Erie doctrine
Encyclopedia
In United States law, the Erie doctrine is a fundamental legal
doctrine
of civil procedure
mandating that a federal court in diversity jurisdiction
(and some allied state-law claims in federal-law actions) must apply state substantive law
.
The doctrine follows from Supreme Court landmark decision
in Erie Railroad Co. v. Tompkins
, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), decided on April 25, 1938, written by Justice
Louis Brandeis
. The case overturned Swift v. Tyson
, which allowed federal judges
sitting in a state to ignore the common law
local decisions of state courts in the same state, in cases based on diversity jurisdiction
.
Erie doctrine today applies regardless of how the federal court may hear a state claim. Whether the federal court decides a state law issue vis-a-vis diversity jurisdiction or bankruptcy jurisdiction, the federal court must honor state common law
when deciding state law issues. See, generally, United Mine Workers v. Gibbs, 383 U.S. 715 (1966) and Butner v. United States, 440 U.S. 48 (1979).
Where the constitution did control and congress could not legislate, the laws of the states necessarily governed, state judge-made rules were every bit as binding on the federal courts as were state statutory provisions.
and the jurisdiction of federal courts in the United States
. Congress
passed a law still in effect today called the Rules of Decision Act
, which states that the laws of a state furnish the rules of decision for a federal court sitting in that state. Thus, a federal court in Texas
, hearing a case based on diversity (as opposed to a federal question), has to follow the laws of the applicable state in resolving a case before it.
had defined the laws of the state as meaning only laws passed by legislatures of that state (though Justice Joseph Story
writing for the court suggested that federal courts should pay special attention to how the "local tribunals" of a state would resolve a dispute). Thus, on issues of "general common law," a federal court was free to ignore decisions by a state's highest court.
resulted in inconsistent judicial rulings in the same state on the same legal issue depending on whether a plaintiff brought a case in state or federal court. In one case, for example, Black and White Taxicab Co. v. Brown and Yellow Taxicab Co.
276 U.S. 518 (1928), the Brown and Yellow Cab Company, a Kentucky
corporation
, sought to create a business association with the Louisville and Nashville Railroad
, where Brown and Yellow would have a monopoly on soliciting passengers of the railroad, effectively eliminating the competition, the Black and White Cab Co. Such an agreement was illegal under Kentucky common law
, as interpreted by Kentucky's highest court. Brown and Yellow dissolved itself, reincorporated in Tennessee
, and executed the agreement there, where such an agreement was legal, bringing suit against Black and White in a Kentucky federal court to prevent them from soliciting passengers. The federal court upheld the agreement, citing Swift, and arguing that under general federal common law, the agreement was valid. If Brown and Yellow had brought suit in a Kentucky state court, the agreement would not have been upheld.
, Tompkins, was walking alongside Erie's railroad tracks in Pennsylvania
when a train passed. An open door struck him and knocked him under the train, severing his arm. In most states, Tompkins could sue for negligence
of the railroad and recover monetary damages for his loss. In Pennsylvania, however, Tompkins would have been considered a trespass
er. He was not to recover for an ordinary negligence claim in the state court of Pennsylvania, because under the law of that state, a claimant had to show "wanton" negligence to recover.
Thus, Tompkins brought his case in federal court to avoid the unfavorable state law. He subsequently won. However, on appeal the Supreme Court held, in an opinion drafted by Justice Brandeis, that such decisions and inconsistent rulings based on a general federal common law were unconstitutional
, and that decisions by a state supreme court were "laws" that federal courts were bound to follow under the Rule of Decision Act. Brandeis noted that the Court felt that Swift allowed federal courts to make unconstitutional modifications of the substantive law of a state. He noted that it violated the right to equal protection under the law, although he did not mean it in the sense of the Fourteenth Amendment
. The Court overruled Swift on its own initiative, since the parties in Erie did not ask the Court to do so.
have added to the vague Erie
decision (Brandeis cited no provision of the Constitution that Swift
violated, although theoretically it might have violated the Tenth Amendment's
reservation of powers to the state). Speaking generally, there are two approaches in determining whether a federal court will apply a state law: (1) the Hanna
& Rules Enabling Act
approach, per when there is a Federal Rule of Civil Procedure
and statute
that conflicts with a state law
; and (2) the Byrd-Erie approach when there is not a conflict between a state and federal practice.
