# Petition — Phillips Petroleum Co. v. Shutts > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0205%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1978 - **Citation:** 434 U.S. 1068 ## Text ILEBD fC 14 l9T7 IN THE MICHAD. ROON Supreme Court of the United States Ocronen Team, 1977 77-856 Puitia PernoneuM Company, Petitioner, v, In, Suvurra, as Executor of the Eatate of Althea Shutta, Individually, and as representative of all that Clana of gas royalty owners under Phillips Petroleum Company oil and gas leases in the Hugoton-Anadarko aren, Rexpondenty, CLERK PETITION FOR A_ WRIT OF CERTIORARI TO THE SUPREME veka THE STATE OF CLARK M, CLIPPORD Canon M, Giana Ronenr A, ALTMAN Joun G, CALENDER Crirpord, GLasa, Mol wain & FINNEY 815 Conneetiont Ave, Washington, D.C, 20006 Joampu W, Kennepy Monnia, Larne, Evana, Brook & KENNEDY Biite 440, 200 Weat Douglas Wichita, Kansas 67202 Kenneren Hrapy C.J, Rowena T, lL. 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A.2d W177 (App, Div, VOTB) cere reer eens iu Freeman V, Alderaan. 110 U, 4 oes OL) Gray ¥ Aneee, Production Company, Pod 679 ; a eg er a Benson 7 ie , 67 ULB, 296 1 368) ink on ok 8, 10, 12, 18 Hartford LAfe Ins, Co, Co, ie iD. ee os) (1916) .,, 4 ba i ys § 1 Ww, : arte, bee do, In ity im nay rho Aven re Gave; 466 Bib latoraational ay Co. ¥, Washing om, 308 26 U8 (10GB) nrcccpeveeseeegereces 7 ber 10, Mi, ih, af 16 Kiemow v, Time Ine,, 406 f-" Dn Od 12, vert, denied, 420 UA, ‘w28 (LOTS) sv secccrseneseengons 1 Maddow v, Gulf Corporation, 107 PQd 1926 (Kan, : uellens Cini ienover Honk @ Hrasd Go, th U, MS, sree? Gee pr sretntrraeene Or i ' 607 P.dd 1992 (Kan, OTT) ccc ccc cece renee 7 P N77) wh. 116 BOTT) vpeccaccecpores 12 Philadelphia Meine Co, ¥, A American Hrase , shoe’ Hele UB 1 Bk, 3060 i uh Siting ve 4 OE onpony, ‘tet’ Pod’ _ ' se ran arn i Supreme Tbe r Hen Hur . Com, 260 U8. 906 - tohn —y SEG Paper Co, 414 U.S. 201 (1078) .7,19 Table of Authorities Continued it Page ConwrrrutionaL Provisions: Article VI of the United States em ppoeeses y Fourteenth Amendment to the United Sta Os 2, 4, 4,7, 4, 0 11, 16, 20, 21 MraTurns | Tv vetd s cec cues eehideeenaeue 4,6, 4, 16, 16,10 TT Aids ode ion Ko bndsbnd nbd phensoben 4, 14,16 Itule 25, our Kules of Civil Procedure ..,,,,,,., 14 LALA eee eee eee eee ee eee eee eee a 7 yr the Sherman Antitrust Act, 16 U.S.C, 46 16 Say ey PEED be'sewedendebebedecadecdeceee oo § Neautations’ Vederal Power Commiasion 18 OF Mt, 4 164.106(4) TTT TTTTY pbbobdedbedes 4 Apminieraative Decisions: Hugoton-Anadarko Area Rate C , Opinion 686, 44 NPC, 761 (apt0h bebeees pe sosenbuevevers 4,6,8 MisORLLAN ROUSE | Comment, Class Action Adjudications, 18 ULC.L.A, L, Rev, URED his cl chbansceccsenses 14 FPPC Publication 8-217, Sales fe oy, Producera ve of Natural Gas to Interstate 1070, ULB, Government Printing Oo peeesbecevcoes 1A Neotion 6 of the Proposed Uniform Class Action Act 11 veelymeor™ Class Actions, 63 A.B.A, Journal 487 1 IN THE Supreme Court of the United States OctToBER TERM, 1977 No. Puusme PerroLeum Company, Petitioner, v. Inu, Suurrme, as Executor of the Estate of Althea Mhutts, Individually, and as representative of all that élass of gas royalty owners under Phillips Petroleum Company oil and gas leases in the Hugoton-Anadarko area, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE SUPREME COURT OF THE STATE OF Petitioner Phillips Petroleum Company prays that a writ of certiorari issue to review the opinion and judg- ment of the Supreme Court of Kansas entered in these proceedings on July 11, 1977. The opinion of the Supreme Court of the State of Kansas ia reported at 222 Kan. 527, 567 P.2d 1292, and appears in the Appendix hereto. (26a) The unpublished judgment and opinion of the District Court of Kiowa 2 County, Kansas, dated July 29, 1976 (App. 6a), modi- fied on August 13, 1976 (App. lla), makes reference to stipulations in the Pretrial Order filed April 14, 1976, which is reproduced in pertinent part in the Appendix. (12a) JURISDICTION The judgment of the Supreme Court of Kansas was made and entered on July 11, 1977. A timely motion for rehearing was denied on September 15, 1977 (App. 65a), and this petition for certiorari was filed within 90 days of that date. This Court’s jurisdiction is in- voked under 28 U.S.C. § 1257(3). The Supreme Court of Kansas is the highest court of the State of Kansas in which a decision can be had. CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED The Fourteenth Amendment to the United States Constitution provides in pertinent part: [N]Jor shall any State deprive any person of life, liberty, or property, without due process of law.... Article VI of the United States Constitution pro- vides in pertinent part: This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Con- trary notwithstanding. 3 The statutory provisions involved are set forth in the Appendix beginning at page la. They include the fol- lowing: 1. Kansas Statutes Annotated, Sections 60-223 and 60-266. 2. Section 4(e) of the Natural Gas Act, 15. U.S.C. § 717e(e). QUESTIONS PRESENTED I. The Kansas Supreme Court has ruled that under the Kansas class action statute (K.S.A. 60-223), Kansas state courts have jurisdiction to render a judgment binding upon vnnamed nonresident members of a plain- tiff class, even though such persons have absolutely no contact with the State of Kansas. Further, the Kansas court has held that jurisdiction over such nonresidents is established ‘‘if procedural due process guarantees are met.” (App. 42a, 567 P.2d at 1308) The first question presented is whether the exercise of in per- sonam jurisdiction by a state court over unnamed non- resident members of a plaintiff class, having no contact with the forum state, under a standard of procedural due process, and not “‘minimum contacts’’ with the forum state, exceeds the constitutional limitations of the state’s power and violates the Due Process Clause of the Fourteenth Amendment. II. The Kansas Supreme Court has ruled that Peti- tioner must pay interest on additional royalties paid in 1972, for the period prior to the time the royalties were ascertained and due and payable. The second ques- tion presented is whether the decision to award interest, on equitable grounds, for the period when the final 4 payment of royalty was properly delayed by operation of federal law so offends notions of fairness as to be violative of the Due Process Clause of the Fourteenth Amendment. STATEMENT OF THE CAS= Petitioner Phillips Petroleum Company (‘‘Phil- lips’’), during the times relevant to this action, was engaged in the production and purchase of natural gas from mineral leases in the Hugoton-Anadarko area and ‘he sale of its gas to various pipeline companies for transportation and resale in interstate commerce.’ Re- spondents were royalty owners in said leases.’ Numerous respondents entered into separate agree- ments with Phillips which provided, inter alta, that the royalty to be paid should be computed in relation to the weighted average price per Mef received by Phillips during any calendar month from all sales of gas deliv- ered by Phillips within a certain ‘‘designated area’’ in the Hugoton-Anadarko area.’ In September 1970, Federal Power Commission (““FPC’’) Opinion No. 586 was issued and it became final in October 1972. In re Hugoton-Anadarko Area Rate Case, 466 F.2d 974 (9th Cir. 1972). Opinion No. ‘The Hugoton-Anadarko area is a Federal Power Commission rate making area encompassing generally the State of Kansas and the Panhandle Section of Texas and Oklahoma. 18 C.F.R. § 154.106 (g). ? The royalty relationship was governed by oil and gas leases and amendments thereto, including gas royalty agreements. * The ‘‘designated area’’ is Texas County, Oklahoma, and Sher- man and Hansford Counties, Texas. —— 5 586 determined the lawful rates for interstate sales of gas in the Hugoton-Anadarko area. The effect of Opin- ion 586, insofar as Phiilips and the respondents are concerned, was its approval, in whole or part, of Phil- lips’ nineteen pending applications for permission to increase prices for the sale of gas by Phillips within the ‘‘designated aree ’’ Insofar as the rate applications were approved it meant that the respondents were en- titled to receive approximately $5,700,000 in additional royalties relating to gas production between 1961 and 1970. In December 1972, Phillips disbursed the addi- tional royalties to the respondents, who numbered over 6,400.* Irl Shutts, a resident of Kansas, brought this action on behalf of himself, and other royalty owners having leases in the Hugoton-Anadarko area to whom Phillips had disbursed additional royalties, to recover interest thereon. Over Phillips’ jurisdictional objection (De- fendant’s Motion to Dismiss Purported Class Action As to Non-Resident Class Plaintiffs, Record on Appeal, p. 19) the trial court certified Ir] Shutts as a member and proper representative of a class of the royalty owners (including nonresidents) who received addi- tional royalty payments from Phillips. The only con- tact between the State of Kansas and the plaintiff class was the residency in that state of 218 of its members. The District Court of Kiowa County, Kansas, heard the case as a class action under K.S.A. 60-223. On the merits, and over Phillips’ objection that no interest is to be awarded where the payment of the principal sum ‘For a fuller, and more detailed discussion of the facts in this ease, the Court’s attention is directed to the factual recitation in the opinion of the Kansas Supreme Court. (App. 26a-35a, 567 P.2d 1298-1304) 6 properly is delayed by federal law, the trial court con- elnded that Phillips was liable for interest. The trial court’s ruling was appealed to the Kansas Supreme Court, which affirmed the trial court with regard to its holdings that: (1) it had jurisdiction over unnamed nonresident plaintiff class members who had no contact with the State of Kansas; and (2) that Phillips must pay interest on the additional royalties notwithstanding their final distribution was properly delayed by federal law. These two holdings form the basis of Phillips’ peti- tion to this Court. REASONS FOR GRANTING THE WRIT For the first time in the United States, a state court has attempted to exercise in personam jurisdiction over a nationwide plaintiff class in which ninety-six percent of the class members were nonresidents of and had no contact whatsoever with the forum state. International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), held that in order to subject a party who is not present with- in the forum to in personam jurisdiction, he must have ‘‘eertain minimum contacts with it such that the main- tenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ’’ Ignoring Inter- national Shoe, the Kansas Supreme Court held that “‘the element necessary to the exercise of jurisdiction over nonresident plaintiff class members is procedural due process,”’ and not minimum contacts with the forum state. (App. 38a, 567 P.2d at 1305) (emphasis in orig- inal) This assertion of personal jurisdiction over non- resident parties having no contacts, ties, or relations with the State of Kansas and who have not affirmatively 7 submitted themselves to the jurisdiction of its courts 1S an egregious violation of the Due Process Clause of the Fourteenth Amendment. ‘‘[A] State, in seeking to assert jurisdiction over a person located outside its borders, may only do so on the basis of minimum con- tacts among the parties, the contested transaction, and the forum state.”’ Shaffer v. Heitner, —— U.S. —-, 97 S.Ct. 2569, 2588 (1977) (Brennan, J., concurring and dissenting). It is imperative that this Court grant certiorari in this case and decide whether state court jurisdiction over a plaintiff class in a nationwide class action must be determined by the traditional jurisdictional require- ments set forth in International Shoe and Shaffer, or whether some new and expanded concept of state court jurisdiction is to be constitutionally sanctioned.’ The likelihood of other multistate class actions in state courts is not a mere possibility but a reality. At this time there are a number of similar class actions in- volving nonresidents pending in the courts of Kansas which have assumed jurisdiction over the nonresident class members. See, e.g., Niz v. Northern Natural Gas Producing Company, 567 P.2d 1322 (Kan. 1977); Sterling v. Superior Oil Compamy, 567 P.2d 1325 (Kan. 1977) ; Maddoz v. Gulf Oil Corporation, 567 P.2d 1326 (Kan. 1977); and Gray v. Amoco Production Com- pany, 564 P.2d 579 (Kan. Ct. App. 1977). Furthermore, the award of interest by the Kansas Supreme Court constitutes a denial of due process of law to Phillips. It is clearly contrary to concepts of * Zahn v. International Paper Co., 414 U.S, 291 (1972) and Snyder v. Harris, 394 U.S, 332 (1969), preclude most nationwide diversity class actions in the federal courts. fundamental fairness to require Phillips to pay in- tereat on additional royalties prior to the time that they became legally due and payable, The Kansas Su- preme Court concedes that the additional royalties were not due and payable until after FPC Opinion 586 became final, This should be the controlling factor in the award of interest, Phillips ahould not be penalized for the delay by the FPC in ruling on Phillipa’ price increase applications, Since a judgment in a clase action in Kansas binds the class whether favorable or unfavorable to the class, K.S.A, 60-223(¢) (2), the exiatence of jurisdiction must be teated in the context of a judgment unfavorable to the class, If the rule were otherwise, a judgment favor- able to Phillips would not be accorded full faith and credit, Hanson v, Denckla, 357 U.S, 235 (1958), Due process would thus be denied Phillips, International Shoe Co, v, Washington, 326 U.S, 310 (1945), held that a judgment cannot be entered against one who has no contacta with the forum state: Whether due process ia satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the lawa which it was the purpose of the due roceas clause to insure, That clause does not con- Complete that a state may make binding a judg ment in personam against an individual or corpo- rate defendant with which the state has no con tacta, ties or relationa, (326 U.S, at 319) This rule recently has been extended by the decision in Shaffer v, Heitner, —— U.S, ——~, 97 S.Ct, 2669 (1977), There, this Court aaid: The standard for determining whether