In a surprising turn for a court known for its pro-business views, the U.S. Supreme Court recently ruled that some class actions may be pursued in federal courts even if they have been procedurally barred in state court.
Writing for the 5-4 majority in Shady Grove Orthopedic Associates v. Allstate Insurance Co., Justice Antonin Scalia, who is not usually known as a defender of class actions, argued that federal law that allows class actions takes precedence over a New York state law that had banned a particular type of class action.
“What is newsworthy about this case is you have a divided opinion, led by Justice Scalia, that gives quite a bit of breathing room for class actions in federal court. It’s the opposite of what you would have expected,” said Todd Seaver, a partner in Berman DeValerio’s San Francisco office.
The minutiae of the case center around rules of civil procedure – specifically, the federal class action Rule 23. Shady Grove Orthopedic Associates had originally sued Allstate Insurance in New York state court to recover overdue interest payments on benefits. The class action was filed on behalf of the medical practice and at least 100 others.
But a federal district court threw out the suit because of a New York state law that prohibits class actions that aim to recover a “penalty,” such as the interest payments in question.
As many as two dozen other states have similar laws that limit class actions, Seaver said. The Supreme Court’s March 31 decision could help many future antitrust and consumer lawsuits get through the courthouse door as class actions.
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.