HERE’S SOME BASICS ON THE ERIE DOCTRINE.
In its most basic form, the Erie doctrine concerns the choice of law in federal court in diversity cases. In its most basic form, it asks three questions:
- Question # 1: Vertical choice of law asks: federal law or state law?
- Question # 2: Horizontal choice of law asks: if state law, which state’s law?
- Question # 3: Erie prediction: once it is determined that state common law applies, what is the relevant law?
Here’s a quick example: suppose P from Florida gets into an accident in Texas with D from Ohio. P files a diversity suit in federal court in Ohio. How will the court answer all three questions?
QUESTION # 1: VERTICAL CHOICE OF LAW
Believe it or not, prior to the Supreme Court’s 1938 opinion in Erie Railroad v. Tompkins, federal courts were free to “invent” their own common law, known as “federal general common law.” This was because of an 1842 case called Swift v. Tyson that gave federal courts a blank check to ignore otherwise-applicable state common law and to create their own federal general common law. In retrospect, this was an odd decision, since even in 1842, federal courts recognized that in diversity cases where state law applied, that federal courts would have to apply state constitutions and statutes. But federal courts were not required to use state common law. The rationale behind Swift was that federal judges could and should lead the development of a more rational body of common law and that they should not be bound by common law (think tort, contracts, etc.). This falsely assumed that “common law” could be determined through rational thought and ignored the fact that law is made by humans in reaction to social policies and values.
Unsurprisingly, Swift led to crazy results. If a plaintiff knew it would lose in state court under state common law, it might try to manufacture diversity (for example, by reincorporating in a different state) and suing in federal court where state common law would not be binding. This actually happened in the infamous 1928 Black & White v. Brown & Yellow Taxicab case, where a Kentucky corporation changed into a Tennessee corporation so it could sue a Kentucky defendant. In that case, the Supreme Court applied the Swift doctrine and upheld this craziness.
By 1938, the court’s membership had changed. In Erie Railroad, the issue was whether a federal court had to follow state tort law or could instead invent its own tort law. The Supreme Court held it was unconstitutional for federal courts to create federal general common law in cases where state common law would otherwise be used. The policy rationale was that allowing federal courts to “invent” their own federal general common law could lead to conflicting results between state and federal courts, and the Court cited Black & White of the “mischievous” nature of Swift. So Swift was history. Finis! The Supreme Court instructed lower courts to instead use state law as articulated by the “highest court” of the relevant state. (More on this last point in question # 3.)
Bottom line: in diversity cases where state common law would otherwise apply, federal courts do not have the power to just “make up” federal general common law. In the absence of controlling federal law, the federal court must use state law, regardless of whether that law is a state constitution, state statute, or state common law.
Application: The Ohio federal court will use state common law and not “federal general common law.”
QUESTION # 2: HORIZONTAL CHOICE OF LAW
If the answer to question # 1 is “use state common law,” the next step is to determine which state’s common law? Consider that many lawsuits involve people, property, and events occurring in many states. In that light, you should not assume that an Ohio court will always use Ohio law. For instance, in our fact pattern, the plaintiff is from Florida, the defendant is from Ohio, the accident was in Texas, and the lawsuit was in Ohio federal court. Which state’s common law of torts should the Ohio federal court use? Texas (place of accident)? Ohio (forum & defendant’s state)? Another state’s law?
This determination of which state’s law is “horizontal” rather than “vertical.” Note that each state has horizontal “choice of law” principles that it uses to determine which state’s law to use. Some states use a “place of accident” or “place of contract” approach. Others engage in “interest” or other types of analysis.
How do federal courts address the horizontal choice-of-law issue? In 1941, the Supreme Court held in Klaxon Co. v. Stentor Elec. Mfg. Co. that when a federal court sits in diversity and use state substantive common law (such as tort law), it should start its analysis by looking to the horizontal choice-of-law principles of the state it sits in. So if suit was filed in Florida federal court, then the court would use Florida state choice of law principles. If filed in Ohio federal court, then Ohio state court choice-of-law principles and so on. This is yet another example of the “when in Rome, do as the Romans do” approach we’ve discussed from time to time. Again, the policy here is that horizontal choice-of-law analysis should be the same in a state court and its corresponding federal courts.
Bottom line: in diversity cases where state common law applies, the federal court sitting in diversity must determine which state’s common law to use. It will do this by applying the state choice-of-law principles for the state it sits in.
Application: The Ohio federal court must apply Ohio state choice-of-law principles. Depending on the Ohio state-court principles, that may point to the use of Texas tort law, Ohio tort law, or (less likely) the tort law of another state.
QUESTION # 3: ERIE PREDICTION
Once the federal court determines to use state common law (question # 1) and which state’s common law to use (question # 2), it will determine the content of the relevant state’s common law. Suppose Ohio choice-of-law principles point towards using Texas tort law. Suppose further the court has to determine whether violating the posted speed limits is “negligence per se” under Texas common law. Under Erie, the federal court must apply the tort law as articulated by the highest court in the state of the relevant state, Texas.
