Sunday, November 24, 2013

Shady Grove Orthopedic Assoc. v. Allstate Ins. Co. case brief

Shady Grove Orthopedic Assoc. v. Allstate Ins. Co. case brief summary
130 S.Ct. 1431 (2010)

Petitioner assignee of an insured brought a putative class action against respondent insurer alleging that the insurer routinely refused to pay interest required by statute on overdue insurance benefits. Upon the grant of a writ of certiorari, the assignee appealed the judgment of the U.S. Court of Appeals for the Second Circuit which held that the action was barred by state law precluding class actions to recover statutory penalties.

The assignee contended that a class of insureds could satisfy the prerequisites for a class action under Fed. R. Civ. P. 23, and that the rule overrode the prohibition of class actions to recover penalties under N.Y. C.P.L.R. 901(b) (2006) in the federal action based on diversity of citizenship. The insurer argued that state law precluded the class action from being pursued, regardless of whether the putative class might otherwise be certifiable under Rule 23.


  • The U.S. Supreme Court held that a class action was available in the federal diversity action to recover the statutory interest from the insured. 
  • Rule 23 explicitly provided a categorical rule that a class action could be maintained if the action satisfied the criteria of Rule 23, and the state law limiting the availability of the class action based on the relief sought did not apply under federal diversity jurisdiction. 
  • The line between eligibility to pursue a class action and certifiability of a class was completely artificial, and the nature of the claim asserted or the relief sought had no bearing upon whether class treatment was available under Rule 23.
The judgment barring the class action was reversed, and the case was remanded for further proceedings. 5-4 Decision; 1 concurrence; 1 dissent.

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