Dealing a blow to defendants facing consumer fraud litigation in the 11th Circuit, the court of appeals for that circuit has reinstated a class action under the Alabama Deceptive Trade Practice Act (ADTPA), despite that the ADTPA itself expressly prohibits class action litigation.

The ADTPA creates a private right of action for consumers, but it expressly prohibits plaintiffs from bringing their claims on behalf of a class. In Lisk v. Lumber One Wood Preserving, LLC, the 11th Circuit held that Rule 23—which provides for class actions in federal court—trumps the ADTPA, and allows plaintiffs to file a class action in federal court, despite that it would be barred in Alabama state court.

Plaintiff Robert Lisk purchased allegedly defective wood from Lumber One. When the wood prematurely rotted, plaintiff brought suit in federal court on behalf of a nationwide class of consumers. Based on the ADTPA’s prohibition against class actions, the district court dismissed the case. The 11th Circuit reversed, concluding that the case was effectively identical to the U.S. Supreme Court’s holding in Shady Grove Orthopedic Associates v. Allstate Ins. Co.

In Shady Grove, the Supreme Court held that Rule 23 trumped a New York statute precluding class actions in all cases involving a statutory penalty. But Shady Grove was a 5-4 decision, and the majority was split in its reasoning. A four-vote plurality opinion, authored by Justice Scalia, concluded that the New York statute was procedural, and not substantive, and therefore Rule 23 could apply without violating the Rules Enabling Act. The Rules Enabling Act provides that federal rules of procedure “shall not abridge, enlarge or modify any substantive right.” 

Justice Stevens—the fifth vote in the majority—authored a separate concurrence, disagreeing with the plurality’s reasoning. He concluded that some state procedural rules nonetheless should apply in federal court, because they function as a part of the state’s definition of substantive rights and remedies. Justice Stevens found it notable that the New York rule at issue in Shady Grove was in a procedural statute, applicable to claims not only under New York law, but also those brought under federal law or the law of another state. As such, it is difficult to characterize that rule as one of substantive New York law. 

By contrast, the prohibition against class actions in Lisk is located directly within the text of the ADTPA itself. The 11th Circuit disregarded that distinction, concluding that “how a state chooses to organize its statutes affects the analysis not at all.” Instead, the 11th Circuit drew a distinction between what it saw as a substantive claim—whether Lumber One violated the ADTPA—and a procedural right—whether offended consumers may seek redress in a single action.

In so ruling, the 11th Circuit states in the opinion that it did not choose between the competing rationales of the Shady Grove majority. But in drawing a simple distinction between procedure and substance, without exploring the purpose or reasoning behind the ADTPA’s class action limitation, the 11th Circuit plainly sided with Justice Scalia’s plurality opinion. That approach creates a meaningful difference for defendants, and eliminates substantive statutory protections included in the very state laws under which plaintiffs are bringing suit.