# Reply Brief — Sun Oil Co. v. Wortman

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Reply Brief
- **Published:** January 1, 1988
- **Citation:** 486 U.S. 717

## Text

No. 87-352

In the Supreme Court of the Unit

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.

On Writ oF CERTIORARI TO THE SUPREME COURT
OF THE STATE OF KANSAS

REPLY BRIEF FOR PETITIONER

GERALD SAWATZKY*

Jim H. GoOERING

TrmMotuy B. MUSTAINE

FOULSTON, SIEFKIN, POWERS
& EBERHARDT
700 Fourth Financial Center
Wichita, Kansas 67202
(316) 267-6371

Epwyn R. SHERWOOD

P.O. Box 2880
Dallas, Texas 75221-2880
(214) 890-5608

Attorneys for Petitioner
Date: February 17, 1988

*Counsel of Record

E. L. Menpennatt, Inc., 926 Cherry Street, Kansas City, Mc. 64106, (816) 421-3030

STATEMENT PURSUANT TO RULE 238.1

Sun Oil Company’s name has been changed to Sun
Exploration and Production Company, the parent com-
pany of which is Sun Company, Inc. The assets of Sun
Exploration and Production Company have been trans-
ferred to Sun Energy Partners, L.P., of which Sun Ex-
ploration and Production Company is the managing gen-
eral partner. The non-wholly owned subsidiaries of Sun
Exploration and Production Company are Canyon Reef
Carriers, Inc., East Texas Salt Water Disposal Company
and Van Salt Water Disposal Company. The non-wholly
owned subsidiary of Sun Company, Inc., is Suncor, Inc.

II

TABLE OF CONTENTS

I. Because Limitations Laws Are Substantive in
Nature, the Full Faith and Credit Clause and the
Due Process Clause Require Kansas to Apply the
Limitations Law of the State Where the Claim
Arose and Claimant Resides—

A. The Artificial Judicial Classification of Limi-
tations Laws As Procedural Is Wrong ................ 1

B. The “Outcome-Determinative” Test Reinforces
the Classification of Limitations Laws As Sub-
stantive for Constitutional Purposes ................ 6

C. Whether the Forum State May Constitution-
ally Apply Its “Discovery Rule’ When the Ac-
tien Is Barred by Limitations in the State
Where the Claim Arose Is Not Presented for
Decision in This Case ................e 10

Ji. Texas, Oklahoma, and Louisiana Laws Govern-
ing Liability for Interest, and the Period of Limita-
tions, Differ From Kansas Laws Applied Below—

A. The Court Below Did Not Apply the Substan-
tive Interest Laws of Texas, Oklahoma and
Louisiana, As Required by Phillips Petroleum
Co. v. Shutts, 472 U.S. 797 (1985) .................... 12

B. The Limitations Laws of Texas, Oklahoma
and Leuisiana Bar Interest Claims Related to
Sun’s 1976 Payout More Than Three Years
Prior tO Sumit ........ceccc.cccsecccecsssse

Conclusion weds a oenesussusnsessaeslespeseiienennneiannn

Ill

TABLE OF AUTHORITIES
Cases

Chase Securities Corp. v. Donaldson, 325 U.S. 304
a Era leasbhidentischemesesecess aie beetannies 7, 10

Ferens v. Deere & Co., 819 F.2d 423 (1987), certiorari
EE 4,5

Filtsch v. Johnson, 174 Okl. 132, 50 P.2d 138 (1935) —...... 17
Flanagan v. Campbell, 183 Okl. 610, 83 P.2d 865 (1938) 17
Goad v. Celotex Corporation, 831 F.2d 508 (4th Cir.

1987), certiorari pending No. 87-1163 ................0........... 9
Home Insurance Co. v. Dick, 281 U.S. 397 (1930) ........ 8
Le Roy v. Crowninshield, 15 F.Cas. 362, 2 Mason. 151

Nee cascsancaconeese 4,7
M’Elmoyle v. Cohen, 13 Pet. 312 (1839)... 7, 8,11
Order of R. Telegraphers v. Railway Exp. Agency, 321

SEE 10

Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ... 14
Phillips Petroleum Co. v. Stahl Petroleum Co., 569
gD) 17
Shutts v. Phillips Petroleum Co., 567 P.2d 1292 (1977) 15
Shutts v. Phillips Petroleuin Co., 235 Kan. 195, 679 P.2d

EE 15
Shutts v. Phillips Petroleum Co., 240 Kan. 764, 732 P.2d

ET 15
Sun Oil Co. v. Wortman, 474 U.S. 806 (1985) ........... 12, 14
T & S Inv. Co. v. Coury, 593 P.2d 503 (Okl. 1979) ........ 17
Wells v. Simonds Abrasive Co., 345 U.S. 514 (1953) ...... 2
Wortman v. Sun Oil Co., 236 Kan. 266, 690 P.2d 385

