Reply Brief — Sun Oil Co. v. Wortman

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sourt, U.S,

No. 87-352 ct 3 Be

a i“ SPANIOL, JR,

CLERK

In the Supreme Court of the United States

OCTOBER TERM, 1987

SUN OIL COMPANY,

Petitioner,

VS.

RICHARD WORTMAN and HAZEL MOORE, Individually

and as representatives of all producers and royalty owners

to whom Sun Oil Company has made or should make pay-

ment of suspended proceeds or royalties pursuant to FPC

opinions or FERC,

Respondents.

REPLY BRIEF OF PETITIONER

-..

GERALD SAWATZKY*

J1mM H. GOERING

FOULSTON, SIEFKIN, POWERS

& EBERHARDT

700 Fourth Financial Center

Wichita, Kansas 67202

(316) 267-6371

Epwyn R. SHERWOOD

Sun Exploration and Production

P.O. Box 2880

Dallas, Texas 75221-2880

(214) 890-5608

Attorneys for Petitioner

Date: September 30, 1987

*Counsel of Record

E. L. MENDENHALL, INc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030

(

TABLE OF CONTENTS

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ahaha alesis east bianicunendelainphnaienidiieunseereneemmsnescitein 1

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TABLE OF AUTHORITIES

Cases

Beard v. J.I. Case, 823 F.2d 1095 (1987) .......00000000....... 3

Campbell v. Holt, 115 U.S. 620 (1885) 2.00.00. 4,5

Chase Securities Corp. v. Donaldson, 325 U.S. 304

IED conidia cdiseeadivenianlidaiiastspacibicclesbaledicimncelenianssiasnnniiiianebssussed 3, 4,5

Ferens v. Deere & Co., 819 F.2d 423 (3rd Cir. 1987) ... 2,5

Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984) 5

Mo.-Kan.-Tex.R.Co. v. Fiberglass Insul., 707 S.W.2d

943 (Tex. Civ. App. 1986, Error Refused, NRE, June

ne III “iiacisdecseicaetabdasintinehinmpnendiontaingipsiiltbeniimancioneanasieabiatianste 6

Phillips Petroleum Company v. Shutts, 472 U.S. 797

a sebbalesebdemnimniticshesssianicauibaning seiblecipatepunnabeiinaal 3, 5,6

Phillips Petroleum Co. v. Stahl Petroleum Co., 569

I I sccesieastlaioneidicianiiiansen 5, 6

Schrieber v. Allis Chalmers Corp., 611 F.2d 790 (10th

Es III sds estnihipchidencestibtielasecbddasoncitiniiiensiopeniesssasdeigiiliiehsabietunten 2

Wells v. Simonds Abrasive Co., 345 U.S. 514 (1953) ....2, 3,4

Whitehall v. Boagni, 255 La. 67, 229 So.2d 702 (1969) 6

Statute

ee OF FN ee

Other

The National Law Journal, Vol. 10, No. 1, page 1, Sep-

tember 14, 1987, “Courthouse Doors Are Reopened”’,

ty Bewerd A. AGED .................. eee Een

No. 87-352

In the Supreme Court of the United States

OCTOBER TERM, 1987

SUN OIL COMPANY,

Petitioner,

VS.

RICHARD WORTMAN and HAZEL MOORE, Individually

and as representatives of all producers and royalty owners

to whom Sun Oil Company has made or should make pay-

ment of suspended proceeds or royalties pursuant to FPC

opinions or FERC,

Respondents.

REPLY BRIEF OF PETITIONER

The present action to recover prejudgment interest on

gas royalties paid out by Sun Oil Company in July, 1976,

and in 1978, was not commenced until August, 1979, more

than three years after the 1976 payout. (A3-A4). Ac-

cordingly, more than 90% of the claims related to Sun’s

July, 1976, payout would be barred by the limitations stat-

utes of Texas, Oklahoma and Louisiana. The Kansas Su-

preme Court did not contest this conclusion, and respon-

dents are unable to cite any authority to the contrary. The

gas leases under which petitioner paid the 1/8th fractional

royalty did not require interest. The claim was one in

equity for unjust enrichment, based on implied contract

or quasi-contract, to which the two-year statute of Texas,

and the three-year statutes of Oklahoma and Louisiana

apply. (Sun’s Petition, p. 5, footnote 2).

