Petitioner brought a class action against Respondent for failure to pay interest on overdue benefits.
A federal rule of civil procedure is valid and enforceable under diversity jurisdiction if it regulates procedure, regardless of incidental effects on state-created rights.
Shady Grove Orthopedic Assocs. (Petitioner) brought a class action against Allstate Insurance Co. (Respondent) in the Eastern District of New York under diversity jurisdiction. Petitioner sought compensation for the interest Respondent routinely refused to pay on overdue benefits.
May Petitioner bring a class action under Rule 23, despite New York Law § 901(b)?
Yes, New York Law § 901(b) cannot prohibit a federal court, under diversity jurisdiction, from maintaining a class action under Rule 23. The lower court’s opinion is reversed and remanded.
Justice Ginsburg argued that the Court eroded Erie Railroad Co. v. Tompkins. She argued that New York Law §901(b) was not merely procedural but had a strong substantive policy, and Rule 23 should not override its restriction on damages.
Justice Stevens agreed with the application of Rule 23 in this case, but disagreed with Justice Scalia’s determination that the substantive nature of state laws would make no difference in a case.
The Court first determined that certification under Rule 23 and New York Law § 901(b) could not be reconciled, as both were procedural, one permitting and the other prohibiting Petitioner’s class action. The Court next determined that the certification of class actions under Rule 23 was valid under the Rules Enabling Act and could not be limited by state law. Under the Rules Enabling Act, procedural rules are valid so long as they govern the manner and means of enforcing rights, and do not alter individual rights, available remedies, or the rules of decision employed by the court. Applying this criterion, Rule 23 was valid because it affected only the number of claims and parties before the court.