28 USC § 1652. State laws as rules of decision
The laws of the 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 [trials at common law] in the courts of the United States, in cases where they apply.
"The statute law of the several states in force for the time being and their unwritten or common law now in use, whether by adoption from the common law of England, the ancient statutes of the same or otherwise" should serve as rules of decision.
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 themselves laws. * * * to the positive statutes of the state, and the construction thereof adopted by the local tribunals, and to rights and titles to things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intraterritorial in their nature and character. * * *
[The Act] is strictly limited to local statutes and local usages of the character before stated, and does not extend to contracts and other instruments of a commercial nature, the true interpretation and effect whereof are to be sought, not in the decisions of local tribunals, but in the general principles and doctrines of commercial jurisprudence.
[916-917] First. Swift v. Tyson, 16 Pet. 1, 18, 10 L.Ed. 865, held that federal courts exercising jurisdiction on the ground of diversity of citizenship need not, in matters of general jurisprudence, apply the unwritten law of the state as declared by its highest court; that they are free to exercise an independent judgment as to what the common law of the state is--or should be * * *.
The federal courts assumed, in the broad field of "general law," the power to declare rules of decision which Congress was confessedly without power to enact as statutes. [Well, as you have seen in Con Law, not quite right.] Doubt was repeatedly expressed as to the correctness of the construction given section 34, and as to the soundness of the rule which it introduced. But it was the more recent research of a competent scholar, who examined the original document, which established that the construction given to it by the Court was erroneous; and that the purpose of the section was merely to make certain that, in all matters except those in which some federal law is controlling, the federal courts exercising jurisdiction in diversity of citizenship cases would apply as their rules of decision the law of the state, unwritten as well as written. (FN5) [Prof. Warren's piece is discussed, and criticized in Note 5 at page 923.]
[917-918] Second. [Lack of uniformity.] * * * Diversity of citizenship jurisdiction was conferred in order to prevent apprehended discrimination in state courts against those not citizens of the state. Swift v. Tyson introduced grave discrimination by noncitizens against citizens. It made rights enjoyed under the unwritten "general law" vary according to whether enforcement was sought in the state or in the federal court; and the privilege of selecting the court in which the right should be determined was conferred upon the noncitizen.
[918] * * * If only a question of statutory construction were involved, we should not be prepared to abandon a doctrine so widely applied throughout nearly a century. But the unconstitutionality of the course pursued has now been made clear, and compels us to do so.
[918] Third. Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state. And whether the law of the state shall be declared by its Legislature in a statute or by its highest court in a decision is not a matter of federal concern. ***There is no federal general common law.*** 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.
[919] Thus the doctrine of Swift v. Tyson is, as Mr. Justice Holmes said, "an unconstitutional assumption of powers by the Courts of the United States which no lapse of time or respectable array of opinion should make us hesitate to correct." In disapproving that doctrine we do not hold unconstitutional section 34 of the Federal Judiciary Act of 1789 or any other act of Congress. We merely declare that in applying the doctrine this Court and the lower courts have invaded rights which in our opinion are reserved by the Constitution to the several States.
The "unconstitutional" course referred to in the majority opinion is apparently the ruling in Swift v. Tyson that the supposed omission of Congress to legislate as to the effect of decisions leaves federal courts free to interpret general law for themselves. (I am not at all sure whether, in the absence of federal statutory direction, federal courts would be compelled to follow state decisions. There was sufficient doubt about the matter in 1789 to induce the first Congress to legislate.) No former opinions of this Court have passed upon it. * * * If the opinion commits this Court to the position that the Congress is without power to declare what rules of substantive law shall govern the federal courts, that conclusion also seems questionable. The line between procedural and substantive law is hazy but no one doubts federal power over procedure. The Judiciary Article and the "necessary and proper" clause of Article One may fully authorize legislation, such as this section of the Judiciary Act.
[922] 2. See Keefe, Gilhooley, Bailey & Day, Weary Erie, 34 Cornell L.Q. 494, 497 (1949): "It is difficult to determine exactly what was unconstitutional about the Tyson doctrine. Unquestionably Article III of the Constitution designates the federal courts as proper forums to litigate suits between "Citizens of different States.' Given jurisdiction, it would logically follow that a federal court would have the constitutional power to determine the controversy by any reasonable method. The choice of 'federal common law' rather than the law of a particular state is clearly not so unreasonable as to be unconstitutional."
According to Professor Borchers, "the drafting and ratification history [of the Constitution] supports the conclusion that diversity was intended at least in part as a protection against aberrational state laws, particularly those regarding commercial transactions." Borchers, The Origins of Diversity Jurisdiction, the Rise of Legal Positivism, and a Brave New World for Erie and Klaxon, 72 Tex. L. Rev. 79, 81 (1993) [Keep track of these notions of why we need diversity].
[924] 8. Professor Fletcher argues that "[i]n such cases, depending on the nature of the dispute, a number of different kinds of law could provide the relevant rules for decision. The general common law was by far the most important of these nonlocal and nonfederal laws. That it was not explicitly referred to in section 34 does not prove that it was not expected to be applied. Rather, the fact that it was not mentioned probably suggests quite the opposite--that its applicability was so obvious as to go without saying." Fletcher, The General Common Law and Section 34 of the Judiciary Act of 1789: The Example of Marine Insurance, 97 Harv.L.Rev. 1513, 1517 (1984). But the hegemony of the general common law was fragmented during the 19th century, and the concept of law changed to one in which legal rules had force only by virtue of the governmental authority behind them, a view now known as "positivism."
