March 31, 2010
Win: U.S. Supreme Court Rightly Protects Class Action Filings
Public Citizen Attorney Argued the Case
WASHINGTON, D.C. – The U.S. Supreme Court today protected the use of class action lawsuits to address corporate wrongdoing by deciding that state laws barring class actions cannot trump federal court rules allowing them. The case, Shady Grove Orthopedic Associates v. Allstate Insurance Company, was argued by Public Citizen attorney Scott Nelson.
The decision, written by Justice Antonin Scalia and joined by Chief Justice John Roberts and Justices John Paul Stevens, Clarence Thomas and Sonia Sotomayor, accepted Public Citizen’s argument that federal rules authorize class actions in any case that meets the criteria set by the rules, and that conflicting state laws cannot override the federal rules. As the majority opinion put it, federal procedural standards “create a categorical rule entitling a plaintiff whose suit meets the specified criteria to pursue his claim as a class action,” and that rule “automatically applies” in all cases in federal court, even if a class action would not be allowed in a similar case brought in a state court.
The case ensures that class actions will be available as a means for redress for people who file claims based on state as well as federal law, as long as there is a basis for federal court jurisdiction over the case, Nelson said. Because Congress expanded federal court jurisdiction over class actions in the so-called “Class Action Fairness Act” (CAFA), state efforts to curtail class actions will not be effective for large numbers of cases over which CAFA provides federal jurisdiction.
“The court’s decision is good for those who use class actions as a remedy to corporate wrongdoing,” Nelson said. “The court did the right thing today.”
The case involves a New York law that says that in New York courts, a class action cannot be maintained to seek statutory penalties. The plaintiff class in this case sought to recover interest on late-paid insurance claims as required by a New York statute. If such lawsuits had to be brought on an individual basis, the claims of any one individual would probably not be worth litigating, so New York’s rule barring class actions, if it applied, would effectively have been the death knell for the case.
But because the case was filed in federal court, where, under today’s ruling, the New York class action ban does not apply, the class may now have an effective remedy for the insurance company’s practice of paying claims late without paying the required interest.
Delaware lawyer John Spadaro originally filed the case in federal district court and persuaded the Supreme Court to hear it. He was co-counsel before the Supreme Court.
To read the court’s opinion, visit https://www.citizen.org/sites/default/files/shadygroveopinion.pdf.