an exerciae of jurisdiction over the interests of persons is con- sistent with the Due Process Clause ia the mini- mum contacts atandard elucidated in /nternational Shoe, (97 S.Ct, at 2682) The erucial holding by the Kansas Supreme Court with reapect to the extension of state juriadiction is as follows: Therefore, while the easential element necessn to eatabliah ,uriadiction over nonresident defend- ante is come ‘minimum contacta’’ between the de- fendant and the forum atate, the element neceasary to the exercise of juriadiction over nonresident plaintiff clase members ia procedural due process. (Ap oer 567 Pld at 1805) (emphasia in origina The Kansas Supreme Court clearly disregarded the minimum contacts requirement for the aseumption of jurisdiction over nonresident plaintiffs, Thus the Kan- sas Supreme Court created an erroneous distinction between plaintiffs and defendants which thie Court never before has recognised, Shaffer v. Heitner indi- cates that it is improper to draw such a distinction when determining questions of juriadiction: ag assertions of state court jurisdiction muat evaluated according to the standards set forth in International Shoe and ita progeny, (97 S.Ct. at 2684-85) = ee V————— eee 10 Since aa noted, judgmenta in class actiona bind the class even if unfavorable, there la no authority or rae tional baaia for the Kansas Supreme Court's disregard of the minimum contact standard required by the Due Process Clause, Substituting ‘procedural due process” for the ‘minimum contacta’’ required by /nternational Shoe and Shaffer aa the foundation of jurisdiction moana that the atate court can create juriadiction where none exists merely by following certain procedural safeguards, The Kanaas Supreme Court, by focusing on notice and adequacy of representation as providing procedural due process and thereby establishing jurin- diction, has ignored the mandate of International Shoe that it ia the ‘quality and nature of the activity” whieh eatablishes juriadiction if due process is otherwise watinfled,’ Phillips does not dispute that a nonresident plaintiff may bring an action against a defendant in any state which can properly assert jurisdiction over the defend. ant, In that situation, however, the plaintiff must vol- untarily submit himself to the juriadiction of the atate court by filing his complaint there, He muat purposely avail himself of the privilege of bringing suit in the forum atate, ‘thus invoking the benefits and protections of ite lawa.’’ Hanson v. Denekla, 397 U.S, 235, 253 (1958), In the instant action, the only plaintiff who affirmatively submitted himself to the jurisdiction of Kansas courte was the representative party, Shutte, The unnamed nonresident clase members took no af- “The Kansas Supreme Court ignores the rule that jurisdiction must exiat before procedural due process becomes an issue, No amount of procedural due process (in the form of notice) ean create jurisdiction where none previously existed, See Shaffer v. Heitner, supra, 97 8.01, at 2086, n, 40, i firmative action within the forum atate which could invoke the benefits and protections of ita laws, Conne- quently, the Kansas court's effort to assume jurisdic: tion over the nonresident members of the plaintiff clans was void for it was a clear attempt to exerciae power in violation of the Due Process Clause, A finding of minimum contacts with the forum «tate must be a prerequisite to the assumption of in personam jurisdiction over both unnamed nonresident plaintiffs in a class action and defendants,’ The Kansas Supreme Court erred in ruling otherwise, There is nothing im- proper in holding unnamed nonresident plaintiffs in a Class action to the aame rules of jurisdiction aa non- resident defendants, The positions of both are similar, Neither has affirmatively acted to submit himself to the atate court's jurisdiction, In a real sense, both are in- voluntarily ‘‘dragged"’ into court, B. There le « Conflict of Decisions Among the Giates on this Important lasue of Juriediction. The confusion among the atates on this constitutional issue can only be resolved by a decision from thia Court. Contrary to the decision in Kansas, the Supreme Court of Pennaylvania declined to assert jurisdiction over nonresidents, holding that a plaintiff class must be ' This requirement ie ined by the National Conference of Comminsioners on Uniform State Laws in Section 6 of their Pro- “y- Uniform Class Action Act, (App. 5a) That section idea or juriadietion over a class member, either plaintiff or ’ if ''a basis for juriadiction existe or would exist in a suit againat the person under the law of this state.’’ ( added) This clearly the constitutional minimum contacte announced in /nternational Shoe the plaintiff as well aa the oor eget mm Vestal, Uniform Class Actions, 68 A.B.A, Journal limited to residenta of the forum state ‘'[b]ecause the jurisdiction of the courte of the Commonwealth is ter- ritorially limited,’’ The class may only include non- residenta ‘‘who submit themselves to the jurisdiction of the state courta,’’ Klemow v, Time Ine, 466 Pa, 189, 197 n.15, 952 A.2d 12, 16 0.15, cert, denied, 420 US, 828 (1976), The Pennaylvania Court supported its holding with prior decisions of this Court, Hanaon v. Denckla, 967 U.S, 236 (1068); Mullane v, Central Hanover Bank & Truat Co,, 399 U.S, 306 (1960), Pennoyer Vv, Neff, 06 U.S, 714 (1877), A New Jersey intermediate appellate court, relying on International Shoe v. Washington, supra, reached the same conclusion, holding that ‘‘a state court does not have jurisdiction over, and therefore cannot bind to a judgment, an individual with whom the state has no ‘eontacta, ties or relations.’ '’ Feldman v, Bates Mfg. Co., 143 NJ, Super, 84, 362 A.2d 1177, 1180 (App, Div. 1976). The court declined to assert jurisdiction over o multistate plaintiff class and correctly distinguished this Court's cases that involved a ‘common fund" or an overriding state interest in the regulation of the defendant corporation organized in that state, 362 A.2d at 1180-81, In view of thie Court's decisions in Snyder v, Harria, 904 U.S. 392 (1969), and Zahn v. International Paper Co., 414 U.S, 201 (1973), whieh limit federal court ju- riadiction in diversity class actions, it is apparent that nationwide class actions will increasingly be brought in atate courte, Therefore, it is essential that this Court set the appropriate bounds of state court jurisdiction in such cases and announce a rule to be applied unt- formly throughout the nation, In attempting to justify the expansion of state court jurisdiction the Kansas Supreme Court held “[{t}hat there is indeed a difference between the jurtadictional standards governing class actions, and those governing all other actions’’ (App, 38a, 567 P.2d at 1905), relying on the following dicta in Hanaberry v, Lee, 911 U.S, $2, 41 (1940); Courts are not infrequently called upon to proceed with catises in which the number of thone interested J the be they h . oo reat fe te make difleult or © the joinder of a Allne nome within the jurisdiction, . .. sais seed The authorities cited by the Kansas Supreme Court in support of this statement, ¢.9., Supreme Tribe of Ben- Hur v, Cauble, 265 U.S, 966 (1921), were all actions where either the nonresident class members had mini- mum contacts with the forum state as required by /n- ternational Shoe, or where the forum state had undis- puted juradiction over property in which the non- residents were interested, When viewed in the context of the authorities cited, the statement in Mansherry that ‘some are not within the jurisdiction” ean only be taken to mean that the plaintiffs were physically outside the territorial limita of the forum state, not that such nonresidents were not properly ‘subject to" the forum state's jurisdiction, However, the Kansas Supreme Court misconstraes Hansberry v, Lee as pro- viding authority for exercising jurisdiction over per- sons who were not otherwise “subject to" the forum state's jurisdiction, The suggestion that Hanaberry vy. 14 Lee provides a different jurisdictional standard for representative actions does not bear analysis,” The Kansas Supreme Court's attempt to expand the jurisdiction of Kansas state courte because the form of the action is a clase action runes afoul of the statutes of Kansas, In the first place, K.8.A, 60-266 clearly provides that ‘‘[t]his article shall not be construed to extend or limit the juriadiction of the district courts, ..' A similar attempt to expand federal court juris diction because of Rule 24, Federal Rules of Civil Pro- — ('Thie precise proposition was considered in « thorough article in the ULCLL.A, Law Heview | It might be argued that the juriadietional standard of due process for representative actions ia different than it ia for individual ae. tions, especially in light of Mansberry v, Lee, in whieh the Court recognized an exeeption to the traditional requirement of absolute judicial power over the parties involved in a elaas aetion, Hansherry made it clear that for a clase member to be bound by a court's decree in a representative action, he muat be adequately represented hy other members of the class, It might he maintained that if a elaas member ia well represented, he eannot elaim that he ia not bound by the judement of the adjudicating eourt, even if he ia not a resident of the forum atate. However, the effeet of Hansherry ean not be drawn with auch a broad brush, for it was not a class aetion ease ond ‘‘ite broad pronouneementa of the requirementa of due process in clase actions are rank dieta.’’ Alao, the exception of Hansherry goes to the ability of the court to render a binding judg. ment on resident class members not actually before the court, and perhane even to those who have not had notiee of the proceedings, hut it does not aanetion the use by atate courts of jurisdictional power unknown to any form of aetion to affect the lewal relations of nonresidents, Neither Hanaherry, nor any subsequent ease, has held that a clam action based on separate and distinet claime ean have a binding effeet on members of the class who are outside the commonly accented juriadietional limita of the atate eourt whieh renders the judgment. NWenee, the jurtedictional reach of a state court in the same whether the action ta representative or individual Comment Class Action Adjudications, 18 UCLA. Ll, Rev, 1002, 1011 (1971) (omphaaia supplied) 15 cedure, was specifically rejected in Snyder v. Harris, #4 U.S, 442, 337 (1969). Furthermore, there is no hint in the elase action statute itself, K.S.A. 60-223, that the clase action device was intended in any way to broaden the Kansas courts’ jurisdiction beyond the territorial limite of the state, or in any way to attempt to change (or abridge) the requirements of due process.as dic- tated by International Shoe and Shaffer. The authorities cited by the Kansas Supreme Court in an attempt to bolster extraterritorial jurisdiction in clase action situations are all distinguishable. Chance v. Superior Court, 373 P.2d 849 (1962), clearly was an in rem proveeling. Daar v. Yellow Cab Co., 433 P.2d 742 (1907), involved only persons who had traveled in Yellow Cabs in the Los Angeles area which gave rise to their elaims. Horst v. Guy, 211 N.W. 2d 723 (N.D. 1973), speetfically limited the class to residents or for- mer residents of North Dakota. These authorities clearly do not support the court’s conclusion. The federal cases, such as Philadelphia Electric Co. v. Ana- conda American Brass Co., 43 F.R.D. 452 (E.D. Pa. 19068) and City of Philadelphia v. Morton Salt Co., 248 F.Supp, 506 (E.D. Pa. 1965), are completely inappo- nite beenuuse they were cases brought under the anti- triiet lawa of the United States where nationwide juris- diction is granted by Section 5 of the Sherman Anti- trust Act, 15 U.S.C. $5. It follows that the Kansas Supreme Court’s holding that different jurisdictional standards apply in class action suite is not supported by any authority and is contrary to K.S.A, 60-223 and K.S.A. 60-266. The Kan- sas Supreme Court has construed K.S.A. 60-223 as expanding state court jurisdiction over nonresidents having no contact with Kansas. This construction 16 renders K.S.A. 60-223 unconstitutional and violates Phillips’ rights under the Due Process Clause of the Fourteenth Amendment. D. This Case is Not Controlled by Prior “Common Fund” Cases. The Kansas Supreme Court, apparently sensing that it was distorting legal precedent in extending state court jurisdiction to nonresident class plaintiffs who had no contacts with Kansas, next considered the ‘‘eommon fund”’ eases which it said were ‘‘closely ana- logous to the case at bar.’’ (App. 47a, 567 P.2d at 1311) Phillips has no quarrel with the ‘‘common fund’’ cases and believes them to be correct holdings in their particular fact situations. However, Phillips strenuously objects to the suggestion by the Kansas Supreme Court that the ‘‘common fund”’ cases are in any way controlling here or even ‘‘closely analogous”’ to the facts in the instant case. This suggestion displays a total lack of understanding by that court of the under- lying relationships between Phillips and its royalty owners giving rise to the claims herein. Under the oil and gas leases Phillips obtains title to the gas when it is produced. Phillips sells gas owned by it to pipeline companies under gas purchase agree- ments. The royalty owners have no right to any of the gas once it is produced, but only have claims against Phillips for the amount of royalty due under the ap- plicable contracts. The relationship between Phillips and its royalty owners is simply a debtor-creditor rela- tionship with each royalty owner having a separate and distinct claim against Phillips and Phillips having a series of separate and distinct contractual liabilities to its royalty owners.