[924-925] 9. After Erie, are federal courts required to adhere to state law on every issue that may arise in a case? Does the decision attempt to draw any distinctions among different types of issues? Does Justice Reed suggest a possible solution? On these questions, consider the relevance of the York case, below.
There is one piece of background that should be added, however. Before 1938, the federal courts were generally directed to follow state procedure under a series of statutes called the Process Acts and the Conformity Act. See generally Burbank, The Rules Enabling Act of 1934, 130 U.Pa.L.Rev. 1015, 1036-42 (1982). The objective was to make sure that the procedure employed in a state the same, whether the case was in state or federal court. In 1934 Congress passed the Rules Enabling Act, which authorized the Supreme Court to promulgate rules of practice and procedure for use in all federal courts to supplant the former requirement that federal courts use state procedure. Thus Justice Reed could observe that "no one doubts federal power over procedure." These rules were drafted by a committee headed by Dean Charles Clark of Yale Law School and became effective in 1938. After 1938, many states chose to model their procedural rules after the Federal Rules. See Oakley & Coon, The Federal Rules in State Courts: A Survey of State Court Systems of Civil Procedure, 61 Wash.L.Rev. 1367 (1986).
Timeline:
[926] [Erie] overruled a particular way of looking at law which dominated the judicial process long after its inadequacies had been laid bare. Law was conceived as a "brooding omnipresence" of Reason, of which decisions were merely evidence and not themselves the controlling formulations. Accordingly, federal courts deemed themselves free to ascertain what Reason, and therefore Law, required wholly independent of authoritatively declared State law, * * *
* * *
* * * Although Sec. 34 of the Judiciary Act of 1789 directed that the "laws of the several States ... shall be regarded as rules of decision in trials of common law ...", this was deemed, consistently for over a hundred years, to be merely declaratory of what would in any event have governed the federal courts and therefore was equally applicable to equity suits.
[927, Rights vs. Remedies] In giving federal courts "cognizance" of equity suits in cases of diversity jurisdiction, Congress never gave, nor did the federal courts ever claim, the power to deny substantive rights created by State law or to create substantive rights denied by State law.
This does not mean that whatever equitable remedy is available in a State court must be available in a diversity suit in a federal court, or conversely, that a federal court may not afford an equitable remedy not available in a State court. * * * State law cannot define the remedies which a federal court must give simply because a federal court in diversity jurisdiction is available as an alternative tribunal to the State's courts. Contrariwise, a federal court may afford an equitable remedy for a substantive right recognized by a State even though a State court cannot give it.
[928, Substance v. Procedure] Is the outlawry, according to State law, of a claim created by the States a matter of "substantive rights" to be respected by a federal court of equity when that court's jurisdiction is dependent on the fact that there is a State-created right, or is such statute of "a mere remedial character," which a federal court may disregard?
Matters of "substance" and matters of "procedure" are much talked about in the books as though they defined a great divide cutting across the whole domain of law.
[928, POLICY] Here we are dealing with a right to recover derived not from the United States but from one of the States. When, because the plaintiff happens to be a nonresident, such a right is enforceable in a federal as well as in a State court, the forms and mode of enforcing the right may at times, naturally enough, vary because the two judicial systems are not identic. But since a federal 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.
[929] Erie R. Co. v. Tompkins has been applied with an eye alert to essentials in avoiding disregard of State law in diversity cases in the federal courts. A policy so important to our federalism must be kept free from entanglements with analytical or terminological niceties.
[928, Federal Matter] It is therefore immaterial whether statutes of limitation are characterized either as "substantive" or "procedural" in State court opinions in any use of those terms unrelated to the specific issue before us.
[928] The question is whether such a statute concerns merely the manner and the means by which a right to recover, as recognized by the State, is enforced, or whether such statutory limitation is a matter of substance in the aspect that alone is relevant to our problem, namely, 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?
[929] In essence, * * *, 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. The nub of the policy that underlies [Erie] is that for the same transaction the accident of a suit by a non-resident litigant in a federal court instead of in a State court a block away, should not lead to a substantially different result. * * *
[929] And so, putting to one side abstractions regarding "substance" and "procedure", we have held that in diversity cases the federal courts must follow the law of the State as to burden of proof, Cities Service Oil Co. v. Dunlap, 308 U.S. 208, 60 S.Ct. 201, 84 L.Ed. 196, as to conflict of laws, Klaxon Co. v. Stentor Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477, as to contributory negligence, Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct. 477, 482, 87 L.Ed. 645, 144 A.L.R. 719. And see Sampson v. Channell, 1 Cir., 110 F.2d 754, 128 A.L.R. 394.
Such particular rules of local law, however, do not in the slightest change the crucial consideration that if a plea of the statute of limitations would bar recovery in a State court, a federal court ought not to afford recovery.
[930] The source of substantive rights enforced by a federal court under diversity jurisdiction, it cannot be said too often, is the law of the States. Whenever that law is authoritatively declared by a State, whether its voice be the legislature or its highest court, such law ought to govern in litigation founded on that law, whether the forum of application is a State or a federal court and whether the remedies be sought at law or may be had in equity.
[Pay close attention to the three Post-Guartanty Trust cases mentioned at pages 932-35].
