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

PETITIONER: Shady Grove Orthopedic Associates, P.A.
RESPONDENT: Allstate Insurance Co.
LOCATION:

DOCKET NO.: 08-1008
DECIDED BY: Roberts Court (2009-2010)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 559 US 393 (2010)
GRANTED: May 04, 2009
ARGUED: Nov 02, 2009
DECIDED: Mar 31, 2010

ADVOCATES:
Christopher Landau - argued the cause for the respondent
Scott L. Nelson - argued the cause for the petitioner

Facts of the case

Shady Grove Orthopedics Associates (Shady Grove), on behalf of a class of plaintiffs, sued Allstate Insurance Company (Allstate) in part for Allstate's alleged failure to pay interest penalties on overdue insurance payments as prescribed by New York statute. Allstate moved to dismiss relying on New York's rules of civil procedure which instruct that class action lawsuits are inappropriate unless specifically prescribed by statute. The U.S. District Court for the Eastern District of New York agreed that Shady Grove's class action claim was not authorized and thus dismissed its claim.

On appeal, Shady Grove argued that the New York rules of civil procedure conflict with Rule 23 of the Federal Rules of Civil Procedure and thus were not applicable. The U.S. Court of Appeals for the Second Circuit disagreed with Shady Grove and affirmed the district court. The Second Circuit, reasoning from the Supreme Court's decision in Erie Railroad Co. v. Tomkins, stated that the New York rules of civil procedure did not conflict with Rule 23 and thus Rule 23 did not control.

Question

1) Can a state legislature prohibit federal courts from using a federal class action rule for a state law claim?

2) Can a state legislature dictate civil procedure in federal courts?

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

Audio Transcription for Oral Argument - November 02, 2009 in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.

Audio Transcription for Opinion Announcement - March 31, 2010 in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.

John G. Roberts, Jr.:

Justice Scalia has our opinion this morning in case 081008, Shady Grove Orthopedic Association versus Allstate Insurance.

Antonin Scalia:

This case is here on writ of certiorari to United States Court of Appeals for the Second Circuit.

Now the petitioner Shady Grove Orthopedic Associates provided medical care to Sonia Galvez for injuries she suffered in a car accident.

As partial payment for that care, Galvez assigned to Shady Grove her rights to insurance benefits under a policy issued in New York by respondent Allstate Insurance.

Shady Grove tendered a claim for the benefits to Allstate.

Allstate eventually paid, but not within 30 days as required by New York law and it refused to pay Shady Grove statutory interest that accrued on overdue benefits.

Shady Grove filed this diversity suit in the Eastern District of New York, seeking relief for itself and a class of all others to whom Allstate allegedly owes interest on overdue benefits.

The district court concluded that it could not certify Allstate’s proposed class whether or not the class satisfied Federal Rule of Civil Procedure 23, which prescribes the requirements for class actions.

Because New York Civil Practice Law Section 901-B provides in pertinent part that absent specific statutory authorization “an action to receive a penalty may not be maintained as a class action.”

Concluding that the statutory interest Shady Grove sought is a penalty, the District Court dismissed the suit for lack of jurisdiction, since Shady Grove's claim alone not gummed in with the class action, fell far short of the amount of controversy requirement for diversity suits in federal court, visor is glazed over already.[Laughter]

The Second Circuit affirmed.

We granted certiorari and now reverse the judgment of the Second Circuit.

When a Federal rule of procedure promulgated pursuant to Congress’ authorization in the Rules Enabling Act answers the question in dispute, the Federal rule controls unless it exceeds the enabling act's authorization or Congress’ rule making power.

In the opinion of the Court filed with the clerk today, we hold that Federal Rule 23 answers the question here in dispute, whether Shady Grove suit may proceed as a class action.

Rule 23 states that “a class action may be maintained” if Rule 23’s criteria are satisfied and if the suit fits into one of the categories described in Rule 23-B.

Because New York Civil Practice Law Section 901-B attempts to answer the same question, it says Shady Grove suit may not be maintained as a class action because of the relief it seeks, it cannot apply in diversity suits unless Rule 23 is ultra vires.

The Second Circuit held and Allstate argues that Rule 23 and 901-B do not conflict because they address different issues.

Rule 23 they say, addresses whether a given class should be certified while 901-B addresses the antecedent question of whether a particular type of claim is eligible for class treatment at all.

We disagree.

This eligibility, certifiability distinction is entirely artificial.

Both eligibility and certifiability amount to prerequisites for maintaining the class action.

Allstate argues that we should read Rule 23 to avoid overstepping the Rules Enabling Act.

If Rule 23 were susceptible of two readings, one that violated the act and one that did not, we would agree, but it is not.

So we must confront head-on whether Rule 23 validly applies.

A majority of the Court concludes that it does though not all, not all five of that majority for the same reason.

In the plurality opinion, are you with me, [Laughter] in the plurality opinion joined in full by the Chief Justice and Justice Thomas and joined in part by Justice Sotomayor, we hold that Rule 23 is valid because it regulates procedure.

The liberty of a federal rule of procedure is not governed by Erie, Erie Railroad versus Tomkins which applies only to judge made rules, but rather by the Rules Enabling Act.

That act allows this Court to promulgate rules of procedure for the federal courts with the limitation that those rules quote “shall not abridge, enlarge or modify any substantive right.

We held nearly 70 years ago in Sibbach versus Wilson and Company that this limitation means that a federal rule “must really regulate procedure,” that is the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of.”

We have applied that test ever since.