Justice SCALIA announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I and II-A, an opinion with respect to Parts II-B and II-D, in which THE CHIEF JUSTICE, Justice THOMAS, and Justice SOTOMAYOR join, and an opinion with respect to Part II-C, in which THE CHIEF JUSTICE and Justice THOMAS join.
New York law prohibits class actions in suits seeking penalties or statutory minimum damages.
The petitioner's complaint alleged the following: Shady Grove Orthopedic Associates, P. A., provided medical care to Sonia E. Galvez for injuries she suffered in an automobile accident. As partial payment for that care, Galvez assigned to Shady Grove her rights to insurance benefits under a policy issued in New York by Allstate Insurance Co. Shady Grove tendered a claim for the assigned benefits to Allstate, which under New York law had 30 days to pay the claim or deny it. See N.Y. Ins. Law Ann. § 5106(a) (West 2009). Allstate apparently paid, but not on time, and it refused to pay the statutory interest that accrued on the overdue benefits (at two percent per month), see ibid.
Shady Grove filed this diversity suit in the Eastern District of New York to recover the unpaid statutory interest. Alleging that Allstate routinely refuses to pay interest on overdue benefits, Shady Grove
The Second Circuit affirmed. 549 F.3d 137 (2008). The court did not dispute that a federal rule adopted in compliance with the Rules Enabling Act, 28 U.S.C. § 2072, would control if it conflicted with § 901(b). But there was no conflict because (as we will describe in more detail below) the Second Circuit concluded that Rule 23 and § 901(b) address different issues. Finding no federal rule on point, the Court of Appeals held that § 901(b) is "substantive" within the meaning of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 S.Ct. 1188 (1938), and thus must be applied by federal courts sitting in diversity.
We granted certiorari, ___ U.S. ___, 129 S.Ct. 2160, 173 L.Ed.2d 1155 (2009).
The framework for our decision is familiar. We must first determine whether Rule 23 answers the question in dispute. Burlington Northern R. Co. v. Woods, 480 U.S. 1, 4-5, 107 S.Ct. 967, 94 L.Ed.2d 1 (1987). If it does, it governs—New York's law notwithstanding—unless it exceeds statutory authorization or Congress's rulemaking power. Id. at 5, 107 S.Ct. 967; see Hanna v. Plumer, 380 U.S. 460, 463-464, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). We do not wade into Erie's murky waters unless the federal rule is inapplicable or invalid. See 380 U.S. at 469-471, 85 S.Ct. 1136.
The question in dispute is whether Shady Grove's suit may proceed as a class action. Rule 23 provides an answer. It states that "[a] class action may be maintained" if two conditions are met: The suit must satisfy the criteria set forth in subdivision (a) (i.e., numerosity, commonality, typicality, and adequacy of representation), and it also must fit into one of the three categories described in subdivision (b). Fed. Rule Civ. Proc. 23(b). By its terms this creates a categorical rule entitling a plaintiff whose suit meets the specified criteria to pursue his claim as a class action. (The Federal Rules regularly use "may" to confer categorical permission, see, e.g., Fed. Rules Civ. Proc. 8(d)(2)-(3), 14(a)(1), 18(a)-(b), 20(a)(1)-(2), 27(a)(1), 30(a)(1), as do federal statutes that establish procedural entitlements, see, e.g., 29 U.S.C. § 626(c)(1); 42 U.S.C. § 2000e-5(f)(1).) Thus, Rule 23 provides a one-size-fits-all formula for deciding the class-action question. Because § 901(b) attempts to answer the same question—i.e., it states that Shady Grove's suit "may not be maintained as a class action" (emphasis added) because of the relief it seeks—it cannot apply in diversity suits unless Rule 23 is ultra vires.
We disagree. To begin with, the line between eligibility and certifiability is entirely artificial. Both are preconditions for maintaining a class action. Allstate suggests that eligibility must depend on the "particular cause of action" asserted, instead of some other attribute of the suit, id. at 12. But that is not so. Congress could, for example, provide that only claims involving more than a certain number of plaintiffs are "eligible" for class treatment in federal court. In other words, relabeling Rule 23(a)'s prerequisites "eligibility criteria" would obviate Allstate's objection—a sure sign that its eligibility-certifiability distinction is made-to-order.
There is no reason, in any event, to read Rule 23 as addressing only whether claims made eligible for class treatment by some other law should be certified as class actions. Allstate asserts that Rule 23 neither explicitly nor implicitly empowers a federal court "to certify a class in each and every case" where the Rule's criteria are met. Id. at 13-14. But that is exactly what Rule 23 does: It says that if the prescribed preconditions are satisfied "[a] class action may be maintained" (emphasis added)—not "a class action may be permitted." Courts do not maintain actions; litigants do. The discretion suggested by Rule 23's "may" is discretion residing in the plaintiff: He may bring his claim in a class action if he wishes. And like the rest of the Federal Rules of Civil Procedure, Rule 23 automatically applies "in all civil actions and proceedings in the United States district courts," Fed. Rule Civ. Proc. 1. See Califano v. Yamasaki, 442 U.S. 682, 699-700, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979).
Allstate points out that Congress has carved out some federal claims from Rule 23's reach, see, e.g., 8 U.S.C. § 1252(e)(1)(B)—which shows, Allstate contends, that Rule 23 does not authorize class actions for all claims, but rather leaves room for laws like § 901(b). But Congress, unlike New York, has ultimate authority over the Federal Rules of Civil Procedure; it can create exceptions to an individual rule as it sees fit—either by directly amending the rule or by enacting a separate statute overriding it in certain instances. Cf. Henderson v. United States, 517 U.S. 654, 668, 116 S.Ct. 1638, 134 L.Ed.2d 880 (1996). The fact that Congress has created specific exceptions to Rule 23 hardly proves that the Rule does not apply generally. In fact, it proves the opposite. If Rule 23 did not authorize class actions across the board, the statutory exceptions would be unnecessary.
Allstate next suggests that the structure of § 901 shows that Rule 23 addresses only certifiability. Section 901(a), it notes, establishes class-certification criteria roughly analogous to those in Rule 23 (wherefore it agrees that subsection is preempted). But § 901(b)'s rule barring class actions for certain claims is set off as its own subsection, and where it applies § 901(a) does not. This shows, according to Allstate, that § 901(b) concerns a separate subject. Perhaps it does concern a subject separate from the subject of § 901(a). But the question before us is
The dissent argues that § 901(b) has nothing to do with whether Shady Grove may maintain its suit as a class action, but affects only the remedy it may obtain if it wins. See post at 1464-1469 (opinion of GINSBURG, J.). Whereas "Rule 23 governs procedural aspects of class litigation" by "prescrib[ing] the considerations relevant to class certification and postcertification proceedings," § 901(b) addresses only "the size of a monetary award a class plaintiff may pursue." Post at 1465-1466. Accordingly, the dissent says, Rule 23 and New York's law may coexist in peace.
We need not decide whether a state law that limits the remedies available in an existing class action would conflict with Rule 23; that is not what § 901(b) does. By its terms, the provision precludes a plaintiff from "maintain[ing]" a class action seeking statutory penalties. Unlike a law that sets a ceiling on damages (or puts other remedies out of reach) in properly filed class actions, § 901(b) says nothing about what remedies a court may award; it prevents the class actions it covers from coming into existence at all.
The dissent asserts that a plaintiff can avoid § 901(b)'s barrier by omitting from his complaint (or removing) a request for statutory penalties. See post at 1467-1468. Even assuming all statutory penalties are waivable,
The dissent all but admits that the literal terms of § 901(b) address the same subject as Rule 23—i.e., whether a class action may be maintained—but insists the provision's purpose is to restrict only remedies. See post at 1466-1468; post at 1467 ("[W]hile phrased as responsive to the question whether certain class actions may begin, § 901(b) is unmistakably aimed at controlling how those actions must end"). Unlike Rule 23, designed to further procedural fairness and efficiency, § 901(b) (we are told) "responds to an entirely different concern": the fear that allowing statutory damages to be awarded on a class-wide basis would "produce overkill." Post at 1466, 1464 (internal quotation marks omitted). The dissent reaches this conclusion on the basis of (1) constituent concern recorded in the law's bill jacket; (2) a commentary suggesting that the Legislature "apparently fear[ed]" that combining class actions and statutory penalties "could result in annihilating punishment of the defendant," V. Alexander, Practice Commentaries, C901:11, reprinted in 7B McKinney's Consolidated Laws of New York Ann., p. 104 (2006) (internal quotation marks omitted); (3) a remark by the Governor in his signing statement that § 901(b) "`provides a controlled remedy,'" post at 1464 (quoting Memorandum on Approving L. 1975, Ch. 207, reprinted in 1975 N.Y. Laws, at 1748; emphasis deleted), and (4) a state court's statement that the final text of § 901(b) "`was the result of a compromise among competing interests,'" post at 1464 (quoting Sperry v. Crompton Corp., 8 N.Y.3d 204, 211, 831 N.Y.S.2d 760, 863 N.E.2d 1012, 1015 (2007)).
