JURIST - Paper Chase: Supreme Court rules states cannot limit federal class action suits

[JURIST] The US Supreme Court [official website; JURIST news archive] on Wednesday ruled [opinion, PDF] 5-4 in Shady Grove Orthopedic Associates v. Allstate Insurance Co. [Cornell LII backgrounder; JURIST report] that a state legislature cannot prohibit the federal courts from using the class action device for state law claims. The US Court of Appeals for the Second Circuit ruled [opinion, PDF] that the state law was substantive and could be applied in federal court, upholding a lower court's dismissal of the suit. In reversing the decision below, Justice Antonin Scalia wrote for a divided court:

The short of the matter is that a Federal Rule governing procedure is valid whether or not it alters the outcome of the case in a way that induces forum shopping. To hold otherwise would be to "disembowel either the Constitution's grant of power over federal procedure" or Congress's exercise of it.

Justice John Paul Stevens filed an opinion concurring in part and concurring in the judgment. Justice Ruth Bader Ginsburg filed a dissenting opinion, in which Justices Anthony Kennedy, Stephen Breyer, and Samuel Alito joined.

Shady Grove Orthopedic Associates filed a class action lawsuit against Allstate Insurance Co. [corporate websites] in federal court. The issue was whether a New York state law, which prohibits a lawsuit seeking a statutory penalty from being brought as a class action, is substantive or procedural under the Erie doctrine [backgrounder].