In the 1960's and 1970's, petitioner extracted gas from
properties leased from respondents in Texas, Oklahoma, and
Louisiana, in exchange for agreements to pay royalties.
Petitioner's prices for interstate gas sales had to be approved by
the Federal Power Commission (FPC), which permitted petitioner to
collect proposed increased prices from customers prior to FPC
approval on the condition that petitioner comply with regulations
requiring it to refund to customers any ultimately unapproved
increase plus interest at specified rates. Petitioner withheld
royalties on the unapproved increases until it obtained FPC
approval. Two of the respondents filed a class action in a Kansas
court, seeking interest on the suspended payments for the period
they were held and used by petitioner. The trial court held that
petitioner was liable for interest at the FPC-set rates under
Texas, Oklahoma, and Louisiana law, and that the application of
Kansas' 5-year statute of limitations rendered respondents' claims
for interest on the July, 1976, payments timely. The Kansas Supreme
Court affirmed, rejecting petitioner's contentions that (1) the
Full Faith and Credit Clause of the Constitution and the Due
Process Clause of the Fourteenth Amendment required the application
of the statutes of limitations of the other States, under which the
suit would be barred, and (2) those same constitutional provisions
mandated interpretations of the other States' substantive laws
concerning interest that were different from the interpretations
arrived at in this case.
Held:
1. The Constitution does not bar application of the forum
State's statute of limitations to claims governed by the
substantive law of a different State. Pp.
486 U. S.
722-730.
(a) Kansas did not violate the Full Faith and Credit Clause by
applying its own statute of limitations. The holding of
M'Elmoyle v.
Cohen, 13 Pet. 312, that statutes of limitation may
be treated as procedural, and therefore governed by the forum
State's law for choice-of-law purposes, was correct when handed
down. Petitioner's argument that this traditional view should be
abandoned in favor of the modern understanding that statutes of
limitations are substantive -- as exemplified by
Guaranty Trust
Co. v. York, 326 U. S. 99, which
so held for
Erie doctrine purposes -- is without merit.
Guaranty Trust itself rejected the notion that there is an
equivalence between what is substantive under
Page 486 U. S. 718
the
Erie doctrine and what is substantive for
choice-of-law purposes. The adoption of petitioner's argument under
the Full Faith and Credit Clause, in the face of the traditional
and still subsisting general practice to the contrary, would amount
to the improper constitutionalizing of choice-of-law rules, without
sufficient guiding standards. Pp.
486 U. S.
722-729.
(b) Petitioner's due process attack upon Kansas' adoption of its
own statute of limitations is without merit. Both the tradition in
place when the constitutional provision was adopted and subsequent
and subsisting general practice establish that a State has
legislative jurisdiction to control the remedies available in its
courts by imposing statutes of limitations in the interest of
regulating the courts' workload and determining when a claim is
stale. Petitioner could not have been unfairly surprised by the
application of this established rule. Pp.
486 U. S.
729-730.
2. The Kansas Supreme Court did not violate the Full Faith and
Credit Clause or the Due Process Clause in its constructions of the
laws of Texas, Oklahoma, and Louisiana regarding interest, since it
contradicted no law of those States that was clearly established
and that had been brought to the court's attention. The court
pointed to laws of those States authorizing agreements to pay
interest at higher than the specified rates, and petitioner did not
point to decisions clearly contradicting the court's conclusion
that such an agreement was implied by petitioner's undertaking with
the FPC.
Phillips Petroleum Co. v. Stahl Petroleum
Co., 569 S.W.2d 480
(Tex.), Okla.Stat., Tit. 23, § 8 (1981), and
Whitehall Gil Co.
v. Boagni, 217 So. 2d 707 (La.App.), distinguished. Pp.
486 U. S.
730-734.
241 Kan. 226,
734 P.2d 1190,
affirmed.
SCALIA, J., delivered the opinion of the Court, in Part I of
which all participating Members joined, in Part II of which
REHNQUIST, C.J., and WHITE, STEVENS, and O'CONNOR, JJ., joined, and
in Part III of which BRENNAN, WHITE, MARSHALL, BLACKMUN, and
STEVENS, JJ., joined. BRENNAN, J., filed an opinion concurring in
part and concurring in the judgment, in which MARSHALL and
BLACKMUN, JJ., joined,
post, p.
486 U. S. 734.
O'CONNOR, J., filed an opinion concurring in part and dissenting in
part, in which REHNQUIST, C.J., joined,
post, p.
486 U. S. 743.
KENNEDY, J., took no part in the consideration or decision of the
case.
Page 486 U. S. 719
JUSTICE SCALIA delivered the opinion of the Court.
Petitioner Sun Oil Company seeks reversal of a decision of the
Supreme Court of Kansas that it is liable for interest on certain
previously suspended gas royalties.
Wortman v. Sun Oil
Co., 241 Kan. 226,
734 P.2d 1190
(1987),
modified, No. 86-59804-AS (June 8, 1987)
(
Wortman III). The Kansas Supreme Court rejected
petitioner's contentions that (1) the Full Faith and Credit Clause
of the Constitution, Art. IV, § 1, and the Due Process Clause of
the Fourteenth Amendment prohibited application of Kansas' statute
of limitations so as to allow to proceed in Kansas courts a suit
barred by the statute of limitations of the State whose substantive
law governs the claim, and (2) those same Clauses of the
Constitution mandated interpretations of other States' substantive
laws concerning interest that were different from those arrived at
by the Kansas courts. We granted certiorari. 484 U.S. 912
(1987).
I
In the 1960's and 1970's, petitioner, a Delaware corporation
with its principal place of business in Texas, extracted gas from
properties that it leased from respondents. The leases provided
that respondents would receive a royalty, usually one-eighth of the
proceeds, from the sale of gas. Petitioner sold the gas in
interstate commerce at prices that had to be approved by the
Federal Power Commission (FPC). The FPC permitted petitioner on
several occasions to collect proposed increased prices from
customers pending final approval, but required petitioner to refund
with interest any amount so collected that was not ultimately
approved. Specifically, petitioner had on file with the FPC an
undertaking
Page 486 U. S. 720
to comply with regulations, now codified at 18 CFR § 154.102
(1987), requiring petitioner to refund any ultimately unapproved
increase plus interest at certain specified rates. § 154.102(c).
Petitioner made no royalty payments to respondents on the increased
amounts collected until the FPC approved the increases. The
respondents' royalty shares of these increases have been called
"suspended royalty payments" in this litigation.
In July, 1976, petitioner paid respondents $1,167,000 in
suspended royalty payments after the FPC approved increases that
had been collected from July, 1974, through April, 1976. These
payments covered 670 properties, 43.7% of which were located in
Texas, 24% in Oklahoma, and 22.8% in Louisiana. In April, 1978,
petitioner paid respondents $2,676,000 in suspended royalty
payments after the FPC approved increases that had been collected
from December, 1976, through April, 1978. These payments covered
690 properties, 40.3% located in Texas, 31.6% in Oklahoma, and
23.6% in Louisiana.
In August, 1979, respondents Richard Wortman and Hazel Moore
filed a class action in a Kansas trial court on behalf of all
landowners to whom petitioner had made or should have made
suspended royalty payments, seeking interest on those payments for
the period that the payments were held and used by petitioner. The
trial court ruled that Kansas law governed
Page 486 U. S. 721
all claims for interest, even claims relating to leases in
another State and brought by residents of that State. The court
further ruled that, under Kansas law, petitioner was liable for
prejudgment interest at the rates petitioner had agreed to pay with
respect to customer refunds under the FPC regulations. These rates
were 7% per annum prior to October 10, 1974; 9% from then until
September 30, 1979; and thereafter the average prime rate
compounded quarterly. The trial court relied on
Shutts v.
Phillips Petroleum Co., 222 Kan. 527,
567 P.2d
1292 (1977) (
Shutts I),
cert. denied, 434
U.S. 1068 (1978). That case, which also involved suspended royalty
payments, had held that Kansas law governed the claims of residents
of other States concerning properties in those States, and that,
under Kansas law, (1) the royalty owners were entitled to interest
on suspended royalty payments because the royalty payments became
owing under the royalty contract at the moment the gas company's
customers paid the increases, and (2) the interest rate to be used
was that set forth in the FPC regulations, because the gas
company's corporate undertaking with the FPC constituted an
agreement to pay that rate.
See 222 Kan. at 562-565, 567
P.2d at 1317-1319.