, the Court decided that the federal policy allocating responsibilities between judge and jury, as embodied in the 7th Amendment of the US Constitution, outweighed the state rule requiring a judge to decide whether an employer was immune from suit. The main goal of the Erie decision was to prevent "forum-shopping," a practice where plaintiffs choose a legal forum
simply because of the probability of a more favorable ruling. The main problem with the decision is that sometimes there is simply no state law or practice on which a federal court may defer. Federal judges are left to guess how a state court would rule on a given legal question, and a state court is in no way bound by a federal decision interpreting their own state law.
Justice Frankfurter in Guaranty Trust Co. v. York
, summarizes the main point of Erie differently... "In essence, the intent of that decision was to ensure 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...." This suggests that Erie's main goal was to achieve equal protection under the law. One way that equal protection is intentionally disregarded would be through "forum shopping
," but the reduction of inequality was the main target of the doctrine.
, the federal court
of a state
hearing a case based on diversity jurisdiction
should apply state law
in the event of conflict between state and federal law if the state law deals with substantive rights of state citizens. The Supreme Court
has defined substantive rights as, "rights conferred by the law to be protected and enforced by the adjective law of judicial procedure." An example of a substantive right would be a state law on fraud
, which may vary widely in composition depending on the jurisdiction. If the state law is merely procedural, or relating merely to the form and mode of judicial operations, then the federal court does not have to apply the conflicting state law. However, the substance-procedure distinction is a generality as the Court rejected any test based upon "litmus paper criterion." Thus, a choice between state and federal law must be made with reference to the underlying policy of the Erie decision. The Court announced a modification of the "outcome-determinative" test in York, whereby the test must be applied in light of the twin aims of Erie, which are the discouragement of forum-shopping and avoidance of inequitable administration of the laws. Under this rule, state procedural law would not supplant federal procedural law if the differences in the outcome are nonsubstantial or trivial, fail to raise Equal Protection concerns, and are unlikely to influence the choice of forum.
, . Gasperini is a post-Hanna decision addressing a conflict between state and federal law for review of jury verdicts. The plaintiff, a well-known artist and photographer from New York, sued a New York museum in federal court in New York, for damages arising from the loss of some photographs and slides he had loaned the museum. A jury found in his favor and awarded damages. The defendant appealed, and the U.S. Court of Appeals for the 2nd Circuit reduced the damages award on appeal. Gasperini appealed to the U.S. Supreme Court.
The New York state provision, a "tort reform" measure, allowed reviewing appellate courts to overturn a jury verdict if it "deviates materially from what would be reasonable compensation." Pursuant to this law, the 2nd Circuit applied the state's appellate standard of review. However, the Supreme Court stated that federal courts, bound by the reexamination clause of the Seventh Amendment, could overturn a jury's finding of fact only if it "shocked the conscience."
The Supreme Court could have resolved the case by reading the Seventh Amendment broadly, and treating it as controlling in federal court. However, instead, the Court opted for what can be described as a compromise, holding that the federal court should apply the state's lower standard review, but in a way that would not run afoul of the 7th Amendment: instead of the federal appeals court reviewing the jury finding, the trial judge would assume the role.
Gasperini, and another recent Erie-area case, Semtek International Inc. v. Lockheed Martin Corp., have shown Erie has gone in a newer and even more complicated direction than the previous controlling cases, and that instead of selecting either federal or state law for a case, the federal court may be required to somehow blend federal and state law, depending on the issue. This is quite frustrating for those who wish to have a black-letter rule that will point them to the answer. However, the possibility of blending in Erie does not open up an infinitude of possibilities. In both Gasperini and Semtek, the common thread is that the blending is done in a way that is calculated to advance the aims of Erie (and York): non-discrimination between litigants, and non-encouragement of forum shopping
. (Source: Allan Ides & Christopher May, Civil Procedure, 3d Edition).
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
doctrine
Doctrine
Doctrine is a codification of beliefs or a body of teachings or instructions, taught principles or positions, as the body of teachings in a branch of knowledge or belief system...
of civil procedure
Civil procedure
Civil procedure is the body of law that sets out the rules and standards that courts follow when adjudicating civil lawsuits...
mandating that a federal court in diversity jurisdiction
Diversity jurisdiction
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...
