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Wednesday, August 25, 2010

Supreme Court Holds That Rule 23 Preempts State Anti-Class Action Laws

I presented this case in a seminar in the Spring, but never posted it to the blog. Mea culpa.

In Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 130 S.Ct. 1431 (U.S., March 31, 2010), a medical provider brought a putative class action against an automobile insurer, alleging breach of contract, bad faith breach of contract, and violation of New York law in failing to pay statutory interest and penalties on overdue payments of insurance benefits owed under no-fault automobile insurance policies. The district court granted the insurer's motion to dismiss and the plaintiffs appealed. The Court of Appeals for the Second Circuit affirmed, and the Supreme Court granted certiorari.

A plurality of the Court, per Justice Scalia, held:
  1. New York law prohibiting class actions in suits seeking penalties or statutory minimum damages conflicted with Federal Rule of Civil Procedure governing class actions, and
  2. Federal Rule of Civil Procedure 23 is valid under the Federal Rules Enabling Act. 28 U.S.C.A. § 2072(b).

The full text of the opinion is here.

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