The principles of
Shutts I were reaffirmed in
Shutts v. Phillips Petroleum Co., 235 Kan.195,
679 P.2d 1159
(1984) (
Shutts II), a factually similar case involving
suspended royalty payments different from those in
Shutts
I. The original decision of the trial court in this case was
then affirmed on the strength of
Shutts II in
Wortman
v. Sun Oil Co., 236 Kan. 266,
690 P.2d 385
(1984) (
Wortman I). The losing gas companies in both cases
petitioned this Court for certiorari.
We reversed that part of
Shutts II which held that
Kansas could apply its substantive law to claims by residents of
other States concerning properties located in those States, and
remanded that case to the Kansas Supreme Court for application of
the governing law of the other States to those claims.
Phillips
Petroleum Co. v. Shutts, 472 U. S. 797,
472 U. S.
816-823 (1985) (
Shutts III). We also vacated
the decision in
Wortman I and remanded it for
reconsideration in light of our decision in
Shutts III.
Sun Oil Co. v. Wortman, 474 U.S. 806 (1985) (
Wortman
II).
On the remand in this case, the trial court held that, under the
law of the other States that had been held by
Shutts III
to govern the vast majority of claims, petitioner was liable for
interest at the rate specified in the FPC regulations. The trial
court further held that nothing in
Shutts III precluded
the application of Kansas' 5-year statute of limitations to these
claims, and that therefore claims for interest on the suspended
royalty payments made in July, 1976, were timely.
Page 486 U. S. 722
The Kansas Supreme Court agreed with the first of these holdings
in
Shutts v. Phillips Petroleum Co., 240 Kan. 764,
732 P.2d 1286
(1987) (
Shutts IV),
cert. pending, No. 87-348.
The decision that the other States' pertinent substantive legal
rules were consistent with those of Kansas was reaffirmed in
Wortman III, the decision we now review.
Wortman
III also held that this Court's decision in
Shutts
III applied only to substantive law, and not to procedural
matters such as the appropriate statute of limitations.
II
This Court has long and repeatedly held that the Constitution
does not bar application of the forum State's statute of
limitations to claims that, in their substance, are and must be
governed by the law of a different State.
See, e.g., Wells v.
Simonds Abrasive Co., 345 U. S. 514,
345 U. S.
516-518 (1953);
Townsend v.
Jemison, 9 How. 407,
50 U. S.
413-420 (1850);
M'Elmoyle v.
Cohen, 13 Pet. 312,
38 U. S.
327-328 (1839). We granted certiorari to reexamine this
issue. We conclude that our prior holdings are sound.
A
The Full Faith and Credit Clause provides:
"Full Faith and Credit shall be given in each State to the
public Acts, Records, and judicial Proceedings of every other
State. And the Congress may by general Laws prescribe the Manner in
which such Acts, Records and Proceedings shall be proved, and the
Effect thereof."
The Full Faith and Credit Clause does not compel
"a state to substitute the statutes of other states for its own
statutes dealing with a subject matter concerning which it is
competent to legislate."
Pacific Employers Ins. Co. v. Industrial Accident
Comm'n, 306 U. S. 493,
306 U. S. 501
(1939). Since the procedural rules of its courts are surely matters
on which a State is competent to legislate, it follows that a State
may apply its own procedural rules to actions litigated in its
courts. The issue here, then, can be characterized as whether a
statute of
Page 486 U. S. 723
limitations may be considered as a procedural matter for
purposes of the Full Faith and Credit Clause.
Petitioner initially argues that
M'Elmoyle v. Cohen,
supra, was wrongly decided when handed down. The holding of
M'Elmoyle, that a statute of limitations may be treated as
procedural, and thus may be governed by forum law even when the
substance of the claim must be governed by another State's law,
rested on two premises, one express and one implicit. The express
premise was that this reflected the rule in international law at
the time the Constitution was adopted. This is indisputably
correct,
see Le Roy v. Crowninshield, 15 F. Cas. 362, 365,
371 (No. 8,269) (D.Mass.1820) (Story, J.) (collecting authorities),
and is not challenged by petitioner. The implicit premise, which
petitioner does challenge, was that this rule from international
law could properly have been applied in the interstate context
consistently with the Full Faith and Credit Clause.
The first sentence of the Full Faith and Credit Clause was not
much discussed at either the Constitutional Convention or the state
ratifying conventions. However, the most pertinent comment at the
Constitutional Convention, made by James Wilson of Pennsylvania,
displays an expectation that would be interpreted against the
background of principles developed in international conflicts law.
See 2 M. Farrand, The Records of the Federal Convention of
1787, p. 488 (rev. ed.1966). Moreover, this expectation was
practically inevitable, since there was no other developed body of
conflicts law to which courts in our new Union could turn for
guidance. [
Footnote 1]
Page 486 U. S. 724
The reported state cases in the decades immediately following
ratification of the Constitution show that courts looked without
hesitation to international law for guidance in resolving the issue
underlying this case: which State's law governs the statute of
limitations. The state of international law on that subject being
as we have described, these early decisions uniformly concluded
that the forum's statute of limitations governed even when it was
longer than the limitations period of the State whose substantive
law governed the merits of the claim.
See Nash v. Tupper,
1 Cai. 402, 412-413 (N.Y. 1803) (citing unreported 1795 New York
case,
Page 486 U. S. 725
Page v. Cable, holding the same);
Pearsall v.
Dwight, 2 Mass. 84, 89-90 (1806);
Ruggles v. Keeler,
3 Johns. 263, 267-268 (N.Y. 1808) (Kent, C.J.);
Graves v.
Graves's Executor, 5 Ky. 207, 208-209 (1810). By 1820, the use
of the forum statute of limitations in the interstate context was
acknowledged to be "well settled."
Medbury v. Hopkins, 3
Conn.472, 473 (1820);
accord, Le Roy v. Crowninshield,
supra, at 371 ("settled");
cf. 28 U.
S. Silliman, 3 Pet. 270,
28 U. S.
276-277 (1830) ("well settled");
Hawkins v.
Barney's Lessee, 5 Pet. 457,
30 U. S. 466
(1831) ("not to be questioned"). Obviously, judges writing in the
era when the Constitution was framed and ratified thought the use
of the forum statute of limitations to be proper in the interstate
context. Their implicit understanding that the Full Faith and
Credit Clause did not preclude reliance on the international law
rule carries great weight.
Moreover, this view of statutes of limitations as procedural for
purposes of choice of law followed quite logically from the manner
in which they were treated for domestic law purposes. At the time
the Constitution was adopted, the rule was already well established
that suit would lie upon a promise to repay a debt barred by the
statute of limitations -- on the theory, as expressed by many
courts, that the debt constitutes consideration for the promise,
since the bar of the statute does not extinguish the underlying
right, but merely causes the remedy to be withheld.
See Little
v. Blunt, 26 Mass. 488, 492 (1830) ("[T]he debt remained, the
remedy was gone");
See also Wetzell v.
Bussard, 11 Wheat. 309,
24 U. S. 311
(1826). This is the same theory, of course, underlying the
conflicts rule: the right subsists, and the forum may choose to
allow its courts to provide a remedy, even though the jurisdiction
where the right arose would not.
See Graves v. Graves's
Executor, supra, at 208-209 ("The statute of limitations . . .
does not destroy the right, but withholds the remedy. It would seem
to follow, therefore, that the
lex fori,
Page 486 U. S. 726
and not the
lex loci, was to prevail with respect to
the time when the action should be commenced").
The historical record shows conclusively, we think, that the
society which adopted the Constitution did not regard statutes of
limitations as substantive provisions, akin to the rules governing
the validity and effect of contracts, but rather as procedural
restrictions fashioned by each jurisdiction for its own courts. As
Chancellor Kent explained in his landmark work, 2 J. Kent,
Commentaries on American Law 462-463 (2d ed. 1832):
"The period sufficient to constitute a bar to the litigation of
sta[l]e demands is a question of municipal policy and regulation,
and one which belongs to the discretion of every government,
consulting its own interest and convenience."
Unable to sustain the contention that, under the original
understanding of the Full Faith and Credit Clause, statutes of
limitations would have been considered substantive, petitioner
argues that we should apply the modern understanding that they are
so. It is now agreed, petitioner argues, that the primary function
of a statute of limitations is to balance the competing substantive
values of repose and vindication of the underlying right; and we
should apply that understanding here, as we have applied it in the
area of choice of law for purposes of federal diversity
jurisdiction, where we have held that statutes of limitations are
substantive,
see Guaranty Trust Co. v. York, 326 U. S.
