Erie, Shady Grove and Rights

The Court recently issued an opinion in the matter of Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Company (available here on Cornell Law's site--unfortunately those of you looking for a Cliff's Notes version will have to wait for the good folks at The Oyez Project to get around to that.) It took nearly five months for the Court to reach a decision on the case and definitively add the longstanding "Erie" doctrine.

The delay was caused by a bitter dispute not over federalism—the original subject of the Erie doctrine—but if the matter actually implicated Federalism at all. As politically contentious as it may sometimes be to agree with Justice Scalia, I have to admit that his straightforward interpretation of the issues at hand won me over, and that I too find the issue to be a simple question of considering legislative intent, rather than of a messy federalism puzzle.

Backing up for those of you who need a quick refresher (I'll admit my not-yet-through-law-school self had to Google "Erie doctrine," the precedent refers to the landmark decision made in 1938 in Erie Railroad Co. v. Tompkins, in which the Court held that substantive state laws still apply to claims that are heard in federal court due to the diversity of state citizenship of the parties involved. (I'd wager a decision intended to deter plaintiffs from filing in federal court with the primary intention of avoiding an unfavorable state law.) This established a key principle relating to federalism: although federal procedural rules dictate federal court proceedings, the substance of state laws is still considered.

In this case, the issue concerned Shady Grove, a chiropractic practice, suing Allstate Insurance Company for the interest on a claim reimbursement that Allstate paid after the deadline. Shady Grove pursued the claim in a class-action lawsuit in which they sought to recover a penalty. New York state law, however, prohibits this type of lawsuit. The defendants argued that this is a substantive law because it has a substantive effect—it creates a substantive "right" for defendants not to be subjected to aggregated class-action liability. As such they maintained that the Erie doctrine prevented the case from going forward. This clashed directly with the federal procedural rule at issue, Rule 23, which explicitly permits class action law suits in federal court. This is clearly a procedural rule, so we oddly meet the conditions specified in Erie: the federal rule dictates procedure, while the state law dictates substantive concerns. Who is right?

In his opinion, Scalia (who I'm sure would twitch at the phrase "created a right") settles the dispute by denying that the state law has substantive merit. In his opinion, he writes that "In sum, it is not the substantive or procedural nature or purpose of the affected state law that matters, but the substantive or procedural nature of the Federal Rule." In short, he negates the notion that the legislature's intended effect in specifying a procedural rule can create a substantive law.This is in line with the Court's inclination to ignore legislative intent.

There have, however, been a few notable exceptions where the Court has considered legislative intent. In considering if this should have been one of them, we have to look at a deeper philosophical question: is it a valid claim that a state law prohibiting an action actually creates a "right" for the citizen to not have to encounter that action?I think that this is legal doublespeak that runs contrary to the fundamental notion of rights—what about you?