Erie Doctrine in 40 Minutes

This episode is a tutorial lecture about the Erie Doctrine. I cover a little bit of the history leading up to the Erie Doctrine and then offer advice about how to tackle an Erie issue in practice or on an exam. This is a 40-minute introduction and overview that focuses on the basics.  

Transcript

Speaker 1: 0:08

Welcome to the civil procedure podcast. I am your host

Speaker 2: 0:12

Thomas Maine. And this episode is about the Erie doctrine. I am going to try to cover both some history and the practical application of the Erie doctrine and do it all in 40 minutes or less. So this is a very streamlined version of an introduction to the Erie doctrine. The Erie doctrine influences every cause of action that is in federal court that doesn't arise under federal law because when there's a federal question, courts apply federal law, whether it's statutory law or common law and whether substantive or procedural, but that's all federal law, but when we're in federal court and there isn't a federal question. And by that, I mean diversity jurisdiction or supplemental jurisdiction. And in those circumstances, it's not immediately obvious what law should apply because on one hand you might think that the federal courts should try to respect and therefore to replicate and apply the substantive and procedural law of the state courts as much as possible from this vantage point. The idea of providing a federal forum for diversity cases is not to undermine or alter those state laws, but just to make sure that all of those laws are administered fairly in this neutral forum, that's why we would have diversity jurisdiction. That's one perspective. But on the other hand, you might imagine, Hey, we're in federal court. The whole point of say diversity jurisdiction is to provide a neutral forum. That is something of an escape from the state court of the plaintiff or this state court of the defendant. And in this vein, it might follow that federal courts should apply federal substantive law and federal procedural law. After all, if state courts are just going to replicate and apply the state law Walden, what's the point of providing the federal forum? Is it just to provide a fancier courtroom? So those are two perspectives. So what or which of those perspectives do we do, or what combination of those do we do? Well, the answer to that begins with the rules of decision, which was part of the judiciary act of 1789. That statute still appears in our judicial code at 28, USC 1652. The key language from that statute provides that the laws of the several states shall be regarded as rules of decisions in trials at common law. Now the famous swift versus Tyson case in 1842, held that those words, the laws of the several states meant only state statutes, not state decisional law, not common law. So this meant that in diversity cases, federal courts applied state statutes with fidelity, but they had their entire own common law. There are common law of torts, their common law of contracts, et cetera. If there wasn't a state statute, then there wasn't any governing state law within this interpretation of the rules of decision act. Now because of the common law of the federal courts, then often deferred from the common laws of the state courts. Well, there was an opportunity for arbitrage and this made federal courts especially attractive to one party or the other whenever there was that difference and parties engaged in all manner of hi-jinks to avail themselves of these opportunities. Now, these machinations occurred with respect to the substantive law in cases at common law, federal procedure was mostly governed by something called the conformity acts. And under those acts, federal courts conformed as near as may be to the procedure of the state court in which they sat. So let's get a bigger picture here then. So in cases at common law, there was substantial intra T R a intra state uniformity with respect to procedure, a federal court in New York, conformed the procedure in law cases to the procedure that the New York state courts applied now with respect to substantive law, as we said, there was interstate uniformity with respect to statutes, but on matters of common law. There wasn't intra state uniformity between the New York state and the New York federal courts with respect to substantive law on matters of common law. There was more uniformity across all federal district courts. And so we could call that inter district uniformity, I N T E R across the federal districts. There was substantive uniformity. So inter district uniformity with respect to substance, but intra state uniformity with respect to procedure. Now on all of this that we've been talking about so far, this regards matters at common law. We are referring here to an era when there were separate systems of law, of common law on the one hand and of equity on the other, and the rules of decision act didn't address equity cases. It was limited by its terms to trials at common law. And it's fair to say that for the most part equity jurisprudence in federal courts was really independent of state court jurisprudence. And this is true both of substantive law and of procedural law. So with respect to these equity issues, there was again, inter district uniformity across the system of federal courts, but at the expense of intra state uniformity, meaning the federal and