citizen participation, so an academic study like this paper, which examines citizen participation in rule-making, is timely and important.
The paper’s case study is of the Volcker rule, which restricts proprietary trading and ownership interests in hedge funds and private equity funds by banking entities. Professor Krawiec chose to focus on the Volcker rule because it “had the potential to illuminate questions of whose voice gets heard on a major issue of financial reform as the sausage is really getting made”. The Dodd-Frank Act left significant discretion to regulators with respect to the details of this rule (and others): key terms and the contours of the exceptions to the bans are not clearly defined. Professor Krawiec explains that the exceptions were a necessary component of a compromise between those who thought that Dodd-Frank should do more to rein in large financial institutions and those who were sympathetic to complaints from financial institutions. She also points out that much of the trading the Volcker rule explicitly permits shares objective characteristics with proprietary trading, such that the motive for the trading is the distinguishing characteristic.
Thus the details of the Volcker rule are being spelled out in administrative rather than legislative processes. The Dodd-Frank Act required the Financial Stability Oversight Council to study and make recommendations on implementing the rule, and in October 2010 the FSOC invited public input to the study via the Federal Register. The invitation produced numerous responses, many of which were based on a form letter produced by a coalition of public interest groups. Professor Krawiec’s study of the letters the FSOC had not identified as form letters (but many of which were) showed that 91% of the 8000 letters sent to the FSOC were form letters. She notes that the number of comment letters suggests that the Volcker rule has some public salience, although the use of the form letter “does not require the same level of investment as the detailed, heavily researched comments submitted by financial institutions and trade groups”. (P. 21.) The comment letters written by private individuals contrast sharply with those submitted by financial institutions and trade groups. Those which were not based on the form letter were short and tended to
lack specific suggestions or recommendations for interpreting and implementing the Volcker Rule… contain many grammatical, punctuation and typographical errors, and express extreme anger at the banks and, often, at the political system as well. (P. 22.)
One result of the governmental insistence on transparency is that the federal financial regulators (including the Federal Reserve Board) have been disclosing information about their communications with the public, including meetings. Professor Krawiec studied available information about meetings between federal regulators and financial institutions, law firms, trade associations and lobbyists and public interest groups. She writes:
In sum, whereas financial industry representatives met with federal agencies on the Volcker Rule a total of 265 times, meetings with entities or groups that might reasonably be expected to act as a counterweight to industry representatives in terms of the information provided and the types of interpretations pressed… numbered only 18. This is roughly the same number of times that a single financial institution–JP Morgan Chase–met with federal agencies on Volcker Rule interpretation and implementation. (P. 27.)
Moreover, nearly all of the small number of meetings between the federal agencies and public interest and advocacy organizations were group meetings.
In the concluding section of the paper Professor Krawiec is careful not to make dramatic claims about what impact the submissions and meetings had on the development of the regulatory agencies’ thinking about how to draft regulations to implement the Volcker Rule. But the paper raises some important questions about how transparent rule-making processes really are, even in the era of open government. Proposed Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds (127 pages of them) were published in the Federal Register on November 7, 2011. The proposing release refers to the FSOC study and states that:
Approximately 8,000 comments were received from the public, including from members of Congress, trade associations, individual banking entities, consumer groups, and individuals. As noted in the issuing release for the Council Study, these comments were carefully considered by the Council when drafting the Council study. (P. 3.)
This brief statement gives a very different picture of the comments from the one portrayed in Professor Krawiec’s paper.
Much has been written about arbitration of employment disputes in the nonunion sector. Much of this literature is theoretical and declamatory, rarely involving an examination of actual institutional arrangements, outcomes and perceptions.1 Some work has been done on outcomes in nonunion arbitrations, but these are hobbled by the inability to track the path different claims may take, including withdrawal and settlement.2 Employee perceptions have been studied in the union sector, but almost nothing has been done in nonunion companies, and certainly nothing that is able to provide a direct measure of innovations in alternative dispute resolution (“ADR”) systems in a given workplace.
Armed with a Ph.D. in Management from the Sloan School at MIT, his J.D. degree from Cornell, and management labor-side experience at Twentieth Century Fox and several law firms, Zev Eigen of Northwestern University School of Law is uniquely positioned and likely to improve this state of affairs in the study of the nonunion workplace. Eigen understands economics and the importance of revealed behavior but he is equally sensitive to the insights of psychologists like my colleague Tom Tyler. Perceptions of fairness affect behaviors, which have feedback effects for each other.
Eigen’s first work as a law teacher built on his dissertation, under Tom Kochan of MIT’s supervision. It was a study of employee perceptions of the fairness of adhesive contracts, The Devil in the Details: The Interrelationship among Citizenship, Rule of Law and Form-Adhesive Contracts, 41 Conn. L. Rev. 381 (2008).
In the work under review, Eigen and his coauthor, Adam Litwin, have obtained access to a truly remarkable data set spanning more than 100,000 workers and more than 1,000 locations across the United States provided by a large nonunion company, which they have dubbed “Gilda”s, Inc.” The authors use employee surveys commenced before the company introduced a four-step ADR system and continuing for several years afterwards—permitted ‘before and after” comparisons of employee perceptions. The four steps of the ADR system were (1) employee initiation of a claim with management, (2) appeal to the HR department, (3) further appeal to either a peer review panel or unilateral determination by higher-level HR management, and (4) if still not satisfied, resort to final, binding arbitration.
Eigen and Litwin are interested in employee perceptions of voice and justice. “Procedural justice” is a measure of how employees perceive the fairness of the procedures employed in a particular system; “interactive justice,” the authors tell us, is a measure of employee perceptions of how well their interests are being taken into account by management in making decisions. They find that the company’s introduction of a formal 4-step ADR system culminating in arbitration resulted in a decrease in “perceived formal procedural justice” but an increase in “perceived informal procedural justice” as well as an increase in “perceived interactive justice.”
One would expect, in theory, to find all three measures advancing in the same direction. It is especially interesting that employees are able to distinguish between the quality of the formal procedural justice they are receiving in the employer’s decision-making process from the quality of the informal procedural justice of those procedures, but one would think that the direction should be other way—that perceptions of formal justice are increasing while perhaps the discretion of management and perhaps other informal processes are on the decline. Moreover, the introduction of the new ADR system has no discernible impact on employees’ organizational commitment—another counterintuitive result.
Explaining these results will take further work. The authors suggest that employees are perceiving a kind of low-level resistance to the new program by their immediate supervisors: “Immediate supervisors might be incentivized to encourage their employees to trust them to resolve claims instead of allowing HR or Gilda’s as a corporate entity to do so. Perhaps local managers are actively encouraging employees to trust them, which could be interpreted implicitly as being encouraged to distrust Gilda’s DRS or the company writ large.” (p. 15) This dynamic is consistent with low-level supervision’s disquiet with the formal processes introduced by union contracts.
I applaud the coauthors, and especially Professor Eigen, for an important contribution to our understanding of ADR in the nonunion workplace. I look forward to further contributions by Zev Eigen.