This evidence of the New York Legislature's purpose is pretty sparse. But even accepting the dissent's account of the Legislature's objective at face value, it cannot override the statute's clear text. Even if its aim is to restrict the remedy a plaintiff can obtain, § 901(b) achieves that end by limiting a plaintiff's power to maintain a class action. The manner in which the law "could have been written," post at 1472, has no bearing; what matters is the law the Legislature did enact. We cannot rewrite that to reflect our perception of legislative purpose, see Oncale v. Sundowner Offshore Services, Inc., 523 U.S. 75, 79-80, 118 S.Ct. 998, 140 L.Ed.2d 201 (1998).
The dissent's approach of determining whether state and federal rules conflict based on the subjective intentions of the
But while the dissent does indeed artificially narrow the scope of § 901(b) by finding that it pursues only substantive policies, that is not the central difficulty of the dissent's position. The central difficulty is that even artificial narrowing cannot render § 901(b) compatible with Rule 23. Whatever the policies they pursue, they flatly contradict each other. Allstate asserts (and the dissent implies, see post at 1461, 1465-1466) that we can (and must) interpret Rule 23 in a manner that avoids overstepping its authorizing statute.
Erie involved the constitutional power of federal courts to supplant state law with judge-made rules. In that context, it made no difference whether the rule was technically one of substance or procedure; the touchstone was whether it "significantly affect[s] the result of a litigation." Guaranty Trust Co. v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 89 S.Ct. 2079 (1945). That is not the test for either the constitutionality or the statutory validity of a Federal Rule of Procedure. Congress has undoubted power to supplant state law, and undoubted power to prescribe rules for the courts it has created, so long as those rules regulate matters "rationally capable of classification" as procedure. Hanna, 380 U.S. at 472, 85 S.Ct. 1136. In the Rules Enabling Act, Congress authorized this Court to promulgate rules of procedure subject to its review, 28 U.S.C. § 2072(a), but with the limitation that those rules "shall not abridge, enlarge or modify any substantive right," § 2072(b).
We have long held that this limitation means that the Rule must "really regulat[e] procedure,—the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them," Sibbach, 312 U.S. at 14, 61 S.Ct. 422; see Hanna, supra at 464, 85 S.Ct. 1136; Burlington, 480 U.S. at 8, 107 S.Ct. 967. The test is not whether the rule affects a litigant's substantive rights; most procedural rules do. Mississippi Publishing Corp. v. Murphree, 326 U.S. 438, 445, 66 S.Ct. 242, 90 S.Ct. 185 (1946). What matters is what the rule itself regulates: If it governs only "the manner and the means" by which the litigants' rights are "enforced," it is valid; if it alters "the rules of decision by which [the] court will adjudicate [those] rights," it is not. Id. at 446, 66 S.Ct. 242 (internal quotation marks omitted).
Applying that test, we have rejected every statutory challenge to a Federal Rule that has come before us. We have found to be in compliance with § 2072(b) rules prescribing methods for serving process, see id. at 445-446, 66 S.Ct. 242 (Fed. Rule Civ. Proc. 4(f)); Hanna, supra at 463-465, 85 S.Ct. 1136 (Fed. Rule Civ. Proc. 4(d)(1)), and requiring litigants whose mental or physical condition is in dispute to submit to examinations, see Sibbach, supra at 14-16, 61 S.Ct. 422 (Fed. Rule Civ. Proc. 35); Schlagenhauf v. Holder,
Applying that criterion, we think it obvious that rules allowing multiple claims (and claims by or against multiple parties) to be litigated together are also valid. See, e.g., Fed. Rules Civ. Proc. 18 (joinder of claims), 20 (joinder of parties), 42(a) (consolidation of actions). Such rules neither change plaintiffs' separate entitlements to relief nor abridge defendants' rights; they alter only how the claims are processed. For the same reason, Rule 23—at least insofar as it allows willing plaintiffs to join their separate claims against the same defendants in a class action—falls within § 2072(b)'s authorization. A class action, no less than traditional joinder (of which it is a species), merely enables a federal court to adjudicate claims of multiple parties at once, instead of in separate suits. And like traditional joinder, it leaves the parties' legal rights and duties intact and the rules of decision unchanged.
Allstate contends that the authorization of class actions is not substantively neutral: Allowing Shady Grove to sue on behalf of a class "transform[s][the] dispute over a five hundred dollar penalty into a dispute over a five million dollar penalty." Brief for Respondent 1. Allstate's aggregate liability, however, does not depend on whether the suit proceeds as a class action. Each of the 1,000-plus members of the putative class could (as Allstate acknowledges) bring a freestanding suit asserting his individual claim. It is undoubtedly true that some plaintiffs who would not bring individual suits for the relatively small sums involved will choose to join a class action. That has no bearing, however, on Allstate's or the plaintiffs' legal rights. The likelihood that some (even many) plaintiffs will be induced to sue by the availability of a class action is just the sort of "incidental effec[t]" we have long held does not violate § 2072(b), Mississippi Publishing, supra at 445, 66 S.Ct. 242.
Allstate argues that Rule 23 violates § 2072(b) because the state law it displaces, § 901(b), creates a right that the Federal Rule abridges—namely, a "substantive right . . . not to be subjected to aggregated class-action liability" in a single suit. Brief for Respondent 31. To begin with, we doubt that that is so. Nothing in the text of § 901(b) (which is to be found in New York's procedural code) confines it to claims under New York law; and of course New York has no power to alter substantive rights and duties created by other sovereigns. As we have said, the consequence of excluding certain class actions may be to cap the damages a defendant can face in a single suit, but the law itself alters only procedure. In that respect, § 901(b) is no different from a state law forbidding simple joinder. As a fallback argument, Allstate argues that even if § 901(b) is a procedural provision, it was enacted "for substantive reasons," id. at 24 (emphasis added). Its end was not to improve "the conduct of the litigation process itself" but to alter "the outcome of that process." Id. at 26.
Hanna unmistakably expressed the same understanding that compliance of a Federal Rule with the Enabling Act is to be assessed by consulting the Rule itself, and not its effects in individual applications:
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. We have held since Sibbach, and reaffirmed repeatedly, that the validity of a Federal Rule depends entirely upon whether it regulates procedure. See Sibbach, supra at 14, 61 S.Ct. 422; Hanna, supra at 464, 85 S.Ct. 1136; Burlington, 480 U.S. at 8, 107 S.Ct. 967. If it does, it is authorized by § 2072 and is valid in all jurisdictions, with respect to all claims, regardless of its incidental effect upon state-created rights.
A few words in response to the concurrence. We understand it to accept the framework we apply—which requires first, determining whether the federal and state rules can be reconciled (because they answer different questions), and second, if they cannot, determining whether the Federal Rule runs afoul of § 2072(b). Post at 1450-1452 (STEVENS, J., concurring in part and concurring in judgment). The concurrence agrees with us that Rule 23 and § 901(b) conflict, post at 1456-1457 and departs from us only with respect to the second part of the test, i.e., whether application of the Federal Rule violates § 2072(b), post at 1451-1455. Like us, it answers no, but for a reason different from ours. Post at 1457-1460.
The concurrence would decide this case on the basis, not that Rule 23 is procedural, but that the state law it displaces is procedural, in the sense that it does not
This analysis squarely conflicts with Sibbach, which established the rule we apply. The concurrence contends that Sibbach did not rule out its approach, but that is not so. Recognizing the impracticability of a test that turns on the idiosyncrasies of state law, Sibbach adopted and applied a rule with a single criterion: whether the Federal Rule "really regulates procedure." 312 U.S. at 14, 61 S.Ct. 422.
In reality, the concurrence seeks not to apply Sibbach, but to overrule it (or, what is the same, to rewrite it). Its approach, the concurrence insists, gives short shrift to the statutory text forbidding the Federal Rules from "abridg[ing], enlarg[ing], or modify[ing] any substantive right," § 2072(b). See post at 1452-1453. There is something to that. It is possible to understand how it can be determined whether a Federal Rule "enlarges" substantive rights without consulting State law: If the Rule creates a substantive right, even one that duplicates some statecreated rights, it establishes a new federal right. But it is hard to understand how it can be determined whether a Federal Rule
Sibbach has been settled law, however, for nearly seven decades.
