Supreme Court Decision Opens Federal Court Doors to More Class Actions
March 31, 2010
In a decision which is expected to open the doors to even more class actions, the Supreme Court ruled on March 31st that class actions which otherwise would be barred or limited by state law may be maintained in federal court under Rule 23 of the Federal Rules of Civil Procedure. At issue in the case, Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., a New York law prohibited recovery of statutory penalties or minimal recoveries as part of the remedy in class action lawsuits. The Shady Grove Plaintiffs sought to get around the state law by bringing their class action in federal court on diversity grounds.
The Supreme Court ruled that the New York law would not apply to their case as the state law must give way to Federal Rule of Civil Procedure 23, even when such a case will be decided based on state law because the federal court is sitting in diversity. Included in the language of the opinion, authored by Justice Scalia, is the sweeping proclamation that “Rule 23 unambiguously authorizes any plaintiff, in any federal civil proceeding, to maintain a class action if the Rules’ prerequisites are met. We cannot contort its text, even to avert a collision with state law that might render it invalid.” (emphasis in original). While the impact of this decision cannot yet be known, it is expected to allow plaintiffs who previously were limited, or even foreclosed from bringing a class action under state law, to be able to seek such treatment in federal court should they be able to meet the requirements of Rule 23 (and the jurisdictional basis to sue in federal court).
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