This report originally appeared in the May 2010 issue of DOTmed Business News

The Supreme Court has handed down a decision that allows a hospital to sue under class-action status to recover interest that accrued on benefits due to the facility. The decision was a 5-4 vote with Justice Antonin Scalia writing the majority opinion. The decision reverses a lower court finding.

In the case of Shady Grove Orthopedic Associates, Penn. v. Allstate Insurance Co., Shady Grove had claimed interest due on overdue benefits with Allstate, which Allstate refused to remit. Shady Grove then filed a class action to recover the interest Allstate owed it and others in its class. The district court had held that by New York law, the court had no jurisdiction because class actions could not be used to recover penalties such as statutory interest. In its brief for the case, Allstate noted that several other states have similar limitations on liability imposed in class action or on the remedy that may be pursued in a class action. To allow the federal rule to supersede those state laws would encourage forum-shopping by plaintiffs, Allstate said.
The Supreme Court considered the question of whether a state procedural law precludes a federal district court from entertaining a class action under the Federal Rule on certifying a class action, which entitles a plaintiff whose suit meets the specified criteria to pursue a claim as a class action. The Court held that the federal rule was superior in this case over the New York procedural law, regardless of effects upon state-created rights. Ultimately, the ruling allows for more class-action suits, which would have been prevented by state procedural rules. In the dissenting opinion, Justice Ruth Bader Ginsberg argued that the majority opinion allowed a $500 case (the amount of interest authorized by the state) to a $5 million dollar case (damages Shady Grove hoped to recover for the class). She said that federal rules should have sensitivity to important state regulatory policies because they involve substantive rights.

More Industry Headlines