* * This is the reason, as the Kansas Supreme Court correctly notes, that the royalty owners’ claims could not be aggregated for federal 17 / Prior decisions of this Court recognizing the bind- ing effect of class action judgments on nonresident plaintiffs in ‘‘ecommon fund”’ cases do not control the instant case. E.g., Hartford Life Ins. Co. v. Ibs, 237 U.S. 662 (1915); Supreme Council of the Royal Ar- canum Vv. Green, 237 U.S. 531: (1915). Those cases are distinguishable on their facts and rationale. They each involved a single separate fund, maintained by an orga- nization that was chartered under and controlled by state law. Each fund was kept within the forum state and existed by the grace of its laws. No other state’s law controlled. Because the funds were finite and ex- haustable, inconsistent judgments could have had a destructive effect on the rights of some of the plaintiff class members who had interests in the funds. Thus, this Court recognized the need for unitary adjudica- tion of plaintiffs’ rights to the common fund, and the power of the forum state court to decide issues con- cerning the fund. The instant action does not involve a common fund controlled solely by a single state’s laws. At issue here is whether Phillips should pay interest on the addi- tional royalties due as a result of its separate contract- ual relation with the individual royalty owners. Since any interest payment which Phillips may be required to make will not come out of a finite or exhaustable fund, correlative rights need not be protected. Contradictory judgments in the several states, some granting and some denying interest, will not impair any mutual rights. In fact each royalty owner’s claim can be adjudi- = separately without affecting the rights of any others. — memes purposes. Snyder v. Harris, 394 U.S. 332 18 No single state has an overriding interest in obtain- ing consistent judgments for parties other than its own residents on the interest question. While Phillips is authorized to do business in Kansas, as it is in Okla- homa and Texas, it is not chartered in Kansas. Rather, it is a Delaware corporation with its principal place of business in Oklahoma. A few of the producing leases involve Kansas lands and may have been executed in Kansas, but Kansas’ interest cannot be grounded on the interpretation of contracts executed exclusively in, or involving lands lying solely within, its borders. Although much of the land situated in the FPC’s Hugo- ton-Anadarko rate making area is located in Kansas,” the greatest volume of jurisdictional gas production for the period has been from the Texas counties of the rate making area.” In this case, the ‘‘designated area”’ gas sales which gave rise to the additional royalties took place in one county of Oklahoma and two coun- ties of Texas. Therefore, neither Kansas, nor Okla- homa, nor Texas, nor any other state can allege a com- pelling interest in adjudicating all of the class mem- bers’ individual contract claims. It would strain the concept of due process and territorial limitations on jurisdiction to allow a state court to adjudicate claims °The Kansas Supreme Court sought to justify its assumption of jurisdiction by stating that ‘‘ Kansas has a legitimate interest in adjudicating the common issue herein because Kansas comprises the largest physical area included in the . . . Hugoton-Anadarko area. _. .’’ (App. 52a, 567 P.2d at 1314-15) This, however, is not an appropriate rationale for the exercise of personal jurisdiction. ‘* The state] does not acquire that jurisdiction by being the ‘center of gravity’ of the controversy, or the most convenient location for litigation.’’ Hanson v. Denckla, 357 U.S. 235, 254 (1958). See FPC Publication S-217, Sales By Producers of Natural Gas to Interstate Pipeline Companies—1970, U.S. Government Printing Office, 1972, Table D, pp. XIII-XIV. 19 of nonresidents who have no contact with the state merely because their claims have issues in common with claims asserted by residents. Even assuming, under conflict of law rules, that Kansas law alone governed the entire class action, this would not be sufficient to give Kansas courts personal jurisdiction over the nonresident class members. ‘‘ [W Je have rejected the argument that if a State’s law can properly be applied to a dispute, its courts necessarily have jurisdiction over the parties to that dispute.’’ Shaffer v, Heitner, —— U.S. ——, 97 S.Ct. 2569, 2586 (1977). E. The Failure of Class Members to Opt Out of the Class Did Not Constitute an Election to Submit Themselves to the Juris- diction of the Kansas Court. The Kansas Supreme Court implies that because the class action notice satisfied procedural due process re- quirements, it also was effective as a device for acquir- ing jurisdiction. (App. 48a, 567 P.2d at 1313) The rationale for such a conclusion is that by failing to opt out of the plaintiff class, the nonresidents elected to submit themselves to the jurisdiction of the Kansas Court.” This theory erroneously presupposes that the trial court had the power (or jurisdiction) to require the nonresident notice recipients to act affirmatively in order to be excluded from the class or, in failing to act, to submit voluntarily to the court’s jurisdiction. ** According to the notice concerning the pending class action, which Shutts sent to all class members, their right to opt out was not absoluie. Rather, it was within the discretion of the District Court to deny exclusion and force any class member to be bound by its final decision, regardless of the member’s desire not to submit himself to the jurisdiction of the court. K.S.A. 60-223(¢) (2). 20 The authorities recognize the clear rule that no state law or rule of judicial procedure has any effect of its own force beyond the limits of the sovereignty from which the authority is derived. In the United States, each state constitutes a distinct and independent sov- ereignty, and consequently the laws of one state do not operate in any other state of their own force.” Just as the laws of every state are subject to territorial limita- tions, so also is the jurisdiction of the states’ courts. A state court’s jurisdiction cannot extend beyond the territory belonging to the sovereignty on behalf of which it functions.“ Thus, the nonresident recipients of the Kansas court’s notice could disregard it with impunity for the notice was ineffective and void for want of power and violative of the Due Process Clause of the Fourteenth Amendment. Il. THE KANSAS COURT ERRED IN HOLDING THAT PHILLIPS MUST PAY INTEREST ON THE ADDITIONAL ROYALTIES The interest issue in this case arises from the pric- ing provisions in the gas royalty agreements. Just as the price Phillips undertook to pay royalty owners was pegged to the average price of gas sold by Phillips in the ‘‘designated area,’’ that ‘‘area’”’ price in turn was dependent upon the rates that the FPC allowed Phil- 8 Cook v. Moffat, 46 U.S. (5 How.) 295, 308 (1847) : ‘‘It is true, that as between the several States of this Union, their respective . . . laws, like those of foreign States, can have no effect in any forum beyond their respective limits. . . .”’ * Huling v. Kaw Valley Railway and Improvement Co., 130 U.S. 559, 563 (1889) : ‘‘[T]he process of the courts of the State... have no efficacy beyond their own borders. . . .’’; Freeman v. Alderson, 119 U.S. 185, 188 (1886): ‘‘The laws of the State have no operation outside of its territory, . . . its tribunals cannot send their citation beyond its limits and require parties there domiciled to respond to proceedings against them... .’’ 21 lips to charge for its gas. That price was not known until long after the gas was produced. The Kansas Supreme Court correctly noted that until such time as the FPC approved Phillips’ proposed price increases, or a portion thereof, Phillips was legally entitled to retain the proceeds from its gas sales in the ‘‘desig- nated area.”’ The court noted further that under prior federal cases the plaintiff class had no legally enforce- able right to obtain royalties on the monies which were collected and held by Phillips subject to possible re- fund pursuant to Section 4(e) of the Natural Gas Act, 15 U.S.C. § 717e(e). (App. 28a, 567 P.2d at 1299) It is elementary that interest is not allowed until the principal sum becomes due and payable, unless other- wise provided by contract. American Iron Co. v. Sea- board Atr Line Railway, 233 U.S. 261, 265 (1914). Here, the contracts do not provide for interest. Notwithstanding the above rule, the Kansas Supreme Court held that Phillips must pay interest on the addi- tional royalty ultimately found to be due for the period during which the ascertainment of the amount due was delayed by operation of federal law. In so holding, the Kansas Supreme Court ignored the interstate market in which the natural gas was sold and the supremacy of existing federal law and regulations. The award of interest for the period when the final payment of the additional royalty was properly delayed by operation of federal law so offends notions of fairness as to be violative of the Due Process Clause. 22 CONCLUSION For the reasons stated, the petition noe writ of certi- orari should be granted. Respectfully submitted, CLank M, CLIProrD Canson M, Giase Rosert A, ALTMAN Joun G, CALENDER Currrorp, Giass, McIL warn & Finney 815 Connecticut Ave, Washington, D.C, 20006 Joaepa W., Kennepy Morais, Larne, Evans, Brock & Kennepy Suite 430, 200 West Douglas Wichita, Kansas 67202 Kennetau Heapy ©, J, Roperrs T. L. Cunpace II Phillips Petroleum Company Bartlesville, Oklahoma 74004 APPENDIX 7 nt -_-.,. _ * See es - la Sections 60-229 and 60-266 of the Kansas Statules Annotated Provide: 60.223, Clase actions, (a) Prerequisites to a class action, One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is ao numerous that joinder of all members is impracti- cable, (2) there are questions of law or fact common to the class, (3) the claima or defenses of the representative partios are typical of the claima or defenses of the class, and (4) the representative parties will fairly and ade- quately protect the interests of the class, (b) Class actions maintainable, An action may be main- tained ar a clase action if the prerequisites of subdivision (a) are satisfied, and in addition; (1) The prosecution of separate actions by or againat individual members of the class would create a risk of (A) inconsistent or varying adjudications with reapect to individual members of the class which would establish in- compatible standards of conduct for the party opposing the class, or (B) adjudications with reapect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or (2) the party opposing the class bas acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with reapect to the class as a whole; or (3) the count finds that the questions of law or fact com- mon to the members of the class predominate over any questions affecting only individual members, and that a clase action is superior to other available methods for the fair and efficient adjudication of the controversy. The mat- ters pertinent to the findings include; (A) The interest of members of the class in prosecuting or defending separate 2a actions; (B) the extent and nature of any litigation con- corning the controversy already begun by or againet mem- bers of the class; (C) the appropriate place for maintain- ing, and the procedural measures which may be needed in conducting, a class action, (c) Determination by order whether class action to be maintained; judgment; actions conducted partially as class actiona, (1) As soon as practicable after the commencement and before the decision on the merits of an action brought as a clase action, the court shall determine by order whether it ja to be maintained as such, Where necessary for the protection of a party or of absent persons, the court, upon motion or on ite own initiative at any time before the decision on the merite of an action brought as a nonclass action, may order that it be maintained as a class action, An order under thie subdivision may be conditional, and may be altered or amended before the decision on the merits, (2) The judgment in an action maintained as a class action shall extend by ite terms to the members of the clans, as defined, whether or not the judgment is favorable to them. In any class action maintained under subdivision (>) (3), the court shall exclude those members who, by a date to be specified, request exclusion, unless the court finds that their inclusion is essential to the fair and efficient ad- judication of the controversy and states ite reasons there- for. To afford members of the class an opportunity to re- quest exclusion, the court shall direct that reasonable notice be given to the class, including specific notice to each member known to be engaged in a separate suit on the same subject matter with the party oppored to the class, (3) When appropriate (A) an action may be brought or maintained as a class action with respect to particular is- 3a sues such as the issue of liability, or (B) a class may be divided into subclasses and each subclass treated as a class, and the provisions of this section shall then be construed and applied accordingly. (d) Orders im conduct of actions, In the conduct of ac- tions to which this section applies, the court may, without limitation, make appropriate orders; (1) Settling the course of proceedings or prescribing measures to prevent undue repetition or complication in the presentation of evidence or argument; (2) requiring, for the protection of the members of the class or otherwise for the fair conduct of the action, that notice be given in such manner as the court may direct to some or all of the members of any atep in the action, or of the proposed extent of the judgment, or of the opportunity of members to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or otherwise to come into the action; (3) imposing conditions on the representative parties or on intervenors; (4) requiring that ne pleadings be amended to eliminate therefrom allegations as to repre- sentation of absent persons, or to include such allegations, and that the action in either case proceed accordingly, The orders may be combined with an order under K.S.A., (0-216, and may be altered or amended as may be desir- able from time to time, (¢) Diwatssal or compromise, An action maintained as a clans action shall not be dismissed or compromised without the approval of the court, and the court in ite discertion may order that notice of a proposed dismissal or compro- mise be given to the clase in such manner as the court may direct, 60-266, Jurisdiction and venue, This article shall not be construed to extend or limit the jurisdiction of the district courts or the venue of actions therein, 4a Section de) of the Natural Gas Act, 16 U.8.C. §717e(e), Provides: Whenever any such new schedule is filed the Commission shall have authority, either upon complaint of any State, municipality, State commission, or