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- W345144884 abstract "Since Supreme Court's decision in Railroad Co. v. Tompkins, (1) federal courts have attempted to apply state law and federal law when sitting in diversity. (2) Courts draw this distinction differently depending whether a Federal Rule of Civil Procedure (Federal Rule) with state law. (3) When a court determines that a Federal Rule does not govern a question, it then applies twin aims of Erie test to determine whether state law should apply. (4) This test asks if applying state law is necessary to (1) avoid inequity between in-state and out-of-state litigants, and (2) avoid incentives for forum-shopping. (5) Courts often read a Federal Rule quite narrowly to avoid a conflict with state law. (6) In Sibbach v. Wilson & Co., (7) however, Court held that when a Federal Rule directly conflicts with state law, Federal Rule must govern unless it is facially invalid for conflicting with Rules Enabling Act. (8) The Act authorizes Supreme Court to promulgate rules of procedure for federal courts, with proviso that such rules not abridge, enlarge or modify any substantive right. (9) This limitation has been construed authorizing any federal rule that is arguably (10) without regard for nature of substantive rights that be modified by application of rule in particular cases. Last Term, in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., (11) Supreme Court held that Federal Rules permit a class action suit to go forward in federal court even though it would have been barred in state court. This ruling frustrates important state legislative objectives and exposes defendants to massive liability in diversity suits. The arguably approach is at odds with plain meaning of statute and should be retired. In its place, Court should adopt an as test for determining how Federal Rules apply in diversity suits. Petitioner Shady Grove, a healthcare provider, alleged that Allstate Insurance was routinely late in paying out benefits and refused to pay two-percent monthly interest required by New York law. (12) Shady Grove filed a diversity suit in Eastern District of New York on behalf of itself and a class of all others to whom Allstate owes interest. (13) Under New York Civil Practice Law Section 901(b) (Section 901(b)), a class action may not be maintained to recover a penalty or statutory minimum damages, (14) thus limiting class certification to plaintiffs seeking only actual damages. There is no comparable prohibition in Federal Rule 23, which contains its own, apparently exclusive, criteria for class certification. (15) New York enacted its prohibition out of concern that combining statutory minimum penalties with class action device could lead to annihilating punishment. (16) A common purpose of both statutory penalties and class action device is to incentivize lawsuits that might not otherwise be worth time, effort, or cost; so combining two devices would greatly magnify incentives to sue. Both Eastern District of New York and Second Circuit held that Rule 23 and section 901(b) could be applied simultaneously. According to Second Circuit, New York statute creates a threshold inquiry--whether certain causes of action are even eligible for class treatment--that must be answered before procedural criteria of Rule 23 can be applied. (17) Because court found no conflict between Federal Rule and state statute, court analyzed Section 901(b) under twin aims of Erie test. The obvious conclusion was that a failure to apply New York prohibition class actions seeking penalties would create an enormous incentive for plaintiffs to choose federal forum. (18) In so ruling, Second Circuit followed the overwhelming majority of district courts that have concluded that section 901(b) is a substantive law that must be applied in federal forum, just it is in state court. …" @default.
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- W345144884 date "2011-01-01" @default.
- W345144884 modified "2023-09-26" @default.
- W345144884 title "Federal Procedural Rules Undermine Important State Interests in Shady Grove Orthopedic Associates. P.A. V. Allstate Insurance Co" @default.
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