Supreme Court Review: New Opinions Defer to State Law, Courts

Abstract

Commentary and analysis of major procedure decisions issued by the Supreme Court in the 1995-96 Term. The article discusses the Court’s decisions in Matshushita Electric Industrial Co. Ltd. v. Epstein and Gasperini v. Center for Humanities Inc. In Matshushita, the Court required federal courts to uphold and give preclusive effect to state class action settlements. The Court determined three major issues. First, it held that full faith and credit required a federal district court to honor a valid state judgment, or in this instance, a state settlement. Second, the Court implicitly held that settlements, like final judgments, are encompassed by preclusion doctrine. Third, the Court held that federal courts must honor a state class action settlement even if that settlement includes a release of claims within the federal court’s exclusive jurisdiction. The article reviews the practical effects of the Matshushita decision and criticisms of the Court’s holdings. In Gasperini, the Court generally held that federal courts must apply state law on damage limitations, rather than any other federal principles. However, the Court split 5-4 in an array of opinions; the Justices could not even agree on what constituted the central issue in the appeal. The majority’s opinion affirms the ability of states to limit damages legislatively, setting statutory caps that may not then be reviewed, second-guessed, or superseded by federal appellate courts in diversity cases. The article surveys the problems raised by Gasperini’s array of decisions.