state courts within any particular state. So it's against that backdrop, that swift versus Tyson era that the year 1938 arrives. And there are major changes in 1938 that continue on to this day. First in 1938, new federal rules of civil procedure, that's when they were introduced and among other things, those federal rules of civil procedure merged the systems of law and equity into one unified system. And they created a set of products, seizures that applied across the federal court system. Note the shift from a regime of intra state procedural uniformity to inter district procedural uniformity. One of those species of uniformity comes at the expense of the other. You can't have both meanwhile, the Erie decision from the Supreme court reinterpreted, the rules of decision act. And so that's what we need to get current on. Well, here's the deal Erie presented the class basic opportunity for arbitrage that I described earlier. This guy Tompkins had a personal injury case against the railroad and federal common law and state common law are a profoundly different it's much easier for him to prove negligence under the federal common law standard in so naturally he files in federal court because that's an option available to him by virtue of the fact that he was a Pennsylvania and the defendant was a new Yorker. So he had the choice to file in federal court. And he did for the obvious reason. And he won at the district court and he won at the circuit court, but he lost at the Supreme court in an opinion by justice, Brandeis, that was much broader than anyone had even argued. And clearly justice Brandeis was bothered by what I've called the arbitrage opportunity that was presented to Tompkins merely because of the fortuitous chance that he happened to be injured by a New York railroad company, rather than being injured by a fellow Pennsylvania that gave him access to a federal court that created that option. The Tompkins naturally exploited justice[inaudible] opinion began the question, vert decision, whether the oft challenged doctrine swift versus Tyson shall now be disapproved, given that framing. It's no surprise that he did disapprove concluding. Ultimately that federal district courts should apply the statutory and the decisional law. That's the big change by re-interpreting the rules of decision act. The federal courts in diversity cases now needed to apply the statutory and the decisional law. In those diversity cases, he thus announces that there is no federal general common law. Now the case is important because it respected and restored state authority in a profound way. In fact, in the guaranty trust versus York case that followed Erie warts said that Erie expressed a policy that, and I'm going to quote here cause it's pretty good. In all cases where a federal court is exercising 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 goals determine the outcome of a litigation as it would B if tried in a state court close quote. Now that principle is so baked into the mindset of the first year law school curriculum. That it probably doesn't seem to you like it could have been any other way. You've internalized this part of the Erie doctrine before you even studied it, but it was quite revolutionary at the time. No one today is seriously questioning this part of era. It's all accepted. Now that of course federal court should apply state statutory law and state decisional law in cases that are in federal court because of diversity jurisdiction or supplemental jurisdiction. But appreciate that. It's a bit of a Dodge to say that federal courts apply state law because it's not at all obvious in many cases, which states law applies after all, when you're in federal court in a diversity case. Well, that necessarily means that the parties are diverse and therefore the underlying transaction or event of that might transcend state boundaries too. So for example, a Pennsylvania and may be suing a West Virginia over some incident that touches on both of those states and maybe even other states to the question of whether Pennsylvania or West Virginia or something other states law determines those parties, rights and responsibilities. Well, vet question it's typically referred too as a horizontal choice of law problem, huh? Horizontal horizontal, because you can think of, of the states on a shared plane and by plane, I mean a geometric plane, a flat two dimensional surface, no thickness extends in all directions. Think of a paper map of the United States that shows all of the states in choosing which of those states laws apply. We refer to that as horizontal choice of law and horizontal moving horizontally across that plane from Pennsylvania to West Virginia, to Ohio, that horizontal choice of law is the core of a course called conflict of laws. And it is not really an Erie problem. We want to distinguish. I wish that by contrast eerie is not a horizontal choice of law problem, but rather a vertical choice of law problem where the vertical conveys the hierarchy of federal and state court system. And the choice between those two systems as we've been talking about from the beginning here is about weather. We want the federal court to just replicate what the state court does. You might think of an architectural metaphor here where architectural the federal court could look exactly like the state court. So the Illinois federal court could