More Federal Class Actions to Come

The Supreme Court declared this month that class action lawsuits limited or prohibited in state courts are now permissible in federal court. The ruling, in Shady Grove Orthopedic Associates v. Allstate Insurance Co., opens the door for more federal class action lawsuits, which isn’t good news for business. Many states—such as New York, where the case originated—had set limits on the kinds of class action suits permitted in court, as well as the maximum statutory damages therein; but, this ruling supersedes state law, declaring instead that federal law will generally determine what is and is not a class action.

It’s clear the Supreme Court was torn on the issue, given the 5-4 final vote and unusual voting lines. Essentially, the majority ruled federal class action guidelines trump the more stringent state class action guidelines, which would allow plaintiffs to pursue class action in federal court even if denied class status in state court.

In other class-action news, the 2009 peanut butter scare has resurfaced in the form of a lawsuit seeking class action status against Kellogg’s Co., the distributor of Austin and Keebler brand crackers that were found to be tainted with salmonella last January. The Peanut Corp. of America, a peanut processing plant in Georgia, supplied—knowingly, regulators claim—many major food producers, including Kellogg’s, with peanut butter paste contaminated with the deadly bacteria. There were several deaths related to the outbreak, as well as hundreds of related illnesses.

At the time of the outbreak, Kellogg’s instituted a voluntary private recall; however, the lawsuit claims the recall wasn’t enough, and, as a result of Kellogg’s inadequate response and prevention methods, consumers suffered.