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Phillips Petroleum Co. v. Shutts

Supreme Court of the United States · 1985 · Civil Procedure

Civil Procedureclass actionsdue processopt-out rightabsent class memberschoice of lawpersonal jurisdictionopt-out class action

Facts

Phillips Petroleum, a Delaware corporation headquartered in Oklahoma, produced or purchased natural gas from leases in 11 States and delayed royalty payments while federal approval of price increases was pending. Respondents, a class of about 28,100 royalty owners residing in all 50 States, the District of Columbia, and several foreign countries, sued in Kansas state court for interest on those delayed royalties; less than 1,000 class members lived in Kansas, and only about one quarter of one percent of the leases were on Kansas land. After certification, notice was sent by first-class mail telling class members they would be bound unless they returned a request for exclusion; 3,400 opted out and 1,500 more were excluded when notice was undeliverable. The Kansas courts applied Kansas law to all claims and entered judgment for the class.

Issue

May a state court exercise jurisdiction over absent plaintiff class members in a money-damages class action without showing that each absent plaintiff has minimum contacts with the forum, so long as the forum provides notice, an opportunity to be heard, an opportunity to opt out, and adequate representation? May Kansas constitutionally apply its own substantive law to every claim in this nationwide class action when most plaintiffs and leases had little or no connection to Kansas?

Rule

For class actions seeking to bind known plaintiffs concerning claims wholly or predominately for money judgments, a forum State may exercise jurisdiction over absent plaintiff class members even if they lack the minimum contacts that would be required for defendants. Due process requires, at minimum, the best practicable notice reasonably calculated to apprise interested parties of the action, an opportunity to be heard and participate, an opportunity to remove themselves by opting out, and adequate representation by the named plaintiffs. Separately, under the Due Process Clause and the Full Faith and Credit Clause, a forum State may apply its own substantive law only if it has a significant contact or significant aggregation of contacts to the claims, creating state interests, such that application of forum law is neither arbitrary nor fundamentally unfair.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A Colorado state court certifies a nationwide class action seeking refunds of small overcharges from a fictional streaming service, Mesa View Media. Most class members live outside Colorado and never did business there except for their subscriptions. The court sends first-class mailed notice to all identifiable members, explains the claims and their right to appear through counsel, includes an exclusion form, and the named plaintiffs are found to adequately represent the class.

If Mesa View Media argues that the court lacks personal jurisdiction over absent class members who have no minimum contacts with Colorado, how should the court rule?

Explanation. For known absent plaintiffs in a class action seeking money damages or similar relief at law, due process does not require the same minimum-contacts showing that applies to defendants. Because absent plaintiffs are not haled into court under threat of default and generally need not appear or hire counsel, the forum may bind them if it provides minimal procedural protections: best practicable notice reasonably calculated to inform them, an opportunity to be heard and participate, an opportunity to opt out, and adequate representation. (Derived from Phillips Petroleum Co. v. Shutts (1985).)