The Ministers and Missionaries Benefit Board, Interpleader Plaintiff,v.Leon Snow et al., Appellants, v. The Estate of Clark Flesher, et al., Respondents.

Brief

N.Y.March 24, 2015

To be Argued by: BRIAN ROSNER (Time Requested: 12 Minutes) CTQ 2015-00001 Second Circuit Court of Appeals Docket No. 14-1021-cv Court of Appeals of the State of New York NO 97. THE MINISTERS AND MISSIONARIES BENEFIT BOARD, Interpleader Plaintiff, – against – LEON SNOW, et al., Appellants, – against – THE ESTATE OF CLARK FLESHER, et al., Respondents. BRIEF AND APPENDIX FOR RESPONDENTS Of Counsel: BRIAN ROSNER NATALIE A. NAPIERALA CARLTON FIELDS JORDEN BURT, P.A. Attorneys for Respondents 405 Lexington Avenue, 36th Floor New York, New York 10174 Tel.: (212) 785-2577 Fax: (212) 785-5203 Date Completed: August 6, 2015 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES ................................................................................... iii PRELIMINARY STATEMENT ............................................................................... 1 THE CERTIFIED QUESTIONS PRESENTED FOR REVIEW .............................. 4 STATEMENT OF THE CASE .................................................................................. 4 The interpleader complaint .............................................................................. 4 The motions for summary judgment ............................................................... 8 The district court's decision ............................................................................. 9 The appeal to the Second Circuit Court of Appeals, and its certification of two questions ........................................................................ 11 SUMMARY OF THE ARGUMENT ...................................................................... 12 ARGUMENT ........................................................................................................... 14 I. THE PLANS' GOVERNING-LAW PROVISION REQUIRES THE APPLICATION OF N. Y. EST. POWERS & TRUSTS LAW § 3–5.1(b)(2).............................................................................. 14 II. THE PROCEEDS OF THE PLANS ARE "PERSONAL PROPERTY…NOT DISPOSED OF BY WILL" WITHIN THE MEANING OF N.Y. EST. POWERS & TRUSTS LAW § 3– 5.1(b)(2) ............................................................................................... 20 N.Y. Est. Powers & Trusts Law .......................................................... 20 The underlying action .......................................................................... 21 Case law addressing § 3–5.1(b)(2) "personal property…not disposed of by will" ............................................................................. 24 "Personal property…not disposed of by will" .................................... 27 Appellants misread McCarthy v. Aetna Life ....................................... 31 ii CONCLUSION ........................................................................................................ 37 iii TABLE OF AUTHORITIES Page(s) Cases Colavito v. Colavito, 2015 WL 292034 (Sup. Ct. Jan. 22, 2015) ......................................................... 29 In re Estate of Donahue, 262 A.D.2d 840 (3rd Dept. 1999) ................................................................. 25, 35 In re Estate of Lewis, 25 N.Y.3d 456 (2015) ......................................................................................... 22 In re Estate of Sugg, 12 N.Y.S.3d 842, 2015 WL 3970721 (N.Y.Sur. Ct. Jun 29, 2015) ............. 22, 29 In re Thomas, 63 A.D.3d 1081(2d Dept. 2009) ....................................................... 25, 28, 29, 35 In re Walker, 117 A.D.3d 838 (2d Dept. 2014) ........................................................................ 29 IRB–Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310 (2012) ..................................................................................passim Kane v. Union Mut. Life Ins., 84 A.D.2d 148 (2d Dept. 1981) .......................................................................... 30 Matter of Allstate Ins. Co. v. Stolar, 81 N.Y.2d 219 (1993) ......................................................................................... 16 McCarthy v. Aetna Life, 92 N.Y.2d 436 (1998) rev’g 231 A.D.2d 211 (1st Dept 1997) ........................................................passim The Ministers and Missionaries Benefit Bd. v. The Estate of Clark Flesher, No. 11 Civ. 9495, 2014 WL 1116846 (S.D.N.Y. Mar. 18, 2014). ............. 3, 9, 10 iv The Ministers and Missionaries Benefit Bd. v. Snow, No. 14-1021, 780 F.3d 150 (2d Cir. 2015) ............................................... 4, 11, 19 Neto v. Thorner, 718 F.Supp. 1222 (S.D.N.Y. 1989) .................................................................... 32 Southeast Bank, N.A. v. Lawrence, 66 N.Y.2d 910 (1985) ................................................................................... 24, 34 Statutes Colo. Rev. Stat. § 15-11-804 ........................................................................... 2, 7, 23 N.Y. Est. Powers & Trusts Law § 1-2.5 .................................................................. 28 N.Y. Est. Powers & Trusts Law § 1-2.6 .................................................................. 20 N.Y. Est. Powers & Trusts Law § 1-2.15 ................................................................ 20 N.Y. Est. Powers & Trusts Law § 3-5.1(a)(2) ................................................... 10, 23 N.Y. Est. Powers & Trusts Law § 3-5.1(b)(1) ......................................................... 30 N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) ..................................................passim N.Y. Est. Powers & Trusts Law § 5-1.1-A .......................................................passim N.Y. Est. Powers & Trusts Law § 5-1.4 ...........................................................passim N.Y. Est. Powers & Trusts Law § 8-1.3 .................................................................. 28 N.Y. Est. Powers & Trusts Law § 8-1.4 .................................................................. 28 N.Y. Est. Powers & Trusts Law § 10-6.8 ................................................................ 28 N.Y. Est. Powers & Trusts Law § 10-10.1 .............................................................. 28 N.Y. Est. Powers & Trusts Law § 13-3.2 .................................................... 21, 30, 31 N.Y. Est. Powers & Trust Law .........................................................................passim N.Y. General Obligations Law § 5-1401 ..........................................................passim Personal Property Law § 24-a .................................................................................. 30 v Other Authorities Choosing New York Law But Not its Choice of Law Rules: Foreign Parties Agreeing to Apply New York Law Are Bound By It Even if New York Court Would Otherwise Choose Foreign, Jan. 2012 N.Y.St. Law Digest 637. ......................................................................... 15, 16, 17 New World Dictionary, Second Edition .................................................................. 28 Restatement (Second) of Conflict of Laws ........................................................ 18, 20 1 PRELIMINARY STATEMENT This action will determine who will receive the proceeds of the estate of the decedent Reverend Clark F. Flesher: either the victims of human trafficking in accordance with the decedent’s intent or Reverend Flesher’s former father-in-law, who, years prior to the decedent’s divorce from his former wife, was named a contingent beneficiary on two forms, and who had no relationship with the decedent prior to his death. The Estate of Reverend Clark F. Flesher (“Estate”) and Appellants Leann Snow and Leon H. Snow (the ex-wife of Reverend Flesher and her father) dispute ownership to the proceeds of Reverend Flesher’s retirement and insurance plans (“Disputed Funds”). The two plans, by their terms, are governed by New York law, and the Disputed Funds’ proceeds are located in New York. [A-96, 113].1 At the time of his death, Reverend Flesher was domiciled in Colorado. [A-217-223, A-241]. During his marriage to Ms. Snow, Reverend Flesher had executed forms designating his then wife as the primary beneficiary, and his then father-in-law as the contingent beneficiary, of the Disputed Funds. [A-115, A-117]. The decedent and Ms. Snow divorced; their martial settlement agreement awarded the parties their respective life insurance policies and authorized them to change their 1 “A” refers to the Appendix dated May 27, 2015. 2 respective beneficiaries. [A-233-234]. Prior to his death, Reverend Flesher had not changed the beneficiary designations. [A-15 at ¶ 18]. The unintended failure to change a beneficiary designation following a divorce is a common social problem that has caused various states, including New York and Colorado, to enact statutes automatically revoking such designations. [RA-54-57].2 Whether the revocation statute of New York or that of Colorado applies to the Disputed Funds is outcome determinative: In either case, the designation of Ms. Snow has been revoked. Under New York’s revocation statute, the designation of a prior spouse (such as Ms. Snow) is vacated but that of a spousal in-law (such as Leon Snow) is not.3 The law of Colorado, where the Estate currently is in probate, is more expansive: It revokes the designations of a former spouse and her family.4 [A-13 at ¶ 4]. Assuming the validity and enforceability of the former father-in-law’s designation – issues to be determined at trial (if necessary) – the only appellant with a claim to the Disputed Funds is Mr. Snow.5 2 “RA” refers to the Supplemental Appendix dated August 4, 2015. 3 New York’s revocation law prevents only an ex-spouse from recovering a revocable disposition, but not an ex-spouse’s family member. N.Y. Est. Powers & Trusts Law § 5–1.4. 4 Colo. Rev. Stat. § 15-11-804, “Revocation of Probate and Nonprobate Transfers by Divorce...” Section 15-11-804(2)(a)(i) revokes any beneficiary designation “made by a divorced individual to his or her former spouse…or…to a relative of the divorced individual’s former spouse…” 5 The beneficiary designation of Leon Snow under the Retirement Plan (as defined herein) was not made in accordance with the contract terms of that plan. The designation is invalid as a matter of contract law. Therefore, as to the Retirement Plan, there is no valid beneficiary 3 The question presented to the district court was whether New York’s substantive law directs the application of Colorado law. N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) contains a choice-of-law directive, which states that, when a person dies out-of-state and has personal property in New York, the disposition of the personal property is “determined by the law of the jurisdiction in which the decedent was domiciled at death.” § 3- 5.1(b)(2). The district court determined that the Disputed Funds are personal property located in New York and that Reverend Flesher was domiciled in Colorado at the time of his death. [A-230-244]. Therefore, the district court applied Est. Powers & Trusts Law § 3-5.1(b)(2) and, pursuant to that statute, invoked the Colorado revocation statute. Id. The district court vacated both the former wife and former father-in-law designation forms, and awarded the Disputed Funds to the Estate. See generally The Ministers and Missionaries Benefit Bd. v. The Estate of Clark Flesher, No. 11 Civ. 9495, 2014 WL 1116846 (S.D.N.Y. Mar. 18, 2014). [A-248- 262]. Appellants appealed to the Second Circuit Court of Appeals. [A-245]. The Second Circuit certified to this Court two questions regarding the application of designation form to which any revocation statute applies, and, accordingly, these funds belong to the Estate. 4 N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2). See The Ministers and Missionaries Benefit Bd. v. Snow, No. 14-1021, 780 F.3d 150 (2d Cir. 2015). [A-248-262]. This Court accepted the certified questions (25 N.Y.3d 935 [2015]), which should be answered in the affirmative. THE CERTIFIED QUESTIONS PRESENTED FOR REVIEW (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 N.Y. Gen. Oblig. Law § 5-1401, requires the application of N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2), a New York statute that may, in turn, require application of the law of another state? Answer: Yes. (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 N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2)? Answer: Yes. STATEMENT OF THE CASE The interpleader complaint The Reverend Flesher was a member of an insurance plan and a retirement plan administered by the Ministers and Missionaries Board of American Baptist 5 Churches (“MMBB”), a New York State corporation. See Interpleader Plaintiff- Appellee’s Complaint (“Compl.”) ¶¶ 1, 3, 10, 22 dated December 23, 2011. [A- 12-20]. In separate Designation of Beneficiary Forms, each dated January 7, 2002, Reverend Flesher designated his then wife, Ms. Snow, as the “primary” beneficiary and his then father-in-law, Mr. Snow, as the “contingent” beneficiary. See the beneficiary form of The American Baptist Churches Retirement Plan (“Retirement Plan”) [A-115] and the beneficiary form of the MMBB Death Benefits Plan [A- 117] (“Death Benefits Plan,” and collectively with the Retirement Plan, “Plans”). In 2008, the Fleshers divorced. In the court-entered order dissolving their marriage (the “Marital Settlement Agreement”), Reverend Flesher and Ms. Snow agreed to “[s]ettle all property interests and rights…arising out of their marriage” and to “[r]elinquish any and all past, present, or future claims that each may have against the property or estate of the other….” See The Marital Settlement Agreement between Leann Flesher and Reverend Clark F. Flesher dated November 2008 and the Notice of Entry [A-122, ¶ 2(b)-(c); see generally A-119-133]. Reverend Flesher and Ms. Snow agreed that each party would keep the proceeds of his or her respective Death Benefit Plan.6 [Id. ¶ 10, A-124]. (“Each of 6 MMBB also employed Ms. Snow, who had created beneficiaries on her MMBB plans. [A-174- 176]. 6 the parties is awarded the life policy insuring their own life and are [sic] immediately authorized to change the beneficiaries thereof”). As to their retirement accounts, the divorced couple were to “calculate the community interest in each party’s retirement accounts” and “equalize the division.” [Id. ¶ 9, A-124]. Each party further relinquished “all right to inherit from the other, and all right to receive in any manner any property of the other on the death of the other, …except as a…beneficiary under any Will or other instrument subsequently executed by either party….” [Id. ¶ 42, A-130]. Reverend Flesher and his former wife had agreed that the terms of the Marital Settlement Agreement would be binding on their “heirs.” [Id. ¶ 51, A- 131]. Reverend Flesher passed away on June 22, 2011. [Id. ¶ 17, A-15]. He died intestate. [A-236]. In July 2011, the District Court for El Paso County, State of Colorado created the Estate of Clark F. Flesher and appointed Michele Arnoldy the Personal Representative of the Estate. [A-236]. Prior to his death, neither he nor his ex-wife had changed the designated beneficiaries on their MMBB accounts. [Id. ¶ 18, A-15; see also Affidavit of Rev. Leann Snow Flesher dated April 20, 2012 ¶ 20, A-176]. Nor had they made a calculation of community interest. [Compl. ¶ 36, A-17]. 7 After his death, the Estate and the Snows each claimed entitlement to the benefits of the Disputed Funds. On December 2, 2011, the Estate applied in the Colorado Probate Court to revoke Appellants’ beneficiary designations pursuant to the Colorado revocation statute, Colo. Rev. Stat. § 15-11-804(2)(a)(i). [See Ex. F (Declaratory Judgment Action filed in the Colorado Probate Court) attached to the Declaration of Francis R. O’Brien dated December 28, 2011, 1:11-cv-09495-KBF, ECF No. 5, A-4; see also A-180-184 ¶ 28]. On December 23, 2011, MMBB commenced this action against the Snows, as well as the Estate and the decedent’s sister, Michele Arnoldy, individually and as the personal representative of the Estate. [A-12-20]. MMBB opined that: New York’s revocation statute, Est. Powers & Trusts § 5-1.4, did not revoke the former wife’s designations, she was entitled to the Disputed Funds, and the interpleader was necessitated by the Estate taking a legal position “inconsistent with MMBB’s view of the law, thus “exposing” MMBB “to risk of liability.” [Id. ¶¶ 20, 31, 44- 45, A-15-16, A-18]. On May 12, 2012, the Colorado Probate Court stayed the Estate’s revocation application pending the outcome of the interpleader action. [A-192]. The underlying district court proceeded to grant interpleader relief to MMBB, discharged it from all liabilities to the interpleader defendants, and 8 enjoined any related action from proceeding until the court issued a final judgment resolving the Disputed Funds. [ECF No. 49, A-7]. Following discovery, the parties moved for summary judgment. The motions for summary judgment In support of the Estate’s motion for summary judgment on certain affirmative defenses, Michele Arnoldy (the decedent’s sister), submitted an affidavit averring to her brother’s domicile in Colorado, as well as his illness and death while in that state. See Affidavit of Michele Arnoldy dated October 15, 2013 [A-217-229]. Reverend Flesher’s last ministry “was to help girls who were the victims of sex trafficking.” [Id. ¶ 23, A-221]. Following Reverend Flesher’s death, Ms. Arnoldy – in compliance with her brother’s intent – “gave Restored Innocence all of Clark’s household possessions to furnish a ‘Cinderella house’ where rescued girls could find shelter” as well as “a sum of Estate money that Clark had intended to tithe to Restored Innocence but, because of his illnesses, had not gotten around to do.” [Id. ¶ 35, A-222]. Ms. Arnoldy noted that prior to his death, her brother had had “limited communications” with his former wife, and that, following their divorce in 2008, Reverend Flesher “had one face-to-face meeting” with Ms. Snow “to forgive her, and then treated her as being out of his life.” [Id. ¶ 36, A-222]. 9 As for Mr. Snow, Ms. Arnoldy did not recall her brother mentioning him “for years.” [Id. ¶ 37, A-222].7 In fact, “Clarke did not inform his former wife of his illness,” and, at his instruction, neither did Ms. Arnoldy, who “asked a mutual acquaintance to tell Ms. Snow of Clark’s passing.” [Id. ¶¶ 37-38, A-222-223]. Ms. Snow did not attend her former husband’s memorial service or, “by card or otherwise, express condolences to [Ms. Arnoldy]” or any family member. [Id. ¶ 38, A-223]. Ms. Arnoldy communicated unsuccessfully with MMBB and Ms. Snow in an attempt to distribute the funds “as [her] brother had wanted, with the bulk funding a ministry to rescue girls from sex trafficking.” [Id. ¶¶ 39, 40, A-223]. The district court’s decision On the parties’ respective cross-motions for summary judgment, the district court held that the Estate is entitled to the Disputed Funds. See Ministers & Missionaries Benefit Bd., supra, 2014 WL 1116846, at *6. [A-241]. In reaching this conclusion, the district court reasoned, among other things, that: (1) the Disputed Funds constitute Reverend Flesher’s personal property, and pursuant to N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2), the “revocation or alteration of a testamentary disposition of personal property, and the manner in 7 The district court noted that “[t]he Snows had little to no contact with Flesher in the two and a half years between his divorce from LeAnn Snow and his death.” 2014 WL 1116846, at *6. 10 which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death;” (2) Reverend Flesher was domiciled in the state of Colorado at his death; and (3) under Colorado’s revocation law, the divorce terminated LeAnn and Leon Snows’ claims to the disputed funds. 2014 WL 1116846, at *5,*6 [A-238, 241]. The district court squarely rejected the Snow’s argument that the Disputed Funds were not personal property and that it should apply a “choice-of-law analysis common to contractual disputes,” and found “[t]his argument [] wholly without merit. The definition of ‘personal property’ in § 3-5.1(a)(2) plainly covers the Disputed Funds.” 2014 WL 1116846, at *5 n.6.8 [A-239]. The district court correctly applied New York’s governing law, to wit, a New York statute that includes a choice-of-law directive, which provides that the disposition of personal property is “determined by the law of the jurisdiction in which the decedent was domiciled at death.” § 3-5.1(b)(2); see also 2014 WL 1116846, at *5,*6. [A-238, 241]. Because the district court found that Reverend Flesher was domiciled in Colorado at the time of his death, it applied Colorado law, which voided the beneficiary designations. Id. at *6 [A-241]. 8 The district court’s conclusion that N.Y. Est. Powers & Trusts Law § 3–5.1(b)(2) applies to the Disputed Funds is supported by N.Y. Est. Powers & Trusts Law § 3-5.1(a)(2), which provides that “‘[p]ersonal property’ means any property other than real property, including tangible and intangible things.” See 2014 WL 1116846, at *5, *6. [A-239]. 11 The appeal to the Second Circuit Court of Appeals, and its certification of two questions The Snows appealed to the Second Circuit Court of Appeals, which reviewed the district court’s decision de novo. Ministers & Missionaries Benefit Bd, supra, 780 F.3d at 152. [A-248-262]. The Second Circuit determined that, before it could consider the district court’s decision to award the Disputed Funds to the Estate, it must decide whether the Plans’ governing law provisions require the application of N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2). Id. The Retirement Plan and the Death Benefit Plan each state that “[t]he provisions of this Plan shall be governed by and construed in accordance with the laws of the State of New York.” [A-96, 113]. The Second Circuit stated that it was “unclear how these provisions should be interpreted” and set forth three possible readings. 780 F.3d at 152. [A-253]. The Second Circuit discussed this Court’s decision in IRB–Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310 (2012), which applied only New York substantive law without reference to New York common-law conflicts- of-laws principles “in a statutory context not at issue in this case.” 780 F.3d at 152-153. [A-254]. It reasoned that it must determine how this Court “would interpret governing law provisions in non-Large Contract Statute” contracts, as here, and stated that it was unaware of any decision by this Court that dictates whether a person’s entitlement to the proceeds of a death benefit plan or a 12 retirement plan constitutes “personal property...not disposed of by will” within N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2). Id. at 154-55. [A-256]. This Court accepted the two certified questions (25 N.Y.3d 935 [2015]), which should be answered in the affirmative. SUMMARY OF THE ARGUMENT N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) is not a judge-made, common- law conflicts-of-law principle that the underlying parties, who agreed to apply New York law, had agreed to not apply. Rather, § 3-5.1(b)(2) is the classic New York “local” law – a statute enacted by the New York Legislature. And, that New York statute specifically includes a choice-of-law directive that is utterly distinct from a common-law conflict-of-law principle or analysis. This is, in conflicts-of-law parlance, the very “local” “internal” substantive New York law that the parties agreed to apply by explicitly contracting for a New York governing or choice-of- law provision. The district court did not ignore the governing law of the Plans. Rather, the district court applied the Plans’ governing law: New York’s body of law includes the N.Y. Estates, Powers & Trusts Law, which, in turn, contains § 3–5.1(b)(2), which, in turn, instructed the district court to apply the law of the jurisdiction – Colorado – in which the decedent was domiciled at death, and in which his intestate estate is in probate. 