be built. So it looks exactly like the Illinois state court, the Missouri federal court could be built. So it looks exactly like the Missouri state court that would be intra state uniformity replicating the state court system. Alternatively, you could have a system of federal courts so that the federal courthouse in Illinois looks like the federal court courthouse in Missouri, but that interim, her district uniformity would come at the expense of intra state uniformity. Can't have both. Now you might be wondering why there even is a vertical choice of law issue because didn't we say here that Erie said that federal courts should be the replicating, the state courts haven't we chosen intrastate uniformity. Isn't that what URI says? Question mark. Answer. Not completely. And that's why we still have eerie questions to this day. And we're now ready to talk about that in Erie justice, Brandeis referenced this need for intrastate uniformity, with respect to substantive rules, okay. And justice reads concurring opinion in Erie made it even clearer error that as he said, it, quote no one doubts, federal power over procedure, close quote. And so that becomes the core fight over this vertical choice of law issue because on matters of procedure, federal courts can ignore state law while on matters of substantive law. As we've already established, the federal courts need to replicate state law. Well, the problem or the fun thing as far as litigators are concerned is that it's often whether something is substance or procedural. For example, how about a statute of limitations? Is that substantive, in which case replicate the state law, or is it procedural in which case state law be damned we can apply the federal procedure? Well, how about a state law that requires medical malpractice, this plaintiffs to file with their complaint, an affidavit from a doctor, uh, testing to the viability of the plaintiff's claim. A lot of states have incorporated a mechanism like that into their state laws. Well, is that substantive, in which case replicate Erie requires it respect for federalism or is it procedural in which case state law be damned? How about pre-judgment interest rates? Substantive equals replicate the state law or procedural equals don't have to worry about state law. How about rules that allow or disallow certain counter claims or claims for set offs? How about a state law that has a built in preference for granting preliminary equitable relief to federal courts in diversity cases need to apply that law? What if states have a different burden of proof? Well, how should that work? If you're litigating a state law claim and diversity and federal court, the label's substance and procedure are not terribly useful. One of the earliest attempts to differentiate these concepts, oops, suggested that matters that were outcome determinative were substantive. That's sort of like saying that if it's important, it's substantive and if it's trivial, it's procedural. But the problem is that even the most trivial rule can be outcome determinative. It can be important if it's enforced. So for example, if under state law, a defendant has 30 days to respond to a complaint, well, what should the federal court do in a diversity case under federal rule 12 a which as we know, requires a response within 21 days. Well, if the court enters a default judgment on day 28, isn't the failure to respect the state law outcome determinative isn't that state law important. Well then does that make it substantive? Although the labels, substance and procedure are very fuzzy, it is important to at least have one sentence definitions of these concepts that you wrote and that you understand these sentences. Aren't going to do all the work for you, but they will give you a measuring stick. When as a starting point, you're going to need to measure something on an exam and argue that it's substantive or procedural. Your definition for substantive law might be something like substantive law defines the parties, rights and responsibilities and proceed laws are the general rules for vindicating those rights and responsibilities. There are no universal definitions for these concepts. So do not feel particularly constrained here. One tip that I offer you is to avoid using the words, substance, and procedure in your analysis until the penultimate sentence of that analysis. Because once you've given it the label, substance or procedure, well, in a sense, then you're done. So to provide real analysis analysis that isn't just conclusory and circular we'll, then don't use the labels themselves until that next to last sentence, where you can say, see, that's why I think it's substantive. And then your concluding sentence would be, and therefore we need to respect and apply the state law or in that penultimate sentence, you say, see, and therefore, I think it's procedural. And then your concluding sentence can be, and therefore state law be damned because under Erie we can apply federal procedure. Now there are decades of cases wrestling with this vertical choice of law problem about substance and procedure. I'm going to cut to the bottom line and give you three steps of analysis that will get you focused on the things that matter right now in these contemporary. Now step zero of our three steps. Step zero is make sure you even have an area issue. You don't need to do this at all, unless