Wednesday, September 15, 2010

SCOTUS Cert Petition of Interest: A Possible Shady Grove Sequel?

Earlier this year, we covered the Supreme Court’s much-anticipated decision in Shady Grove Orthopedic Associates v. Allstate Insurance Co., 130 S. Ct. 1431 (2010), which examined the role of state class-action law in federal court under the Erie doctrine and the Rules Enabling Act (REA). In a 5-4 decision, Shady Grove held that New York state law did not displace Federal Rule of Civil Procedure 23’s framework for deciding whether a class action should be certified. Beyond this basic holding, however, Shady Grove leaves many significant questions unanswered (as I argue in this forthcoming article).

Now pending before the Supreme Court is a petition for certiorari that may be a vehicle for the Supreme Court to confront some of the unresolved issues surrounding Erie and the REA. The case is Medison America, Inc. v. Preferred Medical Systems, LLC (09-1372), and the first question presented is:

“Must a federal court, sitting in diversity and hearing a summary judgment motion, apply state law when state law imposes a higher burden of proof on a movant and preserves the constitutional rights of a nonmovant to a state-created remedy via trial by jury?”

The petitioner in Medison argues that Tennessee law makes it harder for a defendant to obtain summary judgment than the federal summary-judgment standard. The role of state summary-judgment standards in federal court is a classic Erie/REA issue, and it targets two important aspects of Erie/REA that Shady Grove failed to resolve: (1) the proper interpretation of the REA’s requirement that the Federal Rules “shall not abridge, enlarge or modify any substantive right”; and (2) the extent to which a Federal Rule must be read to accommodate state law when its text reasonably allows such a reading, such as when the Rule's text employs an ambiguous standard that can be applied in a manner consistent with state law.

As for the first question, Shady Grove yielded no majority view because Justice Stevens (the tie-breaking fifth vote) wrote separately on the REA, although he ultimately agreed with Justice Scalia’s conclusion that applying Rule 23 in Shady Grove did not violate the REA. Medison would be a particularly interesting vehicle for exploring the REA’s substantive-rights provision, because summary-judgment standards are closely analogous to burdens of proof. Justice Stevens’ Shady Grove concurrence explicitly identified burdens of proof as implicating the kind of substantive rights that the REA protects from interference by the Federal Rules [130 S Ct. at 1450 n.4, 1453 n.9]. Even Justice Scalia recognized that burdens of proof present a “difficult” question under the REA [130 S. Ct. at 1446 n.13].

The second issue is best illustrated by the Supreme Court’s decision in Gasperini v. Center for Humanities, Inc., 518 U.S. 415 (1996). Gasperini held that although Rule 59 governed a post-trial motion to set aside a damage award as excessive, the Erie doctrine required a federal court to apply New York’s standard of review for damage awards, rather than the federal judiciary’s traditional “shocks-the-conscience” test. In Erie parlance, Gasperini indicates that a Federal Rule does not truly “collide” with state law if the Federal Rule’s text is open-ended enough to accommodate state law. Colliding with the federal judiciary’s gloss on a Federal Rule (in Gasperini, the shocks-the-conscience test) is not the same thing as colliding with the Federal Rule itself. Because that judicial gloss is essentially federal common law, the choice between state and federal law is what Hanna called a “relatively unguided Erie choice” that is more likely to opt for state law.

A similar argument could be made in the context of class-certification standards, but it was neither presented nor considered in Shady Grove. That is, even if we accept Shady Grove’s holding that Rule 23 governs class certification in federal court, state law might still displace the federal judiciary’s “common law” on, say, Rule 23(b)(3)’s superiority requirement. Thus a federal court applying Rule 23 in a case like Shady Grove might have to incorporate New York’s view that the danger of remedial overkill makes statutory-damages class actions a bad idea. And federal courts might also have to incorporate state law that is more permissive of class actions; where the class asserts claims arising under such a state’s law, the state’s view that a class action is superior to individual adjudication could legitimately displace the federal judiciary’s more hostile approach.

Medison presents an opportunity for the Supreme Court to squarely confront this issue, because the Erie-meets-summary-judgment question implicates this same line of argument. Even if Rule 56 governs whether summary judgment is appropriate in federal court, the Gasperini argument remains: state law should determine whether a summary-judgment movant has indeed “show[n] that there is no genuine issue as to any material fact.” (If readers are interested, this article addresses this argument in more detail, although it’s from before Shady Grove.)

For more information on Medison, see the Supreme Court’s docket here. Some of the cert. filings are available on Westlaw (the petition is at 2010 WL 1900678 and the petitioner’s reply brief is at 2010 WL 3375619). Medison has been distributed for the Court’s so-called “long Conference” on September 27th.


PS: The second question presented in Medison is also an interesting one:

“Whether the United States Court of Appeals for the Sixth Circuit, applying the holding in Street v. J.C. Bradford & Co., 886 F.2d 1472 (6th Cir. 1989), misinterpreted this Court's decision in Celotex Corp. v. Catrett, 477 U.S. 317 (1986) as authorizing entry of a summary judgment in favor of a party who merely asserts that the nonmovant lacks admissible evidence on an essential element of its claim, i.e. allowing the Respondent to prevail under a ‘put up or shut up’ theory.”

I argue in an earlier article (available here) that the summary-judgment approach exemplified by Street is not a correct reading of Celotex.

Adam Steinman, Federal Courts, Federal Rules of Civil Procedure, Supreme Court Cases | Permalink


Medison - cert. denied October 4, 2010

Posted by: Allison Snyder | Oct 28, 2010 12:05:52 PM

Post a comment