A federal court, sitting in diversity, knows, after Erie, that in most cases it must apply substantive state law, rather than federal common law. However, because a diversity case always involves citizens of at least two states, the federal court will be required to determine which state's law to apply. May a federal court, as a matter of federal common law, choose its own conflict of laws rule to decide which state's law to apply, or, under Erie, must it employ the conflict of laws rule of the state in which it sits?
[935] The Supreme Court decided this question in the post-Erie, pre-York decision of Klaxon Co. v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941):
[936] We are of opinion that the prohibition declared in Erie R. Co. v. Tompkins, 304 U.S. 64, against * * * independent determinations by the federal courts, extends to the field of conflict of laws. The conflict of laws rule to be applied by the federal court in [a particular state] must conform to those prevailing in [that state's] courts. Otherwise, the accident of diversity of citizenship would constantly disturb equal administration of justice in coordinate state and federal courts sitting side by side. * * * Any other ruling would do violence to the principle of uniformity within a state, upon which the Tompkins decision is based.
[939] First. It was decided in Erie R. Co. v. Tompkins that the federal courts in diversity cases must respect the definition of state-created rights and obligations by the state courts. We must, therefore, first examine the rule in Adams v. Davison-Paxon Co. [the S.C. Supreme Court decision] to determine whether it is bound up with these rights and obligations in such a way that its application in the federal court is required.
[939] The South Carolina courts hold that, on judicial review of actions of the Commission under Sec. 72-111, the question whether the claim of an injured workman is within the Commission's jurisdiction is a matter of law for decision by the court, which makes its own findings of fact relating to that jurisdiction.[940] [The inescapable conclusion] Thus the requirement appears to be merely a form and mode of enforcing the immunity, Guaranty Trust Co. of New York v. York, and not a rule intended to be bound up with the definition of the rights and obligations of the parties. * * *
[940] Second. But cases following Erie have evinced a broader policy to the effect that the federal courts should conform as near as may be in the absence of other considerations to state rules even of form and mode where the state rules may bear substantially on the question whether the litigation would come out one way in the federal court and another way in the state court if the federal court failed to apply a particular local rule.* * *
[940] [OUTCOME DETERMINATION] 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. Therefore, were "outcome" the only consideration, a strong case might appear for saying that the federal court should follow the state practice.
[940] 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. An essential characteristic of that system is the manner in which, in civil common-law actions, it distributes trial functions between judge and jury and, under the influence--if not the command (FN10)--of the Seventh Amendment, assigns the decisions of disputed questions of fact to the jury. The policy of uniform enforcement of state-created rights and obligations, see, e.g., Guaranty Trust Co. of New York v. York, supra, cannot in every case exact compliance with a state rule--not bound up with rights and obligations--which disrupts the federal system of allocating functions between judge and jury.
[941] * * * It cannot be gainsaid that there is a strong federal policy against allowing state rules to disrupt the judge-jury relationship in the federal courts. In Herron * * * This Court * * * [held] that "state laws cannot alter the essential character or function of a federal court" because that function "is not in any sense a local matter, and state statutes which would interfere with the appropriate performance of that function are not binding upon the federal court under either the Conformity Act or the 'Rules of Decision' Act." Perhaps even more clearly in light of the influence of the Seventh Amendment, the function assigned to the jury "is an essential factor in the process for which the Federal Constitution provides." * * * but even when Swift v. Tyson was governing law and allowed federal courts sitting in diversity cases to disregard state decisional law, it was never thought that state statutes or constitutions were similarly to be disregarded. Yet Herron held that state statutes and constitutional provisions could not disrupt or alter the essential character or function of a federal court.
We do not think the likelihood of a different result is so strong as to require the federal practice of jury determination of disputed factual issues to yield to the state rule in the interest of uniformity of outcome
BYRD V. BLUE RIDGE [5]
BYRD V. BLUE RIDGE [6]
[943-944] The court notes that "[t]he federal system is an independent system for administering justice to litigants who properly invoke its jurisdiction." Is this a distinct federal interest for purposes of balancing? * * * the federal interest as "the indispensable necessity that a tribunal, if it is to be an independent federal court administering law, must have the capacity to regulate the manner by which cases are to be presented in the search for the truth of the cause." [1] It has been suggested that this interest "might be thought to prove too much; its logic would authorize federal court rejection of purely substantive state standards where, in the federal court's opinion, to apply them would cause an injustice." Redish & Phillips, supra, 91 Harv.L.Rev. at 390. The same authors also articulated the counter-argument: [2] "A court's integrity is to a degree dependent upon its authority to control matters that are intimately bound up with its daily internal operations. In this sense, a court's power to determine the fairest procedures is qualitatively different from its authority to develop principles of substantive law." Id. at 391.[GO with Number 2].
IS THERE A FEDERAL RULE OR POLICY IN THIS AREA?
(1) Constitutionally based, e.g., 7th amendment, supremacy,Byrd.
(2) Federal Rule of Civil Procedure,
Hanna, Ragan, Burlington, Armco
IS THERE A CONFLICT BETWEEN APPLICABLE STATE LAW AND FEDERAL RULE? OR IF THERE IS NO FEDERAL RULE, CAN WE IGNORE STATE LAW?
(1) Is it substance: Why? How? Balancing Byrd factors or the "twin evils" of Hanna (i)shopping and (ii) fairness.
(2) Conflict with federal rule cannot be avoided by a narrow construction of the Federal Rule and superimposition of the state law. Ragan, Armco.IF THERE IS A CONFLICT BETWEEN AN APPLICABLE FEDERAL RULE AND STATE LAW,
(1) Is it a valid exercise of Federal rule-making power? Sibbach, Hanna
(2) Is rationally "procedure"? Burlington, Hanna, c.f., Note 4, pp. 963-4.
