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Civil Procedure Fall 2014

Developments After Shutts

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On remand, the Kansas Supreme Court revisited the Supreme Court’s decision in Shutts in considering Phillips’ argument that the law of LA, NM, OK, TX and WY should govern because 97% of the leases were executed in those five states:

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“As to the choice of law question, however, it was ruled that the application of Kansas law to all of the investors’ claims for interest violated the due process and full faith and credit clauses. In its analysis, the Court first noted that if the law of Kansas was not in conflict with any of the other jurisdictions connected to the suit, then there would be no injury in applying the laws of Kansas…The Court then cited differences in the laws of Kansas, Texas, and Oklahoma which Phillips contended existed. It appears, however, no analysis was made by the Court to determine whether these differences existed in fact.” Shutts v. Phillips Petroleum Co., 240 Kan. 764, 767 (1987).

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The Kansas court went on to find that there was no conflict between the laws of the other five states and the law in Kansas and it entered judgment that was unchanged from the original case with regard to liability and interest rates.

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After Shutts some critics have proposed development of one substantive law for complex multi-party litigation, either by choosing the law of one state to apply to all suits or developing a uniform federal law. Do you think this would be more efficient? Would it be fair?

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Note that CAFA has complicated choice of law analysis after Shutts, by extending federal jurisdiction to cases with minimal diversity provided such cases meet CAFA’s other requirements.

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In Shaffer v. Heiter, the Supreme Court found that “all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.” 433 U.S. 186, 212 (1977). Does Shutts mean the above does not apply to class action plaintiffs?

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Rule 23 only imposes notice and opt-out requirements for 23(b)(3) class actions. Does Shutts’ assertion that the right to opt-out is a due process requirement mean that class members must be given the opportunity to opt out of 23(b)(1) or 23(b)(2) class actions? Footnote 3 in Shutts has caused some confusion about hybrid class actions for monetary and equitable relief because it implies that the decision is not merely limited to 23(b)(3) class actions (for monetary relief). The Supreme Court has heard arguments for but ultimately dismissed two cases arguing for Shutts to be applied to 23(b)(1) and (b)(2) class actions. See Ticor Title Ins. Co. v. Brown, 511 U.S. 117 (1994) and Adams v. Robertson, 520 U.S. 83 (1997).

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