Class Actions Unconstitutional?

For a more theoretical and mildly controversial read regarding class actions, follow the argument and articles (like the recent article in the February 8, 2010 issue of Forbes) of Northwestern University School of Law Professor Martin Redish, who is now suggesting that Rule 23 may be unconstitutional.

It's not clear whether this argument will gain traction in class action litigation, given the long history of class action litigation, but it may increase interest in the Supreme Court case of Shady Grove Orthopedic Assocs. V. Allstate Ins. Co. (Case No. 08-1008), which was argued earlier this term.

In Shady Grove, the issue is whether a state law prohibiting class actions for certain state law claims can preclude class certification in a federal court diversity action. Resolution of this issue requires a determination whether the state law is substantive or procedural; plaintiff Shady Grove argued that the state law was procedural and that FRCP 23 effectively trumped state procedural rules when the case was brought in federal court, and defendant Allstate argued that the state law was substantive and FRCP 23 could not be invoked when the state has made a substantive policy choice limiting the class action vehicle for certain claims.

Any Supreme Court decision regarding FRCP 23 is closely watched and of interest to class action practitioners, but if the Supreme Court agrees with Allstate (and the Second Circuit which adopted Allstate's position), states may begin adopting statutes which limit the use of class actions to vindicate certain state claims — so FRCP may or may not be unconstitutional, but its use and application may be restricted in future federal diversity cases.


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