The Erie Doctrine: Maybe not so useless after all

Anyone who’s gone to law school knows about the Great 1938 Flip-Flop. It’s not that we wanted to learn this shit, mind you; they made us do it. We had no choice.

The Constitution provides that the judicial power of federal courts extends to, among other things, “controversies . . . between citizens of different states[.]” That’s what they call “diversity jurisdiction.” A plaintiff (or defendant) can get a lawsuit into federal court based exclusively on the parties’ state citizenship.

The claims at issue in diversity jurisdiction cases arise under state law. The federal Rules of Decision Act, which dates back to 1789, provides that “[t]he 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 in the courts of the United States, in cases where they apply.”

Seems pretty simple. In a diversity case, a federal court applies state law. Yet for over a century before the Flip-Flop the Supreme Court interpreted the Rules of Decision Act as requiring federal courts to apply only state statutes. Federal courts were free to ignore state court case law and formulate federal common law for use in diversity cases. But state civil procedure codes, being statutes and all, were binding on federal courts in such cases.

That all changed in 1938. In that year Congress passed the Rules Enabling Act, which led to adoption of uniform rules of civil procedure for federal courts, and the Supreme Court decided Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), which held that state substantive law — including state court decisions — governed in federal diversity cases. From then on, state substantive law and federal procedural law applied in cases where jurisdiction was based on diversity of citizenship. The trick, as revealed in subsequent case law, is determining what qualifies as “substantive” for Erie purposes.

The consensus nowadays is that federal courts are a much friendlier forum than state courts for big corporate interests. Federal courts are more likely to grant motions for summary judgment, less likely to grant class certification and, especially in light of the recently decided Bell Atlantic case, more likely to dismiss a lawsuit on the pleadings. Back in 2005, Congress passed and the President signed the horrifically misnamed Class Action Fairness Act, which expanded federal diversity jurisdiction to include a good many class action lawsuits that once upon a time could be prosecuted only in state courts. Tort “reform” monkeys and other pro-corporate fat cats supported the legislation largely for that reason.

In a forthcoming Notre Dame Law Review article, Professor Adam Steinman of the University of Cincinnati College of Law argues, contrary to popular conception but very convincingly IMO, that Erie requires federal courts to apply state law standards for summary judgment, class certification and pleading diversity cases. I highly recommend the article, which is available for download here courtesy of SSRN. For people who actually enjoy delving into the Erie doctrine, the article is a wet dream come true. For the rest of us, the article provides extraordinarily useful analysis of Erie and its bastard progeny along with a well-crafted argument that may well prove useful in practice.

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