there is a state law claim in federal court. And one of the parties who is asserting or is defending that state law claim is asking the federal court to apply some state law, some state rule, some state regulation, some state custom. So step zero, before we even focus on our three steps, make sure you have an Erie issue. Assuming you have an Erie issue. Then here are my three steps. Step one. When the state law has some substantive characteristics and the state law doesn't even arguably conflict with any federal law or practice, well, then a federal court will usually apply the state law. And so here is where you could use your definition of a substantive law as a springboard to identify the substantive characteristics of this state law may cite the rules of decision act section 1652, because after all that statute requires the federal courts to apply quote the laws of the several states close quote. And if there's no conflicting federal law, then you're in a great place here on step one, but rarely will cases be decided on this step one, because much more commonly the state law is going to have some substantive characteristics since after all what law doesn't have some substantive characteristics, but the state law is going to conflict with some federal law or some federal practice. And that puts us into step two and to keep this analysis as simple and streamlined as possible, I'm going to jump past the grand jurisprudential battles of justice Scalia versus justice Ginsburg here. And I'm going to assume that the more formalist approach outlined by justice Scalia is the path more likely to be followed by justice Scalia and justice. Ginsburg's conservative successors. And in step two, what you want to do is you want to ask if the federal courts application of the state law. So if the federal court to apply this state thing that somebody whining about, Hey, in state court, I'd have 30 days to answer this complaint. Hey, in state court, they wouldn't be able to depose my expert as part of discovery in state court. This counterclaim wouldn't be allowed in state court. This would be tried to a judge, not a jury in step two, ask whether the federal courts application of that state law or practice or rule ask, whether it would interfere with, are they straightforward application of the text of a federal rule or of some other federal law. Now there are two things going on. And what I just said there, you're looking for interference. Would this state law interfere? And you're also addressing with what it would interfere in step two, you are looking for real interference with positive law, meaning some mandate, not a tradition, not a practice, but something like a federal rule of civil procedure, something like a statute, something like a federal rule of appellate procedure in these circumstances where there is interference and its interference with a let's focus on federal rule, civil procedure. What we say here in step two is that we have an Erie analysis that is guided by the federal rule. This is called a guided Erie, G U I D E D guided, as opposed to unguided the court wants to respect and apply the federal rules. Remember federal rules of civil procedure, like the Erie case. We're a product of the year, 1938. And for all of the obvious reasons, it would be handy if the federal rules of civil procedure apply died in fundamentally the same way. Yeah. In all federal courts. So this step two asks whether applying the state law would really interfere with the application of the federal rule because federal rule of civil procedure eight, a for example, a pleading standard. Well then some contrary state court pleading standard would interfere. And similarly, if the federal rules of civil procedure have a protocol for allowing class actions under certain prescribed circumstances, well then some contrary state court law about allowing or disallowing class actions. Well, that would interfere with the straightforward application of the federal rule. Again, when you have this kind of interference, then you call it a guided Erie analysis. It's guided by some federal written law. When you do have a guided analysis, you're going to go to what I'm going to call step three, a if it's unguided, then you go to step three B. So it's one or the other, not both if it's unguided, which is to say, well, this doesn't really conflict with a written federal rule. It doesn't really interfere if that's your situation, unguided three B. So let's do three a and then we'll do three B step three, a when our Erie analysis is guided as a practical matter, that means that it's going to be governed by the federal rule. The federal court is kind of apply that federal law or that federal rule of civil procedure, right? Step three, a does ask is that federal rule, a valid mandate? What we're talking about here is that there's this thing called the rules enabling act, and that's 28 USC section 2072. And that's the statute that authorizes the promulgation of things like the federal rules of civil procedure. And that rules enabling act says that the court may prescribe general rules of practice and procedure that do not abridge and large or modify any substantive, right? This means that the federal rule just needs to be in fact, a procedural rule, which you can assume it will be. We just have a placeholder here in case some advisory committee went rogue and put something