13 The language of § 3-5.1(b)(2) is broad and inclusive, clear and unambiguous. The personal property of which an estate is comprised may be transferred in one of two ways. It may be transferred by testamentary disposition – that is, by will. Or it may be transferred by means other than a will – either by intestacy or the various nonprobate testamentary substitutes and other devices listed in Articles 5 and 13. Simply put, a transfer of personal property may occur either by will or “not disposed of by will.” Section 3-5.1 (b)(2) does not provide a third way. This Court and two appellate courts have applied N.Y. Est. Powers & Trusts Law § 3-5.1 (b)(2) in the context of personal property “not disposed of by will.” In the underlying action, the district court’s analysis of the proceeds of the Plans accords with that of this Court and two New York appellate courts. Reviewing the transfer of nonprobate assets is part of the probate process. Such a review commonly occurs where, as here, the validity of a beneficiary designation is disputed, and, if the designation is voided, the nonprobate proceeds are distributed pursuant to a will or the rules of intestacy. The case law shows unequivocally that the transfer of nonprobate assets is reviewed as part of probate, whether pursuant to a will or the rules of intestacy. This Court’s discussion, in McCarthy v. Aetna Life, of how insurance contract provisions narrowly define the method by which the beneficiary 14 designation of a divorced spouse may be altered – a discussion at the heart of Appellants’ argument – is of diminished relevance in the current age of revocation statutes. The enactment of the revocation statutes is a legislative recognition of the decedent’s intent (with limited exceptions, not applicable here) that decedents do not intend to give money to former family members. Insurance companies and pensions plans should be informed of states’ revocation statutes. Such knowledge is a requisite part of their business. Accordingly, section 3–5.1(b)(2) is a benefit to the industry. It contains an unequivocal choice-of-law directive that provides a roadmap as to which state’s revocation statute applies. The premise of the directive – to apply the law of the decedent’s domicile – is consistent with the well-understood, long-standing principle that, in matters of personal property, the law of the owner’s domicile applies. Rather than create confusion, § 3–5.1(b)(2) resolves confusion. ARGUMENT I. THE PLANS’ GOVERNING LAW PROVISION REQUIRES THE APPLICATION OF N. Y. EST. POWERS & TRUSTS LAW § 3– 5.1(b)(2). The Retirement Plan and the Death Benefit Plan each contain a provision identifying New York law as the “governing law.” [A-96, 113]. The parties do not dispute that the Plans’ governing-law provisions require the application of New York law. 15 The Appellants incorrectly interpret the Plans’ choice-of-law provisions to mean that a court cannot apply any law other than that of New York, itself, to the interpretation of the Plans. Appellants therefore conclude that the district court erred in applying the Colorado revocation statute to the Plans. Appellants’ analysis misinterprets what it means “to apply New York law.” In choosing New York law as the “governing” law, the Plans chose the entire body of New York law, which includes the N.Y. Est. Powers & Trusts Law in its entirety, and, specifically, § 3-5.1(b)(2). Pursuant to § 3-5.1(b)(2), when a person dies out-of-state and has personal property located in the State of New York, the disposition of the personal property is “determined by the law of the jurisdiction in which the decedent was domiciled at death.” The district court found that Reverend Flesher was domiciled in Colorado, and therefore it followed the unequivocal directive of the New York statute: By applying § 3-5.1(b)(2) – and choosing Colorado law – the district court applied New York’s substantive or “internal” law, which is consistent with the Plans’ governing law provisions. The eminent professor, the late David Siegel, explained how this choice-of- law analysis should be applied: “New York has its own substantive law, known in conflicts of law parlance as its ‘local law’ or ‘internal law’, and it also has case 16 law-created choice of law rules. If the case has only New York elements, the court goes directly to its own (‘local’) law to resolve all substantive issues.” Siegel, David D., Choosing New York Law But Not its Choice of Law Rules: Foreign Parties Agreeing to Apply New York Law Are Bound By It Even if New York Court Would Otherwise Choose Foreign Law, Jan. 2012 N.Y.St. Law Digest 637 (“Siegel”) at 1. Where an action has more than “New York elements,” the court engages in a further analysis. The judge-created choice-of-law rule adopted by this Court “has come to be known as the ‘most significant relationship’ test, which also was adopted by the Second Restatement of Conflicts.” Id. Under this test, in a contract case, the relationships that determine which state’s substantive law will apply are “[t]he place of contracting, negotiation and performance; the location of the subject matter of the contract; and the domicile of the contracting parties.” Matter of Allstate Ins. Co. v. Stolar, 81 N.Y.2d 219, 227 (1993) (citation omitted); see also Siegel at 1. Prior to IRB-Brasil, an open legal question remained regarding the scope of the law to be applied when parties to a contract agreed to a New York governing law provision in contracts consummated under the New York General Obligations Law. Specifically, it was disputed whether, in choosing to apply New York’s 17 governing law to such contracts, the parties were choosing to apply New York’s principles of conflict of laws. In IRB-Brasil the parties contractually agreed to New York law as the governing substantive law in a contract consummated pursuant to Gen. Oblig. Law § 5-1401 (“Large Contract Statute”).9 20 N.Y.3d at 313. The parties contested whether the agreement to apply New York law referred not only to New York’s “local” law, but also to New York’s “whole” law, i.e., New York’s judge-made choice-of-law rules. Id.; see also Siegel at 2. Because the contract in IRB-Brasil had limited contacts with New York, were conflict of laws principles to apply New York’s “whole” law, the result would be a judicial decision to not apply New York’s substantive law, but rather Brazilian law. 20 N.Y.3d at 314-315. This Court answered “no” to the query of “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. at 312), and held that contacting parties may choose New York “local” law as the governing substantive law regardless of whether a conflicts-of-law analysis would apply a different substantive law. Id. at 315-316. 9 The contract in IRB–Brasil was consummated pursuant to N.Y. Gen. Oblig. Law § 5-1401, which expressly permits parties, whose contracts include amounts greater than $250,000, to choose New York law as the governing law. 20 N.Y.3d at 314-315. 18 This Court further stated that the parties are not required to expressly exclude New York conflicts-of-law principles in the contract: “According to the Restatement (Second) of Conflict of Laws § 187 (3), ‘[i]n the absence of a contrary indication of intention, the reference [to the law of the state chosen by the parties] is to the local law of the state of the chosen law.’…[u]nder the Restatement (Second), 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.” 20 N.Y.3d at 316. N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) is not a judge-made, common- law conflicts-of-law principle that the parties, who agreed to apply New York law, had agreed to not apply. Rather, § 3-5.1(b)(2) is the classic New York “local” law – a statute enacted by the New York Legislature. And, that New York statute specifically includes a choice-of-law directive that is utterly distinct from a common-law conflict-of-law principle or analysis. This is, in conflicts-of-law parlance, the very “local” “internal” substantive New York law that the parties agreed to apply by explicitly contracting for a New York governing or choice of law provision. Appellants would wish it were otherwise. Their argument is that, because the Plans include New York governing law provisions, IRB-Brasil requires that only the New York State law (itself) apply. The simple and correct answer to 19 Appellants’ argument is that the parties explicitly chose New York’s body of substantive law, which includes the N.Y. Est. Powers & Trust Law which, in this instance, directs the application of Colorado law. The Second Circuit Court of Appeals also stated that, in order to reach a conclusion in this action, it must first determine how this Court would interpret governing law provisions in “non-Large Contract Statute” contracts in the context of N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2). See 780 F.3d at 153 [A-256]. In IRB–Brasil, this Court reasoned that, because New York’s common-law conflict-of-laws principles might have required the application of Brazilian rather than New York law with respect to a Large Contract Statute, it was not permitted to look to Brazilian law, and concluded that “[t]he plain language of [the Large Contract Statute] dictates that New York substantive law applies.” Id. at 315. Here, the Second Circuit recognized that the Plans were not consummated pursuant to the Large Contract Statute, and, therefore, that that statute (and its legislative history) do not apply. 780 F.3d at 153 [A-256]. The Second Circuit, however, is uncertain whether this Court’s reasoning in IRB-Brasil would apply outside the statutory context. Id. at 154 [A-258-259]. Although the New York General Obligations Law and the Large Contract Statute are inapplicable to the underlying action, this Court’s reasoning in IRB- 20 Brasil, including that of the Restatement (Second) of Conflict of Laws, is not inconsistent with the district court’s application of § 3-5.1(b)(2). First, the Estate does not argue that the “whole” of New York law should apply, including New York's common-law conflict-of-laws principles. The Estate argues that New York’s governing law should apply and that such law includes the entire N.Y. Est. Powers & Trusts Law, which contains § 3-5.1(b)(2), which includes a choice-of-law directive. Nor did the district engage in a “complicated” common-law conflict-of laws analysis; rather, it simply applied New York’s governing law, i.e. – N.Y. Est. Powers and Trusts Law – precisely as the parties had contracted in the Plans. Based upon the foregoing, the first certified question should be answered in the affirmative. II. The proceeds of the Plans are “personal property…not disposed of by will” within the meaning of N. Y. Est. Powers & Trusts Law § 3-5.1 (b)(2) N. Y. Est. Powers & Trusts Law An “estate” - the property that a person owns - consists of real property or personal property. See, e.g., N. Y. Est. Powers & Trusts Law §§ 1-2.6, 1-2.15; see also id. § 5-1.1-A(c)(7) (“The decedent’s estate shall include all property of the decedent wherever situated”). The property (real or personal) may be disposed of in many ways, e.g., by will (“testamentary deposition,” see id. § 1-2.17), by the 21 rules of intestacy (see generally id., Article 4), or by contract (a designation identifying a beneficiary to receive proceeds upon the death of the person making the designation, see e.g., id. § 5-1.1-A(a)(3) and (b)(G) [the “testamentary substitutes”] and Article 13-3.2). Among personal property typically transferred by a beneficiary designation are the proceeds of “pensions plans, annuities, [and] life insurance.” Margaret Valentine Turano, 2008 Practice Commentary, N. Y. Est. Powers & Trusts Law § 13-3.2 (McKinney). These are the type of proceeds at issue in this action: the Disputed Funds consist of the proceeds of the Death Benefits Plan (a group term life insurance plan) and the Retirement Plan. Whether transferred by will or by beneficiary designation, revocable dispositions of property (real and personal) are subject to a uniform rule of automatic revocation: Upon divorce, the designation of a prior spouse is revoked automatically, with the prior spouse deemed to have predeceased the person who made the designation. See N. Y. Est. Powers & Trusts Law § 5-1.4 (a) and (b). The underlying action This crux of this action is who will receive the Disputed Funds: either the victims of human trafficking in accordance with the Reverend Flesher’s intent or Mr. Snow, who, years prior to the decedent’s divorce from Leann Snow, was 22 named a contingent beneficiary on the Plans, and who had no relationship with the decedent prior to his death. While married, Reverend Flesher had designated as primary and contingent beneficiary his then wife and his then father-in-law, respectively. [A-115, A-117]. Subsequent to his divorce, Reverend Flesher’s intention, repeated as his dying wish, was that the Disputed Funds go to benefit his last ministry, that for sex-trafficked girls. [A-217-229]. Reverend Flesher’s former wife seeks to defeat the decedent’s intention, and claim the Disputed Funds for herself. Of course, N.Y. Est. Powers & Trusts Law § 5-1.4 has revoked unequivocally the Plans’ forgotten beneficiary designation forms upon which the former wife bases her claim. See In re Estate of Lewis, 25 N.Y.3d 456, 459-460 (2015); see also In re Estate of Sugg, 12 N.Y.S.3d 842, 2015 WL 3970721 (N.Y. Sur. Ct. Jun 29, 2015). Nonetheless, stripped of her claim by § 5-1.4, the former wife presses forward through her father and Reverend Flesher’s former father-in-law, Mr. Snow, the Plans’ contingent beneficiary. This Court has already addressed - and rejected - this type of mercenary scenario. See In re Estate of Lewis, 25 N.Y.3d at 459-460. However, just as the N.Y. Estates, Powers & Trusts Law contains a broad revocation provision applicable to all designations, whether that made by will, 23 insurance policy or retirement plan, it contains a similarly broad applicable choice- of-law provision regarding the types of personal property at issue here. N.Y. Est. Powers & Trusts Law § 3-5.1 (b)(2) provides that “[t]he intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property, and the manner in which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death” (emphasis supplied). Reverend Flesher was domiciled in Colorado when he died without a will. [A-241]. His estate is currently in probate in the District Court for El Paso County, State of Colorado. [A-236]. The Disputed Funds are personal property. N.Y. Est. Powers & Trusts Law § 3-5.1 (a)(2); see also A-238-239. On these facts, the district court applied § 3-5.1(b)(2), which contains a choice of law directive to Colorado law, to determine how to dispose of Reverend Flesher’s personal property “not disposed of by will.” Colo. Rev. Stat. § 15-11-804, “Revocation of Probate and Nonprobate Transfers by Divorce…”, speaks directly to the effect of a divorce on prior beneficiary designations. Section 15-11-804(2)(a)(i) revokes any beneficiary designation “made by a divorced individual to his or her former spouse…or…to a relative of the divorced individual’s former spouse…” Applying the Colorado statute, the district court revoked the beneficiary designations of the former wife 24 and former father in-law. The Disputed Funds were awarded to the Estate which, consistent with Reverend Flesher’s dying wish, intends to contribute the funds to his last ministry, that for sex trafficked girls. [See Arnoldy Aff. § 21, A-214]. The district court’s conclusion is consistent with both the plain language of § 3-5.1 (b)(2) and the reasoning and holding of state courts of New York that have applied the statutory phrase “personal property…not disposed of by will.” Case law addressing § 3-5.1 (b)(2) “personal property…not disposed of by will” This Court applied N.Y. Est. Powers & Trusts Law § 3-5.1 (b)(2) to “personal property…not disposed of by will” in Southeast Bank, N.A. v. Lawrence, 66 N.Y.2d 910 (1985), which concerned the “right of publicity” - a form of personal property. Id. at 912. Without obtaining permission, the owners of a New York theatre attempted to name the theatre after the late playwright, Tennessee Williams. Id. at 911. Mr. Williams had been domiciled in Florida at the time of his death, and his estate had been probated in Florida. Id. Though part of Mr. Williams’s estate, his “right of publicity” had not been a testamentary disposition, and he had not transferred the right during his lifetime. Id. at 912. This Court held that the “applicable choice of law principle” was N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2), and, accordingly, New York law directed that Florida law [the jurisdiction in which the decedent was domiciled at death] be applied to determine if the estate had an enforceable right: “…questions 25 concerning personal property rights are to be determined by reference to the substantive law of the decedent’s domicile (EPTL 3-5.1[b][2]….”). Id. (citations omitted). Two appellate courts also have applied N.Y. Est. Powers & Trusts Law § 3- 5.1 (b)(2) in the context of personal property “not disposed of by will.” In re Estate of Donahue, 262 A.D.2d 840 (3rd Dept. 1999) concerned three items of personal property - a trailer, a motor vehicle, and a bank account. The decedent, a New York resident, lived seasonally in Florida in a trailer titled in both his and his girlfriend’s names, and owned a vehicle similarly titled. Id. at 840. The decedent also maintained a Florida bank account to which he added his girlfriend’s name. Id. The decedent was domiciled in New York, died without a will, and the issue concerned the girlfriend’s ownership interests in the Florida property. Id. at 840- 841. “Inasmuch as the decedent remained domiciled in New York,” the Second Department applied N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) to apply New York law “in determining ownership of the Florida personal property.” Id. The Second Department, in In re Thomas, 63 A.D.3d 1081(2d Dept. 2009), addressed an issue now before this Court when it applied N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) to a group pension plan that disposed of the proceeds by beneficiary designation (similar to the Retirement Plan). 26 There, the decedent, who was domiciled in Nevada at the time of his death, lived and worked in New York, and was a member of the New York City Employees’ Retirement System (“NYCERS”). Id. at 1081. He had designated his paramour as the beneficiary of his NYCERS pension plan. Id. The decedent died intestate; his wife sued under N.Y. Est. Powers & Trusts Law § 5-1.1-A and claimed entitlement to one-half of the survivor benefits of the NYCERS pension. Id. at 1081. The wife averred that, under Nevada law, she was entitled to 50% of the NYCERS pension’s proceeds despite the beneficiary form that designated the paramour as the recipient of 100% of the proceeds. Id. at 1082. The Second Department applied the plain language of N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) to the NYCERS pension proceeds, which it deemed personal property. Id. at 1082 (“[a]ccordingly, Nevada law applies, since ‘[t]he intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property, and the manner in which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death’ (EPTL 3-5.1[b][2])).” Id. at 1082. Then, pursuant to § 3-5.1(b)(2), the Appellate Division applied Nevada law – “the law of the jurisdiction in which the decedent was domiciled at death” – to the claim to the residual benefit of the NYCERS pension plan. Id. at 1082-1083. 27 In the underlying action, Judge Forrest’s analysis of the proceeds of the Plans accords with that of this Court and two New York appellate courts. “Personal property…not disposed of by will” The language of § 3-5.1(b)(2) is clear and unambiguous. The personal property of which an estate is comprised may be transferred in one of two ways. It may be transferred by testamentary disposition – that is, by will. Or it may be transferred by means other than a will – either by intestacy or the various nonprobate testamentary substitutes and other devices listed in Articles 5 and 13. See N.Y. Est. Powers & Trusts Law § 5-1.1-A(a)(3); see also id. § 5-1.1-A(b)(G) (the “testamentary substitutes”) and Article 13-3.2. Simply put, a transfer of personal property may occur either by will or “not disposed of by will.” Section 3- 5.1 (b)(2) does not provide a third way. Appellants argue that the words do not mean what they plainly and unambiguously state. To Appellants, “not disposed of by will” means “intestacy,” and specifically excludes nonprobate transfers; however, § 3-5.1(b)(2) does not contain such limiting language. Nor does this statute use the word “intestacy” or other words that are used to connote personal property passing by intestacy only. Throughout the N.Y. Estate Powers & Trust Law, property that passes by the rules of intestacy is “distributed,” the recipient is a “distribute,” and the process of 28 passage is “distribution.” See N.Y. Est. Powers & Trusts Law § 1-2.5 and generally Article 4.10 The language of § 3-5.1 (b)(2) is broad and inclusive, does not include the word “intestacy” or its related language, and, by its plain meaning, includes the property transfers by way of nonprobate devices, such as pension and life insurance proceeds. See, e.g., In re Thomas, 63 A.D.3d 1081. This Court should decline Appellants’ invitation to rewrite the plain and unambiguous words of § 3- 5.1(b)(2). Even if “not disposed of by will” means intestacy, the district court correctly applied § 3-5.1(b)(2). Reverend Clark’s estate is being probated in intestacy. [A- 236]. The Colorado Probate Court will adjudicate the Estate’s challenge to the validity of the beneficiary designations. [A-183]. See, e.g., N.Y. Est. Powers & Trusts Law § 5-1.1-A. Pursuant to the Plans, if the beneficiary designations are 10 The operative verb in § 3-5.1(b)(2) is “devolves” – “such property devolves when not disposed of by will.” The dictionary definition of “devolve” is “to pass (on) to another or others: said of duties, responsibilities, etc..” New World Dictionary, Second Edition. Devolve is used in four sections of the N.Y. Est. Powers & Trusts Law in addition to § 3- 5.1(b)(2). In each section it is used to reference a passage of power, as defined in the dictionary: § 8-1.3 (“Certain charitable trusts regulated”) (“…such duties and powers devolve upon and shall be performed…”); § 8-1.4 (“Supervision of trustees for charitable purposes”) (“..all functions, powers…devolved upon and assumed by…”); § 10-6.8 (Imperative power of appointment; effectuation”) (“…power of appointment devolves upon the supreme court…”); and § 10-10.1 (Power to distribute principal or allocate income; restriction on exercise”) (…its exercise devolves on the surrogate’s court..”). 