The Alabama Deceptive Trade Practices Act’s (ADTPA) restriction on private class actions does not apply in federal court. Federal Rule 23 controls. That’s what the Eleventh Circuit recently held, relying on Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393, 130 S. Ct. 1431, 176 L.Ed.2d 311 (2010).
Plaintiff contracted for installation of a wood fence. The manufacturer warranted that the wood was treated and would remain free from rot, fungal decay, and termite attacks for at least 15 years. However, the plaintiff’s fence posts rotted within three years of installation, and the installer reported that other customers experienced similar problems.
Plaintiff filed a class action in federal court (pursuant to CAFA jurisdiction) against the manufacturer on behalf of all purchasers of the defectively treated wood. Plaintiff asserted claims under Alabama law for violating the ADTPA and for breach of express warranty. The manufacturer moved to dismiss arguing, in relevant part, that the ADTPA does not authorize private class actions. Although the ADTPA creates a private right of action in favor of a consumer against a person who violates the statute, it does not allow private class actions and instead provides that only the Alabama Attorney General or a district attorney may bring class actions.
The district court dismissed the action, and the plaintiff appealed. The Eleventh Circuit addressed the conflict between Federal Rule 23, which authorizes class actions, including for consumer claims like the plaintiff’s, and the ADTPA, and reversed, holding Federal Rule 23 controls. In doing so, the court relied on Shady Grove where the Supreme Court explained that the Federal Rules Enabling Act authorizes the adoption of rules of practice and procedure that apply not only in cases arising under federal law but also in cases in which state law supplies the rule of decision. The Act provides:
(a) The Supreme Court shall have the power to prescribe general rules of practice and procedure and rules of evidence for cases in the United States district courts (including proceedings before magistrate judges thereof) and courts of appeals.
(b) Such rules shall not abridge, enlarge or modify any substantive right. All laws in conflict with such rules shall be of no further force or effect after such rules have taken effect.
28 U.S.C. § 2072. Under the Act, a federal rule applies in any federal lawsuit, and thus displaces any conflicting state provision, so long as the federal rule does not abridge, enlarge, or modify any substantive right—a right that inheres in the rules of decision by which the court will adjudicate the petitioner’s rights.
The manufacturer’s substantive obligation was to comply with the ADTPA—to make only accurate representations about its product, and the plaintiff’s substantive right was to obtain wood that complied with the manufacturer’s representations. The court concluded that those are the rules of decision that govern the ADTPA claim, and that Rule 23 does not alter those substantive rights and obligations. The court explained that the disputed issue is not whether the class is entitled to redress for any misrepresentation, they are, but whether they may seek redress in one action or must instead bring separate actions. Thus, the court concluded Rule 23 does not “abridge, enlarge or modify any substantive right,” and, therefore, controls.