We must acknowledge the reality that keeping the federal-court door open to class actions that cannot proceed in state court will produce forum shopping. That is unacceptable when it comes as the consequence of judge-made rules created to fill supposed "gaps" in positive federal law. See Hanna, 380 U.S. at 471-472, 85 S.Ct. 1136. For where neither the Constitution, a treaty, nor a statute provides the rule of decision or authorizes a federal court to supply one, "state law must govern because
* * *
The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings.
It is so ordered.
Justice STEVENS, concurring in part and concurring in the judgment.
The New York law at issue, N.Y. Civ. Prac. Law Ann. (CPLR) § 901(b) (West 2006), is a procedural rule that is not part of New York's substantive law. Accordingly, I agree with Justice SCALIA that Federal Rule of Civil Procedure 23 must apply in this case and join Parts I and II-A of the Court's opinion. But I also agree with Justice GINSBURG that there are some state procedural rules that federal courts must apply in diversity cases because they function as a part of the State's definition of substantive rights and remedies.
It is a long-recognized principle that federal courts sitting in diversity "apply state substantive law and federal procedural law." Hanna v. Plumer, 380 U.S. 460, 465, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).
That does not mean, however, that the federal rule always governs. Congress has provided for a system of uniform federal rules, see ibid., under which federal courts sitting in diversity operate as "an independent system for administering justice to litigants who properly invoke its jurisdiction," Byrd v. Blue Ridge Rural Elec. Cooperative, Inc., 356 U.S. 525, 537, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), and not
Although the Enabling Act and the Rules of Decision Act "say, roughly, that federal courts are to apply state `substantive' law and federal `procedural' law," the inquiries are not the same. Ibid.; see also id. at 469-470, 85 S.Ct. 1136. The Enabling Act does not invite federal courts to engage in the "relatively unguided Erie choice," id. at 471, 85 S.Ct. 1136, but instead instructs only that federal rules cannot "abridge, enlarge or modify any substantive right," § 2072(b). The Enabling Act's limitation does not mean that federal rules cannot displace state policy judgments; it means only that federal rules cannot displace a State's definition of its own rights or remedies. See Sibbach v. Wilson & Co., 312 U.S. 1, 13-14, 61 S.Ct. 422, 85 S.Ct. 479 (1941) (reasoning that "the phrase `substantive rights'" embraces only those state rights that are sought to be enforced in the judicial proceedings).
Congress has thus struck a balance: "[H]ousekeeping rules for federal courts" will generally apply in diversity cases, notwithstanding that some federal rules "will inevitably differ" from state rules. Hanna, 380 U.S. at 473, 85 S.Ct. 1136. But not every federal "rul[e] of practice or procedure," § 2072(a), will displace state law. To the contrary, federal rules must be interpreted with some degree of "sensitivity to important state interests and regulatory policies," Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427, n. 7, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996), and applied to diversity cases against the background of Congress' command that such rules not alter substantive rights and with consideration of "the degree to which the Rule makes the character and result of the federal litigation stray from the course it would follow in state courts," Hanna, 380 U.S. at 473, 85 S.Ct. 1136. This can be a tricky balance to implement.
It is important to observe that the balance Congress has struck turns, in part, on the nature of the state law that is being displaced by a federal rule. And in my view, the application of that balance does not necessarily turn on whether the state law at issue takes the form of what is traditionally described as substantive or procedural. Rather, it turns on whether the state law actually is part of a State's framework of substantive rights or remedies. See § 2072(b); cf. Hanna, 380 U.S. at 471, 85 S.Ct. 1136 ("The line between `substance' and `procedure' shifts as the legal context changes"); Guaranty Trust Co. v. York, 326 U.S. 99, 108, 65 S.Ct. 1464, 89 S.Ct. 2079 (1945) (noting that the words "`substance'" and "`procedure'" "[e]ach impl[y] different variables depending
Applying this balance, therefore, requires careful interpretation of the state and federal provisions at issue. "The line between procedural and substantive law is hazy," Erie R. Co. v. Tompkins, 304 U.S. 64, 92, 58 S.Ct. 817, 82 S.Ct. 1188 (1938) (Reed, J., concurring), and matters of procedure and matters of substance are not "mutually exclusive categories with easily ascertainable contents," Sibbach, 312 U.S. at 17, 61 S.Ct. 422 (Frankfurter, J., dissenting). Rather, "[r]ules which lawyers call procedural do not always exhaust their effect by regulating procedure," Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 555, 69 S.Ct. 1221, 93 S.Ct. 1528 (1949), and in some situations, "procedure and substance are so interwoven that rational separation becomes well-nigh impossible," id. at 559, 69 S.Ct. 1221 (Rutledge, J., dissenting). A "state procedural rule, though undeniably `procedural' in the ordinary sense of the term," may exist "to influence substantive outcomes," S.A. Healy Co. v. Milwaukee Metropolitan Sewerage Dist., 60 F.3d 305, 310 (C.A.7 1995) (Posner, J.), and may in some instances become so bound up with the state-created right or remedy that it defines the scope of that substantive right or remedy. Such laws, for example, may be seemingly procedural rules that make it significantly more difficult to bring or to prove a claim, thus serving to limit the scope of that claim. See, e.g., Cohen, 337 U.S. at 555, 69 S.Ct. 1221 (state "procedure" that required plaintiffs to post bond before suing); Guaranty Trust Co., 326 U.S. 99, 65 S.Ct. 1464, 89 S.Ct. 2079 (state statute of limitations).
In our federalist system, Congress has not mandated that federal courts dictate to state legislatures the form that their substantive law must take. And were federal courts to ignore those portions of substantive state law that operate as procedural devices, it could in many instances limit the ways that sovereign States may define their rights and remedies. When a State chooses to use a traditionally procedural vehicle as a means of defining the scope of substantive rights or remedies, federal courts must recognize and respect that choice. Cf. Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 533, 69 S.Ct. 1233, 93 S.Ct. 1520 (1949) ("Since th[e] cause of action is created by local law, the measure of it is to be found only in local law . . . . Where local law qualifies or abridges it, the federal court must follow suit").
When both a federal rule and a state law appear to govern a question before a federal court sitting in diversity, our precedents have set out a two-step framework for federal courts to negotiate this thorny area. At both steps of the inquiry, there is a critical question about what the state law and the federal rule mean.
If, on the other hand, the federal rule is "sufficiently broad to control the issue before the Court," such that there is a "direct collision," Walker, 446 U.S. at 749-750, 100 S.Ct. 1978, the court must decide whether application of the federal rule "represents a valid exercise" of the "rulemaking authority . . . bestowed on this Court by the Rules Enabling Act." Burlington Northern R. Co., 480 U.S. at 5, 107 S.Ct. 967; see also Gasperini, 518 U.S. at 427, n. 7, 116 S.Ct. 2211; Hanna, 380 U.S. at 471-474, 85 S.Ct. 1136. That Act requires, inter alia, that federal rules "not abridge, enlarge or modify any substantive right." 28 U.S.C. § 2072(b) (emphasis added). Unlike Justice SCALIA, I believe that an application of a federal rule that effectively abridges, enlarges, or modifies a state-created right or remedy violates this command. Congress may have the constitutional power "to supplant state law" with rules that are "rationally capable of classification as procedure," ante at 1442 (internal quotation marks omitted), but we should generally presume that it has not done so. Cf. Wyeth v. Levine, 555 U.S. ___, ___, 129 S.Ct. 1187, 1194-95, 173 L.Ed.2d 51 (2009) (observing that "we start with the assumption" that a federal statute does not displace a State's law "unless that was the clear and manifest purpose of Congress" (internal quotation marks omitted)). Indeed, the mandate that federal rules "shall not abridge, enlarge or modify any substantive right" evinces the opposite intent, as does Congress' decision to delegate the creation of rules to this Court rather than to a political branch, see 19 Charles Alan Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice and Procedure § 4509, p. 265 (2d ed.1996) (hereinafter Wright).
Justice SCALIA believes that the sole Enabling Act question is whether the federal rule "really regulates procedure," ante at 1442, 1444, 1445, 1446, n. 13 (plurality opinion) (internal quotation marks omitted), which means, apparently, whether it regulates "the manner and the means by which the litigants' rights are enforced," ante at 1442 (internal quotation marks omitted). I respectfully disagree.