(and some allied state-law claims in federal-law actions) must apply state substantive law
State law
In the United States, state law is the law of each separate U.S. state, as passed by the state legislature and adjudicated by state courts. It exists in parallel, and sometimes in conflict with, United States federal law. These disputes are often resolved by the federal courts.-See also:*List of U.S...
.
The doctrine follows from Supreme Court landmark decision
Landmark decision
Landmark court decisions establish new precedents that establish a significant new legal principle or concept, or otherwise substantially change the interpretation of existing law...
in Erie Railroad Co. v. Tompkins
Erie Railroad Co. v. Tompkins
Erie Railroad Co. v. Tompkins, 304 U.S. 64 , was a decision by the Supreme Court of the United States in which the Court held that federal courts did not have the judicial power to create general federal common law when hearing state law claims under diversity jurisdiction...
, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), decided on April 25, 1938, written by Justice
Associate Justice of the Supreme Court of the United States
Associate Justices of the Supreme Court of the United States are the members of the Supreme Court of the United States other than the Chief Justice of the United States...
Louis Brandeis
Louis Brandeis
Louis Dembitz Brandeis ; November 13, 1856 – October 5, 1941) was an Associate Justice on the Supreme Court of the United States from 1916 to 1939.He was born in Louisville, Kentucky, to Jewish immigrant parents who raised him in a secular mode...
. The case overturned Swift v. Tyson
Swift v. Tyson
Swift v. Tyson, , was a case brought in diversity in the Circuit Court for the Southern District of New York on a bill of Exchange accepted in New York in which the Supreme Court of the United States determined that United States federal courts hearing cases brought under their diversity...
, which allowed federal judges
United States federal judge
In the United States, the title of federal judge usually means a judge appointed by the President of the United States and confirmed by the United States Senate in accordance with Article II of the United States Constitution....
sitting in a state to ignore the common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
local decisions of state courts in the same state, in cases based on diversity jurisdiction
Diversity jurisdiction
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...
.
Scope
The AmericanUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
Erie doctrine today applies regardless of how the federal court may hear a state claim. Whether the federal court decides a state law issue vis-a-vis diversity jurisdiction or bankruptcy jurisdiction, the federal court must honor state common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
when deciding state law issues. See, generally, United Mine Workers v. Gibbs, 383 U.S. 715 (1966) and Butner v. United States, 440 U.S. 48 (1979).
Where the constitution did control and congress could not legislate, the laws of the states necessarily governed, state judge-made rules were every bit as binding on the federal courts as were state statutory provisions.
Origin
The Erie case involved a fundamental question of federalismFederalism
Federalism is a political concept in which a group of members are bound together by covenant with a governing representative head. The term "federalism" is also used to describe a system of the government in which sovereignty is constitutionally divided between a central governing authority and...
and the jurisdiction of federal courts in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
passed a law still in effect today called the Rules of Decision Act
Rules of Decision Act
The Rules of Decision Act requires that federal courts apply state law in their decisions arising out of diversity jurisdiction, except when in conflict with federal law.This act came from Section 34 of the Judiciary Act of 1789...
, which states that the laws of a state furnish the rules of decision for a federal court sitting in that state. Thus, a federal court in Texas
Texas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...
, hearing a case based on diversity (as opposed to a federal question), has to follow the laws of the applicable state in resolving a case before it.
Swift v. Tyson
The Supreme Court's decision in Swift v. TysonSwift v. Tyson
Swift v. Tyson, , was a case brought in diversity in the Circuit Court for the Southern District of New York on a bill of Exchange accepted in New York in which the Supreme Court of the United States determined that United States federal courts hearing cases brought under their diversity...
had defined the laws of the state as meaning only laws passed by legislatures of that state (though Justice Joseph Story
Joseph Story
Joseph Story was an American lawyer and jurist who served on the Supreme Court of the United States from 1811 to 1845. He is most remembered today for his opinions in Martin v. Hunter's Lessee and The Amistad, along with his magisterial Commentaries on the Constitution of the United States, first...
writing for the court suggested that federal courts should pay special attention to how the "local tribunals" of a state would resolve a dispute). Thus, on issues of "general common law," a federal court was free to ignore decisions by a state's highest court.