Except as provided in this chapter, an executor or administrator shall not be held to answer to an action by a creditor of the deceased which is not commenced within one year from the time of his giving bond for the performance of his trust, or to such an action which is commenced within said year unless before the expiration thereof the writ in such action has been served by delivery in hand upon such executor or administrator or service thereof accepted by him or a notice stating the name of the estate, the name and address of the creditor, the amount of the claim and the court in which the action has been brought has been filed in the proper registry of probate....[Note how the Supreme Court manages to separate the statute of limitations matter from the service matter. See the discussion in footnote 1 at page 945. This allows the court to distinguish the facts of Guarantee Trust and Ragan.]
[946 BEFORE going on to discuss Erie, the Court seems to dispose of the Rules Enabling Act question as follows:] Under the cases construing the scope of the Enabling Act, Rule 4(d)(1) clearly passes muster. Prescribing the manner in which a defendant is to be notified that a suit has been instituted against him, it relates to the "practice and procedure of the district courts."
"The test must be whether a rule really regulates procedure,--the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them." Sibbach v. Wilson & Co., 312 U.S. 1, 14, 61 S.Ct. 422, 426, 85 L.Ed. 479....
[947 Kinder, gentler outcome-determination] In the first place, it is doubtful that, even if there were no Federal Rule making it clear that in-hand service is not required in diversity actions, the Erie rule would have obligated the District Court to follow the Massachusetts procedure. "Outcome-determination" analysis was never intended to serve as a talisman. Byrd v. Blue Ridge Rural Elec. Cooperative. Indeed, the message of York itself is that choices between state and federal law are to be made not by application of any automatic, "litmus paper" criterion, but rather by reference to the policies underlying the Erie rule.
[TWIN AIMS] The Erie rule is rooted in part in a realization that [1] it would be unfair for the character or result of a litigation materially to differ because the suit had been brought in a federal court. * * * The decision was also in part [2] a reaction to the practice of "forum-shopping" which had grown up in response to the rule of Swift v. Tyson. * * * Not only are nonsubstantial, or trivial, variations not likely to raise the sort of equal protection problems which troubled the Court in Erie: they are also unlikely to influence the choice of a forum. The "outcome-determination" test therefore cannot be read without reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws.
[947, Fn. 9] Erie and its progeny make clear that when a federal court sitting in a diversity case is faced with a question of whether or not to apply state law, the importance of a state rule is indeed relevant, but only in the context of asking whether application of the rule would make so important a difference to the character or result of the litigation that failure to enforce it would unfairly discriminate against citizens of the forum State, or whether application of the rule would have so important an effect upon the fortunes of one or both of the litigants that failure to enforce it would be likely to cause a plaintiff to choose the federal court.
[948] There is, however, a more fundamental flaw in respondent's syllogism: the incorrect assumption that the rule of Erie R. Co. v. Tompkins constitutes the appropriate test of the validity and therefore the applicability of a Federal Rule of Civil Procedure. The Erie rule has never been invoked to void a Federal Rule. It is true that there have been cases where this Court has held applicable a state rule in the face of an argument that the situation was governed by one of the Federal Rules [i.e, the 1949 cases following Guarantee Trust]. But the holding of each such case was not that Erie commanded displacement of a Federal Rule by an inconsistent state rule, but rather that the scope of the Federal Rule was not as broad as the losing party urged, and therefore, there being no Federal Rule which covered the point in dispute, Erie commanded the enforcement of state law. * * * Here, of course, the clash is unavoidable;
[949] * * *It is true that both the Enabling Act and the Erie rule say, roughly, that federal courts are to apply state "substantive" law and federal "procedural" law, but from that it need not follow that the tests are identical. * * *
We are reminded by the Erie opinion that neither Congress nor the federal courts can, under the guise of formulating rules of decision for federal courts, fashion rules which are not supported by a grant of federal authority contained in Article I or some other section of the Constitution; * * * For the constitutional provision for a federal court system [i.e. Art. III, sec. 1] (augmented by the Necessary and Proper Clause) carries with it congressional power to make rules governing the practice and pleading in those courts, which in turn includes a power to regulate matters which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either. Neither York nor the cases following it ever suggested that the rule there laid down for coping with situations where no Federal Rule applies is coextensive with the limitation on Congress to which Erie had adverted.[949-50] "One of the shaping purposes of the Federal Rules is to bring about uniformity in the federal courts by getting away from local rules. This is especially true of matters which relate to the administration of legal proceedings, an area in which federal courts have traditionally exerted strong inherent power, completely aside from the powers Congress expressly conferred in the Rules. The purpose of the Erie doctrine, even as extended in York and Ragan, was never to bottle up federal courts with 'outcome-determinative' and 'integral-relations' stoppers--when there are 'affirmative countervailing [federal] considerations' and when there is a Congressional mandate (the Rules) supported by constitutional authority." Lumbermen's Mutual Casualty Co. v. Wright, 322 F.2d 759, 764 (C.A.5th Cir.1963).
[950] To hold that a Federal Rule of Civil Procedure must cease to function whenever it alters the mode of enforcing state-created rights would be to disembowel either the Constitution's grant of power over federal procedure or Congress' attempt to exercise that power in the Enabling Act. Rule 4(d)(1) is valid and controls the instant case.