29 void, the proceeds, under the rules of intestacy, will go to the personal representative of the Estate. [A-72-73, A-112 ]. Reviewing the transfer of nonprobate assets is a regular part of the probate process. Such a review commonly occurs where, as here, the validity of a beneficiary designation is disputed, so that, if the designation is voided, the nonprobate proceeds are distributed pursuant to a will or the rules of intestacy. Set forth below are a few of the numerous cases in support of this proposition, see, e.g., In re Estate of Sugg, 12 N.Y.S.3d 842, 2015 WL 3970721 (turnover proceeding involving former wife’s possession of life insurance policy proceeds, “an asset” of decedent’s estate); Colavito v. Colavito, 2015 WL 292034 (Sup. Ct. Jan. 22, 2015) (denying wife’s claim to decedent husband’s life insurance and death benefits); In re Walker, 117 A.D.3d 838 (2d Dept. 2014) (turnover proceeding as to correct beneficiary of decedent’s life insurance policy); see also In re Thomas, 63 A.D.3d 1081. The case law shows unequivocally that the transfer of nonprobate assets is reviewed as part of probate, whether pursuant to a will or the rules of intestacy. Nonetheless, Appellants next argue that the reach of § 3-5.1 (b)(2) is limited by its inclusion in Article 3 of the N.Y. Estates, Powers & Trusts Law. Section 3- 5.1 (b)(2) is part of Article 3, Part 5, which is titled “Rules Governing Wills Having Relation to Another Jurisdiction.” Therefore, Appellants conclude, the 30 choice of law directive of § 3-5.1 (b)(2) is restricted to situations involving a will, and cannot apply when, as with Reverend Flesher, the decedent “did not have a valid Will at the time of his death.” [App. Br. at 18]. Appellants’ view of the N.Y. Est. Powers & Trust Law is overly restrictive. True, Article 3 contains the law of wills, and Article 4 contains the law of intestacy. But the articles of the N.Y. Estate Powers & Trust Law are not isolated islands that do not relate to one another. As even Appellants concede, the choice of law provision in § 3-5.1 (b)(2), and its companion for real property in § 3- 5.1(b)(1), state the rule for intestacy. This is so even though the rule for intestacy is stated in Article 3 (wills) and not Article 4 (intestacy). It logically follows to have the choice of law provision for all personal property “not disposed of by will” in one coherent section, rather than in separate provisions in various sections for wills, intestacy, and nonprobate transfers.11 In any event, as discussed herein, a 11 The devices listed in N.Y. Est. Powers & Trust Law § 13-3.2(a) are all substitutes for wills but need not be executed like wills. Nonetheless, through the 1950s, New York courts continued to void beneficiary designations for pension, retirement and insurance proceeds for failure to comply with the execution requirements of a will. Kane v. Union Mut. Life Ins., 84 A.D.2d 148, 151 (2d Dept. 1981). To address this specific issue, the Legislature enacted former section 24-a of the Personal Property Law, the predecessor of N.Y. Est. Powers & Trust Law § 13–3.2: that designations “shall not be impaired or defeated by any statute or rule of law governing the transfer of property by will, gift or intestacy.” § 13–3.2 (a). Id. The words of a statute are intended to be understood within context. N.Y. Est. Powers & Trust Law, Part 2: Definitions. Contrary to Appellants’ suggestion, [App. Br. at 38], the context of the § 13–3.2 (a) language is limited – a beneficiary designation is not to be voided, even if it is not executed in the manner of a will, “provided that the designation is made in writing, is signed by the person making it, and is…made in accordance with the rules prescribed for the pension plan or is agreed to by the insurer.” Id. Under a broader reading, the § 13–3.2 (a) “will 31 common part of the probate process is to review the type of beneficiary designations at issue here to determine one’s entitlement to the assets. Appellants misread McCarthy v. Aetna Life Next, Appellants argue that this Court already has interpreted § 13–3.2 to exclude nonprobate proceeds and further argues that, if it has not already done so, it should as a matter of public policy. [App. Br. at 21-23, 36-39]. Appellants’ arguments are based upon their misguided interpretation of McCarthy v. Aetna Life, 92 N.Y.2d 436 (1998) rev’g 231 A.D.2d 211 (1st Dept 1997). In McCarthy, the decedent, when married, had designated his wife as the beneficiary of his group life insurance policy (governed by Delaware law). Id. at 437-439. Subsequent to their divorce, while domiciled in Pennsylvania, the decedent had prepared a holographic will, which voided the insurance policy beneficiary designation to his former wife. Id. The decedent, however, had failed to alter the named beneficiary (his ex-wife) on the insurance policy. Id. at 439. The McCarthy court could have applied any of three laws to determine whether the holographic will was effective to revoke the beneficiary designation: New York (the situs of the lawsuit), Delaware (the governing law of the insurance substitutes” would not be subject to the revocation statute [§ 5–1.4 (a)] or the spousal right of election [§ 5–1.1 (A)]; however, “will substitutes,” with a few specific exceptions, clearly are subject to both statutes. 32 contract), or Pennsylvania (the place where the decedent executed the holographic will and was domiciled at death). Id. at 440-441. As Appellants note correctly elsewhere in their brief, the first rule of applying a choice-of-law analysis is that the analysis is unnecessary if the outcome will be the same no matter which state’s law is applied. [App. Br. at 23-24]. (“Absent an actual conflict of laws, New York courts will forego a choice of law analysis”). Indeed, the McCarthy court applied this well-accepted choice-of-law principle. This Court did not engage in any analysis or determination of which state law applied , and all the judges, both at the Appellate Division and this Court, agreed that “under Pennsylvania, Delaware and New York law, the method prescribed by the insurance contract must be followed in order to effect a change of beneficiary form.” McCarthy, 92 N.Y.2d at 440.12 12 Nor is Appellants argument furthered by Neto v. Thorner, 718 F.Supp. 1222 (S.D.N.Y. 1989). There, the decedent died, and had a will probated, in Brazil. Id. at 1222-1223. Among decedent’s personal property was a Totten trust with a designated beneficiary. Id. Under Brazilian law, decedent’s will revoked the beneficiary designation. Under New York law, the will did not revoke the designation. Id. at 1224-1225. The district court decided to not apply § 3-5.1(b)(2). In a case predating the enactment of § 3- 5.1 (b)(2), this Court had determined that a Totten trust was a unique device by which a trust creator specifically intended that the law of his domicile not apply to determine rights under the trust. Id. at 1225-1226. Therefore, the Neto court concluded, Totten trusts had been placed outside the application of the “law of the decedent’s domicile” rule, and when the Legislature rewrote the Totten trust statute in 1975, it did not address which law should apply. The reasoning of Neto has no application here. Pension and insurance plans are not Totten trusts. Unlike a Totten trust, pension and insurance plans are not designed with an express intent to avoid the law of the creator’s (or decedent’s) domicile. 33 Were the McCarthy case to occur today (and were New York law governing), the former spouse named in the beneficiary designation, by operation of law, would be treated as if she “had predeceased” the decedent and her designation as beneficiary would be void. See § 5-1.4(a)(b)(1). McCarthy’s discussions regarding the insurance contract provision, which narrowly defined how a beneficiary designation might be altered, and the decedent’s failure to comply with such provision – discussions at the heart of the McCarthy holding – will, due to current law, no longer be an issue. The premise of the discussion in McCarthy is the recognition that the intent of the party making the beneficiary designation is paramount. The reluctance to interfere with that intent is why courts are leery to permit alteration – by will or otherwise – of the written statement of intent as expressed in a beneficiary designation. But the nature of this discussion has changed. Legislatures have recognized the obvious: Divorced people do not wish to give property to their former relatives, and if they do not alter a revocable designation regarding insurance proceeds (or property transferred by will, totten trust, or any other mechanism), the failure to change is due to neglect, not intent. [See RA-54-57]. The enactment of the revocation statutes is a recognition of this over-arching intent 34 that the revocable transfers be revoked, whether or not the insurance companies forms are correctly completed. To apply the decedent’s intent – the premise of the revocation statutes – is where revocation and the principle underlying the McCarthy holding are joined. Nonetheless, based on McCarthy, Appellants present a “parade of horribles” that will occur unless this Court confirms that § 3–5.1(b)(2) does not apply to nonprobate assets, e.g., “If group plans, such as MMBB plans here, are permitted to be adjudicated on a choice-of-law basis that mandates the law of the decedent’s domicile over the law designated in the plans…all designated beneficiaries would be automatically abrogated, as such benefits would be deemed as belonging to the decedent, and necessarily, therefore, further deemed assets belonging to the decedent’s estate.” [App. Br. at 36-37]. Appellants misunderstand the district court’s application of § 3–5.1(b)(2). The district court did not ignore the governing law of the Plans. Rather, the district court applied the Plans’ governing law: New York’s body of law includes the N.Y. Est. Powers & Trusts Law, which, in turn, contains § 3–5.1(b)(2), which, in turn, instructed the district court to apply the law of the jurisdiction – Colorado – in which the decedent was domiciled at death. [A-230-242]. The district court’s application of § 3–5.1(b)(2) is consistent with this Court and New York State appellate courts’ application of this statute. See Southeast Bank, N.A., 66 N.Y.2d 35 910; see also In re Estate of Donahue, 262 A.D.2d 840; In re Thomas, 63 A.D.3d 1081. Appellants’ basic argument is that the terms of an insurance policy are sacrosanct, and no law – neither New York nor Colorado – can alter the policy’s terms with respect to the abrogation or alternation of a beneficiary. [App. Br. at 37]. Appellants’ complaint is that no statute, not even New York’s own revocation statute, can deprive the former wife of the monies that she believes are hers as a matter of right or, at least, contract law. But the revocation statutes, as well as judicial precedent, suggests otherwise. As recognized, the interest to be protected is not that of an insurance company’s convenience, but rather that of the decedent, who has the greatest interest in the manner in which his property is disposed upon his death. Indeed, the very purpose of enactment of the revocation statutes is to protect the decedent’s intent. The general rule of personal property, as has been the law for generations, is expressed in § 3–5.1(b)(2) – the law of decedent’s domicile is applied to issues regarding personalty. Reverend Flesher chose to be domiciled in Colorado, and it is the Colorado revocation statute that expresses his intent. But, Appellants argue, insurance companies “would be saddled with an extraordinarily difficult task” if they had to know the law of a decedent’s domicile before issuing payments. [App. Br. at 39]. 36 Not at all. Insurance companies presumably know where their customers are domiciled when living. Where people live is typically where they die. That companies will need to know the applicable law is reasonable practice, which is neither burdensome nor complex. Appellant notes that MMBB “likely insures plans participants in all (50) states.” [Id.]. Either a state – such as New York or Colorado – has enacted a revocation statute, or it has not. And, if a state does have such a statute, it’s either a spouse-only statute (like New York), or a spouse-plus relatives statute (like Colorado). Contrary to Appellants’ suggestion, insurance companies and pensions plans should be informed of states’ revocation statutes. The McCarthy case is a such an example. Husbands and wives will continue to divorce, and, invariably, continue to not revoke the designation of their respective spouse as the beneficiary. Were the McCarthy case to reoccur today, the question would not be, “Did the decedent correctly revoke the designation by will?” Rather, the question would be, “Since the husband and wife had divorced, which states’ revocation statute applies – New York, Delaware or Pennsylvania?” Certainly, in order to pay benefits, insurance and other companies cannot avoid educating themselves on the information required to apply § 3–5.1(b)(2). Such knowledge is a requisite part of their business and, accordingly, section 3–5.1(b)(2) is a benefit to the industry. It contains an unequivocal choice-of-law 37 directive that provides a roadmap as to which state’s revocation statute applies. The premise of the directive – to apply the law of the decedent’s domicile – is consistent with the well-understood, long-standing principle that, in matters of personal property, the law of the owner’s domicile applies. Rather than create confusion, § 3–5.1(b)(2) resolves confusion. Based upon the foregoing, the second certified question should be answered in the affirmative. CONCLUSION For all of the foregoing reasons, this Court should answer the first and second certified questions in the affirmative. Dated: New York, New York August 6, 2015 Respectfully submitted, CARLTON FIELDS JORDEN BURT, P.A. By: __________________ Brian Rosner brosner@cfjblaw.com Natalie A. Napierala nnapierala@cfjblaw.com 405 Lexington Ave., 36th Floor New York, NY 10174-0002 Telephone: (212) 785-2577 Facsimile: (212) 785-5203 Attorneys for Interpleader-Defendants-Appellees the Estate of Clark Flesher and Michele Arnoldy, Individually and as Personal Representative of the Estate of Clark Flesher APPENDIX TABLE OF CONTENTS Page Brief of Interpleader Defendants-Cross-Claimants- Appellants filed on June 24, 2014 ......................... RA-1 Brief of Interpleader-Defendants-Appellees filed on August 21, 2014 ..................................................... RA-38 Reply Brief of Interpleader Defendants-Cross- Claimants-Appellants filed on September 4, 2014 RA-72 Certification Pursuant to CPLR § 2105 ..................... RA-90 Case: 14-1021 Document: 68 Page: 1 06/24/2014 1256313 37 14-1021-cv UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT THE MINISTERS AND MISSIONAIRES BENEFIT BOARD, Interpleader-Plaintiff-Cross-Defendant-Appellee -v.- LEON SNOW AND LEANN 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 On Appeal from an Order of the United States District Court for the Southern District of New York BRIEF OF THE INTERPLEADER DEFENDANTS-CROSS-CLAIMANTS- APPELLANTS Jesse T. Wilkins Gregory R. Preston PRESTON & WILKINS, LLC 3000 Hempstead Turnpike, Suite 317 Levittown, NY 11756 Tel: 212-809-5808 Fax: 212-898-9034 BRIEF OF INTERPLEADER DEFENDANTS-CROSS-CLAIMANTS-APPELLANTS FILED ON JUNE 24, 2014 [RA-1-RA-37] RA-1 J J j J Case: 14-1021 Document: 68 Page: 2 06/24/2014 1256313 37 TABLE OF CONTENTS TABLE OF AUTHORITIES. .. ............ ...... .. ...... .... ... .. ...... .... ..... .... m PRELIMINARY STATEMENT.. . .. .. . .. .. . . .. . ... ... . .. . ... .. ... . ........ ..... ... . 1 JURISDICTIONAL STATEMENT. ...... .. . . . .. . ... . .. . .... . .... . .. . ... . .. . .. .. ... 1 STATEMENT OF ISSUES PRESENTED FORREVIEW. .. .. .... .. ... .. .. . .. .. 2 STATEMENT OF THE CASE..................... . ..... .... ... ...... .. .. ....... .... 3 STATEMENT OF FACTS ... .. .. . .. .. . ..... . . . ... .... ..... .... ...... . ........ . . . .. .. . 3 SUMMARY OF ARGUMENT....... ........ . ... . .. ........ ... ........ . .... ... . . .... 10 ARGlJMENT. ......... . .......... . ....... ............ . ..... . ...... . ... ... .. .. ...... . ... 12 I. THE STANDARD OF REVIEW FOR A GRANT OF SUMMARY JUDGMENT BY THE DISTRICT COURT.. .. ... . . . . . ... . . ........... . .. . .. . . 12 II. THE DISTRICT COURT ERRED IN ITS APPLICATION OF A LEGAL STANDARD BASED UPON THE LAW OF THE DOMICILE OF THE DECEDENT. ......... ....... .. . .... . ............... .. . . .. 14 A. The Choice of Law Provisions in the MMBB Plans Governing the Disputed Funds Are Controlling in the Determination of the Right to the Disputed Funds, as Between The Snows and The Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 B. The District Court Erred in Ruling that the Disputed Funds, by Definition, Are Personal Property Belonging to the Decedent..... . . 16 C. The Right to the Disputed Funds Is Properly Determined by New York Contract Law Applicable to Life Insurance Contracts Rather Than by Colorado Probate Law.. .... .. . . . . . . . . . . . . . . . . . . . . . . . . . .. . 20 i RA-2 .. . . . . .. . . . . . III .. . .. . . . . . . . . .. . . .. . . .. . .. . . . . . . . . . . .. . . .. . .. .. . . . . . . . . . . .. . . .. . . . .. . . . . .. . . . .. . . . . . . . . . . . . . .. . . . . . . .. . . . . nn . ....... . . . . . . t. . nn . . Case: 14-1021 Document: 68 Page: 3 06/24/2014 1256313 37 D. Public Policy Mandates the Application of New York Law in Determining the Right to the Disputed Funds, as Between Page The Snows and The Estate ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 III. THE DISTRICT COURT ERRED IN ITS RULING THAT THE DECEDENT'S DOMICILE AT THE TIME OF THE DECENT'S DEATH DETERMINED THE RIGHTS TO THE DISPUTED FUNDS, AS BETWEEN THE SNOWS AND THE ESTATE.............. 25 CONCLUSION................... .. ... . .... ................... ....................... ... 30 CERTIFICATE OF COMPLIANCE..... ....... .. .. ...... ... ..... ..... ... ..... ..... 31 ii RA-3 . . .. . . . . . . . . . . .... . . . . . . . . . . I NCE..... . .. . . . . Case: 14-1021 Document: 68 Page: 4 06/24/2014 1256313 37 TABLE OF AUTHORITIES CASES Page 2004 Stuart Moldaw Trust v. XE L.I.F.E. , LLC, 642 F. Supp. 2d 226 (S.D.N.Y. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Adelphia Recovery Trust v. Goldman Sachs & Co., 748 F.3d 110 (2d Cir. 2014) .. .. .. .. .. .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ... 12 Adickes v. S.H Kress & Co. 1 398 U.S. 144 (1970) .. . .. .. .. .. . .. .. .. .. .. . .. .. .. ... 12 Amoco Transport Co. v. Dietze, Inc., 582 F. Supp. 804 (S.D.N.Y. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 20 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) . .. . .. .. .. .. .. . .. . .. . .. .. . .. 13 Bank of N.Y. v. Yugoimport, 745 F.3d 599 (2d Cir. 2014)..................... 12, 14 Celotex Corp. v. Catrett, 477 U.S. 317 (1986)................................... ... 13 Dargahi v. Hymas, 2008 U.S. Dist. LEXIS 122295 (S .D.N.Y. Oct., 15, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15 Estate of Rudolph, 2007 N.Y. Misc. LEXIS 6450 (N.Y. Sur. Ct. Aug. 31, 2007) .. ................................................. 19 In re Estate of Donahue, 692 N.Y.S.2d 225 (N.Y. App. Div. 1999) .... . .. . ...... 27 In re Estate of King, 764 N.Y.S.2d 519 (N.Y. Sur. Ct. 2003) ...... .... ...... .. ... 19 In re Hosley v. Curry, 626 N.Y.S.2d 32 (N.Y. 1995) .......... .. ........ .. ........ .. 27 Knight v. US. Fire Ins. Co., 804 F.2d 9 (2d Cir. 1986) cert. denied, 480 U.S. 932 (1987) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 13 Koob v. IDS Fin. Servs., 629 N.Y.S. 2d 426 (N.Y. App. Div. 1995) .............. 14 iii RA-4 , .. ........ .. . . ... . . . . . . . . ............ ., . . . . . ......... .. ................... .. . .. . .. f Y . 14) ... , . 986) .................................... , . . .................... , 0/ . . / . . . .. . .S. . . . . . . .. . Case: 14-1021 Document: 68 Page: 5 06/24/2014 1256313 37 Page Lefkowitzv. BankofNew York, 528 F.3d 102 (2dCir. 2007) ....................... 28 Marshall v. Marshall, 547 U.S. 293 (2006) ........................................... 28 Ministers & Missionaries Benefit Bd. v. Estate of Estate of Flesher, 2014 U.S. Dist. LEXIS 37822 (S.D.N.Y. Mar. 18, 2014) .................. 1, 3 McCarthy v. Aetna Life Ins. Co., 661 N.Y.S.2d 625 (N.Y. App. Div. 1997) ...... 17 McCarthy v. Aetna Life Ins. Co., 92 N.Y.2d 436 (N.Y. 1998) ......... 18, 20, 23, 24 NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 2013 U.S. Dist. LEXIS 17480 (S.D.N.Y. Feb. 8, 2013) .. .. .. .. .. .. .. .. .. .. . 12 Neto v. Thorner, 718 F. Supp. 1222 (S.D.N.Y. 1989) ....................... 15, 16, 18 Reger v. National Ass 'n of Bedding Mfrs. Group Ins. Trust Fund, 372 N.Y.S.2d 97 (N.Y. Sup. Ct. 1975) .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ... 15 Scottish Air Int'l, Inc. v. British Caledonian Group, PLC, 867 F. Supp. 262 (S.D.N.Y. 1994) ............................................. 12 Skandia Am. Reinsurance Corp. v. Schenck, 441 F. Supp. 715 (S.D.N.Y. 1977) ............................................. 15 Tairi v. Holder, 2014 U.S. App. LEXIS 7650 (2d Cir. Apr. 24, 2014) ............ 13 Texas v. Florida, 306 U.S. 398 (1939) ............................................ 27, 28 William Penn Life Ins. Co. v. Viscuso, 569 F. Supp. 2d 355 (S.D.N.Y. 2008) . .......................................... . ......................... 20, 21 Zervos v. Verizon NY., Inc., 252 F.3d 163, (2d Cir. 2001) ........................ 13 iv RA-5 f . , , , , , , . . . . . . . . . . . . . . . .. . . , . . ..... , izon l Case: 14-1021 Document: 68 Page: 6 06/24/2014 1256313 37 STATUTES Page 28 u.s.c. §1291 . . . . . . . . . . . . . . .. . . . . . . . . . . ... . .. . . . . . .. ... ..... . . . ..... . . . . . . .. . . . . . . . . .. 1 28 u.s.c. § 1294 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 28 u.s.c. § 1332 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 28 u.s.c. § 1335 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 N.Y. Est. Powers & Trusts Law §3-5.1(a)(2) .............................. 11, 16, 19 N.Y. Est. Powers & Trusts Law §3-5 .1 (b )(2) .. .. .. . .. .. .. .. .. . .. 10, 16, 17, 18, 19 N.Y. Est. Powers & Trusts Law § 5-1.4 . . . .. .. . . .. . . .. . .. .. . .. .. .. .. . . .. .. .. . .. .. 21 N.Y. Est. Powers & Trusts Law 5-1.4(a) . .. .. .. . .. .. .. . .. .. .. . .. .. . .. .. .. . .. .. ... 21 N.Y. Est. Powers & Trusts Law§ 13-3.2 . .. .. . .. .. .. .. .. . . .. .. .. . .. .. .. .. .. . .. ... 19 N.Y. Est. Powers & Trusts Law §13-3.2(a) .. .. ................. .. .. .... .... . ..... 23 RULES Fed. R. Civ. P. 56( c) ......... .. ........ .. ......... ... .. .. .. ... ............. . ... .. .... 12 v RA-6 U S C ... ... . . . . . . . .. . U S.C. .... . . .. . .... . .. .. . U S C. ............ . ... ... . .. .. U S C. . .......... .... .. .. ..... . . . . .... , , , . . .. . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . Case: 14-1021 Document: 68 Page: 7 06/24/2014 1256313 37 PRELIMINARY STATEMENT Interpleader-Defendants-Cross-Claimants-Appellants Leon Snow and LeAnn Snow (hereinafter "The Snows") appeal from a final judgment (JA242) entered pursuant to a decision rendered by the United States District Court for the Southern District of New York (Forrest, J.) granting summary judgment in favor of the Interpleader-Defendants-Appellees The Estate of Clark Flesher, Michele Arnoldy, Individually & as Personal Representative of The Estate of Clark Flesher (hereinafter "The Estate"), and denying The Snows' motion for summary judgment. The district court decision is reported as Ministers & Missionaries Benefit Bd. v. Estate of Estate ofFlesher, 2014 U.S. Dist. LEXIS 37822 (S.D.N.Y. Mar. 18, 2014). JURISDICTIONAL STATEMENT The district court had subject matter jurisdiction over this interpleader action pursuant to 28 U.S.C. §§ 1332 and 1335. This Court has jurisdiction of this appeal from a final decision of a United States District Court for the Southern District of New York pursuant to 28 U.S.C. §§ 1291 and 1294. The Snows appeal from the Memorandum Decision and Order (hereinafter the "Order") dated March 18, 2014, granting summary judgment in favor of The Estate. (JA229). A final judgment was entered in the court below on March 26, 2014. (JA242). The Snows filed a timely notice of appeal on April 7, 2014. (JA244). 1 RA-7 a/ , . Case: 14-1021 Document: 68 Page: 8 06/24/2014 1256313 37 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW 1. Whether the district court applied the correct legal standard in determining which of the interpleader defendants (The Snows or The Estate) is entitled to the Disputed Funds (the proceeds of the life insurance plan and the retirement plan benefits). 2. Whether the choice oflaw provisions that are contained in the Plans governing the Disputed Funds are controlling in the determination of the right to the Disputed Funds, as between The Snows and The Estate. 3. Whether the Disputed Funds, by definition, are personal property belonging to the decedent, when the Disputed Funds have designated beneficiaries, including the former spouse of the decedent. 4. Whether the right to the Disputed Funds, as between The Snows and The Estate, is to be determined by the New York law of contracts applicable to insurance contracts, rather than by Colorado probate law. 5. Whether the decedent's domicile at the time of the decedent's death is controlling in the determination of the right to the Disputed Funds, as between The Snows and The Estate, and if the decedent's domicile is controlling, whether the decedent was domiciled in Colorado. 