gas distributing com- pany, or upon its own initiative without complaint, at once, and if it so orders, without answer or formal pleading by the natural-gas company, but upon reasonable notice, to enter upon a hearing concerning the lawfulness of such rate, charge, classification, or service; and, pending such hearing and the decision thereon, the Commission, upon fling with such schedules and delivering to the natural-gas company affected thereby a statement in writing of its reasons for such suspension, may suspend the operation of auch schedule and defer the use of such rate, charge, classi- fication, or service, but not for a longer period than five months beyond the time when it would otherwise go into effect; and after full hearings, either completed before or after the rate, charge, classification, or service goes into effect, the Commission may make such orders with refer. ence thereto as would be proper in a proceeding initiated after it had become effective, If the proceeding has not been concluded and an order made at the expiration of the sus- pension period, on motion of the natural-gas company making the filing, the proposed change of rate, charge, clas- sifleation, or service shall go into effect, Where increased rates or charges are thus made effective, the Commission may, by order, require the natural-gas company to furnish a bond, to be approved by the Commission, to refund any amounts ordered by the Commission, to keep aceurate ac- counts in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf euch amounts were paid, and, upon completion of the hearing and decision, to order such natural-gas company to refund, with interest, the portion of such inereased rates or charges by its decision found not justified, At any hearing involving a rate or charge sought to be increased, the burden of proof 5a to show that the increased rate or charge is just and rea- sonable shall be upon the natural-gas company, and the Commission shall give to the hearings and decision of such questions preference over other questions pending before it and decide the same as speedily as possible. The Proposed Gection 6 of the Uniform Class Action Act Reads Follows: Section 6, (Jurisdiction over Multi-State Classes. ] (4) A court of this State may exercise jurisdiction over ee P _— who is a member of the class suing or being e (1) @ basis for jurisdiction exists, or would exist in a suit against the person, under the law of this State; [(2) the state of residence of the class member has by clase action law, similar to subsection (b), made its resi- dence subject to the jurisdiction of the courts of this State in class actions. ] [(b) A resident of this State who is a member of a class suing or being sued in another state is subject to the juris- diction of that state if it by similar class action law extends reciprocal power to this State. ] 6a IN THE DISTRICT COURT OF KIOWA COUNTY, KANSAS No. 5309 Int Suutrs, as Executor of the estate of Althea Shutts, individually and as representative of all that class of gas royalty owners under Phillips Petroleum Company oil and gas leases in the Hugoton-Anadarko Area, Plaintiff, vs. Pumurs Perroteum Company, Defendant. (Juty 29, 1976) Frxprnes or Fact The stipulations in the pre-trial order provide ade- quately for the findings of fact necessary to present the is- sues herein and are adopted by the court by reference as its findings of fact herein. Also, the contention of the parties are set forth in the pre-trial order in at least sufficient length and are also adopted by reference. Conc.usions or Law 1. This is a proper class action under the provisions of K.S.A. Supp. 60-223 because: (a) The approximately 6400 royalty owners in the Hugoton-Anadarko area makes joinder impractable ; (b) Any interest due each member of the class is too small to justify separate actions; (c) Questions of fact and law are common to all mem- bers in that the facts are really undisputed and the sole legal issue presented is whether the plaintiff members are entitled to interest on the suspended royalties held by defendant ; 7a (d) The claims of the named parties are typical of the claims of all members of the class and will fairly and ade- quately protect the interest of the class; (e) The question presented common to all members of the class predominate over any individual question and a class action is not only superior but the only efficient man- ner to adjudicate the dispute herein (to avoid multiple suits and excessive expenses) and that this court having jurisdiction of a large physical portion of the Hugoton- Anadarko area is a convenient forum for such action. 2. Defendant, in compliance with its contractual duty with its royalty owners, secured the best price obtainable to post bond and agree to the interest back pay provisions to its purchasers or to forfeit the negotiated price increases until final FPC approval. 3. The portion of the increased rates secured under the above paragraph that applied to the royal share of the pro- ceeds was to be paid to royalty owners or to be refunded if not approved by the FPC. This royalty share did not belong to the defendant whether or not the rate was ap- proved by the FPC. 4. The defendant concomitant with its duty to its royalty owners to secure the best price obtainable (under its covenant to market) had the duty to remit the collected share of royalty as promptly as commercially feasable on the same conditions as it was received by defendant or in the altcrnative to place the funds in a proper investment fund for subsequent disbursement. The fact that FPC per- mitted and essentially required defendant to post bond and agree to pay back interest if a refund was ordered did not entitle defendant to free use of the royalty owners share of the increased proceeds. The FPC bond and interest pay back requirements certainly justify and permit defendant business use of the increased rates of its own share of those rates but not the royalty owners share which did not belong 8a to defendant under any eventual ruling by the FPC. See Phillips Petroleum Co. v. Adams, 513 F2d 355. The Court therefore concludes that the defendant is liable for interest on royalty proceeds retained by it and used as a business asset by it pending final FPC approval and conclusion of litigation based on its contractual duty to remit royalty proceeds in a reasonably prompt manner. It is specifically not the basis of this decision that such duty arises from an attempt to impose any facet of fiduciary relationship to the defendant. 3 5. The evidence proffered by plaintiff consisting of the profit and loss statements of defendant and reports relat- ing to economic inflation is excluded and not considered berein. Nor is the FPC regulation requiring interest of the royalty share returned to the purchasers controlling herein. The FPC regulation in point herein did not, and could not for lack of jurisdiction to do so, attempt to regulate the obligation between defendant and members of the plain- tiff class herein as to the time or manner or amount of the royalty interests to be paid out of the increased rates. 6. The royalty owners were entitled to rely on defend- ant to collect the best price obtainable and to represent the royalty owners’ interest before the courts and the FPC (as a result of the implied lease covenant.) This does not imply, however, consent for the defendant to use the roy- alty proceeds as a business asset resulting in the economic gain of interest to defendant to the exclusion of the royalty owners. 7. The acceptance without an accounting as to rates or interest of payment of the suspended royalties herein in December, 1972, did not constitute ratification because there was no basis for the royalty owners to know what was involved in the payment. For the same reason estoppel does not apply to preclude recovery herein. 8. Division orders and unitization orders cannot be construed to modify the lease obligations of the defend- 9a ant, being instruments reflecting royalty owners interests in proceeds from production and unitization of acreage for allowables respectively. No consideration is reflected in these instruments which would support defendant’s con- tention that these instruments, executed subsequent to the origina] leases herein, were contracts to modify the royaliy provisions of said leases. For the same reasons, the gas royalty agreements do not change defendant’s obligations under their original leases except for agreements to the controlled price. 9. Defendants contention that the payment of the ad- ditional royalties in December 1972 constituted a ‘*bounty’’ to plaintiffs is without any foundation and is contrary to said ‘‘gas royalty agreements’’ establishing the FPC ap- proved prices as the basis for royalty payments. 10. To allow defendant free use of the royalty share of production for over ten years as a result of the difficulties and delays caused by the FPC regulations would unjustly enrich defendants. Defendant paid the full royalty share of proceeds collected prior to June 1, 1961, and after October 1, 1970. The decision to withhold the increased (but un- approved) rates in the intervening period was a unilateral decision by defendant that cannot rise to the stature of a defense of ratification. Nor does it support the ‘‘bounty’’ theory of defendant herein as noted above. 11. The statutory rate of interest herein in Kansas, Oklahoma and Texas is six per cent per annum and is allowed as the proper rate of interest to be applied to the suspended royalties herein from time of receipt until date “a judgment herein with interest compounded on an annual sis. 12. Excluded from this judgment are those i parties who have filed their elections herein to be excl ded of the Plaintiff Class. , — P ' 10a Jupement 1s THenerore entered for the Plaintiff Class as set forth herein with Defendant ordered to account to the Court as set forth herein for members of Plaintiff Class. The issue of attorney fees is reserved pending the ac- counting ordered herein. 29, 1976. wae ony /s/ Keaton G. DuckwortH Keaton G. Duckworth District JUDGE ila (CaPTIOoN OMITTED IN PRINTING) Order On Motion On this 13th day of August, 1976, the post judgment Motion of plaintiff class to alter and supplement the judgment of the Court dated July 29, 1976, comes regularly on for hearing, plaintiff class being represented by Chapin & Penny, Medicine Lodge, Kansas, their attorneys; and defendant being represented by T. L. Cubbage II of Ama- rillo, Texas, and Joe Kennedy of Wichita, Kansas, its at- torneys. THEREUPON, the Motion is presented to the Court and the Court being well and fully advised in the premises finds and orders as follows: 1) The judgment of the Court entered herein as of July 29, 1976, is a final judgment as to liability of defend- ant and is appealable prior to the time defendant computes interest as directed therein. _ 2) From and after July 29, 1976, date of entry of judgment of the Court herein, such judgment shall bear interest at the statutory rate of 8% per annum on interest due and to be accounted for herein as ordered by the Court. /8/ Keaton G. Duckwortn Keaton G. Duckworth 12a (CAPTION OMITTED IN PRINTING) Pretrial Order On the 26th day of February, 1976, a Pretrial Conference was had in the above-entitled case, plaintiff class being represented by W. Luke Chapin and Gordon Penny of Chapin & Penny, Medicine Lodge, Kansas; and the de- fendant Phillips Petroleum Company being represented by T. L. Cubbage, II, of Phillips Petroleum Company, P. 0. Box 1751, Amarillo, Texas, 79105, and Joseph W. Kennedy, of Morris, Laing, Evans, Brock & Kennedy, Chartered, Suite 430, 200 West Douglas, Wichita, Kansas, 67202. Wuenevroy, after considering the arguments and stipu- lations of counsel, the pleadings, depositions, interroga- tories, admissions, and exhibits submitted, the Court made the following order: VI. STIPULATIONS A. The parties have agreed to be bound by the follow- ing stipulations, subject to introducing such further evi- dence regarding the same as the parties may deem neces- sary or desirable: 1. This action was filed by the plaintiff, Irl Shutts, (**Shutts’’) a resident of Sun City, Barber County, Kan- sas. Shutts is an owner of gas royalty interests under leases owned or operated by defendant Phillips Petroleum Company (‘‘Phillips’’) in the Hugoton-Anadarko area as hereinafter defined. Shutts or his predecessor in title, Althea Shutts, received certain of the ‘‘FPC suspense money’’, so called, paid out as royalties by Phillips as here- inafter set forth. 13a 2. This action was filed by Shutts seeking to recover, in behalf of himself and all others of Phillips’ gas royalty owners in the Hugoton-Anadarko area, interest, or a share of profits as damages in lieu of interest, on monies with- held by Phillips for a period of years pending approval by the Federal Power Commission (‘‘FPC”’ or ‘‘Commis- sion’’) of certain rate increases on gas purchases. 3. The Court has ordered that as such royalty owner, plaintiff Shutts is a member of a class of approximately 6,400 royalty owners (less a small number of such royalty owners who have opted-out after having received a notice given by publication and mailing according to order of the Court) who received retained funds paid out as royalties by Phillips as a result of FPC Opinion No. 586, issued September 18, 1970, by the Commission, pertaining to gas rates in the Hugoton-Anadarko area rate proceedings; such FPC opinion being affirmed in In Re Hugoton-Anadarko Area Rate Case, 446 F.2d 974 (July 31, 1972), which be- came final October 28, 1972. 4. The ‘“‘Hugoton-Anadarko area’’ is a rate making area defined by the FPC consisting of all of the State of Kansas and parts of the States of Texas and Oklahoma, being roughly the panhandle sections of Texas and Okla- homa. FPC Regulation § 154.106(g) svecifically defines the Hugoton-Anadarko area as follows: — (g) The Hugoton-Anadarko area consists of the State of Kansas, Texas Railroad Commission District No. 10, and the Oklahoma Counties of Cimarron, Texas, Bea- ver, Harper, Woodward, Ellis, Woods, Alfalfa, Grant, Major, Garfield, Roger Mills, Dewey, Custer, Blaine, ae oy pene nants nova Washita, Caddo and rady, an t part of Stephens County lyi ithi T.2N., RS.4 and 5 West. . a rar ee ee re CT Re ee a l4a 5. By various orders issued since the United States Supreme Court, on June 7, 1954, decided Phillips Petroleum Company v. State of Wisconsin, et al., 346 US. 672, 74 §.Ct. 794, 98 L.Ed. 1036, and determined that Phillips, as an independent natural gas producer selling gas to inter- state pipeline companies for interstate transportation and resale was a ‘‘natural gas company’’ within the Natural Gas Act, the FPC suspended increases in prices for sales of gas filed by Phillips and permitted such increases to be collected at some date subsequent to the original date proposed by Phillips, only upon Phillips’ filing with the Commission a corporate undertaking to refund all or any portion of such increases which the FPC might find not to have been justified. 