Justice Harlan, Concurring. [Justice Harlan makes the important point that there is bad forum-shopping, and good forum shopping.]
[950] Erie was something more than an opinion which worried about "forum-shopping and avoidance of inequitable administration of the laws," although to be sure these were important elements of the decision. I have always regarded that decision as one of the modern cornerstones of our federalism, expressing policies that profoundly touch the allocation of judicial power between the state and federal systems.
[951] * * * In turning from the "outcome" test of York back to the unadorned forum-shopping rationale of Erie, however, the Court falls prey to like oversimplification, for a simple forum-shopping rule also proves too much; litigants often choose a federal forum merely to obtain what they consider the advantages of the Federal Rules of Civil Procedure or to try their cases before a supposedly more favorable judge. To my mind the proper line of approach in determining whether to apply a state or a federal rule, whether "substantive" or "procedural," is to stay close to basic principles by inquiring if the choice of rule would substantially affect those primary decisions respecting human conduct which our constitutional system leaves to state regulation. (FN2) If so, Erie and the Constitution require that the state rule prevail, even in the face of a conflicting federal rule.
[951] So long as a reasonable man could characterize any duly adopted federal rule as "procedural," the Court, unless I misapprehend what is said, would have it apply no matter how seriously it frustrated a State's substantive regulation of the primary conduct and affairs of its citizens. Since the members of the Advisory Committee, the Judicial Conference, and this Court who formulated the Federal Rules are presumably reasonable men, it follows that the integrity of the Federal Rules is absolute. Whereas the unadulterated outcome and forum-shopping tests may err too far toward honoring state rules, I submit that the Court's "arguably procedural, ergo constitutional" test moves too fast and far in the other direction.
[I will leave you to examine Professor Ely's excerpt and the notes by yourselves.]
IS THERE A FEDERAL RULE OR POLICY IN THIS AREA?
(1) Constitutionally based, e.g., 7th amendment, supremacy,Byrd.
(2) Federal Rule of Civil Procedure,
Hanna, Ragan, Burlington, Armco
IS THERE A CONFLICT BETWEEN APPLICABLE STATE LAW AND FEDERAL RULE? OR IF THERE IS NO FEDERAL RULE, CAN WE IGNORE STATE LAW?
(1) Is it substance: Why? How? Balancing Byrd factors or the "twin evils" of Hanna (i)shopping and (ii) fairness.
(2) Conflict with federal rule cannot be avoided by a narrow construction of the Federal Rule and superimposition of the state law. Ragan, Armco.IF THERE IS A CONFLICT BETWEEN AN APPLICABLE FEDERAL RULE AND STATE LAW,
(1) Is it a valid exercise of Federal rule-making power? Sibbach, Hanna
(2) Is rationally "procedure"? Burlington, Hanna, c.f., Note 4, pp. 963-4.By now, you should recognize this as basically what the court does in Hanna v. Plumer. After that, you need to view it as a puzzle. Hanna provides the fullest extension of it, by explicitly merging Rules Enabling Act analysis with Erie. The problem is, as the two cases we discussed yesterday suggest, that this puzzle does not always look the same after reorganization and re-assembly. Therefore, you must study the individual components and identify when they are relevant and in what order they must be used.
Let me suggest that you will not find logical consistency in this area. What you will find are results which are justified by classifications pre-determined by the desired result. Well, that is what judges do, and what lawyers do in advocating a position. They frame the question in such a way that their desired answer appears to be perfectly sensible.
Does this mean that this area is unpredictable and unthinking? I will let you decide for yourselves if it is predictable. But it is not unthinking. Remember our discussion at the very beginning of class, substantive justice vs. procedural justice, and more generally, substance vs. procedure. What is really going on here is a balancing of interests, as suggested clearly by Byrd v. Blue Ridge. On the one hand, we have the constitutional interests or concerns of federalism and equal protection. On the other, we have the need for predictable, consistent procedure within any sovereign court system. Clearly, the Supreme Court has indicated that, in this context, the benefit of the doubt in the substance v. procedure dichotomy will go to federal procedure. Why is that? The answer is simple: PROCEDURE IS A NECESSARY EVIL, for reasons that we have spent our entire semester exploring.
Good luck in your examinations.
[960-961 Rules Enabling Act]
[I. VALID RULE?] Federal Rule of Appellate Procedure 38] must * * * be applied if it represents a valid exercise of Congress' rule-making authority, which originates in the [1] Constitution and [2] has been bestowed on this Court by the Rules Enabling Act, 28 U.S.C.A. Sec. 2072.* * * [Rule Enabling Act: Two parts] [1] test of reasonableness. Rules regulating [a] matters indisputably procedural are a priori constitutional. [b] Rules regulating matters "which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either," also satisfy this constitutional standard [citing Hanna ]. * * * [2] The Federal Rule must not "abridge, enlarge or modify any substantive right...." [a] Rules which incidentally affect litigants' substantive rights do not violate this provision if reasonably necessary to maintain the integrity of that system of rules. Moreover, the study and approval given each proposed Rule by the Advisory Committee, the Judicial Conference, and this Court, and the statutory requirement that the Rule be reported to Congress for a period of review before taking effect [b] give the Rules presumptive validity under both the constitutional and statutory constraints.
[961 ERIE?]
