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Justice Scalia Supports Class Actions. Justice Ginsburg Doesn't. Really.

Posted  April 2, 2010

Despite a recent federal law that clamps down on class actions, the Supreme Court on Wednesday breathed new life into the viability of some such cases – and in their 70-some pages of opinions, scrambled the Court’s usual ideological lines.

In the case, Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., No. 08-1008, a group of doctors sued an insurance company when it paid an insurance claim late, but refused to pay a $500 penalty for its delay.  The doctors sued in federal court, and they styled their suit as a class action.  New York state law prohibits class actions for penalties unless statutes explicitly allow class actions.  The district court and the Second Circuit held that the New York state law governs, even in federal court.

The Supreme Court, in a 5-4 majority opinion written by Justice Scalia, disagreed.  According to the Court, Federal Rule of Civil Procedure 23 governs all class actions in federal court.  And that rule establishes only four criteria for class actions (numerousity, commonality, typicality, and representation).  According to Justice Scalia, the federal rule therefore trumps the state law, which effectively established a new criteria.  Even if the New York Legislature might have written the law differently, Justice Scalia wrote, “what matters is the law the Legislature did enact.” Joining Justice Scalia were two traditional allies, Chief Justice Roberts and Justice Thomas, and two interesting allies, Justice Stevens and Justice Sotomayor.  (Justice Stevens separately concurred with those other four justices’ second holding that Congress acted within its power when it passed Rule 23.)

The dissent had an equally novel lineup: Justice Ginsburg, writing for the left-leaning Justice Breyer, along with right-leaning Justices Alito and Kennedy.  According to Justice Ginsburg, the majority opinion serves to “transform a $500 case into a $5,000,000 case.”  She reasoned that courts have an obligation to read the federal rules in a way that is sensitive to state substantive law.  Here, she wrote, such a reading is possible, if the New York law is viewed as a limit on remedies.  And if there is no conflict, then under the Supreme Court’s opinion in Erie R. Co. v. Tompkins (1938), the New York law acts as a substantive legal doctrine that federal courts must apply.  The majority’s conclusion, she held, contradicts Congress’s intent in passing the Class Action Fairness Act of 2005, which made it more difficult for plaintiffs to bring class actions.

This decision may or may not make it easier for plaintiffs to bring more class action cases – the opinions don’t discuss how many states have laws prohibiting class actions that, now, could still be brought in federal court.  But the case definitely does not make it easier to predict how the justices will decide cases.  When Justice Scalia tamps down state rights, and Justice Ginsburg protects them, who knows what’s possible?

Tagged in: Antitrust Litigation,

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