Although the plurality appears to agree with much of my interpretation of § 2072, see ante at 1445-1446, it nonetheless rejects that approach for two reasons, both of which are mistaken. First, Justice SCALIA worries that if federal courts inquire into the effect of federal rules on state law, it will enmesh federal courts in difficult determinations about whether application
Second, the plurality argues that its interpretation of the Enabling Act is dictated by this Court's decision in Sibbach, which applied a Federal Rule about when parties must submit to medical examinations. But the plurality misreads that opinion. As Justice Harlan observed in Hanna, "shorthand formulations which have appeared in earlier opinions are prone to carry untoward results that frequently arise from oversimplification." 380 U.S. at 475, 85 S.Ct. 1136 (concurring opinion). To understand Sibbach, it is first necessary to understand the issue that was before the Court. The petitioner raised only the facial question whether "Rules 35 and 37 [of the Federal Rules of Civil Procedure] are . . . within the mandate of Congress to this court" and not the specific question of "the obligation of federal courts to apply the substantive law of a state."
Justice GINSBURG views the basic issue in this case as whether and how to
Rule 23 Controls Class Certification
When the District Court in the case before us was asked to certify a class action, Federal Rule of Civil Procedure 23 squarely governed the determination whether the court should do so. That is the explicit function of Rule 23. Rule 23, therefore, must apply unless its application would abridge, enlarge, or modify New York rights or remedies.
Notwithstanding the plain language of Rule 23, I understand the dissent to find that Rule 23 does not govern the question of class certification in this matter because New York has made a substantive judgment that such a class should not be certified, as a means of proscribing damages. Although, as discussed infra at 1469-1471, I do not accept the dissent's view of § 901(b), I also do not see how the dissent's interpretation of Rule 23 follows from that view.
At bottom, the dissent's interpretation of Rule 23 seems to be that Rule 23 covers only those cases in which its application would create no Erie problem. The dissent would apply the Rules of Decision Act inquiry under Erie even to cases in which there is a governing federal rule, and thus the Act, by its own terms, does not apply. But "[w]hen a situation is covered by one of the Federal Rules, the question facing the court is a far cry from the typical,
Applying Rule 23 Does Not Violate the Enabling Act
As I have explained, in considering whether to certify a class action such as this one, a federal court must inquire whether doing so would abridge, enlarge, or modify New York's rights or remedies, and thereby violate the Enabling Act. This inquiry is not always a simple one because "[i]t is difficult to conceive of any rule of procedure that cannot have a significant effect on the outcome of a case," Wright § 4508, at 232-233, and almost "any rule can be said to have . . . `substantive effects,' affecting society's distribution of risks and rewards," Ely 724, n. 170. Faced with a federal rule that dictates an answer to a traditionally procedural question and that displaces a state rule, one can often argue that the state rule was really some part of the State's definition of its rights or remedies.
In my view, however, the bar for finding an Enabling Act problem is a high one. The mere fact that a state law is designed as a procedural rule suggests it reflects a judgment about how state courts ought to operate and not a judgment about the scope of state-created rights and remedies. And for the purposes of operating a federal court system, there are costs involved in attempting to discover the true nature of a state procedural rule and allowing such a rule to operate alongside a federal rule that appears to govern the same question. The mere possibility that a federal rule would alter a state-created right is not sufficient. There must be little doubt.
The text of CPLR § 901(b) expressly and unambiguously applies not only to claims based on New York law but also to claims based on federal law or the law of any other State. And there is no interpretation from New York courts to the contrary. It is therefore hard to see how § 901(b) could be understood as a rule that, though procedural in form, serves the function of defining New York's rights or remedies. This is all the more apparent because lawsuits under New York law could be joined in federal class actions well before New York passed § 901(b) in 1975, and New York had done nothing to prevent that. It is true, as the dissent points out, that there is a limited amount of legislative history that can be read to suggest that the New York officials who supported § 901(b) wished to create a "limitation" on New York's "statutory damages." Post at 1464. But, as Justice SCALIA notes, that is not the law that New York adopted.
The legislative history, moreover, does not clearly describe a judgment that § 901(b) would operate as a limitation on New York's statutory damages. In evaluating that legislative history, it is necessary to distinguish between procedural rules adopted for some policy reason and seemingly procedural rules that are intimately bound up in the scope of a substantive right or remedy. Although almost every rule is adopted for some reason and has some effect on the outcome of litigation, not every state rule "defines the dimensions of [a] claim itself," post at 1466. New York clearly crafted § 901(b) with the intent that only certain lawsuits—those for which there were not statutory penalties—could be joined in class actions in New York courts. That decision reflects a policy judgment about which lawsuits should proceed in New York courts in a class form and which should not. As Justice GINSBURG carefully outlines, see post at 1464-1465, § 901(b) was "apparently" adopted in response to fears that the class-action procedure, applied to statutory penalties, would lead to "annihilating punishment of the defendant." V. Alexander, Practice Commentaries, C901:11, reprinted in 7B McKinney's Consolidated Laws of New York Ann., p. 104 (2006) (internal quotation marks omitted); see also Sperry v. Crompton Corp., 8 N.Y.3d 204, 211, 831 N.Y.S.2d 760, 863 N.E.2d 1012, 1015 (2007). But statements such as these are not particularly strong evidence that § 901(b) serves to define who can obtain a statutory penalty or that certifying such a class would enlarge New York's remedy. Any device that makes litigation easier makes it easier for plaintiffs to recover damages.
In addition to the fear of excessive recoveries, some opponents of a broad class-action device "argued that there was no need to permit class actions in order to encourage litigation . . . when statutory penalties . . . provided an aggrieved party with a sufficient economic incentive to pursue a claim." Id., at 211, 831 N.Y.S.2d 760, 863 N.E.2d, at 1015 (emphasis added). But those opponents may have felt merely that, for any number of reasons, New York courts should not conduct trials in the class format when that format is unnecessary
The legislative history of § 901 thus reveals a classically procedural calibration of making it easier to litigate claims in New York courts (under any source of law) only when it is necessary to do so, and not making it too easy when the class tool is not required. This is the same sort of calculation that might go into setting filing fees or deadlines for briefs. There is of course a difference of degree between those examples and class certification, but not a difference of kind; the class vehicle may have a greater practical effect on who brings lawsuits than do low filing fees, but that does not transform it into a damages "proscription," post at 1466, n. 6, 1471, or "limitation," post at 1463, n. 2, 1464, 1464-1465, 1466, 1473.
The difference of degree is relevant to the forum shopping considerations that are part of the Rules of Decision Act or Erie inquiry. If the applicable federal rule did not govern the particular question at issue (or could be fairly read not to do so), then those considerations would matter, for precisely the reasons given by the dissent. See post at 1469-1473. But that is not this case. As the Court explained in Hanna, it is an "incorrect assumption that the rule of Erie R. Co. v. Tompkins constitutes the appropriate test of . . . the applicability of a Federal Rule of Civil Procedure." 380 U.S. at 469-470, 85 S.Ct. 1136. "It is true that both the Enabling Act and the Erie rule say, roughly, that federal courts are to apply state `substantive' law and federal `procedural' law," but the tests are different and reflect the fact that "they were designed to control very different sorts of decisions." Id. at 471, 85 S.Ct. 1136.
Because Rule 23 governs class certification, the only decision is whether certifying a class in this diversity case would "abridge, enlarge or modify" New York's substantive rights or remedies. § 2072(b). Although one can argue that class certification would enlarge New York's "limited" damages remedy, see post at 1463, n. 2, 1464, 1464-1465, 1466, 1473, such arguments rest on extensive speculation about what the New York Legislature had in mind when it created § 901(b). But given that there are two plausible competing narratives, it seems obvious to me that we
Accordingly, I concur in part and concur in the judgment.
Justice GINSBURG, with whom Justice KENNEDY, Justice BREYER, and Justice ALITO join, dissenting.
The Court today approves Shady Grove's attempt to transform a $500 case into a $5,000,000 award, although the State creating the right to recover has proscribed this alchemy. If Shady Grove had filed suit in New York state court, the 2% interest payment authorized by New York Ins. Law Ann. § 5106(a) (West 2009) as a penalty for overdue benefits would, by Shady Grove's own measure, amount to no more than $500. By instead filing in federal court based on the parties' diverse citizenship and requesting class certification, Shady Grove hopes to recover, for the class, statutory damages of more than $5,000,000. The New York Legislature has barred this remedy, instructing that, unless specifically permitted, "an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action." N.Y. Civ. Prac. Law Ann. (CPLR) § 901(b) (West 2006). The Court nevertheless holds that Federal Rule of Civil Procedure 23, which prescribes procedures for the conduct of class actions in federal courts, preempts the application of § 901(b) in diversity suits.