[II. CONFLICT: Rule 38's PURPOSE] discretionary mode of operation unmistakably conflicts with the mandatory provision of Alabama's affirmance penalty statute. Moreover, the purposes underlying the Rule are sufficiently co-extensive with the asserted purposes of the Alabama statute to indicate that the Rule occupies the statute's field of operation so as to preclude its application in federal diversity actions.
[CO-EXISTENCE?] * * * This argument, however, ignores the significant possibility that a Court of Appeals may, in any given case, find a limited justification for imposing penalties in an amount less than 10% of the lower court's judgment. Federal Rule 38 adopts a case-by-case approach to identifying and deterring frivolous appeals; the Alabama statute precludes any exercise of discretion within its scope of operation. * * *
[961 III. PROCEDURE?] Federal Rule 38 regulates matters which can reasonably be classified as procedural, thereby satisfying the constitutional standard for validity. Its displacement of the Alabama statute also satisfies the statutory constraints of the Rules Enabling Act. * * * discretionary procedure affects only the process of enforcing litigants' rights and not the rights themselves.
[966, CONFLICT?] There is no indication that [Rule 3] was intended to toll a state statute of limitations, much less that it purported to displace state tolling rules for purposes of state statutes of limitations. In our view, in diversity actions Rule 3 governs the date from which various timing requirements of the Federal Rules begin to run, but does not affect state statutes of limitations.
[966, SUBSTANCE?] In contrast to Rule 3, the Oklahoma statute is a statement of a substantive decision by that State that actual service on, and accordingly actual notice by, the defendant is an integral part of the several policies served by the statute of limitations. * * * The statute of limitations establishes a deadline after which the defendant may legitimately have peace of mind; it also recognizes that after a certain period of time it is unfair to require the defendant to attempt to piece together his defense to an old claim. A requirement of actual service promotes both of those functions of the statute. * * * It is these policy aspects which make the service requirement an "integral" part of the statute of limitations both in this case and in Ragan. * * * [Compare this to footnote 1, at page 945, and accompanying text in Hanna.]
[966-967, COEXISTENCE] Rule 3 does not replace such policy determinations found in state law. Rule 3 and [state law] can exist side by side, therefore, each controlling its own intended sphere of coverage without conflict.
[ERIE] Since there is no direct conflict between the Federal Rule and the state law, the Hanna analysis does not apply. Instead, the policies [967] behind Erie and Ragan control the issue whether, in the absence of a federal rule directly on point, state service requirements which are an integral part of the statute of limitations should control in an action based on state law which is filed in federal court under diversity jurisdiction. * * * It is sufficient to note that although in this case failure to apply the state service law might not create any problem of forum shopping, the result would be an "inequitable administration of the law." Hanna v. Plummer. There is simply no reason why, in the absence of a controlling federal rule, an action based on state law which concededly would be barred in the state courts by the state statute of limitations should proceed through litigation to judgment in federal court solely because of the fortuity that there is diversity of citizenship between the litigants.
[Do not neglect the notes following each of these cases]
Erie: A Possible Structure of Analysis:
Below I transcribe the Erie Structure outlines that I have been using class, updated by our discussion over the last few days.
I. Is there a Federal rule on point?
II. Is there a conflict between applicable state law and federal rule? Or, if there is no federal rule, can we ignore state law?
III. If there is a conflict between an applicable federal rule and state law,
(1) Is it a valid exercise of Federal rule-making power?
(2) Is rationally "procedure"?I. Is there a Federal rule on point?
(1) Constitutionally-based, e.g., 7th amendment, or supremacy, or necessary and proper, or Due Process.
(2) Strong Federal Policy, Byrd.
(3) Federal Rule of Civil Procedure, Hanna, Ragan, Burlington, Armco, § 2072.II. Is there a conflict between applicable state law and federal rule? OR if there is no federal rule, can we ignore state law? (Guaranty?, §1562).
(1) Balancing Byrd factors or Hanna (i) forum shopping and (ii) fairness.
(2) Conflict with federal rule cannot be avoided by narrow construction of the federal rule and superimposition of the state law. Hanna, Ragan, Armco.
III. If there is a conflict between an applicable federal rule and state law,
(1) Is it a valid exercise of Federal rule-making power? Sibbach, Hanna, sec. 2072
(2) Is it rationally cassifiable as "procedure"? Burlington, Hanna, c.f., Note 4, pp. 963-4.
Burlington I or III?: is it a valid exercise of Federal rule-making power?(1) Constitutional Reasonableness: is it "Procedure"? Sibbach, Burlington, 2072(a)
(a) Indisputably procedural
(b) "Rationally classifiable" as procedure, Hanna.(2) Does it abridge, enlarge or modify substantive rights? Burlington, Hanna, 2072(b)
(a) Incidental effects
(b) Presumptive Validity
FRCP 59. New Trial.
(a) Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States; and (2) in an action tried without a jury, for any of the reasons for which rehearings have heretofore been granted in suits in equity in the courts of the United States. On a motion for a new trial in an action tried without a jury, the court may open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new findings and conclusions, and direct the entry of a new judgment.
I will confess that I find the alignment of justices in this case surreal, given the traditional understanding of the divide in the states' rights/federalism debate.
[976] Under the law of New York, appellate courts are empowered to review the size of jury verdicts and to order new trials when the jury's award "deviates materially from what would be reasonable compensation." N.Y. Civ. Prac. Law and Rules (CPLR) § 5501(c) (McKinney 1995). Under the Seventh Amendment, which governs proceedings in federal court, but not in state court, "the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." U.S. Const., Amdt. 7. ***
[978] Before 1986, state and federal courts in New York generally invoked the same judge-made formulation in responding to excessiveness attacks on jury verdicts: courts would not disturb an award unless the amount was so exorbitant that it "shocked the conscience of the court." ***
[978] In both state and federal courts, trial judges made the excessiveness assessment in the first instance, and appellate judges ordinarily deferred to the trial court's judgment.