ESE 15, 16, 17

Wortman v. Sun Oil Co., 241 Kan. 226, 734 P.2d 1190
EE A

IV

Constitutional Provision

Constitution of the United States, Article IV, Sec.
ID \cespucashLiesaticiptinianas<patibiieeniaaasecsd eiicbipaameiaaieaanastelmaaddaradel passim

Other Authorities

51 Am.Jur.2d, Limitation of Actions, Sec. 453, p. 914. 6

Arthur R. Miller and David Crump, Jurisdiction and
Choice of Law in Multistate Class Actions After
Phillips Petroleum Co. v. Shutts, 96 Yale LJ. 1
OE SIUINEE © ciicocivdecimasatiesanahescosceistadssenieseneuinaassiekicasthiaiedniietretan a ite 18

III Blackstone, Commentaries on the Laws ef England,
308 (1765-1769) (2 Chitty’s Blacksione 246; N.Y.

REID cidcddsbaainchasnadsagecicnesscielctsacl Nlendsr ais taediantcad cee ea enemas 6
Developments in the Law: Statutes of Limitations,

Fe SS 8) eee 6,7
Fischer, The Limits of Statutes of Limitation, 16 South-

westerm Univ. LoBeOV. 3 C1GGB) nnncccccliccnccccccccccncccsesesenese 8

Grossman, Statutes of Limitations and the Conflict of
Laws: Modern Analysis, 1980 Ariz. St. L.J. 1 ........ 3-4, 8

Hay, Full Faith and Credit and Federalism in Choice
of Law, 34 Mercer L.Rev. 709 (1983) -........00....ec... 5,13

Jackson, Full Faith and Credit—The Lawyers’ Clause
of the Constitution, 45 Col. L.Rev. 1 (1945) ........ 4,5, 13

Leflar, The New Conflicts-Limitations Act, 35 Mercer

L.Rev. 461 (1984) .................... Ce A Eee Oe Nat TE 7, 8,11
Martin, Constitutional Limitations on Choice of Law,

61 Cornell L.Rev. 185 (1976) —.....000000000..... URIS re 3,13
Martin, Statutes of Limitation and Rationality in the

Conflict of Laws, 19 Washburn L.J. 405 (1980) ........ 4,8
III Papers of Madison 1449 (1840) 2.00.02... 5

Peilemeier, Why We Should Worry About Full Faith
and Credit to Laws, 60 So. Calif. L.Rev. 1299
PINE cess vacsdtieataiene noe pecan ebiaochanadeicedieeud. eae

Vv

Restatement (Second) of Conflict of Laws, Sec. 142 ....
Uniform Conflict of Laws—Limitations Act, 12 U.L.A.
See RI SRDS Spisscenciecscnininnnistdasisrvonemsdentiobussiestsmiesicianameninabies
Uniform Statute of Limitations on Foreign Claims Act
SITE: sccdaus bbeosacsiasaesaasesthadinianiindcadieibiaaaritectedepiigieomseeunalutuneiiedesiates
Weintraub, Commentary on the Conflict of Laws, Sec.
eB earn

H)

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.

On Writ or CERTIORARI TO THE SUPREME COURT
OF THE STATE OF KANSAS

REPLY BRIEF FOR PETITIONER

I. Because Limitations Laws Are Substantive in
Nature, the Full Faith and Credit Clause and the
Due Process Clause Require Kansas to Apply the
Limitations Law of the State Where the Claim
Arese and Claimant Resides

A. The Artificial Judicial Classification of Limita-
tions Laws As Procedural Is Wrong

The arguments advanced by respondents and amicus
curiae Wiley Goad rest upon the supposition that limita-
tions statutes are procedural. Their arguments do not con-
sider the reasons that have led scholars and courts to rec-
ognize limitations statutes as substantive. Rather, they
merely reiterate archaic rationalizations which have no

2

relation to reality. The result is one fiction flowing from
another, i.e., that a state which extinguishes all right to
sue on a claim created by that state, nevertheless “intends”
that the claim can be sued on later in any distant state
having a longer limitations law.

A corollary to this irrational conclusion is that citizens
must “expect” to be governed by laws of the most un-
expected, unrelated places; and that litigants are presumed
to understand the state’s “intent” that, though a claim
it created is extinguished in that state, it remains alive
in each of the other forty-nine states that has a longer
limitations law. In this Alice-in-Wonderland legal world
the forum state’s applice.ion of its own different limita-
tions law to claims arising elsewhere is asserted as re-
flecting the “freedom” of a “sovereign” state. In reality,
however, it is a refusal io respect the freedom and con-
stitutional right of another state to govern the substantive
claims there arising.

