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Supreme Court Paves Way for More Class Action Lawsuits

By Stephanie Robinson

In a decision released on March 31, 2010, the Supreme Court ruled that claims under New York law that could not have been brought as a class action in state court would not be barred if brought in federal court against Allstate Insurance Co, organized under the laws of another state, on behalf of a class of New York residents. Shady Grove Orthopedic Assoc. P.A. v. Allstate Ins. Co., No. 08-1008. Shady Grove?s individual claim was valued at approximately $500. (Shady Grove had claimed that Allstate routinely delayed payment to medical providers and refused to pay interest on those delayed claims.) The value of the case and the cost to defend it as a class action all the way to the Supreme Court likely cost Allstate hundreds of thousands if not a million dollars, and Allstate was on the losing end of the case in Washington, D.C. The Supreme Court majority held that the while the state class action rule would have barred Shady Grove from litigating anything other than its $500.00 claim, this had no bearing on the Federal Class Action Rule, Fed R. Civ P. 23, which did not by its terms bar the purely state law claims from being brought in federal court as a putative class action. Class action suits are protracted, complex and expensive. The case has been sent back to the federal courts in New York for further proceedings. In light of this decision, companies with out-of-state customers should evaluate their business practices with counsel experienced in class action litigation to take steps to avoid the situation in which Allstate now finds itself.

Full post as published by Business and Technology Law on April 02, 2010 (boomark / email).