[978 CONFLICT] In 1986, as part of a series of tort reform measures, New York codified a standard ***:
"In reviewing a money judgment . . . in which it is contended that the award is excessive or inadequate and that a new trial should have been granted unless a stipulation is entered to a different award, the appellate division shall determine that an award is excessive or inadequate if it deviates materially from what would be reasonable compensation."
III.A. [980]
Federal diversity jurisdiction provides an alternative forum for the adjudication of state-created rights, but it does not carry with it generation of rules of substantive law. As Erie read the Rules of Decision Act: "Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the State." Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law. Classification of a law as "substantive" or "procedural" for Erie purposes is sometimes a challenging endeavor. ***
[980] Guaranty Trust Co. v. York, ***: "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." A later pathmarking case, qualifying Guaranty Trust, explained that the "outcome-determination" test must not be applied mechanically to sweep in all manner of variations; instead, its application must be guided by "the twin aims of the Erie rule: discouragement of forum shopping and avoidance of inequitable administration of the laws." Hanna v. Plumer.
[980 FOOTNOTE 7: Concerning matters covered by the Federal Rules of Civil Procedure, the characterization question is usually unproblematic: It is settled that if the Rule in point is consonant with the Rules Enabling Act,28 U.S.C. § 2072, and the Constitution, the Federal Rule applies regardless of contrary state law. See Hanna v. Plumer; Burlington Northern R. Co. v. Woods. Federal courts have interpreted the Federal Rules, however, with sensitivity to important state interests and regulatory policies. See, e.g., Walker v. Armco Steel Corp., *** (1980) (reaffirming decision in Ragan v. Merchants Transfer & Warehouse Co.),***; ***
[981] It thus appears that if federal courts ignore the change in the New York standard and persist in applying the "shock the conscience" test to damage awards on claims governed by New York law, " 'substantial' variations between state and federal [money judgments]" may be expected. See Hanna. We therefore agree with the Second Circuit that New York's check on excessive damages implicates what we have called Erie's "twin aims." Just as the Erie principle precludes a federal court from giving a state-created claim "longer life . . . than [the claim] would have had in the state court," Ragan, so Erie precludes a recovery in federal court significantly larger than the recovery that would have been tolerated in state court.
B [Page 981]
***Although we reach a different conclusion than Gasperini, we agree that the Second Circuit did not attend to "an essential characteristic of [the federal-court] system," Byrd v. Blue Ridge Rural Elec. Cooperative, when it used § 5501(c) as "the standard for [federal] appellate review."
[981] That "essential characteristic" was described in Byrd, a diversity suit for negligence in which a pivotal issue of fact would have been tried by a judge were the case in state court. The Byrd Court held that, [982] despite the state practice, the plaintiff was entitled to a jury trial in federal court.
[Edited out by our casebook] As the Second Circuit explained, appellate review for abuse of discretion is reconcilable with the Seventh Amendment as a control necessary and proper to the fair administration of justice: "We must give the benefit of every doubt to the judgment of the trial judge; but surely there must be an upper limit, and whether that has been surpassed is not a question of fact with respect to which reasonable men may differ, but a question of law." We now *** make explicit what Justice Stewart thought implicit in our Grunenthal disposition: "Nothing in the Seventh Amendment . . . precludes appellate review of the trial judge's denial of a motion to set aside [a jury verdict] as excessive." 393 U.S. at 164 (Stewart, J., dissenting) (internal quotation marks and footnote omitted).
C. [983] New York's dominant interest can be respected, without disrupting the federal system, once it is recognized that the federal district court is capable of performing the checking function, i.e., that court can apply the State's "deviates materially" standard in line with New York case law evolving under CPLR § 5501(c). We recall, in this regard, that the "deviates materially" standard serves as the guide to be applied in trial as well as appellate courts in New York.
***
[983 FOOTNOTE 22. JUSTICE SCALIA finds in Federal Rule of Civil Procedure 59 a "federal standard" for new trial motions in "direct collision" with, and "leaving no room for the operation of," a state law like CPLR § 5501(c). *** Rule 59(a) is as encompassing as it is uncontroversial. It is indeed "Hornbook" law that a most usual ground for a Rule 59 motion is that the damages are excessive. ***. Whether damages are excessive for the claim-in-suit must be governed by some law. And there is no candidate for that governance other than the law that gives rise to the claim for relief-here, the law of New York. See 28 U.S.C. § 2072(a) and (b) ("Supreme Court shall have the power to prescribe general rules of . . . procedure"; "such rules shall not abridge, enlarge or modify any substantive right").
JUSTICE SCALIA, dissenting. [984]
[985] *** The "essential characteristic" of the federal jury, and, more specifically, the role of the federal trial court in reviewing jury judgments, apparently counts for little. The Court approves the "accommodation" achieved by having district courts review jury verdicts under the "deviates materially" standard, because it regards that as a means of giving effect to the State's purposes "without disrupting the federal system." But changing the standard by which trial judges review jury verdicts does disrupt the federal system, and is plainly inconsistent with "the strong federal policy against allowing state rules to disrupt the judgejury relationship in federal court." Byrd. The Court's opinion does not even acknowledge, let alone address, this dislocation.