The same inverted logic requires that a limitations
defense, which can only be invoked by the affirmative
defense of a litigant for his own repose and security, is
mysteriously transformed into a mere “administrative”
policy relating to “procedure”, which affects the remedy
but not the right. And in return for the “freedom” which
each state has to disregard another state’s laws, each state
which also subscribes to these fictions loses the right to
have its limitations laws respected elsewhere.

According to amicus curiae Goad, a state may free
itself from the rules of this game by calling its limitations
laws “substantive”, thus requiring other states to then
apply that state’s laws—although Wells v. Simonds Abra-
sive Co., 345 U.S. 514 (1953), holds to the contrary. Goad’s
suggestion, that a state may opt into the coverage of the

3

Full Faith and Credit Clause, only continues the charade.
The truth is that there is no discernable difference be-
tween the purpose of a “substantive” limitations law, and
a “procedural” limitatioas law. Both have the same basic
purpose and operate in the same way. To say that the
“substantive” limitation law is a statute of “repose”, while
the “procedural” limitations law is not, makes no sense.
For a state to selectively control whether the federal
Constitution does, or does not, apply, by labeling its limita-
tions law “substantive” cr “procedural” would only add to
the disorder now rampani in this area of constitutional
law.

In this case, Sun Oil Company does not, as charged,
seek a new interpretation of the Constitution. Rather,
we urge the removal of a historical legal aberration which
is contrary to the literal words and the plain purpose of
the Full Faith and Credit Clause, as intended by the
founders and as needed more than ever today. We also
suggest that, once limitations laws are correctly classified
as substantive, the Due Process Clause applies just as
it would to any other substantive law. The correction
of this constitutional error will be a breath of fresh air
removing abuses, and reducing existing disorder in rela-
tions among our States.

Amicus curiae Goad seriously errs in stating that
contemporary scholars do not urge that a change is “con-
stitutionally mandated”. (Brief, p. 4). With few, if any,
exceptions scholars urge constitutional clarification to cor-
rect recognized deficiencies in the present rule.’

1. E.g. Martin, Constituiional Limitations on Choice of
Law, 61 Cornell L.Rev. 185, 221 (1976); Grossman, Statutes
of Limitations and the Conflict of Laws: Modern Analysis,

(Continued on following page)

4

Likewise, respondents err in stating that the existing
rule was “well established in the common law before our
Constitution was adopted. . .” (Brief, p. 6). The common
law rule was not generally known nor was it adopted
in the United States until the early part of the nineteenth
century. See Le Roy v. Crowninshield, 15 F.Cas. 362, 2
Mason. 151 (1820), and cases cited therein. The first
treatise on the subject was Justice Story’s “Commentaries
on the Conflict of Laws”, first published in 1834. Jack-
son, Full Faith and Credit—The Lawyers’ Clause of the
Constitution, 45 Col. L.Rev. 1, 6 (1945). In 1777 the
Articles of Confederation included a full faith and credit
requirement applicable to judicial proceedings. In 1787
that clause was broadened in the Constitution itself to
apply to all public Acts, Records and judicial Proceedings
of each state. During that era the English rule was
virtually unknown and was not established in the states.
Hence the contention that the English rule must be read
into the Full Faith and Credit Clause must fail on this
ground alone. It would be—it was—most incongruous
that this Clause, intended “to form a more perfect Union”
should be cast aside in favor of an English common law
doctrine antithetical to this Union.

In any event, a common law rule contrary to the
letter and the spirit of a constitutional command must
not be read into it, absent strong evidence of such intent

Footnote continued—

1980 Ariz. St. L.J. 1, 48: Weintraub, Commentary on the Con-
flict of Laws, Sec. 9.2B, p. 517 (2d ed. 1980); Martin, Statutes
of Limitation and Rationality in the Conflict of Laws, 19 Wash-
"urn LJ. 405, 421 (1980).

See also, Ferens v. Deere & Co., 819 F.2d 423 (1987), cer-
tiorari pending, No. 87-477.

+)

on the part of those drafting and ratifying the Consti-
tution. There exists no such evidence.”

ihe growing realization that the common law con-
flicts-limitations rule is wrong lends urgent impetus to
the need to reconsider the holdings of M’Elmoyle and
Wells, since the common law rule controlled what little
constitutional analysis those opinions contain. The long
failure to re-examine M’Elmoyle’s acceptance of the com-
mon law fiction that limitations laws affect the “remedy”
but not the “right”, has resulted from the acceptance
of a verbal formula which became sanctified as legal
dogma. The problems and evils wrought by adherence
to this shopworn shibboleth have become more evident
in our present era of burgeoning commercial litigation,
instant communication and rapid travel. This is why
Ferens v. Deere & Co., 819 F.2d 423 (3rd Cir. 1987),
refused to countenance this fiction any longer.

