Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.

This case involved whether a New York law forbidding New York courts to certify a class action in a case where the plaintiff seeks a statutory penalty applies in a federal diversity action where the underlying claim is based on New York law. The case arose when a consumer (and the clinic to which she had assigned her right to insurance recoveries) filed an action against Allstate challenging its practice of making late payments on claims, and seeking the statutory interest that New York law requires when a payment is late. The case was filed in federal court because it met the requirements for diversity jurisdiction under the Class Action Fairness Act, but Allstate successfully persuaded the district court and the Second Circuit Court of Appeals to apply the New York procedural rule barring class actions even though Federal Rule of Civil Procedure 23 would not prohibit class certification in such a case.

The plaintiffs’ attorney filed a petition for certiorari, which came to the attention of the SCAP project. The Litigation Group provided advice and assistance to the plaintiffs’ attorney regarding the preparation of a reply in support of the petition, and when the Court granted certiorari, we took the lead role in briefing and arguing the case. In March 2010, the Court issued a 5-4 decision in our favor. In an unusual alignment of Justices (with Scalia, Roberts, Stevens, Thomas and Sotomayor casting the voted in our favor), the Court strongly affirmed that Rule 23 permits class certification in any federal case that meets its criteria, and that it displaces conflicting state procedural rules that would foreclose class certification. The decision will enhance the ability of consumers (particularly New York consumers) to access the federal courts to pursue class remedies in cases where individual litigation may not be practical or affordable.