Shady Grove Orthopedic Associates v. Allstate Insurance Company

Supreme Court of the United States · 2010 · Civil Procedure

559 U.S. 393 (2010)

Updated July 29, 2026

Civil ProcedureErie doctrineFederal Rules of Civil ProcedureClass actionsRules Enabling ActDiversity jurisdictionRule 23FRCP 23

Facts

Shady Grove provided medical care to an insured, received an assignment of the insured's rights to no-fault insurance benefits, and submitted a claim to Allstate. Under New York law, Allstate had 30 days to pay or deny the claim; although it apparently paid the benefits, it refused to pay the statutory interest that accrued because payment was late. Shady Grove then filed a diversity suit seeking that unpaid statutory interest for itself and a class of others allegedly owed similar interest by Allstate. New York law barred class actions to recover certain statutory penalties, and the lower courts treated the statutory interest as such a penalty.

Issue

When a plaintiff files a diversity suit in federal court seeking to proceed as a class action under Federal Rule of Civil Procedure 23, does New York CPLR §901(b), which bars certain claims for statutory penalties from being maintained as class actions, prevent the federal court from allowing the suit to proceed as a class action? If Rule 23 conflicts with §901(b), is Rule 23 valid under the Rules Enabling Act?

Rule

A federal court must first determine whether a Federal Rule answers the question in dispute. If it does, the Federal Rule governs notwithstanding conflicting state law unless the Rule exceeds the Rules Enabling Act or Congress's rulemaking power. A Federal Rule is valid under the Rules Enabling Act if it really regulates procedure, meaning the manner and means by which litigants' rights are enforced, rather than altering substantive rights, available remedies, or rules of decision.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lena Ortiz filed a diversity action in federal court in Chicago against North Harbor Telecom, a fictional wireless provider. Illinois law says claims seeking a statutory penalty under the state's consumer code may not be maintained as class actions, but Lena's proposed class satisfies all of Federal Rule of Civil Procedure 23's requirements.

Should the federal court apply the Illinois class-action bar or Rule 23?

Explanation. Rule 23 directly answers the question whether a suit may be maintained as a class action. A state law saying such claims may not be maintained as class actions answers the same question in the opposite way, so the two conflict. Under the lead opinion, the federal court applies Rule 23 unless the Rule exceeds the Rules Enabling Act or Congress's rulemaking power. Rule 23 is valid because it regulates procedure—the manner in which claims are processed together—not the underlying substantive rights. (Derived from Shady Grove Orthopedic Associates v. Allstate Insurance Company (2010).)