The Court reads Rule 23 relentlessly to override New York's restriction on the availability of statutory damages. Our decisions, however, caution us to ask, before undermining state legislation: Is this conflict really necessary? Cf. Traynor, Is This Conflict Really Necessary? 37 Tex. L.Rev. 657 (1959). Had the Court engaged in that inquiry, it would not have read Rule 23 to collide with New York's legitimate interest in keeping certain monetary awards reasonably bounded. I would continue to interpret Federal Rules with awareness of, and sensitivity to, important state regulatory policies. Because today's judgment radically departs from that course, I dissent.
"Under the Erie doctrine," it is long settled, "federal courts sitting in diversity apply state substantive law and federal procedural law." Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996); see Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 S.Ct. 1188 (1938). Justice Harlan aptly conveyed the importance of the doctrine; he described Erie as "one of the modern cornerstones of our federalism, expressing policies that profoundly touch the allocation of judicial power between the state and federal systems." Hanna v. Plumer, 380 U.S. 460, 474, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) (concurring opinion). Although we have found Erie's application "sometimes [to be] a challenging endeavor," Gasperini, 518 U.S. at 427, 116 S.Ct. 2211, two federal statutes mark our way.
The first, the Rules of Decision Act,
The second, the Rules Enabling Act, enacted in 1934, authorizes us to "prescribe general rules of practice and procedure" for the federal courts, but with a crucial restriction: "Such rules shall not abridge, enlarge or modify any substantive right." 28 U.S.C. § 2072. Pursuant to this statute, we have adopted the Federal Rules of Civil Procedure. In interpreting the scope of the Rules, including, in particular, Rule 23, we have been mindful of the limits on our authority. See, e.g., Ortiz v. Fibreboard Corp., 527 U.S. 815, 845, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999) (The Rules Enabling Act counsels against "adventurous application" of Rule 23; any tension with the Act "is best kept within tolerable limits."); Amchem Products, Inc. v. Windsor, 521 U.S. 591, 612-613, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). See also Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 503-504, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001).
If a Federal Rule controls an issue and directly conflicts with state law, the Rule, so long as it is consonant with the Rules Enabling Act, applies in diversity suits. See Hanna, 380 U.S. at 469-474, 85 S.Ct. 1136. If, however, no Federal Rule or statute governs the issue, the Rules of Decision Act, as interpreted in Erie, controls. That Act directs federal courts, in diversity cases, to apply state law when failure to do so would invite forum-shopping and yield markedly disparate litigation outcomes. See Gasperini, 518 U.S. at 428, 116 S.Ct. 2211; Hanna, 380 U.S. at 468, 85 S.Ct. 1136. Recognizing that the Rules of Decision Act and the Rules Enabling Act simultaneously frame and inform the Erie analysis, we have endeavored in diversity suits to remain safely within the bounds of both congressional directives.
In our prior decisions in point, many of them not mentioned in the Court's opinion, we have avoided immoderate interpretations of the Federal Rules that would trench on state prerogatives without serving any countervailing federal interest. "Application of the Hanna analysis," we have said, "is premised on a `direct collision' between the Federal Rule and the state law." Walker v. Armco Steel Corp., 446 U.S. 740, 749-750, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980) (quoting Hanna, 380 U.S. at 472, 85 S.Ct. 1136). To displace state law, a Federal Rule, "when fairly construed," must be "`sufficiently broad'" so as "to `control the issue' before the court, thereby leaving no room for the operation of that law." Burlington Northern R. Co. v. Woods, 480 U.S. 1, 4-5, 107 S.Ct. 967, 94 L.Ed.2d 1 (1987) (quoting Walker, 446 U.S. at 749-750, and n. 9, 100 S.Ct. 1978; emphasis added); cf. Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 37-38, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) (SCALIA, J., dissenting) ("[I]n deciding whether a federal ... Rule of Procedure encompasses a particular issue, a broad reading that would create significant disuniformity between state and federal courts should be avoided if the text permits.").
Six years later, in Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 93 S.Ct. 1520 (1949), the Court ruled that state law determines when a diversity suit commences for purposes of tolling the state limitations period. Although Federal Rule 3 specified that "[a] civil action is commenced by filing a complaint with the court," we held that the Rule did not displace a state law that tied an action's commencement to service of the summons. Id. at 531-533, 69 S.Ct. 1233. The "cause of action [wa]s created by local law," the Court explained, therefore "the measure of it [wa]s to be found only in local law." Id. at 533, 69 S.Ct. 1233.
Similarly in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 S.Ct. 1528 (1949), the Court held applicable in a diversity action a state statute requiring plaintiffs, as a prerequisite to pursuit of a stockholder's derivative action, to post a bond as security for costs. At the time of the litigation, Rule 23, now Rule 23.1, addressed a plaintiff's institution of a derivative action in federal court. Although the Federal Rule specified prerequisites to a stockholder's maintenance of a derivative action, the Court found no conflict between the Rule and the state statute in question; the requirements of both could be enforced, the Court observed. See id., at 556, 69 S.Ct. 1221. Burdensome as the security-for-costs requirement may be, Cohen made plain, suitors could not escape the upfront outlay by resorting to the federal court's diversity jurisdiction.
In all of these cases, the Court stated in Hanna, "the scope of the Federal Rule was not as broad as the losing party urged, and therefore, there being no Federal Rule which covered the point in dispute, Erie commanded the enforcement of state law." 380 U.S. at 470, 85 S.Ct. 1136. In Hanna itself, the Court found the clash "unavoidable," ibid.; the petitioner had effected service of process as prescribed by Federal Rule 4(d)(1), but that "how-to" method did not satisfy the special Massachusetts law applicable to service on an executor or administrator. Even as it rejected the Massachusetts prescription in favor of the federal procedure, however, "[t]he majority in Hanna recognized ... that federal rules ... must be interpreted by the courts applying them, and that the process of interpretation can and should reflect an awareness of legitimate state interests." R. Fallon, J. Manning, D. Meltzer, & D. Shapiro, Hart and Wechsler's The Federal Courts and the Federal System 593 (6th ed.2009) (hereinafter Hart & Wechsler).
Following Hanna, we continued to "interpre[t] the federal rules to avoid conflict with important state regulatory policies." Hart & Wechsler 593. In Walker, the Court took up the question whether Ragan should be overruled; we held, once again, that Federal Rule 3 does not directly conflict with state rules governing the time when an action commences for purposes of tolling a limitations period. 446 U.S. at 749-752, 100 S.Ct. 1978. Rule 3, we said, addresses only "the date from which various timing requirements of the Federal Rules begin to run," id. at 751, 100 S.Ct. 1978, and does not "purpor[t] to displace state tolling rules," id. at 750-751, 100 S.Ct. 1978. Significant state policy interests would be frustrated, we observed,
We were similarly attentive to a State's regulatory policy in Gasperini. That diversity case concerned the standard for determining when the large size of a jury verdict warrants a new trial. Federal and state courts alike had generally employed a "shock the conscience" test in reviewing jury awards for excessiveness. See 518 U.S. at 422, 116 S.Ct. 2211. Federal courts did so pursuant to Federal Rule 59(a) which, as worded at the time of Gasperini, instructed that a trial court could grant a new trial "for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States." Fed. Rule Civ. Proc. 59(a) (West 1995). In an effort to provide greater control, New York prescribed procedures under which jury verdicts would be examined to determine whether they "deviate[d] materially from what would be reasonable compensation." See Gasperini, 518 U.S. at 423-425, 116 S.Ct. 2211 (quoting CPLR § 5501(c)). This Court held that Rule 59(a) did not inhibit federal-court accommodation of New York's invigorated test.
Most recently, in Semtek, we addressed the claim-preclusive effect of a federal-court judgment dismissing a diversity action on the basis of a California statute of limitations. The case came to us after the same plaintiff renewed the same fray against the same defendant in a Maryland state court. (Plaintiff chose Maryland because that State's limitations period had not yet run.) We held that Federal Rule 41(b), which provided that an involuntary dismissal "operate[d] as an adjudication on the merits," did not bar maintenance of the renewed action in Maryland. To hold that Rule 41(b) precluded the Maryland courts from entertaining the case, we said, "would arguably violate the jurisdictional limitation of the Rules Enabling Act," 531 U.S. at 503, 121 S.Ct. 1021, and "would in many cases violate [Erie's] federalism principle," id. at 504, 121 S.Ct. 1021.
In sum, both before and after Hanna, the above-described decisions show, federal courts have been cautioned by this Court to "interpre[t] the Federal Rules... with sensitivity to important state interests," Gasperini, 518 U.S. at 427, n. 7, 116 S.Ct. 2211, and a will "to avoid conflict with important state regulatory policies," id. at 438, n. 22, 116 S.Ct. 2211 (internal quotation marks omitted).