Being unable to deny the continuing conflict illustrated

by Schrieber v. Allis Chalmers Corp., 611 F.2d 790 (10th

Cir. 1979), and Ferens v. Deere & Co., 819 F.2d 423 (3rd

Cir. 1987), respondents choose to ignore the substantial

reasons why this Court should decide the constitutional

issues arising under the Full Faith and Credit Clause, and

the Due Process clause. Respondents cannot dispute the

existing conflict in recent decisions, including this very

case. They cannot deny the contemporary scholarly criti-

cism of Schreiber, and cf the broad dictum in Wells v.

Simonds Abrasive Co., 345 U.S. 514, 517 (1953). Like the

emperor who had no clothes, respondents pretend the prob-

lem doesn’t exist.

Whether the Constitution permits a forum state to dis-

regard the shorter limitations law of the state wherein the

claim arose, an issue not directly decided by Wells, is an

issue far broader and deeper than a mere conflict among

the recent decisions, including this case. The flood of

problems flowing from technological and commercial dis-

putes in an expanding economy and population, together

with widely varying limitations laws among the states,

has already catapulted this issue into prominence. One

example is the nationwide asbestos litigation, in which a

parade of lawsuits are being filed in distant forums having

limitations statutes longer than states wherein the claims

arose. These include federal forum transfer questions,

as in Ferens, which depend for their solution on the precise

issue here presented. (The National Law Journal, Vol.

10, No. 1, page 1, September 14, 1987, “Courthouse Doors

Are Reopened’’, by Edward A. Adams.) Similar issues are

now arising in the burgeoning area of toxic tort litigation,

as well as other areas of products liability, commercial

tort and contract actions.

Respondents erroneously contend that the limitations

issue does not exist in this case because the first Kansas

Supreme Court decision (236 Kan. 266, 690 P.2d 385) was

vacated by this Court for reconsideration in light of Phillips

Petroleum Company v. Shutts, 472 U.S. 797 (1985); and

Shutts did not involve a limitations issue because the suit

was brought more promptly. But petitioner, at every stage,

has raised its constitutional objections to the application

of Kansas law to claims arising in other states. These ob-

jections included failure to recognize the other states’

limitations laws, as well as laws governing the liability

issue and rate of interest issue found in Shutts. Accord-

_ingly, this Court’s remand for reconsideration in this case

required the Kansas courts to reconsider application of

other state’s laws to the claims before it, including the lim-

itations laws. Certainly nothing in the remand could have

removed or rejected Sun’s constitutional rights preserved

at every stage of this litigation.

Respondents also fail to :ealize, as the Seventh Circuit

has in Beard v. J.I. Case, 823 F.2d 1095 (1987), that this

Court’s Shutts decision itself calls into question the con-

clusions expressed in Wells and Clay on the limitations

issue.

Next respondents seek to support the correctness of

the Kansas courts’ application of Kansas’ longer limitations

statute by reference to the dictum in Wells, supra; to a

hornbook recitation that limitations statutes are “pro-

cedural” only, and to Chase Securities Corp. v. Donaldson,

325 U.S. 304 (1945).

Wells merely allowed the forum state to apply its own

shorter limitations statute. Whether the dictum complained

of by Mr. Justice Jackson in dissent, and as criticized by

legal scholars, should be limited and made inapplicable to

a forum state seeking to impose its longer statute, is an

important and primary question presented. At the same

time, we see substantial reasons why this Court should also

consider whether a forum staie must constitutionally apply

the longer limitations statute of the state wherein the

claim arose; and thus whether Wells should be overruled.

Limitations laws are more than procedural and reme-

dial, in completely barring a claim when time has expired,

as legal scholars agree. And merely because a state may

describe a limitations statute as “procedural and remedial”

for collateral purposes, or even so that it may apply its

own limitations law, can never change the real impact on

the claim and on the parties. That impact is one of sub-

stance because it determines whether a claim is alive or

dead. It does not merely govern a procedure for processing

a claim, nor choose among potential remedies.

