Civil Procedure Outline - Erie Doctrine

    **Abridged Erie**

  1. In diversity cases in federal court, the court must apply federal procedural law but state substantive law, including state-created common law…mostly. (Erie and RDA) Analysis tracks…
    • State law vs. federal statute (authority from Supremacy Clause)/FRCP (authority from REA 2072)…
      • Is the statute/FRCP is sufficiently broad to control the issue before the court? Does it "occupy the field"? Is it "sufficiently broad to control the issue before the court"? (Walker, Stewart)
      • If so, does the statute/FRCP represent a valid exercise of Congress' authority under the Constitution? (Hanna)
      • For FRCPs, is it "arguably procedural" and will using not "abridge, enlarge, or modify a substantive right"? (REA, used in Sibbach)
        • If passes all of these questions, statute/FRCP controls.
    • State law vs. federal procedural common law (laches, "shocks the conscience")(authority from RDA 1652)…
      • Is the judge-made federal rule broad enough to cover the circumstances? (rules are often interpreted narrowly to avoid conflict, Gasperini, Walker)
        • No. Follow state rule.
        • Yes. Is the federal rule at least arguably procedural (and fall in line with federal statutes and rules)?
          • No. Follow state rule.
          • Yes. Would following the federal rule be outcome-determinative AND encourage forum-shopping? (refined outcome-determinative test, "twin aims of Erie", from Hanna)
            • Yes. Would federal policy trump the application of state law under Byrd balancing ("countervailing factors", Byrd)?
              • Yes. Apply judge-made federal rule.
              • No. Apply state rule.
            • No. Apply judge-made federal rule.

**Full Erie**

  1. Pre-Erie
    1. The Rules of Decision Act
      1. If a federal statute, constitutional provision, or treaty applies, it will provide the governing law.
      2. Otherwise, federal courts should apply relevant state law.
    1. Swift v. Tyson
      1. The RDA refers only to state statutes, not to the common law decisions of state courts.
      2. In cases where no federal statute or state statute applies, courts do not have to rely on state common law decisions; they can look to the common law of any state or even treatises for authority.
      3. Problems
        1. Federal courts in diversity cases could reach their own decisions about the proper rule in common law cases, even if those conclusions contradicted the governing case law of the state in which they sat.
        2. An out-of-state party to a state action has a distinct advantage.
          1. If out-of-state law favored the out-of-state party, they could sue in that state court. The in-state defendant can't remove in diversity cases (1441(b)), so they are stuck in that state court.
          2. If federal courts applied a more favorable rule, the out-of-state party could sue in federal court. There is no right to remove from federal to state court.
            • Thus, the out-of-state party has a choice of different rules since it has a choice of two different court systems.


  2. Erie
    1. Holding
      1. SCOTUS held that Swift's interpretation of the RDA led to an unconstitutional assumption of power by the federal courts since they were making state law through these diversity cases.
      2. The RDA must be interpreted to require federal courts to apply not only the state statutes, but also the common law of the state in a diversity case.
      3. In federal question cases, if a state claim is brought in through supplemental jurisdiction, the federal court must still apply state law to that claim even though federal law will apply to the federal claim.
    1. Early issues
      1. How should a federal court apply state law if there are conflicting state court decisions about the issue at hand?
        • SCOTUS ruled that district courts should use the "supreme court predictive" approach; federal judges should try to predict what the high state court would say.
        • A federal judge should very rarely make the prediction that a state supreme court case would  be overruled.
      1. How should a federal court proceed if there is no precedent at all on the issue?
        • In the same vein, the court should try to predict what state appellate courts would say.
        • As an aside, if the issue were to come up after the diversity ruling, the state court is not bound to follow the federal judge's decision; the state court may take it into account in his decision, but he is not bound to follow it.
      1. Which state's law should a federal court use in diversity cases?
        • Every state has choice-of-law rules to deal with this problem. From Klaxon, federal diversity courts should use the choice-of-law rules of the state in which it sits.
        • Thus, a NY federal court should apply whatever state substantive law the New York state court would apply to the case.
          • This reasoning was based on the fact that Erie mandated that the case should come out the same way in federal court as it would in the state court of the state where the federal court sat.
          • This could create forum-shopping since a party could choose the federal court in a state with a choice-of-law provision that would benefit them. The Klaxon court recognized this risk but shrugged it off as inevitable.


