Although for more than a decade the Shutts personal jurisdiction problem, generated by the first half of the Shutts opinion, dominated the Shutts debate, I argue here that the real, enduring legacy of Phillips Petroleum Co. v. Shutts derives from the second half of that opinion. The second half of Shutts concerns the appropriate applicable law determination in all multistate and nationwide class actions, and therefore this Shutts question is present in every category of class actions.
The applicable law issue is present in every Rule 23(b)(3) federal or state damage class action, as well as the mandatory classes. The applicable law question, then, is the true enduring legacy of Phillips Petroleum Co. v. Shutts. Moreover, the analytical and practical consequences of Shutts applicable law jurisprudence have been enormous in the real world of class action litigation.
The Shutts applicable law principles have resulted in what I call “GRIDLAW.” In order to avoid a court's finding of a lack of predominance, superiority, and manageability, class counsel have been forced into the position of arguing that multistate and nationwide class actions may be resolved by application of one state's law and that no conflict exists among the laws of the many states.
In turn, in order to defeat class certification by demonstrating a lack of predominance, superiority, and manageability, defense counsel have been forced into the position of demonstrating that the laws of the relevant states ― in nationwide class actions, all fifty states and the District of Columbia ― have conflicting laws that require individual application of each state's laws.
To carry the burden of proof with the court, then, class and defense counsel typically prepare charts or “grids” on the applicable law question. The choice-of-law grid consists of a listing of the relevant jurisdictions as set forth by the class definition, with accompanying boxes for each and every claim and defense set forth in the pleadings. The plaintiff's grid is usually a highly simplified chart demonstrating that the laws of the relevant states are identical. And, because the plaintiff's applicable law grid is simple, the plaintiff argues that resolution of the Shutts applicable law question is equally simple, and satisfies due process, predominance, superiority, and manageability.
In response, defense counsel offer competing grids of the laws of the fifty states, often in lengthy and excruciating detail. The purpose of the defense grid proffer is to demonstrate to the court that the laws of the fifty states are indeed in conflict, that the determination of applicable law is highly complicated, that no single law predominates, and that the applicable law issue is so complex as to defeat the superiority of a class action mechanism and frustrate any court's ability to manage the case. Most importantly, the purpose of the defense grid is to convince the court that class members' due process rights would be violated by the court's application of a single state's law, as the Supreme Court held in the original Shutts decision.
I would suggest that not only is GRIDLAW the enduring legacy of Shutts, but it is a semi-ridiculous, burdensome, and costly legacy. One would have thought that any question of the existence of differences among state laws had been resolved almost seventy years ago in Erie Railroad Co. v. Tompkins, when the Supreme Court declared the death of general federal common law. Instead, the Shutts decision, and other landmark Supreme Court choice-of-law decisions, force class action litigants to argue the Erie question over and over in every multistate class action. In the post-Erie era, there is a “theatre of the absurd” quality to the applicable law question as it applies to multistate class actions.
Linda S. Mullenix, Gridlaw: The Enduring Legacy of Phillips Petroleum Co. v. Shutts, 74 University Of Missouri-Kansas City School Of Law Review 651 (2006).