US Supreme Court Supports Class Actions

Posted on: June 24th, 2010 by Steve Larson
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The conventional wisdom is that the US Supreme Court is anti-class action.  However, recent case law suggests otherwise.

A recent example is a proposed class action called Shady Grove Orthopedic Associates, P.A., Petitioner  v. Allstate Insurance Company, 130 S.Ct 1431 (2010).  In that case, the putative class representative, a medical care facility, alleged that Allstate had a routine practice of paying bills late and not paying interest.  Allstate countered by citing a New York state law which prohibits class actions in New York courts whenever those bringing the lawsuit seek a “penalty”- in this case, the recovery of interest –unless the law that creates the penalty specifically allows class actions.  Although the case was before a federal court, Allstate argued that this New York procedural rule should apply rather than the federal court rules that permit class actions.

The district court and appeals court both held in favor of Allstate, saying that the state anti­class-action rule applied in the federal courts.

In March, the U.S. Supreme Court, in a 5-4 decision, held that state procedural rules barring class-action lawsuits cannot trump federal court rules allowing them.  Public Citizen attorney Scott Nelson argued on behalf of Shady Grove before the Supreme Court.  “The Supreme Court’s ruling supported people who use class­ action lawsuits to remedy corporate wrongdoing,” Nelson said. “The court did the right thing.”

The decision is important because it strongly affirms that the federal rules that authorize class actions are presumed to apply to any type of case in federal court.