6. Subsequent to June 7, 1954, Phillips and its subsid- iaries sold natural gas, and components of natural gas, which was produced in the Hugoton-Anadarko area. Some, but not all, of the gas being sold by Phillips within the Hugoton-Anadarko area was sold subject to the jurisdic- tion of the FPC at prices, a portion of which had not been approved by the FPC. 7. The increased sales prices for some, but not all of Phillips’ gas sales in the Hugoton-Anadarko area, were collected by Phillips subject to a duty to refund the same to the purchasers in the event the FPC failed to approve the sales prices pursuant to Section 4(e) of the Natural Gas Act, 15 U.S.C.—717e(e), with interest at 7% per annum from the date of receipt until September 18, 1970, and at 8% per annum thereafter until paid out. 18 C.F.R. § 154.102 (c) and FPC Opinion 586, at page 33. 8. Until June 1, 1961, Phillips paid over to its gas royalty owners in the Hugoton-Anadarko area all of their share (approximately 1/8th) of the increased rates being collected by Phillips, as well as their royalty share of firm proceeds from the sale of gas. 15a 9. Beginning June 1, 1961, as a result of a decision of Phillips’ management, Phillips began withholding all of its royalty owners’ share of increased gas prices unless the royalty owners put up an acceptable indemnity to re- pay the same with interest if the increased rates were not approved by F'PC; and Phillips so notified all of its royalty owners in the Hugoton-Anadarko area. 10. In July, 1961, Phillips gave the following notice to Althea Shutts, and all other members of the class: ‘*Nortice ‘*As you probably know, since June, 1954, all sales of gas to the interstate pipelines have been subject to the control of the Federal Power Commission. Phillips has been successful since that time in securing a num- ber of increases in its contract prices, but these could not be placed into effect until they were approved, after investigation and hearing, by the Federal Power Com- mission, except by the agreement of Phillips to refund to the purchaser, with appropriate interest, such amounts that are not finally allowed by the Commis- sion. Heretofore, Phillips Petroleum Company has voluntarily computed royalties paid you on the basis of a weighted average price which included total pro- ceeds received in the area, without regard to the possibility of future refunds. This practice can no longer be continued. Effective June 1, 1961, and until further notice, royalties paid you will be computed by excluding that portion of any price being collected subject to refund which exceeds 11¢ per Mef ( presently the maximum area price level for increased rates as ayo es > be Federal Power Commission in i ment o eral Policy). Payment of roy- alty based on the balance fe bah collected will be made at such time as it is determined that the sums collected are no longer subject to refund. eee l6a ‘‘Interest owners desiring to receive payments com- puted currently on the full sums being collected may arrange to do so by furnishing Phillips Petroleum Company acceptable indemnity to cover their propor- tionate part of any required refunds, plus the required interest. ‘‘Pumurs PetroLteum Company Natura, Gas DepaRTMENT BagTLesviLLe, OKLAHOMA”’ 11. Seventeen persons or entities (including two trusts, each representing a number of royalty owners) did furnish indemnities acceptable to Phillips and received current payments computed on the fuli sums being collected subject to refund. These seventeen persons or entities are not class members of the plaintiff class herein. 12. As to all other gas royalty owners to whom Phillips was accounting for royalties, Phillips, while collecting pro- ceeds for the proposed increased rates, withheld and de- posited such cash to its general account and commingled it with its other funds from June 1, 1961, to October 1, 1970. 13. On November 27, 1963, the FPC, by its Order In- stituting Area Rate Proceedings (Hugoton-Anadarko Area Dockets No. AR 64-1), issued November 27, 1963, published at 28 Fed. Reg. 12645, subsequently reprinted at 30 FPC 1354, consolidated Phillips’ pending applications, and those of others, for hearing under the consolidated designation of Dockets No. AR 64-1. 14. On September 18, 1970, the FPC issued Opinion 586, Dockets No. AR 64-1, et al, Hugoton-Anadarko Rate Cases, which established sales prices applicable to gas sales and established refund requirements. The same was published on October 10, 1970, at 35 Fed. Reg. 15986 and republished at 44 F.P.C. 761. The decision of the FPC was 17a appealed to the United States Court of Appeals for the Ninth Circuit. 15. As of October 1, 1970, Phillips again began paying all of the royalty owners to whom it accounted, royalties including the rate increases, as to current monthly royal- ties but did not then pay any back royalties on FPC monies previously withheld. 16. On or about November 25, 1970, Phillips cent the following notice to Althea Shutts and all class members: ‘‘Notice Conoerninc Feperat Power Commission Orrnton No. 586 Covertnc Interstate Sates or Gas Propucep FRoM THE HucoTon-ANapDARKO AREA: ‘Effective as of October 1, 1970, and until further notice, Phillips Petroleum Company is giving effect to the full ceiling rate levels established by the Federal Power Commission in Opinion No. 586. If the check enclosed herewith includes your payment for your in- terest in properties in the Hugoton-Anadarko Area, you are hereby notified ‘hat such payment has been based upon the full ceiling rate levele established by the Opinion. “‘If such Opinion should be changed, set aside, or vacated, resulting in a reduction of the rate levels relied upon by Phillips in its calculations, Phillips will expect you to reimburse it in full for any overpayments occasioned thereby. Such recovery may be had, at Phil- lips’ election, by withholding from subsequent pay- ments to you for your interest in oil or gas, or both oil and gas, whether or not produced from the same properties under which the overpayment occurred. 18a ‘‘Your acceptance of the enclosed check will be re- garded as evidence of your consent to such recovery. ‘‘Pynips PeTroLeum CoMPANY Expitoration & Propuction DgPpaRTMENT Gas SetrLements Drvisron—619 FPB BarTLesvitLe, OxLaHoma 74004’’ 17. The November 25, 1970, notice from Phillips to Althea Shutts and all class members was included with Phillips’ royalty settlement check for October, 1970. 18. On July 31, 1972, the Court of Appeals for the Ninth Circuit affirmed Opinion 586 in California v. Federal Power Commission, 466 F.2d 974 (9th Cir. 1972), and, as of October 28, 1972, no application for writ of certiorari had been filed by any of the parties to said action. 19. The effect of FPC Opinion No. 586 was to approve the increased rates collected by Phillips from September 1, 1956, to the extent of approximately $152,000,000.00 in plant sales of gas and approximately $1,000,000.00 in field or lease sales of gas, and to disapprove rate increases to the extent of approximately $29,000,000.00 in plant sales of gas and $73,000.00 in lease sales of gas, the latter amounts being found refundable to the gas purchasers with interest. 20. On or about December 7, 1972, Phillips mailed Mineral Account Check Number 274,352, payable to Althea Shutts, Box 1181, Sun City, Kansas, 67143, in the sum of $2,831.25, and in due course of mail, said check was re- ceived and negotiated by the said payee. On or about the same date Phillips mailed royalty checks to all other members of the class in payment of increased royalties due them by virtue of the finality of FPC Opinion 586. 21. On and after December 7, 1972, Phillips made a payout of approximately $5,700,000.00 in additional royal- 19a ties to over 6,400 persons, firms, corporations, and entities (which includes the class as defined by this Court). 22. At the time of the payouts referenced in paragraph 21 above, Phillips sent the following notice to each payee: Notice ‘*The enclosed check covers payment based upon gas proceeds which have heretofore been held in suspense pending determination by the Federal Power Commis- sion of the just and reasonable rates applicable to the Hugoton-Anadarko Area, and, subsequent to issue of Opinion No. 586 of the Federal Power Commission which determined such rates, pending appeal and ju- dicial finality of said Opinion. The decision of the Cir- cuit Court of Appeals affirming Opinion No. 586 has recently become final. ‘*Credits to leases for these heretofore suspended sums have been aecrued by computer in suspense accounts, pursuant to numerous Federal Power Commission dockets. The detailed monthly prices and lease accrual information cannot, therefore, be reflected in any prac- ticable manner on the enclosed check. The detail of our computations can be audited during regular business hours at our Bartlesville, Oklahoma office. ‘‘Ponurs Perroteum ComPaNy Setrtemexts Drvision Expioration & Propuction DeparTMENT BaRTLESVILLE, OxLaHoma 74004’’ 23. At the time of the payouts referenced above in paragraph A.21, Phillips neither paid nor offered to pay any interest for the use of the money nor did Phillips in the notice sent with the check say anything about interest or how long the money had been held or used by Phillips. 20a 24. The approximately $5,700,000.00 in additional roy- alties paid out by Phillips on or after December 7, 1973, was accumulated by Phillips over a period of years be- ginning in 1961 and it ‘‘was not segregated in a separate fund; rather, this cash was commingled with the defend- ant’s other money and was identified by defendant through an accounting system, as a separate and distinct account entity, and accrued as an account payable liability on de- fendant’s books.’’ (Answer to Interrogatory No. 10, Para- graph b.) ‘‘The proceeds were taken in a normal cash account.’’ (Roberts Deposition Page 52.) 25. The legal rate of interest, if not ‘specified by con- tract, in Kansas, Texas, and Oklahoma is 6% per annum. B. The parties also have agreed to be bound by the following stipulations, subject to introducing such further evidence regarding the same as the parties may deem neces- sary or desirable; Provipep However, that while Shutts and the plaintiff class agree that the following stipulations are factually correct, they object to their relevancy to any issue material in this action: 1. On July 26, 1937, J. T. Clawson and Nannie Claw- son, as Lessors, executed an oil and gas lease, which lease is recorded in Book 211 at page 45 of the Records of Texas County, Oklahoma, covering the East Half (E/2) of Section 31, Township 1 North, Range 17 E.C.M., in Texas County, Oklahoma, wherein the lessee is Cabot Carbon Company. 2. On June 13, 1944, Cabot Carbon Company, as as- signor, assigned the above-referenced oil and gas lease of July 26, 1937, to Phillips by an instrument which is recorded in Book 242 at page 444 of the Records of Texas County, Oklahoma. 3. At some time prior to May 1, 1946, Nannie Clawson succeeded to the rights of J. T. Clawson in the above- referenced oil and gas lease of July 26, 1937. 2la 4. On May 1, 1946, Nannié Clawson and Phillips ex- ecuted an instrument entitled Gas Royalty Agreement, which agreement is recorded in Book 262 at page 311 of the Records of Texas County, Oklahoma. 5. On April 1, 1958, as a remainderman under the Will of John T. Clawson, deceased, and upon the death of Nan- nie Clawson, Althea Shutts became the owner of a part in- terest in the above-referenced oil and gas lease of July 26, 1937. 6. On September 14, 1938, Nannie Clawson, as lessor, executed an oil and gas lease, which lease is recorded in Volume 7 at page 48 of the Lease and Contract Records of Hansford County, Texas, covering the East 120 acres of Section 15, in Block No. 1, Grantee Public Free School and the West 360 acres of Section 16, in Block No. 1, Grantee Public Free School and all of Section 37, in Block No. 1, Grantee W. C. Ry. Co., all in Hansford County, Texas, wherein the lessee was Cabot Carbon Company. 7. On November 25, 1938, Nannie Clawson executed an instrument (recorded in Volume 7 at page 52 of the Lease and Contract Records of Hansford County, Texas) amending the above-referenced oil and gas lease of Sep- tember 14, 1938, so that it would include the East 126.5 acres of Section 15, instead of the East 120 acres only. 8. On August 10, 1944, Cabot Carbon Company, as- signor, assigned the oil and gas lease of September 14, 1938, as amended, referenced above, to Phillips by an instrument which is recorded in Volume 11 at page 147 of the Lease and Contract Records of Hansford County, Texas. 9. On May 21, 1946, Nannie Clawson and Phillips exe- cuted an instrument entitled Gas Royalty Agreement, which agreement is recorded in Volume 15 at page 407 of the Lease and Contract Records of Hansford County, Texas. 22a 10. On April 1, 1958, as a remainderman under the Will of John T. Clawson, deceased, and upon the death of Nannie Clawson, Althea Shutts became the owner of a part interest in the oil and gas lease of September 14, 1938, as amended, referenced above. 11. On April 1, 1958, the above-referenced Gas Royalty Agreement of May 1, 1946, and the above-referenced Gas Royalty Agreement of May 21, 1946, were in full force and effect. 12. The Gas Royalty Agreement of May 1, 1946 and the Gas Royalty Agreement of May 21, 1946, speak for themselves. Copies of the same are attached to this Pretrial Order as Appendixes [ and II, and reference is made to said Appendixes as though the same were copied in full at this point. 13. During her lifetime, neither Althea Shutts nor Phillips terminated either the above-referenced Gas Roy- alty Agreement of May 1, 1946, or the above-referenced Gas Royalty Agreement of May 21, 1946, and the same remained in full force and effect between April 1, 1958, and the time of Althea Shutts’ death. 