2 RA-8 m Case: 14-1021 Document: 68 Page: 9 06/24/2014 1256313 37 STATEMENT OF THE CASE An interpleader action was brought by the filing of a complaint by The Ministers and Missionaries Benefit Board ("The MMBB") in December 2011 before the United States District Court for the Southern District of New York against the two interpleader defendants, The Snows and The Estate. (JA12). This matter, originally assigned to the Hon. Thomas P. Griesa, USDJ, was subsequently transferred to the Hon. Katherine B. Forrest, USDJ. Upon the submission of motions for summary judgment by The Snows and The Estate, Judge Forrest, by Memorandum Decision and Order dated March 18, 2014, ruled on the summary judgment motions in favor of The Estate, thereby awarding the Disputed Funds to The Estate, and denied the Snows' motion for summary judgment. (JA229). The judgment was entered thereafter on March 26, 2014. See JA242; Ministers & Missionaries Benefit Bd. v. Estate of Estate of Flesher, 2014 U.S. Dist. LEXIS 37822 (S.D.N.Y. M:ar. 18, 2014). The Snows filed a timely Notice of Appeal on April 7, 2014. (JA244). This appeal followed. STATEMENT OF FACTS The Interpleader Defendants Named as Designated Beneficiaries LEANN YOWELL SNOW, is currently known, officially and professionally, as Rev. Dr. LeAnn Snow Flesher (hereinafter "LeAnn Snow"). 3 RA-9 I . , . Case: 14-1021 Document: 68 Page: 10 06/24/2014 1256313 37 (JA192, ,-r 1). During the time period from August 1989 through July 1994, LeAnn Snow Flesher was married to Rev. Clark Flesher, the named decedent herein (hereinafter "Clark Flesher"). (JA192, ~ 2). During this time period (1989 through 1994) both LeAnn Snow Flesher and Clark Flesher lived and worked in the New Jersey/New York area. (JA192, ,-r 2). When Clark Flesher began in the employ of Ridgewood Baptist Church in Queens, New York in October 1989, he entered into the RP and the DBP administered by the Ministers and Missionaries Benefit Board Fund (hereinafter "MMBB") for the first time. (JA192, ~ 6). The MMBB is a not-for-profit pension fund incorporated in the State of New York and with its principal place of business in the New York County. (JA197, ~ 4). When Clark Flesher entered into the RP and the DBP in New York, he named LeAnn Snow as the primary beneficiary on each of the plans. (JA192, ,-r 7). In 2002, Clark Flesher resubmitted his designated beneficiary forms for the RP and DBP to MMBB in New York. (JA197, ~ ~ 11 & 12; JA113; JA115). LeAnn Snow became employed with the American Baptist Seminary of the West in Berkeley, California in August 1994. (JA192, ,-r 9). In the fall of 1994, Clark Flesher recreated his beneficiaries on his RP and DBP, and LeAnn Snow created her beneficiaries for the RP and DBP for the first time. (JA192, ~ 1 0). Clark 4 RA-10 ~ ~ I . I ~ I I I ~ Case: 14-1021 Document: 68 Page: 11 06/24/2014 1256313 37 Flesher and LeAnn Snow named each other as the primary beneficiaries on their respective RPs and DBPs. (JA192, ~ 11). The Divorce of Interpleader Defendant LeAnn Snow Flesher and the Marital Settlement Agreement. In October 2008, Clark Flesher and LeAnn Snow met jointly with their respective attorneys to finalize a financial agreement in connection with the termination of their marriage. (JA192, ~ 14). During this meeting a great deal of discussion centered on how Clark Flesher and LeAnn Snow had worked jointly to build joint assets over a 28-year period which was now ending. (JA192, ~ 14). The terms of the subsequent divorce were expressed in a Marital Settlement Agreement (hereinafter "Marital Agreement") between LeAnn Snow and Clark Flesher. (JA117). Pursuant to paragraph 9 of the Marital Agreement, additional specific actions were required to be taken by the parties to the agreement, or alternatively, third-parties acting on their behalf. (JA117, page 3 of 12, ~ 9). It was expressly understood and agreed to by the parties thereto that a Qualified Domestic Relations Order was to be ·prepared, in the first instance by the MMBB, and in the event that MMBB did not so act, then the parties were to retain an entity identified as Moon, Madden and Schwartz, presumably a company that specialized in the preparation ofQDRO's. (JA117, page 3 of 12, ~ 9). Paragraph 9 of the agreement further provides that "once the QDRP has been finalized and the equalization 5 RA-11 m . I Case: 14-1021 Document: 68 Page: 12 06/24/2014 1256313 37 payment made, each party is awarded the retirement account in their respective names. (JA117, page 3 of 12, ~ 9). Undoubtedly, additional action was required by LeAnn Snow and/or Clark Flesher before each party would be deemed the owner of his or her respective accounts. Quite simply, no such actions were ever taken. (JA192, ~ ~ 20 & 21; JA197, ~ 14). Pursuant to the terms of the Marital Agreement, the parties were awarded the life policy insuring their own life and were authorized immediately to change the beneficiaries thereof. (JA117, page 3 of 12, ~ 10). Yet, nearly three years after the Marital Agreement was signed, and at the time of the death of Clark Flesher, neither party to the said agreement had moved to change designated beneficiaries on either of the respective MMBB plans. (JA192, ~ ~ 20 & 21; JA197, ~ ~ 14 & 21). Following the divorce, which became official in December 2008, LeAnn Snow was contacted several months thereafter by the regional MMBB representative to discuss closure of her RP and DBP. (JA192, ~ 15). The MMBB representative advised LeAnn Snow that he had already met with Clark Flesher to have a similar discussion regarding closure of the RP and DBP for Clark Flesher. (JA192, ~ 16). During the meeting with LeAnn Snow, the MMBB representative advised on the procedure to obtain a qualified domestic relations order ("QDRO") and inquired of LeAnn Snow whether she wished to re-evaluate the beneficiaries on her RP and DBP. (JA192, ~ 17). The MMBB representative, shortly following the meeting with 6 RA-12 l l I I J'vTh.1B Case: 14-1021 Document: 68 Page: 13 06/24/2014 1256313 37 LeAnn Snow in October 2008, sent the relevant materials for the QDRO and change of beneficiaries for the M11BB plans. (JA192, ~ 18). The change ofbeneficiaries on the RP and DBP was a very simple process which simply required that the owner of the plan fill in two blanks on a form, sign it and mail in a self-addressed envelope to MMBB in New York. (JA192, ~ 19). Ultimately, LeAnn Snow chose to neither change the beneficiaries on her RP and DBP, nor implement the process for the QDRO. (JA 192, ~ 20). Shortly after the death of Clark Flesher, LeAnn Snow Flesher was contacted by MMBB and made aware that neither had Clark Flesher changed the original designated beneficiaries on his RP and DBP. (JA192, ~ 21). Decedent Clark Flesher's Designated Beneficiaries Pursuant to the Retirement Plan and the Death Benefit Plan At the time of the death of Clark Flesher, the approximate worth of the total benefits from the RP and the DBP was in excess of$400,000.00. (JA197, ~ ~ 15 & 22). The funds from the plans were located in New York County. (JA194, ~ 4). Pursuant to the terms of the MMBB plans, the RP and DBP are governed by New York law. (JA46, page 44, ~ 12.10; JA100, page 9, ~ 9.08). An express provision of each of the respective plans provides that when an unmarried member dies before receiving any benefits, the value of the benefits shall be paid to the member's "Designated Beneficiary". (JA46, page 20-21, ~ 7.02; JA100, page 7, ~ 7.02). Each plan specifically provides that the plan's members shall designate their beneficiary in a writing submitted to MMBB at the New York County office of MMBB. A 7 RA-13 M I be fi : I ,-r ,-r I r $400, I ,-r,-r I ,-r ,-r I ,,-r I ,-r : Case: 14-1021 Document: 68 Page: 14 06/24/2014 1256313 37 change of beneficiary or a revocation of a beneficiary is not effective until a form designating a new beneficiary is provided by the plan member to the New York County office. (JA46, page 20-21, ~ 7.02; JAlOO, page 7, ~ 7.02). Pursuant to the RP and DBP provisions, the divorce of a member has no effect on the designation of a Beneficiary. (JA46, page 20-21, ~ 7.02; JA100, page 7, ~ 7.02). At no time did Clark Flesher notify MMBB of a change in designated beneficiary on either ofthe two MMBB plans. (JA197, ~ 21). Yet, records kept by MMBB indicate that Clark Flesher was in constant communication with MMBB' s New York office from as early as November 1989, and subsequently in January 2000, October & December 2001, January 2002, April & July 2008, and February, March and April2009. (JA203, ~ 8). Following Clark Flesher's death in June 2011 in the State of Colorado, Clark Flesher's sister, Michele Arnoldy, a resident of the State ofNorth Carolina, sought to probate Clark Flesher's estate in Colorado and was appointed Personal Representative of the Estate by the Probate Court there in Colorado. (JA207). Subsequently, The Estate commenced a declaratory action in the Colorado Probate Court, arguably naming MMBB as the defendant. On May 22, 2012, the Colorado Probate Court entered an order staying resolution of the proceeding before it until the interpleader action herein was resolved in this Court. (JA207). 8 RA-14 I . IOO : t I 1 . Case: 14-1021 Document: 68 Page: 15 06/24/2014 1256313 37 This Litigation and The District Court Decision Below The MMBB commenced this litigation by way of an interpleader action in December 2011 in the district court and named The Snows and The Estate as interpleader defendants. At issue was whether The Snows or The Estate was entitled to the Disputed Funds being held by MMBB pursuant to plan benefits to which the decedent had named The Snows as designated beneficiaries. MMBB subsequently posted a bond with the court below for the Disputed Funds, and thereafter, MMBB was dismissed from the litigation by court order dated September 25, 2012. This matter, originally assigned to the Hon. Thomas P. Griesa, USDJ, was later transferred to the Hon. Katherine B. Forrest, USDJ. Upon the simultaneously submission of respective motions for summary judgment and supporting memoranda of law by The Snows and The Estate, Judge Forrest, by Memorandum Decision and Order dated March 18, 2014, ruled on the summary judgment motions in favor of the Estate Defendants and awarded the right to the Disputed Funds to The Estate. The district court, relying on a provision of the New York Estate Powers and Trust Law, reasoned that the provision provided the basis for a choice oflaw analysis that resulted in Colorado probate law being the applicable law to determine the ultimate right to the Disputed Funds, which the district court found to be the decedent's personal property. On this basis, the district court concluded that The Estate was entitled to the Disputed Funds that were the subject of the litigation. 9 RA-15 . , Case: 14-1021 Document: 68 Page: 16 06/24/2014 1256313 37 SUMMARY OF ARGUMENT The district court decision is the result of a clear error of law. The decision below runs counter to a long line of judicial decisions in which cases on facts similar to those of the matter herein were decided differently and the conclusions reached in those cases were quite opposite to the district court's conclusion reached below. In finding that The Estate is entitled to the Disputed Funds, the district court erroneously relied upon a statutory provision in the New York Estate Powers and Trusts Law (N.Y. Est. Powers & Trusts Law§ 3-.5.1 (b)(2)) and ruled that the law of the decedent's domicile at the time of the decedent's death determined the rights to the Disputed Funds, which were non-probate assets, and improperly determined by the court to be personal property of the decedent. The district court, in error, completely disregarded the choice of law prov1s10ns expressly made part of the MMBB plans, which governed the disbursement of the Disputed Funds pursuant to the RP and the DBP. Pursuant to the MMBB plans, the substantive law of New York would govern any and all disputes arising in regard to the plans, and any disbursements to be made pursuant to the plan benefits. Although, an application ofNew York substantive law, arguably would possibly preclude the right of LeAnn Snow, as the former spouse of the decedent, to claim the Disputed Funds, New York law would not defeat Leon 10 RA-16 OVlSlo . . Case: 14-1021 Document: 68 Page: 17 06/24/2014 1256313 37 Snow's right to the Disputed Funds, as Leon Snow is the designated contingent beneficiary to these funds. In numerous decisions, rendered in the very district in which the district court sits, the courts ruled that in interpleader actions, in which multiple interpleader defendants claimed the right to various insurance and retirement plan benefits, the substantive law of the forum state should be applied. In essence, these very courts ruled that the law of insurance contracts was applicable to such interpleader controversies. These courts, therefore, would honor the choice of law provisions in the contract policies, rather than look to laws of another jurisdiction outside the forum state. The district court, in ruling that the Disputed Funds are personal property belonging to the decedent, disregards the basic premise that life insurance policies and retirement plan benefits with designated beneficiaries are non-probate assets which pass outside of a decedent's estate. The district court cites no legal authority for its determination, but rather, simply relies upon another statutory provision, N.Y. Est. Powers & Trusts Law § 3-5.l(a)(2) to define the Disputed Funds as personal property of the decedent. A public policy mandate reqmres that group plans that provide death insurance benefits and retirement benefits should be uniformly administered with a great degree of certainty by plan administrators. As the New York Court of Appeals 11 RA-17 nn . 1 ( UI nn Case: 14-1021 Document: 68 Page: 18 06/24/2014 1256313 37 has opined, if a change in beneficiary can be made by testamentary disposition, then a serious question arises as to the payment of life insurance policies. Accordingly, an adjudication on the basis of a choice of law that favors the decedent's domicile at the time of the decedent's death over the law designated in the group plans would undermine explicit policy decisions rendered by the New York legislature, as well as the decisions of other New York courts. ARGUMENT I. THE STANDARD OF REVIEW FOR A GRANT OF SUMMARY JUDGMENT BY THE DISTRICT COURT On an appeal from a grant of summary judgment by the district court, this Court reviews de novo whether The Estate was entitled to summary judgment as a matter of law. See Bank of N.Y. v. Yugoimport, 745 F.3d 599 (2d Cir. 2014) (citations omitted); Adelphia Recovery Trust v. Goldman Sachs & Co., 748 F.3d 110, 115 (2d Cir. 2014) (citations omitted). A grant of summary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56( c); NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 2013 U.S. Dist. LEXIS 17480, at* 14 (S.D.N.Y. Feb. 8, 2013). A party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact, Adickes v. S.H Kress & Co., 398 U.S. 144, 157 (1970); Scottish Air Int'l, Inc. v. British Caledonian Group, PLC, 867 F. 12 RA-18 l Y , 'l, . Case: 14-1021 Document: 68 Page: 19 06/24/2014 1256313 37 Supp. 262, 265 (S.D.N.Y. 1994), and the party may discharge this burden by demonstrating to the Court that there is an absence of evidence to support the non- moving party's case on an issue which that party would have the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The existence of a genuine issue of material fact depends on both the genuineness and the materiality of the issues raised by the motion. See Scottish Air, 867 F. Supp. at 266. To evaluate a fact's materiality, "it is the substantive law's identification of which facts are critical and which facts are irrelevant that governs." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "Only disputes over facts that might affect the outcome of a suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be count." Id. (citations omitted); see Knight v. US. Fire Ins. Co., 804 F.2d 9, 11-12 (2d Cir. 1986) cert. denied, 480 U.S. 932 (1987). In reviewing the district court's grant of summary judgment, this Court will review the district court's legal conclusions de novo, and further review the decision to determine if an abuse of the court's discretion has occurred whereby the decision carries an error oflaw such as an application of the wrong legal principle or a clearly erroneous factual finding. See Tairi v. Holder, 2014 U.S. App. LEXIS 7650, at *2 (2d Cir. Apr. 24, 2014); Zervos v. Verizon NY., Inc., 252 F.3d 163 (2d Cir. 2001). 13 RA-19 s t. . Y , . Case: 14-1021 Document: 68 Page: 20 06/24/2014 1256313 37 II. THE DISTRICT COURT ERRED IN ITS APPLICATION OF A LEGAL STANDARD BASED UPON THE LAW OF THE DOMICILE OF THE DECEDENT A. The Choice of Law Provisions in the MMBB Plans Governing the Disputed Funds Are Controlling in the Determination of the Right to the Disputed Funds, as Between The Snows and The Estate. MMBB administers the RP and the DBP, in which the decedent participated up until the time of his death. Each of the plans contain express provisions designating that the plans are to be governed and construed in accordance with the laws ofNew York State. (JA46, page44, at §12.10; JA100, page 9, at §9.08). It is the choice-of- law provision in the RP and the DBP that should be enforced and upheld by this Court. It is well established that New York courts will defer to choice-of-law provisions in valid contracts. Bank ofN.Y v. Yugoimport, 745 F.3d at 609 ("New York choice-of-law rules also require the court to honor the parties' choice-of-law provision insofar as matters of substance are concerned, so long as fundamental polices ofNew York law are not thereby violated.") (internal marks omitted); Koob v. IDS Fin. Servs., 629 N.Y.S.2d 426, 433 (N.Y. App. Div. 1995) ("It is the policy of the courts of this State to enforce contractual provisions for choice-of-law and selection of a forum for litigation"). It is most appropriate to adhere to the law agreed upon pursuant to contract provisions in the context of group life insurance plans. Recognizing the benefits of uniform interpretation of group benefit plans, New York courts have held that it is 14 ____________________________________________________________________________ ! RA-20 I . . . I I , , I _I Case: 14-1021 Document: 68 Page: 21 06/24/2014 1256313 37 particularly appropriate to enforce choice-of-law provisions found within the group life insurance plan. See, e.g., Reger v. National Ass 'n of Bedding Mfrs. Group Ins. Trust Fund, 372 N.Y.S.2d 97, 115-116 (N.Y. Sup. Ct. 1975) ("The rule to be applied is rather simple: in group insurance policies a choice of law provision should be given effect unless it contravenes this State's public policy") (citations omitted); Skandia Am. Reinsurance Corp. v. Schenck, 441 F. Supp. 715, 723 (S.D.N.Y. 1977) ("New York courts will uphold choice oflaw clauses in insurance contracts provided that the law chosen bears a reasonable relationship to the transaction and violates no substantial state public policy.") The decedent was a participant in the RP, and received no payments from the plan prior to his death. The RP, therefore, was the equivalent of a "pay on death" account, which further supports the enforcement of choice-of-law provision in the plan. See, e.g., Dargahi v. Hymas, 2008 U.S. Dist. LEXIS 122295, at* 11 (S.D.N.Y. Oct. 15, 2008) ('where a trust agreement provides for the application of the law of a particular forum, that provision must be enforced"). New York courts have held that such accounts held at New York business entities with "pay on death" to third party provisions are properly subject to New York law, regardless of the domicile of the decedent. Neto v. Thorner, 718 F. Supp. 1222, 1225-1226 (S.D.N.Y. 1989) ("In 1963 [decedent] chose a New York bank as the situs of his Totten trust. Like the Duke and Duchess of Arion, [decedent] elected to have his bank trust account 15 -_I RA-21 I ,11 ) I . , , t Case: 14-1021 Document: 68 Page: 22 06/24/2014 1256313 37 governed by the laws of New York ....... New York should therefore determine the trust's disposition.") (internal citations omitted). The RP and DBP are no less subject to New York law, whether the decedent was ultimately domiciled in New York or elsewhere. The choice of law provisions clearly anticipate and demand that the laws of New York should apply to any determination of rights to the Disputed Funds from the plans. B. The District Court Erred in Ruling that the Disputed Funds, by Definition, Are Personal Property Belonging to the Decedent. The district court's Order held that the proper claimants to the Disputed Funds, as between The Snows and The Estate, should be determined by applying Colorado probate law. (JA229, at 9). In so holding, the district court explicitly relied upon N.Y. Est. Powers & Trusts Law §3-5.1 (b)(2) which reads as follows: The intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property, and the manner in which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death. The same statutory provision defines personal property as "any property other than real property, including tangible and intangible things." See, N.Y. Est. Powers & Trusts Law §3-5.1(a)(2). Without citing any legal authority, the district court held that N.Y. Est. Powers & Trusts Law §3-5.l(b)(2) controlled its choice of law analysis, having determined "[t]he definition of personal property" in N.Y. Est. Powers & Trusts Law §3-5.l(a)(2) plainly covers the Disputed Funds". This 16 ---' RA-22 . " ., . nn nn t nn .l I 1 _ _ I Case: 14-1021 Document: 68 Page: 23 06/24/2014 1256313 37 conclusion reached by the district court is an incorrect one and contrary to the interpretations of this statute by other New York courts. The New York Appellate Division addressed a nearly identical situation to the case at bar in McCarthy v. Aetna Life Ins. Co., 661 N.Y.S.2d 625 (N.Y. App. Div. 1997). Similarly to the instant case, McCarthy involved a dispute over the payment of the proceeds from a group life insurance policy. The McCarthy decedent, like the decedent herein (Flesher), had (1) named his wife as the primary beneficiary on his life insurance policy, (2) divorced his wife, (3) fallen ill, and ( 4) died without formally changing his designated beneficiary on the life insurance policy. After his death, the decedent's ex-wife and the decedent's father each sued to recover the life insurance proceeds. The McCarthy decedent died in Pennsylvania, and the group insurance policy at issue contained a Delaware choice of law clause. In McCarthy, the Appellate Division concluded that the choice of law provision must be enforced, and the law of Delaware, specified in the insurance contract, must be applied: "We would give effect to the choice of law provision in the insurance contract itself to determine a material term going to the heart of the contract, to wit, the enforceability of the technical procedures for changing the designation of beneficiary". McCarthy, 661 N.Y.S.2d at 627. In adopting the choice oflaw provision stated in the insurance contract, the Appellate Division rejected the application ofN.Y. Est. Powers & Trusts Law§ 3-5.l(b)(2), which was strenuously 17 RA-23 . l 1( Case: 14-1021 Document: 68 Page: 24 06/24/2014 1256313 37 argued for by the dissent. McCarthy, 661 N.Y.S.2d at 631. ("EPTL 3-5.1(b )(2) provides that ' [ t ]he intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property, and the manner in which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death.' Since the insured was domiciled at death in Pennsylvania, his holographic will probated in Pennsylvania during the pendency of this action should be construed in accordance with the law ofPennsylvania.") (Andrias, J., dissenting). While the New York Court of Appeals ultimately reversed the decision of the Appellate Division (for reasons discussed further in Section I.D below, the Court left undisturbed the Appellate Division's holding concerning choice of law. McCarthy v. Aetna Life Ins. Co., 92 N.Y.2d 436, 440 (N.Y. 1998) ("Because the result would be the same whether the law of Pennsylvania or Delaware is applied, we need not decide that question."). In an earlier decision, the district court also considered the applicability of N.Y. Est. Powers & Trusts Law§ 3.5.1(b)(2) to Totten trusts and in so doing, noted that Totten trusts