  3. Post Erie Changes
    1. Guaranty Trust Co. v. York
      1. Outcome-determinative test
        • The choice of state or federal court in a diversity case should not affect the outcome of the case.
        • Thus, if federal practice differs from state practice, the court should determine whether the case would come out differently if it applied its own rule. If it would, a federal diversity court should use the state rule instead.
      1. Problems with York
        • York mandated deference to state law even in areas where there was constitutional authority to make a separate federal rule.
        • Article III, Section 2 of the Constitution, together with the Necessary and Proper Clause, provide constitutional authority for federal courts to apply their own rules on matters of procedure, like the method of service of process. York, however, required deference to state law even in matters of litigation procedure under the outcome-determinative test.
        • Where the federal court could, constitutionally, apply its own rule, and is making a discretionary policy decision whether to apply state law to ensure uniform outcomes, the court may balance that uniformity policy against other policies.
    1. Byrd v. Blue Ridge
      1. Other policies might outweigh the uniformity policy posited by Erie and York.
        • In cases leading up to Byrd, diversity courts had applied state rules even in matters having to do with procedure in conducting the litigation under the outcome-determinative test, but they have constitutional authority to follow a separate federal practice.
        • The York policy of uniform outcomes must be considered along with other policies, which might sometimes outweigh the uniformity policy.
        • For example, the division of functions between judge and jury in federal cases, under the influence of the 7th Amendment, was an important consideration supporting the use of federal procedure in federal court in diversity cases.
        • Since the state law was not "bound up with rights and obligations of the parties" (in which case the federal could would have to defer to it), the Court could consider "affirmative countervailing considerations."
      1. Byrd did not overrule York, it merely said that balancing was necessary in matters relating to procedure.
        • Only if important federal policies would be compromised by following state rules might the federal court choose to follow a federal procedural rule in the face of a contrary state rule.
    1. Hanna v. Plumer
      1. Court recognized two different tracks.
        1. Conflicts between state law and federal judicial practices (not a federal statute or a Federal Rule)
          • York dealt with judicial practice of applying laches; Byrd dealt with the judicial practice of having the jury decide all factual issues. There was no Federal Rule involved.
          • Of course, in pure substantive matters or those bound up in substantive rights, state law must apply.
          • For grey areas, Hanna prescribed a more focused version of the York outcome-determinative test to decide between state law and federal judicial practices which are not a part of the FRCP.
            • The court should consider whether applying the federal approach rather than the state rule would lead to (1) forum shopping and (2) "inequitable administration of the laws" (significantly different litigation opportunities for diversity litigants than for those who must proceed in state court).
            • The Court said that the question of equitable administration should be viewed prospectively. In other words, would the litigant before filing suit have greater litigation opportunities in federal court if that court followed its own practice instead of state law?
            • In the instant case, the Court said that if the service rule in question were a judicial practice and not a part of the FRCP, state law would not have to be used since the federal approach would only require the P to serve process in a slightly different manner, a difference too slight to affect her choice of forum or provide unfair advantages to diverse Ps over non-diverse Ps.
            • This analysis was dicta, however, because the issue in Hanna dealt directly with a FRCP Rule.


    1. Conflicts between state law and the Federal Rules of Civil Procedure
      • The Federal Rules were adopted by SCOTUS, under authority delegated to it by Congress in the Rules Enabling Act (28 USC 2072).
      • The REA requires that the Rules created by the Court be "arguably procedural" and not "abridge, enlarge, or modify any substantive right."
      • For conflicts involving a Federal Rule, the question is whether the Court had the power to adopt the Rule. It must be broadly procedural (under Sibbach) and must not alter substantive rights.
      • If it meets this two-part test, the Rule is valid and will apply, even if it leads to a different outcome from what the P would obtain in state court.
    1. So, if the conflict involves a federal judicial practice, the "modified outcome determinative test" of Hanna I applies, If it involves a conflict between state law and a FRCP Rule, the question under Hanna II is whether the Court had the power to write the rule (i.e. procedural and not alter substantive rights).
    1. Clarifications on Hanna (requirement of "direct conflicts" with FRCP Rules)
      1. Walker v. Armco Steel Corp.
        • State practice provided that the P must file suit within the limitations period and serve process in the action on the D within 60 days to avoid being barred. Under FRCP Rule 3, an action is "commenced by filing a complaint with the court."
        • If Rule 3 provides that filing the complaint satisfies the limitations period, an action might be barred under state law but timely under the Federal Rule.
        • The Court avoided this problem by holding that FRCP Rule 3 did not directly address the issue of meeting the limitations period and does not affect state statutes of limitations.
        • Thus, since there was no "direct collision" between the state rule and FRCP Rule 3, Hanna I analysis through the "modified outcome-determinative test" applies.
        • It seems likely that if there is a logical limiting construction that avoids a direct conflict, the court will lean towards that construction (and Hanna I analysis).


    1. Gasperini v. Center for Humanities
      1. SCOTUS held that the standard used for judges to review damages created a conflict between state procedural law ("materially deviates" from reasonable compensation) and federal common procedural law  ("shocks the conscience"), does not fall under Rule 59; thus, track 3 analysis is necessary.
      • Track three analysis --
        • Is the judge-made rule broad enough to cover the circumstances?
          • No. Follow state rule.
          • Yes. Is it at least arguably procedural (and fall in line with federal statutes and rules)?
            • No. Follow state rule.
            • Yes. Would following the rule be outcome-determinative AND encourage forum-shopping?
              • Yes. Would federal policy trump the application of state law under Byrd balancing?
                • Yes. Apply judge-made rule.
                • No. Apply state rule.
              • No. Apply judge made rule.
      1. Court found that following the federal common procedural would be outcome-determinative and encourage forum shopping (Hanna). Since federal policy would not trump the application of state law (Byrd), the state standard was used.