Aftermath of Swift
The decision in SwiftSwift v. Tyson
Swift v. Tyson, , was a case brought in diversity in the Circuit Court for the Southern District of New York on a bill of Exchange accepted in New York in which the Supreme Court of the United States determined that United States federal courts hearing cases brought under their diversity...
resulted in inconsistent judicial rulings in the same state on the same legal issue depending on whether a plaintiff brought a case in state or federal court. In one case, for example, Black and White Taxicab Co. v. Brown and Yellow Taxicab Co.
Black and White Taxicab Co. v. Brown and Yellow Taxicab Co.
Black & White Taxicab Co. v. Brown & Yellow Taxicab Co. , 276 U.S. 518 , was a decision by the US Supreme Court in which the Court refused to hold that federal courts sitting in diversity jurisdiction must apply state common law. Ten years later, in Erie Railroad Co. v...
276 U.S. 518 (1928), the Brown and Yellow Cab Company, a Kentucky
Kentucky
The Commonwealth of Kentucky is a state located in the East Central United States of America. As classified by the United States Census Bureau, Kentucky is a Southern state, more specifically in the East South Central region. Kentucky is one of four U.S. states constituted as a commonwealth...
corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
, sought to create a business association with the Louisville and Nashville Railroad
Louisville and Nashville Railroad
The Louisville and Nashville Railroad was a Class I railroad that operated freight and passenger services in the southeast United States.Chartered by the state of Kentucky in 1850, the L&N, as it was generally known, grew into one of the great success stories of American business...
, where Brown and Yellow would have a monopoly on soliciting passengers of the railroad, effectively eliminating the competition, the Black and White Cab Co. Such an agreement was illegal under Kentucky common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
, as interpreted by Kentucky's highest court. Brown and Yellow dissolved itself, reincorporated in Tennessee
Tennessee
Tennessee is a U.S. state located in the Southeastern United States. It has a population of 6,346,105, making it the nation's 17th-largest state by population, and covers , making it the 36th-largest by total land area...
, and executed the agreement there, where such an agreement was legal, bringing suit against Black and White in a Kentucky federal court to prevent them from soliciting passengers. The federal court upheld the agreement, citing Swift, and arguing that under general federal common law, the agreement was valid. If Brown and Yellow had brought suit in a Kentucky state court, the agreement would not have been upheld.
Erie
The decision in Erie involved a railroad accident. The plaintiffPlaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
, Tompkins, was walking alongside Erie's railroad tracks in Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
when a train passed. An open door struck him and knocked him under the train, severing his arm. In most states, Tompkins could sue for negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
of the railroad and recover monetary damages for his loss. In Pennsylvania, however, Tompkins would have been considered a trespass
Trespass
Trespass is an area of tort law broadly divided into three groups: trespass to the person, trespass to chattels and trespass to land.Trespass to the person, historically involved six separate trespasses: threats, assault, battery, wounding, mayhem, and maiming...
er. He was not to recover for an ordinary negligence claim in the state court of Pennsylvania, because under the law of that state, a claimant had to show "wanton" negligence to recover.
Thus, Tompkins brought his case in federal court to avoid the unfavorable state law. He subsequently won. However, on appeal the Supreme Court held, in an opinion drafted by Justice Brandeis, that such decisions and inconsistent rulings based on a general federal common law were unconstitutional
Constitutionality
Constitutionality is the condition of acting in accordance with an applicable constitution. Acts that are not in accordance with the rules laid down in the constitution are deemed to be ultra vires.-See also:*ultra vires*Company law*Constitutional law...
, and that decisions by a state supreme court were "laws" that federal courts were bound to follow under the Rule of Decision Act. Brandeis noted that the Court felt that Swift allowed federal courts to make unconstitutional modifications of the substantive law of a state. He noted that it violated the right to equal protection under the law, although he did not mean it in the sense of the Fourteenth Amendment
Fourteenth Amendment to the United States Constitution
The Fourteenth Amendment to the United States Constitution was adopted on July 9, 1868, as one of the Reconstruction Amendments.Its Citizenship Clause provides a broad definition of citizenship that overruled the Dred Scott v...
. The Court overruled Swift on its own initiative, since the parties in Erie did not ask the Court to do so.
