Presumed Intent: Wolford, Property Default Flips, and An Unlikely Precedent

This guest post does not necessarily represent the views of the Duke Center for Firearms Law. 

Tomorrow morning, the Supreme Court will hear oral arguments in Wolford v. Lopez, concerning the Second Amendment limits on a state’s ability to switch the default rules governing private property to align them with property owners’ presumed intent. In a recent case dealing with the Constitution’s Contracts Clause, the Court confronted similar questions. In Sveen v. Melin (2018), in an 8-1 ruling, the justices concluded that states have significant leeway to switch the default terms governing agreements between private parties, notwithstanding what Justice Gorsuch’s lone dissent accurately described as the Contract Clause’s “categorical” and “absolute” terms. The Court vindicated the legislature’s longstanding authority to switch a default rule to “reflect the intent of most” of the relevant property owners even though the swap would impose a “significant change” on existing contracts. Although the contexts are different, Sveen provides some insight into how we might think about the constitutional dimensions of Hawaii’s change to default property law rights.

Before unpacking the Court’s decision, some background is in order. Article I’s Contracts Clause forbids States from passing “any . . . Law impairing the Obligation of Contracts.” The Minnesota law at issue in Sveen, as the Court characterized it, “establishes a default rule for when Minnesotans divorce.” The challenged Minnesota law flipped the default rule that had been in place until 2002 and provided that, upon divorce, an ex-spouse is automatically removed as a beneficiary of assets like life insurance policies of their former partner. “In contrast to the old law,” the Court observed, “Minnesota’s new revocation-on-divorce statute starts from another baseline: the cancellation, rather than continuation, of a beneficiary designation.” But, as with all default rules, the former partner could always just rename the ex-spouse as beneficiary if that’s what the insured in a particular case wanted.

When Mark Sveen died in 2011, after having previously divorced Kaye Melin, Minnesota courts applied the new default rule to bar her receipt of his life insurance proceeds because he had not overcome the default and renamed her as a beneficiary before his death. Melin argued that the state law unconstitutionally impaired the obligation of the life insurance contract that had been created before the 2002 Minnesota legislature flipped the default rule.

The Court rejected her argument in an opinion by Justice Kagan, joined by all of the justices except Justice Gorsuch. She began by placing Minnesota’s law in the context of this nation’s historical tradition: “[t]he legal system has long used default rules to resolve estate litigation in a way that conforms to decedents’ presumed intent.” She marched through examples. Women’s wills were originally revoked upon marriage; a man’s upon both marriage and birth of a child. Later, states eliminated the gender differences. Then, they eliminated the will’s automatic revocation upon marriage/birth. Next, in the 1980s, “climbing divorce rates” led them to create automatic revocation for will bequests to an ex-spouse upon the marriage’s dissolution. Still later, they applied the same revocation-upon-divorce default to “will substitutes” like life insurance policies. Evolution was the only constant. Through it all, she underscored, “[c]hanges in society brought about changes in the laws governing revocation of wills” and their like. New default rules took the place of the old ones, all with the aim of implementing the default rule that matched owners’ presumed intent at that time and place in society.

The Court’s march through this evolutionary history underscored how states have long responded to changes in society and its values by changing the default rules for property transactions. They have done so with the aim of aligning the default rules with what they judge likely to coincide with most owners’ desires. The Supreme Court agreed that Minnesota’s law effected a “significant” alteration to those contracts created before its enactment, but, for purposes of the Contract Clause, such an alteration did not rise to the level of “substantial impairment.”[1]

Why did the Court conclude the Minnesota law’s concededly “significant change” did not rise to the level of “substantial impairment”? The Court’s reasoning relied on three combined considerations: (1) the statute was designed to reflect what a policyholder would likely have wanted, supporting not undermining the purpose of the contract, (2) it did no more than a divorce court could always have done, and (3) “the statute supplies a mere default rule, which the policyholder can undo in a moment.” I will focus on the first and third rationales, which bear on what Hawaii’s default switch was trying to do and may offer some insight into one path for the Court’s analysis in Wolford.

First, the Court underscored that “the Minnesota statute furthers the policyholder’s intent in many cases—indeed, the drafters reasonably thought in the typical one.” The Court noted that lawmakers had long altered default contract rules in response to changing circumstances and public opinion.  This longstanding history of change weighed against finding the 2002 amendment to be a “substantial impairment.” The Court acknowledged that when the legislature moved from changing default rules about wills to changing default rules about contracts (like insurance policies), its default switching “raise[d] a brand-new constitutional question” because contracts—not wills—are entitled to the Constitution’s protections. But the fact that a new default rule implicated an enumerated constitutional right did not render it automatically suspect. Rather, even in the contracts context, the switch was still trying to further the default that most affected property owners would likely want. “The law no doubt changes how the insurance contract operates,” the Court acknowledged. “But does it impair the contract? Quite the opposite for lots of policyholders,” since they’d likely prefer the new default.