have traditionally passed outside the probate estate of the decedent, and the trusts are not deemed as part of the decedent's estate. Neto, 718 F. Supp. at 1225. The question of law presented to the district court in Neto, was whether New York law or the law of the decedent's domicile (outside of New York) governed the Totten trust assets. Id. at 1222-1223. Although the decedent's will purported to 18 RA-24 e l 1 L l t . Case: 14-1021 Document: 68 Page: 25 06/24/2014 1256313 37 disburse the assets to one other than the designated beneficiary of the trust, the district court again rejected the application of N.Y. Est. Powers & Trusts Law § 3.5 .1 (b )(2) to support the argument that ownership of the trust assets was to be determined by the law where the decedent was domiciled at death. The court in Neto explicitly rejected the argument that the trust assets were personal property to be distributed according to the law of the decedent's last domicile. An elementary principle of probate law is that life insurance policies and pension plan benefits with designated beneficiaries are non-probate assets, which do not pass under a decedent's will nor by intestacy. See N.Y. Est. Powers & Trusts Law§ 13-3.2 (McKinney 2013); see also, In re Estate of King, 764 N.Y.S.2d 519, 520 (N.Y. Sur. Ct. 2003) (non-probate assets included term life insurance policy and retirement pension with death benefit payment); Estate of Rudolph, 2007 N.Y. Misc. LEXIS 6450 (N.Y. Sur. Ct. Aug. 31, 2007) (the decedent left non-probate assets which included her life insurance and pension benefits). Accordingly, the MMBB plan benefits are not the decedent's personal property entitled to probate in Colorado, or any other jurisdiction for probate purposes. Similarly, this Court may properly find that the Disputed Funds are not the personal property of the decedent as defined or contemplated in N.Y. Est. Powers & Trusts Law§ 3.5.1(a)(2). New York courts have consistently ruled that N.Y. Est. Powers & Trusts Law§ 3.5.1(a)(2) is not controlling in determining choice of law 19 RA-25 . t a/ i a/ l Case: 14-1021 Document: 68 Page: 26 06/24/2014 1256313 37 in matters involving the designation of beneficiaries for such contracts as the RP and the DBP. This Court, therefore, should reverse the district court's decision awarding summary judgment in favor of The Estate. C. The Right to the Disputed Funds Is Properly Determined by New York Contract Law Applicable to Life Insurance Contracts Rather Than by Colorado Probate Law. In the federal interpleader action, premised upon diversity of citizenship of the parties to the action, the substantive law of the forum state is to be applied. See Amoco Transport Co. v. Dietze, Inc., 582 F. Supp. 804, 807, n. 3 (S.D.N.Y. 1984) (citations omitted). The district court has undertaken to decide competing claims to an insurance policy in prior interpleader actions. See William Penn Life Ins. Co. v. Viscuso, 569 F. Supp. 2d 355 (S.D.N.Y. 2008). At issue in Viscuso was the right of the designated beneficiary to receive the proceeds of a life insurance policy after a purported change in the designated beneficiary pursuant to a change being made with a power of attorney on behalf of the policy owner. Viscuso, 569 F. Supp. 2d at 357. The Viscuso court applied New York law to decide the defendants' competing claims. Id. at 364. The policy reserve the right solely to the owner to change the designated beneficiary and required written notice to be provided to the home office of the insurer. The Viscuso court noted that in general "the method prescribed by the insurance contract must be followed in order to effect a change of beneficiary." Id., citing McCarthy, 92 N.Y.2d. at 440. 20 RA-26 , . . . i lY . . , Case: 14-1021 Document: 68 Page: 27 06/24/2014 1256313 37 Arguably, under the rationale adopted by the Viscuso court, the decedent would have taken no action in substantial compliance with MMBB 's procedures for changing designated beneficiaries. The Snows, therefore, similarly situated, and designated as primary and contingent beneficiaries, would be entitled to receive the Disputed Funds. The Viscuso court further noted that the record was essentially silent on the intent of the policy owner's intent, and further found that there was nothing to suggest that the owner/insured had done anything to effect a change of designated beneficiary. Viscuso, 569 F. Supp. 2d at. 366. Here, the decedent undertook no effort whatsoever to effect a change to the designated beneficiaries on the MMBB plans. (JA197, ,-r 21). The decedent, however, contacted MMBB on several occasions, during the time of the pending divorce, and, at least in the year following the divorce. (JA203, ,-r 8). Nonetheless, no change in designated beneficiary was ever submitted to MMBB nor received by its office. N.Y. Est. Powers & Trusts Law§ 5-1.4, by its express language would suggest that LeAnn Snow, as the former spouse of the decedent, is precluded from taking as the designated beneficiary on the MMBB plans. The language, however, provides that "Except as provided by the express terms of a governing instrument, divorce .... Revokes any revocable disposition .... of property made for the benefit of the former spouse. N.Y. Est. Powers & Trusts Law 5-1.4(a). The Snows would respectfully 21 RA-27 . t Case: 14-1021 Document: 68 Page: 28 06/24/2014 1256313 37 submit that the express provisions of the RP and the DBP provide the procedures for changing beneficiaries on the MMBB plans, and that as the decedent did not undertake to change the named beneficiaries, The Snows are the proper claimants to the Disputed Funds. As the 2008 amendment to N.Y. Est. Powers & Trusts Law is unambiguous in its applicability solely with regards to the former spouse of a decedent, it is clearly inapplicable to Leon Snow. Accordingly, should this Court find that the provision herein revokes the stated designated beneficiary of LeAnn Snow, this Court should find further that the provision, by its express language, is inapplicable to Leon Snow, and Leon Snow, therefore, is entitled to an award of the RP and DBP funds. The Snows respectfully submit that as the designated beneficiaries on the DBP and the RP, The Snows are the proper claimants to the Disputed Funds. As such, the district court's grant of summary judgment in favor of The Estate should be reversed. D. Public Policy Mandates the Application of New York Law in Determining the Right to the Disputed Funds, as Between The Snows and The Estate. If group plans, such as the RP and DBP at issue herein, are permitted to be adjudicated on a choice of law basis that mandates the law of the decedent's domicile over the law designated in the plans, the overall result would be the undermining of explicit policy decisions made by the New York legislature and as 22 RA-28 . . Case: 14-1021 Document: 68 Page: 29 06/24/2014 1256313 37 further reflected in the decisions of the New York courts. It is well-established that New York law favors swift and certain payment of designated beneficiaries pursuant to life insurance or death benefit plans. This policy decision, as reflected in N.Y. Est. Powers & Trusts Law §13-3.2(a), requires strict compliance with beneficiary designation provisions and forecloses modification of beneficiaries pursuant to other statutes or rules of law. The statutory provision reads as follows: If a person is entitled to receive (1) payment in money, securities or other property under a pension, retirement, death benefit, stock bonus or profit- sharing plan, system or trust or (2) money payable by an insurance company or a savings bank authorized to conduct the business of life insurance under an annuity or pure endowment contract or a policy oflife, group life, industrial life or accident and health insurance, or if a contract made by such an insurer relating to the payment of proceeds or avails of such insurance designates a payee or beneficiary to receive such payment upon the death of the person making the designation or another, the rights of persons so entitled or designated and the ownership of money, securities or other property thereby received shall not be impaired or defeated by any statute or rule of lw governing the transfer of property b will, gift or intestacy. N.Y. Est. Powers & Trusts Law §13-3.2(a). The New York Court of Appeals addressed the public policy supporting N.Y. Est. Powers & Trusts Law § 13-3.2(a) in its McCarthy opinion. As noted in the earlier discussion of McCarthy in Section I.B of this brief, the McCarthy decision represented a nearly identical factual situation to this appeal, in which the decedent divorced his wife after designating her as a beneficiary on his life insurance plan, and thereafter died without ever changing the designated beneficiary. In reversing 23 RA-29 t . L Case: 14-1021 Document: 68 Page: 30 06/24/2014 1256313 37 the Appellate Division, the Court of Appeals upheld the beneficiary designation procedures specified in the insurance contract, having opined as follows: To hold that t change in beneficiary may be made by testamentary disposition alone would open up a serious question as to payment of life insurance policies. It is in the public interest that an insurance company may pay a loss to the beneficiary designated in the policy as promptly after the death of insured as may reasonably be done. If there is uncertainty as to the beneficiary upon the death of insured, in all cases where the right to change the beneficiary had been reserved there would always be a question as to whom the proceeds of the insurance should be paid. If paid to the beneficiary, a will might later be probated designating a different disposition of the fund, and it would be a risk, that few companies would be willing to take. McCarthy, 92 N.Y.2d at 441. This very same public policy is no less applicable in the matter herein on appeal. The RP and the DBP each contain clear, explicit instructions regarding how beneficiary designations are to be made initially, and subsequently changed. These two contracts select New York law as the substantive law to govern the plans, and thereby uniformly provide how the plan provisions and any interpretation thereof can be reliably known by all parties. This uniform approach of the law of a single jurisdiction enables the plan administrator to make payments thereunder quickly and reliably to the designated parties. If the insurer and/or plan administrator cannot rely upon the beneficiary designation forms and the choice of law provision governing its plans, as specified in the plans themselves, then the insurer and/or the plan administrator cannot reliably make payments to beneficiaries designated in the RP and DBP. MMBB, and all 24 RA-30 . , . nn Case: 14-1021 Document: 68 Page: 31 06/24/2014 1256313 37 similarly situated insurers and plan administrators, would be required to reexamine the insurance contracts' terms under the laws of the jurisdiction of each decedent's domicile at the time of the decedent's death. Given that MMBB likely insures plan participants residing in all fifty (50) states, it would be saddled with an extraordinarily difficult task. Prior to making payments under either the RP or the DBP, M11BB would necessarily be required to retain counsel to determine the appropriate state law that would govern such payments. The inherent uniformity and certainty provided in the application of the law of a single jurisdiction would no longer be available to MMBB and similarly situated plan administrators in processing claims, and in tum making payments under the plan provisions. Each death of a policy holder would present the potential for new and unsettled legal questions, as well as controversy regarding payments to be made pursuant to MMBB's plans. III. THE DISTRICT COURT ERRED IN ITS RULING THAT THE DECEDENT'S DOMICILE AT THE TIME OF THE DECENT'S DEATH DETERMINED THE RIGHTS TO THE DISPUTED FUNDS, AS BETWEEN THE SNOWS AND THE ESTATE. Contrary to the district court's finding that the decedent's domicile at the time of the decedent's death is controlling, the district court has otherwise determined that when the rights created by a life insurance contract are disputed, courts will generally apply the law of the state where the insured was domiciled at the time for which the policy was applied. 2004 Stuart Moldaw Trust v. XE L.IF.E., LLC, 642 25 RA-31 M lvI . , Case: 14-1021 Document: 68 Page: 32 06/24/2014 1256313 37 F. Supp. 2d 226, 236 (S.D.N.Y. 2009). In the instant matter, the decedent was domiciled in the State of New York at the time the decedent entered into the RP and DBP. In addition to the decedent's domicile in New York, the MMBB plans, and the Disputed Funds thereto were, and continue to be, located in New York. The Snows respectfully submit that the appropriate choice of domicile to determine the disbursement of the Disputed Funds, is the domicile where the decedent initiated the RP and the DBP. In the first instance, the Marital Agreement between LeAnn Snow and the decedent was subject to California law at the time of its execution. (JA117, page 11 of 12, ~ 55). If Colorado probate law, in general, is found to be applicable to the Disputed Funds, then the Colorado court must look to California law to construe and interpret the provisions of the agreement. Pursuant to the Marital Agreement, the parties' respective property interests that were awarded to them solely and separately are enumerated in explicit provisions, and neither of the RP funds nor the DBP funds is included in those provisions. (JA117, page 2 & 3 of 12, ~ ~ 7 & 8). It is in these explicit provisions that the parties waive any claim or interest to the property enumerated in the provisions. The parties' rights to the respective life insurance policies and the pension benefits are specified in subsequent enumerated provisions, which carry no "waiver of rights" language. (JA117, page 3 of 12, ~ ~ 9 & 10). Thus, the Colorado court could not properly rule, in an application of Colorado law, 26 RA-32 II II ,-r I Case: 14-1021 Document: 68 Page: 33 06/24/2014 1256313 37 that the designated beneficiaries, pursuant to the express language of the Marital Agreement, had relinquished any claims to the MMBB plan benefits. In further support of the district court's conclusion that the Colorado was the applicable law to determine the right to the Disputed Funds, the district court ruled that the decedent was domiciled in Colorado at the time of his death. It is an undisputed fact that the decedent lived in the State of California until sometime in December of 2010. (JA164, ~ 11). Thereafter, the decedent died in the State of Colorado in June 2011.. (JA164, ~ 16). The district court concluded, nonetheless, that in this short interval of seven months, the decedent changed his domicile to the State of Colorado. The Estate, therefore, in the role of the party alleging a change in the decedent's domicile, had the burden to prove the change of domicile by clear and convincing evidence. See, In re Hosley v. Curry, 626 N.Y.S.2d 32, 34, (N.Y. 1995) (citations omitted); In re Estate of Donahue, 692 N.Y.S.2d 225, 226 (N.Y. App. Div. 1999). Otherwise, an existing domicile continues until a new one is acquired. The decedent neither changed his automobile California registration nor did the decedent acquire a Colorado driver's license. (JA133, responses 4 & 9). No evidence was submitted to indicate that the decedent filed taxes in the State of Colorado, or that the decedent changed his place of voting from California. Courts have recognized that one's statements may provide evidence of the intent to establish 27 RA-33 I ,,-r I ,,-r . y' . Case: 14-1021 Document: 68 Page: 34 06/24/2014 1256313 37 domicile at a given place of residence, but such statements are of slight weight when conflicting with facts. See, Texas v. Florida, 306 U.S. 398, 425, 1939 U.S. LEXIS 982 (1939) (citations omitted). In the absence of the decedent's domicile having been shown by clear and convincing evidence to be established in the State of Colorado, the Colorado statutes are not controlling with respect to the non-probate assets at issue before this Court, nor are the Colorado laws applicable under a choice- of-law analysis. Although the district court makes no reference to the "probate exception, the district court arguably relied upon its application to support its conclusions of law. The "probate exception" to federal jurisdiction is a judicially created doctrine that is neither compelled by the United States Constitution nor by and federal statute. See Marshall v. Marshall, 547 U.S. 293, 298 (2006). The United States Supreme Court recognized that the "probate exception reserves to state probate courts the annulment of a will and the administration of a decedent's estate; and it also precludes federal courts from endeavoring to dispose of property that is in the custody of the state probate court. Marshall, 547 U.S. at 311-312. Accordingly, so long as federal court does not endeavor to administer a probate matter or exercise control over a res in the custody of a state court, if jurisdiction otherwise lies, then the federal court may, indeed must, exercise it. See Lefkowitz v. Bank of New York, 528 F .3d 102 (2d Cir. 2007). In the instant matter, the res at issue herein is the funds in the MMBB plans, 28 RA-34 , . , Case: 14-1021 Document: 68 Page: 35 06/24/2014 1256313 37 originally located in New York County, subsequently secured by bond posted by MMBB, and presently located in New York County. The Colorado court, and the application of Colorado law, therefore, was entitled to no deference in deciding the rights to the Disputed Funds. The MMBB plans, which decedent entered into in the State of New York, the explicit MMBB plans' provisions which provide that New York law governs such plans, and the location of the plan funds in New York, when viewed all together as supporting factors, warrant the application of New York state law to the determination of whether The Snows or The Estate, are entitled to the Disputed Funds. Accordingly, this Court should reverse the order and judgment of the district court that granted summary judgment to the Estate and further awarded the Disputed Funds to the Estate. 29 RA-35 l'vI J\t1M , J\t1M nn . Case: 14-1021 Document: 68 Page: 36 06/24/2014 1256313 37 CONCLUSION For all the reasons set forth above, the Judgment of the District Court granting summary judgment for The Estate and denying the Snows' motion for summary judgment should be reversed. Dated: June 23, 2014 Levittown, New York Respectfully submitted, Jesse T. Wilkins Gregory R. Preston 3000 Hempstead Turnpike - Suite 317 Levittown, New York 11756 Tel: (212) 809-5808 Attorneys for Interpleader-Defendants -Cross-Claimants-Appellants Leon Snow and LeAnn Snow 30 RA-36 :~ c . Case: 14-1021 Document: 68 Page: 37 06/24/2014 1256313 37 CERTIFICATE OF COMPLIANCE I hereby certify that this brief complies with Rule 32(a)(7)(B) because it contains 7,295 words, excluding portions of the brief exempted by Rule 32(a)(7)(B)(iii), and that it complies with the typeface and type style requirements of Rule 32(a)(5)-(6) because it is printed in a proportionally spaced 14-point font, Times New Roman. 31 ~d· in~ Attorneys for Interpleader-Defendants -Cross-Claimants-Appellants Leon Snow and LeAnn Snow RA-37 u· 14-1021-cv IN THE United States Court of Appeals FOR THE SECOND CIRCUIT THE MINISTERS AND MISSIONARIES BENEFIT BOARD, Interpleader-Plaintiff-Cross-Defendant-Appellee, —against— LEON SNOW, LEANN YOWELL SNOW, Interpleader-Defendants-Cross-Claimants-Appellants, —against— THE ESTATE OF CLARK FLESHER, MICHELE ARNOLDY, Individually and as Personal Representative of the ESTATE OF CLARK FLESHER, Interpleader-Defendants-Appellees. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK BRIEF OF THE INTERPLEADER-DEFENDANTS-APPELLEES, THE ESTATE OF CLARK FLESHER AND MICHELE ARNOLDY, INDIVIDUALLY AND AS THE PERSONAL REPRESENTATIVE OF THE ESTATE OF CLARK FLESHER BRIAN ROSNER NATALIE A. NAPIERALA CARLTON FIELDS JORDEN BURT, P.A. 405 Lexington Avenue, 29th Floor New York, New York 10174-0002 Telephone: (212) 785-2577 Facsimile: (212) 785-5203 brosner@cfjblaw.com nnapierala@cfjblaw.com Attorneys for Interpleader- Defendants-Appellees Case: 14-1021 Document: 90 Page: 1 08/21/2014 1301455 34 BRIEF OF INTERPLEADER-DEFENDANTS-APPELLEES FILED ON AUGUST 21, 2014 [RA-38-RA-71] RA-38 i TABLE OF CONTENTS Page PRELIMINARY STATEMENT.. ......................................................................... 1 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW ...................... 3 STATEMENT OF THE CASE ............................................................................. 5 SUMMARY OF THE ARGUMENT .................................................................. 12 ARGUMENT ......................................................................................................... 13 I. THE LOWER COURT DETERMINED CORRECTLY THAT THE APPELLANTS PRE-DIVORCE BENEFICIARY DESIGNATIONS HAD BEEN TERMINATED. ............................. 13 A. The district court applied the correct contractual choice-of- law provisions. ......................................................................... 18 B. The validity of the beneficiary designations are subject to determination by statute. .......................................................... 19 C. The Disputed Funds are personal property…….… ................. 21 D. N.Y. Est. Powers & Trusts Law section 5-1.4 has altered the results of prior case law ..................................................... 22 E. The court below correctly determined that Reverend Flesher was domiciled in Colorado, and correctly applied the Colorado revocation statute. .............................................. 25 CONCLUSION ..................................................................................................... 29 Case: 14-1021 Document: 90 Page: 2 08/21/2014 1301455 34 RA-39 ii TABLE OF AUTHORITIES Page(s) Cases In the Matter of Donahue, 262 A.D.2d 840, 692 N.Y.S.2d 225 (3d Dep’t 1999) ....................................... 21 In re Estate of DeWitt, 54 P.3d 849 (Colo. 2002) .................................................................................. 27 In Re Estate of Johnson, 304 P.3d 614 (Colo.App.2012).............................................................. 16, 27, 28 Matter of Lampshire, 57 Misc.2d 332, 292 N.Y.S.2d 578 (Surr. Ct., Erie Cnty. 1968) ................ 14, 20 McCarthy v. Aetna Life Insurance Company, 92 N.Y.2d 436, 681 N.Y.S.2d 790, 704 N.E.2d 557 (1998) ....................... 23, 24 Neto v. Thorner, 718 F.Supp. 1222 (S.D.N.Y. 1989) ................................................................... 24 Southeast Bank, N.A. v. Lawrence, 66 N.Y.2d 910, 498 N.Y.S.2d 775 (1985) ......................................................... 21 Statutes 28 U.S.C. § 1335 ....................................................................................................... 5 Colo. Rev. Stat. § 15-11-804 ........................................................................ 3, 17, 26 Colo. Rev. Stat. § 15-11-804(2)(a)(i) ..............................................................passim N.Y. Est. Powers & Trusts Law § 3-5.1(a)(2) .................................................. 10, 22 N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) .................................................passim N.Y. Est. Powers & Trusts Law § 5-1.4 (amended 2008) ...............................passim N.Y. Est. Powers & Trusts Law § 5-1.4(a) ............................................. ....13,14, 24 N.Y. Est. Powers & Trusts Law § 5-1.4(a)(b)(1) ................................................... 23 Case: 14-1021 Document: 90 Page: 3 08/21/2014 1301455 34 RA-40 iii N.Y. Est. Powers & Trusts Law § 5-1.4(c) ............................................................ 27 Rules Fed.R.Civ.P. 22 ......................................................................................................... 5 Rule 33 of the Federal Rules of Civil Procedure ...................................................... 6 Rule 34 of the Federal Rules of Civil Procedure ...................................................... 8 Other Authorities Julie S. Erikson, Divorce and the Effects of CRS § 15-11-804 on Estate Planning Documents, 34 COLO. LAW. 93 (Jan. 2005) ........................ 