14. Althea Shutts died on May 15, 1974. 15. At all times relevant to this action, Phillips has operated five gas wells on the two above-referenced leases, said wells being more specifically described as follows: 23a P.P.Co. Well name File No. Meter No. Location (1) Winfield 45104 56010 Sec. 31 (2) Logsdon 43168 52722 Sec. 15 (3) Lighter #1 43168 52721 Sec. 16 (4) Byrne #1 45390 53408 Sec. 37 (5) Byrne #2 45390 52809 ‘Sec. 37 and Phillips has produced from said five wells. 16. The leases described above in paragraphs B.1 and B.6 cover lands situated within the Hugoton-Anadarko area as defined above in paragraph A.4. 17. The ‘‘designated area’’ is an area comprising Texas County, Oklahoma and Sherman and Hansford Counties, Texas. 18. At times relevant to this action, Phillips had 19 applications before the FPC requesting permission to in- crease the prices for sales of gas by Phillips within the ‘‘designated area’’, and other increases outside the ‘‘desig- nated area’’ but within the Hugoton-Anadarko area. In due course, the FPC issued order suspending all of Phillips’ rate increase applications and published the suspension orders in the Federal Register. 19. Phillips chose to collect the higher rates subject to possible refund pursuant to Section 4(e) of the Natural Gas Act. Increases in gas sales prices not made effective subject to FPC approval cannot be made retroactive. 20. As to the FPC suspenses monies, FPC regulations required that certain bond or indemnity agreement or agreements be filed by gas producers in order to collect the increased rates. Pursuant to regulations and indemnity agreements duly filed, Phillips did collect the increased rates and agreed to pay any money ordered refunded to gas purchasers back to the gas purchasers together with in- terest. 24a 21. This action does not involve ‘‘firm proceeds’’, i.e., the proceeds derived from sales of gas within the Hugoton- Anadarko area at prices which were at or below the rate which had already been approved by the FPC. Royalties calculated in relation to such firm proceeds were all paid in a timely manner. 22. On a month-by-month basis, and prior to October 1, 1970, Shutts, Shutts’ predecessors in interest, and all class members, received a royalty computed on the basis of the firm proceeds of Phillip’s sales in the Hugoton-Anadarko area, i.e., a rate based on sales prices already found just aud reasonable by the PFC. 23. On September 20, 1960, the FPC issued its State- ment of General Policy, as amended (initially published in 25 Fed. Reg. 9578). 24. That the notice, quoted above in paragraph A.10, to Althea Shutts and all other members of the class was mailed on or about July 28, 1961, and was included with Phillips’ royalty settlement check for June, 1961, that was sent by Phillips to all class members. 25. In the due course of mail, Althea Shutts received and negotiated Phillips’ check for the June, 196] royalty settlement. However, neither Althea Shutts nor anyone act- ing on her behalf contacted Phillips regarding its offer as stated in the above-referenced notice. 26. In the due course of mail, all other class members received and negotiated Phillips’ check for the June, 1961 royalty settlement. 27. After July 28, 1961, Althea Shutts did not request Phillips to continue to disburse royalties to her as before, without indemnity to cover those monies subject to possible refund. 28. After July 28, 1961, neither Althea Shutts nor any other class member responded to Phillips’ offer in its 25a notice of July, 1961, and requested that they be allowed to furnish Phillips with acceptable indemnity so that they might be paid otherwise than according to the method out- lined in Phillips’ July 28, 1961 notice. (Seventeen persona or entities did accept Phillips’ offer, and they are not members of the plaintiff class herein.) 26a IN THE SUPREME COURT OF THE STATE OF KANSAS JULY TERM, 1977 PRESENT How. HAROLD R. FATZER, Curr Justice Hor. ALFRED G. SCHROEDER, Hon. ROBERT H. KAUL, How. ALEX M. FROMME, Hon. PERRY L. OWSLEY, Hox. DAVID PRAGER, Hox. ROBERT H. MILLER, JUSTICES. No. 47,917 Int Suvutts, as Executor of the Estate of Althea Shutts, Individually, and as a representative of all that class of gas royalty owners under Phillips Petroleum Company oil and gas leases in the Hugoton-Anadarko area, Ap- pellee and Cross-Appellant, v. Pumu.is PrTRoLeuM Company, Appellant and Cross-Appellee. (Juty 11, 1977) The opinion of the court was delivered by Scuroeper, J.: This is a class action suit filed against Phillips Petroleum Company seeking to recover interest on ‘‘suspense royalties’’ attributed to gas produced from leases in the three-state Hugoton-Anadarko area during the nine-year period from June 1961, to October 1970. Phil- lips Petroleum Company finally paid what it termed ‘‘sus- pense royalties’’ without interest in December 1972, after the Federal Power Commission (FPC) approved certain of Phillips’ pending gas price rate increase applications. The trial court determined (1) the matter could be tried as a class action, (2) the class members had not waived any claim for 27a interest, (3) that Phillips was liable for interest on a theory of unjust enrichment, and (4) the class should be awarded six percent compound interest. Phillips Petroleum Company has appealed and the class has cross-appealed asserting the points hereinafter considered and determined. Irl Shutts (plaintiff-appellee and cross-appellant), a resident of Sun City, Kansas, is the executor of the estate of Althea Shutts, and a royalty owner under producing oil and gas leases owned by Phillips Petroleum Company (defendant-appellant and cross-ap- pellee) (hereafter Phillips) in the Hugoton-Anadarko area. Shutts or his predecessor in title, Althea Shutts, received certain of the “FPC suspense money,” so-called, paid out as royalties by Phil- lips as hereinafter set forth. The trial court certified Shutts as a member and proper representative of a class of approximately 6,400 gas royalty owners (less a small number of such royalty owners who have opted-out after having received notice given by publication and mailing according to order of the court) who received retained funds paid out as royalties by Phillips as a result of Federal Power Commission Opinion No. 586, issued September 18, 1970, by the Commission and which became final October 28, 1972, determining the lawful gas rates in the Hugo- ton-Anadarko area rate proceedings. (In re Hugoton-Anadarko Area Rate Case, 466 F.2d 974 [9th Cir. 1972].) During her lifetime, Althea Shutts, a resident of Kansas, owned one-seventh (1/7) of the lessor’s interest in two oil and gas leases covering lands in Oklahoma and Texas. These leases were within the Federal Power Commission’s rate-making area known as the “Hugoton-Anadarko area” which encompasses all of the State of Kansas and the panhandle sections of Texas and Oklahoma. (See 18 C.F.R. § 154.106[g].) The lessee’s interest in Althea Shutts’ two leases was owned by Phillips Petroleum Company which operated five producing gas wells. On each of these two leases, Althea Shutts’ predecessor in title had entered into a gas royalty agreement with Phillips which has remained in full force and effect and which provides that the royalty paid to the lessor shall be computed in relation to the weighted average price per Mcf received by Phillips during any calendar month from all sales of gas delivered by Phillips within a certain “designated area.” On June 7, 1954, in Phillips Petroleum Co. v. Wisconsin, 347 2oa U.S. 672, 98 L.Ed. 1035, 74 S.Ct. 794, it was determined that Phillips, as an independent natural gas producer selling gas to interstate pipeline companies for interstate transportation and resale, was a “natural gas company” within the Natural Gas Act. (15 U.S.C. § 717, et seq.) Accordingly, such sales of gas by Phillips were subject to regulation by the Federal Power Com- mission (hereafter FPC). By various orders issued since that decision, the FPC has suspended increases in prices for sales of gas by Phillips and has permitted such increases to be collected at some date subsequent to the original date proposed by Phillips, only upon Phillips’ filing with the Commission a corporate undertaking to refund any or all portions of such increase which the FPC might find not to have been justified. This corporate undertaking cost Phillips nothing to obtain. Phillips chose to collect the higher rate, subject to possible refund, because in- creases in gas sales prices not made effective subject to FPC approval could not be made retroactive. Phillips filed the required corporate undertaking to refund the “FPC suspense money.” After June 7, 1954, Phillips sold gas in the “designated area” and throughout the Hugoton-Anadarko area. Some of this gas was sold subject to the FPC jurisdiction at prices which had not been approved by the FPC. The increased prices for some, but not all, of Phillips’ gas sales in the “designated area” and the Hugoton- Anadarko area were collected by Phillips subject to a duty to refund the same to the gas purchasers in the event the FPC failed to approve the sales prices pursuant to Section 4(e) of the Natural Gas Act, 15 U.S.C. § 717c(e), with interest at seven percent (7%) per annum from the date of receipt until September 18, 1970, and eight percent (8%) per annum thereafter until paid out, if the FPC did not approve the sales price. (18 C.F.R. § 154.102[c] and FPC Opinion No. 586, p. 33.) Until such time as the FPC approved such increased sales prices, or a portion of such prices, Phillips was entitled to retain the proceeds from such sales under federal cases holding that the royalty owners had no legally enforceable right to obtain such monies held by Phillips subject to refund. (See Ashland Oil & Refining Company o. Staats, Inc., 271 F. Supp. 571, £79 [D. Kan. 1967]; and Boutte vo. Cheoron Oil Com- pany, 316 F. Supp. 524 [E.D. La. 1970), aff'd 442 F.2d 1337 [5th Cir. 1971].) Until June 1, 1961, Phillips in its monthly payments to its gas 29a Beginning June 1, 1961, Phillips’ management decided to begin In July 1961, Phillips gave the following notice to Althea Shutts and all other royalty owners in the Hugoton-Anadarko area: “NOTICE “As you probably know, since June, 1954, all sales of gas to the interstate pipelines have been subject to the control of the Federal Power Commission. Phillips has been successful since that time in securing a number of increases in its contract prices, but these could not be placed into effect until they were approved, after investigation and hearing, by the Federal Power Commission, “PHILLIPS PETROLEUM COMPANY NATURAL GAS DEPARTMENT BARTLESVILLE, OKLAHOMA” (Emphasis added.) The indemnity which Phillips required was not a no-cost corporate undertaking, which was all Phillips filed with the FPC. Rather, Phillips required a corporate surety bond in an amount based on estimated production for two years, plus seven percent (7%) interest, subject to Phillips’ review at the end of eighteen . (18) months. ‘30a This notice was included with Phillips’ royalty checks for June 1961, that were mailed to all its royalty owners on July 28, 1961. Seventeen (17) persons or entities (who are not members of this class action) did furnish indemnities acceptable to Phillips and - eceived current payments computed on the full sums being “collected, including amounts subject to refund. However, none of the approximately 6,400 class members responded to Phillips’ offer contained in the notice, or requested that they be allowed to furnish Phillips with acceptable indemnity, so that they might be paid otherwise than according to the method outlined in Phillips’ July 28, 1961, notice. ey At various times after May 20, 1960, Phillips had nfneteen (19) applications before the FPC requesting permission to increase the price for sales of gas by it within the “designated area.” In due course the FPC issued orders suspending the nineteen (19) rate increase applications. On November 27, 1963, the FPC consolidated the applications of Phillips and others for hearing in the Hugoton-Anadarko area rate proceeding. From June 1, 1961, to October 1, 1970, Phillips deposited the increased rate monies collected in its general account and com- mingled it with its other funds, without ever giving notice of this fact to royalty owners during the time it was holding money. It is important to note that during this period of time Phillips had no entitlement to the gas royalty owners’ share of the “suspense royalties,” whether or not the rates were approved by the FPC. Phillips never owned this money. While Phillips collected eight- eighths (8/8) of the increased rates, under no condition was the one-eighth (%) of the increase attributable to the royalty owners ever to go to Phillips. That royalty share, according to eventual FPC ruling, was either to go to Phillips’ royalty owners, or back to Phillips’ gas purchasers with interest, or part to one and part to the other. On September 18, 1970, the FPC issued Opinion No. 586 in the Hugoton-Anadarko rate cases which established sales prices ap- plicable to the gas sales and refund requirements. The order was made effective October 1, 1970. (See 44 FPC 761 and 35 Fed. Reg. 15,986 [1970].) The effect of FPC Opinion No. 586 was to approve the increased rates collected by Phillips from September 1, 1956, to the extent of approximately $152,000,000 in plant sales of gas and approximately $1,000,000 in field or lease sales of gas, 3la and to disapprove rate increases to the extent of approximately oe ome Sen - and $73,000 in lease sales of gas, latter amounts ound refundable to the — ng gas purchasers However, the FPC had no jurisdiction over landowner royalty interests relating to the sale of gas, and it undertook to make no ruling with reference to whether any interest or compensation was payable by the producers to the royalty owners for “suspense royalties” held by Phillips. As of October 1, 1970, Phillips again began paying all of the royalty owners, to whom it accounted, royalties including the rate increases as to current monthly royalties, but Phillips did not then pay any back “suspense royalties” on monies previously withheld. On or about November 25, 1970, Phillips sent the eauring aation to Altiies Gtiatte and ether sayully ewonss in the class: “NOTICE CONCERNING FEDERAL POWER