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Phillips Petroleum Co. v. Shutts

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Bloomberg Law

Citation. 22 Ill.472 U.S. 797, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985)

Brief Fact Summary. Plaintiffs, royalty owners to gas produced by Defendant, brought a class action in Kansas state court against Defendant to recover interest on royalty payments. The trial court sent notice to all class members, most of whom were located outside of Kansas, notifying them of the litigation, their right to appear and their right to opt out of the litigation. The trial court, applying Kansas law to the transactions, found Defendant liable to all class members, which Defendant appealed.

Synopsis of Rule of Law. In order to bind absent class members to a class action involving monetary judgment, due process requires that all absent class members receive notice describing the litigation, their right to appear, and their right to opt out of the litigation. A state’s law can only be applied if the state has contact or an aggregation of contacts that create state interests in the litigation so that the choice of law is neither arbitrary nor unfair.



Facts. Plaintiffs Shutts and others similarly situated were royalty owners possessing rights to leases from which Defendant produced gas. Defendant produced or purchased gas from lease land located in eleven states. Plaintiffs brought a class action against Defendant in Kansas state court to recover interest on royalty payments. The trial court certified a class of 33,000 royalty owners. All class members were sent notice that described the lawsuit, offered an opportunity to personally appear, and that they could opt out by returning a request for exclusion. The final class was 28,000 that resided in all 50 states, the District of Columbia, and some foreign countries. Class members whose notice was undeliverable were also excluded. 99% of the leases and 97% of the class members had no connection with Kansas except for the lawsuit. The trial court applied Kansas contract and equity law and found Defendant liable to all class members. Defendant appealed arguing the due process clause of the Fourteenth Amendment prevented the Kansas court from adjudicating the claims of all the class members and the full faith and credit clause prohibited application of Kansas law to all of the transactions between Defendant and the class members. The Supreme Court of Kansas affirmed the trial court’s ruling.

Issue. Did the Kansas trial court have jurisdiction to adjudicate the claims of absent class members not residing in Kansas? Should the Kansas trial court have applied to Kansas law to all transactions of the absent class members?

Content Type: Brief


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