Only recently, therefore, has the problem been ad-
dressed. Only recently have demands for reform and
change been pressed. The realization that limitations
laws are indeed substantive has led judges, lawyers and
scholars to urge change in every available way, as in
the Uniform Conflict of Laws—Limitations Act, and in
proposed revisions to Section 142 of Restatement (Sec-
ond) of Conflict of Laws. Even England in 1984 changed
its common law—the law responsible for our present
problem—to treat limitations laws as substantive. [Sun’s
Brief, pp. 27-32, notes 12, 14, 16].

2. Jackson, Full Faith and Credit—-The Lawyers’ Clause
of the Constitution, 45 Col. L.Rev. 1, 3-6 (1945); Hay, Full
Faith and Credit and Federalism in Choice of Law, 34 Mercer
L.Rev. 709, 710 (1983); Peilemeier, Wny We Should Worry
About Full Faith and Credit to Laws, 60 So. Calif. L.Rev. 1299,
1302 (1987): III Papers of Madison 1449, 1480-81 (1840).

6

Once it is determined, however, that limitations laws
are primarily substantive, as reason dictates and scholars
agree, the solution to the problem merely requires appli-
cation of our Constitution as written, according to its pur-
pose from the beginning.

B. The ‘“Outcome-Determinative”’’ Test Reinforces
the Classification of Limitations Laws As Sub-
stantive for Constitutional Purposes

The primary purpose of limitations statutes is ‘“un-
doubtedly one of fairness to the defendant. There comes
a time when he ought to be secure in his reasonable
expectation that the slate has been wiped clear of ancient
obligations, . . .” Developments in the Law. Statutes
of Limitations, 63 Harv. L.Rev. 1177, 1185. (1950).

This primary purpose of repose is reflected in the
fact that limitations is an affirmative defense to be in-
voked by a defendant for its own benefit. From Black-
stone’s age to the present, only the litigant could plead
the statute of limitations in bar. For example, to a com-
plaint on a promise, defendant could plead that “he made
no such promise within six years; which is an effectual
bar to the complaint.” III Blackstone, Commentaries on
the Laws of England, 308 (1765-1769) (2 Chitty’s Black-
stone 246: N.Y. 1832). 51 Am.Jur.2d, Limitation of Ac-
tions, See. 453, p. 914. Justic: Story himself observed
that the then recent common law conflicts cases had failed
to consider the important factor that a limitations de-
fense is “authorized to be made by the debtor and at his
option”. For this reason as well, he said, a limitations
defense should be no different from any other legal de-
fense. He “could perceive no reason why the right to
use that defence, good by his own laws, should not travel

7

with the debtor into every other country.” Only because
the error of the contrary rule was “too strongly en-
grafted” did he so rule, against his own reason and judg-
ment. Le Roy v. Crowninshield, 15 F.Cas. at 368, 369.

The English conflicts rule, first adopted on this con-
tinent years after our Constitution was ratified, was then
applied in a constitutional case to negate the Full Faith
and Credit Clause, in M’Elmoyle v. Cohen, 13 Pet. 312
(1839). The “historical accident” whereby the parochial
English rule separated “right” from “remedy”, led to
the erroneous correlation of “procedure” with “remedy”
and the ensuing failure of courts to classify limitations
laws as substantive. Leflar, The New Conflicts-Limita-
tions Act, 35 Mercer L.Rev. 461, 473 (1984). The tech-
nical terminology of common law writs as to forms of
action and “remedies” stifled logical analysis. Develop-
ments in the Law: Statutes of Limitations, 63 Harv.
L.Rev. at 1187 (1950). Cases involving limitations con-
flicts questions, therefore, historically failed to analyze
the substantive nature of limitations laws. Rote accep-
tance of legal dogma became an easy substitute for real-
istic analysis.

Now that our jurisprudence has long since disen-
thralled itself of common law technicalities, it can dis-
pense with these “unsatisfactory rationalizations”. Chase
Securities Corp. v. Donaldson, 325 U.S. 304, 314 (1945).
With this history behind us, we have a more objective
overview of the constitutional problem and its solution.
Being free of arbitrary dogma, courts can better analyze
the true nature of limitations laws, so as to anchor our
Constitution’s operation in the bedrock of reality. When
so viewed, the substantive nature of the limitations de-

8

fense as intending to grant repose cannot fairly be dis-
puted. Leflar, The New Conflicis-Limitations Act, 35
Mercer L.Rev. 461, 469 (1984); Martin, Statutes of Lim-
itation and Rationality in the Conflict of Laws, 19 Wash-
burn L.J., 405, 420 (1980); Fischer, The Limits of Statutes
of Limitation, 16 Southwestern Univ. L.Rev. 1, 32 (1986).

