61 Pages Posted: 16 Sep 2010 Last revised: 26 Nov 2010
Shady Grove Orthopedic Associates v. Allstate Insurance Co., a closely watched case decided in the 2009-10 Term, presented the Court with an opportunity to speak to two related problems under the Rules Enabling Act that have languished for decades without proper resolution. The first involves a broad interpretive question: How can the limitations on rule-making authority contained in the Act be applied in a manner that reflects the separation-of-powers concerns that animated them while also exhibiting respect for the state regulatory arrangements that govern much of our economic and social activity? The second problem involves the intersection of the Enabling Act with class action practice. After almost half a century of doctrinal development under modern Rule 23, the possibility that the entire endeavor may have unfolded in violation of the Enabling Act seems increasingly compelling, but the consequences of such a conclusion would be so disruptive as to render the conclusion itself unacceptable. Shady Grove called for a restrained and enlightened interpretation of both the Enabling Act and Rule 23, but the Justices did not deliver.
This Article seeks to redeem the missed opportunities of Shady Grove and provide the clarifying accounts of the Enabling Act and Rule 23 that the opinions fail to offer. Building upon past work, we identify the need for a more dynamic approach to the text of Federal Rules than the Court has exhibited - one that recognizes the indeterminacy inherent in prospective rulemaking, the role of federal common law in the interpretation of the Rules, and the role of the Rules in shaping federal common law - and the need to revisit the line between “procedure” and “substance” in light of practical experience and evolving legal norms.
Turning to the status of class action litigation under the Enabling Act, we regard Shady Grove as the occasion for a shift in understanding of the sources and content of aggregation policy. Although some may view the reorientation we propose as radical, it has deep roots in the history of the class action and its treatment under Rule 23, and is consistent with much existing class action practice. The answer to the seeming dilemma caused by Rule 23’s dramatic impact upon substantive liability and regulatory regimes is that Rule 23 is not the source of the aggregate liability policies that generate that impact, and it never has been. Rather, it is the substantive liability and regulatory regimes of state and federal law that courts must look to in determining whether aggregate relief is appropriate and consistent with the goals of that underlying law. Rule 23 is merely the mechanism for carrying an aggregate proceeding into effect when the underlying law supports that result. It is an important mechanism - one that makes its own controlling policy choices for the federal courts about such matters as notice, opportunity to opt out, and immediate appeal of certification. But Rule 23 does not set policy on the propriety of aggregate remedies as a means of accomplishing regulatory goals - and it could not possibly do so. In the dispute that produced Shady Grove, C.P.L.R. § 901(b) set liability policy under New York law. The Court did violence to the Enabling Act when it concluded that Rule 23 could supersede that policy.
Keywords: Federal Rules of Civil Procedure, Federal Rule 23, class actions, complex litigation, The Rules Enabling Act, separation of powers, rulemaking, federal common law, substance versus procedure, private enforcement
Suggested Citation: Suggested Citation
Burbank, Stephen B. and Wolff, Tobias Barrington, Redeeming the Missed Opportunities of Shady Grove. University of Pennsylvania Law Review, Vol. 159, p. 17, 2010; U of Penn Law School, Public Law Research Paper No. 10-31. Available at SSRN: https://ssrn.com/abstract=1677608