The Erie Doctrine

Erie doctrine only applies in federal courts for Diversity of Citizenship

Apple federal law, or state law?

For federal question, federal law trumps state law, no Erie

Otherwise, Apply State/substantive, Federal/procedural
Substantive law – law that defines the rights of the parties
Procedural law – law that governs the manner and means of enforcing those rights

Rules of Decision Act (RDA) – the federal courts in diversity cases must apply state substantive
law and federal procedural law
Rule Enabling Act (REA) – if federal rule of civil procedure is procedural, and does not unduly
abridge substantive right, apply federal law

Choosing between Federal and State Law

1. Federal rule analysis – when a FRCP (or federal statute) directly addresses the issue at hand
2. Erie analysis – federal law does not directly address the issue

Federal rule analysis – if a valid FRCP/statute directly conflicts with state law,
Federal rule applies if
1. The rule is arguably procedural
2. The rule does not change any substantive right
 FRCP are basically always valid under REA, and always procedural
 If no conflict with state law, apply Erie analysis

SvT – 1842 – permitted federal judges to displace state law with fed. Law in diversity cases
Allowed fed judge leeway to apply the law, judge applied federal common law

Erie Railroad Co v Tompkins, 1938

 Rule – Although the 1789 Rules of Decision Act (RDA) allows federal courts to apply their
own rules of procedure in actions brought in federal court, it commands they use state law for
substantive issues.
 Facts: T claimed negligence when injured by passing train door on railroad path when
trespassing. Penn. law states that V was trespassing and RR not liable for negligence. T
argued for federal general law.
 Swift – SvT held that fed ct free to exercise judgment, but it prevented uniformity, created
uncertainty, resulted in discrimination.
 Holding – SprCt held that except in matters governed by the US Constitution or Act of
Congress, the law that is to be applied in any case is the law of the state. No Federal
Common Law. State law is THE law.

Reasons for Erie –

1. No uniformity – if fed ct interprets law, decisions will be all over the place, No prediction
2. Federal Common Law unconstitutional, takes power from states (state autonomy)
3. Not fair if Federal court only respects legislatures, not state’s highest court
Twin Aims of Erie
1. Discourage forum shopping
2. Avoid inequitable administration of the law

Erie Factors
1. Choice of law determines the outcome: yes, favor state law
 Will choice of law significantly affect the outcome
 Example – state statute of limitations, can determine outcome of case
2. State law expresses strong state interest: yes, favor state law
 When state intends the law to help define the rights of the parties
 Example – state law of statute of limitations, state law policy judgement
3. Countervailing federal policy should overcome state law: yes, favor federal law
 Example – federal interests in judge-jury relations, independence of federal courts
4. Twin Aims of Erie
 Courts must apply state conflict-of-law rules, or risk forum shopping/inequity.

Byrd v Blue Ridge Rural Electric Cooperative, 1958

 Rule – The Erie Doctrine requires that federal courts in diversity cases respect definitions of
rights and obligations created by state courts, but state laws cannot alter the essential
characteristics and functions of the federal courts, including the right to trial by jury.
 Facts: P lineman from N.C. sued D power company from S. C. for negligence. D says P
statutory employee and must accept statutory compensation benefits. Factual question, state
law has judge decide, federal law has jury decide.
 Holding: D states immunity must be decided by a judge. 1. Fed cts must respect the
definition of state-created rights. This requirement is a form and mode, not a requirement. 2.
Fed ct should try to conform, but state law cannot change the fed ct purpose. 3. Judge and
jury may have the same outcome. Not a strong likelihood of a different result.

Hanna v. Plumer, 1965

 Rule – The Erie Doctrine mandates that federal courts apply state substantive law and federal
procedural law, but the Constitution grants the federal court system the power to regulate
their procedures.
 Issue: Whether in a diversity of citizenship case, service of process shall be made according
to state law or federal law.
 Facts: Citizen of Ohio, was in an accident with decedent (of Massachusetts) in South
Carolina, sued in federal court for diversity. Service made according to federal law for
substitute service. D filed answer saying notice violated state law.
 Holding: Federal rule for notice is constitutional. Rule permits for service of a summons
anywhere within the state, no conflicting state rule. Service of process is procedural law.