The injustice inherent in failure to apply the limita-
tions law of another state where the claim arose led to
the enactment of “borrowing” statutes by many states,
requiring those limitations laws to be applied, in some
circumstances, by the forum. But the inconsistency and
confusion caused by this “unruly assemblage of statutes
and their uncertain interpretation” only added to the
problem. Leflar, The New Conflicts-Limitations Act, 35
Mercer L.Rev. 461, 463-4. Grossman, Statutes of Lim-
itations and Conflict of Laws: Modern Analysis, 1980
Ariz. St. L.J. 1, 14-15. The vacuum left by M’Elmoyle’s
failure to apply the Full Faith and Credit Clause to the
substantive limitations issue, led to these ineffective at-
tempts by states to address what should have been a
federal constitutional solution.

The irrationality of the common iaw rule that a right
could exist without a remedy, which led to equating
remedy with procedure, also led courts to make excep-
tions concerning “built-in” limitations statutes by calling
them “substantive” for conflicts purposes, even though
their function as statutes of repose was the same. Leflar,
Id., at p. 462.°

3. Similarly, contractual limitations provisions, otherwise
valid, have no significant substantive difference from limita-
tions statutes. Their operation is merely confined to a given
contract. Martin, Statutes of Limitation and Rationality in the
Conflict of Laws, 19 Washburn L.J. 405, 416-17 (1980), dis-
cussing Home Insurance Co. v. Dick, 281 U.S. 397 (1930).

9

Yet respondents and amicus curiae Goad ignore these
reasons, these purposes, and this history. They assume
ipso facto the procedural nature of limitations laws, per-
petuating the obvious fiction without rhyme or reason.
Then they argue that any procedural law may on occasion
be “outcome-determinative”, thereby invalidating this test
for constitutional purposes even though the law may be
substantive. Their argument, of course, entirely by-passes
the point made in Sun’s brief. Limitations laws are not
procedural rules governing how an action may be com-
menced and maintained, nor determining which of several
remedies may be available in granting legal relief. They
determine whether a claim can be maintained, or cannot
be maintained, when invoked by a litigant. They a. for
the purpose of “wiping the slate clean”, to grant repose to
the litigant. They are either a defense to the claim, or
they are not. In either instance they are outcome-deter-
minative in barring, or not barring, the action. These are
indisputable reasons requiring limitations laws to be
classified as substantive.

Yet amicus curiae Goad, ignoring these compelling
reasons, indulges in more faulty logic. Stripped of pre-
tense, the argument is that a procedural noncompliance
may be outcome-determinative in a given case. (Brief,
11-12). If limitations laws are outcome-determinative, it
is inferred, they are also procedural. But this false
syllogism is bereft of all meaning. On that premise, any
substantive law which is outcome-determinative would
also be considered to be procedural.

The conclusion in Goad v. Celotex Corporation, 831
F.2d 508 (4th Cir. 1987), certiorari pending No. 87-1163,
that limitations laws are primarily for efficient “court
management” and only incidentally for “repose”, is un-

10

sound. Goad’s reliance on Chase Securities Corp. v. Don-
aldson, 325 U.S. 304, 314 (1945) is misplaced. Chase held
that a state could lengthen its own limitations law without
violating due process. It described limitations statutes as
sparing courts from litigating “stale claims, and the citizen
from being put to his defense after memories have faded,
witnesses have died or disappeared, and evidence has been
lost.” Cited in support of this purpose was Order of R.
Telegraphers v. Railway Exp. Agency, 321 U.S. 342, 348-49
(1944), which described the limitations statute’s “conclu-
sive effects .. . designed to promote justice” by preventing
surprises and giving timely notice to litigants. These are
plainly purposes of “conclusive” repose for the litigant.

Nowhere in the cases or literature has anyone at-
tempted to show how a court would be adversely affected
in its procedure by applying another state’s different limita-
tions law. It is the claim of the litigant which is always
directly affected. Thus policies affecting the viability of
that claim are necessarily substantive in nature. If a
state, therefore, has no interest affecting that claim other
than adjudicating it in court, the forum state may not
constitutionally apply its own different limitations law.

