SCOTUS Issues Decision in Shady Grove

The Supreme Court has issued its decision in Shady Grove Orthopedic Associates v. Allstate Insurance, a case making a fresh contribution to the Erie/Hanna line of cases. Here is an excerpt from the Syllabus:

After respondent Allstate refused to remit the interest due under New York law on petitioner Shady Grove’s insurance claim, Shady Grove filed this class action in diversity to recover interest Allstate owed it and others. Despite the class action provisions set forth in Federal Rule of Civil Procedure 23, the District Court held itself deprived of jurisdiction by N. Y. Civ. Prac. Law Ann. §901(b), which precludes a class action to recover a “penalty” such as statutory interest. Affirming, the Second Circuit acknowledged that a Federal Rule adopted in compliance with the Rules Enabling Act, 28 U. S. C. §2072, would control if it conflicted with §901(b), but held there was no conflict because §901(b) and Rule 23 address different issues—eligibility of the particular type of claim for class treatment and certifiability of a given class, respectively. Finding no Federal Rule on point, the Court of Appeals held that §901(b) must be applied by federal courts sitting in diversity because it is “substantive” within the meaning of Erie R. Co. v. Tompkins , 304 U. S. 64 (1938) .

Held: The judgment is reversed, and the case is remanded.

Scalia, J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I and II–A, in which Roberts, C. J., and Stevens, Thomas, and Sotomayor, JJ., joined, an opinion with respect to Parts II–B and II–D, in which Roberts, C. J., and Thomas, and Sotomayor, JJ., joined, and an opinion with respect to Part II–C, in which Roberts, C. J., and , Thomas, J., joined. Stevens, J ., filed an opinion concurring in part and concurring in the judgment. Ginsburg, J., filed a dissenting opinion, in which Kennedy, Breyer, and Alito, JJ., joined.