Civ Pro 2 Notes 10/1/04


So far, we’ve seen the rudimentary structure of the way Rule 23 works and how it’s applied in the federal courts.  The Rule has two parts: 23(a), which establishes the four prerequisites, and 23(b), which classifies the classes into one of three rigid categories.


Hansberry v. Lee


The Hansberrys bought a house in Chicago allegedly covered by a racially restrictive covenant.  The Lee family is trying to stop them from moving in.  So in the trial court, Lee sues the Hansberrys and the sellers of the property.  The Hansberrys discovered that the restrictive covenant is no good because it was not signed by 95% of the residents.  So Hansberry says you can’t enforce it anyway, and no deed restriction has been broken because none exists.  Lee responds that the issue has been precluded because the covenant has already been upheld.  In Burke v. Kleiman, the parties falsely stipulated that 95% of the residents had signed the covenant.


We didn’t have the class action rule that we have today back in 1940.  Burke purported to represent herself and other property owners in similar situations.  So it was a plaintiffs’ class against an individual defendant.  The Illinois Supreme Court decided that it was indeed a class action and that Hansberry is a member of that class, and thus is bound by the stipulation that 95% of the signatures had been achieved.  But was Hansberry really represented by the plaintiff class in Burke?  No!  There was a problem!  Burke’s class representatives were trying to uphold the restrictive covenant!  They didn’t represent Hansberry’s interests!  They were adverse to his interests!  Justice Stone says that Hansberry is not part of the same class as the Burke class.


This case stands for three things: (1) class members are entitled to adequate representation as a matter of constitutional law as a prerequisite to being bound by class litigation.  (2) Since Hansberry isn’t going to be bound by the ruling in Burke v. Kleiman, he can dispute the factual finding that 95% of the residents signed the covenant.  If you’re not an active participant in the class litigation, you can collaterally attack that litigation to see if you’re really bound by the former class because you were adequately represented by it.   (3) If you are adequately represented, class members are bound by the result of the class litigation.


To what decree are the differences in the classes and the different requirements that the Rules embody creatures of efficiency as opposed to dictated by what the Constitution requires, especially along the lines of notice?


Phillips Petroleum v. Shutts


So we have Phillips Petroleum.  Phillips spews forth oil.  The leaseholds are owned by individuals such as Shutts.  Phillips is trying to screw the little guys by paying them royalties on prices that are too low.  Shutts wants to recover interest on the money that was withheld.  There are 33,000 people in Shutts’s position who get together to sue for the interest the oil company owes.  Shutts sues in Kansas.  None of these people have much interest.  Each of them has a small amount of interest in their interest.  This is a perfect example of class litigation bringing together small claims that are too small to litigate individually.  Shutts provides the best possible notice.  He sends out a letter to all of the class members telling them they can opt-out if they want.  28,100 are in, 3,400 opt out, and 1,500 were not found and excluded.  Less than 1,000 of the plaintiffs are actually in Kansas, and a negligible part of the oil and gas leases are in Kansas.  Phillips makes a personal jurisdiction argument that only the Kansas plaintiffs can sue.  Phillips argues that there has to be an opt-in procedure.


Justice Rehnquist says we don’t need opt-in.  Why?  The issues of personal jurisdiction are not the same when you talk about a class of out-of-state plaintiffs than when you talk about out-of-state defendants.  When you’re a class-action plaintiff, the state may exercise jurisdiction over the claim of an absent class-plaintiff, even though that plaintiff may not have minimum contacts.  But the minimal requirements of due process must be met: there must be notice plus the opportunity to be heard and the ability to opt out.  This later gets built in to Rule 23.


Back to Class Notes