So what if the Texas Supreme Court has decided this issue? If it has and has done so recently and clearly, then the federal court will likely apply the tort law as articulated by the Texas Supreme Court.
But what if the Texas Supreme Court has not spoken on the issue? Then the federal court must make an “Erie prediction,” making an educated guess as to how the Texas Supreme Court might rule today. The court can look at lower Texas court opinions, the trends in other states, dissents, and law review articles. The federal court may also be able to simply ask the Texas Supreme Court by “certifying” the issue to the state court.
Ok, but what if the Texas Supreme Court has spoken on the issue, but that was a really long time ago? Federal courts making Erie predictions are not required to blindly apply state common law if they believe that the issue would be decided differently today by that state’s Supreme Court. For example, suppose the Texas Supreme Court addressed the “negligence per se” issue in 1928 but not since then. Further suppose that many other states’ courts had decided differently since then. In such a case, the federal court has the power to make a “prediction,” since the question is not how the Texas Supreme Court decided in 1928, but how it might decide that issue today.
Bottom line: In making an Erie prediction, the federal court must apply state law as articulated by the relevant state’s highest court. If that court hasn’t yet spoken on the issue, or if the highest court has spoken but would likely rule differently today, then the federal court must “predict” how the state supreme court would likely rule today. Such Erie “predictions” can look to lower-court opinions, decisions from other jurisdictions, dissents, and law review articles.
Application: The Ohio federal court will research Texastort law and determine whether the Texas Supreme Court has spoken on the relevant issue. If it has not spoken, then the federal court will make an Erie prediction. Even if the Texas Supreme Court has spoken, the court can still make an Erie prediction if it determines that the Texas Supreme Court would rule differently today.
SUMMARY OF THE THREE QUESTIONS
Remember our facts. P from Florida gets into an accident in Texas with D from Ohio. P files a diversity suit in federal court in Ohio. How will the court answer all three questions?
- Question # 1: Vertical choice of law asks: federal law or state law? Here the diversity case would have to use state common law.
- Question # 2: Horizontal choice of law asks: if state law, which state’s law? As speculated, let’s assume that Ohio choice of law principles point to Texas tort law.
- Question # 3: Erie prediction: once it is determined that state common law applies, what is the relevant law? Here the federal court would research Texas tort law and make an Erie determination (or prediction).
WHAT ABOUT PROCEDURE IN A DIVERSITY CASE?
Ok, so in a diversity case using common law, the federal court has to use state law. But what about the FRCP? Does Erie require that federal courts sitting in diversity use state procedure instead of the FRCP?
Here’s a short and basic answer. Generally speaking, the FRCP is still used in diversity cases even when state common law is used. This should be obvious to you in light of the many diversity cases we’ve read where the FRCP is used alongside state substantive common law. Indeed, the Supreme Court has made clear that in a case where a valid FRCP applies, the federal court uses the FRCP and not a state procedure. See Hanna v. Plumer (1961).
But there are complications beyond our current focus, more difficult variations of the Erie doctrine. A few are noted briefly below without detailed elaboration, and I’d be happy to discuss them with you if you’re curious.
- What if the federal procedure is judge-made instead of contained in a rule of the FRCP? Here, the court will engage in “twin aims” analysis to determine whether to use state or federal procedure.
- What if the scope of the FRCP rule is unclear? Here, the court will need to determine the scope of the FRCP; unfortunately, the Supreme Court has not been terribly consistent on how broadly or narrowly to read a rule of the FRCP.
- When is a rule of the FRCP valid or invalid? I noted above that a valid FRCP will apply in a diversity case. To determine validity of a FRCP rule, the court will engage in Constitutional and statutory analysis of the FRCP rule under the Rules Enabling Act. For now, suffice it to say that the Supreme Court has never invalidated one of its own FRCP rules. Shocking, right?
MY, HOW THE WORLD HAS CHANGED!
The table below shows how tremendously things have changed before and after Erie.
|Before Erie and FRCP||Federal courts created federal general common law, and could ignore state common law. But if the state law was from a state constitution, state statute, or hard-to-define “local usage,” then state law would be used. (Swift 1842)||Oftentimes federal courts used state procedure (Conformity Act of 1872), though federal procedural law instead sometimes applied (such as diversity statute, federal common law of evidence).|
|After Erie and FRCP (both of them were in 1938)||First. If the case relies on state common law, use state common law and not “federal general common law” (Erie 1938).
Second. Use choice-of-law principles of host state to determine which state’s substantive common law should apply (Klaxon 1941).
Third. Use common law as articulated by the highest court of the relevant state (Erie 1938). This requires making a “prediction” of how that state court would rule on the issue today.
|Generally use valid FRCP and other “Rules Enabling Act” rules: Use FRCP (and other federal rules such as the FRE, FRAP, and procedural statutes such as sections 1331, 1331, 1404, 1406, 1441, etc.)|
Added Nov. 6, 2016