Read these notes on two important pre-Hanna cases. Note how they struggle with the substance-procedure divide. Further note that neither case is like Erie because neither involves general federal common law, i.e., substantive law.
Instead, each of these two cases involve judge-made procedural law, or “federal judicial practice,” which may conflict with state procedural law. A federal judicial practice is a judge-made procedure that does not come from the Constitution, or from a federal statute, or from the FRCP.
In such cases (i.e., cases involving conflicts between a federal judicial practice and state procedural law), which law should be applied: the federal judicial practice, or the state procedural law?
Guaranty Trust Co. of New York v. York (U.S. 1945)
This case created the infamous “outcome-determinative test.” In the case, a federal court was hearing an equitable claim. Previously, a federal court hearing an equity case might use “laches” rather than a state statute of limitations. Laches is an equitable principle that essentially says that if a claimant sits on its rights too long, and if the defendant suffers prejudice as a result, the claim might be barred. Laches is a flexible doctrine that can look to a number of factors. A statute of limitations, on the other hand, can be much more bright-line. In Guaranty Trust, the Supreme Court had to decide whether a federal court sitting in diversity had to apply the state statute of limitations or whether it could apply its own judicial preference for using laches. If the statute of limitations applied, the defendant would immediately win. But if laches was used, the claim might proceed and the plaintiff had a chance of prevailing on the merits.
The Supreme Court held that the state statute of limitations had to be used. The Court looked to the “policy” underlying Erie, asking “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?” It characterized the “policy” of Erie that “the outcome of the litigation in the federal court should be substantially the same.”
Note that Erie concerned a conflict involving purely substantive law, i.e., the duty a railroad owed a passenger. Further note that Erie held that it would be unconstitutional for federal courts to themselves fashion “federal general common law” that would supplant such substantive rights. In contrast, the law at issue in Guaranty Trust was not purely substantive. At best, the choice between laches/statute of limitations was in that “hazy” ground between substance and procedure. Accordingly, Guaranty Trust did not rest its holding on the unconstitutionality of using laches; instead, Guaranty Trust based its outcome-determinative test on what the Court viewed as the same-outcomes “policy” underlying Erie. This suggests that for laws that are not purely substantive, the outcome-determinative test is not Constitutionally mandated, but is instead a self-imposed judicial restraint. This may help to explain why the outcome-determinative test was modified significantly by the subsequent Byrd case, and was cut back significantly by the Hanna case.
Note how troubling the outcome-determinative test is. For example, suppose federal courts require blue briefs and that state courts require red briefs. Does that mean that federal courts must permit red briefs in diversity cases? That seems awfully silly. More seriously, suppose that state law requires a particular claim (say, one against an executor) to be personally served, but the FRCP permits service at the executor’s home. Might the difference in procedures require application of state law? (Hint: that is the issue in Hanna!) If so, could the outcome-determinative test gut the FRCP?
Byrd. v. Blue Ridge Rural Electric Cooperative (U.S. 1958)
This case shows an attempt to narrow the scope of Guaranty Trust’s outcome-determinative test. In this case, the plaintiff had to show he was an “employee” to prevail for purposes of state workers compensation law. The issue the Court had to decide was whether to apply state law (requiring a judge to determine whether the plaintiff was an “employee”) or federal law (preferring a jury, as the Court suggests, even when the Constitution did not demand it).
Here, the Court initially assumed that using a judge might “substantially affect” the outcome. However, the Court said “there are affirmative countervailing considerations at work,” namely, the existence of the federal system as “an independent system for administering justice to litigants.” The Court further noted that an “essential characteristic of that system is the manner” that federal courts distribute judge/jury roles. Here, the court concluded that “the federal policy favoring jury decisions of disputed fact” trumped the state law requiring a judge. The Court buttressed its conclusion by noting its doubt that a different result would follow by use of a jury due to the federal practices of permitting judges to comment on the evidence, on the credibility of witnesses, as well as the judge’s discretion to grant a new trial if the verdict appeared to be against the weight of the evidence.
Questions on Hanna v. Plumer (U.S. 1960)
- Note that Guaranty Trust and Byrd both involved conflicts between state law and federal judicial practices. As noted, a federal judicial practice is a judge-made procedure that does not come from the Constitution, a statute, or the FRCP.
- If we applied the test of Guaranty Trust to the facts of Hanna, who would win?
- Note that the conflict in Hanna arose between a state service law and Rule 4 of the FRCP. Thus, when you read Hanna, note that the court provides two separate analyses. The first, “Hanna I,” starts on page 938 with “Thus were there no conflicting,” and ends on page 940 with “to which the Erie opinion alluded.” Note that the Hanna I analysis is dicta because this is not a case arising under Erie or the Rules of Decision Act, 28 U.S.C. § 1652 (“RDA”).
- How does the Court in Hanna I modify Guaranty Trust’s “outcome-determinative test”? Is the test now less likely to require courts to follow state law than under Guaranty Trust? What is the new test in Hanna I?
- What does Hanna mean about the “twin aims” of Erie? What are they? What might they mean?
- The second analysis in Hanna—“Hanna II”— has two portions: the first portion is between page 937 (“We conclude that the adoption”) and ends on page 938 (“Id., at 445-46.”). The second starts on page 940 with “There is, however, a more fundamental flaw . . . .” This analysis decides the case because the validity of a FRCP is determined by reference to the Constitution and to the Rules Enabling Act, 28 U.S.C. § 2072 (“REA”).
- Read the REA. This is a Congressional statute that gives the Supreme Court the power to create or amend rules such as the FRCP, the Federal Rules of Appellate Procedure, and others. Related statutes detail the procedure for creating or amending such rules. Generally speaking, changes or additions to the FRCP go through several layers of review before they are approved or rejected by the United States Supreme Court. Once approved by the Supreme Court no later than May 1 of a year, any new or amended rules go into effect Dec. 1 of that year unless the Congress passes a law to prevent it.
- What is the order of analysis under Hanna II/REA? Should we analyze an FRCP rule’s validity under both the Constitution and the REA? What is the test for each part of the analysis?
- When an REA rule (like a Rule of the FRCP) conflicts with state law, do we start by presuming the FRCP’s validity under both the Constitution and the REA?
- Which analysis appears to more deferential to state law: Hanna I (Erie/RDA), or Hanna II (REA)? This is extremely important. Why is one analysis more likely to lead to the use of federal law? Are there good reasons for this?
- How likely is Guaranty Trust to lead to the use of state law? Hanna I? Hanna II?
Questions on Walker v. Armco Steel Co. (U.S. 1980)
- Note that in Walker, the Court reads Rule 3 narrowly to avoid a conflict, thus making the case a dispute between a federal judicial practice and state law. Had the Court read Rule 3 to toll statutes of limitations, the conflict would have been between a FRCP and state law, and the case would have been analyzed under the REA (Hanna II). Question: if the Court had analyzed Walker under the REA/Hanna II, which law would have prevailed?
- Frustratingly, the Court has not been entirely clear on how broadly or narrowly to interpret a rule of the FRCP. See Shady Grove.
- Also frustratingly, the Court has not given us a clear understanding of how to apply 28 U.S.C. § 2072(b), which states that “Such rules [such as the FRCP] shall not abridge, enlarge or modify any substantive right.” See Shady Grove.
Posted March 25, 2015