99 (1945).
To address the last point first:
Guaranty Trust itself
rejects the notion that there is an equivalence between what is
substantive under the
Erie doctrine and what is
substantive for purposes of conflict of laws.
Id. at
326 U. S. 108.
Except at the extremes, the terms "substance" and "procedure"
precisely describe very little except a dichotomy, and what they
mean in a particular context is largely determined by the purposes
for which the dichotomy is drawn. In the context of our
Erie jurisprudence,
see Erie R. Co. v. Tompkins,
304 U. S. 64
(1938), that purpose is to establish (within the limits
Page 486 U. S. 727
of applicable federal law, including the prescribed Rules of
Federal Procedure) substantial uniformity of predictable outcome
between cases tried in a federal court and cases tried in the
courts of the State in which the federal court sits.
See
Guaranty Trust, supra, at
326 U. S. 109;
Hanna v. Plumer, 380 U. S. 460,
380 U. S. 467,
380 U. S.
471-474 (1965). The purpose of the substance-procedure
dichotomy in the context of the Full Faith and Credit Clause, by
contrast, is not to establish uniformity, but to delimit spheres of
state legislative competence. How different the two purposes (and
hence the appropriate meanings) are is suggested by this: it is
never the case under
Erie that either federal or state law
-- if the two differ -- can properly be applied to a particular
issue,
cf. Erie, supra, at
304 U. S. 72-73;
but since the legislative jurisdictions of the States overlap, it
is frequently the case under the Full Faith and Credit Clause that
a court can lawfully apply either the law of one State or the
contrary law of another,
see Shutts III, 472 U.S. at
472 U. S. 823
("[I]n many situations, a state court may be free to apply one of
several choices of law"). Today, for example, we do not hold that
Kansas must apply its own statute of limitations to a claim
governed in its substance by another State's law, but only that it
may.
But to address petitioner's broader point of which the
Erie argument is only a part -- that we should update our
notion of what is sufficiently "substantive" to require full faith
and credit: we cannot imagine what would be the basis for such an
updating. As we have just observed, the words "substantive" and
"procedural" themselves (besides not appearing in the Full Faith
and Credit Clause) do not have a precise content, even (indeed
especially) as their usage has evolved. And if one consults the
purpose of their usage in the full faith and credit context, that
purpose is quite simply to give both the forum State and other
interested States the legislative jurisdiction to which they are
entitled. If we abandon the currently applied traditional notions
of such entitlement, we would embark upon the enterprise of
constitutionalizing
Page 486 U. S. 728
choice-of-law rules, with no compass to guide us beyond our own
perceptions of what seems desirable. [
Footnote 2] There is no more reason to consider
recharacterizing statutes of limitation as substantive under the
Full Faith and Credit Clause than there is to consider
recharacterizing a host of other matters generally treated as
procedural under conflicts law, and hence generally regarded as
within the forum State's legislative jurisdiction.
See,
e.g., Restatement (Second) of Conflict of Laws § 131 (remedies
available), § 133 (placement of burden of proof), § 134 (burden of
production), § 135 (sufficiency of the evidence), § 139
(privileges) (1971).
In sum, long established and still subsisting choice-of-law
practices that come to be thought, by modern scholars, unwise,
Page 486 U. S. 729
do not thereby become unconstitutional. If current conditions
render it desirable that forum States no longer treat a particular
issue as procedural for conflict of laws purposes, those States can
themselves adopt a rule to that effect,
e.g., Heavner v.
Uniroyal, Inc., 63 N.J. 130, 135-141,
305
A.2d 412, 415-418 (1973) (statute of limitations), or it can be
proposed that Congress legislate to that effect under the second
sentence of the Full Faith and Credit Clause,
cf. 11 U.
S. Duryee, 7 Cranch
11 U. S. 481, 485
(1813);
Pacific Employers Ins. Co. v. Industrial Accident
Comm'n, 306 U.S. at
306 U. S. 502.
It is not the function of this Court, however, to make departures
from established choice-of-law precedent and practice
constitutionally mandatory. We hold, therefore, that Kansas did not
violate the Full Faith and Credit Clause when it applied its own
statute of limitations.
B
Petitioner also makes a due process attack upon the Kansas
court's application of its own statute of limitations. [
Footnote 3]
Page 486 U. S. 730
Here again neither the tradition in place when the
constitutional provision was adopted nor subsequent practice
supports the contention. At the time the Fourteenth Amendment was
adopted, this Court had not only explicitly approved (under the
Full Faith and Credit Clause) forum state application of its own
statute of limitations, but the practice had gone essentially
unchallenged. And it has gone essentially unchallenged since.
"If a thing has been practised for two hundred years by common
consent, it will need a strong case for the Fourteenth Amendment to
affect it."
Jackman v. Rosenbaum Co., 260 U. S.
22,
260 U. S. 31
(1922).
A State's interest in regulating the workload of its courts and
determining when a claim is too stale to be adjudicated certainly
suffices to give it legislative jurisdiction to control the
remedies available in its courts by imposing statutes of
limitations. Moreover, petitioner could in no way have been
unfairly surprised by the application to it of a rule that is as
old as the Republic. There is, in short, nothing in Kansas' action
here that is "arbitrary or unfair,"
Shutts III, 472 U.S.
at
472 U. S.
821-822, and the due process challenge is entirely
without substance.
III
In
Shutts III, we held that Kansas could not apply its
own law to claims for interest by nonresidents concerning royalties
from property located in other States. The Kansas Supreme Court has
complied with that ruling, but petitioner claims that it has
unconstitutionally distorted Texas, Oklahoma, and Louisiana law in
its determination of that law made in
Shutts IV and
applied to this case in
Wortman III.
To constitute a violation of the Full Faith and Credit Clause or
the Due Process Clause, it is not enough that a
Page 486 U. S. 731
state court misconstrue the law of another State. Rather, our
cases make plain that the misconstruction must contradict law of
the other State that is clearly established and that has been
brought to the court's attention.
See, e.g., Pennsylvania Fire
Ins. Co. v. Gold Issue Mining & Milling Co., 243 U. S.
93,
243 U. S. 96
(1917);
Western Life Indemnity Co. v. Rupp, 235 U.
S. 261,
235 U. S. 275
(1914);
Louisville & N. R. Co. v. Melton, 218 U. S.
36,
218 U. S. 51-52
(1910);
Banholzer v. New York Life Ins. Co., 178 U.
S. 402,
178 U. S. 408
(1900);
see also Shutts III, supra, at
472 U. S.
834-842 (STEVENS, J., concurring in part and dissenting
in part). We cannot conclude that any of the interpretations at
issue here runs afoul of this standard.
1.
Texas: Petitioner contests the Kansas Supreme
Court's interpretation of Texas law on the interest rate. Texas'
statutory rate of 6% does not apply when a "specified rate of
interest is agreed upon by the parties." Tex.Rev.Civ.Stat.Ann.,
Art. 5069-1.03 (Vernon 1987). Such an agreement need not be
express, but can be inferred from conduct.
See Preston Farm
& Ranch Supply, Inc. v. Bio-Zyme
Enterprises, 625 S.W.2d 295,
298, 300 (Tex.1981). The Kansas court held an agreement to pay
interest at a higher rate was implied by petitioner's undertaking
with the FPC to comply with federal regulations setting forth the
applicable rates of interest for refundable moneys held in
suspense.
See Shutts IV, 240 Kan. at 777, 783-784,
790-791, 732 P.2d at 1298, 1302, 1306;
see also Shutts I,
222 Kan. at 562-565, 567 P.2d at 1317-1319.
Petitioner brought to the Kansas court's attention no Texas
decision clearly indicating that an agreement to pay interest at a
specified rate would not be implied in these circumstances.
[
Footnote 4] Petitioner's
reliance on
Phillips Petroleum
Page 486 U. S.
732
Co. v. Stahl Petroleum Co., 569 S.W.2d 480
(Tex.1978), is misplaced. Although that case was similar to the
present one on its facts, the point at issue here was neither
raised nor decided. In
Stahl, the intermediate Texas court
had ordered interest paid at the statutory 6% rate. There is
nothing
Page 486 U. S. 733
to indicate, however, that the royalty owner had requested
anything else, and only the lessee, and not the royalty owner,
appealed.