26 Kym Miller, Statutory Termination of Property Rights and Interests Upon Divorce, 18 J. AM. ACAD. MATRIM. LAW 549 (2003) ..................... 13 Susan N. Grey, Applying Revocation-On-Divorce Statutes to Will Substitutes, 18 QUINNIPIAC PROB. L.J. 83, 84 (2004) .................................................... 15 Case: 14-1021 Document: 90 Page: 4 08/21/2014 1301455 34 RA-41 1 Interpleader-Defendants-Appellees the Estate of Clark Flesher and Michele Arnoldy, Individually and as Personal Representative of the Estate of Clark Flesher (“Appellees”), submit this brief in opposition to the appeal by Interpleader- Defendants-Appellants Leann and Leon Snow (“Appellants”) from the district court’s (Honorable Kathleen Forrest) grant of the Appellees’ Motion for Summary Judgment and denial of the Appellants’ Motion for Summary Judgment. PRELIMINARY STATEMENT After his marriage, the Reverend Clark Flesher completed forms designating his then wife and then father-in-law (Appellants Leann and Leon Snow) as, respectively, the primary and contingent beneficiaries of Reverend Flesher’s retirement and insurance plans (the proceeds of which have been designated the “Disputed Funds”). When Reverend Flesher divorced Appellant Snow, he did not change the beneficiary designation forms. The unintended failure to change spousal-related designation forms after a divorce is a social problem that certain state legislatures, including New York and Colorado, have addressed. Specifically, New York State has enacted a revocation statute that, upon a divorce, automatically revokes prior beneficiary designation forms for retirement and insurance plans. There are two revocation statutes arguably dispositive of the Disputed Funds – that of New York (where the Case: 14-1021 Document: 90 Page: 5 08/21/2014 1301455 34 RA-42 2 Disputed Funds are located) and that of Colorado (where Reverend Flesher was domiciled after the divorce, and where he was conducting his ministry at the time of his death). The issue in this case is, “Which state revocation statute applies to the pre- divorce beneficiary forms?” Appellants’ initial argument is that no revocation statute applies, and the beneficiary designations are to be enforced, with the Disputed Funds going to Ms. Snow as the primary beneficiary. Appellants’ second argument acknowledges that the pre-divorce beneficiary designation forms are subject to a revocation statute. However, Appellants assert that the applicable statute is New York, under whose terms the designation of the prior spouse (Ms. Snow) is vacated but that of a spousal in-law (Reverend Flesher’s father-in-law, Leon Snow) is not.1 The court below reached the correct result – the Colorado statute applies. As Judge Forrest explained, the Disputed Funds are personal property located in New York State. Under long-term, black letter New York law, when a person dies out-of-state and has personal property in New York, the disposition of the personal property is “determined by the law of the jurisdiction in which the decedent was domiciled at death.” N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2). 1 The beneficiary designation of the father-in-law under the retirement plan was not made in accordance with the contract terms of the retirement plan. The designation is invalid as a matter of contract law. Therefore, as to the retirement plan, there is no valid beneficiary designation form to which any revocation statute applies, and, as such, these funds belong to the Estate. See infra note 35. Case: 14-1021 Document: 90 Page: 6 08/21/2014 1301455 34 RA-43 3 In granting Appellees’ summary judgment motion, Judge Forrest’s core finding, after a detailed factual review, was that Reverend Flesher was domiciled in Colorado at the time of his death. Appellants presented no fact to dispute this determination. Therefore, Judge Forrest concluded, the law that determines the disposition of the Disputed Funds is that of Colorado, whose revocation statute specifically revokes beneficiary designations made to either the prior spouse or the prior in-law.2 Accordingly, Judge Forrest found that the beneficiary designations had been revoked by statute. The Disputed Funds belong to the Estate Appellees, who, in accordance with the Reverend Flesher’s dying wish, will contribute the money to the Reverend Flesher’s last ministry - a charity ministering to the needs of sex trafficked girls.3 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW 1. Are the beneficiary forms for retirement and insurance accounts located in New York subject to a revocation statute – that is, a statute that, after a divorce, automatically revokes the designation of a prior spouse and/or in-law as a beneficiary? 2 Colo. Rev. Stat. § 15-11-804, “Revocation of Probate and Nonprobate Transfers by Divorce...” Section 15-11-804(2)(a)(i) revokes any beneficiary designation “made by a divorced individual to his or her former spouse…or…to a relative of the divorced individual’s former spouse…” 3 Affidavit of Michele Arnoldy dated October 15, 2013 (“Arnoldy Aff.”), JA175-187. “JA” refers to the Joint Appendix. Case: 14-1021 Document: 90 Page: 7 08/21/2014 1301455 34 RA-44 4 2. Did the district court err in determining that the beneficiary designations had been revoked, and that the Disputed Funds belong to the Appellees, where the court found a) that the Disputed Funds were “personal property” and not “real property,” b) that, because Reverend Flesher had died out-of-state, New York law required that the disposition of the Disputed Funds be “determined by the law of the jurisdiction in which the decedent was domiciled at death,” N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2), c) that Reverend Flesher had changed his domicile from California to Colorado when he packed up his earthly possessions and moved to Colorado, where he re-established his ministry, and announced broadly and publicly that he had moved to a new home where he intended to remain for the rest of his life, and d) that Colorado law revoked the pre-divorce beneficiary designations of a former spouse or former in-law? Case: 14-1021 Document: 90 Page: 8 08/21/2014 1301455 34 RA-45 5 STATEMENT OF THE CASE The Interpleader Complaint The Reverend Clark Flesher was a member of an insurance plan and a retirement plan administered by Plaintiff Ministers and Missionaries Board of American Baptist Churches (“MMBB”), a New York State corporation.4 After Reverend Flesher’s death, three claimants to the Disputed Funds emerged: i) Appellees, claiming as the appointees of the Colorado Probate Court, ii) Reverend Flesher’s former wife, Appellant Leann Yowell Snow, claiming as pre-divorce designated beneficiary, and iii) Reverend Flesher’s former father-in- law, Appellant Leon Snow, also claiming as pre-divorce designated beneficiary.5 Pursuant to 28 U.S.C. § 1335 and Fed.R.Civ.P. 22, MMBB commenced this interpleader action.6 On September 25, 2012, the court (Griesa, J.) granted interpleader relief, directing the claimants “to settle all claims concerning the Disputed Funds in this Court.” 7 The Motions for Summary Judgment After discovery, the two claimant groups each moved for summary judgment. 4 Interpleader Plaintiff-Appellee’s Complaint (“Compl.”) ¶¶ 1, 3, 10 and 22 dated December 23, 2011, JA12-15. 5 Id. ¶¶ 4, 15-16, 19, 27-28, 41-42 and 47. 6 See generally Compl., JA12-20. 7 Order dated September 25, 2012 ¶ 5, 11-cv-09495, ECF No. 49. Case: 14-1021 Document: 90 Page: 9 08/21/2014 1301455 34 RA-46 6 Appellee Michele Arnoldy submitted an affidavit averring to the circumstances of her brother’s move to Colorado and his subsequent death.8 Specifically, she attested that Revered Flesher’s last will and testament read, in its entirety: I, Clark Flesher declare my sister Michele Arnoldy as my beneficiary and executor of my estate. I give Michele full authority to execute any health directives and in handling all my financial & personal property.9 She further attested with specificity on Reverend Flesher’s “thoughts and activities regarding his decision to leave California and start a new life in Colorado,”10 as well as his messages to his friends and family on Facebook illustrating his move to Colorado Springs, Colorado.11 She provided significant evidentiary proof “[c]onsistent with his [sic] Clark’s multiple statements,” that “Clark moved his life to Colorado.”12 Following Reverend Flesher‘s illness in the hospital, Ms. Arnoldy “told Clark that [she] would take care of his finances, as he had wanted, and that [she] knew that [she] should give the majority of his retirement and insurance funds to help rescue girls from sex trafficking. [She] asked if [she] had understood 8 Arnoldy Aff., JA175-JA187. 9 Id. ¶ 6, JA176, JA182-183. 10 Id. ¶ 14, JA177; see also Interpleader Defendant Michele Arnoldy’s Response to Interpleader Defendants Leon Snow and Leanne Yowell Snow’s Request for Interrogatories Pursuant to Rule 33 of the Federal Rules of Civil Procedure (“Arnoldy’s Resps. to Rule 33 Reqs.”), JA134-140, 160. 11 Arnoldy Aff. ¶¶ 15-19, JA177-178. 12 Id. ¶ 20, JA178, 184-187; see also JA151-156 Case: 14-1021 Document: 90 Page: 10 08/21/2014 1301455 34 RA-47 7 correctly what he wanted [her] to do with his monies. He gave two long blinks to indicate ‘yes.’”13 Indeed, following Reverend Flesher’s death, Ms. Arnoldy “gave Restored Innocence all of Clark’s household possessions to furnish a ‘Cinderella house’ where rescued girls could find shelter”14 and “also gave Restored Innocence a sum of Estate money that Clark had intended to tithe to Restored Innocence but, because of his illnesses, had not gotten around to do.”15 Ms. Arnoldy noted that prior to his death, her brother had had “limited communications with his former wife, Leann Yowell Snow,”16 that “ Clarke did not inform his former wife of his illness,” and, at his instruction, she did not either,17 that she had ”asked a mutual acquaintance to tell Ms. Snow of Clark’s passing,”18 and that Appellant Snow “did not attend Clark’s memorial service or, by card or otherwise, express condolences to me or any member of Clark’s family.”19 13 Id. ¶ 32, JA180. In the last days of his illness, Reverend Flesher was “mute and paralyzed, but mentally alert.” He and his sister had worked out a “communication system in which his giving two long blinks would mean ‘yes.’” Id. ¶ 30, JA179. 14 Id. ¶ 35, JA180. 15 Id. 16 Arnoldy Aff. ¶ 36, JA180. 17 Id. ¶ 37, JA180. 18 Id. ¶ 38, JA181. 19 Id. Case: 14-1021 Document: 90 Page: 11 08/21/2014 1301455 34 RA-48 8 Appellees’ Rule 56.1 Statement also sets forth the following uncontested material facts, among others, at JA164-167: ▪ In December 2010, Reverend Flesher moved from California to Colorado;20 ▪ At that same time, Reverend Flesher “believed that God had called him to move to Colorado to recover and start a new ministry. In accordance with his belief, he loaded up his vehicle with personal goods, particularly those necessary (such as pastoral reference books) to commence his ministry in Colorado. A few unnecessary items were left in storage in California, to be retrieved at some later date;”21 ▪ In December 2010, Reverend Flesher “moved into the residence of a life-long friend in Colorado Springs, Colorado and became active in the local church” and “became actively engaged in two Colorado Springs ministries serving such youth,” and “[i]ntending to move into the facility of YWAM as a resident counselor, he pre-paid three months of rent, while simultaneously looking for a cabin in the Colorado Springs area to purchase as his home;”22 20 Appellees’ Interrogatory Responses No. 11, JA137-138; see also Exhibit A to Intepleader Defendant Michele Arnoldy’s Response and Objections to the Interpleader Defendants Leon Snow and Leann Yowell Snow’s Request for the Production of Documents Pursuant to Rule 34 of the Federal Rules of Civil Procedure (“Arnoldy Resps. to Rule 34 Reqs.”) at EST000001, 00008, 000010-000012, 000014, JA150, 157,159-161,163. 21 Arnoldy’s Resps. to Rule 33 Reqs. No. 11, JA137-138. 22 Id. Case: 14-1021 Document: 90 Page: 12 08/21/2014 1301455 34 RA-49 9 ▪ Reverend Flesher began a rigorous program of chemotherapy in Colorado Springs;23 ▪ Reverend Flesher’s “Facebook account profile shows Colorado Springs as his place of residence and multiple postings discuss his move to Colorado Springs, CO;”24 ▪ Reverend Flesher passed away in a Colorado Springs hospice on June 22, 201125; and ▪ In July 2011, the District Court for El Paso County, State of Colorado, created the Estate and appointed Reverend Flesher’s sister, Michele Arnoldy, as Personal Representative.26 Judge Forrest’s Memorandum Decision and Order In a comprehensive Memorandum Decision and Order, Judge Forrest awarded the Disputed Funds to the Appellees. See Order Granting Mot. Summ. J., Mar. 18, 2014, ECF No. 93 (“Mem. Decision”), JA229-241. Since the interpleader action was based on diversity jurisdiction, Judge Forrest applied the law of New York, the forum state. Id. at 9, JA237. The court noted Appellant Snows’ concession that the “[t]he relevant choice-of-law rules are the rules of the forum state, here, New York.’” Id. 23 Id. 24 Id.; see also Exhibit A to Arnoldy Resps. to Rule 34 Reqs., EST000008, 000010- 000014, JA157, 159-163. 25 Compl. ¶ 17, JA15. 26 Compl. ¶ 4, JA13. Case: 14-1021 Document: 90 Page: 13 08/21/2014 1301455 34 RA-50 10 Judge Forrest applied the N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2) to determine the law governing the inheritance of personal property located in New York State when the deceased dies outside of New York State: “Under New York law, ‘[t]he intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property, and the manner in which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death.’ N.Y. Est. Powers & Trusts Law § 3- 5.1(b)(2) (emphasis added).” See Mem. Decision at 9, JA237. The district court determined that the Disputed Funds – the proceeds of an insurance policy and a retirement policy – were personal property. Id. at 9-10, JA237-238. This conclusion was required by N.Y. Est. Powers & Trusts Law § 3- 5.1(a)(2): “ ‘Personal property’ means any property other than real property, including tangible and intangible things.” Id. In response to the Appellants’ argument that the Disputed Funds were not personal property, and that the court “should engage in the choice-of-law analysis common to contractual disputes,” the court noted, “[t]his argument is wholly without merit. The definition of ‘personal property’ in § 3-5.1(a)(2) plainly covers the Disputed Funds.” Mem. Decision at 10, JA238, n. 6. Judge Forrest then addressed the only factual issue before her: Where was Reverend Flesher domiciled at the time of his death? Were he domiciled in Case: 14-1021 Document: 90 Page: 14 08/21/2014 1301455 34 RA-51 11 Colorado, Judge Forrest explained, the pre-divorce designations of the Snows would be terminated. “Under Colorado law, divorce ‘[r]evokes any revocable…disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument and any disposition or appointment created by law or in a governing instrument to a relative of the divorced individual’s former spouse…’ Colo. Rev. Stat. §15-11-804(2)(a)(i).” Id. at 10, JA238. After an extensive analysis of Second Circuit Court of Appeals decisions on the meaning of “domicile,” the court concluded that the “Estate Defendants [Appellees] have met their burden of showing that [Reverend] Flesher was domiciled in Colorado at the time of his death.” Id. at 12, JA 240. “There is no dispute,” the district court noted, “that Flesher physically moved to Colorado in December 2010. Extensive, credible evidence from Flesher’s sister, Arnoldy, which was based on first hand observation and knowledge, clearly indicates that Flesher moved to Colorado with nearly all his possessions and intended to stay there. Arnoldy, and the documents she obtained, provides further credible evidence that Flesher intended to remain in Colorado in order to undertake new ministry opportunities and to receive medical treatment.” Id. Case: 14-1021 Document: 90 Page: 15 08/21/2014 1301455 34 RA-52 12 The Snows, Judge Forrest explained, had simply failed to “create a genuine issue of material fact as to [Reverend] Flesher’s domicile at the time of his death.” Id. The Snows’ failure to do so, Judge Forrest observed, was “likely because the Snows had little to no contact with [Reverend] Flesher in the two and a half years between his divorce from LeAnn Snow and his death.” Id. at 12-13, JA240-241. At most, the district court noted, the Snows raise the argument that Flesher had not updated or changed “certain licenses and registrations to Colorado at the time of his death. In light of the other, uncontroverted evidence offered by the Estate Defendants,” the Snows’ arguments were “insufficient to create a genuine issue of fact as to Flesher’s domicile at the time of his death.” Id. at 13, JA241. SUMMARY OF ARGUMENT The district court properly determined that the Disputed Funds were “personal property,” not “real property,” and that, because Reverend Flesher had died out-of-state, New York law required that the disposition of the Disputed Funds be “determined by the law of the jurisdiction in which the decedent was domiciled at death.” N.Y. Est. Powers & Trusts Law § 3-5.1(b)(2). Having found that Reverend Flesher had physically moved to Colorado with nearly all of his possessions, and that he intended to remain in Colorado in order to undertake new ministry opportunities and to receive medical treatment, Case: 14-1021 Document: 90 Page: 16 08/21/2014 1301455 34 RA-53 13 the district court properly determined that Reverend Flesher was domiciled in Colorado at the time of his death. Consequently, the district court properly applied Colorado law to revoke the pre-divorce beneficiary designations of the prior spouse and in-law and to award the Disputed Funds to the Estate. ARGUMENT I. THE LOWER COURT DETERMINED CORRECTLY THAT THE APPELLANTS PRE-DIVORCE BENEFICIARY DESIGNATIONS HAD BEEN TERMINATED. This dispute concerns a decedent’s neglect to change beneficiary forms after his divorce and before his death. The neglect to change forms after a divorce is a common national problem. To address this problem, several states – including New York and Colorado – have enacted statutes “terminating a spouse’s rights and interests in certain property automatically upon the entry of a decree of dissolution of marriage, or an annulment of marriage.”27 The New York State Legislature (“NYS Legislature”) enacted its first revocation statute in 1967. The statute was limited to property dispositions made by will – revoking, as a matter of law, any will provision by which a decedent left property to a former spouse. See N.Y. Est. Powers & Trusts Law § 5-1.4(a) 27 Kym Miller, Statutory Termination of Property Rights and Interests Upon Divorce, 18 J. AM. ACAD. MATRIM. LAW 549 (2003). Case: 14-1021 Document: 90 Page: 17 08/21/2014 1301455 34 RA-54 14 (McKinney’s Supp. Practice Cmt.) (amended 2008). As noted by a commentator, the NYS Legislature “found the notion of a testator’s gift to an ex-spouse counterintuitive,” and, accordingly, enacted the statute to terminate such dispositions. Margaret Valentine Turano, N.Y. Est. Powers & Trusts Law former § 5-1.4 (McKinney’s Supp. Practice Cmt.). In so changing the law, the NYS Legislature intended to put an end to the often-heard argument that the decedent “could have altered his will after a divorce” if he had wanted to. Matter of Lampshire, 57 Misc.2d 332, 333, 292 N.Y.S.2d 578, 579 (Surr. Ct., Erie Cnty. 1968). The “could have” argument “was not convincing because it is well conceded that the public is lax in making or revoking wills.” Id. The NYS Legislature reversed the pre-existing law: Divorce now created a presumption of revocation. To include a divorced spouse in a will, the decedent would need to take the affirmative step of specifically stating in his will his intent to include the divorced spouse. Id. In 2008, the NYS Legislature amended section 5-1.4 to extend automatic revocation to pre-divorce beneficiary designations for insurance and pension proceeds - the type of property transfers at issue in this case. The NYS Legislature understood that, increasingly in modern society, property transfers are Case: 14-1021 Document: 90 Page: 18 08/21/2014 1301455 34 RA-55 15 made outside of a will,28 as in fact they were here. To extend revocation specifically to property designations that were substitutes for testamentary transfers, the NYS Legislature amended section 5-1.4 to apply to “any revocable…disposition or appointment of property made by a divorced individual…including, but not limited to, a disposition or appointment by…beneficiary designation in a life insurance policy or…in a pension or retirement benefits plan, or by a revocable trust, including a bank account in trust form…” (emphasis added). N.Y. Est. Powers & Trusts Law § 5-1.4 (amended 2008). The legislative policy underlying this extension is, as with the core statute itself, the preservation of “presumed testamentary intent”29 – that a decedent would not have wanted a former relative to receive property based on a designation that had been executed prior to the decedent’s divorce.30 Extending revocation to “beneficiary designation[s] in a life insurance policy or…in a 28 The Memorandum in Support of amending section 5-1.4 explained that, under the existing law, “a divorce does not revoke many other revocable dispositions which are essentially like wills (so-called ‘testamentary substitutes’), such as lifetime revocable trusts (including Totten Trusts), life insurance policies, or joint tenancies (including joint bank accounts)….This measure would rectify the inconsistencies noted above.” N.Y. State Assemb., A08858, 2007-2008 (Mem.Supp. N.Y.State Assemb.) at 1; see also Susan N. Grey, Applying Revocation-On-Divorce Statutes to Will Substitutes, 18 QUINNIPIAC PROB. L.J. 83, 84 (2004). 29 Grey, supra, at 84. 30 Id. Case: 14-1021 Document: 90 Page: 19 08/21/2014 1301455 34 RA-56 16 pension or retirement benefits plan”31 was intended to fill “a necessary gap in protection for divorced persons”32 by protecting the interests of decedents who “die following divorce…without changing beneficiary designations…after the divorce.”33 For the same policy reason, the Colorado Legislature has enacted a statute automatically revoking, upon divorce, a decedent’s beneficiary designations of the prior spouse or in-law.34 The issue in this case is, “Which state revocation statute applies to the Disputed Funds - that of New York or that of Colorado?” The answer determines the outcome of the case. Under the New York statute, the designation of a prior spouse (such as Ms. Snow) is vacated but that of 31 N.Y. Est. Powers & Trusts Law § 5-1.4. 32 Grey, supra, at 84. 33 Id. at 101 (“The increase in the use of nonprobate assets in wealth transmissions necessitates expansion of the statutes to include nonprobate transfers. The existence of a multiple-marriage society means that ever greater numbers of decedents may die following divorce and remarriage without changing beneficiary designations or other transfer mechanisms after divorce”). The Memorandum in Support of amending section 5-1.4 explained, “The law, presumes…that no one would want a former spouse to…share in his or her estate…This bill…extends the sound reasoning of the existing legislation to cover policies of life insurance…” N.Y. State Assemb., A04174, 2007-2008 (Mem.Supp. N.Y. State Assemb.) 