Federal law pre-empts state divorce ruling

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The $400,000 life insurance benefits of a deceased Wayne County soldier will go to his father, not his children as he had indicated as part of a divorce settlement.

U.S. District Court Judge Michael A. Telesca ruled this week that he is bound by federal law to grant the policy proceeds to the beneficiary of Pvt. First Class Jonathan Roos, rejecting a claim by his ex-wife to impose the establishment of a trust for their two children.

Roos was in the midst of a divorce from plaintiff Erika L. Roos when he enlisted in the Army in October 2004. On March 15, 2005, before the divorce was final, Roos named his father, David Roos, as the principal beneficiary of his Servicemember’s Group Life Insurance, a federally-established group term life insurance program for members of the armed forces. Roos died June 13, 2006, while on active duty.

His ex-wife, who is represented by K. Wade Eaton of Chamberlain D’Amanda Oppenheimer & Greenfield, claimed the imposition of the trust was consistent with the anti-attachment provision of the SGLI Act and not prohibited by federal law. Judge Telesca disagreed.

Eaton said he had yet to discuss the decision with his client and whether or not to seek an appeal.

“The sense that I got from the judge’s decision is that the court was sympathetic with my client, but was constrained to dismiss the cased based on the Supreme Court’s ruling in Ridgway,” Eaton said.

In Ridgway v. Ridgway 454 U.S. 46, 49-53 (1981), the benefits of Army Sgt. Richard H. Ridgway’s Servicemembers Group Life Insurance were not given to his ex-wife for their three children even though keeping the policy in force for that purpose was part of a divorce decree.

Ridgway did keep the policy in force, but shortly after he remarried, he changed the beneficiary designation to “by law,” which grants them to the widow — the current wife.

The first wife’s challenge went all the way to the U.S. Supreme Court which ruled federal law trumped state law and that the imposition of a trust by a Maine court was contrary to the SGLI Act and the Supremacy Clause of the Constitution.

By law, policy proceeds go first to the beneficiary and where none is indicated, to the widow or widower.

Roos named his father as his beneficiary and the proceeds were directed to him even though Roos had indicated at a September 2005 divorce status hearing that his children, including one from a previous relationship, were his only beneficiaries. A trust was never established.

As part of the divorce settlement, according to court documents, Roos agreed to continue his SGLI policy and assure that if he died, two-thirds of the death benefit would go into a guardianship account for the sole benefit of his two younger children.

It is undisputed, according to court papers, that David Roos took no action to ensure the policy’s proceeds be preserved and used for the sole benefit of his three grandchildren. Erika Roos sought the trust imposition in July 2008 in Wayne County Supreme Court. The case was moved by David Roos to U.S. District Court for Western District of New York in Rochester.

“The threshold question here is whether plaintiff’s state law cause for action for imposition of a constructive trust is pre-empted by federal law, i.e., the SGLIA,” Judge Telesca wrote. “Defendant argues that it is pre-empted. Plaintiff asserts that the relief she seeks is consistent with Congress’s intent in enacting the SGLIA.”

Judge Telesca notes the Supremacy Clause of the U.S. Constitution provides “the laws of the United States … shall be the supreme law of the land … any thing in the Constitution or laws of any state to the contrary notwithstanding.”

“Even though the Supreme Court found its holding ‘unpalatable,’ it nonetheless determined that the Supremacy Clause mandated that the federal law of the SGLIA must prevail over the conflicting state law of domestic relations and of constructive trusts,” Judge Telesca wrote in his decision and order, filed Tuesday.

He noted that Erika Roos tried to distinguish Ridgway on the basis of a 1987 Supreme Court decision in Rose v. Rose 481 U.S. 619 which recognized an exception to the anti-attachment provision in a statute governing the payment of disability benefits to veterans.

The SGLI Act of 1965 was modified in 1970 to include an anti-attachment provision to shield payments from taxation, creditors’ claims or seizure through any legal process.

In the Rose case, a disabled Vietnam veteran was held in contempt of court for failing to pay child support. A state court ruled his only means to satisfy that obligation was to use benefits he received for his service-related disability.

Judge Telesca noted that the Rose court found that recognizing an exception to prohibiting any attachment would not undermine the federal purpose in providing the benefits because that statute intended they support the veteran and his family.

“The ‘critical difference’ between Ridgway and Rose was that Congress had not made the disabled veteran, Rose, the ‘exclusive beneficiary of the disability benefits,’” the decision says.

Judge Telesca ruled that the Rose decision didn’t apply in the Roos case and that Ridgway “remains the controlling law on the subject,” although he does include a quote, as Eaton pointed out, from Justice John Paul Stevens who served on the High Court from 1975 to June 2010.

Justice Stevens, concurring in the Rose decision, notes “The contrary holding in Ridgway is hopelessly anomalous, and should be relegated to the status of ‘a derelict on the waters of the law.’” Lambert v. California, 355 U.S. 225, 355 U.S. 332 (1957) (Frankfurter, J., dissenting).

Judge Telesca further noted that he was sympathetic with the plaintiff and that the inequities of the case favor her minor children, but it is undisputed that Roos clearly designated his father as the primary beneficiary.

“The beneficiary election form is unambiguous,” Judge Telesca wrote. “Pfc. Roos’ statements during the state court divorce proceedings to the effect that he intended to leave the proceeds of his policy to his children cannot be considered to be controlling as they were not in writing and received by the proper office prior to his death, as required by the SGLIA.”

David Roos is represented by Gary H. Abelson, a partner in the Rochester firm Hiscock & Barclay LLP, who was out of town and could not be reached for comment.