SCALIA, Dissenting.
[985 *** Browning-Ferris rejected a request to fashion a federal common-law rule limiting the size of punitive-damages awards in federal courts, reaffirming the principle of Erie, that "in a diversity action, or in any other lawsuit where state law provides the basis of decision, the propriety of an award of punitive damages . . . and the factors the jury may consider in determining their amount, are questions of state law." **** [985] *** But the opinion expressly stated that "federal law . . . will control on those issues involving the proper review of the jury award by a federal district court and court of appeals." "In reviewing an award of punitive damages," it said, "the role of the district court is to determine whether the jury's verdict is within the confines of state law, and to determine, by reference to federal standards developed under Rule 59, whether a new trial or remittitur should be ordered." The same distinction necessarily applies where the judgment under review is for compensatory damages: State substantive law controls what injuries are compensable and in what amount; but federal standards determine whether the award exceeds what is lawful to such degree that it may be set aside by order for new trial or remittitur.
Scalia, Dissenging.
[986] The Court commits the classic Erie mistake of regarding whatever changes the outcome as substantive. That is not the only factor to be considered. See Byrd *** Outcome-determination "was never intended to serve as a talisman," Hanna v. Plumer, and does not have the power to convert the most classic elements of the process of assuring that the law is observed into the substantive law itself. The right to have a jury make the findings of fact, for example, is generally thought to favor plaintiffs, and that advantage is often thought significant enough to be the basis for forum selection. But no one would argue that Erie confers a right to a jury in federal court wherever state courts would provide it; or that, were it not for the Seventh Amendment, Erie would require federal courts to dispense with the jury whenever state courts do so.
Scalia, Dissenting
[987] The foregoing describes why I think the Court's Erie analysis is flawed. But in my view, one does not even reach the Erie question in this case. The standard to be applied by a district court in ruling on a motion for a new trial is set forth in Rule 59 of the Federal Rules of Civil Procedure, which provides that "[a] new trial may be granted . . . for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States" (emphasis added). ***Assuming (as we have no reason to question) that this is a correct interpretation of what Rule 59 requires, it is undeniable that the federal rule is "'sufficiently broad' to cause a 'direct [988] collision' with the state law or, implicitly, to 'control the issue' before the court, thereby leaving no room for the operation of that law." Burlington Northern R. Co. v. Woods.See also Justice Saclia's Footnote 12 at page 987. FN12. I agree with the Court's entire progression of reasoning in its footnote 22 leading to the conclusion that state law must determine "[w]hether damages are excessive. " But the question of whether damages are excessive is quite separate from the question of when a jury award may be set aside for excessiveness. It is the latter that is governed by Rule 59, as Browning-Ferris said, district courts are "to determine, by reference to federal standards developed under Rule 59, whether a new trial or remittitur should be ordered," 492 U.S., at 279, 109 S.Ct., at 2922 (emphasis added).
Scalia, Dissenting.
[988] It is simply not possible to give controlling effect both to the federal standard and the state standard in reviewing the jury's award. That being so, the court has no choice but to apply the Federal Rule, which is an exercise of what we have called Congress's "power to regulate matters which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either," Hanna.
These are the notes and questions from Freer and Perdue, but I think that they are helpful to the reading of the case. (Freer and Perdue, Civil Procedure, Cases, Materials, and Questions (1997) pages 334-349.)
1. Notice that Gasperini addresses two separate issues: first, the proper
standard for the district court to apply in ruling on a motion for new trial, and second, the proper standard of appellate review of the district court's ruling.
2. The Court concludes that if federal courts applied the "shock the conscience" test rather than New York law, there would be substantial variations between state and federal money judgments. Does the Court consider whether there are any countervailing federal interests that point in favor of applying a federal standard? Should the Court have considered this?
3. The majority held that appellate courts must apply an abuse of discretion standard of review. Why? Is this required by the Seventh Amendment? While the standard of review affect outcome or choice of forum?
4. After Gasperini, how are lower courts supposed to use Hanna and Byrd? Notice that the Supreme Court relies on both but says nothing about the relationship between the two.
5. Professor Chemerinsky has suggested the following approach which combines both Hanna and Byrd:[I]f there is a conflict between federal and state law, in deciding whether to apply state or federal law, a three-step inquiry is used. First, is there a valid federal statute or Rule of Civil or Appellate Procedure on point? If so, the federal law is to be applied by the federal court deciding a diversity action. If there is not a valid, on point federal law, the second inquiry is whether the application of the state law is likely to determine the outcome of the litigation. If state law is not outcome determinative, then federal law is applied. But once it is concluded that state law is likely to determine the result, then the third question is whether there is an overriding federal interest. If so, then federal law controls; otherwise, the state law that is outcome determinative is applied. Of course, at each step there are unanswered questions, and federal courts possess discretion to decide what constitutes an on point federal law in a particular case, when a state law is outcome determinative, and what federal interests outweigh the need to use state law.
ERWIN CHEMERINSKY, FEDERAL JURISDICTION 308 (2d ed. 1994).1s this a sensible approach? Is it what the Court did in Gasperini?
6. Justice Scalia accuses the majority of committing the "classic Erie mistake of regarding whatever changes the outcome as substantive." Did the majority do what Scalia alleges? Is this a mistake?
7. Justice Scalia argues that Rule 59 mandates a federal standard for granting a new trial. Do you agree?