Sun Oil Company v. Wortman
486 U.S. 717 (1988)
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Rule of Law:
A forum state may constitutionally apply its own statute of limitations to claims governed by the substantive law of another state because statutes of limitations are traditionally considered procedural, not substantive, for choice-of-law purposes under the Full Faith and Credit and Due Process Clauses.
Facts:
- In the 1960s and 1970s, Sun Oil Company leased land from various landowners, including Richard Wortman and Hazel Moore, in Texas, Oklahoma, and Louisiana for natural gas extraction.
- The leases provided that the landowners would receive a royalty, typically one-eighth of the proceeds from the sale of gas.
- Sun Oil sold the gas in interstate commerce, with prices subject to approval by the Federal Power Commission (FPC).
- The FPC permitted Sun Oil to collect proposed price increases from customers pending final approval, but required Sun Oil to refund any unapproved amounts with interest.
- Sun Oil collected these price increases but withheld the corresponding royalty payments from the landowners until the FPC granted final approval.
- In 1976 and 1978, after the FPC approved the price increases, Sun Oil paid the landowners the principal amounts of these 'suspended royalties' but did not include any interest for the period the funds were withheld.
Procedural Posture:
- Richard Wortman and Hazel Moore filed a class-action lawsuit against Sun Oil Company in a Kansas trial court, seeking interest on suspended royalty payments.
- The trial court applied Kansas law and ruled in favor of the landowners.
- The Kansas Supreme Court affirmed the trial court's decision in a ruling known as Wortman I.
- The U.S. Supreme Court granted certiorari, vacated the Kansas judgment, and remanded the case for reconsideration in light of Phillips Petroleum Co. v. Shutts, which held that a forum state cannot apply its own substantive law to claims lacking any connection to that state.
- On remand, the Kansas trial court held that the substantive laws of Texas, Oklahoma, and Louisiana required interest payments at the FPC rate, and that Kansas’s longer, 5-year statute of limitations applied because it was procedural.
- The Kansas Supreme Court affirmed this decision in a ruling known as Wortman III.
- Sun Oil Company again petitioned the U.S. Supreme Court for a writ of certiorari, which was granted.
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Issue:
Does a state court violate the Full Faith and Credit Clause or the Due Process Clause by applying its own statute of limitations to claims that are substantively governed by the laws of other states?
Opinions:
Majority - Justice Scalia
No. A state court does not violate the Full Faith and Credit Clause or the Due Process Clause by applying its own statute of limitations to claims governed by another state's substantive law. This conclusion rests on the long-established historical principle that statutes of limitations are procedural, not substantive. The Court's reasoning is grounded in the original understanding of the Full Faith and Credit Clause, which was interpreted against the background of international law that treated limitations periods as matters of forum law (lex fori). This historical view saw statutes of limitation as affecting only the remedy, not the underlying right. Furthermore, the substance-procedure dichotomy serves a different purpose in choice-of-law analysis than it does in the Erie doctrine; for constitutional purposes, it delimits the spheres of state legislative competence, and states are competent to legislate the procedural rules for their own courts. The Court also held that Kansas's interpretation of Texas, Oklahoma, and Louisiana law on interest rates was not unconstitutional because Sun Oil failed to show it contradicted 'clearly established' law from those states.
Concurring - Justice Brennan
No. While the result is correct, the majority's reliance on tradition is conclusory and problematic. The proper analysis should be based on the 'significant contacts' test from Phillips Petroleum Co. v. Shutts, which asks whether a state has sufficient interests to make the choice of its law neither arbitrary nor fundamentally unfair. A forum state always has a significant procedural interest in the administration of its courts, which justifies the application of its own statute of limitations, whether it is longer or shorter than that of the claim state. This interest-based analysis is a sounder foundation for the decision than the majority’s sweeping and potentially mischievous deference to any 'long established and still subsisting' practice.
Concurring-in-part-and-dissenting-in-part - Justice O'Connor
No, as to the statute of limitations issue. The Court correctly concluded that Kansas could apply its own statute of limitations, and I join Parts I and II of the majority opinion. However, the Kansas Supreme Court violated the Full Faith and Credit Clause when it interpreted the substantive law of Texas, Oklahoma, and Louisiana regarding interest rates. Those states have clear statutes setting interest rates at 6% or 7%, yet the Kansas court ignored them. It invented a novel 'implied agreement' theory, unsupported by any precedent from those states, to justify applying a much higher interest rate. This practice of ignoring clearly established law from sister states under the guise of 'predicting' a change renders the Full Faith and Credit Clause a 'precatory admonition'.
Analysis:
Sun Oil Co. v. Wortman reaffirms the traditional choice-of-law rule that statutes of limitation are procedural and thus governed by the law of the forum state. The case is significant for drawing a sharp distinction between the substance-procedure analysis required for Erie doctrine purposes and that used for Full Faith and Credit Clause issues, cementing that the two are not interchangeable. The decision signals the Court's hesitance to constitutionalize choice-of-law doctrines, preferring to allow states to evolve their own rules rather than imposing a single federal standard. The fractured opinions, particularly the clash between Scalia's historical approach and Brennan's interest-analysis framework, highlight a fundamental methodological division on the Court in this area of law.
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