34 See supra note 2 discussing Section 15-11-804(2)(a)(i); see also In Re Estate of Johnson, 304 P.3d 614, 616 (Colo.App.2012) (“[S]ection 15-11-804(2) ‘represents a legislative determination that the failure of an insured to revoke the designation of a spouse as beneficiary after dissolution of the marriage more likely than not represents inattention’”). Case: 14-1021 Document: 90 Page: 20 08/21/2014 1301455 34 RA-57 17 a spousal in-law (such as Reverend Flesher’s father-in-law, Leon Snow) is not.35 Under Colorado law, both spousal designations are void.36 Having determined that Reverend Flesher was domiciled in Colorado at the time of his death, Judge Forrest applied Colorado law to determine the disposition of the Disputed Funds: The disposition of personal property is “determined by the law of the jurisdiction in which the decedent was domiciled at death,” N.Y. Est. Powers & Trusts Law §3-5.1(b)(2). Under Colorado law, the beneficiary designations were void. See Mem. Decision at 10, JA238. Appellants assert that Judge Forrest’s conclusion is a “clear error of law” that “runs counter to a long line of judicial decisions in…cases on facts similar to those of the matter herein,” disregards “numerous decisions” and “basic 35 A revocation statute is relevant only where a beneficiary designation has been made properly under the terms of the relevant contract. This is not the case regarding Leon Snow. His beneficiary designation under the retirement plan was not made in accordance with the contract terms of the retirement plan, and is invalid as a matter of contract law. Under the retirement plan, “spouse” is defined as a plan member’s “husband or wife.” Retirement Plan, ¶ 2.25, JA55. “Beneficiary” or “Designated Beneficiary” is defined as beneficiary designated “in writing on the prescribed form.” Id. ¶ 2.09, JA53. The definition does not distinguish between primary or contingent beneficiary. Id. In order for a plan member to designate any beneficiary other than a spouse, the spouse must provide “written consent to such designation (which consent must be on a form prescribed by the Board and filed at the office of the Board prior to the Member’s death)…” Retirement Plan, ¶ 701(d), JA70. The record does not contain any written consent of Mr. Snow’s designation as a beneficiary under the retirement plan. In the absence of a spousal written consent, the form designating Mr. Snow, see JA114, is invalid, and the property devolves to the Estate regardless of which revocation statute applies. 36 Colo. Rev. Stat. § 15-11-804, “Revocation of Probate and Nonprobate Transfers by Divorce...” Section 15-11-804(2)(a)(i) revokes any beneficiary designation “made by a divorced individual to his or her former spouse…or…to a relative of the divorced individual’s former spouse…” Case: 14-1021 Document: 90 Page: 21 08/21/2014 1301455 34 RA-58 18 premise[s]” of law, and cites “no legal authority for its determination.” Brief of Appellants dated June 23, 2014 (“Appellants’ Brief”) at 10-11. Appellants’ analysis is incorrect. Judge Forrest’s factual determination of Reverend Flesher’s domicile at the time of his death is well grounded in the undisputed facts presented on the motions for summary judgment. The district court’s legal conclusions are correct, and the holdings of the few cases cited by Appellants either support Judge Forrest’s conclusions or are not relevant. A. The district court applied the correct contractual choice-of-law provisions. The MMBB insurance plan and retirement plan each contain a provision identifying New York law as the “governing law.”37 To the Appellants, the meaning of this choice-of-law provision is that a court cannot apply any law other than that of New York to the interpretation of any term of the retirement or insurance plans. Therefore, Appellants conclude, Judge Forrest erred by applying the Colorado revocation statute to contracts “governed” by New York law. Appellants’ Brief at 10, 14-16. This analysis misinterprets what it means “to apply New York law.” In choosing New York law as the “governing” law, the retirement and insurance 37 The retirement plan states “Governing Law. The provisions of the Retirement Plan shall be governed by and construed in accordance with the laws of the State of New York.” See JA95. The insurance plan reads, “Governing Law. The provisions of this Plan shall be governed by and construed in accordance with the laws of the State of New York.” See JA112. Case: 14-1021 Document: 90 Page: 22 08/21/2014 1301455 34 RA-59 19 plans chose the entire body of New York law as governing. This body of law includes the N.Y. Est. Powers & Trusts Law, section 3-5.1(b)(2), which directs a court to look outside of New York State for the applicable law. The district court followed this directive of the N.Y. Est. Powers & Trusts Law when she chose Colorado law to determine the disposition of personal property where a decedent domiciled in Colorado died while having property in New York. By applying section 3-5.1(b)(2) – and choosing Colorado law – Judge Forrest applied New York law, which was consistent with the governing law provisions of the retirement and insurance plans. B. The validity of the beneficiary designations are subject to determination by statute. Appellants argue that the life insurance policy and retirement benefits plan that are the source of the Disputed Funds are stand-alone New York State contracts whose terms govern without reference to any statute. Appellants’ Brief at 20-25. They argue that the terms provide the exclusive means by which beneficiary designations are to be made or altered, and if those contract provisions are not followed - as they were not here - the designations must remain as stated. Id. Appellants’ rigid analysis is exactly what the NYS Legislature rejected by making beneficiary designations subject to a revocation statute. Case: 14-1021 Document: 90 Page: 23 08/21/2014 1301455 34 RA-60 20 The NYS Legislature amended N.Y. Est. Powers & Trusts Law section 5- 1.4 to apply to “any revocable…disposition or appointment of property made by a divorced individual…including, but not limited to, a disposition or appointment by…beneficiary designation in a life insurance policy or…in a pension or retirement benefits plan” (emphasis added). Consistent with the legislation of many sister states, including Colorado, the NYS Legislature has made beneficiary designations subject to automatic revocation based upon the single fact of divorce. Contract provisions regarding beneficiary alteration are, when a divorce occurs, over-ridden by the statute. It was the NYS Legislature’s intent to limit the relevance of contract provisions when a divorce occurred. In New York, as in other states, the NYS Legislature understood how people really act after a divorce. Just as people are lax in revising wills after a divorce, “it is well conceded that the public is lax” in revising beneficiary designations. See Matter of Lampshire, 57 Misc.2d at 333. Although decedents do not want their prior spouses to inherit insurance proceeds, the reality is that – as in this case – they neglect to comply with the contract provisions that would rescind the pre-divorce spousal designation. Correcting this neglect is the reason for the enactment of the revocation statutes.38 38 See supra note 28 at 84. Moreover, the Memorandum in Support of amending section 5- 1.4 explained, “The law presumes…that no one would want a former spouse to…share in his or Case: 14-1021 Document: 90 Page: 24 08/21/2014 1301455 34 RA-61 21 C. The Disputed Funds are personal property. To determine which revocation statute applied to the Disputed Funds, the court below looked to section 3-5.1(b)(2) of the N.Y. Est. Powers & Trusts Law: “The intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property, and the manner in which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death”) (emphasis added).39 Appellants assert that Judge Forrest erred in applying section 3-5.1(b)(2) because the Disputed Funds are not personal property. Appellants’ Brief at 10, 16-20. As Appellants explain, “[a]n elementary principle of probate law is that life insurance policies and pension plan benefits with designated beneficiaries are non-probate assets, which do not pass under a decedent’s will nor by intestacy. [citations omitted] Accordingly, the MMBB plan benefits are not the decedent’s personal property, entitled to probate in Colorado, or any other jurisdiction for probate purposes.” Id. at 19. her estate…This bill…extends the sound reasoning of the existing legislation to cover policies of life insurance…” N.Y. State Assemb., A04174, 2007-2008 (Mem.Supp. N.Y.State Assemb.) 39 See also Southeast Bank, N.A. v. Lawrence, 66 N.Y.2d 910, 912, 498 N.Y.S.2d 775, 776 (1985) (“…questions concerning personal property rights are to be determined by reference to the substantive law of the decedent’s domicile EPTL § 3-5.1(b)(2)…”); In the Matter of Donahue, 262 A.D.2d 840, 841, 692 N.Y.S.2d 225, 226 (3d Dep’t 1999) (“Inasmuch as decedent remained domiciled in New York, Surrogate’s Court correctly applied New York law in determining ownership of Florida personal property (see, EPTL 3-5.1(b)(2)”). Case: 14-1021 Document: 90 Page: 25 08/21/2014 1301455 34 RA-62 22 As Judge Forrest noted, “[t]his argument is wholly without merit. The definition of ‘personal property’ in § 3-5.1(a)(2) plainly covers the Disputed Funds.” Mem. Decision at 10, JA238, n. 6. In brief, there are two kinds of property – real property and everything else. That the Disputed Funds are non- probate property is not relevant to whether the property is real or personal. Section 3-5.1(a)(2), as does section 5-1.4, concerns revocable dispositions of property. Dispositions of personal property are revocable whether the disposition is made by will or one of the “many other revocable dispositions which are essentially like wills (so-called ‘testamentary substitutes’), such as…life insurance policies.” See N.Y. State Assemb., A08858, 2007-2008 (Mem.Supp. N.Y. State Assemb.) at 1 (amended section 5-1.4). The Disputed Funds are a revocable disposition of personal property squarely within the purview of section 3-5.1(a)(2). D. N.Y. Est. Powers & Trusts Law section 5-1.4 has altered the results of prior case law. Appellants analyze two decisions to argue that New York law prevents the alteration of a beneficiary designation unless done in strict adherence to contract terms directing how an alteration is to be made. Those decisions have no relevance to the issues before the Court today and do not alter Judge Forrest’s decision. Case: 14-1021 Document: 90 Page: 26 08/21/2014 1301455 34 RA-63 23 In McCarthy v. Aetna Life Insurance Company, 92 N.Y.2d 436, 681 N.Y.S.2d 790, 704 N.E.2d 557 (1998), the decedent had prepared a holographic will voiding his prior will (that had bequeathed his belongings to his wife) and leaving all his possessions, including his insurance benefits, to his father. Id. at 437-439. The decedent, however, failed to alter the named beneficiary (his ex- wife) on the requisite insurance policy. Id. at 439. Because “substantial compliance” with insurance policy terms was the substantive law of Delaware, Pennsylvania and New York in 1998, Id. at 440- 441, the Court of Appeals was “restrained” from acknowledging “the decedent’s stated intention that his father receive the proceeds from the insurance policy” and, as such, the proceeds went to the wife. Id. at 442. Were the McCarthy case to occur today (and were New York law governing), the former spouse named in the beneficiary designation, by operation of law, would be treated as if she “had predeceased” the decedent and her designation as beneficiary would be void. See N.Y. Est. Powers & Trusts Law § 5-1.4(a)(b)(1). McCarthy’s lengthy discussions regarding the insurance contract provision for altering a beneficiary designation, and the decedent’s failure to comply with such provisions (and the consequence of that failure) – discussions at the heart of the McCarthy holding (and the bulk of Appellants’ argument) – are, Case: 14-1021 Document: 90 Page: 27 08/21/2014 1301455 34 RA-64 24 under current law, not relevant to determining the validity of a beneficiary designation. A similar analysis, and conclusion, applies to Neto v. Thorner, 718 F.Supp. 1222 (S.D.N.Y. 1989). In Neto, the court reviewed whether N.Y. Est. Powers & Trusts Law section 3-5.1(b)(2) required that Brazilian law be applied to determine the disposition of the “Totten trust” at issue and concluded that the NYS Legislature has exempted the Totten trust from the choice-of-law provision of section 7-5.2(2). 718 F.Supp. at 1225 (“…in passing section 7-5.2(2) in 1975, the NYS Legislature did not intend to bring Totten trusts within the coverage of section 3-5.1”). As with McCarthy, the Neto Court’s decision has been altered by the NYS Legislature. Were the Neto case to occur today, and were the Totten trust beneficiary a spouse, the property distribution would be made void by the revocation statute. By the 2008 amendment, the revocation statute was made applicable to Totten trusts, which were brought into alignment with the NYS Legislature’s current view that a decedent’s intent is that the former spouse not be permitted to inherit based upon a pre-divorce designation of beneficiary. See N.Y. Est. Powers & Trusts Law § 5-1.4(a) (amended 2008). Case: 14-1021 Document: 90 Page: 28 08/21/2014 1301455 34 RA-65 25 E. The court below correctly determined that Reverend Flesher was domiciled in Colorado, and correctly applied the Colorado revocation statute. Appellants argue that Judge Forrest erred in determining that Reverend Flesher had moved his domicile to Colorado, and that, if he had moved, the court erred in how it applied the Colorado revocation statute. Appellants’ Brief at 25- 29. As Judge Forrest noted, two things are indispensable to effect a change of domicile: “a new residence and an intention to remain there.” Mem. Decision at 11, JA239. The court found that both had been established by clear and convincing evidence. “There is no dispute,” the court noted, “that Flesher physically moved to Colorado in December 2010. Extensive, credible evidence from Flesher’s sister, Michele Arnoldy, which was based on first hand observation and knowledge, clearly indicates that Flesher moved to Colorado with nearly all of his possessions and intended to stay there. Arnoldy, and the documents she obtained, provides further credible evidence that Flesher intended to remain in Colorado in order to undertake new ministry opportunities and to receive medical treatment.” Mem. Decision at 12, JA240. The Snows, the district court explained, had simply failed to “create a genuine issue of material fact as to [Reverend] Flesher’s domicile at the time of Case: 14-1021 Document: 90 Page: 29 08/21/2014 1301455 34 RA-66 26 his death.” Id. The Snows’ failure to do so, Judge Forrest observed, was “likely because the Snows had little to no contact with [Reverend] Flesher in the two and a half years between his divorce from LeAnn Snow and his death.” Id. at 12-13, at JA240-241. At most, the district court noted, the Snows raise the argument (repeated to this Court) that Flesher had not updated or changed “certain licenses and registrations to Colorado at the time of his death. In light of the other, uncontroverted evidence offered by the Estate Defendants,” the Snows’ arguments were “insufficient to create a genuine issue of fact as to Flesher’s domicile at the time of his death.” Id. Further, contrary to Appellants’ assertion, Judge Forrest applied the Colorado statute correctly. As the court found, “Under Colorado law, divorce ‘[r]evokes any revocable…disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument and any disposition or appointment created by law or in a governing instrument to a relative of the divorced individual’s former spouse…’ Colo. Rev. Stat. § 15-11- 804(2)(a)(i).’”40 Mem. Decision at 10, JA238. Further, the district court noted, “Colorado courts hold that this provision automatically revokes beneficiary designations on insurance policies following 40 A commentator has described this revocation provision as the “heart of the [Colorado] divorce revocation statute…,” whose intent is “to bring the law into line with the expectations and presumed intents of divorcing couples.” Julie S. Erikson, Divorce and the Effects of CRS § 15-11-804 on Estate Planning Documents, 34 COLO. LAW. 93 (January 2005). Case: 14-1021 Document: 90 Page: 30 08/21/2014 1301455 34 RA-67 27 divorce, absent a specific carve out in the policy, marriage dissolution agreement or a court order. See In Re Estate of Johnson, 304 P.3d 614, 616-17 (Colo. App. 2012); see also In re Estate of DeWitt, 54 P.3d 849, 852-53 (Colo. 2002).” 41 Id. Before the court below, as here, Appellants argued that the policies at issue contained such a carve out – the carve out, it is argued, is the provision regarding how to alter beneficiary designations. Appellants’ Brief at 21-22. Of course, all policies contain such provisions which, as legislatures in New York and Colorado have determined, were being ignored after divorces, thus, requiring the enactment of the revocation statutes. Appellants’ reasoning, were it accepted, would defeat these legislatures’ very purpose in enacting such statutes. Similar to the holdings of Colorado courts, Judge Forrest rejected this reasoning: “The fact that an insurance policy sets forth procedures for changing a prior beneficiary designation, by itself, is insufficient. See Johnson, 304 P.3d at 617. There is no dispute that no such carve out exists in the RP [retirement plan] and DBP [death benefit plan].” Mem. Decision at 10, JA238. The revoked beneficiary in In Re Johnson had argued, as do the Appellants here, that the language regarding how to change beneficiaries in the underlying policy document were such “express terms” exempting her designation form from 41 The “carve-out” referenced by the court is contained in section 15-11-804(2), which applies revocation “[e]xcept as provided by the express terms of a governing instrument, court order, or a contract relating to the division of the marital estate”(emphasis added). This “carve out” language is common to revocation statutes, including the revocation statute of New York. See N.Y. Est. Powers & Trusts Law § 5-1.4(c). Case: 14-1021 Document: 90 Page: 31 08/21/2014 1301455 34 RA-68 28 the application of Section 15-11-804(2). In Re Estate of Johnson, 304 P.3d 614, 617. The Colorado court disagreed and noted that “[t]he policy contains no express language exempting spouses from automatic revocation of beneficiary status upon divorce, as the law requires.” Id. In sum, Judge Forrest correctly opined that the “Disputed Funds” are personal property located in New York State: Under black letter New York law, when a person dies out-of-state and has personal property in New York, the disposition of the personal property is “determined by the law of the jurisdiction in which the decedent was domiciled at death.” N.Y. Est. Powers & Trusts Law §3-5.1(b)(2). Judge Forrest also properly found that Reverend Flesher was domiciled in Colorado at the time of his death, and that the law that determines the disposition of the Disputed Funds is that of Colorado, whose revocation statute specifically revokes beneficiary designations made to either the prior spouse or the prior in- law. Case: 14-1021 Document: 90 Page: 32 08/21/2014 1301455 34 RA-69 29 CONCLUSION For the foregoing reasons, Interpleader-Defendants-Appellees the Estate of Clark Flesher and Michele Arnoldy, Individually and as Personal Representative of the Estate of Clark Flesher, respectfully request that the judgment granting Appellees’ Motion for Summary Judgment be affirmed, with costs and fees, including attorneys’ fees, awarded to Appellees. Dated: New York, New York August 21, 2014 Respectfully submitted, CARLTON FIELDS JORDEN BURT, P.A. By: /s/ Brian Rosner Brian Rosner brosner@cfjblaw.com Natalie A. Napierala nnapierala@cfjblaw.com 405 Lexington Ave., 29th Floor New York, NY 10174-0002 Telephone: (212) 785-2577 Facsimile: (212) 785-5203 Attorneys for Interpleader-Defendants-Appellees the Estate of Clark Flesher and Michele Arnoldy, Individually and as Personal Representative of the Estate of Clark Flesher Case: 14-1021 Document: 90 Page: 33 08/21/2014 1301455 34 RA-70 30 CERTIFICATE OF COMPLIANCE This brief complies with the type-volume limitation of Rule 32(a)(7)(B) of the Federal Rules of Appellate Procedure because it contains 6,431 words, excluding the parts of the brief exempted by Rule 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Rule 32(a)(5) and the type style requirements of Rule 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word in Times Roman 14-point font. Dated: New York, New York August 21, 2014 Respectfully submitted, CARLTON FIELDS JORDEN BURT, P.A. By: /s/ Brian Rosner Brian Rosner brosner@cfjblaw.com Natalie A. Napierala nnapierala@cfjblaw.com 405 Lexington Ave., 29th Floor New York, NY 10174-0002 Telephone: (212) 785-2577 Facsimile: (212) 785-5203 Attorneys for Interpleader-Defendants-Appellees the Estate of Clark Flesher and Michele Arnoldy, Individually and as Personal Representative of the Estate of Clark Flesher Case: 14-1021 Document: 90 Page: 34 08/21/2014 1301455 34 RA-71 l+1021-cv UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT TI-M MINISTERS AND MISSIONAIRES BENEFIT BOARD, Int erp I e ad er - P I aint iff- C r o s s - D efendant - App ell e e -v.- LEON SNOW AND LEANN SNOW, I nt erp I e ad er - D efendants - Cr o s s - C I aimant s -App el I ant s -v.- TFm, ESTATE OF CLARK FLESHER, MICHELE ARNOLDY, Individually & as Personal Representative of TFIE ESTATE OF CLARK FLESIfiR Int erp I e ader - D efendont s - App el I e e s On Appealfrom an Order of the tJnited States District Court for the Southern District of New York REPLY BRIEF OF THE INTERPLEADER.DEFENDANTS-CROSS- CLAIMANTS.APPELLANTS Jesse T. Wilkins Gregory R. Preston PRESTON & WILKINS, LLC 3000 Hempstead Turnpike, Suite 317 Levittown, NY 11756 Tel: 212-809-5808 F ax: 212-898-903 4 Case: 14-1021 Document: 94 Page: 1 09/04/2014 1312458 18 REPLY BRIEF OF INTERPLEADER DEFENDANTS-CROSS-CLAIMANTS-APPELLANTS FILED ON SEPTEMBER 4, 2014 [RA-72-RA-89] RA-72 14-1021-e I HE IS ERS IRES t l l t f- t p l ts l t l HE t ti H HER t l a t p l l f U it f ct f P EADER-DEFENDANTS-CROSS- ANTS-APP LANTS ins I S stea tto n, l: : 8-903 TABLE OF CONTENTS Page iiTABLE OF AUTHORITIES. REPLY BzuEF OF THE INTERPLEADER-DEFENDANTS-CROSS - CLAIMANT S.APPELLANTS I. NEW YORK LAW IS THE APPLICABLE LAW GOVERNING TI-M RP AND DBP A. N.Y. Est. Powers & Trusts Law S 3 - 5.1(b)(2) Is Not Controlling 1 B. The Estate's Preferred Approach Would Result in Delayed Payments to Designated Beneficiaries. II. THE, ISSUE OF WHETHER TI-M BENEFICIARY DESIGNATION OF LEON SNOW WAS MADE IN ACCORDANCE WITH THE CONTRACTUAL TERMS OF TI-IE RP IS IMPERMISSIBLY RAISED FOR THE FIRST TIME BY THE ESTATE ON APPEAL III. TI-IE SNOWS REPLY TO MISCELLANEOUS MIS STATEMENTS AND/OR MISREPRESENTATIONS IN THE ESTATE'S BRIEF CONCLUSION CERTIFICATE OF COMPLIANCE. 6 8 10 13 T4 Case: 14-1021 Document: 94 Page: 2 09/04/2014 1312458 18 RA-73 ORlTIES............................. . ..... . . . ...................... 11 L Rl DER-DEFENDANTS-CRO S - NT - TS ........................................... . ... . ....... 1 1. HE .. .. .. .. ... .. .... .... .. ..... . . ............................... 1 § - S ontrolling. . . . . .. . . .. . . . . . . .. . . .... .. . . . . ... . ... . ..................... . roa ciaries.. . .......... .. . . ... . .. . .... . . . ... . I. E ER HE R n H P IS Y IS PPEAL.......... ....... .............. .. ... I. H IS NEOUS IS ENTS /OR IS EP TIONS 'S l F ....... . ...... . ......... . ....................... CLUSION...... . . . ............................... ...................... . . . ..... .. IC TE I NCE .................................... . ....... . . . . 1 i TABLE OF AUTHORITIES CASES Page Baker v. Dorfman,239 F.3d 415 (2d Cir. 2000) ..... 9, Bank of N.Y. v. Yugoimport, 745 F.3d 599 (2dCir.2014) Graves v. Summit Bank,541 N.E.2d974 (Ind. Ct. App. 1989) IRB-Brasil Resseguros, S.A. v, Inepar Invs., 5.A,, 20 N.Y.3d 3 l0 (N.Y . 2012) In re Estate of Donahue,692 N.Y.S.2d 225 (N.Y. App. Div. 1999) In re Gffird's Will,279 N.Y. 470 (N.Y. 1939) 5 McCarthy v. Aetna Life Ins, Co,, 61 N.Y.S ,2d 625 (N.Y. App. Div. I 997) . . 3, 4 McCarthy v. Aetna Life Ins. Co., 92 N.Y.2d 436 (N.Y. 1998) 6 Skandia Am, Reinsurance Corp. v. Schenck, 44rF. Supp. 71s (S.D.N.Y. 1977) 3 Southeast Bank, N.A. v, Lawrence, 66 N.y.2d 910,498 N.y.S.2d 775 OI.y. 1985) 10 2 STATUTES Idaho Code Ann. $ 15-2-508 Page 416 ?s J) J N.Y. Est. Powers & Trusts Law $ N.Y. Est. Powers & Trusts Law I 3-5.1 ii Case: 14-1021 Document: 94 Page: 3 09/04/2014 1312458 18 RA-74 S . , ) .... ........................... , k f i rt 2 ........ .... ... . ........ . k) 54 9 .. . . . ............. 7 . . . .) S . . 1 ( .20 ................................................... 