Research Matters: William H.J. Hubbard on "An Empirical Study of the Effect of Shady Grove v. Allstate on Forum Shopping in the New York Courts"

Research Matters is a biweekly feature in which a member of the faculty talks about some of his or her latest work and its impact and relevance to law and society.

William H.J. Hubbard, Assistant Professor of Law, wrote “An Empirical Study of the Effect of Shady Grove v. Allstate on Forum Shopping in the New York Courts.” It will be published this fall in the Journal of Law, Economics and Policy at George Mason University School of Law. The paper studies “forum shopping,” when a litigant chooses where to file suit in order to obtain a more favorable outcome. The question was the extent to which court precedent under the Erie Doctrine, which determines whether a federal court must apply state law or federal law in certain cases, influences forum shopping behavior of litigants and lawyers. The Erie Doctrine has long been debated by lawyers and judges, but very little empirical work was done, before Hubbard, to look at its effects.

Q. How did this research come to be?

A. There was a conference to celebrate the 75th anniversary of the Supreme Court case, Erie Railroad Co. v. Tompkins, which every 1L law student has to suffer through in Civ Pro at some point. It was decided in April 1938, and we had a conference in April 2013 to celebrate. Richard Epstein was trying to round up people to participate in this conference, and he kind of bullied me into it. He said, ‘We really want something empirical.’ And the real danger of someone who does empirical work signing up for a conference is that you never know until you get the data whether you’ll be able to get the data at all, and if the data will actually tell you something interesting. I got lucky; this paper turned out well.

Q. Why study the Erie case?

A. Law professors love Erie, but few people outside the legal profession have even heard of it. So the question is, why do lawyers think it’s so important when non-lawyers don’t even know it exists? One of the reasons is this concern about forum shopping, which goes to ideas about the basic fairness of the judicial system. I think that’s why even non-lawyers might care about this case if they learned about it. A lot of people are uncomfortable with the possibility that a person can guarantee success or failure in a case simply by choosing to go before one judge rather than another judge. The Erie case announced a legal rule that the Supreme Court argued would reduce forum shopping. But, although it reduced the ability of a plaintiff to choose the outcome of a case by going into state court instead of federal court – which is what we call vertical forum shopping – it created the ability for a plaintiff to change the outcome of a case by choosing to file in one state instead of a different state. That’s horizontal forum shopping. A plaintiff might be from Ohio, and the defendant might be from New Jersey, but the plaintiff files suit in California, because the plaintiff is more likely to win the case in California. A lot of the debates about the Erie Doctrine – Should it be broader? Should it be narrower? – have to do with the concern that we don’t want to allow forum shopping to become the dominant factor in determining the outcome of cases. That’s the reason why lawyers often think of this case as being important, and why I think it remains relevant today, 75 years after it was decided.

I discovered that we don’t have a lot of data on forum shopping, and that’s what got me excited about this project. Hopefully this paper provides a little nugget of evidence that will contribute to future discussion of this issue.

Q. What did you find?

A. I looked at the Shady Grove case, which was decided in 2010. The Supreme Court had to apply the Erie Doctrine to decide whether the New York rule governing class actions or the federal law rule governing class actions would apply in a lawsuit filed in federal court. The New York rule, for this particular, narrow kind of lawsuit, says you can’t have a class action. The federal rule says you can have a class action. And so the question was, which rule applies? The district court said the New York rule applied, so there couldn’t be a class action. But when it got to the Supreme Court, the Supreme Court said that the federal rule applies, so there could be a class action. So you have this situation where the rule that applied to the courts in New York flipped. Before the Supreme Court decided the case, the rule was, New York law applied. After the Supreme Court decided the case, the rule was federal law applied.

I exploited that sudden change in the rule to look at court filings in New York. Did people suddenly start filing more class actions in federal court because the federal rule favored the plaintiff? And it’s really quite dramatic. There’s a huge spike immediately after the Supreme Court opinion in the number of class action filings in federal court in New York. That indicated that at least with respect to this type of case, the potential for forum shopping is very high. The number of cases more than doubled.

Q. What could change or be affected because of this work?

A. It’s tricky, because what I wasn’t able to measure was horizontal forum shopping. One might say, there was a dramatic forum shopping effect, and that’s a bad thing, and so maybe we should be more aggressive in applying the Erie Doctrine to create the same rule in state court and federal court. The reason that conclusion is still unproven is because even harder than measuring vertical forum shopping is this question of measuring horizontal forum shopping. There is a claim, and I think it’s a reasonable one, that getting rid of vertical forum shopping has the side effect of increasing horizontal forum shopping. One thing I wasn’t able to do with the data I had here was look for horizontal forum shopping effects caused by Supreme Court decisions. As a consequence, it’s hard to make that jump from objective description of forum shopping to normative claims about which direction policy should move. I’d love to really get my teeth into horizontal forum shopping to investigate this further.