Our decisions instruct over and over again that, in the adjudication of diversity cases, state interests—whether advanced in a statute, e.g., Cohen, or a procedural rule, e.g., Gasperini—warrant our respectful consideration. Yet today, the Court gives no quarter to New York's limitation on statutory damages and requires the lower courts to thwart the regulatory policy at stake: To prevent excessive damages, New York's law controls the penalty to which a defendant may be exposed in a single suit. The story behind § 901(b)'s enactment deserves telling.
In 1975, the Judicial Conference of the State of New York proposed a new class-action statute designed "to set up a flexible, functional scheme" that would provide "an effective, but controlled group remedy." Judicial Conference Report on CPLR, reprinted in 1975 N.Y. Laws pp. 1477, 1493 (McKinney). As originally drafted, the legislation addressed only the procedural aspects of class actions; it specified, for example, five prerequisites for certification, eventually codified at § 901(a), that closely tracked those listed in Rule 23. See CPLR § 901(a) (requiring, for class certification, numerosity, predominance, typicality, adequacy of representation, and superiority).
While the Judicial Conference proposal was in the New York Legislature's hopper, "various groups advocated for the addition of a provision that would prohibit class action plaintiffs from being awarded a statutorily-created penalty ... except when expressly authorized in the pertinent statute." Sperry v. Crompton Corp., 8 N.Y.3d 204, 211, 831 N.Y.S.2d 760, 863 N.E.2d 1012, 1015 (2007). These constituents "feared that recoveries beyond actual damages could lead to excessively harsh results." Ibid. "They also argued that there was no need to permit class actions ... [because] statutory penalties ... provided an aggrieved party with a sufficient economic incentive to pursue a claim." Ibid. Such penalties, constituents observed, often far exceed a plaintiff's actual damages. "When lumped together," they argued, "penalties and class actions produce overkill." Attachment to Letter from G. Perkinson, New York State Council of Retail Merchants, Inc., to J. Gribetz, Executive Chamber (June 4, 1975) (Legislative Report), Bill Jacket, L. 1975, Ch. 207.
Aiming to avoid "annihilating punishment of the defendant," the New York Legislature amended the proposed statute to bar the recovery of statutory damages in class actions. V. Alexander, Practice Commentaries, C901:11, reprinted in 7B McKinney's Consolidated Laws of New York Ann., p. 104 (2006) (internal quotation marks omitted). In his signing statement, Governor Hugh Carey stated that the new statute "empowers the court to prevent abuse of the class action device and provides a controlled remedy." Memorandum on Approving L. 1975, Ch. 207, reprinted in 1975 N.Y. Laws, at 1748 (emphasis added).
"[T]he final bill ... was the result of a compromise among competing interests." Sperry, 8 N.Y.3d at 211, 831 N.Y.S.2d 760, 863 N.E.2d at 1015. Section 901(a) allows
Shady Grove contends—and the Court today agrees—that Rule 23 unavoidably preempts New York's prohibition on the recovery of statutory damages in class actions. The Federal Rule, the Court emphasizes, states that Shady Grove's suit "may be" maintained as a class action, which conflicts with § 901(b)'s instruction that it "may not" so proceed. Ante at 1437 (internal quotation marks omitted and emphasis deleted). Accordingly, the Court insists, § 901(b) "cannot apply in diversity suits unless Rule 23 is ultra vires." Ibid. Concluding that Rule 23 does not violate the Rules Enabling Act, the Court holds that the federal provision controls Shady Grove's ability to seek, on behalf of a class, a statutory penalty of over $5,000,000. Ante at 1442-1444 (plurality opinion); ante at 1457-1460 (STEVENS, J., concurring in part and concurring in judgment).
The Court, I am convinced, finds conflict where none is necessary. Mindful of the history behind § 901(b)'s enactment, the thrust of our precedent, and the substantive-rights limitation in the Rules Enabling Act, I conclude, as did the Second Circuit and every District Court to have considered the question in any detail,
In other words, Rule 23 describes a method of enforcing a claim for relief, while § 901(b) defines the dimensions of the claim itself. In this regard, it is immaterial that § 901(b) bars statutory penalties in wholesale, rather than retail, fashion. The New York Legislature could have embedded the limitation in every provision creating a cause of action for which a penalty is authorized; § 901(b) operates as shorthand to the same effect. It is as much a part of the delineation of the claim for relief as it would be were it included claim by claim in the New York Code.
The Court single-mindedly focuses on whether a suit "may" or "may not" be maintained as a class action. See ante at 1437-1439. Putting the question that way, the Court does not home in on the reason why. Rule 23 authorizes class treatment for suits satisfying its prerequisites because the class mechanism generally affords a fair and efficient way to aggregate claims for adjudication. Section 901(b) responds to an entirely different concern; it does not allow class members to recover statutory damages because the New York Legislature considered the result of adjudicating such claims en masse to be exorbitant.
Suppose, for example, that a State, wishing to cap damages in class actions at $1,000,000, enacted a statute providing that "a suit to recover more than $1,000,000 may not be maintained as a class action." Under the Court's reasoning—which attributes dispositive significance to the words "may not be maintained"—Rule 23 would preempt this provision, nevermind that Congress, by authorizing the promulgation of rules of procedure for federal courts, surely did not intend to displace state-created ceilings on damages.
The absence of an inevitable collision between Rule 23 and § 901(b) becomes evident once it is comprehended that a federal court sitting in diversity can accord due respect to both state and federal prescriptions. Plaintiffs seeking to vindicate claims for which the State has provided a statutory penalty may pursue relief through a class action if they forgo statutory damages and instead seek actual damages or injunctive or declaratory relief; any putative class member who objects can opt out and pursue actual damages, if available, and the statutory penalty in an individual action. See, e.g., Mendez v. The Radec Corp., 260 F.R.D. 38, 55 (W.D.N.Y. 2009); Brzychnalski v. Unesco, Inc., 35 F.Supp.2d 351, 353 (S.D.N.Y.1999).
Any doubt whether Rule 23 leaves § 901(b) in control of the remedial issue at the core of this case should be dispelled by our Erie jurisprudence, including Hanna, which counsels us to read Federal Rules moderately and cautions against stretching a rule to cover every situation it could conceivably reach.
Notably, New York is not alone in its effort to contain penalties and minimum recoveries by disallowing class relief; Congress, too, has precluded class treatment for certain claims seeking a statutorily designated minimum recovery. See, e.g., 15 U.S.C. § 1640(a)(2)(B) (Truth in Lending Act) ("[I]n the case of a class action... no minimum recovery shall be applicable."); § 1693m(a)(2)(B) (Electronic Fund Transfer Act) (same); 12 U.S.C. § 4010(a)(2)(B)(i) (Expedited Fund Availability Act) (same). Today's judgment denies to the States the full power Congress has to keep certain monetary awards within reasonable bounds. Cf. Beard v. Kindler, 558 U.S. ___, ___, 130 S.Ct. 612, 618-19, ___ L.Ed.2d ___ (2009) ("In light of ... federalism and comity concerns ... it would seem particularly strange to disregard state ... rules that are substantially similar to those to which we give full force in our own courts."). States may hesitate to create determinate statutory penalties in the future if they are impotent to prevent federal-court distortion of the remedy they have shaped.
By finding a conflict without considering whether Rule 23 rationally should be read to avoid any collision, the Court unwisely and unnecessarily retreats from the federalism principles undergirding Erie. Had the Court reflected on the respect for state regulatory interests endorsed in our decisions, it would have found no cause to interpret Rule 23 so woodenly—and every
Because I perceive no unavoidable conflict between Rule 23 and § 901(b), I would decide this case by inquiring "whether application of the [state] rule would have so important an effect upon the fortunes of one or both of the litigants that failure to [apply] it would be likely to cause a plaintiff to choose the federal court." Hanna, 380 U.S. at 468, n. 9, 85 S.Ct. 1136. See Gasperini, 518 U.S. at 428, 116 S.Ct. 2211.
Seeking to pretermit that inquiry, Shady Grove urges that the class-action bar in § 901(b) must be regarded as "procedural" because it is contained in the CPLR, which "govern[s] the procedure in civil judicial proceedings in all courts of the state." Brief for Petitioner 34 (quoting CPLR § 101; emphasis in original). Placement in the CPLR is hardly dispositive. The provision held "substantive" for Erie purposes in Gasperini is also contained in the CPLR (§ 5501(c)), as are limitations periods, § 201 et seq., prescriptions plainly "substantive" for Erie purposes however they may be characterized for other purposes, see York, 326 U.S. at 109-112, 65 S.Ct. 1464. See also, e.g., 1 Restatement (Second) of Conflict of Laws § 133, Reporter's Note, p. 369 (1969) (hereinafter Restatement) ("Under the rule of Erie ... the federal courts have classified the burden of persuasion as to contributory negligence as a matter of substantive law that is governed by the rule of the State in which they sit even though the courts of that State have characterized their rule as procedural for choice-of-law purposes."); Cook, "Substance" and "Procedure" in the Conflict of Laws, 42 Yale L.J. 333 (1933).
