April 1, 2010

An Erie Decision: Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Company

All nine Supreme Court Justices agree that aggregating statutory damages in a class action can result in “ruinous liability”; that state statutes prohibiting class actions seeking statutory damages can prevent that ruinous liability; and that barring federal courts from enforcing such statutes in diversity cases would not only allow that ruinous liability, but would also create inconsistencies between state and federal courts, which would encourage forum shopping and jurisdictional gaming by those intent on profiting from that ruinous liability. Undeterred, a majority of the Court recently decided that such statutes are procedural in nature and cannot be applied in diversity cases in federal court. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 599 U.S. ---, 130 S. Ct. 1431 (2010).

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