Phillips Petroleum Co. v. Shutts

Brief Fact Summary.

Plaintiffs suing Defendant for interest on late royalty payments and attempt to be certified as a class.

Synopsis of Rule of Law.

(1) A state may exercise jurisdiction over the claim of an absent class action plaintiff even if the plaintiff lacks minimum contacts with the state so long as the plaintiff is provided with due process protection.

Facts.

Plaintiff Shutts, a royalty owner with rights to the leases from which Defendant Phillips produced gas, brought a class action lawsuit in Kansas state court alleging the class members were owed interest on late royalty payments. The court certified the class consisting of plaintiffs from all states, some territories, and foreign countries. Shutts sent every class member a letter via first-class mail notifying them that they could appear in the action or else they would be represented by Shutts. There was also a letter titled “request for exclusion” on which they could choose to opt out of the class. The final class consisted of 28,100 members. 90%+ of the class members and leases had no connection to Kansas. After trial the Kansas state court found Phillips liable under state law for the royalties. Phillips appealed to the Kansas Supreme Court. On appeal Phillips challenged personal jurisdiction over the absent class members and that the opt out notice was not sufficient to bind opt out members that were not Kansas residents or did not have minimum contacts with the state. Phillips also argued the trial court should not have applied Kansas law to all the claims but should have applied the relevant state laws based on where the leases were located. The Supreme Court of Kansas affirmed the lower court decision. The Supreme Court granted Phillips’ certiorari.

Issue.

may a state exercise jurisdiction over the claim of an absent class member plaintiff even if the plaintiff lacks minimum contacts with the state?

Held.

Yes,  a state may exercise jurisdiction over the claim of an absent class member plaintiff even if the plaintiff lacks minimum contacts with the state so long as they are given due process protection. The decision of the Supreme Court of Kansas is affirmed as to the jurisdictional issue.

Discussion.

1. The burden placed on an out of state defendant is greater than that of an out of state plaintiff.
2. Plaintiffs in this case were not forced to travel anywhere to defend themselves, whereas an out of state defendant might be required to hire counsel and travel to the forum state.
3. Plaintiffs in this case also had other plaintiffs to defend their interests.
4. Because out of state plaintiffs have less of a burden, a state may exercise personal jurisdiction over their claim even if the out of state plaintiff lacks the minimum contacts required to exercise the same over an out of state defendant.
5. A forum state however must still provide due process safeguards to out of state plaintiffs in the form of, for example, giving them notice or allowing them to participate in the litigation. They must also be given an opportunity to opt out of the class.
6. The class members in this case received adequate due process protections from the Kansas state court and therefore appropriately exercise personal jurisdiction over the class.
7. The decision of the Supreme Court of Kansas is affirmed as to the jurisdictional issue.