Finally, respondents quote from Chase Securities Corp.

v. Donaldson, 325 U.S. 304 (1945), as though it supported

their position. It does not. Justice Jackson (who later

dissented in Wells) wrote for a unanimous Court, holding

that a state may lengthen its own limitations statute ap-

plicable to claims arising in that state which are already

barred, so long as vested rights are not extinguished:

“. . The Fourteenth Amendment does not make an

act of state legislation void merely because it has

some retrospective operation.” (325 U.S. at 315).

The Court’s opinion noted that Campbell v. Holt, 115

U.S. 620 (1885), involving the same issue, had adopted as

a “working hypothesis, as a matter of constitutional law,

the view that statutes of limitation go to matters of remedy,

not to destruction of fundamental rights.” Justice Jack-

son, while accepting the result aad the ultimate holding,

described the above reasoning of Campbell v. Holt as “un-

satisfactory rationalization.” (325 U.S. at 314).

It is just such “unsatisfactory rationalization” which

the Third Circuit in Ferens, and an array of legal scholars,

have rejected in forbidding, on constitutional grounds, the

application of the forum state’s longer limitations laws to

claims barred by the state in which they arose. The fore-

going comment in Chase Securities Corp. simply reinforces

the need to expunge the “unsatisfactory rationalization”

that statutes of limitations are remedial for constitutional

purposes, to prevent its improper application to the present

constitutional issue.

Our constitutional rights, above all rights, emanate

from and apply to substance and reality. If governed by an

“unsatisfactory rationalization” that limitations laws are

merely procedural for constitutional purposes in applying

the laws of other states, these basic rights are effectively

denied.

The present issue, left open by Keeton v. Hustler Mag-

azine, Inc., 465 U.S. 770, 778 (1984), is ripe for decision, and

is squarely presented in this case.

II.

The conflict between the decision below, and this

Court’s Phillips decision, is clear from respondents’ brief

itself, which tries to explain away the 6% per annum in-

terest rate required by Texas constitutional and statutory

law. Respondents, as did the court below, would ignore

the 6% rate imposed in Phillips Petroleum Co. v. Stahl

Petroleum Co., 569 S.W.2d 480 (Tex. 1980), by arguing

that Texas would allow a higher “equitable” rate in such

cases, if sought by claimant. The argument that “equity”

would permit a rate higher than Texas’ 6% statutory rate

was later specifically rejected in Mo.-Kan.-Tex.R.Co. v.

Fiberglass Insul., 707 S.W.2d 943, 947 (Tex. Civ. App. 1986,

Error Refused, NRE, June 25, 1986):

“We conclude that Stahl allows courts to award pre-

judgment interest on equitable grounds at the six

percent legal rate of art. 5069-1.03 when no statute

provides for such a recovery. It thus enlarges the

class of cases in which prejudgment interest may be

granted without increasing the rate of equitable pre-

judgment interest that may be awarded.”

Yet respondents and the lower court ignore that con-

clusive ruling rejecting their position concerning Stahl,

just as they ignore this Court’s Phillips opinion noting that

“. . Texas has never awarded any such interest at a rate

greater than 6%... .” (472 U.S. at 817).

Oklahoma, by statute, extinguishes liability for interest

if the principal is paid and accepted, as here. Okla. Stat.,

tit. 23, Sec. 8. Louisiana does not impose liability for in-

terest on a royalty owner who owes a refund for overpay-

ment, under similar circumstances. Whitehall v. Boagni,

255 La. 67, 229 So.2d 702 (1969). Interest liability, if im-

posed, is 6% per annum in Oklahoma, and 7% in Louisiana,

as this Court observed in Phillips, 472 U.S. at 817. Peti-

tioner does not at all concede that Oklahoma and Louisiana

impose liability for interest, as asserted by respondents.

Rather, the Kansas courts’ patent disregard of rates of in-

terest established by Texas wherein most of the claims

arose, as well as by Oklahoma and Louisiana, amply and

clearly demonstrates the violation of petitioners’ federal

constitutional rights, as set forth in Phillips.

CONCLUSION

The Petition should be granted.

Respectfully submitted,