Civil Procedure Keyed to Spencer
Shady Grove Orthopedic Assoc. v. Allstate Ins. Co.
Shady Grove Orthopedic Associates, P.A. (Plaintiff) provided medical care to Sonia Galvez who sustained injuries in a car accident. As partial payment for the medical care, Galvez assigned to Plaintiff her rights to insurance benefits under a policy by Allstate Insurance Company (Defendant). Although Defendant paid Plaintiff, it failed to do so within the statutorily required time and refused to pay the statutory interest that had accrued on the late payment. Plaintiff filed a diversity class action suit in the Eastern District of New York to recover the statutory interest owed to it and similarly situated parties. The district court dismissed the suit for lack of jurisdiction. There, the court held that the statutory interest sought was a penalty and, consequently, New York Civil Practice Law § 901(b) precluded a class action suit in federal court to recover a “penalty” despite Fed. R. Civ. P. 23 which permits class actions. Plaintiff appealed and the court of appeals affirmed and held that Rule 23 and § 901(b) addressed different issues and thus did not conflict. The U.S. Supreme Court granted certiorari to review.
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