in the federal rules of civil procedure that wasn't really procedural. Imagine, for example, some advisory committee that creates a new federal rule that would abolish comparative negligence. Well, we would get down here in step three, a and we would say, wait a minute, this is not a valid federal rule of civil procedure. The court can promulgated these rules of civil procedure, but they do need to be nominally procedural in this isn't the deep soul searching about what is substantive or procedural, but rather instead of once over lightly, yeah, this is kind of what a procedural rule looks like. If it's arguably procedural, that's good enough. Now, when you don't have a guided Erie analysis, then you're in step three B, which necessarily means that we've got a conflict between some state law. So somebody whining about how things are done in state court, but it's conflicting, not with a federal role. If it conflicted with a federal role or with a federal statute or some other positive law, we would be over in step three a well then what else could there be? Uh, it could be a federal custom. It could be a tradition or some other standard that isn't federal positive law. And to resolve this tension in step three, be the tension between the state mandate and the federal mandate we do. What's called bird balancing. Why RD, bird balancing named after it case and bird balancing just requires you to consider those two competing visions of uniforms that we keep talking about. Is this the kind of thing that should be the same in the federal and state courts within a state? Is this the kind of thing where intra state uniformity is really important, articulate that narrative and balanced that narrative against the competing vision, the interest in having union formity across a federal system of courts. And here are three specific questions that you can use as prompts to address this balancing first, ask and answer this question. If the federal court didn't follow the state court practice on this particular issue, is this difference? Something that is so significant that somebody would choose the forum to get that particular advantage. A party is unlikely for example, to choose a federal court because they don't have to file their pleadings in duplicate like they do in the state court. That's not something that would lead to what we call forum, shopping. Something like this would be an issue that would be resolved by a jury as opposed to a judge. Well that might lead to forum shopping. Somebody might choose the federal forum for that particular reason. The second question that you would want to ask yourself and to answer would be again, consider that the federal court doesn't adopt the state thing so that there is difference between federal court practice and state court practice ask yourself whether it's unfair. The two to otherwise. Similarly situated parties will be treated differently in the federal court and state court, just because one of them to go to federal court, they might've suffered the same injury. They might be otherwise subject to the same law, but one gets to litigate in federal court while the other is trapped in state court, ask whether that seems fair, some differences will pull at your heartstrings, others won't with these first two questions. Then the more that it would lead to forum shop and the more unfair it seems, the more compelling the argument in favor of intra state uniformity. The third question you want to ask yourself as part of this bird balancing exercise is whether this is the kind of thing that should be uniform across, across all federal district courts. We have a system of federal courts and one virtue of having a system is even if you're called to litigate in the federal court in some unfamiliar state, you've got a sense of what practice and procedure will be like in that federal court, then ask yourself, is this thing that I'm focusing on right now? Here? Is this something that should be a shared character terroristic among federal courts? Because if so, that's the argument in favor of inter district uniformity answering those three questions. We'll get you talking about the things that courts will consider on a bird balancing analysis, which is this step three B. So let's recap this whole episode before 1938, there was substantial intra state uniformity on matters of procedure. And there was lots of inter district uniformity among federal courts with respect to matters of substantive law. But after 1938, those two visions of uniformity switched places. Now because of Erie, we have substantial interests, state uniformity with regard to matters of substantive law, but among federal courts, we have substantial inter district uniformity with respect to matters of procedure. So that's why the modern fights about Erie are about whether something is substantive or procedural. And I've given you a quick and dirty three step framework. That is a streamlined version of how courts tend to answer that question. And let me emphasize one last time that eerie issues happen because state law claims find their way into federal court. We don't have Erie issues on federal question claims being litigated in federal court that concludes this episode of the civil procedure podcast.

Speaker 1: 39:08

I appreciate your

Speaker 2: 39:09

Attention and I hope that you have

Speaker 1: 39:11

A very good day[inaudible].