How might that rationale apply in Wolford? To paraphrase Sveen, the Hawaii law no doubt changes how gun carriers interact with private property. But does it impair the right to keep and bear arms? Quite the opposite for lots of landowners—particularly those in Hawaii—who likely prefer the new default and choose to exercise their rights by exclusion. No one in Wolford so much as questions that private property owners themselves have the right to exclude guns from their property. The challengers indeed emphasize they “have no quarrel with that principle.” The only question in Wolford is whether the state can switch the default rule to (in its view) align the default with what most landowners prefer. Sveen endorsed such evolutions in default rules for property allocations, based in large part on the long history of states doing so. The same seems to be true as well for real property. As a trio of property law professors wrote in an amicus brief in Wolford, “States have repeatedly adjusted the right to exclude through default rules that reflect evolving conceptions of ownership and access, and that differ across time, by region, and by property type.” Because Bruen demands attention to history and tradition, the same long history of default-rule evolution that influenced the Sveen Court should also bear on Wolford’s analysis.

As for the third rationale in Sveen, the majority emphasized that not only was the default switch designed to “honor” the contract maker’s presumed intent, the default rule could easily be overcome. “The law puts in place a presumption about what an insured wants after divorcing. But if the presumption is wrong, the insured may overthrow it. And he may do so by the simple act of sending a change-of-beneficiary form to his insurer.” In other words, the Court emphasized, at its core the default rule imposed nothing more than “a paperwork requirement (and a fairly painless one, at that).” For the minority of property owners whose wishes did not align with the default, they had an easy route to vindicate their wishes: sign a piece of paper.

That rationale, too, bears on Wolfold. In the same way as Minnesota’s default rule, Hawaii’s default rule is quite easy to reverse. It many instances, it might even be less than the “paperwork requirement” that Sveen characterized as minimal. A landowner who wishes to allow guns on their property can post a sign or otherwise indicate, like through verbal permission, that those who carry are welcome to do so on that property. Indeed, at the same time the Ninth Circuit upheld Hawaii’s default switch, it struck down California’s very similar swap on these exact grounds; California’s default rule, the panel wrote, was invalid precisely because it was so much “stricter than Hawaii’s law with respect to how a private-property owner may overcome the new default rule prohibiting firearms.” If the ease of overcoming a new default rule mattered in Sveen in deciding whether the state unconstitutionally impaired a contract, it should matter in the Court’s analysis in Wolford, too, in assessing whether Hawaii’s new default rule unconstitutionally infringes the right to keep and bear arms.

Of course, I am not pretending Sveen governs Wolford. These two cases arise in quite different contexts (perhaps explaining why Sveen is not cited in any of the Wolford briefing). The Second Amendment and the Contracts Clause protect different rights. The method the Court has used to implement those respective rights diverges in key respects. And the analysis in Sveen certainly does not map one-to-one onto a Bruen-style analysis. Even granting all that, there are obvious parallels that the Court should not ignore. Both cases are fundamentally about setting up default rules for property and centrally concerned with the state’s authority to change those default rules, even when that default switch affects fundamental constitutional rights. In both cases, the complaint is that the legislature cannot make that initial presumptive decision for the property owners. Neither Melin nor the Wolford challengers contest that Sveen and Hawaiian property owners, respectively, could have freely (and lawfully) made the exact same decision as the legislative default.

The Sveen Court’s emphasis on the continually evolving nature of default rules that shift in response to judgments about changes in owners’ desires, combined with its attention to the ease of overcoming the default, ought to be considered in Wolford. After all—to hammer home one more similarity—the text of both the Second Amendment and the Contracts Clause purport to be unqualified. Yet Sveen rejected the argument that the Contract Clause’s unqualified language prohibiting “any . . . law” impairing contractual obligations meant all impairments, no matter their significance or burden, were invalid. “[T]he Court has always approved statutes like this one, which enable a party with only minimal effort to protect his original contract rights against the law’s operation.” Despite Justice Gorsuch’s protestations about the Clause’s “categorical” nature—that it was framed in “absolute” terms and that the framers wanted existing contracts to be viewed as “inviolable”—he found himself alone in dissent in Sveen. Perhaps that too should be the fate of justices in Wolford who mistake bare text for absolute commands and ignore the venerable history and tradition of default rules that change over time, evolving in response to legislative judgments about how best to implement their constituent’s valid wishes about their own property.