C. Whether the Forum State May Constitutionally
Apply Its “‘Discovery Rule’’ When the Action
Is Barred by Limitations in the State Where
the Claim Arose Is Not Presented for Decision
in This Case

Amicus curiae Goad argues that if the Constitution
requires forum states to apply limitations laws as being
substantive in nature, an exception should be made where
the forum state has a “discovery rule”, but the state
whose substantive law applies does not. This argument

11

centers on the “unfairness” exception or “escape clause”
contained in Section 4 of the Uniform Conflict of Laws—
Limitations Act, 12 U.L.A. 50 (1987 Supp.).

The conclusion of the Committee approving the Uni-
form Act was that limitations laws are substantive and
should be so treated in deciding conflict of laws issues.
Under Seciion 2, the limitations law of the state whose
substantive law governs is to be applied, whether shorter
or longer than the forum state. By a narrow vote, the
“unfairness” exception in Section 4 was retained in the
Uniform Act. This vague exception would benefit a claim-
ant who could not reascnably have known of his claim
before the limitations period had expired in the state
where his claim arose, or in certain tolling situations.
Leflar, The New Conflicts-Limitations Act, 35 Mercer
L.Rev. 461, 479-80 (1984).

The Uniform Conflict of Laws—Limitations Act super-
seded the earlie' Uniform Statute of Limitations on For-
eign Claims Act (1957). The latter Act would have
applied either the limitations law of the place where the
claim accrued, or that of the forum, whichever was
shorter. This was found to be unsatisfactory, and was
not considered a “sound solution to the choice of law
problem. ...” Leflar, Id., at 464-465. But all these
laudable efforts aimed at legal reform were but continuing
attempts to fill the constitutional void in this area of law
created by the old M’Elmoyle rule. Hence the history
of the Uniform Act confirms the near universal judgment
of legal scholars and judges that limitations laws are
indeed substantive in nature.

Once we conclude that limitations laws are substan-
tive, the constitutional consequences follow because such

12

laws significantly affect people’s legal rights. What ex-
ceptions the Uniform Act may have made are not perti-
nent to the constitutional issue, unless they address a
constitutional concern.

In our federal Union, each state is entitled to enact
and apply substantive laws governing events occurring
in that state, in any way that is constitutionally valid.
It follows that the forum state must, as a general rule,
give full faith and credit to the limitations laws of the
state whose substantive law is found to be applicable.
If those limitations laws are so “unfair” or otherwise
defective, as to be unconstitutional under the Due Process
Clause or the Equal Protection Clause, the solution is
to grant the relief that the Constitution requires in that
individual case. The solution is not to apply the law
of the forum state in order to avoid a more stringent,
but valid, law of another state.

The present case does not involve a “discovery” issue,
nor any similar issue of “unfairness”. There is no reason
now to address or decide the specific question raised by
Goad.

Il. Texas, Oklahoma, and Louisiana Laws Governing
Liability for Interest, and the Period of Limita-
tions, Differ From Kansas Laws Applied Below

A. The Court Below Did Not Apply the Substan-
tive Interest Laws of Texas, Oklahoma and
Louisiana, As Required by Phillips Petroleum
Co. v. Shutts, 472 U.S. 797 (1985)

After having been directed by this Court’s remand
(474 U.S. 806) to apply the applicable laws of other states
to class members’ claims arising in those states, the Kansas

13

court has failed to do so. Instead, Kansas has ventured
to predict that the other states would adopt the Kansas
theory, and has again exported its own peculiar version
of interest law. This case, therefore, presents the oppor-
tunity to articulate a standard under which courts must
heed and apply the Full Faith and Credit constitutional
command.

In the past, the Clause has been weakened by ques-
tions whether it was self-executing, whether it meant any-
thing other than what Congress might provide by legisla-
tion, and whether it applied to a state’s common law laid
down in judicial decisions, as well as to judgments and
public acts. While these questions have been resolved, this
legal history combined with deficient “private advocacy”
have resulted in lack of clarity and strength in court de-
cisions. Jackson, Full Faith and Credit—The Lawyer's
Clause of the Constitution, 45 Col. L.Rev. 1, 7-17, 33-34
(1945). We can only join the calls of Justice Jackson, and
of other scholars on this subject, for doctrinal clarification
and strengthening of the Full Faith and Credit Clause, to
better implement its purpose. Hay, Full Faith and Credit
and Federalism in Choice of Law, 34 Mercer L.Rev. 709
(1983); Pielemeier, Why We Shouid Worry About Full
Faith and Credit to Laws, 60 So. Calif. L.Rev. 1299 (1987);
Martin, Constitutional Limitations on Choice of Law, 61
Cornell L.Rev. 185 (1976).‘

4. Constitution of the United States, Article IV, Sec. 1 con-
tains the proviso that “. . . Congress may by general Laws pre-
scribe the Manner in which such Acts, Records and Proceedings
shall be proved, and the Effect thereof.”

