U.S. Supreme Court Strikes Down State Limitations Through Use of Federal Class Actions

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In a significant blow to business but a boon for consumers, the Supreme Court ruled yesterday that certain class actions barred or limited by state laws may proceed in federal courts. In Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Company, __ U.S. __ (March 31, 2010) a 5-4 majority, led by Justice Antonin Scalia, the Supreme Court decided that Rule 23 controls when a class-action lawsuit can be filed in federal court, even when such a case in federal court will be decided based on state law. ... Scalia rejected arguments by Allstate and the Second Circuit that Rule 23 and the New York law did not conflict because they addressed different issues. Allstate contended that Rule 23 is procedural, governing whether a class should be certified, while the New York law is substantive, determining whether a particular type of claim is eligible for class treatment. He called the "eligibility-certifiability" distinction "entirely artificial," explaining that both are prerequisites for maintaining a class action.

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