Development
Several later casesLegal case
A legal case is a dispute between opposing parties resolved by a court, or by some equivalent legal process. A legal case may be either civil or criminal...
have added to the vague Erie
Erie Railroad Co. v. Tompkins
Erie Railroad Co. v. Tompkins, 304 U.S. 64 , was a decision by the Supreme Court of the United States in which the Court held that federal courts did not have the judicial power to create general federal common law when hearing state law claims under diversity jurisdiction...
decision (Brandeis cited no provision of the Constitution that Swift
Swift v. Tyson
Swift v. Tyson, , was a case brought in diversity in the Circuit Court for the Southern District of New York on a bill of Exchange accepted in New York in which the Supreme Court of the United States determined that United States federal courts hearing cases brought under their diversity...
violated, although theoretically it might have violated the Tenth Amendment's
Tenth Amendment to the United States Constitution
The Tenth Amendment to the United States Constitution, which is part of the Bill of Rights, was ratified on December 15, 1791...
reservation of powers to the state). Speaking generally, there are two approaches in determining whether a federal court will apply a state law: (1) the Hanna
Hanna v. Plumer
Hanna v. Plumer, 380 U.S. 460 , was a decision by the Supreme Court of the United States, in which the Court further refined the Erie doctrine regarding when and by what means federal courts are obliged to apply state law in cases brought under diversity jurisdiction...
& Rules Enabling Act
Rules Enabling Act
The Rules Enabling Act is an Act of Congress that gave the judicial branch the power to promulgate the Federal Rules of Civil Procedure. Amendments to the Act allowed for the creation of the Federal Rules of Criminal Procedure and other procedural court rules...
approach, per when there is a Federal Rule of Civil Procedure
Federal Rules of Civil Procedure
The Federal Rules of Civil Procedure govern civil procedure in United States district courts. The FRCP are promulgated by the United States Supreme Court pursuant to the Rules Enabling Act, and then the United States Congress has 7 months to veto the rules promulgated or they become part of the...
and statute
Statute
A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...
that conflicts with a state law
State law
In the United States, state law is the law of each separate U.S. state, as passed by the state legislature and adjudicated by state courts. It exists in parallel, and sometimes in conflict with, United States federal law. These disputes are often resolved by the federal courts.-See also:*List of U.S...
; and (2) the Byrd-Erie approach when there is not a conflict between a state and federal practice.
Byrd-Erie
This approach suggests that unless there is a major countervailing federal policy that trumps the state practice, if ignoring the state law would lead to forum shopping by plaintiffs and unequal administration of the laws (like in Yellow Cab above), the court should apply the state law. In Byrd v. Blue Ridge Rural Electrical Cooperative, Inc.Byrd v. Blue Ridge Rural Electric Cooperative, Inc.
Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525 , decided on May 19, 1958, was a decision by the Supreme Court of the United States that refined the doctrine regarding in what instances courts were required to follow state law....
, the Court decided that the federal policy allocating responsibilities between judge and jury, as embodied in the 7th Amendment of the US Constitution, outweighed the state rule requiring a judge to decide whether an employer was immune from suit. The main goal of the Erie decision was to prevent "forum-shopping," a practice where plaintiffs choose a legal forum
Venue (law)
Venue is the location where a case is heard. In the United States, the venue is either a county or a district or division . Venue deals with locality of a lawsuit--that is, in which locale a lawsuit may be filed or commenced...
simply because of the probability of a more favorable ruling. The main problem with the decision is that sometimes there is simply no state law or practice on which a federal court may defer. Federal judges are left to guess how a state court would rule on a given legal question, and a state court is in no way bound by a federal decision interpreting their own state law.
Justice Frankfurter in Guaranty Trust Co. v. York
Guaranty Trust Co. v. York
Guaranty Trust Co. v. York, 326 U.S. 99 , was a United States Supreme Court case that described how federal courts were to follow state law. Justice Frankfurter delivered the majority opinion further refining the doctrine set forth in Erie Railroad Co. v...
, summarizes the main point of Erie differently... "In essence, the intent of that decision was to ensure 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...." This suggests that Erie's main goal was to achieve equal protection under the law. One way that equal protection is intentionally disregarded would be through "forum shopping
Forum shopping
Forum shopping is the informal name given to the practice adopted by some litigants to get their legal case heard in the court thought most likely to provide a favorable judgment...