Shady Grove also ranks § 901(b) as "procedural" because "nothing in [the statute] suggests that it is limited to rights of action based on New York state law, as opposed to federal law or the law of other states"; instead it "applies to actions seeking penalties under any statute." Brief for Petitioner 35-36. See also ante at 1457-1458 (STEVENS, J., concurring in part and concurring in judgment) (Section 901(b) cannot "be understood as a rule that... serves the function of defining New York's rights or remedies" because its "text ... expressly and unambiguously applies not only to claims based on New York law but also to claims based on federal law or the law of any other State.").
It is true that § 901(b) is not specifically limited to claims arising under New York law. But neither is it expressly extended to claims arising under foreign law. The rule prescribes, without elaboration either way, that "an action to recover a penalty... may not be maintained as a class action." We have often recognized that "general words" appearing in a statute may, in fact, have limited application; "[t]he words `any person or persons,'" for example, "are broad enough to comprehend every human being. But general words must not only be limited to cases within the jurisdiction of the state, but also to those objects to which the legislature intended to apply them." United States v. Palmer, 3 Wheat. 610, 631, 4 S.Ct. 471 (1818) (opinion for the Court by Marshall, C. J.). See also Small v. United States, 544 U.S. 385, 388, 125 S.Ct. 1752, 161 L.Ed.2d 651 (2005) ("In law, a legislature that uses the statutory phrase `any person' may or may not mean to include `persons' outside the jurisdiction of the state." (some internal quotation marks omitted)); Flora v. United States, 362 U.S. 145, 149, 80 S.Ct. 630,
Moreover, Shady Grove overlooks the most likely explanation for the absence of limiting language: New York legislators make law with New York plaintiffs and defendants in mind, i.e., as if New York were the universe. See Baxter, Choice of Law and the Federal System, 16 Stan. L.Rev. 1, 11 (1963) ("[L]awmakers often speak in universal terms but must be understood to speak with reference to their constituents."); cf. Smith v. United States, 507 U.S. 197, 204, n. 5, 113 S.Ct. 1178, 122 L.Ed.2d 548 (1993) (presumption against extraterritoriality rooted in part in "the commonsense notion that Congress generally legislates with domestic concerns in mind").
The point was well put by Brainerd Currie in his seminal article on governmental interest analysis in conflict-of-laws cases. The article centers on a now-archaic Massachusetts law that prevented married women from binding themselves by contract as sureties for their husbands. Discussing whether the Massachusetts prescription applied to transactions involving foreign factors (a foreign forum, foreign place of contracting, or foreign parties), Currie observed:
Shady Grove's suggestion that States must specifically limit their laws to domestic rights of action if they wish their enactments to apply in federal diversity litigation misses the obvious point: State legislators generally do not focus on an interstate setting when drafting statutes.
Shady Grove also observes that a New York court has applied § 901(b) to a federal claim for relief under the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C. § 227, see Rudgayzer & Gratt v. Cape Canaveral Tour & Travel, Inc., 22 App. Div.3d 148, 799 N.Y.S.2d 795 (2005), thus revealing § 901(b)'s "procedural" cast. Brief for Petitioner 36. We note first that the TCPA itself calls for the application of state law. See Rudgayzer, 22 App. Div.3d, at 149-150, 799 N.Y.S.2d, at 796-797 (federal action authorized in state court "if otherwise permitted by the laws or rules of the court of [the] State" (quoting 47 U.S.C. § 227(b)(3))). See also Gottlieb v. Carnival Corp., 436 F.3d 335, 342 (2d Cir.2006) (SOTOMAYOR, J.)
Moreover, statutes qualify as "substantive" for Erie purposes even when they have "procedural" thrusts as well. See, e.g., Cohen, 337 U.S, at 555, 69 S.Ct. 1221; cf. Woods v. Interstate Realty Co., 337 U.S. 535, 536-538, and n. 1, 69 S.Ct. 1235, 93 S.Ct. 1524 (1949) (holding diversity case must be dismissed based on state statute that, by its terms, governed only proceedings in state court). Statutes of limitations are, again, exemplary. They supply "substantive" law in diversity suits, see York, 326 U.S. at 109-112, 65 S.Ct. 1464, even though, as Shady Grove acknowledges, state courts often apply the forum's limitations period as a "procedural" bar to claims arising under the law of another State, see Reply Brief 24, n. 16; Tr. of Oral Arg. 16-17. See also Restatement §§ 142-143 (when adjudicating a foreign cause of action, State may use either its own or the foreign jurisdiction's statute of limitations, whichever is shorter). Similarly, federal courts sitting in diversity give effect to state laws governing the burden of proving contributory negligence, see Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct. 477, 87 S.Ct. 645 (1943), yet state courts adjudicating foreign causes of action often apply their own local law to this issue. See Restatement § 133 and Reporter's Note.
In short, Shady Grove's effort to characterize § 901(b) as simply "procedural" cannot successfully elide this fundamental norm: When no federal law or rule is dispositive of an issue, and a state statute is outcome affective in the sense our cases on Erie (pre and post-Hanna) develop, the Rules of Decision Act commands application of the State's law in diversity suits. Gasperini, 518 U.S. at 428, 116 S.Ct. 2211; Hanna, 380 U.S. at 468, n. 9, 85 S.Ct. 1136; York, 326 U.S. at 109, 65 S.Ct. 1464. As this case starkly demonstrates, if federal courts exercising diversity jurisdiction are compelled by Rule 23 to award statutory penalties in class actions while New York courts are bound by § 901(b)'s proscription, "substantial variations between state and federal [money judgments] may be expected." Gasperini, 518 U.S. at 430, 116 S.Ct. 2211 (quoting Hanna, 380 U.S. at 467-468, 85 S.Ct. 1136 (internal quotation marks omitted)). The "variation" here is indeed "substantial." Shady Grove seeks class relief that is ten thousand times greater than the individual remedy available to it in state court. As the plurality acknowledges, ante at 1448, forum shopping will undoubtedly result if a plaintiff need only file in federal instead of state court to seek a massive monetary award explicitly barred by state law. See Gasperini, 518 U.S. at 431, 116 S.Ct. 2211 ("Erie precludes a recovery in federal court significantly larger than the recovery that would have been tolerated in state court.").
It is beyond debate that "a statutory cap on damages would supply substantive law for Erie purposes." Gasperini, 518 U.S. at 428, 116 S.Ct. 2211. See also id. at 439-440, 116 S.Ct. 2211 (STEVENS, J., dissenting) ("A state-law ceiling on allowable damages ... is a substantive rule of decision that federal courts must apply in diversity cases governed by New York law."); id. at 464, 116 S.Ct. 2211 (SCALIA, J., dissenting) ("State substantive law controls what injuries are compensable and in what amount."). In Gasperini, we determined that New York's standard for measuring the alleged excessiveness of a jury verdict was designed to provide a control analogous to a damages cap. Id. at 429, 116 S.Ct. 2211. The statute was framed as "a procedural instruction," we noted, "but the State's objective [wa]s manifestly substantive." Ibid.
Gasperini's observations apply with full force in this case. By barring the recovery of statutory damages in a class action, § 901(b) controls a defendant's maximum liability in a suit seeking such a remedy. The remedial provision could have been written as an explicit cap: "In any class action seeking statutory damages, relief is limited to the amount the named plaintiff would have recovered in an individual suit." That New York's Legislature used other words to express the very same meaning should be inconsequential.
We have long recognized the impropriety of displacing, in a diversity action, state-law limitations on state-created remedies. See Woods, 337 U.S. at 538, 69 S.Ct. 1235 (in a diversity case, a plaintiff "barred from recovery in the state court ... should likewise be barred in the federal court"); York, 326 U.S. at 108-109, 65 S.Ct. 1464 (federal court sitting in diversity "cannot afford recovery if the right to recover is made unavailable by the State nor can it substantively affect the enforcement of the right as given by the State"). Just as Erie precludes a federal court from entering a deficiency judgment when a State has "authoritatively announced that [such] judgments cannot be secured within its borders," Angel v. Bullington, 330 U.S. 183, 191, 67 S.Ct. 657, 91 S.Ct. 832 (1947), so too Erie should prevent a federal court from awarding statutory penalties aggregated through a class action when New York prohibits this recovery. See also Ragan, 337 U.S. at 533, 69 S.Ct. 1233 ("Where local law qualifies or abridges [a claim], the federal court must follow suit. Otherwise there is a different measure of the cause of action in one court than in the other, and the principle of Erie ... is transgressed."). In sum, because "New York substantive law governs [this] claim for relief, New York law ... guide[s] the allowable damages." Gasperini, 518 U.S. at 437, 116 S.Ct. 2211.
