Monday, December 20, 2010
Now in print (and available here) is Redeeming the Missed Opportunities of Shady Grove, 159 U. Penn. L. Rev. 17 (2010), by Professors Stephen Burbank (Pennsylvania) and Tobias Wolff (Pennsylvania). The article begins:
Few subjects in the field of Procedure are characterized by greater legal abstraction than the collection of doctrines that govern the relationship between the federal and state courts. The grand experiment by which the drafters of the Constitution “split the atom of sovereignty,” as Justice Kennedy memorably put it, has not always produced readily administrable doctrines for the actual business of running parallel and overlapping judicial systems. The Court’s efforts to harmonize the operation of those systems through the Erie doctrine and its interpretations of the Rules Enabling Act—the statute that both authorizes and limits the Federal Rules of Civil Procedure—have been most successful when undertaken with an informed awareness of social dynamics and consequences. But successful harmonization of the judicial systems has been the exception, not the rule.
Two related problems under the Enabling Act cry out for pragmatism informed by both knowledge of history and realism about contemporary conditions, but have languished for decades without proper resolution. The first involves a broad interpretive question: how can the limitations on rulemaking authority contained in the Act be applied in a manner that reflects the separation-of-powers concerns that animated them while also exhibiting respect for the state regulatory arrangements that govern much of our economic and social activity? The Supreme Court has not yet provided a useful answer to that question. Instead, it has often relied on a rigid formalism that creates perverse incentives, leading the Court to give some Federal Rules implausibly broad interpretations in order to apply federal law while emptying others of content in order to avoid an Enabling Act challenge.
The second problem involves the intersection of the Enabling Act with class action practice: following the 1966 amendments to Federal Rule of Civil Procedure 23 and the ascendance of the class action to a position of central importance in the enforcement of many regulatory policies, how can Rule 23 be squared with any reasonable account of the Enabling Act’s prohibition against rules that abridge, enlarge, or modify substantive rights? The prospect of class certification is the single most important factor in the dynamics of litigation or settlement in any proceeding in which class treatment is on the table. Certification can transform unenforceable negative-value claims into an industry-changing event and dramatically alter the litigation or settlement value of high-stakes individual claims. After almost half a century of doctrinal development under modern Rule 23, the possibility that the entire endeavor may have unfolded in violation of the Enabling Act seems increasingly compelling, but the disruptive consequences of such a conclusion would be unacceptable.
Shady Grove Orthopedic Associates v. Allstate Insurance Co., a closely watched case decided in the 2009–10 Term, presented the Supreme Court of the United States with an opportunity to speak to both issues. Shady Grove was a federal diversity case involving a potential conflict between a provision of New York law that prohibits the award of penalties or statutory damages on a classwide basis unless expressly authorized, and Federal Rule 23, which broadly authorizes federal courts to certify, manage, and hear class action proceedings. Sadly, the case shed little light. In a fractured opinion written for a divided Court, Justice Scalia held that Rule 23 displaced New York’s law on the issue of classwide penalty liability. In the portion of his opinion that spoke for a majority, Justice Scalia offered an interpretation of Rule 23 that found a conflict with New York law where none need exist. And when speaking for a plurality, he provided an account of federal and state policies on aggregate litigation that ignored the practical realities of the modern class action and the animating impulses behind it, an account that more accurately reflects class action practice in 1938 than in 2010. There are some valid insights in the plurality opinion dealing with the proper interpretive approach to the Enabling Act, but they are eclipsed by oversimplification and overwhelmed by the tide of confusion that characterizes the rest of the opinion. Shady Grove called for a restrained and enlightened interpretation of both the Enabling Act and Rule 23, but the Justices did not deliver.