COMMISSION OPINION NO. 586 COVERING INTERSTATE SALES OF GAS PRODUCED FROM ' THE HUGOTON-ANADARKO AREA: “Effective as of October 1, 1970, and until further notice, Phillips Petroleum Company is giving effect to the full ceiling rate levels established by the Federal Power Commission in Opinion No. 586. If the check enclosed herewith includes payment for your interest in properties in the Hugoton-Anadarko Area, you are hereby notified that such payment has been based upon the full ceilinz rate levels eee rn Opinion should be changed, set aside, or vacated, in a reduction of the rate levels relied upon by Phillips in its calculations, Phillips wil! expect you to reimburse it in full for any overpayments occasioned thereby. Such recovery may be had, at Phillips’ election, by withholding from subsequent payments to you for your interest in oil or gas, or both oil and gas, whether or not produced from the same properties under which the overpayment occurred. “Your acceptance of the enclosed check will be regarded as evidence of your consent to such recovery. “PHILLIPS PETROLEUM COMPANY EXPLORATION & PRODUCTION DEPARTMENT GAS SETTLEMENTS DIVISION - 619 FPB BARTLESVILLE, OKLAHOMA 74004” The foregoing notice from Phillips to Althea Shutts and all class See ae ee Phillips’ royalty checks for October Litigation regarding FPC Opinion No. 586 continued until July 31, 1972, when the Ninth Circuit Court of Appeals affirmed the FPC opinion. When no appeal was taken, the opinion became 32a final on October 28, 1972. (See In re Hugoton-Anadarko Area Rate Case, supra.) On or about December 7, 1972, Phillips mailed royalty checks to royalty owners in payment of the increased royalties due them by virtue of the finality of FPC Opinion No. 586. Phillips paid Althea Shutts the sum of $2,831.25, and paid out approximately $5,700,000 in additional royalties to over 6,400 persons, firms, corporations and entities (which includes the class as defined by the trial court). Only 218 of these persons were residents of Kansas. Of that number only 128 had executed gas royalty agree- ments of the type under which Althea Shutts’ royalty was paid. (See Phillips’ July 1961, notice to ail of its royalty owners in the Hugoton-Anadarko area heretofore quoted as stipulated by the parties herein.) The record is barren as to the number in the plaintiff class residing in other states who have gas leases with Phillips covering land in Kansas, which encompasses the largest portion of the Hugoton-Anadarko area. At the time of these payouts, Phillips sent the following notice to each payee: “NOTICE “The enclosed check covers payment based upon _gas proceeds which have heretofore been held in suspense pending determination by the Federal Power Commission of the just and reasonable rates applicable to the Hugoton-Anadarko Area, and, subsequent to issue of Opinion No. 586 of the Federal Power Com- mission which determined such rates, pending appeal and judicial finality of said Opinion. The decision of the Circuit Court of Appeals affirming Opinion No. 586 has recently become final. “Credits to leases for these heretofore suspended sums have been accrued by computer in suspense accounts, pursuant to numerous Federal Power Commis- sion dockets. The detailed monthly prices and lease accrual information cannot, therefore, be reflected in any practicable manner on the enclosed check. The detail of our computations can be audited during regular business hours at our Bartles- ville, Oklahoma office. “PHILLIPS PETROLEUM COMPANY SETTLEMENTS DIVISION EXPLORATION & PRODUCTION DEPARTMENT BARTLESVILLE, OKLAHOMA 74004” (Emphasis added.) The foregoing notice discloses Phillips neither paid nor offered to pay any interest for the use of the money, nor did Phillips say anything about interest or how long the money had been held or used by Phillips. Althea Shutts accepted the payment for increased royalties 33a before she died on May 15, 1974. On September 16, 1974, Irl Shutts filed this action. Shutts, as a representative of approxi- mately 6,400 royalty owners, claimed approximately $1,000 in- terest for himself and interest for the members of the class on the amount ultimately paid to the royalty owners which have here- tofore been denominated “suspense royalties.” On November 26, 1974, Shutts filed a motion to certify the action as a class action. On May 1, 1975, Judge Robert M. Baker granted Shutts’ motion for a class order under K.S.A. 60-223 and ordered notice to be given to all gas royalty owners in the Hugoton-Anadarko area, regardless of whether such leases cov- ered land in Kansas, Texas or Oklahoma. Phillips’ request to take an interlocutory appeal was denied. Shutts prepared notices which were distributed by Phillips during a monthly royalty payment mailing to all royalty owners in the Hugoton-Anadarko area then receiving royalties from Se notice provided: “1. The court will include as members of the plaintiff class herein all of the gas royalty owners addressed above; provided, however, any person or concern so included may by filing a written request to the Clerk of the District Court of Kiowa County, Kansas, Greensburg, Kansas, 67054, on or before the 30th day of April, 1976 [original notice specified July 15, 1975] be excluded from the class unless upon notice and after hearing and for stated reasons the court finds that inclusion is essential to the fair and efficient adjudication of the controversy. Any class member, if he so desires, may appear in the case in person or through his an an a a “2. Judgment in this action, whether for the plaintiff class or for the de- fendant, will be binding on all class members except those who may be excluded as above stated. Class members excluded will not be entitled to share in the Sane ey Sa Se “3. Plaintiffs’ attorneys’ fees are contingent on recovery. If the plaintiffs are successful, the court will allow a reasonable attorneys’ fee for plaintiffs’ attorneys out of the interest fund created. If plaintiffs are unsuccessful, there wil] be no allowance of attorneys’ fees.” Notices were also published in seven area newspapers and sent by first class mail by the plaintiff to former royalty owners. Judge Baker later disqualified himself, and Judge Duckworth was eventually assigned to this case. On August 12, 1975, three Texas residents mailed a notice to the clerk of the district court saying they did not wish to par- 34a ticipate in this class action suit. Because this notice was not timely filed and because a multiplicity of suits could occur if exclusion was granted, the trial court sustained Phillips’ motion to deny the exclusion. The trial court adopted by reference the stipulations of the parties set forth in the >retrial order as its findings of fact and concluded (1) the matter could be tried as a class action, (2) the class members had not waived any claim for interest, (3) that Phillips was liable for interest on a theory of unjust enrichment, and (4) the class should be awarded six percent compound inter- est. Specifically, the trial court determined in its conclusions of law: “1. This is a proper class action under the provisions of K.S.A. Supp. 60-223 because: (a) The approximately 6400 royalty owners in the Hugoton-Anadarko area makes joinder impractable; [sic] (b) Any interest due each member of the class is too small to justify separate actions; (c) Questions of fact and law are common to all members in that the facts are really undisputed and the sole legal issue presented is whether the plaintiff members are entitled to interest on the suspended royalties held by defendant; (d) The claims of the named parties herein are typical of the claims of all members of the class and will fairly and adequately protect the interest of the class; (e) The question presented common to all members of the class predo- minates over any individual question and a class action is not only superior but the only efficient manner to adjudicate the dispute herein (to avoid multiple suits and excessive expenses) and that this court hacing furisdiction of a large physical portion of the Hugoton-Anadarko area is a convenient forum for such action. “4. The defendant concomitant with its duty to its royalty owners to secure the best price obtainable (under its covenant to market) bed the duty to remit the collected share of royalty as promptly as commercially ::asable [sic] on the same conditions as it was received by defendant or in the alte: native to place the funds in a proper investment fund for subsequent disbursement. The fact that FPC permitted and essentially required defendant to post bond and agree to pay back interest if a refund was ordered did not entitle defendant to free use of the royalty owners share of the increased proceeds. The FPC bond and interest pay back requirements certainly justify and permit defendant business use of the increased rates of its own share of those rates but not the royaiiy owners share which did not belong to defendant under any eventual ruling by the FPC. See Phillips Petro- leum Co. v. Adams, 513 F2d 355. The Court therefore concludes that the defendant is liable for interest on rayalty proceeds retained by it and used as a 35a business asset by it pending final FPC approval and conclusion of litigation based on its contractual duty to remit royalty proceeds in a reasonably prompt manner. It is specifically not the basis of this decision that such duty arises from an attempt to impose any facet of fiduciary relationship to the defendant. “ The eccaytance without on accounting 0s to sates or taterest of payment of the suspended royalties herein in December, 1972, did not constitute ratification because there was no basis for the royalty owners to know what was involved in the payment. For the same reason estoppel does not apply to preclude recovery fendant’s obligations under their original leases except for agreements controlled price. a “D. Defendant's contention that the payment of the additional royalties in December 1972 constituted a ‘bounty’ to plaintiffs is without any foundation and is contrary to said gas royalty agreements’ establishing the FPC approved prices “10. To allow defendant free use of the royalty share of production for over ten years as a result of the difficulties and delays caused by the FPC regulations would unjustly enrich defendants. Defendant paid the full royalty share of proceeds collected prior to June 1, 1961, and after October 1, 1970. The decision to withhold the increased (but unapproved) rates in the intervening period was a unilateral decision by defendant that cannot rise to the stature of a defense of ratification. Nor does it support the ‘bounty’ theory of defendant herein as noted “11. The statutory rate of interest herein in Kansas, Oklahoma and Texas is six per cent per annum and is allowed as the proper rate of interest to be applied to the suspended royalties herein from time of receipt until date of judgment herein with interest compounded on an annual basis.” (Emphasis added.) Appeal has been duly perfected by Phillips, and a cross-appeal hes been taken challenging the amount of interest awarded by the court. The appellant contends the trial court erred in holding that it had jurisdiction over in personam claims of unnamed nonresident class plaintiffs having no contact with the State of Kansas. Here the representative of the plaintiff class is a resident of Kansas. The named defendant does business in Kansas, and has been duly served with process in Kansas. No question is asserted on this appeal as to the jurisdiction of the trial court over the defendant or the trial court’s power to enforce a judgment against 36a the defendant. Two hundred and eighteen plaintiff class members are Kansas residents, and an unknown number of the plaintiff members, many of whom reside in other states, have gas leases with Phillips covering Kansas lands. But it must be conceded some gas leases or other contracts entered into between Phillips and the gas royalty owners in the plaintiff class involve persons who are not residents of Kansas or persons who have gas leases covering land which is outside the physical boundaries of Kansas or both. It is a basic rule of law that for a person to be bound by a state court’s judgment affecting his legal rights, he must be subject to the adjudicating court’s jurisdiction. The question presented is how can a Kansas court assert jurisdiction in a plaintiff class action, where some of the individual plaintiff class members do not reside in Kansas and do not have land in Kansas covered by leases with Phillips. It is apparent the multistate class action filed herein presents a novel issue in terms of in personam jurisdiction. However, while multistate class actions are novel, state courts have long been confronted with actions brought against nonresident defendants. Out of these cases have developed jurisdictional principles which permit courts to assert personal jurisdiction over a foreign de- fendant or to obtain jurisdiction over the property of a foreign defendant, and in both cases to render a binding judgment. The basic requirements to subject defendants to personal lia- bility were first established in Pennoyer ov. Neff, 95 U.S. 714, 24 L.Ed. 565, where the United States Supreme Court held: . . The authority of every tribunal is necessarily restricted by the territo- rial limits of the State in which it is established. Any attempt to exercise authority beyond those limits would be deemed in every other forum, as has been said by this court, an illegitimate assumption of power, and be resisted as mere abuse. . . .” (p. 720.) The ruling in Pennoyer was expanded and made more flexible by cases examining the “minimum contacts” necessary to exer- cise in personam jurisdiction over a nonresident defendant. (Jn- ternat. Shoe Co. v. Washington, 326 U.S. 310, 90 L.Ed. 95, 66 S.Ct. 154, 161 A.L.R. 1057; and McGee wv. International Life Ins. Co., 355 U.S. 220, 2 L.Ed.2d 223, 78 S.Ct. 199.) Pennoyer was also expanded by quasi in rem judgments binding a nonresident defendant by the court’s exercise of in rem jurisdiction over the 37a nonresident defendant's property, thereby subjecting the prop- erty to the court's jurisdiction. (Note, Consumer Class Actions with a Multistate Class: A Problem of Jurisdiction, 25 Hastings L. J. 1411, 1426-1428 [1974].) Recently, in Hanson v. Denckla, 357 U.S. 235, 2 L.Ed.2d 1283, 78 S.Ct. 1228, the United States Supreme Court