State Law in the Federal Courts: The Erie Doctrine

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1 State Law in the Federal Courts: The Erie Doctrine

2 Hypo 1 P is a life-long resident of San Francisco. D is a life-long resident of Portland, OR. P and D get in a car accident in Las Vegas, NV. P files a diversity action in the U.S. District Court for the District of Oregon, alleging that D was negligent. What substantive tort law should the court apply? Federal common law? Decisional law from California courts [interpreting CA common law of torts or any CA statute specifying how liability works in automobile accident cases]? Decisional law from Oregon courts [interpreting OR common law of torts or any OR statute specifying how liability works in automobile accident cases]? Decisional law from Nevada courts [interpreting NV common law of torts or any NV statute specifying how liability works in automobile accident cases]?

3 Rules of Decision Act (28 U.S.C. 1652) The laws of the several states, except where the constitution, treaties or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of the United States, in cases where they apply.

4 Swift v. Tyson (US 1842) In the ordinary use of language it will hardly be contended that the decisions of Courts constitute laws. They are, at most, only evidence of what the laws are, and are not of themselves laws. The laws of a state are more usually understood to mean the rules and enactments promulgated by the legislative authority thereof, or long established local customs having the force of laws.

5 Erie R. Co. v. Tompkins (US 1938) [T]he construction given to [the Rules of Decision Act] was erroneous; the purpose of the section was merely to make certain that the federal courts exercising jurisdiction in diversity of citizenship would apply as their rules of decision the law of the state, unwritten as well as written. Experience in applying the doctrine of Swift v. Tyson, had revealed its defects, political and social; and the benefits expected to flow from the rule did not accrue. Persistence of state courts in their own opinions on questions of common law prevented uniformity. On the other hand, the mischievous results of the doctrine had become apparent. Swift v. Tyson introduced grave discrimination by noncitizens against citizens. Congress has no power to declare substantive rules of common law applicable in a state whether they be local in their nature or general, be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts.

6 Hypo 2 Forward to Harry Tompkins III is walking on a pathway along the tracks of the Erie Railroad in PA, when he is hit and injured by something projecting from a passing train. Assume that Congress has enacted the Federal Interstate Railway Act, authorizing suits for damages arising from railroad accidents and imposing a duty of ordinary care standard. Tompkins sues Erie in federal court in PA under this statute. Assume that PA decisional law continues to adhere to the willful or wanton negligence standard for trespassers. Which law should the court apply?

7 Rules of Decision Act (28 U.S.C. 1652) The laws of the several states, except where the constitution, treaties or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of the United States, in cases where they apply.

8 Hypo 3 P is a life-long resident of San Francisco. D is a life-long resident of Las Vegas, NV. P and D get in a car accident in Las Vegas, NV. P files a diversity action in the U.S. District Court for the District of Nevada, alleging that D was negligent. Under Erie, must federal judge wear a powdered wig if that s what the state rule is for how a case like this proceeds? Or can the federal court develop its own practice for courtroom decorum, and use that practice in a diversity case like this one?

9 Guarantee Trust v. York (US 1945) But since a fed court adjudicating a State-created right solely because of the diversity of citizenship of the parties is for that purpose, in effect, only another court of the State, it cannot afford recovery if the right to recover is made unavailable by the State nor can it substantially affect the enforcement of the right as given by the State. And so the proper question is whether such a [state rule] concerns merely the manner and means by which a right to recover, as recognized by the State, is enforced, or does it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court? The intent of Erie was to insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court.

10 Rule after Erie and York Step 1: is the state rule a matter of substantive law i.e., is it bound up with the core rights and obligations created by the state law? If yes, then Erie requires fed ct to apply state law If no, go to step 2 Step 2: Even if the state rule is merely procedural, i.e. it is about a form or mode of enforcing a state substantive right, not the right itself, we ask: would ignoring the state rule substantially affect the outcome of the case? If yes, fed ct. usually applies the state rule If no, can apply the federal rule

11 Cohen v. Beneficial Indust. Loan Corp. (US 1949) NJ rule req d Ps in shareholder derivative action to post bond in order to file complaint If the state s goal is to impose another hurdle a class of shareholders must jump through, to make it harder to file those kinds of suits, this is where the line between substance and procedure becomes blurry -- this is an example of using a procedure that has a substantive purpose

12 Ragan v. Merchants Transfer & Warehouse Co. (US 1949) Complaint filed within Kansas 2-year SOL, but Δ not served until after state SOL had expired; state rule required service w/in 2 years of accident [Litigating the cause of action] carries the same burden and is subject to the same defenses in the federal court as in the state court. Otherwise there is a different measure of the cause of action in one court than the other, and the principle of Erie is transgressed.

13 Woods v. Interstate Realty Co. (US 1949) State rule was that if corporation is not licensed to do business in the state (by which it also consents to in-state service), then it can t itself sue in the state courts [W]here in such cases one is barred from recovery in the state court, he should likewise be barred in the federal court. The contrary result would create discriminations against citizens of the State in favor of those authorized to invoke the diversity jurisdiction of the federal courts.

14 Bernhardt v. Polygraphic Co. of America (US 1956) State law allowed P to revoke arbitration agreement at any time, whereas federal common law rule would have been to enforce the arbitration agreement The nature of the tribunal where suits are tried is an important part of the parcel of rights behind a cause of action.

15 Byrd v. Blue Ridge Rural Elec. (US 1958) Issue: Does judge or jury get to decide if P is an employee under the state Workers Comp statute? [T]he requirement appears to be merely a form and mode of enforcing immunity and not a rule intended to be bound up with the definition of the rights and obligations of the parties. It may well be that in the instant personal-injury case the outcome would be substantially affected by whether the issue of immunity is decided by a judge or a jury. But there are affirmative countervailing considerations at work here. The federal system is an independent system for administering justice to litigants who properly invoke its jurisdiction.

16 Rule after Erie, York & Byrd Step 1: is the state rule a matter of substantive law i.e., is it bound up with the core rights and obligations created by the state law? If yes, then Erie requires fed ct to apply state law If no, go to step 2 Step 2: Even if the state rule is merely procedural, i.e. it is about a form or mode of enforcing a state substantive right, not the right itself, we ask: would ignoring the state rule substantially affect the outcome of the case? If yes, fed ct. usually applies the state rule, unless the risk of potential impact on the outcome is outweighed by countervailing federal policies that arise from the federal courts status as an independent judicial system If no, apply the federal rule

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