2 f , 69 . . ............. 5 i ord 's il , 279 . 939) ...... ... .... .......... .... ... .. .. ... . fe . .) . .S. 1 .................................... , . fe . .) .2d 9 8) ................... . . , 41 5 . . . . 977) .... .. .. .... .......... . .... ... .. ............. st ./J.. . ence, Y.2d Y.S.2d (N.Y. ..... ............ ... ... ... .. .. 5 S § 8 ................................................... . ..... 7 s s s § .1. .................................... . ....... , rs s s § 3-5.1 (b)(2) . .................... ... .. ....... 1, 2, 3, 5 i N.Y. Est. Powers & Trusts Law $ 5-1.4 N.Y. Est. Powers & Trusts Law 913-3.2(a) 3,4 6 iii Case: 14-1021 Document: 94 Page: 4 09/04/2014 1312458 18 RA-75 . t. § . . . . . . .................................... , t. § 13-3.2(a) .. ..... . . ...... . . . .. .......... . . . ... . . . i REPLY BRIEF OF THE II{TERPLEADER.DEFENDANTS.CROS S. CLAIMANTS-APPELLANTS Interpleader Defendants-Cross Claimants-Appellants Leon Snow and LeAnn Snow (hereinafter the "appellants" or the 'oSnows") submit this reply brief in response to the brief submitted by the Interpleader Defendants-Appellees The Estate of Clark Flesher, Michele Arnoldy, Individually & as Personal Representative of The Estate of Clark Flesher ("hereinafter the "appellees" or the "Estate"), and in further support of their appeal. I. NEW YORK LAW IS THE APPLICABLE LAW GOVERNING THE RP AND DBP. The appellees acknowledge that the RP and the DBP contain express provisions which provide that each of the plans "shall be governed by and construed in accordance with the laws of the State of New York." (Estate Br. at 18, n.37.) The law, as chosen by the parties to the respective plans, is to be applied to the analysis of the contractual provisions in the plans. New York law simply does not require a different result or interpretation to reach the correct conclusion that the choice-of- law provisions of each plan is applicable herein. A. N.Y. Est. Powers & Trusts Law $ 3-5.1(bX2) Is Not Controlling. The Estate, in error, contends that N.Y. Est. Powers & Trusts Law $ 3- 5.1(b)(2) not only overrides, but indeed, trumps an explicit choice-of-law provision in contracts such as the RP and DBP. (Estate Br. at 21). There is nothing in the Case: 14-1021 Document: 94 Page: 5 09/04/2014 1312458 18 RA-76 IN E -DEFE DANTS-CROS - TS- P S l der l i t - ll t on now nd now rei after t e el nts" r t e "Snows") ubmit is ply ri f i i lees t t l r r, i l s r onal entati f t t s" " st te"), i i . l e t t i r isions rned tr i a ce t t . .) e e e t t l is isions a s. t r ire i fere t te e sion t i - f- la isions f a ica le . . . t. rs ts § .1 ( )(2) I t ling. i t t r § - S.l )(2) t errides, t indeed, tru ps cit -Ia r ision i tra s t ( st he is t i i the 1 language of N.Y. Est. Powers & Trusts Law $ 3-5.1(bX2), or in the cases applying the statutory provision, either explicit or otherwise, that would override a choice-of- law provision in a valid contract. Such choice-of-law provisions are routinely honored by New York State courts as long as fundamental issues of public policy are not violated. See, e.g., Banh of N.Y. v. Yugoimport, T45 F.3d 599, 609 (2d Cir, 20r4). The Estate does not argue that honoring the choice-of-law provisions in the RP and DBP contravenes cuffent New York public policy in this particular area. Enforcement by New York State courts of the contractual parties' desire to have New York law deemed applicable to the contracts at issue here would assuredly further the state's public policy of encouraging a predictable contractual choice of New York commercial law. Cf IRB-Brasil Resseguros, S.A. v. Inepar Invs., 5.A.,20 N.Y.3d 3 10, 3 1 5-3 I 6 (2012) ("To find here that courts must engage in a conflict-of- laws analysis despite the parties' plainly expressed desire to apply New York law would frustrate the Legislature's purpose of encouraging a predicable contractual choice of New York commercial law and, crucially, of eliminating uncertainty regarding the governing law.") (citations omitted). New York courts have held that it is particularly important to enforce choice-of-law provisions in group life insurance plans because of the benefits of uniform interpretation of such plans. See, Case: 14-1021 Document: 94 Page: 6 09/04/2014 1312458 18 RA-77 N. . t. § - . ( )( i t ppl t t t i xpli i t r i i i li ontract. uch oi e-of-I r i i s re t l t t s l li l d. e, . k . . i r 7 . 99, ir. 1 i - f I rr l l rti l r r . rt ' i l t l r l l j asil gur . , S ., .y' 1 1 ts f l t e l r s slature's r i l , i l , ing . ) ta io ). ts rti l rly t - f I ife s ra ce lans e ause f t ts f for terpretation f e, 2 e.g., Skandia Am. Reinsurance Corp. v. Schenck, 441F. Supp. 715,723 (S.D.N.Y. re77). The Estate misunderstands the governing decisions in New York State courts on the applicable choice-of-law provisions. In our opening brief, we analyzed,the New York State Appellate Division's decision in McCarthy v. Aetna Life Insurance Co.,661 N.Y.S.2d 625 (N.Y.App. Div. 1997). We therein explained that the appellate court expressly rejected the argument that N.Y. Est. Powers & Trusts Law $ 3-5.1(bX2) had trumped a choice-of-law provision in a life insurance policy. (Snows Br. at 17-18). The Estate cites no contrary legal authority, but instead merely asserts that McCarthy has "no relevance to the issues before the Court." (Estate Br. at 22) In order to avoid McCarthy 's clear holding and its adverse implications for the Estate's position, as effoneously endorsed by the district court below, the Estate would rely onthe inapposite statutoryhistory of N.Y. Est. Powers & Trusts Law g 5-1.4. In furtherance of the Estate's misplaced reliance, the Estate hypothesizes thatthe 2008 statutory revision to this statutory provision must have been broadly intended "to limit the relevance of contract provisions when a divorce occurred" (Estate Br. at 20), which means that the 1997 decision in McCarthy and its progeny were "altered by the NYS Legislature". (Estate Br. at24). Case: 14-1021 Document: 94 Page: 7 09/04/2014 1312458 18 RA-78 e.g., kandi . ei ur orp. v. chenck, 4 1 . upp. 715,723 ( .D. . . 19 ). t t t r ci i i t t rt t ppli l i - f I r vi i ns. I r i ri f, al t t s o 's i i i . if I o., 1 . . . 5 .Y. . iv. 997). rein l t t t ll t t m t § .l(b)(2) m i - f I li . ( no s . t l t ri l ss rts t at t . t 2.) I thy' e ts rse lications t state's siti , rrone s ct t l r l the a te t t r hist r m § - .4. I furtherance f t e state's is lace iance, t st te pothesizes t t the t t t re isio t t s be r intende "to li it the re e a f tract pro isions he vorce re ( stat r. at ), hich eans that the sion in cCarthy a its progeny ere "altered b the S egislature". (Estate r. 24). 3 In reply to the Estate's arguments, the Snows vigorously counter, and respectfully submit to this Court, that the 2008 amendments to N.Y. Est. Powers & Trusts Law $ 5-1.4 do not generally "limit the relevance of contract provisions upon divorce, and the amendments do not overturn the McCarthy decision. Furthermore, the amendments do not even remotely address the portion of McCarthy's holding that is relevant herein. After considering the argument that N.Y. Est. Powers & Trusts Law $ 3-5.1 required application of the law of the jurisdiction where the decedent was domiciled at death in order to analyze the disposition of a life insurance policy, the court, nonetheless, concluded, ooWe would give effect to the choice-of- law provision in the insurance contract itself to determine a material term going to the heart of that contract. ,.." McCarthy, 661N.Y.S,2d at 627 . The current validity of the McCarthy holding is highly relevant because the language of N.Y. Est. Powers & Trusts Law $ 3-5.1 is exactly the same today as it was in 1997, at the time of the McCarthy decision. The district court below even quoted the same portion of the statute as did the dissenters in McCarthy. (JA 237). See, McCarthy,661 N.Y.S.2d at 631 ("lt]he intrinsic validity, effect, revocation or alteration of a testamentary disposition of personal property, and the manner in which such property devolves when not disposed of by will, are determined by the law of the jurisdiction in which the decedent was domiciled at death.")). Moreover, N.Y. Est. Powers & Trusts Law $ 3-5.1 merely restates a longstanding New York Case: 14-1021 Document: 94 Page: 8 09/04/2014 1312458 18 RA-79 ply to e tate's rgu ents, e nows i r usly unter, pectf l i t . t. § 5- . ral s cision. t t l rt ' t l t rein. i . t. § .1 i l r e l e , "We i i ts ri a t.. r , 61 . .S.2 . l m t . § tl cision. ion s rt y. . , 66 . .S. [t]he trinsic iti rt , i c e e s s , t f e juris iction i ich t a led t . ». oreover, rusts § gsta ing 4 common law rule about the testamentary disposition of personal properly. See, e.g., In re Gffird's Will,279 N.Y. 470, 474-475 (N.Y. 1939) (noting that before the statute that predated N.Y. Est. Powers & Trusts Law $ 3-5.1(bX2) was enacted, "it was the common law rule that the validity and effect of a testamentary disposition of personal property are regulated by the law of the testator's domicile at the time of his death.") The additional cases cited by the Estate that apply N.Y. Est. Powers & Trusts Law $ 3-5.1(b)(2) equally miss the mark. None of the cases cited by the Estate implicate valid choice-of-law provisions, nor do the cases address in any way whether the statute invalidates a contractual choice-of-law provision. See, Estate Br. at 21, n.39; see also, Southeast Banlc, N.A. v. Lctwrence, 66 N.Y.zd 910,912, 498 N.Y.S.2d 775,776 Of.Y. 1985) (analyzingoodescendible right of publicity" under Florida law as required by N.Y. Est. Powers & Trusts Law g 3-5.1(bXz)); In re Estate of Donahue,692 N.Y.S.2d 225 (N.Y. App. Div. 1999) (applying New York law to determine ownership of a trailer and vehicle titled in Florida under N.Y. Est. Powers & Trusts Law $ 3-5.1(bX2)). Accordingly, N.Y. Est. Powers & Trusts Law $ 3-5.1(b)(2) cannot be deemed to invalidate or trump valid choice-of-law provisions in contracts such as the RP and DBP at issue herein, and, the district court's decision below, therefore, should be reversed. Case: 14-1021 Document: 94 Page: 9 09/04/2014 1312458 18 RA-80 l t i i rt e, . ., i i or il , 2 .Y. 470, - 75 .Y. 9) ti t f r t t t t. § )( t , li i f t t r iti l rt ar i t ." it l § al ark. s t li i -of-I , r es s y idates Ia . t , k . . a , 2 , , . , (N. . zing " ible l t. § )(2 / 692 .S. n ler le tle ida r . t. s sts a § 1 ( )(2)). c ly, . . ers rusts a § tm t alidate p id Ia isions tracts e is ' , erse . 5 B. The Estate's Preferred Approach Would Result in Delayed Payments to Designated Beneficiaries. The Snows respectfully submit that upholding choice-of-law provisions in group life insurance plans would be entirely compatible with the applicable New York case law, and precedents set therein, as well as with the policy decisions of the New York Legislature. If N.Y. Est. Powers & Trusts Law $ 3-5.1 can be applied to override the contractual provisions of the RP and the DBP, then the established New York precedents and legislative policy decisions are entirely without merit, and essentially, eradicated in their entirety. As the Snows noted in their opening brief, New York law favors swift and certain payment of benefits from life insurance and death benefit plans. (Snows Br. at 22-25.) See, McCarthy v. Aetna Life Insurence Co,, 92 N.Y.2d 436, 441 (N.Y. 1998)("It is in the public interest thatan insurance company may pay a loss to the beneficiary designated in the policy as promptly after the death of the insured as may reasonably be done."); see also N.Y. Est. Powers & Trusts Law $ I3-3.2(a). If the district court's analysis is adopted and the district court's ruling is upheld, insurers and plan administrators, whose plans are offen administered in all fifty states, can no longer rely on the choice-of-law provisions expressly included in their particular plans. The insurers and plan administrators would find it necessary to analyze the contractual terms of their individual plans under the law of each decedent's domicile, which would only be known to the plan administrators at the time of the decedent's Case: 14-1021 Document: 94 Page: 10 09/04/2014 1312458 18 RA-81 . t t ' r f rr d ch ul sult I i f a ies. pectful y it t l i i -of-I l ti l ti li l l l i t i l ture. U . § t s nts l ti li i i r ti l t rit, senti l , t i f i r i f f . . - 5.) , if a . , 6, 1 )( l t a e . t § 1 ). ' l 's l s e s s rs, s te s l t l i - f-I sly i s. s rat rs l t al s idual a s e s rat rs ' s 6 demise. The lack of a consistent and predictable approach to the payment of benefits to designated beneficiaries would necessarily result in an extraordinary complex, time-consuming, and costly approach to determine how the insurers and plan administrators would make benefit payments without being subjected to possible litigation over their good faith efforts to make timely payments to designated beneficiaries. The interplay of individual state laws of contract and state probate laws, only adds to the uncertainty and complexity certain to revolve around proper payments to designated beneficiaries under plans such as the RP and DBP. Insurers and plan administrators, absent the certainty provided in their respective choice-of- law provisions, are more likely than ever to incur an even greater expense, as they are forced to resort increasingly to interpleader actions that are costly both financially and time wise, in order to ascertain whether they are required to pay benefits to designated beneficiaries, or alternatively to the decedent's estate. Although certain states, New York and Colorado, for example, direct that divorce revokes testamentary provisions and non-probate benefi ciary designations in favor of an ex-spouse, other states only revoke testamentary provisions made in favor of an ex-spouse prior to divorce. See, e.g., Idaho Code Ann. $ 15-2-508;; Graves v. Summit Bank,541 N.E.2 d974,977-979 (Ind. Ct. App. 1989) (finding that neither the accountholder's divorce nor a notation that his IRA was to be distributed in accordance with his post-divorce will were sufficient to change the beneficiary Case: 14-1021 Document: 94 Page: 11 09/04/2014 1312458 18 RA-82 i e. f i efi l ssaril sult n t r i r i , d stly r ch t r i e rers nd i l efit t i j r ir d ith ff rts ke ly t i eficiaries. l l t t t l rt i t l f a ies . , t i ti le , rt i fi f ies, ely t' t i , , l , e robate i i i , e s o s e. ., § ; ves t , 5 . .2 974,9 -9 in in t l r' r ti t i ill f f 7 designation in favor of the accountholder's ex-spouse made prior to the decedent's divorce). Admittedly, u certain trend appears to be emerging whereby some state legislatures have enacted statutes to effect a presumed testator's intent not to leave benefits to a former spouse. The uncertainty that insurers and plan administrators face when ex-spouses remain as the designated beneficiary (thereby entitled to benefit payments under a choice-of-law provision of the benefit plan), will likely grow exponentially, as insurers increasingly face situations where the designated beneficiary is a same-sex partner, particularly if a state does not recognize same-sex unions or marriases. Finally, as this case aptly demonstrates, even the preliminary question of the decedent's domicile can be hotly contested, which necessarily fuither delays payments to beneficiaries and vastly increases the costs of administering such plans and policies. In light of the unforeseen and surely unintended adverse effect on the ability of MMBB to make timely payments pursuant to the RP and the DBP, the district court decision below should be overturned. II. THE ISSUE OF WHNTHER THE BENEFICIARY DESIGNATION OF LEON SNOW WAS MADE IN ACCORDANCE WITH THE CONTRACTUAL TERMS OF THE RP IS IMPERMISSIBLY RAISED FOR THE FIRST TIME BY THE ESTATE ON APPEAL. The Estate attempts to raise, for the first time, an issue that was not presented to the district court below. The Estate would now argue that the designation of Leon Case: 14-1021 Document: 94 Page: 12 09/04/2014 1312458 18 RA-83 i ti 's i dly, a rt i d ars r i r by e t t f t t fi ouse. rt i t t e n s ain s i t efici ry r by tit fi i - f I efit ), ill ential , s r i l t f . . U Io n ges. l tl l t ent's icile n tly sted, i h essarily r r a ies t re l i s. rese te ili l , . E I T AL P IS . ts , rs e, l e t e 8 Snow was invalid as a matter of contract law. (Estate Br. at 2,n.1, & 17,n.35). Given that this argument was not presented in the Estate's moving papers for summary judgment, the district court could not have ruled on the Estate's argument regarding the validity of the beneficiary designation of Leon Snow as a designated beneficiary. The Snows, in reviewing the district court's Memorandum Decision and Order, note that Judge Forrest found that an undisputed fact was that Flesher designated his then wife'ol-eAnn Flesher" as the'oprimary" beneficiary of the RP and the DBP, and his then father-in-law Leon Snow as the "contingent" beneficiary of those accounts. See, JA23l & JA232. Despite Judge Forrest's finding, the Estate would have this Court rule that LeAnn (Snow) Flesher's consent was required in order for the desienation to be valid. The Snows respectfully submit to this Court that the issue was not presented below and therefore is not properly before the Court here on appeal. This Court has recognized the general rule that ooa federal appellate court does not consider an issue not passed upon below." Baher v, Dorfman,239 F.3d 415 (2d Cir. 2000) (citations omitted.) The Estate reaches its illogical conclusion that the consent of LeAnn Snow, as spouse of the decedent at the time of the beneficiary designation was required at the time by relying upon the Estate's own literal reading of the contractual provision. Another, more plausible, reading of the provision could result in a finding that the spouse's consent is required when, and only when, the spouse is not named as the Case: 14-1021 Document: 94 Page: 13 09/04/2014 1312458 18 RA-84 l s tt r w. t . t , n. 7, . 3 i n t i r nt s t t d t t 's i ers j t, t i r i li i fi i t i efi i ry. ti a r, t t e st d t n t d ct s t e "Le nn " ri fi ti t fi ounts. , A231 32. l rt t t ig ctf l eal. ze "a l l l ." k . 23 t s lo ic f ' t l t t 9 designated beneficiary in the first instance. In any event, fuither inquiries made directly to the MMBB plan administrator might very well have resolved any potential ambiguity or conflict of interest in the designation of Leon Snow as a designated beneficiary of the RP, or the DBP, for that matter. To reach a valid conclusion in this regard, additional factfinding would have been required. The Estate, however, undertook no further such findings of fact in the district court proceeding. As this Court opined in the Baker decision, the appellate court is more likely to exercise its discretion to consider an issue not raised initially in the district court where the issue is purely legal and there is no need for additional factfinding. See, Baker,239 F3.d at 420. Accordingly, the issue is not properly before this Court on appeal. ilI. THE SNOWS REPLY TO MISCELLANEOUS MISSTATEMENTS AND/OR MISREPRESENTATIONS IN THE ESTATE'S BRIEF. The Estate goes to great lengths to portray the lack of a change of designated beneficiaries by the decent as one of neglect. Admittedly, New York, Colorado and other jurisdictions have decided that more often than not, that may be the case, i.e., one of neglect, and particularly when it comes to revising testamenlary dispositions. While admittedly, flo one can say with absolute certainty what was in the mind of the decedent from the time of his divorce in 2008 until his demise in 201 1, certain other facts from the record below are relevant. In the first instance, the decedent and LeAnn Snow had been married for approximately twenty-eight years. (JA195). Both the 10 Case: 14-1021 Document: 94 Page: 14 09/04/2014 1312458 18 RA-85 si t nefi i r i t t i stance. ny vent, r r i i J'v1J\lIB i l l t bi uit r nfli t t si ti s i fi at er. l r gard, dditi nal tfi i g l ve n uired. e t te, i i l r ti i r l t l l i , er, t l II . S S ENTS IS IONS 'S . t s ra ie l ct. tt , ra j ris ictions te ., a ly e t es t t ions. le t , n ith te t at as f t r i e s rc s se 1 a ts r t e rd t e irst insta ce, t t e nn e e -eight I 5). t decedent and LeAnn Snow were plan participants in the RP and the DBP. (JA194). Following the divorce of the decedent and LeAnn Snow, neither of them changed the designated beneficiaries on their respective RP and DBP plans. (JA195). Prior to the divorce becoming official, the decedent was in telephone communication periodically with the MMBB New York office. (JA205) The decedent was in further telephone communication with that office as late as April 2009. (JA206). Yet, the decedent never completed a change of beneficiary designation on the MMBB plans. (JA195). There is indeed a possibility that the decedent's failure to so change beneficiaries was intentional. None can say with absolute certainty whether the decedent's action, or inaction, was not intentional. The Estate, in its brief, offers a short descriptive narcative that Michele Arnoldy, the decedent's sister, would attest to be the decedent's last will and testament. (Estate Br. at 6). This handwritten document was not admitted into probate in Colorado, or at least, nowhere is it indicated in the record below that it was admitted into probate. In her affidavit, the decedent's sister acknowledges that the decedent would have wanted the written document to be his last will and testament. (JA170). She further acknowledges that she attempted to get a more formal will prepared, but was unable to have it fully executed prior to the decedent's demise. (JAl70). Accordingly, there was no valid last will and testament for the decedent. \t Case: 14-1021 Document: 94 Page: 15 09/04/2014 1312458 18 RA-86 nt rt i t l t i i f i . ri r e i r e coming ffi ial, e dent s i ti ri dical y it e B rk ffi e. 05) t i ti t s i 09. 06). t, e dent ver l ted nge f fi i ti . ). sibili t t' fi l y i 's . t , i f, rt scriptive rrati t ic l , nt' i t r, l t nt' t ill te . s i ten e t t te , t t, te. t, le e t i te . le e l s ise. 17 . c in ly, e id la e t t. 11 In conclusion, there is no absolute certainty that the decedent's failure to change designated beneficiaries on the RP and the DBP was simply a matter of neglect. It is fairly certain, however, that the decedent did not execute a valid last will and testament that could have been probated in the courts in Colorado. These two points of clarification may appear to be of lesser significance on their own, but these points, considered together with the record from below and the Snows' arguments submitted in their initial brief and this reply brief, strongly support a reversal of the district court judgment below. t2 Case: 14-1021 Document: 94 Page: 16 09/04/2014 1312458 18 RA-87 I cl si n, t r i sol t rtainty t t' i nge si t d efi i d s i ply at er f glect. I irl rt i i t t l t ill t l l r do. l ri r i i i se i t , i red t r it e rd low nd e t i ir l i ply ri f, tr gly port t t j t 12 CONCLUSION For all the reasons set forth above, the Judgment of the District Court granting summary judgment for The Estate and denying the Snows' motion for summary judgment should be reversed. Dated: September 4,20t4 Levittown. New York Respectfully submitted, v Jesse T. Wilkins Gregory R. Preston 3000 Hempstead Turnpike - Suite 317 Levittown, New York 11756 TeI: (212) 809-5808 Attorney s for Interp le ader-D efendunts - C r o s s -C I aimunt s -App e ll unts Leon Snow and LeAnn Snow 13 Case: 14-1021 Document: 94 Page: 17 09/04/2014 1312458 18 RA-88 r l sons et rt , t i tri t rt t j t r t t d nyi o s' ti r j e t l ated: pt , 1 , pectfull PRESTON-& ILKINS, L C '-, By: vfiU7;n 1/ I II ins stea e - tto n, l: ttorney for nterp - a ts l a t pp la ts CERTIFICATE OF COMPLIANCE I hereby certify that this brief complies with Rule 32(a)(7)(B) because it contains 2909 words, excluding portions of the brief exempted by Rule 32(a)(7)(B)(iii), and that it complies with the typeface and type style requirements of Rule 32(a)(5)-(6) because it is printed in a proportionally spaced l4-point font, Times New Roman. Att orney s for Int erp I e ader - D efendant s - C r o s s - C I ai m ant s - App e I I ant s Leon Snow and LeAnn Snow Je6de T. Will