reaffirmed the Pennoyer rule in holding that the lower court’s exercise of in personam jurisdiction over the nonresident defendant was in- valid. The United States Supreme Court stated: “. . . But it is a mistake to assume that this trend heralds the eventual demice of alll sestrictions on the personal juriediction of state cousts. (Citation omitted.) Those restrictions are more than a guarantee of immunity from incon- venient or distant litigation. They are a consequence of territorial limitations on the power of the respective States. However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has had -the ‘minimal contacts’ with that State that are a prerequisite to its exercise of power over him. . . .” (p. 251.) (Emphasis added.) The most recent case of the United States Supreme Court indicating the parameters of quasi in rem jurisdiction over non- resident defendants is Shaffer v. Heitner, ___ U.S. " L.Ed.2d . S.Ct. __. [No. 75-1812, decided June 24, 1977], following Internat. Shoe Co. v. Washington, supra. Kansas cases examining and following these jurisdictional re- quirements over nonresident defendants include Misco-United Supply, Inc. v. Richards of Rockford, Inc., 215 Kan. 849, 528 P.2d 1248; Tilley vo. Keller Truck & Implement Corp., 200 Kan. 641, 438 P.2d 128; and Woodring o. Hall, 200 Kan. 597, 433 P.2d 135. These cases all deal with nonresident defendants, not nonresi- dent plaintiffs. Whether all nonresident plaintiffs in a class action are required to have “minimum contacts” with the forum is a different matter. Because a class action must necessarily proceed in the absence of almost every class member, we hold the resi- dential makeup of the class membership is not controlling. (Note, Consumer Class Actions with a Multistate Class: A Problem of Jurisdiction, supra at 1432.) What is important is that the non- resident plaintiffs be given notice and an opportunity to be heard and that their rights be justly protected by adequate representa- tion. These are the essential requirements of due process, and they must be satisfied in any class action by every court, state or federal, regardless of the residences of the absent class members. Therefore, while the essential element necessary to establish 38a jurisdiction over nonresident defendants is some “minimum contacts” between the defendant and the forum state, the element necessary to the exercise of jurisdiction over nonresident plaintiff class members is procedural due process. That there is indeed a difference between the jurisdictional standards governing class actions, and those governing all other actions, was emphasized long ago by the United States Supreme Court in Hansberry v. Lee, 311 U.S. 32, 85 L.Ed. 22, 61 S.Ct. 115, 132 A.L.R. 741. There the court refused to bind a Negro petitioner to a judgment against him, as a member of a class on the basis of earlier litigation, where a false and fraudulent stipulation was entered into. In that case the court noted: “It is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment i personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process. Pennoyer o. Neff, 95 U.S. 714; 1 Freeman on Judgments (Sth ed.), § 407. A judgment rendered in such circumstances is not entitled to the full faith and credit which the Constitution and statute of the United States, R.S. § 905, 28 U.S.C. § 687, prescribe. . . . Uae seeeey eae Game scenes enyiee OS, 9 Sbes om precisely defined by judicial opinion, the judgment in a ‘ ’ or ‘representative suit, to which some members of the class are parties, may bind members of the class or those represented who were not made parties to it. . . . “| Courts are not infrequently called upon to proceed with causes in which the number of those interested in the litigation is so great as to make difficult or impossible the joinder of all because some are not within the jurisdic- tion or because their whereabouts is unknown or where if all were made parties to the suit its continued abatement by the death of some would prevent or unduly delay a decree. In such cases where the interests of those not joined are of the same class as the interests of those who are, and where it is considered that the latter fairly represent the former in the prosecution of the litigation of the issues in which al) have a common interest, the court will proceed to a decree. . . . (pp. 40-42.) (Emphasis added.) Thus, although the general rule is that only persons subject to a court’s jurisdiction are bound by its judgment, there is a rec- ognized exception for suits of a representative character. While the United States Supreme Court conceded that the extent of this exception had not been precisely defined by judicial opinion, it went on to suggest that if a class were adequately represented, its interest would be protected and the court could proceed to a final decree. These pronouncements, although pure dicta, would not have been included in the opinion unless they were intended to state the rule regarding class actions. The opinion also foretells 39a what is an essential requisite of due process as to absent plaintiff class members, adequate representation. (See Gray cv. Amoco Production Co., 1 Kan. App. 2d —_, 564 P.2d 579 [No. 48,385, decided. May 20, 1977].) An examination of the nature of class action suits provides a historical background for this conclusion. Class action suits arose in equity and were known to English chancery practice since the Seventeenth Century. (A. Homburger, State Class Actions and the Federal Rule, 71 Colum. L. Rev. 609, 611 [1971]; and H. Hunter, Georgia Investment Company v. Norman—The Supreme Court Creates a New Form of Class Action for Georgia, 24 Mercer L. Rev. 447, 448 [1973].) In the 1853 opinion of Smith et al v. Swormstedt, et al, 57 U.S. (16 How.) 288, 14 L.Ed. 942, the United States Supreme Court gave its blessing to the equitable class suit by noting: “The rule is well established, that where the parties interested are numerous, and the suit is for an object common to them all, some of the body may maintain a bill on behalf of themselves and of the others; and a bill may also be maintained against a portion of a numerous body of defendants, representing a common interest. . . .” (* p. 302.) In 1938, the Federal Rules of Civil Procedure defined class actions in terms of the abstract nature of the rights involved: the so-called “true” category was defined as involving “joint, com- mon, or secondary rights”; the “hybrid” category, as involving “several” rights related to “specific property”; the “spurious” category, as involving “several” rights affected by a common question and related to common relief. (See Proposed Rules of Civil Procedure, 39 F.R.D. 69, 98 [1966].) Because of the unworkability of these classifications, the Fed- eral Rules of Civil Procedure were amended in 1966. It was decided the new rules would allow a judgment to bind all class members unless a member affirmatively “opted out” of the liti- gation at its commencement. (Fed. R. Civ. P. 23 [c] [3].) Recently the United States Supreme Court has required plain- tiffs to assume the cost of notice in common-question class actions. (Eisen o. Carlisle & Jacquelin, 417 U.S. 156, 40 L.Ed.2d 732, 94 S.Ct. 2140.) The United States Supreme Court has also refused to aggregate class action claims to meet the $10,000 federal jurisdictional requirements. (Zahn v. Intemational Paper Co., 414 U.S. 291, 38 L.Ed.2d 511, 94 S.Ct. 505; and Snyder ov. 40a Harris, 394 U.S. 332, 22 L.Ed.2d 319, 89 S.Ct. 1053, reh. denied 394 U.S. 1025, 23 L.Ed.2d 50, 89 S.Ct. 1622.) While the results are supported by the fear of overloading the federal judicial system and the desire not to judicially expand the constitutionally established jurisdictional limits, these recent United States Su- preme Court cases have clearly restricted access to federal courts. This suit, for example, could not be brought in a federal court. Furthermore, the FPC does not have jurisdiction over the matter. If the state courts will not hear the matter, who will grant relief? If state courts cannot maintain class action suits with nonresi- dent plaintiffs, can the “small man” find legal redress in our modern society which increasingly exposes people to group inju- ries for which they are individually unable to get adequate lega! redress, either because they do not know enough or because such redress is disproportionately expensive? (See A. Homburger, State Class Actions and the Federal Rule, 71 Colum. L. Rev. 609, 641-643 [1971].) The appellant argues this action should be brought in several different state courts. This risks inconsistent adjudications for a class which is otherwise treated alike. Furthermore, the statute of limitations has run in Oklahoma and Texas. The United States Supreme Court has held the commencement of a class action suit tolls the applicable statute of limitations as to all members of the class. (American Pipe & Construction Co. c. Utah, 414 U.S. 538, 38 L.Ed.2d 713, 94 S.Ct. 756, reh. denied 415 U.S. 952, 39 L.Ed.2d 568, 94 S.Ct. 1477; and Eisen v. Carlisle & Jacquelin, supra.) However, if in this action Kansas is without jurisdiction over class plaintiffs in other states, this action would not toll the statute of limitations in those states. We examine then the Kansas rules regarding class actions. Our statutes reveal a recognition of the need for permitting actions to be brought by a named plaintiff in a representative capacity. (G.S. 1868, ch. 80, § 38; L. 1909, ch. 182, § 37; R.S. 1923, 60-413; and L. 1963, ch. 303, § 60-223, amended by Supreme Court order dated July 17, 1969.) In its present form the Kansas Class Action Rule, modeled after the Federal Rule of Civil Procedure 23, is found at K.S.A. 60-223. It gives the prerequisites for a class action as follows: “(a) Prerequisites to a class action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so 4la numerous that joinder of al! members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. “(6) Class actions maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition: “(1) The prosecution of separate actions by or against individual members of the class would create a risk of (A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or “(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) The interest of members of the class in prosecuting or defending separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against members of the class; (C) the appropriate place for maintain- ing, and the procedural measures which may be needed in conducting, a class action.” Phillips argues this is not a proper case for class action treat- ment under K.S.A. 60-223(5)(3) because there are differing ques- tions of law and fact governing the rights which arise under gas leases in three states. Phillips attempts to apply an overly restric- tive interpretation of the “commonality” requirement of K.S.A. 60-223(a). (Gray v. Amoco Production Co., supra; Sommers ov. Abraham Lincoln Federal Savings & L. Ass'n, 66 F.R.D. 581 {E.D. Pa. 1975]; and Fertig v. Blue Cross of Iowa, 68 F.R.D. 53 ([N.D. lowa 1974]}.) However, as explained later in this opinion, there are questions of fact and law common to the plaintiff class. (See Perlman vo. First National Bank of Chicago, 15 lll. App.3d 784, 305 N.E.2d 236 [1973], appeal dismissed 60 I1].2d 529, 331 N.E.2d 65.) Citations to the venue statutes of Kansas and other states are inapplicable here. (See United States c. Trucking Employers, Inc., 72 F.R.D. 98 [D.D.C. 1976].) First, venue is not a jurisdic- tional matter, but a procedural one. (Gray 0. Amoco Production Co., supra; and 77 Am. Jur.2d, Venue, § 1, p. 832.) Second, this is a transitory action affecting real property only incidentally. Be- ——- 42a cause this court has in personam jurisdiction over the defendant, venue lies in Kiowa County. (Gray c. Amoco Production Co., supra; 20 Am. Jur.2d, Courts, § 121, p. 476-477; and Farha t. Signal Companies, Inc., 216 Kan. 471, 532 P.2d 1330, modified 217 Kan. 43, 535 P.2d 46. .) Lastly, if the venue attack is carried to its logical conclusion a class action could not even be maintained in Kansas with Kansas residents because the venue statute would require separate suits in the different counties. After reviewing K.S.A. 60-223, we hold Kansas courts can exercise jurisdiction over nonresident plaintiffs in a class action if procedural due process guarantees are met. Although no case in Kansas or any other jurisdiction is precisely in point on the factual situation here presented, many courts in cases from other jurisdictions have reached out to bind nonresident plaintiffs. In Chance v. Superior Court, 58 Cal.2d 275, 23 Cal. Rptr. 761, 373 P.2d 849 (1962), the California Supreme Court held a class action to foreclose separate trust deeds securing each of 2,139 notes was proper and did not deny due process to unnamed noteholders, many of whom may not have been California resi- dents, where the class was ascertainable and susceptible to no- tice, where the virtually identical notes were created in a single transaction as part of a speculative scheme, where all policy- holders had common interests in reaching other assets, and where their individual lots were all in one tract which was more valu- able as an entity. In Daar tu. Yellow Cab Co., 67 Cal.2d 695, 63 Cal. Rptr. 724, 433 P.2d 732 (1967), the plaintiff brought a class action on behalf of himself and all other users of the taxi cab services in the Los Angeles area who were overcharged by Yellow Cab. The Califor- nia Supreme Court permitted this class action to proceed al- though some members of the plaintiff class were unknown and may have been residents of other states. In Horst v. Guy, 211 N.W.2d 723 (N.D. 1973), the plaintiff filed a class action to secure payment of a veteran’s bonus under the North Dakota Vietnam Conflict Veterans’ Adjusted Compensa- tion Act. The appellants claimed a class action was inappropriate because the district court might not have jurisdiction over all class members because some members were outside the state of North Dakota. The North Dakota Supreme Court held: . [Thhe fact that some of the members of the [plaintiff] class may not be 43a within North Dakota does not remove the jurisdiction of the district court to hear the case as a class action.” (p. 727.) However, there the class was limited [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0205%3A1. Public record. Not legal advice.