Federal Class Actions: A Near-Death Experience in a Shady Grove
36 Pages Posted: 23 Jan 2013
Date Written: December 31, 2010
In a significant appeal decided March 31, 2010 ― and largely ignored by the media ― a plurality of Supreme Court Justices in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co. rescued federal class actions from withering demise at the hands of the states. The media is to be forgiven for its neglect, however, as Shady Grove turned on a nuanced Erie problem, a jurisprudential doctrine that defies witty sound bites and easy summarization. Even Justice Scalia, delivering the plurality opinion to a Supreme Court audience, noted: “Eyes have glazed over already.”
The Court decided that Federal Rule of Civil Procedure 23 takes precedence in federal diversity class actions and preempts state statutory provisions that limit class litigation. Shady Grove is muddled, however, by an array of decisions running nearly forty-two pages in length, with Justices joining and concurring in various parts. One needs a scorecard to tally doctrinal positions. Moreover, Shady Grove resulted in an unusual alignment of Justices that defied ideological predispositions and stereotypes. Justice Sotomayor joined conservative Chief Justice Roberts and Justices Scalia and Thomas to save the federal class action, while Justice Alito joined liberal dissenting Justices Kennedy, Ginsburg, and Breyer in support of state prerogative.
There is no majority opinion in Shady Grove. The Court split 4-1-4, with the departing Justice Stevens's concurrence supplying the pivotal vote in support of Rule 23. Justice Stevens's concurrence, however, simultaneously disagrees with Scalia's opinion and agrees with Ginsburg's dissent, further mystifying Erie doctrine.
As a policy matter, the Court's decision in Shady Grove will have a wide-ranging impact on the future of class action litigation in both federal and state courts. In essence, a slim plurality of the Supreme Court saved the federal class action from death by a thousand cuts through state-limiting provisions on class litigation. The Justices recognized that their decision will encourage class action federal forum shopping to evade states with existing statutory limits on class litigation. Justice Ginsburg noted the irony inherent in the Court's decision, which undermined congressional intent in enacting the Class Action Fairness Act of 2005 (“CAFA”) while saving the federal class action. As a matter of Erie jurisprudence, the Court splintered on Erie principles and muddied the already murky swamp of Erie doctrine. Shady Grove is destined to become a classic “teaching case” in law schools that will perplex professors and law students alike.
Keywords: Shady Grove, Federal Class Actions, Federal Rule 23, Pre-emption, State Class Actions, Supreme Court
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