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Two Key Cases Governing Class Action Litigation

TGCFReport
09.01.10

On March 31, the U.S. Supreme Court decided Shady Grove Orthopedic Associates v. Allstate Insurance Co. The court held that Federal Rule of Civil Procedure 23 — deemed by the opinion as the “one-size-fits-all formula for deciding the class-action question” — prevails over state laws that would otherwise limit a plaintiff’s option of filing a claim as a class action.

Many state legislatures, including Texas’, pass laws creating statutory causes of action but then add provisions that prevent filing the claim as a class action. One Texas law, for example, creates a statutory consumer claim against a company that fails to timely provide customer rebates in the manner described by the company’s offer. Another regulates commercial e-mail solicitation. Both of these statutes also prevent plaintiffs from filing their claims as state class actions.

Under the Shady Grove decision, the same claims that the Texas Legislature determined should not be eligible as state class actions are now, nevertheless, subject to becoming federal class actions. That assumes, of course, that other federal procedural requirements are met, including the requirement that the amount in controversy exceeds $75,000 and that the litigants be diverse, i.e., citizens of different states.

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