Id. at 481. Thus, the Texas Supreme Court's
holding that 6% interest was payable is in no way a holding that
more than 6% was not. It is far from unconstitutional for the
Kansas Supreme Court to anticipate that the Texas Supreme Court
would distinguish the case on the eminently reasonable ground that
no rate of interest based on an implied agreement was at issue.
2.
Oklahoma: Petitioner contests the Kansas Supreme
Court's interpretations of Oklahoma law as to both liability for
interest and the rate to be paid. Concerning liability, petitioner
relies on a statute providing that "[a]ccepting payment of the
whole principal, as such, waives all claim to interest."
Okla.Stat., Tit. 23, § 8 (1981). But the Oklahoma Supreme Court has
held that this statute does not bar a claim for interest based on
an implied agreement to pay interest, since, in that event, the
interest becomes, for purposes of the statute, part of the
"principal" owed.
See Webster Drilling Co. v. Sterling Oil of
Oklahoma, Inc., 376 P.2d 236,
238 (1962). Regarding the rate of interest, Oklahoma law provides
for 6% only "in the absence of any contract as to the rate of
interest, and by contract the parties may agree to any rate as may
be authorized by law." Okla.Stat., Tit. 15, § 266 (1981). Thus, for
Oklahoma as for Texas, petitioner's contention founders on the fact
that it pointed to no decision indicating that an agreement to pay
more than 6% interest would not be implied in circumstances such as
those of the present case.
3.
Louisiana: Finally, petitioner contests the Kansas
Supreme Court's interpretation of Louisiana law both as to
liability for interest and the rate to be paid. Concerning
liability, petitioner relies on
Whitehall Oil Co. v.
Boagni, 217 So. 2d 707 (La. App.1968),
aff'd on other
issues, 255 La. 67,
229 So.
2d 702 (1969). That case involved a situation opposite from
that involved here: the gas companies had
paid the
Page 486 U. S. 734
royalties on increased prices before FPC approval, and were
seeking interest on those payments when the approval
did
not ensue. It thus involved a claim for unjust enrichment,
see 217 So. 2d at 709, and does not stand for the
proposition that no interest is recoverable on a contractual debt
-- which would arguably (if not inevitably) have been governed by
the Louisiana statute mandating interest on "[a]ll debts . . . from
the time they become due." La.Civ.Code Ann., Art.1938 (West 1977);
see also Wurzlow v. Placid Oil Co., 279 So. 2d 749,
772-774 (La.App.) (applying Art.1938 to oil and gas royalties),
cert. denied, 282 So.
2d 140 (La.1973).
As to petitioner's claim that, if interest was payable,
Louisiana's 7% rate clearly applied: the 7% rate specified in the
above-quoted statute applied "unless otherwise stipulated."
Art.1938. Petitioner brought to the Kansas court's attention no
Louisiana decision indicating that an implied agreement could not
constitute such a stipulation, or that an implied agreement would
not be found in the circumstances of this case.
Cf. Boutte v.
Chevron Oil Co., 316 F.
Supp. 524, 531 (ED La.1970) (dictum) (gas company will owe
royalty owner interest at FPC rates on suspended royalty payments
once FPC approves increases),
aff'd, 442 F.2d 1337 (CA5
1971).
* * * *
For the reasons stated, the judgment of the Kansas Supreme Court
is
Affirmed.
JUSTICE KENNEDY took no part in the consideration or decision of
this case.
[
Footnote 1]
JUSTICE BRENNAN's concurrence,
post at
486 U. S. 740,
misunderstands the famous statement from
Milwaukee County v. M.
E. White Co., 296 U. S. 268,
296 U. S.
276-277 (1935), that "[t]he very purpose of the full
faith and credit clause was to alter the status of the several
states as independent foreign sovereignties." This statement is
true, as the context of the statement in
Milwaukee County
makes clear, not because the Clause itself radically changed the
principles of conflicts law, but because it made conflicts
principles enforceable as a matter of constitutional command,
rather than leaving enforcement to the vagaries of the forum's view
of comity.
See Estin v. Estin, 334 U.
S. 541,
334 U. S. 546
(1948) (the Full Faith and Credit Clause "substituted a command for
the earlier principles of comity, and
thus basically
altered the status of the States as independent sovereigns")
(emphasis added).
The concurrence's assertion,
post at
486 U. S.
740-741, n. 3, that
Milwaukee County did not
rely upon international conflicts law is entirely beside the point.
It is not our point that the content of the Full Faith and Credit
Clause is governed by international conflicts law, but only (in
order to meet petitioner's contention that
M'Elmoyle was
wrong when decided) that its original content was properly derived
from that source. The conflicts law embodied in the Full Faith and
Credit Clause allows room for common law development, just as did
the international conflicts law that it originally embodied. But
the concurrence points to no such common law development. The rule
applied in
M'Elmoyle continues to be the rule applied by
most of the States. Nor, contrary to what the concurrence says,
post at
486 U. S.
740-741, n. 3, did
Milwaukee County strike down
a practice that was in accord with then-accepted conflicts
principles. Although the Restatement of Conflicts of Laws § 443
(1934) had taken the position that a judgment for taxes was not
enforceable in another State, our opinion noted that "[t]he precise
question now presented appears to have been decided in only a
single case,
New York v. Coe Manufacturing Co., 112 N.J.L.
536, 172 Atl. 198 [(1934)]," which held, as did this Court, that
such a judgment was enforceable. 296 U.S. at
296 U. S.
278-279. The opinion took some pains, moreover, to
distinguish the traditional conflicts rules that one State need not
entertain an action for taxes based on another State's statute,
id. at
296 U. S.
274-277;
see also id. at
296 U. S. 279,
and that, generally, one State need not enforce a judgment from
another State for a penalty,
see id. at
296 U. S.
279-280.
Cf. Restatement of Conflicts of Laws §
443, Comment d (1948 Supp.) (money judgments based on tax claims
are enforceable "since such claims are not deemed penalties").
[
Footnote 2]
Contrary to JUSTICE BRENNAN's concurrence,
post at
486 U. S.
739-742, there is nothing unusual about our approach.
This Court has regularly relied on traditional and subsisting
practice in determining the constitutionally permissible authority
of courts.
See, e.g., Young v. United States ex rel. Vuitton et
Fils, S.A., 481 U. S. 787,
481 U. S. 795,
and n. 7 (1987) (Article III);
Tull v. United States,
481 U. S. 412,
481 U. S.
417-421 (1987) (Seventh Amendment);
Aetna Life Ins.
Co. v. Lavoie, 475 U. S. 813,
475 U. S.
820-821 (1986) (disqualification of judges);
Press-Enterprise Co. v. Superior Court of California, Riverside
County, 464 U. S. 501,
464 U. S.
505-508 (1984) (openness of jury selection process);
Northern Pipeline Construction Co. v. Marathon Pipe Line
Co., 458 U. S. 50,
458 U. S. 57-60,
and nn. 10-11,
458 U. S. 64-76,
and nn. 15, 25,
458 U. S. 86-87,
n. 39 (1982) (plurality opinion of BRENNAN, J., joined by MARSHALL,
BLACKMUN, and STEVENS, JJ.) (Article III);
id. at
458 U. S. 90-91
(REHNQUIST, J., joined by O'CONNOR, J., concurring in judgment);
United States v. Nixon, 418 U. S. 683,
418 U. S. 696
(1974) ("In the constitutional sense, controversy . . . means the
kind of controversy courts traditionally resolve"). The
concurrence's citation,
post at
486 U. S. 740,
of the criticism by the plurality opinion in
Allstate Ins. Co.
v. Hague, 449 U. S. 302
(1981), of
Hartford Accident & Indemnity Co. v. Delta &
Pine Land Co., 292 U. S. 143
(1934), is not to the contrary. That criticism merely rejected the
view that the Constitution enshrines the rule that the law of the
place of contracting governs validity of all provisions of the
contract. By the time of
Allstate, of course, such a rule
could not have been characterized as a subsisting tradition, if it
ever could have been, in light of escape devices such as the
doctrine of public policy, characterization of an issue as
procedural, and the rule that the law of the place of performance
governs matters of performance.
