Chapter 5: The

Erie Doctrine
 Introduction
Deals with claims heard by Federal Courts sitting in
diversity jurisdiction.
Question: Which law, State or Federal, must apply to
claims in Federal Court sitting with diversity jurisdiction?
 Choice of Law
State Courts: Whatever state the court is in, that states
law applies.
o Every state has choice of law doctrine.
o Based on common law; Both sides will argue for what law applies.
Federal Courts: If the case is not a federal question,
court must determine what law will be applied:
o Either that of the state (common law); or
o federal common law (prior to Erie).
Applicable Law Prior to Erie
28 U.S.C. 1652: Rules of Decision Act
The laws of several states, except where the Constitution
or treaties of the United States or Acts of Congress
otherwise require or provide, shall be regarded as rules
of decision in civil actions in the courts of the United
States, in cases where they apply
Question: what does the laws of several states mean,
other than State law will apply to non-federal question
claims?
 Swift v. Tyson (1840)
Tyson (New York) tendered a bill of exchange (e.g. a check) to a group of land
speculators as payment for land he sought to purchase. The land speculators
then used the bill of exchange to pay off a pre-existing debt owed to Swift.
Upon discovering that the land he sought to purchase was not owned by the
speculators, Tyson refused to honor the bill of exchange; thus Swift could not
get paid. Swift then filed an action seeking payment.
Tyson-New York Law: Provides that transactions obtained through fraud are void.
Swift-Prevailing Commercial Law: Provides that a bona fide holder, who
acquired such bill for consideration and without notice of fraud, are entitled to payment
on the bill
 Issue and Holding
Issue: whether the Federal Court of New York was bound to apply the laws of
New York, or whether the court was free to develop its own view on the law?
Held: federal courts sitting in diversity jurisdiction are not bound to apply the
substantive law of the states, but rather are free to exercise an independent
judgment as to what the common law of the state is.
The Court interpreted 1652 as meaning only state statutes, not state
common law.
o The decisions of local tribunals are not laws but merely evidence of what the laws are.
o Thus federal courts are entitled to create their own law in the area.
 Rationale
1. Promote Uniformity
o States are all individualistic and do their own thing BUT society needs uniformity
in the law for commercial matters; Works to aid commerce
2. Philosophical Concept of Law
o During the 19th century, Courts viewed that Common Law was not made law by
courts but rather federal courts deduced law by their own judgment.
o The art of reason was used to deduce unchanging, transcendental lawthe law
was already out there unchanging and omnipresent
o Thus if state courts made common law and federal courts did not like it, they
would develop their own common law in the areasuch as Tort or Contract Law.
 The Erie Doctrine
In the years following Swift, various problems arose with
Federal Courts, sitting in diversity, applying federal
common law in claims arising under state law.
The Supreme Court in Erie sought to address these
problems and establish a general framework to govern the
relationship between state common law and federal
courts.
 Erie Railroad Co. v. Tompkins
(1938)
Plaintiff (Penn.) was injured by Defendant Railroad in the State of
Pennsylvania. Plaintiff then filed suit alleging negligence in New York
Federal Court, which had diversity jurisdiction over the claim.
Plaintiff-Federal Common Law: Because no Pennsylvania statute exists
for negligence, the federal courts should determine the lawwhich
ultimately would provide a simple negligence standard
Defendant-Pennsylvania Common Law: Provides that a Railroad is only
liable for Willful or Wanton negligence
The Supreme Court is faced with precedent in Swift v. Tyson to apply
federal common law but refuses to do so
 Holding
The Court held that federal courts sitting in diversity
must apply states substantive law (ie. Tort law), whether
that law is in the form of a state statute or state judicial
decision
Thus the Court invalidated federal common law
 Rationale
1. New Scholarship
o Lost documents were found; Maybe writers of 1652 actually meant
that state common law applies
2. Negative Experience with Swift
o Uniformity did not develop but federal and state courts split even
further
o Confusing distinction between general law and local law
o Unfairness of Forum Shopping: Discriminated against in state citizens
 Rationale
3. Legal Realism
o Law is now seen as what an authority says it is; Even if it goes
against human injustice; Laws are viewed as unjust because we
fundamentally disagree with them NOT because some
transcendental, unchanging law is inconsistent with it
o Laws are now seen as a matter of policy; Courts & legislature
decide if laws are just; We have procedural system set up; States
can have bad law if they want to and federal courts cannon
change it
 Swift as Unconstitutional
The Court held this but did not explain whypossible rationales include:
1. Equal Protection
o Different people get to choose different lawsBUT nobody was really being
treated differently; Courts were just applying their own set of laws.
2. Separation of Powers
o Gives creation of substantive law to congress.
3. 10th Amendment (Most Rational)
o Federal government only has certain powers and other powers are left to the
state.
 Impact of The Erie Doctrine
Questions from Erie
If federal court has to apply substantive state law, does
that apply to procedure and evidence laws?
How to determine if an issue is substantive or procedural.