," but the reduction of inequality was the main target of the doctrine.
Hanna
Under the approach in Hanna v. PlumerHanna v. Plumer
Hanna v. Plumer, 380 U.S. 460 , was a decision by the Supreme Court of the United States, in which the Court further refined the Erie doctrine regarding when and by what means federal courts are obliged to apply state law in cases brought under diversity jurisdiction...
, the federal court
United States district court
The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each United States...
of a state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
hearing a case based on diversity jurisdiction
Diversity jurisdiction
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...
should apply state law
State law
In the United States, state law is the law of each separate U.S. state, as passed by the state legislature and adjudicated by state courts. It exists in parallel, and sometimes in conflict with, United States federal law. These disputes are often resolved by the federal courts.-See also:*List of U.S...
in the event of conflict between state and federal law if the state law deals with substantive rights of state citizens. The Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
has defined substantive rights as, "rights conferred by the law to be protected and enforced by the adjective law of judicial procedure." An example of a substantive right would be a state law on fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, which may vary widely in composition depending on the jurisdiction. If the state law is merely procedural, or relating merely to the form and mode of judicial operations, then the federal court does not have to apply the conflicting state law. However, the substance-procedure distinction is a generality as the Court rejected any test based upon "litmus paper criterion." Thus, a choice between state and federal law must be made with reference to the underlying policy of the Erie decision. The Court announced a modification of the "outcome-determinative" test in York, whereby the test must be applied in light of the twin aims of Erie, which are the discouragement of forum-shopping and avoidance of inequitable administration of the laws. Under this rule, state procedural law would not supplant federal procedural law if the differences in the outcome are nonsubstantial or trivial, fail to raise Equal Protection concerns, and are unlikely to influence the choice of forum.
Gasperini
A recent Supreme Court case that addressed the Erie problem is Gasperini v. Center for HumanitiesGasperini v. Center for Humanities
Gasperini v. Center for Humanities, 518 U.S. 415 , was a decision by the Supreme Court of the United States, in which the Court further refined the Erie doctrine which regards when and how federal courts were to apply state law in cases brought under diversity jurisdiction...
, . Gasperini is a post-Hanna decision addressing a conflict between state and federal law for review of jury verdicts. The plaintiff, a well-known artist and photographer from New York, sued a New York museum in federal court in New York, for damages arising from the loss of some photographs and slides he had loaned the museum. A jury found in his favor and awarded damages. The defendant appealed, and the U.S. Court of Appeals for the 2nd Circuit reduced the damages award on appeal. Gasperini appealed to the U.S. Supreme Court.
The New York state provision, a "tort reform" measure, allowed reviewing appellate courts to overturn a jury verdict if it "deviates materially from what would be reasonable compensation." Pursuant to this law, the 2nd Circuit applied the state's appellate standard of review. However, the Supreme Court stated that federal courts, bound by the reexamination clause of the Seventh Amendment, could overturn a jury's finding of fact only if it "shocked the conscience."
The Supreme Court could have resolved the case by reading the Seventh Amendment broadly, and treating it as controlling in federal court. However, instead, the Court opted for what can be described as a compromise, holding that the federal court should apply the state's lower standard review, but in a way that would not run afoul of the 7th Amendment: instead of the federal appeals court reviewing the jury finding, the trial judge would assume the role.
Gasperini, and another recent Erie-area case, Semtek International Inc. v. Lockheed Martin Corp., have shown Erie has gone in a newer and even more complicated direction than the previous controlling cases, and that instead of selecting either federal or state law for a case, the federal court may be required to somehow blend federal and state law, depending on the issue. This is quite frustrating for those who wish to have a black-letter rule that will point them to the answer. However, the possibility of blending in Erie does not open up an infinitude of possibilities. In both Gasperini and Semtek, the common thread is that the blending is done in a way that is calculated to advance the aims of Erie (and York): non-discrimination between litigants, and non-encouragement of forum shopping
Forum shopping
Forum shopping is the informal name given to the practice adopted by some litigants to get their legal case heard in the court thought most likely to provide a favorable judgment...
. (Source: Allan Ides & Christopher May, Civil Procedure, 3d Edition).