[
Footnote 3]
Although petitioner takes up this issue after discussion of the
full faith and credit claim, and devotes much less argument to it,
we may note that, logically, the full faith and credit claim is
entirely dependent upon it. It cannot possibly be a violation of
the Full Faith and Credit Clause for a State to decline to apply
another State's law in a case where that other State itself does
not consider it applicable. Although in certain circumstances
standard conflicts law considers a statute of limitations to bar
the right, and not just the remedy,
see Restatement
(Second) of Conflict of Laws § 143 (1971), petitioner concedes,
see Tr. of Oral Arg. 4-5, that (apart from the fact that
Kansas does not so regard the out-of-state statutes of limitations
at issue here) Texas, Oklahoma, and Louisiana view their own
statutes as procedural for choice-of-law purposes,
see, e.g.,
Los Angeles Airways, Inc. v. Lummis, 603 S.W.2d 246, 248 (Tex.
Civ. App.1980),
cert. denied, 455 U.S. 988 (1982);
Western Natural Gas Co. v. Cities Service Gas
Co., 507 P.2d 1236,
1242 (Okla.),
cert. denied, 409 U.S. 1052 (1972);
Kirby Lumber Co. v. Hicks Co., 144 La. 473, 475, 80 So.
663 (1919). A full faith and credit problem can therefore arise
only if that disposition by those other States is invalid -- that
is, if they, as well as Kansas, are compelled to consider their
statutes of limitations substantive. The nub of the present
controversy, in other words, is the scope of constitutionally
permissible legislative jurisdiction, and it matters little whether
that is discussed in the context of the Full Faith and Credit
Clause, as the litigants have principally done, or in the context
of the Due Process Clause. Since we are largely traversing ground
already covered, our discussion of the due process claim can be
brief.
[
Footnote 4]
The partial dissent's dissatisfaction with our decision to let
stand Kansas' interpretation of Texas law, as well as Oklahoma and
Louisiana law,
see infra at
486 U. S.
733-734, appears to rest on two premises: (1) that the
respondent has some threshold burden of supporting Kansas'
interpretation of what the other States' laws would likely be,
post at
486 U. S.
743-744,
486 U. S.
745-746,
486 U. S.
746-747,
486 U. S. 748,
and (2) that respondents have not met that burden because Kansas'
view of contract law is a manifest departure from normal and proper
principles of contract law.
Post at
486 U. S. 746,
486 U. S.
748-749. We think neither premise is correct.
First, placing the initial burden on respondents to support the
Kansas court's interpretations is flatly inconsistent with the
precedent of this Court. Relief cannot be granted in this Court
unless decisions plainly contradicting the Kansas court's
interpretations were brought to the Kansas court's attention.
See, e.g., Western Life Indemnity Co. v. Rupp,
235 U. S. 261,
235 U. S. 275
(1914) ("If such decision existed, it was incumbent upon defendant
to prove it as matter of fact");
Texas & N.O. R. Co. v.
Miller, 221 U. S. 408,
221 U. S. 416
(1911) ("There was neither allegation nor proof that the court of
last resort in Louisiana had considered the question or made any
ruling upon it, and so it became the duty of the Texas courts . . .
to decide the question according to their independent judgment");
Louisville & N. R. Co. v. Melton, 218 U. S.
36,
218 U. S. 52
(1910) ("[S]uch settled construction must be pleaded and
proved").
Second, the partial dissent appears to assume that contract law
requires a promissor to make a conscious assumption of an
obligation in order to be bound. It is standard contract law,
however, that a party may be bound by a custom or usage even though
he is unaware of it, and indeed even if he positively intended the
contrary.
See U.C.C. §§ 1-201(3), 1-205(3), and Comment 4,
1 U.L.A. 44, 84, 85 (1976); Restatement (Second) of Contracts §
221, and Comment a (1981). The Kansas Supreme Court considered
petitioner's undertaking with the FPC (as well as the reference to
a similar undertaking in an indemnity agreement proposed by another
oil company to its lessors) to be evidence of an industry usage (or
"common understanding," U.C.C. § 1-205, Comment 4, 1 U.L.A. 86),
that, in a case such as the present one, interest would be paid at
the FPC-prescribed rates.
See Shutts IV, 240 Kan. at 784,
732 P.2d at 1302 (describing undertaking with FPC as showing
"industry practice"). Especially since the existence and scope of a
particular usage is usually a question of fact,
see U.C.C.
§ 1-205(2), 1 U.L.A. 84; Restatement (Second) of Contracts § 219,
Comment a; § 222(2), it seems particularly inappropriate to suggest
that the Kansas court, without having been referred to any
decisions on the subject from the other States, should have known
that its decision was contrary to the law of those other
States.
JUSTICE BRENNAN, with whom JUSTICE MARSHALL and JUSTICE BLACKMUN
join, concurring in part and concurring in the judgment.
I join Parts I and III of the Court's opinion. Although I also
agree with the result the Court reaches in Part II, I
Page 486 U. S. 735
reach that result through a somewhat different path of
analysis.
For 150 years, this Court has consistently held that a forum
State may apply its own statute of limitations period to
out-of-state claims, even though it is longer or shorter than the
limitations period that would be applied by the State out of which
the claim arose.
See Wells v. Simonds Abrasive Co.,
345 U. S. 514
(1953) (shorter);
Townsend v.
Jemison, 9 How. 407 (1850) (longer);
McElmoyle v.
Cohen, 13 Pet. 312 (1839) (shorter). The main
question presented in this case is whether this line of authority
has been undermined by more recent case law concerning the
constitutionality of state choice-of-law rules. [
Footnote 2/1]
See Phillips Petroleum Co. v.
Shutts, 472 U. S. 797
(1985);
Allstate Ins. Co. v. Hague, 449 U.
S. 302 (1981). I conclude that it has not.
I start, as did the Court in
Wells, by emphasizing
that
"[t]he Full Faith and Credit Clause does not compel a state to
adopt any particular set of rules of conflict of laws; it merely
sets certain minimum requirements which each state must observe
when asked to apply the law of a sister state."
345 U.S. at
345 U. S. 516.
The minimum requirements imposed by the Full Faith and Credit
Clause [
Footnote 2/2] are that a
forum State should not apply its law unless it has
"'a significant contact or significant aggregation of contacts,
creating state interests, such that choice of its law is neither
arbitrary nor fundamentally unfair.'"
Phillips Petroleum, supra, at
472 U. S. 818,
quoting
Page 486 U. S. 736
Allstate, supra, at
449 U. S.
312-313 (plurality opinion of BRENNAN, J., joined by
WHITE, MARSHALL, and BLACKMUN, JJ.). The constitutional issue in
this case is somewhat more complicated than usual, because the
question is not the typical one of whether a State can
constitutionally apply its substantive law where both it and
another State have certain contacts with the litigants and the
facts underlying the dispute. Rather the question here is whether a
forum State can constitutionally apply its limitations period,
which has mixed substantive and procedural aspects, where its
contacts with the dispute stem only from its status as the
forum.
Were statutes of limitations purely substantive, the issue would
be an easy one, for where, as here, a forum State has no contacts
with the underlying dispute, it has no substantive interests and
cannot apply its own law on a purely substantive matter. Nor would
the issue be difficult if statutes of limitations were purely
procedural, for the contacts a State has with a dispute by virtue
of being the forum always create state procedural interests that
make application of the forum's law on purely procedural questions
"neither arbitrary nor fundamentally unfair."
Phillips
Petroleum, supra, at
472 U. S. 818.
Statutes of limitations, however, defy characterization as either
purely procedural or purely substantive. The statute of limitations
a State enacts represents a balance between, on the one hand, its
substantive interest in vindicating substantive claims and, on the
other hand, a combination of its procedural interest in freeing its
courts from adjudicating stale claims and its substantive interest
in giving individuals repose from ancient breaches of law. A State
that has enacted a particular limitations period has simply
determined that, after that period, the interest in vindicating
claims becomes outweighed by the combination of the interests in
repose and avoiding stale claims. One cannot neatly categorize this
complicated temporal balance as either procedural or
substantive.
Page 486 U. S. 737
Given the complex of interests underlying statutes of
limitations, I conclude that the contact a State has with a claim
simply by virtue of being the forum creates a sufficient procedural
interest to make the application of its limitations period to
wholly out-of-state claims consistent with the Full Faith and
Credit Clause. This is clearest when the forum State's limitations
period is shorter than that of the claim State. A forum State's
procedural interest in avoiding the adjudication of stale claims is
equally applicable to in-state and out-of-state claims. That the
State out of which the claim arose may have concluded that at that
shorter period its substantive interests outweigh its procedural
interest in avoiding stale claims would not make any difference; it
would be "
neither arbitrary nor fundamentally unfair,'"
Phillips Petroleum, supra, at 472 U. S. 818,
for the forum State to conclude that its procedural interest is
more weighty than that of the claim State and requires an earlier
time bar, as long as the time bar applied in a nondiscriminatory
manner to in-state and out-of-state claims alike.