The Court's erosion of Erie's federalism grounding impels me to point out the large irony in today's judgment. Shady Grove is able to pursue its claim in federal court only by virtue of the recent enactment of the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d). In CAFA, Congress opened federal-court doors to state-law-based class actions so long as there is minimal diversity, at least 100 class members, and at least $5,000,000 in controversy. Ibid. By providing a federal forum, Congress sought to check what it considered to be the overreadiness of some state courts to certify class actions. See, e.g., S.Rep. No. 109-14, p. 4 (2005) (CAFA prevents lawyers from "gam[ing] the procedural rules [to] keep nationwide or multi-state class actions in state courts whose judges have reputations for readily certifying classes." (internal quotation marks omitted)); id. at 22 (disapproving "the `I never met a class action I didn't like' approach to class certification" that "is prevalent in state courts in some localities"). In other words, Congress envisioned fewer— not more—class actions overall. Congress surely never anticipated that CAFA would make federal courts a mecca for suits of the kind Shady Grove has launched: class actions seeking state-created penalties for claims arising under state law—claims that would be barred from class treatment in the State's own courts. Cf. Woods, 337 U.S. at 537, 69 S.Ct. 1235 ("[T]he policy of Erie ... preclude[s] maintenance in ... federal court... of suits to which the State ha[s] closed its courts.").
* * *
I would continue to approach Erie questions in a manner mindful of the purposes underlying the Rules of Decision Act and the Rules Enabling Act, faithful to precedent, and respectful of important state interests. I would therefore hold that the New York Legislature's limitation on the recovery of statutory damages applies in this case, and would affirm the Second Circuit's judgment.
"(a) One or more members of a class may sue or be sued as representative parties on behalf of all if:"
"1. the class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable;"
"2. there are questions of law or fact common to the class which predominate over any questions affecting only individual members;"
"3. the claims or defenses of the representative parties are typical of the claims or defenses of the class;"
"4. the representative parties will fairly and adequately protect the interests of the class; and"
"5. a class action is superior to other available methods for the fair and efficient adjudication of the controversy."
"(b) Unless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action."
"(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:"
"(1) the class is so numerous that joinder of all members is impracticable;"
"(2) there are questions of law or fact common to the class;"
"(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and".
"(4) the representative parties will fairly and adequately protect the interests of the class."
Subsection (b) says that "[a] class action may be maintained if Rule 23(a) is satisfied and if" the suit falls into one of three described categories (irrelevant for present purposes).
If all the dissent means is that we should read an ambiguous Federal Rule to avoid "substantial variations [in outcomes] between state and federal litigation," Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 504, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001) (internal quotation marks omitted), we entirely agree. We should do so not to avoid doubt as to the Rule's validity—since a Federal Rule that fails Erie's forum-shopping test is not ipso facto invalid, see Hanna v. Plumer, 380 U.S. 460, 469-472, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965)—but because it is reasonable to assume that "Congress is just as concerned as we have been to avoid significant differences between state and federal courts in adjudicating claims," Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 37-38, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) (SCALIA, J., dissenting). The assumption is irrelevant here, however, because there is only one reasonable reading of Rule 23.
The concurrence responds that the "the specific question of `the obligation of federal courts to apply the substantive law of a state'" was not before the Court, post at 1454 (quoting Sibbach, supra at 9, 61 S.Ct. 422). It is clear from the context, however, that this passage referred to the Erie prohibition of court-created rules that displace state law. The opinion unquestionably dealt with the Federal Rules' compliance with § 2072(b), and it adopted the standard we apply here to resolve the question, which does not depend on whether individual applications of the Rule abridge or modify state-law rights. See 312 U.S. at 13-14, 61 S.Ct. 422. To the extent Sibbach did not address the Federal Rules' validity vis- & Agrave; -vis contrary state law, Hanna surely did, see 380 U.S. at 472, 85 S.Ct. 1136, and it made clear that Sibbach's test still controls, see 380 U.S. at 464-465, 470-471, 85 S.Ct. 1136.
In contrast, Hanna's obscure obiter dictum that a court "need not wholly blind itself" to a Federal Rule's effect on a case's outcome, 380 U.S. at 473, 85 S.Ct. 1136—which the concurrence invokes twice, post at 1452, 1455-1456, n. 14—has never resurfaced in our opinions in the 45 years since its first unfortunate utterance. Nor does it cast doubt on Sibbach's straightforward test: As the concurrence notes, Hanna cited Sibbach for that statement, 380 U.S. at 473, 85 S.Ct. 1136, showing it saw no inconsistency between the two.
The concurrence's concern would make more sense if many Federal Rules that effectively alter state-law rights "bound up with procedures" would survive under Sibbach. But as the concurrence concedes, post at 1454, n. 10, very few would do so. The possible existence of a few outlier instances does not prove Sibbach's interpretation is absurd. Congress may well have accepted such anomalies as the price of a uniform system of federal procedure.
Justice SCALIA responds that some of these federal rules might be invalid under his view of the Enabling Act because they may not "really regulat[e] procedure." Ante at 1447, n. 13 (internal quotation marks omitted). This response, of course, highlights how empty the plurality's test really is. See n. 10, infra. The response is also limited to those rules that can be described as "regulat[ing]" substance, ante at ___; it does not address those federal rules that alter the right at issue in the litigation, see Sibbach v. Wilson & Co., 312 U.S. 1, 13-14, 61 S.Ct. 422, 85 S.Ct. 479 (1941), only when they displace particular state laws. JUSTICE SCALIA speculates that "Congress may well have accepted" the occasional alteration of substantive rights "as the price of a uniform system of federal procedure." Ante at 1446-1447, n. 13. Were we forced to speculate about the balance that Congress struck, I might very well agree. But no speculation is necessary because Congress explicitly told us that federal rules "shall not" alter "any" substantive right. § 2072(b).
Justice SCALIA notes that in Mississippi Publishing Corp. v. Murphree, 326 U.S. 438, 66 S.Ct. 242, 90 S.Ct. 185 (1946), we used language that supported his view. See ante at 1442-1443. But in that case, we contemplated only that the Federal Rule in question might have "incidental effects . . . upon the rights of litigants," explaining that "[t]he fact that the application of Rule 4(f) will operate to subject petitioner's rights to adjudication by the district court for northern Mississippi" rather than southern Mississippi "will undoubtedly affect those rights." 326 U.S. at 445-446, 66 S.Ct. 242. There was no suggestion that by affecting the method of enforcing the rights in that case, the federal rules could plausibly abridge, enlarge, or modify the rights themselves.
It may be that if the dissent's interpretation of § 901(b) were correct, this class could not (or has not) alleged sufficient damages for the federal court to have jurisdiction, see 28 U.S.C. § 1332(d)(6). But that issue was not raised in respondent's motion to dismiss (from which the case comes to this Court), and it was not squarely presented to the Court. In any event, although the lead plaintiff has "acknowledged that its individual claim" is for less than the required amount in controversy, see 549 F.3d 137, 140 (C.A.2 2008), we do not know what actual damages the entire class can allege. Thus, even if the Court were to adopt all of the dissent's premises, I believe the correct disposition would be to vacate and remand for further consideration of whether the required amount in controversy has or can be met.
The dissent's citations, moreover, highlight simply that when interpreting statutes, context matters. Thus, we sometimes presume that laws cover only domestic conduct and sometimes do not, depending upon, inter alia, whether it makes sense in a given situation to assume that "the character of an act as lawful or unlawful must be determined wholly by the law of the [place] where the act is done," American Banana Co. v. United Fruit Co., 213 U.S. 347, 356, 29 S.Ct. 511, 53 S.Ct. 826 (1909). But in the context of § 901(b), a presumption against extraterritoriality makes little sense. That presumption applies almost only to laws governing what people can or cannot do. Section 901(b), however, is not directed to the conduct of persons but is instead directed to New York courts. Thus, § 901(b) is, by its own terms, not extraterritorial insofar as it states that it governs New York courts. It is possible that the New York Legislature simply did not realize that New York courts hear claims under other sources of law and that other courts hear claims under New York law, and therefore mistakenly believed that they had written a limit on New York remedies. But because New York set up § 901(b) as a general rule about how its courts operate, my strong presumption is to the contrary.