That proviso authorized Congress to enact uniform eviden-
tiary methods for proving state laws, thereby preventing the
danger that a state’s procedural or evidentiary rules might lead
to evasion of the Full Faith and Credit Clause. Ironically,

(Continued on following page)

14

In Phillips Petroleum Co. v. Shutts, this Court di-
rected Kansas to apply the laws of Texas, Oklahoma and
Louisiana to the class action claims for interest; and re-
manded this case for that purpose. (474 U.S. 806). Yet
Kansas proceeded to ignore the existing laws of those
states by predicting that those states would be enlightened
enough to adopt the Kansas theory.

It is Sun’s position that Kansas must, under our
Constitution, apply the existing law of another state as
it is found. Kansas is not entitled to change the existing
law of another state, under the guise that it is merely
construing and applying that law. If Kansas is allowed
to disregard the Full Faith and Credit Clause, and Due
Process Clause, in that manner, it will remain free for
each state tu evade the constitutional command with
impunity. A brief look at how Kansas exported its own
unorthodox theory of interest law proves the need to for-
mulate and enunciate a test requiring constitutional com-
pliance.

Notwithstanding this Court’s recognition that “. . .
Texas has never awarded any such interest at a rate
greater than 6% .. .”’ (472 U.S. at 817), the Kansas Su-
preme Court again on remand applied the Kansas theory
of interest which adopts the interest rate found in an
inapplicable federal regulation, as it had before. Sun’s

Footnote continued—

that proviso led to unwarranted doubts, questioning whether
the Clause was self-executing without congressional action; thus
weakening the impact of the Clause. The Articles of Confedera-
tion in 1777 required ful] faith and credit to be given to court
records and proceedings. In 1787, the Constitutional Clause
was enlarged to include a state’s other public acts and records,
and Congress was given power to prescribe the manner in which
such laws should be proved. The purpose was to strengthen
the requirement, not to weaken it.

15

brief demonstrates that the Texas Supreme Court applied
the Texas statutory and state constitutional 6% rate in
its identical Stahl case, with full knowledge of the higher
federal rate, and with full knowledge of Kansas’ different
theory utilizing the federal rate.

Respondents are unable to answer Sun’s summary of
the Texas judicial record in its royalty interest cases, pre-
ferring instead to quote from inapplicable personal injury
cases. Respondents then lamely claim that Sun’s federally
filed FPC undertaking to refund excess gas prices to its
pipeline purchasers, with interest, mysteriously became a
contract between Sun and its royalty owners (over whom
the federal commission exercised no jurisdiction). It is
thus contended that Texas would enforce this “contract” to
pay a higher rate of interest. But the lower court, at least,
recognized that the only basis for recovery in any state was
under unjust enrichment “equitable principles,” not on a
written contract. (Shutts, supra, 732 P.2d at 1290, 1294;
679 P.2d at 1175; 567 P.2d at 1319, 1321) (Wortman, supra,
J.A. 119, 150).

In advocating a new theory of recovery, respondents
are merely grasping for non-existent support for the lower
court’s refusal to follow Texas law. Neither can respon-
dents find support for the lower court’s similar export of
the Kansas theory to Oklahoma and Louisiana. (Sun Brief,
p. 38). The truth is that the Kansas theory, adopting in-
applicable federal interest rates as state law, is based en-
tirely on the lower court’s notions of “equity.” It is an
unorthodox theory unsupported by statutes or cases in
other states. Whatever its equitable merit, however, each
state is entitled to promulgate its own laws. Kansas cannot
constitutionally export its theory so as to govern class
members’ interest claims arising in other states.

16

B. The Limitations Laws of Texas, Oklahoma and
Louisiana Bar Interest Claims Related to Sun’s
1976 Payout More Than Three Years Prior to
Suit

Respondents are also forced to grasp at straws in
their argument contending that the limitations laws of
Texas and Oklahoma do not bar claims arising in those
states. (Respondents concede that Louisiana law bars such
claims). They erroneously state that interest, awarded
on the basis of unjust enrichment “equitable principles,”
is instead based upon written contracts requiring interest.

The plaintiff class members were subject to written
oil and gas leases requiring Sun to pay a 1/8th royalty on
gas sales. But the leases contained no provision, express or
implied, for interest. The interest award was based on the
equitable doctrine of unjust enrichment, which, until this
case, was subject to the three year Kansas limitations staut-
ute.