The constitutional question is somewhat less clear where, as
here, the forum State's limitations period is longer than that of
the claim State. In this situation, the claim State's statute of
limitations reflects its policy judgment that, at the time the suit
was filed, the combination of the claim State's procedural interest
in avoiding stale claims and its substantive interest in repose
outweighs its substantive interest in vindicating the plaintiff's
substantive rights. Assuming, for the moment, that each State has
an equal substantive interest in the repose of defendants, then a
forum State that has concluded that its procedural interest is less
weighty than that of the claim State does not act unfairly or
arbitrarily in applying its longer limitations period. The claim
State does not, after all, have any substantive interest in
not vindicating rights it has created. Nor will it do to
argue that the forum State has no interest in vindicating the
substantive rights of nonresidents: the forum State cannot
discriminate against
Page 486 U. S. 738
nonresidents, and, if it has concluded that the substantive
rights of its citizens outweigh its procedural interests at that
period, then it cannot be faulted for applying that determination
evenhandedly.
If the different limitations periods also reflect differing
assessments of the substantive interests in the repose of
defendants, however, the issue is more complicated. It is, to begin
with, not entirely clear whether the interest in the repose of
defendants is an interest the State has as a forum or wholly as the
creator of the claim at issue. Even if one assumes the latter,
determining whether application of the forum State's longer
limitations period would thwart the claim State's substantive
interest in repose requires a complex assessment of the relative
weights of both States' procedural and substantive interests. For
example, a claim State may have a substantive interest in
vindicating claims that, at a particular period, outweighs its
substantive interest in repose standing alone, but not the
combination of its interests in repose and avoiding the
adjudication of stale claims. Such a State would not have its
substantive interest in repose thwarted by the claim's adjudication
in a State that professed no procedural interest in avoiding stale
claims, even if the forum State had less substantive interest in
repose than the claim State, because the forum State would be
according the claim State's substantive interests all the weight
the claim State gives them. Such efforts to break down and weigh
the procedural and substantive components and interests served by
the various States' limitations periods would, however, involve a
difficult, unwieldy and somewhat artificial inquiry that itself
implicates the strong procedural interest any forum State has in
having administrable choice-of-law rules.
In light of the forum State's procedural interests and the
inherent ambiguity of any more refined inquiry in this context,
there is some force to the conclusion that the forum State's
contacts give it sufficient procedural interests to make it
"
neither arbitrary nor fundamentally unfair,'" Phillips
Petroleum,
Page 486 U. S. 739
472 U.S. at
472 U. S. 818,
for the State to have a
per se rule of applying its own
limitations period to out-of-state claims -- particularly where, as
here, the States out of which the claims arise view their statutes
of limitations as procedural.
See ante at
486 U. S.
729-730, n. 3. The issue, after all, is not whether the
decision to apply forum limitations law is wise as a matter of
choice-of-law doctrine, but whether the decision is within the
range of constitutionally permissible choices,
Wells, 345
U.S. at
345 U. S. 516,
and we have already held that distinctions similar to those offered
above "are too unsubstantial to form the basis for constitutional
distinctions,"
id. at
345 U. S.
517-518 (holding that it is constitutionally irrelevant
whether the foreign limitations period is built into the statutory
provision creating the out-of-state cause of action at issue). This
conclusion may not be compelled, but the arguments to the contrary
are, at best, arguable, and any merely arguable inconsistency with
our current full faith and credit jurisprudence surely does not
merit deviating from 150 years of precedent holding that choosing
the forum State's limitations period over that of the claim State
is constitutionally permissible.
The Court's technique of avoiding close examination of the
relevant interests by wrapping itself in the mantle of tradition is
as troublesome as it is conclusory. It leads the Court to assert
broadly (albeit in dicta) that States do not violate the Full Faith
and Credit Clause by adjudicating out-of-state claims under the
forum's own law on,
inter alia, remedies, burdens of
proof, and burdens of production.
Ante at
486 U. S. 728.
The constitutionality of refusing to apply the law of the claim
State on such issues was not briefed or argued before this Court,
and whether, as the Court asserts without support, there are
insufficient reasons for "recharacterizing" these issues (at least
in part) as substantive is a question that itself presents multiple
issues of enormous difficulty and importance which deserve more
than the off-hand treatment the Court gives them.
Page 486 U. S. 740
Even more troublesome is the Court's sweeping dictum that
any choice-of-law practice that is "long established and
still subsisting" is constitutional.
Ibid. This statement,
on its face, seems to encompass choice-of-law doctrines on purely
substantive issues, and the blind reliance on tradition confuses
and conflicts with the full faith and credit test we articulated
just three years ago in
Phillips Petroleum, supra, at
472 U. S. 818.
See also Allstate, 449 U.S. at
449 U. S.
308-309, n. 11 (plurality opinion of BRENNAN, J., joined
by WHITE, MARSHALL, and BLACKMUN, JJ.) (stating that a 1934 case
giving "controlling constitutional significance" to a traditional
choice-of-law test "has scant relevance for today"). That certain
choice-of-law practices have so far avoided constitutional scrutiny
by this Court is, in any event, a poor reason for concluding their
constitutional validity. Nor is it persuasive that the practice
reflected the rule applied by States or in international law around
the time of the adoption of the Constitution,
see ante at
486 U. S.
723-726, since "[t]he very purpose of the full faith and
credit clause was to alter the status of the several states as
independent foreign sovereignties,"
Milwaukee County v. M. E.
White Co., 296 U. S. 268,
296 U. S.
276-277 (1935), not to leave matters unchanged.
[
Footnote 2/3] The Court never
offers a satisfactory
Page 486 U. S. 741
explanation as to why tradition should enable States to engage
in practices that, under our current test, are "arbitrary" or
"fundamentally unfair." The broad range of choice-of-law practices
that may, in one jurisdiction or another, be traditional are not
before this Court, and have not been surveyed by it, and we can
only guess what practices today's opinion
Page 486 U. S. 742
approves sight unseen. Nor am I much comforted by the fact that
the Court opines on the constitutionality of traditional
choice-of-law practices only to the extent they are "still
subsisting," for few cases involve challenges to practices that no
longer subsist. One wonders as well how future courts will
determine which practices are traditional enough (or subsist
strongly enough) to be constitutional, and about the utility of
requiring courts to focus on such an uncertain and formalistic
inquiry, rather than on the fairness and arbitrariness of the
choice-of-law rule at issue. Indeed, the disarray of the Court's
test is amply demonstrated by the fact that two of the Justices
necessary to form the Court leave open the issue of whether a forum
State could constitutionally refuse to apply a shorter limitations
period regarded as substantive by the foreign State,
see
post at
486 U. S. 743
(O'CONNOR, J., joined by REHNQUIST, C.J., concurring in part and
dissenting in part), even though, in many States, the subsisting
tradition of applying the forum's limitations period recognizes no
exception for limitations periods considered substantive by the
foreign State.
See generally Restatement (Second) of
Conflict of Laws § 143 and Reporter's Note (1971) (collecting
cases). [
Footnote 2/4]
Page 486 U. S. 743
In short, I fear the Court's rationale will cause considerable
mischief, with no corresponding benefit. This mischief is all the
more unfortunate because it appears to stem from the misperception
that this case cannot be resolved without conclusively labeling
statutes of limitations as either "procedural" or "substantive."
Having asked the wrong question (and an unanswerable one), it is no
wonder the Court resorts to tradition, rather than analysis, to
answer it. Because I believe a careful examination of the
Phillips Petroleum test and the governmental interests
created by the relevant contacts provides narrower and sounder
grounds for affirming, I concur in the judgment.
[
Footnote 2/1]
I agree with the Court's rejection of petitioner's additional
argument that the constitutionality of applying the forum State's
limitations period should be judged under the
"outcome-determinative" test of
Guaranty Trust Co. v.
York, 326 U. S. 99
(1945).
See ante at
486 U. S.
726-727.
[
Footnote 2/2]
The minimum requirements imposed by the Due Process Clause are,
in this context, the same as those imposed by the Full Faith and
Credit Clause.
See Phillips Petroleum Co. v. Shutts,
472 U. S. 797,
472 U. S.
818-819 (1985);
Allstate Ins. Co. v. Hague,
449 U. S. 302,
449 U. S. 308,
and n. 10 (1981) (plurality opinion of BRENNAN, J., joined by
WHITE, MARSHALL, and BLACKMUN, JJ.);
id. at
449 U. S. 332
(Powell, J., joined by Burger, C.J., and REHNQUIST, J.,
dissenting).