Gasperini v Center for Humanities, Inc., 1996

 Rule – A federal district court can apply state law governing the excessiveness or inadequacy
of compensation awards without running afoul of the Seventh Amendment.
 Facts – Petitioner journalist was awarded $450,000 in compensatory damages by a federal
court jury for the loss of 300 slide transparencies. Respondent’s motion for a new trial was
denied. The appellate court set aside the verdict as excessive, relying on McKinney which
empowered New York appellate courts to review the size of jury verdicts and to order new
trials when the award was unreasonable.
 Holding – A law that results in a substantially larger recovery in federal than state court is
substantive. New York’s law controlling compensation awards for excessiveness or
inadequacy can be given effect.

Shady Grove Orthopedic v Allstate Ins., 2010

 Rule – FRCP 23 preempts state law as to when a class action law by a state court is
insufficient grounds for modifying a final judgment in a federal diversity action.
 Issue – Did the trial court have jurisdiction over the case. Yes.
 Facts – Insurance company refused to remit the interest due under New York law on an
insured’s insurance claim. The insured filed a class action in diversity to recover interest
against the insurance company and others. New York law says no penalty for class action
suits. Rule 23 permits class actions in federal court.
 Holding – Rule 23 permits all class actions that meets its requirements, and a state cannot
limit that permission.

Is conflicting issue addressed by FRCP (federal statute)?

1. Yes, apply Hanna (federal rule analysis).
a. Is it valid within REA? Apply Federal Law
2. No, apply Byrd OR Hanna Dicta
a. Byrd Holdings
i. Substantial Substantive Law, Apply State Law
ii. Balance form and mode effect on the outcome w/other federal interests,
 Apply State Law or Federal Law
b. Hanna Dicta
i. Real chance of forum shopping, Apply State Law
ii. Real chance of inequality, Apply State Law

Determining State Law

Conflict-of-Law Rules Apply

 If there is a question as to which state’s law to apply, then a federal court must use the
conflict of law or choice of law rules of the state where the federal court sits.
 Each state has its own choice of law rules
 Usually, law of the state with the greatest connection to the issues involved will govern

Deweerth v Baldinger, 1994

 Rules – A clarification of substantive state law by a state court is insufficient grounds for
modifying a final judgment in a federal diversity action.
 Facts – Deweerth owned a Monet before WWII that disappeared at end of war. Purchased by
Baldinger. De found the painting, demanded painting returned. NY statute of limitations for
recovery of stolen property limits the suit to 3 years after the action accrued.
 Holding – State’s court of last resort ruling overrules the ruling of a federal court sitting in
diversity when interpreting state law.

Federal Common Law

No federal general common law, federal courts lack power to make general common-law rules
when state law should apply.

Federal courts have power to interpret federal law, and fill gaps in federal statutes.

Areas of Significant Federal Interest – superior to or in conflict with state laws

 Admiralty
 Foreign relations
 Cases implicating federal constitutional powers

Gap-Filling in Federal Statutes

 Narrow issues – interpretation of statutory terms
 Broad issues – recognition of an implied right of action under federal statute
 When?
o Typically influenced by strength of the federal interest
o Need for federal uniformity
o Expectations of the parties
o Perceived intent of Congress in passing statute
 Sources – sometimes create a uniform federal rule, sometimes adopt state law

Federal Law in State Court

State have concurrent jurisdiction over most federal causes of action

 Exceptions – where Congress has granted the federal courts exclusive jurisdiction.
 State courts must follow federal procedures behind federal law
o Particular rights, like right to jury, is by statute and governed by federal law

I. Is there federal directive on point? Apply Hanna.

If Yes, federal
IF no, state

II. If there is no federal directive on point, 2 part test

a. Outcome determinative – different results in state v federal Byrd
b. Is the state issue/right substantive (or bound) or is it form and mode?
i. If substantive (or bound, part of the elements), apply state law.
ii. If just form and mode, is it still outcome determinative.
iii. If yes, apply state law unless some federal interest outweighs state interest
i.g. national security, federal privilege
III. Twin Aims of Erie
a. Avoid forum shopping
b. Will it lead to equitable administration of the law