Griffin v. McCoach

Rule of Law:

Federal courts sitting in diversity jurisdiction must apply the conflict of laws rules of the state in which they sit, and a state may constitutionally refuse to enforce a contract valid where made if it finds the contract's enforcement to be contrary to its own strong public policy.

Facts:

• Colonel Robert D. Gordon, a resident of Texas, interested seven individuals, including John D. McCoach, in Texas oil developments, forming the Middleton Tex Oil Syndicate, a New York common law association.
• Members of the Syndicate advanced money to Gordon and, at his request and agreement to repay, paid premiums on a term life insurance policy taken out by Gordon, naming the Syndicate as beneficiary.
• After two years, the Middleton Tex Oil Syndicate ceased operations due to financial reverses, leading its members to form the Protection Syndicate in 1924, with John D. McCoach as Trustee, solely to pay premiums and distribute policy proceeds.
• The beneficiary of the policy was changed to name the members of the Protection Syndicate.
• In 1934, Gordon and the Protection Syndicate members further modified the beneficiaries: Gordon would receive one-eighth of disability proceeds, his wife one-eighth of death proceeds, and the remaining seven-eighths would go to the Trustee for the Protection Syndicate members, in exchange for Gordon releasing his right to change beneficiaries.
• The original insurance policy application was signed by Gordon in New York, processed in New Jersey, and delivered in New York; subsequent beneficiary change forms were executed by Gordon in Texas, returned to New York, and sent to New Jersey for endorsement, with the policy then returned to New York.
• Three members of the Protection Syndicate later assigned their interests in the policy to three individuals who had not been involved in the original syndicate, and these assignees subsequently paid their share of the premiums.

Procedural Posture:

• The personal representatives of Colonel Robert D. Gordon's heirs at law initiated an action in the United States District Court for the Northern District of Texas against the Prudential Insurance Company of America to collect on Gordon's life insurance policy.
• Prudential Insurance Company filed a bill of interpleader, naming John D. McCoach, Trustee, and other claimants as parties, and tendering the net amount due under the policy.
• The District Court allowed the interpleader, discharged Prudential, and resolved the interests of other parties, leaving a controversy between Gordon's estate and McCoach, Trustee, regarding certain portions of the insurance proceeds.
• The District Court decreed that Mrs. Gordon receive her one-eighth share and the remaining balance be paid to the Trustee for the benefit of the Protection Syndicate members, finding the policy to be a New York contract and the beneficiaries had an insurable interest.
• Gordon's personal representatives (petitioner) appealed to the Circuit Court of Appeals, challenging the judgment regarding the assigned interests, arguing that Texas law required an insurable interest which the assignees lacked, and that Texas public policy prohibited collection by beneficiaries without such interest, even if the contract was governed by another state's law.
• The Circuit Court of Appeals affirmed the District Court's decision, holding that the policy was a New York contract, no insurable interest restrictions existed under New York law, and applying Texas law would be an unwarranted extraterritorial control of contracts.
• Certiorari was sought and allowed by the Supreme Court of the United States due to a perceived conflict with Sampson v. Channell concerning the application of state conflict of laws rules by federal courts.