[
Footnote 2/3]
The Court miscites
Milwaukee County and
Estin v.
Estin, 334 U. S. 541
(1948), for the proposition that the Full Faith and Credit Clause
merely made traditional principles of conflicts law enforceable as
a matter of constitutional command.
See ante at
486 U. S.
723-724, n. 1. Although the Court correctly notes that
Estin states that the Full Faith and Credit Clause
"substituted a command for the earlier principles of comity,"
Estin, supra, at
334 U. S. 546,
nowhere does
Estin state that the content of that
substituted command is determined by reference to principles of
traditional conflicts law. To the contrary,
Estin never
refers to traditional conflicts law, but rather decides the Full
Faith and Credit issue by carefully examining the interests of the
various States in having their law applied. 334 U.S. at
334 U. S.
546-549. Similarly,
Milwaukee County does not
rely on traditional conflicts law, but on the conclusion that the
interests behind the local policy were
"too trivial to merit serious consideration when weighed against
the policy of the constitutional provision and the interest of the
[foreign] state whose judgment is challenged."
Milwaukee County v. M. E. White Co., 296 U.S. at
296 U. S. 277.
Indeed,
Milwaukee County expressly noted that its holding
that a forum State was constitutionally obligated to enforce a
foreign judgment for taxes conflicted with the traditional (and
then-subsisting) conflicts of law rule that such foreign judgments
were unenforceable.
Id. at
296 U. S. 279,
n. 4 (citing and declining to follow § 443 of the 1934 Restatement
of Conflict of Laws).
See also Restatement of Conflict of
Laws § 443, p. 159 (Supp.1948) (explaining that this traditional
conflicts rule had to be modified because it had been invalidated
in
Milwaukee County). Although
Milwaukee County
also stated that only a single case had decided the question
whether a State's tax judgment was entitled to full faith and
credit in another State,
Milwaukee County, supra, at
296 U. S. 278,
the Court did not question the fact that the rule against enforcing
foreign tax judgments accorded with then-accepted common law
conflicts doctrine.
See also E. Scoles & P. Hay,
Conflict of Laws §§ 24.19, 24.23 (1982). In fact, this traditional
conflicts rule continues to subsist in the international context,
where the Full Faith and Credit Clause does not apply.
See,
e.g., Her Majesty, Queen in Right of Province of British Columbia
v. Gilbertson, 597 F.2d 1161, 1163-1166, and n. 8 (CA9 1979);
Commissioner of Taxes, Federation of Rhodesia v.
McFarland, [1965(1)] S.A. 470, 472 (South Africa Sup.Ct.1964);
United States v. Harden, [1963] S.C.R. 366 (Canada
Sup.Ct.); Uniform Foreign Money-Judgments Recognition Act § 1(2),
13 U.L.A. 263 (1986) (excluding foreign tax judgments from the
judgments enforceable under the Act) (adopted in 16 States);
Foreign Judgments (Reciprocal Enforcement) Act, 1933, 23 & 24
Geo. 5, ch. 13, pt. I, § 1(2)(b) (same). That
Milwaukee
County did not also invalidate the traditional rules barring
adjudication of a foreign tax suit or enforcement of a foreign
penalty judgment,
see ante at
486 U. S.
723-724, n. 1, is irrelevant --
Milwaukee
County reasoned that the constitutional validity of those
conflicts rules was not presented, not that their traditional
status rendered them sacrosanct. The simple fact remains that the
question the Court addressed in
Milwaukee County, like the
question we should address in this case, was not one of conflicts
law, but of whether as a constitutional matter the forum State had
interests justifying application of its own law. "Of that question,
this Court is the final arbiter,"
Milwaukee County, supra,
at
296 U. S. 274,
not tradition or existing practice.
[
Footnote 2/4]
The Court misses the point by stating that relying on tradition
is not "unusual."
Ante at
486 U. S. 728,
n. 2. That we have in other contexts examined tradition to
determine the constitutionally permissible authority of courts is
no explanation for abandoning the "interest-contacts" test we have
long applied to determine the constitutionally permissible
authority of States under the Full Faith and Credit Clause. Nor
does it explain why we should adopt a constitutional test that, in
the context of conflicts of laws, is confused and purposeless. The
Court only heaps more confusion on its "traditional and subsisting
practice" test by asserting that, by the time of
Allstate Ins.
Co. v. Hague, 449 U. S. 302
(1981), the rule that the law of the place of contracting applies
"could not have been characterized as a subsisting tradition, if it
ever could have been."
Ante at
486 U. S. 728,
n. 2. The doubt expressed about whether this rule was ever a
subsisting tradition is remarkable, given that it was once the
dominant rule for determining what law applied in contract cases.
See, e.g., Restatement of Conflict of Laws § 332 (1934).
True, by the time of
Allstate, the rule no longer
commanded a consensus, but the rule still "subsisted" in a majority
of States. Scoles & Hay, Conflict of Laws § 18.21, at 666-667.
It is difficult to see why this lack of uniformity or the existence
of "escape devices" should render this traditional rule any less of
a "subsisting tradition" than the rule that the limitations period
of the forum governs, which does not apply in many States and which
is subject to "escape devices" allowing application of the foreign
limitations period when it is "built-into" the statute creating the
right, when it has attributes the forum State would regard as
substantive, when it is considered substantive by the foreign
State, and when the forum State has a borrowing statute.
See
generally Restatement (Second) of Conflict of Laws § 143 and
Reporter's Note (1971) (collecting cases).
JUSTICE O'CONNOR, with whom THE CHIEF JUSTICE joins, concurring
in part and dissenting in part.
The Court properly concludes that Kansas did not violate the
Full Faith and Credit Clause or the Due Process Clause when it
chose to apply its own statute of limitations in this case.
Different issues might have arisen if Texas, Oklahoma, or Louisiana
regarded its own shorter statute of limitations as substantive.
Such issues, however, are not presented in this case, and they are
appropriately left unresolved. Accordingly, I join Parts I and II
of the Court's opinion.
In my view, however, the Supreme Court of Kansas violated the
Full Faith and Credit Clause when it concluded that the three
States in question would apply the interest rates
Page 486 U. S. 744
set forth in the regulations of the Federal Power Commission
(FPC). The Court correctly states that misconstruing those States'
laws would not, by itself, have violated the Constitution, for the
Full Faith and Credit Clause only required the Kansas court to
adhere to law that was clearly established in those States and that
had been brought to the Kansas court's attention.
See ante
at
486 U. S.
730-731. Under the standard the Court articulates,
however, the Clause was violated. Each of the three States has a
statute setting an interest rate that is different from the FPC
rate, and the Supreme Court of Kansas offered no valid reason
whatsoever for ignoring those statutory rates. Neither has this
Court suggested a colorable argument that could support the Kansas
court's decision, and its affirmance of that decision effectively
converts an important constitutional guarantee into a precatory
admonition.
The Kansas courts have applied equitable principles to justify
their choice of the FPC interest rate in this and analogous cases.
See ante at
486 U. S.
720-722;
Phillips Petroleum Co. v. Shutts,
472 U. S. 797,
472 U. S. 816
(1985) (
Shutts III). In
Shutts III, we noted that
"Oklahoma would most likely apply its constitutional and statutory
6% interest rate, rather than the much higher Kansas rates applied
in this litigation"; that "Texas has never awarded any such
interest at a rate greater than 6%, which corresponds with the
Texas constitutional and statutory rate"; and that "[t]he Kansas
interest rate also conflicts with the rate which is applicable in
Louisiana."
Id. at
472 U. S. 817,
and n. 7. We supported each of these propositions with appropriate
citations to state law, but remanded the case so that the Supreme
Court of Kansas could provide "a more thoroughgoing treatment" of
the apparent conflicts between its law and the law of the other
three States.
Id. at
472 U. S. 818.
We then vacated the judgment in the present case and remanded for
reconsideration in light of
Shutts III. See Sun Oil
Co. v. Wortman, 474 U.S. 806 (1985) (
Wortman II).
On remand, the Supreme Court of Kansas considered the
Shutts case first, and then applied the conclusions
reached
Page 486 U. S. 745
there in the case before us today.