Recognizing this impediment to denying Sun’s limita-
tions defense, the Kansas court, sua sponte, developed a
new theory of Kansas limitations law avoiding iis three
year limitations for such equitable actions, based on an-
other common law fiction. (690 P.2d at 391, J.A. 122).
In calculating unpaid interest accruing on principal already
paid, the so-called “United States Rule” allows the unpaid
interest amount as of date of payout, also to draw interest
until date of judgment. To avoid the common law rule
forbidding compounding of interest (interest on interest),
the Rule as stated treats the debtor’s payment of principal
as being partly for the accrued interest as of that date, so
that interest may then continue to accrue on the unpaid
“principal” balance.

17

Despite respondents’ petition seeking only interest,
and alleging prior payment of principal; and despite a
stipulation to that effect in the pretrial order (J.A. 7,
90-51), the Kansas court cited the foregoing fiction as a
basis for saying that the suit was for “principal” royalty
amounts required to be paid by the written lease. Using
this fiction, it applied the Kansas five year statute applica-
ble to written contracts. (Wortman v. Sun Oil Co., 690 P.2d
at 391, J.A. 122).

Conceding that Kansas has the constitutional right
to use a fictional formula to turn suits for equitable in-
terest into suits for royalty principal long since paid, Kan-
sas has no right to export this medieval magic into the
law of other states. Texas does not indulge in the Kansas
fiction that interest is principal. Phillips Petroleum Co.
v. Stahl Petroleum Co., 569 S.W.2d 480, 488 (Tex. S.Ct.
1978), ruled that interest is properly calculated on interest.
It held there was no need to indulge in an irrelevant fic-
tion of this kind, i.e., that interest is principal. In Texas,
there is not the slightest pretense for applying a limita‘ions
statute applicable to written contracts to the interest claims
in this case. Accordingly, the two year Texas limitations
statute is applicable. (Sun Brief, p. 7).

Nor could any court, we suppose, rationally hold that
Oklahoma would adopt the Kansas theory treating an
equitable suit for interest, after the principal debt was
paid in full, as a suit for principal owing under a written
contract. Oklahoma’s three year limitations statute bars
the interest claims arising therein, related to Sun’s 1976
payout. Filtsch v. Johnson, 174 Okl. 132, 50 P.2d 138
(1935) (action for rent); Flanagan v. Campbeil, 183 Okl.
610, 83 P.2d 865 (1938) (action for royalty oil); T« S
Inv. Co. v. Coury, 593 P.2d 503 (Okl. 1979) (quasi-contract).

18

The unorthodox theories adopted by Kansas for its
own purposes and for its own reasons, relating to interest
liability and limitations laws, are vivid examples of laws
created by “magnet states”, drawing to themselves nation-
wide litigation in a given area of law. Arthur R. Miller
and David Crump, Jurisdiction and Choice of Law in
Multistate Class Actions After Phillips Petroleum Co. v.
Shutts, ¥6 Yale L.J. 1 (1986).*° Unless protected by the
Full Faith and Credit Clause and the Due Process Clause,
litigants’ substantive rights will be determined by the
fortuitous laws of states who have no legitimate interest
in the disputes. And each state having laws considered
favorable for one class or group of citizens will become
a litigation haven where local state courts create and
apply “national” law. Our Constitution was meant to pre-
vent that result.

5. Another example is the lower court’s construction of
the Kansas limitations “borrowing” statute which adopts the
shorter limitations act of the state where the cause of action
arose. Kansas holds its “borrowing” statute inapplicable in
this class action because the “cause of action arose in Kansas
as well as in Texas, Oklahoma, Louisiana, New Mexico, and
Mississippi.” (J.A. 157). Treating many individual claims from
many states as one cause of action arising in Kansas vividly
demonstrates that state’s intent to apply its own law to claims
arising elsewhere.

19

CONCLUSION

Kansas has again, after prior remand by this Court,
avoided applying substantive laws of Texas, Oklahoma and
Louisiana to the claims arising in each of those states.®
In order to insure compliance with the Constitution, it
becomes necessary for this Court to examine those laws
in laying down a test which each state may use as a guide
in enforcing the constitutional command.

In this particular case, another general remand re-
quiring the lower court to consider again the substantive
laws of the interested states is not enough. The Kansas
court should be directed to enter judgment for Sun as
requested in the Conclusion to its Brief.

Respectfuliy submitted,

GERALD SAWATZKY*
Jim H. GOERING
TIMOTHY B. MUSTAINE
FOULSTON, SIEFKIN, POWERS
& EBERHARDT
700 Fourth Financial Center
Wichita, Kansas 67202
(316) 267-6371
- and -
Epwyn R. SHERWOOD

P.O. Box 2880
Dallas, Texas 75221-2880
(214) 890-5608

Attorneys for Petitioner

*Counsel of Kecord

6. Because the claims arising in Mississippi and New Mexico
are de minimis, Sun disregards them in this Court.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0707%3A08. Public record. Not legal advice.