Applying the Erie Doctrine in Diversity Cases
A. Erie RR v. Thompkins Rule: If there is no federal or state statutory or
constitutional provision, federal courts apply state common law.
a. Federal constitutional, statutory, or treaty provision:
Federal law applies
b. No Federal const, stat, or treaty provision exists; but a state
const’l or statutory provision exists:
State Const. or statute applies
c. No federal or state const’l, stat, or treaty provision exists
State common law applies
B. Rationales of Erie
a. Swift misread the Rules of Decision Act
b. Swift prompts forum shopping and makes the outcome of the
case differ depending on whether the parties are of diverse
c. It is unconstitutional for the federal courts to make law in an
area that Congress cannot or does not regulate
C. Post-Erie problem: When do federal courts apply federal law and
when do they apply state law in diversity cases?
a. Rules Enabling Act, 28 USC 2072 – authorizes the promulgation
of federal rules of procedure, but the rules must not “abridge,
enlarge, or modify any substantive right.”
b. Rules of Decision Act, 28 USC 1652, requires that state law be
the rule of decision in federal courts, except where federal
law otherwise requires.
c. Supremacy Clause, US Const. Art. IV, provides that federal
Supremacy law “shall be the supreme Law of the Land; and the judges of
Clause every State shall be bound thereby, any thing in the Const. or
Laws of any State to the Contrary not withstanding.”
d. Federal courts in diversity apply state substantive law and
federal procedural law.
i. Erie and RDA require federal courts to apply state
ii. REA requires fed. Courts to apply federal rules of
D. How to distinguish between substance and procedure:
Guaranty a. “outcome determinative” test – Guaranty Trust v. York
Byrd b. “important federal interest” test – Byrd v. Blue Ridge
c. existence of valid federal rule test – Hanna v. Plumer
E. Erie Doctrine Flowchart
#1 – Identify conflict between fed. and state law on
procedural/substantive issue. If federal, const, stat, treaty or FRCP
applies to issue, federal law applies if it is valid.
#2 – If no federal constitutional, stat., treaty or FRCP applies,
consider whether choice between federal and state law or
practice is outcome determinative. If not outcome determinative
apply federal law. If outcome determinative go on to ask …
#3 – Is there an important federal interest in applying the federal
procedural practice? If not, apply state law. “Important federal
interest” is up to lawyer’s creativity.
Federal courts’ interest in protecting the practice of jury trials.
Byrd v. Blue Ridge.
Federal government’s interest in having uniform federal
procedure apply to defense contractors. Boyle v. United
F. The Law Applied: Assuming state law, which state’s law?
a. NY plaintiff sues DE, NJ and international defendants in
federal court in OK (assume min. contacts). Erie says state
Choice tort law applies. But which state?
Of b. Federal courts apply the choice law rules of the state in which
Law federal court sits. Klaxon v. Stentor.
c. Each state applies its own choice of law rules.
G. More recent approach: State that has the most significant
relationship to the incident and to the parties.
a. Factors in torts cases:
i. Where injury occurred
ii. Where conduct causing injury occurred
iii. Domicile of parties
iv. Where relationship between parties is centered
b. Factors in contracts cases:
i. Place of contracting
ii. Place of performance
iii. Place of negotiation
iv. Domicile of parties