See Shutts v. Phillips
Petroleum Co., 240 Kan. 764,
732 P.2d 1286
(1987) (
Shutts IV); 241 Kan. 226, 229,
734 P.2d 1190,
1193 (1987) (opinion below). When one reviews the reasoning of the
Kansas court, an undertaking that the majority omits without
explanation, that court's failure to give full effect -- or any
effect -- to the laws of its sister States becomes
unmistakable.
Adhering to its equitable theory of unjust enrichment, which it
now claimed would be adopted by each of the States whose laws it
purported to apply, the Kansas court concluded:
"Under equitable principles, the states would imply an agreement
binding [the oil and gas company] to pay the funds held in suspense
to the royalty owners when the FPC approved the respective rate
increases sought by [the company], together with interest at the
rates and in accordance with the FPC regulations found in 18 CFR §
154.102 (1986) to the time of judgment herein. These funds held by
[the company] as stakeholder originated in federal law, and are
thoroughly permeated with interest fixed by federal law in the FPC
regulations. . . ."
Shutts IV, supra, at 800, 732 P.2d at 1313.
This conclusion was not supported with so much as a single
colorable argument. The Kansas court, for example, took note of the
following Texas statute:
"When no specified rate of interest is
agreed upon by the
parties, interest at the rate of six percent per annum shall
be allowed on all accounts and contracts ascertaining the sum
payable, commencing on the thirtieth (30th) day from and after the
time when the sum is due and payable."
240 Kan. at 777, 732 P.2d at 1298 (quoting
Tex.Rev.Civ.Stat.Ann., Art. 5069-1.03 (Vernon 1987)) (emphasis
added). This statute was held inapplicable for the following
reason.
"No Texas court ever mentioned the higher rates set by federal
regulations to which [the oil and gas company] had
Page 486 U. S. 746
agreed to comply in its corporate undertaking.
This issue
has not been determined by the Texas Supreme Court."
240 Kan. at 777, 732 P.2d at 1298 (emphasis in original;
citations omitted). Thus, the only reason suggested for ignoring
the contrary language of the Texas statute was that the Texas
Supreme Court had not specifically rejected the Kansas equitable
theory. The court cited no case in which the Kansas theory had ever
been proposed to the Texas courts; no case suggesting that the
Texas courts would "imply an agreement" by the parties to adopt the
FPC rates in these circumstances; and no case from
any
jurisdiction adopting the Kansas theory under which the funds in
question were "thoroughly permeated with interest fixed by federal
law." In sum, the Kansas court offered not a single affirmative
reason for supposing that the Texas courts would adopt the Kansas
theory in the face of the contrary language of the Texas
statute.
The Supreme Court of Kansas dealt with the following Oklahoma
statute in an equally unsatisfactory manner.
"'The legal rate of interest shall be six percent (6%) in the
absence of any contract as to the rate of interest, and
by
contract the parties may agree to any rate as may be
authorized by law, now in effect or hereinafter enacted.'"
Id. at 784, 732 P.2d at 1302 (quoting Okla.Stat., Tit.
15, § 266 (1981)) (emphasis added). The Kansas court's entire
discussion of this statute was as follows:
"In the above cases where interest was awarded, the applicable
rate was six percent. However, in
First Nat. Bank v. Cit. &
So. Bank, 651 F.2d 696 (10th Cir.1981), applying Oklahoma law,
a federal circuit court awarded interest at the rate of ten percent
as provided in the promissory note, and rejected the argument that
interest must be limited to Oklahoma's legal rate of six percent.
Therefore, in equity, the corporate undertaking entered
Page 486 U. S. 747
into by [the oil and gas company] and the FPC would probably be
viewed by implication as contractual by the Oklahoma courts, and
the rates required in 18 CFR § 154.102 (1986) would be imposed,
rather than the statutory six percent."
240 Kan. at 784, 732 P.2d at 1302. The court did not explain why
it thought that Oklahoma law could properly be inferred from a
decision by a federal court. Nor did the court explain why an
express agreement in a promissory note should be considered
equivalent to the fictional or "implied" agreement that the court
chose to find in the case before it. (In
First Nat. Bank of
Hominy, Okla. v. Citizens and Southern Bank of Cobb Cty., Marietta,
Ga., 651 F.2d 696 (CA10 1981), the defendant was the guarantor
of the obligation evidenced by the promissory note.) Once again,
the Kansas court read its theory of unjust enrichment into another
State's law without a shred of affirmative support for doing
so.
The applicable Louisiana statute provided that "
[a]ll debts
shall bear interest at the rate of seven percent per annum from the
time they become due, unless otherwise stipulated.'" 240
Kan. at 791, 732 P.2d at 1307 (quoting La.Civ.Code Ann., Art.1938
(West 1977)) (emphasis added). After discussing three irrelevant
federal decisions, the Kansas court concluded:
"We find Louisiana would apply the FPC rates of interest under
equitable principles.
Whitehall Oil Co. v. Boagni, [255]
La. 67."
240 Kan. at 793, 732 P.2d at 1308.
Boagni, a 1969
decision of the Supreme Court of Louisiana, does not support the
proposition for which it was cited. In that case, an oil and gas
company was permitted to recover royalties from its lessors after
the FPC revised downwards the gas prices to which the royalties
were tied. The Louisiana court reached this conclusion by applying
equitable principles
"to determine conflicting claims under a contract where there is
neither express law
nor contractual provisions
governing a determination of them."
255 La. 67, 74,
229 So.
2d 702, 704 (1969) (emphasis added). This holding does not
Page 486 U. S. 748
in any way support the proposition that the Louisiana courts
would apply equitable principles to reach a result contrary to that
dictated by the language of a Louisiana statute. Thus, the Supreme
Court of Kansas again concluded that one of its sister States would
decline to apply its own statute, and the Kansas court again failed
to offer any colorable support for its conclusion.
At bottom, the Kansas court's insistence on its equitable theory
seems based on nothing more than its conviction that it
would have been "fair" for the parties to agree that the
oil and gas company should pay the same interest rates for
suspended royalty payments arising from approved price increases
that the company would have had to pay its customers for refunds
arising from disapproved price increases. That is a wholly
inadequate basis for concluding that three other States would
conclude that the parties
did make such an agreement. Even
assuming that the result imposed on the parties by the Kansas court
was "fair," which is not at all obvious, neither that court nor
this Court has given any reason for concluding that the parties to
the case before us agreed either to adopt the FPC interest rates or
to be bound by the Kansas judiciary's notions of equity.
The majority does not discuss the Kansas court's analysis of its
sister States' statutes, which clearly indicate that rates of 6% or
7% were applicable. Indeed, the Court appears to think that no
analysis was necessary, because the Kansas court was not bound by
the language of the statutes with which it was confronted.
See
ante at
486 U. S. 732,
n. 4 ("Relief cannot be granted in this Court unless
decisions plainly contradicting the Kansas court's
interpretations were brought to the Kansas court's attention"
(emphasis added; citations omitted)). This suggestion is
inconsistent with the language of the Full Faith and Credit Clause,
and is not dictated by the holding in any of our previous cases.
Nor is the Court on firmer ground when it imagines that the Kansas
court merely read "standard contract law" into the statutes of its
sister
Page 486 U. S. 749
States.
Ibid. The "industry practice" of complying with
FPC regulations where they are applicable hardly implies an
"industry usage" or "common understanding" under which the terms of
those regulations are to be applied in other situations where they
are
not applicable. Neither the Kansas court nor this
Court has pointed to a single instance -- let alone an "industry
practice" -- in which an oil company and its lessor agreed that the
FPC interest rates would apply in circumstances like those
presented here. Unless "industry usage" means "practices that the
Supreme Court of Kansas thinks are fair," neither standard contract
law nor standard logic will support the majority's attempted
defense of the Kansas court's result.
Today's decision discards important parts of our decision in
Shutts III, 472 U. S. 797
(1985), and of the Full Faith and Credit Clause. Faced with the
constitutional obligation to apply the substantive law of another
State, a court that does not like that law apparently need take
only two steps in order to avoid applying it. First, invent a legal
theory so novel or strange that the other State has never had an
opportunity to reject it; then, on the basis of nothing but
unsupported speculation, "predict" that the other State would adopt
that theory if it had the chance. To call this giving full faith
and credit to the law of another State ignores the language of the
Constitution and leaves it without the capacity to fulfill its
purpose. Rather than take such a step, I would remand this case to
the Supreme Court of Kansas with instructions to give effect to the
interest rates established by law in Texas, Oklahoma, and
Louisiana. I therefore respectfully dissent.